As filed with the Securities and Exchange Commission on September 7, 2018
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin 401(k) Plan
(Exact Name of Registrant as Specified in Its Charter)
Federal | 6036 | Pending | ||
(State or Other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
7001 West Edgerton Avenue
Greenfield, WI 53220
(414) 421-8200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
Richard B. Hurd
President and Chief Executive Officer
1895 Bancorp of Wisconsin, Inc.
7001 West Edgerton Avenue
Greenfield, WI 53220
(414) 421-8200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
Kip Weissman, Esq.
Marc Levy, Esq.
Luse Gorman, PC
5335 Wisconsin Avenue, N.W., Suite 780
Washington, D.C. 20015
(202) 274-2000
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):
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
CALCULATION OF REGISTRATION FEE
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Title of each class of securities to be registered |
Amount
to be
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Proposed
maximum offering price per share |
Proposed
offering price |
Amount of registration fee |
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Common Stock, $0.01 par value per share |
3,273,188 shares | $10.00 | $32,731,880(1) | $4,076 | ||||
Participation Interests |
528,550(2) | (2) | ||||||
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(1) |
Estimated solely for the purpose of calculating the registration fee. |
(2) |
The securities to be purchased by the PryraMax Bank, FSB 401(k) Plan are included in the amount shown for the common stock. Accordingly, no separate fee is required for the participation interests. |
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 Supplement
Interests in
PYRAMAX BANK, FSB 401(K) SAVINGS PLAN
Offering of Participation Interests in up to 528,550 Shares of
1895 Bancorp of Wisconsin, Inc.
Common Stock
In connection with the conversion of PyraMax Bank, FSB (the Bank) from the mutual to the stock form of organization and the related stock offering of 1895 Bancorp of Wisconsin, Inc. (the Reorganization), 1895 Bancorp of Wisconsin, Inc. and the Bank are allowing participants in the PyraMax Bank, FSB 401(k) Savings Plan (the 401(k) Plan) the opportunity to invest up to 50% of their accounts in shares of common stock of 1895 Bancorp of Wisconsin, Inc. (1895 Bancorp Common Stock) on the date of the stock offering. Based on the value of the 401(k) Plan assets at July 31, 2018, the trustee of the 401(k) Plan can acquire up to 528,550 shares of 1895 Bancorp Common Stock, at the purchase price of $10.00 per share. This prospectus supplement relates to the initial election of the 401(k) Plan participants to direct the trustee of the 401(k) Plan to invest up to 50% of their 401(k) Plan accounts in 1895 Bancorp Common Stock at the time of the stock offering.
The Bank has registered on behalf of the 401(k) Plan up to 528,550 participation interests so that the trustee of the 401(k) Plan could purchase up to 528,550 shares of 1895 Bancorp Common Stock in the offering, at the purchase price of $10.00 per share. This prospectus supplement relates to the election of Plan participants to direct the trustee of the 401(k) Plan to invest up to 50% of their 401(k) Plan accounts in the 1895 Bancorp Stock Fund on the date of the stock offering.
The prospectus of 1895 Bancorp of Wisconsin, Inc., dated [DATE] , accompanies this prospectus supplement. It contains detailed information regarding the Reorganization of the Bank and the stock offering of 1895 Bancorp Common Stock and the financial condition, results of operations and business of 1895 Bancorp of Wisconsin, Inc. and the Bank. This prospectus supplement provides information regarding the 401(k) Plan. You should read this prospectus supplement together with the prospectus and keep both for future reference.
For a discussion of risks that you should consider, see Risk Factors beginning on page [ ] of the accompanying prospectus and Notice of Your Rights Concerning Employer Securities below.
The interests in the 401(k) Plan and the offering of 1895 Bancorp of Wisconsin, Inc. common stock have not been approved or disapproved by the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission or any other federal or state agency. Any representation to the contrary is a criminal offense.
The securities offered in this prospectus supplement and in the prospectus are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
This prospectus supplement may be used only in connection with offers and sales by 1895 Bancorp of Wisconsin, Inc. of participation interests in shares of 1895 Bancorp Common Stock pursuant to the 401(k) Plan. No one may use this prospectus supplement to re-offer or resell participation interests or shares of 1895 Bancorp Common Stock acquired through the 401(k) Plan.
You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. 1895 Bancorp of Wisconsin, Inc., the Bank and the 401(k) Plan have not authorized anyone to provide you with information that is different.
This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the prospectus nor any sale of 1895 Bancorp Common Stock or participation interests representing an ownership interest in 1895 Bancorp Common Stock shall under any circumstances imply that there has been no change in the affairs of 1895 Bancorp of Wisconsin, Inc. or any of its subsidiaries or the 401(k) Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement.
The date of this prospectus supplement is [DATE] .
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Additional Purchases of 1895 Bancorp Stock Fund Units after the Offering |
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Purchase Price of Common Stock in the Offering and After the Offering |
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Securities and Exchange Commission Reporting and Short-Swing Profit Liability |
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1895 Bancorp of Wisconsin, Inc. is offering participants in the PyraMax Bank, FSB 401(k) Savings Plan (the 401(k) Plan) the opportunity to purchase stock of 1895 Bancorp of Wisconsin, Inc. through the 401(k) Plan by purchasing participation interests, through the Stock Offering Fund established under the 401(k) Plan in connection with the stock offering (Offering). The 401(k) Plan may acquire up to 528,550 shares of 1895 Bancorp of Wisconsin, Inc. common stock (1895 Bancorp Common Stock) in the stock offering. Your investment in 1895 Bancorp Common Stock in connection with the stock offering through the Stock Offering Fund is subject to the purchase priorities contained in the PyraMax Bank, FSB Plan of Reorganization from a Mutual Savings Bank to a Mutual Holding Company and Stock Issuance Plan (the Plan of Reorganization). |
Information with regard to the 401(k) Plan is contained in this prospectus supplement and information with regard to the financial condition, results of operations and business of 1895 Bancorp of Wisconsin, Inc. is contained in the accompanying prospectus. The address of the principal executive office of 1895 Bancorp of Wisconsin, Inc. and the Bank is 7001 West Edgerton Avenue, Greenfield, WI 53220. The Banks telephone number is (414) 421-8200. |
All elections to purchase stock in the Stock Offering Fund in the stock offering under the 401(k) Plan and any questions about this prospectus supplement should be addressed to Monica Baker, Senior Vice President, Chief Brand Officer and Director, PyraMax Bank, FSB, 7001 West Edgerton Avenue, Greenfield, WI, 53220. |
In connection with the Reorganization and stock offering, you may elect to designate a percentage of your 401(k) Plan account balance (up to 50 percent) to the Stock Offering Fund, to be used to purchase common stock of 1895 Bancorp of Wisconsin, Inc. issued in the stock offering at $10 per share. In making this determination, you should carefully consider the information set forth on page 19 of this prospectus supplement under Notice of Your Rights Concerning Employer Securities The Importance of Diversifying Your Retirement Savings. The trustee of the Stock Offering Fund will purchase common stock of 1895 Bancorp of Wisconsin, Inc. at $10.00 per share to be held as stock in accordance with your directions. |
401(k) Plan participants are eligible to direct a transfer of funds to the Stock Offering Fund. However, such directions are subject to the purchase priorities and purchase limitations in the 401(k) Plan of Reorganization of PyraMax Bank, FSB, which provides for a subscription and community offering, as described below. |
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In the Offering, the purchase priorities are as follows and apply in the case more shares are ordered than are available for sale (an oversubscription):
Subscription offering:
(1) |
First, to depositors of PyraMax Bank, FSB with $50 or more as of March 15, 2017. |
(2) |
Second, to PyraMax Bank, FSBs and 1895 Bancorp of Wisconsin, Inc.s tax-qualified plans, including the employee stock ownership plan and the 401(k) Plan. |
(3) |
Third, to depositors of PyraMax Bank, FSB with $50 or more on deposit as of [SERD] . |
(4) |
Fourth, to members of PyraMax Bank, FSB (as defined in the Banks charter and bylaws) as of [DATE] who do not qualify in one of the foregoing categories. |
If there are shares remaining after all of the orders in the subscription offering have been filled, shares will be offered in a community offering with a preference to natural persons residing in Milwaukee County, Wisconsin. |
If you fall into subscription offering categories (1), (3), or (4) above, you have subscription rights to purchase 1895 Bancorp Common Stock in the subscription offering. You will separately receive offering materials in the mail, including a Stock Order Form. If you wish to purchase stock outside of the 401(k) Plan, you must complete and submit the Stock Order Form and payment, using the stock order reply envelope provided. |
Additionally, or instead of placing an order outside of the 401(k) Plan through a Stock Order Form, as a 401(k) Plan participant, you may place an order for common stock through the 401(k) Plan, using the enclosed Special Investment Election Form, to be completed and submitted in the manner described below. |
The trustee of the 401(k) Plan will purchase 1895 Bancorp Common Stock in the stock offering based on the designated percentage set forth in your Special Investment Election Form. Once you make your election, the amount that you elect to transfer from your existing investment options for the purchase of 1895 Bancorp Common Stock in connection with the stock offering will be removed from your existing investment options and transferred to the Stock Offering Fund, which is an interest-bearing cash account in the 401(k) Plan, pending the formal closing of the stock offering, several weeks later. |
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After the end of the stock offering period, we will determine whether all or any portion of your order may be filled (based on your purchase priority as described above and whether the stock offering is oversubscribed). The amount that can be used toward your order will be applied to the purchase of participation interests and will be denominated in shares of 1985 Bancorp Common Stock in the 401(k) Plan. |
In the event the stock offering is oversubscribed, i.e. there are more orders for shares of 1895 Bancorp Common Stock than shares available for sale in the stock offering, and the trustee is unable to use the full amount allocated by you to purchase shares of common stock in the stock offering, the amount that cannot be invested in shares of common stock, and any interest earned, will be reinvested in the other investment funds of the 401(k) Plan in accordance with your then existing investment election (in proportion to your investment direction for future contributions). If you do not have an existing election as to the investment of future contributions, then such amounts will be transferred to and invested in applicable Blackrock Lifepath Index Fund, based on your retirement age assumption, pending your reinvestment in another fund of your choice. |
If you choose not to direct the investment of your account balances towards the purchase of any shares in the Offering, your account balances will remain in the investment funds of the 401(k) Plan as previously directed by you. |
At the conclusion of the stock offering, once the eligible assets in the Stock Offering Fund have been used to purchase 1895 Bancorp Common Stock, the shares will be transferred to and held in the 1895 Bancorp Stock Fund. Your interests in the 1895 Bancorp Stock Fund will be referred to as participation interests and will be denominated in shares of 1895 Bancorp Common Stock. |
The value of one participation interest will equal one share of common stock of 1895 Bancorp of Wisconsin, Inc., which will be initially valued at $10. |
Following the stock offering, each day, the aggregate value of the 1895 Bancorp Stock Fund will be determined by dividing the total market value of the 1895 Bancorp Stock Fund at the end of the day by the total number of shares held in the 1895 Bancorp Stock Fund |
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as of the previous days end. The change in share value reflects the days change in 1895 Bancorp Common Stock price, and the value of each participation interest should be the same as one share of 1895 Bancorp Common Stock. Your account in the 1895 Bancorp Stock Fund will be reported to you on your regular 401(k) Plan participant statements. You can also go on-line at any time to principal.com or call 1-800-547-7754 to review your account balances. |
As of July 31, 2018, the market value of the assets of the 401(k) Plan attributable to active and former employees of the Bank was approximately $10,570,976. The 401(k) Plan administrator informed each participant of the value of his or her account balance under the 401(k) Plan as of June 30, 2018, however participants can also go on-line and look at their account balances at any time. |
Enclosed is a Special Investment Election Form on which you can elect to transfer up to 50% of your account balance in the 401(k) Plan to the Stock Offering Fund for the purchase of participation interests in 1895 Bancorp Common Stock at $10 each in the stock offering. If you wish to use all or part of your account balance in the 401(k) Plan to purchase 1895 Bancorp Common Stock issued in the Offering, you should indicate that decision on the Special Investment Election Form. In making this determination, you should carefully consider the information set forth on page [PAGE] of this prospectus supplement under Notice of Your Rights Concerning Employer Securities The Importance of Diversifying Your Retirement Savings. |
If you do not wish to purchase 1895 Bancorp Common Stock in the Offering through the 401(k) Plan, you must still fill out the Special Investment Election Form and check Box D for No Election in Section D of the form and return the form to Monica Baker, Senior Vice President, Chief Brand Officer, PyraMax Bank, FSB, as indicated below . |
Enclosed is a Special Investment Election Form on which you can elect to purchase 1895 Bancorp Common Stock in connection with the stock offering. This is done by following the procedures designated below. Please note the following stipulations concerning this election: |
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Using your Special Investment Election Form, you can direct up to 50% (designated as a percentage) of your current account balance to the Stock Offering Fund. |
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Your election is subject to a minimum purchase of 25 shares which equates to $250.00. |
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Your election, plus any order you placed outside the 401(k) Plan, is subject to a maximum purchase of 10,000 shares which equates to $100,000 |
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The election period closes at 4:00 p.m., Eastern Time, [DEADLINE]. |
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Following the Offering period for the 401(k) Plan (401(k) offering period), the 401(k) Plan trustee will sell the applicable percentage of each of your investment funds that you have elected to sell in order to purchase shares in the Stock Offering Fund and will transfer the proceeds upon settlement to the Stock Offering Fund. The 401(k) Plan trustee will process such sales for all participants on a single day following the 401(k) offering period and before the close of the subscription offering period. After your election is accepted, it will be rounded down to the closest dollar amount divisible by $10.00. The difference will remain in the Stock Offering Fund until the Offering closes and the shares are acquired by the 401(k) Plan. |
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At that time, the shares purchased in the Stock Offering Fund based on your election will be transferred to the 1895 Bancorp Stock Fund and any remaining funds from your account will be transferred out of the Stock Offering Fund for investment in the other funds under the 401(k) Plan, based on your election currently on file for future contributions. If you do not have an election on file for future contributions, any remaining funds will be transferred to the applicable Blackrock Lifepath Index Fund, based on your retirement age assumption, to be reinvested by you in your discretion. |
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During the stock offering period, you will continue to have the ability to transfer amounts not invested in the 1895 Bancorp Stock Fund among all the other investment funds on a daily basis. However, you will not be permitted to change the investment amounts that you designated to be transferred to the Stock Offering Fund. |
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The amount you elect to transfer to the purchase of 1895 Bancorp Common Stock needs to be segregated and held until the Offering closes. Therefore, this money is not available for distributions, loans or withdrawals until the Offering is completed, which is after the closing of the subscription offering period. |
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You are allowed only one election to transfer funds to the 1895 Bancorp Stock Fund. Follow these steps to elect to use all or part of your account balance in the 401(k) Plan to purchase shares in the stock offering: |
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Use the enclosed Special Investment Election Form to transfer up to 50% of your account balance to the Stock Offering Fund to purchase 1895 Bancorp Common Stock in the Offering. Indicate next to each fund in which you are invested the percentage of that fund you wish to transfer to the 1895 Bancorp Stock Fund. If you do not wish to transfer an amount from a particular fund in which you have an investment, you do not have to indicate anything, or you can indicate -0-. |
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Please print your name and social security number on the Special Investment Election Form. |
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Please complete Section D of the Special Investment Election Form Purchaser Information indicating your individual purchase priority and provide the information requested on your accounts in PyraMax Bank, FSB. |
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Sign and date the Special Investment Election Form and return it by hand delivery, regular mail or fax to the person designated immediately below. |
If you wish to purchase 1895 Bancorp Common Stock with up to 50% of your 401(k) Plan account balances, your Special Investment Election Form must be received by Monica Baker; no later than 4:00 p.m., Eastern Time, on [DEADLINE] . To allow for processing, this deadline is prior to the subscription offering period deadline (which is [DATE] ). If you have any questions with respect to the Special Investment Election Form, please contact Monica Baker, Senior Vice President, Chief Brand Officer. |
You may not revoke your Special Investment Election Form once it has been delivered to Monica Baker, Senior Vice President, Chief Brand Officer . You will, however, continue to have the ability to transfer amounts not directed towards the purchase of 1895 Bancorp Common Stock in the Offering among all of the other investment funds on a daily basis. |
Whether or not you choose to purchase 1895 Bancorp Common Stock in the Offering through the 401(k) Plan, you will at all times |
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have complete access to those amounts in your account that you do not apply towards purchases in the Offering. For example, you will be able to purchase other funds within the 401(k) Plan with that portion of your account balance that you do not apply towards purchases in the Offering during the Offering period. Such purchases will be made at the prevailing market price in the same manner as you make such purchases now, i.e., through telephone transfers and internet access to your account. You can only purchase 1895 Bancorp Common Stock in the Offering through the 401(k) Plan by returning your Special Investment Election Form to Monica Baker by the due date. You cannot purchase 1895 Bancorp Common Stock in the Offering by means of telephone transfers or the internet. That portion of your 401(k) Plan account balance that you elect to apply towards the purchase of 1895 Bancorp Common Stock in the Offering will be irrevocably committed to such purchase. |
The Common Stock acquired by the trustee at your direction will be allocated to your account and will be held in the 1895 Bancorp Stock Fund. |
You may direct the trustee as to how to vote your shares of 1895 Bancorp Common Stock held in the 1895 Bancorp Stock Fund. If the trustee does not receive your voting instructions, the trustee will be directed by PyraMax Bank, FSB to vote your shares in the same proportion as the voting instructions received from other participants related to their shares of 1895 Bancorp Common Stock |
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held by the 401(k) Plan, provided that such vote is made in accordance with the Employee Retirement Income Security Act of 1974, as amended (ERISA). All voting instructions will be kept confidential. |
DESCRIPTION OF THE 401(k) PLAN
PyraMax Bank, FSB originally adopted the 401(k) Plan effective as of February 13, 1989. The 401(k) Plan was last restated, effective July 1, 2017. In connection with the Conversion of PyraMax Bank, FSB from the mutual to stock form of organization as the wholly owned subsidiary of 1895 Bancorp of Wisconsin, Inc., 1895 Bancorp of Wisconsin, Inc. and the Bank desire to allow participants to purchase common stock of 1895 Bancorp of Wisconsin, Inc. in their accounts in the 401(k) Plan. The 401(k) Plan is a tax-qualified plan with a cash or deferred compensation feature established in accordance with the requirements under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as amended (the Code).
The Bank intends that the 401(k) Plan, in operation, will comply with the requirements under Section 401(a) and Section 401(k) of the Code. The Bank will adopt any amendments to the 401(k) Plan that may be necessary to ensure the continuing qualified status of the 401(k) Plan under the Code and applicable Treasury Regulations.
Employee Retirement Income Security Act of 1974 (ERISA). The 401(k) Plan is an individual account plan other than a money purchase pension plan within the meaning of ERISA. As such, the 401(k) Plan is subject to all of the provisions of Title I (Protection of Employee Benefit Rights) and Title II (Amendments to the Code Relating to Retirement Plans) of ERISA, except to the funding requirements contained in Part 3 of Title I of ERISA, which by their terms do not apply to an individual account plan (other than a money purchase plan). The 401(k) Plan is not subject to Title IV (Plan Termination Insurance) of ERISA. The funding requirements contained in Title IV of ERISA are not applicable to participants or beneficiaries under the 401(k) Plan.
Reference to Full Text of 401(k) Plan. The following portions of this prospectus supplement summarize certain provisions of the 401(k) Plan. They are not complete and are qualified in their entirety by the full text of the 401(k) Plan. Copies of the 401(k) Plan are available to all employees by filing a request with the 401(k) Plan Administrator c/o PyraMax Bank, FSB, Attn: Monica Baker, Senior Vice President, Chief Brand Officer. You are urged to read carefully the full text of the 401(k) Plan.
As an employee of the Bank, you are eligible to become a participant in the 401(k) Plan by making elective deferral contributions on the first day of the calendar month, coincident or next following the date you attain age 18 and complete 1 month of service, measured from
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your date of hire, provided that you are an eligible employee at such time. Eligible employees will become participants with respect to profit sharing contributions on the next payroll date after attaining age 18 and completing six months of consecutive service. You will be eligible to receive a profit sharing contribution if you meet the eligibility requirements and have 1,000 hours of service during the plan year and are employed on the last day of the plan year. You will be eligible to receive safe harbor contributions (as defined below), if you are an eligible employee after six months of service and entry on the next payroll date. You are not an eligible employee if you are a member of the following classes of employees: (i) an 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; (ii) any leased employee; (iii) any non-resident alien who received no earned income which constitutes income from services performed in the United States; and (iv) employees of South Milwaukee Investments, Inc. and Temporary Employees as classified by the Bank.
As of July 31, 2018, there were approximately 145 active and former employees with account balances in the 401(k) Plan.
Contributions under the 401(k) Plan
Elective Deferrals. You are permitted to defer on a pre-tax basis up to 100% of your Compensation, subject to certain restrictions imposed by the Code, and to have that amount contributed to the 401(k) Plan on your behalf. Your pre-tax deferrals are subject to certain restrictions imposed by the Code, and for 2018, you may defer up to $18,500 and you may defer an additional $6,000 if you qualify for catch-up contributions as described in the next paragraph. The Compensation of each participant taken into account under the 401(k) Plan is limited by the Code, and for 2018 the limit is $275,000 (this limit may change on an annual basis). Canceling or changing your contribution percentage can be accomplished either over the telephone or over the internet at any time.
If, after receiving a notice from the Bank, you do not make an elective deferral contribution election, you will be deemed to have made an election to defer 6% of your Compensation. This percentage election will increase each year by 1% until your elective deferral is 10%. You can prevent this automatic deferral contribution election if you turn in the applicable form to prevent such contributions. Similarly, you can withdraw contributions made without your consent for up to a brief period of time after the automatic contributions are first removed from your Compensation.
Roth Elective Deferrals . You may elect to designate all or a portion of deferrals as Roth elective deferrals. Roth elective deferrals do not reduce your total taxable income or your current taxes. Because you pay taxes on these contribution when they are made, these contributions will not be taxed later when received as a benefit and distributed as a qualified distribution. A distribution will be a qualified distribution if (i) the distribution is made on or after you attain age 59 1 ⁄ 2 , on or after the date of your death, or as a result of you becoming disabled as defined by the Code; or (ii) the distribution is made after the end of the 5-taxable-year period beginning with the first taxable year in which you make a Roth elective deferral contribution to this plan.
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Catch-up Contributions . If you have made the maximum amount of elective deferrals allowed by the 401(k) Plan or other legal limits and you have attained at least age 50 (or will reach age 50 prior to the end of the tax year, which is March 31), you are also eligible to make an additional catch-up contribution. In 2018, the maximum catch-up contribution is $6,000. You may authorize your employer to withhold a specified dollar amount of your compensation for this purpose.
Safe Harbor Matching Contributions . The Bank will make a safe harbor matching contribution to your account if you have satisfied the eligibility requirements and have made a matched employee contribution during the plan year. A matched employee contribution is any elective deferral contribution or catch-up contribution that you may make. The safe harbor matching contribution is an amount equal to 100% of your matched employee contributions that are not in excess of six percent (6%) of your Compensation. The safe harbor matching contribution is subject to change from year to year, in the discretion of the Bank.
Profit Sharing Contributions . The Bank may, in its discretion, make profit sharing contributions to the accounts of eligible participants from time to time on a nondiscriminatory basis. The amount of any profit sharing contributions, if made, will be determined in the sole discretion of the Bank and will only be available to participants who have 1,000 hours of service during the plan year and are employed on the last of the plan year.
Qualified Non-Elective Contributions . In addition to the contributions described above, the Bank may make additional qualified non-elective contributions for the benefit of participants determined at the discretion of the Bank.
Rollover Contributions . The 401(k) Plan may accept a rollover contribution from another tax-qualified plan or eligible individual retirement account made on behalf of an eligible employee, regardless of whether such employee has met the age and service requirements of the Plan. An eligible employee who has not met the age and service requirements of the 401(k) Plan shall be considered a participant only with respect to the amount of his or her rollover contributions, if any.
Contribution Limits. For the tax year beginning January 1, 2018, the amount of your elective deferrals may not exceed $18,500 per calendar year, or $24,500 if you are eligible to make catch-up contributions. Contributions in excess of this limit are known as excess deferrals. If you defer amounts in excess of this limitation, your gross income for federal income tax purposes will include the excess in the year of the deferral. In addition, unless the excess deferral is distributed before April 15 of the following year, it will be taxed again in the year distributed. Income on the excess deferral distributed by April 15 of the immediately succeeding year will be treated, for federal income tax purposes, as earned and received by you in the tax year in which the contribution is made.
The total amount of contributions that you make and any contribution your employer makes on your behalf to your account in one year is limited to the lesser of 100% of your compensation or $55,000 (for 2018), or if applicable, $61,000 (for 2018) including catch-up contributions.
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Rollovers . You may make a rollover contribution of an eligible rollover distribution from any other qualified retirement plan or an individual retirement arrangement (IRA). These funds will be maintained in a separate rollover account in which you will have a nonforfeitable vested interest.
Benefits under the 401(k) Plan
Vesting. At all times, you have a fully vested, nonforfeitable interest in your elective deferrals, including Roth elective deferrals, catch-up contributions, if any, safe harbor matching contributions, qualified non-elective contributions and rollover contributions.
Your profit sharing contributions, if any, will vest in accordance with the following:
Vesting Schedule | ||
Profit Sharing Contributions | ||
Period of Service |
Vested
Percentage |
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Less than 2 years |
0% | |
2 years |
20% | |
3 years |
40% | |
4 years |
60% | |
5 years |
100% | |
6 years |
100% |
Distribution at Termination of Employment . You will be entitled to receive a distribution of the vested amounts in your account when your employment terminates for any reason. Your benefit will be equal to the vested balance of your account. The 401(k) Plan will make involuntary cash-out distributions of vested account balances in accordance with the 401(k) Plan. If you are not a 5% or more owner of your employer, your required benefit commencement date is the April 1 st following the close of the year in which the later occurs: you attain age 70 1 ⁄ 2 or you terminate employment.
Distribution after Death of Participant . In the event of your death, the value of your entire account will be payable to your beneficiary in accordance with the 401(k) Plan.
Investment of Contributions and Account Balances
All amounts credited to your accounts under the 401(k) Plan are held in the 401(k) Plan trust (the Trust), which is administered by the trustee of the 401(k) Plan. Prior to the effective date of the Offering, you were provided the opportunity to direct the investments of your account into one of the investment options described below.
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The following table provides performance data with respect to the investment funds in the 401(k) Plan:
Average Annual Total Return
(as of 6/30/2018 quarter end) |
||||||||||||||||||||||||
Investment Option Name |
YTD | 1-Year | 3-Year | 5-Year | 10-Year | Incept Date | ||||||||||||||||||
AB Global Bond Z Fund |
(0.64 | ) | 0.27 | 3.14 | 3.21 | 4.58 | 10/2013 | |||||||||||||||||
AllianzGI NFJ Mid-Cap Value Institutional Fund |
(3.86 | ) | 5.26 | 10.89 | 12.29 | 9.62 | 12/30/1997 | |||||||||||||||||
American Beacon International Equity Institutional Fund |
(3.45 | ) | 6.50 | 3.59 | 5.86 | 3.39 | 08/07/1991 | |||||||||||||||||
American Beacon Small Cap Value Institutional Fund |
4.34 | 12.70 | 9.87 | 11.43 | 10.78 | 12/31/1998 | ||||||||||||||||||
American Funds EuroPacific Growth R6 Fund |
(1.82 | ) | 9.35 | 6.51 | 8.34 | 4.82 | 05/01/2009 | |||||||||||||||||
American Funds New World R6 Fund |
(2.56 | ) | 10.45 | 7.46 | 6.71 | 3.90 | 05/01/2009 | |||||||||||||||||
Baird Aggregate Bond Institutional Fund |
(1.76 | ) | (0.34 | ) | 2.10 | 2.81 | 4.43 | 09/29/2000 | ||||||||||||||||
Bond Market Index Separate Account-Z |
(1.74 | ) | (0.65 | ) | 1.43 | 2.02 | | 12/30/2009 | ||||||||||||||||
Delaware Corporate Bond Instl Fund |
(3.73 | ) | (1.28 | ) | 2.40 | 3.31 | 6.69 | 09/15/1998 | ||||||||||||||||
Dodge & Cox Stock Fund |
0.96 | 11.85 | 10.95 | 12.81 | 9.70 | 01/04/1965 | ||||||||||||||||||
Eaton Vance Floating Rate I Fund |
2.29 | 4.31 | 4.52 | 3.84 | 4.48 | 01/2001 | ||||||||||||||||||
Global Real Estate Securities Separate Account-Z |
1.87 | 9.54 | 6.83 | 7.56 | 7.46 | 09/30/2013 | ||||||||||||||||||
Goldman Sachs International Small Cap Insights Instl Fund |
(1.65 | ) | 11.44 | 10.10 | 11.67 | 8.19 | 09/28/2007 | |||||||||||||||||
Harbor Capital Appreciation Inst Fund |
10.94 | 29.21 | 15.29 | 18.14 | 12.35 | 12/29/1987 | ||||||||||||||||||
International Equity Index Separate Account-Z |
(2.55 | ) | 6.22 | 4.62 | 6.14 | | 12/30/2009 | |||||||||||||||||
Invesco Growth and Income R6 Fund |
(1.14 | ) | 8.17 | 9.12 | 10.88 | 9.17 | 09/24/2012 | |||||||||||||||||
Ivy High Income N Fund |
1.91 | 4.78 | 5.64 | 5.26 | 8.03 | 07/2014 | ||||||||||||||||||
LargeCap S&P 500 Index Separate Account-Z |
2.64 | 14.31 | 11.86 | 13.33 | 10.10 | 01/01/1990 | ||||||||||||||||||
MFS Blended Research Core Equity R6 Fund |
0.83 | 12.05 | 9.14 | 12.40 | 9.61 | 01/14/1994 | ||||||||||||||||||
MidCap S&P 400 Index Separate Account-Z |
3.45 | 13.40 | 10.79 | 12.58 | 10.67 | 08/31/1999 | ||||||||||||||||||
PIMCO International Bond (US Dollar-Hedged) I Fund |
1.91 | 4.33 | 4.81 | 5.24 | 6.71 | 12/1992 | ||||||||||||||||||
Oppenheimer Developing Markets Institutional Fund |
(1.09 | ) | 12.63 | 7.59 | 6.04 | 5.67 | 12/2011 | |||||||||||||||||
PIMCO Real Return Instl Fund |
(0.25 | ) | 2.05 | 1.97 | 1.64 | 3.36 | 01/29/1997 | |||||||||||||||||
Principal Fixed Income Guaranteed Option (no chart info) |
||||||||||||||||||||||||
Putnam Convertible Securities Y Fund |
4.07 | 10.73 | 6.27 | 8.26 | 7.32 | 12/1998 | ||||||||||||||||||
SmallCap S&P 600 Index Separate Account-Z |
9.31 | 20.35 | 13.74 | 14.52 | 12.18 | 08/31/1999 | ||||||||||||||||||
Vanguard Explorer Admiral Fund |
11.65 | 23.67 | 11.63 | 13.52 | 11.23 | 12/11/1967 | ||||||||||||||||||
Western Asset Core Bond IS Fund |
(1.82 | ) | 0.19 | 2.74 | 3.38 | 5.34 | 08/29/1990 | |||||||||||||||||
BlackRock Lifepath Index Retirement K Fund |
(0.28 | ) | 4.74 | 4.80 | 5.55 | | 05/31/2011 | |||||||||||||||||
BlackRock Lifepath Index 2020 K Fund |
(0.31 | ) | 5.55 | 5.33 | 6.35 | | 05/31/2011 | |||||||||||||||||
BlackRock Lifepath Index 2025 K Fund |
(0.05 | ) | 6.75 | 6.21 | 7.19 | | 05/31/2011 | |||||||||||||||||
BlackRock Lifepath Index 2030 K Fund |
0.12 | 7.92 | 6.92 | 7.90 | | 5/31/2011 | ||||||||||||||||||
BlackRock Lifepath Index 2035 K Fund |
0.21 | 8.92 | 7.61 | 8.54 | | 05/31/2011 | ||||||||||||||||||
BlackRock Lifepath Index 2040 K Fund |
0.37 | 9.86 | 8.22 | 9.14 | | 05/31/2011 | ||||||||||||||||||
BlackRock Lifepath Index 2045 K Fund |
0.49 | 10.52 | 8.64 | 9.59 | | 05/31/2011 | ||||||||||||||||||
BlackRock Lifepath Index 2050 K Fund |
0.49 | 10.72 | 8.76 | 9.85 | | 05/31/2011 | ||||||||||||||||||
BlackRock Lifepath Index 2055 K Fund |
0.49 | 10.75 | 8.79 | 10.04 | | 05/31/2011 | ||||||||||||||||||
BlackRock Lifepath Index 2060 K Fund |
0.50 | 10.80 | | | | 02/29/2016 |
Description of the Investment Funds
The following is a description of each of the funds:
AB Global Bond Z Fund. This fund seeks to generate current income consistent with preservation of capital. The fund invests at least 80% of its net assets in fixed-income securities. It invests significantly in fixed-income securities of non-U.S. companies. The fund normally invests in the fixed-income securities of companies located in at least three countries. It may invest in a broad range of fixed-income securities in both developed and emerging markets. The fund may invest across all fixed-income sectors, including U.S. and non-U.S. government and corporate debt securities.
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AllianzGI NFJ Mid-Cap Value Institutional Fund. This fund seeks long-term growth of capital and income. The fund seeks to achieve its investment objective by normally investing at least 80% of its net assets (plus borrowings made for investment purposes) in common stocks and other equity securities of companies with medium market capitalizations. The manager currently defines medium market capitalization companies as companies with a market capitalization of at least $3 billion and up to the largest company held in the Russell Midcap Index.
American Beacon International Equity Institutional Fund. This fund seeks long-term capital appreciation. The fund normally invests at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in common stocks and securities convertible into common stocks of issuers based in at least three different countries located outside the United States. It primarily invests in countries comprising the Morgan Stanley Capital International Europe Australasia and Far East Index (MSCI EAFE Index). The MSCI EAFE Index is comprised of equity securities of companies from various industrial sectors whose primary trading markets are located outside the United States.
American Beacon Small Cap Value Institutional Fund. This fund seeks long-term appreciation and current income. Under normal circumstances, at least 80% of the funds net assets (plus the amount of any borrowings for investment purposes) are invested in equity securities of small market capitalization U.S. companies. These companies have market capitalizations of $5 billion or less at the time of investment. The funds investments may include common stocks, real estate investment trusts (REITs), American Depositary Receipts (ADRs) and U.S. dollar-denominated foreign stocks traded on U.S. exchanges.
American Funds EuroPacific Growth R6 Fund. This fund seeks long-term growth and capital. The fund invests primarily in common stocks of issuers in Europe and the Pacific Basin that This fund adviser believes have the potential for growth. Growth stocks are stocks that the investment adviser believes have the potential for above-average capital appreciation. It normally will invest at least 80% of its net assets in securities of issuers in Europe and the Pacific Basin. The fund may invest a portion of its assets in common stocks and other securities of companies in emerging markets.
American Funds New World R6 Fund. This fund seeks long-term capital appreciation. The fund invests primarily in common stock of companies with significant exposure to countries with developing economies and/or markets. Under normal market conditions, the fund will invest at least 35% of its assets in equity and debt securities of issuers primarily based in qualified countries that have developing economics and/or markets.
Baird Aggregate Bond Institutional Fund . This fund seeks an annual rate of total return, before fund expenses, greater than the annual rate of total return of the Barclays U.S. Aggregate Bond Index. The fund normally invests at least 80% of its net assets in the following types of U.S. dollar-denominated debt obligations: U.S. government and other public-sector entities; asset-backed and mortgage-backed obligations of U.S. foreign issuers; corporate debt of U. S. and foreign issuers. It only invests in debt obligations rated investment grade at the time of purchase by at least one major rating agency or, if unrated, determined by Robert W. Baird & Co. incorporated to be investment grade.
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Bond Market Index Separate Account-Z. This fund seeks to provide current income. The fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in debt securities held by the Barclay U.S. Aggregate Bond Index at the time of purchase. The index is composed of investment grade, fixed rate debt issues, including government, corporate, assets-backed, and mortgage-backed securities, with maturities of one year or more. It employs a passive investment approach designed to attempt to track the performance of the index.
Delaware Corporate Bond Instl Fund. This fund seeks total return. Under normal circumstances, the fund will invest at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in corporate bonds (80% bonds). It may also invest up to 20% of its net assets in high yield corporate bonds (junk bonds). In addition, the fund may invest up to 40% of its total assets in foreign securities, but the funds total non-U.S.-dollar currency exposure will be limited, in the aggregate, to no more that 25% of net assets.
Dodge & Cox Stock Fund. This fund seeks long-term growth of principal and income; a secondary objective is to achieve a reasonable current income. The fund invests primarily in a diversified portfolio of equity securities. It will invest at least 80% of its total assets in equity securities, including common stocks, depositary receipts evidencing ownership of common stocks, preferred stocks, securities convertible into common stocks, and securities that carry the right to buy common stocks. The fund may invest up to 20% of its total assets in U.S. dollar-denominated securities of non-U.S. issuers traded in the United States that are not in the S&P 500.
Eaton Vance Floating Rate I Fund. This fund seeks to provide a high level of current income. Under normal circumstances, the fund invests at least 80% of its total assets in income producing floating rate loans and other floating rate debt securities. It invests primarily in senior floating rate loans of domestic and foreign borrowers (Senior Loans). Senior Loans typically are of below investment grade quality and have below investment grade credit ratings, which ratings are associated with securities having high risk, speculative characteristics (sometimes referred to as junk).
Global Real Estate Securities Separate Account-Z. This investment seeks to generate a total return. Under normal circumstances, the fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of U.S. and non-U.S. companies principally engaged in the real estate industry at the time of purchase. For the funds investment policies, a real estate company has at least 50% of its assets, income or profits derived from products or services related to the real estate industry.
Goldman Sachs International Small Cap Insights Instl Fund. This fund seeks long-term growth of capital. The fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of purchase) (Net Assets) in a broadly diversified portfolio of equity investments in small-cap non-U.S. issuers. The advisor uses a quantitative style of management in combination with a qualitative overlay at emphasizes fundamentally-based stock selection, careful portfolio construction and efficient implementation.
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Harbor Capital Appreciation Inst Fund. This fund seeks long-term growth of capital. The fund invests primarily in equity securities, principally common and preferred stocks, of U.S. companies with market capitalizations of at least $1 billion at the time of purchase and that the Subadvisor considers having above average prospects for growth. The stocks of mid and large cap companies in the funds portfolio are those the Subadvisor expects to maintain or achieve above average earnings growth. The fund may invest up to 20% of its total assets in the securities of foreign issuers, including issuers located or doing business in emerging markets.
International Equity Index Separate Account-Z. This fund seeks long-term growth of capital. The fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in securities that compose the MSCI EEAFE NR Index at the time of purchase. The Index is a market-weighted equity index designed to measure the equity performance of developed markets, excluding the United States and Canada. The advisor employs a passive investment approach designed to attempt to track the performance of the index.
Invesco Growth and Income R6 Fund. This fund seeks total return through growth of capital and current income. Under normal market conditions, the funds investment adviser seeks to achieve the funds investment objective by investing primarily in income-producing equity securities, which include common stocks and convertible securities. It may invest in securities of issuers of all capitalization sizes; however, a substantial number of the issuers in which the fund invests are large-capitalization issuers. The fund may invest up to 25% of its net assets in securities of foreign issuers, which may include depositary receipts.
Ivy High Income N Fund. This fund seeks to provide total return through a combination of high current income and capital appreciation. The fund invests primarily in a diversified portfolio of high-yield, high-risk, fixed-income securities, including secured and unsecured loan assignments, loan participations and other loan instruments (loans), of U.S. and foreign issuers, the risks of which are, in the judgment of the adviser consistent with the funds objective. It may invest up to 100% of its total assets in foreign securities that are denominated in U.S. dollars or foreign currencies.
LargeCap S&P 500 Index Separate Account-Z. This fund option normally invests the majority of assets in common stocks of companies that compose the S&P 500 Index. Management attempts to mirror the investment performance of the index by allocating assets in approximately the same weightings as the S&P 500 Index. Over the long-term, management seeks a very close correlation between the performance of the Separate Account before expenses and that of the S&P 500 Index.
MFS Blended Research Core Equity R6 Fund. This fund seeks capital appreciation. The fund normally invests at least 80% of the funds net assets in equity securities. Equity securities include common stocks and other securities that represent an ownership interest (or right to acquire an ownership interest) in a company or other issuer.
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MidCap S&P 400 Index Separate Account-Z. The investment option normally invests the majority of assets in common stocks of companies that compose the S&P MidCap 400 Index. Management attempts to mirror the investment performance of the index by allocating assets in approximately the same weightings as the S&P MidCap 400 Index. Over the long-term, management seeks a very close correlation between the performance of the Separate Account before expenses and that of the S&P MidCap 400 Index.
Oppenheimer Developing Markets Institutional Fund. This fund seeks capital appreciation. The fund mainly invests in common stock of issuers in developing and emerging markets throughout the world and at times it may invest up to 100% of its total assets in foreign securities. Under normal market conditions, it will invest at least 80% of its net assets, plus borrowings for investment purposes, in equity securities of issuers whose principal activities are in a developing market, i.e. are in a developing market or are economically tied to a developing market country. The fund will invest in at least three developing markets.
PIMCO International Bond (US Dollar-Hedged) I Fund. This fund seeks maximum total return, consistent with preservation of capital and prudent investment management. The fund normally invests at least 80% of its assets in Fixed Income Instruments that are economically tied to foreign (non-U.S.) countries, representing at least three foreign countries, which may be represented by forwards or derivatives such as options, future contracts or swap arrangements. It invests primarily in investment-grade debt securities, but may invest up to 10% of its total assets in junk bonds as rated by Moodys, S&P or Fitch, or, if unrated, as determined by PIMCO. The fund is non-diversified.
PIMCO Real Return Instl Fund. This fund seeks maximum real return, consistent with preservation of capital and prudent investment management. The fund normally invests at least 80% of its net assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies or instrumentalities, and corporations, which may be represented by forwards or derivatives such as options, futures contracts or swap agreements.
Principal Fixed Income Guaranteed Option. The Principal Fixed Income Guaranteed Option is a guaranteed general-account backed group annuity contract that has been issued by Principal Life Insurance Company (Principal Life) to Principal Trust Company as custodian.
Putnam Convertible Securities Y Fund. This fund seeks current income and capital appreciation; its secondary objective is conservation of capital. The fund invests mainly in convertible securities of U.S. companies. Convertible securities combine the investment characteristics of bonds and common stocks. Under normal circumstances, it invests at least 80% of the funds net assets in convertible securities. Convertible securities include bonds, preferred stocks and other instruments that can be converted into or exchanged for common stock or equivalent value. A significant portion of the convertible securities are below-investment-grade.
SmallCap S&P 600 Index Separate Account-Z. This fund seeks long-term growth of capital and normally invests the majority of assets in common stocks of companies that compose the S&P SmallCap 600 Index. Management attempts to mirror the investment performance of the index by allocating assets in approximately the same weightings as the S&P 600 Index. Over the long-term, management seeks a very close correlation between the performance of the Separate Account before expenses and that of the S&P 600 Index.
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Vanguard Explorer Admiral Fund. This fund seeks to provide long-term capital appreciation. The fund invests mainly in the stocks of small and mid-size companies. These companies tend to be unseasoned but are considered by the funds advisors to have superior growth potential. Also, these companies often provide little or no dividend income. It uses multiple investment advisors.
Western Asset Core Bond IS Fund. This fund seeks to maximize total return, consistent with prudent investment management and liquidity needs. The fund invests in a portfolio of fixed income securities of various maturities and, under normal market conditions, will invest at least 80% of its net assets in debt and fixed income securities. Although the fund may invest in debt and fixed income securities of any maturity, under normal market conditions the target dollar-weighted average effective duration for the fund is expected to range within 20% of the average duration of the domestic bond market as a whole as estimated by the funds subadvisor.
BlackRock Lifepath Index Retirement K Fund. This fund seeks to provide for retirement outcomes based on quantitatively measured risk. The fund is a Feeder fund that invests all of its assets in the Master Portfolio, a series of Master Investment Portfolio with a substantially identical investment objective, which allocates and reallocates its assets among a combination of equity and bond index funds and money market funds in propositions based on its own instruments that are components of or have economic characteristics similar to the securities included in its custom benchmark index.
BlackRock Lifepath Index 2020 K Fund
BlackRock Lifepath Index 2025 K Fund.
BlackRock Lifepath Index 2030 K Fund.
BlackRock Lifepath Index 2035 K Fund.
BlackRock Lifepath Index 2040 K Fund.
BlackRock Lifepath Index 2045 K Fund.
BlackRock Lifepath Index 2050 K Fund.
BlackRock Lifepath Index 2055 K Fund.
BlackRock Lifepath Index 2060 K Fund. These funds seek to provide for retirement outcomes based on quantitatively measured risk. The funds are Feeder funds that invest all of their assets in the Master Portfolio, a series of Master Investment Portfolio (MIP) with substantially identical investment objectives, which allocate and reallocate their assets among a combination of equity and bond index funds and money market funds (the underlying funds) in proportions based on their own comprehensive investment strategy.
An investment in any of the funds listed above is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. As with any mutual fund investment, there is always a risk that you may lose money on your investment in any of the funds listed above.
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In connection with the stock offering, the 401(k) Plan now offers the 1895 Bancorp Stock Fund as an additional choice to the investment options described above. 1895 Bancorp Stock Fund invests primarily in the shares of common stock of 1895 Bancorp of Wisconsin, Inc. In connection with the stock offering, you may, in the manner described earlier, direct the trustee to invest up to 50% of your 401(k) Plan account in 1895 Bancorp Stock Fund as a one-time special election.
As of the date of this prospectus supplement, there is no established market for 1895 Bancorp of Wisconsin, Inc. common stock. Accordingly, there is no record of the historical performance of 1895 Bancorp Stock Fund. Performance of 1895 Bancorp Stock Fund depends on a number of factors, including the financial condition and profitability of 1895 Bancorp of Wisconsin, Inc. and the Bank and market conditions for shares of 1895 Bancorp of Wisconsin, Inc. common stock generally.
Investments in 1895 Bancorp Stock Fund involve special risks common to investments in the shares of common stock of 1895 Bancorp of Wisconsin, Inc. In making a decision to invest all or a part of your account balance in the 1895 Bancorp Stock Fund, you should carefully consider the information set forth on page 16 of this prospectus supplement under Notice of Your Rights Concerning Employer Securities The Importance of Diversifying Your Retirement Savings.
For a discussion of material risks you should consider, see Risk Factors beginning on page 16 of the attached prospectus and the section of this prospectus supplement called Notice of Your Rights Concerning Employer Securities below.
Withdrawals from the 401(k) Plan
Applicable federal law requires the 401(k) Plan to impose substantial restrictions on the right of a 401(k) Plan participant to withdraw amounts held for his or her benefit under the 401(k) Plan prior to the participants termination of employment with the Bank. A substantial federal tax penalty may also be imposed on withdrawals made prior to the participants attainment of age 59 1 ⁄ 2 , regardless of whether such a withdrawal occurs during his or her employment with the Bank or after termination of employment.
Withdrawal from your Account prior to Retirement. Once you have attained age 59 1 ⁄ 2 , you may request distribution of all or part of the amounts credited to your accounts attributable to elective deferrals, nonelective contributions and matching contributions.
Hardship Withdrawals . If you incur a financial hardship, you may request a withdrawal from the portion of your account attributable to your pre-tax and after-tax elective deferrals.
Rollover Contributions . You may withdraw amounts you contributed to the 401(k) Plan as a rollover contribution at any time.
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Loan . You may request a loan from your account pursuant to the procedures established in the 401(k) Plan.
Administration of the 401(k) Plan
The Trustee and Custodian . The trustee of the 401(k) Plan is the Board of Directors of the Bank.
Plan Administrator . Pursuant to the terms of the 401(k) Plan, the 401(k) Plan is administered by the 401(k) Plan administrator. The address of the 401(k) Plan administrator is PyraMax Bank, FSB, 7001 West Edgerton Avenue, Greenfield, WI 53220. The 401(k) Plan administrator is responsible for the administration of the 401(k) Plan, interpretation of the provisions of the 401(k) Plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the 401(k) Plan, maintenance of plan records, books of account and all other data necessary for the proper administration of the 401(k) Plan, preparation and filing of all returns and reports relating to the 401(k) Plan which are required to be filed with the U.S. Department of Labor and the Internal Revenue Service, and for all disclosures required to be made to participants, beneficiaries and others under Sections 104 and 105 of ERISA.
Reports to Plan Participants . The 401(k) Plan administrator will furnish you a statement at least quarterly showing the balance in your account as of the end of that period, the amount of contributions allocated to your account for that period, and any adjustments to your account to reflect earnings or losses (if any). In addition, you can go on-line to principal.com or call 1-800 -547-7754 at any time to review your account balances.
It is the intention of the Bank to continue the 401(k) Plan indefinitely. Nevertheless, the Bank may terminate the 401(k) Plan at any time. If the 401(k) Plan is terminated in whole or in part, then regardless of other provisions in the 401(k) Plan, you will have a fully vested interest in your accounts. The Bank reserves the right to make any amendment or amendments to the 401(k) Plan which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries; provided, however, that the Bank may make any amendment it determines necessary or desirable, with or without retroactive effect, to comply with ERISA.
Merger, Consolidation or Transfer
In the event of the merger or consolidation of the 401(k) Plan with another plan, or the transfer of the trust assets to another plan, the 401(k) Plan requires that you would receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer.
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Federal Income Tax Consequences
The following is a brief summary of the material federal income tax aspects of the 401(k) Plan. You should not rely on this summary as a complete or definitive description of the material federal income tax consequences relating to the 401(k) Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws. Please consult your tax advisor with respect to any distribution from the 401(k) Plan and transactions involving the 401(k) Plan.
As a tax-qualified retirement plan, the Code affords the 401(k) Plan special tax treatment, including:
(1) the sponsoring employer is allowed an immediate tax deduction for the amount contributed to the 401(k) Plan each year;
(2) participants pay no current income tax on amounts contributed by the employer on their behalf; and
(3) earnings of the 401(k) Plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments.
The Bank will administer the 401(k) Plan to comply with the requirements of the Code as of the applicable effective date of any change in the law.
Lump-Sum Distribution . A distribution from the 401(k) Plan to a participant or the beneficiary of a participant will qualify as a lump-sum distribution if it is made within one taxable year, on account of the participants death, disability or separation from service, or after the participant attains age 59 1 ⁄ 2 , and consists of the balance credited to participants under the 401(k) Plan and all other profit sharing plans (and in some cases all other stock bonus plans), if any, maintained by the Bank. The portion of any lump-sum distribution required to be included in your taxable income for federal income tax purposes consists of the entire amount of the lump-sum distribution, less the amount of after-tax contributions, if any, you have made to this 401(k) Plan and any other profit sharing plans maintained by the Bank, which is included in the distribution.
1895 Bancorp of Wisconsin, Inc. Common Stock Included in Lump-Sum Distribution . If a lump-sum distribution includes 1895 Bancorp Common Stock, the distribution generally will be taxed in the manner described above, except that the total taxable amount may be reduced by the amount of any net unrealized appreciation with respect to 1895 Bancorp Common Stock, that is, the excess of the value of 1895 Bancorp Common Stock at the time of the distribution over its cost or other basis of the securities to the trust. The tax basis of 1895 Bancorp Common Stock, for purposes of computing gain or loss on its subsequent sale, equals the value of 1895 Bancorp Common Stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a subsequent sale or other taxable disposition of 1895 Bancorp Common Stock, to the extent of the amount of net unrealized appreciation at the time of distribution, will constitute long-term capital gain, regardless of the holding period of 1895 Bancorp Common Stock. Any
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gain on a subsequent sale or other taxable disposition of 1895 Bancorp Common Stock, in excess of the amount of net unrealized appreciation at the time of distribution, will be considered long-term capital gain. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed by regulations to be issued by the Internal Revenue Service.
Distributions: Rollovers and Direct Transfers to Another Qualified Plan or to an IRA . You may roll over virtually all distributions from the 401(k) Plan to another qualified plan or to an individual retirement account (IRA) in accordance with the terms of the other plan or account.
Notice of Your Rights Concerning Employer Securities
There has been an important change in Federal law that provides specific rights concerning investments in employer securities, such as 1895 Bancorp of Wisconsin, Inc. common stock. Because you may in the future have investments in 1895 Bancorp Stock Fund under the 401(k) Plan, you should take the time to read the following information carefully.
Your Rights Concerning Employer Securities . The 401(k) Plan must allow you to elect to move any portion of your account that is invested in the 1895 Bancorp Stock Fund from that investment into other investment alternatives under the 401(k) Plan. You may contact the 401(k) Plan Administrator shown above for specific information regarding this new right, including how to make this election. In deciding whether to exercise this right, you will want to give careful consideration to the information below that describes the importance of diversification. All of the investment options under the 401(k) Plan are available to you if you decide to diversify out of the 1895 Bancorp Stock Fund.
The Importance of Diversifying Your Retirement Savings . To help achieve long-term retirement security, you should give careful consideration to the benefits of a well-balanced and diversified investment portfolio. Spreading your assets among different types of investments can help you achieve a favorable rate of return, while minimizing your overall risk of losing money. This is because market or other economic conditions that cause one category of assets, or one particular security, to perform very well often cause another asset category, or another particular security, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, your savings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy to help you manage investment risk.
In deciding how to invest your retirement savings, you should take into account all of your assets, including any retirement savings outside of the 401(k) Plan. No single approach is right for everyone because, among other factors, individuals have different financial goals, different time horizons for meeting their goals, and different tolerance for risk. Therefore, you should carefully consider the rights described here and how these rights affect the amount of money that you invest in 1895 Bancorp Common Stock through the 401(k) Plan.
It is also important to periodically review your investment portfolio, your investment objectives, and the investment options under the 401(k) Plan to help ensure that your retirement savings will meet your retirement goals.
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Additional ERISA Considerations
The 401(k) Plan is subject to certain provisions of ERISA, including special provisions relating to control over the 401(k) Plans assets by participants and beneficiaries. The 401(k) Plans feature that allows you to direct the investment of your account balances is intended to satisfy the requirements of Section 404(c) of ERISA relating to control over plan assets by a participant or beneficiary. The effect of this is two-fold. First, you will not be deemed a fiduciary because of your exercise of investment discretion. Second, no person who otherwise is a fiduciary, such as the Bank, the 401(k) Plan Administrator, or the 401(k) Plans trustee is liable under the fiduciary responsibility provision of ERISA for any loss which results from your exercise of control over the assets in your 401(k) Plan account.
Because you will be entitled to invest up to 50% of your account balance in the 401(k) Plan in 1895 Bancorp of Wisconsin, Inc. common stock, the regulations under Section 404(c) of ERISA require that the 401(k) Plan establish procedures that ensure the confidentiality of your decision to purchase, hold, or sell employer securities, except to the extent that disclosure of such information is necessary to comply with federal or state laws not preempted by ERISA. These regulations also require that your exercise of voting and similar rights with respect to the common stock be conducted in a way that ensures the confidentiality of your exercise of these rights.
Securities and Exchange Commission Reporting and Short-Swing Profit Liability
Section 16 of the Securities Exchange Act of 1934, as amended, imposes reporting and liability requirements on (i) officers, (ii) directors, and (iii) persons beneficially owning more than 10% of public companies such as 1895 Bancorp of Wisconsin, Inc. Section 16(a) of the Securities Exchange Act of 1934 requires the filing of reports of beneficial ownership. Within 10 days of becoming an officer, director or person beneficially owning more than 10% of the shares of 1895 Bancorp of Wisconsin, Inc. the individual must fill out a Form 3 reporting initial beneficial ownership and file it with the Securities and Exchange Commission. Changes in beneficial ownership, such as purchases, sales and gifts generally must be reported periodically, either on a Form 4 within two business days after the change occurs, or annually on a Form 5 within 45 days after the close of 1895 Bancorp of Wisconsin, Inc.s fiscal year. Discretionary transactions in and beneficial ownership of the common stock through the 1895 Bancorp Stock Fund of the 401(k) Plan by officers, directors and persons beneficially owning more than 10% of the common stock of 1895 Bancorp of Wisconsin, Inc. generally must be reported to the Securities and Exchange Commission by such individuals.
In addition to the reporting requirements described above, Section 16(b) of the Securities Exchange Act of 1934, as amended, provides for the recovery by 1895 Bancorp of Wisconsin, Inc. of profits realized by an officer, director or any person beneficially owning more than 10% of 1895 Bancorp of Wisconsin, Inc.s common stock resulting from non-exempt purchases and sales of 1895 Bancorp of Wisconsin, Inc. common stock within any six-month period.
The Securities and Exchange Commission has adopted rules that provide exemptions from the profit recovery provisions of Section 16(b) for all transactions in employer securities within an employee benefit plan, provided certain requirements are met. These requirements generally involve restrictions upon the timing of elections to acquire or dispose of employer securities for the accounts of Section 16(b) persons.
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Except for distributions of common stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, persons affected by Section 16(b) are required to hold shares of common stock distributed from the 401(k) Plan for six months following such distribution and are prohibited from directing additional purchases within the 1895 Bancorp Stock Fund for six months after receiving such a distribution.
Financial Information Regarding 401(k) Plan Assets
Financial information representing the assets available for plan benefits at December 31, 2017, is available upon written request to the 401(k) Plan Administrator at the address shown above.
The validity of the issuance of the common stock has been passed upon by Luse Gorman, PC, Washington, D.C., which firm acted as special counsel to 1895 Bancorp of Wisconsin, Inc. in connection with 1895 Bancorp of Wisconsin, Inc.s stock offering.
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1895 Bancorp of Wisconsin, Inc.
(Proposed Holding Company for PyraMax Bank, FSB)
Up to 2,783,000 Shares of Common Stock
(Subject to increase to up to 3,200,450 shares)
1895 Bancorp of Wisconsin, Inc. is offering up to 2,783,000 shares of its common stock for sale at $10.00 per share on a best efforts basis in connection with the reorganization of PyraMax Bank, FSB 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 Nasdaq Capital Market under the symbol BCOW upon conclusion of the offering. We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012.
The shares being offered represent 44.0% of the shares of common stock of 1895 Bancorp of Wisconsin, Inc. that will be outstanding following the offering. After the offering, 55.0% of our outstanding common stock will be owned by 1895 Bancorp of Wisconsin, MHC, our federally chartered mutual holding company, and 1.0% will be contributed to our charitable foundation. These percentages will not be affected by the number of shares we sell in the offering. We must sell a minimum of 2,057,000 shares in order to complete the offering. We may sell up to 3,200,450 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 of PyraMax Bank, FSB 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 March 15, 2017 will have first priority to purchase shares of common stock of 1895 Bancorp of Wisconsin, 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 Keefe Bruyette & Woods, Inc., a Stifel Company (KBW).
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 10,000 shares ($100,000), and no person together with an associate or group of persons acting in concert may purchase more than 15,000 shares ($150,000).
The offering is scheduled to expire at 1:00 p.m., Central Time, on [Date 1] . We may extend the expiration date without notice to you, until [Date 2] , or such later date as the Board of Governors of the Federal Reserve System may approve, which may not be beyond , 2020. Once submitted, orders are irrevocable unless the offering is terminated or extended beyond [Date 2] , or the number of shares of common stock to be sold is increased to more than 3,200,450 shares or decreased to less than 2,057,000 shares. If the offering is extended beyond [Date 2] , 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 3,200,450 shares or decreased to less than 2,057,000 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 PyraMax Bank, FSB and will earn interest at 0.15% until completion or termination of the offering.
KBW 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, our officers, directors and employees 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.
OFFERING SUMMARY
Price: $10.00 per share
Minimum | Midpoint | Maximum | Adjusted Maximum | |||||||||||||
Number of shares |
2,057,000 | 2,420,000 | 2,783,000 | 3,200,450 | ||||||||||||
Gross offering proceeds |
$ | 20,570,000 | $ | 24,200,000 | $ | 27,830,000 | $ | 32,004,500 | ||||||||
Estimated offering expenses, excluding selling agent fees and expenses |
$ | 1,185,000 | $ | 1,185,000 | $ | 1,185,000 | $ | 1,185,000 | ||||||||
Estimated selling agent fees and expenses (1) (2) |
$ | 315,000 | $ | 315,000 | $ | 315,000 | $ | 315,000 | ||||||||
Estimated net proceeds (1) |
$ | 19,070,000 | $ | 22,700,000 | $ | 26,330,000 | $ | 30,504,500 | ||||||||
Estimated net proceeds per share (1) |
$ | 9.27 | $ | 9.38 | $ | 9.46 | $ | 9.53 |
(1) |
See The Reorganization and Offering - Plan of Distribution and Marketing Arrangements for a discussion of KBWs compensation for this offering and the compensation to be received by KBW and the other broker-dealers who may participate in a syndicated community offering. |
(2) |
Excludes reimbursable expenses and records agent fees, which are included in estimated offering expenses. |
This investment involves a degree of risk, including the possible loss of principal.
Please read the Risk Factors beginning on page 22.
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.
KEEFE BRUYETTE & WOODS, INC.
A Stifel Company
For assistance, please contact the Stock Information Center at ( ) - .
The date of this prospectus is , 2018.
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RESTRICTIONS ON THE ACQUISITION OF 1895 BANCORP OF WISCONSIN, INC. AND PYRAMAX BANK, FSB |
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The following summary provides material information regarding the reorganization, the offering of common stock by 1895 Bancorp of Wisconsin, Inc. and the business of PyraMax Bank, FSB. 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 PyraMax Bank, FSB. In certain circumstances, where appropriate, the terms we, us and our refer collectively to 1895 Bancorp of Wisconsin, MHC, 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB or to any of those entities, depending on the context.
The Companies
1895 Bancorp of Wisconsin, MHC
Upon completion of the reorganization and the offering, 1895 Bancorp of Wisconsin, MHC will become the federally chartered mutual holding company of 1895 Bancorp of Wisconsin, Inc. and will own 55% of 1895 Bancorp of Wisconsins common stock. 1895 Bancorp of Wisconsin, MHC is not currently an operating company and has not engaged in any business to date. 1895 Bancorp of Wisconsin, MHC will be formed upon completion of the reorganization. As a mutual holding company, 1895 Bancorp of Wisconsin, MHC will be a non-stock company that will have as its members all holders of deposit accounts at PyraMax Bank, FSB as of March 15, 2017. As a mutual holding company, 1895 Bancorp of Wisconsin, MHC is required by law to own a majority of the voting stock of 1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, Inc. will be chartered under federal law and will own 100% of the issued and outstanding common stock of PyraMax Bank, FSB following the reorganization and offering. This offering is being made by 1895 Bancorp of Wisconsin, Inc. 1895 Bancorp of Wisconsin, Inc. is not currently an operating company and will be formed upon completion of the reorganization. Our corporate office will be located at 7001 West Edgerton Avenue, Greenfield, Wisconsin 53220, and our telephone number will be (414) 421-8200.
Upon completion of the offering, 1895 Bancorp of Wisconsin, MHC will own 55% and public stockholders will own 45% of 1895 Bancorp of Wisconsin, 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 company under the meaning of the Nasdaq corporate governance rules following the offering, 1895 Bancorp of Wisconsin, Inc. will be exempt from certain corporate governance requirements, including the requirement that a majority of our board of directors be independent under Nasdaq listing 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 the applicable Nasdaq corporate governance listing standards.
PyraMax Bank, FSB
PyraMax Bank, FSB is a federally chartered mutual savings bank headquartered in Greenfield, Wisconsin. PyraMax Bank, FSB was established in 1895 as South Milwaukee Savings and Loan Association and has operated continuously in the Milwaukee metropolitan area since that time. In 1993, the bank changed its name to South Milwaukee Savings Bank, S.A. In May 2000, a merger between South Milwaukee Savings Bank and Mitchell Savings Bank officially formed PyraMax Bank, SSB. The bank changed to a federal savings bank charter in 2003, changing its name to PyraMax Bank, FSB.
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From our founding in 1895, we operated as a traditional thrift institution, offering primarily residential mortgage loans and savings accounts, supplemented with multi-family and commercial real estate loans. In 2007, Richard Hurd was promoted to President and Chief Executive Officer of PyraMax Bank, FSB. Mr. Hurd began shifting PyraMax Bank, FSBs focus to include more business-oriented products and services. In 2010, PyraMax Bank, FSB hired Charles Mauer as its Chief Credit Officer, continuing our increased focus on business-oriented lending.
Commercial real estate growth has been the primary source of recent loan growth, and commercial business loan originations have also been emphasized.
We conduct our operations from our six full-service banking offices in Milwaukee County, our two full-service banking offices in Waukesha County and our full-service banking office in Ozaukee County Wisconsin. We consider our primary lending market area to be Milwaukee, Waukesha and Ozaukee Counties, however, we occasionally make loans secured by properties located outside of our primary lending market, usually to borrowers with whom we have an existing relationship and who have a presence within our primary market.
At June 30, 2018, we had total assets of $482.6 million, total deposits of $404.6 million and total equity of $37.7 million. We had a net loss of $323,000 for the six months ended June 30, 2018 and a net income of $1.7 million for the year ended December 31, 2017.
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, multi-family loans, commercial real estate loans, commercial, construction and land loans, and consumer loans.
PyraMax Bank, FSB is subject to comprehensive regulation and examination by its primary federal regulator, the Office of the Comptroller of the Currency.
PyraMax Bank, FSBs corporate office is located at 7001 West Edgerton Avenue, Greenfield, Wisconsin 53220, and our telephone number at this address is (414) 421-8200. Our website address is www.pyramaxbank.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 currently have the right to vote on certain matters pertaining to PyraMax Bank, FSB, such as the election of directors and the proposed mutual holding company reorganization described in this prospectus. 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 bank 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, PyraMax Bank, FSB will become a federal stock savings bank subsidiary of 1895 Bancorp of Wisconsin, Inc., and 1895 Bancorp of Wisconsin, Inc. will be a majority-owned subsidiary of 1895 Bancorp of Wisconsin, MHC. After the reorganization, our depositors will become members of 1895 Bancorp of Wisconsin, MHC, and will continue to have the same voting rights in 1895 Bancorp of Wisconsin, MHC as they had in PyraMax Bank, FSB prior to the reorganization.
2
In connection with the reorganization, we are offering shares of common stock of 1895 Bancorp of Wisconsin, 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:
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increase our capital to support future growth and profitability, although we currently have capital well in excess of all applicable regulatory requirements; |
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compete more effectively in the financial services marketplace; |
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offer our customers, employees, management and directors an equity ownership interest in 1895 Bancorp of Wisconsin, Inc., our stock holding company, and thereby an economic interest in our future success; |
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attract and retain qualified personnel by establishing stock-based benefit plans; and |
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increase our flexibility to structure and finance the expansion of our operations, including potential acquisitions of other financial institutions or branches thereof, or establishing de novo branches, although we have no current acquisitions or new branches planned. |
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 bank 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 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, 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 44% of our outstanding shares of common stock will be offered for sale in the offering, 1.0% of our outstanding shares will be contributed to the charitable foundation, and 55% of our outstanding shares will be retained by 1895 Bancorp of Wisconsin, MHC. Our board of directors has determined that offering 44% 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 1895 Bancorp of Wisconsin, MHC to Stock Form.
3
The following chart shows our corporate structure following the reorganization and offering:
Business Strategy
Our current business strategy consists of the following:
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Grow our balance sheet and improve profitability. Given our attractive market area, we believe we are well-positioned to increase the size of our balance sheet without a proportional increase in overhead expense or operating risk. Accordingly, we intend to increase, on a managed basis, our assets and liabilities, particularly loans and deposits. As we grow our assets, particularly higher-yielding commercial loans, while controlling our expenses, we anticipate improving our earnings. |
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Grow our loan portfolio prudently with a focus on diversifying the portfolio, particularly in commercial real estate and commercial lending. Our principal business activity historically has been the origination of residential mortgage loans, supplemented with commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner occupied loans). We intend to retain our presence as a mortgage lender in our market area and increase our focus on originating commercial real estate and commercial loans (which includes commercial and industrial loans). 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. |
Increasing our commercial real estate loans and commercial business loans involves risk, as described in Risk FactorsRisks Related to Our BusinessWe have a substantial amount of commercial real estate and commercial 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 and Our portfolio of loans with a higher risk of loss is increasing, which may lead to additional provisions for loan losses or charge-offs, which would reduce our profits or cause losses.
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Continue to increase core deposits, with an emphasis on low cost demand deposits. We seek core deposits to provide a stable source of funds to support loan growth at costs consistent with improving our net 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 checking accounts, money market accounts and statement savings. In particular, our Treasury Management unit focuses on generating and retaining business deposits, which assists in generating fee income. Core deposits have increased to $205.8 million at June 30, 2018, from $188.9 million at December 31, 2015. |
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Manage credit risk to maintain a low level of non-performing 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. In recent years we have conducted an extensive review of, and have enhanced, our credit, underwriting and loan processing policies and procedures. Our nonperforming assets to total assets ratio was 0.38% at June 30, 2018, compared to 0.40% at December 31, 2017 and 0.67% at December 31, 2016. At June 30, 2018, the majority of our nonperforming assets were related to residential real estate. |
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Grow organically and through opportunistic bank or branch acquisitions or de novo branching. In addition to organic growth, we will also consider 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 in Wisconsin. We will consider expanding our branch network by establishing new ( de novo ) branches and/or through acquisitions, although we have no current acquisitions or new branches planned. The capital we are raising in the offering will also provide us the opportunity to make acquisitions of other financial institutions or branches thereof, and will help fund improvements in our operating facilities, credit reporting and customer delivery services in order to enhance our competitiveness. |
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Continue to provide value to our community . Our goal is to provide long-term value to our customers, employees and the communities we serve by executing a safe and sound service-oriented 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. |
A full description of our products and services can be found under Business of PyraMax Bank, FSB.
Terms of the Offering
We are offering between 2,057,000 and 2,783,000 shares of common stock of 1895 Bancorp of Wisconsin, Inc. to eligible depositors, 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 1895 Bancorp of Wisconsin, Inc. We may increase the maximum number of shares that we sell in the offering by up to 15%, to 3,200,450 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 OfferingOffering of Common StockSubscription Rights for a description of allocation procedures in the event of an oversubscription.
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Unless the pro forma market value of 1895 Bancorp of Wisconsin, Inc. decreases below $46.8 million or increases above $72.7 million, or the offering is extended beyond [Date 2] , 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. KBW, 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 KBW 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 1895 Bancorp of Wisconsin, Inc. in a subscription offering in the following descending order of priority:
(1) |
depositors who had accounts at PyraMax Bank, FSB with aggregate balances of at least $50 at the close of business on March 15, 2017; |
(2) |
the tax-qualified employee benefit plans of PyraMax Bank, FSB (including our employee stock ownership plan); |
(3) |
depositors who had accounts at PyraMax Bank, FSB with aggregate balances of at least $50 at the close of business on [SERD] ; and |
(4) |
depositors of PyraMax Bank, FSB at the close of business on [VRD] . |
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 Wisconsin Counties of Milwaukee, Waukesha and Ozaukee 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 KBW. 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 March 15, 2017, [SERD] or [VRD] , as applicable. Failure to list an account or providing incorrect information could result in the loss of all or part of a subscribers 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 OfferingOffering of Common Stock.
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How We Determined the Offering Range and the $10.00 Price Per Share
Our decision to offer between 2,057,000 shares and 2,783,000 shares, which is our offering range, is based on an independent appraisal of our pro forma market value prepared by Keller & Company, Inc. (Keller & Company), a firm experienced in appraisals of financial institutions. Keller & Company is of the opinion that as of September 5, 2018, and assuming we sell a minority of our shares in the offering, the estimated pro forma market value of the common stock of 1895 Bancorp of Wisconsin, Inc. was $55.0 million. Based on applicable regulations, this market value forms the midpoint of a valuation range with a minimum of $46.8 million and a maximum of $63.3 million.
Our board of directors determined that the common stock should be sold at $10.00 per share and that 44% of the outstanding shares of 1895 Bancorp of Wisconsin, Inc. common stock should be offered for sale in the offering, 1% of the outstanding shares should be contributed to the charitable foundation, and 55% of the outstanding shares should be held by 1895 Bancorp of Wisconsin, MHC. Therefore, based on the valuation range, the number of shares of 1895 Bancorp of Wisconsin, Inc. common stock that will be sold in the offering will range from 2,057,000 shares to 2,783,000 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 $72.7 million and an offering of 3,200,450 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 Keller & Company considers comparable to 1895 Bancorp of Wisconsin, Inc. on a pro forma basis. See The Reorganization and Offering How We Determined the Stock Pricing and the Number of Shares to be Issued. The appraisal peer group consists of the following companies, all of which are traded on the Nasdaq Stock Market. Total assets are as of June 30, 2018.
Company Name |
Ticker
Symbol |
Headquarters | Total Assets | |||||
(In thousands) | ||||||||
Community First Bancshares, Inc. |
CFBI | Covington, GA | $ | 292,476 | ||||
Eagle Financial Bancorp, Inc. |
EFBI | Cincinnati, OH | 132,160 | |||||
Elmira Savings Bank |
ESBK | Elmira, NY | 553,389 | |||||
Equitable Financial Corp. |
EQFN | Grand Island, NE | 305,633 | |||||
FSB Bancorp, Inc. |
FSBC | Fairport, NY | 312,853 | |||||
Hamilton Bancorp, Inc. |
HBK | Towson, MD | 526,310 | |||||
HMN Financial, Inc. |
HMNF | Rochester, MN | 722,080 | |||||
IF Bancorp, Inc. |
IROQ | Watseka, IL | 619,310 | |||||
Prudential Bancorp, Inc. |
PBIP | Philadelphia, PA | 944,329 | |||||
Severn Bancorp, Inc. |
SVBI | Annapolis, MD | 801,183 |
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 $46.8 million or above $72.7 million, then 1895 Bancorp of Wisconsin, 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.
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Two measures investors use to analyze an issuers stock are the ratio of the offering price to the issuers tangible book value and the ratio of the offering price to the issuers annual net income. Keller & Company considered these ratios, among other factors, in preparing its independent appraisal. Tangible book value is the same as total equity less any intangible assets, and represents the difference between the issuers assets and liabilities.
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 45% of our outstanding shares of common stock is sold in the offering, including shares contributed to the charitable foundation, as opposed to 100% of our outstanding shares of common stock). These figures are from the Keller & Company 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 no premium or discount based on a not meaningful price-to-earnings multiple on a non-fully converted price-to-earnings basis and a discount of 14.60% on a non-fully converted price-to-tangible-book value basis.
Non-Fully Converted
Pro Forma Price-to-Earnings Multiple (1) |
Non-Fully Converted
Pro Forma Price-to-Tangible Book Value Ratio (1) |
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1895 Bancorp of Wisconsin, Inc. |
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Adjusted Maximum |
n/m | 117.10 | % | |||||
Maximum |
n/m | 108.11 | ||||||
Midpoint |
n/m | 99.40 | ||||||
Minimum |
n/m | 89.61 | ||||||
Valuation of peer group companies as of September 5, 2018 |
||||||||
Averages |
37.56 | % | 116.40 | % | ||||
Medians |
31.53 | 114.70 |
n/m |
Not meaningful |
(1) |
Information is based upon actual earnings for the 12 months ended June 30, 2018. 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, as of and for the same periods reflected in the above table, with such ratios adjusted to their fully converted equivalent basis, and the resulting pricing ratios for 1895 Bancorp of Wisconsin, Inc. on a fully converted equivalent basis. Compared to the average fully converted pricing ratios of the peer group, 1895 Bancorp of Wisconsin, Inc.s pro forma fully converted pricing ratios at the midpoint of the offering range indicated no premium or discount based on a not meaningful price-to-earnings multiple on a fully converted price-to-earnings basis and a discount of 44.96% on a fully converted price-to-tangible-book value basis.
8
Fully Converted
Pro Forma Price-to-Earnings Multiple (1) |
Fully Converted
Pro Forma Price-to-Book Value Ratio |
|||||||
1895 Bancorp of Wisconsin, Inc. |
||||||||
Adjusted Maximum |
n/m | 73.07 | % | |||||
Maximum |
n/m | 69.30 | ||||||
Midpoint |
n/m | 65.42 | ||||||
Minimum |
n/m | 60.81 | ||||||
Valuation of peer group companies as of September 5, 2018 |
||||||||
Averages |
37.56 | % | 108.65 | % | ||||
Medians |
31.53 | 110.18 |
n/m |
Not meaningful |
(1) |
Information is based upon actual earnings for the 12 months ended June 30, 2018. These ratios are different from the ratios in Pro Forma Data. |
The pro forma fully converted calculations for 1895 Bancorp of Wisconsin, Inc. include the following assumptions:
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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 $3.00 per option, and with the expense to be amortized over five years; and |
|
offering expenses would equal 6.20% of the offering amount at the midpoint of the offering range. |
The independent appraisal does not indicate market value. Do not assume or expect that 1895 Bancorp of Wisconsin, 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 Keller & Company 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 offering in PyraMax Bank, FSB, fund the loan to our employee stock ownership plan to finance its purchase of shares of common stock in the offering, contribute $100,000 to the charitable foundation, contribute $100,000 to 1895 Bancorp of
9
Wisconsin, MHC as its initial capitalization, and retain the remainder of the net proceeds from the offering at 1895 Bancorp of Wisconsin, Inc. Therefore, assuming we sell 2,783,000 shares of common stock at the maximum of the offering range, and we have net proceeds of $26.3 million, we intend to invest $13.2 million in PyraMax Bank, FSB, loan $2.5 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 1895 Bancorp of Wisconsin, MHC and the charitable foundation), contribute $100,000 to 1895 Bancorp of Wisconsin, MHC, contribute $100,000 to the charitable foundation and retain the remaining $10.6 million of the net proceeds at 1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, 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. 1895 Bancorp of Wisconsin, 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. PyraMax Bank, FSB 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 organically through de novo branching, or expand through acquisitions of other financial institutions, branch offices, or other financial service businesses. PyraMax Bank, FSB may also use the proceeds it receives to support new loan, deposit or other financial products and services, and for general corporate purposes.
Neither PyraMax Bank, FSB nor 1895 Bancorp of Wisconsin, 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 $100,000 of common stock. If any of the following persons purchase shares of common stock, their purchases when combined with your purchases cannot exceed $150,000 of common stock:
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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 PyraMax Bank, FSB; |
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Companies or other entities in which you are an officer or partner or have a 10% or greater beneficial ownership interest; |
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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; and |
|
Any other persons who may be your associates or persons acting in concert with you. |
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.
10
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 OfferingOffering of Common StockLimitations on Purchase of Shares.
We expect that the employee stock ownership plan will purchase 3.92% of our outstanding shares (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation). 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 183,300 shares to 285,100 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 1895 Bancorp of Wisconsin, Inc. (cash and third-party checks will not be accepted); or |
|
authorizing us to withdraw available funds (without any early withdrawal penalty) from the types of deposit account(s) maintained with PyraMax Bank, FSB designated on the stock order form. |
PyraMax Bank, FSB 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 PyraMax Bank, FSB 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 PyraMax Bank, FSBs office located at _____. Please do not mail stock order forms to PyraMax Bank, FSB . Once submitted, your order is irrevocable. We do not intend 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 PyraMax Bank, FSB. Subscription funds will earn interest at 0.15%. If the offering is terminated, we will promptly return your subscription funds with interest.
Withdrawals from certificate of deposit accounts at PyraMax Bank, FSB 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 PyraMax Bank, FSB must be in the
11
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 0.15% 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 PyraMax Bank, FSB, the Federal Deposit Insurance Corporation (FDIC) 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 PyraMax Bank, FSB, 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 [Date 1] offering deadline, for assistance with purchases using funds in your IRA or other retirement account held at PyraMax Bank, FSB or elsewhere. Whether you may use such funds for the purchase of shares in the 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 offering, see The Reorganization and OfferingProcedure for Purchasing SharesUsing 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 name(s) of person who do not have subscription rights or who qualify only in a lower purchase priority than you do. Doing so may jeopardize your subscription rights. In addition, the stock order form requires that you list all deposit 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 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.
12
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 1:00 p.m., Central Time, on [Date 1] , 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 1:00 p.m., Central Time, on [Date 1] 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 1:00 p.m., Central Time, on [Date 1] , whether or not we have been able to locate each person entitled to subscription rights.
See The Reorganization and OfferingProcedure for Purchasing SharesExpiration Date for a complete description of the deadline for purchasing shares in the 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 [Date 2] , or the number of shares to be sold in the offering is increased to more than 3,200,450 shares or decreased to fewer than 2,057,000 shares.
Termination of the Offering
The subscription offering will expire at 1:00 p.m., Central Time, on [Date 1] . 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 [Date 2] , or such later date as the applicable regulators may approve. If the subscription offering and/or community offering are extended beyond [Date 2] , 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 _____ __, 2020, which is two years after the special meeting of members of PyraMax Bank, FSB to be held on _____ to vote on the plan of reorganization.
13
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 2,057,000 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 [Date 2] 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 [Date 2] , 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 3,200,450 shares or decreased to less than 2,057,000 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 BCOW upon conclusion of the offering. See Market for the Common Stock.
Our Dividend Policy
We do not currently intend to pay dividends on our common stock following completion of the offering. In the event that we do determine to pay dividends in the future, the payment and amount of any dividends 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 Boards current regulations restricting the waiver of dividends by mutual holding companies; statutory and regulatory limitations; and general economic conditions. See Our Policy Regarding Dividends in this prospectus for additional information regarding our dividend policy.
Possible Change in the Offering Range
Keller & Company will update its appraisal before we complete the offering. If, as a result of demand for the shares or changes in market conditions, Keller & Company determines that our pro forma market value has increased, we may sell up to 3,200,450 shares in the offering without further notice to you. If our pro forma market value at that time is either below $46.8 million or above $72.7 million, then, after consulting with the Federal Reserve Board, we may:
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terminate the offering, cancel deposit account withdrawal authorizations and promptly return all funds received in the offering with interest at 0.15%; |
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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 0.15% 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.
14
Possible Termination of the Offering
We may terminate the offering at any time prior to the special meeting of members of PyraMax Bank, FSB 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 0.15%, 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 a stock-based benefits plan that will provide for grants of stock options and restricted stock.
Employee Stock Ownership Plan . The board of directors of PyraMax Bank, FSB 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 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) from the proceeds of the loan made by 1895 Bancorp of Wisconsin, Inc. to the plan.
Stock-Based Benefit Plan . In addition to shares purchased by the employee stock ownership plan, we intend to adopt a stock-based benefit plan. The plan will be designed to attract and retain qualified personnel in key positions and provide directors, officers and key employees with an ownership interest in 1895 Bancorp of Wisconsin, Inc., which will be an incentive to contribute to our success, and will reward key employees for their performance. The number of options granted and shares of restricted common stock awarded under a stock-based benefit plan may not exceed 4.90% and 1.96%, respectively, of our total outstanding shares, including shares issued to 1895 Bancorp of Wisconsin, MHC, provided that if PyraMax Bank, FSBs 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 the stock-based benefit plan, 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 1895 Bancorp of Wisconsin, 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.
A stock-based benefit plan will not be established sooner than six months after the offering, and if adopted within one year after the offering, the plan 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 1895 Bancorp of Wisconsin, MHC. If a stock-based benefit plan is established more than one year after the offering, it 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 1895 Bancorp of Wisconsin, MHC.
15
The following additional restrictions would apply to our stock-based benefit plan only if such plan is adopted within one year after the offering:
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non-employee directors in the aggregate may not receive more than 30% of the options and shares of restricted common stock authorized under the plan; |
|
no non-employee director may receive more than 5% of the options and shares of restricted common stock authorized under the plan; |
|
no individual may receive more than 25% of the options and shares of restricted common stock authorized under the plan; |
|
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 plan; and |
|
accelerated vesting is not permitted except for death, disability or upon a change in control of PyraMax Bank, FSB or 1895 Bancorp of Wisconsin, Inc. |
We have not determined whether we will present a stock-based benefit plan for stockholder approval prior to or more than 12 months after the completion of the 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 plan 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 a stock-based benefit plan 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 FactorsRisks Related to the OfferingOur stock-based benefit plans will increase our costs, which will reduce our net income and Management Future Stock Benefit Plans.
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 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) and that we implement a stock-based benefit plan granting options to purchase 4.90% of the total shares of common stock of 1895 Bancorp of Wisconsin, Inc. issued in connection with the reorganization (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) and awarding shares of restricted common stock equal to 1.96% of the total shares of common stock of 1895 Bancorp of Wisconsin, Inc. issued in connection with the reorganization (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation).
16
Plan |
Individuals Eligible to Receive Awards |
Percent of
Outstanding Shares |
Value of Benefits Based on
Adjusted Maximum of Offering Range (In Thousands) |
|||||||||
Employee stock ownership plan |
All employees | 3.92 | % | $ | 2,850 | |||||||
Stock awards |
Directors, officers and employees | 1.96 | 1,426 | |||||||||
Stock options |
Directors, officers and employees | 4.90 | 1,069 | (1) | ||||||||
|
|
|
|
|||||||||
Total |
10.78 | % | $ | 5,345 | ||||||||
|
|
|
|
(1) |
The fair value of stock options has been estimated at $3.00 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 2.71%; and a volatility rate of 13.89% 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 1895 Bancorp of Wisconsin, 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 |
91,600 Shares
Awarded at Minimum of Offering Range |
107,800 Shares
Awarded at Midpoint of Offering Range |
124,000 Shares
Awarded at Maximum of Offering Range |
142,600 Shares
Awarded at Adjusted Maximum of Offering Range |
||||||||||||
(In thousands, except share price information) | ||||||||||||||||
$ 8.00 | $ | 733 | $ | 862 | $ | 992 | $ | 1,141 | ||||||||
$10.00 | $ | 916 | $ | 1,078 | $ | 1,240 | $ | 1,426 | ||||||||
$12.00 | $ | 1,099 | $ | 1,294 | $ | 1,488 | $ | 1,711 | ||||||||
$14.00 | $ | 1,282 | $ | 1,509 | $ | 1,736 | $ | 1,996 |
The grant-date fair value of the options granted under the stock-based benefit plan will be based in part on the price of shares of 1895 Bancorp of Wisconsin, 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 |
229,075 Options at
Minimum of Offering Range |
269,500 Options at
Midpoint of Offering Range |
309,925 Options at
Maximum of Offering Range |
356,414 Options at
Adjusted Maximum of Offering Range |
|||||||||||||||
(In thousands, except market/exercise price and fair value information) | ||||||||||||||||||||
$ 8.00 | $ | 2.40 | $ | 550 | $ | 647 | $ | 744 | $ | 855 | ||||||||||
$10.00 | $ | 3.00 | $ | 687 | $ | 809 | $ | 930 | $ | 1,069 | ||||||||||
$12.00 | $ | 3.59 | $ | 822 | $ | 968 | $ | 1,113 | $ | 1,280 | ||||||||||
$14.00 | $ | 4.19 | $ | 960 | $ | 1,129 | $ | 1,299 | $ | 1,493 |
Restrictions on the Acquisition of 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB
Federal regulations, as well as provisions contained in the charter and bylaws of PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, Inc., restrict the ability of any person, firm or entity to acquire 1895 Bancorp of Wisconsin, Inc., PyraMax Bank, FSB, or their respective capital stock. These restrictions include the requirement that a potential acquirer of common stock obtain the prior approval of the Federal
17
Reserve Board and/or the Office of the Comptroller of the Currency before acquiring in excess of 10% of the voting stock of 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB, as well as a provision in each of 1895 Bancorp of Wisconsin, Inc.s and PyraMax Bank, FSBs respective charters that generally provides that for a period of five years from the closing of the offering, no person, other than 1895 Bancorp of Wisconsin, MHC, may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of equity security of 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB held by persons other than 1895 Bancorp of Wisconsin, MHC, and, with respect to PyraMax Bank, FSB, other than 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. must be owned by 1895 Bancorp of Wisconsin, MHC, any acquisition of 1895 Bancorp of Wisconsin, Inc. must be approved by 1895 Bancorp of Wisconsin, MHC. Furthermore, 1895 Bancorp of Wisconsin, MHC would not be required to pursue or approve a sale of 1895 Bancorp of Wisconsin, Inc. even if such sale were favored by a majority of 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, 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
1895 Bancorp of Wisconsin, Inc.s directors and executive officers and their associates are expected to purchase, for investment purposes, approximately 46,000 ($460,000) shares of common stock in the offering, which represents 2.24% of the shares sold to the public (including shares contributed to the charitable foundation) and 0.98% of the total shares to be outstanding after the offering (including shares owned by 1895 Bancorp of Wisconsin, MHC), each at the minimum of the offering range, respectively. Like all of our eligible depositor purchasers, our directors and executive officers and their associates have subscription rights based on their deposits 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 number of shares acquired in the offering by our directors and executive officers (and their associates) may not exceed 26% of the outstanding shares held by persons other than 1895 Bancorp of Wisconsin, 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 26% 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.
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Conditions to Completing the Reorganization and Offering
We cannot complete the reorganization and offering unless:
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we sell at least 2,057,000 shares, the minimum of the offering range; |
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the members of PyraMax Bank, FSB vote to approve the reorganization and offering; and |
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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 FDIC. |
Federal Reserve Board, Office of the Comptroller of the Currency or FDIC approval does not constitute a recommendation or endorsement of an investment in our stock.
Possible Conversion of 1895 Bancorp of Wisconsin, MHC to Stock Form
In the future, 1895 Bancorp of Wisconsin, MHC may convert from the mutual to capital stock form of ownership, in a transaction commonly referred to as a second-step conversion. In a second-step conversion, members of 1895 Bancorp of Wisconsin, MHC would have subscription rights to purchase common stock of 1895 Bancorp of Wisconsin, Inc. or its successor, and the public stockholders of 1895 Bancorp of Wisconsin, Inc. would be entitled to exchange their shares of common stock for an equal percentage of shares of the converted 1895 Bancorp of Wisconsin, MHC. This percentage may be adjusted to reflect any assets owned by 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. common stock (excluding shares held by 1895 Bancorp of Wisconsin, MHC) and the approval of the depositor members of 1895 Bancorp of Wisconsin, MHC. Public stockholders will not be able to force a merger or second-step conversion transaction of 1895 Bancorp of Wisconsin, MHC without the consent of 1895 Bancorp of Wisconsin, MHC since such transactions would require the approval of a majority of the outstanding shares of 1895 Bancorp of Wisconsin, Inc.s common stock.
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 1:00 p.m., Central Time, on [Date 1] , whether or not we have been able to locate each person entitled to subscription rights.
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Our Contribution of Cash and Shares of Common Stock to the Charitable Foundation
To further our commitment to our local community, we intend to establish and fund a charitable foundation as part of the reorganization and offering. Assuming we receive regulatory approval, we intend to contribute to the charitable foundation $100,000 in cash and 1.0% of our outstanding shares, or 55,000 shares of our common stock at the midpoint of the offering range (for an aggregate contribution of $650,000, at the midpoint of the offering range, based on the $10.00 per share offering price). As a result of the contribution, we expect to record an after-tax expense of approximately $434,500, at the midpoint of the offering range, during the quarter in which the reorganization and offering is completed.
The charitable foundation will be dedicated exclusively to supporting charitable causes and community development activities in the communities in which we operate. The contribution of common stock and cash to the charitable foundation will:
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with respect to the contribution of shares of common stock, dilute the voting interests of purchasers of shares of our common stock in the offering; and |
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result in an expense, and a reduction in capital, during the quarter in which the contribution is made, equal to the full amount of the contribution to the charitable foundation, which we expect to be offset in part by a corresponding tax benefit. |
The amount of common stock that we would offer for sale would be greater if the offering were to be completed without the establishment and funding of the charitable foundation. For a further discussion of the financial impact of the charitable foundation, including its effect on those who purchase shares in the offering, see Risk FactorsThe contribution to the charitable foundation will dilute your ownership interest and adversely affect net income in 2019, Risk FactorsOur contribution to the charitable foundation may not be tax deductible, which could reduce our profits.
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 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 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
PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, 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 depositor members as a result of the exercise of the nontransferable subscription rights. PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, Inc. have also received an opinion of Wipfli LLP regarding the material Wisconsin 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 PyraMax Bank, FSB, 1895 Bancorp of Wisconsin, Inc. or persons eligible to subscribe in the subscription offering. See the section of this prospectus entitled Taxation for additional information regarding taxes.
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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 FactorsRisks Related to the OfferingWe 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 SupervisionEmerging 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
Our banking personnel may not, by law, assist with investment-related questions about the offering. If you have any questions regarding the reorganization and offering, please call the Stock Information Center at (___) ___-____. The Stock Information Center will be open Monday through Friday between 9:00 a.m. and 3:00 p.m., Central Time. The Stock Information Center will be closed on bank holidays.
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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 a substantial amount of commercial real estate and commercial 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 June 30, 2018, commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner occupied loans) totaled $182.7 million, or 49.3% of our loan portfolio, and commercial loans (which includes commercial and industrial loans) totaled $32.5 million, or 8.8% of our loan portfolio. Of this aggregate amount, we had $70.4 million in non-owner occupied non-residential real estate, $57.9 million in multi-family residential real estate, $36.1 million in owner occupied non-residential real estate, $11.6 million in non-owner occupied residential real estate and $6.7 million in commercial real estate construction loans. We intend to increase originations of these types of loans. Given their larger balances and the complexity of the underlying collateral, commercial real estate and commercial 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 loans depends on the successful management and operation of the borrowers properties or related businesses, repayment of such loans can be affected by adverse conditions in the local, regional and national real estate market or economy. A downturn in the real estate market or the local, regional and national economy could adversely impact the value of properties securing the loan or the revenues from the borrowers business, thereby increasing the risk of non-performing loans. Further, unlike residential mortgage loans, commercial real estate loans and commercial 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 or liquidate 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 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, which may lead to additional provisions for loan losses or charge-offs, which would reduce our profits or cause losses.
Our commercial real estate loan portfolio has increased to $182.7 million, or 49.3% of total loans, at June 30, 2018 from $101.5 million, or 36.6% of total loans, at December 31, 2013. We intend to continue our emphasis on originating commercial real estate and commercial loan originations. Many of 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.
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The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.
The FDIC, the Federal Reserve Board and the OCC have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under this guidance, a financial institution that, like us, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors (i) total reported loans for construction, land development and other land represent 100% or more of total capital, or (ii) total reported loans secured by multi-family and non-farm non-residential properties, loans for construction, land development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital. The particular focus of the guidance is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution). The purpose of the guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance states that management should employ heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing. We have concluded that we have a concentration in commercial real estate lending under the foregoing standards because our balance in commercial real estate loans at June 30, 2018 represents more than 300% of total capital. Owner occupied commercial real estate totals 93% of total capital, while non-owner occupied commercial real estate totals an additional 378% of total capital. While we believe we have implemented policies and procedures with respect to our commercial real estate loan portfolio consistent with this guidance, bank regulators could require is to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us.
Our business strategy includes managed 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 loans and deposits. 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 the ability of our executive officers to execute our business strategy to increase commercial real estate and commercial loans and to increase our new and existing customers deposit relationships, 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 expanding lending capacity, and generally a period of time is required to generate the necessary revenues to offset these 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 until certain economies of scale are reached.
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Our utilization of time deposits, including brokered certificates of deposit, as a source of funds for loans and our other liquidity needs could have an adverse effect on our operating results.
We rely primarily on deposits for funds to make loans and provide for our other liquidity needs, including time deposits and brokered certificates of deposit. As of June 30, 2018, brokered deposits, represented approximately 16.8% of our total deposits. Such deposits may not be as stable as other types of deposits and, in the future, depositors may not renew those time deposits when they mature, or we may have to pay a higher rate of interest to attract or keep them or to replace them with other deposits or with funds from other sources. Not being able to attract those deposits or to keep or replace them as they mature would adversely affect our liquidity. Additionally, we are regulated by the OCC, which requires us to maintain certain capital levels to be considered well capitalized. If we fail to maintain these capital levels, we could lose our ability to obtain funding through brokered deposits. In addition, we may also be restricted from paying higher deposit rates to attract, keep or replace those deposits, which could have a negative effect on our operating results and the value of our common stock.
Our cost of operations is high relative to our revenues.
The cost of generating our income is measured by our efficiency ratio (the ratio of non-interest expense to the sum of net interest income and non-interest income). Our efficiency ratio was 106.86%, 112.19% and 91.79% for the six months ended June 30, 2018 and the years ended December 31, 2017 and 2016, respectively. Our efficiency ratio lags our peer group as our competitors for loans and deposits are often larger banks who can offer very competitive terms to originate and retain commercial real estate and commercial loans, as well as very competitive rates on deposit products. Additionally, our interest expense is higher than our peer group as our sources of funding tend to rely on higher-cost brokered certificates of deposit and Federal Home Loan Bank (FHLB) advances more than our competitors. We have also had a series of significant one-time expenses over the last several years, including core data processing conversion, branch sale costs and expenses related to our self-insured healthcare coverage. The additional costs associated with being a public company will adversely affect our efficiency ratio. We anticipate, however, that the net proceeds from this offering will increase our capital levels, which will also allow us to increase interest-earning assets, such as loans and investments, and our interest income, which should benefit our efficiency ratio.
Costs related to our self-insured healthcare coverage may adversely affect our results of operations and financial condition.
We provide self-insured healthcare coverage to our employees and their dependents. We are self-insured with respect to substantially all of our healthcare coverage. We maintain reserves (recorded in Other Liabilities on our balance sheet) to cover our estimated liabilities for healthcare claims. The reserve was $534,000 as of June 30, 2018. The determination of these reserves is based upon a number of factors, including current and historical claims activity, claims payment patterns and medical cost trends. Accordingly, reserves do not represent an exact calculation of liability. Reserves can be affected by both internal and external events, such as adverse developments in existing claims or changes in medical costs, medical conditions of claimants, claims handling procedures, administrative costs and legal fees, inflation, and legal trends and legislative changes. Reserves are adjusted from time to time to reflect new claims, claim developments, or systemic changes, and such adjustments are reflected in the results of the periods in which the reserves are changed. Our estimated accrual for healthcare coverage claims is based upon an actuarial estimate provided by our independent actuary. The estimated accrual does not include an estimated provision for the incidence of unknown catastrophic claims. Moreover, because of the uncertainties that surround estimating healthcare requirements and expenses, we cannot be certain that our reserves are adequate. If the number or severity of claims for which we are self-insured increases, or if our reserves are insufficient to cover our actual healthcare coverage expenses, we would incur charges to our earnings that could be material to our results of operations and financial condition.
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We face additional risks due to our mortgage banking activities that could negatively impact net income and liquidity.
We sell the majority of the fixed-rate conforming and eligible jumbo one-to four-family residential real estate loans that we originate. The sale of these loans generates noninterest income and are a source of liquidity for PyraMax Bank, FSB. Disruption in the secondary market for residential mortgage loans could result in our inability to sell mortgage loans, which could negatively impact our liquidity position and earnings. In addition, declines in real estate values or increases in interest rates could reduce the potential for robust mortgage originations, which could negatively impact our earnings. As we do sell mortgage loans, we also face the risk that such loans may have been made in breach of our representations and warranties to the buyers and we could be forced to repurchase such loans or pay other damages.
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. Our executive officers and lending personnel possess expertise in our markets and key business relationships, and have been integral in the restructuring of our operations, including the implementation of a more aggressive sales culture within our institution. Any one of them 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.
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 managements 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 as a result of such reviews, we may decide to adjust our allowance for loan losses or recognize further loan charge-offs. However, regulatory agencies are not directly involved in the process of establishing the allowance for loan losses, as the process is our responsibility and any adjustment of the allowance is the responsibility of management. Material additions to the allowance would materially decrease our net income.
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We may be adversely affected by recent changes in U.S. tax laws.
Changes in tax laws contained in the Tax Cuts and Jobs Act, which was enacted in December 2017, include a number of provisions that will have an impact on the banking industry, borrowers and the market for single-family residential real estate. Changes include (i) a lower limit on the deductibility of mortgage interest on single-family residential mortgage loans, (ii) the elimination of interest deductions for home equity loans, (iii) a limitation on the deductibility of business interest expense and (iv) a limitation on the deductibility of property taxes and state and local income taxes. The recent changes in the tax laws may have an adverse effect on the market for, and valuation of, residential properties, and on the demand for such loans in the future, and could make it harder for borrowers to make their loan payments. If home ownership becomes less attractive, demand for mortgage loans could decrease. The value of the properties securing loans in our loan portfolio may be adversely impacted as a result of the changing economics of home ownership, which could require an increase in our provision for loan losses, which would reduce our profitability and could materially adversely affect our business, financial condition and results of operations.
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 non-performing 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 local, regional or national 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 size makes it more difficult for us to compete.
Our 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
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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 brokerage. Finally, as a smaller institution, we are disproportionately affected by the continually increasing costs of compliance with new banking and other regulations.
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.
Our information technology systems may be subject to failure, interruption or security breaches.
Information technology systems are critical to our business. We use various technology systems to manage our customer relationships, general ledger, securities investments, deposits, and loans. We have established policies and procedures to prevent or limit the impact of system failures, interruptions and security breaches, including privacy breaches and cyber attacks, but such events may still occur or may not be adequately addressed if they do occur.
There have been increasing efforts by third parties to breach data security at financial institutions. There have been several recent instances involving financial services and consumer-based companies reporting the unauthorized disclosure of client or customer information or the destruction or theft of corporate data. Although we take protective measures, the security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber attacks that could have an impact on information security. Because the techniques used to cause security breaches change frequently, we may be unable to proactively address these techniques or to implement adequate preventative measures.
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In addition, we outsource a majority of our data processing requirements to certain third-party providers. If these third-party providers encounter difficulties, or if we have difficulty communicating with those service providers, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.
The occurrence of any system failures, interruption, or breach of security could damage our reputation and result in a loss of customers and business, subject us to additional regulatory scrutiny, or could expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.
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 exceed non-interest expense and the provision for loan losses. Net interest income makes up a majority of our net 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 institutions net interest margin and create financial risk for financial institutions that originate longer-term, fixed-rate mortgage loans. At June 30, 2018, 70.1% of our loan portfolio consisted of fixed-rate 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, liabilities and equity (our economic value of equity or EVE) would change in the event of a range of assumed changes in market interest rates. As of June 30, 2018, in the event of an instantaneous 200 basis point increase in interest rates, we estimate that we would experience a 16.7% decrease in EVE. For further discussion of how changes in interest rates could impact us, see Managements Discussion and Analysis of Financial Condition and Results of Operations of PyraMax Bank, FSBManagement of Market Risk.
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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 securities brokerage 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 and fees 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 due to competition, 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 PyraMax Bank, FSBMarket Area and Competition.
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.
PyraMax Bank, FSB is subject to extensive regulation, supervision and examination by the Office of the Comptroller of the Currency, and 1895 Bancorp of Wisconsin, 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 of PyraMax Bank, FSB, 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 firm. These changes could materially impact, potentially even retroactively, how we report our financial condition and results of operations.
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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 exercised significant discretion in drafting the implementing rules and regulations. It will be some time before the full effect of the Dodd-Frank Act and the regulations thereunder can be assessed. 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 managements 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 suspected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasurys 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 pursuing 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. Furthermore, these rules and regulations continue to evolve and expand.
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.
Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and defines capital for calculating these ratios. The minimum capital requirements are: (i) a common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6%; (iii) a total capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. The regulations also establish 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 capital conservation buffer requirement began being phased in January 2016 at 0.625% of risk-weighted assets and is increasing 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 then applicable buffer amount.
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. Specifically, following the completion of the offering, PyraMax Bank, FSBs ability to pay dividends to 1895 Bancorp of Wisconsin, Inc. will be limited if it does not have the capital conservation buffer required by the new capital rules, which may further limit 1895 Bancorp of Wisconsin, Inc.s ability to pay dividends to stockholders. See Regulation and SupervisionFederal Banking RegulationCapital Requirements.
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The cost of additional finance and accounting systems, procedures, compliance 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 managements 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. In some cases, we could be required to apply new or revised guidance retroactively. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations.
Changes in managements 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 managements 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 costs 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.
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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 propertys 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 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 1895 Bancorp of Wisconsin, Inc. and the outlook for the financial services industry in general. Price fluctuations in our common stock may be unrelated to our operating performance.
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The capital we raise in the 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. Although we anticipate increasing net interest income using proceeds of the offering, our return on equity will be reduced by the capital raised in the 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.
We have broad discretion in using the proceeds of the 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 $9.5 million and $15.3 million of the net proceeds of the offering in PyraMax Bank, FSB. We also expect to use a portion of the net proceeds we retain to fund a loan to the employee stock ownership plan for the purchase of shares of common stock in the offering by the employee stock ownership plan, and will contribute $100,000 to 1895 Bancorp of Wisconsin, MHC as a part of our formation of the mutual holding company and will contribute $100,000 to the charitable foundation that we are establishing in connection with the reorganization. We may use the remaining net proceeds to invest in short-term and other investments, repurchase shares of our common stock, pay dividends, although we currently do not intend to pay dividends, or for other general corporate purposes. PyraMax Bank, FSB 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 contributions to 1895 Bancorp of Wisconsin, MHC and to the charitable foundation, 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 1895 Bancorp of Wisconsin, Inc., PyraMax Bank, FSB or the stockholders. For additional information see How We Intend To Use The Proceeds From The Offering.
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 Nasdaq Capital Market under the symbol BCOW upon conclusion of the offering, subject to completion of the offering and compliance with certain conditions, including having 300 round lot stockholders (stockholders owning more than 100 shares) and at least three companies making a market for our common stock. The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within
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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 1895 Bancorp of Wisconsin, MHC, 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 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 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 net income.
We anticipate that our employee stock ownership plan will purchase in the offering shares of our common stock equal to up to 3.92% of our outstanding shares (including the shares held by 1895 Bancorp of Wisconsin, MHC and the charitable foundation) 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 a stock-based benefit plan 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 a stock-based benefit plan in an amount up to 25% of the shares of common stock held by persons other than 1895 Bancorp of Wisconsin, MHC. The number of shares of common stock or options granted under any initial stock-based benefit plan may not exceed 1.96% and 4.90%, respectively, of our total outstanding shares, including shares issued to 1895 Bancorp of Wisconsin, MHC and contributed to the charitable foundation.
The shares of restricted common stock granted under the stock-based benefit plan 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 plan are repurchased in the open market (rather than issued directly from authorized but unissued shares by 1895 Bancorp of Wisconsin, Inc.) and cost the same as the purchase price in the offering, the reduction to stockholders equity due to the plan would be between $916,000 at the minimum of the offering range and approximately $1.4 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 Managements Discussion and Analysis of Financial Condition and Results of Operations of PyraMax Bank, FSB, and based on certain assumptions discussed therein, we estimate this annual pre-tax expense, assuming it is amortized over a 10-year vesting period, would be approximately $101,000, assuming we sell 3,200,450 shares in the offering.
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The implementation of a stock-based benefit plan may dilute your ownership interest.
We intend to adopt a stock-based benefit plan following the reorganization and offering. The stock-based benefit plan 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 restricted 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 1895 Bancorp of Wisconsin, MHC and the charitable foundation).
Persons who purchase stock in the offering will own a minority of 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc.s common stock. As a result, stockholders other than 1895 Bancorp of Wisconsin, MHC will not be able to exercise voting control over most matters put to a vote of stockholders. 1895 Bancorp of Wisconsin, MHC will own a majority of 1895 Bancorp of Wisconsin, 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. Generally, the same directors and officers who manage PyraMax Bank, FSB will also manage 1895 Bancorp of Wisconsin, Inc. and 1895 Bancorp of Wisconsin, MHC. Our board of directors, officers or 1895 Bancorp of Wisconsin, MHC may take actions that the public stockholders believe to be contrary to their interests, including whether or not the mutual holding company should convert to stock form in a second-step transaction. The only matters as to which stockholders other than 1895 Bancorp of Wisconsin, MHC will be able to exercise voting control currently include any proposal to implement a stock-based benefit plan or a second-step conversion. In addition, 1895 Bancorp of Wisconsin, 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.
1895 Bancorp of Wisconsin, MHC, as the majority stockholder of 1895 Bancorp of Wisconsin, Inc., will be able to control the outcome of virtually all matters presented to stockholders for their approval, including any proposal to acquire 1895 Bancorp of Wisconsin, Inc. Accordingly, 1895 Bancorp of Wisconsin, MHC may prevent the sale of control or merger of 1895 Bancorp of Wisconsin, Inc. or its subsidiaries even if such a transaction were favored by a majority of the public stockholders of 1895 Bancorp of Wisconsin, Inc. The board of directors of PyraMax Bank, FSB 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 1895 Bancorp of Wisconsin, 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
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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 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB 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 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc.s charter will generally provide that, for a period of five years from the closing of the offering, no person, other than 1895 Bancorp of Wisconsin, MHC, may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of equity security of 1895 Bancorp of Wisconsin, Inc. held by persons other than 1895 Bancorp of Wisconsin, MHC, and that any shares acquired in excess of this limit will not be entitled to be voted and will not be counted as voting stock in connection with any matters submitted to the stockholders for a vote. PyraMax Bank, FSBs charter will contain a similar provision, except the ownership restriction will apply to persons other than 1895 Bancorp of Wisconsin, MHC and 1895 Bancorp of Wisconsin, Inc.
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 to a public company, which will be subject to significant regulatory oversight and reporting obligations under the federal securities laws. In particular, these new obligations will require substantial attention from our management team 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. We do not currently intend to pay dividends on our common stock following completion of our offering. 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 only to our public stockholders, under the regulations that have been implemented by the Federal Reserve Board following the enactment of the Dodd-Frank Act
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with regard to dividend waivers by mutual holding companies. See Our Policy Regarding Dividends, Regulation and SupervisionFederal Banking RegulationCapital Requirements, Federal Banking RegulationCapital Distributions and Holding Company RegulationWaivers of Dividends by 1895 Bancorp of Wisconsin, MHC.
1895 Bancorp of Wisconsin, Inc. will depend primarily upon the proceeds it retains from the offering as well as earnings of PyraMax Bank, FSB to provide funds to pay dividends on our common stock. The payment of dividends by PyraMax Bank, FSB 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 1895 Bancorp of Wisconsin, Inc. will depend, in large part, on PyraMax Bank, FSBs 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, 1895 Bancorp of Wisconsin, MHC will be restricted from waiving the receipt of dividends.
1895 Bancorp of Wisconsin, Inc.s board of directors will have the authority to declare dividends on our common stock, subject to statutory and regulatory requirements. If 1895 Bancorp of Wisconsin, Inc. pays dividends to its stockholders, it also will be required to pay dividends to 1895 Bancorp of Wisconsin, MHC, unless 1895 Bancorp of Wisconsin, MHC is permitted by the Federal Reserve Board to waive the receipt of dividends. The Federal Reserve Boards 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 1895 Bancorp of Wisconsin, MHC along with all other stockholders, the amount of dividends available for all other stockholders will be less than if 1895 Bancorp of Wisconsin, 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
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statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation or on 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 $1.07 billion, (b) the date that we become a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934, 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.
Risks Related to the Charitable Foundation
The contribution to the charitable foundation will dilute your ownership interest and adversely affect net income in 2019.
We intend to establish and fund a new charitable foundation in connection with the reorganization and offering. We intend to contribute $100,000 in cash and 1.0% of our outstanding shares, or 55,000 shares at the midpoint of the offering range (for an aggregate contribution of $650,000, at the midpoint of the offering range, based on the $10.00 per share offering price) to this charitable foundation. The contribution will have an adverse effect on our net income for the quarter and year in which we make the issuance and contribution to the charitable foundation. The after-tax expense of the contribution is expected to reduce net income in the year of the contribution by approximately $434,500, at the midpoint of the offering range. Our 2017 net income was $1.7 million.
Our contribution to the charitable foundation may not be tax deductible, which could reduce our profits.
We may not have sufficient profits to be able to fully use the tax deduction from our contribution to the charitable foundation. Under the Internal Revenue Code, an entity is permitted to deduct up to 10% of its taxable income (generally income before federal income taxes and charitable contributions expense) in any one year for charitable contributions. Any contribution in excess of the 10% limit may be deducted for federal income tax purposes over each of the five years following the year in which the charitable contribution is made. Accordingly, a charitable contribution could, if necessary, be deducted over a six-year period and expires thereafter.
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SELECTED FINANCIAL AND OTHER DATA
The following tables set forth selected historical financial and other data for PyraMax Bank, FSB at the dates and for the periods indicated. It is only a summary and it should be read in conjunction with the business and financial information contained elsewhere in this prospectus, including the financial statements beginning on page F-1. The information at June 30, 2018 and for the six months ended June 30, 2018 and 2017 is not audited but, in the opinion of management, includes all adjustments necessary for a fair presentation. All adjustments are normal and recurring. The results of operations for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the entire year. The information at December 31, 2017 and 2016 and for the years ended December 31, 2017 and 2016 is derived in part from the audited financial statements appearing in this prospectus. The information at and for the years ended December 31, 2015, 2014 and 2013 is derived in part from financial statements not appearing in this prospectus.
At June 30, | At December 31, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Selected Financial Condition Data: |
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Total assets |
$ | 482,617 | $ | 468,361 | $ | 450,173 | $ | 425,674 | $ | 414,448 | $ | 429,927 | ||||||||||||
Cash and cash equivalents |
7,995 | 12,497 | 7,779 | 7,192 | 9,790 | 12,997 | ||||||||||||||||||
Securities available-for-sale |
69,296 | 88,955 | 96,458 | 73,010 | 83,885 | 106,712 | ||||||||||||||||||
Loans held for sale |
1,170 | 217 | 479 | 339 | 246 | 953 | ||||||||||||||||||
Loans receivable, net |
368,021 | 331,206 | 312,523 | 314,000 | 288,794 | 274,018 | ||||||||||||||||||
Premises and equipment, net |
7,601 | 7,661 | 8,925 | 9,115 | 9,491 | 10,695 | ||||||||||||||||||
Mortgage servicing rights, net |
2,163 | 2,270 | 2,421 | 2,476 | 2,673 | 2,454 | ||||||||||||||||||
Federal Home Loan Bank stock |
1,818 | 1,436 | 2,170 | 1,720 | 2,091 | 2,091 | ||||||||||||||||||
Accrued interest receivable |
1,144 | 1,214 | 1,163 | 1,160 | 1,219 | 1,362 | ||||||||||||||||||
Bank owned life insurance |
13,931 | 13,732 | 13,321 | 12,872 | 12,426 | 11,991 | ||||||||||||||||||
Other assets |
9,478 | 9,173 | 4,934 | 3,790 | 3,833 | 6,654 | ||||||||||||||||||
Total liabilities |
444,927 | 429,367 | 412,833 | 388,841 | 378,367 | 392,418 | ||||||||||||||||||
Deposits |
404,560 | 389,291 | 358,882 | 352,979 | 350,575 | 345,398 | ||||||||||||||||||
Federal Home Loan Bank advances |
27,677 | 34,693 | 48,224 | 31,452 | 22,795 | 41,820 | ||||||||||||||||||
Accrued interest payable |
346 | 340 | 276 | 208 | 173 | 333 | ||||||||||||||||||
Other liabilities |
12,344 | 5,043 | 5,451 | 4,202 | 4,824 | 4,867 | ||||||||||||||||||
Total equity |
37,690 | 38,994 | 37,340 | 36,833 | 36,081 | 37,509 |
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For the Six Months
Ended June 30, |
For the Year Ended December 31, | |||||||||||||||||||||||||||
2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Selected Operating Data: |
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Interest and dividend income |
$ | 8,013 | $ | 7,500 | $ | 15,256 | $ | 13,797 | $ | 13,856 | $ | 14,654 | $ | 14,808 | ||||||||||||||
Interest expense |
1,948 | 1,591 | 3,361 | 2,685 | 2,556 | 3,139 | 3,761 | |||||||||||||||||||||
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Net interest income |
6,065 | 5,909 | 11,895 | 11,112 | 11,300 | 11,515 | 11,047 | |||||||||||||||||||||
Provision for loan losses |
| | | | (684 | ) | | (600 | ) | |||||||||||||||||||
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Net interest income after provision for loan losses |
6,065 | 5,909 | 11,895 | 11,112 | 11,984 | 11,515 | 11,647 | |||||||||||||||||||||
Non-interest income |
1,483 | 1,465 | 2,892 | 4,155 | 3,004 | 2,243 | 4,421 | |||||||||||||||||||||
Non-interest expense |
8,065 | 6,936 | 16,590 | 14,013 | 14,223 | 16,946 | 14,850 | |||||||||||||||||||||
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Income (loss) before income tax expense (benefit) |
(517 | ) | 438 | (1,803 | ) | 1,254 | 765 | (3,188 | ) | 1,218 | ||||||||||||||||||
Income tax expense (benefit) (1) |
(194 | ) | (4,589 | ) | (3,462 | ) | | | | | ||||||||||||||||||
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Net income (loss) |
$ | (323 | ) | $ | 5,027 | $ | 1,659 | $ | 1,254 | $ | 765 | $ | (3,188 | ) | $ | 1,218 | ||||||||||||
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(1) |
For the years ended December 31, 2016, 2015, 2014 and 2013, the recorded income tax expense and the reversal of our deferred tax asset valuation allowance resulted in a net income tax expense of $0. |
40
At or For the Six Months
Ended June 30, |
At or For the Year Ended December 31, | |||||||||||||||||||||||||||
2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Performance Ratios (1) : |
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Return on average assets (2) |
(0.14 | )% | 2.22 | % | 0.36 | % | 0.29 | % | 0.18 | % | (0.74 | )% | 0.29 | % | ||||||||||||||
Return on average equity (3) |
(1.68 | )% | 25.42 | % | 4.02 | % | 3.26 | % | 2.06 | % | (8.33 | )% | 3.14 | % | ||||||||||||||
Interest rate spread (4) |
2.65 | % | 2.71 | % | 2.67 | % | 2.70 | % | 2.83 | % | 2.79 | % | 2.71 | % | ||||||||||||||
Net interest margin (5) |
2.79 | % | 2.83 | % | 2.80 | % | 2.81 | % | 2.94 | % | 2.89 | % | 2.83 | % | ||||||||||||||
Efficiency ratio (6) |
106.86 | % | 94.06 | % | 112.19 | % | 91.79 | % | 99.43 | % | 123.17 | % | 96.00 | % | ||||||||||||||
Average interest-earning assets to average interest-bearing liabilities |
114.99 | % | 116.08 | % | 116.31 | % | 116.80 | % | 115.78 | % | 113.48 | % | 112.50 | % | ||||||||||||||
Average loans to average deposits |
90.05 | % | 84.77 | % | 85.85 | % | 87.74 | % | 89.78 | % | 83.38 | % | 80.62 | % | ||||||||||||||
Equity to assets (7) |
8.16 | % | 8.75 | % | 8.95 | % | 9.02 | % | 8.94 | % | 8.86 | % | 9.13 | % | ||||||||||||||
Capital Ratios: |
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Tier 1 capital (to adjusted total assets) |
7.46 | % | 8.52 | % | 7.35 | % | 8.41 | % | 8.50 | % | 8.40 | % | 8.79 | % | ||||||||||||||
Tier I capital (to risk-weighted assets) |
9.70 | % | 12.27 | % | 11.07 | % | 11.31 | % | 11.53 | % | 10.98 | % | 11.90 | % | ||||||||||||||
Total capital (to risk-weighted assets) |
10.55 | % | 13.24 | % | 12.05 | % | 12.22 | % | 12.52 | % | 12.16 | % | 13.11 | % | ||||||||||||||
Common equity Tier 1 capital (to risk-weighted assets) |
9.70 | % | 12.27 | % | 11.07 | % | 11.31 | % | 11.53 | % | 10.98 | % | 11.90 | % | ||||||||||||||
Asset Quality Ratios: |
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Allowance for loan losses as a percent of total loans |
0.83 | % | 0.95 | % | 0.93 | % | 0.95 | % | 0.97 | % | 1.28 | % | 1.38 | % | ||||||||||||||
Allowance for loan losses as a percent of non-performing loans |
167.40 | % | 143.98 | % | 163.90 | % | 100.39 | % | 66.35 | % | 74.71 | % | 37.49 | % | ||||||||||||||
Net charge-offs (recoveries) to average outstanding loans during the period |
| % | 0.01 | % | 0.03 | % | (0.03 | )% | 0.01 | % | (0.03 | )% | (0.35 | )% | ||||||||||||||
Non-performing loans as a percent of total loans |
0.50 | % | 0.66 | % | 0.57 | % | 0.96 | % | 1.47 | % | 1.71 | % | 3.69 | % | ||||||||||||||
Non-performing assets as a percent of total assets |
0.38 | % | 0.46 | % | 0.40 | % | 0.67 | % | 1.09 | % | 1.21 | % | 2.82 | % | ||||||||||||||
Other Data: |
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Number of offices |
9 | 9 | 9 | 8 | 8 | 8 | 8 | |||||||||||||||||||||
Number of full-time equivalent employees |
118 | 116 | 111 | 113 | 104 | 107 | 111 |
(1) |
Performance ratios for the six months ended June 30, 2018 and 2017 are annualized. |
(2) |
Represents net income divided by average total assets. For the six months ended June 30, 2017 and the year ended December 31, 2017, reflects the reversal of our deferred tax asset valuation in the amount of $4.8 million. |
(3) |
Represents net income divided by average equity. For the six months ended June 30, 2017 and the year ended December 31, 2017, reflects the reversal of our deferred tax asset valuation in the amount of $4.8 million. |
(4) |
Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost on average interest-bearing liabilities. Tax exempt income is reported on a tax equivalent basis using a combined federal and state marginal tax rate of 29% for 2018 and 42% for the previous periods. |
(5) |
Represents net interest income as a percent of average interest-earning assets. Tax exempt income is reported on a tax equivalent basis using a combined federal and state marginal tax rate of 29% for 2018 and 42% for the previous periods. |
(6) |
Represents non-interest expense divided by the sum of net interest income and non-interest income. |
(7) |
Represents average equity divided by average total assets. |
41
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, contemplate, continue, target and words of similar meaning. These forward-looking statements include, but are not limited to:
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statements of our goals, intentions and expectations; |
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statements regarding our business plans, prospects, growth and operating strategies; |
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statements regarding the quality of our loan and investment portfolios; and |
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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:
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general economic conditions, either nationally or in our market areas, that are worse than expected; |
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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; |
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our ability to access cost-effective funding; |
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fluctuations in real estate values and both residential and commercial real estate market conditions; |
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demand for loans and deposits in our market area; |
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our ability to implement and change our business strategies; |
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competition among depository and other financial institutions; |
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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; |
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adverse changes in the securities or secondary mortgage markets; |
42
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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; |
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the impact of the Dodd-Frank Act and the implementing regulations; |
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changes in the quality or composition of our loan or investment portfolios; |
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technological changes that may be more difficult or expensive than expected; |
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the inability of third-party providers to perform as expected; |
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our ability to manage market risk, credit risk and operational risk in the current economic environment; |
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our ability to enter new markets successfully and capitalize on growth opportunities; |
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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; |
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changes in consumer spending, borrowing and savings habits; |
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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; |
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our ability to retain key employees; |
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our compensation expense associated with equity allocated or awarded to our employees; and |
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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 22.
43
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 $19.1 million and $26.3 million, or $30.5 million if the offering is increased by 15%.
1895 Bancorp of Wisconsin, Inc. intends to distribute the net proceeds from the offering as follows:
Based Upon the Sale at $10.00 Per Share of | ||||||||||||||||||||||||||||||||
2,057,000 Shares at
Minimum of Offering Range |
2,420,000 Shares at
Midpoint of Offering Range |
2,783,000 Shares at
Maximum of Offering Range |
3,200,450 Shares at
Adjusted Maximum of Offering Range (1) |
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Amount |
Percent of
Net Proceeds |
Amount |
Percent of
Net Proceeds |
Amount |
Percent of
Net Proceeds |
Amount |
Percent of
Net Proceeds |
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(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Offering proceeds |
$ | 20,570 | $ | 24,200 | $ | 27,830 | $ | 32,005 | ||||||||||||||||||||||||
Less: estimated offering expenses |
(1,500 | ) | (1,500 | ) | (1,500 | ) | (1,500 | ) | ||||||||||||||||||||||||
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Net offering proceeds |
$ | 19,070 | 100.00 | % | $ | 22,700 | 100.00 | % | $ | 26,330 | 100.00 | % | $ | 30,505 | 100.00 | % | ||||||||||||||||
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Less: |
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Amount contributed to 1895 Bancorp of Wisconsin, MHC |
$ | (100 | ) | (0.52 | )% | $ | (100 | ) | (0.44 | )% | $ | (100 | ) | (0.38 | )% | $ | (100 | ) | (0.33 | )% | ||||||||||||
Cash contribution to foundation |
$ | (100 | ) | (0.52 | )% | $ | (100 | ) | (0.44 | )% | $ | (100 | ) | (0.38 | )% | $ | (100 | ) | (0.33 | )% | ||||||||||||
Proceeds contributed to PyraMax Bank, FSB |
$ | (9,535 | ) | (50.00 | )% | $ | (11,350 | ) | (50.00 | )% | $ | (13,165 | ) | (50.00 | )% | $ | (15,253 | ) | (50.00 | )% | ||||||||||||
Proceeds used for loan to employee stock ownership plan (2) |
$ | (1,833 | ) | (9.61 | )% | $ | (2,156 | ) | (9.50 | )% | $ | (2,479 | ) | (9.42 | )% | $ | (2,851 | ) | (9.35 | )% | ||||||||||||
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Proceeds retained by 1895 Bancorp of Wisconsin, Inc. |
$ | 7,502 | 39.34 | % | $ | 8,994 | 39.62 | % | $ | 10,486 | 39.83 | % | $ | 12,201 | 40.00 | % | ||||||||||||||||
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(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 (ESOP) will purchase 3.92% of our outstanding shares (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) with the ESOP obtaining the funds to purchase the shares from a loan made available by 1895 Bancorp of Wisconsin, Inc. to the ESOP. The loan will be repaid principally through PyraMax Bank, FSBs contribution to the ESOP and dividends payable on common stock held by the ESOP over the anticipated 25-year term of the loan. The interest rate for the ESOP 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 OfferingPlan 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 PyraMax Bank, FSBs deposits. PyraMax Bank, FSB will receive at least 50% of the net proceeds of the offering.
Use of Proceeds Retained by 1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, Inc.:
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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 PyraMax Bank, FSBInvestment Activities; |
44
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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; |
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may, in the future, use a portion of the proceeds that it retains to finance acquisitions of financial institutions, or branches thereof, 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 |
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expects to use the proceeds that it retains from time to time for other general corporate purposes. |
Use of Proceeds Received by PyraMax Bank, FSB
PyraMax Bank, FSB:
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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; |
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intends to use a portion of the proceeds received to fund new one- to four-family residential mortgage loans, commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner occupied loans) and commercial loans (which includes commercial and industrial loans) and, to a lesser extent, other loans, in accordance with our business plan and lending guidelines. See Business of PyraMax Bank, FSBLending Activities; |
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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; |
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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 PyraMax Bank, FSBInvestment Activities; |
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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 |
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expects to use the proceeds received from time to time for other general corporate purposes. |
The use of the proceeds by 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB 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.
45
OUR POLICY REGARDING DIVIDENDS
We do not currently intend to pay dividends on our common stock following completion of the offering. In the event that we do determine to pay dividends in the future, the payment and amount of any dividends 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 Boards current regulations restricting the waiver of dividends by mutual holding companies; statutory and regulatory limitations; and general economic conditions.
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 companys 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 companys overall rate or earnings retention is inconsistent with its capital needs and overall financial condition. In addition, PyraMax Bank, FSBs 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.
1895 Bancorp of Wisconsin, Inc. will file a consolidated federal tax return with PyraMax Bank, FSB. Accordingly, it is anticipated that any cash distributions that 1895 Bancorp of Wisconsin, Inc. makes to its 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 offering, 1895 Bancorp of Wisconsin, Inc. will not take any action to declare an extraordinary dividend to its 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 1895 Bancorp of Wisconsin, Inc. - Common Stock. Dividends we can declare and pay will depend, in part, upon receipt of dividends from PyraMax Bank, FSB, because initially we will have no source of income other than dividends from PyraMax Bank, FSB and earnings from the investment of the net proceeds from the sale of shares of common stock retained by 1895 Bancorp of Wisconsin, 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 PyraMax Bank, FSB to 1895 Bancorp of Wisconsin, Inc. that would be deemed to be drawn out of PyraMax Bank, FSBs bad debt reserves, if any, would require a payment of taxes at the then-current tax rate by PyraMax Bank, FSB on the amount of earnings deemed to be removed from the reserves for such distribution. PyraMax Bank, FSB does not intend to make any distribution to 1895 Bancorp of Wisconsin, Inc. that would create such a federal tax liability. See Taxation.
46
If 1895 Bancorp of Wisconsin, Inc. pays dividends to its stockholders, it will likely pay dividends to 1895 Bancorp of Wisconsin, MHC. The Federal Reserve Boards current regulations significantly restrict the ability of mutual holding companies organized after December 1, 2009 to waive dividends declared by their subsidiaries. Accordingly, we do not currently anticipate that 1895 Bancorp of Wisconsin, MHC will waive dividends paid by 1895 Bancorp of Wisconsin, Inc. See Risk Factors - Risks Related to the Offering - Under current law, if we declare dividends on our common stock, 1895 Bancorp of Wisconsin, MHC will be restricted from waiving the receipt of dividends.
1895 Bancorp of Wisconsin, Inc. is a to-be-formed company and has never issued capital stock. PyraMax Bank, FSB, as a mutual institution, has never issued capital stock. Accordingly, there is no established market for our common stock. 1895 Bancorp of Wisconsin, Inc. expects that its common stock will be quoted on the Nasdaq Capital Market under the symbol BCOW upon completion of the offering.
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 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 offering and may have an adverse impact on the price at which the common stock can be sold.
47
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
At June 30, 2018, PyraMax Bank, FSB 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 PyraMax Bank, FSB at June 30, 2018, and the pro forma equity capital and regulatory capital of PyraMax Bank, FSB after giving effect to the sale of shares of common stock at $10.00 per share. The table assumes the receipt by PyraMax Bank, FSB of 50% of the net proceeds. See How We Intend to Use the Proceeds from the Offering.
PyraMax Bank, FSB
Historical at June 30, 2018 |
Pro Forma at June 30, 2018, Based Upon the Sale in the Offering of (1) | |||||||||||||||||||||||||||||||||||||||
2,057,000 Shares | 2,420,000 Shares | 2,783,000 Shares | 3,200,450 Shares (2) | |||||||||||||||||||||||||||||||||||||
Amount |
Percent of
Assets (3(4)) |
Amount |
Percent of
Assets (3) |
Amount |
Percent of
Assets (3) |
Amount |
Percent of
Assets (3) |
Amount |
Percent of
Assets (3) |
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(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||
Equity |
$ | 37,690 | 7.8 | % | $ | 44,476 | 9.1 | % | $ | 45,806 | 9.3 | % | $ | 47,136 | 9.6 | % | $ | 48,666 | 9.8 | % | ||||||||||||||||||||
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Tier 1 leverage capital |
$ | 35,552 | 7.5 | % | $ | 42,338 | 8.7 | % | $ | 43,668 | 8.9 | % | $ | 44,998 | 9.2 | % | $ | 46,528 | 9.5 | % | ||||||||||||||||||||
Tier 1 leverage capital requirement |
23,830 | 5.0 | 24,307 | 5.0 | 24,397 | 5.0 | 24,488 | 5.0 | 24,592 | 5.0 | ||||||||||||||||||||||||||||||
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Excess |
$ | 11,722 | 2.5 | % | $ | 18,031 | 3.7 | % | $ | 19,271 | 3.9 | % | $ | 20,510 | 4.2 | % | $ | 21,936 | 4.5 | % | ||||||||||||||||||||
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Tier 1 risk-based capital (5) |
$ | 35,552 | 9.7 | % | $ | 42,338 | 11.5 | % | $ | 43,668 | 11.8 | % | $ | 44,998 | 12.2 | % | $ | 46,528 | 12.6 | % | ||||||||||||||||||||
Tier 1 risk-based requirement |
29,313 | 8.0 | 29,466 | 8.0 | 29,495 | 8.0 | 29,524 | 8.0 | 29,557 | 8.0 | ||||||||||||||||||||||||||||||
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Excess |
$ | 6,239 | 1.7 | % | $ | 12,872 | 3.5 | % | $ | 14,173 | 3.8 | % | $ | 15,474 | 4.2 | % | $ | 16,971 | 4.6 | % | ||||||||||||||||||||
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Total risk-based capital (5) |
$ | 38,644 | 10.5 | % | $ | 45,430 | 12.3 | % | $ | 46,760 | 12.7 | % | $ | 48,090 | 13.0 | % | $ | 49,620 | 13.4 | % | ||||||||||||||||||||
Total risk-based requirement |
36,641 | 10.0 | 36,832 | 10.0 | 36,868 | 10.0 | 36,905 | 10.0 | 36,946 | 10.0 | ||||||||||||||||||||||||||||||
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Excess |
$ | 2,003 | 0.5 | % | $ | 8,598 | 2.3 | % | $ | 9,892 | 2.7 | % | $ | 11,185 | 3.0 | % | $ | 12,674 | 3.4 | % | ||||||||||||||||||||
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Common equity tier 1 risk-based capital (5) |
$ | 35,552 | 9.7 | % | $ | 42,338 | 11.5 | % | $ | 43,668 | 11.8 | % | $ | 44,998 | 12.2 | % | $ | 46,528 | 12.6 | % | ||||||||||||||||||||
Common equity tier 1 risk-based requirement |
23,817 | 6.5 | 23,941 | 6.5 | 23,964 | 6.5 | 23,988 | 6.5 | 24,015 | 6.5 | ||||||||||||||||||||||||||||||
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Excess |
$ | 11,735 | 3.2 | % | $ | 18,397 | 5.0 | % | $ | 19,704 | 5.3 | % | $ | 21,010 | 5.7 | % | $ | 22,513 | 6.1 | % | ||||||||||||||||||||
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Reconciliation of capital infused into PyraMax Bank, FSB: |
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Net offering proceeds |
$ | 19,070 | $ | 22,700 | $ | 26,330 | $ | 30,505 | ||||||||||||||||||||||||||||||||
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Proceeds to PyraMax Bank, FSB |
$ | 9,535 | $ | 11,350 | $ | 13,165 | $ | 15,253 | ||||||||||||||||||||||||||||||||
Less: Common stock acquired by employee stock ownership plan |
1,833 | 2,156 | 2,479 | 2,851 | ||||||||||||||||||||||||||||||||||||
Less: Common stock acquired by stock-based benefit plans |
916 | 1,078 | 1,240 | 1,426 | ||||||||||||||||||||||||||||||||||||
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Pro forma increase |
$ | 6,786 | $ | 8,116 | $ | 9,446 | $ | 10,976 | ||||||||||||||||||||||||||||||||
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(1) |
Pro forma capital levels assume that the employee stock ownership plan purchases 3.92% of our total outstanding shares (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) 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 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) for restricted stock awards. Pro forma capital calculated under U.S. generally accepted accounting principles (U.S. 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) |
Based on total assets of $480.3 million for the purposes of the GAAP capital ratio, total assets of $476.6 million, for the purposes of the Tier 1 leverage capital requirement and risk-weighted assets of $366.4 million, for the purposes of the Tier 1 risk-based and total risk-based capital requirements. |
(5) |
Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20% risk weighting. |
48
The following table presents the historical capitalization of PyraMax Bank, FSB at June 30, 2018, and the pro forma consolidated capitalization of 1895 Bancorp of Wisconsin, 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.
PyraMax Bank,
FSB Historical Capitalization at June 30, 2018 |
Pro Forma Consolidated Capitalization at June 30, 2018
of 1895 Bancorp of Wisconsin, Inc. Based Upon the Sale for $10.00 Per Share of |
|||||||||||||||||||
2,057,000
Shares |
2,420,000
Shares |
2,783,000
Shares |
3,200,450
Shares (1) |
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(Dollars in thousands) | ||||||||||||||||||||
Deposits (2) |
$ | 404,560 | $ | 404,560 | $ | 404,560 | $ | 404,560 | $ | 404,560 | ||||||||||
Borrowings |
27,677 | 27,677 | 27,677 | 27,677 | 27,677 | |||||||||||||||
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Total interest-bearing liabilities |
$ | 432,237 | $ | 432,237 | $ | 432,237 | $ | 432,237 | $ | 432,237 | ||||||||||
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Stockholders equity: |
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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: |
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19,000,000 shares authorized (post offering);
|
| 47 | 55 | 63 | 73 | |||||||||||||||
Additional paid-in capital (3) |
| 19,044 | 22,666 | 26,288 | 30,453 | |||||||||||||||
Retained earnings (4) |
39,459 | 39,459 | 39,459 | 39,459 | 39,459 | |||||||||||||||
Accumulated other comprehensive loss, net |
(1,769 | ) | (1,769 | ) | (1,769 | ) | (1,769 | ) | (1,769 | ) | ||||||||||
Shares issued to foundation |
| 468 | 550 | 633 | 727 | |||||||||||||||
Less: |
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After-tax expense of contribution to charitable foundation (5) |
| 470 | 535 | 600 | 674 | |||||||||||||||
Assets retained by 1895 Bancorp of Wisconsin,
|
| 100 | 100 | 100 | 100 | |||||||||||||||
Cash contribution to foundation |
| 100 | 100 | 100 | 100 | |||||||||||||||
Common stock acquired by employee stock ownership plan (7) |
| 1,833 | 2,156 | 2,479 | 2,851 | |||||||||||||||
Common stock acquired by stock-based benefit
|
| 916 | 1,078 | 1,240 | 1,426 | |||||||||||||||
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Total stockholders equity |
$ | 37,690 | $ | 53,930 | $ | 57,092 | $ | 60,255 | $ | 63,892 | ||||||||||
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Total tangible stockholders equity |
$ | 39,459 | $ | 55,699 | $ | 58,861 | $ | 62,024 | $ | 65,661 | ||||||||||
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Pro forma shares of common stock outstanding: |
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Shares offered for sale |
| 2,057,000 | 2,420,000 | 2,783,000 | 3,200,450 | |||||||||||||||
Shares issued to charitable foundation |
| 46,750 | 55,000 | 63,250 | 72,737 | |||||||||||||||
Shares issued to 1895 Bancorp of Wisconsin, MHC |
| 2,571,000 | 3,025,000 | 3,478,750 | 4,000,750 | |||||||||||||||
Total shares outstanding |
| 4,675,000 | 5,500,000 | 6,325,000 | 7,273,750 | |||||||||||||||
Total stockholders equity as a percentage of pro forma total assets |
7.81 | % | 10.79 | % | 11.36 | % | 11.91 | % | 12.54 | % | ||||||||||
Total stockholders tangible equity as a percentage of pro forma total assets |
8.18 | % | 11.17 | % | 11.72 | % | 12.28 | % | 12.90 | % |
(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 1895 Bancorp of Wisconsin, Inc. expects to adopt. The plan of reorganization permits 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, MHC. |
(4) |
The retained earnings of PyraMax Bank, FSB will be substantially restricted after the offering. See Regulation and Supervision Federal Banking Regulation Capital Distributions. |
(footnotes continued on following page)
49
(5) |
Represents the expense of the contribution to the charitable foundation based on a 21.0% tax rate. The realization of the deferred tax benefit is limited annually to a maximum deduction for charitable donations equal to 10% of our annual taxable income, subject to our ability to carry forward any unused portion of the deduction for five years following the year in which the contribution is made. |
(6) |
Pro forma stockholders equity reflects a $100,000 initial capitalization of 1895 Bancorp of Wisconsin, MHC. |
(7) |
Assumes that 3.92% of the shares of common stock outstanding following the reorganization and offering (including shares issued to 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) 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 1895 Bancorp of Wisconsin, Inc. and will represent unearned compensation, reflected as a reduction of capital The common stock acquired by the employee stock ownership plan is reflected as a reduction of stockholders equity. PyraMax Bank, FSB will provide the funds to repay the employee stock ownership plan loan. See ManagementBenefit Plans and Agreements. |
(8) |
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 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) are purchased by 1895 Bancorp of Wisconsin, Inc. for stock awards under a stock-based benefit plan in the open market. The shares of common stock to be purchased by 1895 Bancorp of Wisconsin, Inc. for the stock-based benefit plan are reflected as a reduction of stockholders equity. See Pro Forma Data and Management. The plan of reorganization permits 1895 Bancorp of Wisconsin, Inc. to adopt a stock-based benefit plan that awards stock or stock options, in an aggregate amount up to 25% of the shares of common stock held by persons other than 1895 Bancorp of Wisconsin, MHC. The stock-based benefit plan will not be implemented for at least six months after the reorganization and offering and until it has been approved by stockholders. |
50
The following tables summarize historical data of PyraMax Bank, FSB and pro forma data of 1895 Bancorp of Wisconsin, Inc. at and for the six months ended June 30, 2018 and the year ended December 31, 2017. 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) |
our employee stock ownership plan will purchase an amount of shares equal to 3.92% of our outstanding shares, including shares held by 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation, with a loan from 1895 Bancorp of Wisconsin, 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 PyraMax Bank, FSB; and |
(ii) |
expenses of the offering, including fees and expenses to be paid to KBW, will be $1.5 million. |
We calculated the pro forma consolidated net income of 1895 Bancorp of Wisconsin, 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 2.85% (2.25% on an after-tax basis), which is equal to the yield on the five-year U.S. Treasury Note as of June 30, 2018. 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 forma 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 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) 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 1895 Bancorp of Wisconsin, MHC.
51
We have also 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 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation). 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 $3.00 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 13.89% 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 2.71%. The plan of reorganization provides that we may grant awards of stock or 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 1895 Bancorp of Wisconsin, MHC.
As disclosed under How We Intend to Use the Proceeds from the Offering, 1895 Bancorp of Wisconsin, Inc. intends to contribute 50% of the net proceeds from the offering to PyraMax Bank, FSB. 1895 Bancorp of Wisconsin, Inc. will contribute $100,000 to 1895 Bancorp of Wisconsin, MHC and $100,000 to the charitable foundation and will retain the remainder of the net proceeds from the offering. 1895 Bancorp of Wisconsin, 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 table does not give effect to:
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withdrawals from deposit accounts for the purpose of purchasing shares of common stock in the offering; |
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1895 Bancorp of Wisconsin, Inc.s results of operations after the offering; |
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increased fees and expenses that we would pay KBW and other broker-dealers if we conducted a syndicated offering; or |
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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 1895 Bancorp of Wisconsin, Inc., computed in accordance with U.S. GAAP. 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.
52
At or For the Six Months Ended June 30, 2018
Based Upon the Sale at $10.00 Per Share of |
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2,057,000
Shares at Minimum of Offering Range |
2,420,000
Shares at Midpoint of Offering Range |
2,783,000
Shares at Maximum of Offering Range |
3,200,450
Shares at Adjusted Maximum of Offering Range (1) |
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(Dollars in thousands, except per share amounts) | ||||||||||||||||
Gross proceeds of the offering |
$ | 20,570 | $ | 24,200 | $ | 27,830 | $ | 32,005 | ||||||||
Market value of shares issued to foundation |
468 | 550 | 633 | 727 | ||||||||||||
Market value of shares issued to 1895 Bancorp of Wisconsin, MHC |
25,713 | 30,250 | 34,788 | 40,006 | ||||||||||||
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Market value of 1895 Bancorp of Wisconsin, Inc. |
$ | 46,750 | $ | 55,000 | $ | 63,250 | $ | 72,738 | ||||||||
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Gross proceeds of the offering |
$ | 20,570 | $ | 24,200 | $ | 27,830 | $ | 32,005 | ||||||||
Estimated expenses |
(1,500 | ) | (1,500 | ) | (1,500 | ) | (1,500 | ) | ||||||||
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Estimated net proceeds |
19,070 | 22,700 | 26,330 | 30,505 | ||||||||||||
1895 Bancorp of Wisconsin, MHC capitalization |
(100 | ) | (100 | ) | (100 | ) | (100 | ) | ||||||||
Cash contribution to foundation |
(100 | ) | (100 | ) | (100 | ) | (100 | ) | ||||||||
Common stock acquired by employee stock ownership plan (2) |
(1,833 | ) | (2,156 | ) | (2,479 | ) | (2,851 | ) | ||||||||
Common stock acquired by stock-based benefit plans (3) |
(916 | ) | (1,078 | ) | (1,240 | ) | (1,426 | ) | ||||||||
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Estimated net proceeds as adjusted |
$ | 16,121 | $ | 19,266 | $ | 22,411 | $ | 26,028 | ||||||||
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For the six months ended June 30, 2018 |
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Consolidated net income: |
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Historical |
$ | (323 | ) | $ | (323 | ) | $ | (323 | ) | $ | (323 | ) | ||||
Income on adjusted net proceeds |
181 | 217 | 252 | 293 | ||||||||||||
Employee stock ownership plan (2) |
(29 | ) | (34 | ) | (39 | ) | (45 | ) | ||||||||
Shares granted under stock-based benefit plans (3) |
(72 | ) | (85 | ) | (98 | ) | (113 | ) | ||||||||
Options granted under stock-based benefit plans (4) |
(33 | ) | (38 | ) | (44 | ) | (51 | ) | ||||||||
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Pro forma net income |
$ | (276 | ) | $ | (263 | ) | $ | (252 | ) | $ | (239 | ) | ||||
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Earnings per share: |
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Historical |
$ | (0.07 | ) | $ | (0.06 | ) | $ | (0.05 | ) | $ | (0.05 | ) | ||||
Income on net proceeds |
0.04 | 0.04 | 0.04 | 0.04 | ||||||||||||
Employee stock ownership plan (2) |
(0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||||
Shares granted under stock-based benefit plans (3) |
(0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | ||||||||
Options granted under stock-based benefit plans (4) |
(0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||||
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Pro forma earnings per share |
$ | (0.07 | ) | $ | (0.06 | ) | $ | (0.05 | ) | $ | (0.05 | ) | ||||
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Offering price to pro forma earnings per share |
(71.43 | )x | (83.33 | )x | (100.00 | )x | (100.00 | )x | ||||||||
Number of shares used in earnings per share calculations (2) |
4,495,405 | 5,288,712 | 6,082,019 | 6,994,322 | ||||||||||||
At June 30, 2018 |
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Stockholders equity: |
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Historical |
$ | 37,690 | $ | 37,690 | $ | 37,690 | $ | 37,690 | ||||||||
Estimated net proceeds |
19,070 | 22,700 | 26,330 | 30,505 | ||||||||||||
Capitalization of 1895 Bancorp of Wisconsin, MHC |
(100 | ) | (100 | ) | (100 | ) | (100 | ) | ||||||||
Stock contribution to foundation |
468 | 550 | 633 | 727 | ||||||||||||
After tax cost of foundation |
(449 | ) | (514 | ) | (579 | ) | (653 | ) | ||||||||
Common stock acquired by employee stock ownership plan (2) |
(1,833 | ) | (2,156 | ) | (2,479 | ) | (2,851 | ) | ||||||||
Common stock acquired by stock-based benefit plans (3) |
(916 | ) | (1,078 | ) | (1,240 | ) | (1,426 | ) | ||||||||
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Pro forma stockholders equity (5) |
$ | 53,930 | $ | 57,092 | $ | 60,255 | $ | 63,892 | ||||||||
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Pro forma tangible stockholders equity |
$ | 52,161 | $ | 55,323 | $ | 58,486 | $ | 52,123 | ||||||||
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Stockholders equity per share: |
||||||||||||||||
Historical |
$ | 8.06 | $ | 6.85 | $ | 5.96 | $ | 5.18 | ||||||||
Estimated net proceeds |
4.08 | 4.13 | 4.16 | 4.19 | ||||||||||||
Capitalization of 1895 Bancorp of Wisconsin, MHC |
(0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | ||||||||
Shares issued to foundation |
0.10 | 0.10 | 0.10 | 0.10 | ||||||||||||
After tax cost of foundation |
(0.10 | ) | (0.09 | ) | (0.09 | ) | (0.09 | ) | ||||||||
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 | ) | ||||||||
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Pro forma stockholders equity per share (3)(5) |
$ | 11.53 | $ | 10.38 | $ | 9.52 | $ | 8.77 | ||||||||
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Pro forma tangible stockholders equity per share |
$ | 11.16 | $ | 10.06 | $ | 9.25 | $ | 8.54 | ||||||||
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Offering price as a percentage of pro forma stockholders equity per share |
86.73 | % | 96.34 | % | 105.04 | % | 113.90 | % | ||||||||
Offering price as a percentage of pro forma tangible stockholders equity per share |
89.61 | % | 99.40 | % | 108.11 | % | 117.10 | % | ||||||||
Number of shares outstanding for pro forma equity per share calculations |
4,675,000 | 5,500,000 | 6,325,000 | 7,273,750 |
53
(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 in the offering 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 1895 Bancorp of Wisconsin, Inc. The amount to be borrowed is reflected as a reduction of stockholders equity. PyraMax Bank, FSB 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. PyraMax Bank, FSBs total annual payment of the employee stock ownership plan debt is based upon 25 equal annual installments of principal and interest. The pro forma net earnings information makes the following assumptions: (i) PyraMax Bank, FSBs 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 183,300, 215,600, 247,900 and 285,100 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range; (iii) 3,665, 4,312, 4,959 and 5,703 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 quarter ended June 30, 2018 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, resulting in a reduction from total outstanding shares (which is also the number of shares outstanding for pro forma equity per share calculations) of 4,491,740, 5,284,400, 6,077,060 and 6,988,619 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range, to determine the number of shares outstanding for 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 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation) either through open market purchases or from authorized but unissued shares of common stock or treasury stock of 1895 Bancorp of Wisconsin, Inc., if any. Funds used by the stock-based benefit plan to purchase the shares will be contributed to the plan by 1895 Bancorp of Wisconsin, Inc. In calculating the pro forma effect of the stock-based benefit plan, it is assumed that the shares were acquired by the plan in open market purchases at the beginning of the year 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 December 31, 2017. The actual purchase price of the shares granted under the stock-based benefit plan 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 1895 Bancorp of Wisconsin, Inc., there would be a dilutive effect of up to 1.93% 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 plan are obtained from authorized but unissued shares. |
(4) |
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 1895 Bancorp of Wisconsin, 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 $3.00 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 21.0%. 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 4.67% on the ownership interest of persons who purchase common stock in the offering. |
(5) |
The retained earnings of PyraMax Bank, FSB will continue to be substantially restricted after the offering. See Regulation and SupervisionFederal Banking Regulation. |
54
At or For the Year Ended December 31, 2017
Based Upon the Sale at $10.00 Per Share of |
||||||||||||||||
2,057,000
Shares at Minimum of Offering Range |
2,420,000
Shares at Midpoint of Offering Range |
2,783,000
Shares at Maximum of Offering Range |
3,200,450
Shares at Adjusted Maximum of Offering Range (1) |
|||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||
Gross proceeds of the offering |
$ | 20,570 | $ | 24,200 | $ | 27,830 | $ | 32,005 | ||||||||
Market value of shares issued to foundation |
468 | 550 | 633 | 727 | ||||||||||||
Market value of shares issued to 1895 Bancorp of Wisconsin, MHC |
25,713 | 30,250 | 34,788 | 40,006 | ||||||||||||
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Market value of 1895 Bancorp of Wisconsin, Inc. |
$ | 46,750 | $ | 55,000 | $ | 63,250 | $ | 72,738 | ||||||||
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Gross proceeds of the offering |
$ | 20,570 | $ | 24,200 | $ | 27,830 | $ | 32,005 | ||||||||
Estimated expenses |
(1,500 | ) | (1,500 | ) | (1,500 | ) | (1,500 | ) | ||||||||
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Estimated net proceeds |
19,070 | 22,700 | 26,330 | 30,505 | ||||||||||||
1895 Bancorp of Wisconsin, MHC capitalization |
(100 | ) | (100 | ) | (100 | ) | (100 | ) | ||||||||
Cash contribution to foundation |
(100 | ) | (100 | ) | (100 | ) | (100 | ) | ||||||||
Common stock acquired by employee stock ownership plan (2) |
(1,833 | ) | (2,156 | ) | (2,479 | ) | (2,851 | ) | ||||||||
Common stock acquired by stock-based benefit plans (3) |
(916 | ) | (1,078 | ) | (1,240 | ) | (1,426 | ) | ||||||||
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Estimated net proceeds as adjusted |
$ | 16,121 | $ | 19,266 | $ | 22,411 | $ | 26,028 | ||||||||
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For the year ended December 31, 2017 |
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Consolidated net income: |
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Historical (4) |
$ | 1,660 | $ | 1,660 | $ | 1,660 | $ | 1,660 | ||||||||
Income on adjusted net proceeds |
363 | 433 | 504 | 586 | ||||||||||||
Employee stock ownership plan (2) |
(58 | ) | (68 | ) | (78 | ) | (90 | ) | ||||||||
Shares granted under stock-based benefit plans (3) |
(145 | ) | (170 | ) | (196 | ) | (225 | ) | ||||||||
Options granted under stock-based benefit plans (5) |
(65 | ) | (77 | ) | (88 | ) | (101 | ) | ||||||||
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Pro forma net income |
$ | 1,755 | $ | 1,778 | $ | 1,802 | $ | 1,830 | ||||||||
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Earnings per share: |
||||||||||||||||
Historical |
$ | 0.37 | $ | 0.31 | $ | 0.27 | $ | 0.24 | ||||||||
Income on net proceeds |
0.08 | 0.08 | 0.08 | 0.08 | ||||||||||||
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) |
(0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||||
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Pro forma earnings per share |
$ | 0.40 | $ | 0.34 | $ | 0.30 | $ | 0.27 | ||||||||
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Offering price to pro forma earnings per share |
25.00x | 29.41x | 33.33x | 37.04x | ||||||||||||
Number of shares used in earnings per share calculations (2) |
4,499,070 | 5,293,024 | 6,086,978 | 7,000,024 | ||||||||||||
At December 31, 2017 |
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Stockholders equity: |
||||||||||||||||
Historical (4) |
$ | 38,994 | $ | 38,994 | $ | 38,994 | $ | 38,994 | ||||||||
Estimated net proceeds |
19,070 | 22,700 | 26,330 | 30,505 | ||||||||||||
Capitalization of 1895 Bancorp of Wisconsin, MHC |
(100 | ) | (100 | ) | (100 | ) | (100 | ) | ||||||||
Stock contribution to foundation |
468 | 550 | 633 | 727 | ||||||||||||
After tax cost of foundation |
(449 | ) | (514 | ) | (579 | ) | (653 | ) | ||||||||
Common stock acquired by employee stock ownership plan (2) |
(1,833 | ) | (2,156 | ) | (2,479 | ) | (2,851 | ) | ||||||||
Common stock acquired by stock-based benefit plans (3) |
(916 | ) | (1,078 | ) | (1,240 | ) | (1,426 | ) | ||||||||
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Pro forma stockholders equity (6) |
$ | 55,234 | $ | 58,396 | $ | 61,559 | $ | 65,196 | ||||||||
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Pro forma tangible stockholders equity |
$ | 53,465 | $ | 56,627 | $ | 59,790 | $ | 63,427 | ||||||||
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Stockholders equity per share: |
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Historical |
$ | 8.34 | $ | 7.09 | $ | 6.17 | $ | 5.36 | ||||||||
Estimated net proceeds |
4.08 | 4.13 | 4.16 | 4.19 | ||||||||||||
Capitalization of 1895 Bancorp of Wisconsin, MHC |
(0.02 | ) | (0.02 | ) | (0.02 | ) | (0.01 | ) | ||||||||
Shares issued to foundation |
0.10 | 0.10 | 0.10 | 0.10 | ||||||||||||
After tax cost of foundation |
(0.10 | ) | (0.09 | ) | (0.09 | ) | (0.09 | ) | ||||||||
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 | ) | ||||||||
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Pro forma stockholders equity per share (3)(6) |
$ | 11.81 | $ | 10.62 | $ | 9.73 | $ | 8.96 | ||||||||
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Pro forma tangible stockholders equity per share |
$ | 11.44 | $ | 10.30 | $ | 9.45 | $ | 8.72 | ||||||||
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Offering price as a percentage of pro forma stockholders equity per share |
84.67 | % | 94.16 | % | 102.77 | % | 111.61 | % | ||||||||
Offering price as a percentage of pro forma tangible stockholders equity per share |
87.41 | % | 97.09 | % | 105.82 | % | 114.68 | % | ||||||||
Number of shares outstanding for pro forma equity per share calculations |
4,675,000 | 5,500,000 | 6,325,000 | 7,273,750 |
55
(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 in the offering 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 1895 Bancorp of Wisconsin, Inc. The amount to be borrowed is reflected as a reduction of stockholders equity. PyraMax Bank, FSB 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. PyraMax Bank, FSBs total annual payment of the employee stock ownership plan debt is based upon 25 equal annual installments of principal and interest. The pro forma net earnings information makes the following assumptions: (i) PyraMax Bank, FSBs 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 183,300, 215,600, 247,900 and 285,100 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range; (iii) 7,330, 8,624, 9,918 and 11,405 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 December 31, 2017 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, resulting in a reduction from total outstanding shares (which is also the number of shares outstanding for pro forma equity per share calculations) of 4,491,740, 5,284,400, 6,077,060 and 6,988,619 shares, respectively, at the minimum, midpoint, maximum and adjusted maximum of the offering range, to determine the number of shares outstanding for 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 1895 Bancorp of Wisconsin, MHC) either through open market purchases or from authorized but unissued shares of common stock or treasury stock of 1895 Bancorp of Wisconsin, Inc., if any. Funds used by the stock-based benefit plans to purchase the shares will be contributed to the plan by 1895 Bancorp of Wisconsin, 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 year 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 December 31, 2017. 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 1895 Bancorp of Wisconsin, Inc., there would be a dilutive effect of up to 1.93% 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 PyraMax Bank, FSBs audited December 31, 2017 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 1895 Bancorp of Wisconsin, MHC and shares of common stock contributed to the charitable foundation). 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 $3.00 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 21.0%. 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 4.67% on the ownership interest of persons who purchase common stock in the offering. |
(6) |
The retained earnings of PyraMax Bank, FSB will continue to be substantially restricted after the offering. See Regulation and SupervisionFederal Banking Regulation. |
56
COMPARISON OF VALUATION AND PRO FORMA INFORMATION
WITH AND WITHOUT THE CHARITABLE FOUNDATION
As reflected in the table below, if the charitable foundation is not established and funded in connection with the reorganization and offering, a greater number of shares of common stock would be sold in the offering. At the minimum, midpoint, maximum, and adjusted maximum of the valuation range, the amount of the stock sold in the offering is $20.6 million, $24.2 million, $27.8 million and $32.0 million, respectively, with the charitable foundation, as compared to $21.0 million, $24.8 million, $28.5 million and $32.7 million, respectively, without the charitable foundation. However, due to the size of the contribution to the charitable foundation, Keller & Company determined that the additional capital that would be received, assuming the offering occurs without the charitable foundation, was immaterial to the pro forma valuation; and accordingly, the valuation is unchanged with or without the charitable foundation.
For comparative purposes only, set forth below are certain pricing ratios, financial data and ratios at and for the six months ended June 30, 2018, at the minimum, midpoint, maximum, and adjusted maximum of the offering range, assuming the offering was completed at the beginning of the period, with and without the charitable foundation.
Minimum of Offering Range | Midpoint of Offering Range | Maximum of Offering Range |
Adjusted Maximum of
Offering Range |
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With
Foundation |
Without
Foundation |
With
Foundation |
Without
Foundation |
With
Foundation |
Without
Foundation |
With
Foundation |
Without
Foundation |
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(Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
Estimated offering amount |
$ | 20,570 | $ | 21,038 | $ | 24,200 | $ | 24,750 | $ | 27,830 | $ | 28,463 | $ | 32,004 | $ | 32,732 | ||||||||||||||||
Pro forma market capitalization |
46,750 | 46,750 | 55,000 | 55,000 | 63,250 | 63,250 | 72,737 | 72,737 | ||||||||||||||||||||||||
Total assets |
498,936 | 499,306 | 502,099 | 502,533 | 505,128 | 505,760 | 508,897 | 509,472 | ||||||||||||||||||||||||
Total liabilities |
444,926 | 445,006 | 444,006 | 444,927 | 444,873 | 444,927 | 444,005 | 444,927 | ||||||||||||||||||||||||
Pro forma shareholders equity |
53,930 | 54,380 | 57,092 | 57,606 | 60,255 | 60,833 | 63,891 | 64,545 | ||||||||||||||||||||||||
Pro forma net income (1) |
(276 | ) | (269 | ) | (263 | ) | (256 | ) | (252 | ) | (244 | ) | (239 | ) | (230 | ) | ||||||||||||||||
Pro forma shareholders equity per share |
11.53 | 11.63 | 10.38 | 10.47 | 9.52 | 9.61 | 8.77 | 8.87 | ||||||||||||||||||||||||
Pro forma net income per share |
(0.07 | ) | (0.07 | ) | (0.06 | ) | (0.06 | ) | (0.05 | ) | (0.05 | ) | (0.05 | ) | (0.05 | ) | ||||||||||||||||
Pro forma pricing ratios: |
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Offering price as a percentage of pro forma shareholders equity per share |
86.73 | % | 85.97 | % | 96.34 | % | 95.48 | % | 105.04 | % | 103.97 | % | 113.90 | % | 112.69 | % | ||||||||||||||||
Offering price as a percentage of pro forma price to earnings |
(71.43 | )% | (71.43 | )% | (83.33 | )% | (83.33 | )% | (100.00 | )% | (100.00 | )% | (100.00 | )% | (100.00 | )% | ||||||||||||||||
Offering price to pro forma assets per share |
9.37x | 9.36x | 10.95x | 10.94x | 12.52x | 12.51x | 14.29x | 14.28x | ||||||||||||||||||||||||
Pro forma financial ratios: |
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Return on assets (annualized) |
(0.11 | )% | (0.11 | )% | (0.10 | )% | (0.10 | )% | (0.10 | )% | (0.10 | )% | (0.09 | )% | (0.09 | )% | ||||||||||||||||
Return on equity (annualized) |
(1.02 | )% | (0.99 | )% | (0.92 | )% | (0.89 | )% | (0.83 | )% | (0.82 | )% | (0.74 | )% | (0.71 | )% | ||||||||||||||||
Equity to assets |
10.81 | % | 10.89 | % | 11.37 | % | 11.46 | % | 11.93 | % | 12.03 | % | 12.55 | % | 12.67 | % |
(footnotes on following page)
57
(1) |
The following table shows the estimated after-tax expense associated with the contribution to the charitable foundation, as well as pro forma net (loss), pro forma net (loss) per share, pro forma (loss) on assets and pro forma (loss) on shareholders equity assuming the contribution to the charitable foundation was expensed during the six months ended June 30, 2018. |
Minimum of
Offering Range |
Midpoint of
Offering Range |
Maximum of
Offering Range |
Adjusted
Maximum of Offering Range |
|||||||||||||
After-tax expense of stock and cash contribution to foundation |
$ | 499,000 | $ | 514,000 | $ | 579,000 | $ | 653,000 | ||||||||
Pro forma net (loss) |
$ | (276,000 | ) | $ | (263,000 | ) | $ | (252,000 | ) | $ | (239,000 | ) | ||||
Pro forma net (loss) per share |
$ | (0.07 | ) | $ | (0.06 | ) | $ | (0.05 | ) | $ | (0.05 | ) | ||||
Offering price to pro forma net income (loss) per share |
(71.43 | )x | (83.33 | )x | (100.00 | )x | (100.00 | )x | ||||||||
Pro forma (loss) on assets (annualized) |
(0.11 | )% | (0.10 | )% | (0.10 | )% | (0.09 | )% | ||||||||
Pro forma (loss) on equity (annualized) |
(1.02 | )% | (0.92 | )% | (0.84 | )% | (0.75 | )% |
* |
Not meaningful. |
58
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF PYRAMAX BANK, FSB
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 audited and unaudited 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 PyraMax Bank, FSB provided in this prospectus.
Overview
PyraMax Bank, FSB is a federally chartered mutual savings bank headquartered in Greenfield, Wisconsin. PyraMax Bank, FSB was established in 1895 as South Milwaukee Savings and Loan Association and has operated continuously in the Milwaukee metropolitan area since that time. In 1993, the bank changed its name to South Milwaukee Savings Bank, S.A. In May 2000, a merger between South Milwaukee Savings Bank and Mitchell Savings Bank officially formed PyraMax Bank, SSB. The bank changed to a federal savings bank charter in 2003, changing its name to PyraMax Bank, FSB.
From our founding in 1895, we operated as a traditional thrift institution, offering primarily residential mortgage loans and savings accounts, supplemented with multi-family and commercial real estate, multi-family and commercial business loans. In 2007, Richard Hurd was promoted to President and Chief Executive Officer of PyraMax Bank, FSB. Mr. Hurd began shifting PyraMax Bank, FSBs focus to include more business-oriented products and services. In 2010, PyraMax Bank, FSB hired Charles Mauer as its Chief Credit Officer, continuing our increased focus on business-oriented lending.
Commercial real estate growth has been the primary source of recent loan growth, and commercial business loan originations have also been emphasized.
We conduct our operations from our six full-service banking offices in Milwaukee County, our two full-service banking offices in Waukesha County and our full-service banking office in Ozaukee County Wisconsin. We consider our primary lending market area to be Milwaukee, Waukesha and Ozaukee Counties, however, we occasionally make loans secured by properties located outside of our primary lending market, usually to borrowers with whom we have an existing relationship and who have a presence within our primary market.
At June 30, 2018, we had total assets of $482.6 million, total deposits of $404.6 million and total equity of $37.7 million. We had a net loss of $323,000 for the six months ended June 30, 2018 and a net income of $1.7 million for the year ended December 31, 2017.
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, commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner occupied loans), commercial loan (which includes commercial and industrial loans) and consumer loans.
59
Subject to market conditions, we expect to increase our focus on originating commercial real estate and commercial business loans in an effort to continue 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 of mortgage-backed securities issued by U.S. government sponsored enterprises, state and municipal securities, asset-backed securities and corporate collateralized mortgage-backed securities. We offer a variety of deposit accounts, including checking accounts, savings accounts and certificate of deposit accounts. Additionally, we have used borrowings, primarily advances from the Federal Home Loan Bank of Chicago, to fund our operations.
PyraMax Bank, FSB is subject to comprehensive regulation and examination by its primary federal regulator, the Office of the Comptroller of the Currency.
Our corporate office is located at 7001 West Edgerton Avenue, Greenfield, Wisconsin 53220, and our telephone number at this address is (414) 421-8200. Our website address is www.pyramaxbank.com. Information on our website is not and should not be considered a part of this prospectus.
Business Strategy
Our current business strategy consists of the following:
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Grow our balance sheet and improve profitability. Given our attractive market area, we believe we are well-positioned to increase the size of our balance sheet without a proportional increase in overhead expense or operating risk. Accordingly, we intend to increase, on a managed basis, our assets and liabilities, particularly loans and deposits. As we grow our assets, particularly higher-yielding commercial loans, while controlling our expenses, we anticipate improving our earnings. |
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Grow our loan portfolio prudently with a focus on diversifying the portfolio, particularly in commercial real estate and commercial lending. Our principal business activity historically has been the origination of residential mortgage loans, supplemented with commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner occupied loans). We intend to retain our presence as a mortgage lender in our market area and increase our focus on originating commercial real estate and commercial loans (which includes commercial and industrial loans). 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. |
Increasing our commercial real estate and business loans involves risk, as described in Risk Factors Risks Related to Our Business We have a substantial amount of commercial real estate and commercial 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 and Our portfolio of loans with a higher risk of loss is increasing, which may lead to additional provisions for loan losses or charge-offs, which would reduce our profits or cause losses.
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Continue to increase core deposits, with an emphasis on low cost demand deposits. We seek core deposits to provide a stable source of funds to support loan growth at costs consistent with improving our net 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 checking accounts, money market accounts and statement savings. In particular, our Treasury Management unit focuses on generating and retaining business deposits, which assists in generating fee income. Core deposits have increased to $205.8 million at June 30, 2018, from $188.9 million at December 31, 2015. |
60
|
Manage credit risk to maintain a low level of non-performing 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. In recent years we have conducted an extensive review of, and have enhanced, our credit, underwriting and loan processing policies and procedures. Our nonperforming assets to total assets ratio was 0.38% at June 30, 2018, compared to 0.40% at December 31, 2017 and 0.67% at December 31, 2016. At June 30, 2018, the majority of our nonperforming assets were related to residential real estate. |
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Grow organically and through opportunistic bank or branch acquisitions or de novo branching. In addition to organic growth, we will also consider 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 in Wisconsin. We will consider expanding our branch network by establishing new ( de novo ) branches and/or through acquisitions, although we have no current acquisitions or new branches planned. The capital we are raising in the offering will also provide us the opportunity to make acquisitions of other financial institutions or branches thereof, and will help fund improvements in our operating facilities, credit reporting and customer delivery services in order to enhance our competitiveness. |
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Continue to provide value to our community . Our goal is to provide long-term value to our customers, employees and the communities we serve by executing a safe and sound service-oriented 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. |
These strategies are intended to guide our investment of the net proceeds of the offering. We intend to continue to pursue our business strategy after the reorganization and the offering, subject to changes necessitated by future market conditions, regulatory restrictions and other factors
Anticipated Increase in Non-interest Expense
Following the completion of the reorganization and offering, our non-interest expense is expected to increase, 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 a stock-based benefit plan, if approved by our stockholders, no earlier than six months after the completion of the reorganization. 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 net income; and Management Benefit Plans and Agreements.
Our non-interest expense will also increase as a result of our contribution of cash and shares of common stock to our charitable foundation, and as a result of the increased reporting and other costs associated with operating as a public company as we may be required to expand our accounting staff and expand our internal audit and risk management functions, and/or engage outside consultants to provide these services for us until qualified personnel are hired. For further information, please see Summary Our Contribution of Cash and Shares of Our Common Stock to the Charitable Foundation, Risk Factors
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Risks Related to Our Business 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 and Risks Related to the Charitable Foundation The contribution to the charitable foundation will dilute your ownership interest and adversely affect net income in 2019, and 1895 Bancorp of Wisconsin Community Foundation.
Critical 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 generally accepted accounting principles used in the United States of America. 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 critical 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.
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 critical accounting policies:
Allowance for Loan Losses. The allowance for loan losses is the estimated amount considered necessary to cover inherent, but unconfirmed, credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses which is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of our most critical accounting policies.
Management performs a quarterly evaluation of the allowance for loan losses. Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.
The analysis has two components, specific and general allowances. The specific allowance is for unconfirmed losses related to loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral, adjusted for market conditions and selling expenses. If the fair value of the loan is less than the loans carrying value, a charge is recorded for the difference. The general allowance, which is for loans reviewed collectively, is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This analysis establishes historical loss percentages and qualitative factors that are applied to the loan groups to determine the amount of the allowance for loan losses necessary for loans that are reviewed collectively. The qualitative
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component is critical in determining the allowance for loan losses as certain trends may indicate the need for changes to the allowance for loan losses based on factors beyond the historical loss history. Not incorporating a qualitative component could misstate the allowance for loan losses. Actual loan losses may be significantly more than the allowances we have established which could result in a material negative effect on our financial results.
Fair Value. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. PyraMax Bank, FSB estimates the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, PyraMax Bank, FSB estimates fair value. These estimates are subjective in nature and any imprecision in estimating these factors can impact the amount of gain or loss recorded. A more detailed description of the fair values measured at each level of the fair value hierarchy and the methodology utilized by PyraMax Bank, FSB can be found in Note 14 of the Financial Statements Fair Value.
Comparison of Financial Condition at June 30, 2018 and December 31, 2017
Total Assets. Total assets increased $14.3 million, or 3.0%, to $482.6 million at June 30, 2018 from $468.4 million at December 31, 2017. The increase resulted primarily from an increase in net loans of $36.8 million, partially offset by decreases in available-for-sale securities of $19.7 million and cash and cash equivalents of $4.5 million.
Cash and Cash Equivalents. Cash and cash equivalents decreased $4.5 million, or 36.0%, to $8.0 million at June 30, 2018 from $12.5 million at December 31, 2017. The decrease resulted primarily from normal fluctuations and seasonal deposit outflow.
Net Loans. Net loans increased $36.8 million, or 11.1%, to $368.0 million at June 30, 2018 from $331.2 million at December 31, 2017. The increase resulted from increases of $25.7 million, or 16.4%, in commercial real estate loans and $12.8 million, or 65.1%, in other loans (primarily commercial and industrial loans). These increases were offset in part by decreases of $2.6 million, or 6.1%, in home equity lines of credit. This increase was the result of our increased marketing efforts, as well as a strong local economy, which drove increased demand for rental units. Due to the extended sales cycle for this type of lending as well as larger loan amounts, loan growth increased from 2017. The majority of these loans were for existing, fully seasoned projects as opposed to new projects being developed.
Securities Available-for-Sale . Securities available-for-sale decreased $19.7 million, or 22.1%, to $69.3 million at June 30, 2018 from $89.0 million at December 31, 2017.
Deposits. Deposits increased $15.3 million, or 3.9%, to $404.6 million at June 30, 2018 from $389.3 million at December 31, 2017. Certificate of deposit accounts increased $12.5 million, or 6.7%, to $198.7 million as of June 30, 2018 compared to $186.2 million as of December 31, 2017. Money market accounts increased $9.7 million, or 17.5 %, to $64.7 million at June 30, 2018 from $55.0 million at December 31, 2017. Non interest-bearing demand accounts decreased $6.0 million, or 9.5 % to $56.9 million at June 30, 2018, compared to $62.8 million at December 31, 2017. Money market accounts increased significantly in 2018 due to the addition of two large accounts totaling $18.0 million sourced from the Treasury Management department. These accounts are of a short-term nature and are expected to liquidate by December 31, 2018. Our strategy for deposit generation is to use targeted, special duration certificates of deposit and money market accounts which do not have a negative impact on our normal pricing structure for existing accounts.
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Borrowings. Borrowings, consisting entirely of Federal Home Loan Bank advances, totaled $27.7 million at June 30, 2018 compared to $34.7 million at December 31, 2017. The aggregate cost of outstanding advances from the Federal Home Loan Bank was 1.48% at June 30, 2018, compared to PyraMax Bank, FSBs cost of deposits of 0.93% at that date.
Other Liabilities. Other liabilities increased $7.3 million, or 144.8%, to $12.3 million at June 30, 2018 from $5.0 million at December 31, 2017.
Total Equity. Total equity decreased $1.3 million, or 3.3%, to $37.7 million at June 30, 2018 from $39.0 million at December 31, 2017. The decrease primarily resulted from $981,000 decrease of other comprehensive income, partially offset by a net income of $323,000 for the six months ended June 30, 2018.
Comparison of Financial Condition at December 31, 2017 and December 31, 2016
Total Assets. Total assets increased $18.2 million, or 4.0%, to $468.4 million at December 31, 2017 from $450.2 million at December 31, 2016. The increase resulted primarily from an increase in net loans of $18.7 million and an increase in cash and cash equivalents of $4.7 million, or 60.7%, to $12.5 million at December 31, 2017 from $7.8 million at December 31, 2016, offset in part by decreases of $7.5 million in securities available-for-sale and $1.3 million in premises and equipment, net.
Cash and Cash Equivalents. Cash and cash equivalents increased $4.7 million, or 60.7%, to $12.5 million at December 31, 2017 from $7.8 million at December 31, 2016. The increase resulted primarily from the proceeds of the sale of securities available-for-sale of $7.5 million.
Net Loans. Net loans increased $18.7 million, or 6.0%, to $331.2 million at December 31, 2017 from $312.5 million at December 31, 2016. The increase resulted from increases of $12.9 million, or 9.0%, in commercial real estate loans and $5.8 million, or 3.4%, in other loans (primarily commercial and industrial loans). The increases resulted from increased marketing and the addition of new leadership in the commercial lending department, as well as the addition of two commercial loan officers. This growth was also enhanced by a stronger economy in the Milwaukee metropolitan market and our addition of a new branch in Ozaukee County. These increases were offset in part by a decrease of $2.8 million, or 6.2%, in home equity lines of credit.
Securities Available-for-Sale. Securities available for sale decreased $7.5 million, or 7.8%, to $89.0 million at December 31, 2017 from $96.5 million at December 31, 2016.
Premises and equipment, net. Premises and equipment, net decreased $1.3 million, or 14.2%, to $7.7 million at December 31, 2017 from $8.9 million at December 31, 2016. The decrease resulted from the establishment of a $1.1 million impairment on a branch building.
Deposits. Deposits increased $30.4 million, or 8.5%, to $389.3 million at December 31, 2017 from $358.9 million at December 31, 2016. Certificate of deposit accounts increased $29.0 million, or 18.5%, to $186.2 million at December 31, 2017 from $157.2 million at December 31, 2016, and non-interest-bearing checking accounts increased $5.7 million, or 10.0%, to $62.8 million at December 31, 2017, from $57.1 million at December 31, 2016. We experienced deposit growth in 2018 due to our addition of a new branch in Ozaukee County, which led to additional certificates of deposit and demand and money market accounts, including commercial demand accounts. These increases were offset in part by a decrease of $2.6 million, or 4.5%, in money market accounts, to $55.0 million, at December 31, 2017 from $57.6 million at December 31, 2016.
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Borrowings. Borrowings, consisting entirely of Federal Home Loan Bank advances, totaled $34.7 million at December 31, 2017 compared to $48.2 million at December 31, 2016. The aggregate cost of outstanding advances from the Federal Home Loan Bank was 1.29% at December 31, 2017, compared to our cost of deposits of 0.81% at that date.
Other Liabilities. Other liabilities decreased $408,000, or 7.4%, to $5.0 million at December 31, 2017 from $5.5 million at December 31, 2016.
Total Equity. Total equity increased $1.7 million, or 4.4%, to $39.0 million at December 31, 2017 from $37.3 million at December 31, 2016. The increase resulted from net income of $1.7 million during 2017.
Comparison of Operating Results for the Six Months Ended June 30, 2018 and 2017
General. We had a net loss of $323,000 for the six months ended June 30, 2018, compared to net income of $5.0 million for the six months ended June 30, 2017, a decrease of $5.3 million, or 106.4%. The decrease in net income was the net effect of an income tax benefit of $4.6 million during the six months ended June 30, 2017 compared to an income tax benefit of $194,000 during the six months ended June 30, 2018, due to the reversal of a deferred tax valuation allowance.
Interest and Dividend Income. Interest and dividend income increased $513,000, or 6.8%, to $8.0 million for the six months ended June 30, 2018 from $7.5 million for the six months ended June 30, 2017. The increase was primarily attributable to a $36.2 million increase in the average balance of loans outstanding.
Interest Expense. Interest expense increased $357,000, or 22.4%, to $1.9 million for the six months ended June 30, 2018, from $1.6 million for the six months ended June 30, 2017. Interest expense on deposits increased 332,000, or 24.8%, to $1.7 million during the six months ended June 30, 2018 from $1.3 million during the six months ended June 30, 2017, as the average balance of deposits increased $21.5 million to $332.5 million for the 2018 period from $311.0 million for the 2017 period and rates on deposits increased 14 basis points.
Net Interest Income. Net interest income increased $156,000, or 2.6%, to $6.1 million for the six months ended June 30, 2018 from $5.9 million for the six months ended June 30, 2017. Average interest-earning assets increased $17.4 million, or 4.2%, to $435.0 million for the 2018 quarter from $417.6 million for the 2017 quarter. The increase was due primarily to an increase in loans. Our net interest rate spread decreased to 2.68% for the six months ended June 30, 2018 from 2.73% for the six months ended June 30, 2017, and our net interest margin decreased to 2.82% for the 2018 quarter from 2.85% for the 2017 quarter. The decrease in net interest rate spread was primarily a result of growth in certificates of deposit balances in a rising rate environment.
Provision for Loan Losses. We recorded no provision for loan losses for the six months ended June 30, 2018 and for the six months ended June 30, 2017, respectively. The allowance for loan losses was $3.1 million, or 0.83% of total loans, at June 30, 2018, compared to $3.1 million, or 0.95% of total loans, at June 30, 2017. Classified (special mention, substandard, doubtful and loss) and watch loans decreased to $16.6 million at June 30, 2018 from $22.8 million at June 30, 2017. Total nonperforming loans decreased to $1.8 million at June 30, 2018 from $2.1 million at June 30, 2017. Net charge-offs for the six months ended June 30, 2018 were $1,000 compared to net recoveries of $40,000 for the prior year period. At June 30, 2018, $763,000, or 25.9%, of the nonperforming loans were contractually current.
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Non-interest Income . Non-interest income remained unchanged at $1.5 million for the six months ended June 30, 2018 and the six months ended June 30, 2017, respectively.
Non-interest Expense. Non-interest expense increased $1.1 million, or 16.3%, to $8.1 million for the six months ended June 30, 2018 from $6.9 million for the six months ended June 30, 2017. The increase was due primarily to an increase of $1.0 million, or 27.1%, in salary and benefit costs for the six months ended June 30, 2018 to $4.9 million compared to $3.9 million for the six months ended June 30, 2017. During the six months ended June 30, 2018, the increase in salary and benefit expenses of $1.1 million included salary increases of $228,000, due to new hires for the Treasury Management department and annual merit increases in salaries; a $315,000 accrual of incentive payments for the first six months of 2018, which accrual was made in full in the fourth quarter in previous years; and $483,000 in healthcare insurance costs. We anticipate that our healthcare insurance costs will increase in the third and fourth quarters of this year due to a large claim for non-covered procedures. Given that we self-insure for health insurance, increases in healthcare coverage costs are recorded as non-interest expense when they become probable and reasonably estimable. We evaluate the cost of self-insurance versus traditional indemnity insurance annually.
Upon consummation of the reorganization and stock offering, we expect non-interest expense to increase because of costs associated with operating as a public company and increased compensation costs related to possible implementation of a stock-based benefit plan, if approved by our stockholders.
Income Tax Benefit. We recorded an income tax benefit of $194,000 for the six months ended June 30, 2018 compared to an income tax benefit of $4.6 million for the six months ended June 30, 2017, a decrease of $4.4 million, or 96.0%, resulting from the reversal of our $4.8 million deferred tax valuation allowance.
Comparison of Operating Results for the Years Ended December 31, 2017 and December 31, 2016
General. We had net income of $1.7 million for the year ended December 31, 2017, compared to net income of $1.3 million for the year ended December 31, 2016, an increase of $405,000, or 32.3%. The increase in net income was the net effect of an increase in net interest income of $783,000, or 7.0%, a decrease of $1.3 million, or 30.4%, in non-interest income, an increase of $2.6 million, or 18.4%, in non-interest expense and an increase of $3.5 million in income tax benefits.
Interest and Dividend Income. Interest and dividend income increased $1.5 million, or 10.6%, to $15.3 million for the year ended December 31, 2017 from $13.8 million for the year ended December 31, 2016. The increase was primarily attributable to a $1.1 million increase in interest on loans, and a $346,000 increase in interest on available-for sale securities, due to an increase in the average balance of available-for-sale securities year to year. The average balance of loans increased by $19.6 million to $324.5 million for 2017 from $304.9 million for 2016, while the average yield on loans increased 9 basis points to 4.03% during 2017 from 3.94% during 2016. The average balance of available-for-sale securities increased $12.6 million, or 15.8%, to $92.5 million for 2017 from $79.9 million for 2016 and the average yield on available-for-sale securities increased 7 basis points to 2.27% for 2017 from 2.20% for 2016.
Interest Expense. Interest expense increased $676,000, or 25.0%, to $3.4 million for the year ended December 31, 2017 from $2.7 million for the year ended December 31, 2016. The increase was primarily due to an increase of $476,000, or 22.2%, in interest expense on certificates of deposit between
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2017 and 2016. The average balance of certificates of deposit increased $12.1 million to $173.6 million for 2017 from $161.5 million for 2016, while the average cost of these deposits increased 18 basis points to 1.51% for 2017 from 1.33% for 2016. Additionally, interest expense on borrowings, consisting entirely of FHLB advances, increased $193,000 or 70%, to $468,000 during 2017 from $275,000 during 2016 as the average balance of borrowings increased to $38.6 million during 2017 from $24.7 million during 2016, and the cost of borrowings increased 10 basis points to 1.21% in 2017 from 1.11% in 2016.
Net Interest Income. Net interest income increased $783,000, or 7.0%, to $11.9 million for the year ended December 31, 2017 from $11.1 million for the year ended December 31, 2016. Average net interest-earning assets increased $2.7 million year to year. Our net interest rate spread decreased to 2.67% for the year ended December 31, 2017 from 2.70% for the year ended December 31, 2016, and our net interest margin remained relatively unchanged at 2.80% for the year ended December 31, 2017 compared to 2.81% for the year ended December 31, 2016. The decrease in net interest rate spread was primarily a result of the yield on certificates of deposit increasing 18 basis points to 1.51% for 2017 from 1.33% for 2016, reflecting the change in market interest rates over this period.
Provision for Loan Losses. We recorded no provision for loan losses for the year ended December 31, 2017 and for the year ended December 31, 2016, respectively. The allowance for loan losses was $3.1 million, or 0.93% of total loans, at December 31, 2017, compared to $3.0 million, or 0.95% of total loans, at December 31, 2016. Classified (special mention, substandard, doubtful and loss) and watch loans decreased to $18.5 million at December 31, 2017 from $24.9 million at December 31, 2016. Total nonperforming loans decreased to $1.9 million at December 31, 2017 from $3.0 million at December 31, 2016. Net recoveries for 2017 were $85,000, an increase of $164,000 over $79,000 of net charge-offs in 2016. At December 31, 2017, $1.0 million, or 24%, of the nonperforming loans were contractually current.
Non-interest Income . Non-interest income decreased $1.3 million, or 31.0%, to $2.9 million for the year ended December 31, 2017 from $4.2 million for the year ended December 31, 2016. The decrease was primarily due to a decrease in gain on sale and servicing of loans of $1.1 million and a decrease in gain on sale of securities of $159,000.
Non-interest Expense. Non-interest expense increased $2.6 million, or 18.4%, to $16.6 million for 2017 from $14.0 million for 2016. The increase was due primarily to a $1.1 million valuation allowance established as part of the anticipated sale of a branch office, a non-recurring $880,000 increase in other operating expense related to a data processing conversion, and an increase of $846,000, or 10.9%, in salaries and employee benefits, to $8.6 million in 2017 from $7.8 million in 2016. The increase in salary and employee benefits resulted from normal salary and incentives increases of $272,000 and $275,000, respectively, and an increase in the cost of benefits of $295,000, relating primarily to self-insured healthcare costs. These increases were offset in part by a decrease of $139,000, or 43.3%, in marketing expense, and $118,000 or 15.1% in professional fees included in other expenses.
Income Tax Expense (Benefit). We recorded an income tax benefit of $3.5 million for 2017 compared to no income tax benefit in 2016 due to the reversal of our deferred tax asset valuation in 2016. The decrease reflected a decrease of $4.8 million of deferred tax valuation allowance.
Average Balances and Yields . The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Nonaccrual loans are included in average balances only. Loan fees are included in interest income on loans and are not material.
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At June 30,
2018 |
Six Months Ended June 30, | |||||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||||||
Average
Yield/Cost Rate (1) |
Average
Outstanding Balance |
Interest and
Dividends |
Yield/Cost
Rate (1) |
Average
Outstanding Balance |
Interest and
Dividends |
Yield/Rate (1) | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Interest-earning assets: |
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Loans |
3.98 | % | $ | 356,169 | $ | 7,087 | 3.98 | % | $ | 319,935 | $ | 6,435 | 4.02 | % | ||||||||||||||
Securities available-for-sale |
2.37 | % | 76,285 | 905 | 2.37 | % | 94,998 | 1,057 | 2.23 | % | ||||||||||||||||||
Other interest-earning assets |
1.54 | % | 2,571 | 21 | 1.63 | % | 2,685 | 8 | 0.60 | % | ||||||||||||||||||
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Total interest-earning assets |
3.72 | % | 435,025 | 8,013 | 3.68 | % | 417,618 | 7,500 | 3.59 | % | ||||||||||||||||||
Non-interest-earning assets |
36,081 | 34,657 | ||||||||||||||||||||||||||
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Total assets |
$ | 471,106 | $ | 452,275 | ||||||||||||||||||||||||
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Interest-earning liabilities: |
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NOW accounts |
0.17 | % | $ | 28,075 | $ | 22 | 0.16 | % | $ | 26,581 | $ | 16 | 0.12 | % | ||||||||||||||
Money market accounts |
0.66 | % | 62,205 | 167 | 0.54 | % | 59,462 | 83 | 0.28 | % | ||||||||||||||||||
Savings accounts |
0.13 | % | 57,691 | 36 | 0.13 | % | 59,052 | 30 | 0.10 | % | ||||||||||||||||||
Certificates of deposit |
1.67 | % | 184,495 | 1,446 | 1.57 | % | 165,885 | 1,210 | 1.46 | % | ||||||||||||||||||
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Total interest-bearing deposits |
1.09 | % | 332,466 | 1,671 | 1.01 | % | 310,980 | 1,339 | 0.86 | % | ||||||||||||||||||
Federal Home Loan Bank advances |
1.46 | % | 40,451 | 277 | 1.37 | % | 44,298 | 252 | 1.14 | % | ||||||||||||||||||
Other interest-bearing liabilities |
| 5,018 | | | 4,492 | | | |||||||||||||||||||||
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Total interest-bearing liabilities |
1.10 | % | 377,935 | 1,948 | 1.03 | % | 359,770 | 1,591 | 0.88 | % | ||||||||||||||||||
Non-interest-bearing deposits |
52,761 | 51,190 | ||||||||||||||||||||||||||
Other non-interest-bearing liabilities |
2,001 | 1,758 | ||||||||||||||||||||||||||
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Total liabilities |
432,697 | 412,718 | ||||||||||||||||||||||||||
Total stockholders equity |
38,409 | 39,557 | ||||||||||||||||||||||||||
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Total liabilities and stockholders equity |
$ | 471,106 | $ | 452,275 | ||||||||||||||||||||||||
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Net interest income |
$ | 6,065 | $ | 5,909 | ||||||||||||||||||||||||
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Net interest-earning assets |
$ | 57,090 | $ | 57,848 | ||||||||||||||||||||||||
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|
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Interest rate spread (2) |
2.62 | % | 2.65 | % | 2.71 | % | ||||||||||||||||||||||
Net interest margin (3) |
2.79 | % | 2.83 | % | ||||||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities |
115.11 | % | 116.08 | % |
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For the Years Ended December 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||||||||||||||||||
Outstanding
Average Balance |
Interest and
Dividends |
Average
Yield/Cost |
Outstanding
Average Balance |
Interest and
Dividends |
Average
Yield/Cost |
Outstanding
Average Balance |
Interest and
Dividends |
Average
Yield/ Cost |
||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Interest-earning assets: |
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Loans |
$ | 324,465 | $ | 13,076 | 4.03 | % | $ | 304,853 | $ | 12,000 | 3.94 | % | $ | 300,082 | $ | 12,160 | 4.05 | % | ||||||||||||||||||
Securities available-for-sale |
92,500 | 2,102 | 2.27 | % | 79,889 | 1,756 | 2.20 | % | 77,974 | 1,685 | 2.16 | % | ||||||||||||||||||||||||
Other interest-earning assets |
7,849 | 78 | 0.99 | % | 10,287 | 41 | 0.40 | % | 6,600 | 11 | 0.16 | % | ||||||||||||||||||||||||
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|||||||||||||||||||||||||
Total interest-earning assets |
424,814 | 15,256 | 3.59 | % | 395,029 | 13,797 | 3.49 | % | 384,656 | 13,856 | 3.60 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Non-interest-earning assets |
36,013 | 31,604 | 31,263 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total assets |
$ | 460,827 | $ | 426,633 | $ | 415,920 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Interest-earning liabilities: |
||||||||||||||||||||||||||||||||||||
NOW accounts |
$ | 26,557 | $ | 31 | 0.12 | % | $ | 27,539 | $ | 48 | 0.17 | % | $ | 28,348 | $ | 50 | 0.18 | % | ||||||||||||||||||
Money market accounts |
59,266 | 179 | 0.30 | % | 58,428 | 126 | 0.22 | % | 62,401 | 117 | 0.19 | % | ||||||||||||||||||||||||
Savings accounts |
60,052 | 61 | 0.10 | % | 59,114 | 91 | 0.15 | % | 53,900 | 88 | 0.16 | % | ||||||||||||||||||||||||
Certificates of deposit |
173,587 | 2,622 | 1.51 | % | 161,459 | 2,145 | 1.33 | % | 162,586 | 1,810 | 1.11 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total interest-bearing deposits |
319,462 | $ | 2,893 | 0.91 | % | 306,540 | 2,410 | 0.79 | % | 307,235 | 2,065 | 0.67 | % | |||||||||||||||||||||||
Federal Home Loan Bank advances |
38,635 | $ | 468 | 1.21 | % | 24,675 | 275 | 1.12 | % | 18,116 | 490 | 2.71 | % | |||||||||||||||||||||||
Other interest-bearing liabilities |
7,137 | | | % | 7,004 | | 0.01 | % | 6,872 | 1 | 0.01 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total interest-bearing liabilities |
365,234 | 3,361 | 0.92 | % | 338,129 | 2,685 | 0.79 | % | 332,223 | 2,556 | 0.77 | % | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Non-interest-bearing deposits |
52,576 | 48,014 | 44,400 | |||||||||||||||||||||||||||||||||
Other non-interest-bearing liabilities |
1,785 | 1,927 | 2,097 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total liabilities |
419,598 | 388,160 | 378,720 | |||||||||||||||||||||||||||||||||
Total stockholders equity |
41,233 | 38,473 | 37,200 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total liabilities and stockholders equity |
$ | 460,831 | $ | 426,633 | $ | 415,920 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Net interest income |
$ | 11,895 | $ | 11,112 | $ | 11,300 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Net interest-earning assets |
$ | 59,580 | $ | 56,900 | $ | 52,433 | ||||||||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||||||
Interest rate spread (1) |
2.67 | % | 2.70 | % | 2.83 | % | ||||||||||||||||||||||||||||||
Net interest margin (2) |
2.80 | % | 2.81 | % | 2.94 | % | ||||||||||||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities |
116.31 | % | 116.80 | % | 115.78 | % |
(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 margin represents net interest income divided by average total interest-earning assets. |
69
Rate/Volume Analysis
The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in average rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior period average 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.
Six Months Ended June 30,
2018 vs. 2017 |
Year Ended December 31,
2017 vs. 2016 |
|||||||||||||||||||||||
Increase (Decrease) Due to |
Total
Increase (Decrease) |
Increase (Decrease) Due to |
Total
Increase (Decrease) |
|||||||||||||||||||||
Volume | Rate | Volume | Rate | |||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans |
$ | 720 | $ | (67 | ) | $ | 653 | $ | 785 | $ | 291 | $ | 1,076 | |||||||||||
Securities |
(229 | ) | 76 | (153 | ) | 285 | 61 | 346 | ||||||||||||||||
Other (1) |
| 13 | 13 | (7 | ) | 44 | 37 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total interest-earning assets |
491 | 22 | 513 | $ | 1,063 | $ | 396 | $ | 1,459 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
NOW |
1 | 5 | 6 | (2 | ) | (15 | ) | (17 | ) | |||||||||||||||
Money Market deposits |
4 | 81 | 85 | 2 | 51 | 53 | ||||||||||||||||||
Savings |
(1 | ) | 6 | 5 | 2 | (31 | ) | (29 | ) | |||||||||||||||
Certificates of deposit |
142 | 94 | 236 | 169 | 307 | 476 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total interest-bearing deposits |
146 | 186 | 332 | 171 | 312 | 483 | ||||||||||||||||||
Borrowings |
(19 | ) | 44 | 25 | 167 | 26 | 193 | |||||||||||||||||
Other |
| | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total interest-bearing liabilities |
127 | 230 | 357 | 338 | 338 | 676 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Change in net interest income |
$ | 364 | $ | (208 | ) | $ | 156 | $ | 725 | $ | 58 | $ | 783 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Consists of Federal funds sold. |
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 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.
Our asset/liability management strategy attempts to manage the impact of changes in interest rates on net interest income, our primary source of earnings. Among the techniques we use to manage interest rate risk are:
|
originating commercial real estate and commercial loans, which tend to have shorter terms and higher interest rates than owner occupied one- to four-family residential real estate loans, and which generate customer relationships that can result in larger non-interest-bearing checking accounts; |
70
|
selling substantially all of our conforming and eligible jumbo, longer-term, fixed-rate one- to four-family residential real estate loans and retaining the non-conforming and shorter-term, fixed-rate and adjustable-rate one- to four-family residential real estate loans that we originate, subject to market conditions and periodic review of our asset/liability management needs; and |
|
reducing our dependence on jumbo and brokered certificates of deposit to support lending and investment activities and increasing our reliance on core deposits, including checking accounts and savings accounts, which are less interest rate sensitive than certificates of deposit. |
Our board of directors is responsible for the review and oversight of our executive management team and other essential operational staff which are responsible for our asset/liability analysis. These officers act as an asset/liability committee and are charged with developing and implementing an asset/liability management plan, and they meet at least quarterly to review pricing and liquidity needs and assess our interest rate risk. 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 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.
The table below sets forth, as of June 30, 2018, 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 |
$ | 12,306 | (4.7 | )% | ||||
+300 |
12,494 | (3.3 | )% | |||||
+200 |
12,660 | (2.0 | )% | |||||
+100 |
12,760 | (1.2 | %) | |||||
Level |
12,917 | | ||||||
-100 |
12,727 | (1.5 | )% |
(1) |
Assumes an immediate uniform change in interest rates at all maturities. |
71
Economic Value of Equity . We monitor interest rate risk through the use of a simulation model that estimates the amounts by which the fair value of our assets and liabilities (our economic value of equity or EVE) would change in the event of a range of assumed changes in market interest rates. The quarterly reports developed in the simulation model assist us in identifying, measuring, monitoring and controlling interest rate risk to ensure compliance within our policy guidelines.
The table below sets forth, as of June 30, 2018, the estimated changes in our EVE that would result from the designated instantaneous changes in market interest rates. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.
Estimated Increase (Decrease) in EVE | ||||||||||||
Basis Point (bp) Change in
|
Estimated EVE (2) | Amount | Percent | |||||||||
(Dollars in thousands) | ||||||||||||
400 |
$ | 37,219 | $ | (16,092 | ) | (30.2 | )% | |||||
300 |
40,353 | (12,958 | ) | (24.3 | )% | |||||||
200 |
44,426 | (8,885 | ) | (16.7 | )% | |||||||
100 |
48,957 | (4,354 | ) | (8.2 | )% | |||||||
|
53,311 | | | |||||||||
(100) |
55,829 | 2,518 | (4.7 | )% |
(1) Assumes an instantaneous uniform change in interest rates at all maturities.
(2) EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.
The table above indicates that at June 30, 2018, in the event of a 100 basis point decrease in interest rates, we would have experienced a 4.7% decrease in our EVE. In the event of a 200 basis point increase in interest rates at June 30, 2018, we would have experienced an 16.7% decrease in our EVE.
Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in EVE 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 EVE table presented assumes 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 EVE table provides 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 EVE and will differ from actual results.
EVE 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 Chicago. At June 30, 2018, we had $27.7 million outstanding in advances from the Federal Home Loan Bank of. At June 30, 2018, we had the ability to have $118.9 million additional Federal Home Loan Bank of Chicago advances. Additionally, at June 30, 2018, we had a $10.0 million federal funds line of credit with the BMO Harris Bank, none of which was drawn at June 30, 2018.
72
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 cash equivalents and available-for-sale investment securities. 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 (used in) operating activities was ($831,000) and $327,000 for the six months ended June 30, 2018 and the year ended December 31, 2017, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of investment securities, offset by principal collections on loans, proceeds from the sale of loans and the sale of securities and proceeds from maturing securities and pay downs on securities, was $18.9 million for the six months ended June 30, 2018, primarily due to a net increase of loans of $36.8 million. Net cash used in investing activities was $11.6 million for the year ended December 31, 2017, primarily due to net increase in loans of $18.7 million. Net cash provided by financing activities, consisting of activity in deposit accounts and FHLB advances, was $15.2 million and $16.0 million for the six months ended June 30, 2018 and the year ended December 31, 2017, respectively.
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 current strategy to increase core deposits and the continued use of Federal Home Loan Bank of Chicago advances as well as brokered certificates of deposit as needed, to fund loan growth.
At June 30, 2018, we exceeded all of our regulatory capital requirements with a Tier 1 leverage capital level of $35.6 million, or 7.46% of adjusted total assets, which is above the well-capitalized required level of $23.8 million, or 5.00%; and total risk-based capital of $38.6 million, or 10.55% of risk-weighted assets, which is above the well-capitalized required level of $36.6 million, or 10.00%. Management is not aware of any conditions or events since the most recent notification that would change our category.
Off-Balance Sheet Arrangements and 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 potential 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. For additional information, see Note 10 of the notes to the financial statements beginning on page F-1 of this prospectus.
Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include operating leases for premises and equipment, agreements with respect to borrowings and deposits, and agreements with respect to securities.
73
The following tables present contractual obligations at June 30, 2018 and December 31, 2017.
Payments Due by Period | ||||||||||||||||||||
Contractual Obligations |
Total |
Less Than
One Year |
One to Three
Years |
Three to Five
Years |
More Than
Five Years |
|||||||||||||||
(In thousands) | ||||||||||||||||||||
At June 30, 2018: |
||||||||||||||||||||
Long-term debt obligations |
$ | 27,677 | $ | 15,035 | $ | 5,078 | $ | 7,091 | $ | 473 | ||||||||||
Operating lease obligations |
427 | 216 | 211 | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 28,104 | $ | 15,251 | $ | 5,289 | $ | 7,091 | $ | 473 | ||||||||||
|
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|
|
|
|
|
|
|
|||||||||||
At December 31, 2017: |
||||||||||||||||||||
Long-term debt obligations |
$ | 34,693 | $ | 10,034 | $ | 17,075 | $ | 7,088 | $ | 496 | ||||||||||
Operating lease obligations |
534 | 214 | 300 | 20 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 35,227 | $ | 10,248 | $ | 17,375 | $ | 7,108 | $ | 496 | ||||||||||
|
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|
|
|
|
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Recent Accounting Pronouncements
For a discussion of the impact of recent accounting pronouncements, see Note 1 of the notes to our financial statements beginning on page F-1 of this prospectus.
Impact of Inflation and Changing Prices
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 institutions 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.
74
BUSINESS OF 1895 BANCORP OF WISCONSIN, 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 PyraMax Bank, FSB. We intend to retain up to 50% of the net proceeds from the offering. $100,000 will be contributed 1895 Bancorp of Wisconsin, MHC. A portion of the net proceeds we retain will be used to make a loan to the PyraMax Bank, FSB employee stock ownership plan to fund the purchase of shares of our common stock by the employee stock ownership plan. Additionally, we intend to contribute $100,000 in cash to 1895 Bancorp of Wisconsin Community Foundation, the charitable foundation that we are creating and funding in connection with the reorganization and offering. We intend to invest our capital as discussed in How We Intend to Use the Proceeds from the Offering.
In the future, 1895 Bancorp of Wisconsin, Inc., as the holding company of PyraMax Bank, FSB, 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 1895 Bancorp of Wisconsin, Inc. at the present time.
Our cash flow will depend on earnings from the investment of the net proceeds received in the offering that we retain, and any dividends received from PyraMax Bank, FSB. Initially, 1895 Bancorp of Wisconsin, Inc. will neither own nor lease any property, but will instead use the premises, equipment and furniture of PyraMax Bank, FSB. At the present time, we intend to employ only persons who are officers of PyraMax Bank, FSB to serve as officers of 1895 Bancorp of Wisconsin, Inc. We will also use the support staff of PyraMax Bank, FSB from time to time. These persons will not be separately compensated by 1895 Bancorp of Wisconsin, Inc. 1895 Bancorp of Wisconsin, Inc. may hire additional employees, as appropriate, to the extent it expands its business in the future. The initial directors of 1895 Bancorp of Wisconsin, Inc. will consist of the current directors of PyraMax Bank, FSB. See Management.
BUSINESS OF 1895 BANCORP OF WISCONSIN, MHC
1895 Bancorp of Wisconsin, MHC will be formed as a federal mutual holding company and will at all times own a majority of the outstanding shares of 1895 Bancorp of Wisconsin, Inc.s common stock. Persons who had membership rights in PyraMax Bank, FSB as of the date of the reorganization will continue to have membership rights; however, these membership rights will be in 1895 Bancorp of Wisconsin, MHC.
1895 Bancorp of Wisconsin, MHCs principal assets will be the common stock of 1895 Bancorp of Wisconsin, Inc. it receives in the reorganization and offering and $100,000 cash in initial capitalization, which will be contributed by 1895 Bancorp of Wisconsin, Inc. from the net proceeds of the offering. Presently, it is expected that the only business activity of 1895 Bancorp of Wisconsin, MHC will be to own a majority of 1895 Bancorp of Wisconsin, Inc.s common stock. 1895 Bancorp of Wisconsin, 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.
1895 Bancorp of Wisconsin, MHC will neither own nor lease any property, but will instead use the premises, equipment and furniture of PyraMax Bank, FSB. It is anticipated that 1895 Bancorp of Wisconsin, MHC will employ only persons who are officers of PyraMax Bank, FSB to serve as officers of 1895 Bancorp of Wisconsin, MHC. Those persons will not be separately compensated by 1895 Bancorp of Wisconsin, MHC. The initial directors of 1895 Bancorp of Wisconsin, MHC will consist of the current directors of PyraMax Bank, FSB.
75
General
PyraMax Bank, FSB is a federally chartered mutual savings bank headquartered in Greenfield, Wisconsin. PyraMax Bank, FSB was established in 1895 as South Milwaukee Savings and Loan Association and has operated continuously in the Milwaukee metropolitan area since that time. In 1993, the bank changed its name to South Milwaukee Savings Bank, S.A. In May 2000, a merger between South Milwaukee Savings Bank and Mitchell Savings Bank officially formed PyraMax Bank, SSB. The bank changed to a federal savings bank charter in 2003, changing its name to PyraMax Bank, FSB.
From our founding in 1895, we operated as a traditional thrift institution, offering primarily residential mortgage loans and savings accounts, supplemented with multi-family and commercial real estate loans. In 2007, Richard Hurd was promoted to President and Chief Executive Officer of PyraMax Bank, FSB. Mr. Hurd began shifting PyraMax Bank, FSBs focus to include more business-oriented products and services. In 2010, PyraMax Bank, FSB hired Charles Mauer as its Chief Credit Officer, continuing our increased focus on business-oriented lending.
Commercial real estate growth has been the primary source of recent loan growth, and commercial business loan originations have also been emphasized.
We conduct our operations from our six full-service banking offices in Milwaukee County, our two full-service banking offices in Waukesha County and our full-service banking office in Ozaukee County Wisconsin. We consider our primary lending market area to be Milwaukee, Waukesha and Ozaukee Counties, however, we occasionally make loans secured by properties located outside of our primary lending market, usually to borrowers with whom we have an existing relationship and who have a presence within our primary market.
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, commercial real estate loans (which includes non-owner occupied commercial real estate, multi-family, owner occupied commercial real estate and one- to four-family non-owner occupied loans), commercial loans (which includes commercial and industrial loans) and consumer loans.
Subject to market conditions, we expect to increase our focus on originating commercial real estate and commercial business loans in an effort to continue 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 of mortgage-backed securities issued by U.S. government sponsored enterprises, state and municipal securities, asset-backed securities and corporate collateralized mortgage-backed securities. We offer a variety of deposit accounts, including checking accounts, savings accounts and certificate of deposit accounts. Additionally, we have used borrowings, primarily advances from the Federal Home Loan Bank of Chicago, to fund our operations.
Reflecting our focus on our community, in connection with the offering, we intend to establish a charitable foundation called 1895 Bancorp of Wisconsin Community Foundation and fund it with $100,000 in cash and 1.0% of our outstanding shares of common stock (or 55,000 shares based on the midpoint of the offering range, for an aggregate contribution of $650,000 based on the $10.00 per share offering price) of our common stock. The purpose of this foundation will be to make contributions to support various charitable organizations operating in our community now and in the future.
76
Our website address is www. pyramaxbank.com . Information on this website should not be considered a part of this prospectus.
Market Area
We conduct our operations from our six full-service banking offices in Milwaukee County, our two full-service banking offices in Waukesha County and our full service banking office in Ozaukee County, Wisconsin We consider our primary lending market area to be southeastern Wisconsin, however, we occasionally make loans secured by properties located outside of our primary lending market, usually to borrowers with whom we have an existing relationship and who have a presence within our primary market.
Milwaukee County contains a diverse cross section of employment sectors, with a mix of services, manufacturing, wholesale/retail trade, federal and local government, health care facilities and finance-related employment. Milwaukee County had an estimated population of 952,085 in 2017.
Milwaukee County is primarily an urban community and is the fortieth wealthiest county in Wisconsin. Our banking office in downtown Milwaukee is located in the historic Third Ward district, a mixed-use neighborhood that includes over 450 businesses. Our other Milwaukee County banking offices are located in more suburban areas, but are still in proximity to downtown Milwaukee. PyraMax Bank, FSB works with the City of Milwaukee and neighborhood housing agencies to support home ownership in all markets in which we operate.
According to the United States Census from 2011 through 2017:
|
The median household income in Milwaukee County was $45,263 compared to a median household income for Wisconsin of $54,610; |
|
The median home value was $150,000, compared to $167,000 in Wisconsin; |
|
Approximately 29.7% of the population of Milwaukee County held a bachelors degree or higher, compared to 28.4% of Wisconsin; and |
|
Approximately19.8% of the population of Milwaukee County had incomes below the poverty level, compared to 11.8% of Wisconsin. |
Waukesha County is primarily a suburban community and is the second wealthiest county in Wisconsin, with a median household income of $78,268 from 2011 to 2017. Waukesha County had an estimated population of 400,621 in 2017. Waukesha County has a diversified economy, including numerous educational institutions and a wide-ranging hospitality industry.
According to the United States Census from 2011 through 2017:
|
The median household income in Waukesha County was $78,268 compared to a median household income for Wisconsin of $54,610; |
|
The median home value was $254,700, compared to $167,000 in Wisconsin; |
|
Approximately 41.6% of the population of Waukesha County held a bachelors degree or higher, compared to 28.4% of Wisconsin; and |
|
Approximately 5.2% of the population of Waukesha County had incomes below the poverty level, compared to 11.8% of Wisconsin. |
77
Ozaukee County is the wealthiest county in Wisconsin, with a median household income of $78,415 from 2011 to 2017. Ozaukee County had an estimated population of 88,429 in 2017. Ozaukee Countys economy includes manufacturing, agricultural, healthcare, governmental and trade sectors.
According to the United States Census from 2011 through 2017:
|
The median household income in Ozaukee County was $78,415 compared to a median household income for Wisconsin of $54,610; |
|
The median home value was $248,800, compared to $167,000 in Wisconsin; |
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Approximately 46.7% of the population of Ozaukee County held a bachelors degree or higher, compared to 28.4% of Wisconsin; and |
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Approximately 5.4% of the population of Ozaukee County had incomes below the poverty level, compared to 11.8% of Wisconsin. |
Competition
We face significant competition within our market both in making loans and attracting deposits. Our market area has a high concentration of financial institutions, including large money center and regional banks, community banks and credit unions. Some of our competitors offer products and services that we currently do not offer, such as trust services and private banking. Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms, consumer finance companies and credit unions. We face additional competition for deposits from short-term money market funds, brokerage firms, mutual funds and insurance companies.
As of June 30, 2017 (the latest date for which information is available), our market share was 0.54% of total deposits in Milwaukee County, Wisconsin, making us the 23 rd largest out of 47 banks in Milwaukee County.
Lending Activities
Our principal lending activity is in one- to four-family residential real estate loans, commercial real estate loans, commercial loans and consumer loans. Subject to market conditions and our asset-liability analysis, we expect to continue to increase our focus on commercial and commercial real estate loans, in an effort to diversify our overall loan portfolio and increase the overall yield earned on our loans. We compete by focusing on personalized service for consumers as well as businesses. Due to our structure, we are able to move quickly on client requests and are able to price competitively compared to our competitors. Our responsiveness has enabled us to grow and retain our customer base. Additionally, the Milwaukee market has demonstrated strong growth and diversity in the commercial segment. Our focus on Milwaukee, Waukesha and Ozaukee counties enables us to utilize a limited sales force for maximum results. Our reputation for strong credit underwriting has also allowed us to build a network of smaller banks that purchase participations of loans which exceed our legal lending limit.
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Loan Portfolio Composition.
The following table sets forth the composition of the loan portfolio at the dates indicated.
At June 30, | At December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||
Residential Real Estate Loans: |
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First mortgages |
$ | 105,831 | 28.6 | % | $ | 106,120 | 31.8 | % | $ | 103,900 | 33.0 | % | $ | 114,077 | 36.0 | % | $ | 90,325 | 30.9 | % | $ | 99,883 | 36.0 | % | ||||||||||||||||||||||||
Construction |
4,959 | 1.3 | % | 3,358 | 1.0 | % | 4,619 | 1.5 | % | 3,276 | 1.0 | % | 3,508 | 1.2 | % | 919 | 0.3 | % | ||||||||||||||||||||||||||||||
Commercial Loans: |
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Real estate |
182,695 | 49.3 | % | 156,991 | 47.1 | % | 144,093 | 45.7 | % | 137,292 | 43.4 | % | 130,928 | 44.8 | % | 101,524 | 36.6 | % | ||||||||||||||||||||||||||||||
Land development |
2,638 | 0.7 | % | 2,687 | 0.8 | % | 1,508 | 0.5 | % | 2,340 | 0.8 | % | 5,544 | 1.9 | % | 9,925 | 3.6 | % | ||||||||||||||||||||||||||||||
Other |
32,540 | 8.8 | % | 19,715 | 5.9 | % | 14,505 | 4.6 | % | 11,397 | 3.6 | % | 10,997 | 3.8 | % | 15,614 | 5.7 | % | ||||||||||||||||||||||||||||||
Consumer Loans: |
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Home equity lines of credit |
39,770 | 10.7 | % | 42,344 | 12.7 | % | 45,162 | 14.3 | % | 46,928 | 14.8 | % | 49,455 | 16.9 | % | 47,423 | 17.1 | % | ||||||||||||||||||||||||||||||
Other consumer |
2,140 | 0.6 | % | 2,495 | 0.7 | % | 1,225 | 0.4 | % | 1,301 | 0.4 | % | 1,361 | 0.5 | % | 2,047 | 0.7 | % | ||||||||||||||||||||||||||||||
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Total loans receivable |
370,573 | 100.0 | % | 333,710 | 100.0 | % | 315,012 | 100.0 | % | 316,611 | 100.0 | % | 292,118 | 100.0 | % | 277,335 | 100.0 | % | ||||||||||||||||||||||||||||||
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Less: net deferred loan
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540 | 589 | 519 | 476 | 418 | 517 | ||||||||||||||||||||||||||||||||||||||||||
Less: allowance for loan losses |
(3,092 | ) | (3,093 | ) | (3,008 | ) | (3,087 | ) | (3,741 | ) | (3,834 | ) | ||||||||||||||||||||||||||||||||||||
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Loans receivable, net |
$ | 368,021 | $ | 331,206 | $ | 312,523 | $ | 314,000 | $ | 288,795 | $ | 274,018 | ||||||||||||||||||||||||||||||||||||
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Loan Portfolio Maturities
The following tables set forth certain information at June 30, 2018 and December 31, 2017 regarding the dollar amount of loan principal repayments becoming due during the periods indicated. The tables do not include any estimate of prepayments that significantly shorten the average loan life and may cause actual repayment experience to differ from that shown below. Demand loans, which are loans having no stated repayment schedule or no stated maturity, are reported as due in one year or less.
At June 30, 2018 | ||||||||||||||||
Residential
Real Estate Loans |
Commercial
Loans |
Consumer
Loans |
Total Loans | |||||||||||||
(In thousands) | ||||||||||||||||
Amounts due in: |
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One year or less |
$ | 5,115 | $ | 32,022 | $ | 8,511 | $ | 45,648 | ||||||||
More than one year through five years |
17,075 | 110,976 | 28,910 | 156,961 | ||||||||||||
More than five years |
88,600 | 74,875 | 4,489 | 167,964 | ||||||||||||
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Total |
$ | 110,790 | $ | 217,873 | $ | 41,910 | $ | 370,573 | ||||||||
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At December 31, 2017 | ||||||||||||||||
Residential
Real Estate Loans |
Commercial
Loans |
Consumer
Loans |
Total
Loans |
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(In thousands) | ||||||||||||||||
Amounts due in: |
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One year or less |
$ | 14,157 | $ | 48,281 | $ | 8,726 | $ | 71,164 | ||||||||
More than one year through five years |
19,908 | 92,278 | 16,596 | 128,782 | ||||||||||||
More than five years |
75,413 | 38,834 | 19,517 | 133,764 | ||||||||||||
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Total |
$ | 109,478 | $ | 179,393 | $ | 44,839 | $ | 333,710 | ||||||||
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Fixed vs. Adjustable Rate Loans
The following table sets forth the dollar amount of all loans at June 30, 2018 that are due after June 30, 2019 and have either fixed interest rates or floating or adjustable interest rates. The amounts shown below exclude unearned loan origination fees.
Fixed Rates |
Floating or
Adjustable Rates |
Total | ||||||||||
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Residential real estate loans |
$ | 76,930 | $ | 28,745 | $ | 105,675 | ||||||
Commercial loans |
135,377 | 50,474 | 185,851 | |||||||||
Consumer loans |
16,082 | 17,317 | 33,399 | |||||||||
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Total |
$ | 228,389 | $ | 96,536 | $ | 324,925 | ||||||
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The following table sets forth the dollar amount of all loans at December 31, 2017 that are due after December 31, 2018 and have either fixed interest rates or floating or adjustable interest rates. The amounts shown below exclude unearned loan origination fees.
Fixed Rates |
Floating or
Adjustable Rates |
Total | ||||||||||
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Residential real estate loans |
$ | 75,981 | $ | 19,340 | $ | 95,321 | ||||||
Commercial loans |
101,763 | 29,349 | 131,112 | |||||||||
Consumer loans |
33,451 | 2,662 | 36,113 | |||||||||
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Total |
$ | 211,195 | $ | 51,351 | $ | 262,546 | ||||||
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One- to four-family Residential Real Estate Lending . At June 30, 2018, we had $105.8 million of loans secured by one- to four-family residential real estate, representing 28.6% of our total loan portfolio. We originate both fixed-rate and adjustable-rate one- to four-family residential real estate loans. At June 30, 2018, 73.0% of our one- to four-family residential real estate loans were fixed-rate loans, and 27.0% of such loans were adjustable-rate loans.
Our fixed-rate one- to four-family residential real estate loans typically have terms of 10 to 30 years and are generally underwritten according to Freddie Mac and Fannie Mae guidelines when the loan balance meets such guidelines, and we refer to loans that conform to such guidelines as conforming loans. We generally originate both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Fannie Mae, which as of June 30, 2018 was generally $453,100 for single-family homes in our market area. We sell, on both a servicing-released and servicing-retained basis, our conforming and eligible jumbo fixed-rate one- to four-family residential real estate loans. We also originate loans above the lending limit for conforming loans, which are referred to as jumbo loans that we may retain in our portfolio. Jumbo loans that we originate typically have 15 to 30 year terms and maximum loan-to-value ratios of 80%. At June 30, 2018, we had $4.9 million in jumbo loans, which represented 4.4% of our one- to four-family residential real estate loans. Our average loan size for jumbo loans was $544,000 at June 30, 2018. Generally all of our one- to four-family residential real estate loans are secured by properties located in southeastern Wisconsin.
We generally limit the loan-to-value ratios of our mortgage loans without private mortgage insurance to 80% of the sales price or appraised value, whichever is lower. Loans where the borrower obtains private mortgage insurance may be made in excess of this limit.
Our adjustable-rate one- to four-family residential real estate loans carry terms to maturity ranging from 10 to 30 years and generally have fixed rates for initial terms of five years, although we also offer initial terms of three or seven years, and adjust annually thereafter at a margin, which in recent years has been tied to a margin above the applicable treasury rate. The maximum amount by which the interest rate may be increased or decreased is generally 2% per adjustment period, with a lifetime interest rate cap of generally 6% over the initial interest rate of the loan and a rate floor. We typically hold in our loan portfolio our adjustable-rate one- to four-family residential real estate loans.
Although adjustable-rate mortgage loans may reduce to an extent our vulnerability to changes in market interest rates because they periodically re-price, as interest rates increase the required payments due from the borrower also increase (subject to rate caps), increasing the potential for default by the borrower. At the same time, the ability of the borrower to repay the loan and the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustments of the contractual interest rate are also limited by our maximum periodic and lifetime rate adjustments.
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Moreover, the interest rates on most of our adjustable-rate loans do not adjust for up to five years after origination. As a result, the effectiveness of adjustable-rate mortgage loans in compensating for changes in general interest rates may be limited during periods of rapidly rising interest rates.
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 have a subprime lending program for one- to four-family residential real estate loans ( i.e. , loans that generally target borrowers with weakened credit histories).
Generally, residential mortgage loans that we originate include due-on-sale clauses, which give us the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid. All borrowers are required to obtain title insurance for the benefit of PyraMax Bank, FSB. We also require homeowners insurance and fire and casualty insurance and, where circumstances warrant, flood insurance on properties securing real estate loans.
Residential Real Estate Construction Lending . We originate loans to finance the construction of owner occupied one- to four-family residential properties to the prospective homeowners. At June 30, 2018, residential construction loan balances were $5.0 million, or 1.3% of our total loan portfolio, with an additional $3.0 million available to borrowers. The majority of these loans are secured by properties located in our primary market area.
Our owner occupied one- to four-family residential construction loans are generally structured as interest-only for 12 months. Construction loan values for one-to four-family residential properties generally will not exceed 80% during the construction phase of the mortgage, however, if private mortgage insurance is obtained we will consider loan-to-value limits up to 95%.
Once the construction project is satisfactorily completed, generally within 12 months, the loan will convert to an amortizing loan for the remaining term of the loan. Upon completion the loan will be evaluated for sale on the secondary market. The interest rate is generally a fixed rate for up to 30 years, or a five- to seven-year adjustable rate mortgage.
Before making a commitment to fund a construction loan, we generally require an appraisal of the property by an independent licensed appraiser. The construction phase is carefully monitored to minimize our risk. All construction projects must be completed in accordance with approved plans and approved by the municipality in which they are located. Loan proceeds are disbursed periodically in increments as construction progresses and as inspections by our approved inspectors warrant.
Commercial Real Estate Lending . Consistent with our strategy to diversify our loan portfolio and increase our yield, we are focused on increasing our origination of commercial real estate loans. At June 30, 2018, we had $182.7 million in commercial real estate loans, representing 49.3% of our total loan portfolio. Of this aggregate amount, we had $70.4 million in non-owner occupied non-residential real estate, $57.9 million in multi-family residential real estate, $36.1 million in owner occupied non-residential real estate, $11.6 million in non-owner occupied residential real estate loans and $6.7 million in commercial real estate construction loans.
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Our commercial real estate loans are generally secured by office and industrial buildings, warehouses, small retail facilities and restaurants and other special purpose commercial properties, primarily in Milwaukee, Waukesha and Ozaukee Counties, Wisconsin. Our multi-family loans, which are classified as commercial real estate loans in the tabular presentation, are generally secured by properties consisting of five or more rental units in our market area. We also purchase and participate in commercial real estate loans from other financial institutions. Such loans are independently underwritten according to our policies.
Our commercial real estate loans generally have initial terms of five to ten years and amortization terms of 15 to 30 years, with a balloon payment at the end of the initial term, and may be fixed-rate or adjustable-rate loans. Our adjustable-rate commercial real estate loans are generally tied to a margin above the prime rate or the applicable treasury rate. The maximum loan-to-value ratio of our commercial real estate loans is generally 80% of the lower of cost or appraised value of the property securing the loan.
We originate a variety of adjustable-rate multi-family residential real estate loans with terms and amortization periods generally up to 30 years, which may include balloon loans. Interest rates and payments on our adjustable-rate loans adjust every five, seven or ten years and generally are indexed to the prime rate or the corresponding Treasury rate, plus a margin. We generally include pre-payment penalties on multi-family residential real estate loans we originate.
At June 30, 2018, the average loan size of our outstanding commercial real estate loans was $562,000, and the largest of such loans was a $6.1 million loan consisting of an outstanding balance of $3.6 million, with an additional $2.5 million available, for a commercial construction project secured by a first mortgage on an industrial property. This loan was performing in accordance with its repayment terms at June 30, 2018.
We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including project-level and global cash flows, credit history, and management 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 borrowers experience in owning or managing similar property and the borrowers 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). We generally require a debt service ratio of at least 1.20x. All commercial real estate loans, with the exception of owner occupied real estate, of $500,000 or more are appraised by outside independent appraisers. Personal guarantees are generally obtained from the principals of commercial real estate loans. We require property and casualty insurance and flood insurance if the property is determined to be in a flood zone area.
In underwriting multi-family and non-owner occupied one- to four-family residential real estate loans, we consider a number of factors, which include the projected net cash flow to the loans debt service requirement (generally requiring a minimum debt service coverage ratio of 1.20x), the age and condition of the collateral, the financial resources and income level of the borrower and the borrowers experience in owning or managing similar properties. Multi-family residential real estate loans are generally originated in amounts up to 80% of the appraised value or the purchase price of the property securing the loan, whichever is lower. When circumstances warrant, guarantees are obtained from multi-family and one-to four-family residential real estate customers. In addition, the borrowers and guarantors financial information on such loans is monitored on an ongoing basis by requiring periodic financial statement updates.
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Commercial real estate loans entail greater credit risks compared to one- to four-family residential real estate loans because they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment of loans secured by income-producing properties typically depends on the successful operation of the property, as repayment of the loan generally is dependent, in large part, on sufficient income from the property to cover operating expenses and debt service. Changes in economic conditions that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property. Additionally, any decline in real estate values may be more pronounced for commercial real estate than residential properties. If we foreclose on a commercial real estate loan, the marketing and liquidation period to convert the real estate asset to cash can be a lengthy process 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.
We also originate loans to finance the construction of commercial properties, multi-family residential projects (including non-owner occupied one- to four-family residences) and professional complexes. At June 30, 2018, commercial construction loan balances were $6.7 million, or 1.8% of our total loan portfolio. Under these loans, an additional $11.8 million remains available to borrowers. The majority of these loans are secured by properties located in our primary market area.
Our commercial real estate construction loans are generally structured as interest-only payments during the anticipated construction time. The interest rate is generally fixed for five years at the five-year Treasury rate plus a margin of 1.9% to 2.4%. We generally offer commercial construction loans with a value up to 80% of the appraised value on a completed basis or the cost of completion, whichever is less.
Construction loans generally involve greater credit risk than long-term financing on improved, owner occupied real estate. In the event a loan is made on property that is not yet approved for the planned development or improvements, there is a risk that necessary approvals will not be granted or will be delayed. Risk of loss on a construction loan also depends upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost is inaccurate, we may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project is inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment of the construction loan upon the sale of the property. Construction loans also carry the risk that construction will not be completed on time in accordance with specifications and projected costs. In addition, repayment of these loans can be dependent on the sale or rental of the property to third parties, and the ultimate sale or rental of the property may not occur as anticipated.
Before making a commitment to fund a construction loan, we generally require an appraisal of the property by an independent licensed appraiser. The construction phase is carefully monitored to minimize our risk. All construction projects must be completed in accordance with approved plans and approved by the municipality in which they are located. Loan proceeds are disbursed periodically in increments as construction progresses and as inspections by our approved inspectors warrant.
At June 30, 2018, our largest construction and land development loan had an outstanding balance of $3.6 million, with an additional $2.5 million available to the borrower to complete construction, and was secured by a first mortgage on an industrial building. At June 30, 2018, this loan was performing according to its original terms.
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Land Development Loans. We originate loans to finance the development of land for agricultural purposes and for the development of commercial and residential properties. Land development loans are generally secured by vacant land and/or property that is in the process of improvement. At June 30, 2018, land loans were $2.6 million, or 0.7% of our total loan portfolio, with no additional funds available to borrowers. The majority of these loans are secured by properties located in our primary market area.
Our land development loans may be structured as interest-only loans or amortizing. The interest rate generally floats, at the prime rate or prime rate plus 1%. We offer financing to purchase or refinance land for agricultural purposes or development with a maximum loan to value ratio of 65%. However, if we are providing financing to improve the land, the maximum loan to value ratio will generally be 80% of the appraised value on a completed basis or the cost of completion, whichever is less.
Land development loans generally involve greater credit risk than long-term financing on improved, owner occupied real estate. In the event a loan is made on property that is not yet approved for the planned development, there is a risk that necessary approvals will not be granted or will be delayed. Risk of loss on a land development loan also depends upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of development costs is inaccurate, we may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project is inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment of the construction loan upon the sale of the property. Land development loans also carry the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, repayment of these loans can be dependent on the sale of the property to third parties, and the ultimate sale or rental of the property may not occur as anticipated.
Before making a commitment to fund a land loan, we generally require an appraisal of the property by an independent licensed appraiser. We will monitor the land loan in a similar fashion to any other commercial real estate loan.
At June 30, 2018, our largest land loan had an outstanding balance of $1.7 million and was secured by agricultural land. At June 30, 2018, this loan was performing according to its original terms.
Commercial Lending . At June 30, 2018, we had $32.5 million of commercial loans, representing 8.8% of our total loan portfolio. We originate commercial loans and lines of credit secured by non-real estate business assets. These loans are made based primarily on historical and projected cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not behave as forecasted, and collateral securing loans may fluctuate in value because of economic or individual performance factors. Financial information is obtained from the borrowers to evaluate cash flow sufficiency to service debt and is periodically updated during the life of the loan. These loans are generally originated to small businesses in our primary market area. Our commercial loans are generally used by the borrowers for working capital purposes or for acquiring equipment, inventory or furniture, and are primarily secured by business assets other than real estate, such as business equipment, inventory and accounts receivable. Our commercial loans are generally term loans with terms of three to seven years and lines of credit with terms of one to two years, with a target loan size of $250,000 to $5.0 million. Our commercial and industrial lines of credit are generally priced on an adjustable-rate basis tied to the prime rate. Term loans are generally priced at a spread over the applicable treasury rate. We generally obtain personal guarantees with commercial loans.
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At June 30, 2018, the average loan size of our outstanding commercial loans was $103,000, and our largest outstanding commercial and industrial loan commitment was a $5.8 million loan to a financial/leasing company, which provides equipment financing, through leases and loans, to their customers in the technology, office, medical, manufacturing, construction and communication industries, among others. When the financial/leasing company enters into a loan or lease with their customer, they obtain the necessary funding from the Bank to fulfill their lease or loan commitment to their customer. The term of our advances are generally the same as the term the financial/leasing company provider to their customer. The Banks funding is secured by an assignment of the relevant lease or loan documents between the financial/leasing company and its customer. This commitment was performing in accordance with its repayment terms at June 30, 2018.
We typically originate commercial loans on the basis of the borrowers ability to make repayment from the cash flow of the borrowers business, the experience and stability of the borrowers management team, earnings projections and their underlying assumptions, and the value and marketability of any collateral securing the loan. As a result, the availability of funds for the repayment of commercial loans may be substantially dependent on the success of the business itself and the general economic environment in our market area. Therefore, commercial loans that we originate have greater credit risk than one- to four-family residential real estate loans. In addition, commercial loans often result in larger outstanding balances to single borrowers, or related groups of borrowers, and also generally require substantially greater evaluation and oversight efforts.
Consumer Lending. We offer a variety of consumer loans to individuals who reside or work in our market area, including home equity lines of credit, new and used automobile loans, boat loans, recreational vehicle loans and loans secured by certificates of deposit. At June 30, 2018, our consumer loan portfolio totaled $41.9 million, or 11.3% of our total loan portfolio. At June 30, 2018, $31.5 million of that amount, or 8.4% of our total loan portfolio, consists of outstanding balances on home equity lines of credit, which lines of credit had $34.3 million available to draw. At June 30, 2018, we had $43,500 of unsecured consumer loans.
Generally, our home equity lines of credit are underwritten with a maximum loan to value of 85%, a minimum credit score of 640 and a maximum debt to income ratio of 43%.
Consumer loans generally have shorter terms to maturity, which reduces our exposure to changes in interest rates. In addition, management believes that offering consumer loan products helps to expand and create stronger ties to our existing customer base by increasing the number of customer relationships and providing cross-marketing opportunities.
Originations, Sales and Purchases of Loans
Our loan originations are generated by our loan personnel operating at our banking office locations. While we originate both fixed-rate and adjustable-rate loans, our ability to generate each type of loan depends upon relative borrower demand and the pricing levels as set in the local marketplace by competing banks, thrifts, credit unions, and mortgage banking companies. Our volume of real estate loan originations is influenced significantly by market interest rates, and, accordingly, the volume of our real estate loan originations can vary from period to period.
We consider our balance sheet as well as market conditions on an ongoing basis in making decisions as to whether to hold loans we originate for investment or to sell such residential loans to investors, choosing the strategy that is most advantageous to us from a profitability and risk management standpoint. We sell the majority of the fixed-rate conforming and eligible jumbo one- to four-family residential real estate loans that we originate, on both a servicing-released and servicing-retained basis, with limited or no recourse, while retaining some non-eligible fixed-rate and adjustable-rate one- to four-family residential real estate loans in order to manage the duration and time to repricing of our loan portfolio. For the six months ended June 30, 2018 and the years ended December 31, 2017 and 2016, we sold $31.3 million, $62.3 million and $122.6 million of one- to four-family residential real estate loans.
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The loans that we originate to sell are closed in our name, and are subsequently sold to our investors who provide Fannie Mae and Freddie Mac conventional products as well as FHA and VA government loans. We recognize, at the time of sale, the cash gain or loss on the sale of the loans based on the difference between the net cash proceeds received and the carrying value of the loans sold. Subject to market and economic conditions, management intends to continue this sales activity in future periods to generate gain on sale income.
From time to time, we may purchase commercial real estate and commercial loan participations secured by properties within and outside of our primary lending market area in which we are not the lead lender. In these circumstances, we follow our customary loan underwriting and approval policies. At June 30, 2018, we had seven loans totaling $7.9 million in which we were not the lead lender, all of which were performing in accordance with their original repayment terms. We also have participated out portions of a loan that exceeded our loans-to-one borrower legal lending limit and for risk diversification. Historically, we have not purchased whole loans, however, pursuant to our growth strategy, we may purchase whole loans in the future.
Loan Approval Procedures and Authority
Pursuant to federal law, the aggregate amount of loans that PyraMax Bank, FSB is permitted to make to any one borrower or a group of related borrowers is generally limited to 15% of PyraMax Bank, FSBs 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 June 30, 2018, based on the 15% limitation, PyraMax Bank, FSBs loans-to-one-borrower limit was approximately $5.8 million. On the same date, PyraMax Bank, FSB had two borrowers with outstanding balances in excess of this amount. At the time the loans were originated the borrowers were within PyraMax Bank, FSBs legal lending limit, and only exceeded this limit based on a subsequent decrease in PyraMax Bank, FSBs capital levels. At June 30, 2018, our largest loan relationship with one borrower was for $6.1 million, consisting of an outstanding balance of $3.6 million, with an additional $2.5 million available, for a commercial construction project which was secured by a first mortgage on an industrial property, and the loans were performing in accordance with their repayment terms on that date. Our loan-to-one borrower limitation will increase following the completion of the offering due to the additional capital PyraMax Bank, FSB will receive.
Our lending is subject to written underwriting standards and origination procedures. Decisions on loan applications are made on the basis of detailed information 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 information is primarily designed to determine the borrowers ability to repay the requested loan, and the more significant items 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. Our President and Chief Executive Officer has individual authorization to approve loans up to $2.0 million. Our Chief Credit Officer has individual authorization to approve loans up to $1.0 million. Our Vice President-Credit Administration has individual authorization to approve loans up to $250,000. Our Officers Loan Committee, which consists of our President, Chief Brand Officer, Chief Credit Officer, Chief Financial Officer, Chief Lending Officer, Vice President-Credit Administration and all commercial lenders, can approve loans up to $2.0 million in the aggregate. Loans in excess of $2.0 million require the approval of our Board of Directors, or, if exigent circumstances exist, the President and Chief Credit Officer may approve such loans if the Board of Directors is unavailable and such approval is based on a recommendation of the Chief Credit Officer and is subsequently approved by the Board of Directors.
87
In addition, the following individuals have retail consumer loan authority: our Chief Brand Officer can approve loans up to $200,000; our Vice President-Retail Operations and Senior Underwriters can approve loans up to $150,000; our Junior Underwriters can approve loans up to $100,000; our Vice President-Retail Banking, Sales Manager can approve loans up to $100,000; and one Branch Executive Officer can approve loans up to $75,000 while all other Branch Executive Officers can approve loans up to $1,000.
Our Chief Brand Officer, Vice President-Retail Loan Operations, and Senior Underwriters and Underwriters have authority to approve conforming mortgage loans up to the secondary market limit.
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.
From time to time, a loan applicant may not meet one or more of the loan policy or loan program requirements, resulting in a denial of the loan application. The loan officer may seek an exception, by providing detailed information to explain the policy/program exception along with other pertinent information. The following individuals have the authority to approve these requests with the indicated loan limits for commercial mortgage loans and consumer loans: the Board of Directors may approve loans with exceptions up to the legal lending limit of PyraMax Bank, FSB; the Officers Loan Committee and our President and Chief Executive Officers may approve loans with exceptions up to $2.0 million; and our Chief Credit Officer may approve loans with exceptions up to $1.0 million. Our Chief Brand Officer has the authority to approve exceptions on conforming mortgage loans up to the secondary market limits, however, the loan would still need to qualify for sale in the secondary market after granting the exception. Our Chief Brand Officer and Resolution Officer have exception authority for consumer loans with limits of $200,000 and $100,000, respectively.
Delinquencies and Non-Performing Assets
Delinquency Procedures for Owner Occupied One- to Four-Family Residential and Consumer Loans. When an owner-occupied residential real estate or consumer loan payment becomes 16 days past due, we contact the customer by mailing a late notice, and loan officers and/or members of our loan collection department may contact the customer. If a loan payment becomes 30 days past due, we mail an additional late notice, and we also place telephone calls to the borrower. These loan collection efforts continue until a loan becomes 90-120 days past due, at which point we would generally refer the loan for foreclosure proceedings unless management determines that it is in the best interest of PyraMax Bank, FSB to work further with the borrower to arrange a workout plan. The foreclosure process generally would begin when a loan becomes 120 days delinquent. From time to time we may accept deeds in lieu of foreclosure.
Delinquency Procedures for Commercial and Commercial Real Estate Loans. When a commercial loan or commercial real estate loan becomes 10 days past due, we contact the customer by mailing a late notice. The loan officer assigned to the account may also contact the borrower. If the loan continues to run past due, the loan officer will continue to contact the borrower to determine the cause of the past due payment(s) and arrange for payments. This information will be discussed with the Chief Credit Officer to determine the nature of the past due payment and, if necessary, to develop a plan to bring the past due payment(s) current and determine if the likelihood of repayment is in question. The loan will also be evaluated for a change to the risk rating. Depending on the circumstances, the lender and Chief Credit Officer may develop a plan to protect PyraMax Bank, FSBs interest in the loan. If necessary, PyraMax Bank, FSB will engage an attorney to pursue further collection efforts.
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Our High Risk Loan Committee, which consists of our President, Chief Credit Officer, Chief Financial Officer and Chief Lending Officer provides oversight of stressed commercial and retail loans to mitigate identified risks.
Loans Past Due and Nonperforming Assets . Loans are reviewed on a regular basis. Management determines that a loan is impaired or nonperforming 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 foreclosed assets. Foreclosed assets are recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal, or evaluation when acceptable, 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, in either case during the applicable period of such determination. 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.
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Delinquent Loans . The following table sets forth our loan delinquencies by type, by amount and by percentage of type at the dates indicated.
At June 30,
2018 |
At December 31,
2017 |
|||||||||||||||||||||||||||||||
30-89 Days | 90 Days or More | 30-89 Days | 90 Days or More | |||||||||||||||||||||||||||||
Number of
Loans |
Principal
Balance |
Number of
Loans |
Principal
Balance |
Number of
Loans |
Principal
Balance |
Number of
Loans |
Principal
Balance |
|||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Residential real estate loans |
7 | $ | 906 | 2 | $ | 293 | 22 | $ | 2,156 | 5 | $ | 56 | ||||||||||||||||||||
Commercial real estate loans |
1 | 152 | 1 | 303 | 1 | 6 | 2 | 303 | ||||||||||||||||||||||||
Commercial loans |
| | | | | | | | ||||||||||||||||||||||||
Consumer loans |
11 | 56 | 3 | 82 | 22 | 537 | 5 | 125 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
19 | $ | 1,114 | 6 | $ | 678 | 45 | $ | 2,699 | 12 | $ | 484 | ||||||||||||||||||||
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|
|
At December 31, | ||||||||||||||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||||||||||||||
30-89 Days | 90 Days or More | 30-89 Days | 90 Days or More | |||||||||||||||||||||||||||||
Number of
Loans |
Principal
Balance |
Number of
Loans |
Principal
Balance |
Number of
Loans |
Principal
Balance |
Number of
Loans |
Principal
Balance |
|||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Residential real estate loans |
14 | $ | 1,789 | 4 | $ | 398 | 18 | $ | 2,618 | 3 | $ | 208 | ||||||||||||||||||||
Commercial real estate loans |
1 | 369 | 2 | 479 | 1 | 280 | 3 | 1,062 | ||||||||||||||||||||||||
Commercial loans |
| | | | 1 | 13 | | | ||||||||||||||||||||||||
Consumer loans |
12 | 336 | 2 | 34 | 15 | 513 | 1 | 77 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
27 | $ | 2,494 | 8 | $ | 911 | 35 | $ | 3,424 | 7 | $ | 1,347 | ||||||||||||||||||||
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Nonperforming Loans. We generally cease accruing interest on our loans when contractual payments of principal or interest have become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income is reversed. Interest received on nonaccrual loans generally is applied against principal or interest and is recognized on a cash basis. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.
Nonperforming loans decreased to $1.8 million, or 0.5% of total loans, at June 30, 2018 from $1.9 million, or 0.6% of total loans, at December 31, 2017 and $3.0 million, or 1.0% of total loans, at December 31, 2016. The decrease in nonperforming loans was due to decreases in nonperforming loans in all loan categories.
Troubled Debt Restructurings. Loans are accounted for as troubled debt restructurings when a borrower is experiencing financial difficulties that lead to a restructuring of the loan, and PyraMax Bank, FSB grants a concession to the borrower that it would not otherwise consider. These concessions include a modification of terms, such as a reduction of the stated interest rate or loan balance, a reduction of accrued interest, an extension of the maturity date at an interest rate lower than current market rate for a new loan with similar risk, or some combination thereof to facilitate payment. Troubled debt restructurings are considered impaired loans. No additional loan commitments were outstanding to our troubled debt restructured borrowers at June 30, 2018.
Loans on non-accrual status at the date of modification are initially classified as non-accrual troubled debt restructurings. At June 30, 2018, we had $695,000 in non-accrual troubled debt restructurings, none of which were in the process of foreclosure as of June 30, 2018. Our policy provides that troubled debt restructured loans are returned to accrual status after a period of satisfactory and reasonable future payment performance under the terms of the restructuring. Satisfactory payment performance is generally no less than six consecutive months of timely payments. At June 30, 2018, we had $578,000 in accruing troubled debt restructurings.
91
Nonperforming Assets. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.
At June 30,
2018 |
At December 31, | |||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Non-accrual loans: (1) |
||||||||||||||||||||||||
Residential real estate loans |
$ | 1,145 | $ | 1,128 | $ | 1,681 | $ | 3,136 | $ | 2,820 | $ | 4,162 | ||||||||||||
Commercial loans |
328 | 335 | 826 | 1,510 | 1,514 | 5,458 | ||||||||||||||||||
Consumer loans |
374 | 424 | 489 | 7 | 675 | 608 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
1,847 | 1,887 | 2,996 | 4,653 | 5,009 | 10,228 | ||||||||||||||||||
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|
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|
|
|||||||||||||
Accruing loans past due 90 days or more: |
||||||||||||||||||||||||
Residential real estate loans |
| | | | | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
| | | | | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total non-performing loans |
1,847 | 1,887 | 2,996 | 4,653 | 5,009 | 10,229 | ||||||||||||||||||
Other real estate owned |
| | | 5 | 162 | 1,905 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total non-performing assets |
$ | 1,847 | $ | 1,887 | $ | 2,996 | $ | 4,658 | $ | 5,171 | $ | 12,134 | ||||||||||||
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|
|
|
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|
|
|
|
|||||||||||||
Troubled debt restructurings (accruing): |
||||||||||||||||||||||||
Residential real estate loans |
$ | 337 | $ | 483 | $ | 395 | $ | 403 | $ | 411 | $ | 421 | ||||||||||||
Commercial loans |
241 | 246 | 427 | 441 | 271 | 302 | ||||||||||||||||||
Consumer loans |
| | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total troubled debt restructurings (accruing) |
$ | 578 | $ | 729 | $ | 822 | $ | 844 | $ | 682 | $ | 723 | ||||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||||
Total troubled debt restructurings (accruing) and total non-performing assets |
$ | 2,425 | $ | 2,616 | $ | 3,818 | $ | 5,502 | $ | 5,853 | $ | 12,857 | ||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total non-performing loans to total loans |
0.50 | % | 0.57 | % | 0.95 | % | 1.47 | % | 1.71 | % | 3.69 | % | ||||||||||||
Total non-performing loans to total assets |
0.38 | % | 0.40 | % | 0.67 | % | 1.09 | % | 1.21 | % | 2. 38 | % | ||||||||||||
Total non-performing assets and troubled debt restructurings (accruing) to total assets |
0.50 | % | 0.56 | % | 0.85 | % | 1.29 | % | 1.41 | % | 2.99 | % |
(1) |
Non-accrual loans at June 30, 2018 include $695 of troubled debt restructurings. |
Interest income that would have been recorded for the six months ended June 30, 2018 had non-accruing loans been current according to their original terms amounted to $62,894. In addition, there was no additional interest income that would have been recorded for the year ended December 31, 2017 had accruing troubled debt restructurings been current according to their original terms.
Foreclosed Assets . Foreclosed assets consist of property acquired through formal foreclosure, in-substance foreclosure or by deed in lieu of foreclosure, and are recorded at the lower of recorded investment or fair value less estimated costs to sell. Write-downs from recorded investment to fair value, which are required at the time of foreclosure, are charged to the allowance for loan losses. After transfer, adjustments to the carrying value of the properties that result from subsequent declines in value are charged to operations in the period in which the declines occur. During the six months ended June 30, 2018, no loans were transferred into foreclosed assets. We had no foreclosed assets at June 30, 2018 and December 31, 2017, respectively.
92
Classified Assets . Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the OCC 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 reserve 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 in the loan portfolio. 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 institutions 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 accordance with our loan policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations. Loans are listed on the watch list initially because of emerging financial weaknesses even though the loan is currently performing as agreed, or if the loan possesses weaknesses although currently performing. If a loan deteriorates in asset quality, the classification is changed to special mention, substandard, doubtful or loss depending on the circumstances and the evaluation. Generally, loans 90 days or more past due are placed on nonaccrual status and classified substandard. Management reviews the status of each impaired loan on our watch list on a quarterly basis.
On the basis of this review of our assets, our classified assets (including commercial, residential and consumer loans) at the dates indicated were as follows:
At June 30,
2018 |
At December 31, | |||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||
(In thousands) | ||||||||||||||||
Watch and Special Mention |
$ | 14,406 | $ | 14,964 | $ | 18,315 | $ | 12,871 | ||||||||
Substandard |
2,077 | 3,440 | 6,421 | 8,134 | ||||||||||||
Doubtful |
125 | 137 | 163 | 239 | ||||||||||||
Loss |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total classified assets |
$ | 16,608 | $ | 18,541 | $ | 24,899 | $ | 21,244 | ||||||||
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|
|
|
|
|
|
|
Allowance for Loan Losses
The allowance for loan losses is maintained at a level which, in managements judgment, is adequate to absorb probable credit losses inherent in the loan portfolio. The amount of the allowance is based on managements 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
93
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 managements 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. Managements periodic evaluation of the adequacy of the allowance is based on various factors, including, but not limited to, managements 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, and as a result of such reviews, we may have to adjust our allowance for loan losses. However, regulatory agencies are not directly involved in the process for establishing the allowance for loan losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.
94
Allowance for Loan Losses . The following table sets forth activity in our allowance for loan losses for the periods indicated.
Six Months Ended
June 30, |
Year Ended December 31, | |||||||||||||||||||||||||||
2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Allowance for loan losses at beginning of period |
$ | 3,093 | $ | 3,008 | $ | 3,008 | $ | 3,087 | $ | 3,741 | $ | 3,834 | $ | 5,374 | ||||||||||||||
Provision (credit) for loan losses |
| | | | (684 | ) | | (600 | ) | |||||||||||||||||||
Charge-offs: |
||||||||||||||||||||||||||||
Residential real estate loans |
| | | 89 | 218 | 110 | 356 | |||||||||||||||||||||
Commercial loans |
| | | 114 | | 209 | 677 | |||||||||||||||||||||
Consumer loans |
34 | 8 | 37 | 113 | 45 | 113 | 750 | |||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total charge-offs |
34 | 8 | 37 | 316 | 263 | 432 | 1,783 | |||||||||||||||||||||
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|
|
|
|
|
|
|||||||||||||||
Recoveries: |
||||||||||||||||||||||||||||
Residential real estate loans |
3 | 5 | 22 | 51 | 10 | 36 | 89 | |||||||||||||||||||||
Commercial loans |
12 | 11 | 24 | 45 | 119 | 207 | 644 | |||||||||||||||||||||
Consumer loans |
18 | 32 | 76 | 141 | 164 | 96 | 110 | |||||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
|||||||||||||||
Total recoveries |
33 | 48 | 122 | 237 | 293 | 339 | 843 | |||||||||||||||||||||
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|
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|
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|
|
|||||||||||||||
Net charge-offs (recoveries) |
1 | (40 | ) | (85 | ) | 79 | (30 | ) | 93 | 940 | ||||||||||||||||||
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|
|
|
|||||||||||||||
Allowance for loan losses at end of period |
3,092 | 3,048 | 3,093 | 3,008 | 3,087 | 3,741 | 3,834 | |||||||||||||||||||||
Allowance for loan losses to non-performing loans at end of period |
167.40 | % | 143.98 | % | 163.90 | % | 100.39 | % | 66.35 | % | 74.71 | % | 37.49 | % | ||||||||||||||
Allowance for loan losses to total loans outstanding at end of period |
0.83 | % | 0.95 | % | 0.93 | % | 0.95 | % | 0.97 | % | 1.28 | % | 1.38 | % | ||||||||||||||
Net charge-offs (recoveries) to average loans outstanding during period |
| % | 0.01 | % | 0.03 | % | (0.03 | )% | 0.01 | % | (0.03 | )% | (0.35 | )% |
95
Allocation of Allowance for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category, the total loan balances by category, and the percent of loans in each category to total loans 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 the dates indicated, we had no unallocated allowance for loan losses.
At December 31, | ||||||||||||||||||||||||||||||||||||
At June 30, 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||
Allowance
for Loan Losses |
Percent of
Allowance in Category to Total Allocated Allowance |
Percent of
Loans in Each Category to Total Loans |
Allowance
for Loan Losses |
Percent of
Allowance in Category to Total Allocated Allowance |
Percent of
Loans in Each Category to Total Loans |
Allowance
for Loan Losses |
Percent of
Allowance in Category to Total Allocated Allowance |
Percent of
Loans in Each Category to Total Loans |
||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Residential real estate |
$ | 1,249 | 40.4 | % | 29.9 | % | $ | 1,246 | 40.3 | % | 32.8 | % | $ | 1,224 | 40.7 | % | 34.5 | % | ||||||||||||||||||
Commercial |
1,381 | 44.6 | 58.8 | 1,369 | 44.2 | % | 53.8 | % | 1,345 | 44.7 | % | 50.8 | % | |||||||||||||||||||||||
Consumer |
462 | 14.9 | 11.3 | 478 | 15.5 | % | 13.4 | % | 439 | 14.6 | % | 14.7 | % | |||||||||||||||||||||||
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|
|
|
|
|||||||||||||||||||
Total allocated allowance |
3,092 | 100.0 | % | 100.0 | % | 3,093 | 100.0 | % | 100.0 | % | 3,008 | 100.0 | % | 100.0 | % | |||||||||||||||||||||
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|||||||||||||||||||||||||
Unallocated |
| | | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total |
$ | 3,092 | $ | 3,093 | $ | 3,008 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
At December 31, | ||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||
Allowance
for Loan Losses |
Percent of
Allowance in Category to Total Allocated Allowance |
Percent of
Loans in Category to Total Loans |
Allowance
for Loan Losses |
Percent of
Allowance in Category to Total Allocated Allowance |
Percent of
Loans in Category to Total Loans |
Allowance
for Loan Losses |
Percent of
Allowance in Category to Total Allocated Allowance |
Percent of
Loans in Category to Total Loans |
||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Residential real estate |
$ | 1,262 | 40.9 | % | 37.0 | % | $ | 758 | 20.3 | % | 32.1 | % | $ | 832 | 21.7 | % | 36.3 | % | ||||||||||||||||||
Commercial |
1,414 | 45.8 | 47.8 | 2,909 | 77.8 | 50.5 | 2,910 | 75.9 | 45.9 | |||||||||||||||||||||||||||
Consumer |
411 | 13.3 | 15.2 | 74 | 2.0 | 17.4 | 92 | 2.4 | 17.8 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total allocated allowance |
3,087 | 100.0 | % | 100.0 | % | 3,741 | 100.0 | % | 100.0 | % | 3,834 | 100.0 | % | 100.0 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Unallocated |
| | | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total |
$ | 3,087 | $ | 3,741 | ¤ | $ | 3,834 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
96
At June 30, 2018, our allowance for loan losses represented 0.83% of total loans and 167.41% of non-performing loans, and at December 31, 2017, our allowance for loan losses represented 0.95% of total loans and 83.3% of non-performing loans. There were $1,000, $(85,000) and $79,000 in net loan charge-offs (recoveries) during the six months ended June 30, 2018 and the years ended December 31, 2017 and 2016, respectively.
Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Because future events affecting borrowers and collateral cannot be predicted with certainty, the existing allowance for loan losses may not be adequate and management may determine that increases in the allowance are necessary if the quality of any portion of our loan portfolio deteriorates as a result. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations.
Investment Activities
General . The goals of our investment policy are to provide and maintain liquidity to meet deposit withdrawal and loan funding needs, to help mitigate interest rate and market risk, to diversify our assets, and to generate a reasonable rate of return on funds within the context of our interest rate and credit risk objectives. Our board of directors is responsible for adopting our investment policy. The investment policy is reviewed annually by the board of directors. Authority to make investments under the approved investment policy guidelines is delegated to our president and chief executive officer and our chief financial officer. All investment transactions are reviewed at the next regularly scheduled meeting of the board of directors. All of our investment securities are classified as available-for-sale.
We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various government-sponsored enterprises and municipal governments, deposits at the Federal Home Loan Bank of Chicago, certificates of deposit of federally insured institutions, investment grade corporate bonds and investment grade marketable equity securities. We also are required to maintain an investment in Federal Home Loan Bank of Chicago stock. While we have the authority under applicable law to invest in derivative securities, we had no investments in derivative securities at June 30, 2018 or December 31, 2017.
97
The following table sets forth the amortized cost and fair value of our investment securities portfolio (excluding Federal Home Loan Bank of Chicago common stock) at the dates indicated. At the dates indicated, all of our investment securities were held as available-for-sale.
At June 30, | At December 31, | |||||||||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||
Amortized
Cost |
Fair
Value |
Amortized
Cost |
Fair
Value |
Amortized
Cost |
Fair
Value |
Amortized
Cost |
Fair
Value |
|||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Securities available-for-sale: |
||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions |
$ | 11,683 | $ | 11,431 | $ | 20,545 | $ | 20,630 | $ | 21,872 | $ | 21,964 | $ | 19,706 | $ | 20,130 | ||||||||||||||||
Government-sponsored mortgage-backed securities |
55,090 | 52,910 | 61,218 | 60,024 | 66,041 | 64,949 | 41,526 | 41,414 | ||||||||||||||||||||||||
Corporate collateralized mortgage obligations |
503 | 505 | 696 | 702 | 1,254 | 1,254 | 1,914 | 1,918 | ||||||||||||||||||||||||
Asset-backed securities (1) |
4,193 | 4,205 | 4,835 | 4,832 | 5,623 | 5,524 | 6,976 | 6,820 | ||||||||||||||||||||||||
Corporate bonds |
| | 1,495 | 1,516 | 1,495 | 1,498 | 1,494 | 1,493 | ||||||||||||||||||||||||
Certificates of deposit |
249 | 245 | 1,246 | 1,251 | 1,244 | 1,269 | 1,242 | 1,235 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | 71,718 | $ | 69,296 | $ | 90,035 | $ | 88,955 | $ | 97,529 | $ | 96,458 | $ | 72,858 | $ | 73,010 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Asset-backed securities are comprised of pools of student loans. |
98
Portfolio Maturities and Yields. The following table sets forth the stated maturities and weighted average yields of investment securities at June 30, 2018. Weighted average yields on tax-exempt securities are presented on a tax equivalent basis using a combined federal and state marginal tax rate of 29%. Certain mortgage-backed securities have adjustable interest rates and will reprice annually within the various maturity ranges. These repricing schedules are not reflected in the table below. Weighted average yield calculations on investment securities available for sale do not give effect to changes in fair value that are reflected as a component of equity.
One Year or Less |
More than One Year to Five
Years |
More than Five Years to
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) | ||||||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale: |
||||||||||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions |
$ | 1,984 | 2.59 | % | 6,199 | 2.54 | % | $ | 3,500 | 2.32 | % | | | % | 11,683 | 11,431 | 2.49 | % | ||||||||||||||||||||||||||
Government-sponsored mortgage-backed securities |
| 4.75 | % | 4,757 | 2.04 | % | 18,634 | 2.49 | % | 31,699 | 2.28 | % | 55,090 | 52,910 | 2.30 | % | ||||||||||||||||||||||||||||
Corporate collateralized mortgage obligations |
17 | 4.50 | % | 3 | 5.19 | % | | | % | 483 | 3.98 | % | 503 | 505 | 4.00 | % | ||||||||||||||||||||||||||||
Asset-backed securities |
| | % | | | % | 2,604 | 3.20 | % | 1,589 | 3.20 | % | 4,193 | 4,205 | 3.20 | % | ||||||||||||||||||||||||||||
Corporate bonds |
| | % | | | % | | | % | | | % | | | | % | ||||||||||||||||||||||||||||
Certificates of deposit |
| | % | 249 | 2.46 | % | | | % | | | % | 249 | 245 | 2.46 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Total |
$ | 2,001 | 2.61 | % | $ | 11,208 | 2.25 | % | $ | 24,738 | 2.55 | % | $ | 33,771 | 2.35 | % | $ | 71,718 | $ | 69,296 | 2.39 | % | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
99
The following table sets forth the stated maturities and weighted average yields of investment securities at December 31, 2017. Weighted average yields on tax-exempt securities are presented on a tax equivalent basis using a combined federal and state marginal tax rate of 29%. Certain mortgage-backed securities have adjustable interest rates and will reprice annually within the various maturity ranges. These repricing schedules are not reflected in the table below. Weighted average yield calculations on investment securities available for sale do not give effect to changes in fair value that are reflected as a component of equity.
One Year or Less |
More than One
Year to Five Years |
More than Five
Years to 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) | ||||||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale: |
||||||||||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions |
368 | 4.10 | % | 9,539 | 3.04 | % | 8,586 | 2.89 | % | 2,052 | 3.20 | % | 20,545 | 20,630 | 3.01 | % | ||||||||||||||||||||||||||||
Government-sponsored mortgage-backed securities |
| | % | 4,132 | 1.82 | % | 21,356 | 2.35 | % | 35,730 | 2.27 | % | 61,218 | 60,024 | 2.27 | % | ||||||||||||||||||||||||||||
Corporate collateralized mortgage obligations |
41 | 4.51 | % | 9 | 5.22 | % | | | % | 646 | 3.47 | % | 696 | 702 | 3.55 | % | ||||||||||||||||||||||||||||
Asset-backed securities |
| | % | | | % | 3,077 | 2.32 | % | 1,758 | 2.20 | % | 4,835 | 4,832 | 2.28 | % | ||||||||||||||||||||||||||||
Corporate bonds |
| | % | 1,495 | 3.02 | % | | | % | | | % | 1,495 | 1,516 | 3.02 | % | ||||||||||||||||||||||||||||
Certificates of deposit |
| | % | 1,246 | 2.40 | % | | | % | | | % | 1,246 | 1,251 | 2.40 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Total |
$ | 409 | 4.14 | % | $ | 16,421 | 2.68 | % | $ | 33,019 | 2.49 | % | $ | 40,186 | 2.33 | % | $ | 90,035 | $ | 88,955 | 2.46 | % | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
100
Obligations of State and Political Subdivision (Municipal) Securities. At June 30, 2018, we had municipal securities totaling $11.4 million, which constituted 16% of our securities portfolio. Our current municipal securities have a weighted average maturity of 4.5 years. These securities often provide slightly higher after-tax yields than U.S. government and agency securities and mortgage-backed securities, but are not as liquid as other investments, so we typically maintain investments in municipal securities, to the extent appropriate, for generating returns in our investment portfolio.
Government-sponsored Mortgage-Backed Securities . At June 30, 2018, we had government-sponsored mortgage-backed securities totaling $52.9 million, which constituted 76% of our securities portfolio, including $51.5 million of agency collateralized mortgage obligations (CMOs). Mortgage-backed securities are securities issued in the secondary market that are collateralized by pools of mortgages. Certain types of mortgage-backed securities are commonly referred to as pass-through certificates because the principal and interest of the underlying loans is passed through to investors, net of certain costs, including servicing and guarantee fees. We invest primarily in mortgage-backed securities backed by one- to four-family mortgages. All of our mortgage-backed securities are either backed by Ginnie Mae, a U.S. government agency, the Small Business Administration, or government-sponsored enterprises, such as Fannie Mae and Freddie Mac.
Residential and commercial mortgage-backed securities issued by U.S. government agencies and government-sponsored enterprises are more liquid than individual mortgage loans because there is an active trading market for such securities. In addition, residential and commercial mortgage-backed securities may be used to collateralize our borrowings. Investments in residential and commercial mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such interests, thereby affecting the net yield on our securities. Current prepayment speeds determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.
Corporate Collateralized Mortgage Obligations . At June 30, 2018, we had corporate collateralized mortgage obligations totaling $505,000, which constituted 0.7% of our securities portfolio. While these securities generally provide lower yields than other investments in our securities investment portfolio, we maintain these investments, to the extent we deem appropriate, for liquidity purposes, as collateral for borrowings and for prepayment protection.
Asset-backed Securities . At June 30, 2018 we had asset-backed securities comprised of pools of student loans totaling $4.2 million, which constituted 6% of our securities portfolio. All of our asset-backed securities are investment grade and have interest rates tied to an index (LIBOR).
Certificates of Deposit. At June 30, 2018, we had certificates of deposit totaling $245,000, which constituted 0.3% of our securities portfolio. While these securities generally provide lower yields than other investments in our securities investment portfolio, we maintain these investments, to the extent we deem appropriate, for liquidity purposes.
Federal Home Loan Bank Stock. We held common stock of the Federal Home Loan Bank of Chicago in connection with our borrowing activities totaling $1.8 million at June 30, 2018. The Federal Home Loan Bank of Chicago common stock is carried at cost. We may be required to purchase additional Federal Home Loan Bank of Chicago stock if we increase borrowings in the future.
Bank-Owned Life Insurance . We invest in bank-owned life insurance to provide us with a funding source for certain of our benefit plan obligations. Bank-owned life insurance also generally provides us non-interest income that is non-taxable. At June 30, 2018, our balance in bank-owned life insurance totaled $13.9 million and was issued by two insurance companies, each of which was rated AA+ by Standard & Poors.
101
Sources of Funds
General. Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also use borrowings, primarily Federal Home Loan Bank of Chicago advances, to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and to manage the cost of funds. In addition, we receive funds from scheduled loan payments, loan and mortgage-backed securities prepayments, maturities and calls of available-for-sale securities, 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 residents within our primary market area. We offer a selection of deposit accounts, including non-interest-bearing checking accounts, interest-bearing checking accounts, money market accounts, statement savings, health savings and certificates of deposit. 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. At June 30, 2018, our core deposits, which are deposits other than certificates of deposit, were $205.8 million, representing 50.9% of total deposits. As part of our business strategy, we intend to continue our effort to increase our core deposits while allowing higher-cost certificates of deposit to run off upon maturity.
Interest rates, 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. The flow of deposits is influenced significantly by general economic conditions, changes in interest rates and competition. The variety of deposit accounts that we offer allows us to be competitive in generating deposits and to respond with flexibility to changes in our customers demands. Our ability to gather deposits is impacted by the competitive market in which we operate, which includes numerous financial institutions of varying sizes offering a wide range of products. We believe that deposits are a stable source of funds, but our ability to attract and maintain deposits at favorable rates will be affected by market conditions, including competition and prevailing interest rates.
Our strategy is to not be the market leader in overall pricing for deposits. We find it more profitable to concentrate on specific special rate and term accounts, which allows us to add accounts without impacting our overall liability costs for existing accounts. We concentrate on odd-month, longer term certificates and larger minimum balance non-maturity deposits to generate new funds. Additionally, in 2018, we established a Treasury Management department, which concentrates on gathering deposits from both existing commercial loan clients and new commercial prospects. We anticipate that Treasury Management activities will have a positive impact on lower cost deposits and will aid in retaining full service clients.
102
The following tables set forth the distribution of total deposit accounts, by account type, for the periods indicated.
At June 30,
2018 |
At December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||||||||||||||||||||||||||||||
Amount | Percent | Rate | Amount | Percent | Rate | Amount | Percent | Rate | Amount | Percent | Rate | |||||||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||
Noninterest-bearing demand accounts |
$ | 56,851 | 14.05 | % | 0.00 | % | $ | 62,817 | 16.14 | % | 0.00 | % | $ | 57,092 | 15.91 | % | 0.00 | % | $ | 47,555 | 13.47 | % | 0.00 | % | ||||||||||||||||||||||||
NOW accounts |
27,042 | 6.68 | % | 0.16 | % | 26,649 | 6.85 | % | 0.12 | % | 27,237 | 7.59 | % | 0.17 | % | 29,595 | 8.38 | % | 0.17 | % | ||||||||||||||||||||||||||||
Money market accounts |
64,670 | 15.99 | % | 0.52 | % | 55,016 | 14.13 | % | 0.33 | % | 57,587 | 16.05 | % | 0.22 | % | 58,456 | 16.56 | % | 0.20 | % | ||||||||||||||||||||||||||||
Savings accounts |
57,266 | 14.16 | % | 0.13 | % | 58,566 | 15.04 | % | 0.10 | % | 59,770 | 16.65 | % | 0.15 | % | 53,285 | 15.10 | % | 0.16 | % | ||||||||||||||||||||||||||||
Certificates of deposit |
198,731 | (1) | 49.12 | % | 1.46 | % | 186,243 | 47.84 | % | 1.41 | % | 157,196 | 43.80 | % | 1.36 | % | 164,088 | 46.49 | % | 1.10 | % | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total |
$ | 404,560 | 100.0 | % | 0.83 | % | $ | 389,291 | 100.0 | % | 0.74 | % | $ | 358,882 | 100.0 | % | 0.67 | % | $ | 352,979 | 100.0 | % | 0.58 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Of this amount, $68,008 were brokered certificates of deposit. |
The following tables indicate the amount of jumbo certificates of deposit by time remaining until maturity at June 30, 2018 and December 31, 2017. Jumbo certificates of deposit require minimum deposits of $100,000.
Maturity Period |
Dollar Amount | |||
(In thousands) | ||||
At June 30, 2018: |
||||
Three months or less |
$ | 16,799 | ||
Over three through six months |
14,608 | |||
Over six through twelve months |
7,913 | |||
Over twelve months |
24,618 | |||
|
|
|||
Total |
$ | 63,938 | ||
|
|
|||
At December 31, 2017: |
||||
Three months or less |
$ | 4,509 | ||
Over three through six months |
5,088 | |||
Over six through twelve months |
31,445 | |||
Over twelve months |
25,238 | |||
|
|
|||
Total |
$ | 66,280 | ||
|
|
103
The following table indicates the time deposit accounts classified by rate and maturity at June 30, 2018.
Amount Due | ||||||||||||||||||||||||
Less Than One
Year |
More Than
One Year to Two Years |
More Than
Two Years to Three Years |
More Than
Three Years |
Total |
Percent of
Total Time Deposit Accounts |
|||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
0.00 - 1.00% |
$ | 10,375 | $ | 10,150 | $ | 940 | $ | 67 | $ | 21,532 | 10.8 | % | ||||||||||||
1.01 - 2.00% |
47,670 | 48,732 | 48,325 | 8,182 | 152,909 | 77.0 | % | |||||||||||||||||
2.01 - 3.00% |
226 | 17,129 | 6,535 | 400 | 24,290 | 12.2 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 58,271 | $ | 76,011 | $ | 55,800 | $ | 8,649 | $ | 198,731 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The following table indicates the time deposit accounts classified by rate and maturity at December 31, 2017.
Amount Due | ||||||||||||||||||||||||
Less Than One
Year |
More Than
One Year to Two Years |
More Than
Two Years to Three Years |
More Than
Three Years |
Total |
Percent of
Total Time Deposit Accounts |
|||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
0.00 - 1.00% |
$ | 28,309 | $ | 1,531 | $ | 331 | $ | 30 | $ | 30,201 | 16.2 | % | ||||||||||||
1.01 - 2.00% |
57,409 | 40,711 | 48,183 | 7,036 | 153,339 | 82.3 | % | |||||||||||||||||
2.01 - 3.00% |
584 | 115 | 2,004 | | 2,703 | 1.5 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 86,302 | $ | 42,357 | $ | 50,518 | $ | 7,066 | $ | 186,243 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
104
Borrowed Funds. We may obtain advances from the Federal Home Loan Bank of Chicago upon the security of our capital stock in the Federal Home Loan Bank of Chicago and certain of our mortgage loans. Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. We use such advances to provide short-term funding as a supplement to our deposits. To the extent such borrowings have different terms to repricing than our deposits, they can change our interest rate risk profile. At June 30, 2018, we had $27.7 million in advances from the Federal Home Loan Bank of Chicago. At June 30, 2018, due to the Federal Home Loan Bank of Chicagos repurchase of its stock, we had no available additional Federal Home Loan Bank of Chicago advances, although we may access additional advances if we purchase additional Federal Home Loan Bank of Chicago capital stock.
Additionally, at June 30, 2018 we had a $10.0 million federal funds rate line of credit with the BMO Harris Bank, none of which was drawn at June 30, 2018, as well as a line of credit at the Federal Reserve.
The following table sets forth information concerning balances and interest rates on our borrowings at and for the periods shown:
Six Months Ended
June 30, |
Year Ended December 31, | |||||||||||||||
2018 | 2017 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Maximum balance outstanding at any
month-end
|
$ | 50,388 | $ | 64,922 | $ | 64,922 | $ | 48,224 | ||||||||
Average balance outstanding during period |
$ | 40,451 | $ | 44,298 | $ | 38,635 | $ | 24,675 | ||||||||
Weighted average interest rate during period |
1.37 | % | 1.14 | % | 1.21 | % | 1.12 | % | ||||||||
Balance outstanding at end of period |
$ | 27,677 | $ | 29,709 | $ | 34,693 | $ | 48,224 | ||||||||
Weighted average interest rate at end of period |
1.48 | % | 1.26 | % | 1.34 | % | 1.23 | % |
105
Properties
As of June 30, 2018, the net book value of our real properties, including land, was $6.2 million. The following is a list of our offices:
Location |
Year
Opened |
Square
Footage |
Owned/
Leased |
Lease
Expiration Date |
Net Book
Value at June 30, 2018 |
|||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Corporate Office: |
||||||||||||||||||||
7001 West Edgerton Avenue Greenfield, WI 53220 |
1980 | 23,186 | Owned | N/A | $ | 1,403 | ||||||||||||||
Branch Offices: |
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9000 West Drexel Avenue Franklin, WI 53132 |
2004 | 3,930 | Owned | N/A | 794 | |||||||||||||||
1150 Washington Street Grafton, WI 53024 |
2016 | 5,700 | Leased | 4/1/2019 | | |||||||||||||||
1605 West Mitchell Street Milwaukee, WI 53204 |
1967 | 4,242 | Owned | N/A | 688 | |||||||||||||||
318 North Water Street Milwaukee, WI 53202 |
2005 | 4,677 | Leased | 12/31/2019 | | |||||||||||||||
405 Rivercrest Court Mukwonago, WI 53149 |
1999 | 3,097 | Owned | N/A | 484 | |||||||||||||||
1015 Marquette Avenue South Milwaukee, WI 53172 |
1972 | 3,942 | Owned | N/A | 570 | |||||||||||||||
1500 East Moreland Avenue Waukesha, WI 53186 |
1969 | 4,546 | Owned | N/A | 1,466 | |||||||||||||||
8001 West National Avenue West Allis, WI 53214 |
2008 | 4,238 | Owned | N/A | 807 | |||||||||||||||
Total |
$ | 6,212 |
Subsidiary and Other Activities
Upon completion of the conversion, PyraMax Bank, FSB will become the wholly owned subsidiary of 1895 Bancorp of Wisconsin, Inc. PyraMax Bank, FSB has no subsidiaries.
Legal Proceedings
We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at June 30, 2018, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.
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Expense and Tax Allocation
PyraMax Bank, FSB will enter into an agreement with 1895 Bancorp of Wisconsin, Inc. to provide it with certain administrative support services for compensation not less than the fair market value of the services provided. In addition, PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, 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 June 30, 2018, we had 118 full-time equivalent employees. Our employees are not represented by any collective bargaining group. Management believes that we have a good working relationship with our employees.
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PyraMax Bank, FSB is, and 1895 Bancorp of Wisconsin, MHC and 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, MHC, 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB.
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, PyraMax Bank, FSB currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal income tax returns. 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB 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, PyraMax Bank, FSB 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).
Net Operating Loss Carryovers. A financial institution may carry net operating losses forward to the succeeding 20 taxable years. At December 31, 2017, PyraMax Bank, FSB had a federal net operating loss carryover of $12.7 million that will expire in 2038.
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 it is carried and is used to offset any capital gains. Any undeducted loss remaining after the five-year carryover period is not deductible. At December 31, 2017, PyraMax Bank, FSB had no capital loss carryovers.
Corporate Dividends. 1895 Bancorp of Wisconsin, Inc. may generally exclude from its income 100% of dividends received from PyraMax Bank, FSB as a member of the same affiliated group of corporations.
State Taxation
1895 Bancorp of Wisconsin, Inc. will be subject to the Wisconsin corporate franchise (income) tax. Wisconsin imposes a corporate franchise tax of 7.9% on the combined taxable incomes of the members of 1895 Financials consolidated income tax group, which will include PyraMax Bank, FSB.
PyraMax Bank, FSBs state tax returns have not been audited for the last five years.
Net Operating Loss Carryovers. Wisconsin law allows financial institutions to carry forward a Wisconsin net operating loss to the succeeding 20 taxable years. At December 31, 2017, PyraMax Bank, FSB had Wisconsin net operating loss carryover of $22.8 million that will expire in 2033.
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General
As a federal savings bank, PyraMax Bank, FSB is subject to examination, supervision and regulation, primarily by the Office of the Comptroller of the Currency, and, secondarily, by the FDIC as deposits insurer. The federal system of regulation and supervision establishes a comprehensive framework of activities in which PyraMax Bank, FSB may engage and is intended primarily for the protection of depositors and the FDICs Deposit Insurance Fund. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies. That includes with respect to the classification of assets and the establishment of loan loss reserves for regulatory purposes.
PyraMax Bank, FSB 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, PyraMax Bank, FSB is a member of and owns stock in the Federal Home Loan Bank of Chicago, which is one of the 11 regional banks in the Federal Home Loan Bank System. PyraMax Bank, FSBs 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 PyraMax Bank, FSBs loan documents.
As a savings and loan holding company, 1895 Bancorp of Wisconsin, Inc. will be subject to examination and supervision by, and be required to file certain reports with, the Federal Reserve Board. 1895 Bancorp of Wisconsin, 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 PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, Inc. This description of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effects on PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, Inc. Any change in these laws or regulations, whether by Congress or the applicable regulatory agencies, could have a material adverse impact on 1895 Bancorp of Wisconsin, Inc., PyraMax Bank, FSB 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 Acts changes go well beyond that and affect the lending, investments and other operations of all depository institutions.
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 PyraMax Bank, FSB, 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.
In addition to creating the Consumer Financial Protection Bureau, the Dodd-Frank Act, among other things, directed changes in the way that institutions are assessed for deposit insurance, mandated the imposition of tougher consolidated capital requirements on holding companies, required the issuance of
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regulations requiring originators of securitized loans to retain a percentage of the risk for the transferred loans, imposed regulatory rate-setting for certain debit card interchange fees, repealed restrictions on the payment of interest on commercial demand deposits and contained a number of reforms related to mortgage originations.
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. The Dodd-Frank Act has resulted in, and may continue to result in, an increased regulatory burden and increased compliance, operating and interest expense for PyraMax Bank, FSB.
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, PyraMax Bank, FSB may invest in mortgage loans secured by residential and commercial real estate, commercial and industrial 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. PyraMax Bank, FSB may also establish, subject to specified investment limits, service corporation subsidiaries that may engage in certain activities not otherwise permissible for PyraMax Bank, FSB, including real estate investment and securities and insurance brokerage.
Examinations and Assessments. PyraMax Bank, FSB is primarily supervised by the Office of the Comptroller of the Currency. PyraMax Bank, FSB is required to file reports with and is subject to periodic examination by the Office of the Comptroller of the Currency. PyraMax Bank, FSB is required to pay assessments to the Office of the Comptroller of the Currency to fund the agencys 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% of 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 a one-time 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). PyraMax Bank, FSB did exercise the opt-out election. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.
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In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, an institutions 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.
Legislation enacted in May 2018 requires the federal banking agencies, including the Office of the Comptroller of the Currency, to establish for institutions with assets of less than $10 billion of assets a community bank leverage ratio of between 8 to 10%. Institutions with capital meeting the specified requirement will be considered to comply with the applicable regulatory capital requirements, including the risk-based requirements. The establishment of the community bank leverage ratio is subject to notice and comment rulemaking by the federal regulators.
At June 30, 2018, PyraMax Bank, FSBs capital exceeded all applicable requirements including the applicable capital conservation buffer. 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 June 30, 2018, PyraMax Bank, FSB 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 . 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 institutions level of capital. An institution
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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 associations 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 June 30, 2018, PyraMax Bank, FSB 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, PyraMax Bank, FSB must satisfy the qualified thrift lender, or QTL, test. Under the QTL test, PyraMax Bank, FSB 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 associations business.
Alternatively, PyraMax Bank, FSB 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 QTL 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 June 30, 2018, PyraMax Bank, FSB satisfied the QTL test.
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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 associations 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 associations net income for that year to date plus the savings associations 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 PyraMax Bank, FSB, 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.
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 associations record of compliance with the Community Reinvestment Act. A savings associations 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. PyraMax Bank, FSB received an Outstanding Community Reinvestment Act rating in its most recent federal evaluation.
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Transactions with Related Parties. A federal savings associations 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 PyraMax Bank, FSB. 1895 Bancorp of Wisconsin, Inc. will be an affiliate of PyraMax Bank, FSB because of its control of PyraMax Bank, FSB. In general, certain transactions between an insured depository institution and its affiliates are subject to 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 from an affiliate and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.
PyraMax Bank, FSBs 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 PyraMax Bank, FSBs capital. |
In addition, extensions of credit in excess of certain limits must be approved by PyraMax Bank, FSBs 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 PyraMax Bank, FSB. Deposit accounts in PyraMax Bank, FSB 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 FDICs risk-based assessment system, insured institutions were assigned a risk category based on supervisory evaluations, regulatory capital levels and certain other factors. An institutions 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 institutions 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.
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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 1.15%, 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 FICO assessment for the Second Quarter of 2018 was 0.44 basis point of assets less tangible equity, decreasing to 0.32 basis point for the Third Quarter of 2018. The bonds issued by the FICO are due to mature by 2019.
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 PyraMax Bank, FSB. PyraMax Bank, FSB 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. PyraMax Bank, FSB 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 Chicago, PyraMax Bank, FSB is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of June 30, 2018, PyraMax Bank, FSB was in compliance with this requirement.
Other Regulations
Interest and other charges collected or contracted for by PyraMax Bank, FSB are subject to state usury laws and federal laws concerning interest rates. PyraMax Bank, FSBs 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, color, religion, national origin and 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, governing disclosures with respect to deposit accounts; 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 PyraMax Bank, FSB 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 institutions 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 . 1895 Bancorp of Wisconsin, Inc. and 1895 Bancorp of Wisconsin, MHC will be savings and loan holding companies within the meaning of the Home Owners Loan Act. As such, 1895 Bancorp of Wisconsin, Inc. and 1895 Bancorp of Wisconsin, MHC will be registered with the Federal Reserve Board and 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 1895 Bancorp of Wisconsin, Inc., 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. and 1895 Bancorp of Wisconsin, 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,
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provided certain conditions are met and financial holding company status is elected, and 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. 1895 Bancorp of Wisconsin, Inc. and 1895 Bancorp of Wisconsin, MHC have not elected financial holding company status.
Federal law prohibits a savings and loan holding company, including 1895 Bancorp of Wisconsin, Inc. and 1895 Bancorp of Wisconsin, MHC, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings association 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 consolidated 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. Recent legislation directed the Federal Reserve Board to expand the applicability of the exception to holding companies of up to $3.0 billion of consolidated assets.
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 financial and managerial 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 organizations 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 companys
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net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the companys overall rate or earnings retention is inconsistent with the companys 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 1895 Bancorp of Wisconsin, Inc. to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.
Waivers of Dividends by 1895 Bancorp of Wisconsin, MHC . 1895 Bancorp of Wisconsin, Inc. may pay dividends on its common stock to public stockholders. If it does, it is also required to pay dividends to 1895 Bancorp of Wisconsin, MHC, unless 1895 Bancorp of Wisconsin, MHC elects to waive the receipt of dividends. Under the Dodd-Frank Act, 1895 Bancorp of Wisconsin, MHC must receive the approval of the Federal Reserve Board before it may waive the receipt of any dividends from 1895 Bancorp of Wisconsin, 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 companys 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 1895 Bancorp of Wisconsin, MHC, each officer or director of 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB, 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 1895 Bancorp of Wisconsin, 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 companys 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 companys 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
1895 Bancorp of Wisconsin, Inc.s common stock will be registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. 1895 Bancorp of Wisconsin, 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 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 $1.07 billion during its most recently completed fiscal year qualifies as an emerging growth company. 1895 Bancorp of Wisconsin, Inc. qualifies as an emerging growth company under the JOBS Act.
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An emerging growth company may choose not to hold non-binding advisory stockholder votes on annual executive compensation (more frequently referred to as say-on-pay votes) or on 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 companys internal control over financial reporting, and can provide scaled disclosure regarding executive compensation; however, 1895 Bancorp of Wisconsin, 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. 1895 Bancorp of Wisconsin, 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).
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Our Directors
The board of directors of 1895 Bancorp of Wisconsin, Inc. will initially consist of seven 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 1895 Bancorp of Wisconsin, MHC will own a majority of our outstanding common stock, we will be a controlled company within the meaning of the Nasdaq corporate governance guidelines. As a controlled company, 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, we have determined that each of our directors, other than Richard Hurd and Monica Baker, would be considered independent under the Nasdaq Stock Market corporate governance listing standards. See Board Independence.
The following table states our directors names, their ages as of June 30, 2018, and the calendar years when they began serving as directors of PyraMax Bank, FSB.
Directors |
Position |
Age | Director Since |
Current Term
to Expire |
||||||||||
Monica Baker |
Senior Vice President-Chief Brand Officer | 49 | 2006 | 2019 | ||||||||||
Darrell Francis |
Chairman of the Board | 66 | 1986 | 2020 | ||||||||||
Richard Hurd |
President and Chief Executive Officer | 66 | 2004 | 2020 | ||||||||||
Joseph Murphy |
Director | 70 | 2005 | 2021 | ||||||||||
James Spiegelberg |
Director | 59 | 2006 | 2019 | ||||||||||
John Talsky |
Director | 69 | 2001 | 2020 | ||||||||||
Gary Zenobi |
Director | 72 | 1992 | 2021 |
The business experience for the past five years of each of our directors is set forth below. The biographies also contain information regarding the persons 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.
Monica Baker was appointed Senior Vice President-Chief Brand Officer in January 2014. Ms. Baker began with PyraMax Bank, FSB in 1993 as the Vice President of Marketing/Human Resources/Savings. In August 2000, she was promoted to Senior Vice President of Marketing/Human Resources and then in 2010 promoted to Senior Vice President of Marketing/Human Resources/Retail Lending. Ms. Baker has been on the Board of Directors since 2006. Prior to being employed with PyraMax Bank, FSB Ms. Baker was the Human Resources Officer at Maritime Savings Bank. She brings with her over 34 years of banking experience, focused on retail banking, retail lending, human resources and marketing. Ms. Baker holds her Master of Business Administration Degree from the University of Wisconsin-Milwaukee and undergraduate with a double major in Human Resources and Marketing from the University of Wisconsin-Milwaukee. Ms. Bakers extensive experience in retail banking, retail lending, human resources and marketing are valuable to our Board of Directors in assessing the performance of PyraMax Bank, FSB.
Darrell Francis has served on the Board of Directors of PyraMax Bank, FSB since June 1986. He was appointed Chairman of the Board in July 2007. He owns and operates a private dental practice in Wisconsin and has performed general dentistry since 1976. Dr. Frances has been member of the South Milwaukee Police and Fire Commission for over 25 years. He is the former President of the South Milwaukee Lions Club and was previously on the Board of Directors of Southshore-YMCA. Mr. Francis has extensive knowledge of local markets and the communities served by PyraMax Bank, FSB.
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Richard Hurd was appointed President and Chief Executive Officer of PyraMax Bank, FSB in 2007. Prior to that, Mr. Hurd was the Chief Operating Officer from 2004 to 2007. Mr. Hurd has been a board member since 2004. He joined PyraMax Bank, FSB in 2001. Prior to joining PyraMax Bank, FSB Mr. Hurd had 30 years of banking experience at First Wisconsin National Bank, Marine Bank and Bank One Corporation. Mr. Hurds banking experience and knowledge of financial markets enhance the breadth of experience of our Board of Directors.
Joseph Murphy has served on the Board of Directors of PyraMax Bank, FSB since December 2005. He was City Attorney for the City of South Milwaukee from 1982 to 2016. Mr. Murphy was a principal shareholder in Murphy & Leonard, LLP (formerly Murphy & Brennan), a Milwaukee law firm concentrating in commercial litigation, municipal law, real estate, estate planning and family law from 1981 to 2016. Mr. Murphy was an Assistant District Attorney in Milwaukee County from 1977 to 1981. Mr. Murphy retired in 2017. Mr. Murphys extensive and varied background as an attorney and in real estate are valuable to our Board of Directors.
James Spiegelberg was appointed to PyraMax Bank, FSBs Board of Directors in 2006. He owns Spiegelberg Financial Services, a full-service tax, accounting and financial services firm. Mr. Spiegelberg has over 27 years of accounting experience. Mr. Spiegelberg was Vice President of Finance, TransWorld Express Airlines from 1987 to 1989 and Vice President of Finance & Administration, JBL Professional from 1989 to 1993. Prior to that, he was Director of Accounting, Jet America Airlines from 1985 to 1987. Mr. Spiegelberg began his professional experience with Touche Ross as an auditor from 1981 to 1983. After successfully passing the CPA exam, he accepted a position in Internal Audit with Rexnord Corporation from 1983 to 1985. In 2001, Mr. Spiegelberg became an Investment Advisor Representative and also holds health and life insurance licenses, which adds valuable knowledge and experience to our Board of Directors. His work experience qualifies him to be a member of the Audit Committee as an audit committee financial expert under the rules and regulations of the Securities and Exchange Commission.
John Talsky was appointed to the Board of Directors in 2001. Mr. Talsky is an attorney who has owned a law firm specializing in estate planning and related services since 1973. Mr. Talsky is the Village of Greendale Board of Zoning Appeals Member, Chairman (1990 to Present). Mr. Talskys broad legal experience enables him to bring a unique perspective to the Board of Directors.
Gary Zenobi was appointed to the Board of Directors in 1992. Mr. Zenobi is a retired certified public accountant who owned his own certified public accounting firm, GAZ LLC, from 2010 to 2015. He was a partner in the accounting firm of Bartlett & Zenobi, SC. from 1994 to 2010. Prior to that, Mr. Zenobi owned his own firm Gary A. Zenobi, S.C. from 1988 to 1994. Mr. Zenobi also worked at the CPA firms Jannsen & Co. SC from 1977 to 1987 and Bersch and Co. SC from 1973 to 1976. He was the Comptroller of American Medical Services, Inc from 1970 to 1973 and began his career working for Touche Ross firm from 1967 to 1970. Mr. Zenobi is a certified public accountant and his diverse background and broad experience in public accounting enhances our Board of Directors oversight of financial reporting. His work experience qualifies him to be a member of the Audit Committee as an audit committee financial expert under the rules and regulations of the Securities and Exchange Commission.
Executive Officers Who Are Not Directors
The following sets forth information regarding our executive officers who are not directors. Age information is as of June 30, 2018. The executive officers of 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB are elected annually.
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Richard J. Krier joined PyraMax Bank, FSB in April 2011 as the Chief Financial Officer. Prior to that, Mr. Krier served as the Chief Financial Officer of Partnership Community Bancshares from 2008 until 2011. Mr. Krier has over 30 years of broad-based banking experience in the areas of financial management, operations, performance measurement and decision support. Mr. Krier is also a certified public accountant. Age 58.
Charles Mauer joined PyraMax Bank, FSB in June 2010 as PyraMax Bank, FSBs Chief Credit Officer. He is responsible for the overall management of PyraMax Bank, FSBs Credit Administration Department, including loan underwriting, loan review, lending support, loan policies, procedures and processes to ensure the overall quality of PyraMax Bank, FSBs loan portfolio. Mr. Mauer has over 30 years of commercial, consumer and mortgage lending as well as credit administration experience. Prior to working at PyraMax Bank, FSB, he was a First Vice President of Credit Administration at Ozaukee Bank where he also managed client relationships for over 20 years. In 2007, Ozaukee Bank was acquired by BMO Harris. Mr. Mauer remained with BMO Harris for three years serving as Senior Vice PresidentConcurrence Officer. Age 59.
Thomas K. Peterson was appointed Senior Vice President, Chief Lending Officer as of January, 2017. Prior to being employed by PyraMax Bank, FSB, Mr. Peterson was the Commercial Business Segment Leader for the Milwaukee-Madison Markets for Associated Bank from 2014 to 2017, and was the Commercial Business Team Leader for the Milwaukee Unit from 2010-2014. Mr. Peterson has over 36 years of banking experience, including various commercial banking roles at Ozaukee Bank, Harris-BMO and Associated Bank. Age 61.
Board Independence
The board of directors has determined that each of our directors, other than Richard Hurd and Monica Baker, would be considered independent under the Nasdaq Stock Market corporate governance listing standards. In determining the independence of our directors, the board of directors considered relationships between PyraMax Bank, FSB 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 PyraMax Bank, FSB. In addition, we utilize the services of Mr. Talskys law firm, of which he is the owner, and utilized the services of Mr. Murphys law firm until his retirement in 2017.
Transactions With Certain Related Persons
Federal law generally prohibits publicly traded companies from making loans to their executive officers and directors, but it contains a specific exemption from the prohibition for loans made by federally insured financial institutions, such as PyraMax Bank, FSB, to their executive officers and directors in compliance with federal banking regulations. At June 30, 2018, all of our loans to directors and executive officers were made in the ordinary course of business, 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 PyraMax Bank, FSB, and did not involve more than the normal risk of collectability or present other unfavorable features. These loans were performing according to their original repayment terms at June 30, 2018, and were made in compliance with federal banking regulations.
PyraMax Bank, FSB has not entered into any transactions since January 1, 2016 in which the amount involved exceeded $120,000 and in which any related persons had or will have a direct or indirect material interest.
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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 December 31, 2017, the board of directors of PyraMax Bank, FSB met 12 times. It is expected that the board of directors of 1895 Bancorp of Wisconsin, Inc. will establish a standing audit committee, which will operate under a written charter, which will govern its composition, responsibilities and operations.
1895 Bancorp of Wisconsin, Inc.s Audit Committee will consist of Directors Spiegelberg (Chairman), Francis and Zenobi. 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 1895 Bancorp of Wisconsin, 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, 1895 Bancorp of Wisconsin, Inc. will adopt several written policies to govern the activities of both 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB 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:
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the composition, responsibilities and operation of our board of directors; |
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the establishment and operation of board committees, including an audit committee, the charter for which will be available on our website; |
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convening executive sessions of independent directors; and |
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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.
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Executive Officer Compensation
Summary Compensation Table. The table below summarizes for the year ended December 31, 2017 the total compensation paid to or earned by our President and Chief Executive Officer, Richard Hurd, and our two other most highly compensated executive officers. Each individual listed in the table below is referred to as a named executive officer.
Summary Compensation Table |
||||||||||||||||||||
Name and principal position |
Year |
Salary
($) |
Bonus
(1)
($) |
All Other
Compensation (2) ($) |
Total
($) |
|||||||||||||||
Richard Hurd President and Chief Executive Officer |
2017 | 271,235 | 82,013 | 18,359 | 371,607 | |||||||||||||||
Charles Mauer Senior Vice President and Chief Credit Officer |
2017 | 168,842 | 51,053 | 4,506 | 224,401 | |||||||||||||||
Thomas Peterson Senior Vice President and Chief Lending Officer |
2017 | 168,269 | 52,500 | 3,974 | 224,743 |
(1) |
Amounts in this column represent a discretionary bonus. |
(2) |
The amounts in this column reflect what PyraMax Bank, FSB paid for, or reimbursed, the applicable named executive officer for the various benefits and perquisites received. A break-down of the various elements of compensation in this column is set forth in the following table: |
All Other Compensation |
||||||||||||||||
Name |
Paid Time Off
and Other ($) |
Country Club and
Related Expenses ($) |
Board Fees
($) |
Total All Other
Compensation ($) |
||||||||||||
Richard Hurd |
300 | 3,659 | 14,400 | 18,359 | ||||||||||||
Charles Mauer |
| 4,506 | | 4,506 | ||||||||||||
Thomas Peterson |
| 3,974 | | 3,974 |
Benefit Plans and Agreements
Proposed Employment Agreements . In connection with the reorganization and offering, PyraMax Bank, FSB intends to enter into employment agreements with the named executive officers Richard B. Hurd, President and Chief Executive Officer; Charles Mauer, Senior Vice President, Chief Credit Officer; and Thomas K. Peterson, Senior Vice President and Chief Lending Officer, among others.
Mr. Hurds employment agreement has an initial term of three years. At least 30 days prior to the anniversary date of the agreement and each anniversary date thereafter the disinterested members of the Board of Directors must conduct a comprehensive performance evaluation and affirmatively approve any extension of the agreement for an additional year or determine not to extend the term of the agreement. If the Board of Directors determines not to extend the term, it shall provide with a written notice of non-renewal prior to the anniversary date.
The employment agreements with the other executives each have an initial term of eighteen months. On the first anniversary date of the effective date of the agreements the disinterested members of the Board of Directors may choose to conduct a comprehensive performance evaluation and affirmatively approve any extension of the agreements for an additional twelve months or determine not to extend the term of the agreement. If the Board of Directors determines not to extend the term, it shall provide with a written notice of non-renewal, and the agreements will terminate as the end of the initial term.
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The employment agreements will provide for base salaries for Messrs. Hurd, Mauer, and Peterson in the amounts of $ , $ , and $ , respectively. The base salaries may be increased, but not decreased (other than a decrease which is applicable to all senior officers). In addition to base salary, the executives will be entitled to participate in any bonus programs (including a discretionary bonus and a performance-based bonus) and benefit plans that are made available to management employees. Mr. Hurds employment agreement will provide for country club membership fees. The executives will be reimbursed for all reasonable business expenses incurred.
In the event of an executives involuntary termination of employment for reasons other than cause, disability or death, or in the event of the executives resignation for good reason, the executive will receive a severance payment equal to the base salary and bonus(es) that the executive would have earned during the remaining term of the employment agreement. Such payment will be payable in a lump sum within 30 days following the executives date of termination. In addition, the executive will be entitled to continued life insurance and non-taxable medical and dental insurance coverage, at PyraMax Bank, FSBs expense, substantially comparable to the coverage maintained for the executive and the executives dependents prior to the executives termination. For purposes of the employment agreements, good reason is defined as: (i) the failure to appoint or re-elect the executive to his executive position or a material change in executives function, duties, or responsibilities, which change would cause the executives position to become one of lesser responsibility, importance, or scope; (ii) a relocation of the executives principal place of employment by more than 35 miles from the executives principal place of employment as of the initial effective date of the employment agreement; (iii) a material reduction in benefits and perquisites, including base salary (except for any reduction that is part of a good faith, overall reduction of such benefits applicable to all officers or employees of PyraMax Bank, FSB); (iv) a liquidation or dissolution of PyraMax Bank, FSB; or (v) a material breach of the employment agreement by PyraMax Bank, FSB. In order to be entitled to the benefit set forth above, an executive will be required to enter into a release of claims against 1895 Bancorp of Wisconsin and PyraMax Bank, FSB.
In the event of executives involuntary termination of employment other than for cause, disability or death, or in the event of the executives resignation for good reason, following the effective date of a change in control of 1895 Bancorp of Wisconsin or PyraMax Bank, FSB, the executive will be entitled to (in lieu of the payments and benefits described in the previous paragraph) a severance payment equal to one and one-half (1.5) times (three (3) times, for Mr. Hurd) the sum of (i) the executives highest annual rate of base salary payable at any time under the agreement, plus (ii) the highest bonus paid to the executive with respect to the prior three completed fiscal years. Such payment will be payable in a lump sum within 10 days following the executives date of termination. In addition, the executive would be entitled, at PyraMax Bank, FSBs (or PyraMax Bank, FSBs successors) expense, to the continuation of substantially comparable life insurance and non-taxable medical and dental insurance coverage for the executive and the executives dependents 18 months (36 months, for Mr. Hurd) following the executives termination.
Should the executives become disabled, they will be entitled to disability benefits, if any, provided under a long-term (or short-term) disability plan sponsored by PyraMax Bank, FSB and will receive continued non-taxable medical and dental benefit coverage substantially comparable to that maintained for executive and his dependents prior to becoming disabled until the earlier of (i) the date the executive returns to full-time employment of PyraMax Bank, FSB, (ii) the executive is employed full-time by another employer, (iii) 12 months from the date of executives termination due to disability. In the event of an executives death while employed, the executives estate or beneficiary will be paid his base salary for six months following death, and his family will continue to receive non-taxable medical and dental coverage for 12 months after his death.
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Upon any termination of employment (other than a termination in connection with a change in control), the executives will be required to adhere to one-year non-competition covenant and will be prohibited from soliciting employees of PyraMax Bank, FSB or any affiliate for the purpose of having such person(s) terminate employment with PyraMax Bank, FSB or its affiliates and provide services or accept employment with a competing business. The executives also agree that during their employment and following such employment, the executives will maintain and will not disclose the confidential information of PyraMax Bank, FSB.
Existing Employment Agreement . PyraMax Bank, FSB and Thomas K. Peterson, Senior Vice President and Chief Lending Officer, are parties to a three-year employment agreement that was entered into January 3, 2017. At the expiration of the term, the employment agreement indicates that Mr. Peterson will become an employee at will. Under the existing employment agreement Mr. Peterson receives a salary in 2018 of $180,250 and may receive bonuses and other similar incentive compensation in the sole discretion of PyraMax Bank, FSB. Mr. Peterson will also be entitled to 33 personal days of leave per year, certain benefits described in his offer letter, as well as those additional benefits as are currently available and described in PyraMax Bank, FSBs employment booklets and manuals, or as required by law.
If PyraMax Bank, FSB terminates Mr. Petersons employment without cause, he will be entitled to receive his salary but no other benefits for the remaining term of the employment agreement. If Mr. Peterson breaches any reasonable term of his employment or if he is terminated for cause, he will receive no further compensation under the employment agreement. Mr. Peterson may terminate his employment upon three weeks notice to PyraMax Bank, FSB. Upon any termination, other than a termination without cause, Mr. Peterson will receive only those employment benefits required by law which are applicable to all former employees. Contemporaneously with the execution of the employment agreement, Mr. Peterson entered into a non-compete and confidentiality agreement pursuant to which Mr. Peterson agreed that he would maintain the confidentiality of PyraMax Bank, FSBs confidential information and would return all property, files and other material belonging to PyraMax Bank, FSB in his possession. In addition, for a period of twelve months following his termination of employment for any reason, he would not interfere with customers or employees of PyraMax Bank, FSB.
If Mr. Peterson accepts the new 18-month employment agreement described above, PyraMax Bank, FSB and Mr. Peterson will simultaneously terminate his existing employment agreement.
Nonqualified Deferred Compensation Plan. PyraMax Bank, FSB has entered into a Nonqualified Deferred Compensation Plan (the Deferral Plan) for the benefit of its directors and senior executives. The Plan is a nonqualified plan of deferred compensation within the meaning of Section 409A of the Internal Revenue Code. Only those persons designated by PyraMax Bank, FSB shall be able to participate by entering into a compensation deferral agreement and electing to defer up to 100% of such participants regular salary, bonus, commissions or directors fees, as applicable. PyraMax Bank, FSB, may, but is not obligated, to make discretionary contributions to the Deferral Plan from time to time, which contributions are not required to be uniform among the participants. A participant will be 100% vested in his or her deferrals and earnings thereon, however, any discretionary amounts contributed by PyraMax Bank, FSB, shall be vested based on the participants years of service, at the rate of 20% per year, such that a participant will be fully vested after five years of service. A participant will also become fully vested in his or her employer discretionary contributions in the event of the participants death or disability while employed, or in the event of a change in control. The amounts deferred under the terms of the Deferral Plan are deemed to be invested in investment options similar to those available under PyraMax Bank, FSBs 401(k) Savings Plan. In connection with the offering, the Deferral Plan has been amended to give the participants a one-time election to invest all or a portion of their accounts in the Deferral Plan in common stock of 1895 Bancorp of Wisconsin, Inc.
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401(k) Plan. PyraMax Bank, FSB maintains the PyraMax Bank, FSB 401(k) Savings 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 eligible employees of PyraMax Bank, FSB. An eligible employee must complete one months of service and attain the age of 18 to be eligible to participate in the 401(k) Plan by making elective deferrals (including Roth elective deferrals). In order to receive a safe harbor matching contribution or employer discretionary profit sharing contribution on the next payroll date after both attaining age 18 and completing six months of service. If an eligible employee does not elect whether or not to make elective deferrals after notice of eligibility from PyraMax Bank, FSB, the employee will be deemed to have made an automatic election to defer six percent of his or her compensation.
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 2018, the salary deferral contribution limit is $18,500, 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, PyraMax Bank, FSB may make safe harbor matching contributions and discretionary profit sharing contributions to the 401(k) Plan. Currently, PyraMax Bank, FSB makes a safe-harbor matching contribution to the 401(k) Plan equal to 100% of a participants salary deferrals, up to the first six percent of the participants compensation.
A participant is always 100% vested in his or her salary deferral contributions and safe-harbor matching contributions. Employer discretionary profit sharing contributions vest based on a participants years of service with PyraMax Bank, FSB, at the rate of 0% after one year of service, and then 20% after each of second through fourth year of service, accelerating to 100% after the fifth year of service. Participants also become fully vested upon their death, disability or the attainment of their retirement age. Participants have the ability to direct the investment of their account balances among a number of investment alternatives. PyraMax Bank, FSB intends to allow participants in the 401(k) Plan to use up to 50% of their account balances under the plan to subscribe for stock in the offering. Generally, unless the participant elects otherwise, the participants account balance will be distributed as a result of the participants termination of employment. Participants are also permitted to receive distributions from the 401(k) Plan during employment under certain circumstances, including for hardship withdrawals and participant loans. Expense recognized in connection with the 401(k) Plan totaled approximately $355,000 for the fiscal year ended December 31, 2017.
Employee Stock Ownership Plan. In connection with the reorganization, PyraMax Bank, FSB adopted an employee stock ownership plan for eligible 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 employees completion of 1,000 hours of service during a continuous 12-month period.
The employee stock ownership plan trustee is expected to purchase, on behalf of the employee stock ownership plan, 3.92% of our outstanding shares (including shares issued to 1895 Bancorp of Wisconsin, MHC and the charitable foundation). We expect that this purchase will be made in the offering. We anticipate that the employee stock ownership plan will fund its stock purchase with a loan from 1895 Bancorp of Wisconsin, Inc. equal to the aggregate purchase price of the common stock. The loan will be repaid principally through PyraMax Bank, FSBs 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 a fixed rate equal to the prime rate, as published in The Wall Street Journal , on the closing date of the offering. See Pro Forma Data.
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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 the loan is repaid. The trustee will allocate the shares released among participants on the basis of each participants proportional share of compensation relative to all participants. Each participant will vest in his or her benefit at a rate of 20% per year, such that the participant will be fully vested upon completion of five years of credited service. However, each participant who was employed by PyraMax Bank, FSB prior to the offering will receive credit for vesting purposes for years of service prior to the adoption of the employee stock ownership plan. A participant also will become fully vested automatically in his or her benefit upon normal retirement, death or disability, a change in control, or termination of the employee stock ownership plan. Generally, a participant will receive a distribution from the employee stock ownership plan upon separation from service.
The employee stock ownership plan permits a participant to direct the trustee as to how to vote the shares of common stock allocated to his or her account. The trustee votes unallocated shares and allocated shares for which participants do not provide instructions on any matter in the same ratio as those shares for which participants provide instructions, subject to fulfillment of the trustees fiduciary responsibilities.
Under applicable accounting requirements, PyraMax Bank, FSB 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 each participants account. 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 1895 Bancorp of Wisconsin, Inc.s earnings.
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Director Compensation
The following table sets forth for the fiscal year ended December 31, 2017 certain information as to the total remuneration we paid to our directors other than to directors who are also our named executive officers. Information with respect to director compensation paid to directors who are also named executive officers is included above in Executive Officer CompensationSummary Compensation Table.
Directors Compensation Table |
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Name |
Fees earned
or paid in cash ($) |
All Other
Compensation ($) |
Total
(1)
($) |
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Monica Baker |
14,400 | 206,287 | (2) | 220,687 | ||||||||
Darrell Francis |
40,200 | 5,000 | 45,200 | |||||||||
Joseph Murphy |
35,400 | 5,000 | 40,400 | |||||||||
James Spiegelberg |
35,400 | 5,000 | 40,400 | |||||||||
John Talsky |
35,400 | 5,000 | 40,400 | |||||||||
Gary Zenobi |
35,400 | 5,000 | 40,400 |
(1) |
For the year ended December 31, 2017, each independent director of PyraMax Bank, FSB was paid a monthly retainer of $2,950, and Ms. Baker was paid a monthly retainer of $1,200. Mr. Frances was paid $4,800 in 2017 for his duties as Chairman of the Board. Directors Francis, Murphy, Spiegelberg, Talsky and Zenobi each received a $5,000 bonus in 2017. |
(2) |
In addition to the reported director fees, Ms. Baker, who also serves as a Senior Vice President and Chief Brand Officer of PyraMax Bank, FSB, earned $155,033 in base salary, $46,878 in annual bonus for calendar year 2017, $4,376 in paid time off and reported $40 in imputed income from a split dollar life insurance agreement with PyraMax Bank, FSB. |
Future Stock Benefit Plans
Stock-Based Incentive Plan . Following the offering, we intend to adopt a stock-based incentive plan that will be designed to attract and retain qualified personnel in key positions, provide directors, officers and key employees with a proprietary interest in 1895 Bancorp of Wisconsin, Inc. as an incentive to contribute to our success and reward key employees for outstanding 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 1895 Financial and the charitable foundation), provided that, if PyraMax Bank, FSBs 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 1895 Bancorp of Wisconsin, 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.
A stock-based benefit plan will not be established sooner than six months after the consummation of the offering, and if adopted within one year after the consummation of the offering, the plan 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 1895 Bancorp of Wisconsin, MHC. If a stock-based benefit plan is established more than one year after the consummation of the offering, it 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 1895 Bancorp of Wisconsin, MHC. The following additional restrictions would apply to our stock-based benefit plans only if such plans are adopted within one year after the offering:
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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; |
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no non-employee director may receive more than 5% of the options and shares of restricted common stock authorized under the plans; |
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no individual may receive more than 25% of the options and shares of restricted common stock authorized under the plans; |
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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 |
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accelerated vesting is not permitted except for death, disability or upon a change in control of PyraMax Bank, FSB or 1895 Bancorp of Wisconsin, Inc. |
These restrictions do not apply to plans adopted after one year following the consummation of the offering.
We have not determined whether we will present a stock-based benefit plan for stockholder approval prior to or more than 12 months after the consummation 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.
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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 OfferingOffering of Common StockLimitations on Purchase of Shares.
Name and Title |
Number of
Shares (1) |
Aggregate
Purchase Price (1) |
Percent of
Outstanding Shares at Minimum of Offering Range |
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Richard Hurd, President and Chief Executive Officer, Director |
10,000 | $ | 100,000 | * | ||||||||
Joseph Murphy, Director |
10,000 | 100,000 | * | |||||||||
Darrell Francis, Chairman of the Board |
10,000 | 100,000 | * | |||||||||
Monica Baker, Senior Vice President-Chief Brand Officer, Director |
2,500 | 25,000 | * | |||||||||
Gary Zenobi, Director |
2,500 | 25,000 | * | |||||||||
James Spiegelberg, Director |
5,000 | 50,000 | * | |||||||||
John Talsky, Director |
3,000 | 30,000 | * | |||||||||
Charles Mauer, Senior Vice President and Chief Credit Officer |
1,000 | 10,000 | * | |||||||||
Thomas Peterson, Senior Vice President and Chief Lending Officer |
1,000 | 10,000 | * | |||||||||
Richard Krier, Senior Vice President and Chief Financial Officer |
1,000 | 10,000 | * | |||||||||
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|
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All directors and executive officers as a group (10 persons) |
46,000 | $ | 460,000 | 2.24 | % | |||||||
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* |
Less than 1.0%. |
(1) |
Includes purchases by the named individuals 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. |
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THE REORGANIZATION AND OFFERING
The board of directors of PyraMax Bank, FSB has approved the plan of reorganization. The plan of reorganization must also be approved by PyraMax Bank, FSBs members. A special meeting of members has been called for this purpose. We have filed an application with respect to the reorganization and offering with the Federal Reserve Board. 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 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 September 5, 2018, our board of directors unanimously adopted the plan of reorganization 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, 1895 Bancorp of Wisconsin, Inc. will be the mid-tier stock holding company and 1895 Bancorp of Wisconsin, MHC will be the top-tier mutual holding company. After the offering, purchasers in the offering and the charitable foundation will own 45% and 1895 Bancorp of Wisconsin, MHC will own 55% of the outstanding shares of common stock of 1895 Bancorp of Wisconsin, Inc.
Consummation of the reorganization and offering is subject to, among other things, approval of the plan of reorganization by the members of PyraMax Bank, FSB as of the voting record date. A special meeting of members has been called for this purpose, to be held on , 2018. 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) |
PyraMax Bank, FSB 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, PyraMax Bank, FSB 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) |
PyraMax Bank, FSB will amend its charter and bylaws to read in the form of a federal mutual holding company to become 1895 Bancorp of Wisconsin, MHC; |
(iv) |
1895 Bancorp of Wisconsin, MHC will organize 1895 Bancorp of Wisconsin, Inc. as a wholly owned subsidiary, and transfer $1,000 to 1895 Bancorp of Wisconsin, Inc. in exchange for 100 shares of 1895 Bancorp of Wisconsin, Inc. common stock; and |
(v) |
1895 Bancorp of Wisconsin, MHC will transfer all of the initially issued stock of the Stock Bank to 1895 Bancorp of Wisconsin, Inc. in exchange for additional shares of 1895 Bancorp of Wisconsin, Inc. common stock, and the Stock Bank will become a wholly owned subsidiary of 1895 Bancorp of Wisconsin, Inc. |
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Concurrently with the reorganization, 1895 Bancorp of Wisconsin, Inc. will offer for sale 44% of its common stock representing 44% of the pro forma market value of 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB.
We have mailed to each account holder 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 PyraMax Bank, FSBs 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 of reorganization.
The following is a summary of the material aspects of the plan of reorganization and the 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 PyraMax Bank, FSB 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 PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, 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 capital cushion against unforeseen risk and expand our asset 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, and offer our customers, employees, management and directors an equity ownership interest in 1895 Bancorp of Wisconsin, Inc., our stock holding company, and thereby an economic interest in our future success. 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 our 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 1895 Bancorp of Wisconsin, MHC to own a majority of the common stock of 1895 Bancorp of Wisconsin, Inc. A majority of our voting stock will be owned by 1895 Bancorp of Wisconsin, MHC, which will be controlled by its board of directors. While this
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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. 1895 Bancorp of Wisconsin, MHC will be able to elect all the members of 1895 Bancorp of Wisconsin, Inc.s board of directors, and will be able to control the outcome of nearly all matters presented to our stockholders for resolution by vote. No assurance can be given that 1895 Bancorp of Wisconsin, MHC will not take action adverse to the interests of stockholders other than 1895 Bancorp of Wisconsin, MHC. For example, 1895 Bancorp of Wisconsin, MHC could prevent the sale of control of 1895 Bancorp of Wisconsin, Inc., or defeat a candidate for the board of directors of 1895 Bancorp of Wisconsin, 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 capital in the future because a majority of our common stock will be available for sale in the event of a conversion of 1895 Bancorp of Wisconsin, MHC to stock form. Our board of directors has determined that offering 44% of our outstanding shares of common stock for sale in the offering and contributing 1% of our outstanding shares to the charitable foundation allows for an efficient use of net proceeds for 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB over the next several years.
The reorganization does not preclude the future conversion of 1895 Bancorp of Wisconsin, MHC from the mutual to stock form of organization. No assurance can be given when, if ever, 1895 Bancorp of Wisconsin, MHC will convert to stock form or what conditions the Federal Reserve Board or other regulatory agencies may impose on such a transaction. Additionally, public stockholders will not be able to force a future conversion of 1895 Bancorp of Wisconsin, MHC without the consent of 1895 Bancorp of Wisconsin, MHC since the transaction would require the approval of a majority of the outstanding shares of 1895 Bancorp of Wisconsin, Inc.s common stock. See SummaryPossible Conversion of 1895 Bancorp of Wisconsin, MHC to Stock Form.
Effects of the Reorganization and Offering on Depositors and Borrowers of PyraMax Bank, FSB
Continuity. While the reorganization is being accomplished, and after its completion, our routine business of accepting deposits and making loans will continue without interruption. PyraMax Bank, FSB 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 team and staff.
Liquidation Rights . Following the completion of the reorganization, all depositors who had liquidation rights with respect to PyraMax Bank, FSB as of the effective date of the reorganization will continue to have such rights solely with respect to 1895 Bancorp of Wisconsin, MHC so long as they continue to hold their deposit accounts with PyraMax Bank, FSB. In addition, all persons who become depositors of PyraMax Bank, FSB subsequent to the reorganization will have such liquidation rights with respect to 1895 Bancorp of Wisconsin, MHC.
Deposit Accounts and Loans . Under the plan of reorganization, each depositor of PyraMax Bank, FSB 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 PyraMax Bank, FSB will continue to be federally insured by the FDIC up to the legal maximum limit in the same manner as deposit accounts existing in PyraMax Bank, FSB 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.
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Voting Rights . Following the completion of the reorganization and offering, members of PyraMax Bank, FSB will no longer have voting rights in PyraMax Bank, FSB, but will have voting rights in 1895 Bancorp of Wisconsin, MHC. Following the completion of the reorganization and offering, voting rights in 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. stockholders. Although 1895 Bancorp of Wisconsin, Inc. will have the power to issue shares of capital stock to persons other than 1895 Bancorp of Wisconsin, MHC, as long as 1895 Bancorp of Wisconsin, MHC is in existence, 1895 Bancorp of Wisconsin, MHC will be required to own a majority of the voting stock of 1895 Bancorp of Wisconsin, Inc., and consequently will be able to control the outcome of nearly all matters put to a vote of stockholders. 1895 Bancorp of Wisconsin, Inc. must own 100% of the voting stock of PyraMax Bank, FSB.
Offering of Common Stock
Under the plan of reorganization, up to 2,783,000 shares (subject to increase to up to 3,200,450 shares) of 1895 Bancorp of Wisconsin, 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 1:00 p.m., Central Time, on [Date 1] , unless otherwise extended by PyraMax Bank, FSB. 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 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 [Date 2] , unless extended with the approval of the Federal Reserve Board. If the offering is not completed by [Date 2] , 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 PyraMax Bank, FSB of their intention to maintain, modify or rescind their subscriptions. If the subscriber rescinds or does not respond in any manner to PyraMax Bank, FSBs notice, the funds submitted will be refunded to the subscriber with interest at 0.15%, which is PyraMax Bank, FSBs current passbook savings rate, and/or the subscribers 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 0.15%, 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 PyraMax Bank, FSB as of the close of business on March 15, 2017 will receive nontransferable subscription rights to subscribe for up to the greater of the following:
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$100,000 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 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 persons 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, directors and their associates in this category based on their increased deposits in PyraMax Bank, FSB in the one-year period preceding March 15, 2017 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 March 15, 2017. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscribers stock allocation.
Category 2: Tax-Qualified Employee Plans. The plan of reorganization provides that tax-qualified employee plans of PyraMax Bank, FSB, such as the employee stock ownership plan and 401(k) Plan, will receive nontransferable subscription rights to purchase up to 4.90% of the shares of common stock issued and 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 1895 Bancorp of Wisconsin, MHC and shares contributed to the charitable foundation). 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 will purchase shares of common stock directly from 1895 Bancorp of Wisconsin, 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 [SERD] , will receive nontransferable subscription rights to subscribe for up to the greater of:
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$100,000 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. |
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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 [SERD] . Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscribers 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 depositor of PyraMax Bank, FSB who is not an eligible account holder, supplemental eligible account holder or tax-qualified employee plan, as of the close of business on _____, will receive nontransferable subscription rights to purchase up to $100,000 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 members orders.
To ensure proper allocation of stock, each other member must list on his or her stock order form all deposit accounts in which he or she had an ownership interest on _____. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscribers stock allocation.
PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, 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 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 PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, 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 PyraMax Bank, FSB or 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. in a community offering to members of the general public to whom 1895 Bancorp of Wisconsin, 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 Wisconsin Counties of Milwaukee, Waukesha and Ozaukee. Subject to the maximum purchase limitations, these persons may purchase up to $100,000 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, 1895 Bancorp of Wisconsin, Inc. will determine in its sole discretion the advisability of a
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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 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB, 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 Wisconsin Counties of Milwaukee, Waukesha and Ozaukee whose orders are accepted by PyraMax Bank, FSB, 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 Wisconsin Counties of Milwaukee, Waukesha and Ozaukee, 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 Wisconsin Counties of Milwaukee, Waukesha and Ozaukee, 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 KBW, acting as our agent. In such capacity, KBW may form a syndicate of other brokers-dealers who are member firms of the Financial Industry Regulatory Authority, Inc. (FINRA). Neither KBW 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, KBW 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 purchasers in the event an extension is granted.
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 $100,000 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 1895 Bancorp of Wisconsin, 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 PyraMax Bank or wire transfers). See Procedure for Purchasing Shares.
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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 FINRA 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:
A. |
The aggregate amount of outstanding common stock of 1895 Bancorp of Wisconsin, Inc. owned or controlled by persons other than 1895 Bancorp of Wisconsin, MHC at the close of the reorganization and offering shall be less than 50% of 1895 Bancorp of Wisconsin, Inc.s total outstanding common stock. |
B. |
The maximum purchase of common stock in the subscription offering by a person or group of persons through a single deposit account is $100,000. No person by himself, with an associate or group of persons acting in concert, may purchase more than $150,000 of the common stock offered in the offering, except that: (i) 1895 Bancorp of Wisconsin, 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 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% (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. |
C. |
The aggregate amount of common stock acquired in the offering, plus all prior stock offerings by 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB that are attributable to such person shall not be counted. |
D. |
The aggregate amount of common stock acquired in the offering, plus all prior stock issuances by 1895 Bancorp of Wisconsin, Inc., by any non-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 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB that are attributable to such person shall not be counted. |
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E. |
The aggregate amount of common stock acquired in the offering, plus all prior stock issuances by 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. at the conclusion of the offering. |
F. |
The aggregate amount of common stock acquired in the offering, plus all prior stock issuances by 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. at the conclusion of the offering. |
G. |
The aggregate amount of common stock that may be encompassed under all stock option plans and restricted stock plans of 1895 Bancorp of Wisconsin, Inc. may not exceed, in the aggregate, 25% of the outstanding shares of common stock of 1895 Bancorp of Wisconsin, Inc. held by persons other than 1895 Bancorp of Wisconsin, MHC at the conclusion of the offering. |
H. |
The aggregate amount of common stock acquired in the offering, plus all prior stock issuances by 1895 Bancorp of Wisconsin, 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 26% (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 1895 Bancorp of Wisconsin, 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. |
I. |
The aggregate amount of common stock acquired in the offering, plus all prior stock issuances by 1895 Bancorp of Wisconsin, 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 26% of the stockholders equity of 1895 Bancorp of Wisconsin, Inc. held by persons other than 1895 Bancorp of Wisconsin, MHC at the conclusion of the offering. |
J. |
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. 1895 Bancorp of Wisconsin, 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. |
K. |
The board of directors of 1895 Bancorp of Wisconsin, 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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L. |
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 1895 Bancorp of Wisconsin, MHC, 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB or a majority-owned subsidiary of 1895 Bancorp of Wisconsin, MHC, 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB, 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 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 1895 Bancorp of Wisconsin, MHC, 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB 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 board of directors of 1895 Bancorp of Wisconsin, Inc. may, in its 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 whom they are acting in concert, to the extent such
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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 the federal banking regulators) of the total number of shares sold in the offering. Requests to purchase shares of 1895 Bancorp of Wisconsin, Inc. common stock under this provision will be allocated by the board of directors of 1895 Bancorp of Wisconsin, Inc. 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 board of directors of 1895 Bancorp of Wisconsin, Inc., 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 PyraMax Bank, FSB or 1895 Bancorp of Wisconsin, Inc. and except as described below. In addition, under FINRA guidelines, members of 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 KBW.
To assist in the marketing of the common stock, we have retained KBW, which is a broker-dealer registered with FINRA. In its role as financial advisor, KBW will:
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provide advice on the financial and securities market implications of the plan of reorganization; |
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assist in structuring and marketing the offering; |
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review 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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assist us in analyzing proposals from outside vendors retained in connection with the offering, as needed; |
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assist us in preparing for and scheduling meetings with potential investors, as necessary; and |
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provide general advice and assistance as may be reasonably necessary to promote the successful completion of the offering. |
For its services as financial advisor, KBW has received a non-refundable management fee of $25,000, and will receive a success fee of $315,000 for the shares of common stock sold in the offering. The $25,000 management fee will be credited against the $315,000 success fee.
In the event shares of common stock are sold in a syndicated community offering, we will pay fees of 6.0% of the aggregate dollar amount of shares of common stock sold in the syndicated community offering to KBW and any other broker-dealers included in the syndicated community offering. Any such offering will be on a best efforts basis, and KBW 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 will indemnify KBW 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.
KBW 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. KBW 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 and 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. KBW will solicit orders and conduct sales of the common stock of 1895 Bancorp of Wisconsin, Inc. in states in which our directors and executive officers are not permitted to offer and sell our shares of common stock.
We have also engaged KBW to act as our records agent in connection with the offering. In its role as records agent, KBW will, among other things:
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consolidate deposit accounts, develop a central file and calculate eligible votes; |
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design and prepare proxy forms and stock order forms; |
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organize and supervise the Stock Information Center; |
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tabulate proxies; |
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act as or support the inspector of election at the special meeting of members; and |
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provide necessary subscription services to distribute, collect and tabulate stock orders in the subscription and community offerings. |
KBW will receive fees of $25,000 for these services. Of the fees for serving as records agent, $10,000 has been paid as of the date of this prospectus. In the event of any material changes in the regulations or the plan of conversion, or delays requiring duplicate or replacement processing due to changes to record dates, KBW may be entitled to an additional fee not to exceed $10,000.
KBW also will be reimbursed for its reasonable expenses in an amount not to exceed $75,000 for its attorneys fees and expenses and not to exceed $30,000 for its role as our financial advisor and records agent. The expense cap, including legal fees, may be increased an additional $25,000 by mutual consent, including in the event of any material delay of the offering which would require an update of the financial information in tabular form to reflect a period later than set forth in the original filing of the prospectus.
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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 Keller & Company, Inc. (Keller & Company) to prepare an independent valuation appraisal. For its services in preparing the initial valuation, and any updates thereto, Keller & Company will receive a fee of $39,000. Keller & Company will be reimbursed for its expenses up to $1,500.
We are not affiliated with Keller & Company, and neither we nor Keller & Company has an economic interest in, or is held in common with, the other. Keller & Company 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 Keller & Company from serving in the role of our independent appraiser.
We have agreed to indemnify Keller & Company 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, bad faith or willful misconduct.
The independent valuation appraisal considered the pro forma impact of the offering. Consistent with federal appraisal guidelines, the appraisal considers 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 utilized methodologies were based upon the current market valuations of the peer group companies identified by Keller & Company, subject to valuation adjustments applied by Keller & Company to account for differences between us and our peer group. Keller & Company placed the greatest emphasis on the price-to-book value approach in estimating pro forma market value. Keller & Company also used the pro forma price-to-assets approach for comparison purposes, however, Keller & Company determined this approach to be less meaningful for a company like us, as we have equity well in excess of regulatory capital requirements.
The independent valuation was prepared by Keller & Company in reliance upon the information contained in this prospectus, including our financial statements. Keller & Company 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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the establishment and funding of the charitable foundation with $100,000 and 1% of our outstanding shares of common stock (55,000 shares of common stock at the midpoint of the offering range); |
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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. |
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The independent valuation is also based on an analysis of a peer group of publicly traded savings and loan holding companies that Keller & Company considered comparable to us under regulatory guidelines applicable to the independent valuation. Under these guidelines, a minimum of 10 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, Keller & Company limited the peer group companies to the following two selection criteria: (i) institutions with assets of less than $980.0 million; and (ii) institutions with equity-to-assets ratios greater than 7.00%. The regulatory appraisal guidelines require Keller & Company to select a minimum of 10 peer companies, whose equity securities are traded on an exchange.
In applying each of the valuation methods, Keller & Company considered adjustments to the pro forma market value based on a comparison of us with the peer group. Keller & Company advised the board of directors that the valuation conclusion included the following adjustments relative to the peer group:
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a moderate downward adjustment was applied for profitability, growth and viability of earnings which took into consideration our lower historical, recent and pro forma return on assets and return on equity, and uncertainty related to future earnings growth given our current financial characteristics; |
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a downward adjustment was made for our financial condition due to our historical and current higher level of nonperforming assets and lower ratios of reserves to loans and reserves to nonperforming assets relative to the peer group and industry; |
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a modest 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; |
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a modest downward adjustment was made for marketing of the offering based on the risk and uncertainty related to a new offering; and |
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a modest upward adjustment was made for PyraMax Bank, FSBs market area. |
Keller & Company made no adjustments for dividends, subscription interest or management.
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, Keller & Company advised us that as of September 5, 2018, the estimated pro forma market value of the common stock, assuming we were selling a minority of our shares in the offering, was $55.0 million. Based on applicable regulations, this forms a midpoint of a valuation range with a minimum of $46.8 million and a maximum of $63.3 million. Our board of
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directors determined to offer the shares of common stock in the offering at the purchase price of $10.00 per share and that 44% of our outstanding shares should be held by purchasers in the offering, 1% of our outstanding shares should be contributed to the charitable foundation, and 55% of our outstanding shares should be held by 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. will issue will range from 4,675,000 to 6,325,000 shares, with a midpoint of 5,500,000 shares (including in each case shares issued to 1895 Bancorp of Wisconsin, MHC and the charitable foundation), and the number of shares sold in the offering will range from 2,057,000 shares to 2,783,000 shares, with a midpoint of 2,420,000 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 December, 2016 and for the quarter ended June 30, 2018, (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 Keller & Company 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 $72.7 million and the maximum number of shares that will be outstanding immediately following the offering may be increased up to 15% to up to 7,273,750 shares. Under such circumstances the number of shares sold in the offering will be increased to up to 3,200,450 shares and the number of shares held by 1895 Bancorp of Wisconsin, MHC will be increased to up to 4,073,300 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 StockLimitations 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. Keller & Company did not independently verify the financial statements and other information provided by PyraMax Bank, FSB, nor did Keller & Company value independently the assets or liabilities of PyraMax Bank, FSB. The independent valuation considers PyraMax Bank, FSB 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 $72.7 million or a decrease in the pro forma market value to less than $46.8 million, then 1895 Bancorp of Wisconsin, 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 tellers 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 submitted for subscriptions will be promptly returned
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to investors, with interest at 0.15% per annum from the date the stock order was received, 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 , 2020.
An increase in the independent valuation and the number of shares to be issued in the offering would decrease both a subscribers ownership interest and 1895 Bancorp of Wisconsin, 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 subscribers ownership interest and 1895 Bancorp of Wisconsin, 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 Keller & Company and the detailed memorandum of the appraiser setting forth the method and assumptions for such appraisal are available for inspection at the Greenfield office of PyraMax Bank, FSB 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, Keller & Company confirms to PyraMax Bank, FSB 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 Keller & Company to conclude that the independent valuation is incompatible with its estimate of the pro forma market value of the common stock of 1895 Bancorp of Wisconsin, 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.
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 KBW or one or more other members of the syndicate, or by their respective affiliates. In those cases, prospective investors may view offering terms 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 KBW or any other member of the syndicate in its capacity as selling agent or syndicate member and should not be relied upon by investors.
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Procedure for Purchasing Shares
Expiration Date. The offering will expire at 1:00 p.m., Central Time, on [Date 1] , 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 [Date 2] would require regulatory approval. If the offering is extended past [Date 2] , 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 0.15% from the date your stock order was processed. No single extension will exceed 90 days. Aggregate extensions may not go beyond , 2020, 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 0.15% 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 1:00 p.m., Central Time, [Date 1] . 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 PyraMax Bank, FSBs office located at . Once tendered, an order form cannot be modified or revoked unless the offering is terminated or is extended beyond [Date 2] , or the number of shares of common stock to be sold is increased to more than 3,200,450 shares or decreased to less than 2,057,000 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.
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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 PyraMax Bank, FSB 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:
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personal check, bank check or money order, payable to 1895 Bancorp of Wisconsin, Inc.; or |
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authorization of withdrawal from the types of PyraMax Bank, FSB deposit account(s)designated on the stock order form. |
Appropriate means for designating withdrawals from deposit accounts at PyraMax Bank, FSB 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 0.15% 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 PyraMax Bank, FSB and will earn interest at a rate of 0.15% 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 PyraMax Bank, FSB 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 PyraMax Bank, FSB 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 1895 Bancorp of Wisconsin, Inc. You may not designate on your stock order form a direct withdrawal from a PyraMax Bank, FSB 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 PyraMax Bank, FSB 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 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.
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Our employee stock ownership plan will not be required to pay for any shares purchased in the offering until completion of the offering, provided there is a loan commitment from either an unrelated financial institution or 1895 Bancorp of Wisconsin, 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 offering.
Using Retirement Account Funds. If you are interested in using funds in your individual retirement account (IRA) or other retirement account to purchase shares of common stock in the offering, you must do so through an account offered by a custodian that can hold common stock. By regulation, PyraMax Bank, FSB retirement accounts are not capable of holding common stock. Therefore, if you wish to use funds that are currently in a retirement account held at PyraMax Bank, FSB, you may not designate on the 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 instead have to be transferred to an independent trustee or custodian, such as a brokerage firm, which offers the type of retirement accounts that can hold common stock. The purchase must be made through that account. If you do not have such an account, you will need to establish one before placing a stock order. A one-time and/or annual administrative fee may be payable to the independent trustee or custodian. You may select the IRA custodian of your choice. You may, but are under no obligation to, select KBW or one of its affiliated broker dealers, Stifel, Nicolaus & Company, Incorporated (SN) or Century Securities Associates (CSA) as your IRA or other retirement account custodian. If you do purchase shares of 1895 Bancorp of Wisconsin, Inc. common stock using funds from a KWB, SN or CSA IRA account, you acknowledge that KBW, SN or CSA, as applicable, did not recommend or give you advice regarding such purchase. Other than the standard account fees and compensation associated with all IRA accounts, KBW, SN and CSA do not receive additional fees or compensation as a result of the purchase of 1895 Bancorp of Wisconsin, Inc. common stock through a KBW, SN or CSA IRA or retirement account. There will be no early withdrawal or Internal Revenue Service interest penalties for these transfers. Individuals interested in using funds in an individual retirement account or any other retirement account, whether held at PyraMax Bank, FSB or elsewhere, to purchase shares of common stock should contact our Stock Information Center for guidance as soon as possible, preferably at least two weeks before the [Date 1] offering deadline. 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
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 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 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.
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
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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 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 name(s) of person who do not have subscription rights or who qualify only in a lower purchase priority than you do. Doing so may jeopardize your subscription rights.
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 FINRA, 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 InformationStock 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 ( ) - . The Stock Information Center is open for telephone calls Monday through Friday, between 9:00 a.m. and 3:00 p.m., Central 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 PyraMax Bank, FSB, 1895 Bancorp of Wisconsin, 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 PyraMax Bank, FSB or 1895 Bancorp of Wisconsin, Inc. would prevail in a judicial proceeding.
PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, 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:
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1. |
The conversion of PyraMax Bank, FSB to 1895 Bancorp of Wisconsin, MHC will qualify as a tax-free reorganization under Internal Revenue Code Section 368(a)(1)(F). |
2. |
The transfer by PyraMax Bank, FSB in mutual form (the Mutual Bank) of substantially all of its assets and liabilities to PyraMax Bank, FSB 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 Banks 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. |
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PyraMax Bank, FSB will recognize no income with respect to its bad debt reserve established under Internal Revenue Code Section 593. |
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The Stock Bank will recognize no gain or loss upon its receipt of property from the Mutual Bank in exchange for its stock. |
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The Stock Banks 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. |
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The Stock Banks holding period for the property received from the Mutual Bank will include the period during which such property was held by the Mutual Bank. |
8. |
PyraMax Bank, FSBs members will recognize no gain or loss by reason of the reorganization. |
9. |
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 1895 Bancorp of Wisconsin, 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. |
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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 1895 Bancorp of Wisconsin, 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. |
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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 1895 Bancorp of Wisconsin, MHC to be received by the eligible account holders, supplemental eligible account holders, and other members of the Mutual Bank shall be zero. |
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1895 Bancorp of Wisconsin, MHC and the persons who purchased common stock of 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. in exchange for stock in 1895 Bancorp of Wisconsin, Inc. |
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1895 Bancorp of Wisconsin, Inc. will recognize no gain or loss on its receipt of the Stock Bank stock and cash in exchange for 1895 Bancorp of Wisconsin, Inc. |
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1895 Bancorp of Wisconsin, MHCs basis in the 1895 Bancorp of Wisconsin, Inc. common stock received will be the same as its basis in the Stock Bank stock transferred. |
15. |
1895 Bancorp of Wisconsin, MHCs holding period in 1895 Bancorp of Wisconsin, 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. |
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1895 Bancorp of Wisconsin, Inc.s basis in the Stock Bank stock received from 1895 Bancorp of Wisconsin, MHC will be the same as the basis of such property in the hands of 1895 Bancorp of Wisconsin, MHC. |
17. |
1895 Bancorp of Wisconsin, Inc.s holding period for the Stock Bank stock received from 1895 Bancorp of Wisconsin, MHC will include the period during which the property was held by 1895 Bancorp of Wisconsin, MHC. |
18. |
It is more likely than not that the basis of 1895 Bancorp of Wisconsin, 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 the tax opinions summarized above address all material federal income tax consequences that are generally applicable to 1895 Bancorp of Wisconsin, Inc., 1895 Bancorp of Wisconsin, MHC, PyraMax Bank, FSB 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, supplemental eligible account holders and other members 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. In addition, in the view of Keller & Company (which is acting as independent appraiser of the value of the shares of 1895 Bancorp of Wisconsin, Inc. common stock in connection with the reorganization), the subscription rights do not have any value for the reasons set forth above. Keller & Companys view is not binding on the Internal Revenue Service. 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 are deemed to have an ascertainable value, receipt of these rights could result in taxable gain, in an amount equal to the ascertainable value, to those eligible account holders, supplemental eligible account holders and other members who exercise the subscription rights, and we 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.
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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 PyraMax Bank, FSB, the members of PyraMax Bank, FSB, 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB would prevail in a judicial or administrative proceeding.
The federal tax opinion has been filed with the Securities and Exchange Commission as an exhibit to 1895 Bancorp of Wisconsin, Inc.s registration statement. An opinion regarding the Wisconsin state income tax consequences consistent with the federal tax opinion has been issued by Wipfli LLP, tax advisors to PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB 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. These shares being acquired by the directors, executive officers and their associates 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 record 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 1895 Bancorp of Wisconsin, Inc. also will be restricted by the insider trading rules promulgated pursuant to the Securities Exchange Act of 1934.
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, or to purchases of our common stock by one or more tax-qualified employee stock benefit plans or nontax-qualified employee stock benefit plans, including any stock-based benefit plans.
Federal regulations prohibit 1895 Bancorp of Wisconsin, 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.
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1895 BANCORP OF WISCONSIN COMMUNITY FOUNDATION
General
In furtherance of our commitment to the communities in our market area, the plan of reorganization provides that we will establish a new charitable foundation, 1895 Bancorp of Wisconsin Community Foundation, as a non-stock, nonprofit Delaware corporation in connection with the reorganization and offering. The charitable foundation will be funded with cash and shares of our common stock, as further described below. By further enhancing our visibility and reputation in the communities within our market area, we believe that the charitable foundation will enhance the long-term value of PyraMax Bank, FSBs community banking franchise. The reorganization and offering present us with a unique opportunity to provide a substantial and continuing benefit to our community through the charitable foundation.
Purpose of the Charitable Foundation
In connection with the closing of the reorganization and offering, we intend to contribute to the charitable foundation $100,000 in cash and 1.0% of our outstanding shares of common stock, which would consist of 55,000 shares of our common stock at the midpoint of the offering range (for an aggregate contribution of $650,000, at the midpoint of the offering range, based on the $10.00 per share offering price).
The purpose of the charitable foundation is to provide financial support to charitable organizations in our market area and to enable the communities that we serve to share in our long-term growth. The charitable foundation will be dedicated completely to community activities and the promotion of charitable causes, and may be able to support such activities in ways that are not presently available to us.
Funding the charitable foundation with shares of our common stock is also intended to allow our communities to share in our potential growth and success after the offering is completed because the charitable foundation will benefit directly from any increases in the value of our shares of common stock. In addition, the charitable foundation will maintain close ties with PyraMax Bank, FSB, thereby forming a partnership within the communities in which PyraMax Bank, FSB operates.
Structure of the Charitable Foundation
The charitable foundation will be incorporated under Delaware law as a non-stock, nonprofit corporation. The certificate of incorporation of the charitable foundation will provide that the corporation is organized exclusively for charitable purposes as set forth in Section 501(c)(3) of the Internal Revenue Code. The certificate of incorporation will further provide that no part of the net earnings of the charitable foundation will inure to the benefit of, or be distributable to, its members, directors or officers or to private individuals.
The charitable foundation will be governed by a board of directors, initially consisting of Monica Baker, and of PyraMax Bank, FSB and at least one other individual. We are required to select one person to serve on the initial board of directors who is not one of our officers or directors and who has experience with local charitable organizations and grant making. As of the date of this prospectus, we have not selected the individual to serve as the director to satisfy these requirements. For five years after the reorganization and offering, one seat on the charitable foundations board of directors will be reserved for a person from our local community who has experience with local community charitable organizations and grant making and who is not one of our officers, directors or employees, and at least one seat on the charitable foundations board of directors will be reserved for one of PyraMax Bank, FSBs directors.
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The board of directors of the charitable foundation will be responsible for establishing its grant and donation policies, consistent with the purposes for which it was established. As directors of a nonprofit corporation, the directors of the charitable foundation will at all times be bound by their fiduciary duty to advance the charitable foundations charitable goals, to protect its assets and to act in a manner consistent with the charitable purposes for which the charitable foundation is established. The directors also will be responsible for directing the activities of the charitable foundation, including the management and voting of the shares of our common stock held by the charitable foundation. However, as required by applicable regulations, all shares of our common stock held by the charitable foundation must be voted in the same ratio as all other shares of our common stock on all proposals considered by our shareholders.
The charitable foundations place of business will be located at our administrative offices. The board of directors of the charitable foundation will appoint such officers and employees as may be necessary to manage its operations. To the extent applicable, we will comply with the affiliates restrictions set forth in Sections 23A and 23B of the Federal Reserve Act and applicable OCC regulations governing transactions between PyraMax Bank, FSB and the charitable foundation.
The charitable foundation will receive working capital from the initial cash contribution and:
(1) |
any dividends that may be paid on our shares of common stock in the future to the extent that it continues to own shares of our common stock; |
(2) |
within the limits of applicable federal and state laws, loans collateralized by the shares of common stock; and |
(3) |
the proceeds of the sale of any of the shares of common stock in the open market from time to time. |
As a private foundation under Section 501(c)(3) of the Internal Revenue Code, the charitable foundation will be required to distribute annually in grants or donations a minimum of 5% of the average fair market value of its net investment assets.
Tax Considerations
We believe that an organization created for the above purposes should qualify as a Section 501(c)(3) exempt organization under the Internal Revenue Code and should be classified as a private foundation. As long as the charitable foundation files an application for tax-exempt status within 27 months of the last day of the month in which it was organized, and provided the Internal Revenue Service approves the application, its effective date as a Section 501(c)(3) organization will be the date of its organization. We have not received a tax opinion as to whether the charitable foundations tax-exempt status will be affected by the regulatory requirement that all shares of our common stock held by it must be voted in the same ratio as all other outstanding shares of our common stock on all proposals considered by our shareholders.
We believe that our contribution of shares of our common stock to the charitable foundation should not constitute an act of self-dealing and that we should be entitled to a deduction in the amount of the fair market value of the stock at the time of the contribution less the nominal amount that the charitable foundation is required to pay us for such stock. We are permitted to deduct for charitable purposes only an amount equal to 10% of our annual taxable income in any one year. We are permitted under the Internal Revenue Code to carry the excess contribution over the five-year period following the contribution to the charitable foundation. We estimate that all of the contribution should be deductible over the six-year period ( i.e. , the year in which the contribution is made and the succeeding five-year
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period). However, we do not have any assurance that the Internal Revenue Service will grant tax-exempt status to the charitable foundation. In such event, our contribution to the charitable foundation would be expensed without a tax benefit, resulting in a reduction in earnings in the year in which the Internal Revenue Service makes such a determination. Furthermore, even if the contribution is deductible, we may not have sufficient earnings to be able to use the deduction in full. Any such decision to continue to make additional contributions to the charitable foundation in the future would be based on an assessment of, among other factors, our financial condition at that time, the interests of our shareholders and depositors, and the financial condition and operations of the foundation.
As a private foundation, earnings and gains, if any, from the sale of common stock or other assets are exempt from federal and state income taxation. However, investment income, such as interest, dividends and capital gains, is generally taxed at a rate of 1%. The charitable foundation will be required to file an annual return with the Internal Revenue Service within four and one-half months after the close of its fiscal year. The charitable foundation will be required to make its annual return available for public inspection. The annual return for a private foundation includes, among other things, an itemized list of all grants made or approved, showing the amount of each grant, the recipient, any relationship between a grant recipient and the foundations managers and a concise statement of the purpose of each grant.
Regulatory Requirements Imposed on the Charitable Foundation
The OCC and the Federal Reserve Board require that, before our board of directors adopted the plan of reorganization, the board of directors had to identify its members that will serve on the charitable foundations board, and these directors could not participate in our boards discussions concerning contributions to the charitable foundation, and could not vote on the matter. Our board of directors complied with this regulation in adopting the plan of reorganization.
The OCC and the Federal Reserve Board will generally not object if a well-capitalized savings association contributes to a charitable foundation an aggregate amount of 8% or less of the shares or proceeds issued in an offering. PyraMax Bank, FSB qualifies as a well-capitalized savings association for purposes of this limitation, and the contribution to the charitable foundation will not exceed this limitation.
The OCC and the Federal Reserve Board impose the following additional requirements on the establishment of the charitable foundation:
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the charitable foundations primary purpose must be to serve and make grants in our local community; |
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the OCC and the Federal Reserve Board may examine the charitable foundation at the foundations expense; |
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the charitable foundation must comply with all supervisory directives imposed by the OCC and the Federal Reserve Board; |
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the charitable foundation must provide annually to the OCC and the Federal Reserve Board a copy of the annual report that the charitable foundation submits to the Internal Revenue Service; |
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the charitable foundation must operate according to written policies adopted by its board of directors, including a conflict of interest policy; |
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the charitable foundation may not engage in self-dealing and must comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code; and |
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the charitable foundation must vote its shares of our common stock in the same ratio as all of the other shares voted on each proposal considered by our shareholders. |
RESTRICTIONS ON THE ACQUISITION OF 1895 BANCORP OF WISCONSIN, INC.
AND PYRAMAX BANK, FSB
The principal federal regulatory restrictions which affect the ability of any person, firm or entity to acquire 1895 Bancorp of Wisconsin, Inc., PyraMax Bank, FSB or their respective capital stock are described below. Also discussed are certain provisions in 1895 Bancorp of Wisconsin, Inc.s charter and bylaws that may be deemed to affect the ability of a person, firm or entity to acquire 1895 Bancorp of Wisconsin, Inc.
Mutual Holding Company Structure
1895 Bancorp of Wisconsin, MHC will own a majority of the outstanding common stock of 1895 Bancorp of Wisconsin, 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, 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. It will not be possible for another entity to acquire 1895 Bancorp of Wisconsin, Inc. without the consent of 1895 Bancorp of Wisconsin, MHC. 1895 Bancorp of Wisconsin, MHC, as long as it remains in the mutual form of organization, will control a majority of the voting stock of 1895 Bancorp of Wisconsin, Inc.
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 where (i) 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:
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the acquisition would result in a monopoly or substantially lessen competition; |
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the financial condition of the acquiring person might jeopardize the financial stability of the institution; |
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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 |
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the acquisition would have an adverse effect on the Deposit Insurance Fund. |
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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 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB without the Federal Reserve Boards prior approval.
Charters and Bylaws of 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB
The following discussion is a summary of provisions of the charter and bylaws of 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB that may be deemed to affect the ability of a person, firm or entity to acquire 1895 Bancorp of Wisconsin, Inc. The description is necessarily general and qualified by reference to the charter and bylaws.
Classified Board of Directors . The board of directors of 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. for a three-year term. A classified board promotes continuity and stability of management of 1895 Bancorp of Wisconsin, 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, 1895 Bancorp of Wisconsin, Inc. will have authorized but unissued shares of preferred stock and common stock. See Description of Capital Stock of 1895 Bancorp of Wisconsin, Inc. Although these shares could be used by the board of directors of 1895 Bancorp of Wisconsin, Inc. to make it more difficult or to discourage an attempt to obtain control of 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, MHC will own a majority of the common stock for so long as we remain in the mutual holding company structure.
How Shares are Voted . 1895 Bancorp of Wisconsin, Inc.s charter provides that there will not be cumulative voting by stockholders for the election of 1895 Bancorp of Wisconsin, Inc.s directors. No cumulative voting rights means that 1895 Bancorp of Wisconsin, MHC, as the holder of a majority of the shares eligible to be voted at a meeting of stockholders, may elect all directors of 1895 Bancorp of Wisconsin, Inc. to be elected at that meeting. This could prevent minority stockholder representation on 1895 Bancorp of Wisconsin, Inc.s board of directors.
Restrictions on Acquisitions of Shares . A section in 1895 Bancorp of Wisconsin, Inc.s charter provides that for a period of five years from the closing of the offering, no person, other than 1895 Bancorp of Wisconsin, MHC, may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of equity security of 1895 Bancorp of Wisconsin, Inc. held by persons other than 1895 Bancorp of Wisconsin, MHC, and that any shares acquired in excess of this limit will not be entitled to be voted and will not be counted as voting stock in connection with any matters submitted to the stockholders for a vote. PyraMax Bank, FSBs charter will contain a similar provision, except the ownership restriction will apply to persons other than 1895 Bancorp of Wisconsin, MHC and 1895 Bancorp of Wisconsin, Inc.
Procedures for Stockholder Nominations and Proposals for New Business . 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. at least five days before the date of the annual meeting. Management believes that it is in the best interests of 1895 Bancorp of Wisconsin, 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
159
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 . 1895 Bancorp of Wisconsin, Inc.s 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 1895 Bancorp of Wisconsin, 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 offering. We believe these provisions are in the best interests of 1895 Bancorp of Wisconsin, Inc. and its stockholders. Our board of directors believes that it will be in the best position to determine the true value of 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, 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.
Despite our belief as to the benefits to stockholders of these provisions of 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc.s charter and bylaws described above, benefit plans of 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB that may authorize the issuance of equity to its board of directors, officers and employees adopted in connection with or
160
following the offering contain or may contain provisions which also may discourage hostile takeover attempts which the board of directors of PyraMax Bank, FSB might conclude are not in the best interests of 1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB or 1895 Bancorp of Wisconsin, Inc.s stockholders.
DESCRIPTION OF CAPITAL STOCK OF 1895 BANCORP OF WISCONSIN, INC.
General
1895 Bancorp of Wisconsin, Inc. is authorized to issue 90,000,000 shares of common stock having a par value of $0.01 per share and 10,000,000 shares of serial preferred stock, par value of $0.01 per share. Each share of 1895 Bancorp of Wisconsin, 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 of reorganization, all of the stock will be duly authorized, fully paid and nonassessable. Presented below is a description of the features of 1895 Bancorp of Wisconsin, Inc.s capital stock that are deemed material to an investment decision with respect to the offering. The common stock of 1895 Bancorp of Wisconsin, Inc. will represent nonwithdrawable capital, will not be an account of an insurable type, and will not be insured by the FDIC.
1895 Bancorp of Wisconsin, Inc. currently expects that it will have a maximum of up to 7,273,750 shares of common stock outstanding after the offering, of which up to 3,273,187 shares will be held by persons other than 1895 Bancorp of Wisconsin, MHC. Our board of directors can, without stockholder approval, issue additional shares of common stock, although 1895 Bancorp of Wisconsin, MHC, so long as it is in existence, must own a majority of 1895 Bancorp of Wisconsin, Inc.s outstanding shares of common stock. 1895 Bancorp of Wisconsin, 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. 1895 Bancorp of Wisconsin, 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 . 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. will be entitled to receive and share equally in such dividends as may be declared by the board of directors of 1895 Bancorp of Wisconsin, Inc. out of funds legally available therefor. Dividends from 1895 Bancorp of Wisconsin, Inc. will depend, in large part, upon receipt of dividends from PyraMax Bank, FSB, because 1895 Bancorp of Wisconsin, Inc. initially will have no source of income other than dividends from PyraMax Bank, FSB, earnings from the investment of proceeds retained by 1895 Bancorp of Wisconsin, Inc. from the sale of shares of common stock, and interest payments with respect to 1895 Bancorp of Wisconsin, Inc.s loan to the employee stock ownership plan to fund the plans purchase of our common stock. Regulations of the Federal Reserve Board and the Office of the Comptroller of the Currency impose limitations on capital distributions by savings institutions.
If 1895 Bancorp of Wisconsin, Inc. pays dividends to its stockholders, it would likely pay dividends to 1895 Bancorp of Wisconsin, MHC, unless 1895 Bancorp of Wisconsin, MHC is permitted by the Federal Reserve Board to waive the receipt of dividends. The Federal Reserve Boards current regulations significantly restrict the ability of mutual holding companies organized after December 1, 2009 to waive dividends declared by their subsidiaries. Accordingly, because dividends would be required to be paid to 1895 Bancorp of Wisconsin, MHC along with all other stockholders, the amount of dividends available for all other stockholders would be less than if 1895 Bancorp of Wisconsin, MHC were permitted to waive the receipt of dividends.
161
Pursuant to our charter, 1895 Bancorp of Wisconsin, Inc. is authorized to issue preferred stock. If 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. will possess exclusive voting rights in 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, 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 PyraMax Bank, FSB, 1895 Bancorp of Wisconsin, Inc., as holder of PyraMax Bank, FSBs capital stock, would be entitled to receive, after payment or provision for payment of all debts and liabilities of PyraMax Bank, FSB, including all deposit accounts and accrued interest thereon, all assets of PyraMax Bank, FSB available for distribution. In the event of liquidation, dissolution or winding up of 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. issues more shares in the future. The common stock is not subject to redemption.
Preferred Stock
None of the shares of 1895 Bancorp of Wisconsin, 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. 1895 Bancorp of Wisconsin, Inc. has no present plans to issue preferred stock.
will act as the transfer agent and registrar for the common stock.
The legality of the common stock and the federal income tax consequences of the reorganization and offering have been passed upon for PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, Inc. by the firm of Luse Gorman, PC, Washington, D.C. The Wisconsin state income tax consequences of the reorganization and offering have been passed upon for PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, Inc. by Wipfli LLP, Milwaukee, Wisconsin. Luse Gorman, PC and Wipfli LLP have consented to the references in this prospectus to their opinions. Certain legal matters regarding the reorganization and offering will be passed upon for KBW by Silver, Freedman, Taff & Tiernan LLP.
162
The financial statements of PyraMax Bank, FSB as of December 31, 2017 and 2016 and for each of the years in the two-year period ended December 31, 2017 have been audited by Wipfli LLP, an independent registered public accounting firm, as stated in its report thereon and included in this prospectus and registration statement in reliance upon such report of such firm as experts in accounting and auditing.
Keller & Company has consented to the publication in this prospectus of the summary of its report to PyraMax Bank, FSB and 1895 Bancorp of Wisconsin, 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 letter with respect to subscription rights.
WHERE YOU CAN FIND MORE INFORMATION
1895 Bancorp of Wisconsin, 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 Commissions 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.
1895 Bancorp of Wisconsin, Inc. and PyraMax Bank, FSB 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 Assistant Vice President of the Federal Reserve Bank of Chicago, at (312) 322-6846, the Central District Office of the Office of the Comptroller of the Currency located at One Financial Place, Suite 2700, 440 South LaSalle Street, Chicago, Illinois 60605, and the Chicago Regional Office of the FDIC located at 300 South Riverside Plaza, Suite 1700, Chicago, Illinois 60606.
A copy of the charter and bylaws of 1895 Bancorp of Wisconsin, Inc. is available without charge from PyraMax Bank, FSB.
In connection with the offering, 1895 Bancorp of Wisconsin, 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, 1895 Bancorp of Wisconsin, 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, 1895 Bancorp of Wisconsin, Inc. has undertaken that it will not terminate this registration for a period of at least three years following the reorganization.
163
INDEX TO FINANCIAL STATEMENTS OF
PYRAMAX BANK, FSB
F-1 | ||||
Balance Sheets at June 30, 2018 (unaudited) and December 31, 2017 and 2016 |
F-2 | |||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 |
* * *
Separate financial statements for 1895 Bancorp of Wisconsin, Inc. have not been included in this prospectus because 1895 Bancorp of Wisconsin, 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.
164
Report of Independent Registered Public Accounting Firm
Audit Committee
PyraMax Bank, FSB
Greenfield, Wisconsin
Opinion on the Financial Statements
We have audited the accompanying balance sheets of PyraMax Bank, FSB (the Company) as of December 31, 2017 and 2016, and the related statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the two years in the period ended December 31, 2017 and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Wipfli LLP
We have served as the Companys auditor since 2011.
September 6, 2018
Appleton, Wisconsin
F-1
PYRAMAX BANK, FSB
(In thousands) |
||||||||||||
June 30,
2018 |
December 31,
2017 |
December 31,
2016 |
||||||||||
(unaudited) | ||||||||||||
Assets | ||||||||||||
Cash and due from banks |
$ | 7,995 | $ | 12,497 | $ | 7,467 | ||||||
Fed funds sold |
| | 312 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents |
7,995 | 12,497 | 7,779 | |||||||||
Available for sale securities, stated at fair value |
69,296 | 88,955 | 96,458 | |||||||||
Loans held for sale |
1,170 | 217 | 479 | |||||||||
Loans, net of allowance for loan and lease losses of $3,092, $3,093 and $3,008, respectively |
368,021 | 331,206 | 312,523 | |||||||||
Premises and equipment, net |
7,601 | 7,661 | 8,925 | |||||||||
Mortgage servicing rights, net |
2,163 | 2,270 | 2,421 | |||||||||
Federal Home Loan Bank (FHLB) stock, at cost |
1,818 | 1,436 | 2,170 | |||||||||
Accrued interest receivable |
1,144 | 1,214 | 1,163 | |||||||||
Cash value of life insurance |
13,931 | 13,732 | 13,321 | |||||||||
Other assets |
9,478 | 9,173 | 4,934 | |||||||||
|
|
|
|
|
|
|||||||
TOTAL ASSETS |
$ | 482,617 | $ | 468,361 | $ | 450,173 | ||||||
|
|
|
|
|
|
|||||||
Liabilities and Equity | ||||||||||||
Deposits |
$ | 404,560 | $ | 389,291 | $ | 358,882 | ||||||
Advance payments by borrowers for taxes and insurance |
7,367 | 385 | 1,297 | |||||||||
FHLB advances |
27,677 | 34,693 | 48,224 | |||||||||
Accrued interest payable |
346 | 340 | 276 | |||||||||
Other liabilities |
4,977 | 4,658 | 4,154 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
444,927 | 429,367 | 412,833 | |||||||||
|
|
|
|
|
|
|||||||
Retained earnings |
39,459 | 39,782 | 37,993 | |||||||||
Accumulated other comprehensive loss, net of income taxes |
(1,769 | ) | (788 | ) | (653 | ) | ||||||
|
|
|
|
|
|
|||||||
Total equity |
37,690 | 38,994 | 37,340 | |||||||||
|
|
|
|
|
|
|||||||
TOTAL LIABILITIES AND EQUITY |
$ | 482,617 | $ | 468,361 | $ | 450,173 | ||||||
|
|
|
|
|
|
See accompanying notes to financial statements.
F-2
PYRAMAX BANK, FSB
(In thousands)
Six months ended
June 30, |
Years ended
December 31, |
|||||||||||||||
2018 | 2017 | 2017 | 2016 | |||||||||||||
(unaudited) | ||||||||||||||||
Interest and dividend income: |
||||||||||||||||
Loans, including fees |
$ | 7,087 | $ | 6,435 | $ | 13,076 | $ | 12,000 | ||||||||
Securities |
||||||||||||||||
Taxable |
905 | 1,057 | 2,102 | 1,746 | ||||||||||||
Tax-exempt |
| | | 10 | ||||||||||||
Other |
21 | 8 | 78 | 41 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total interest and dividend income |
8,013 | 7,500 | 15,256 | 13,797 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Interest expense: |
||||||||||||||||
Interest-bearing deposits |
1,671 | 1,339 | 2,893 | 2,410 | ||||||||||||
Borrowed funds |
277 | 252 | 468 | 275 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total interest expense |
1,948 | 1,591 | 3,361 | 2,685 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net interest income |
6,065 | 5,909 | 11,895 | 11,112 | ||||||||||||
Provision for loan losses |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net interest income after provision for loan losses |
6,065 | 5,909 | 11,895 | 11,112 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Noninterest income: |
||||||||||||||||
Service charges and other fees |
415 | 444 | 867 | 861 | ||||||||||||
Loan servicing |
332 | 415 | 779 | 933 | ||||||||||||
Net gain on sale of loans |
437 | 363 | 772 | 1,713 | ||||||||||||
Net gain on sale of securities |
67 | | | 159 | ||||||||||||
Increase in cash surrender value of insurance |
199 | 208 | 411 | 448 | ||||||||||||
Other |
33 | 35 | 63 | 41 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total noninterest income |
1,483 | 1,465 | 2,892 | 4,155 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Noninterest expense: |
||||||||||||||||
Salaries and employee benefits |
4,949 | 3,893 | 8,648 | 7,802 | ||||||||||||
Impairment loss on premises and equipment |
| | 1,095 | | ||||||||||||
Foreclosed assets, net |
1 | 7 | 8 | (64 | ) | |||||||||||
Advertising and promotions |
53 | 44 | 182 | 321 | ||||||||||||
Data processing |
359 | 546 | 1,031 | 1,015 | ||||||||||||
Occupancy and equipment |
823 | 849 | 1,635 | 1,576 | ||||||||||||
FDIC assessment |
163 | 129 | 253 | 253 | ||||||||||||
Other |
1,717 | 1,468 | 3,738 | 3,110 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total noninterest expense |
8,065 | 6,936 | 16,590 | 14,013 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes |
(517 | ) | 438 | (1,803 | ) | 1,254 | ||||||||||
Provision (credit) for income taxes |
(194 | ) | (4,589 | ) | (3,462 | ) | | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
$ | (323 | ) | $ | 5,027 | $ | 1,659 | $ | 1,254 | |||||||
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-3
PYRAMAX BANK, FSB
STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In thousands)
Six months ended
June 30, |
Years ended
December 31, |
|||||||||||||||
2018 | 2017 | 2017 | 2016 | |||||||||||||
(unaudited) | ||||||||||||||||
Net income (loss) |
$ | (323 | ) | $ | 5,027 | $ | 1,659 | $ | 1,254 | |||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss): |
||||||||||||||||
Unrealized holding gains (losses) arising during the period |
(1,275 | ) | 1,120 | (8 | ) | (1,065 | ) | |||||||||
Reclassification adjustment for gains realized in net income |
(67 | ) | | | (159 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss) before tax effect |
(1,342 | ) | 1,120 | (8 | ) | (1,224 | ) | |||||||||
Tax effect of other comprehensive income (loss) items |
(361 | ) | 436 | (3 | ) | (477 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss), net of tax |
(981 | ) | 684 | (5 | ) | (747 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss) |
$ | (1,304 | ) | $ | 5,711 | $ | 1,654 | $ | 507 | |||||||
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-4
PYRAMAX BANK, FSB
STATEMENTS OF CHANGES IN EQUITY
(Amounts in thousands)
Retained
Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Total
Equity |
||||||||||
Balances at January 1, 2016 |
$ | 36,739 | $ | 94 | $ | 36,833 | ||||||
Net Income |
1,254 | | 1,254 | |||||||||
Other comprehensive income (loss) |
| (747 | ) | (747 | ) | |||||||
|
|
|
|
|
|
|||||||
Balance December 31, 2016 |
37,993 | (653 | ) | 37,340 | ||||||||
Net Income |
1,659 | | 1,659 | |||||||||
Other comprehensive income (loss) |
| (5 | ) | (5 | ) | |||||||
Reclassification of stranded tax effects in accumulated other comprehensive loss |
130 | (130 | ) | | ||||||||
|
|
|
|
|
|
|||||||
Balance December 31, 2017 |
39,782 | (788 | ) | 38,994 | ||||||||
Net Loss |
(323 | ) | | (323 | ) | |||||||
Other comprehensive loss |
| (981 | ) | (981 | ) | |||||||
|
|
|
|
|
|
|||||||
Balance June 30, 2018 (unaudited) |
$ | 39,459 | $ | (1,769 | ) | $ | 37,690 | |||||
|
|
|
|
|
|
See accompanying notes to financial statements.
F-5
PYRAMAX BANK, FSB
(In thousands)
For the six months ended
June 30, |
For the years ended
December 31, |
|||||||||||||||
2018 | 2017 | 2017 | 2016 | |||||||||||||
(unaudited) | ||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Net income (loss) |
$ | (323 | ) | 5,027 | $ | 1,659 | $ | 1,254 | ||||||||
Adjustments to reconcile net income (loss) to net cash from operating activities: |
||||||||||||||||
Depreciation |
318 | 350 | 691 | 671 | ||||||||||||
Net amortization of premiums and discounts on securities |
188 | 224 | 598 | 596 | ||||||||||||
Write-down and loss on disposal of premises and equipment |
8 | | 1,095 | | ||||||||||||
Deferred tax benefit |
(194 | ) | (4,656 | ) | (3,551 | ) | | |||||||||
Gain on sale and impairments of foreclosed assets |
| | | (97 | ) | |||||||||||
Net gain on sale of investments |
(67 | ) | | | (159 | ) | ||||||||||
Originations of mortgage loans held for sale |
(31,127 | ) | (23,500 | ) | (62,012 | ) | (122,737 | ) | ||||||||
Proceeds from sales of mortgage loans held for sale |
30,553 | 21,403 | 63,046 | 124,311 | ||||||||||||
Net gain on sale of mortgage loans held for sale |
(379 | ) | (302 | ) | (772 | ) | (1,713 | ) | ||||||||
Increase in cash value of life insurance |
(199 | ) | (208 | ) | (411 | ) | (448 | ) | ||||||||
Proceeds from sales of premises and equipment |
| | | | ||||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||
Mortgage servicing rights |
107 | 54 | 151 | 55 | ||||||||||||
Accrued interest receivable and other assets |
(41 | ) | 228 | (735 | ) | (676 | ) | |||||||||
Accrued interest payable and other liabilities |
325 | (585 | ) | 568 | 625 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash provided by operating activities |
(831 | ) | (1,965 | ) | 327 | 1,682 | ||||||||||
Cash Flows From Investing Activities |
||||||||||||||||
Proceeds from sales of securities available for sale |
14,392 | | | 8,860 | ||||||||||||
Maturities, prepayments, and calls of securities available for sale |
4,171 | 7,277 | 11,933 | 10,995 | ||||||||||||
Purchase of securities available for sale |
| | (5,037 | ) | (44,965 | ) | ||||||||||
Net (increase) decrease in loans |
(36,821 | ) | (5,358 | ) | (18,683 | ) | 1,074 | |||||||||
Capital expenditures for premises and equipment |
(266 | ) | (320 | ) | (522 | ) | (480 | ) | ||||||||
Net (increase) decrease in FHLB stock |
(382 | ) | 833 | 734 | (450 | ) | ||||||||||
Proceeds from sales of foreclosed assets |
| | | 504 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash used in investing activities |
(18,906 | ) | 2,432 | (11,575 | ) | (24,462 | ) | |||||||||
Cash Flows From Financing Activities |
||||||||||||||||
Net increase (decrease) in deposits |
15,269 | 16,625 | 30,409 | 5,903 | ||||||||||||
Net increase (decrease) in advance payments by borrowers for taxes and insurance |
6,982 | 6,235 | (912 | ) | 692 | |||||||||||
Proceeds from issuance of FHLB Advances |
| | 5,000 | 29,000 | ||||||||||||
Principal payments on FHLB Advances |
(7,016 | ) | (18,515 | ) | (18,531 | ) | (12,228 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash provided by financing activities |
15,235 | 4,345 | 15,966 | 23,367 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in cash and cash equivalents |
(4,502 | ) | 4,812 | 4,718 | 587 | |||||||||||
Cash and cash equivalents at beginning of year |
12,497 | 7,779 | 7,779 | 7,192 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash and cash equivalents at end of year |
$ | 7,995 | 12,591 | $ | 12,497 | $ | 7,779 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Supplemental cash flow information: |
||||||||||||||||
Cash paid during the year for interest |
$ | 1,942 | $ | 1,585 | $ | 3,298 | $ | 2,617 | ||||||||
Noncash investing and financing activities: |
||||||||||||||||
Loans transferred to foreclosed assets |
$ | | $ | | $ | | $ | 402 |
See accompanying notes to financial statements.
F-6
PYRAMAX BANK, FSB
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 1 Summary of Significant Accounting Policies
Organization
PyraMax Bank, FSB (the Bank) is chartered as a federal mutual savings bank. The Bank operates as a full-service financial institution, providing a full range of financial services, including the granting of commercial, residential, and consumer loans and acceptance of deposits from individual customers and small businesses in the metropolitan Milwaukee, Wisconsin, area. The Bank is subject to competition from other financial and nonfinancial institutions providing financial products. In addition, the Bank is subject to the regulations of certain regulatory agencies and undergoes periodic examination by those regulatory agencies.
Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the fair values of securities, fair value of financial instruments, mortgage servicing rights, and the valuation of deferred income tax assets.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, interest-bearing and non-interest-bearing accounts in other financial institutions, and federal funds sold, all of which have original maturities of three months or less.
Available for Sale Securities
Securities classified as available for sale are those securities that the Bank intends to hold for an indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Banks assets and liabilities, liquidity needs, regulatory capital requirements, and other similar factors. Securities classified as available for sale are carried at fair value. Unrealized gains or losses are reported as increases or decreases in other comprehensive income, net of the related deferred tax effect. Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings. Gains and losses on the sale of securities are recorded on the trade date and determined using the specific-identification method.
Declines in fair value of securities that are deemed to be other than temporary, if applicable, are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient enough to allow for any anticipated recovery in fair value.
F-7
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 1 Summary of Significant Accounting Policies (continued)
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loan sold.
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances adjusted for deferred loan fees and costs, charge-offs, and an allowance for loan losses. Interest on loans is accrued and credited to income based on the unpaid principal balance. Loan-origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.
The accrual of interest on loans is discontinued when, in the opinion of management, there is an indication that the borrower may be unable to make payments as they become due. When loans are placed on nonaccrual status or charged off, all unpaid accrued interest is reversed against interest income. The interest on these loans is subsequently accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Allowance for Loan Losses
The allowance for loan losses is maintained at the level considered adequate by management to provide for losses that are probable as of the balance sheet date. The allowance for loan losses is established through a provision for loan losses charged to expense as losses are estimated to have occurred. Loan losses are charged against the allowance when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. In determining the adequacy of the allowance balance, the Bank makes evaluations of the loan portfolio and related off-balance sheet commitments, considers current economic conditions and historical loss experience, and reviews specific problem loans and other factors.
When establishing the allowance for loan losses, management categorizes loans into risk categories generally based on the nature of the collateral and the basis of repayment. These risk categories and their relevant risk characteristics are as follows:
Commercial real estate : These loans are dependent on the industries tied to these loans. Commercial real estate loans are secured primarily by office and industrial buildings, warehouses, small retail shopping facilities, and various special-purpose properties, including hotels and restaurants. Financial information is obtained from borrowers and/or the individual project to evaluate cash flow sufficiency to service debt and is periodically updated during the life of the loan. Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market, such as geographic location and/or property type,
Land development: These loans are secured by vacant land and/or property that are in the process of improvement, including (a) land development preparatory to erecting vertical improvements or (b) the on-site construction of industrial, commercial, residential, or farm buildings. Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user. In the event a loan is made on property that is not yet improved for the planned development, there is the risk that necessary approvals will not be granted or will be delayed. Construction loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs.
F-8
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 1 Summary of Significant Accounting Policies (continued)
1-4 family: These loans are generally to individuals and are underwritten by evaluating the credit history of the borrower, the ability of the borrower to meet the debt service requirements of the loan and total debt obligations, the underlying collateral, and the loan to collateral value. Underwriting standards for 1-4 family owner-occupied loans are heavily influenced by statutory requirements, which include, but are not limited to, loan-to-value and affordability ratios, risk-based pricing strategies, and documentation requirements.
Consumer: These loans may take the form of installment loans, demand loans, or single payment loans, and are extended to individuals for household, family, and other personal expenditures. These loans generally include direct consumer automobile loans and credit card loans. Also included in this category are junior liens on 1-4 family residential properties These loans are generally smaller in size and are underwritten by evaluating the credit history of the borrower, the ability of the borrower to meet the debt service requirements of the loan and total debt obligations.
Management regularly evaluates the allowance for loan losses using the Banks past loan loss experience, known and inherent risks in the loan portfolio, composition of the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral, current economic conditions, and other relevant factors. This evaluation is inherently subjective since it requires material estimates that may be susceptible to significant change.
A loan is impaired when, based on current information, it is probable that the Bank will not collect all amounts due in accordance with the contractual terms of the loan agreement. Management determines whether a loan is impaired on a case-by-case basis, taking into consideration the payment status, collateral value, length and reason of any payment delays, the borrowers prior payment record, and any other relevant factors. Large groups of smaller-balance homogeneous loans, such as residential mortgage and consumer loans, are collectively evaluated in the allowance for loan losses analysis and are not subject to impairment analysis unless such loans have been subject to a restructuring agreement. Specific allowances for impaired loans are based on discounted cash flows of expected future payments using the loans initial effective interest rate or the fair value of the collateral if the loan is collateral dependent.
In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies may require the 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.
Troubled Debt Restructurings
Loans are accounted for as troubled debt restructurings when a borrower is experiencing financial difficulties that lead to a restructuring of the loan, and the Bank grants a concession to the borrower that they would not otherwise consider. These concessions include a modification of terms such as a reduction of the stated interest rate or loan balance, a reduction of accrued interest, an extension of the maturity date at an interest rate lower than a current market rate for a new loan with similar risk, or some combination thereof to facilitate repayment. Troubled debt restructurings are considered impaired loans.
Mortgage Servicing Rights
Mortgage servicing rights are recognized as separate assets when rights are acquired through sale of mortgage loans. Mortgage servicing rights acquired through sale of loans are recognized as a component of loan servicing income and are recorded at fair value. The fair value of mortgage servicing rights is estimated using a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as costs to service, a discount rate, the custodial earnings rate, ancillary income, default rates and losses, and prepayment speeds. The fair value of mortgage servicing rights may change because of changes in the discount rates, prepayment expectations, default rates, and other factors. Mortgage servicing rights are amortized into income in proportion to and over the period of the estimated future net servicing income of the underlying loans.
F-9
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 1 Summary of Significant Accounting Policies (continued)
Mortgage servicing rights are evaluated for impairment at least annually and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation includes stratifying the mortgage servicing rights by predominant characteristics such as interest rates and terms and estimating fair value of each stratum. Impairment is recognized through a valuation allowance for an individual stratum to the extent that fair value is less than the carrying amount for the stratum.
Premises and Equipment
Depreciable assets are stated at cost less accumulated depreciation. Provisions for depreciation are computed on straight-line method over the estimated useful lives of the assets.
Federal Home Loan Bank Stock
The Banks investment in Federal Home Loan Bank (FHLB) stock is carried at cost, which approximates fair value. The Bank is required to hold the stock as a member of the FHLB, and transfer of the stock is substantially restricted. The stock is pledged as collateral for outstanding FHLB advances. The stock is evaluated for impairment on an annual basis.
Foreclosed Assets
Assets acquired through or in lieu of loan foreclosure are held for sale and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less costs to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net foreclosed asset expense. There were no foreclosed assets as of June 30, 2018 and as of December 31, 2017 and 2016, respectively. There were approximately $205 of residential real estate loans in process of foreclosure at June 30, 2018 and approximately $205 and $171 of residential real estate loans in process of foreclosure at December 31, 2017 and 2016, respectively.
Income Taxes
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 income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and 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 income tax assets and liabilities are adjusted through the provision for income taxes. The differences relate principally to the allowances for loan losses, deferred compensation, depreciation, FHLB stock dividends and non-accrual interest. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. The Bank recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Based on its evaluation, the Bank has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements.
The Banks policy is to recognize interest and penalties related to income tax issues as components of income tax expense. During the periods shown, the Bank did not recognize any interest or penalties related to income tax expense in its statements of operations.
Employee Benefit Plans
The Bank has employee benefit plans for qualified employees. The Banks policy is to fund contributions as accrued.
F-10
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 1 Summary of Significant Accounting Policies (continued)
Off-Balance Sheet Instruments
In the ordinary course of business, the Bank has entered into off-balance-sheet financial instruments including commitments to extend credit, unfunded commitments under lines of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.
Rate Lock Commitments
The Bank enters into commitments to originate loans, whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in other assets or liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans. Fair value is based on fees currently charged to enter into similar agreements and for fixed-rate commitments also considers the difference between current levels of interest rates and the committed rates.
Advertising
Advertising costs are expensed as incurred.
Other Comprehensive Income (Loss)
Other comprehensive loss is shown on the statements of comprehensive income (loss). The Banks accumulated other comprehensive income (loss) is composed of the unrealized loss on securities available for sale, net of tax and is shown on the statements of changes in equity. Reclassification adjustments out of other comprehensive loss for gains realized on sales of securities available for sale comprise the entire balance of net gain on sale of securities on the statements of operations. As part of this reclassification, income tax expense of approximately $361 and ($436) was recognized for the periods ended June 30, 2018 and 2017 respectively; and $3 and $477 was recognized for the years ended December 31, 2017 and 2016 in provision (credit) for income taxes on the statements of operations.
Reclassifications
Certain reclassifications have been made to the 2016 financial statements to conform to the 2017 classifications.
Recent Accounting Pronouncements
The Bank recently adopted the following Accounting Standards Updates (ASU) issued by the Financial Accounting Standards Board (FASB):
ASU 2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This standard allows entities to reclassify from accumulated other comprehensive income to retained earnings stranded tax effects that result from remeasuring deferred tax assets and liabilities related to accumulated other comprehensive income for the newly enacted federal corporate income tax rate. The Bank adopted this new accounting standard for the year ended December 31, 2017. As a result, the Bank elected to reclassify $130 of stranded tax effects from accumulated other comprehensive income to undivided profits as of December 31, 2017.
F-11
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 1 Summary of Significant Accounting Policies (continued)
ASU 2017-08 Receivables Non-Refundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The ASU requires premiums on callable debt securities to be amortized to the earliest call date. The Bank adopted this accounting standard for the year ended December 31, 2017.
The following Accounting Standards Updates (ASUs) have been issued by the Financial Accounting Standards Board (FASB) and may impact the Banks financial statements in future reporting periods.
ASU No. 2016-13, Credit Losses (Topic 326). ASU 2016-13 requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Bank is currently assessing the impact of adopting ASU 2016-13 on its financial statements.
ASU 2016-02 Leases. ASU 2016-02 affects any entity that enters into a lease and is intended to increase the transparency and comparability of financial statements among organizations. The ASU requires, among other changes, a lessee to recognize on its balance sheet a lease asset and a lease liability for those leases previously classified as operating leases. The lease asset would represent the right to use the underlying asset for the lease term and the lease liability would represent the discounted value of the required lease payments to the lessor. The ASU would also require entities to disclose key information about leasing arrangements. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. Management is currently evaluating the impact that ASU 2016-02 will have on the Banks financial position, results of operations and disclosures.
ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The standard makes a number of changes to the recognition and measurement standards of financial instruments, including the following changes: 1) equity securities with a readily determinable fair value will have to be measured at fair value with changes in fair value recognized in net income; 2) entities that are public business entities will no longer be required to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost; and 3) entities that are public business entities will be required to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. This standard is effective for financial statements issued for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The adoption of this standard is not expected to have a material impact on our financial condition or results of operations, except that the Bank will no longer disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost.
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The amendment supersedes and replaces nearly all existing revenue recognition guidance. Under the amended guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual and interim periods beginning after December 15, 2018. Adoption of ASU No. 2014-09 is not expected to have a material impact on the Banks financial statements.
F-12
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 2 Cash and Due from Banks
Under Regulation D, savings institutions are generally required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank, based upon a percentage of deposits. The Bank was required to maintain reserve balances with the Federal Reserve Bank of $0 as of June 30, 2018 and as of both December 31, 2017 and 2016.
In the normal course of business, the Bank maintains cash and due from bank balances with correspondent banks. Balances in these accounts may exceed the Federal Deposit Insurance Corporations insured limit of $250. Management believes these financial institutions have strong credit ratings and that the credit risk related to these deposits is minimal.
NOTE 3 Available for Sale Securities
Amortized costs and fair values of available for sale securities are summarized as follows:
Amortized
Cost |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Estimated
Fair Value |
|||||||||||||
June 30, 2018 (unaudited) |
||||||||||||||||
Obligations of states and political subdivisions |
$ | 11,683 | $ | 25 | $ | (277 | ) | $ | 11,431 | |||||||
Government-sponsored mortgage-backed securities |
55,090 | 4 | (2,184 | ) | 52,910 | |||||||||||
Corporate collateralized mortgage obligations |
503 | 2 | | 505 | ||||||||||||
Asset-backed securities |
4,193 | 12 | | 4,205 | ||||||||||||
Corporate bonds |
| | | | ||||||||||||
Certificates of deposit |
249 | | (4 | ) | 245 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total available for sale securities |
$ | 71,718 | $ | 43 | $ | (2,465 | ) | $ | 69,296 | |||||||
|
|
|
|
|
|
|
|
|||||||||
Amortized
Cost |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Estimated
Fair Value |
|||||||||||||
December 31, 2017 |
||||||||||||||||
Obligations of states and political subdivisions |
$ | 20,545 | $ | 243 | $ | (158 | ) | $ | 20,630 | |||||||
Government-sponsored mortgage-backed securities |
61,218 | 41 | (1,235 | ) | 60,024 | |||||||||||
Corporate collateralized mortgage obligations |
696 | 6 | | 702 | ||||||||||||
Asset-backed securities |
4,835 | 9 | (12 | ) | 4,832 | |||||||||||
Corporate bonds |
1,495 | 21 | | 1,516 | ||||||||||||
Certificates of deposit |
1,246 | 5 | | 1,251 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total available for sale securities |
$ | 90,035 | $ | 325 | $ | (1,405 | ) | $ | 88,955 | |||||||
|
|
|
|
|
|
|
|
|||||||||
Amortized
Cost |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Estimated
Fair Value |
|||||||||||||
December 31, 2016 |
||||||||||||||||
Obligations of states and political subdivisions |
$ | 21,872 | $ | 316 | $ | (224 | ) | $ | 21,964 | |||||||
Government-sponsored mortgage-backed securities |
66,041 | 61 | (1,153 | ) | 64,949 | |||||||||||
Corporate collateralized mortgage obligations |
1,254 | 4 | (4 | ) | 1,254 | |||||||||||
Asset-backed securities |
5,623 | | (99 | ) | 5,524 | |||||||||||
Corporate bonds |
1,495 | 3 | | 1,498 | ||||||||||||
Certificates of deposit |
1,244 | 25 | | 1,269 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total available for sale securities |
$ | 97,529 | $ | 409 | $ | (1,480 | ) | $ | 96,458 | |||||||
|
|
|
|
|
|
|
|
Fair values of securities are estimated based on financial models or prices paid for similar securities. It is possible interest rates could change considerably, resulting in a material change in estimated fair value.
F-13
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 3 Available for Sale Securities (continued)
The following table presents the portion of the Banks portfolio which has gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position:
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair
Value |
Unrealized
Losses |
Fair Value |
Unrealized
Losses |
Fair Value |
Unrealized
Losses |
|||||||||||||||||||
June 30, 2018 (unaudited) |
||||||||||||||||||||||||
Obligations of states and political subdivisions |
$ | 3,109 | $ | (48 | ) | $ | 5,332 | $ | (229 | ) | $ | 8,441 | $ | (277 | ) | |||||||||
Government-sponsored mortgage-backed securities |
20,241 | (518 | ) | 32,451 | (1,666 | ) | 52,692 | (2,184 | ) | |||||||||||||||
Corporate collateralized mortgage obligations |
194 | | | | 194 | | ||||||||||||||||||
Asset-backed securities |
243 | | | | 243 | | ||||||||||||||||||
Certificates of deposit |
245 | (4 | ) | | | 245 | (4 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total available for sale securities |
$ | 24,032 | $ | (570 | ) | $ | 37,783 | $ | (1,895 | ) | $ | 61,815 | $ | (2,465 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair
Value |
Unrealized
Losses |
Fair Value |
Unrealized
Losses |
Fair Value |
Unrealized
Losses |
|||||||||||||||||||
December 31, 2017 |
||||||||||||||||||||||||
Obligations of states and political subdivisions |
$ | 1,435 | $ | (18 | ) | $ | 5,866 | $ | (140 | ) | $ | 7,301 | $ | (158 | ) | |||||||||
Government-sponsored mortgage-backed securities |
18,507 | (131 | ) | 36,176 | (1,104 | ) | 54,683 | (1,235 | ) | |||||||||||||||
Corporate collateralized mortgage obligations |
8 | | | | 8 | | ||||||||||||||||||
Asset-backed securities |
| | 936 | (12 | ) | 936 | (12 | ) | ||||||||||||||||
Certificates of deposit |
249 | | | | 249 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total available for sale securities |
$ | 20,199 | $ | (149 | ) | $ | 42,978 | $ | (1,256 | ) | $ | 63,177 | $ | (1,405 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair
Value |
Unrealized
Losses |
Fair Value |
Unrealized
Losses |
Fair Value |
Unrealized
Losses |
|||||||||||||||||||
December 31, 2016 |
||||||||||||||||||||||||
Obligations of states and political subdivisions |
$ | 7,509 | $ | (212 | ) | $ | 407 | $ | (12 | ) | $ | 7,916 | $ | (224 | ) | |||||||||
Government-sponsored mortgage-backed securities |
57,180 | (1,153 | ) | | | 57,180 | (1,153 | ) | ||||||||||||||||
Corporate collateralized mortgage obligations |
355 | (2 | ) | 456 | (2 | ) | 811 | (4 | ) | |||||||||||||||
Asset-backed securities |
| | 5,524 | (99 | ) | 5,524 | (99 | ) | ||||||||||||||||
Certificates of deposit |
| | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total available for sale securities |
$ | 65,044 | $ | (1,367 | ) | $ | 6,387 | $ | (113 | ) | $ | 71,431 | $ | (1,480 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2018 and December 31, 2017 respectively, the bank had 57 and 48 debt securities with unrealized losses with aggregate depreciation of 4% and 2% from the Banks amortized cost basis. These unrealized losses relate principally to the changes in interest rates and are not caused by changes in the financial condition of the issuer, the quality of any underlying assets, or applicable credit enhancements. In analyzing whether unrealized losses on debt securities are other than temporary, management considers whether the securities are issued by a government body or agency, whether a rating agency has downgraded the securities, industry analysts reports, the financial condition and performance of the issuer, and the quality of any underlying assets or credit enhancements. Since management has the ability to hold debt securities for the foreseeable future, no declines are deemed to be other than temporary.
F-14
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 3 Available for Sale Securities (continued)
The amortized cost and fair value of available for sale securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities in mortgage-backed securities since the anticipated maturities are not readily determinable. Therefore, these securities are not included in the maturity categories in the following maturity summary listed below:
June 30, 2018
(unaudited) |
||||||||
Amortized
Cost |
Fair
Value |
|||||||
Due in one year or less |
$ | 1,984 | $ | 1,982 | ||||
Due after one year through 5 years |
6,448 | 6,292 | ||||||
Due after 5 years through 10 years |
3,500 | 3,402 | ||||||
Due after 10 years |
| | ||||||
|
|
|
|
|||||
Subtotal |
11,932 | 11,676 | ||||||
Mortgage-backed securities |
55,593 | 53,415 | ||||||
Asset-backed securities |
4,193 | 4,205 | ||||||
|
|
|
|
|||||
Total |
$ | 71,718 | $ | 69,296 | ||||
|
|
|
|
|||||
December 31, 2017 | ||||||||
Amortized
Cost |
Fair
Value |
|||||||
Due in one year or less |
$ | 368 | $ | 370 | ||||
Due after one year through 5 years |
12,280 | 12,386 | ||||||
Due after 5 years through 10 years |
8,586 | 8,577 | ||||||
Due after 10 years |
2,052 | 2,064 | ||||||
|
|
|
|
|||||
Subtotal |
23,286 | 23,397 | ||||||
Mortgage-backed securities |
61,914 | 60,726 | ||||||
Asset-backed securities |
4,835 | 4,832 | ||||||
|
|
|
|
|||||
Total |
$ | 90,035 | $ | 88,955 | ||||
|
|
|
|
The following is a summary of the proceeds from sales of securities available for sale, as well as gross gains and losses, for the periods ended June 30, 2018 and 2017 and the years ended December 31, 2017 and 2016, respectively:
Six Months ended June 30, | Years ended December 31, | |||||||||||||||
2018 | 2017 | 2017 | 2016 | |||||||||||||
(unaudited) | ||||||||||||||||
Proceeds from sale of securities |
$ | 14,392 | $ | | $ | | $ | 8,860 | ||||||||
Gross gains |
137 | | | 159 | ||||||||||||
Gross losses |
(70 | ) | | | |
As of June 30, 2018, approximately $12,393 of securities were pledged.
There were no securities were pledged as of December 31, 2017 and 2016.
F-15
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 4 Loans
Major classifications of loans are as follows:
June 30, | December 31, | December 31, | ||||||||||
2018 | 2017 | 2016 | ||||||||||
(unaudited) | ||||||||||||
Commercial: |
||||||||||||
Real estate |
$ | 182,695 | $ | 156,991 | $ | 144,093 | ||||||
Land development |
2,638 | 2,687 | 1,508 | |||||||||
Other |
32,540 | 19,715 | 14,505 | |||||||||
Residential real estate: |
||||||||||||
Residential real estate first mortgage |
105,831 | 106,120 | 103,900 | |||||||||
Residential real estate construction |
4,959 | 3,358 | 4,619 | |||||||||
Consumer: |
||||||||||||
Home equity and lines of credit |
39,770 | 42,344 | 45,162 | |||||||||
Other |
2,140 | 2,495 | 1,225 | |||||||||
|
|
|
|
|
|
|||||||
Subtotal |
370,573 | 333,710 | 315,012 | |||||||||
Net deferred loan fees |
540 | 589 | 519 | |||||||||
Allowance for loan losses |
(3,092 | ) | (3,093 | ) | (3,008 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loans |
$ | 368,021 | $ | 331,206 | $ | 312,523 | ||||||
|
|
|
|
|
|
Deposit accounts in an overdrawn position and reclassified as loans approximated $26 as of June 30, 2018 and approximately $102 and $75 at December 31, 2017 and 2016, respectively.
F-16
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 4 Loans (continued)
A summary of the activity in the allowance for loan losses by portfolio segment is as follows:
Commercial | Residential | Consumer | Total | |||||||||||||
June 30, 2018 (unaudited) |
||||||||||||||||
Beginning balance |
$ | 1,369 | $ | 1,246 | $ | 478 | $ | 3,093 | ||||||||
Provision for loan losses |
| | | | ||||||||||||
Loans charged off |
| | (34 | ) | (34 | ) | ||||||||||
Recoveries of loans previously charged off |
12 | 3 | 18 | 33 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total ending allowance balance |
$ | 1,381 | $ | 1,249 | $ | 462 | $ | 3,092 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
June 30, 2017 (unaudited) |
||||||||||||||||
Beginning balance |
$ | 1,345 | $ | 1,224 | $ | 439 | $ | 3,008 | ||||||||
Provision for loan losses |
| | | | ||||||||||||
Loans charged off |
| | (8 | ) | (8 | ) | ||||||||||
Recoveries of loans previously charged off |
11 | 5 | 32 | 48 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total ending allowance balance |
$ | 1,356 | $ | 1,229 | $ | 463 | $ | 3,048 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2017 |
||||||||||||||||
Beginning balance |
$ | 1,345 | $ | 1,224 | $ | 439 | $ | 3,008 | ||||||||
Provision for loan losses |
| | | | ||||||||||||
Loans charged off |
| | (37 | ) | (37 | ) | ||||||||||
Recoveries of loans previously charged off |
24 | 22 | 76 | 122 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total ending allowance balance |
$ | 1,369 | $ | 1,246 | $ | 478 | $ | 3,093 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2016 |
||||||||||||||||
Beginning balance |
$ | 1,414 | $ | 1,262 | $ | 411 | $ | 3,087 | ||||||||
Provision for loan losses |
| | | | ||||||||||||
Loans charged off |
(114 | ) | (89 | ) | (113 | ) | (316 | ) | ||||||||
Recoveries of loans previously charged off |
45 | 51 | 141 | 237 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total ending allowance balance |
$ | 1,345 | $ | 1,224 | $ | 439 | $ | 3,008 | ||||||||
|
|
|
|
|
|
|
|
F-17
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 4 Loans (continued)
Information about how loans were evaluated for impairment and the related allowance for loan losses follows:
Commercial | Residential | Consumer | Total | |||||||||||||
June 30, 2018 (unaudited) |
||||||||||||||||
Loans: |
||||||||||||||||
Individually evaluated for impairment |
$ | 328 | $ | 1,146 | $ | 373 | $ | 1,847 | ||||||||
Collectively evaluated for impairment |
217,545 | 109,644 | 41,537 | 368,726 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total loans |
$ | 217,873 | $ | 110,790 | $ | 41,910 | $ | 370,573 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Allowance for loan losses: |
||||||||||||||||
Individually evaluated for impairment |
$ | | $ | 6 | $ | 194 | $ | 200 | ||||||||
Collectively evaluated for impairment |
1,381 | 1,243 | 268 | 2,892 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total allowance for loan losses |
$ | 1,381 | $ | 1,249 | $ | 462 | $ | 3,092 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2017 |
||||||||||||||||
Loans: |
||||||||||||||||
Individually evaluated for impairment |
$ | 2,529 | $ | 1,888 | $ | | $ | 4,417 | ||||||||
Collectively evaluated for impairment |
176,864 | 107,590 | 44,839 | 329,293 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total loans |
$ | 179,393 | $ | 109,478 | $ | 44,839 | $ | 333,710 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Allowance for loan losses: |
||||||||||||||||
Individually evaluated for impairment |
$ | | $ | 230 | $ | | $ | 230 | ||||||||
Collectively evaluated for impairment |
1,369 | 1,016 | 478 | 2,863 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total allowance for loan losses |
$ | 1,369 | $ | 1,246 | $ | 478 | $ | 3,093 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2016 |
||||||||||||||||
Loans: |
||||||||||||||||
Individually evaluated for impairment |
$ | 4,713 | $ | 1,640 | $ | 199 | $ | 6,552 | ||||||||
Collectively evaluated for impairment |
155,393 | 106,878 | 46,189 | 308,460 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total loans |
$ | 160,106 | $ | 108,518 | $ | 46,388 | $ | 315,012 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Allowance for loan losses: |
||||||||||||||||
Individually evaluated for impairment |
$ | 36 | $ | 112 | $ | 164 | $ | 312 | ||||||||
Collectively evaluated for impairment |
1,309 | 1,112 | 275 | 2,696 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total allowance for loan losses |
$ | 1,345 | $ | 1,224 | $ | 439 | $ | 3,008 | ||||||||
|
|
|
|
|
|
|
|
F-18
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 4 Loans (continued)
Information regarding impaired loans follows:
Recorded
Investment |
Principal
Balance |
Related
Allowance |
Average
Investment |
Interest
Recognized |
||||||||||||||||
June 30, 2018 (unaudited) |
||||||||||||||||||||
Loans with no related allowance for loan losses: |
||||||||||||||||||||
Commercial |
||||||||||||||||||||
Commercial real estate |
$ | 303 | $ | 303 | $ | na | $ | 303 | $ | | ||||||||||
Land development |
25 | 32 | na | 27 | | |||||||||||||||
Residential real estate and consumer |
||||||||||||||||||||
Residential real estateFirst mortgage |
1,055 | 1,535 | na | 965 | 2 | |||||||||||||||
Home equity lines of credit |
138 | 333 | | 141 | | |||||||||||||||
Other consumer |
1 | 142 | | 2 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total loans with no related allowance |
1,522 | 2,345 | | 1,438 | 2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loans with related allowance for loan losses: |
||||||||||||||||||||
Residential Real estate and consumer |
||||||||||||||||||||
Residential real estateFirst mortgage |
91 | 91 | 6 | 45 | | |||||||||||||||
Home equity lines of credit |
234 | 249 | 194 | 214 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
325 | 340 | 200 | 259 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Grand totals |
$ | 1,847 | $ | 2,685 | $ | 200 | $ | 1,697 | $ | 2 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2017 |
||||||||||||||||||||
Loans with no related allowance for loan losses: |
||||||||||||||||||||
Commercial |
||||||||||||||||||||
Commercial real estate |
$ | 2,024 | $ | 2,024 | $ | na | $ | 2,192 | $ | 148 | ||||||||||
Land development |
303 | 303 | na | 303 | | |||||||||||||||
Other |
202 | 202 | na | 138 | 3 | |||||||||||||||
Residential real estate and consumer |
||||||||||||||||||||
Residential real estateFirst mortgage |
1,510 | 1,785 | na | 1,838 | 89 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total loans with no related allowance |
4,039 | 4,314 | | 4,471 | 240 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loans with related allowance for loan losses: |
||||||||||||||||||||
Residential Real estate and consumer |
||||||||||||||||||||
Residential real estateFirst mortgage |
378 | 392 | 230 | 394 | 15 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
378 | 392 | 230 | 394 | 15 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Grand totals |
$ | 4,417 | $ | 4,706 | $ | 230 | $ | 4,865 | $ | 255 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2016 |
||||||||||||||||||||
Loans with no related allowance for loan losses: |
||||||||||||||||||||
Commercial |
||||||||||||||||||||
Commercial real estate |
$ | 3,518 | $ | 3,518 | $ | na | $ | 3,486 | $ | 226 | ||||||||||
Land development |
479 | 624 | na | 682 | | |||||||||||||||
Other |
679 | 718 | na | 832 | 17 | |||||||||||||||
Residential real estate and consumer |
||||||||||||||||||||
Residential real estate First mortgage |
1,529 | 1,978 | na | 1,691 | 63 | |||||||||||||||
Home equity and lines of credit |
35 | 57 | | 209 | 10 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total loans with no related allowance |
6,240 | 6,895 | | 6,900 | 316 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loans with related allowance for loan losses: |
||||||||||||||||||||
Commercial other |
36 | 68 | 36 | 72 | | |||||||||||||||
Residential Real estate First mortgage |
112 | 112 | 112 | 189 | | |||||||||||||||
Home equity and lines of credit |
164 | 183 | 164 | 82 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
312 | 363 | 312 | 343 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Grand totals |
$ | 6,552 | $ | 7,258 | $ | 312 | $ | 7,243 | $ | 316 | ||||||||||
|
|
|
|
|
|
|
|
|
|
F-19
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 4 Loans (continued)
There were no additional funds committed to impaired loans as of June 30, 2018, and December 31, 2017 and 2016, respectively.
The Bank regularly evaluates various attributes of loans to determine the appropriateness of the allowance for loan losses. The credit quality indicators monitored differ depending on the class of loan.
Pass ratings are assigned to loans with adequate collateral and debt service ability such that collectability of the contractual loan payments is highly probable.
Watch / Special mention ratings are assigned to loans where management has some concern that the collateral or debt service ability may not be adequate, though the collectability of the contractual loan payments is still probable.
Substandard ratings are assigned to loans that do not have adequate collateral and/or debt service ability such that collectability of the contractual loan payments is no longer probable.
Doubtful ratings are assigned to loans that do not have adequate collateral and/or debt service ability, and collectability of the contractual loan payments is unlikely.
Information regarding the credit quality indicators most closely monitored for commercial loans by class follows:
Pass |
Watch/
Special Mention |
Substandard | Doubtful | Totals | ||||||||||||||||
June 30, 2018 (unaudited) |
||||||||||||||||||||
Real Estate |
$ | 173,420 | $ | 8,320 | $ | 955 | $ | | $ | 182,695 | ||||||||||
Land development |
2,335 | | 303 | | 2,638 | |||||||||||||||
Other |
26,938 | 5,602 | | | 32,540 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Totals |
$ | 202,693 | $ | 13,922 | $ | 1,258 | $ | | $ | 217,873 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2017 |
||||||||||||||||||||
Real Estate |
$ | 144,763 | $ | 9,786 | $ | 2,442 | $ | | $ | 156,991 | ||||||||||
Land development |
2,384 | | 303 | | 2,687 | |||||||||||||||
Other |
14,505 | 5,178 | 32 | | 19,715 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Totals |
$ | 161,652 | $ | 14,964 | $ | 2,777 | $ | | $ | 179,393 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2016 |
||||||||||||||||||||
Real Estate |
$ | 124,511 | $ | 16,239 | $ | 3,343 | $ | | $ | 144,093 | ||||||||||
Land development |
973 | 55 | 480 | | 1,508 | |||||||||||||||
Other |
11,773 | 2,021 | 711 | | 14,505 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Totals |
$ | 137,257 | $ | 18,315 | $ | 4,534 | $ | | $ | 160,106 | ||||||||||
|
|
|
|
|
|
|
|
|
|
F-20
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 4 Loans (continued)
Residential real estate and consumer loans are generally evaluated based on whether or not the loan is performing according to the contractual terms of the loan.
Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans by class follows:
Performing |
Non
Performing |
Total | ||||||||||
June 30, 2018 (unaudited) |
||||||||||||
Residential real estateFirst mortgage |
$ | 104,686 | $ | 1,145 | $ | 105,831 | ||||||
Residential real estateConstruction |
4,959 | | 4,959 | |||||||||
ConsumerHome equity |
39,399 | 371 | 39,770 | |||||||||
ConsumerOther |
2,139 | 1 | 2,140 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 151,183 | $ | 1,517 | $ | 152,700 | ||||||
|
|
|
|
|
|
|||||||
Performing |
Non
Performing |
Total | ||||||||||
December 31, 2017 |
||||||||||||
Residential real estateFirst mortgage |
$ | 105,083 | $ | 1,037 | $ | 106,120 | ||||||
Residential real estateConstruction |
3,358 | | 3,358 | |||||||||
ConsumerHome equity |
41,819 | 525 | 42,344 | |||||||||
ConsumerOther |
2,493 | 2 | 2,495 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 152,753 | $ | 1,564 | $ | 154,317 | ||||||
|
|
|
|
|
|
|||||||
Performing |
Non
Performing |
Total | ||||||||||
December 31, 2016 |
||||||||||||
Residential real estateFirst mortgage |
$ | 101,818 | $ | 2,082 | $ | 103,900 | ||||||
Residential real estateConstruction |
4,619 | | 4,619 | |||||||||
ConsumerHome equity |
44,678 | 484 | 45,162 | |||||||||
ConsumerOther |
1,221 | 4 | 1,225 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 152,336 | $ | 2,570 | $ | 154,906 | ||||||
|
|
|
|
|
|
F-21
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 4 Loans (continued)
Loan aging information follows:
Current
Loans |
Loans
Past Due 30-89 Days |
Loans
Past Due 90+ Days |
Total
Loans |
Nonaccrual
Loans |
||||||||||||||||
June 30, 2018 (unaudited) |
||||||||||||||||||||
Residential real estate loans |
||||||||||||||||||||
First mortgages |
$ | 104,632 | $ | 906 | $ | 293 | $ | 105,831 | $ | 1,145 | ||||||||||
Construction |
4,959 | | | 4,959 | | |||||||||||||||
Commercial loans |
||||||||||||||||||||
Real estate |
182,240 | 152 | 303 | 182,695 | 303 | |||||||||||||||
Land |
2,638 | | | 2,638 | | |||||||||||||||
Other |
32,540 | | | 32,540 | 25 | |||||||||||||||
Consumer loans |
||||||||||||||||||||
Home equity |
39,637 | 53 | 80 | 39,770 | 372 | |||||||||||||||
Other consumer |
2,135 | 3 | 2 | 2,140 | 2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Grand total loans |
$ | 368,781 | $ | 1,114 | $ | 678 | $ | 370,573 | $ | 1,847 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2017 |
||||||||||||||||||||
Residential real estate loans |
||||||||||||||||||||
First mortgages |
$ | 103,908 | $ | 2,156 | $ | 56 | $ | 106,120 | $ | 1,128 | ||||||||||
Construction |
3,358 | | | 3,358 | | |||||||||||||||
Commercial loans |
||||||||||||||||||||
Real estate |
156,985 | 6 | | 156,991 | | |||||||||||||||
Land |
2,384 | | 303 | 2,687 | 303 | |||||||||||||||
Other |
19,715 | | | 19,715 | 32 | |||||||||||||||
Consumer loans |
||||||||||||||||||||
Home equity |
41,694 | 526 | 124 | 42,344 | 420 | |||||||||||||||
Other consumer |
2,483 | 11 | 1 | 2,495 | 4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Grand total loans |
$ | 330,527 | $ | 2,699 | $ | 484 | $ | 333,710 | $ | 1,887 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2016 |
||||||||||||||||||||
Residential real estate loans |
||||||||||||||||||||
First mortgages |
$ | 101,713 | $ | 1,789 | $ | 398 | $ | 103,900 | $ | 1,681 | ||||||||||
Construction |
4,619 | | | 4,619 | | |||||||||||||||
Commercial loans |
||||||||||||||||||||
Real estate |
143,724 | 369 | | 144,093 | | |||||||||||||||
Land |
1,029 | | 479 | 1,508 | 479 | |||||||||||||||
Other |
14,505 | | | 14,505 | 347 | |||||||||||||||
Consumer loans |
||||||||||||||||||||
Home equity |
44,792 | 336 | 34 | 45,162 | 484 | |||||||||||||||
Other consumer |
1,225 | | | 1,225 | 5 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Grand total loans |
$ | 311,607 | $ | 2,494 | $ | 911 | $ | 315,012 | $ | 2,996 | ||||||||||
|
|
|
|
|
|
|
|
|
|
There are no loans 90 or more days past due and accruing interest as of June 30, 2018, or December 31, 2017 or 2016.
F-22
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 4 Loans (continued)
Management regularly monitors impaired loan relationships. In the event facts and circumstances change, an additional provision for loan losses may be necessary.
Nonperforming loans are as follows:
As of June 30, 2018 (unaudited) |
||||
Nonaccrual loans, other than troubled debt restructurings |
$ | 1,152 | ||
Nonaccrual loans, troubled debt restructurings |
695 | |||
|
|
|||
Total nonperforming loans (NPLs) |
$ | 1,847 | ||
|
|
|||
Restructured loans, accruing |
$ | 578 | ||
|
|
As of December 31 |
2017 | 2016 | ||||||
Nonaccrual loans, other than troubled debt restructurings |
$ | 1,058 | $ | 2,063 | ||||
Nonaccrual loans, troubled debt restructurings |
829 | 932 | ||||||
|
|
|
|
|||||
Total nonperforming loans (NPLs) |
$ | 1,887 | $ | 2,995 | ||||
|
|
|
|
|||||
Restructured loans, accruing |
$ | 729 | $ | 822 | ||||
|
|
|
|
There were no new TDRs during the six months ended June 30, 2018 and no new TDRs during 2017 and 2016.
The Bank considers a troubled debt restructuring in default if it becomes past due more than 90 days. No troubled debt restructurings defaulted during the first six months of 2018. No troubled debt restructurings defaulted within 12 months of their modification date during the years ended December 31, 2017 and 2016.
F-23
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 5 Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and are summarized as follows:
As of
June 30, 2018 (unaudited) |
As of December 31, | |||||||||||
2017 | 2016 | |||||||||||
Land |
$ | 1,408 | $ | 1,408 | $ | 1,408 | ||||||
Buildings |
9,217 | 9,341 | 10,185 | |||||||||
Leasehold improvements |
428 | 661 | 640 | |||||||||
Furniture and equipment |
6,451 | 6,122 | 5,912 | |||||||||
|
|
|
|
|
|
|||||||
Totals |
17,504 | 17,532 | 18,145 | |||||||||
|
|
|
|
|
|
|||||||
Less: Accumulated depreciation |
9,903 | 9,871 | 9,220 | |||||||||
|
|
|
|
|
|
|||||||
Premises and equipment, net |
$ | 7,601 | $ | 7,661 | $ | 8,925 | ||||||
|
|
|
|
|
|
Depreciation expense was $318 and $350 for the periods ended June 30, 2018 and 2017, and $691 and $671 for the years ended December 31, 2017 and 2016, respectively.
During the year ended December 31, 2017, the Bank recognized impairment on a branch building totaling $1,095.
The Bank leases premises from nonrelated entities. Lease expense was $109 and $101 for the six months ended June 30, 2018 and 2017, respectively, and $203 for 2017 and $173 for 2016.
Rent commitments, before considering renewal options that are present, are as follows as of June 30, 2018:
2018 |
$ | 107 | ||
2019 |
219 | |||
2020 |
81 | |||
2021 |
20 | |||
|
|
|||
$ | 427 | |||
|
|
Rent commitments, before considering renewal options that are present, are as follows as of December 31, 2017:
2018 |
$ | 214 | ||
2019 |
219 | |||
2020 |
81 | |||
2021 |
20 | |||
|
|
|||
$ | 534 | |||
|
|
F-24
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 6 Mortgage Servicing Rights
Loans serviced for others are not included in the balance sheets. The unpaid principal balance of mortgage loans serviced for others totaled $340.9 million as of June 30, 2018 and $355.6 million at December 31, 2017, and $376.7 million at December 31, 2016.
The following is a summary of changes in the balance of mortgage servicing rights for the periods indicated below:
As of
June 30, 2018 (unaudited) |
As of December 31, | |||||||||||
2017 | 2016 | |||||||||||
Beginning balances |
$ | 2,270 | $ | 2,421 | $ | 2,476 | ||||||
Additions |
81 | 199 | 439 | |||||||||
Amortization |
(188 | ) | (350 | ) | (494 | ) | ||||||
|
|
|
|
|
|
|||||||
Ending balances |
$ | 2,163 | $ | 2,270 | $ | 2,421 | ||||||
|
|
|
|
|
|
|||||||
Fair value at beginning of the period |
$ | 3,158 | $ | 3,422 | $ | 3,389 | ||||||
|
|
|
|
|
|
|||||||
Fair value at the end of the period |
$ | 3,008 | $ | 3,158 | $ | 3,422 | ||||||
|
|
|
|
|
|
There was no valuation allowance as of June 30, 2018, December 31, 2017 and 2016.
The estimated fair value of mortgage servicing rights was determined using a valuation model that calculates the present value of expected future servicing and ancillary income, net of expected servicing costs. The model incorporates various assumptions such as discount rates, prepayment speeds, and ancillary income and servicing costs. At June 30, 2018 and as of December 31, 2017 and 2016, the model used discount rates ranging from 10% to 15% and prepayment speeds ranging from 9% to 36%, respectively, both of which were based on market data from independent organizations.
The following table shows the estimated future amortization of mortgage servicing rights for the next five years. The projections of amortization expense are based on existing asset balances June 30, 2018 and as of as of December 31, 2017. The actual amortization expense the Bank recognizes in any given period may be significantly different depending on changes in interest rates, market conditions, and regulatory requirements.
As of
June 30, 2018 (unaudited) |
As of
December 31, 2017 |
|||||||
2018 |
$ | 228 | $ | 479 | ||||
2019 |
429 | 450 | ||||||
2020 |
400 | 420 | ||||||
2021 |
372 | 390 | ||||||
2022 |
341 | 358 | ||||||
2023 |
281 | 173 | ||||||
Thereafter |
112 | | ||||||
|
|
|
|
|||||
Total |
$ | 2,163 | $ | 2,270 | ||||
|
|
|
|
F-25
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 7 Deposits
The composition of deposits are as follows:
June 30, 2018
(unaudited) |
December 31, | |||||||||||
2017 | 2016 | |||||||||||
Non-interest bearing checking |
$ | 56,851 | $ | 62,817 | $ | 57,092 | ||||||
Interest bearing checking |
27,042 | 26,649 | 27,237 | |||||||||
Money market |
64,670 | 55,016 | 57,587 | |||||||||
Statement savings accounts |
57,266 | 58,566 | 59,770 | |||||||||
Certificates of deposit |
198,731 | 186,243 | 157,196 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 404,560 | $ | 389,291 | $ | 358,882 | ||||||
|
|
|
|
|
|
Certificates of deposit that meet or exceed the FDIC insurance limit of $250 totaled $14,669 as of June 30, 2018 and $14,892 and $9,264 at December 31, 2017 and 2016, respectively.
The scheduled maturities of certificates of deposit are as follows:
As of
June 30, 2018 (unaudited) |
As of
December 31, 2017 |
|||||||
2018 |
$ | 58,272 | $ | 86,303 | ||||
2019 |
76,011 | 42,356 | ||||||
2020 |
55,799 | 50,518 | ||||||
2021 |
7,093 | 6,378 | ||||||
2022 |
1,144 | 684 | ||||||
Thereafter |
412 | 4 | ||||||
|
|
|
|
|||||
Total |
$ | 198,731 | $ | 186,243 | ||||
|
|
|
|
F-26
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 8 FHLB Advances
FHLB advances consist of the following:
As of June 30,
2018
|
As of December 31, |
|||||||||||||||||||
2017 |
2016 | |||||||||||||||||||
Rate |
Amount |
Rate |
Amount | Rates | Amount | |||||||||||||||
Open line of credit |
2.12% | $ | 3,000 | 0.88% | $ | 10,000 | 0.70% | $ | 18,500 | |||||||||||
Fixed rate, fixed term advances |
1.13% 1.50% | 24,000 | 1.13% 1.50% | 24,000 | 0.88% 1.41% | 29,000 | ||||||||||||||
Advance structured note, payments due monthly, maturity in February 2030 |
7.47% | 677 | 7.47% | 693 | 7.47% | 724 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 27,677 | $ | 34,693 | $ | 48,224 | ||||||||||||||
|
|
|
|
|
|
The following is a summary of scheduled maturities of FHLB advances:
As of June 30, 2018 (unaudited) |
Weighted
Average Rate |
Amount | ||||||
2018 |
2.15 | % | $ | 3,017 | ||||
2019 |
1.44 | % | 17,036 | |||||
2020 |
7.47 | % | 39 | |||||
2021 |
1.45 | % | 7,042 | |||||
2022 |
7.47 | % | 46 | |||||
Thereafter |
7.47 | % | 497 | |||||
|
|
|||||||
Total |
$ | 27,677 | ||||||
|
|
As of December 31, 2017 |
Weighted
Average Rate |
Amount | ||||||
2018 |
0.90 | % | $ | 10,034 | ||||
2019 |
1.25 | % | 17,036 | |||||
2020 |
7.47 | % | 39 | |||||
2021 |
1.45 | % | 7,042 | |||||
2022 |
7.47 | % | 46 | |||||
Thereafter |
7.47 | % | 496 | |||||
|
|
|||||||
Total |
$ | 34,693 | ||||||
|
|
Actual maturities may differ from the scheduled principal maturities due to call options on the various advances.
The Bank has a master contract agreement with the FHLB that provides for borrowing up to the lesser of 22.22 times the FHLB stock owned, a determined percentage of the book value of the Banks qualifying real estate loans, or a determined percentage of the Banks assets. The FHLB provides both fixed and floating rate advances. Floating rates are tied to short-term market rates of interest such as London InterBank Offered Rate (LIBOR), federal funds, or treasury bill rates. FHLB advances are subject to a prepayment penalty if they are repaid prior to maturity. The Bank has pledged approximately $150.6 million at June 30, 2018 and $137.4 million at December 31, 2017, and $206.2 million at December 31, 2016 of qualifying loans. FHLB advances are also secured by $1.8 million at June 30, 2018 and $1.4 million at December 31, 2017 and $2.2 million at December 31, 2016 of FHLB stock owned by the Bank. At June 30, 2018 and at December 31, 2017 and 2016, the Banks available and unused portion of this borrowing agreement totaled $0.
F-27
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 9 Employee Benefit Plan
The Bank sponsors a 401(k) profit sharing covering substantially all employees certain age and minimum service requirements. The Bank may then match a discretionary percentage of each eligible participants contribution. Matching contributions were $159 and $167 as of June 30, 2018 and 2017 respectively and $355, in 2017 and $339 in 2016.
NOTE 10 Income Taxes
The provision for income taxes included in the accompanying financial statements consists of the following components:
Six months ended June 30, | ||||||||
2018 | 2017 | |||||||
Current Taxes |
||||||||
Federal |
$ | | $ | 67 | ||||
State |
| | ||||||
|
|
|
|
|||||
Total current |
| 67 | ||||||
|
|
|
|
|||||
Deferred Income Taxes |
||||||||
Federal |
(137 | ) | 70 | |||||
State |
(57 | ) | 31 | |||||
Change in valuation allowance |
| (4,757 | ) | |||||
|
|
|
|
|||||
Total deferred |
(194 | ) | (4,656 | ) | ||||
|
|
|
|
|||||
Total income tax (benefit) |
$ | (194 | ) | $ | (4,589 | ) | ||
|
|
|
|
Years ended December 31, | ||||||||
2017 | 2016 | |||||||
Current Taxes |
||||||||
Federal |
$ | 89 | $ | | ||||
State |
| | ||||||
|
|
|
|
|||||
Total current |
89 | | ||||||
Deferred Income Taxes |
||||||||
Federal |
(678 | ) | 5 | |||||
State |
(178 | ) | 12 | |||||
Adjustment to the net deferred asset for the tax cuts and Job Act |
2,062 | | ||||||
Change in valuation allowance |
(4,757 | ) | 17 | |||||
|
|
|
|
|||||
Total deferred |
(3,551 | ) | | |||||
|
|
|
|
|||||
Total income tax (benefit) |
$ | (3,462 | ) | $ | | |||
|
|
|
|
F-28
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 10 Income Taxes (continued)
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The net deferred tax asset in the accompanying balance sheet includes the following amounts of deferred tax assets and liabilities:
June 30,
2018 |
December 31, | |||||||||||
2017 | 2016 | |||||||||||
Deferred Tax Assets |
||||||||||||
Allowance for loan losses |
$ | 858 | $ | 848 | $ | 1,184 | ||||||
Deferred compensation |
773 | 615 | 968 | |||||||||
Accrued employee benefits |
56 | 227 | 102 | |||||||||
Loss carryforwards |
4,271 | 4,105 | 5,361 | |||||||||
Unrealized loss on available for sale securities |
653 | 292 | 418 | |||||||||
Premises and equipment |
292 | 274 | | |||||||||
Other |
406 | 436 | 448 | |||||||||
|
|
|
|
|
|
|||||||
Deferred Tax Assets |
7,309 | 6,797 | 8,481 | |||||||||
|
|
|
|
|
|
|||||||
Deferred Tax Liabilities |
||||||||||||
Loan fees |
148 | 161 | 204 | |||||||||
Premises and equipment |
| | 91 | |||||||||
Mortgage servicing rights |
593 | 623 | 953 | |||||||||
FHLB stock dividends |
42 | 42 | 60 | |||||||||
|
|
|
|
|
|
|||||||
Deferred Tax Liabilities |
783 | 826 | 1,308 | |||||||||
|
|
|
|
|
|
|||||||
Valuation allowance |
| | (4,757 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net Deferred Tax Asset |
$ | 6,526 | $ | 5,971 | $ | 2,416 | ||||||
|
|
|
|
|
|
The Bank has federal loss carryforwards of approximately $13,200 and $12,600 as of June 30, 2018 and December 31, 2017, respectively. These losses begin to expire in 2030. The Bank has state net operating loss carryforwards totaling $23,300 and $22,650 that may be applied against future state taxable income and begin to expire in 2023 and 2021 as of June 30, 2018 and December 31, 2017, respectively.
Deferred tax assets are deferred tax consequences attributable to deductible temporary differences and carryforwards. After the deferred tax asset has been measured using the applicable enacted tax rate and provisions of the enacted tax law, it is then necessary to assess the need for a valuation allowance. A valuation allowance is needed when, based on the weight of the available evidence, it is more likely than not that some portion of the deferred asset will not be realized. As required by generally accepted accounting principles, available evidence is weighted heavily on cumulative losses, with less weight placed on future projected profitability. Realization of the deferred tax asset is dependent on whether there will be sufficient future taxable income of the appropriate character in the period during which deductible temporary differences reverse or within the carryforward periods available under tax law. Management determined there was enough reasonable evidence under current tax laws to reverse the December 31, 2016, valuation allowance of $4,757 in 2017.
Under the Internal Revenue Code and Wisconsin statutes, the Bank is permitted to deduct, for tax years beginning before 1997, an annual addition to a reserve for bad debts. The amount differs from the provision for loan losses recorded for financial accounting purposes. Under prior law, bad debt deductions for income tax purposes were included in taxable income of later years only if the bad debt reserves were used for purposes other than to absorb bad debt losses. Because the Bank did not intend to use the reserve
F-29
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 10 Income Taxes (continued)
for purposes other than to absorb losses, no deferred income taxes were provided. Retained earnings at June 30, 2018 and December 31, 2017, included approximately $8,315, for which no deferred federal or state income taxes were provided. If, in the future, the Bank no longer qualified as a bank for tax purposes, income taxes of approximately $2,278 would be imposed.
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the Act). The Act amends the Internal Revenue Code to reduce corporate tax rates and modify various tax policies, credits, and deductions. The Act reduces the corporate federal tax rate from a maximum of 35% to a flat 21% rate, which is effective for the Bank beginning January 1, 2018. As a result of the tax rate reduction in the Act, the Bank reduced its net deferred tax asset during the year ended December 31, 2017, by $2,062, which was recognized as additional income tax expense.
A summary of the sources of differences between income taxes at the federal statutory rate and the provision (credit) for income taxes follows:
Six months ended June 30, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Amount |
% of Pretax
Income |
Amount |
% of Pretax
Income |
|||||||||||||
Reconciliation of statutory to effective rates |
||||||||||||||||
Federal income taxes at statutory rate |
$ | (109 | ) | 21.00 | % | $ | 149 | 34.00 | % | |||||||
Adjustments for |
||||||||||||||||
State income taxes, net of federal income tax benefit |
(45 | ) | 8.12 | % | 20 | 4.57 | % | |||||||||
Increase in CSV of life insurance |
(42 | ) | 8.70 | % | (71 | ) | (16.21 | )% | ||||||||
Change in Valuation Allowance |
| | (4,757 | ) | (1,086.07 | )% | ||||||||||
Other |
2 | (0.38 | )% | 70 | 15.97 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Provision (credit) for income taxes |
$ | 194 | 37.44 | % | $ | (4,589 | ) | (1,047.74 | )% | |||||||
|
|
|
|
|
|
|
|
Years ended December 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Amount |
% of Pretax
Income |
Amount |
% of Pretax
Income |
|||||||||||||
Reconciliation of statutory to effective rates |
||||||||||||||||
Federal income taxes at statutory rate |
$ | (613 | ) | 34.00 | % | $ | 426 | 34.00 | % | |||||||
Adjustments for |
||||||||||||||||
Tax exempt interest on municipal obligations |
| | (3 | ) | (0.23 | )% | ||||||||||
State income taxes, net of federal income tax benefit |
(118 | ) | 6.54 | % | 7 | 0.56 | % | |||||||||
Increase in CSV of life insurance |
(140 | ) | 7.76 | % | (152 | ) | (12.12 | )% | ||||||||
Adjustment for the Tax Cut and Jobs Act |
2,062 | (114.36 | )% | | | |||||||||||
Change in Valuation Allowance |
(4,757 | ) | 263.83 | % | (17 | ) | (1.36 | )% | ||||||||
Other |
104 | (5.76 | )% | (261 | ) | (20.85 | )% | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Provision (credit) for income taxes |
$ | (3,462 | ) | 192.01 | % | $ | | | % | |||||||
|
|
|
|
|
|
|
|
With few exceptions, the Bank is no longer subject to federal or state examinations by taxing authorities for years before 2013.
F-30
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 11 Commitments and Contingencies
In the normal course of business, the Bank may be involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Banks financial statements. No legal proceedings existed at December 31, 2017.
The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These instruments include commitments to extend credit and commitments to sell loans. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheets.
The Banks exposure to credit loss is represented by the contractual, or notional, amount of these commitments. The Bank follows the same credit policies in making commitments as it does for on-balance- sheet instruments. Since some of the commitments are expected to expire without being drawn upon, and some of the commitments may not be drawn upon to the total extent of the commitment, the notional amount of these commitments does not necessarily represent future cash requirements of the Bank.
The contract amounts of credit-related financial instruments at June 30, 2018 and December 31, 2017 and 2016 are summarized below:
June 30, 2018 | Fixed Rate | Variable Rate | Total | |||||||||
Commitments to extend credit |
$ | 14,849 | $ | 58,369 | $ | 73,218 | ||||||
Standby letters of credit, variable |
| 33 | 33 | |||||||||
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance |
560 | | 560 | |||||||||
Commitment to sell loans |
5,303 | | 5,303 | |||||||||
Overdraft protection program commitments |
4,255 | | 4,255 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 24,967 | $ | 58,402 | $ | 83,369 | ||||||
|
|
|
|
|
|
December 31, 2017 | Fixed Rate | Variable Rate | Total | |||||||||
Commitments to extend credit |
$ | 8,563 | $ | 41,204 | $ | 49,767 | ||||||
Standby letters of credit, variable |
| 353 | 353 | |||||||||
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance |
695 | | 695 | |||||||||
Commitment to sell loans |
7,328 | | 7,328 | |||||||||
Overdraft protection program commitments |
4,331 | | 4,331 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 20,917 | $ | 41,557 | $ | 62,474 | ||||||
|
|
|
|
|
|
December 31, 2016 | Fixed Rate | Variable Rate | Total | |||||||||
Commitments to extend credit |
$ | 17,720 | $ | 44,490 | $ | 62,211 | ||||||
Standby letters of credit, variable |
| 343 | 343 | |||||||||
Credit enhancement under the FHLB of Chicago Mortgage Partnership Finance |
738 | | 738 | |||||||||
Commitment to sell loans |
4,656 | | 4,656 | |||||||||
Overdraft protection program commitments |
4,657 | | 4,657 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 27,770 | $ | 44,833 | $ | 72,604 | ||||||
|
|
|
|
|
|
F-31
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 11 Commitments and Contingencies
Commitments to extend credit and commitments to sell credits are agreements to lend to a customer at fixed or variable rates 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. The amount of collateral obtained upon extension of credit is based on managements credit evaluation of the customer. Collateral held varies but may include accounts receivable; inventory; property, plant, and equipment; real estate; and stocks and bonds.
Standby letters of credit are conditional lending commitments issued by the Bank to guarantee the performance of a customer to a third party. Generally, all standby letters of credit issued have expiration dates within one year. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank generally holds collateral supporting these commitments. Standby letters of credit are not reflected in the financial statements, since recording the fair value of these guarantees would not have a significant impact on the financial statements.
The Bank participates in the FHLB Mortgage Partnership Finance Program (the Program). In addition to entering into forward commitments to sell mortgage loans to a secondary market agency, the Bank enters into firm commitments to deliver loans to the FHLB through the Program. Under the Program, loans are funded by the FHLB, and the Bank receives an agency fee reported as a component of gain on sale of loans. The Bank had $2,884 of commitments to deliver loans through the Program as of June 30, 2018 and no firm commitments outstanding to deliver loans through the Program at December 31, 2017. Once delivered to the Program, the Bank provides a contractually agreed-upon credit enhancement and performs servicing of the loans. Under the credit enhancement, the Bank is liable for losses on loans delivered to the Program after application of any mortgage insurance and a contractually agreed-upon credit enhancement provided by the Program subject to an agreed-upon maximum. The Bank receives a fee for this credit enhancement. The Bank records a liability for expected losses in excess of anticipated credit enhancement fees. As of June 30, 2018, and December 31, 2017 and 2016, the Bank had no liability outstanding.
Unfunded commitments under overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit may or may not require collateral and may or may not contain a specific maturity date.
F-32
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 12 Concentration of Credit Risk
Financial instruments that potentially subject the Bank to credit risk consist primarily of cash and cash equivalents, investments, and loans. The Banks cash and cash equivalents are held in demand accounts with various institutions. The Banks investments are held in a variety of interest bearing investments including obligations from the U.S. government and government sponsored agencies and certificates of deposit. Such deposits are generally in excess of insured limits. The Bank has not experienced any historical losses on its deposits of cash and cash equivalents. Practically all of the Banks loans and commitments have been granted to customers in the Banks market area. Although the Bank has a diversified loan portfolio, the ability of their debtors to honor their contracts is dependent on the economic conditions of the counties surrounding the Bank. The concentration of credit by type of loan is set forth in Note 4.
NOTE 13 Related-Party Transactions
A summary of loans to directors, executive officers, and their affiliates follows:
June 30, |
Years ended
December 31, |
|||||||||||
2018
(unaudited) |
2017 | 2016 | ||||||||||
Beginning balance |
$ | 1,477 | $ | 2,004 | $ | 2,271 | ||||||
New loans |
52 | 202 | 141 | |||||||||
Repayments |
(152 | ) | (729 | ) | (408 | ) | ||||||
|
|
|
|
|
|
|||||||
Ending balance |
$ | 1,377 | $ | 1,477 | $ | 2,004 | ||||||
|
|
|
|
|
|
Deposits from directors, executive officers, and their affiliates totaled $1,065 as of June 30, 2018 and $926 and $844 at December 31, 2017 and 2016, respectively.
The Bank utilizes the services of law firms in which certain of the Banks directors are partners. Fees paid to the firms for the six months ended June 30, 2018 and 2017 were $21 and $41 respectively, and $63 and $45 during the years ended December 31, 2017 and 2016, respectively.
NOTE 14 Fair Value
Accounting standards describe three levels of inputs that may be used to measure fair value (the fair value hierarchy). The level of an asset or liability within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement of that asset or liability.
Following is a brief description of each level of the fair value hierarchy:
Level 1 Fair value measurement is based on quoted prices for identical assets or liabilities in active markets.
Level 2 Fair value measurement is based on: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets or liabilities in markets that are not active; or (3)valuation models and methodologies for which all significant assumptions are or can be corroborated by observable market data.
Level 3 Fair value measurement is based on valuation models and methodologies that incorporate at least one significant assumption that cannot be corroborated by observable market data. Level 3 measurements reflect the Banks estimates about assumptions market participants would use in measuring fair value of the asset or liability.
F-33
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 14 Fair Value (continued)
Some assets and liabilities, such as securities available for sale, are measured at fair value on a recurring basis under accounting principles generally accepted in the United States. Other assets and liabilities, such as impaired loans, may be measured at fair value on a nonrecurring basis.
Following is a description of the Banks valuation methodology and significant inputs used for each asset and liability measured at fair value on a recurring or nonrecurring basis, as well as the classification of the asset or liability within the fair value hierarchy.
Available for sale securities Available for sale securities may be classified as Level 1 or Level 2 measurements within the fair value hierarchy. Level 1 securities include equity securities traded on a national exchange. The fair value measurement of a Level 1 security is based on the quoted price of the security. Level 2 securities include U.S. government and agency securities, obligations of states and political subdivisions, corporate debt securities, and mortgage related securities. The fair value measurement of a Level 2 security is obtained from an independent pricing service and is based on recent sales of similar securities and other observable market data.
Loans Loans are not measured at fair value on a recurring basis. However, loans considered to be impaired may be measured at fair value on a nonrecurring basis. The fair value measurement of an impaired loan that is collateral dependent is based on the fair value of the underlying collateral. Independent appraisals are obtained that utilize one or more valuation methodologies-typically they will incorporate a comparable sales approach and an income approach. Management routinely evaluates the fair value measurements of independent appraisers and adjusts those valuations based on differences noted between actual selling prices of collateral and the most recent appraised value. Such adjustments are usually significant, which results in a Level 3 classification. All other impaired loan measurements are based on the present value of expected future cash flows discounted at the applicable effective interest rate and, thus, are not fair value measurements.
F-34
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 14 Fair Value (continued)
Assets measured at fair value on a recurring basis are summarized below:
Recurring Fair Value Measurements Using | ||||||||||||||||
Quoted Prices
in Active Markets for Identical Instruments (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Total | |||||||||||||
As of June 30, 2018 (unaudited) |
||||||||||||||||
Assets: |
||||||||||||||||
Available for sale securities: |
||||||||||||||||
Obligations of states and political subdivisions |
$ | | $ | 11,431 | $ | | $ | 11,431 | ||||||||
Government-sponsored mortgage-backed securities |
| 52,910 | | 52,910 | ||||||||||||
CMO |
| 505 | | 505 | ||||||||||||
Asset-backed securities |
| 4,205 | | 4,205 | ||||||||||||
Certificates of deposit |
| 245 | | 245 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | | $ | 69,296 | $ | | $ | 69,296 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
As of December 31, 2017 |
||||||||||||||||
Assets: |
||||||||||||||||
Available for sale securities: |
||||||||||||||||
Obligations of states and political subdivisions |
$ | | $ | 20,630 | $ | | $ | 20,630 | ||||||||
Government-sponsored mortgage-backed securities |
| 60,024 | | 60,024 | ||||||||||||
CMO |
| 702 | | 702 | ||||||||||||
Asset-backed securities |
| 4,832 | | 4,832 | ||||||||||||
Certificates of deposit |
| 1,516 | | 1,516 | ||||||||||||
Corporate bonds |
| 1,251 | | 1,251 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | | $ | 88,955 | $ | | $ | 88,955 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
As of December 31, 2016 |
||||||||||||||||
Assets: |
||||||||||||||||
Available for sale securities: |
||||||||||||||||
Obligations of states and political subdivisions |
$ | | $ | 21,964 | $ | | $ | 21,964 | ||||||||
Government-sponsored mortgage-backed securities |
| 64,949 | | 64,949 | ||||||||||||
CMO |
1,254 | 1,254 | ||||||||||||||
Asset-backed securities |
| 5,524 | | 5,524 | ||||||||||||
Certificates of deposit |
| 1,269 | | 1,269 | ||||||||||||
Corporate bonds |
| 1,498 | | 1,498 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | | $ | 96,458 | $ | | $ | 96,458 | ||||||||
|
|
|
|
|
|
|
|
F-35
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 14 Fair Value (continued)
Information regarding the fair value of assets measured at fair value on a nonrecurring basis follows:
Recurring Fair Value Measurements Using | ||||||||||||||||
Quoted Prices in
Active Markets for Identical Instruments (Level 1) |
Significant Other
Observable Inputs (Level 2) |
Significant Other
Unobservable Inputs (Level 3) |
Total | |||||||||||||
As of June 30, 2018 (unaudited) |
||||||||||||||||
Assets: |
||||||||||||||||
Loans |
| | $ | 125 | $ | 125 | ||||||||||
As of December 31, 2017 |
||||||||||||||||
Assets: |
||||||||||||||||
Loans |
| | $ | 148 | $ | 148 | ||||||||||
As of December 31, 2016 |
||||||||||||||||
Assets: |
||||||||||||||||
Loans |
| | | |
Loans with a carrying amount of $325 were considered impaired and written down to their estimated fair value of $125 as of June 30, 2018. As a result, the Bank recognized a specific valuation allowance against these impaired loans totaling $200 as of June 30, 2018. Loans with a carrying amount of $378 were considered impaired and were written down to their estimated fair value of $148 as of December 31, 2017. As a result, the Bank recognized a specific valuation allowance against these impaired loans totaling $230 as of December 31, 2017. Loans with a carrying amount of $311 were considered impaired and were written down to their estimated fair value of $0 as of December 31, 2016. As a result the Bank recognized a specific valuation allowance against these impaired loans totaling $311.
The following presents quantitative information about nonrecurring Level 3 fair value measurements:
Fair
Value |
Valuation Technique | Unobservable Input(s) |
Range/
Weighted Average |
|||||||||||||
As of June 30, 2018 (unaudited) |
||||||||||||||||
Impaired loans |
$ | 125 |
|
Market and/or
income approach |
|
|
Management discount
on appraised values |
|
10%-20% | |||||||
As of December 31, 2017 |
||||||||||||||||
Impaired loans |
$ | 148 |
|
Market and/or
income approach |
|
|
Management discount
on appraised values |
|
10%-20% | |||||||
As of December 31, 2016 |
||||||||||||||||
Impaired loans |
$ | |
|
Market and/or
income approach |
|
|
Management discount
on appraised values |
|
10%-20% |
F-36
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 14 Fair Value (continued)
The Bank estimates fair value of all financial instruments regardless of whether such instruments are measured at fair value. The following methods and assumptions were used by the Bank to estimate fair value of financial instruments not previously discussed.
Cash and cash equivalents Fair value approximates the carrying value.
Loans held for sale Fair value is based on commitments on hand from investors or prevailing market prices.
Loans Fair value of variable rate loans that reprice frequently is based on carrying values. Fair value of other loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings. Fair value of impaired and other nonperforming loans is estimated using discounted expected future cash flows or the fair value of the underlying collateral, if applicable.
FHLB stock Fair value is the redeemable (carrying) value based on the redemption provisions of the Federal Home Loan Bank.
Accrued interest receivable and payable Fair value approximates the carrying value.
Cash value of life insurance Fair value is based on reported values of the assets.
Deposits and advance payments by borrowers for taxes and insurance Fair value of deposits with no stated maturity, such as demand deposits, savings, and money market accounts, including advance payments by borrowers for taxes and insurance, by definition, is the amount payable on demand on the reporting date. Fair value of fixed rate time deposits is estimated using discounted cash flows applying interest rates currently being offered on similar time deposits.
FHLB Advances Fair value of fixed rate, fixed term borrowings is estimated by discounting future cash flows using the current rates at which similar borrowings would be made. Fair value of borrowings with variable rates or maturing within 90 days approximates the carrying value of those borrowings.
The carrying value and estimated fair value of financial instruments follow:
June 30, 2018 (unaudited) | ||||||||||||||||
Carrying
Value |
Level 1 | Level 2 | Level 3 | |||||||||||||
Financial assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 7,995 | $ | 7,995 | $ | | $ | | ||||||||
Available for sale securities |
69,296 | | 69,296 | | ||||||||||||
Loans held for sale |
1,170 | | 1,170 | | ||||||||||||
Loans |
368,021 | | | 361,189 | ||||||||||||
Accrued interest receivable |
1,144 | 1,144 | | | ||||||||||||
Cash value of life insurance |
13,931 | | | 13,931 | ||||||||||||
FHLB stock |
1,818 | | | 1,818 | ||||||||||||
Financial liabilities: |
||||||||||||||||
Deposits |
404,560 | 205,829 | | 197,133 | ||||||||||||
Advance payments by borrowers for taxes and insurance |
7,367 | 7,367 | | | ||||||||||||
FHLB advances |
27,677 | | 27,047 | |||||||||||||
Accrued interest payable |
$ | 346 | $ | 346 | $ | | $ | |
F-37
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 14 Fair Value (continued)
December 31, 2017 | ||||||||||||||||
Carrying
Value |
Level 1 | Level 2 | Level 3 | |||||||||||||
Financial assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 12,497 | $ | 12,497 | $ | | $ | | ||||||||
Available for sale securities |
88,995 | | 88,955 | | ||||||||||||
Loans held for sale |
217 | | 217 | | ||||||||||||
Loans |
331,206 | | | 328,526 | ||||||||||||
Accrued interest receivable |
1,214 | 1,214 | | | ||||||||||||
Cash value of life insurance |
13,732 | | | 13,732 | ||||||||||||
FHLB stock |
1,436 | | | 1,436 | ||||||||||||
Financial liabilities: |
||||||||||||||||
Deposits |
389,291 | 203,048 | | 185,758 | ||||||||||||
Advance payments by borrowers for taxes and insurance |
385 | 385 | | | ||||||||||||
FHLB advances |
34,693 | | | 34,229 | ||||||||||||
Accrued interest payable |
$ | 340 | $ | 340 | $ | | $ | |
December 31, 2016 | ||||||||||||||||
Carrying
Value |
Level 1 | Level 2 | Level 3 | |||||||||||||
Financial assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 7,779 | $ | 7,779 | $ | | $ | | ||||||||
Available for sale securities |
96,458 | | 96,458 | | ||||||||||||
Loans held for sale |
479 | | 479 | | ||||||||||||
Loans |
312,523 | | | 309,443 | ||||||||||||
Accrued interest receivable |
1,163 | 1,163 | | | ||||||||||||
Cash value of life insurance |
13,321 | | | 13,321 | ||||||||||||
FHLB stock |
2,170 | | | 2,170 | ||||||||||||
Financial liabilities: |
||||||||||||||||
Deposits |
358,882 | 201,686 | | 156,394 | ||||||||||||
Advance payments by borrowers for taxes and insurance |
1,297 | 1,297 | | | ||||||||||||
FHLB advances |
48,224 | | | 47,826 | ||||||||||||
Accrued interest payable |
$ | 276 | $ | 276 | $ | | $ | |
Limitations The fair value of a financial instrument is the current amount that would be exchanged between market participants, other than in a forced liquidation. Fair value is best determined based on quoted market prices. However, in many instances, there are no quoted market prices for the Banks various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Bank.
F-38
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 14 Fair Value (continued)
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 Banks entire holdings of a particular instrument. Because no market exists for a significant portion of the Banks financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters that could 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. Deposits with no stated maturities are defined as having a fair value equivalent to the amount payable on demand. This prohibits adjusting fair value derived from retaining those deposits for an expected future period of time. This component, commonly referred to as a deposit base intangible, is neither considered in the above amounts, nor is it recorded as an intangible asset on the balance sheets. 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.
NOTE 15 Equity and Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by federal and state 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 Banks 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 assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1, and Total capital to risk-weighted assets and of Tier 1 capital to average assets. It is managements opinion, as of June 30 2018 and as of December 31, 2017, that the Bank met all applicable capital adequacy requirements.
As of June 30 2018 and as of December 31, 2017, the Bank is categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum regulatory capital ratios as set forth in the table. There are no conditions or events since December 31, 2017 that management believes have changed the category.
F-39
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 15 Equity and Regulatory Matters (continued)
The Banks actual capital amounts and ratios are presented in the following tables:
Actual |
For Capital Adequacy
Purposes |
To Be Well Capitalized
Under Prompt Corrective Action Provisions |
||||||||||||||||||||||
(Dollars in Thousands) |
Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
June 30, 2018 (unaudited): |
||||||||||||||||||||||||
Leverage (Tier 1) |
$ | 35,552 | 7.5 | % | $ | 19,064 | 4.0 | % | $ | 23,830 | 5.0 | % | ||||||||||||
Risk Based: |
||||||||||||||||||||||||
Common Tier 1 |
35,552 | 9.7 | 16,489 | 4.5 | 23,817 | 6.5 | ||||||||||||||||||
Tier 1 |
35,552 | 9.7 | 21,985 | 6.0 | 29,313 | 8.0 | ||||||||||||||||||
Total |
$ | 38,644 | 10.5 | % | $ | 29,313 | 8.0 | % | $ | 36,641 | 10.0 | % | ||||||||||||
December 31, 2017: |
||||||||||||||||||||||||
Leverage (Tier 1) |
$ | 34,868 | 7.4 | % | $ | 18,975 | 4.0 | % | $ | 23,719 | 5.0 | % | ||||||||||||
Risk Based: |
||||||||||||||||||||||||
Common Tier 1 |
34,868 | 11.1 | 14,174 | 4.5 | 20,473 | 6.5 | ||||||||||||||||||
Tier 1 |
34,868 | 11.1 | 18,898 | 6.0 | 25,197 | 8.0 | ||||||||||||||||||
Total |
$ | 37,961 | 12.1 | % | $ | 25,197 | 8.0 | % | $ | 31,497 | 10.0 | % | ||||||||||||
December 31, 2016: |
||||||||||||||||||||||||
Leverage (Tier 1) |
$ | 37,158 | 8.4 | % | $ | 17,667 | 4.0 | % | $ | 22,084 | 5.0 | % | ||||||||||||
Risk Based: |
||||||||||||||||||||||||
Common Tier 1 |
37,158 | 11.3 | 14,786 | 4.5 | 21,357 | 6.5 | ||||||||||||||||||
Tier 1 |
37,158 | 11.3 | 19,714 | 6.0 | 26,286 | 8.0 | ||||||||||||||||||
Total |
$ | 40,166 | 12.2 | % | $ | 26,286 | 8.0 | % | $ | 32,857 | 10.0 | % |
F-40
PYRAMAX BANK, FSB
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2018 and June 30, 2017 (unaudited) and
Years Ended December 31, 2017 and 2016
(In thousands)
NOTE 16 Deferred Compensation
The Bank has obligations to certain retired and active employees and directors under deferred compensation plans. A liability is recorded for the value of the deferred compensation obligations amounting to $2.3 million at June 30, 2018 and $2.2 million and $1.9 million at December 31, 2017 and 2016, respectively. The amounts deferred under the plans are invested in various cash equivalent, bond, and equity security accounts that are maintained in a Rabbi Trust. As of June 30, 2108 and December 31, 2017 and 2016, the balances in the Rabbi Trust accounts was included with other assets and totaled $2.3 million, $2.2 million and $1.9 million, respectively.
The Bank has entered into various salary continuation agreements with key officers. The agreements provide for the payment of specified amounts upon each employees retirement or death. The liability outstanding under the agreements was $489 as of June 30, 2018 and $538 at December 31, 2017, and $631 at December 31, 2016. The amount charged to operations was $22 and $24 for the six month periods ended June 30, 2018 and 2017, respectively, and $48 and $85 for the years ended December 31, 2017 and 2016, respectively.
The Bank is the beneficiary of insurance policies on the lives of certain key employees. These policies had a cash value of $13.9 million as of June 30, 2018 and $13.7 million at and $13.3 million at December 31, 2017 and 2016, respectively.
NOTE 17 Subsequent Event
On September 5, 2018, the Board of Directors of the Bank adopted a Plan of Reorganization from a Mutual Savings Bank 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 1895 Bancorp of Wisconsin, 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 appraisers valuation. The stock will be priced at $10.00 per share. In addition, the Banks 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. 1895 Bancorp of Wisconsin, Inc. will be organized as a corporation under the laws of the United States and will offer 45% of its common stock to be outstanding to the Banks eligible members, the ESOP and certain other persons. 1895 Bancorp of Wisconsin, MHC will be organized as a mutual holding company under the laws of the United States and will own 55% of the common stock of 1895 Bancorp of Wisconsin, 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 June 30, 2018, no reorganization costs had been incurred.
Management has reviewed the Banks operations for potential disclosure or financial statement impacts related to events occurring after December 31, 2017, but prior to the release of these financial statements. Based on the results of this review, no additional subsequent event disclosures or financial statement impacts to these financial statements are required as of September 6, 2018.
F-41
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 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB. 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 1895 Bancorp of Wisconsin, Inc. or PyraMax Bank, FSB since any of the dates as of which information is furnished herein or since the date hereof.
Up to 2,783,000 shares
(Subject to Increase to up to 3,200,450 shares)
1895 Bancorp of Wisconsin, Inc.
(Proposed Holding Company for
PyraMax Bank, FSB)
COMMON STOCK
par value $0.01 per share
PROSPECTUS
KEEFE BRUYETTE & WOODS, INC.
A Stifel Company
, 2018
These securities are not deposits or accounts and are not federally insured or guaranteed.
Until [Date 2], 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 |
Estimated Amount | ||||
Registrants Legal Fees and Expenses |
$ | 500,000 | ||
Registrants Accounting Fees and Expenses |
177,500 | |||
Marketing Agent Fees and Expenses (1) |
390,000 | |||
Records Management Fees and Expenses |
25,000 | |||
Appraisal Fees and Expenses |
40,500 | |||
Printing, Postage, Mailing and EDGAR Fees |
160,000 | |||
Filing Fees (NASDAQ, FINRA, SEC) |
76,200 | |||
Transfer Agent Fees and Expenses |
20,000 | |||
Business Plan Fees and Expenses |
59,500 | |||
Stock Certificate Fees and Expenses |
10,000 | |||
Other |
41,300 | |||
|
|
|||
Total |
$ | 1,500,000 | ||
|
|
(1) |
Estimated at the adjusted maximum of the offering range, assuming 100% of the shares are sold in the subscription offering. |
Item 14. |
Indemnification of Directors and Officers |
Provisions in the Registrants bylaws provide for indemnification of the Registrants 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 1895 Bancorp of Wisconsin, 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 attorneys 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: |
a. |
Settlement, |
b. |
Final judgment against him or her, or |
c. |
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:
(a) |
List of Exhibits |
II-2
99.1 | Engagement letter with Keller & Company, Inc. to serve as appraiser | |
99.2 | Letter of Keller & Company, Inc. with respect to value of Subscription Rights | |
99.3 | Appraisal Report of Keller & Company, Inc. | |
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 inapplicable or is included in the consolidated financial statements and 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 Greenfield, State of Wisconsin on September 7, 2018.
1895 BANCORP OF WISCONSIN, INC. | ||
By: |
/s/ Richard B. Hurd |
|
Richard B. Hurd | ||
President and Chief Executive Officer | ||
(Duly Authorized Representative) |
We, the undersigned directors and officers of 1895 Bancorp of Wisconsin, Inc. (the Corporation) hereby severally constitute and appoint Richard B. Hurd as our true and lawful attorney and agent, to do any and all things in our names in the capacities indicated below which said individual may deem necessary or advisable to enable the Corporation to comply with the Securities Act of 1933, as amended, 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 Corporations common stock, including specifically, but not limited to, power and authority to sign for 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 individual shall do or cause to be done by virtue thereof.
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/ Richard B. Hurd Richard B. Hurd |
President, Chief Executive Officer and Director (Principal Executive Officer) |
September 7, 2018 | ||
/s/ Richard J. Krier Richard J. Krier |
Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
September 7, 2018 | ||
/s/ Darrell Francis Darrell Francis |
Chairman of the Board | September 7, 2018 | ||
/s/ Monica Baker Monica Baker |
Senior Vice President and Director | September 7, 2018 | ||
/s/ Joseph Murphy Joseph Murphy |
Director | September 7, 2018 | ||
/s/ James Spiegelberg James Spiegelberg |
Director | September 7, 2018 | ||
/s/ John Talsky John Talsky |
Director | September 7, 2018 | ||
/s/ Gary Zenobi Gary Zenobi |
Director | September 7, 2018 |
Exhibit 1.1
July 3, 2018
PyraMax Bank, FSB
7001 West Edgerton Ave.,
Greenfield, WI 53220
Attention: | Mr. Richard B. Hurd | |||
President & Chief Executive Officer |
Ladies and Gentlemen:
This letter confirms the engagement of Keefe, Bruyette & Woods, Inc. (KBW) to act as the exclusive financial advisor to PyraMax Bank, FSBs (the Bank) proposed reorganization into the mutual holding company form of organization pursuant to the Banks proposed Plan of Conversion (the Conversion). The Conversion will involve (i) the creation of a newly organized middle-tier stock holding company (the Mid-Tier Holding Company) and the creation of a newly formed mutual holding company (the MHC), (ii) pro forma for the Offerings (as defined below), (A) the full ownership of the Bank by the Mid-Tier Holding Company and (B) the ownership of greater than 50% of the outstanding common stock of the Mid-Tier Holding Company (the Common Stock) by the MHC and (iii) the offer and sale of the Common Stock not to be owned by the MHC in accordance with the foregoing clause, initially to eligible persons in a Subscription Offering, with any remaining shares offered to the general public in a Community Offering (as defined herein) (a Subscription Offering, a Community Offering and any Syndicated Community Offering (as defined herein) are collectively referred to herein as the Offerings). In addition, KBW will act as Conversion Agent and Data Processing Records Management Agent in connection with the Offerings pursuant to the terms of a separate agreement between the Bank and KBW. The Bank, the MHC and the Mid-Tier Holding Company are collectively referred to herein as the Company. This letter sets forth the terms and conditions of our engagement.
1. |
Advisory/Offering Services |
As the Companys exclusive financial advisor, KBW will provide financial and logistical advice to the Company and will assist the Companys management, legal counsel, accountants and other advisors in connection with the Conversion and the Offerings, and related issues. We anticipate our services will include the following, each as may be necessary and as the Company may reasonably request:
1. |
Providing advice on the financial and securities market implications of the Conversion and any related corporate documents, including the Plan of Conversion; |
2. |
Assisting in structuring the Offerings, including developing and assisting in implementing a marketing strategy for the Offerings; |
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 2 of 9
3. |
Serving as sole bookrunning manager in connection with the Offerings; |
4. |
Reviewing all offering documents related to the Offerings, including the prospectus (the Prospectus) and any related offering materials, stock order forms, letters, brochures and other related offering materials (it being understood that preparation and filing of such documents will be the responsibility of the Company and its counsel); |
5. |
Assisting the Company in preparing for and scheduling meetings with potential investors and broker-dealers, as necessary; |
6. |
Assisting the Company in analyzing proposals from outside vendors retained in connection with the Offerings, including printers, transfer agents and appraisal firms; |
7. |
Assisting the Company in the drafting and distribution of press releases as required or appropriate in connection with the Offerings; |
8. |
Meeting with the board of directors of the Company (the Board of Directors) and/or management of the Company to discuss any of the above services; and |
9. |
Performing such other financial advisory and investment banking services in connection with the Conversion and the Offerings as may be agreed upon by KBW and the Company. |
2. |
Due Diligence Review |
The Company acknowledges and agrees that KBWs obligation to perform the services contemplated by this Agreement shall be subject to the satisfactory completion of such investigations and inquiries relating to the Company, and its directors, officers, agents and employees, as KBW and their counsel in their sole discretion may deem appropriate under the circumstances (the Due Diligence Review).
The Company agrees it will make available to KBW all information, whether or not publicly available, which KBW reasonably requests (the Information), and will permit KBW to discuss with the Board of Directors and management the operations and prospects of the Company. KBW will treat all Confidential Information (as defined herein) as confidential in accordance with the provisions of Section 9 hereof. The Company recognizes and confirms that KBW (a) will use and rely on and assume the accuracy and completeness of the Information in performing the services contemplated by this Agreement without having independently verified or analyzed the accuracy or completeness of same, and (b) does not assume responsibility or liability for the accuracy or completeness of the Information or to conduct any independent verification or any appraisal or physical inspection of properties or assets. The Company acknowledges and agrees that KBW will rely upon Company management as to the reasonableness and achievability of any financial and operating forecasts and projections provided to KBW or which KBW is directed to use, and that KBW will assume, at the Companys direction, that all financial forecasts and projections have been reasonably prepared by Company management on a basis reflecting the best then currently available estimates and judgments of management as to the expected future financial performance of the Company, and that such forecasts and projections will be realized in the amounts and in the time periods currently estimated.
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 3 of 9
3. |
Regulatory Filings |
The Company will cause the registration statement (the Registration Statement) and the Prospectus to be filed with the Securities and Exchange Commission (the SEC) and will cause all other offering documents in respect of the Conversion and the Offerings to be filed, as necessary or appropriate, with applicable regulatory agencies including the SEC, the Financial Industry Regulatory Authority (FINRA), and the appropriate federal and/or state bank regulatory agencies. In addition, the Company and KBW agree that the Companys counsel shall serve as counsel with respect to blue sky matters in connection with the Offerings, and that the Company shall cause such counsel to prepare a Blue Sky Memorandum related to the Offerings including KBWs participation therein and shall furnish KBW a copy thereof addressed to KBW or upon which counsel shall state KBW may rely.
4. |
Fees |
For the services hereunder, the Company shall pay the following non-refundable cash fees to KBW, in the amounts and at the times set forth below:
(a) |
Management Fee: A non-refundable cash fee in an amount of $25,000 (the Management Fee) shall be payable by the Company to KBW, as follows: (i) $12,500 shall be paid immediately upon the execution of this Agreement and (ii) the remaining $12,500 shall be paid immediately upon the initial filing of the Registration Statement (whether or not such filing is publicly available). Each payment in respect of the Management Fee shall be deemed to have been earned in full when due. Should the Offerings or this Agreement be terminated for any reason, KBW shall be deemed to have earned in full, and be entitled to be paid in full, all fees then due and payable as of such date of termination. |
(b) |
Success Fee: A Success Fee of $315,000 for shares of the Common Stock sold in the Subscription Offering and the Community Offering shall be paid upon the completion of the Offerings. The Management Fee described in 4(a), to the extent then already paid, will be credited against the Success Fee. The obligation to pay to KBW the full Success Fee upon completion of the Subscription Offering and any Community Offering shall survive any termination of this agreement, including any termination occurring prior to the completion of such Offerings. |
(c) |
Fees for Syndicated Community Offering : If any shares of the Common Stock remain unsold after the completion of the Subscription Offering and any Community Offering, at the request of the Company, KBW will seek to form a syndicate of registered broker-dealers (a Syndicated Community Offering), to assist on a best efforts basis, subject to the terms and conditions set forth in a selected dealers agreement to be entered into by and between the Company and KBW. KBW will endeavor to distribute the Common Stock among broker-dealers in a fashion which best meets the distribution objectives of the Company and the Conversion. In the event of a Syndicated Community Offering, KBW will be paid a transaction fee not to exceed 6.0% of the aggregate purchase price of the shares of Common Stock sold in the Syndicated Community Offering. The Success Fee described in 4(b) will be credited against the transaction fee. From this fee, KBW will pass onto selected broker-dealers (if any), who assist in the Syndicated Community Offering, an |
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 4 of 9
amount competitive with gross underwriting discounts charged at such time for comparable amounts of stock sold at a comparable price per share in a similar market environment. Fees with respect to purchases affected with the assistance of a broker/dealer other than KBW shall be transmitted by KBW to such broker/dealer.
(d) |
In connection with the Subscription Offering, if, as a result of any resolicitation of subscribers undertaken by the Company, KBW reasonably determines that it is required or requested to provide significant services, KBW will be entitled to additional compensation for such services, which additional compensation will not exceed $25,000. |
The terms of any Agency Agreement (as defined herein) to be entered into between the Company and KBW in connection with the Offerings shall contain fee provisions no less favorable to KBW than those set forth above. To the extent required under applicable FINRA rules and regulations, the payment of compensation by the Company to KBW pursuant to this Section 4 is subject to FINRAs review thereof.
5. |
Additional Services |
KBW further agrees to provide general financial advisory assistance to the Company that is not in the context of any contemplated transaction, for a period of three years following completion of the Offerings, including general strategic planning, the creation of a capital management strategy designed to enhance the value of the Company, including the formation of a dividend policy and share repurchase program, assistance with shareholder relations matters, general advice on mergers and acquisitions, and other related financial matters, without the payment by the Company of any fees in addition to those set forth in Section 4 hereof. Nothing in this Agreement shall require the Company to obtain such services from KBW. If KBW acts as a financial advisor to the Company in connection with any specific transactions, the terms of such engagement will be set forth in a separate agreement between the Company and KBW.
6. |
Expenses |
The Company will bear all expenses of the proposed Offerings customarily borne by issuers, including, without limitation, regulatory filing fees, SEC, Blue Sky, and FINRA filing and registration fees; the fees of the Companys accountants, attorneys, appraiser, business plan consultant, transfer agent and registrar, printing, mailing and marketing and syndicate expenses associated with the Offerings; the fees set forth in Section 4; and fees for Blue Sky legal work. If KBW incurs any expenses on behalf of Company in connection with the matters contemplated by this Agreement, the Company will reimburse KBW for such expenses.
KBW will also be reimbursed for its reasonable out-of-pocket expenses, not to exceed $25,000 (subject to the provisions of this paragraph), related to the Offerings, including, but not limited to, costs of travel, meals and lodging, clerical assistance, photocopying, telephone, facsimile, and couriers. KBW will also be reimbursed for fees and expenses of its counsel not to exceed $75,000 (subject to the provisions of this paragraph). These expense caps assume no unusual circumstances or delays, and no
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 5 of 9
resolicitation in connection with the Offerings. The Company acknowledges and agrees that, in the event unusual circumstances arise or a delay or resolicitation occurs (including but not limited to a delay in the Offerings which would require an update of the financial information in tabular form to reflect a period later than that set forth in the original filing of the offering documents), such expense caps may be increased by additional amounts, not to exceed an additional $10,000 in the case of additional out-of-pocket expenses of KBW and an additional $15,000 in the case of additional fees and expenses of KBWs legal counsel. In no event shall out-of-pocket expenses, including fees and expenses of counsel, exceed $125,000. The provisions of this paragraph shall not apply to or in any way impair or limit the indemnification or contribution provisions contained herein.
7. |
Limitations |
The Company acknowledges that all opinions and advice (written or oral) given by KBW to the Company in connection with KBWs engagement are intended solely for the benefit and use of the Company for the purposes of its evaluation of the proposed Offerings. Unless otherwise expressly stated in an opinion letter issued by KBW or otherwise expressly agreed, no one other than the Company is authorized to rely upon this engagement of KBW or any statements or conduct by KBW. The Company agrees that any such opinion or advice, as well as this Agreement (including any of the terms hereof) shall not be used, reproduced, disseminated, quoted or referred to at any time, in any manner, or for any purpose, nor shall any public references to KBW be made by the Company or any of its representatives, without the prior written consent of KBW.
It is expressly understood and agreed that KBW is not undertaking to provide any advice relating to legal, regulatory, accounting or tax matters. In furtherance thereof, the Company acknowledges and agrees that (a) it and its affiliates have relied and will continue to rely on the advice of its own legal, tax and accounting advisors for all matters relating to the Conversion and the Offerings, and all other matters and (b) neither it, or any of its affiliates, has received, or has relied upon, the advice of KBW or any of its affiliates regarding matters of law, regulation, taxation or accounting.
The Company acknowledges and agrees that KBW has been retained to act solely as financial advisor to the Company and not as an advisor to or agent of any other person, and the Companys engagement of KBW is not intended to confer rights upon any person not a party to this Agreement (including shareholders, employees or creditors of the Company) as against KBW or its affiliates, or their respective directors, officers, employees or agents. In such capacity, KBW shall act as an independent contractor, and any duties arising out of its engagement shall be owed solely to the Company. It is understood that KBWs responsibility to the Company is solely contractual in nature and KBW does not owe the Company, or any other party, any fiduciary duty as a result of this Agreement.
The Company acknowledges that KBW is a securities firm engaged in securities trading and brokerage activities and providing investment banking and financial advisory services. In the ordinary course of business, KBW and its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in the Companys debt or equity securities, or the debt or equity securities of the Companys affiliates or other entities that may be involved in the transactions contemplated by this Agreement. In
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 6 of 9
addition, KBW and its affiliates may from time to time perform various investment banking and financial advisory services for other clients and customers who may have conflicting interests with respect to the Company. The Company acknowledges that KBW and its affiliates have no obligation to use in connection with this engagement or to furnish the Company confidential information obtained from other companies.
8. |
Benefit |
This Agreement shall inure to the benefit of the parties hereto and their respective successors, and the obligations and liabilities assumed hereunder by the parties hereto shall be binding upon their respective successors; provided, however, that this Agreement shall not be assignable without the mutual consent of KBW and the Bank.
9. |
Confidentiality |
KBW acknowledges that a portion of the Information provided to it in connection with its engagement hereunder may contain confidential and proprietary business information concerning the Company (such Information, the Confidential Information). KBW agrees that, 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, it will treat as confidential all Confidential Information; provided, however, that KBW may disclose such Confidential Information to its agents and advisors who are assisting or advising KBW in performing its services hereunder and who have been instructed to be bound by the terms and conditions of this paragraph. As used herein, the term Confidential Information shall not include information which (a) is or becomes available to the public other than as a result of a disclosure by KBW or its representatives in violation of this Agreement, (b) was available to KBW on a non-confidential basis prior to its disclosure to KBW or its representatives by the Company, or (c) becomes available to KBW on a non-confidential basis from a person other than the Company who is not known to KBW to be bound not to disclose such information pursuant to a contractual obligation of confidentiality to the Company.
The Company hereby acknowledges and agrees that all presentation materials and financial models used by KBW in performing its services hereunder have been developed by and are proprietary to KBW. 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 KBW.
10. |
Advertisements |
The Company agrees that, following the closing of the Offerings, KBW has the right to place advertisements in financial and other newspapers and journals at its own expense, describing its services to the Company and a general description of such offering. In addition, the Company agrees to include in any press release or public announcement announcing any such offering a reference to KBWs role as financial advisor and sole bookrunning manager with respect to such offering, provided that the Company will submit a copy of any such press release or public announcement to KBW for its prior approval, which approval shall not be unreasonably withheld or delayed.
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 7 of 9
11. |
Indemnification |
As KBW will be acting on behalf of the Company in connection with the Conversion and the Offerings, the Company agrees to indemnify and hold harmless KBW and its affiliates, the respective partners, directors, officers, employees and agents of KBW and its affiliates and each other person, if any, controlling KBW or any of its affiliates and each of their successors and assigns (KBW and each such person being an Indemnified Party) to the fullest extent permitted by law, from and against any and all losses, claims, damages 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 Conversion or the Offerings or the engagement of KBW pursuant to, or the performance by KBW of the services contemplated by, this Agreement, and will reimburse any Indemnified Party for all expenses (including legal fees and expenses) as they are incurred, including expenses incurred in connection with the investigation, preparing for or defending any such action or claim whether or not in connection with pending or threatened litigation, or any action or proceeding arising therefrom, whether or not KBW is a party; 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 (a) arises out of or is based upon any untrue statement of a material fact or the omission of a material fact required to be stated therein or necessary to make not misleading any statements contained in any final prospectus, or any amendment or supplement thereto, made in reliance on and in conformity with written information furnished to the Company by KBW expressly for use therein or (b) to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court of competent jurisdiction to have resulted primarily from KBWs gross negligence or bad faith of KBW.
If the indemnification provided for in the foregoing paragraph is judicially determined to be unavailable (other than in accordance with the terms hereof) to any person otherwise entitled to indemnity in respect of any losses, claims, damages or liabilities referred to herein, then, in lieu of indemnifying such person hereunder, the Company shall contribute to the amount paid or payable by such person as a result of such losses, claims, damages or liabilities (and expenses relating thereto) (i) in such proportion as is appropriate to reflect the relative benefits to the Company, on the one hand, and KBW, on the other hand, of the engagement provided for in this Agreement or (ii) if the allocation provided for in clause (i) above is not available, in such proportion as is appropriate to reflect not only the relative benefits referred to in such clause (i) but also the relative fault of each of the Company and KBW, as well as any other relevant equitable considerations; provided, however , in no event shall KBWs aggregate contribution to the amount paid or payable exceed the aggregate amount of fees actually received by KBW under this Agreement. For the purposes of this Agreement, the relative benefits to the Company and to KBW 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 in the Conversion and the Offerings that are the subject of the engagement hereunder, whether or not consummated, bears to (b) the fees paid or to be paid to KBW under this Agreement.
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 8 of 9
The Company also agrees that neither KBW, nor any of its affiliates nor any officer, director, employee or agent of KBW or any of its affiliates, nor any person controlling KBW or any of its affiliates, shall have any liability to the Company for or in connection with such engagement except for any such liability for losses, claims, damages, liabilities or expenses incurred by the Company which are finally judicially determined to have resulted primarily from KBWs bad faith or gross negligence. The foregoing agreement shall be in addition to any rights that KBW, the Company or any Indemnified Party may have at common law or otherwise, including, but not limited to, any right to contribution. For the sole purpose of enforcing and otherwise giving effect to the indemnification and contribution provisions of this agreement, the Company hereby consents to personal jurisdiction and service and venue in any court in which any claim which is subject to this agreement is brought against KBW or any other indemnified party.
The Company agrees that it will not, without the prior written consent of KBW, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not KBW is an actual or potential party to such claim, action, suit, or proceeding) unless such settlement, compromise or consent includes an unconditional release of KBW from all liability arising out of such claim, action, suit or proceeding.
12. |
Definitive Agreement |
This Agreement reflects KBWs present intention of proceeding to work with the Company on the proposed Offerings. No legal and binding obligation is created on the part of the Company or KBW with respect to the subject matter hereof, except as to (i) the agreement to maintain the confidentiality of Confidential Information set forth in Section 9, (ii) the payment of certain fees as set forth in Section 4, (iii) the payment of expenses as set forth in Section 6, (iv) the limitations set forth in Section 7, (v) the limitations of liability, the indemnification and contribution obligations and the other provisions set forth in Section 11 and (iv) those terms as may be set forth in a mutually agreed upon agency agreement between KBW and the Company to be executed prior to commencement of the Offerings (the Agency Agreement), all of which, notwithstanding anything to the contrary that may be contained herein, shall constitute the binding obligations of the parties hereto and which shall survive any termination of this Agreement or the completion of the services furnished hereunder and shall remain operative and in full force and effect.
The Company acknowledges and agrees that KBWs provision of services in connection with the Conversion and the Offerings, as contemplated herein, is expressly subject to (a) satisfactory completion of Due Diligence Review by KBW, (b) the preparation of a Registration Statement and Prospectus and other offering materials that are satisfactory to KBW in form and substance, (c) compliance with all applicable legal and regulatory requirements to the reasonable satisfaction of KBW and its counsel, (d) market conditions (including at the time of any of the proposed Offerings), (e) approval of KBWs internal committee and (f) any other conditions that KBW may deem appropriate for the transactions contemplated hereby.
This Agreement 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 New York, without regard to the conflicts of laws principles thereof. Any right to trial by jury with respect to any claim or action arising out of this Agreement or conduct in connection with the engagement is hereby waived by the parties hereto.
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 9 of 9
If the foregoing correctly sets forth our mutual understanding, please so indicate by signing and returning an original copy of this Agreement to the undersigned.
Very truly yours,
KEEFE, BRUYETTE & WOODS, INC.
By: |
|
Date: | July 30, 2018 | |||||
James T. Crotty | ||||||||
Director | ||||||||
PYRAMAX BANK, FSB | ||||||||
By: |
|
Date: | July 5, 2018 | |||||
Richard B. Hurd | ||||||||
President & Chief Executive Officer |
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
July 3, 2018
PyraMax Bank, FSB
7001 West Edgerton Ave.,
Greenfield, WI 53220
Attention: | Mr. Richard B. Hurd | |||
President & Chief Executive Officer |
Re: Services of Conversion Agent and Data Processing Records Management Agent
Ladies and Gentlemen:
This letter agreement (this Agreement) confirms the engagement of Keefe, Bruyette & Woods, Inc. (KBW) by PyraMax Bank, FSB (the Bank), on behalf of both itself and the Company (as defined herein), to act as the conversion agent and the data processing records management agent (KBW in such capacities, the Agent) to the Company in connection with the Banks proposed reorganization into the mutual holding company form of organization, including the offer and sale of the common stock (the Conversion) pursuant to the Companys proposed Plan of Conversion (the Plan of Conversion). The Conversion will involve (i) the creation of a newly organized middle-tier stock holding company (the Mid-Tier Holding Company) and the creation of a newly formed mutual holding company (the MHC), (ii) pro forma for the Offerings (as defined herein), (A) the full ownership of the Bank by the Mid-Tier Holding Company and (B) the ownership of greater than 50% of the outstanding common stock of the Mid-Tier Holding Company (the Common Stock) by the MHC and (iii) the offer and sale of the Common Stock not to be owned by the MHC in accordance with the foregoing clause, initially to eligible persons in a subscription offering (the Subscription Offering), with any remaining unsold shares of Common Stock to then be offered to the general public in a community offering (the Community Offering) and if necessary, through a syndicate of broker-dealers organized by KBW (a Syndicated Community Offering) (the Subscription Offering, Community Offering, and any Syndicated Community Offering are collectively referred to herein as the Offerings). The Bank, the MHC and the Mid-Tier Holding Company are collectively referred to herein as the Company.
This Agreement sets forth the terms and conditions of KBWs engagement solely in its capacity as Agent. It is acknowledged that the terms of KBWs engagement by the Company as exclusive financial advisor in the Conversion and as sole bookrunning manager in the Offerings is set forth in a separate agreement entered into by and between KBW and the Bank (on behalf of both itself and the Company) on or about the date hereof (such separate agreement, the Advisory Agreement).
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 2 of 12
1. |
Description of Services. |
As Agent, and as the Company may reasonably request, KBW will provide the services further described below (the Services):
1. |
Consolidation of Accounts and Development of a Central File, including, but not limited to the following: |
|
Consolidate accounts having the same ownership and separate the consolidated file information into necessary groupings to satisfy mailing requirements; |
|
Create the master file of account holders as of key record dates; and |
|
Create software for the operation of the Companys Stock Information Center, including subscription management and proxy solicitation efforts. |
2. |
Preparation of Proxy Forms; Proxy Solicitation and Special Meeting Services, including, but not limited to the following: |
|
Assist the Companys financial printer with labeling of proxy materials for voting; |
|
Provide support for any follow-up mailings to members, as needed, including proxy grams and additional solicitation materials; |
|
Proxy and ballot tabulation; and |
|
Support the Inspector of Election for the Companys special meeting of members, assuming the election is not contested. |
3. |
Subscription Services, including, but not limited to the following: |
|
Assist the Company in establishing and managing a Stock Information Center; |
|
Provide the physical location of the Stock Information Center including materials required; |
|
Assist in educating Company personnel; |
|
Establish recordkeeping and reporting procedures; |
|
Manage the Stock Information Center during the Offerings; |
|
Assist the Companys financial printer with labeling of offering materials for subscribing for shares of Common Stock; |
|
Provide support for any follow-up mailings to members, as needed, including additional solicitation materials; |
|
Common Stock order form processing and production of daily reports and analysis; |
|
Provide supporting account information to the Companys legal counsel for blue sky research and applicable registration; |
|
Assist the Companys transfer agent with the generation and mailing of stock certificates or statements of ownership; |
|
Perform interest and refund calculations and provide a file to enable the Company or its transfer agent to generate interest and refund checks. |
4. |
Records Processing Services: KBW will provide records processing services (the Records Processing Services) contemplated hereby. The parties hereto expressly acknowledge and agree that KBW expects to subcontract certain Records Processing Services, including without limitation certain integral data processing functions, to any one or more of its affiliates or to any other party (including non-affiliate third parties). |
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 3 of 12
2. |
Duties and Obligations. |
KBW, as Agent, hereby agrees to perform the Services in a commercially reasonable manner and to comply with all timely, appropriate and lawful instructions received from duly authorized representatives of the Company. KBW makes no warranties regarding the rendering of the Services (including, without limitation, warranties of merchantability, security, accuracy, non-infringement, and fitness for a particular purpose), and no additional warranties may be implied from the terms of this Agreement. The Company will: (i) inform all of its authorized representatives, which may include attorneys, agents and advisors, that KBW shall act as the exclusive Agent and that they are authorized and directed to communicate with KBW and to promptly provide KBW with all information that is reasonably requested; (ii) cause KBW to have adequate notice of, and permit KBW to attend, meetings (whether in person or otherwise) where KBWs attendance is, in the discretion of KBW, relevant, advisable or necessary; (iii) cause KBW to receive, as they become available, copies of the documents relating to the Plan of Conversion, the Conversion and the Offerings, to the extent KBW believes that such documents are necessary or appropriate for it to perform the Services and (iv) cause KBW to have adequate advance notice of any proposed changes to the Plan of Conversion, the proposed Services or the timetable of the Offerings. Failure by the Company to keep KBW timely and adequately informed or to provide KBW with complete and accurate necessary information on a timely basis shall excuse KBWs delay in the performance of its Services and may be grounds for KBW to terminate the Services pursuant to this Agreement.
The actions to be taken by KBW hereunder are deemed by the parties to be ministerial only and not discretionary. KBW, in its capacity as Agent under this Agreement, shall not be called upon at any time to give any advice regarding implementing the Plan of Conversion. The Company shall have the sole responsibility to make any and all decisions with respect to implementing the Plan of Conversion, including but not limited to decisions regarding which customer bank accounts are to be included in accountholder records provided to KBW.
KBW expects to subcontract certain data processing functions integral to the Services with any one or more of its affiliates or with any other party. The fees and expenses of such subcontractor shall not be billed to the Company, unless otherwise agreed to by the parties hereto in writing. Such subcontractor shall agree to comply with the provisions of this Agreement set forth under the heading Confidentiality and Consumer Privacy.
3. |
Fees Payable to KBW. |
For the Services described above, the Company agrees to pay KBW a non-refundable cash fee of $25,000 (the Services Fee) . Such fee is based upon the requirements of current banking regulations, the Companys Plan of Conversion as currently contemplated, and the expectation that member data will be processed as of three key record dates. Any material changes in
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 4 of 12
applicable regulations or the Plan of Conversion, or delays requiring duplicate or replacement processing due to changes to record dates, may result in additional fees not exceeding $10,000 payable to KBW. The Services Fee shall be payable as follows: (i) $10,000 shall be payable immediately upon execution of this Agreement, which shall be non-refundable and deemed to be earned in full when paid and (ii) all remaining amounts shall be payable immediately upon the completion of the Offerings.
4. |
Costs and Expenses; Reimbursement. |
The Company will bear all of expenses in connection with the Offerings and the matters contemplated by this Agreement. The Company shall also reimburse KBW for its reasonable out-of-pocket expenses incurred in connection with the Services, regardless of whether the Offerings are consummated, provided that such out-of-pocket expenses shall not exceed $5,000 without the Companys written consent, which shall not be unreasonably withheld, conditioned or delayed. Typical expenses include, but are not limited to, additional programming costs, postage, overnight delivery, telephone and travel. Not later than two days before the closing of the Offerings, KBW will provide the Company with documentation of all reimbursable expenses of KBW, to be paid at closing. The provisions of this paragraph shall not apply to or in any way impair the indemnification, contribution or liability limitation provisions set forth in this Agreement.
5. |
Reliance on Information Provided. |
The Company agrees to provide KBW with such information as KBW may reasonably require to carry out the Services under this Agreement (all such information so provided, the Information). The Company recognizes and confirms that KBW (a) will use and rely on and assume the accuracy and completeness of such Information in performing the Services contemplated by this Agreement without having independently verified or analyzed the accuracy or completeness of the same, and (b) does not assume responsibility or liability for the accuracy or completeness of the Information (including, without limitation, accountholder records provided or processed) or to conduct any independent verification or any appraisal or physical inspection of properties or assets.
KBW, as Agent, may further rely upon the instructions and representations (whether oral or in writing) of the Companys duly authorized representatives, without inquiry or investigation. KBW shall not be responsible for any action taken in reliance upon any signature, endorsement, assignment, certificate, order, request, notice or instruction (whether written or oral), or other instrument or document reasonably believed by it to be valid, genuine and sufficient in carrying out its duties hereunder. KBW shall not be liable or responsible, and shall be fully authorized and protected for, acting or failing to act in accordance with any oral instructions or requests.
KBW may consult with legal counsel chosen in good faith as to KBWs obligations or performance under this Agreement, and KBW shall not incur any liability in acting in good faith in accordance with any advice from such counsel with respect to KBWs obligations or performance under this Agreement.
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 5 of 12
6. |
Confidentiality and Consumer Privacy. |
KBW acknowledges that a portion of the Information provided to it in connection with its engagement hereunder may contain confidential and proprietary business information concerning the Company (such Information, the Confidential Information). KBW agrees that, 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, it will treat as confidential all Confidential Information; provided, however, that KBW may disclose such Confidential Information to its agents and advisors who are assisting or advising KBW in performing its services hereunder and who have been instructed to be bound by the terms and conditions of this paragraph. As used herein, the term Confidential Information shall not include information which (a) is or becomes available to the public other than as a result of a disclosure by KBW or its representatives in violation of this Agreement, (b) was available to KBW on a non-confidential basis prior to its disclosure to KBW or its representatives by the Company, or (c) becomes available to KBW on a non-confidential basis from a person other than the Company who is not known to KBW to be bound not to disclose such information pursuant to a contractual obligation of confidentiality to the Company. It is understood by the parties hereto that the receiving party shall be deemed to have satisfied its obligation to hold the Confidential Information confidential if it exercises the same care as it takes to preserve the confidentiality of its own similar information.
KBW further acknowledges that a portion of the Information provided to it in connection with its engagement hereunder will include nonpublic personal data regarding Company customers and bank account records. KBW agrees that such information shall be deemed to be Confidential Information under this Agreement and shall not be used or disclosed except in accordance with the terms of this Agreement.
If at any time KBW is served with any judicial or administrative order, judgment, decree, motion, writ, or other form of judicial or administrative process which in any way affects any property of the Company, KBW is authorized to comply therewith in any reasonable manner as it or its legal counsel of its own choosing deems appropriate; provided that the Agent shall, if permissible by law or regulation, endeavor to give notice thereof to the Company. If KBW complies with any such judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process, KBW shall not be liable to any of the parties, or to any other person or entity, even though such order, judgment, decree, writ or process may be subsequently modified or vacated or otherwise determined to have been without legal force or effect.
7. |
Limitations of Responsibilities. |
KBW, as Agent, (a) shall have no duties or obligations other than the contractual obligations 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 of Common Stock represented thereby, and will not be required to and will make no representations as to the validity, value or genuineness of any offer in connection with the Offerings or otherwise; (c) shall not be obliged
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 6 of 12
to take any legal action hereunder which might in its sole judgment involve any expense or liability, unless it shall have been furnished with indemnity satisfactory to it; and (d) 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.
The duties, responsibilities and obligations of KBW, as Agent, shall be limited to those expressly set forth herein, and no duties, responsibilities or obligations shall be inferred or implied. KBW, in its capacity as Agent, shall not be subject to, nor required to comply with, any other agreement between or among any or all of the parties hereto and/or any other person or entity, even though reference thereto may be made herein or therein, or to comply with any direction or instruction (other than those contained herein or delivered in accordance with this Agreement) from any person or entity other than the Company. Except as may otherwise specifically be set forth herein, KBW shall not be required to, and shall not, expend or risk any of its own funds or otherwise incur any financial liability in the performance of its duties hereunder.
KBW, as Agent in furnishing services to the Company under this Agreement, is acting only as an independent contractor and is not a fiduciary of, nor will its entering into this Agreement give rise to fiduciary duties to, the Company. KBW does not undertake by this Agreement or otherwise to perform any obligation of the Company, whether regulatory, contractual, or otherwise. KBW has the sole right and obligation to supervise, manage, contract, direct, procure, perform or cause to be performed, all work to be performed by it under this Agreement unless otherwise provided in this Agreement. The Company understands and agrees that KBW may perform services substantially similar to those to be performed hereunder for others, and nothing herein is intended to restrict or prohibit KBW from performing such services for others.
No implied duties or obligations shall be read into this Agreement against KBW, and KBW, in its capacity as such, shall not be bound by any provision of any agreement between the Company and any other person or entity other than this Agreement, and KBW shall have no duty to inquire into, or to take into account its knowledge of, the terms and conditions of any agreement made or entered into in connection with this Agreement.
8. |
Indemnification; Contribution; Limitations of Liability . |
The Company agrees to indemnify and hold harmless KBW and its affiliates, the respective partners, directors, officers, employees, and agents of KBW and its affiliates and each other person, if any, controlling KBW or any of its affiliates and each of their successors and assigns (KBW and each such person being an Indemnified Party) to the fullest extent permitted by law, from and against any and all losses, claims, damages and liabilities, joint or several, to which such Indemnified Party may become subject under applicable federal or state law, and reasonably related to or arising out of the engagement of KBW pursuant to, and the performance by KBW of the services contemplated by, this Agreement , and will reimburse any Indemnified Party for all expenses (including legal fees and expenses) as they are incurred, including expenses incurred in connection with the investigation, preparing for or defending any such action or claim whether or not in connection with pending or threatened litigation, or any action
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 7 of 12
or proceeding arising therefrom, whether or not KBW is a party. The Company will not be liable under the foregoing indemnification provision to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court of competent jurisdiction to have resulted primarily from KBWs bad faith or gross negligence.
If the indemnification provided for in the foregoing paragraph is judicially determined to be unavailable (other than in accordance with the terms hereof) to any person otherwise entitled to indemnity in respect of any losses, claims, damages or liabilities referred to herein, then, in lieu of indemnifying such person hereunder, the Company shall contribute to the amount paid or payable by such person as a result of such losses, claims, damages or liabilities (and expenses relating thereto) (i) in such proportion as is appropriate to reflect the relative benefits to the Company, on the one hand, and KBW, on the other hand, of the engagement provided for in this Agreement or (ii) if the allocation provided for in clause (i) above is not available, in such proportion as is appropriate to reflect not only the relative benefits referred to in such clause (i) but also the relative fault of each of the Company and KBW, as well as any other relevant equitable considerations; provided, however , in no event shall KBWs aggregate contribution to the amount paid or payable exceed the aggregate amount of fees actually received by KBW under this Agreement. For the purposes of this Agreement, the relative benefits to the Company and to KBW 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 in the Conversion and the Offerings that are the subject of the engagement hereunder, whether or not consummated, bears to (b) the fees paid or to be paid to KBW under this Agreement.
The Company also agrees that neither KBW, nor any of its affiliates nor any officer, director, employee or agent of KBW or any of its affiliates, nor any person controlling KBW or any of its affiliates, shall have any liability to the Company for or in connection with such engagement except for any such liability for losses, claims, damages, liabilities or expenses incurred by the Company which are finally judicially determined to have resulted primarily from KBWs bad faith or gross negligence. The foregoing agreement shall be in addition to any rights that KBW, the Company or any Indemnified Party may have at common law or otherwise, including, but not limited to, any right to contribution. For the sole purpose of enforcing and otherwise giving effect to the provisions of this Agreement, the Company hereby consents to personal jurisdiction and service and venue in any court in which any claim which is subject to this agreement is brought against KBW or any other Indemnified Party.
KBW shall not be responsible nor liable for delays, errors or omissions arising from, relating to or made in connection with circumstances beyond its reasonable control, including but not limited to, acts or omissions of the Company or any of its advisors or agents, acts of governmental authorities, acts of civil commotion or riot, insurrection, acts of military authority, war or acts of war or terrorism, national emergencies, labor difficulties, fire, flood, weather-related problems, acts of God or nature, mechanical or electrical breakdown, computer problems, failure or unavailability of communications or power supply or any change in law or regulation materially affecting KBW or the Company.
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 8 of 12
In no event shall KBW be liable for: (i) acting in accordance with or relying upon any instruction, request, notice, demand, certificate, order or document from the Company or any authorized representative acting on its behalf or (ii) for any consequential, indirect, incidental, punitive, exemplary or special damages of any kind whatsoever (including but not limited to lost profits) even if KBW has been advised of the possibility of such damages. Any liability of KBW shall be limited to the amount of fees paid to KBW for the Services performed by KBW as Agent pursuant to this Agreement. A claim by Company for a return of fees paid to KBW by the Company for the Services performed as Agent pursuant to this Agreement shall be the sole and exclusive remedy for any damages. This limitation of liability is intended to apply to the full extent allowed by law, regardless of the grounds or nature of any claim asserted.
The Company agrees that it will not, without the prior written consent of KBW, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not KBW is an actual or potential party to such claim, action, suit, or proceeding) unless such settlement, compromise or consent includes an unconditional release of KBW from all liability arising out of such claim, action, suit or proceeding.
It is understood that KBWs engagement referred to above may be embodied in one or more separate written agreements and that, in connection with such engagement, KBW may also be requested to provide additional services or to act for the Company in one or more additional capacities. The indemnification provided hereunder shall apply to said engagement, any such additional services or activities and any modification, and shall remain in full force and effect following the completion or termination of KBWs engagement or this Agreement.
9. |
Commencement and Termination. |
This Agreement shall commence immediately upon execution hereof by all parties and shall continue in force until the consummation or termination of the Conversion or the Offerings or the termination of this Agreement. This Agreement may only be terminated by the Company for cause due to action by KBW constituting a material violation of applicable law or a material breach of this Agreement, which breach remains uncured for ten (10) business days after written notice of such breach is delivered by the Company to KBW. This Agreement may only be terminated by KBW in the event of one or more of the following: (i) termination of the Advisor Agreement; (ii) circumstances described in this Agreement in the second paragraph under the heading Miscellaneous; (iii) action by the Company constituting a material violation of applicable law or a material breach of this Agreement (including as described in this Agreement in the first paragraph under the heading Duties and Obligations or failure to pay the fees and expenses of KBW as set forth herein), which breach remains uncured for ten (10) business days after written notice of breach is delivered by KBW to the Company or (iv) any proceeding in bankruptcy, reorganization, rehabilitation, guaranty fund action, receivership or insolvency is commenced by or against the Company, the Company shall become insolvent, or cease paying its obligations as they become due.
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 9 of 12
10. |
Survival of Obligations. |
The covenants and agreements of the parties hereto, including those set forth under Indemnification; Contribution; Limitations of Liability above, will remain in full force and effect and will survive the consummation of the Conversion and the Offerings or the termination of this Agreement, and KBW, its affiliates, the officers, directors, employees and agents of KBW and any of its affiliates, and any person controlling KBW and any of its affiliates, shall be entitled to the benefit of the covenants and agreements thereafter.
11. |
Miscellaneous. |
The parties hereto acknowledge that there are no third party beneficiaries to this Agreement, which is for the exclusive benefit of the parties hereto. No other person or entity or their respective heirs, successors and assigns shall be deemed to have any legal or equitable right, remedy or claim hereto.
In the event of any ambiguity or uncertainty hereunder or in any notice, instruction or other communication received by KBW hereunder, KBW will provide the Company a reasonable opportunity to resolve such uncertainty or ambiguity and in the event that such uncertainty or ambiguity is unresolved KBW may, in its sole discretion, take any action it deems appropriate or refrain from taking any action unless and until KBW receives written instructions from the Company clarifying the ambiguity or uncertainty, and KBW shall not be liable for acting or the failure to take any action during this period. In the event of any disagreement between the Company and any other person or entity resulting in adverse claims and demands being made herein or affected hereby, KBW shall be entitled to refuse to comply with any such claims or demands as long as such disagreement may continue, and in so refusing, shall make no delivery or other disposition under this Agreement, and in so doing shall be entitled to continue to refrain from acting until: (i) the right of adverse claimants shall have been finally settled by binding arbitration or finally adjudicated in a court of competent jurisdiction or (ii) all differences shall have been settled by agreement among the adverse claimants and the Company or other persons or entities and KBW shall have been notified in writing of such agreement signed by the Company and the adverse person(s) or entity(ies). In the event of such disagreement, KBW may, but need not, tender into the registry or custody of any court of competent jurisdiction all property in KBWs possession pursuant to the terms of this Agreement, together with such legal proceedings as KBW deems appropriate, and thereupon KBW shall be discharged from all further duties under this Agreement. The filing of any such legal proceeding shall not deprive KBW of compensation or expenses paid or payable hereunder for Services, and KBW shall not be liable with respect to any suspension of performance, delay or otherwise as a result of the tendering of such property. KBW shall have no obligation to take any legal action in connection with this Agreement or towards its enforcement, or to appear in, prosecute or defend any action or legal proceeding which would or might involve KBW in any cost, expense, loss or liability unless indemnification, satisfactory to KBW, in its sole discretion, shall be furnished by the Company. KBW shall be indemnified for all reasonable costs (including employee time at the employees hourly rate determined by his annual salary) and reasonable attorneys fees and expenses in connection with any such action.
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 10 of 12
This Agreement contains the entire agreement of the parties with respect to the subject matter hereof. This Agreement supersedes any other agreements, either oral or written, among the parties hereto with respect to the specific subject matter hereof, but not any engagement, underwriting, agency or other agreements among the parties pursuant to which KBW is acting as the Companys financial advisor, underwriter, placement agent, investment banker or in any similar capacity, including without limitation the Advisory Agreement. Except as specifically set forth herein, each party hereto acknowledges that no representation, inducement, promise or agreement, written, oral or otherwise, has been made by any party, or anyone acting on behalf of any party, which is not embodied or expressly stated herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding in relation to the Services. The Company hereby acknowledges and agrees that: (i) KBW has made full and complete disclosure to the Company of the possibility or existence of any conflict of interest resulting from KBW serving as both data processing records management agent pursuant to this Agreement and as financial advisor, underwriter, placement agent, investment banker or in any similar capacity pursuant to the Advisory Agreement or any other separate agreement and (ii) having received full disclosure thereof, the Company hereby waives any such conflict of interest and consents to KBW serving in such dual capacity.
This Agreement 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 New York, without regard to the conflicts of laws principles thereof. Any right to trial by jury with respect to any claim or action arising out of this Agreement or conduct in connection with the engagement is hereby waived by the parties hereto.
This Agreement may be executed in several counterparts, which taken together, shall constitute one and the same document. All section headings used herein are for convenience and ease of reference only and do not constitute part of this Agreement and shall not be referred to for the purpose of defining, interpreting, construing or enforcing any of the provisions of this Agreement. All pronouns and variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the party or parties to this Agreement may require.
This Agreement may not be assigned by any party without the prior written consent of the other parties hereto and any purported assignment made in violation of the foregoing shall be void and have no legal effect; except that consent is not required for an assignment to a KBW affiliate or successor in interest. This Agreement may be modified only by a written amendment signed by all of the parties hereto and no waiver of any provision hereof shall be effective unless expressed in a writing signed by the party to be charged. No waiver of the breach of any provision or term of this Agreement shall be deemed or construed to be a waiver of any other or subsequent breach.
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 11 of 12
Should any term or provision, or portion of such provision, of this Agreement be invalid or unenforceable, the scope thereof or the period covered thereby or otherwise, such term, provision, or portion of such provision, shall be deemed to be reduced and limited to enable KBW or the Company, as applicable, to enforce it to the maximum extent permissible under the laws and public policies applied under the jurisdiction in which enforcement is sought. If any term or provision of this Agreement is held or deemed to be invalid or unenforceable, in whole or in part, by a court of competent jurisdiction, such term or provision shall be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement which shall be construed to preserve, to the maximum extent permissible, the intent and purposes of this Agreement. Any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such terms or provisions in any other jurisdiction.
All media releases, public announcements and public disclosures by either party or its agents relating to this Agreement or the subject matter of this Agreement, but not including any announcement intended solely for internal distribution at such party or any disclosure required by legal, accounting or regulatory requirements beyond the reasonable control of such party, shall be coordinated with and approved by the other party prior to the release thereof, which approval shall not be unreasonably withheld.
12. |
Notices. |
Except as otherwise contemplated by this Agreement, all notices, demands, requests or other communications which may be or are required to be given, served or sent by any party to any other party pursuant to this Agreement, other than in the normal course of conducting the Services, can be by certified or registered mail, personal delivery or transmitted by any standard form of telecommunication with proof of delivery addressed as follows:
(a) |
If to the Agent: |
Keefe, Bruyette & Woods, Inc.
70 W Madison, Suite 2401
Chicago, IL 60602
Attn: James R. Crotty
Telephone: (312) 423-8274
Fax: (312) 423-8232
If to the Company:
PyraMax Bank, FSB
7001 West Edgerton Ave.,
Greenfield, WI 53220
Attn: Richard Hurd
Each party may designate by notice in writing a new address/addressee to which any notice, demand, request or communication may thereafter be provided. If the foregoing correctly sets forth our mutual understanding, please so indicate by signing and returning the original copy of this letter to the undersigned.
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
PyraMax Bank, FSB
July 3, 2018
Page 12 of 12
Very truly yours,
KEEFE, BRUYETTE & WOODS, INC.
By: |
|
Date: | July 30, 2018 | |||||
James T. Crotty | ||||||||
Director | ||||||||
PYRAMAX BANK, FSB | ||||||||
By: |
|
Date: | July 5, 2018 | |||||
Richard B. Hurd | ||||||||
President & Chief Executive Officer |
Keefe, Bruyette & Woods 70 West Madison, Suite 2401 Chicago, IL 60602
312.423.8200 800.929.6113 Fax 312.423.8232 www.kbw.com
Exhibit 2
PYRAMAX BANK, FSB
PLAN OF REORGANIZATION
FROM A MUTUAL SAVINGS
BANK
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 |
11 | ||||
5. |
Special Meeting of Members |
12 | ||||
6. |
Rights of Members of the MHC |
12 | ||||
7. |
Conversion of MHC to Stock Form |
12 | ||||
8. |
Timing of the Reorganization and Sale of Capital Stock |
13 | ||||
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 |
15 | ||||
12. |
Additional Limitations on Purchases of Common Stock |
18 | ||||
13. |
Payment for Stock |
21 | ||||
14. |
Manner of Exercising Subscription Rights Through Order Forms |
22 | ||||
15. |
Undelivered, Defective or Late Order Form; Insufficient Payment |
23 | ||||
16. |
Completion of the Stock Offering |
23 | ||||
17. |
Market for Common Stock |
24 | ||||
18. |
Stock Purchases by Management Persons After the Stock Offering |
24 | ||||
19. |
Resales of Stock by Directors and Officers |
24 | ||||
20. |
Stock Certificates |
25 | ||||
21. |
Restriction on Financing Stock Purchases |
25 | ||||
22. |
Stock Benefit Plans |
25 | ||||
23. |
Post-Reorganization Filing and Market Making |
25 | ||||
24. |
Payment of Dividends and Repurchase of Stock |
26 | ||||
25. |
Reorganization and Stock Offering Expenses |
26 | ||||
26. |
Employment and Other Severance Agreements |
26 | ||||
27. |
Residents of Foreign Countries and Certain States |
26 | ||||
28. |
Interpretation |
27 | ||||
29. |
Amendment or Termination of the Plan |
27 |
Exhibits
Exhibit A |
Charter and Bylaws of the Bank |
|
Exhibit B |
Charter and Bylaws of the Holding Company |
|
Exhibit C |
Charter and Bylaws of the MHC |
1. |
Introduction |
This Plan of Reorganization from a Mutual Savings Bank to a Mutual Holding Company and Stock Issuance Plan, dated as of September 5, 2018 (the Plan), provides for the reorganization of PyraMax Bank, FSB (the Bank) from a federally chartered mutual savings bank 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 Holding Company will offer shares of Common Stock for sale on a priority basis to depositors of the Bank 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 Reserves Regulation MM, 12 C.F.R. Part 239, the Securities Act of 1933 and the regulations of the SEC thereunder, 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 banks. Since the Holding Company will not offer all of its Common Stock for sale 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 Companys 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 Banks 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.
1
In furtherance of the Banks commitment to its community, this Plan provides for a contribution of Holding Company Common Stock and/or cash, subject to regulatory limitations, to the Foundation. The funding of the Foundation is intended to enhance the Banks existing community reinvestment activities in a manner that will allow the Banks local communities to share in the growth and profitability of the Holding Company and the Bank over the long term.
The Plan has been approved by the Board of Directors of the Bank. The Plan must also be approved by the Members of the Bank at a Special Meeting of Members to be called for that purpose by at least a majority of the total number of votes entitled to be cast by Voting Members of the Bank. Each Voting Member will be entitled to cast one vote for each $100 or fraction thereof of deposits in the Bank on the Voting Record Date. No Voting Member may cast more than 1,000 votes at the Special Meeting.
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.
2
Bank: PyraMax Bank, FSB 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 Wisconsin counties of Milwaukee, Waukesha and Ozaukee.
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: March 15, 2017, 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.
3
ESOP: The Stock Banks 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.
Foundation 1895 Bancorp of Wisconsin Community Foundation, a new charitable foundation intended to qualify as an exempt organization under Code Section 501(c)(3) that will receive Holding Company Common Stock and/or cash in connection with the Offering.
Foundation Shares Shares of Holding Company Common Stock issued to the Foundation in connection with the Reorganization.
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.
4
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 dealers 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 Companys 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 Companys 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.
5
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 bank 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 Banks 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.
6
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; |
7
(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 |
A. |
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. |
8
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 Banks present locations.
B. |
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.
C. |
The Stock 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.
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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. Thereafter, the Holding Company, as the sole stockholder of the Stock Bank, will elect approximately one-third of the Stock Banks Board of Directors annually. 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.
D. |
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 Companys 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.
E. |
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 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 MHCs 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.
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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:
A. |
Approval of the Plan by a majority of the Board of Directors of the Bank. |
B. |
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. |
C. |
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. |
D. |
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 Banks charter and bylaws. |
E. |
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. |
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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 Banks 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 applicable Bank Regulators. 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 of the Bank. 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.
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. 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 must 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.
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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 regulations require 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 bank 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 Banks 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 Reserves 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.
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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.
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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, Syndicated Community Offering or 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.
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.
A. |
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 $100,000, 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
15
whose subscriptions remain unfilled in the same proportion that each such subscribers 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 $100,000, 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 subscribers 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, Officers and their associates do not qualify as Supplemental Eligible Account Holders.
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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 $100,000, 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.
B. |
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 $100,000 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.
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C. |
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 $100,000 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 not 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 $100,000 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:
A. |
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 Companys total outstanding Common Stock. |
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B. |
The maximum purchase of Common Stock in the Subscription Offering by a Person or group of Persons through a single Deposit Account is $100,000. No Person by himself, with an Associate or group of Persons Acting in Concert, may purchase more than $150,000 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, including shares issues to the Foundation, 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, including shares issues to the Foundation; (ii) the Tax-Qualified Employee Plans may purchase up to 10% of the shares offered in the Stock Offering, including shares issues to the Foundation; 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. |
C. |
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 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 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. |
D. |
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. |
E. |
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. |
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F. |
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 |
G. |
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 than the MHC at the conclusion of the Stock Offering. |
H. |
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 26% (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. |
I. |
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 26% of the stockholders equity of the Holding Company held by persons other than the MHC at the conclusion of the Stock Offering. |
J. |
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. |
K. |
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. |
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L. |
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 purchasers 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
21
shall be canceled at the time of withdrawal, without penalty, and the remaining balance will earn interest at the Banks passbook rate. Funds for which a withdrawal is authorized will remain in the purchasers 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 Banks 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 Banks 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. |
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; |
B. |
The purchase price per share for shares of Common Stock to be sold in the Subscription and Community Offerings; |
C. |
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; |
D. |
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; |
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E. |
An acknowledgment that the recipient of the Order Form has received a final copy of the prospectus prior to execution of the Order Form; |
F. |
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 subscribers Deposit Account at the Bank); and |
G. |
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.
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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 consummation of 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:
A. |
Negotiated transactions involving more than 1% of the outstanding stock in the class of stock; or |
B. |
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. |
Contribution to the Foundation |
As part of the Reorganization, the Holding Company and the Bank intend to donate shares of Holding Company Common Stock and cash to the Foundation, in such amounts, subject to regulatory limits, as shall be approved by the Board of Directors. This contribution to the Foundation is intended to enhance the Banks existing community reinvestment activities, and to share with the communities in which the Bank conducts its business a part of the Banks financial success as a community minded, financial services institution. The contribution of Holding Company Common Stock to the Foundation may further this goal as it may enable the community to share in the growth and profitability of the Holding Company and the Bank over the long term.
The Foundation is dedicated to the promotion of charitable purposes including community development, grants or donations to support housing assistance, not-for-profit community groups and other types of organizations or civic-minded projects. The Foundation will annually distribute total grants to assist charitable organizations or to fund projects within its local community of not less than 5% of the average fair market value of Foundation assets each year, less certain expenses. In order to serve the purposes for which it was formed and to maintain its qualification under Code Section 501(c)(3), the Foundation may sell, on an annual basis, a portion of the Foundation Shares.
24
For a period of five years following the Conversion, except for temporary periods resulting from death, resignation, removal or disqualification, (i) at least one director of the Foundation will be an independent director who is unaffiliated with the Holding Company and the Bank who is from the Banks local community and who has experience with local community charitable organizations and grant making, and (ii) at least one director shall be a person who is also a member of the Board of Directors of the Bank. The board of directors of the Foundation will be responsible for establishing the policies of the Foundation, including a conflicts of interest policy, consistent with the stated purposes of the Foundation.
The contribution to the Foundation as part of the Reorganization must be approved by a majority of the total number of votes eligible to be cast by Voting Members. The decision to proceed with the formation and/or grant of Common Stock and/or cash to the Foundation will be at the sole discretion of the Board of Directors.
20. |
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.
21. |
Stock Certificates |
Each stock certificate if issued shall bear a legend giving appropriate notice of the restrictions set forth in Section 20 above. Appropriate instructions shall be issued to the Holding Companys 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.
22. |
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.
23. |
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.
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24. |
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.
25. |
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 Reserves 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.
26. |
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.
27. |
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.
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28. |
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.
29. |
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.
30. |
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 21, 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.
Approved as of September 5, 2018
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EXHIBIT A
Charter and Bylaws of the Bank
A-1
PYRAMAX BANK
FEDERAL STOCK CHARTER
Section 1. Corporate title. The full corporate title of the savings association is PyraMax Bank, FSB (the Bank).
Section 2. Office. The home office shall be located in Greenfield, Wisconsin.
Section 3. Duration. The duration of the Bank is perpetual.
Section 4. Purpose and powers . The purpose of the Bank is to pursue any or all of the lawful objectives of a Federal savings association 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 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 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 Bank), labor, or services actually performed for the 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 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 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 Bank or in connection with the conversion of the 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 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.
A-2
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 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 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 association in a merger or consolidation for the Bank, shall not be considered to be such an adverse change. |
A description of the different classes and series of the Banks 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:
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 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 Bank available for distribution remaining after: (i) payment or provision for payment of the Banks 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 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.
A-3
Preferred stock. The 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 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 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. |
A-4
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 Bank shall file with 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 Bank shall not be entitled to preemptive rights with respect to any shares of the Bank which may be issued.
Section 7. Directors . The Bank shall be under the direction of a board of directors. The authorized number of directors, as stated in the Banks 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 Banks charter or bylaws to the contrary, for a period of five years from the date of completion of the conversion of the 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 Bank. This limitation shall not apply to a transaction in which the 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 OCCs 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 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 Bank.
A-5
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 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.
Section 10. Priority of Accounts. In any situation in which the priority of the accounts of the Bank is in controversy, all such accounts shall, to the extent of their withdrawable value, be debts of the Bank having at least as high a priority as the claims of general creditors of the Bank not having priority (other than any priority arising or resulting from consensual subordination) over other general creditors of the Bank.
A-6
PYRAMAX BANK, FSB
ATTEST: |
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Corporate Secretary | ||
BY: |
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Richard Hurd | ||
President and Chief Executive Officer |
OFFICE OF THE COMPTROLLER OF THE CURRENCY
ATTEST: |
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Deputy Comptroller for Licensing | ||
BY: |
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Comptroller of the Currency | ||
Effective Date: |
A-7
PYRAMAX BANK, FSB
BYLAWS
Article I - Home Office
The home office of PyraMax Bank, FSB (the Bank) shall be at 7001 West Edgerton Avenue, Greenfield, Milwaukee County, Wisconsin 53220.
Article II Shareholders
Section 1. Place of Meetings. All annual and special meetings of shareholders shall be held at any convenient place as the board of directors may designate.
Section 2. Annual Meeting. A meeting of the shareholders of the Bank for the election of directors and for the transaction of any other business of the Bank shall be held annually within 150 days after the end of the Banks fiscal year.
Section 3. Special Meetings. Special meetings of the shareholders 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 10% or more of the shares of the 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 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 Roberts Rules of Order, unless otherwise prescribed by regulations of the Office of the Comptroller of the Currency (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 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. Notwithstanding anything in this section, however, a federal stock association that is wholly owned shall not be subject to the shareholder notice requirement.
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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 before 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 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 Bank and shall be subject to inspection by any shareholder of record or the shareholders agent at any time during usual business hours for a period of 20 days before 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 shareholders 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. Notwithstanding anything in this section, however, a federal stock association that is wholly owned shall not be subject to the voting list requirements. In lieu of making the shareholder list available for inspection by shareholders as provided above, the board of directors may elect to follow the procedures prescribed in § 5.22(k)(4)(ii) of the OCCs regulations as now or hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the 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 that might have been transacted at the meeting as originally notified. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. 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.
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Section 10. Shares Controlled by Bank. Neither treasury shares of its own stock held by the 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 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 11. Cumulative Voting. Shareholders may not cumulate their votes for election of directors.
Section 12. 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 13. Nominations and new business. Nominations for directors and new business submitted by shareholders shall be voted upon at the annual meeting if such nominations or new business are submitted in writing and delivered to the secretary of the association at least five days before the date of the annual meeting. Ballots bearing the names of all the persons nominated shall be provided for use at the annual meeting.
Section 14. Informal Action by Shareholders. Any action required to be taken at a meeting of the shareholders, or any other action that 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, either the chairman of the board or the President to preside at its meetings.
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Section 2. Number and Term. The board of directors shall consist of seven (7) 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 one another 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 Banks 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 one another. 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 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.
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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 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 because 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 Bank who is present at a meeting of the board of directors at which action on any 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 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 as defined in 12 CFR 5.21(j)(1)(x)(B) (or any successor regulation) 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. Director Qualifications . A person is not qualified to serve as a director if he or she: (i) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, (ii) a person against whom a banking agency has, within the past ten years, issued
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a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and subject to appeal, or (iii) has found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (1) breached a fiduciary duty involving personal profit or (2) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency.
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 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 Bank otherwise than in the usual and regular course of its business; a voluntary dissolution of the 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 days 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.
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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 Bank and may prescribe the duties, constitution, and procedures thereof.
Article V - Officers
Section 1. Positions. The officers of the 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 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 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 officers 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 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.
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Section 3. Removal. Any officer may be removed by the board of directors whenever in its judgment the best interests of the 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 Bank to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Bank. Such authority may be general or confined to specific instances.
Section 2. 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 Bank shall be signed by one or more officers, employees or agents of the Bank in such manner as shall from time to time be determined by the board of directors.
Article VII - Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Certificates representing shares of capital stock of the Bank shall be in such form as shall be determined by the board of directors and approved by the OCC. 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 Bank. All certificates surrendered to the 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 Bank as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of the 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 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 Bank shall be deemed by the association to be the owner for all purposes.
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Article VIIIFiscal Year
The fiscal year of the Bank shall end on the last day of December 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 Banks charter and the regulations and orders of the OCC, the board of directors may, from time to time, declare, and the Bank may pay, dividends on its outstanding shares of capital stock.
Article X - Corporate Seal
The board of directors shall provide a Bank seal which shall be two concentric circles between which shall be the name of the 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 Bank at any legal meeting, and (ii) receipt of any applicable regulatory approval. When the 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 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 Bank of the Banks 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 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 Bank and upon such information, opinions, reports or statements presented to the 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 persons professional or expert competence and who has been selected with reasonable care by or on behalf of the Bank.
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EXHIBIT B
Charter and Bylaws of the Holding Company
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1895 BANCORP OF WISCONSIN, INC.
STOCK HOLDING COMPANY CHARTER
Section 1. Corporate title . The full corporate title of the mutual holding company subsidiary holding company is 1895 Bancorp of Wisconsin, Inc. (the Company).
Section 2. Domicile. The domicile of the Company shall be in Milwaukee County, Wisconsin.
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 100,000,000, of which 90,000,000 shares shall be common stock, par value $0.01 per share, and of which 10,000,000 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.
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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) |
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 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 Companys 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.
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.
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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 Companys 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) |
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 Company; |
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 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; |
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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 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 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, MHC. This limitation expires on , 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 FRBs 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 1895 Bancorp of Wisconsin, 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 6, 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.
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(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 Companys 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.
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1895 BANCORP OF WISCONSIN, INC.
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Corporate Secretary | ||
BY: |
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Richard Hurd | ||
President and Chief Executive Officer | ||
BOARD OF GOVERNORS OF THE | ||
FEDERAL RESERVE SYSTEM | ||
BY: |
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Secretary of Board of Governors of the | ||
Federal Reserve System | ||
Effective Date: |
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1895 BANCORP OF WISCONSIN, INC.
BYLAWS
Article IHome Office
The home office of 1895 Bancorp of Wisconsin, Inc. (the Company) shall be at 7001 West Edgerton Avenue, Greenfield, Milwaukee County, Wisconsin 53220.
Article IIShareholders
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 Companys fiscal year on the third Friday 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.
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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 shareholders 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 shareholders 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 FRBs 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 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
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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 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
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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.
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.
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Article IIIBoard 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 seven (7) 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 Companys 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.
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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.
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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. Director Qualifications . A person is not qualified to serve as a director if he or she: (i) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, (ii) a person against whom a banking agency has, within the past ten years, issued a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and subject to appeal, or (iii) has found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (1) breached a fiduciary duty involving personal profit or (2) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency.
Article IVExecutive 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 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.
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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 days 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 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 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.
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Article VOfficers
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 officers 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 VIContracts, 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.
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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 VIICertificates 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 VIIIFiscal Year
The fiscal year of the Company shall end on the last day of December each year. The appointment of accountants shall be subject to annual ratification by the shareholders.
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Article IXDividends
Subject to the terms of the Companys 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 XCorporate 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 XIAmendments
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 Companys 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 persons professional or expert competence and who has been selected with reasonable care by or on behalf of the Company.
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EXHIBIT C
Charter and Bylaws of the MHC
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1895 BANCORP OF WISCONSIN, MHC
FEDERAL MUTUAL HOLDING COMPANY CHARTER
Section 1: Corporate title. The name of the mutual holding company is 1895 Bancorp of Wisconsin, MHC (the Mutual Holding Company).
Section 2: Home Office . The home office of the Mutual Holding Company shall be located in Milwaukee County, Wisconsin.
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 PyraMax Bank, FSB (the 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 Bank shall be permitted to cast one vote for each $100, or fraction thereof, of the withdrawal value of the members account. 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 Companys 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 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 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 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.
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1895 Bancorp of Wisconsin, MHC | ||
ATTEST: |
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Corporate Secretary | ||
BY: |
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Richard Hurd | ||
President and Chief Executive Officer | ||
BOARD OF GOVERNORS OF THE | ||
FEDERAL RESERVE SYSTEM | ||
BY: |
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Secretary of Board of Governors of the | ||
Federal Reserve System | ||
Effective Date: |
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1895 BANCORP OF WISCONSIN, MHC
BYLAWS
1. Annual meeting of members. The annual meeting of the members of 1895 Bancorp of Wisconsin, 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 Wednesday in March 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
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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 seven (7). 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.
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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 Companys 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.
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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
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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 FRBs 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.
Approved by the Board of Directors and effective as of , .
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Exhibit 3.1
1895 BANCORP OF WISCONSIN, INC.
STOCK HOLDING COMPANY CHARTER
Section 1. Corporate title . The full corporate title of the mutual holding company subsidiary holding company is 1895 Bancorp of Wisconsin, Inc. (the Company).
Section 2. Domicile. The domicile of the Company shall be in Milwaukee County, Wisconsin.
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 100,000,000, of which 90,000,000 shares shall be common stock, par value $0.01 per share, and of which 10,000,000 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.
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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) |
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 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 Companys 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.
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 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
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assets of the Company available for distribution remaining after: (i) payment or provision for payment of the Companys 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) |
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 Company; |
(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 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 |
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(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 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 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, MHC. This limitation expires on [five years from date of charter] 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 FRBs 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 1895 Bancorp of Wisconsin, 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 6, 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.
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(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 Companys 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.
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1895 BANCORP OF WISCONSIN, INC. | ||
ATTEST: |
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|
Corporate Secretary | ||
BY: |
|
|
Richard Hurd | ||
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: |
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Exhibit 3.2
1895 BANCORP OF WISCONSIN, INC.
BYLAWS
Article IHome Office
The home office of 1895 Bancorp of Wisconsin, Inc. (the Company) shall be at 7001 West Edgerton Avenue, Greenfield, Milwaukee County, Wisconsin 53220.
Article IIShareholders
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 Companys fiscal year on the third Friday 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.
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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 shareholders 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 shareholders 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 FRBs 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 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
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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 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
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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.
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.
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Article IIIBoard 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 seven (7) 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 Companys 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.
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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
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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. Director Qualifications . A person is not qualified to serve as a director if he or she: (i) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, (ii) a person against whom a banking agency has, within the past ten years, issued a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and subject to appeal, or (iii) has found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (1) breached a fiduciary duty involving personal profit or (2) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency.
Article IVExecutive 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 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 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.
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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 days 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 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 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.
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Article VOfficers
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 officers 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 VIContracts, 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.
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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 VIICertificates 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 VIIIFiscal Year
The fiscal year of the Company shall end on the last day of December each year. The appointment of accountants shall be subject to annual ratification by the shareholders.
Article IXDividends
Subject to the terms of the Companys 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.
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Article XCorporate 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 XIAmendments
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 Companys 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 persons professional or expert competence and who has been selected with reasonable care by or on behalf of the Company.
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Exhibit 4
No. | INCORPORATED UNDER THE LAWS OF THE UNITED STATES OF AMERICA | Shares |
1895 B ANCORP OF W ISCONSIN , I NC .
Greenfield, Wisconsin
FULLY PAID AND NON-ASSESSABLE
PAR VALUE $0.01 PER SHARE
THIS CERTIFIES that | is the owner of |
SHARES OF COMMON STOCK OF
1895 B ANCORP OF W ISCONSIN , I NC .
a federally chartered subsidiary savings and loan holding company
The shares evidenced by this certificate are transferable only on the books of 1895 Bancorp of Wisconsin, Inc. by the holder hereof, in person or by attorney, upon surrender of this certificate properly endorsed.
The interest in 1895 Bancorp of Wisconsin, Inc. evidenced by this certificate may not be retired or withdrawn except as provided in the Charter and Bylaws of 1895 Bancorp of Wisconsin, Inc.
IN WITNESS WHEREOF, 1895 Bancorp of Wisconsin, 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 , 2018.
By |
|
By |
|
|||||
MONICA BAKER CORPORATE SECRETARY |
RICHARD HURD PRESIDENT AND CHIEF EXECUTIVE OFFICER |
The shares of common stock evidenced by this certificate are subject to a limitation contained in the 1895 Bancorp of Wisconsin, 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 First Federal Bank of Wisconsin, no person other than 1895 Bancorp of Wisconsin, 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 1895 Bancorp of Wisconsin, Inc. held by persons other than 1895 Bancorp of Wisconsin, MHC. This limitation shall not apply to the purchase of shares by an underwriter 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 Federal Reserve Boards regulations. 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.
Dated,
In the presence of | Signature: |
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, N.W., SUITE 780
WASHINGTON, D.C. 20015
TELEPHONE (202) 274-2000
FACSIMILE (202) 362-2902
www.luselaw.com
WRITERS DIRECT DIAL NUMBER
(202) 274-2000
September 7, 2018
Board of Directors
1895 Bancorp of Wisconsin, Inc.
7001 West Edgerton Avenue
Greenfield, Wisconsin 53220
Re: |
1895 Bancorp of Wisconsin, 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, and contribution to 1895 Bancorp of Wisconsin Community Foundation (the Charitable Foundation), of the shares of common stock, par value $0.01 per share (the Common Stock), of 1895 Bancorp of Wisconsin, Inc. (the Company). We have reviewed the Companys 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 and, in the case of the Charitable Foundation, contributed 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 8.1
FORM OF FEDERAL TAX OPINION
______________, 2018
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, MHC
7001 W. Edgerton Ave.
Greenfield, Wisconsin 53220
Re: |
Federal Tax Consequences of Mutual Holding Company Formation and Stock Issuance |
Gentlemen:
We have been requested as special counsel to PyraMax Bank, FSB, a federally-chartered mutual savings bank (the Bank ), 1895 Bancorp of Wisconsin, MHC, a to-be-formed federally-chartered mutual holding company (the Mutual Holding Company ), and 1895 Bancorp of Wisconsin, Inc., a to-be-formed federally-chartered subsidiary holding company with the power to issue capital stock (the Stock Holding Company ), to express our opinions concerning the material federal income tax consequences relating to the reorganization of the Bank from a mutual savings bank to a mutual holding company (all steps in such reorganization are collectively referred to herein as the Reorganization ) pursuant to that certain PyraMax Bank, FSB Plan of Reorganization From a Mutual Savings Bank to a Mutual Holding Company and Stock Issuance Plan (the Plan of Reorganization ). Concurrently with the Reorganization, the Stock Holding Company will offer for sale less than 50.0% of its Common Stock on a priority basis to depositors and Tax-Qualified Employee Plans of PyraMax Bank, FSB, with any remaining shares offered to the public in a Community Offering. Unless otherwise defined, all terms used herein have the meanings given to such terms in the Plan of Reorganization.
Source of Facts . It has been represented to us that the facts set forth herein apply to the Reorganization. In preparing this letter, we relied on the attached, duly authorized and executed representations regarding the Reorganization. If any of the facts are incorrect or incomplete, our discussion and conclusion may be different than those set forth below. We are under no obligation and we expressly disavow any obligation to advise the Bank, the Mutual Holding Company or the Stock Holding Company if we learn that the facts are not as they have been represented to us. We have made such investigations as we have deemed relevant or necessary for the purpose of our opinions. In our examination, we have assumed the authenticity of original documents, the accuracy of copies and the genuineness of signatures. In connection therewith, we have examined the Plan of Reorganization and certain other documents of or relating to the Reorganization, some of which are described or referred to in the Plan of Reorganization and which we deemed necessary to examine in order to issue the opinions set forth below. We have further assumed the absence of adverse facts not apparent from the face of the instruments and documents we examined.
LUSE GORMAN, PC
Attorneys at Law
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, MHC
, 2018
Page 2
In issuing our opinions, we have assumed that the Plan of Reorganization has been duly and validly authorized and has been approved and adopted by the board of directors of the Bank at a meeting duly called and held, that the Bank will comply with the terms and conditions of the Plan of Reorganization, and that the various representations and warranties which are provided to us are accurate, complete, true and correct. Accordingly, we express no opinion concerning the effect, if any, of variations from the foregoing. We specifically express no opinion concerning tax matters relating to the Plan of Reorganization under state and local tax laws and under federal income tax laws except on the basis of the documents and assumptions described above.
Source of Law . In issuing the opinions set forth below, we have referred solely to existing provisions of the Internal Revenue Code of 1986, as amended (the Code ), existing and proposed Treasury regulations ( Treasury Regulations ) thereunder, and upon current Internal Revenue Service (the Service ) administrative rulings, notices and procedures and court decisions. Such laws, regulations, administrative rulings, notices and procedures and court decisions are subject to change at any time. Any such change could affect the continuing validity of the opinions set forth below. These opinions are as of the date hereof, and we disclaim any obligation to advise you of any change in any matter considered herein after the date hereof.
In rendering our opinions, we have assumed that the persons and entities identified in the Plan of Reorganization will at all times comply with the requirements of Code Section 351, the other applicable state and federal laws and the representations of the Bank. In addition, we have assumed that the activities of the persons and entities identified in the Plan of Reorganization will be conducted strictly in accordance with the Plan of Reorganization. Any variations may affect the opinions we are rendering.
We emphasize that the outcome of litigation cannot be predicted with certainty and, although we have attempted in good faith to opine as to the probable outcome of the merits of each tax issue with respect to which an opinion was requested, there can be no assurance that our conclusions are correct or that they would be adopted by the Service or a court.
PROPOSED TRANSACTION
On September 5, 2018, the board of directors of the Bank adopted the Plan of Reorganization. For what are represented to be valid business purposes, the Banks board of directors has decided to convert to a mutual holding company structure pursuant to statutes. The following steps are proposed:
(i) |
The Bank will organize an interim stock savings bank (the Interim Bank ), as a wholly-owned subsidiary; |
LUSE GORMAN, PC
Attorneys at Law
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, MHC
, 2018
Page 3
(ii) |
By means of a purchase and assumption agreement, the Bank will transfer all of its assets and liabilities, other than $100,000 in cash, to the Interim Bank, which will become the Stock Bank (the 351 Transaction ); |
(iii) |
The Bank will amend its charter and by-laws so as to become the Mutual Holding Company; |
(iv) |
The Mutual Holding Company will organize the Stock Holding Company, as a wholly-owned subsidiary; |
(v) |
The Mutual Holding Company will transfer $1,000 in cash and all of the common stock of the Stock Bank to the Stock Holding Company in exchange for 100 shares of common stock of the Stock Holding Company (the Secondary 351 Transaction ). |
(vi) |
Contemporaneously with the reorganization of the Bank into the mutual holding company structure, including the organization of the Mutual Holding Company, the Stock Holding Company and the Stock Bank, the Stock Holding Company will offer less than 50.0% of its Common Stock in the Subscription Offering and, if applicable, the Community Offering. |
Collectively, the above steps (i) through (vi) are referred to as the Reorganization. Those persons who, as of the effective date of the Reorganization (the Effective Date ), hold depository rights with respect to Bank will thereafter have such rights solely with respect to the Stock Bank. Each deposit account with the Bank at the time of the exchange will become a deposit account in the Stock Bank in the same amount and upon the same terms and conditions. Following the completion of the Reorganization, all depositors who had membership rights with respect to the Bank immediately prior to the Reorganization will continue to have such rights solely with respect to the Mutual Holding Company, so long as they continue to hold deposit accounts with the Stock Bank. All new depositors of the Stock Bank after the completion of the Reorganization will have ownership rights solely with respect to the Mutual Holding Company, so long as they continue to hold deposit accounts with the Stock Bank.
Following the Reorganization, the Stock Holding Company will have the power to issue shares of capital stock (including common and preferred stock) to persons other than the Mutual Holding Company. So long as the Mutual Holding Company is in existence, however, it must own a majority of the voting stock of the Stock Holding Company. The Stock Holding Company may issue any amount of non-voting stock to persons other than Mutual Holding Company. No such non-voting stock will be issued as of the date of the Reorganization.
LUSE GORMAN, PC
Attorneys at Law
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, MHC
, 2018
Page 4
LAW AND ANALYSIS
Code Section 368(a)(1)(F) provides that the term reorganization means a mere change in identity, form, or place of organization of one corporation, however effected.
Code Section 351(a) provides that no gain or loss will be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in Code Section 368(c)) of the corporation.
Code Section 368(c) provides that control means the ownership of stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of the corporation.
Code Section 351 requires a transfer of property in exchange for stock. The transfer requirement is satisfied so long as the transferor transfers to the transferee all substantial rights associated with the transferred property. In Revenue Ruling 2003-48, the Service ruled that because the former owners of the state-chartered mutual bank were in control (within the meaning of Code Section 368(c)) of the mutual holding company, the transfer of their equity interests in the state-chartered mutual bank to the mutual holding company, in exchange for membership interests in the mutual holding company, qualified as a transfer described in Code Section 351. The Service also ruled that the mutual holding companys contribution of stock of the stock bank to the stock holding company in exchange for the voting stock of the stock holding company constituted a transfer under Code Section 351.
In Revenue Ruling 2003-48, the Service had the opportunity to rule on a transaction similar to the one at hand and found that it involved two back-to-back exchanges of property for stock within the meaning of Code Section 351. In the revenue ruling, a mutual bank established the mutual holding company as a wholly-owned stock subsidiary and the mutual holding company established two wholly-owned subsidiaries, one of which was a stock holding company. The mutual bank converted to stock form in a transaction under Code Section 368(a)(1)(F), pursuant to which its members constructively received shares of its common stock. The mutual holding company then cancelled its shares of common stock and exchanged its charter for a mutual holding company charter. The members then transferred the shares of stock bank stock constructively received to the mutual holding company in exchange for membership interests in the mutual holding company. Thereafter, the mutual holding company contributed the stock of the stock bank to the stock holding company in exchange for additional shares and the stock holding company issued more than 20% but less than 50% of its common stock to the public in a stock offering. With respect to the first transfer, the Service found that because the former owners of the bank are in control (within the meaning of Code Section
LUSE GORMAN, PC
Attorneys at Law
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, MHC
, 2018
Page 5
368(c) of the mutual holding company, their exchange of their equity interests in the bank for membership interests in the mutual holding company qualified as a transfer described in Code Section 351. The Service found this to be the case even though the mutual holding company transferred all of its interest in the stock bank to the stock holding company, citing Revenue Ruling 77-449, 1977-2 C.B. 110 and Revenue Ruling 83-34, 1983-1C.B. 79. In addition, the Service found that the transfer by the mutual holding company of the stock bank to the stock holding company also qualified as a transfer within the meaning of Code Section 351. The Service found that the subsequent stock offering by the stock holding company did not prevent the transaction from qualifying as a transfer described in Code Section 351 because the persons to whom the stock was issued pursuant to the stock offering, together with the mutual holding company, were both considered transferors to the mutual holding company.
Revenue Ruling 77-449 found that where there are successive transfers of property from a domestic corporation to its wholly-owned domestic subsidiary and from that subsidiary to its wholly-owned domestic subsidiary, where each transfer is part of a plan and made solely in exchange for additional shares of the subsidiarys stock, each transfer satisfies the requirements of Code Section 351. Revenue Ruling 83-34 expanded on the holding in Revenue Ruling 77-449, however, in the latter case, the transfers were to subsidiaries that were 80% controlled subsidiaries within the meaning of Code Section 368(c). Revenue Ruling 83-34 found both transactions to satisfy the requirements of Code Section 351, even though at the end of the second transfer the transferor in the first transfer no longer had 80% control of the company to whom the property was initially transferred.
In Revenue Ruling 2003-51, the Service also ruled that a transfer of assets to a corporation (the first corporation) in exchange for an amount of stock of the first corporation constituting control satisfies the control requirement of Code Section 351, if pursuant to a binding agreement entered into by the transferor with a third party prior to the exchange, the transferor transfers the stock of the first corporation to another corporation (the second corporation) simultaneously with the transfer of assets by the third party to the second corporation and, immediately thereafter, the transferor and the third party are in control of the second corporation. In its analysis, the Service acknowledged that it had previously found that the control requirements of Code Section 351 were not satisfied where, pursuant to a binding agreement entered into by the transferor prior to the transfer of property, the transferor loses control of the corporation by a taxable sale of all or part of that stock to a third party who did not also transfer property to the corporation in exchange for stock. However, the Service reasoned that treating a transfer of property that is followed by a nontaxable disposition of the stock received as a transfer described in Code Section 351 is not inconsistent with the purpose of Code Section 351.
LUSE GORMAN, PC
Attorneys at Law
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, MHC
, 2018
Page 6
Application of the Law to the Facts in the 351 Transactions .
The transactions in the instant case are substantially similar to the transactions in Revenue Ruling 2003-48. Although the form of the initial 351 Transaction was different than the form of the first transaction in Revenue Ruling 2003-48, both qualify as transfers under Code Section 351. In addition, in Revenue Ruling 2003-48, following the contribution of the stock bank stock to the mutual holding company by the former owners of the bank (in its mutual form), the mutual holding company transferred the stock bank to the stock holding company contemporaneously with the stock offering. Accordingly, because the stock holding company in the instant case is also a wholly-owned subsidiary of the mutual holding company at the commencement of the Secondary 351 Transaction, the reasoning in Revenue Ruling 2003-48 (which cited as support Revenue Rulings 77-449 and 83-34) applies to cause the transfer to qualify under Code Section 351. Lastly, Revenue Ruling 2003-48 also Service found that the participation by members of the public in the stock holding companys stock offering did not prevent the second transaction from qualifying as a transfer under Code Section 351 because those persons were aggregated with mutual holding company and treated as transferors in a transfer qualifying under Code Section 351. Accordingly, we believe that the Secondary 351 Transaction will also qualify as a tax-free exchange of property solely for stock under Code Section 351.
SUMMARY OF OPINIONS
Based on the facts, representations and assumptions set forth herein, we are of the opinion that:
1. The conversion of the Bank to the Mutual Holding Company will qualify as a reorganization under Section 368(a)(1)(F).
2. The transfer by the Bank of substantially all of its assets and liabilities to the Stock Bank qualifies as an exchange under Code Section 351 and the 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.
3. The Banks 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 (Code Section 1223(1)).
4. The Bank will recognize no income with respect to its bad debt reserve established under Code Section 593.
LUSE GORMAN, PC
Attorneys at Law
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, MHC
, 2018
Page 7
5. The Stock Bank will recognize no gain or loss upon its receipt of property from the Bank in exchange for its stock (Code Section 1032(a)).
6. The Stock Banks basis in the property received from the Bank will be the same as the basis of such property in the hands of the Bank immediately prior to the Reorganization. (Code Section 362(a)).
7. The Stock Banks holding period for the property received from the Bank will include the period during which such property was held by the Bank (Code Section 1223(2)).
8. The Bank members will recognize no gain or loss by reason of the Reorganization.
9. No gain or loss shall be recognized by Eligible Account Holders, Supplemental Eligible Account Holders or Other Members of Bank on the issuance to them of withdrawable deposit accounts in Stock Bank plus liquidation rights with respect to Mutual Holding Company, in exchange for their deposit accounts in the Mutual Bank or to the other depositors on the issuance to them of withdrawable deposit accounts (Code Section 354(a)).
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 the Stock Holding Company. 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. (Code Section 356(a)). 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 (Rev. Rul. 56-572, 1956-2 C.B. 182).
11. The basis of the deposit accounts in the Stock Bank to be received by Eligible Account Holders, Supplemental Eligible Account Holders and Other Members of the Bank will be the same as the basis of their deposit accounts in the Bank surrendered in exchange therefor. (Code Section 358(a)(1)). The basis of the interests in the liquidation rights in the Mutual Holding Company to be received by Eligible Account Holders, Supplemental Eligible Account Holders, and Other Members of the Mutual Bank shall be zero (Rev. Rul. 71-233, 1971-1 C.B. 113).
LUSE GORMAN, PC
Attorneys at Law
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, MHC
, 2018
Page 8
12. The Mutual Holding Company and the persons who purchased Common Stock of the Stock Holding Company in the Subscription Offering and any Community Offering (Minority Stockholders ) will recognize no gain or loss upon the transfer of Stock Bank stock and cash, respectively, to the Stock Holding Company in exchange for stock in the Stock Holding Company (Code Section 351(a)).
13. The Stock Holding Company will recognize no gain or loss on its receipt of Stock Bank stock and cash in exchange for Stock Holding Company Common Stock (Code Section 1032(a)).
14. The Mutual Holding Companys basis in the Stock Holding Company Common Stock received in the Secondary 351 Transaction will be the same as its basis in the Stock Bank stock transferred (Code Section 358(a)(1)).
15. The Mutual Holding Companys holding period in the Stock Holding Company 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 (Code Section 1223(1)).
16. The Stock Holding Companys basis in the Stock Bank stock received from the Mutual Holding Company will be the same as the basis of such property in the hands of the Mutual Holding Company (Code Section 362(a)).
17. The Stock Holding Companys holding period for the Stock Bank stock received from the Mutual Holding Company will include the period during which the property was held by the Mutual Holding Company (Code Section 1223(2)).
18. It is more likely than not that the basis of the Stock Holding Company Common Stock to its stockholders will be the purchase price thereof. (Code Section 1012). 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 (Code Section 1223(6)).
The opinions set forth above represent our conclusions as to the application of existing Federal income tax law to the facts of the instant transaction, and we can give no assurance that changes in such law, or in the interpretation thereof, will not affect the opinions expressed by us. Moreover, there can be no assurance that contrary positions may not be taken by the IRS, or that a court considering the issues would not hold contrary to such opinions.
LUSE GORMAN, PC
Attorneys at Law
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, MHC
, 2018
Page 9
With respect to our opinion under paragraph 4 above, the Bank has represented to us that the value of common stock received by the Bank in exchange for accounts receivable will be equal to the net value of the accounts transferred i.e., the face value of the accounts receivable previously included in income less the amount of the reserve for bad debts. In Nash v. United States , 398 U.S. 1 (1970), the Supreme Court held that a reserve for bad debts is not recaptured by a transferor of accounts receivable to a controlled corporation for its stock. The Court found that the transferors merely received stock and securities equal in value to the net worth of the receivables transferred i.e., their face value less the reserve for bad debts. Since no gain or loss is realized, there is no reason to include the reserve in income. See also Rev. Rul. 78-280, 1978-2 C.B. 139.
Our opinion under paragraph 10 above is predicated on the representation that no person shall receive any payment, whether in money or property, in lieu of the issuance of subscription rights. With respect to our opinion under paragraphs 10 and 18, we note that the subscription rights will be granted at no cost to the recipients, will be 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. We also note that Keller & Company, Inc. has issued a letter to the Board of Directors of the Stock Holding Company and the Bank dated [Date], 2018 that the subscription rights will have no ascertainable fair market value. Finally, we note that the Service has not in the past concluded that subscription rights have value.
If the subscription rights are subsequently found to have a fair market value, income may be recognized by various recipients of the subscription rights (in certain cases, whether or not the rights are exercised) and the Stock Holding Company and/or the Stock Bank may be taxable on the distribution of the subscription rights.
We do not express any opinion as to the availability of any equitable or specific remedy upon any breach of any of the covenants, warranties or other provisions contained in any agreement. We have not examined, and we express no opinion with respect to the applicability of, or liability under, any Federal, state or local law, ordinance, or regulation other than as expressed above.
It is expressly understood that the opinions set forth above represent our conclusions based upon the documents reviewed by us and the facts presented to us. Any material amendments to such documents or changes in any significant fact would affect the opinions expressed herein.
We have not been asked to, and we do not, render any opinion with respect to any matters other than those expressly set forth above.
LUSE GORMAN, PC
Attorneys at Law
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, MHC
, 2018
Page 10
We hereby consent to the filing of this opinion as an exhibit to the Banks combined Form MHC-1/MHC-2 Notice of MHC Reorganization and Application for Approval of a Minority Stock Issuance by a Subsidiary of MHC, and as an exhibit to the Stock Holding Companys Application on Form H-(e)1, as filed with the Board of Governors of the Federal Reserve System, and Stock Holding Companys Registration Statement on Form S-1 as filed with the SEC. We also consent to the references to our firm in the Prospectus contained in the Forms MHC-1/MHC-2, H-(e)1, and S-1 under the captions The Reorganization and Offering Material Income Tax Consequences and Legal and Tax Matters, and to the summarization of our opinion in such Prospectus.
Very truly yours, |
|
LUSE GORMAN, PC |
Exhibit 8.2
|
Wipfli LLP 2901 East Enterprise Avenue Appleton, WI 54913
PO Box 1893 Appleton, WI 54912-1893
920.739.6500 fax 920.739.6707
www.wipfli.com |
FORM OF STATE TAX OPINION
__________, 2018
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin, MHC
7001 West Edgerton Avenue
Greenfield, WI 53220
RE: Wisconsin Franchise and Income Tax Opinion Relating to the Mutual Holding Company Formation and Stock Issuance
Dear Directors:
In accordance with your request, set forth below is the opinion of this firm relating to the material Wisconsin franchise and income tax consequences of the proposed reorganization (the Reorganization) of PyraMax Bank, FSB (the Bank) from a federally chartered mutual savings bank to a mutual holding company with stock subsidiaries (a stock holding company and a stock savings bank).
For purposes of this opinion we have reviewed the applicable Wisconsin authority. We have also examined copies or drafts of such transaction-related documents as we deem appropriate, and assumed that they are correct, accurate and complete in all material respects, and that they will not be substantially modified prior to the consummation of the Reorganization. In forming and issuing our opinion, we have relied on the written opinion regarding the federal tax treatment of the transaction prepared by Luse Gorman, PC. Our opinion assumes that the reorganization constitutes two back-to-back tax-free exchanges of property for stock under Code Section 351 and a mere change in form under Code Section 368(a)(1)(F).
Facts
The mutual holding company reorganization is a series of transactions by which you will reorganize your corporate structure from your current status as a mutual savings bank to the mutual holding company form of ownership. The Reorganization will be conducted pursuant to a plan of reorganization and stock issuance plan, which you refer to as the plan of reorganization (the Plan).
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin MHC
Page 2 of 3
, 2018
Pursuant to the Plan, PyraMax Bank, FSB will become a federal stock savings bank subsidiary of 1895 Bancorp of Wisconsin, Inc., and 1895 Bancorp of Wisconsin, Inc. will be a majority-owned subsidiary of 1895 Bancorp of Wisconsin, MHC. After the Reorganization, your depositors will become members of 1895 Bancorp of Wisconsin, MHC, and will continue to have the same voting rights in 1895 Bancorp of Wisconsin, MHC as they had in PyraMax Bank, FSB prior to the Reorganization.
In connection with the Reorganization, you are offering to sell shares of common stock of 1895 Bancorp of Wisconsin, Inc. Unlike a standard mutual-to-stock conversion transaction in which all of the common stock of the holding company of the converting savings bank 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 1895 Bancorp of Wisconsin, Inc. must be held by the mutual holding company. Based on these restrictions and an evaluation of the capital needs, your board of directors has decided that 45% of the outstanding shares of common stock will be offered for sale in the offering (including an estimated 55,000 shares to be contributed to the new charitable foundation), and 55% of the shares will be retained by 1895 Bancorp of Wisconsin, MHC.
Other than the shares contributed to the charitable foundation, all such shares will be issued and sold at a uniform $10 price per share. The aggregate price at which all Common Stock will be offered and sold pursuant to the Plan will be based on the offered percentage of the estimated pro forma market value of the Bank, as converted. The estimated pro forma market value has been determined by an independent appraiser, Keller & Company, Inc. The conversion of the Bank from mutual to stock form and the sale of newly issued shares of the stock of the Bank to the Holding Company will be deemed effective concurrent with the closing of the sale of the Common Stock.
Discussion of Relevant Wisconsin Income Tax Issues
Wis. Stat. Section 71.26(2)(a) defines net income of a corporation as gross income computed under the Internal Revenue Code as modified by 71.26(3). Net income is further modified for addbacks of credits and related subtraction items which, based on the facts provided, are not relevant to our analysis.
For tax years beginning after December 31, 2017, pursuant to Wis. Stat. Section 71.22(4)(l)(1), Internal Revenue Code is defined as the federal Internal Revenue Code as amended to December 31, 2017 with exceptions specifically enumerated in the statute.
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
1895 Bancorp of Wisconsin MHC
Page 3 of 3
, 2018
Opinion
Wisconsin does not modify or exclude the provisions of Internal Revenue Code Sections 351 or 368(a)(1)(F). Therefore, provided the transaction constitutes two back-to-back tax-free exchanges of property for stock under Code Section 351 and a reorganization within the meaning of Code Section 368(a)(1)(F), Wisconsin will conform to the federal income tax treatment of the transaction.
Scope of Opinion
The scope of this opinion is expressly limited to the Wisconsin franchise and income tax consequences of the proposed transaction in connection with the representations and assumptions stated above.
Our opinion, as stated above, is based upon the analysis of the Wisconsin income tax statutes and administrative code, current administrative rulings, notices and procedures, and court decisions. Such laws, regulations, administrative rulings, notices and procedures and court decisions are subject to change at any time and such change may be retroactively effective. If so, our views as set forth may be affected and may not be relied upon. This opinion is as of the date hereof, and we disclaim any obligation to advise you of any change in any matter considered herein after the date hereof. Further, any variation or differences in facts or representations recited herein, for any reason, could affect our conclusions, possibly in an adverse manner, and make them inapplicable.
This letter represents our views as to interpretation of existing law and, accordingly, no assurance can be given that the Wisconsin Department of Revenue upon audit will agree with the above analysis.
If you have any questions regarding this letter, please contact Melaine Brandt at 608.274.1980.
Sincerely,
Wipfli LLP
Exhibit 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (this Agreement ) is made effective as of , 2018 (the Effective Date ), by and between PyraMax Bank, FSB, a federally chartered savings bank (the Bank ) and Richard Hurd (the Executive ). The Bank and Executive are sometimes collectively referred to herein as the parties. Any reference to the Company shall mean 1895 Bancorp of Wisconsin, Inc., the federal mid-tier holding company of the Bank. The Company is a signatory to this Agreement for the purpose of guaranteeing the Banks performance hereunder.
WITNESSETH
WHEREAS , Executive is currently employed as President and Chief Executive Officer of the Bank;
WHEREAS , the Bank has adopted a Plan of Reorganization pursuant to which the Bank will convert to a stock bank and become a wholly owned subsidiary of the Company, which will be a mid-tier holding company, the majority owner of which will be 1895 Bancorp of Wisconsin, MHC, a federal mutual holding company (the MHC);
WHEREAS , the Bank desires to assure itself of the continued availability of the Executives services as provided in this Agreement; and
WHEREAS , the Executive is willing to serve the Bank on the terms and conditions hereinafter set forth.
NOW, THEREFORE , in consideration of the mutual covenants herein contained, and upon the terms and conditions hereinafter provided, the parties hereby agree as follows:
1. |
POSITION AND RESPONSIBILITIES. |
During the term of this Agreement Executive shall serve as a member of the board of directors of the Bank (the Board) and President and Chief Executive Officer of the Bank. Executive shall be responsible for the overall management of the Bank, and shall be responsible for establishing the business objectives, policies and strategic plan of the Bank, in conjunction with the Board. Executive also shall be responsible for providing leadership and direction to all departments or divisions of the Bank, and shall be the primary contact between the Board and the staff. As Chief Executive Officer, Executive shall directly report to the Board. Executive also shall be nominated as a member of the Board, subject to election by members or shareholders of the Bank, as the case may be. Executive also agrees to serve, if elected, as an officer and director of any affiliate of the Bank.
2. |
TERM AND DUTIES. |
(a) Three-Year Contract; Annual Renewal . The term of this Agreement shall commence as of the Effective Date and shall continue thereafter for a period of three (3) years. Commencing on the first anniversary date of this Agreement (the Anniversary Date ) and
continuing on each Anniversary Date thereafter, the term of this Agreement shall renew for an additional year such that the remaining term of this Agreement is always three (3) years; provided, however, that in order for this Agreement to renew, the disinterested members of the Board of Directors of the Bank (the Board ) must take the following actions within the time frames set forth below prior to each Anniversary Date: (i) at least thirty (30) days prior to the Anniversary Date, conduct or review a comprehensive performance evaluation of Executive for purposes of determining whether to extend this Agreement; and (ii) affirmatively approve the renewal or non-renewal of this Agreement, which decision shall be included in the minutes of the Boards meeting. If the decision of such disinterested members of the Board is not to renew this Agreement, then the Board shall provide Executive with a written notice of non-renewal ( Non-Renewal Notice ) prior to any Anniversary Date, such that this Agreement shall terminate at the end of twenty-four (24) months following such Anniversary Date. Notwithstanding the foregoing, in the event that the Company or the Bank has entered into an agreement to effect a transaction which would be considered a Change in Control as defined below, then the term of this Agreement shall be extended and shall terminate thirty-six (36) months following the date on which the Change in Control occurs.
(b) Termination of Employment . Notwithstanding anything contained in this Agreement to the contrary, either Executive or the Bank may terminate Executives employment with the Bank at any time during the term of this Agreement, subject to the terms and conditions of this Agreement.
(c) Continued Employment Following Expiration of Term . Nothing in this Agreement shall mandate or prohibit a continuation of Executives employment following the expiration of the term of this Agreement, upon such terms and conditions as the Bank and Executive may mutually agree.
(d) Duties; Membership on Other Boards . During the term of this Agreement, except for periods of absence occasioned by illness, reasonable vacation periods, and reasonable leaves of absence approved by the Board, Executive shall devote substantially all of his business time, attention, skill, and efforts to the faithful performance of his duties hereunder, including activities and services related to the organization, operation and management of the Bank; provided, however, that, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, business companies or business or civic organizations, which, in the Boards judgment, will not present any conflict of interest with the Bank, or materially affect the performance of Executives duties pursuant to this Agreement. Executive shall provide the Board of Directors annually for its approval a list of organizations for which the Executive acts as a director or officer.
3. |
COMPENSATION, BENEFITS AND REIMBURSEMENT. |
(a) Base Salary . In consideration of Executives performance of the duties set forth in Section 2, the Bank shall provide Executive the compensation specified in this Agreement. The Bank shall pay Executive a salary of $ per year ( Base Salary ). The Base Salary shall be payable biweekly, or with such other frequency as officers of the Bank are generally paid. During the term of this Agreement, the Base Salary shall be reviewed at least annually by the Board or by a committee designated by the Board, and the Bank may increase,
2
but not decrease (except for a decrease that is generally applicable to all senior management employees) Executives Base Salary. Any increase in Base Salary shall become Base Salary for purposes of this Agreement.
(b) Bonus Compensation . Executive will be eligible for an annual performance-based bonus based on the criteria determined by the Board. Additionally, Executive will be eligible for a discretionary bonus in the sole discretion of the Board. Executive shall be entitled to equitable participation in incentive compensation and bonuses in any plan or arrangement of the Bank or the Company in which Executive is eligible to participate. Nothing paid to Executive under any such plan or arrangement will be deemed to be in lieu of other compensation to which Executive is entitled under this Agreement.
(c) Employee Benefits . The Bank shall provide Executive with employee benefit plans, arrangements and perquisites substantially equivalent to those in which Executive was participating or from which he was deriving benefit immediately prior to the commencement of the term of this Agreement, and the Bank shall not, without Executives prior written consent, make any changes in such plans, arrangements or perquisites that would adversely affect Executives rights or benefits thereunder, except as to any changes that are applicable to all participating employees. The Bank shall also pay the cost of Executives membership to a country club of Executives choice, provided that the country club is in the State of Wisconsin. Without limiting the generality of the foregoing provisions of this Section 3(c), Executive will be entitled to participate in and receive benefits under any employee benefit plans including, but not limited to, retirement plans, supplemental retirement plans, pension plans, profit-sharing plans, health-and-accident insurance plans, medical coverage or any other employee benefit plan or arrangement made available by the Bank and/or the Company in the future to its senior executives, including any stock benefit plans, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.
(d) Paid Time Off . Executive shall be entitled to paid vacation time each year during the term of this Agreement (measured on a fiscal or calendar year basis, in accordance with the Banks usual practices), as well as sick leave, holidays and other paid absences in accordance with the Banks policies and procedures for senior executives. Any unused paid time off during an annual period shall be treated in accordance with the Banks personnel policies as in effect from time to time.
(e) Expense Reimbursements . The Bank shall also pay or reimburse Executive for all reasonable travel, entertainment and other reasonable expenses incurred by Executive during the course of performing his obligations under this Agreement, including, without limitation, fees for memberships in such clubs and organizations as Executive and the Board shall mutually agree are necessary and appropriate in connection with the performance of his duties under this Agreement, upon presentation to the Bank of an itemized account of such expenses in such form as the Bank may reasonably require, provided that such payment or reimbursement shall be made as soon as practicable but in no event later than March 15 of the year following the year in which such right to such payment or reimbursement occurred.
3
4. |
PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION. |
(a) Upon the occurrence of an Event of Termination (as herein defined) during the term of this Agreement, the provisions of this Section 4 shall apply; provided, however, that in the event such Event of Termination occurs within twenty-four (24) months following a Change in Control (as defined in Section 5 hereof), Section 5 shall apply instead. As used in this Agreement, an Event of Termination shall mean and include any one or more of the following:
(i) the involuntary termination of Executives employment hereunder by the Bank for any reason other than termination governed by Section 5 (in connection with or following a Change in Control), Section 6 (due to Disability or death), Section 7 (due to Retirement), or Section 8 (for Cause), provided that such termination constitutes a Separation from Service within the meaning of Section 409A of the Internal Revenue Code (Code); or
(ii) Executives resignation from the Banks employ upon any of the following, unless consented to by Executive:
(A) failure to appoint Executive to the position set forth in Section 1, or a material change in Executives function, duties, or responsibilities, which change would cause Executives position to become one of lesser responsibility, importance, or scope from the position and responsibilities described in Section 1, to which Executive has not agreed in writing (and any such material change shall be deemed a continuing breach of this Agreement by the Bank);
(B) a relocation of Executives principal place of employment to a location that is more than 35 miles from the location of the Banks principal executive offices as of the date of this Agreement;
(C) a material reduction in the benefits and perquisites, including Base Salary, to Executive from those being provided as of the Effective Date (except for any reduction that is part of a reduction in pay or benefits that is generally applicable to officers or employees of the Bank);
(D) a liquidation or dissolution of the Bank; or
(E) a material breach of this Agreement by the Bank.
Upon the occurrence of any event described in clause (ii) above, Executive shall have the right to elect to terminate his employment under this Agreement by resignation for Good Reason upon not less than thirty (30) days prior written notice given within a reasonable period of time (not to exceed ninety (90) days) after the event giving rise to the right to elect, which termination by Executive shall be an Event of Termination. The Bank shall have thirty (30) days to cure the condition giving rise to the Event of Termination, provided that the Bank may elect to waive said thirty (30) day period. For the avoidance of doubt, the non-renewal of this Agreement under
4
Section 2(a) hereof, without the occurrence of an Event of Termination under this Section 4(a)(ii) prior to the end of the term of this Agreement, shall not be considered an event that would permit the Executive to resign for Good Reason and receive a severance payment.
(b) Upon the occurrence of an Event of Termination, the Bank shall pay Executive, or, in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, the Base Salary and bonuses that Executive would be entitled to for the remaining unexpired term of the Agreement. For purposes of determining the bonus(es) payable hereunder, the bonus(es) will be deemed to be equal to the average annual bonus paid over the prior three years, and (ii) otherwise paid at such time as such bonus would have been paid absent an Event of Termination (i.e., if only two bonuses would otherwise be paid during the remaining term, then two bonuses will be included in the calculation). Such payments shall be paid in a lump sum on or before the 30 th day following the Executives Separation from Service (within the meaning of Section 409A of the Code), unless the payment is due in connection with a termination program involving more than one employee, in which case the payment shall be due within no more than 60 th day following Executives Separation from Service, and shall not be reduced in the event Executive obtains other employment following the Event of Termination. Notwithstanding the foregoing, Executive shall not be entitled to any payments or benefits under this Section 4 unless and until (i) Executive executes a release of his claims against the Bank, the Company and any affiliate, and their officers, directors, successors and assigns, releasing said persons from any and all claims, rights, demands, causes of action, suits, arbitrations or grievances relating to the employment relationship, including claims under the Age Discrimination in Employment Act, but not including claims for benefits under tax-qualified plans or other benefit plans in which Executive is vested, claims for benefits required by applicable law or claims with respect to obligations set forth in this Agreement that survive the termination of this Agreement (the Release ), and (ii) the payments and benefits shall begin on the 30 th day following the date of the Executives Separation from Service, provided that before that date, the Executive has signed (and not revoked) the Release and the Release is irrevocable under the time period set forth under applicable law.
(c) Upon the occurrence of an Event of Termination, the Bank shall provide, at the Banks expense, for the remaining unexpired term of the Agreement, nontaxable medical and dental coverage and life insurance coverage substantially comparable, as reasonably available, to the coverage maintained by the Bank for Executive and his dependents prior to the Event of Termination, except to the extent such coverage may be changed in its application to all Bank employees and then such coverage provided to Executive and his dependents shall be commensurate with such changed coverage. Notwithstanding the foregoing, if applicable law prohibits (including, but not limited to, laws prohibiting discriminating in favor of highly compensated employees), or, if participation by the Executive is not permitted under the terms of the applicable health or life insurance plans, or if providing such benefits would subject the Bank to penalties, then the Bank shall pay the Executive a cash lump sum payment reasonably estimated to be equal to the value (or the remaining value) of such non-taxable medical and dental benefits, with such payment to be made by lump sum within ten (10) business days of the Date of Termination, or if later, the date on which the Bank determines that such insurance coverage (or the remainder of such insurance coverage) cannot be provided for the foregoing reasons. If providing a lump sum cash payment would result in a violation of Code Section 409A, then the cash payment(s) shall be made to Executive at such time as the premiums would otherwise have been paid.
5
(d) For purposes of this Agreement, a Separation from Service shall have occurred if the Bank and Executive reasonably anticipate that either no further services will be performed by the Executive after the date of the Event of Termination (whether as an employee or as an independent contractor) or the level of further services performed will not exceed 49% of the average level of bona fide services in the thirty-six (36) months immediately preceding the Event of Termination. For all purposes hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-1(h)(ii). If Executive is a Specified Employee, as defined in Code Section 409A and any payment to be made under sub-paragraph (b) or (c) of this Section 4 shall be determined to be subject to Code Section 409A, then if required by Code Section 409A, such payment or a portion of such payment (to the minimum extent possible) shall be delayed and shall be paid on the first day of the seventh month following Executives Separation from Service.
5. |
CHANGE IN CONTROL . |
(a) Any payments made to Executive pursuant to this Section 5 are in lieu of any payments that may otherwise be owed to Executive pursuant to this Agreement under Section 4, such that Executive shall either receive payments pursuant to Section 4 or pursuant to Section 5, but not pursuant to both Sections.
(b) For purposes of this Agreement, the term Change in Control shall mean:
(1) |
Merger : The Company or the Bank merges into or consolidates with another entity, or merges another Bank or corporation into the Bank or the Company, and as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation; |
(2) |
Acquisition of Significant Share Ownership : A person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Companys or the Banks voting securities; provided, however, this clause (2) shall not apply to beneficial ownership of the Companys or the Banks voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities; |
(3) |
Change in Board Composition : During any period of two consecutive years, individuals who constitute the Companys or the Banks Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Companys or the Banks Board of Directors; provided, however, that for purposes of this clause (c), each director who is first elected by the board (or first nominated by the board for election by the stockholders or corporators) by a vote of at least two- |
6
thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or |
(4) |
Sale of Assets : The Company or the Bank sells to a third party all or substantially all of its assets. |
(5) |
Notwithstanding anything herein to the contrary, a Change in Control shall not be deemed to have occurred in connection with the Banks mutual holding company reorganization and/or minority offering. Similarly, a Change in Control shall not be deemed to have occurred in the event of a second-step conversion of the MHC to a stock holding company with a contemporaneous stock offering. |
(c) Upon the occurrence of a Change in Control followed within twenty-four (24) months by an Event of Termination (as defined in Section 4 hereof), Executive shall receive as severance pay or liquidated damages, or both, a lump sum cash payment equal to three (3) times the sum of (i) Executives highest annual rate of Base Salary paid to Executive at any time under this Agreement, plus (ii) the highest bonus paid to Executive with respect to the three completed fiscal years prior to the Change in Control. Such payment shall be paid in a lump sum within ten (10) days of the Executives Separation from Service (within the meaning of Section 409A of the Code) and shall not be reduced in the event Executive obtains other employment following the Event of Termination.
(d) Upon the occurrence of a Change in Control followed within twenty-four (24) months by an Event of Termination (as defined in Section 4 hereof), the Bank (or its successor) shall provide at the Banks (or its successors) expense, nontaxable medical and dental coverage and life insurance coverage substantially comparable, as reasonably available, to the coverage maintained by the Bank for Executive and his dependents prior to his termination, except to the extent such coverage may be changed in its application to all Bank employees and then the coverage provided to Executive and his dependents shall be commensurate with such changed coverage. Such coverage shall cease thirty-six (36) months following the termination of Executives employment. Notwithstanding the foregoing, if applicable law prohibits (including, but not limited to, laws prohibiting discriminating in favor of highly compensated employees), or, if participation by the Executive is not permitted under the terms of the applicable health or life insurance plans, or if providing such benefits would subject the Bank to penalties, then the Bank shall pay the Executive a cash lump sum payment reasonably estimated to be equal to the value (or the remaining value) of such non-taxable medical and dental benefits or life insurance coverage, with such payment to be made by lump sum within ten (10) business days of the Date of Termination, or if later, the date on which the Bank determines that such insurance coverage (or the remainder of such insurance coverage) cannot be provided for the foregoing reasons. If providing a lump sum cash payment would result in a violation of Code Section 409A, then the cash payment(s) shall be made to Executive at such time as the premiums would otherwise have been paid.
7
6. |
TERMINATION FOR DISABILITY OR DEATH. |
(a) Termination of Executives employment based on Disability shall be construed to comply with Section 409A of the Internal Revenue Code and shall be deemed to have occurred if: (i) Executive 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 last for a continuous period of not less than 12 months, and as a result, Executive is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank or the Company; or (ii) Executive is determined to be totally disabled by the Social Security Administration. The provisions of Sections 6(b) and (c) shall apply upon the termination of the Executives employment based on Disability. Upon the determination that Executive has suffered a Disability, disability payments hereunder shall commence within thirty (30) days.
The Bank shall cause to be continued life insurance coverage and non-taxable medical and dental coverage substantially comparable, as reasonably available, to the coverage maintained by the Bank for Executive and Executives dependents prior to the termination of his employment based on Disability (in accordance with its customary co-pay percentages), except to the extent such coverage may be changed in its application to all Bank employees or not available on an individual basis to an employee terminated based on Disability. This coverage shall cease upon the earlier of (i) the date Executive returns to the full-time employment of the Bank; (ii) Executives full-time employment by another employer; or (iii) twelve (12) months from the date of termination of Executives employment based on Disability. Nothing herein shall be construed to prevent Executive from continuing such coverage for the remainder of any applicable COBRA period at his own expense. If participation by the Executive is not permitted under the terms of an applicable plan (i.e., such as a group life insurance plan), the Bank shall provide Executive with reimbursement (payable on a monthly basis) of premiums paid by the Executive to obtain similar benefits for the period specified above; provided, however, that the reimbursement shall not exceed the cost of the monthly premiums for active employees.
(d) In the event of Executives death during the term of this Agreement, his estate, legal representatives or named beneficiaries (as directed by Executive in writing) shall be paid Executives Base Salary at the rate in effect at the time of Executives death in accordance with the regular payroll practices of the Bank for a period of six (6) months from the date of Executives death. Such payments are in addition to any life insurance benefits that Executives beneficiaries may be entitled to receive under any employee benefit plan maintained by the Bank for the benefit of Executive, including, but not limited to, the Banks tax-qualified retirement plans. In addition, the Bank shall continue to provide for twelve (12) months after Executives death non-taxable medical, dental and other insurance benefits substantially comparable to the coverage maintained by the Bank for Executives dependents prior to his death (in accordance with the customary co-pay percentages). Nothing herein shall be construed to prevent Executives eligible dependents from continuing such coverage for the remainder of any applicable COBRA period at their own expense.
8
7. |
TERMINATION UPON RETIREMENT. |
Termination of Executives employment based on Retirement shall mean termination of Executives employment at any time after Executive reaches age 65 or in accordance with any retirement policy established by the Board with Executives consent as it applies to him. Upon termination of Executive based on Retirement, no amounts or benefits shall be due Executive under this Agreement, and Executive shall be entitled to all benefits under any retirement plan of the Bank and other plans to which Executive is a party.
8. |
TERMINATION FOR CAUSE. |
(a) The Bank may terminate Executives employment at any time, but any termination other than termination for Cause, as defined herein, shall not prejudice Executives right to compensation or other benefits under this Agreement. Executive shall have no right to receive compensation or other benefits for any period after termination for Cause. The term Cause as used herein, shall exist when there has been a good faith determination by the Board that there shall have occurred one or more of the following events with respect to the Executive:
(1) |
personal dishonesty in performing Executives duties on behalf of the Bank; |
(2) |
incompetence in performing Executives duties on behalf of the Bank; |
(3) |
willful misconduct that in the judgment of the Board will likely cause economic damage to the Bank or injury to the business reputation of the Bank; |
(4) |
breach of fiduciary duty involving personal profit; |
(5) |
material breach of the Banks Code of Ethics; |
(6) |
intentional failure to perform stated duties under this Agreement after written notice thereof from the Board; |
(7) |
willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflect adversely on the reputation of the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or |
(8) |
material breach by Executive of any provision of this Agreement. |
Notwithstanding the foregoing, Cause shall not be deemed to exist unless there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for the Executive to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct described above and specifying the particulars thereof. Prior to holding a
9
meeting at which the Board is to make a final determination whether Cause exists, if the Board determines in good faith at a meeting of the Board, by not less than a majority of its entire membership, that there is probable cause for it to find that the Executive was guilty of conduct constituting Cause as described above, the Board may suspend the Executive from his duties hereunder for a reasonable period of time not to exceed fourteen (14) days pending a further meeting at which the Executive shall be given the opportunity to be heard before the Board. Upon a finding of Cause, the Board shall deliver to the Executive a Notice of Termination, as more fully described in Section 10 below.
(b) For purposes of this Section 8, no act or failure to act, on the part of Executive, shall be considered willful unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executives action or omission was in the best interests of the Bank. Any act, or failure to act, based upon the direction of the Board or based upon the advice of counsel for the Bank shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Bank.
9. |
RESIGNATION FROM BOARDS OF DIRECTORS |
In the event of Executives termination of employment due to an Event of Termination, Executives service as a director of the Bank, the Company, and any affiliate of the Bank or the Company shall immediately terminate. This Section 9 shall constitute a resignation notice for such purposes.
10. |
NOTICE. |
(a) Any purported termination by the Bank for Cause shall be communicated by Notice of Termination to Executive. If, within thirty (30) days after any Notice of Termination for Cause is given, Executive notifies the Bank that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration, as provided in Section 20. Notwithstanding the pendency of any such dispute, the Bank shall discontinue paying Executives compensation until the dispute is finally resolved in accordance with this Agreement. If it is determined that Executive is entitled to compensation and benefits under Section 4 or 5, the payment of such compensation and benefits by the Bank shall commence immediately following the date of resolution by arbitration, with interest due Executive on the cash amount that would have been paid pending arbitration (at the prime rate as published in The Wall Street Journal from time to time).
(b) Any other purported termination by the Bank or by Executive shall be communicated by a Notice of Termination (as defined in Section 10(c)) to the other party. If, within thirty (30) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration as provided in Section 20. Notwithstanding the pendency of any such dispute, the Bank shall continue to pay Executive his Base Salary, and other compensation and benefits in effect when the notice giving rise to the dispute was given (except as to termination of Executive for Cause); provided, however, that such payments and benefits shall not continue beyond the remaining unexpired term of the Agreement. In the event the voluntary termination by Executive of his employment is disputed by the Bank, and if it is
10
determined in arbitration that Executive is not entitled to termination benefits pursuant to this Agreement, he shall return all cash payments made to him pending resolution by arbitration, with interest thereon at the prime rate as published in The Wall Street Journal from time to time, if it is determined in arbitration that Executives voluntary termination of employment was not taken in good faith and not in the reasonable belief that grounds existed for his voluntary termination. If it is determined that Executive is entitled to receive severance benefits under this Agreement, then any continuation of Base Salary and other compensation and benefits made to Executive under this Section 10 shall offset the amount of any severance benefits that are due to Executive under this Agreement.
(c) For purposes of this Agreement, a Notice of Termination shall mean a written notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated.
11. |
POST-TERMINATION OBLIGATIONS. |
(a) One-Year Non-Solicitation . Executive hereby covenants and agrees that, for a period of one year following his termination of employment with the Bank, he shall not, without the written consent of the Bank, either directly or indirectly solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of the Bank or the Company, or any of their respective subsidiaries or affiliates, to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to, any business whatsoever that competes with the business of the Bank or the Company, or any of their direct or indirect subsidiaries or affiliates or has headquarters or offices within 35 miles of the locations in which the Bank or the Company has business operations or has filed an application for regulatory approval to establish an office;
(b) One-Year Non-Competition . Executive hereby covenants and agrees that, for a period of one year following his termination of employment with the Bank, he shall not, without the written consent of the Bank, either directly or indirectly become an officer, employee, consultant, director, independent contractor, agent, sole proprietor, joint venturer, greater than 5% equity owner or stockholder, partner or trustee of any savings association, savings and loan association, savings and loan holding company, credit union, bank or bank holding company, insurance company or agency, any mortgage or loan broker or any other financial services entity or business that competes with the business of the Bank or its affiliates or has headquarters or offices within 35 miles of Greenfield, Wisconsin Notwithstanding the foregoing, this non-competition restriction shall not apply if Executives employment is terminated following a Change in Control or if the Bank terminates the Executive for a reason other than Cause (as defined in this Agreement).
(c) As used in this Agreement, Confidential Information means information belonging to the Bank which is of value to the Bank in the course of conducting its business and the disclosure of which could result in a competitive or other disadvantage to the Bank. Confidential Information includes, without limitation, financial information, reports, and forecasts; inventions, improvements and other intellectual property; trade secrets; know-how;
11
designs, processes or formulae; software; market or sales information or plans; customer lists; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by the management of the Bank. Confidential Information includes information developed by the Executive in the course of the Executives employment by the Bank, as well as other information to which the Executive may have access in connection with the Executives employment. Confidential Information also includes the confidential information of others with which the Bank has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain. The Executive understands and agrees that the Executives employment creates a relationship of confidence and trust between the Executive and the Bank with respect to all Confidential Information. At all times, both during the Executives employment with the Bank and after its termination, the Executive will keep in confidence and trust all such Confidential Information, and will not use or disclose any such Confidential Information without the written consent of the Bank, except as may be necessary in the ordinary course of performing the Executives duties to the Bank.
(d) Executive shall, upon reasonable notice, furnish such information and assistance to the Bank as may reasonably be required by the Bank, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however, that Executive shall not be required to provide information or assistance with respect to any litigation between the Executive and the Bank or any of its subsidiaries or affiliates.
(e) All payments and benefits to Executive under this Agreement shall be subject to Executives compliance with this Section 11. The parties hereto, recognizing that irreparable injury will result to the Bank, its business and property in the event of Executives breach of this Section 11, agree that, in the event of any such breach by Executive, the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive and all persons acting for or with Executive. Executive represents and admits that Executives experience and capabilities are such that Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Bank, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Bank or the Company from pursuing any other remedies available to them for such breach or threatened breach, including the recovery of damages from Executive.
12. |
SOURCE OF PAYMENTS. |
All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank. The Company may accede to this Agreement but only for the purposed of guaranteeing payment and provision of all amounts and benefits due hereunder to Executive.
13. |
EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS. |
This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Bank or any predecessor of the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or
12
compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.
14. |
NO ATTACHMENT; BINDING ON SUCCESSORS. |
(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of, Executive and the Bank and their respective successors and assigns.
15. |
MODIFICATION AND WAIVER. |
(a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.
16. |
REQUIRED PROVISIONS. |
(a) The Bank may terminate Executives employment at any time, but any termination by the Board other than termination for Cause shall not prejudice Executives right to compensation or other benefits under this Agreement. Executive shall have no right to receive compensation or other benefits for any period after termination for Cause.
(b) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Banks affairs by a notice served under Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act, the Banks obligations under this contract shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended.
(c) If Executive is removed and/or permanently prohibited from participating in the conduct of the Banks affairs by an order issued under Section 8(e)(4) [12 USC §1818(e)(4)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act, all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.
13
(d) If the Bank is in default as defined in Section 3(x)(1) [12 USC §1813(x)(1)] of the Federal Deposit Insurance Act, all obligations of the Bank under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations under this Agreement shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the Bank, (i) by either the Office of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System (collectively, the Regulator) or his or her designee, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) [12 USC §1823(c)] of the Federal Deposit Insurance Act; or (ii) by the Regulator or his or her designee at the time the Regulator or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Regulator to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.
(f) Notwithstanding anything herein contained to the contrary, any payments to Executive by the Bank or the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359.
17. |
SEVERABILITY. |
If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.
18. |
HEADINGS FOR REFERENCE ONLY. |
The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.
19. |
GOVERNING LAW. |
This Agreement shall be governed by the laws of the State of Wisconsin except to the extent superseded by federal law.
20. |
ARBITRATION. |
Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by binding arbitration, as an alternative to civil litigation and without any trial by jury to resolve such claims, conducted by a panel of three arbitrators sitting in a location selected by Executive within fifty (50) miles from the main office of the Bank, in accordance with the rules of the American Arbitration Banks National Rules for the Resolution of Employment Disputes (National Rules) then in effect. One arbitrator shall be selected by
14
Executive, one arbitrator shall be selected by the Bank and the third arbitrator shall be selected by the arbitrators selected by the parties. If the arbitrators are unable to agree within fifteen (15) days upon a third arbitrator, the arbitrator shall be appointed for them from a panel of arbitrators selected in accordance with the National Rules. Judgment may be entered on the arbitrators award in any court having jurisdiction.
21. |
INDEMNIFICATION. |
(a) Executive shall be provided with coverage under a standard directors and officers liability insurance policy, and shall be indemnified for the term of this Agreement and for a period of six years thereafter to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Bank or any affiliate (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys fees and the cost of reasonable settlements (such settlements must be approved by the Board), provided, however, Executive shall not be indemnified or reimbursed for legal expenses or liabilities incurred in connection with an action, suit or proceeding arising from any illegal or fraudulent act committed by Executive. Any such indemnification shall be made consistent with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(k), and the regulations issued thereunder in 12 C.F.R. Part 359.
(b) Any indemnification by the Bank shall be subject to compliance with any applicable regulations of the Federal Deposit Insurance Corporation.
22. |
NOTICE. |
For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:
To the Bank: |
Chairman of the Board PyraMax Bank, FSB 7001 W. Edgerton Ave. Greenfield, WI 53220 |
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To Executive: |
Richard Hurd At the address last appearing on the personnel records of the Bank |
15
IN WITNESS WHEREOF , the Bank and the Company have caused this Agreement to be executed by their duly authorized representatives, and Executive has signed this Agreement, on the date first above written.
PYRAMAX BANK, FSB | ||
By: |
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|
Chairman of the Board | ||
1895 Bancorp of Wisconsin, INC. | ||
By: |
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Chairman of the Board | ||
EXECUTIVE | ||
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||
Richard Hurd |
16
Exhibit 10.3
FORM OF 18-MONTH
EMPLOYMENT AGREEMENT
This Employment Agreement (this Agreement ) is made effective as of , 2018 (the Effective Date ), by and between PyraMax Bank, FSB, a federally chartered savings bank (the Bank ) and (the Executive ). The Bank and Executive are sometimes collectively referred to herein as the parties. Any reference to the Company shall mean 1895 Bancorp of Wisconsin, Inc., the federal mid-tier holding company of the Bank. The Company is a signatory to this Agreement for the purpose of guaranteeing the Banks performance hereunder.
WITNESSETH
WHEREAS , Executive is currently employed as of the Bank;
WHEREAS , the Bank has adopted a Plan of Reorganization pursuant to which the Bank will convert to a stock bank and become a wholly owned subsidiary of the Company, which will be a mid-tier holding company, the majority owner of which will be 1895 Bancorp of Wisconsin, MHC, a federal mutual holding company;
WHEREAS , the Bank desires to assure itself of the continued availability of the Executives services as provided in this Agreement; and
WHEREAS , the Executive is willing to serve the Bank on the terms and conditions hereinafter set forth.
NOW, THEREFORE , in consideration of the mutual covenants herein contained, and upon the terms and conditions hereinafter provided, the parties hereby agree as follows:
1. |
POSITION AND RESPONSIBILITIES. |
During the term of this Agreement Executive shall serve as [title] , and Executive accepts such employment, subject to the terms and conditions set forth in this Agreement. Executive shall have such duties, responsibilities and powers as are set forth by the Board of Directors of the Bank and/or the President and Chief Executive Officer of the Bank provided that such duties are generally consistent with those as [title] .
2. |
TERM AND DUTIES. |
(a) Eighteen-Month Contract; Annual Renewal . The term (Term) of this Agreement shall commence as of the Effective Date and shall continue thereafter for a period of eighteen (18) months. On the first anniversary of the Effective Date of this Agreement (the Anniversary Date ), the disinterested members of the Board of Directors of the Bank (the Board ) will meet to consider the renewal or nonrenewal of this Agreement. In connection with such consideration, the Board shall (i) conduct a comprehensive performance evaluation of Executive (or review such performance evaluation conducted by the Compensation Committee
of the Board) for purposes of determining whether to extend this Agreement; and (ii) approve the renewal or non-renewal of this Agreement for an additional twelve months (so that the remaining term shall be eighteen months), which decision shall be included in the minutes of the Boards meeting. If the decision of such disinterested members of the Board is not to renew this Agreement, then the Board shall provide Executive with a written notice of non-renewal ( Non-Renewal Notice ) that this Agreement shall terminate at the end of the Term. Notwithstanding the foregoing, in the event that the Company or the Bank has entered into an agreement to effect a transaction which would be considered a Change in Control as defined below, then, unless Executive has previously been informed that this Agreement shall not be renewed) the term of this Agreement shall be extended and shall terminate eighteen months following the date on which the Change in Control occurs.
(b) Termination of Employment . Notwithstanding anything contained in this Agreement to the contrary, either Executive or the Bank may terminate Executives employment with the Bank at any time during the term of this Agreement, subject to the terms and conditions of this Agreement.
(c) Continued Employment Following Expiration of Term . Nothing in this Agreement shall mandate or prohibit a continuation of Executives employment following the expiration of the term of this Agreement, upon such terms and conditions as the Bank and Executive may mutually agree.
(d) Duties; Membership on Other Boards . During the term of this Agreement, except for periods of absence occasioned by illness, reasonable vacation periods, and reasonable leaves of absence approved by the Board, Executive shall devote substantially all of his business time, attention, skill, and efforts to the faithful performance of his duties hereunder, including activities and services related to [ insert, based on position ]; provided, however, that, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, business companies or business or civic organizations, which, in the Boards judgment, will not present any conflict of interest with the Bank, or materially affect the performance of Executives duties pursuant to this Agreement. Executive shall provide the Board of Directors annually for its approval a list of organizations for which the Executive acts as a director or officer.
3. |
COMPENSATION, BENEFITS AND REIMBURSEMENT. |
(a) Base Salary . In consideration of Executives performance of the duties set forth in Section 2, the Bank shall provide Executive the compensation specified in this Agreement. The Bank shall pay Executive a salary of $ per year ( Base Salary ). The Base Salary shall be payable biweekly, or with such other frequency as officers of the Bank are generally paid. During the term of this Agreement, the Base Salary shall be reviewed at least annually by the Board or by a committee designated by the Board, and the Bank may increase, but not decrease (except for a decrease that is generally applicable to all senior management employees) Executives Base Salary. Any increase in Base Salary shall become Base Salary for purposes of this Agreement.
2
(b) Bonus Compensation . Executive will be eligible for an annual performance-based bonus based on the criteria determined by the Board. Additionally, Executive will be eligible for a discretionary bonus in the sole discretion of the Board. Executive shall be entitled to equitable participation in incentive compensation and bonuses in any plan or arrangement of the Bank or the Company in which Executive is eligible to participate. Nothing paid to Executive under any such plan or arrangement will be deemed to be in lieu of other compensation to which Executive is entitled under this Agreement.
(c) Employee Benefits . The Bank shall provide Executive with employee benefit plans, arrangements and perquisites substantially equivalent to those in which Executive was participating or from which he was deriving benefit immediately prior to the commencement of the term of this Agreement, and the Bank shall not, without Executives prior written consent, make any changes in such plans, arrangements or perquisites that would adversely affect Executives rights or benefits thereunder, except as to any changes that are applicable to all participating employees. Without limiting the generality of the foregoing provisions of this Section 3(c), Executive will be entitled to participate in and receive benefits under any employee benefit plans including, but not limited to, retirement plans, supplemental retirement plans, pension plans, profit-sharing plans, health-and-accident insurance plans, medical coverage or any other employee benefit plan or arrangement made available by the Bank and/or the Company in the future to its senior executives, including any stock benefit plans, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.
(d) Paid Time Off . Executive shall be entitled to paid vacation time each year during the term of this Agreement (measured on a fiscal or calendar year basis, in accordance with the Banks usual practices), as well as sick leave, holidays and other paid absences in accordance with the Banks policies and procedures for senior executives. Any unused paid time off during an annual period shall be treated in accordance with the Banks personnel policies as in effect from time to time.
(e) Expense Reimbursements . The Bank shall also pay or reimburse Executive for all reasonable travel, entertainment and other reasonable expenses incurred by Executive during the course of performing his obligations under this Agreement, including, without limitation, fees for memberships in such clubs and organizations as Executive and the Board shall mutually agree are necessary and appropriate in connection with the performance of his duties under this Agreement, upon presentation to the Bank of an itemized account of such expenses in such form as the Bank may reasonably require, provided that such payment or reimbursement shall be made as soon as practicable but in no event later than March 15 of the year following the year in which such right to such payment or reimbursement occurred.
3
4. |
PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION. |
(a) Upon the occurrence of an Event of Termination (as herein defined) during the term of this Agreement, the provisions of this Section 4 shall apply; provided, however, that in the event such Event of Termination occurs within eighteen (18) months following a Change in Control (as defined in Section 5 hereof), Section 5 shall apply instead. As used in this Agreement, an Event of Termination shall mean and include any one or more of the following:
(i) the involuntary termination of Executives employment hereunder by the Bank for any reason other than termination governed by Section 5 (in connection with or following a Change in Control), Section 6 (due to Disability or death), Section 7 (due to Retirement), or Section 8 (for Cause), provided that such termination constitutes a Separation from Service within the meaning of Section 409A of the Internal Revenue Code (Code); or
(ii) Executives resignation from the Banks employ upon any of the following, unless consented to by Executive:
(A) failure to appoint Executive to the position set forth in Section 1, or a material change in Executives function, duties, or responsibilities, which change would cause Executives position to become one of lesser responsibility, importance, or scope from the position and responsibilities described in Section 1, to which Executive has not agreed in writing (and any such material change shall be deemed a continuing breach of this Agreement by the Bank);
(B) a relocation of Executives principal place of employment to a location that is more than 35 miles from the location of the Banks principal executive offices as of the date of this Agreement;
(C) a material reduction in the benefits and perquisites, including Base Salary, to Executive from those being provided as of the Effective Date (except for any reduction that is part of a reduction in pay or benefits that is generally applicable to officers or employees of the Bank);
(D) a liquidation or dissolution of the Bank; or
(E) a material breach of this Agreement by the Bank.
Upon the occurrence of any event described in clause (ii) above, Executive shall have the right to elect to terminate his employment under this Agreement by resignation for Good Reason upon not less than thirty (30) days prior written notice given within a reasonable period of time (not to exceed ninety (90) days) after the event giving rise to the right to elect, which termination by Executive shall be an Event of Termination. The Bank shall have thirty (30) days to cure the condition giving rise to the Event of Termination, provided that the Bank may elect to waive said thirty (30) day period. For the avoidance of doubt, the non-renewal of this Agreement under Section 2(a) hereof, without the occurrence of an Event of Termination under this Section 4(a)(ii) prior to the end of the term of this Agreement, shall not be considered an event that would permit the Executive to resign for Good Reason and receive a severance payment.
(b) Upon the occurrence of an Event of Termination, the Bank shall pay Executive, or, in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, the Base Salary and bonus(es) that Executive would be entitled to for the remaining unexpired term of the Agreement. For purposes of determining the bonus(es) payable hereunder, the bonus(es) will be deemed to be equal to the
4
average annual bonus paid over the prior two years, and (ii) otherwise paid at such time as such bonus would have been paid absent an Event of Termination (i.e., if only one bonus would otherwise be paid during the remaining term, then one bonus will be included in the calculation). Such payments shall be paid in a lump sum on or before the 30 th day following the Executives Separation from Service (within the meaning of Section 409A of the Code), unless the payment is due in connection with a termination program involving more than one employee, in which case the payment shall be due within no more than the 60 th day following Executives Separation from Service, and shall not be reduced in the event Executive obtains other employment following the Event of Termination. Notwithstanding the foregoing, Executive shall not be entitled to any payments or benefits under this Section 4 unless and until (i) Executive executes a release of his claims against the Bank, the Company and any affiliate, and their officers, directors, successors and assigns, releasing said persons from any and all claims, rights, demands, causes of action, suits, arbitrations or grievances relating to the employment relationship, including claims under the Age Discrimination in Employment Act, but not including claims for benefits under tax-qualified plans or other benefit plans in which Executive is vested, claims for benefits required by applicable law or claims with respect to obligations set forth in this Agreement that survive the termination of this Agreement (the Release ), and (ii) the payments and benefits shall begin on the 30 th day following the date of the Executives Separation from Service, provided that before that date, the Executive has signed (and not revoked) the Release and the Release is irrevocable under the time period set forth under applicable law.
(c) Upon the occurrence of an Event of Termination, the Bank shall provide, at the Banks expense, for the remaining unexpired term of the Agreement, nontaxable medical and dental coverage and life insurance coverage substantially comparable, as reasonably available, to the coverage maintained by the Bank for Executive and his dependents prior to the Event of Termination, except to the extent such coverage may be changed in its application to all Bank employees and then such coverage provided to Executive and his dependents shall be commensurate with such changed coverage. Notwithstanding the foregoing, if applicable law prohibits (including, but not limited to, laws prohibiting discriminating in favor of highly compensated employees), or, if participation by the Executive is not permitted under the terms of the applicable health or life insurance plans, or if providing such benefits would subject the Bank to penalties, then the Bank shall pay the Executive a cash lump sum payment reasonably estimated to be equal to the value (or the remaining value) of such non-taxable medical and dental benefits, with such payment to be made by lump sum within ten (10) business days of the Date of Termination, or if later, the date on which the Bank determines that such insurance coverage (or the remainder of such insurance coverage) cannot be provided for the foregoing reasons.
(d) For purposes of this Agreement, a Separation from Service shall have occurred if the Bank and Executive reasonably anticipate that either no further services will be performed by the Executive after the date of the Event of Termination (whether as an employee or as an independent contractor) or the level of further services performed will not exceed 49% of the average level of bona fide services in the thirty-six (36) months immediately preceding the Event of Termination. For all purposes hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-1(h)(ii). If Executive is a Specified Employee, as defined in Code Section 409A and any payment to be made under sub-
5
paragraph (b) or (c) of this Section 4 shall be determined to be subject to Code Section 409A, then if required by Code Section 409A, such payment or a portion of such payment (to the minimum extent possible) shall be delayed and shall be paid on the first day of the seventh month following Executives Separation from Service.
5. |
CHANGE IN CONTROL. |
(a) Any payments made to Executive pursuant to this Section 5 are in lieu of any payments that may otherwise be owed to Executive pursuant to this Agreement under Section 4, such that Executive shall either receive payments pursuant to Section 4 or pursuant to Section 5, but not pursuant to both Sections.
(b) For purposes of this Agreement, the term Change in Control shall mean:
(1) |
Merger : The Company or the Bank merges into or consolidates with another entity, or merges another Bank or corporation into the Bank or the Company, and as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation; |
(2) |
Acquisition of Significant Share Ownership : A person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Companys or the Banks voting securities; provided, however, this clause (2) shall not apply to beneficial ownership of the Companys or the Banks voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities; |
(3) |
Change in Board Composition : During any period of two consecutive years, individuals who constitute the Companys or the Banks Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Companys or the Banks Board of Directors; provided, however, that for purposes of this clause (c), each director who is first elected by the board (or first nominated by the board for election by the stockholders or corporators) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or |
(4) |
Sale of Assets : The Company or the Bank sells to a third party all or substantially all of its assets. |
(5) |
Notwithstanding anything herein to the contrary, a Change in Control shall not be deemed to have occurred in connection with the Banks mutual holding company reorganization and/or minority offering. Similarly, a Change in Control shall not be deemed to have occurred in the event of a second-step conversion of the MHC to a stock holding company with a contemporaneous stock offering. |
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(c) Upon the occurrence of a Change in Control followed within eighteen (18) months by an Event of Termination (as defined in Section 4 hereof), Executive shall receive as severance pay or liquidated damages, or both, a lump sum cash payment equal to one and one half times the sum of (i) Executives highest annual rate of Base Salary paid to Executive at any time under this Agreement, plus (ii) the highest bonus paid to Executive with respect to the three completed fiscal years prior to the Change in Control. Such payment shall be paid in a lump sum within ten (10) days of the Executives Separation from Service (within the meaning of Section 409A of the Code) and shall not be reduced in the event Executive obtains other employment following the Event of Termination.
(d) Upon the occurrence of a Change in Control followed within eighteen (18) months by an Event of Termination (as defined in Section 4 hereof), the Bank (or its successor) shall provide at the Banks (or its successors) expense, nontaxable medical and dental coverage and life insurance coverage substantially comparable, as reasonably available, to the coverage maintained by the Bank for Executive and his dependents prior to his termination, except to the extent such coverage may be changed in its application to all Bank employees and then the coverage provided to Executive and his dependents shall be commensurate with such changed coverage. Such coverage shall cease eighteen (18) months following the termination of Executives employment. Notwithstanding the foregoing, if applicable law prohibits (including, but not limited to, laws prohibiting discriminating in favor of highly compensated employees), or, if participation by the Executive is not permitted under the terms of the applicable health or life insurance plans, or if providing such benefits would subject the Bank to penalties, then the Bank shall pay the Executive a cash lump sum payment reasonably estimated to be equal to the value (or the remaining value) of such non-taxable medical and dental benefits, with such payment to be made by lump sum within ten (10) business days of the Date of Termination, or if later, the date on which the Bank determines that such insurance coverage (or the remainder of such insurance coverage) cannot be provided for the foregoing reasons.
6. |
TERMINATION FOR DISABILITY OR DEATH. |
(a) Termination of Executives employment based on Disability shall be construed to comply with Section 409A of the Internal Revenue Code and shall be deemed to have occurred if: (i) Executive 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 last for a continuous period of not less than 12 months, and as a result, Executive is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank or the Company; or (ii) Executive is determined to be totally disabled by the Social Security Administration. The provisions of Sections 6(b) and (c) shall apply upon the termination of the Executives employment based on Disability. Upon the determination that Executive has suffered a Disability, disability payments hereunder shall commence within thirty (30) days.
(b) To the extent permitted by applicable law, the Bank shall cause to be continued life insurance coverage and non-taxable medical and dental coverage substantially comparable,
7
as reasonably available, to the coverage maintained by the Bank for Executive and Executives dependents prior to the termination of his employment based on Disability (in accordance with its customary co-pay percentages), except to the extent such coverage may be changed in its application to all Bank employees or not available on an individual basis to an employee terminated based on Disability. This coverage shall cease upon the earlier of (i) the date Executive returns to the full-time employment of the Bank; (ii) Executives full-time employment by another employer; or (iii) twelve (12) months after the date of termination of Executives employment based on Disability. Nothing herein shall be construed to prevent Executive from continuing such coverage for the remainder of the applicable COBRA period at his own expense. If participation by the Executive is not permitted under the terms of an applicable plan (i.e., such as the group life insurance plan), the Bank shall provide Executive with reimbursement (payable on a monthly basis) of premiums paid by the Executive to obtain similar benefits for the period specified above; provided, however, that the reimbursement shall not exceed the cost of the monthly premiums for active employees.
(d) In the event of Executives death during the term of this Agreement, his estate, legal representatives or named beneficiaries (as directed by Executive in writing) shall be paid Executives Base Salary at the rate in effect at the time of Executives death in accordance with the regular payroll practices of the Bank for a period of six (6) months from the date of Executives death. Such payments are in addition to any life insurance benefits that Executives beneficiaries may be entitled to receive under any employee benefit plan maintained by the Bank for the benefit of Executive, including, but not limited to, the Banks tax-qualified retirement plans. In addition, the Bank shall continue to provide for twelve (12) months after Executives death non-taxable medical, dental and other insurance benefits substantially comparable to the coverage maintained by the Bank for Executives dependents prior to his death (in accordance with the customary co-pay percentages). Nothing herein shall be construed to prevent Executives eligible dependents from continuing such coverage for the remainder of any applicable COBRA period at their own expense.
7. |
TERMINATION UPON RETIREMENT. |
Termination of Executives employment based on Retirement shall mean termination of Executives employment at any time after Executive reaches age 65 or in accordance with any retirement policy established by the Board with Executives consent as it applies to him. Upon termination of Executive based on Retirement, no amounts or benefits shall be due Executive under this Agreement, and Executive shall be entitled to all benefits under any retirement plan of the Bank and other plans to which Executive is a party.
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8. |
TERMINATION FOR CAUSE. |
(a) The Bank may terminate Executives employment at any time, but any termination other than termination for Cause, as defined herein, shall not prejudice Executives right to compensation or other benefits under this Agreement. Executive shall have no right to receive compensation or other benefits for any period after termination for Cause. The term Cause as used herein, shall exist when there has been a good faith determination by the Board that there shall have occurred one or more of the following events with respect to the Executive:
(1) |
personal dishonesty in performing Executives duties on behalf of the Bank; |
(2) |
incompetence in performing Executives duties on behalf of the Bank; |
(3) |
willful misconduct that in the judgment of the Board will likely cause economic damage to the Bank or injury to the business reputation of the Bank; |
(4) |
breach of fiduciary duty involving personal profit; |
(5) |
material breach of the Banks Code of Ethics; |
(6) |
intentional failure to perform stated duties under this Agreement after written notice thereof from the Board; |
(7) |
willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflect adversely on the reputation of the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or |
(8) |
material breach by Executive of any provision of this Agreement. |
Notwithstanding the foregoing, Cause shall not be deemed to exist unless there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for the Executive to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct described above and specifying the particulars thereof. Prior to holding a meeting at which the Board is to make a final determination whether Cause exists, if the Board determines in good faith at a meeting of the Board, by not less than a majority of its entire membership, that there is probable cause for it to find that the Executive was guilty of conduct constituting Cause as described above, the Board may suspend the Executive from his duties hereunder for a reasonable period of time not to exceed fourteen (14) days pending a further meeting at which the Executive shall be given the opportunity to be heard before the Board. Upon a finding of Cause, the Board shall deliver to the Executive a Notice of Termination, as more fully described in Section 9 below.
(b) For purposes of this Section 8, no act or failure to act, on the part of Executive, shall be considered willful unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executives action or omission was in the best interests of the Bank. Any act, or failure to act, based upon the direction of the Board or based upon the advice of counsel for the Bank shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Bank.
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9. |
NOTICE. |
(a) Any purported termination by the Bank for Cause shall be communicated by Notice of Termination to Executive. If, within thirty (30) days after any Notice of Termination for Cause is given, Executive notifies the Bank that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration, as provided in Section 19. Notwithstanding the pendency of any such dispute, the Bank shall discontinue paying Executives compensation until the dispute is finally resolved in accordance with this Agreement. If it is determined that Executive is entitled to compensation and benefits under Section 4 or 5, the payment of such compensation and benefits by the Bank shall commence immediately following the date of resolution by arbitration, with interest due Executive on the cash amount that would have been paid pending arbitration (at the prime rate as published in The Wall Street Journal from time to time).
(b) Any other purported termination by the Bank or by Executive shall be communicated by a Notice of Termination (as defined in Section 9(c)) to the other party. If, within thirty (30) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration as provided in Section 19. Notwithstanding the pendency of any such dispute, the Bank shall continue to pay Executive his Base Salary, and other compensation and benefits in effect when the notice giving rise to the dispute was given (except as to termination of Executive for Cause); provided, however, that such payments and benefits shall not continue beyond thethe remaining unexpired Term of this Agreement. In the event the voluntary termination by Executive of his employment is disputed by the Bank, and if it is determined in arbitration that Executive is not entitled to termination benefits pursuant to this Agreement, he shall return all cash payments made to him pending resolution by arbitration, with interest thereon at the prime rate as published in The Wall Street Journal from time to time, if it is determined in arbitration that Executives voluntary termination of employment was not taken in good faith and not in the reasonable belief that grounds existed for his voluntary termination. If it is determined that Executive is entitled to receive severance benefits under this Agreement, then any continuation of Base Salary and other compensation and benefits made to Executive under this Section 9 shall offset the amount of any severance benefits that are due to Executive under this Agreement.
(c) For purposes of this Agreement, a Notice of Termination shall mean a written notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated.
10. |
POST-TERMINATION OBLIGATIONS. |
(a) One-Year Non-Solicitation . Executive hereby covenants and agrees that, for a period of one year following his termination of employment with the Bank, he shall not, without the written consent of the Bank, either directly or indirectly solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of the Bank or the Company, or any of their respective subsidiaries or affiliates, to terminate his or her employment and accept employment
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or become affiliated with, or provide services for compensation in any capacity whatsoever to, any business whatsoever that competes with the business of the Bank or the Company, or any of their direct or indirect subsidiaries or affiliates or has headquarters or offices within 35 miles of the locations in which the Bank or the Company has business operations or has filed an application for regulatory approval to establish an office;
(b) One-Year Non-Competition . Executive hereby covenants and agrees that, for a period of one year following his termination of employment with the Bank, he shall not, without the written consent of the Bank, either directly or indirectly become an officer, employee, consultant, director, independent contractor, agent, sole proprietor, joint venturer, greater than 5% equity owner or stockholder, partner or trustee of any savings association, savings and loan association, savings and loan holding company, credit union, bank or bank holding company, insurance company or agency, any mortgage or loan broker or any other financial services entity or business that competes with the business of the Bank or its affiliates or has headquarters or offices within 35 miles of Greenfield, Wisconsin Notwithstanding the foregoing, this non-competition restriction shall not apply if Executives employment is terminated following a Change in Control or if the Bank terminates the Executive for a reason other than Cause (as defined in this Agreement).
(c) As used in this Agreement, Confidential Information means information belonging to the Bank which is of value to the Bank in the course of conducting its business and the disclosure of which could result in a competitive or other disadvantage to the Bank. Confidential Information includes, without limitation, financial information, reports, and forecasts; inventions, improvements and other intellectual property; trade secrets; know-how; designs, processes or formulae; software; market or sales information or plans; customer lists; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by the management of the Bank. Confidential Information includes information developed by the Executive in the course of the Executives employment by the Bank, as well as other information to which the Executive may have access in connection with the Executives employment. Confidential Information also includes the confidential information of others with which the Bank has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain. The Executive understands and agrees that the Executives employment creates a relationship of confidence and trust between the Executive and the Bank with respect to all Confidential Information. At all times, both during the Executives employment with the Bank and after its termination, the Executive will keep in confidence and trust all such Confidential Information, and will not use or disclose any such Confidential Information without the written consent of the Bank, except as may be necessary in the ordinary course of performing the Executives duties to the Bank.
(d) Executive shall, upon reasonable notice, furnish such information and assistance to the Bank as may reasonably be required by the Bank, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however, that Executive shall not be required to provide information or assistance with respect to any litigation between the Executive and the Bank or any of its subsidiaries or affiliates.
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(e) All payments and benefits to Executive under this Agreement shall be subject to Executives compliance with this Section 10. The parties hereto, recognizing that irreparable injury will result to the Bank, its business and property in the event of Executives breach of this Section 10, agree that, in the event of any such breach by Executive, the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive and all persons acting for or with Executive. Executive represents and admits that Executives experience and capabilities are such that Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Bank, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Bank or the Company from pursuing any other remedies available to them for such breach or threatened breach, including the recovery of damages from Executive.
11. |
SOURCE OF PAYMENTS. |
All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank. The Company may accede to this Agreement but only for the purposed of guaranteeing payment and provision of all amounts and benefits due hereunder to Executive.
12. |
EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS. |
This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Bank or any predecessor of the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.
13. |
NO ATTACHMENT; BINDING ON SUCCESSORS. |
(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of, Executive and the Bank and their respective successors and assigns.
14. |
MODIFICATION AND WAIVER. |
(a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.
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15. |
REQUIRED PROVISIONS. |
(a) The Bank may terminate Executives employment at any time, but any termination by the Board other than termination for Cause shall not prejudice Executives right to compensation or other benefits under this Agreement. Executive shall have no right to receive compensation or other benefits for any period after termination for Cause.
(b) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Banks affairs by a notice served under Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act, the Banks obligations under this contract shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended.
(c) If Executive is removed and/or permanently prohibited from participating in the conduct of the Banks affairs by an order issued under Section 8(e)(4) [12 USC §1818(e)(4)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act, all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x)(1) [12 USC §1813(x)(1)] of the Federal Deposit Insurance Act, all obligations of the Bank under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations under this Agreement shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the Bank, (i) by either the Office of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System (collectively, the Regulator) or his or her designee, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) [12 USC §1823(c)] of the Federal Deposit Insurance Act; or (ii) by the Regulator or his or her designee at the time the Regulator or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Regulator to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.
(f) Notwithstanding anything herein contained to the contrary, any payments to Executive by the Bank or the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359.
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16. |
SEVERABILITY. |
If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.
17. |
HEADINGS FOR REFERENCE ONLY. |
The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.
18. |
GOVERNING LAW. |
This Agreement shall be governed by the laws of the State of Wisconsin except to the extent superseded by federal law.
19. |
ARBITRATION. |
Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by binding arbitration, as an alternative to civil litigation and without any trial by jury to resolve such claims, conducted by a panel of three arbitrators sitting in a location selected by Executive within fifty (50) miles from the main office of the Bank, in accordance with the rules of the American Arbitration Banks National Rules for the Resolution of Employment Disputes (National Rules) then in effect. One arbitrator shall be selected by Executive, one arbitrator shall be selected by the Bank and the third arbitrator shall be selected by the arbitrators selected by the parties. If the arbitrators are unable to agree within fifteen (15) days upon a third arbitrator, the arbitrator shall be appointed for them from a panel of arbitrators selected in accordance with the National Rules. Judgment may be entered on the arbitrators award in any court having jurisdiction.
20. |
INDEMNIFICATION. |
(a) Executive shall be provided with coverage under a standard directors and officers liability insurance policy, and shall be indemnified for the term of this Agreement and for a period of six years thereafter to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Bank or any affiliate (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys fees and the cost of reasonable settlements (such settlements must be approved by the Board), provided, however, Executive shall not be indemnified or reimbursed for legal expenses or liabilities incurred in connection with an action, suit or proceeding arising from any illegal or fraudulent act committed by Executive. Any such indemnification shall be made consistent with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(k), and the regulations issued thereunder in 12 C.F.R. Part 359.
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(b) Any indemnification by the Bank shall be subject to compliance with any applicable regulations of the Federal Deposit Insurance Corporation.
21. |
NOTICE. |
For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:
To the Bank: |
Chairman of the Board PyraMax Bank, FSB 7001 W. Edgerton Ave. Greenfield, WI 53220 |
|
To Executive: |
|
|
At the address last appearing on the personnel records of the Bank |
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IN WITNESS WHEREOF , the Bank and the Company have caused this Agreement to be executed by their duly authorized representatives, and Executive has signed this Agreement, on the date first above written.
PYRAMAX BANK, FSB | ||
By: |
|
|
Richard Hurd | ||
President and Chief Executive Officer | ||
1895 Bancorp of Wisconsin, INC. | ||
By: |
|
|
Richard Hurd | ||
President and Chief Executive Officer | ||
EXECUTIVE | ||
|
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Exhibit 10.4
EMPLOYMENT CONTRACT
THIS EMPLOYMENT CONTRACT dated this 3rd day of January 2017 BETWEEN:
PyraMax Bank, FSB (the Employer)
-AND-
Thomas Peterson (the Employee)
IN CONSIDERATION OF the mutual benefits and obligations set forth in this Agreement, the receipt and sufficiency of which consideration is hereby acknowledged, the parties to this Agreement agree as follows:
Commencement Date and Term
1. |
This is a three-year employment contract in which the Employer has obligated itself to continue to employ Employee for a term of 36 months unless Employee voluntarily terminates his employment, or he is terminated for breach of this agreement or for other Just Cause as further explained in paragraph 15 hereof. The Employee will commence employment with the Employer on the 9th day of January Commencement Date). After 36 months from the Commencement Date Employee will become an employee at will and his salary, compensation benefits will be determined by Employer without the restrictions contained in this Agreement. Thirty- six months after the Commencement Date, paragraphs 6-16 hereof will become null and void. The provisions of paragraphs 17-36 will survive the Employees transition to an employee at will and will continue throughout his employment with Employer and after termination as written in paragraphs 23 and 24 below. |
Job Title and Description
2. |
The Employer agrees to employ the Employee as its Chief Lending Officer Senior Vice President Commercial Lending. The Employee will be expected to perform the job duties defined in Employers Policies and as directed by Employer s CEO from time to time. |
3. |
The Employee agrees to be employed on the terms and conditions set out in this Agreement. The Employee agrees to be subject to the general supervision of and act pursuant to the orders, advice and direction of the Employer. |
4. |
The Employee agrees to abide by the Employers rules, regulations, and practices, including those concerning confidential information, work schedules, PTO and sick leave, as they may from time to time be adopted or modified. |
Employee Compensation
5. |
Compensation paid to the Employee for the services rendered by the Employee as required by this Agreement (the Compensation) will include a Salary of $175,000.00 (USD) per year (hereinafter the Salary) payable pursuant to employers payment policies. |
6. |
This Salary will be payable according to employers policy until this agreement or employees subsequent at will employment is terminated. The Employer is entitled to deduct from the Employees Salary, or from any other compensation in whatever form, any applicable deductions and remittances as required by law. |
7. |
The Employee understands and agrees that any additional compensation paid to the Employee in the form of bonuses or other similar incentive compensation will rest in the sole discretion of the Employer and be earned and paid pursuant to Employers policies. During the first 36 months of employment, the Employee will have an annual incentive target of up to 30% of Salary based on production. |
8. |
The Employer will reimburse the Employee for all reasonable expenses, in accordance with the Employers policy as in effect from time to time, including but not limited to, travel and entertainment expenses incurred by the Employee in connection with the business of the Employer. Expenses will be paid within a reasonable time after submission of acceptable supporting documentation. |
Employee Benefits
9. |
The Employee will be entitled to only those additional benefits that are currently available as described in the Employers employment booklets and manuals or as required by law. Benefits to which employee is entitled may be changed from time to time as Employer may determine. |
10. |
Employer discretionary benefits are subject to change, without compensation, upon the notice of that change pursuant to Employers policies and providing that any change to those benefits is taken generally with respect to other employees and does not single out the Employee. |
11. |
The additional benefits described in the letter offer of employment from Monica Baker dated November 9, 2016 which is attached will also be provided during the term of this agreement until termination as provided in paragraphs 15-18 or until 36 months after the Commencement Date, whichever is earlier. |
Personal Time Off (PTO)
12. |
The Employee will be entitled to 33 personal days per year. For the year 2017, PTO will prorated from the Commencement Date. PTO for any partial year of employment will be similarly prorated. |
13. |
The times and dates for any PTO will be determined by mutual agreement between the Employer and the Employee. |
14. |
Upon termination of employment, the Employer will pay compensation to the Employee for any accrued and unused PTO. |
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Termination of Employment
15. |
Where the Employee has breached any reasonable term of this Agreement or where there is just cause for termination, the Employer may terminate the Employees employment without notice, as permitted by law. |
16. |
In the event that Employer terminates Employees employment without just cause prior to the date on which Employee completes 36 months of employment, Employee shall be entitled to continue to receive the Salary defined herein at paragraph 6, and only the Salary defined herein, to the day which is 36 months after his first day of active employment with Employer. |
17. |
If the Employee wishes to terminate this employment with the Employer, the Employee will provide the Employer with notice of three (3) weeks. As an alternative, if the Employee co-operates with the training and development of a replacement, then sufficient notice is given if it is sufficient notice to allow the Employer to find and train the replacement. In the event Employee notifies Employer he is terminating his employment with Employer, notwithstanding any provision herein to the contrary, Employer may elect to immediately terminate this contract or select any other termination date earlier than that given by the Employee and such date will be deemed to have been mutually agreed upon by both parties. |
18. |
The Termination Date specified by the Employee may expire on any day of the month and upon the Termination Date the Employer will forthwith pay to the Employee any outstanding portion of the wage, accrued PTO and banked time, if any, calculated to the Termination Date. |
19. |
Except pursuant to the terms of paragraph 16 above, after termination Employee will be entitled to receive only those employee benefits required by law which are applicable to all former employees. |
Conflict of Interest
20. |
During the term of Employees active employment with Employer, he agrees to comply with Employers policies on conflict of interest. |
21. |
During the term of the Employees active employment with the Employer, the Employee will not, directly or indirectly, engage or participate in any other business activities that the Employer, in its reasonable discretion, determines to be in conflict with the best interests of the Employer without the written consent of the Employer, which consent will not be unreasonably withheld. Employee agrees to inform Employer of any activities he engages in for compensation during his employment with Employer. |
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Compliance with Employers Policies and Regulatory Policies and Procedures
22. |
During the term of the Employees employment with Employer, Employee agrees to comply with Employers policies and procedures. Employee understands and agrees that Employers business is governed and restricted by a number of Federal and State regulations, policies and procedures. Employee agrees to know and comply with all Federal and State regulations, policies and procedures which apply to his activities on behalf of Employer. |
23. |
Restrictive covenants. |
a) |
Executed contemporaneously with this agreement is a Non-compete and Confidential Information agreement. The mutual promises made in this agreement is part of the consideration provided for that Non-compete and Confidential Information agreement. The terms of that Non-compete and Confidential Information agreement survive termination of employment for the periods of time stated in and pursuant to the provisions of that Non- compete and Confidential Information agreement. |
Contract Binding Authority
24. |
Notwithstanding any other term or condition expressed or implied in this Agreement to the contrary, the Employee will not have the authority to enter into any contracts or, commitments for or on the behalf of the Employer except as specifically authorized by Employer in writing. |
Remedies
25. |
In the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Employee agrees that the Employer is entitled to a permanent injunction, in addition to and not in limitation of any other rights and remedies available to the Employer at law or in equity, in order to prevent or restrain any such breach by the Employee or by the Employees partners, agents, representatives, servants, employees, and/or any and all persons directly or indirectly acting for or with the Employee. |
Severability
26. |
The Employer and the Employee acknowledge that this Agreement is reasonable, valid and enforceable. However, if any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties intent that such provision be changed in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result. |
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Notices
27. |
Any notices, deliveries, requests, demands or other communications required here will be deemed to be completed when hand-delivered, delivered by agent, or by email to the parties at the following addresses or as the parties may later designate in writing: |
a. Employer:
Name: | PyraMax Bank, FSB, Attn: Monica Baker | |
Address: | 7001 W. Edgerton Ave., Greenfield, WI | |
Email: | mbaker@pyramaxbank.com |
b. Employee:
Name: | Thomas Peterson | |
Address: | 312 W. Lilac Ln., Grafton, WI 53024 | |
Email: | Souperpetel@yahoo.com |
Modification of Agreement
28. |
Any amendment or modification of this Agreement or additional obligation assumed by either party in connection with this Agreement will only be binding if evidenced in writing signed by each party or an authorized representative of each party. |
Governing Law
29. |
This Agreement will be construed in accordance with and governed by the laws of the state of Wisconsin. |
Definitions
30. |
For the purpose of this Agreement the following definitions will apply: |
a |
Customer Information means customer information, including but not limited to, names of customers and their representatives, contracts and their contents and parties, customer services, data provided by customers and the type, quantity and specifications of products and services purchased, or received by customers of the Employer. |
b. |
Termination Date means the date specified in this Agreement or in a subsequent notice by either the Employee or the Employer to be the last day of employment under this Agreement. The parties acknowledge that various provisions of this Agreement will survive the Termination Date. |
General Provisions
31. |
Time is of the essence in this Agreement. |
32. |
No failure or delay by either party to this Agreement in exercising any power, right or privilege provided in this Agreement will operate as a waiver, nor will any single or partial exercise of such rights, powers or privileges preclude any further exercise of them or the exercise of any other right, power or privilege provided in this Agreement. |
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33. |
This Agreement will inure to the benefit of and be binding upon the respective heirs, executors, administrators, successors and assigns, as the case may be, of the Employer and the Employee. |
34. |
This Agreement may be executed in counterparts. Facsimile signatures are binding and are considered to be original signatures. |
35. |
This Agreement and the attached Employment Contract and the letter of Monica Baker constitute the entire agreement between the parties and there are no further items or provisions, either oral or written. The parties to this Agreement stipulate that neither of them has made any representations with respect to the subject matter of this Agreement except such representations as are specifically set forth in this Agreement, the attached Employment Contract and letter of Monica Baker. |
IN WITNESS WHEREOF, the parties have duly affixed their signatures under hand and seal on this 3 rd day of January 2017.
EMPLOYER: | ||||
PyraMax Bank, FSB | ||||
By: | /s/ Chuck Mauer | (SEAL) | ||
EMPLOYEE: | ||||
/s/ Thomas Peterson | ||||
Thomas Peterson |
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NON-COMPETE AND CONFIDENTIAL INFORMATION AGREEMENT
The parties to this Agreement acknowledge that the undersigned Tom Peterson, (hereinafter referred to as Employee) has been offered an employment contract with PyraMax Bank, FSB, (hereinafter sometimes referred to as PyraMax Bank or the Bank). The parties also acknowledge that in the course of Employees employment with PyraMax Bank, he will be given certain Confidential Information (as further defined herein) and that this information will be essential to Employees performance of his/her job at PyraMax Bank. Employee and the Bank acknowledge that part of Employees compensation is based on performance and that without access to the Banks Confidential Information Employees performance and compensation would be reduced.
In consideration of Employees employment agreement with PyraMax Bank, and access to the Banks Confidential Information, which consideration the Employee acknowledges is good and sufficient consideration for this Agreement, Employee and PyraMax Bank hereby agree as follows:
1. |
Restrictive Covenants. |
(a) Confidential Information. Employee acknowledges that the Bank has created and maintains at great expense strategic plans, sales data and sales strategy, methods, products, procedures, processes, techniques, financial information, customer lists, personal customer data, pricing policies, personnel data and other similar confidential and proprietary information, and has received from its customers certain confidential and proprietary information (collectively, the Confidential Information). Employee further acknowledges that the Bank has taken and will continue to take actions to protect the Confidential Information. Accordingly, the Employee agrees that during the term of the Employees employment with the Bank, and until the sooner of (i) such time as the Confidential Information becomes generally available to the public through no fault of the Employee or other person under the duty of confidentiality to the Bank, (ii) such time as the Confidential Information no longer provides a benefit to the Bank, or (iii) two (2) years after the termination of the Employees employment with the Bank, the Employee will not, in any capacity, use or disclose, or cause to be used or disclosed, in any geographic territory in which the Bank or any of the Banks customers do business, any Confidential Information the Employee acquired while employed by the Bank. The requirements of confidentiality and the limitations on use and disclosure described in this Agreement shall not apply to Confidential Information that the Employee can demonstrate by clear and convincing evidence, at the time of disclosure by the Bank to the Employee, was known to the Employee as evidenced by the Employees contemporaneous written records. The parties hereto agree that nothing in this Agreement shall be construed to limit or negate the law of torts or trade secrets where it provides the Bank with broader protection than that provided herein.
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(b) Return of Bank Property. The parties hereto acknowledge that any material (in computerized or written form) that the Employee obtained in the course of performing the Employees employment duties are the sole and exclusive property of the Bank, the Employee agrees to immediately return any and all records, files, computerized data, documents, Confidential Information or proprietary information. or any other property owned or belonging to the Bank in the Employees possession or under his or her control, without any originals or copies being kept by the Employee or conveyed to any other person. upon the Employees separation from employment or upon the Banks request.
(c) Non-Interference with Customers, Employees. For a period of twelve (12) months following the termination of the Employees employment with the Bank for any reason, the Employee will not, directly or indirectly, on behalf of him/himself or any other person. entity or enterprise, do any of the following:
(i) solicit or accept business from any person or entity who is an Active Customer (as defined below) of the Bank, a Subsidiary of the Bank. or any of Bank s affiliates, with whom the Employee has had business contact during the twelve (12) month period prior to the termination of the Employees employment with the Bank (the Reference Period) for the purpose of providing competitive products or services similar to those provided by the Employee during the Reference Period;
(ii) request or advise any of the Active Customers, suppliers or other business contacts of the Bank who have business relationships with the Bank and with whom the Employee had business contact during his/her employment with the Bank to withdraw, curtail or cancel any of their business relations with the Bank;
(iii) induce or attempt to induce any employee or other personnel of the Bank to terminate his or her relationship or breach his/her employment relationship or other contractual relationship, whether oral or written, with the Bank; provided, however, that nothing shall-prevent a future employer of the Employee from hiring such employee or other personnel if the Employee does not otherwise violate this provision.
Active Customer shall mean any customer or prospective customer of the Bank which, within the Reference Period, either received any products or services supplied by or on behalf of the Bank or was the recipient of at least two (2) business contacts by any personnel of the Bank (including the Employee).
(d) Remedies. Notwithstanding any other provision of this Agreement, if the Employee breaches any provision of this Paragraph 1, the Bank shall be entitled to injunctive and other equitable relief (without the necessity of showing actual monetary damages or of posting any bond or other security): (i) restraining and enjoining any act with would constitute a breach. or (ii) compelling the performance of any obligation which, if not performed, would constitute a breach, as well as any other remedies available to the Bank, including monetary damages. Upon the Banks request, the Employee shall provide reasonable assurances and evidence of compliance with the restrictive covenants set forth in this Paragraph 1. If any court of competent jurisdiction shall deem any provision in this Paragraph 1 too restrictive, the other provisions shall stand, and the court shall modify the unduly restrictive provision to the point of greatest restriction permissible by law. The restrictive covenants set forth in this Paragraph 1 shall survive the termination of this Agreement, and the Employees termination of employment for any reason, and the Employee shall continue to be bound by the terms of the Paragraph 1 as if this Agreement was still in effect.
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3. Employee and the Bank agree that any action, legal or equitable, concerning the validity, enforcement or applicability of this Agreement to any set of circumstances shall be brought in the Circuit Court of Milwaukee County, State of Wisconsin.
4. Employee hereby irrevocably submits him/herself to the jurisdiction of the Circuit Court of Milwaukee County, State of Wisconsin and waives all objections to personal jurisdiction for the purpose of any action brought to enforce this Agreement or to contest the validity of any of the terms of this Agreement.
5. This Agreement contains the entire agreement of the parties regarding the subject matter hereof. This Agreement may be modified only by a duly authorized writing executed by both parties.
Dated: 1/3/17 | ||
Employee: | /s/ Thomas Peterson | |
Tom Peterson | ||
PyraMax Bank, FSB, by: | ||
/s/ Chuck Mauer | ||
CCO | ||
Name and Title |
..,
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Exhibit 10.5
NONQUALIFIED DEFERRED COMPENSATION PLAN
ADOPTION AGREEMENT
The Plan Sponsor named below hereby establishes a Nonqualified Deferred Compensation Plan for Eligible Individuals as provided in this Adoption Agreement and the Basic Plan Document.
I. |
Plan Sponsor Information |
(a) |
Name and Address of Plan Sponsor: |
PyraMax Bank |
7001 W. Edgerton Greenfield WI 53220 |
(b) |
Plan Name: |
PyraMax Bank FSB NQDC |
(c) |
Telephone Number: 414.235.5204 |
(d) |
Tax ID Number: 39-0624390 |
Name of Plan: PyraMax Bank FSB NQDC |
(e) |
Tax Year End: 12/31 |
II. |
Definitions |
(a) Compensation Shall mean (select one or more):
(i) | ☑ | Regular Salary | ||||
(ii) | ☑ | Bonuses | ||||
(iii) | ☐ | Commissions | ||||
(iv) | ☐ | Performance-Based Compensation | ||||
(v) | ☑ | Director Fees |
1
April 2015
(b) |
Disability |
(i) |
Distributable Event (select one): |
(1) ☑ |
Disability shall be a Distributable Event under the Plan. |
(2) ☐ |
Disability shall not be a Distributable Event under the Plan. |
(ii) |
Definition: A Participant shall be disabled if the Participant |
(select one or more, if applicable): |
(1) ☐ |
is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; |
(2) ☐ |
is by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Participants Plan Sponsor; |
(3) ☐ |
is determined to be disabled in accordance with a disability insurance program that applies a definition of disability that complies with the requirements of (1) or (2) above; |
(4) ☑ |
is determined to be disabled by the Social Security Administration or Railroad Retirement Board. |
(c) |
Domestic Partner Shall mean an individual whose domestic partnership with a Participant has been registered with the Plan Sponsor, if required under the policies and procedures established by the Plan Sponsor, and is (select one): |
(i) ☑ |
An individual over age 18 in a committed relationship with the Participant which relationship includes the following characteristics: the parties have shared the same regular and permanent residence for at least six (6) months; neither party is legally married to any other person; the parties have no blood relationship that would preclude marriage both parties have attained the age of legal majority in their state of residence; and the parties are financially interdependent. |
(i) ☐ |
An individual who satisfies the following criteria: |
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(ii) ☐ |
The Plan does not recognize Domestic Partners. |
(d) |
Interim Distribution Date Shall mean (select one): |
(i) ☐ |
The first day of the Taxable Year in which falls the date that is three (3), five (5) or ten (10) years beginning after the Taxable Year in which the services giving rise to the earliest Compensation Deferrals and/or Matching or Discretionary Credits subject to the Interim Distribution Date are to be performed, as selected by the Participant, upon which a distribution shall be made in accordance with Section 6.9 of the Plan document. |
(ii) ☐ |
The first day of the Taxable Year in which falls the date that is (may be three (3) or greater), (must be five (5) or greater, and must be greater than the number set forth in the immediately preceding blank line), or (must be five (5) or greater, and must be greater than the number set forth in the immediately preceding blank line) years beginning after the Taxable Year in which the services giving rise to the earliest Compensation Deferrals and/or Matching or Discretionary Credits subject to the Interim Distribution Date are to be performed, as selected by the Participant, upon which a distribution shall be made in accordance with Section 6.9 of the Plan document. (For example, if the Plan Sponsor selects 3, 6 and 10 years above, a Participant who defers Compensation otherwise payable in 2015 may elect to have an Interim Distribution Date with respect to such deferral that is January 1, 2018, January 1, 2021 or January 1, 2025.) |
(e) |
De Minimis Distributions (select one): |
(i) ☐ |
The Plan Sponsor shall not make De Minimis Distributions. |
(ii) ☐ |
The Plan Sponsor shall make De Minimis Distributions, and, notwithstanding the Participants election regarding the Separation from Service Payment, the Plan Sponsor shall pay the Participants benefit in a single lump sum payment, provided that: |
(1) |
the payment accompanies the termination and liquidation of the entirety of the Participants interest in the Plan and all Aggregated Plans, and |
(2) |
the payment is not greater than (select one): |
(A) |
☐ $ (select an amount no greater than the current applicable dollar limit under Code section 402(g)(1)(8)) ($18,000 for 2015) (the Applicable Dollar Limit)), or |
3
(B) ☑ |
The Applicable Dollar Limit, as adjusted, for the Taxable Year in which the payment occurs. |
(f) |
Effective Date This is a (select one): |
(i) ☐ |
New Plan. The effective date of this new Plan is __________________________ |
(ii) ☑ |
Restatement of an existing Plan. The Plan was originally effective as of 01/01/2012 The effective date of this restated Plan document and Adoption Agreement is 01/01/2016. This restated Plan document and Adoption Agreement apply to all amounts (select 1 or 2 and, if applicable, 3) |
(1) ☐ |
deferred in taxable years beginning after An amount is considered deferred as of any date for purposes of this Section if the Participant has a legally binding right to be paid the amount and the right to the amount is earned and vested. |
(2) ☐ |
________________________________ |
(3) ☐ |
Notwithstanding the foregoing, this restated Plan document and Adoption Agreement will not apply to the following amounts (describe, if applicable): ____________________________________ |
III. |
Eligibility |
The Plan is intended to be a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of §§201(2) and 301(a)(3) of the Employee Retirement Income Security Act of 1974 (ERISA). The Plan Sponsor should consult with counsel regarding eligibility under the select group standard.
An individual shall be an Eligible Individual as follows (select one or more):
(a) ☑ |
If he or she is designated as an Eligible Individual by resolution of the Board of the Plan Sponsor. |
(b) ☐ |
If he or she is designated, in writing, as an Eligible Individual by the Plan Administrator. The Plan Administrator will not vote or act on any matter regarding eligibility that relates solely to himself or herself. |
4
(a) ☐ |
If he or she occupies one of the following positions: |
(b) ☑ |
If his or her Compensation for a Taxable Year is expected to be greater than $120,000 |
(c) ☐ |
If he or she is an Eligible Individual, as defined in Ill (a), (b) (c) or (d) above, of an Additional Adopting Plan Sponsor as listed on Exhibit A attached to this Adoption Agreement and is otherwise defined as an Eligible Individual under the Plan. |
IV. |
Compensation Deferrals (select one or more): |
(a) ☐ |
A Participants Compensation Deferrals with respect to a Taxable Year shall be limited to a minimum of ( select one or more ): |
(i) |
☐ _____________________ % of a Participants Regular Salary |
(ii) |
☐ _____________________ % of a Participants Bonus |
(iii) |
☐ _____________________ % of a Participants Commission |
(iv) |
☐ _____________________ % of a Participants Performance-Based Compensation |
(v) |
☐ _____________________ % of a Participants Directors Fees |
(b) ☐ |
A Participants Compensation Deferrals with respect to a Taxable Year shall be limited to a maximum of ( select one or more ): |
(i) |
☑ _______100___________ % of a Participants Regular Salary |
(ii) |
☑ _______100___________ % of a Participants Bonus |
(iii) |
☑ _______100___________ % of a Participants Commission |
(iv) |
☐ _____________________ % of a Participants Performance-Based Compensation |
(v) |
☑ _______100___________ % of a Participants Directors Fees |
(c) ☐ |
Participants Compensation Deferrals with respect to a Taxable Year shall be limited to a minimum of ( select one or more ): |
(i) |
☐ _____________________ % of a Participants Regular Salary |
(ii) |
☐ _____________________ % of a Participants Bonus |
(iii) |
☐ _____________________ % of a Participants Commission |
(iv) |
☐ _____________________ % of a Participants Performance-Based Compensation |
(v) |
☐ _____________________ % of a Participants Directors Fees |
5
(d) ☐ |
A Participants Compensation Deferrals with respect to a Taxable Year shall be limited to a maximum of (select one or more): |
(i) |
☐ _____________________ % of a Participants Regular Salary |
(ii) |
☐ _____________________ % of a Participants Bonus |
(iii) |
☐ _____________________ % of a Participants Commission |
(iv) |
☐ _____________________ % of a Participants Performance-Based Compensation |
(v) |
☐ _____________________ % of a Participants Directors Fees |
(e) |
A Participants Compensation Deferral election (select one): |
(i) |
☐ will |
(ii) |
☐ will not |
evergreen (or carry over) to subsequent Taxable Years. (If a Participants Compensation Deferral election does not evergreen, or carryover, to a subsequent Taxable Year, the Participant will be deemed to have elected not to defer Compensation during a subsequent Taxable Year unless the Participant submits, in accordance with the terms of the Plan and Code §409A, an affirmative Compensation Deferral election for each upcoming Taxable Year.)
V. |
Matching Credits |
(a) |
Matching Credits shall be determined in accordance with one or more of the following methods (select one or more): |
(i) ☐ |
The Plan Sponsor shall credit to the Account of each Participant % of such Participants Compensation Deferrals. Matching Credits shall be made based on Compensation Deferrals made each (select one): |
(1) |
☐ Pay Period |
(2) |
☐ Taxable Year |
(3) |
☐ Other (specify) _______________________________ |
6
(ii) |
The Plan Sponsor shall credit to the Account of each Participant % of such Participants Compensation Deferrals that do not exceed % the Participants Compensation, plus % of the Participants Compensation Deferrals that exceed _____% of such Participants Compensation but do not exceed _____% of the Participants Compensation. Matching Credits shall be made based on Compensation Deferrals made each (select one): |
(1) |
Pay Period |
(2) |
Taxable Year |
(3) |
Other (specify) _______________________________ |
(iii) |
☐ The Plan Sponsor shall credit to the Account of each Participant an annual Matching Credit equal to (a) the matching contribution amount (if any) which the Plan Sponsor would have contributed under the Participants qualified plan account or accounts for the Taxable Year were the Plan Sponsor not prohibited under applicable law (including due to Code, including ACP testing, limits) from making such a matching contribution under the qualified plan, minus (b) the matching contribution the Plan Sponsor actually contributed under the Participants qualified plan account or accounts for the Taxable Year. Notwithstanding the preceding, a Participant will receive an annual Matching Credit under this Plan for a Taxable Year only if the Participant has made the maximum salary reduction contributions permitted under the qualified plan during the applicable Taxable Year. |
(iv) |
☐An amount determined and made at a time in the discretion of the Plan Sponsor. |
(v) |
☑ The Plan does not offer Matching Credits. |
(b) |
Limitations on Matching Credits. |
(i) |
☐ The Matching Credit shall not exceed $ for any Participant. |
(ii) |
☐ The Plan Sponsor shall not provide a Matching Credit for any Compensation Deferral in excess of % of the Participants Compensation. |
(c) |
Eligibility for Matching Credit (select one or more) (As noted above, if the Plan Sponsor elects to make Matching Credits in accordance with (a)(iii), a Participant will be eligible for an annual Matching Credit only if the Participant has made the maximum salary reduction contributions permitted under the Plan Sponsors qualified plan during the applicable Taxable Year): |
(i) |
☐ All Participants who have completed at least _____ Hours of Employment during the Taxable Year. The term |
7
Hours of Employment is defined as:
_____________________________________
_____________________________________
(ii) |
☐ All Participants employed on the last day of a Taxable Year. |
(iii) |
☐ All Participants who satisfy the following conditions: |
_____________________________________
_____________________________________
(iv) |
☑ No eligibility conditions. All Participants who make Compensation Deferrals are eligible for Matching Credits. |
VI. |
Discretionary Credits |
(a) |
Amount of Discretionary Credit (select one): |
(i) |
☑ An amount determined at the discretion of Plan Sponsor, which need not be uniform as to Participants. |
(ii) |
☐ An amount determined by the following formula: |
__________________________________________ |
__________________________________________ |
(iii) |
An amount equal to (a) the non-matching contribution amount (if any) which the Plan Sponsor would have contributed under the Participants qualified plan account or accounts for the Taxable Year were the Plan Sponsor not prohibited under applicable law (including due to Code limits) from making such a contribution under the qualified plan, minus (b) the non-matching contribution the Plan Sponsor actually contributed under the Participants qualified plan account or accounts for the Taxable Year. |
(iv) |
☐ The Plan does not offer Discretionary Credits. |
(b) |
Eligibility for Discretionary Credit (select one or more): |
(i) ☐ |
All Participants who have completed at least _______ Hours of Employment during the Taxable Year. (The term Hours of Employment must be defined as defined above. If no Matching Contributions are provided, or Hours of Employment are not an eligibility requirement for Matching Contributions, the term Hours of Employment is defined as: ___________________________________ |
8
(ii) ☐ |
All Participants employed on the last day of a Taxable Year. |
(ii) ☐ |
All Participants who satisfy the following conditions: |
_________________________________________________ |
_________________________________________________ |
(iv) ☐ |
No eligibility conditions. All Participants who are Eligible Individuals of the Plan Sponsor during the Taxable Year are eligible for Discretionary Credits. |
VH. |
Vesting and Forfeitures (select one or more): |
(a) ☐ |
A Participants entire Account shall be 100% vested at all times. |
(b) ☐ |
A Participants vesting schedule can be accelerated at the discretion of the Plan Administrator if such a change in vesting schedule is in writing. The Plan Administrator will not vote or act on any matter regarding Vesting and Forfeitures that relates solely to himself or herself. |
(c) ☑ |
The Participant shall at all times be one-hundred percent (100%) vested in his or her Compensation Deferrals, as well as in any hypothetical appreciation (or depreciation) specifically attributable to such Compensation Deferrals due to Investment Credits and Debits. The Participant shall vest in Matching Credits and/or Discretionary Credits, as well as in any hypothetical appreciation (or depreciation) specifically attributable to such amounts due to Investment Credits and Debits, pursuant to the vesting schedule shown below. |
Years of Service | Vesting Percentage | |
1 |
20% | |
2 |
40% | |
3 |
60% | |
4 |
80% | |
5 |
100% |
For purposes of the above schedule, a Participant shall earn a Year of Service as follows:
__________________________________________________________________
__________________________________________________________________
The Vesting Schedule specified above applies (select one):
☐ |
separately to each Class Year Account of a Participant |
☐ |
the entire Plan Account of a Participant. |
9
(d) ☑ |
A Participants entire Account shall become 100% vested upon ( select one or more ): |
(i) |
☑ The Participants death while employed |
(ii) |
☑ The Participants Disability while employed. |
(iii) |
☐ The Participants attainment of age _____ while employed. |
(iv) |
☑ A Plan Termination Following a Change in Control Event, if applicable. |
(i) |
☐ A Conflict of Interest Divestiture. |
(ii) |
☐ The Participants involuntary Separation from Service Without Good Cause by the Plan Sponsor. |
(e) ☐ |
A Participant who is otherwise vested in accordance with this Section VII shall nevertheless forfeit his or her vested Account (other than Compensation Deferrals and any hypothetical appreciation or depreciation specifically attributable to such Compensation Deferrals) under the following circumstances {please specify): |
________________________________________________________________________________________ |
________________________________________________________________________________________ |
(f) |
Any forfeitures under the Plan shall be credited to the Account of each Participant other than the Participant whose Account generated the forfeiture in the same proportion that each such Participants Account as of the end of the Taxable Year in which the forfeiture occurred bears to the Accounts of all such Participants as of the same date. |
VIII. |
Delay in Payment (select one or more): |
An amount otherwise required to be paid under the Plan shall be delayed if the payment
(a) ☐ |
Is subject to Code §162(m). |
(b) ☐ |
Violates federal securities laws or certain other applicable law. |
10
IX. |
Change in Control Event |
(a) |
A Change in Control Event shall be defined as (election applies only to Plan Sponsors that are corporations; select one or more): |
(i) ☑ |
Change in Ownership of the Corporation. |
(ii) ☑ |
A Change in the Effective Control of the Corporation. |
(iii) ☐ |
A Change in Ownership of a Substantial Portion of a Corporations Assets. |
(b) |
The occurrence of a Change in Control Event shall ( select one ): |
(i) ☐ |
not, under any circumstances, including the discretion of the Plan Sponsor, constitute a Plan Termination Following a Change in Control Event. |
(ii) ☐ |
constitute a Plan Termination Following a Change Control Event. |
(iii) ☑ |
may constitute a Plan Termination Following a Change in Control Event, at the discretion of the Plan Sponsor, within 12 months of a Change in Control Event. |
X. |
Distribution Elections |
(a) A Participants election of the form and timing of payment of his or her benefit under the Plan applies (select one):
(i) ☐ |
separately to each vested Class Year Account |
(ii) ☐ |
to his or her entire vested Account. |
(b) If a Participant may submit a new form and timing of payment election for each Class Year Account, a Participants form and timing of payment election (select one):
(i) ☐ |
will |
(ii) ☑ |
will not |
evergreen (or carry over) to apply to subsequent Class Year Accounts.
(c) For purposes of Section 6.3 of the Plan, Normal Retirement Age means Age ________
11
XI. |
Signatures |
This Nonqualified Deferred Compensation Plan, including this Adoption Agreement, has been designed to permit Participants to defer Federal and state income tax on amounts credited to their Accounts until a later Taxable Year. The Plan Sponsor adopting this Plan should consult with tax counsel regarding the consequences of adopting this Plan to both the Plan Sponsor and Participants and the effect an amendment or restatement of an existing plan using this Plan Document may have, if any, under Code §409A. Registration of interests under this Nonqualified Deferred Compensation Plan may be required under securities law. Independent legal counsel should be consulted with respect to securities law issues. By executing this Adoption Agreement, the Plan Sponsor acknowledges that no representations or warranties as to the legal consequences (including the tax and securities law consequences) to the Plan Sponsor and Participants of the operation of this Plan have been made by the entity that has provided this Plan document and Adoption Agreement. |
The Plan and this accompanying Adoption Agreement were adopted by the Plan Sponsor the 1 st day of January, 2016. |
Executed for the Plan Sponsor by: Monica Baker |
Title of Individual: Chief Brand Officer |
Signature: |
12
EXHIBIT A
ADDITIONAL ADOPTING PLAN SPONSORS
In accordance with paragraph 1.33 of the Basic Plan Document, the Plan Sponsor has consented to allow the following entities to participate in the Plan:
1. |
|
2. |
|
3. |
|
4. |
|
5. |
|
6. |
|
7. |
|
8. |
|
9. |
|
10. |
|
13
NONQUALIFIED DEFERRED COMPENSATION PLAN
BASIC PLAN DOCUMENT
April 2015
TABLE OF CONTENTS
PREAMBLE |
1 | |||||||||
ARTICLE I | ||||||||||
DEFINITIONS | 2 | |||||||||
1.1 | Account | 2 | ||||||||
1.2 | Adoption Agreement | 2 | ||||||||
1.3 | Affiliate | 2 | ||||||||
1.4 | Aggregated Plan | 2 | ||||||||
1.5 | Beneficiary | 2 | ||||||||
1.6 | Benefit Benchmarks | 2 | ||||||||
1.7 | Board | 2 | ||||||||
1.8 | Change in Control Event | 2 | ||||||||
1.9 | Class Year Account | 7 | ||||||||
1.10 | Code | 7 | ||||||||
1.11 | Commissions | 7 | ||||||||
1.12 | Compensation | 7 | ||||||||
1.13 | Compensation Deferral Agreement | 7 | ||||||||
1.14 | Compensation Deferrals | 7 | ||||||||
1.15 | Conflict of Interest Divestiture | 7 | ||||||||
1.16 | Corporate Dissolution | 7 | ||||||||
1.17 | De Minimis Distribution | 7 | ||||||||
1.18 | Disability | 7 | ||||||||
1.19 | Distributable Event | 7 | ||||||||
1.20 | Domestic Partner | 8 | ||||||||
1.21 | Domestic Relations Order | 8 | ||||||||
1.22 | Effective Date | 8 | ||||||||
1.23 | Eligible Individual | 8 | ||||||||
1.24 | ERISA | 8 | ||||||||
1.25 | Income Inclusion Under Code § 409A | 8 | ||||||||
1.26 | Interim Distribution Date | 8 | ||||||||
1.27 | Investment Commissions | 9 | ||||||||
1.28 | Investment Credits and Debits | 9 | ||||||||
1.29 | Nonqualified Deferred Compensation Plan | 9 | ||||||||
1.30 | Normal Retirement Age | 9 | ||||||||
1.31 | Participant | 9 | ||||||||
1.32 | Performance-Based Compensation | 10 | ||||||||
1.33 | Plan | 10 | ||||||||
1.34 | Plan Administrator | 10 | ||||||||
1.35 | Plan Sponsor | 11 | ||||||||
1.36 | Plan Termination Following a Change in Control Event | 11 | ||||||||
1.37 | Plan Termination Following a Corporate Dissolution | 11 | ||||||||
1.38 | Plan Termination in Connection with Termination of Certain Similar Arrangements | 11 | ||||||||
1.39 | Regular Salary | 11 | ||||||||
1.40 | Sales Commissions | 11 | ||||||||
1.41 | Separation from Service | 12 | ||||||||
1.42 | Specified Employee | 13 | ||||||||
1.43 | Spouse | 14 | ||||||||
1.44 | Taxable Year | 14 | ||||||||
1.45 | Trust | 14 | ||||||||
1.46 | Trustee | 14 | ||||||||
1.47 | Unforeseeable Emergency | 14 | ||||||||
1.48 | Valuation Date | 14 | ||||||||
1.49 | Without Good Cause | 14 |
I
ARTICLE II |
||||||||
ELIGIBILITY AND PARTICIPATION | 15 | |||||||
2.1 | Eligibility | 15 | ||||||
2.2 | Participation | 15 | ||||||
2.3 | Compensation Deferral Agreement | 15 | ||||||
2.4 | Matching Credits and Discretionary Credits | 17 | ||||||
2.5 | Establishing a Reserve for Plan Liabilities | 17 | ||||||
ARTICLE III |
||||||||
PARTICIPANT ACCOUNTS AND REPORTS | 17 | |||||||
3.1 | Establishment of Accounts | 17 | ||||||
3.2 | Account Maintenance | 18 | ||||||
3.3 | Investment Credits and Debits | 18 | ||||||
3.4 | Participant Statements | 19 | ||||||
ARTICLE IV |
||||||||
WITHHOLDING OF TAXES | 20 | |||||||
4.1 | Withholding from Compensation | 20 | ||||||
4.2 | Withholding from Benefit Distributions | 20 | ||||||
ARTICLE V |
||||||||
VESTING | 20 | |||||||
5.1 | Vesting | 20 | ||||||
ARTICLE VI |
||||||||
PAYMENTS | 20 | |||||||
6.1 | Benefits | 20 | ||||||
6.2 | Timing of Distribution Elections | 21 | ||||||
6.3 | Separation from Service Payment | 22 | ||||||
6.4 | Conflict of Interest Divestiture | 23 | ||||||
6.5 | Death Benefit | 23 | ||||||
6.6 | Disability Benefit | 23 | ||||||
6.7 | Domestic Relations Order Payment | 24 | ||||||
6.8 | Unforeseeable Emergency Distribution | 24 | ||||||
6.9 | Election to Receive Interim Distributions | 24 | ||||||
6.10 | Payment upon Income Inclusion Under § 409A | 25 | ||||||
6.11 | Permissible Delay in Payments | 25 | ||||||
6.12 | Beneficiary Designation | 26 | ||||||
6.13 | Claims Procedure | 26 | ||||||
ARTICLE VII |
||||||||
CANCELLATION OF DEFERRALS | 31 | |||||||
7.1 | Unforeseeable Emergency | 31 |
II
ARTICLE VIII |
||||||||
PLAN ADMINISTRATION |
31 | |||||||
8.1 | Appointment | 31 | ||||||
8.2 | Duties of Plan Administrator | 31 | ||||||
8.3 | Plan Sponsor | 32 | ||||||
8.4 | Administrative Fees and Expenses | 32 | ||||||
8.5 | Plan Administration and Interpretation | 32 | ||||||
8.6 | Powers, Duties, Procedures | 32 | ||||||
8.7 | Information | 33 | ||||||
8.8 | Indemnification of Plan Administrator | 33 | ||||||
8.9 | Plan Administration Following a Change in Control Event | 33 | ||||||
ARTICLE IX |
||||||||
TRUST FUND |
34 | |||||||
9.1 | Trust | 34 | ||||||
9.2 | Unfunded Plan | 34 | ||||||
9.3 | Assignment and Alienation | 34 | ||||||
ARTICLE X |
||||||||
AMENDMENT AND PLAN TERMINATION |
35 | |||||||
10.1 | Amendment | 35 | ||||||
10.2 | Plan Termination | 35 | ||||||
10.3 | Plan Termination Following a Change in Control Event | 35 | ||||||
10.4 | Plan Termination Following a Corporate Dissolution | 36 | ||||||
10.5 | Plan Termination in Connection with Termination of Certain Similar Arrangements | 36 | ||||||
10.6 | Effect of Payment | 37 | ||||||
ARTICLE XI |
||||||||
MISCELLANEOUS |
37 | |||||||
11.1 | Total Agreement | 37 | ||||||
11.2 | Employment Rights | 38 | ||||||
11.3 | Non-Assignability | 38 | ||||||
11.4 | Binding Agreement | 38 | ||||||
11.5 | Receipt and Release | 38 | ||||||
11.6 | Furnishing Information | 38 | ||||||
11.7 | Compliance with Code § 409A | 39 | ||||||
11.8 | Insurance | 39 | ||||||
11.9 | Governing Law | 39 | ||||||
11.10 | Headings and Subheadings | 39 |
III
PREAMBLE
The Plan Sponsor, by executing the Nonqualified Deferred Compensation Plan Adoption Agreement, hereby establishes or amends an unfunded Nonqualified Deferred Compensation Plan for a select group of management or highly compensated Eligible Individuals. Under the terms of the Plan, Eligible Individuals may elect to defer receipt of their Compensation to a later Taxable Year.
Participants shall have no right, either directly or indirectly, to anticipate, sell, assign or otherwise transfer any benefit accrued under the Plan. In addition, no Participant shall have any interest in any assets set aside as a source of funds to satisfy benefit obligations under the Plan. Participants shall have the status of general unsecured creditors of the Plan Sponsor, and the Plan shall constitute an unsecured promise by the Plan Sponsor to make benefit payments in the future.
The Plan is intended to be a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of ERISA §§201(2) and 301(a)(3), is intended to comply with the requirements of Code §409A and the regulations and binding guidance issued thereunder to avoid adverse tax consequences and shall be interpreted and administered to the extent possible in a manner consistent with that intent.
ARTICLE I
DEFINITIONS
1.1 |
Account The bookkeeping account established for each Participant to record his or her benefit under the Plan. |
1.2 |
Adoption Agreement The written instrument by which the Plan Sponsor establishes or amends a Nonqualified Deferred Compensation Plan for Eligible Individuals. |
1.3 |
Affiliate Any corporation or business entity that would be considered a single employer with the Plan Sponsor pursuant to Code §§ 414(b) or 414(c). |
1.4 |
Aggregated Plan A nonqualified deferred compensation plan that is required to be aggregated and treated with the Plan as a single plan under Code § 409A. |
1.5 |
Beneficiary An individual, individuals, trust or other entity designated by the Participant to receive his or her benefit in the event of the Participants death. If more than one Beneficiary survives the Participant, the Participants benefit shall be divided equally among all such Beneficiaries, unless otherwise provided in the Beneficiary Designation form. Nothing herein shall prevent the Participant from designating primary and contingent Beneficiaries. |
1.6 |
Benefit Benchmarks Hypothetical investment funds or benchmarks made available to Participants by the Plan Administrator for purposes of valuing benefits under the Plan. |
1.7 |
Board The Board of Directors of the Plan Sponsor identified in Section I of the Adoption Agreement, or similar governing body if such Plan Sponsor has no Board of Directors. |
1.8 |
Change in Control Event A Change in Ownership, Change in Effective Control or Change in Ownership of a Substantial Portion of Assets, as elected by the Plan Sponsor in the Adoption Agreement, of a corporation identified in Section 1.8(e). |
(a) |
Change in Effective Control of the Corporation |
(i) |
Notwithstanding that a corporation has not undergone a Change in Ownership, a Change in Effective Control occurs on the date that either: |
(1) |
any one person or Persons Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or Persons Acting as a Group) ownership of stock of the corporation possessing 30 percent or more of the total voting power of the stock of such corporation; or |
2
(2) |
a majority of members of the corporations board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the corporations board of directors prior to the date of the appointment or election, provided that for purposes of this Section 1.8(a)(i)(2) the term corporation refers solely to the relevant corporation identified in Section 1.8(e) for which no other corporation is a majority shareholder for purposes of that section. |
In the absence of an event described in Section 1.8(a)(i)(1) or Section 1.8(a)(i)(2) a Change in Effective Control will not have occurred.
(ii) |
A Change in Effective Control may occur in any transaction in which either of the two corporations involved in the transaction has a Change in Ownership or a Change in Ownership of a Substantial Portion of Assets. |
(iii) |
If any one person or Persons Acting as a Group, is considered to effectively control a corporation (within the meaning of this Section 1.8(a)), the acquisition of additional control of the corporation by the same person or Persons Acting as a Group is not considered to cause a Change in Effective Control (or to cause a Change in Ownership within the meaning of Section 1.8(b)). |
(b) |
Change in the Ownership of the Corporation. A Change in Ownership occurs on the date that any one person or Persons Acting as a Group, acquires ownership of stock of the corporation that, together with stock held by such person or Persons Acting as a Group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of such corporation. However, if any one person or Persons Acting as a Group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of a corporation, the acquisition of additional stock by the same person or Persons Acting as a Group is not considered to cause a Change in Ownership (or to cause a Change in Effective Control). An increase in the percentage of stock owned by any one person or Persons Acting as a Group, as a result of a transaction in which the |
3
corporation acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of a Change in Ownership. A Change in Ownership applies only when there is a transfer of stock of a corporation (or issuance of stock of a corporation) and stock in such corporation remains outstanding after the transaction. |
(c) |
Change in the Ownership of a Substantial Portion of a Corporations Assets |
(i) |
A Change in Ownership of a Substantial Portion of Assets occurs on the date that any one person or Persons Acting as a Group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or Persons Acting as a Group) assets from the corporation that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the corporation immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. |
(ii) |
There is no Change in Ownership of a Substantial Portion of Assets when there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer, as provided in this Section 1.8(c)(ii). A transfer of assets by a corporation is not treated as a change in the ownership of such assets if the assets are transferred to: |
(1) |
a shareholder of the corporation (immediately before the asset transfer) in exchange for or with respect to its stock; |
(2) |
an entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by the corporation; |
(3) |
a person or Persons Acting as a Group, that owns, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of the corporation; or |
(4) |
an entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person described in Section 1.8(c)(ii)(c.). |
For purposes of this Section 1.8(c)(ii) and except as otherwise provided, a persons status is determined immediately after the transfer of the assets. |
4
(d) |
Persons Acting as a Group |
(i) |
With regards to Change in the Ownership, persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or similar business transaction with the corporation. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. |
(ii) |
With regards to Change in Effective Control, persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or similar business transaction with the corporation. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. |
(iii) |
With regards to Change in Ownership of a Substantial Portion of Assets, persons will not be considered to be acting as a group solely because they purchase assets of the same corporation at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets or similar business transaction with the corporation. If a person, including an entity shareholder owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar |
5
transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only to the extent of the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. |
(e) |
To constitute a Change in Control Event as to a Participant, the Change in Control Event must relate to: |
(i) |
the corporation with respect to which the Participant is an Eligible Individual at the time of the Change in Control Event; |
(ii) |
the corporation that is liable for the payment of the Account (or all corporations liable for the payment if more than one corporation is liable) but only if either the Participants benefits under the Plan are attributable to the performance of services by the Participant for such corporation (or corporations) or there is a bona fide business purpose for such corporation or corporations to be liable for such payment and, in either case, no significant purpose in making such corporation or corporations liable for such payment is the avoidance of Federal income tax; or |
(iii) |
a corporation that is a majority shareholder of a corporation identified in Sections 1.8(e)(i) or 1.8(e)(ii), or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified in Section 1.8(e)(i) or Section 1.8(e)(ii). With regard to a relevant corporation, a majority shareholder is a shareholder owning more than 50% of the total fair market value and total voting power of such corporation. |
(f) |
Stock Ownership. For the purposes of this Section 1.8, ownership of stock will be determined by the application of Code §318(a). Stock underlying a vested option is considered owned by the individual who holds the vested option (and the stock underlying an unvested option is not considered owned by the individual who holds the unvested option). For purposes of the preceding sentence, however, if a vested option is exercisable for stock that is not substantially vested (as defined by Treasury Regulation §§ 1.83-3(b) and (j)), the stock underlying the option is not treated as owned by the individual who holds the option. In addition, mutual and cooperative corporations are treated as having stock for purposes of this Section 1.8(f). |
6
1.9 |
Class Year Account Shall mean the balance credited to a Participants or Beneficiarys Account for a Taxable Year, including the Participants Compensation Deferrals relating to Compensation paid for services performed during the Plan Year, Matching Credits earned for services performed during the Taxable Year (if elected by the Plan Sponsor in the Adoption Agreement), Discretionary Credits earned for services performed during the Taxable Year (if elected by the Plan Sponsor in the Adoption Agreement), and Investment Debits and Credits allocable to the Class Year Account (as determined by the Plan Sponsor, in its discretion). |
1.10 |
Code The Internal Revenue Code of 1986, as amended from time to time Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. |
1.11 |
Commissions Shall mean both Investment Commissions and Sales Commissions. |
1.12 |
Compensation Shall mean a Participants Regular Salary, bonuses, Commissions, Performance-Based Compensation, and director fees, as elected by the Plan Sponsor in the Adoption Agreement. |
1.13 |
Compensation Deferral Agreement The written agreement between an Eligible Individual and the Plan Sponsor to defer receipt by the Eligible Individual of Compensation. Such agreement shall state the deferral amount or percentage of Compensation to be withheld from the Eligible Individuals Compensation and shall state the date on which the agreement is effective, as provided at Section 2.3. |
1.14 |
Compensation Deferrals That portion of a Participants Compensation which is deferred under the terms of this Plan. |
1.15 |
Conflict of Interest Divestiture Shall have the meaning set forth in Section 6.4. |
1.16 |
Corporate Dissolution A corporate dissolution taxed pursuant to Code §331 or with the approval of a bankruptcy court pursuant to section 503(b)(1)(A) of title 11, United States Code. |
1.17 |
De Minimis Distribution Shall have the meaning elected by the Plan Sponsor in the Adoption Agreement. |
1.18 |
Disability Shall have the meaning elected by the Plan Sponsor in the Adoption Agreement. |
1.19 |
Distributable Event The events entitling a Participant or Beneficiary to a payment of benefits under the Plan, which shall be: Separation from Service; death; Disability, if applicable; the occurrence of an Interim Distribution Date; the occurrence of an Unforeseeable Emergency; Plan Termination Following |
7
a Change of Control Event, if applicable; Plan Termination Following a Corporate Dissolution; Plan Termination in Connection with Termination of Certain Similar Arrangements; Conflict of Interest Divestiture; Domestic Relations Order; and Income Inclusion Under Code § 409A. |
1.20 |
Domestic Partner Shall have the meaning elected by the Plan Sponsor in the Adoption Agreement. The Plan Administrator in its sole discretion shall determine whether an individual meets the requirements of a Domestic Partner and shall have the right to request documentary proof of the existence of a Domestic Partner relationship, which proof may include, but is not limited to, a joint checking account, a joint mortgage or lease, drivers licenses showing the same address, the registration of a domestic partnership or civil union in states that recognize such relationships or such other proof as the Plan Administrator may determine. |
1.21 |
Domestic Relations Order Any judgment, decree or order (including approval of a property settlement agreement) which relates to the provision of child support, alimony payments or marital property rights to a Spouse, former Spouse, child or other dependent of a Participant and is made pursuant to a State domestic relations law (including a community property law). |
1.22 |
Effective Date The date as of which the Plan becomes effective or is amended, as selected in the Adoption Agreement. |
1.23 |
Eligible Individual Any common-law employee, independent contractor or non- employee director who provides services to the Plan Sponsor and is designated by the Plan Sponsor as eligible to participate in the Plan in accordance with Section 2.1. Only those individuals who are part of a select group of management or highly compensated individuals, as determined by the Plan Sponsor in its sole discretion, may be designated as Eligible Individuals under the Plan. |
1.24 |
ERISA The Employee Retirement Income Security Act of 1974, as amended. Reference to any section or subsection of ERISA includes reference to any comparable or succeeding provisions of any legislation which amends, supplements or replaces such section or subsection. |
1.25 |
Income Inclusion Under Code § 409A Shall have the meaning set forth in Section 6.10. |
1.26 |
Interim Distribution Date Shall have the meaning elected by the Plan Sponsor in the Adoption Agreement. |
8
1.27 |
Investment Commissions The Compensation or the portion of Compensation earned by a Participant that meets the following requirements: (a) a substantial portion of the services provided by the Participant for such Compensation consists of sales of financial products or other direct customer services to an unrelated customer with respect to customer assets or customer asset accounts; (b) the customer retains the right to terminate the customer relationship and may move or liquidate the assets or asset accounts without undue delay (which may be subject to a reasonable notice period); (c) such Compensation consists of a portion of the value of the overall assets or asset account balance, an amount substantially all of which is calculated by reference to the increase in the value of the overall assets or account balance during a specified period, or both; and (d) the value of the overall assets or account balance and Investment Commission is determined at least annually. For this purpose, a customer is treated as an unrelated customer only if the customer is not related (within the meaning of Code § 409A) to either the Plan Sponsor, any Affiliate or the Participant. Notwithstanding the foregoing, Compensation involving a related customer will be treated as an Investment Commission provided that (x) the Compensation otherwise meets the requirements set forth in this section, (y) substantial sales from which Investment Commissions arise are made, or substantial services from which Investment Commissions arise are provided, to unrelated customers by the Plan Sponsor or an Affiliate and (z) the sales and service arrangement and the commission arrangement with respect to the related customers are bona fide, arise from the Plan Sponsors or Affiliates ordinary course of business and are substantially the same, both in terms and in practice, as the terms and practices applicable to unrelated customers (within the meaning of Code § 409A) to which (individually or in the aggregate) substantial sales are made or substantial services provided by the Plan Sponsor or an Affiliate. |
1.28 |
Investment Credits and Debits Bookkeeping adjustments to Participants Accounts to reflect the hypothetical interest, earnings, appreciation, losses and depreciation that would be accrued or realized if assets equal to the value of such Accounts were invested in accordance with such Participants Benefit Benchmarks. |
1.29 |
Nonqualified Deferred Compensation Plan A pension plan, within the meaning of ERISA §201(2), the purpose of which is to permit a select group of management or highly compensated Eligible Individuals to defer receipt of a portion of their Compensation to a future date. |
1.30 |
Normal Retirement Age The age designated by the Plan Sponsor in the Adoption Agreement. |
1.31 |
Participant An Eligible Individual who is currently deferring a portion of his or her Compensation under this Plan, or who is currently eligible for Matching Credits or Discretionary Credits, or an Eligible Individual or former Eligible Individual who is still entitled to the payment of benefits under the Plan. |
9
1.32 |
Performance-Based Compensation Compensation, the amount of which, or entitlement to which, is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months. Organizational or individual performance criteria are considered pre-established if established in writing by no later than 90 days after the commencement of the period of service to which the criteria relates, provided that the outcome is substantially uncertain at the time the criteria are established. Performance-Based Compensation does not include any amount, or portion of any amount, that will be paid either regardless of performance or based upon a level of performance that is substantially certain to be met at the time the criteria is established. If payments are based upon the satisfaction of subjective criteria, the subjective performance criteria must be bona fide and relate to the performance of the Participant, a group that includes the Participant or a business unit for which the Participant provides services, and the determination that any subjective performance criteria have been met must not be made by the Participant, a family member of the Participant or a person under the effective control of the Participant or a family member of the Participant or where any amount of the compensation of the person making such determination is effectively controlled in whole or in part by the Participant or family member of the Participant. Compensation determined by reference to the value of the Plan Sponsor or an Affiliate, or the stock of the Plan Sponsor or an Affiliate, shall be Performance Based Compensation only as provided under Code § 409A and the regulations and binding guidance issued thereunder. |
1.33 |
Plan The Nonqualified Deferred Compensation Plan established by the Plan Sponsor under the terms of this Basic Plan Document and the accompanying Adoption Agreement. |
1.34 |
Plan Administrator The individual(s) or committee appointed by the Plan Sponsor identified in Section I of the Adoption Agreement to administer the Plan as provided herein. If no such appointment is made, the Chief Executive Officer of the Plan Sponsor identified in Section I of the Adoption Agreement (or the most senior officer of such Plan Sponsor if the Plan Sponsor does not have a Chief Executive Officer) shall serve as the Plan Administrator. In no event shall a Plan Administrator who is a Participant be permitted to make decisions regarding his or her benefits under this Plan; rather, such decisions shall be made by the other members of any committee appointed to act as the Plan Administrator or, if no such committee has been appointed, the most senior officer of the Plan Sponsor identified in Section I of the Adoption Agreement whose benefits are not at issue in the decision. If a Change in Control Event occurs with respect to the Plan Sponsor named in Section I of the Adoption Agreement, the existing Plan Administrator shall be removed, and a new Plan Administrator shall be appointed as provided in Section 8.9. |
10
1.35 |
Plan Sponsor The corporation or business entity identified in Section I of the Adoption Agreement, including any successor to such corporation or business that assumes the obligations of such corporation or business. The term Plan Sponsor shall also include, where appropriate, any entity affiliated with the Plan Sponsor which adopts the Plan with the consent of the Plan Sponsor and is listed on Exhibit A attached to the Adoption Agreement. Only the Plan Sponsor identified in Section I of the Adoption Agreement shall have the power to amend this Plan, appoint the Plan Administrator, or exercise any of the powers described in Section 8.3 hereof. |
1.36 |
Plan Termination Following a Change in Control Event Shall have the meaning set forth in Section 10.3. |
1.37 |
Plan Termination Following a Corporate Dissolution Shall have the meaning set forth in Section 10.4. |
1.38 |
Plan Termination in Connection with Termination of Certain Similar Arrangements Shall have the meaning set forth in Section 10.5. |
1.39 |
Regular Salary The Participants gross income paid by the Plan Sponsor during the Taxable Year as reportable on Internal Revenue Service Form W-2, including amounts excludible from gross income that are contributed by the Participant on a pre-tax basis to a salary reduction retirement or welfare plan (including amounts contributed to this Plan), but excluding Commissions, bonuses, Performance-Based Compensation, director fees, or any other irregular payments. |
1.40 |
Sales Commissions Compensation earned by a Participant that meets the following requirements: (a) a substantial portion of the services provided by the Participant for the Compensation consists of the direct sale of a product or service to an unrelated customer; (b) the Compensation paid by the Plan Sponsor consists of either a portion of the purchase price for the product or service or an amount substantially all of which is calculated by reference to the volume of sales; and (c) payment of the Compensation is either contingent upon the Plan Sponsor or Affiliate receiving payment from an unrelated customer for the product or services or, if applied consistently to all similarly situated Participants, is contingent upon the closing of the sales transaction and such other requirements as may be specified by the Plan Sponsor or Affiliate before the closing of the sales transaction. For this purpose, a customer will be treated as an unrelated customer only if the customer is not related (within the meaning of Code § 409A) to either the Plan Sponsor, any Affiliate or the Participant. Notwithstanding the foregoing, Compensation involving a related customer will be treated will be treated as a Sales Commission provided that (x) the Compensation otherwise meets the requirements set forth in this section, (y) substantial sales from which Sales Commissions arise are made, or substantial services from which Sales Commissions arise are provided, to |
11
unrelated customers by the Plan Sponsor or an Affiliate and (z) the sales and service arrangement and the commission arrangement with respect to the related customers are bona fide, arise from the Plan Sponsors or Affiliates ordinary course of business and are substantially the same, both in terms and in practice, as the terms and practices applicable to unrelated customers (within the meaning of Code § 409A) to which (individually or in the aggregate) substantial sales are made or substantial services provided by the Plan Sponsor or an Affiliate. |
1.41 |
Separation from Service A Participant shall have a Separation from Service under the circumstances described below. |
(a) |
Employees A Participant who is a common law employee has a Separation from Service if the Participant voluntarily or involuntarily terminates employment with the Plan Sponsor and all Affiliates, for any reason other than Disability or death. A termination of employment occurs if the facts and circumstances indicate that the Plan Sponsor and the Participant reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services the Participant will perform after such date (whether as an employee or an independent contractor) will decrease to no more than 20 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services if the Participant has been providing services for less than 36 months). Notwithstanding the foregoing, the employment relationship is treated as continuing while the Participant is on military leave, sick leave or other bona fide leave of absence if the period of leave does not exceed 6 months, or if longer, so long as the Participant retains the right to reemployment with the Plan Sponsor or an Affiliate under an applicable statute or contract. When a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or to last for a period of at least 6 months and such impairment causes the Participant to be unable to perform the duties of his or her position or any substantially similar position, a 29-month period of absence shall be substituted for the 6-month period above. |
(b) |
Independent Contractors A Participant who is an independent contractor shall have a Separation from Service upon the expiration of all contracts under which services are performed for the Plan Sponsor and all Affiliates if the expiration constitute a good faith and complete termination of the contractual relationship. An expiration does not constitute a good faith and complete termination of the contractual relationship if the Plan |
12
Sponsor or an Affiliate anticipates a renewal of a contractual relationship or the independent contractor becoming an employee. For this purpose, a Plan Sponsor is considered to anticipate the renewal of the contractual relationship if the Plan Sponsor or an Affiliate intends to contract again for the services provided under the expired contract and the independent contractor has not been eliminated as a possible provider of services under any such new contract. A Plan Sponsor is considered to intend to contract again for the services provided under an expired contract if doing so is conditioned only upon incurring a need for the services, the availability of funds or both. |
(c) |
Directors Except as otherwise provided hereunder, a Participant who is a member of the Board shall be considered to be an Independent Contractor for purposes of determining whether the Participant has had a Separation from Service. |
(d) |
Dual Status If a Participant provides services to the Plan Sponsor and any Affiliates as an employee and as an independent contractor, the Participant must have a Separation from Service with the Plan Sponsor and all Affiliates both as an employee and an independent contractor to have a Separation from Service. Notwithstanding the foregoing, if a Participant provides services to the Plan Sponsor and any Affiliates as an employee and as a director, (1) the services provided as a director are not taken into account in determining whether the Participant has a Separation from Service as an employee under the Plan if the Participant participates in the Plan as an employee, provided the Participant does not participate in any other nonqualified deferred compensation plan as a director that is aggregated with the Plan under Code §409A, and (2) the services provided as an employee are not taken into account in determining whether the Participant has a Separation from Service as a director under the Plan if the Participant participates in the Plan as a director, provided the Participant does not participate in any other nonqualified deferred compensation plan as an employee that is aggregated with the Plan under Code §409A. |
1.42 |
Specified Employee A key employee (as defined in Code § 416(i) without regard to paragraph (5) thereof) of a Plan Sponsor or its Affiliates, any stock of which is publicly traded on an established securities market or otherwise. A Participant is a key employee if the Participant meets the requirements of Code §416(i)(1)(A)(i), (ii) or (iii) (applied in accordance with the regulations thereunder and disregarding Code §416(i)(5)) at any time during the 12- month period ending each December 31. If a Participant is a key employee at any time during the 12-month period |
13
ending on such December 31, the Participant is treated as a Specified Employee for the 12-month period beginning on the following April 1. Whether any stock of a Plan Sponsor or its Affiliates is publicly traded on an established securities market or otherwise must be determined as of the date of the Participants Separation from Service. |
1.43 |
Spouse The individual to whom a Participant is married, or was married in the case of a deceased Participant who was married at the time of his or her death. |
1.44 |
Taxable Year The 12-consecutive-month period beginning each January 1 and ending each December 31. |
1.45 |
Trust The agreement, if any, between the Plan Sponsor and the Trustee under which assets may be delivered by the Plan Sponsor to the Trustee to offset liabilities assumed by the Plan Sponsor under the Plan. Any assets held under the terms of the Trust shall be the exclusive property of the Plan Sponsor and shall be subject to the creditor claims of the Plan Sponsor with respect to whom such Trust has been established. Participants shall have no right, secured or unsecured, to any assets held under the terms of the Trust. |
1.46 |
Trustee The institution named by the Plan Sponsor in the Trust agreement, if any, and any corporation which succeeds the Trustee by merger or by acquisition of assets or operation of law. |
1.47 |
Unforeseeable Emergency A severe financial hardship to the Participant resulting from an illness or accident of the Participant or the Participants Spouse, Beneficiary or dependent (as defined in Code §152 without regard to §§ 152(b)(1), (b)(2) and (d)(1)(B)), loss of the Participants property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. |
1.48 |
Valuation Date The date on which Participant Accounts under the Plan are valued. The Valuation Date shall be each business day of the Taxable Year on which the New York Stock Exchange and, if a Trust has been established in connection with the Plan, the Trustee are open for business. |
1.49 |
Without Good Cause A Participants involuntary Separation from Service shall be without good cause if it occurs for reasons other than the Participants commission of a crime involving dishonesty or moral turpitude ( e.g ., fraud, theft, embezzlement, deception, etc. ); misconduct, including but not limited to insubordinate behavior, by the Participant in the performance of his or her job duties and responsibilities; any conduct by the Participant of a nature which reflects negatively upon the Plan Sponsor or any Affiliate or which would prevent the Participant from being able to adequately perform his or her job duties and responsibilities ( e.g. , malicious, willful and wanton, or negligent conduct, etc .); the Participants failure to adequately perform his/her duties and responsibilities as such duties and responsibilities are, from time to time in the Plan Sponsors absolute discretion, determined; and the Participants breach of any of the Plan Sponsors established operating policies and procedures. |
14
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 |
Eligibility The Plan Sponsor will designate in the Adoption Agreement those persons who shall be considered Eligible Individuals under the Plan. |
2.2 |
Participation The Plan Administrator shall provide written notification to each Eligible Individual of his or her eligibility to participate in the Plan. |
2.3 |
Compensation Deferral Agreement In order to defer Compensation under the Plan for a given Taxable Year, an Eligible Individual must enter into a Compensation Deferral Agreement with the Plan Sponsor authorizing the deferral of all or part of the Participants Compensation for such Taxable Year. |
Upon receipt of a properly completed and executed Compensation Deferral Agreement, the Plan Administrator shall notify the Plan Sponsor to withhold that portion of the Participants Compensation specified in the Agreement. In no event will the Participant be permitted to defer more or less than the amount(s) specified by the Plan Sponsor in the Adoption Agreement.
Subject to Section 7.1, the Compensation Deferral Agreement shall remain in effect for the duration of the Taxable Year to which it relates. If elected by the Plan Sponsor in the Adoption Agreement, and subject to Section 7.1, the Compensation Deferral Agreement also shall remain in effect for subsequent Taxable Years unless and until it is timely changed for a subsequent Taxable Year as described below.
Except as provided below, a Compensation Deferral Agreement must be completed and returned to the Plan Sponsor prior to the first day of the Taxable Year in which services are performed for the Compensation deferred and shall be irrevocable for the Taxable Year except as otherwise provided hereunder.
(a) |
Initial Eligibility If the Plan is established on a date other than the first day of a Taxable Year, or if an individual becomes an Eligible Individual on a date other than the first day of a Taxable Year and such individual has not at any time been eligible to participate in the Plan or any Aggregated Plan, the Compensation Deferral Agreement may be completed and returned to the Plan Sponsor within 30 days after the Effective Date or within 30 days after the Eligible Individuals initial eligibility date. In no event shall a Participant be permitted to defer Compensation with respect to services performed before the date on which the Compensation Deferral Agreement is signed by the Participant and accepted by the Plan Administrator. |
15
(b) |
Former Participants With No Account Balance If an Eligible Individual who is a former Participant has been paid all amounts deferred under the Plan and any Aggregated Plan and, on and before the date of the last payment, is not eligible to continue (or elect to continue) to participate in the Plan or any Aggregated Plan for periods after the last payment (other than through an election of a different time and form of payment with respect to the amounts paid), the Eligible Individual may be treated as initially eligible to participate in the Plan pursuant to subsection (a) above as of the first date following such last payment that the Eligible Individual again becomes eligible to participate in the Plan. |
(c) |
Participants Ineligible for Two Years If an Eligible Individual who is a Participant or former Participant ceases being eligible to participate in the Plan and any Aggregated Plan, regardless of whether all amounts deferred under such plans have been paid, and subsequently becomes eligible to participate in the Plan again, the Eligible Individual may be treated as being initially eligible to participate in the Plan pursuant to subsection (a) above if the Eligible Individual has not been eligible to participate in the Plan or an Aggregated Plan (other than through the accrual of earnings) at any time during the twenty-four (24) month period ending on the date the Eligible Individual again becomes eligible to participate in the Plan. |
(d) |
Performance-Based Compensation A Compensation Deferral Agreement with respect to Performance-Based Compensation may be completed and returned to the Plan Sponsor no later than the date that is six months before the end of the performance period to which the Performance-Based Compensation relates, provided the Participant performs services continuously from the later of the beginning of the performance period or the date upon which the performance criteria are established through the date upon which the Participant makes an initial deferral election, and further provided that in no event may an election to defer Performance- Based Compensation be made with respect to Compensation that has become readily ascertainable. |
(e) |
Sales Commissions Compensation Deferral Agreements made with respect to Sales Commissions must be completed and returned to the Plan Sponsor prior to the first day of the Taxable Year in which the customer remits payment to the Plan Sponsor or Affiliate for which the Sales Commission is paid or, if applied consistently to all similarly situated Participants, the Taxable Year in which the sale occurs. |
16
(f) |
Investment Commissions Compensation Deferral Agreements made with respect to Investment Commissions must be completed and returned to the Plan Sponsor prior to the first day of the Taxable Year in which falls the date that is twelve (12) months before the date as of which the overall value of the assets or asset accounts is determined for purposes of calculating the Investment Commission. |
2.4 |
Matching Credits and Discretionary Credits The Plan Sponsor may adjust the Account of a Participant with Matching Credits or Discretionary Credits. The amount of the Discretionary Credits and/or Matching Credits and the formula(s) for allocating such credits will be selected by the Plan Sponsor in the Adoption Agreement. Notwithstanding the preceding, if the Plan Sponsor elects to make Matching Credits in accordance with Section V.(a)(iii) of the Adoption Agreement, a Participant will receive a Matching Credit under this Plan for a Taxable Year only if the Participant has made the maximum salary reduction contributions permitted under the Plan Sponsors qualified retirement plan during the applicable Taxable Year. |
2.5 |
Establishing a Reserve for Plan Liabilities The Plan Sponsor may, but is not required to, establish one or more Trusts to which the Plan Sponsor may transfer such assets as the Plan Sponsor determines in its sole discretion to assist in meeting its obligations under the Plan. Any such assets shall be the property of the Plan Sponsor and remain subject to the claims of the Plan Sponsors creditors, to the extent provided under any Trust established with respect to such Plan Sponsor. The Trustee shall have no duty to determine whether the amounts forwarded by the Plan Sponsor are the correct amount or that they have been transmitted in a timely manner. |
ARTICLE III
PARTICIPANT ACCOUNTS AND REPORTS
3.1 |
Establishment of Accounts The Plan Administrator shall establish and maintain individual recordkeeping Accounts, Class Year Accounts and subaccounts, as applicable, on behalf of each Participant for purposes of determining each Participants benefits under the Plan. A Participants Account does not represent the Participants ownership of, or any ownership interest in, any assets which may be set aside to satisfy the Plan Sponsors obligations under the Plan. |
17
3.2 |
Account Maintenance As of each Valuation Date, the Plan Administrator shall credit each Participants Account (or, if applicable, Class Year Accounts) with the following: |
(a) |
An amount equal to any Compensation Deferrals made by the Participant since the last Valuation Date; |
(b) |
An amount equal to any Matching Credits or Discretionary Credits, and any forfeitures, if applicable, since the last Valuation Date; and |
(c) |
An amount equal to deemed Investment Credits under Section 3.3 below since the last Valuation Date. |
As of each Valuation Date, the Plan Administrator shall debit each Participants Account (or, if applicable, Class Year Accounts) with the following:
(d) |
An amount equal to any distributions from the Plan to the Participant or Beneficiary since the last Valuation Date; and |
(e) |
An amount equal to deemed Investment Debits under Section 3.3 below since the last Valuation Date; and |
(f) |
An amount equal to any forfeitures incurred by the Participant since the last Valuation Date. |
3.3 |
Investment Credits and Debits The Accounts (or, if applicable, Class Year Accounts) of Participants shall be adjusted for Investment Credits and Debits in accordance with this Section 3.3. |
Participants shall have the right to specify one or more Benefit Benchmarks in which their Compensation Deferrals, Matching Credits and Discretionary Credits shall be deemed to be invested. The Benefit Benchmarks shall be utilized solely for purposes of adjusting their Accounts (or, if applicable, Class Year Accounts) in accordance with procedures adopted by the Plan Administrator. The Plan Administrator shall provide the Participant with a list of the available Benefit Benchmarks. From time to time, in the sole discretion of the Plan Administrator, the Benefit Benchmarks available within the Plan may be revised. All Benefit Benchmark selections must be denominated in whole percentages unless the Plan Administrator determines that lower increments are acceptable. A Participant may make changes in the manner in which future Compensation Deferrals, Matching Credits and/or Discretionary Credits are deemed to be invested among the various Benefit Benchmarks within the Plan in accordance with procedures established by the Plan Administrator. A Participant may re- direct the manner in which earlier Compensation Deferrals, Matching Credits and/or Discretionary Credits, as well as any appreciation (or depreciation) to-date, are deemed to be invested among the Benefit Benchmarks available in the Plan in accordance with procedures established by the Plan Administrator.
18
As of each Valuation Date, the Plan Administrator shall adjust the Account (or, if applicable, Class Year Accounts) of each Participant for interest, earnings or appreciation (less losses and depreciation) with respect to the then balance of the Participants Account equal to the actual results of the Participants deemed Benefit Benchmark elections.
All notional acquisitions and dispositions of Benefit Benchmarks which occur within a Participants Account, pursuant to the terms of the Plan, shall be deemed to occur at such times as the Plan Administrator shall determine to be administratively feasible in its sole discretion and the Participants Account shall be adjusted accordingly. Accordingly, if a distribution or reallocation must occur pursuant to the terms of the Plan and all or some portion of the Account must be valued in connection with such distribution or reallocation (to reflect Investment Credits and Debits), the Plan Administrator may in its sole discretion, unless otherwise provided for in the Plan, select a date or dates which shall be used for valuation purposes.
Notwithstanding anything to the contrary, any Investment Credits or Debits made to any Participants Account following a Plan Termination or a Change in Control Event shall be made in a manner no less favorable to Participants than the practices and procedures employed under the Plan, or as otherwise in effect, as of the date of the Plan Termination or the Change in Control Event.
Notwithstanding the Participants deemed Benefit Benchmark elections under the Plan, the Plan Sponsor shall be under no obligation to actually invest any amounts in such manner, or in any manner, and such Benefit Benchmark elections shall be used solely to determine the amounts by which the Participants Account shall be adjusted under this Article III.
3.4 |
Participant Statements The Plan Administrator shall provide each Participant with a statement showing the credits to and debits from his or her Account during the period from the last statement date. Such statement shall be provided to Participants as soon as administratively feasible following the end of each Taxable Year and on such other dates as agreed to by the Plan Sponsor and the party maintaining Participant records. |
19
ARTICLE IV
WITHHOLDING OF TAXES
4.1 |
Withholding from Compensation For any Taxable Year in which Compensation Deferrals, Matching Credits and/or Discretionary Credits are made to or vested within the Plan (as applicable), the Plan Sponsor shall withhold the Participants share of income, FICA and other employment taxes from the portion of the Participants Compensation not deferred. If deemed appropriate by the Plan Sponsor, all or any portion of a benefit under the Plan may be distributed in certain instances where necessary to facilitate compliance with applicable withholding requirements to the extent such distribution would not result in adverse tax consequences under Code §409A. The amount of any such distribution shall not exceed the amount necessary to comply with applicable withholding requirements. |
4.2 |
Withholding from Benefit Distributions The Plan Sponsor (or the Trustee of the Trust, as applicable) shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Plan Sponsor, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Plan Sponsor. |
ARTICLE V
VESTING
5.1 |
Vesting A Participant shall be immediately vested in ( i.e. , shall have a non-forfeitable right to) all Compensation Deferrals credited to his or her Account, including any Investment Credits or Debits associated therewith. The Plan Sponsor shall specify in the Adoption Agreement the vesting provisions applicable to any Discretionary Credits or Matching Credits allocated to the Accounts ( or, if applicable, Class Year Accounts) of Participants. Upon a Distributable Event, except as otherwise provided under the Plan, any amount of the benefit payment credited to the Account (or, if applicable, Class Year Account) of the Participant that is not vested shall be forfeited. Forfeitures incurred by a Participant shall reduce the amounts credited to a Participants Account (or, if applicable, Class Year Accounts), but shall not be reallocated to the Accounts (or, if applicable, Class Year Accounts) of other Participants unless otherwise specified in the Adoption Agreement. A distribution for a Domestic Relations Order Payment under Section 6.7 shall be made from the Account of the Participant only to the extent it is vested. |
ARTICLE VI
PAYMENTS
6.1 |
Benefits Except as otherwise provided under the Plan, a Participants or Beneficiarys benefit payable under the Plan shall be the value of the Participants vested Account (or, if applicable, Class Year Accounts ) at the time a Distributable Event occurs with respect to such Participant or Beneficiary. In no event, will a Participants right to a benefit under this Plan give such Participant a secured right or claim on any assets set aside by the Plan Sponsor to meet its obligations under the Plan. All payments from the Plan shall be subject to applicable tax withholding and shall commence (or be fully paid, in the event a lump sum form of distribution was selected) no later than ninety (90) days after the occurrence of the Distributable Event, except as otherwise provided herein. |
20
6.2 |
Timing of Distribution Elections. |
(a) Initial Elections . If the Plan Sponsor has elected in the Adoption Agreement to allow a Participant to elect a separate form and timing of distribution for each Class Year Account under the Plan, the Participant shall elect the form and timing of payment of each Class Year Account at the time the Participant submits (or is required to submit, in accordance with Section 2.3 and Code § 409A) his or her Compensation Deferral Agreement for the Taxable Year for which the Class Year Account is established.
If the Plan Sponsor has not elected in the Adoption Agreement to allow a Participant to elect a separate form and timing of distribution for each Class Year Account under the Plan, the Participant shall elect the form and timing of payment of his or her Account at the earlier of (a) the time the Participant submits (or is required to submit, in accordance with Section 2.3 and Code § 409A) his or her Compensation Deferral Agreement for the Taxable Year for which the Class Year Account is established, or (b) the December 31 preceding the Taxable Year in which the services giving rise to the Participants first Matching Credits or Discretionary Credits to be earned under the Plan are to be performed (unless a later date is permitted in accordance with the provisions of Code § 409A and Treas. Reg. § 1.409A- 2). If a Participant elects an in-service Interim Distribution Date, the Participant must make a new form and timing of payment election for Compensation Deferrals that may be credited to the Participants Account and for Matching Credits and/or Discretionary Credits that may be earned during and after the Taxable Year in which falls the in-service Interim Distribution Date. Such election (a) must be made prior to the beginning of the Taxable Year in which the services giving rise to the earliest Compensation Deferrals, Matching Credits or Discretionary Credits subject to the new form and timing of payment election are to be performed and (b) is subject to rules generally applicable to form and timing of payment elections under this Plan.
(b) Subsequent Changes in Time and Form of Payment . A Participant may elect to change the time or form of payment of amounts distributable upon a Separation from Service or elect to change the time of payment of amounts distributable upon an Interim Distribution Date, provided, however, that any such election shall be effective only if:
(i) |
the election does not accelerate the time or schedule of any payment within the meaning of Code § 409A; |
(ii) |
the election does not take effect until at least twelve 12 months after the date on which the election is made; |
21
(iii) |
the first payment with respect to which such election is made is deferred for a period of 5 years from the date such payment would otherwise have been made; and |
(iv) |
for a change to a payment made upon an Interim Distribution Date, such election is made at least 12 months before such Interim Distribution Date. |
The Plan Administrator shall have sole and absolute discretion to decide whether such a request shall be approved but may approve no more than one such request for any Participant with respect to any Compensation Deferral or Matching or Discretionary Credit.
(c) Failures to Elect . If a Participant fails to properly elect the form or time of distribution for his or her Account, or Class Year Account, as applicable, the Participant shall be deemed to have elected to receive his or her Account, or Class Year Account, as applicable, in a single lump sum commencing on his or her Separation from Service.
6.3 |
Separation from Service Payment In the event of a Participants Separation from Service, the Participants vested Account (or, if applicable, Class Year Account) shall be paid in the form of a cash lump sum or, if elected by the Participant, in annual cash payments (over a period of five (5), ten (10), or fifteen (15) years). A Participant may elect one form of payment for a Separation from Service that occurs before Normal Retirement Age, and a different form of payment for a Separation from Service that occurs on or after Normal Retirement Age. For purposes of Code § 409A, installment payments shall be treated as a single payment. If applicable, the initial installment shall be based on the value of the Participants vested Account (or, if applicable, Class Year Account), measured on the date of his or her Separation from Service, and shall be equal to 1/n (where n is equal to the total number of annual benefit payments not yet distributed). Subsequent installment payments shall be computed in a consistent fashion, with the measurement date being the anniversary of the original measurement date. Election of the form of the Separation from Service Payment must be provided to the Plan Administrator at the time required by Section 6.2 of this Plan. |
Notwithstanding a Participants election regarding the form of the Separation from Service Payment, the Plan Sponsor shall make a De Minimis Distribution, as elected by the Plan Sponsor in the Adoption Agreement, and pay the Participants or Beneficiarys benefit in a single lump-sum payment.
22
Notwithstanding the foregoing, a distribution resulting from a Separation from Service by a Participant who is a Specified Employee on the date of Separation from Service shall be made within the ninety (90) days following the date that is 6 months after the Separation from Service or, if earlier, within the ninety (90) days following the death of the Specified Employee. The first payment made following the 6-month period described in the preceding sentence shall include all payments that otherwise would have been made after Separation from Service but for the delay required by this paragraph.
6.4 |
Conflict of Interest Divestiture The Plan Administrator shall pay to a Participant all or a portion of the Participants vested Account to the extent |
(a) |
necessary for any Participant who is Federal officer or employee in the executive branch to comply with an ethics agreement with the Federal government; or |
(b) |
reasonably necessary to avoid the violation of an applicable Federal, state or local ethics or conflicts of interest law (including when such payment is reasonably necessary to permit the Participant to participate in activities in the normal course of his or her position in which the Participant would not otherwise be able to participate under an applicable rule). |
The Plan Administrator shall have complete discretion to determine whether the Participants circumstances meet the requirements for a Conflict of Interest Divestiture and the amount of any distribution. A distribution under this Section shall be made at such time and in such form as shall be necessary to comply with an applicable ethics agreement or to avoid the violation of an applicable ethics or conflict of interest law.
6.5 |
Death Benefit In the event of the Participants death, whether before or after the Participant has otherwise incurred a Distributable Event or commenced |
receiving payments from the Plan, the Participants Beneficiary shall receive the balance of the Participants vested Account in a single lump-sum cash payment.
6.6 |
Disability Benefit If the occurrence of a Disability is a Distributable Event, as elected by the Plan Sponsor in the Adoption Agreement, the Plan Administrator shall pay to a Participant the balance of the Participants vested Account in a single lump-sum cash payment in the event the Participant suffers a Disability (whether before or after the Participant has otherwise incurred a Distributable Event or commenced receiving payments from the Plan). The Plan Administrator shall have complete discretion to determine whether the circumstances of the Participant constitute a Disability and the time at which such Disability occurs consistent with the terms of the Plan. |
23
6.7 |
Domestic Relations Order Payment If it is necessary to satisfy a Domestic Relations Order, whether before or after the Participant has otherwise incurred a Distributable Event or commenced receiving payments from the Plan, the Plan Administrator shall pay to the Spouse, former Spouse, child, or other dependent of the Participant, as specified in the Domestic Relations Order, the amount from the Participants vested Account required to fulfill the Domestic Relations Order. The Plan Administrator shall have complete discretion to determine whether the circumstances of the Participant meet the requirements for a Domestic Relations Order Payment under this Section. If the request for a payment due to a Domestic Relations Order is approved, the distribution shall be made at such time and in such form as shall be necessary to satisfy the Domestic Relations Order. |
6.8 |
Unforeseeable Emergency Distribution If a Participant has an Unforeseeable Emergency, as defined herein, the Plan Administrator may pay to the Participant that portion of his or her vested Account which the Plan Administrator determines is reasonably necessary to satisfy the emergency. The amounts distributed to the Participant as a result of an Unforeseeable Emergency may not exceed the amounts reasonably necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participants assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cancellation of Compensation Deferrals pursuant to Section 7.1. A Participant requesting an Unforeseeable Emergency Distribution shall apply for the payment in writing on a form approved by the Plan Administrator and shall provide such additional information as the Plan Administrator may require. The Plan Administrator shall have complete discretion to determine whether the financial hardship of the Participant constitutes an Unforeseeable Emergency under the Plan. If, subject to the sole discretion of the Plan Administrator, the request for a withdrawal is approved, the distribution shall be made within ninety (90) days after the date of approval by the Plan Administrator. |
6.9 |
Election to Receive Interim Distributions A Participant may make an election, at the time required by Section 6.2, to have his or her Account or the Class Year Account, as applicable, to which the election relates paid to him or her at an Interim Distribution Date designated by the Participant. Such Account or Class Year Account shall be payable in a single cash lump sum payment within ninety (90) days after an applicable Interim Distribution Date. The Participants selection of an Interim Distribution Date is irrevocable, except as provided in Section 6.2(b), and must comply with the definition of Interim Distribution Date under Section 1.26. |
24
6.10 |
Payment upon Income Inclusion Under § 409A If the Plan Administrator determines at any time that the Plan fails to meet the requirements of Code § 409A with respect to a Participant, the Plan Administrator shall distribute to the Participant the amount from the Participants vested Account that is required to be included in income as a result of such failure in a single lump- sum payment. |
6.11 |
Permissible Delay in Payments A payment may be delayed beyond the distribution date otherwise provided for under the Plan in one or more of the circumstances below, if the Plan Sponsor so elects in the Adoption Agreement. |
(a) |
Payments Subject to Code § 162(m) A payment, including any portion thereof, will be delayed when the Plan Sponsor reasonably anticipates that its deduction with respect to such payment otherwise would be eliminated by application of Code § 162(m), provided that the payment is made either during the Participants first Taxable Year in which the Plan Sponsor reasonably anticipates (or should reasonably anticipate) that if the payment is made during such year the deduction of such payment will not be barred by Code § 162(m) or during the period beginning with the date of the Participants Separation from Service and ending on the later of the last day of the Plan Sponsors taxable year in which the Participant has a Separation from Service or the 15 th day of the third month following the Participants Separation from Service, and provided further that when any scheduled payment to a Participant in the Plan Sponsors taxable year is delayed in accordance with this Section, all scheduled payments to such Participant that could be delayed in accordance with this Section are also delayed. When a payment is delayed to a date on or after the Participants Separation from Service, the payment shall be treated as a payment upon a Separation from Service and, in the case of a Specified Employee, the date that is 6 months after a Participants Separation from Service is substituted for any reference to a Participants Separation from Service in the foregoing provisions of this Section. |
(b) |
Violation of Federal Securities Laws or Other Applicable Law A payment will be delayed when the Plan Sponsor reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law, provided that the payment will be made at the earliest date at which the Plan Sponsor reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision or other provision of the Code is not treated as a violation of applicable law. |
25
6.12 |
Beneficiary Designation A Participant shall have the right to designate a Beneficiary and to amend or revoke such designation at any time in writing. Such designation, amendment or revocation shall be effective upon receipt by the Plan Administrator. If the Beneficiary is a minor or incompetent, benefits may be paid to a legal guardian, trustee, or other proper representative of the Beneficiary, and such payment shall completely discharge the Plan Sponsor and the Plan of all further obligations hereunder. |
If no Beneficiary designation is made, or if the Beneficiary designation is held invalid, or if no Beneficiary survives the Participant and benefits are determined to be payable following the Participants death, the Plan Administrator shall direct that payment of benefits be made to the person or persons in the first of the below categories in which there is a survivor. The categories of successor beneficiaries, in order, are as follows:
(a) |
Participants Spouse; |
(b) |
Participants Domestic Partner, if elected by the Plan Sponsor in the Adoption Agreement: |
(c) |
Participants descendants, per stirpes (eligible descendants shall be determined by the intestacy laws of the state in which the decedent was domiciled); |
(d) |
Participants parents; |
(e) |
Participants brothers and sisters (including step brothers and step sisters); and |
(f) |
Participants estate. |
6.13 |
Claims Procedure All claims for benefits under the Plan, and all questions regarding the operation of the Plan, shall be submitted to the Plan Administrator in writing. The Plan Administrator has complete discretion and authority to interpret and construe any provision of the Plan, and its decisions regarding claims for benefits hereunder are final and binding. |
(a) |
Presentation of Claim . Any Participant, Beneficiary or person claiming benefits under the Plan (such Participant, Beneficiary or other person being referred to below as a Claimant) may deliver to the Plan Administrator a written claim for a determination with respect to benefits distributable to such Claimant from the Plan. The claim must state with particularity the determination desired by the Claimant. |
26
Any claim by a Participant that a payment made under the Plan is less than the amount to which the Participant is entitled must be made in writing pursuant to the foregoing provisions of this Section within 180 days after the date of such payment. Notwithstanding any other provision of the Plan, including the provisions of Section 5.1, a Participant shall forfeit all rights to any amounts claimed if the Participant fails to make claim as provided in the preceding sentence.
(b) |
Notification of Decision The Plan Administrator shall consider a Claimants claim within a reasonable time, and shall notify the Claimant in writing: |
(i) |
that the Claimants requested determination has been made, and that the claim has been allowed in full; or |
(ii) |
that the Plan Administrator has reached a conclusion contrary, in whole or in part, to the Claimants requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: |
(1) |
the specific reason(s) for the denial of the claim, or any part of it; |
(2) |
specific reference(s) to pertinent provisions of the Plan upon which such denial was based; |
(3) |
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; |
(4) |
a description of the claim review procedure set forth in Section 6.13(c) below, including information regarding any applicable time limits and a statement regarding the Claimants right to bring an action under ERISA §502(a) following an adverse determination on review; and |
(5) |
if the decision involved the Disability of the Participant, information regarding whether an internal rule or procedure was relied upon in making its decision and that the Claimant can request a copy of such rule or procedure, free of charge, upon request. |
The Plan Administrator will notify the Claimant of an adverse decision within ninety (90) days after the date the claim was received, unless the Plan Administrator determines there are special circumstances that require an extension of time in which to make a decision. If an extension of time is needed, the Plan
27
Administrator shall notify the Claimant of the extension before the expiration of the original 90-day period. The notice will include a description of the special circumstances requiring an extension of time and an estimate of the date it expects a decision to be made. The extension shall not exceed an additional 90-day period.
If the adverse decision relates to a claim involving the Disability of the Participant, the Plan Administrator will notify the Claimant of an adverse decision within forty-five (45) days after the date the claim was received, unless the Plan Administrator determines that matters beyond its control require an extension of time in which to make a decision. If an extension of time is needed, the Plan Administrator shall notify the Claimant of the extension before the expiration of the original 45-day period. The notice will include a description of the circumstances necessitating the extension and an estimate of the date it expects a decision to be made. The extension shall not exceed an additional 30-day period unless, within the 30-day period the Plan Administrator again determines that more time is needed due to matters beyond its control, in which case notice of the need for not more than an additional thirty (30) days is provided to the Claimant before the first 30-day period expires. The notice will include a description of the circumstances requiring the extension and an estimate of the date it expects a decision to be made. Any extension notice will include information regarding the standards on which a determination of Disability will be made, the outstanding issues which prevent a decision from being made, and any additional information which is needed in order to reach a decision. The Claimant will have forty-five (45) days to supply any additional information.
If the Plan Administrator notifies the Claimant of the need for an extension of time to make a decision regarding his or her claim in accordance with this Section 6.13(b), and the extension is needed due to the Claimants failure to provide information necessary to decide the claim, the period of time in which the Plan Administrator must make a decision does not include the time between the date the notice of the extension was sent to the Claimant and the date the Claimant responds to the request for additional information.
(c) |
Review of a Denied Claim Within sixty (60) days after receiving a notice from the Plan Administrator that a claim has been denied, in whole or in part, a Claimant (or the Claimants duly authorized representative) may file with the Plan Administrator a written request for a review of the denial of the claim. During the 60-day review period, the Claimant (or the Claimants duly authorized representative): |
(i) |
may review relevant documents; |
28
(ii) |
may submit written comments or other documents relating to the claim; |
(iii) |
may request access to and copies of all relevant documents, free of charge; |
(iv) |
may request a hearing, which the Plan Administrator, in its sole discretion, may grant. |
The Plan Administrator will consider all documents and other information submitted by the Claimant in reviewing its previous decision, including documents not available to or considered by it during its initial determination.
If the appeal relates to a determination of the Plan Administrator involving the Disability of the Participant, the Claimant will have one-hundred-eighty (180) days following receipt of a denial to file a written request for review. In such event, no deference shall be given to the initial benefit determination, and the review shall be conducted by an appropriate fiduciary who is someone other than the individual who made the initial determination or a subordinate of such individual. If the initial determination was based in whole or in part on a medical judgment, the reviewer shall consult with an appropriately trained and experienced health care professional, and shall disclose the identity of any experts who provided advice with regard to the initial decision. The health care professional whose advice is sought during the appeal process will not be an individual who was consulted during the initial determination, nor a subordinate of such an individual.
(d) |
Decision on Review The Plan Administrator 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, unless a hearing is held or other special circumstances require additional time, in which case the Plan Administrators decision must be rendered within one- hundred-twenty (120) days after such date. If an extension of time is needed, the Plan Administrator shall notify the Claimant of the extension before the expiration of the original 60-day period. The notice will include a description of the circumstances requiring the extension and an estimate of the date it expects a decision to be made. Such decision must be written in a manner calculated to be understood by the Claimant, and if the decision on review is adverse it must contain: |
(i) |
specific reasons for the decision; |
(ii) |
specific reference(s) to the pertinent Plan provisions upon which the decision was based; |
29
(iii) |
a statement that the Claimant may receive, upon request and free of charge, access to and copies of relevant documents and information; |
(iv) |
a statement describing any voluntary appeal procedures under the Plan and the Claimants right to bring an action under ERISA §502(a); |
(v) |
if the decision involved the Disability of the Participant, information regarding whether an internal rule or procedure was relied upon in making its decision and that the Claimant can request a copy of such rule or procedure, free of charge, upon request; |
(vi) |
if the decision involved the Disability of the Participant, a statement that the Claimant and the Plan may have other voluntary alternative dispute resolution options, such as mediation, and that the Claimant may find out what options are available by contacting the local U.S. Department of Labor Office and the state insurance regulatory agency; and |
(vii) |
such other matters as the Plan Administrator deems relevant. If the appeal involves the Disability of the Participant, the decision of the Plan Administrator will be made within forty- five (45) days after the filing of the written request for review, unless special circumstances require additional time, in which case the Plan Administrators decision will be made within ninety (90) days after the date the request was filed. If an extension of time is needed, the Plan Administrator shall notify the Claimant of the extension before the expiration of the original 45-day period. The notice will include a description of the circumstances requiring the extension and an estimate of the date it expects a decision to be made. |
If the Plan Administrator notifies the Claimant of the need for an extension of time to make a decision regarding his or her appeal in accordance with this Section 6.13(d), and the extension is needed due to the Claimants failure to provide information necessary to decide the appeal, the period of time in which the Plan Administrator must make a decision does not include the time between the date the notice of the extension was sent to the Claimant and the date the Claimant responds to the request for additional information.
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ARTICLE VII
CANCELLATION OF DEFERRALS
7.1 |
Unforeseeable Emergency If a Participant has an Unforeseeable Emergency, as defined herein, the Plan Administrator may cancel all future Compensation Deferrals pertaining to Compensation not yet earned and required to be made pursuant to the Participants current Compensation Deferral Agreement if reasonably necessary to satisfy the Participants financial hardship subject to the standards and requirements for an Unforeseeable Emergency Distribution set forth in Section 6.8. If a Participant receives a hardship distribution from a qualified plan of the Plan Sponsor pursuant to Code § 401(k)(2)(B)(IV), the Plan Administrator shall cancel all future Compensation Deferrals pertaining to Compensation not yet earned and required to be made pursuant to the Participants current Compensation Deferral Agreement, and the Participant will be prohibited from making Compensation Deferrals under the Plan for at least six (6) months after receipt of the hardship distribution or such longer period as may be prescribed by the qualified plan. The Participants eligibility for Employer Matching Credits and/or Employer Discretionary Credits shall be similarly canceled, and the Participant shall be eligible to defer Compensation again at a later time only as provided under Article II. |
ARTICLE VIII
PLAN ADMINISTRATION
8.1 |
Appointment The Plan Administrator shall serve at the pleasure of the Plan Sponsor, who shall have the right to remove the Plan Administrator at any time upon thirty (30) days written notice. The Plan Administrator shall have the right to resign upon thirty (30) days written notice to the Plan Sponsor. |
8.2 |
Duties of Plan Administrator The Plan Administrator shall be responsible to perform all administrative functions of the Plan. These duties include but are not limited to: |
(a) |
Communicating with Participants in connection with their rights and benefits under the Plan; |
(b) |
Reviewing Benefit Benchmark elections received from Participants; |
(c) |
Arranging for the payment of taxes (including income tax withholding), expenses and benefit payments to Participants under the Plan; |
(d) |
Filing any returns and reports due with respect to the Plan; |
(e) |
Interpreting and construing Plan provisions and settling claims for Plan benefits; and |
(f) |
Serving as the Plans designated representative for the service of notices, reports, claims or legal process. |
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8.3 |
Plan Sponsor The Plan Sponsor has sole responsibility for the establishment and maintenance of the Plan. The Plan Sponsor through its Board shall have the power and authority to appoint the Plan Administrator, Trustee and any other professionals as may be required for the administration of the Plan. The Plan Sponsor shall also have the right to remove any individual or party appointed to perform administrative, investment, fiduciary or other functions under the Plan. The Plan Sponsor may delegate any of its powers to the Plan Administrator, Board member or a committee of the Board. |
8.4 |
Administrative Fees and Expenses All reasonable costs, charges and expenses incurred by the Plan Administrator or the Trustee in connection with the administration of the Plan or the Trust shall be paid by the Plan Sponsor. If not so paid, such costs, charges and expenses shall be charged to the Trust, if any, established in connection with the Plan. The Trustee shall be specifically authorized to charge its fees and expenses directly to the Trust. If the Trust has insufficient liquid assets to cover the applicable fees, the Trustee shall have the right to liquidate assets held in the Trust to pay any fees or expenses due. Notwithstanding the foregoing, no Compensation other than reimbursement for expenses shall be paid to a Plan Administrator who is an employee of the Plan Sponsor. |
8.5 |
Plan Administration and Interpretation The Plan Administrator shall have complete discretionary control and authority to determine the rights and benefits and all claims, demands and actions arising out of the provisions of the Plan or any Participant, Beneficiary, deceased Participant, or other person having or claiming to have any interest under the Plan. The Plan Administrator shall have complete discretion to interpret the Plan and to decide all matters under the Plan. Such interpretation and decision shall be final, conclusive, and binding on all Participants and any person claiming under or through any Participant. Any individual serving as Plan Administrator who is a Participant will not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Plan Administrator shall be entitled to rely on information furnished by a Participant, a Beneficiary, the Plan Sponsor, or other party. The Plan Administrator shall have the responsibility for complying with any reporting and disclosure requirements of ERISA. |
8.6 |
Powers, Duties, Procedures The Plan Administrator shall have such powers and duties, may adopt such rules, may act in accordance with such procedures, may appoint such officers or agents, may delegate such powers and duties, may receive such reimbursement and compensation, and shall follow such claims and appeal procedures with respect to the Plan as it may establish, each consistently with the terms of the Plan. |
32
8.7 |
Information To enable the Plan Administrator to perform its functions, the Plan Sponsor shall supply full and timely information to the Plan Administrator on all matters relating to the Compensation of Participants, their employment, retirement, death, Separation from Service, and such other pertinent facts as the Plan Administrator may require. |
8.8 |
Indemnification of Plan Administrator The Plan Sponsor agrees to indemnify and to defend to the fullest extent permitted by law any officer(s), employee(s) or Board members who serve as Plan Administrator (including any such individual who formerly served as Plan Administrator) against all liabilities, damages, costs and expenses (including reasonable attorneys fees and amounts paid in settlement of any claims approved by the Plan Sponsor) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith. |
8.9 |
Plan Administration Following a Change in Control Event Notwithstanding anything to the contrary in this Article VIII or elsewhere in the Plan or Trust, upon a Change in Control Event with respect to the Plan Sponsor identified in Section I of the Adoption Agreement the individual serving as Chief Executive Officer of such Plan Sponsor immediately prior to such Change in Control Event who is also a Participant in the Plan, or if the Plan Sponsor has no Chief Executive Officer who is also a Participant in the Plan, the Plan Sponsors most senior officer who is also a Participant in the Plan, shall have the right to appoint an individual, third party or committee to serve as Plan Administrator. Such appointment shall be made in writing and copies thereof shall be delivered to the Board, to the existing Plan Administrator, to the Trustee, and to all Plan Participants. The Trustee and all other service providers shall be entitled to rely fully on instructions received from the successor Plan Administrator and shall be indemnified to the fullest extent permitted by law for acting in accordance with the proper instructions of the successor Plan Administrator. |
33
ARTICLE IX
TRUST FUND
9.1 |
Trust The Plan Sponsor may establish a Trust for the purpose of accumulating assets which may, but need not be used, by the Plan Sponsor to satisfy some or all of its financial obligations to provide benefits to Participants under this Plan. Any trust created under this Section 9.1 shall be domiciled in the United States of America, and no assets of the Plan shall be held or transferred outside the United States. All assets held in the Trust shall remain the exclusive property of the Plan Sponsor and shall be available to pay creditor claims of the Plan Sponsor in the event of insolvency, to the extent provided under any Trust established with respect to such Plan Sponsor. The assets held in Trust shall be administered in accordance with the terms of the separate Trust Agreement between the Trustee and the Plan Sponsor. |
If elected by the Plan Sponsor in the Adoption Agreement, as soon as administratively feasible following the end of each Taxable Year (or as otherwise required by the Code), the Trustee shall transfer, on behalf of each Participant, from the Trust to the trust maintained in connection with the Plan Sponsors 401(k) plan, an amount equal to the lesser of (a) the maximum amount of pre-tax deferrals and, if applicable, matching contributions that the Participant could have made, or received, under the Plan Sponsors 401(k) Plan for that previous Taxable Year, within the limits imposed under the terms of the Plan Sponsors 401(k) Plan and the Code (including Code §§ 402(g), 401(k) and 401(m)), or (b) the amount of Compensation Deferrals the Participant actually deferred and, if applicable, Matching Credits the Participant actually received, under the terms of this Plan for that Taxable Year; provided however, the Trustee shall not transfer in any amounts attributable to earnings, and the Trustee shall not transfer an amount of Compensation Deferrals that exceeds the limit with respect to elective deferrals under Code § 402(g) in effect for the Taxable Year for which such transfer occurs in accordance with Code § 409A.
9.2 |
Unfunded Plan In no event will the assets accumulated by the Plan Sponsor in the Trust be construed as creating a funded Plan under the applicable provisions of ERISA or the Code, or under the provisions of any other applicable statute or regulation. Any funds set aside by the Plan Sponsor in Trust shall be administered in accordance with the terms of the Trust. |
9.3 |
Assignment and Alienation No Participant or Beneficiary of a deceased Participant shall have the right to anticipate, assign, transfer, sell, mortgage, pledge or hypothecate any benefit under this Plan. The Plan Administrator shall not recognize any attempt by a third party to attach, garnish or levy upon any benefit under the Plan except as may be required by law. |
34
ARTICLE X
AMENDMENT AND PLAN TERMINATION
10.1 |
Amendment The Plan Sponsor identified in Section I of the Adoption Agreement shall have the right to amend this Plan without the consent of any Participant or Beneficiary hereunder, provided that no such amendment shall have the effect of reducing any of the vested benefits to which a Participant or Beneficiary has accrued a right as of the effective date of the amendment. Notwithstanding the foregoing, the Plan Sponsor identified in Section I of the Adoption Agreement shall have the right to amend this Plan in any manner whatsoever without the consent of any Participant or Beneficiary to comply with the requirements of Code §409A and any binding guidance thereunder to avoid adverse tax consequences even if such amendment has the affect of reducing a vested benefit or existing right of a Participant or Beneficiary hereunder. |
10.2 |
Plan Termination The Plan Sponsor identified in Section I of the Adoption Agreement may terminate or discontinue the Plan in whole or in part at any time. No further Discretionary Credits or Matching Credits shall be made following Plan Termination, and no further Compensation Deferrals shall be permitted after the Taxable Year in which the Plan Termination occurs, except that the Plan Sponsor shall be responsible to pay any benefit attributable to vested amounts credited to the Participants Account as of the effective date of termination (following any adjustments to such Accounts in accordance with Article III hereof). If the Plan is terminated in accordance with this Section 10.2, the Plan Administrator shall make distribution of the Participants vested benefit upon the occurrence of a Distributable Event with respect to a Participant. A Participants vested benefit shall be adjusted to reflect Investment Credits and Debits for all Valuation Dates between Plan Termination and the occurrence of a Participants Distributable Event. |
10.3 |
Plan Termination Following a Change in Control Event If, as elected by the Plan Sponsor in the Adoption Agreement: |
(a) |
a Change in Control Event constitutes a Plan Termination; or |
(b) |
within the 30 days preceding or the 12 months following a Change in Control Event, the Plan Sponsor takes irrevocable action to terminate the Plan, |
the Plan will be terminated and liquidated with respect to the Participants of each corporation that experienced the Change in Control Event. The Plan will be terminated under this Section 10.3 only if all other arrangements sponsored by the Plan Sponsor experiencing the Change in Control Event that would be aggregated with the Plan as a single plan under Code § 409A are also terminated, so all participants under such
35
aggregated arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within 12 months after the date the Plan Sponsor takes all necessary action to terminate the Plan and the other arrangements. For purposes of this Section 10.3, when the Change of Control Event results from an asset purchase transaction, the applicable Plan Sponsor with the discretion to terminate the Plan and the other arrangements is the Plan Sponsor that is primarily liable immediately after the transaction for the payment of deferred compensation. Upon a Plan Termination Following a Change in Control Event, no further Compensation Deferrals or Employer Discretionary Credits or Employer Matching Credits shall be made, and the Plan Administrator shall be responsible to pay any benefit attributable to vested amounts credited to the Participants Account as soon as practicable following date on which the Plan Sponsor irrevocably takes all necessary action to terminate the Plan (following any final adjustments to such Accounts in accordance with Article III hereof), but not later than 12 months following such date.
10.4 |
Plan Termination Following a Corporate Dissolution The Plan Sponsor in its discretion may terminate and liquidate the Plan and make the payments provided below within 12 months after a Corporate Dissolution provided that the value of the Participants vested benefits is included in the Participants gross incomes in the latest of the following years (or, if earlier, the year in which the amount is actually or constructively received): |
(a) |
the calendar year in which the Plan Termination occurs; |
(b) |
the first calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or |
(c) |
the first calendar year in which the payment is administratively practicable. |
Upon a Plan Termination Following a Corporate Dissolution, no further Compensation Deferrals or Employer Discretionary Credits or Employer Matching Credits shall be made, and the Plan Administrator shall be responsible to pay any benefit attributable to vested amounts credited to the Participants Account as of the effective date of termination (following any final adjustments to such Accounts in accordance with Article III hereof).
10.5 |
Plan Termination in Connection with Termination of Certain Similar Arrangements The Plan Sponsor in its discretion may terminate the Plan and make the distribution provided below provided that |
(a) |
the termination does not occur proximate to a downturn in the financial health of the Plan Sponsor and its Affiliates; |
36
(b) |
the Plan Sponsor terminates all other arrangements that would be aggregated with the Plan as a single plan under Code § 409A if the same Participant had deferrals of compensation under all of the other arrangements; |
(c) |
no payments in liquidation of the Plan are made within 12 months after the date the Plan Sponsor takes all necessary action to irrevocably terminate the Plan, other than payments that would be payable under the terms of the Plan if action to terminate the Plan had not occurred; |
(d) |
all payments are made within 24 months after the date the Plan Sponsor takes all necessary action to irrevocably terminate the Plan; and |
(e) |
neither the Plan Sponsor nor any Affiliate adopts a new plan that would be aggregated with any terminated plan or arrangement under the definition of what constitutes a plan for purposes of Code §409A if the same Participant participated in both arrangements, at any time within 3 years following the date the Plan Sponsor takes all necessary action to irrevocably terminate the Plan. |
Upon a Plan Termination in Connection with the Termination of Certain Similar Arrangements, no further Employer Discretionary Credits or Employer Matching Credits shall be made, and no further Compensation Deferrals shall be made after the Taxable Year in which the Plan Termination in Connection with the Termination of Certain Similar Arrangements occurs. The Plan Administrator shall be responsible to pay any benefit attributable to vested amounts credited to the Participants Account as soon as practicable after distributions are permissible under Code § 409A (following any final adjustments to such Accounts in accordance with Article III hereof).
10.6 |
Effect of Payment The full payment of the balance of a Participants vested Account under the provisions of the Plan shall completely discharge all obligations to a Participant and his designated Beneficiaries under this Plan and each of the Participants Compensation Deferral Agreements shall terminate. |
ARTICLE XI
MISCELLANEOUS
11.1 |
Total Agreement This Plan document and the executed Adoption Agreement, Compensation Deferral Agreement, Beneficiary designation and other administration forms shall constitute the total agreement or contract between the Plan Sponsor and the Participant regarding the Plan. No oral statement regarding the Plan may be relied upon by a Participant or Beneficiary. The Plan Sponsor or Plan Administrator shall have the right to establish such procedures as are necessary for the administration or operation of the Plan or Trust, and such procedures shall also be considered a part of the Plan unless clearly contrary to the express provisions thereof. |
37
11.2 |
Employment Rights Neither the establishment of this Plan nor any modification thereof, nor the creation of any Trust or Account, nor the payment of any benefits, shall be construed as giving a Participant or other person a right to employment with the Plan Sponsor or any Affiliate or any other legal or equitable right against the Plan Sponsor of any Affiliate except as provided in the Plan. In no event shall the terms of employment of any Eligible Individual be modified or in any way be affected by the Plan. |
11.3 |
Non-Assignability None of the benefits, payments, proceeds or claims of any Participant or Beneficiary shall be subject to attachment or garnishment or other legal process by any creditor of such Participant or Beneficiary, nor shall any Participant or Beneficiary have the right to alienate, commute, pledge, encumber or assign any of the benefits or payments or proceeds which he or she may expect to receive, contingently or otherwise under the Plan. |
11.4 |
Binding Agreement Any action with respect to the Plan taken by the Plan Administrator or the Plan Sponsor or the Trustee or any action authorized by or taken at the direction of the Plan Administrator, the Plan Sponsor or other authorized party shall be conclusive upon all Participants and Beneficiaries entitled to benefits under the Plan. |
11.5 |
Receipt and Release Any payment to any Participant or Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Plan Sponsor, the Plan Administrator and the Trustee under the Plan, and the Plan Administrator may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. If any Participant or Beneficiary is determined by the Plan Administrator to be incompetent by reason of physical or mental disability (including not being the age of majority) to give a valid receipt and release, the Plan Administrator may cause payment or payments becoming due to such person to be made to a legal guardian, trustee, or other proper representative of the Participant or Beneficiary without responsibility on the part of the Plan Administrator, the Plan Sponsor or the Trustee to follow the application of such funds. |
11.6 |
Furnishing Information A Participant or Beneficiary will cooperate with the Plan Administrator or any representative thereof by furnishing any and all information requested by the Plan Administrator and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Plan Administrator may deemnecessary. |
38
11.7 |
Compliance with Code § 409A Notwithstanding any provision of the Plan to the contrary, all provisions of the Plan will be interpreted and applied to comply with the requirements of Code §409A and any regulations and applicable binding guidance so as to avoid adverse tax consequences. No provision of the Plan, however, is intended or shall be interpreted to create any right with respect to the tax treatment of the amounts paid or payable hereunder, and neither the Plan Sponsor nor any Affiliate shall under any circumstances have any liability to a Participant or Beneficiary for any taxes, penalties or interest due on amounts paid or payable under the Plan, including taxes, penalties or interest imposed under Code § 409A. |
11.8 |
Insurance The Plan Sponsors, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as they may choose. The Plan Sponsors or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Plan Sponsor shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to which the Plan Sponsor have applied for insurance. |
11.9 |
Governing Law Construction, validity and administration of this Plan shall be governed by applicable Federal law and applicable state law in which the principal office of the Plan Sponsor is located, without regard to the conflict of law provisions of such state law. If any provision shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. |
11.10 |
Headings and Subheadings Headings and subheadings in this Plan are inserted for convenience only and are not to be considered in the interpretation of the provisions hereof. |
39
PYRAMAX BANK, FSB
NON-QUALIFIED DEFERRED COMPENSATION PLAN
Amendment One
WHEREAS, PyraMax Bank, FSB (the Bank) maintains the PyraMax Bank, FSB Non-Qualified Deferred Compensation Plan (the Plan), originally effective as of January 1, 2012, and restated effective as of January 1, 2016; and
WHEREAS , pursuant to Section 10.1 of Article X of the Plan, the Bank has the right to amend the Plan; and
WHEREAS , the Board of Directors of the Bank (the Board) now desires to offer a one-time election for Participants to convert all or part of the Participants Accounts to 1895 Bancorp of Wisconsin, Inc. common stock under the Plan in connection with the Banks conversion to the mutual holding company structure and related stock offering;
NOW, THEREFORE , the Board hereby amends the Plan in the following respects effective immediately:
1. Section 1 of the Plan is hereby amended by adding the following definitions:
1.50 |
Company shall mean 1895 Bancorp of Wisconsin, Inc. |
1.51 |
Company Stock shall mean the common stock of the Company. |
1.52 |
Offering The offering of the sale of Company Stock made to the public in connection with the conversion of the Plan Sponsor to the mutual holding company structure. |
1.53 |
One-Time Election Form The form used by a Participate to elect to convert all or part of the Participants account to Company Stock under Section 3.1(b) of the Plan. |
2. The first paragraph of Section 3.1 shall be designated as 3.1(a) and the following shall be designated as new Section 3.1(b):
(b) |
Each Participant may make a one-time irrevocable election to convert all or part of the Participants Account to Company Stock subject to any limits established by the Plan Sponsors investment policy attributable to the Plan. The election under this Section 3.1(b) shall be made on the One-Time Election Form during the Offering. |
In connection with the inclusion of Company Stock, the Plan Sponsor shall establish procedures to ensure that no Participant who is deemed an insider under the laws and regulations of the Securities Exchange Commission shall transact in such Company Stock during any black-out period established by the Plan Sponsor. The Plan Sponsor shall also establish rules and procedures to permit Participants to provide voting directions with respect to any Company Stock allocated to such Participants Accounts.
Any dividends paid on shares of Company Stock held in Participants Accounts shall be immediately reinvested in additional shares of Company Stock.
3. The following subsection 6.2(d) shall be added to the end of Section 6.2:
(d) |
Notwithstanding any other provision to the contrary in the Plan or the Adoption Agreement, all amounts invested in Company Stock shall be distributed to the Participant or Beneficiary in Company Stock. |
[Signature Page to Follow]
2
IN WITNESS WHEREOF , this Amendment One has been executed by the duly authorized officer of the Bank as of the date set forth below.
PYRAMAX BANK, FSB | ||||||
|
By: |
|
||||
Date |
3
Exhibit 21
Subsidiaries of the Registrant
The following is a list of the subsidiaries of 1895 Bancorp of Wisconsin, Inc.:
Name |
State of Incorporation |
|
PyraMax Bank, FSB |
Federal |
Exhibit 23.2
KELLER & COMPANY, INC.
FINANCIAL INSTITUTION CONSULTANTS
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 43017
(614) 766-1426 (614) 766-1459 FAX
September 7, 2018
The Boards of Directors
1895 Bancorp of Wisconsin, Inc.
PyraMax Bank, FSB
1360 S. Moorland Road
Brookfield, Wisconsin 53005
Members of the Boards:
We hereby consent to the use of our firms name in (i) the Registration Statement on Form S-l to be filed by 1895 Bancorp of Wisconsin, Inc., with the Securities and Exchange Commission, and (ii) the Notice of Mutual Holding Company Reorganization and Application for Approval of a Minority Stock Issuance by a Subsidiary of a Mutual Holding Company on combined Form MHC-l/Form MHC-2 to be filed by PyraMax Bank, FSB with the Federal Reserve Board, as amended and supplemented. We also hereby consent to the inclusion of, summary of and references to our appraisal and our statement concerning subscription rights in such filings, including the prospectus of 1895 Bancorp of Wisconsin, Inc. and being named as an expert in the Prospectus.
Sincerely,
KELLER & COMPANY, INC. |
|
Michael R. Keller |
President |
MRK:jmm |
Exhibit 23.3
Consent of Independent Registered Public Accounting Firm
The Board of Directors
PyraMax Bank, FSB
We hereby consent to the (i) inclusion of our audit report dated September 6, 2018, related to the financial statements of PyraMax Bank, FSB, as filed in the Registration Statement on Form S-1 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, (ii) being named as an expert in the Prospectus and (iii) inclusion of the state tax opinion in the Registration Statement on Form S-1 and 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.
Wipfli LLP
Appleton, Wisconsin
September 7, 2018
Exhibit 99.1
KELLER & COMPANY, INC.
FINANCIAL INSTITUTION CONSULTANTS
555 METRO PLACE NORTH
SUITE 524
DUBLIN. OHIO 43017
(614) 766-1426 (614) 766-1459 FAX
July 17, 2018
The Board of Directors
PyraMax Bank, FSB
7001 West Edgerton Avenue
Greenfield, Wisconsin 53220
Re: Conversion Valuation Agreement
Attn: Richard Hurd
Keller & Company, Inc. (hereinafter referred to as KELLER) hereby proposes to prepare an independent conversion appraisal of PyraMax Bank, FSB (hereinafter referred to as PyraMax ), relating to the mutual to stock conversion of PyraMax and minority stock offering (the Stock Offering) of PyraMaxs mid-tier holding company. KELLER will provide a pro forma valuation of the market value of the shares of PyraMaxs mid-tier holding company to be sold in connection with the minority stock offering.
KELLER is a national financial consulting firm that primarily serves the financial institution industry. KELLER is experienced in evaluating and appraising thrift institutions and thrift institution holding companies. KELLER is an experienced conversion appraiser for filings with the Office of the Comptroller of the Currency ( OCC ), the Federal Deposit Insurance Corporation ( FDIC ) and the Federal Reserve Board ( FRB ), and is also approved by the Internal Revenue Service as an expert in bank and thrift stock valuations. Keller has completed conversion appraisals related to standard conversions, mutual holding company stock offerings and conversions involving foundations.
KELLER agrees to prepare the conversion appraisal in the format required by the FRB in a timely manner for prompt filing with the FRB . KELLER will provide any additional information as requested and will complete appraisal updates in accordance with regulatory requirements and based on market conditions. Keller will also complete the prospectus tables relating to the valuation level and offering.
The appraisal report will provide a detailed description of PyraMax, including its financial condition, operating performance, asset quality, rate sensitivity position, liquidity level and management qualifications. The appraisal will include a description of PyraMaxs market area, including both economic and demographic characteristics and trends. An analysis of other publicly-traded thrift institutions will be performed to determine a comparable group, and adjustments to the appraised value will be made based on a comparison of PyraMax with the comparable group and recognizing the risk related to an initial public offering.
In completing its appraisal, KELLER will rely upon the information in the Subscription and Community Offering Prospectus, including the audited and unaudited financial statements. Among other factors, KELLER will also consider the following : the present and projected operating results and financial condition of PyraMax; the economic and demographic conditions in PyraMaxs existing marketing area; pertinent historical financial and other information relating to PyraMax; a comparative evaluation of the operating and financial statistics of PyraMax with those of other thrift institutions; the proposed price per share; the aggregate size of the offering of common stock; the impact of the stock offering on PyraMaxs capital position and earnings potential; PyraMaxs proposed initial dividend, if any; and the trading market for securities of comparable institutions and general conditions in the market for such securities. In preparing the appraisal, KELLER will rely solely upon, and assume the accuracy and completeness of, financial and statistical information provided by PyraMax, and will not independently value the assets or liabilities of PyraMax in order to prepare the appraisal.
Upon completion of the conversion appraisal, KELLER will make a presentation to the board of directors of PyraMax to review the content of the appraisal, the format and the assumptions. A written presentation will be provided to each board member as a part of the overall presentation.
For its services in making this appraisal, KELLERs fee will be $39,000 including one final valuation update, plus out-of-pocket expenses not to exceed $1,500, for travel, copying, binding, etc. Any additional valuation updates, including the final update, will not be subject to an additional fee. Upon the acceptance of this proposal, KELLER shall be paid a retainer of $5,000 to be applied to the total appraisal fee of $39,000, the balance of which will be payable at the time of the completion of the appraisal. Any appraisal valuation update is not a mandatory requirement but can be requested by regulators. Including such a request by regulators or completed voluntarily in response to changes in the market prices of thrifts, our total fee will be $39,000, including the final valuation update, which will be required.
PyraMax agrees, by the acceptance of this proposal, to indemnify KELLER and its employees and affiliates for certain costs and expenses, including reasonable legal fees, in connection with claims or litigation reasonably relating to the appraisal and arising out of any misstatement or untrue statement of a material fact in information supplied to KELLER by PyraMax or by an intentional omission by PyraMax to state a material fact in the information, provided, however, PyraMax shall not be obligated to indemnify KELLER for any loss, cost or expense attributable to the negligence, bad faith or willful misconduct of KELLER or its employees or agents or to the extent such loss, cost or expense was due to a breach of this agreement by KELLER.
KELLER agrees to indemnify PyraMax and its employees and affiliates for certain costs and expenses, including reasonable legal fees, in connection with claims or litigation relating to or based upon the negligence, bad faith or willful misconduct of KELLER or its employees or affiliates.
This proposal will be considered accepted upon the execution of the two enclosed copies of this agreement and the return of one executed copy to KELLER, accompanied by the specified retainer.
KELLER & COMPANY, INC. |
||
By: |
|
|
Michael R. Keller | ||
President |
PyraMax Bank, FSB |
||
By: |
|
|
Richard Hurd | ||
President & Chief Executive Officer |
Date: |
July 27, 2018 |
Exhibit 99.2
KELLER & COMPANY, INC.
FINANCIAL INSTITUTION CONSULTANTS
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 43017
(614) 766-1426 (614) 766-1459 FAX
September 7, 2018
The Boards of Directors
1895 Bancorp of Wisconsin, Inc.
PyraMax Bank, FSB
7001 West Edgerton Avenue
Greenfield, Wisconsin 53220
Re: Subscription Rights 1895 Bancorp of Wisconsin, Inc.
To the Boards:
The purpose of this letter is to provide an opinion of the value of the subscription rights of the to be issued common stock of 1895 Bancorp of Wisconsin, Inc. (the Corporation), in regard to the stock offering of the Corporation.
Because the subscription rights to purchase shares of common stock in the Corporation, which are to be issued to the depositors and certain borrowers of PyraMax Bank, FSB and will be acquired by such recipients without cost, will be nontransferable and of short duration and will afford the recipients the right only to purchase shares of common stock at the same price as will be paid by members of the general public in a direct community offering, we are of the opinion that:
(1) |
The subscription rights will have no ascertainable fair market value, and; |
(2) |
The price at which the subscription rights are exercisable will not be more or less than the fair market value of the shares on the date of the exercise. |
Further, it is our opinion that the subscription rights will have no economic value on the date of distribution or at the time of exercise, whether or not a community offering takes place.
Sincerely,
KELLER & COMPANY, INC. |
|
Michael R. Keller |
President |
MRK:jmm |
Exhibit 99.3
CONVERSION VALUATION APPRAISAL REPORT
Prepared for:
1895 Bancorp of Wisconsin, Inc.
Greenfield, Wisconsin
As Of:
August 7, 2018
Prepared By:
Keller & Company, Inc.
555 Metro Place North
Suite 524
Dublin, Ohio 43017
(614) 766-1426
KELLER & COMPANY
KELLER & COMPANY, INC.
FINANCIAL INSTITUTION CONSULTANTS
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 43017
(614) 766-1426 (614) 766-1459 FAX
September 5, 2018
The Boards of Directors
1895 Bancorp of Wisconsin, Inc.
PyraMax Bank, FSB
7001 West Edgerton Avenue
Greenfield, Wisconsin 53220
To the Boards:
We hereby submit an independent appraisal (Appraisal) of the pro forma market value of the to-be-issued stock of 1895 Bancorp of Wisconsin, Inc. (the Corporation), which is the mid-tier holding company of PyraMax Bank, FSB, Greenfield, Wisconsin, (PyraMax or the Bank). Such stock is to be issued in connection with the application by the Corporation to complete a minority stock offering, with 1895 Bancorp of Wisconsin, MHC, a federally chartered mutual holding company, to own approximately 55.0 percent of the shares of the Corporation, with 44.0 percent of the shares of the Corporation to be offered to the public and 1.0 percent to be issued to the new Foundation. This appraisal was prepared and provided to the Corporation in accordance with the appraisal requirements of the Federal Reserve Board.
Keller & Company, Inc. is an independent, financial institution consulting firm that serves both thrift institutions and banks. The firm is a full-service consulting organization, as described in more detail in Exhibit A, specializing in business and strategic plans, stock valuations, conversion and reorganization appraisals, market studies and fairness opinions for thrift institutions and banks. The firm has affirmed its independence in this transaction with the preparation of its Affidavit of Independence, a copy of which is included as Exhibit C.
Our appraisal is based on the assumption that the data and material provided to us by the Corporation, PyraMax and the independent auditors, Wipfli, LLP, are both accurate and complete. We did not verify the financial statements provided to us, nor did we conduct independent valuations of the Banks assets and liabilities. We have also used information from other public sources, but we cannot assure the accuracy of such material.
In the preparation of this appraisal, we held discussions with the management of the Corporation and the Bank, with the law firm of Luse Gorman, PC, the Banks conversion counsel, and with Wipfli, LLP. Further, we viewed the Corporations local economy and primary market area.
Boards of Directors
PyraMax Bank, FSB
1895 Bancorp of Wisconsin, Inc.
September 5, 2018
Page 2
This valuation must not be considered to be a recommendation as to the purchase of stock in the Corporation, and we can provide no guarantee or assurance that any person who purchases shares of the Corporations stock will be able to later sell such shares at a price equivalent to the price designated in this appraisal.
Our valuation will be updated if required and will give consideration to any new developments in the Corporations operation that have an impact on operations or financial condition. Further, we will give consideration to any changes in general market conditions and to specific changes in the market for publicly traded thrift institutions. Based on the material impact of any such changes on the pro forma market value of the Corporation as determined by this firm, we will make necessary adjustments to the Corporations appraised value in such appraisal update.
It is our opinion that as of August 7, 2018, the pro forma market value or appraised value of 1895 Bancorp of Wisconsin, Inc. was $55,000,000 at the midpoint of the valuation range, with a minority public offering of $24,200,000 or 2,420,000 shares at $10 per share and foundation shares of 55,000 shares at $10 per share or $550,000 for a combined 45.0 percent of the total value or $24,750,000 or 2,475,000 shares at $10 per share.
Very truly yours,
KELLER & COMPANY, INC.
CONVERSION VALUATION APPRAISAL REPORT
Prepared for:
1895 Bancorp of Wisconsin, Inc.
Greenfield, Wisconsin
As Of:
August 7, 2018
TABLE OF CONTENTS
PAGE | ||||||
INTRODUCTION |
1 | |||||
I. | Description of PyraMax Bank, FSB | |||||
General | 4 | |||||
Performance Overview | 8 | |||||
Income and Expense | 10 | |||||
Yields and Costs | 15 | |||||
Interest Rate Sensitivity | 17 | |||||
Lending Activities | 19 | |||||
Nonperforming Assets | 23 | |||||
Investments | 26 | |||||
Deposit Activities | 26 | |||||
Borrowings | 27 | |||||
Subsidiaries | 27 | |||||
Office Properties | 28 | |||||
Management | 28 | |||||
II. | Description of Primary Market Area | 30 | ||||
III. | Comparable Group Selection | |||||
Introduction | 37 | |||||
General Parameters | ||||||
Merger/Acquisition | 38 | |||||
Trading Exchange | 39 | |||||
IPO Date | 39 | |||||
Geographic Location | 40 | |||||
Asset Size | 40 | |||||
Balance Sheet Parameters | ||||||
Introduction | 42 | |||||
Cash and Investments to Assets | 42 | |||||
Mortgage-Backed Securities to Assets | 43 | |||||
One- to Four-Family Loans to Assets | 43 | |||||
Total Net Loans to Assets | 44 | |||||
Total Net Loans and Mortgage-Backed Securities to Assets | 44 | |||||
Borrowed Funds to Assets | 44 | |||||
Equity to Assets | 45 | |||||
Performance Parameters |
||||||
Introduction | 46 |
TABLE OF CONTENTS (cont.)
PAGE | ||||||
III. | Comparable Group Selection (cont.) | |||||
Performance Parameters (cont.) | ||||||
Return on Average Assets | 46 | |||||
Return on Average Equity | 47 | |||||
Net Interest Margin | 47 | |||||
Operating Expenses to Assets | 48 | |||||
Noninterest Income to Assets | 48 | |||||
Asset Quality Parameters | ||||||
Introduction | 49 | |||||
Nonperforming Assets to Total Assets | 49 | |||||
Repossessed Assets to Assets | 49 | |||||
Loan Loss Reserve to Assets | 50 | |||||
The Comparable Group | 51 | |||||
IV. | Analysis of Financial Performance | 52 | ||||
V. | Market Value Adjustments | |||||
Earnings Performance | 55 | |||||
Market Area | 60 | |||||
Financial Condition | 61 | |||||
Asset, Loan and Deposit Growth | 64 | |||||
Dividend Payments | 65 | |||||
Subscription Interest | 66 | |||||
Liquidity/Marketability of Stock | 67 | |||||
Management | 68 | |||||
Marketing of the Issue | 70 | |||||
VI. | Valuation Methods | |||||
Introduction | 71 | |||||
Valuation Methods | 71 | |||||
Valuation Range | 72 | |||||
Price to Book Value Method | 72 | |||||
Price to Core Earnings Method | 73 | |||||
Price to Assets Method | 74 | |||||
Valuation Analysis and Summary | 75 | |||||
Valuation Conclusion | 76 |
LIST OF EXHIBITS
NUMERICAL
EXHIBITS |
PAGE | |||
1 | Balance Sheets - At June 30, 2018 and at December 31, 2017 | 79 | ||
2 | Balance Sheets - At December 31, 2013 through 2016 | 80 | ||
3 | Statement of Income for the Twelve Months Ended June 30, 2018 and the Year Ended December 31, 2017 | 81 | ||
4 | Statements of Income for the Years Ended December 31, 2013 through 2016 | 82 | ||
5 | Selected Financial Information | 83 | ||
6 | Income and Expense Trends | 84 | ||
7 | Normalized Earnings Trend | 85 | ||
8 | Performance Indicators | 86 | ||
9 | Volume/Rate Analysis | 87 | ||
10 | Yield and Cost Trends | 88 | ||
11 | Net Portfolio Value | 89 | ||
12 | Loan Portfolio Composition | 90 | ||
13 | Loan Maturity Schedule | 91 | ||
14 | Delinquent Loans | 92 | ||
15 | Nonperforming Assets | 93 | ||
16 | Classified Assets | 94 | ||
17 | Allowance for Loan Losses | 95 | ||
18 | Investment Portfolio Composition | 96 | ||
19 | Mix of Deposits | 97 | ||
20 | Certificates of Deposit by Maturity | 98 | ||
21 | Borrowed Funds Activity | 99 | ||
22 | Offices of PyraMax Bank, FSB | 100 | ||
23 | Management of the Bank | 101 | ||
24 | Key Demographic Data and Trends | 102 | ||
25 | Key Housing Data | 103 | ||
26 | Major Sources of Employment | 104 | ||
27 | Unemployment Rates | 105 | ||
28 | Market Share of Deposits | 106 | ||
29 | National Interest Rates by Quarter | 107 |
LIST OF EXHIBITS (cont.)
NUMERICAL EXHIBITS |
PAGE | |||
30 | Thrift Share Data and Pricing Ratios | 108 | ||
31 | Key Financial Data and Ratios | 115 | ||
32 | Recently Converted Thrift Institutions | 122 | ||
33 | Acquisitions and Pending Acquisitions | 123 | ||
34 | Balance Sheets Parameters - Comparable Group Selection | 124 | ||
35 | Operating Performance and Asset Quality Parameters - Comparable Group Selection | 126 | ||
36 | Balance Sheet Ratios - Final Comparable Group | 128 | ||
37 | Operating Performance and Asset Quality Ratios - Final Comparable Group | 129 | ||
38 | Balance Sheet Totals - Final Comparable Group | 130 | ||
39 | Balance Sheet - Asset Composition Most Recent Quarter | 131 | ||
40 | Balance Sheet - Liability and Equity Most Recent Quarter | 132 | ||
41 | Income and Expense Comparison - Trailing Four Quarters | 133 | ||
42 | Income and Expense Comparison as a Percent of Average Assets | 134 | ||
43 | Yields, Costs and Earnings Ratios - Trailing Four Quarters | 135 | ||
44 | Reserves and Supplemental Data | 136 | ||
45 | Comparable Group Ratios - Full Conversion | 137 | ||
46 | Valuation Analysis and Conclusions - Full Conversion | 138 | ||
47 | Pro Forma Effects of Conversion Proceeds - Minimum - Full Conversion | 139 | ||
48 | Pro Forma Effects of Conversion Proceeds - Midpoint - Full Conversion | 140 | ||
49 | Pro Forma Effects of Conversion Proceeds - Maximum - Full Conversion | 141 | ||
50 | Pro Forma Effects of Conversion Proceeds - Maximum, as Adjusted - Full Conversion | 142 | ||
51 | Summary of Valuation Premium or Discount - Full Conversion | 143 | ||
52 | Comparable Group Ratios - Minority Offering | 144 | ||
53 | Valuation Analysis and Calculation - Minority Offering | 145 | ||
54 | Projected Effect of Conversion Proceeds - Minimum - Minority Offering | 146 | ||
55 | Projected Effect of Conversion Proceeds - Midpoint - Minority Offering | 147 | ||
56 | Projected Effect of Conversion Proceeds - Maximum - Minority Offering | 148 | ||
57 | Projected Effect of Conversion Proceeds - Maximum, as adjusted - Minority Offering | 149 | ||
58 | Summary of Valuation of Valuation Premium or Discount - Minority Offering | 150 |
ALPHABETICAL EXHIBITS | PAGE | |||
A | Background and Qualifications | 152 | ||
B | RB 20 Certification | 156 | ||
C | Affidavit of Independence | 157 |
INTRODUCTION
Keller & Company, Inc. is an independent appraisal firm for financial institutions and has prepared this Conversion Valuation Appraisal Report (Report) to provide the pro forma market value of the to-be-issued common stock of 1895 Bancorp of Wisconsin, Inc. (the Corporation), which will be formed as a mid-tier holding company to own all of the common stock of PyraMax Bank, FSB (PyraMax or the Bank), Greenfield, Wisconsin. Under the Plan of Conversion, the Corporation will be majority owned by 1895 Bancorp of Wisconsin, MHC, a federally chartered mutual holding company, which will own 55.0 percent of the Corporation. The Corporation will sell to the public 44.0 percent of the appraised value of the Corporation as determined in this Report in a minority stock offering and will give 55,000 shares or 1.0 percent to the new foundation, 1895 Financial Community Foundation, for a combined 45.0 percent of shares to be issued with the remaining 55.0 percent of the shares outstanding held by 1895 Bancorp of Wisconsin, MHC. The shares of common stock are to be issued in connection with the Banks Application for Approval of a Minority Stock Offering and Reorganization from a federally chartered mutual savings and loan association to a federally chartered stock savings and loan association as a subsidiary of a mid-tier holding company.
The Application is being filed with the Federal Reserve Board (FRB) and the Securities and Exchange Commission (SEC). Such Application for Conversion has been reviewed by us, including the Prospectus and related documents, and discussed with the Banks management and the Banks conversion counsel, Luse Gorman, PC, Washington, D.C.
This conversion appraisal was prepared based on regulatory guidelines entitled Guidelines for Appraisal Reports for the Valuation of Savings Institutions Converting from the Mutual to Stock Form of Organization, and the Revised Guidelines for Appraisal Reports and represents a full appraisal report. The Report provides detailed exhibits based on the Revised Guidelines and a discussion on each of the factors that need to be considered. Our valuation will be updated in accordance with the Revised Guidelines and will consider any changes in market conditions for thrift institutions.
1
Introduction (cont.)
The pro forma market value is defined as the price at which the stock of the Corporation after conversion would change hands between a typical willing buyer and a typical willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, and with both parties having reasonable knowledge of relevant facts in an arms-length transaction. The appraisal assumes the Bank is a going concern and that the shares issued by the Corporation in the conversion are sold in noncontrol blocks.
As part of our appraisal procedure, we have reviewed the financial statements for the five fiscal years ended December 31, 2013, 2014, 2015, 2016 and 2017, and unaudited financial statements for the six months ended June 30, 2017 and 2018, and discussed them with PyraMaxs management and with PyraMaxs independent auditors, Wipfli, LLP, Milwaukee, Wisconsin. We have also discussed and reviewed with management other financial matters and have reviewed internal projections. We have reviewed the Corporations preliminary Form S-1 and the related filings and discussed them with management and with the Banks conversion counsel.
To gain insight into the Banks local market condition, we have traveled PyraMaxs market area where it operates nine offices, comprised of its main office and eight branches. The Banks main office is in Greenfield, Wisconsin, and the eight branches are in Franklin, Grafton, Milwaukee, Mukwonago, South Milwaukee, Third Ward, Waukesha and West Allis.
We have studied the economic and demographic characteristics of the primary market area, and analyzed the Banks primary market area relative to Wisconsin and the United States. We have also examined the competitive market within which PyraMax operates, giving consideration to the areas numerous financial institution offices, mortgage banking offices, and credit union offices and other key market area characteristics, both positive and negative.
We have given consideration to the market conditions for securities in general and for publicly traded thrift stocks in particular. We have examined the performance of selected publicly traded thrift institutions and compared the performance of PyraMax to those selected institutions.
2
Introduction (cont.)
Our valuation is not intended to represent and must not be interpreted to be a recommendation of any kind as to the desirability of purchasing the to-be-outstanding shares of common stock of the Corporation. Giving consideration to the fact that this appraisal is based on numerous factors that can change over time, we can provide no assurance that any person who purchases the stock of the Corporation in this mutual-to-stock conversion will subsequently be able to sell such shares at prices similar to the pro forma market value of the Corporation as determined in this conversion appraisal.
3
I. |
DESCRIPTION OF PYRAMAX BANK, FSB |
GENERAL
PyraMax Bank, FSB (PyraMax) was organized in 1895 as a state-chartered mutual savings and loan association with the name, South Milwaukee Savings and Loan Association. The Bank later converted to a federal chartered savings bank and changed its name to PyraMax Bank, FSB in 2000.
PyraMax conducts its business from its main office in Greenfield and its eight branch offices. PyraMax has six offices in Milwaukee County, two offices in Waukesha County and one office in Ozaukee County. The Bank has entered into an agreement to sell its Milwaukee branch in Milwaukee County with an expected closing date in the fourth quarter of 2018. The Banks primary retail market area is focused on Milwaukee County and extends into Waukesha and Ozaukee Counties.
PyraMaxs deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (FDIC) in the Bank Insurance Fund (BIF). The Bank is also subject to certain reserve requirements of the Board of Governors of the Federal Reserve Bank (the FRB). PyraMax is a member of the Federal Home Loan Bank (the FHLB) of Chicago and is regulated by the OCC. As of June 30, 2018, PyraMax had assets of $482,617,000 deposits of $404,560,000 and equity of $37,691,000.
PyraMax has been principally engaged in the business of serving the financial needs of the public in its local communities and throughout its primary market area as a community-oriented institution. PyraMax has been actively involved in the origination of commercial real estate loans and one- to four-family mortgage loans, with commercial real estate loans representing 49.3 percent of its loan portfolio at June 30, 2018. One- to four-family mortgage loans represented a lesser 29.0 percent of its loan portfolio at June 30, 2018. The Banks primary sources of funds have been retail deposits from residents in its local communities and to a lesser extent, FHLB advances. The Bank is also an originator of multi-family loans, construction loans, commercial business loans, home equity loans, and consumer loans. Consumer loans include automobile loans, loans on deposit accounts and other secured and unsecured personal loans.
4
General (cont.)
The Bank had cash and investments of $77.3 million, or 16.0 percent of its assets, excluding FHLB stock which totaled $1,818,000 or 0.4 percent of assets at June 30, 2018. The Bank had $52.0 million of its investments in mortgage-backed and related securities representing 10.8 percent of assets. Deposits, principal payments, FHLB advances and equity have been the primary sources of funds for the Banks lending and investment activities.
The total amount of stock to be sold by the Corporation in the minority stock offering will be $24,200,000 or 2,420,000 shares at $10 per share, representing 44.0 percent of the midpoint fully converted appraised value of $55.0 million, with another 55,000 shares to be issued to the new foundation. The net conversion proceeds will be $22.7 million, net of conversion expenses of approximately $1,500,000. The actual cash proceeds to the Bank of $11.35 million will represent 50.0 percent of the net conversion proceeds. The ESOP will represent 8.0 percent of a 49.0 percent minority offering or 215,600 shares at $10 per share, representing $2,156,000 or 3.92 percent of the total value. The Banks net proceeds will be used to fund new loans and to invest in securities following their initial deployment to short term investments. The Bank may also use the proceeds to expand services, expand operations or acquire other financial service organizations, diversify into other businesses, or for any other purposes authorized by law. The Corporation will use its proceeds to fund the ESOP and to invest in short-term deposits.
The Bank has experienced a modest deposit increase over the past three fiscal years, with deposits increasing 10.3 percent from December 31, 2015, to December 31, 2017, or an average of 3.7 percent per year. From December 31, 2016, to December 31, 2017, deposits increased by $30.4 million or 9.1 percent, compared to an increase of 1.7 percent in fiscal 2016. For the six months ended June 30, 2018, deposits increased a modest 3.9 percent or 7.8 percent on an annualized basis.
5
General (cont.)
The Bank has experienced an increase in its loan portfolio during the past three years and in the most recent six months and has focused on monitoring its asset quality position, on controlling its net interest margin and on maintaining a reasonable equity to assets ratio. Equity to assets increased from 8.94 percent of assets at December 31, 2015, to 8.95 percent at December 31, 2017, and then decreased to 8.16 percent at June 30, 2018, impacted by the Banks stronger growth in assets.
The primary lending strategy of PyraMax has been to focus on the origination of commercial real estate loans, adjustable-rate and fixed-rate one-to four-family mortgage loans, the origination of home equity loans and multi-family loans, with less activity in construction loans and consumer loans.
The Banks share of one- to four-family mortgage loans has decreased modestly from 36.0 percent of gross loans at December 31, 2013, to 29.0 percent at June 30, 2018. Commercial real estate loans, including multi-family loans, increased from 36.6 percent to 49.3 percent of loans December 31, 2013, to June 30, 2018. Construction loans increased from 0.3 percent of loans to 0.9 percent from December 31, 2013, to June 30, 2018. One- to four-family loans and commercial loans, excluding home equity loans, as a group increased modestly from 87.9 percent of gross loans at December 31, 2013, to 87.8 percent at June 30, 2018. The increase in these loans was offset by the Banks decreases in home equity loans and consumer loans. The Banks share of consumer loans decreased from a minimal 0.7 percent to 0.6 percent during the same time period, and home equity loans decreased from 17.1 percent to 10.7 percent of gross loans.
Managements internal strategy has also included continued emphasis on maintaining an adequate and appropriate level of allowance for loan losses relative to loans and nonperforming assets in recognition of the more stringent requirements within the industry to establish and maintain a higher level of general valuation allowances and also in recognition of the Banks stronger growth in loans. At December 31, 2013, PyraMax had $3,834,000 in its loan loss allowance or 1.38 percent of gross loans, and 31.63 percent of nonperforming loans with the loan loss allowance decreasing to $3,092,000 and representing a lower 0.83 percent of gross loans and a higher 104.41 percent of nonperforming loans at June 30, 2018.
6
General (cont.)
The basis of earnings for the Bank has been interest income from loans and investments with the net interest margin being the key determinant of net earnings with an emphasis on strengthening noninterest income and reducing noninterest expenses. With a primary dependence on net interest margin for earnings, management will focus on striving to maintain the Banks net interest margin without undertaking excessive credit risk combined with controlling the Banks interest risk position and continuing to pursue reducing noninterest expenses, control nonperforming assets, and strengthening noninterest income.
7
PERFORMANCE OVERVIEW
The financial position of PyraMax at fiscal year end December 31, 2013, through December 31, 2017, and at June 30, 2018, is shown in Exhibits 1 and 2, and the earnings performance of PyraMax for the fiscal years ended December 31, 2013, through 2017 and for the twelve months ended June 30, 2018, is shown in Exhibits 3 and 4. Exhibit 5 provides selected financial data at December 31, 2013 through 2017 and at June 30, 2018. PyraMax has experienced an increase in its loan portfolio, asset base, and deposits from December 31, 2013, through June 30, 2018, with a decrease in cash and investments. The most recent trend for the Bank from December 31, 2017, to June 30, 2018, was a modest increase in assets, a modest decrease in cash and investments, a moderate increase in loans with a modest increase in deposits.
With regard to the Banks historical financial condition, PyraMax has experienced a modest increase in assets from December 31, 2013, through June 30, 2018, with a moderate increase in loans, a moderate increase in deposits and a minimal increase in the dollar level of equity.
The Bank witnessed an increase in assets of $52.7 million or 12.3 percent for the period of December 31, 2013, to June 30, 2018, representing an average annual increase of 2.72 percent. Over the past two fiscal periods, the Bank experienced its largest dollar increase in assets of $24.5 million in 2016, due primarily to a $24.0 million increase in cash and investments, with a $1.0 million decrease in loans. During the Banks recent fiscal year of 2017, assets increased $18.2 million or 4.0 percent, compared to an increase of $24.5 million or 5.8 percent in 2016.
PyraMaxs net loan portfolio, which includes mortgage loans and nonmortgage loans, increased from $275.0 million at December 31, 2013, to $369.2 million at June 30, 2018, and represented a total increase of $94.2 million, or 34.3 percent. The average annual increase during that period was 7.61 percent. For the year ended December 31, 2017, net loans increased $18.4 million or 5.9 percent to $331.4 million, compared to an increase of $37.8 million or 11.4 percent to $369.2 million in the six months ended June 30, 2018.
8
Performance Overview (cont.)
PyraMax has obtained funds through deposits and FHLB advances with a moderate use of FHLB advances totaling $27.7 million at June 30, 2018. The Banks competitive rates for deposits in its local market in conjunction with its focus on service have been the sources for competing for retail deposits. Deposits increased $30.4 million or 8.5 percent from December 31, 2016 to 2017, and increased $15.3 million or 3.9 percent, or 7.8 percent, annualized, to $404.6 million at June 30, 2018, from December 31, 2017.
The Bank witnessed a slight increase in its dollar equity level from December 31, 2013 to June 30, 2018. At December 31, 2013, the Bank had an equity level of $37.5 million, representing an 8.72 percent equity to assets ratio and decreased to $37.3 million at December 31, 2016, representing a lower 8.29 percent equity to assets ratio. At December 31, 2017, equity was $39.0 million and a higher 8.33 percent of assets, and then decreased to $37.7 million and a modestly lower 7.81 percent at June 30, 2018.
The overall decrease in the equity to assets ratio from December 31, 2013, to June 30, 2018, was impacted by the Banks increase in assets. The dollar level of equity increased $182,000 or 0.5 percent from December 31, 2013, to June 30, 2018, representing an average annual increase of 0.1 percent.
9
INCOME AND EXPENSE
Exhibit 6 presents selected operating data for PyraMax. This table provides key income and expense figures in dollars for the years ended December 31, 2013, 2014, 2015, 2016 and 2017, and for the six months ended June 30, 2017 and 2018.
PyraMax witnessed a modest increase in its dollar level of interest income from 2013 to 2017. Interest income was $14.8 million in 2013 and a lower $13.9 million in 2015. Interest income then decreased in the year ended December 31, 2016, to $13.8 million or $59,000 and then increased $1.5 million to $15.3 million at December 31, 2017. In the six months ended June 30, 2018, interest income increased to $8.01 million or $16.0 million, annualized.
The Banks interest expense experienced a modest decrease from 2013 to 2017. Interest expense decreased from $3.8 million in 2013 to $2.6 million in 2015, representing a decrease of $1.2 million or 32.0 percent. Interest expense then increased by $129,000 or 5.0 percent in 2016 to $2.69 million and increased $676,000 or 25.2 percent in 2017 to $3.4 million. In the six months ended June 30, 2018, interest expense was $1,948,000 or a higher $3.9 million, annualized. Such increase in interest income from 2013 through June 30, 2018, notwithstanding the smaller increase in interest expense, resulted in a modest dollar increase in annual net interest income but a decrease in net interest margin. Net interest income decreased in the year ended December 31, 2015, to $11,300,000, then decreased to $11,112,000 in 2016, then increased to $11,895,000 in 2017, and then increased to $6,065,000 in the six months ended June 30, 2018, or $12,130,000, annualized.
The Bank has made no provisions for loan losses in each of the past five years of 2013 through 2017 or in the six months ended June 30, 2018, but has recognized credits to provisions in 2013 and 2015. The amounts of those credits were determined in recognition of the Banks levels of loans, nonperforming assets, charge-offs and repossessed assets. The loan loss credits were $600,000 in 2013 and $684,000 in 2015. The impact of these loan loss provisions and credits has been to provide PyraMax with a general valuation allowance of $3,092,000 at June 30, 2018, or 0.83 percent of gross loans and 104.43 percent of nonperforming loans.
10
Income and Expense (cont.)
Total other income or noninterest income indicated a decrease in dollars from 2013 to 2017 and then a slight increase in the six months ended June 30, 2018. Noninterest income was $4,421,000 or 1.03 percent of assets in 2013 and a similar $4,155,000 in 2016 or 0.92 percent of assets. In the year ended December 31, 2017, noninterest income was a lower $2,892,000, representing 0.62 percent of assets. In the six months ended June 30, 2018, noninterest income was $1,483,000 or 0.61 percent of assets, on an annualized basis. Noninterest income consists primarily of gains and losses on the sale of loans, servicing fee income, service charges and other income.
The Banks general and administrative expenses or noninterest expenses decreased from $14.85 million for the year of 2013 to $14.01 million for the year ended December 31, 2016, representing a decrease of 5.6 percent, then increased to $16.59 million for the year ended December 31, 2017, or an 18.4 percent increase, and then decreased to $8.07 million or $16.14 million, annualized for the six months ended June 30, 2018. On a percent of assets basis, operating expenses decreased from 3.45 percent of average assets for the year ended December 31, 2013, to 3.11 percent for the year ended December 31, 2016, then increased to 3.54 percent for the year ended December 31, 2017, and then decreased to 3.34 percent for the six months ended June 30, 2018, annualized.
The net earnings position of PyraMax has indicated volatility from 2013 through 2017. The annual net income (loss) figures for the years of 2013, 2014, 2015, 2016 and 2017 were $1,288,000, $(3,188,000), $765,000, $1,254,000 and $1,660,000, respectively, and $(323,000) for the six months ended June 30, 2018, representing returns on average assets of 0.29 percent, (0.74) percent, 0.18 percent, 0.29 percent and 0.36 percent for fiscal years 2013, 2014, 2015, 2016 and 2017, respectively, and (0.14) percent for the six months ended June 30, 2018, annualized.
11
Income and Expense (cont.)
Exhibit 7 provides the Banks normalized earnings or core earnings for the twelve months ended June 30, 2018. The Banks normalized earnings typically eliminate any nonrecurring income and expense items. There were two expense adjustments, resulting in the normalized income being a smaller loss than actual earnings (loss) for the twelve months ended June 30, 2018, and equal to a loss of $133,000. The core income adjustments were a reduction in provision for loan losses of $425,000 and a reduction in real estate owned losses of $234,000 with no tax credit.
The key performance indicators comprised of selected performance ratios, asset quality ratios and capital ratios are shown in Exhibit 8 to reflect the results of performance. The Banks return on average assets changed from 0.29 percent in 2013, to (0.74) percent in 2014, to 0.18 percent in 2015, to 0.29 percent in 2016, to 0.36 percent in 2017, and then to (0.14) percent in the six months ended June 30, 2018, with the lower earnings in 2014 due partially to the Banks higher noninterest expenses combined with lower noninterest income.
The Banks net interest rate spread decreased from 2.71 percent in 2013 to 2.70 percent in 2016, then decreased to 2.67 percent in 2017, and then decreased to 2.65 percent in the six months ended June 30, 2018. The Banks net interest margin indicated a somewhat similar trend, decreasing from 2.83 percent in 2013 to 2.81 percent in 2016, then decreased to 2.80 percent in 2017, and decreased to 2.79 percent in the six months ended June 30, 2018. PyraMaxs net interest rate spread decreased 1 basis point from 2013 to 2016, then decreased 3 basis points in 2017 and then increased 50 basis points in the first two quarters of 2018. The Banks net interest margin followed a similar overall trend, decreasing 2 basis points from 2013 to 2016, then decreasing 1 basis point from 2016 to 2017 and then decreasing 2 basis points in the first two quarters of 2018.
12
Income and Expense (cont.)
The Banks return on average equity increased from 2013 to 2017, and then decreased in the first two quarters of 2018. The return on average equity increased from 3.17 percent in 2013, to 3.26 percent in 2016, then increased to 4.03 percent in 2017, and then decreased to (1.68) percent in the first two quarters of 2018, annualized.
PyraMaxs ratio of average interest-earning assets to interest-bearing liabilities increased modestly from 112.50 percent at December 31, 2013, to 116.80 percent at December 31, 2016, then decreased to 116.31 percent at December 31, 2017, and then decreased to 114.99 percent at June 30, 2018. The Banks overall increase in its ratio of interest-earning assets to interest-bearing liabilities is primarily the result of the Banks increase in its loan share.
Another key performance ratio reflecting efficiency of operation is the ratio of noninterest expenses to noninterest income plus net interest income referred to as the efficiency ratio. The industry norm is 56.1 percent for all thrifts and 71.3 percent for thrifts with assets of $100.0 million to $1.0 billion, with the lower the ratio indicating higher efficiency. The Bank has been characterized with a moderately lower level of efficiency historically reflected in its higher efficiency ratio, which decreased from 96.00 percent in 2013 to 91.79 percent in 2016, increased to 112.19 percent in 2017, and then decreased to 106.86 percent in the six months ended June 30, 2018.
Earnings performance can be affected by an institutions asset quality position. The ratio of nonperforming loans to total loans is a key indicator of asset quality. PyraMax witnessed a decrease in its nonperforming loans ratio from December 31, 2013, to June 30, 2018, and the ratio is modestly above the industry norm. Nonperforming loans, by definition, consist of loans delinquent 90 days or more, troubled debt restructurings that have not been performing for at least three months, and nonaccruing loans. PyraMaxs nonperforming loans consisted of nonaccrual loans with only $1,000 in loans accruing but past due in 2013, and no nonaccruing troubled debt restructured loans. The ratio of nonperforming loans to total loans was 0.80 percent at June 30, 2018, decreasing from 1.25 percent at December 31, 2017, and decreasing from 4.36 percent at December 31, 2013.
13
Income and Expense (cont.)
Two other indicators of asset quality are the Banks ratios of allowance for loan losses to total loans and also to nonperforming loans. The Banks allowance for loan losses was 1.38 percent of loans at December 31, 2013, decreased to 0.95 percent at December 31, 2016, decreased to 0.93 percent of loans at December 31, 2017, and then decreased to 0.83 percent at June 30, 2018. As a percentage of nonperforming loans, PyraMaxs allowance for loan losses to nonperforming loans was 37.40 percent at December 31, 2013, a higher 100.43 percent at December 31, 2016, a higher 163.90 percent at December 31, 2017, and a higher 167.59 percent at June 30, 2018.
Exhibit 9 provides the changes in net interest income due to rate and volume changes for the fiscal year ended December 31, 2017, and for the six months ended June 30, 2018. For the year ended December 31, 2017, net interest income increased $829,345, due to an increase in interest income of $1,505,382, decreased by a $676,037 increase in interest expense. The increase in interest income was due to an increase due to rate of $436,303, accented by an increase due to volume of $1,069,079. The increase in interest expense was due to a $338,034 increase due to rate, accented by a $338,003 increase due to volume.
For the six months ended June 30, 2018, net interest income increased $150,908, due to an increase in interest income of $508,620, reduced by an increase in interest expense of $357,712 The increase in interest income was due to an increase due to volume of $496,774, accented by an increase due to rate of $11,846. The increase in interest expense was due to an increase due to volume of $127,472, accented by an increase due to rate of $230,240.
14
YIELDS AND COSTS
The overview of yield and cost trends for the years ended December 31, 2015, 2016 and 2017 and for the six months ended June 30, 2018, and at June 30, 2018, can be seen in Exhibit 10, which offers a summary of key yields on interest-earning assets and costs of interest-bearing liabilities.
PyraMaxs weighted average yield on its loan portfolio increased 2 basis points from fiscal year 2015 to 2017, from 4.05 percent to 4.07 percent and then decreased 1 basis point to 4.06 percent for the six months ended June 30, 2018. The yield on securities available-for-sale increased from 2.16 percent to 2.27 percent from 2015 to 2017 or 11 basis points, and then decreased to 2.23 percent in the six months ended June 30, 2018. The yield on other interest-earning assets increased 83 basis points from 2015 to 2017, from 0.17 percent to 1.00 percent, and then decreased 40 basis points to 0.60 percent in the six months ended June 30, 2018. The combined weighted average yield on all interest-earning assets increased 2 basis points to 3.62 percent from fiscal year 2015 to 2017 and remained at 3.62 percent in the six months ended June 30, 2018, and then increased 9 basis points to 3.71 percent at June 30, 2018.
PyraMaxs weighted average cost of interest-bearing liabilities increased 15 basis points to 0.92 percent from fiscal year 2015 to 2017, which was more than the Banks 2 basis point increase in yield, resulting in a decrease in the Banks net interest rate spread of 13 basis points from 2.83 percent to 2.70 percent from 2015 to 2017. The Banks cost of interest-bearing liabilities then decreased 4 basis points to 0.88 percent in the six months ended June 30, 2018, which was less than the Banks zero basis point change in yield, resulting in an increase in the Banks net interest rate spread. The Banks interest rate spread increased 4 basis points in the six months ended June 30, 2018. The Banks net interest margin decreased from 2.94 percent in 2015 to 2.83 percent in fiscal year 2017, representing a decrease of 11 basis points and then increased to 2.86 percent in the six months ended June 30, 2018.
15
Yields and Costs (cont.)
The Banks ratio of average interest-earning assets to interest-bearing liabilities was 115.78 percent for the year ended December 31, 2015, and was 116.80 percent for the year ended December 31, 2016, then decreased to 116.31 percent for the year ended December 31, 2017, and then decreased to 116.08 percent at June 30, 2018.
16
INTEREST RATE SENSITIVITY
PyraMax has monitored its interest rate sensitivity position and focused on maintaining a reasonable level of interest rate risk exposure by maintaining higher shares of adjustable-rate residential mortgage loans, commercial real estate loans and multi-family loans and adjustable-rate home equity loans to offset its moderate share of fixed-rate residential mortgage loans. PyraMax recognizes the thrift industrys historically higher interest rate risk exposure, which caused a negative impact on earnings and economic value of equity in the past as a result of significant fluctuations in interest rates, specifically rising rates in the past. Such exposure was due to the disparate rate of maturity and/or repricing of assets relative to liabilities commonly referred to as an institutions gap. The larger an institutions gap, the greater the risk (interest rate risk) of earnings loss due to a decrease in net interest margin and a decrease in economic value of equity or portfolio loss. In response to the potential impact of interest rate volatility and negative earnings impact, many institutions have taken steps to reduce their gap position. This frequently results in a decline in the institutions net interest margin and overall earnings performance. PyraMax has responded to the interest rate sensitivity issue by monitoring its shares of adjustable-rate one to four family loans, commercial real estate loans and consumer loans.
The Bank measures its interest rate risk through the use of its economic value of equity (EVE) of the expected cash flows from interest-earning assets and interest-bearing liabilities and any off-balance sheets contracts. The EVE for the Bank is calculated on a quarterly basis by an outside firm, showing the Banks EVE to asset ratio, the dollar change in EVE, and the change in the EVE ratio for the Bank under rising and falling interest rates. Such changes in EVE ratio under changing rates are reflective of the Banks interest rate risk exposure.
There are numerous factors which have a measurable influence on interest rate sensitivity in addition to changing interest rates. Such key factors to consider when analyzing interest rate sensitivity include the loan payoff schedule, accelerated principal payments, sale of fixed-rate loans, deposit maturities, interest rate caps on adjustable-rate mortgage loans and deposit withdrawals.
17
Interest Rate Sensitivity (cont.)
Exhibit 11 provides the Banks EVE levels and ratios as of June 30, 2018, based on the most recent calculations and reflects the changes in the Banks EVE levels under rising and declining interest rates.
The Banks change in its EVE level at June 30, 2018, based on a rise in interest rates of 100 basis points was an 8.2 percent decrease, representing a dollar decrease in equity value of $4,354,000. In contrast, based on a decline in interest rates of 100 basis points, the Banks EVE level was estimated to decrease 4.7 percent or $2,518,000 at June 30, 2018. The Banks exposure increases to a 16.7 percent decrease under a 200 basis point rise in rates, representing a dollar decrease in equity of $8,885,000. The Banks exposure is not reasonably measurable based on a 200 basis point decrease in interest rates, due to the currently low level of interest rates.
The Bank is aware of its interest rate risk exposure under rapidly rising rates and falling rates. Due to PyraMaxs recognition of the need to control its interest rate exposure, the Bank has been moderately active in the origination of adjustable-rate loans. The Bank plans to increase its lending activity in the future and continue to maintain a moderate share of adjustable-rate loans. The Bank will also continue to focus on strengthening its EVE ratio, recognizing the planned conversion and minority stock offering will strengthen the Banks equity level and EVE ratio, based on any change in interest rates.
18
LENDING ACTIVITIES
PyraMax has focused its lending activity on the origination of conventional mortgage loans secured by one- to four-family dwellings, commercial real estate and multi-family loans, home equity loans, construction loans, other commercial business loans and consumer loans. Exhibit 12 provides a summary of PyraMaxs loan portfolio by loan type at December 31, 2013 through 2017, and at June 30, 2018.
The primary loan type for PyraMax has been commercial real estate loans, including multi-family loans, representing a strong 49.3 percent of the Banks gross loans as of June 30, 2018. This share of loans has seen a moderate increase from 36.6 percent at December 31, 2013. The second largest loan type as of June 30, 2018, was residential loans secured by one- to four-family dwellings, which comprised a moderate 29.0 percent of gross loans at June 30, 2018, compared to 36.0 percent as of December 31, 2013. The third largest loan type was home equity loans, which comprised a moderate 10.7 percent of gross loans at June 30, 2018, compared to a larger 17.1 percent at December 31, 2013. The fourth largest loan category was other loans, including commercial business loans, which represented 8.8 percent of gross loans at June 30, 2018, increasing from 5.6 percent at December 31, 2013. These four loan categories represented a strong 97.8 percent of gross loans at June 30, 2018, compared to a lesser 95.3 percent of gross loans at December 31, 2013.
The Bank had a minimal 0.9 percent of loans in construction loans at June 30, 2018, up from 0.3 at December 31, 2013. The Bank had a similar 0.7 percent of loans in land loans, down from 3.6 percent at December 31, 2013. The consumer loan category was the smallest loan category at June 30, 2018, and represented a minimal 0.6 percent of gross loans compared to 0.7 percent at December 31, 2013. Consumer loans were also the smallest loan category at December 31, 2013. The Banks consumer loans include savings account loans, automobile loans, and other secured and unsecured loans. The overall mix of loans has witnessed moderate changes from December 31, 2013, to June 30, 2018, with the Bank having decreased its share of one- to four-family loans, offset by an increase in its share of commercial real estate loans. Home equity loans have also decreased.
19
Lending Activities (cont.)
The emphasis of PyraMaxs lending activity is the origination of commercial real estate loans, including multi-family loans and conventional mortgage loans secured by one- to four-family residences. Such properties are located primarily in Milwaukee County and to a lesser extent in the adjacent Waukesha and Ozaukee Counties. At June 30, 2018, 49.3 percent of PyraMaxs gross loans consisted of loans secured by commercial real estate and multi-family properties, both owner-occupied and nonowner-occupied, with 29.0 percent of loans secured by conventional mortgage loans.
The Bank offers several types of adjustable-rate mortgage loans (ARMs), with adjustment periods of three years, five years, seven years and ten years. The interest rates on ARMs are generally indexed to the weekly average yield on U.S. Treasury rate securities adjusted to a constant maturity of one year. ARMs have a maximum rate adjustment of 2.0 percent at each adjustment period and 6.0 percent for the life of the loan. Rate adjustments are computed by adding a stated margin to the index, the U.S. Treasury securities rate. The Bank normally retains all ARMs which it originates. The majority of ARMs have terms of up to 30 years, which is the maximum term offered, with some loans having terms of 15 and 20 years.
The Banks one- to four-family mortgage loans remain outstanding for shorter periods than their contractual terms, because borrowers have the right to refinance or prepay. These mortgage loans contain due on sale clauses which permit the Bank to accelerate the indebtedness of the loan upon transfer of ownership of the mortgage property.
The Banks other key mortgage loan product is a fixed-rate mortgage loan with PyraMaxs fixed-rate mortgage loans having terms of 10 years to 30 years. Fixed-rate mortgage loans have a maximum term of 30 years. The Banks fixed-rate mortgage loans normally conform to Fannie Mae underwriting standards. The Bank also originates conforming jumbo loans residential mortgage loans. The Bank normally retains its jumbo fixed-rate residential mortgage loans.
20
Lending Activities (cont.)
The normal loan-to-value ratio for conventional mortgage loans to purchase or refinance one-to four-family dwellings generally does not exceed 80.0 percent at PyraMax, even though the Bank is permitted to make loans above 80.0 percent loan-to-value ratio. While the Bank does make loans above 80.0 percent of loan-to-value, the Bank requires private mortgage insurance for the amount in excess of the 80.0 percent loan-to-value ratio for fixed-rate loans and adjustable-rate loans. Mortgage loans originated by the Bank include due-on-sale clauses enabling the Bank to adjust rates on fixed-rate loans in the event the borrower transfers ownership. The Bank also requires an escrow account for insurance and taxes on loans with a loan-to-value ratio in excess of 80.0 percent.
PyraMax has also been an originator of adjustable-rate and fixed-rate commercial real estate loans and multi-family loans in the past and will continue to make multi-family and commercial real estate loans. The adjustable-rate loans have rate caps of 2.0 percent at each adjustment period and 6.0 percent over the life of the loan. The Bank had a total of $182.7 million in commercial real estate loans, including multi-family loans at June 30, 2018, or a combined 49.3 percent of gross loans, compared to a lesser 36.6 percent of gross loans at December 31, 2013.
The major portion of commercial real estate and multi-family loans are secured by apartment buildings, industrial buildings, warehouses, small retail establishments, restaurants, office buildings, and other owner-occupied properties used for business. Most of the multi-family and commercial real estate loans are fully amortizing with a term of up to 30 years, with rates on the adjustable-rate loans adjusting at the end of the initial term of five, seven or ten years. The maximum loan-to-value ratio is normally 80.0 percent for multi-family loans and 80.0 percent for commercial real estate loans.
The Bank also originates construction and land development loans. The Bank had $6.0 million or 1.6 percent of gross loans in construction and land development loans at June 30, 2018. The maximum loan-to-value ratio is 80.0 percent of the contract price or completed appraised value, whichever is less.
21
Lending Activities (cont.)
PyraMax is also an originator of commercial business loans, which totaled $2.5 million and represented a modest 8.8 percent of loans at June 30, 2018. The Bank had $15.6 million in commercial business loans at December 31, 2013, or 15.6 percent of loans. These loans are normally floating-rate and indexed to the Wall Street Journal prime rate or fixed-rate with a term of two years or term loans with terms of three to seven years.
PyraMax also offers consumer loans, with these loans totaling only $2.1 million at June 30, 2018, and representing 1.3 percent of gross loans. Consumer loans primarily include automobile loans, share loans, and other secured and unsecured loans. The Bank has also been active in home equity loans or lines of credit, which totaled $39.8 million or 10.7 percent of gross loans at June 30, 2018. The interest rate for home equity lines of credit is tied to the prevailing prime interest rate.
Exhibit 13 provides a loan maturity schedule and breakdown and a summary of PyraMaxs fixed- and adjustable-rate loans, indicating a majority of fixed-rate loans. At June 30, 2018, 72.5 percent of the Banks loans due after June 30, 2018, were fixed-rate and 27.5 percent were adjustable-rate. At June 30, 2018, the Bank had 54.7 percent of its loans due on or before June 30, 2023, or in five years or less. The Bank had a lesser 45.3 percent of its loans with a maturity of more than five years.
22
NONPERFORMING ASSETS
PyraMax understands asset quality risk and the direct relationship of such risk to delinquent loans and nonperforming assets, including real estate owned. The quality of assets has been a key concern to financial institutions throughout many regions of the country. A number of financial institutions have been confronted with higher levels of nonperforming assets over the past few years and have been forced to recognize significant losses, setting aside major valuation allowances.
A sharp increase in nonperforming assets has often been related to specific regions of the country and has frequently been associated with higher risk loans, including commercial real estate loans and multi-family loans and nonowner-occupied single-family loans. PyraMax has a modestly higher level of nonperforming assets, with nonperforming assets decreasing noticeably since 2013.
Exhibit 14 provides a summary of PyraMaxs delinquent loans at December 31, 2015, 2016, and 2017, and at June 30, 2018, indicating an overall decrease in the dollar amount of delinquent loans from December 31, 2015, to June 30, 2018, but an increase in loans delinquent 90 days or more. The Bank had $1,114,000 in loans delinquent 30 to 89 days at June 30, 2018. Loans delinquent 90 days or more totaled $1,846,000 at June 30, 2018, with these two categories representing 0.80 percent of gross loans, with most of them one- to four-family real estate loans. At December 31, 2015, delinquent loans of 30 to 89 days totaled $3,424,000 or 1.08 percent of gross loans and loans delinquent 90 days or more totaled $1,347,000 or 0.43 percent of gross loans for a combined total of $4,771,000 and a higher share of 1.51 percent of gross loans, compared to a lower $2,960,000 and a lower 0.80 percent of gross loans at June 30, 2018.
It is normal procedure for PyraMaxs board to review loans delinquent 90 days or more on a monthly basis, to assess their collectability and possibly commence foreclosure proceedings. When a loan is delinquent 15 days, the Bank sends a late notice to the borrower and also contact the borrower by a phone call. If a loan payment becomes 30 days past due, an additional late notice is mailed and a loan-specific letter is written by a collection representative. After 90 days delinquency, a demand letter is sent, and the loan is referred to foreclosure. The foreclosure process generally would begin when a loan becomes 120 days delinquent.
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Nonperforming Assets (cont.)
Exhibit 15 provides a summary of PyraMaxs nonperforming assets at December 31, 2013, 2014, 2015, 2016 and 2017, and at June 30, 2018. Nonperforming assets, by definition, include loans 90 days or more past due, nonaccruing loans, troubled debt restructurings that have not performed, and repossessed assets. The Bank carried a lower dollar level of nonperforming assets at June 30, 2018, relative to December 31, 2013. PyraMaxs level of nonperforming assets was $12,642,000 at December 31, 2013, and a lower $1,845,000 at June 30, 2018, which represented 2.94 percent of assets in 2013 and 0.38 percent of assets at June 30, 2018. The Banks nonperforming assets included $10,737,000 in nonaccrual loans, $1,000 in loans 90 days or more past due and $1,905,000 in real estate owned for a total of $12,642,000 at December 31, 2013 or 3.68 percent of assets. At June 30, 2018, nonperforming assets were a lower $1,845,000 or a lower 0.38 percent of assets and included $1,845,000 in nonaccrual loans, no real estate owned, and no loans 90 days or more past due.
PyraMaxs levels of nonperforming assets were lower than its level of classified assets at June 30, 2018, and higher than its level of classified assets at December 31, 2013. The Banks ratios of classified assets to assets, excluding special mention assets, were 1.97 percent of assets at December 31, 2015, and a lower 0.46 percent at June 30, 2018 (reference Exhibit 16). The Banks classified assets consisted of $2,077,000 in substandard assets, with $125,000 in assets classified as doubtful and no assets classified as loss at June 30, 2018. The Bank had $134,000 in assets classified as substandard, $239,000 in assets classified as doubtful, and no assets classified as loss at December 31, 2015.
Exhibit 17 shows PyraMaxs allowance for loan losses at December 31, 2013, 2014, 2015, 2016 and 2017, and at June 30, 2018, indicating the activity and the resultant balances. PyraMax has witnessed a moderate decrease in its balance of allowance for loan losses from $3,834,000 at December 31, 2013, to $3,092,000 at June 30, 2018, in response to its ability to reduce nonperforming loans and nonperforming assets. The Bank had no provisions for loan losses in 2013, 2014, 2015, 2016, 2017 or in the six months ended June 30, 2018, but had credits of $600,000 in 2013 and $684,000 in 2015.
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Nonperforming Assets (cont.)
The Bank had total charge-offs of $1,783,000 in 2013, $432,000 in 2014, $263,000 in 2015, $316,000 in 2016, $37,000 in 2017 and $34,000 in the six months ended June 30, 2018, with total recoveries of $843,000 in 2013, $339,000 in 2014, $293,000 in 2015, $237,000 in 2016, $122,000 in 2017, and $33,000 in the six months ended June 30, 2018. The Banks ratio of allowance for loan losses to gross loans was 1.38 percent at December 31, 2013, a lower 0.93 percent at December 31, 2017, and a lower 0.83 percent at June 30, 2018. Allowance for loan losses to nonperforming loans was 31.63 percent at December 31, 2013, and a higher 74.02 percent at December 31, 2017, and a higher 104.43 percent at June 30, 2018.
25
INVESTMENTS
The investment and securities portfolio, including certificates of deposit, has been comprised of asset-backed securities, municipal securities, interest-bearing deposits, mortgage-backed securities, corporate bonds and corporate collateralized mortgage obligations. Exhibit 18 provides a summary of PyraMaxs investment portfolio at December 31, 2015, 2016 and 2017, and at June 30, 2018, excluding FHLB stock. Investment securities totaled $69.3 million at June 30, 2018, based on fair value, compared to $73.0 million at December 31, 2015. The Bank had $41.4 million in mortgage-backed securities at December 31, 2015, and $52.9 million at June 30, 2018, representing 76.4 percent of investments. Mortgage-backed securities represented the largest category of the Banks investments at June 30, 2018, followed by municipal securities. In 2015, mortgage-backed securities was also the largest investment category followed by municipal securities.
The second key component of cash and investments at June 30, 2018, was municipal securities, totaling $11.4 million and representing 16.5 percent of total investments, excluding FHLB stock, compared to $20.1 million and a larger 27.6 percent of total investments at December 31, 2015. The Bank had $818,000 in FHLB stock at June 30, 2018. The weighted average yield on investment securities was 2.37 percent for the six months ended June 30, 2018, and a lesser 2.16 percent in 2015.
DEPOSIT ACTIVITIES
The mix of total deposits by amount at December 31, 2015, 2016 and 2017, and at June 30, 2018, is provided in Exhibit 19. There has been a moderate change in total deposits and a modest change in the deposit mix during this period. Total deposits have increased from $353.0 million at December 31, 2015, to $404.6 million at June 30, 2018, representing an increase of $51.6 million or 14.6 percent. Certificates of deposit have increased from $164.1 million at December 31, 2015, to $198.7 million at June 30, 2018, representing an increase of $34.6 million or 21.1 percent, while savings, transaction and MMDA accounts have increased $16.9 million from $188.9 million at December 31, 2015, to $205.8 million at June 30, 2018, or 8.9 percent.
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Deposit Activities (cont.)
Exhibit 20 provides a breakdown of the Banks certificates of deposits in amounts of $100,000 or more by maturity at December 31, 2017, and at June 30, 2018. The largest category of these certificates based on maturity is certificates with a maturity of over one year to three years at June 30, 2018, which represented a strong 38.5 percent of these certificates followed by certificates with a maturity of three months or less, which represented a moderate 26.3 percent of certificates. The largest category of certificates at December 31, 2017, was certificates with a maturity of six months to twelve months, which represented a strong 47.5 percent of these certificates followed by certificates with a maturity of over twelve months, which represented a strong 38.1 percent of certificates.
BORROWINGS
PyraMax has made moderate use of FHLB advances (reference Exhibit 21) in each of the years ended December 31, 2016 and 2017, and in the six months ended June 30, 2018. The Bank had total FHLB advances of $27.7 million at June 30, 2018, with a weighted cost of 1.53 percent during the period and a balance of a larger $48.2 million at December 31, 2016, with a weighted cost of a higher 1.21 percent during the period.
SUBSIDIARIES
PyraMax has no subsidiaries.
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OFFICE PROPERTIES
PyraMax had nine offices at June 30, 2018, its main office in Greenfield and eight branches in Franklin, Grafton, two in Milwaukee, Mukwonago, South Milwaukee, Waukesha and West Ellis. The Bank has entered into an agreement to sell its Mitchell Street branch in Milwaukee, which is expected to close in the fourth quarter of 2018. The Bank owns its Mitchell Street branch. The Bank owns seven of its offices and leases two offices (reference Exhibit 22). At June 30, 2018, the Banks total investment in fixed assets, based on depreciated cost, was $7.6 million or 1.57 percent of assets.
MANAGEMENT
Mr. Richard Hurd was appointed president and chief executive officer of PyraMax Bank in 2007. Prior to that, Mr. Hurd was the chief operating officer from 2004 to 2007. Mr. Hurd has been a board member since 2004. He joined PyraMax Bank in 2001. Prior to joining PyraMax Bank, Mr. Hurd had thirty years of banking experience at First Wisconsin National Bank, Marine Bank and Bank One Corporation. Mr. Hurds banking experience and knowledge of financial markets enhance the breadth of experience of the Banks board of directors.
Ms. Monica Baker was appointed senior vice president/chief brand officer in January 2014. Ms. Baker began with PyraMax Bank in 1993 as the vice president of marketing/human resources/savings. In August 2000, she was promoted to senior vice president of marketing/human resources and then in 2010 promoted to senior vice president of marketing/human resources/retail lending. Ms. Baker has been on the board of directors since 2006. Prior to being employed with PyraMax Bank, Ms. Baker was the human resources officer at Maritime Savings Bank. She brings over 34 years of banking experience, focused on retail banking, retail lending, human resources and marketing. Ms. Bakers extensive experience in retail banking, retail lending, human resources and marketing are valuable to our board of directors in assessing the performance of PyraMax Bank.
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Management (cont.)
Mr. Richard J. Krier joined PyraMax Bank in April 2011 as the chief financial officer. Prior to that, Mr. Krier served as the chief financial officer of Partnership Community Bancshares from 2008 until 2011. Mr. Krier has over 30 years of broad-based banking experience in the areas of financial management, operations, performance measurement and decision support. Mr. Krier is also a certified public accountant.
Mr. Chuck Mauer joined PyraMax Bank in June 2010 as the Banks chief credit officer. He is responsible for the overall management of the Banks credit administration department, including loan underwriting, loan review, lending support, loan policies, procedures and processes to ensure the overall quality of the Banks loan portfolio. Mr. Mauer has over 30 years of commercial, consumer and mortgage lending as well as credit administration experience. Prior to working at PyraMax Bank, he was a first vice president of credit administration at Ozaukee Bank where he also managed client relationships for over 20 years. In 2007, Ozaukee Bank was acquired by BMO Harris Bank. Mr. Mauer remained with BMO Harris Bank for three more years, serving as senior vice president-concurrence officer.
Mr. Thomas K. Peterson was appointed senior vice president, chief lending officer in January 2017. Prior to being employed by PyraMax Bank, Mr. Peterson was the commercial business segment leader for the Milwaukee-Madison markets for Associated Bank. Mr. Peterson has over 36 years of banking experience, including various commercial banking roles at Ozaukee Bank, BMO Harris Bank, and Associated Bank.
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II. |
DESCRIPTION OF PRIMARY MARKET AREA |
PyraMaxs market area is focused on Milwaukee County along with the adjacent Ozaukee and Waukesha Counties in Wisconsin. Exhibit 24 shows the trends in population, households and income for Milwaukee County, Ozaukee County and Waukesha County, Wisconsin and the United States. Milwaukee Countys population increased slightly by 0.8 percent from 2000 to 2010, Ozaukee Countys population increased by 5.0 percent and Waukesha Countys population increased by 8.1 percent, while Wisconsins and the United States population levels increased by 6.0 percent and 9.7 percent, respectively, during the same time period. Through 2020, population is projected to increase by 0.4 percent, 4.5 percent, 5.0 percent, 3.5 percent and 7.6 percent in Milwaukee, Ozaukee and Waukesha Counties, Wisconsin and the United States respectively.
More important is the trend in households. Milwaukee County experienced a modest 1.6 percent increase in households from 2000 through 2010, compared to increases of 10.9 percent in Ozaukee County, 12.9 percent in Waukesha County, 9.4 percent in Wisconsin and 10.7 percent in the United States. All areas are projected to increase in number of households from 2010 through 2020, by a slight 1.3 percent in Milwaukee County, by 4.6 percent in Ozaukee County, by 4.7 percent in Warren County, as well as Wisconsin and the United States by 3.7 percent and 7.5 percent, respectively.
The Milwaukee County had the lowest per capita income level in both 2000 and 2010 while Ozaukee County maintained the highest per capita income level in both years. Per capita income increased in all areas from 2000 to 2010. Milwaukee Countys per capita income increased to $24,254, Ozaukee Countys per capital income level increased to $42,180 and Waukesha Countys per capita income level increased to $37,282. Wisconsins per capita income increased to $27,192 and the United States increased to $26,059. In 2000, median household income in the three counties were a lower $38,100 in Milwaukee County, higher levels of $62,745 in Ozaukee County and $62,839 in Waukesha County, with Wisconsin at $43,791 and the United States with a median household income of $41,994. Median household
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Description of Primary Market Area (cont.)
income increased from 2000 to 2010 by 14.4 percent, 20.9 percent, 20.4 percent, 19.6 percent and 19.2 percent to $43,599, $75,854, $75,689, $52,374 and $50,046 in Milwaukee County, Ozaukee County, Waukesha County, Wisconsin and the United States, respectively. All areas are also projected to show increases in their median household income levels from 2010 through 2020. The median household income levels in Milwaukee, Ozaukee and Waukesha Counties, Wisconsin and the United States are projected to increase by 14.0 percent, 14.6 percent, 11.5 percent, 9.9 percent and 23.1 percent, respectively, to $49,722, $86,937, $84,386, $57,579 and $61,618, respectively, from 2010 to 2020. Milwaukee County is characterized with a noticeably lower historical and projected median household income level relative to all other regions.
Exhibit 25 provides a summary of key housing data for Milwaukee, Ozaukee and Waukesha Counties, Wisconsin and the United States. In 2000, Milwaukee County had the lowest rate of owner-occupancy at 52.6 percent, lower than Ozaukee County at 76.3 percent, Waukesha County at 76.4 percent, Wisconsin at 68.4 percent and the United States at 66.2 percent. As a result, Milwaukee County supported a higher rate of renter-occupied housing of 47.4 percent, compared to 23.7 percent in Ozaukee County, 23.6 percent Waukesha County, 31.6 percent in Wisconsin and 33.8 percent in the United States. In 2010, owner-occupied housing decreased slightly in Milwaukee County to 51.3 percent, increased slightly in Ozaukee County to 76.7 percent, increased slightly in Waukesha County to 76.8 percent, decreased in Wisconsin to 68.1 percent and in the United States to 65.4 percent. Conversely, the renter-occupied rates increased slightly in Milwaukee County to 48.7 percent, decreased slightly in Ozaukee County to 23.3 percent, in Wisconsin to 31.9 percent and in the United States to 34.6 percent. Renter-occupied percentages decreased slightly in Waukesha County to 23.2 percent.
Milwaukee Countys 2000 median housing value was $103,200, lower than all other areas median housing values. The other 2000 median housing values were $177,300 in Ozaukee County, $170,400 in Waukesha County, $112,200 in Wisconsin with the United States median housing value at $119,600. The 2000 median rent in Milwaukee County was $555,
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Description of Primary Market Area (cont.)
which was lower than Ozaukee County at $642, Waukesha County at $726 and the United States at $602, with Wisconsins median rent level at the lowest level of $540. In 2010, median housing values had increased in Milwaukee County to $162,900, in Ozaukee to $255,600, in Waukesha County to $257,700, in Wisconsin to $169,000 and in the United States to $186,200 with Milwaukee County continuing to show the lowest median housing value. The 2010 median rent levels were $786, $819, $906, $749 and $871, in Milwaukee, Ozaukee and Waukesha Counties, Wisconsin and the United States, respectively.
In 2000, the major source of employment for all areas by industry group, based on share of employment, was the services industry. The services industry was responsible for the majority of employment in all three counties, Wisconsin and the United States with 47.6 percent, 43.1 percent, 40.6 percent, 41.5 percent and 46.7 percent of jobs (reference Exhibit 26). The manufacturing industry was the second major employer in Milwaukee, Ozaukee and Waukesha Counties and Wisconsin at 18.5 percent, 23.7 percent, 21.2 percent and 22.2 percent but was the third largest employer in the United States at 14.1 percent The wholesale/retail trade group was the third major overall employer in Milwaukee, Ozaukee and Waukesha Counties and Wisconsin at 13.6 percent, 14.5 percent, 16.6 percent, 14.8 percent, and the wholesale/retail trade group was the second major overall employer in the United States with 15.3 percent of employment. The agriculture/mining group, construction group, transportation/utilities, information and finance/insurance/real estate group combined to provide 20.3 percent of employment in Milwaukee County, 19.0 percent of employment in Ozaukee County, 21.6 percent of employment in Waukesha County, 21.5 percent of employment in Wisconsin and 23.9 percent in the United States.
In 2010, the services industry, manufacturing industry and wholesale/retail trade industry provided the first, second and third highest levels of employment, respectively, for Milwaukee, Ozaukee and Waukesha Counties and Wisconsin. In Milwaukee, Ozaukee and Waukesha Counties and Wisconsin the manufacturing sector remained the second higher employer with the wholesale/retail industry third. The services industry accounted for 54.1 percent, 49.1 percent,
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Description of Primary Market Area (cont.)
45.5 percent, 46.8 percent and 53.2 percent in Milwaukee County, Ozaukee County, Waukesha County, Wisconsin and the United States, respectively. The manufacturing trade industry provided for 15.0 percent, 23.7 percent, 18.2 percent, 18.4 percent and 10.4 percent of employment in Milwaukee County, Ozaukee County, Waukesha County, Wisconsin and the United States, respectively. The wholesale/retail trade group provided 12.9 percent, 14.5 percent, 15.8 percent, 14.2 percent, and 14.5 percent of employment in Milwaukee, Ozaukee and Waukesha Counties, Wisconsin and the United States, respectively. In the 2010 Census, the agriculture/mining, construction, transportation/utilities, information, and finance/insurance/real estate sectors accounted for 18.3 percent, 18.8, 20.5 percent, 20.6 percent and 21.9 percent in Milwaukee, Ozaukee and Waukesha Counties, Wisconsin and the United States, respectively.
Some of the largest employers in Milwaukee, Ozaukee and Waukesha Counties are listed below.
Employer |
Employees |
Product/Service |
||
(Waukesha County) | ||||
Anthem Blue Cross Blue Shield | 2,000 | Insurance | ||
Arandall Corp. | 1,000 | Printing | ||
Community Memorial Hospital | 1,000 + | Healthcare | ||
Cooper Power Systems | 2,200 | Energy | ||
Fiserv, Inc. | 1,000+ | Data Processing | ||
GE Healthcare Bio-Sciences Corp | 6,000 | Diagnosing Systems | ||
Generac Holding | 3,800 | Manufacturing | ||
Harley Davidson Motor Co. | 2,700 | Motorcycles/Accessories | ||
Husco International, Inc. | 530 | Manufacturing | ||
Kohls | 7,800 | Retail Sales | ||
MetalTek International | 500 | Manufacturing | ||
Milwaukee Electric Tool Corp. | 600 | Manufacturing | ||
ProHealth Care | 4,800 | Healthcare | ||
Quad/Graphics Inc. | 7,500 | Printing/Marketing | ||
Roundys | 2,857 | Supermarkets | ||
Target Corp. | 600 | Distribution | ||
(Ozaukee County) | ||||
Allen Edmonds Corp. | 400 | Manufacturing Mens Footwear | ||
Aurora Medical Cntr. | 726 | Healthcare | ||
Charter Steel | 565 | Manufacturing | ||
Columbia-St. Marys | 500-999 | Healthcare | ||
Concordia University | 500-999 | Education | ||
Doral Dental USA | 250-499 | Dental Insurance Carrier | ||
HP Performance Systems | 250-499 | Manufacturing Brake Systems |
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Description of Primary Market Area (cont.)
(Ozaukee County contd.) | ||||
Kleen Test Products | 250-499 | Sanitary Wiping Cloths | ||
Leeson Electric Corp. | 600 | Mfg./Distrib. Electric Motors | ||
Legett & Platt Inc. | 500-999 | Aluminum die-casting | ||
Rockwell Automation | 5,000 | Mgr. Automation Systems & Equipment | ||
Telsmith Inc. | 250-499 | Rock Crushing Equipment | ||
(Milwaukee County) | ||||
AT & T Wisconsin | 3,500 | Communications | ||
Aurora Health Care | 32,000 | Healthcare | ||
BMO Harris | 3,400 | Financial services | ||
Briggs & Stratton | 1,358 | Manufacturing small engines | ||
Columbia St. Marys | 4,500 | Healthcare | ||
FIS | 2,800 | Financial data | ||
Froedtest Health | 10,900 | Healthcare | ||
Medical College of Wisconsin | 5,300 | Medical school | ||
Northwestern Mutual | 5,585 | Insurance | ||
Potawatomi Bingo Casino | 3,000 | Entertainment | ||
Rockwell Automation | 1,909 | Power, controls & information technology | ||
SC Johnson | 2,200 | Home products, pest control | ||
We Energies | 4,300 | Electricity, gas & steam utility | ||
Wheaton Franciscan Healthcare | 11,000 | Healthcare |
The unemployment rate is another key economic indicator. Exhibit 27 shows the unemployment rates in Milwaukee, Ozaukee and Waukesha Counties, Wisconsin and the United States in 2014 through May of 2018. Milwaukee Countys unemployment rates have been higher than the state unemployment rates, while Ozaukee and Waukesha Counties rates have been lower than both state and national rates. In 2014, Milwaukee County had an unemployment rate of 6.9 percent, compared to unemployment rates of 4.2 percent in Ozaukee County, 4.4 percent in Waukesha County, 5.4 percent in Wisconsin and 6.2 percent in the United States. In 2015, all areas decreased in unemployment to 5.7 percent, 3.7 percent, 3.8 percent, 4.5 percent and 5.3 percent in Milwaukee, Ozaukee and Waukesha Counties, Wisconsin and the United States, respectively. In 2016, all areas unemployment rates again decreased to 5.0 percent, 3.3 percent, 3.4 percent, 4.0 percent and 4.9 percent in Milwaukee, Ozaukee and Waukesha, Counties, Wisconsin and the United States, respectively. In 2017, Milwaukee County, Ozaukee County, Waukesha County, Wisconsin and the United States had decreases in unemployment to 4.0 percent, 2.8 percent, 2.9 percent, 3.3 percent and 4.4 percent, respectively. Through May of 2018, all areas again had decreases in unemployment rates to 3.2 percent in Milwaukee County, to 2.3 percent in Ozaukee County, to 2.4 percent in Waukesha County, and to 2.6 percent and 3.6 percent in Wisconsin and the United States, respectively.
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Description of Primary Market Area (cont.)
Exhibit 28 provides deposit data for banks and thrifts in Milwaukee, Ozaukee and Waukesha Counties in which the Bank has its offices. PyraMaxs deposit base in Milwaukee County was approximately $277.0 million or a 10.5 percent share of the approximately $2.6 billion total thrift deposits and a 0.5 percent share of the total deposits, which were approximately $53.4 billion as of June 30, 2017. PyraMaxs deposit base in Ozaukee County was approximately $32.0 million or a 16.0 percent share of the $200.5 million total thrifts deposits and a 1.3 percent share of total deposits, which were approximately $2.5 billion as of June 30, 2017. PyraMaxs deposit base in Waukesha County was approximately $74.5 million or a 4.8 percent share of the $1.5 billion total thrift deposits and a 0.6 percent share of the total deposits, which were approximately $12.0 billion as of June 30, 2017. The total market area is dominated by banks, with bank deposits accounting for approximately 93.5 percent of deposits at June 30, 2017.
Exhibit 29 provides interest rate data for each quarter for the years 2014 through the second quarter of 2018. The interest rates tracked are the Prime Rate, as well as 90-Day, One-Year and Thirty-Year Treasury Bills. Short term interest rates were stable in 2014, increased modestly in 2015 and continued to rise in 2016, 2017 and in the first two quarters of 2018, with 30-year Treasury notes decreasing in 2014, then rising in 2015, stable in 2016, decreasing in 2017 and rising in the first two quarters of 2018.
SUMMARY
In summary, population increased minimally in Milwaukee County from 2000 to 2010, and the number of households also increased minimally. Ozaukee Countys increase in population and households was higher than that of Milwaukee County but lower than that of Waukesha County from 2000 to 2010. The 2010 per capita and median household income levels in Milwaukee County were below those of Waukesha and Ozaukee Counties and below state and
35
Description of Primary Market Area (cont.)
national levels. Also, Milwaukee Countys unemployment rates have been above national rates. According to the 2010 Census, median housing values in Milwaukee County were below both the state and the national median housing values, while median housing values in Waukesha and Ozaukee Counties were above the state median housing value.
The Bank holds deposits of approximately 8.8 percent of all thrift deposits in the three-county market area as of June 30, 2017, representing a minimal 0.6 percent share of the total deposit base of approximately $67.9 billion.
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III. |
COMPARABLE GROUP SELECTION |
Introduction
Integral to the valuation of the Corporation is the selection of an appropriate group of publicly traded thrift institutions, hereinafter referred to as the comparable group. This section identifies the comparable group and describes each parameter used in the selection of each institution in the group, resulting in a comparable group based on such specific and detailed parameters, current financials and recent trading prices. The various characteristics of the selected comparable group provide the primary basis for making the necessary adjustments to the Corporations pro forma value relative to the comparable group. There is also a recognition and consideration of financial comparisons with all publicly traded, FDIC-insured thrifts in the United States and all publicly traded, FDIC-insured thrifts in the Midwest region and in Wisconsin.
Exhibits 30 and 31 present Share Data and Pricing Ratios and Key Financial Data and Ratios, respectively, both individually and in aggregate, for the universe of 122 publicly traded, FDIC-insured thrifts in the United States (all thrifts), and mutual holding companies, used in the selection of the comparable group and other financial comparisons. Exhibits 30 and 31 also subclassify all thrifts by region, including the 39 publicly traded Midwest thrifts (Midwest thrifts) and the 4 publicly traded thrifts in Wisconsin Wisconsin thrifts), and by trading exchange.
The selection of the comparable group was based on the establishment of both general and specific parameters using financial, operating and asset quality characteristics of the Corporation as determinants for defining those parameters. The determination of parameters was also based on the uniqueness of each parameter as a normal indicator of a thrift institutions operating philosophy and perspective. The parameters established and defined are considered to be both reasonable and reflective of the Corporations basic operation.
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Introduction (cont.)
The general parameter requirements for the selection of the peer group candidates included a maximum asset size limit of $950 million, a trading exchange requirement that each candidate be traded on one of the two major stock exchanges, the New York Stock Exchange or the NASDAQ, a geographic parameter that eliminates potential candidates located in the Southwest and West, a merger and acquisition parameter that eliminates any potential candidate that is involved as a seller in a merger and acquisition transaction, and a recent conversion parameter that eliminates any institution that has not been converted from mutual to stock for at least four quarters or prior to June 30, 2018. Due to the general parameter requirement related to trading on NASDAQ or one of the other two major stock exchanges, the size of the peer group institutions results in larger institutions.
Inasmuch as the comparable group must consist of at least ten institutions, the parameters relating to asset size and geographic location have been expanded as necessary in order to fulfill this requirement.
Due to limited availability, there was only one mutual holding company included as a potential comparable group candidate.
GENERAL PARAMETERS
Merger/Acquisition
The comparable group will not include any institution that is a proposed seller in a merger or acquisition as of August 7, 2018, 2018. There are no pending merger/acquisition transactions involving thrift institutions that were potential comparable group candidates in the Corporations city, county or market area as indicated in Exhibit 33.
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Trading Exchange
It is necessary that each institution in the comparable group be listed on one of the three major stock exchanges, the New York Stock Exchange or the National Association of Securities Dealers Automated Quotation System (NASDAQ). Such a listing indicates that an institutions stock has demonstrated trading activity and is responsive to normal market conditions, which are requirements for listing. Of the 122 publicly traded, FDIC-insured savings institutions, 3 are traded on the New York Stock Exchange and 64 are traded on NASDAQ. There were an additional 20 traded over the counter and 35 institutions are listed in the Pink Sheets, but they were not considered for the comparable group selection.
IPO Date
Another general parameter for the selection of the comparable group is the initial public offering (IPO) date, which must be at least four quarterly periods prior to June 30, 2018, in order to insure at least four consecutive quarters of reported data as a publicly traded institution. The resulting parameter is a required IPO of March 31, 2017, or earlier.
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Geographic Location
The geographic location of an institution is a key parameter due to the impact of various economic and thrift industry conditions on the performance and trading prices of thrift institution stocks. Although geographic location and asset size are the two parameters that have been developed incrementally to fulfill the comparable group requirements, the geographic location parameter has nevertheless eliminated regions of the United States distant to the Corporation, including the Southwest and West regions.
The geographic location parameter consists of the Midwest, North Central, Southeast and Northeast regions for a total of fifteen states. To extend the geographic parameter beyond those states could result in the selection of similar thrift institutions with regard to financial conditions and operating characteristics, but with different pricing ratios due to their geographic regions. The result could then be an unrepresentative comparable group with regard to price relative to the parameters and, therefore, an inaccurate value.
Asset Size
Asset size was another key parameter used in the selection of the comparable group. The total asset size for any potential comparable group institution was $950 million or less, due to the general similarity of asset mix and operating strategies of institutions within this asset range, compared to the Corporation, with assets of approximately $483 million. Such an asset size parameter was necessary to obtain an appropriate comparable group of at least ten institutions.
In connection with asset size, we did not consider the number of offices or branches in selecting or eliminating candidates, since that characteristic is directly related to operating expenses, which are recognized as an operating performance parameter.
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SUMMARY
Exhibits 34 and 35 show the 28 institutions considered as comparable group candidates after applying the general financial, geographic and merger/acquisition parameters, with the outlined institutions being those ultimately selected for the comparable group using the balance sheet, performance and asset quality parameters established in this section along with being publicly traded on one of the three major exchanges..
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BALANCE SHEET PARAMETERS
Introduction
The balance sheet parameters focused on seven balance sheet ratios as determinants for selecting a comparable group, as presented in Exhibit 34. The balance sheet ratios consist of the following:
1. Cash and investments to assets
2. Mortgage-backed securities to assets
3. One- to four-family loans to assets
4. Total net loans to assets
5. Total net loans and mortgage-backed securities to assets
6. Borrowed funds to assets
7. Equity to assets
The parameters enable the identification and elimination of thrift institutions that are distinctly and functionally different from the Corporation with regard to asset mix. The balance sheet parameters also distinguish institutions with a significantly different capital position from the Corporation. The ratio of deposits to assets was not used as a parameter as it is directly related to and affected by an institutions equity and borrowed funds ratios, which are separate parameters.
Cash and Investments to Assets
The Banks ratio of cash and investments to assets, excluding mortgage-backed securities, was 5.82 percent at June 30, 2018, and reflects the Corporations modestly lower share of investments, lower than the national and regional averages of 11.7 percent and 13.8 percent, respectively. The Banks investments have consisted of asset-backed securities, municipal securities, corporate bonds and interest-bearing deposits. For its recent two years ended December 31, 2016, and December 31, 2017, the Corporations average ratio of cash and investments to assets was a higher 8.58 percent, ranging from a high of 8.70 percent in 2017 to a low of 7.45 percent at June 30, 2018.
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Cash and Investments to Assets (cont.)
The parameter range for cash and investments is has been defined as 20.0 percent or less of assets, with a midpoint of 10.0 percent.
Mortgage-Backed Securities to Assets
At June 30, 2018, the Corporations ratio of mortgage-backed securities to assets was 10.77 percent, modestly higher than the national average of 7.1 percent and the regional average of 7.6 percent for publicly traded thrifts.
Inasmuch as many institutions purchase mortgage-backed securities as an alternative to both lending, relative to cyclical loan demand and prevailing interest rates, and other investment vehicles, this parameter is also fairly broad at 16.0 percent or less of assets and a midpoint of 8.0 percent.
One- to Four-Family Loans to Assets
The Corporations lending activity is focused on the origination of residential mortgage loans secured by one- to four-family dwellings. One- to four-family loans, including construction loans and excluding home equity loans, represented 25.8 percent of the Corporations assets at June 30, 2018, which is higher than its ratio of 24.5 percent at December 31, 2017, and similar to its ratio of 26.0 percent at December 31, 2016. The parameter for this characteristic is 72.00 percent of assets or less in one- to four-family loans with a midpoint of 36.00 percent.
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Total Net Loans to Assets
At June 30, 2018, the Corporation had a 76.50 percent ratio of total net loans to assets and a lower two fiscal year average of 71.12 percent, compared to the national average of 74.0 percent and the regional average of 70.1 percent for publicly traded thrifts. The Corporations ratio of total net loans to assets changed from 70.46 percent of total assets at December 31, 2016, to 71.77 percent at December 31, 2017, to 76.50 percent at June 30, 2018.
The parameter for the selection of the comparable group is from 60.0 percent to 88.0 percent with a midpoint of 74.0 percent. The lower end of the parameter range relates to the fact that, as the referenced national and regional averages indicate, many institutions hold greater volumes of investment securities and/or mortgage-backed securities as cyclical alternatives to lending, but may otherwise be similar to the Corporation.
Total Net Loans and Mortgage-Backed Securities to Assets
As discussed previously, the Corporations shares of mortgage-backed securities to assets and total net loans to assets were 10.77 percent and 76.50 percent, respectively, for a combined share of 87.27 percent. Recognizing the industry and regional ratios of 81.1 percent and 77.7 percent, respectively, the parameter range for the comparable group in this category is 70.0 percent to 90.0 percent, with a midpoint of 80.0 percent.
Borrowed Funds to Assets
The Corporation had borrowed funds of $27.7 million or 5.73 percent of assets at June 30, 2018, which is lower than current industry averages.
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Borrowed Funds to Assets (cont.)
The use of borrowed funds by some institutions indicates an alternative to retail deposits and may provide a source of longer term funds. The federal insurance premium on deposits has also increased the attractiveness of borrowed funds. The institutional demand for borrowed funds has increased recently, due to the rise in rates paid on deposits. Additionally, many thrifts are now aggressively seeking deposits, since quality lending opportunities have increased in the current economic environment.
The parameter range of borrowed funds to assets is 22.0 percent or less with a midpoint of 11.0 percent.
Equity to Assets
The Corporations equity to assets ratio was 7.81 percent at June 30, 2018, 8.33 percent at December 31, 2017 and 8.29 percent at December 31, 2016, averaging 8.3 percent for the two fiscal years ended December 31, 2017. The Banks equity increased in 2016, increased in 2017, and then decreased in the six months ended June 30, 2018. After conversion, based on the midpoint value of $50.0 million, with a 44.0 percent minority offering, with 50.0 percent of the net proceeds of the public offering going to the Bank, its equity is projected to increase to 9.9 percent of assets, with the Corporation at 11.4 percent of assets.
Based on those equity ratios, we have defined the equity ratio parameter to be 7.0 percent to 26.0 percent with a midpoint ratio of 16.5 percent.
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PERFORMANCE PARAMETERS
Introduction
Exhibit 35 presents five parameters identified as key indicators of the Corporations earnings performance and the basis for such performance both historically and the six months ended June 30, 2018. The primary performance indicator is the Corporations core return on average assets (ROAA). The second performance indicator is the Corporations core return on average equity (ROAE). To measure the Corporations ability to generate net interest income, we have used net interest margin. The supplemental source of income for the Corporation is noninterest income, and the parameter used to measure this factor is the ratio of noninterest income to average assets. The final performance indicator is the Corporations ratio of operating expenses or noninterest expenses to average assets, a key factor in distinguishing different types of operations, particularly institutions that are aggressive in secondary market activities, which often results in much higher operating costs and overhead ratios.
Return on Average Assets
The key performance parameter is core ROAA. For the twelve months ended June 30, 2018, the Corporations core ROAA was 0.09 percent based on a core income of $438,000, as detailed in Item I of this Report. The net ROAA for the year ended December 31, 2017, was 0.36 percent. The Corporations ROAAs in its most recent three fiscal years ended December 31, 2017, were 0.18 percent, 0.29 percent, and 0.36 percent, respectively, with a three fiscal year average ROAA of 0.28 percent.
Considering the historical and current earnings performance of the Corporation, the range for the ROAA parameter based on core income has been defined as 1.00 percent or less with a midpoint of 0.50 percent.
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Return on Average Equity
The ROAE has been used as a secondary parameter to eliminate any institutions with an unusually high or low ROAE that is inconsistent with the Corporations position. This parameter does not provide as much meaning for a newly converted thrift institution as it does for established stock institutions, due to the unseasoned nature of the capital structure of the newly converted thrift and the inability to accurately reflect a mature ROAE for the newly converted thrift relative to other stock institutions.
The Corporations core ROAE for the twelve months ended June 30, 2018, was 1.08 percent based on its core income and 4.03 percent in the fiscal year ended December 31, 2017.
The parameter range for ROAE for the comparable group, based on core income, is 8.00 percent or less with a midpoint of 4.00 percent.
Net Interest Margin
The Corporation had a net interest margin of 3.13 percent for the twelve months ended June 30, 2018, representing net interest income as a percentage of average interest-earning assets. The Corporations net interest margin levels in its three fiscal years of 2015 through 2017 were 2.94 percent, 2.81 percent, and 2.80 percent, respectively, averaging 2.85 percent.
The parameter range for the selection of the comparable group is from a low of 2.70 percent to a high of 4.20 percent with a midpoint of 3.45 percent.
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Operating Expenses to Assets
For the twelve months ended June 30, 2018, the Corporation had a 3.77 percent ratio of operating expense to average assets. In its three fiscal years ended December 31, 2017, the Corporations expense ratio averaged 3.36 percent, from a low of 3.31 percent in fiscal year 2016 to a high of 3.42 percent in fiscal year 2015.
The operating expense to assets parameter for the selection of the comparable group is from a low of 1.50 percent to a high of 4.50 percent with a midpoint of 3.00 percent.
Noninterest Income to Assets
Compared to publicly traded thrifts, the Corporation has experienced a lower level of noninterest income as a source of additional income. The Corporations ratio of noninterest income to average assets was 0.62 percent for the twelve months ended June 30, 2018. For its three years ended December 31, 2015 through 2017 the Corporations ratio of noninterest income to average assets was 0.71 percent, 0.96 percent and 0.38 percent, respectively, for an average of 0.68 percent.
The range for this parameter for the selection of the comparable group is 1.50 percent of average assets or less, with a midpoint of 0.75 percent.
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ASSET QUALITY PARAMETERS
Introduction
The final set of financial parameters used in the selection of the comparable group are asset quality parameters, also shown in Exhibit 35. The purpose of these parameters is to insure that any thrift institution in the comparable group has an asset quality position similar to that of the Corporation. The three defined asset quality parameters are the ratios of nonperforming assets to total assets, repossessed assets to total assets and loan loss reserves to total assets at the end of the most recent period.
Nonperforming Assets to Total Assets
The Corporations ratio of nonperforming assets to assets was 0.38 percent at June 30, 2018, which was lower than the national average of 0.65 percent for publicly traded thrifts and the average of 0.67 percent for Midwest thrifts. The Corporations ratio of nonperforming assets to total assets averaged 0.72 for its most recent three fiscal years ended December 31, 2017, from a high of 1.10 percent in 2015, to a low of 0.40 percent 2017.
The comparable group parameter for nonperforming assets is 2.25 percent or less of total assets, with a midpoint of 1.13 percent.
Repossessed Assets to Assets
The Corporation had no repossessed assets at June 30, 2018, representing a ratio to total assets of zero percent, following ratios of repossessed assets to total assets of zero percent at December 31, 2017, and December 31, 2016, respectively. National and regional averages were 0.12 percent and 0.13 percent, respectively, for publicly traded thrift institutions.
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Repossessed Assets to Assets (cont.)
The range for the repossessed assets to total assets parameter is 0.12 percent of assets or less with a midpoint of 0.06 percent.
Loans Loss Reserves to Assets
The Corporation had an allowance for loan losses of $3,092,000, representing a loan loss allowance to total assets ratio of 0.64 percent at June 30, 2018, which was similar to its 0.66 percent ratio at December 31, 2017, and lower than its 0.67 percent ratio at December 31, 2016.
The loan loss allowance to assets parameter range used for the selection of the comparable group required a minimum ratio of 0.40 percent of assets.
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THE COMPARABLE GROUP
With the application of the parameters previously identified and applied, the final comparable group represents ten institutions identified in Exhibits 35, 36 and 37. The comparable group institutions range in size from $132.2 million to $944.3 million with an average asset size of $521.0 million and have an average of 6.0 offices per institution. Two of the comparable group institutions are in Maryland, two are in New York, and one each in Illinois, Nebraska, Pennsylvania, Ohio, Minnesota and Ohio, and all ten were traded on NASDAQ.
The comparable group institutions as a unit have a ratio of equity to assets of 13.84 percent, which is 9.8 percent higher than all publicly traded thrift institutions in the United States; and for the most recent four quarters indicated a core return on average assets of 0.54 percent, lower than all publicly traded thrifts at 0.87 percent and publicly traded Wisconsin thrifts at 1.07 percent.
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IV. |
ANALYSIS OF FINANCIAL PERFORMANCE |
This section reviews and compares the financial performance of the Corporation to all publicly traded thrifts, to publicly traded thrifts in the Midwest region and to Wisconsin thrifts, as well as to the ten institutions constituting the Corporations comparable group, as selected and described in the previous section. The comparative analysis focuses on financial condition, earning performance and pertinent ratios as presented in Exhibits 38 through 43.
As presented in Exhibits 39 and 40, at June 30, 2018, the Corporations total equity of 7.81 percent of assets was lower than the comparable group at 13.84 percent, all thrifts at 12.60 percent, Midwest thrifts at 12.58 percent and Wisconsin thrifts at 15.26 percent. The Corporation had a 76.50 percent share of net loans in its asset mix, lower than the comparable group at 77.85 percent, but higher than all thrifts at 74.00 percent, Wisconsin thrifts at 75.58 percent and higher than Midwest thrifts at 70.13 percent. The Corporations lower share of net loans and lower 5.82 percent share of cash and investments is primarily the result of its higher 10.77 percent share of mortgage-backed securities. The comparable group had a higher 9.89 percent share of cash and investments and a lower 5.48 percent share of mortgage-backed securities. All thrifts had 7.13 percent of assets in mortgage-backed securities and 11.66 percent in cash and investments. The Corporations 83.83 percent share of deposits was higher than the comparable group, all thrifts and Midwest thrifts and higher than Wisconsin thrifts, reflecting the Corporations lower share of borrowed funds of 5.73 percent and lower share of equity of 7.81 percent. As ratios to assets, the comparable group had deposits of 78.69 percent and borrowings of 7.87 percent. All thrifts averaged a 77.83 percent share of deposits and 9.27 percent of borrowed funds, while Midwest thrifts had a 79.03 percent share of deposits and an 8.05 percent share of borrowed funds. Wisconsin thrifts averaged a 74.37 percent share of deposits and a higher 10.67 percent share of borrowed funds. The Corporation had no goodwill, compared to 0.55 percent for the comparable group, 0.60 percent for all thrifts, 0.28 percent for Midwest thrifts and 0.02 percent for Wisconsin thrifts.
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Analysis of Financial Performance (cont.)
Operating performance indicators are summarized in Exhibits 41, 42 and 43 and provide a synopsis of key sources of income and key expense items for the Corporation in comparison to the comparable group, all thrifts, and regional thrifts for the trailing four quarters.
As shown in Exhibit 43, for the twelve months ended June 30, 2018, the Corporation had a yield on average interest-earning assets lower than the comparable group and similar to all thrifts, higher than Midwest thrifts and lower than Wisconsin thrifts. The Corporations yield on interest-earning assets was 4.09 percent compared to the comparable group at 4.12 percent, all thrifts at 4.07 percent, Midwest thrifts at 3.75 percent and Wisconsin thrifts at 4.03 percent.
The Corporations cost of funds for the twelve months ended June 30, 2018, was higher than the comparable group, Midwest thrifts and all thrifts and lower than Wisconsin thrifts. The Corporation had an average cost of interest-bearing liabilities of 0.96 percent compared to 0.88 percent for the comparable group, 0.86 percent for all thrifts, 0.81 percent for Midwest thrifts and 0.90 percent for Wisconsin thrifts. The Corporations yield on interest-earning assets and interest cost resulted in a net interest spread of 3.13 percent, which was lower than the comparable group at 3.24 percent, lower than all thrifts at 3.22 percent, higher than Midwest thrifts at 2.98 percent and lower than Wisconsin thrifts at 3.41 percent. The Corporation generated a net interest margin of 3.13 percent for the twelve months ended June 30, 2018, based on its ratio of net interest income to average interest-earning assets, which was lower than the comparable group ratio of 3.39 percent. All thrifts averaged a higher 3.37 percent net interest margin for the trailing four quarters, with Midwest thrifts at 3.09 percent and Wisconsin thrifts at a higher 3.30 percent.
The Corporations major source of earnings is interest income, as indicated by the operations ratios presented in Exhibit 42. The Corporation had no provision for loan losses during the twelve months ended June 30, 2018, representing zero percent of average assets. The average provision for loan losses for the comparable group was 0.14 percent, with all thrifts at 0.08 percent, Midwest thrifts at 0.06 percent and Wisconsin thrifts at (0.12) percent.
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Analysis of Financial Performance (cont.)
The Corporations total noninterest income was $2,921,000 or 0.62 percent of average assets for the twelve months ended June 30, 2018. Such a ratio of noninterest income to average assets was lower than the comparable group at 0.83 percent, and lower than all thrifts at 0.84 percent, Midwest thrifts at 0.87 percent and Wisconsin thrifts at 0.57 percent. For the twelve months ended June 30, 2018, the Corporations operating expense ratio was 3.77 percent of average assets, higher than the comparable group at 3.11 percent, all thrifts at 2.81 percent, Midwest thrifts at 3.10 percent, and Wisconsin thrifts at 3.66 percent.
The overall impact of the Corporations income and expense ratios is reflected in its net income and return on assets. For the twelve months ended June 30, 2018, the Corporation had a net ROAA of (0.79) percent and core ROAA of 0.09 percent. For its most recent four quarters, the comparable group had a higher net ROAA of 0.42 percent and a core ROAA of 0.51 percent. All publicly traded thrifts averaged a higher net ROAA of 0.84 percent and 0.87 percent core ROAA, with Midwest thrifts a 0.78 percent net ROAA and a 1.03 percent core ROAA. The twelve month net ROAA for the 4 Wisconsin thrifts was 0.96 percent and their core ROAA was 1.07 percent.
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V. |
MARKET VALUE ADJUSTMENTS |
This is a conclusive section where adjustments are made to determine the pro forma market value or appraised value of the Corporation based on a comparison of PyraMax with the comparable group. These adjustments will take into consideration such key items as earnings performance, primary market area, financial condition, asset and deposit growth, dividend payments, subscription interest, liquidity of the stock to be issued, management, and market conditions or marketing of the issue. It must be noted that all of the institutions in the comparable group have their differences among themselves and relative to the Bank, and, as a result, such adjustments become necessary.
EARNINGS PERFORMANCE
In analyzing earnings performance, consideration was given to net interest income, the amount and volatility of interest income and interest expense relative to changes in market area conditions and to changes in overall interest rates, the quality of assets as it relates to the presence of problem assets which may result in adjustments to earnings due to provisions for loan losses, the balance of current and historical nonperforming assets and real estate owned, the balance of valuation allowances to support any problem assets or nonperforming assets, the amount and volatility of noninterest income, and the amount and ratio of noninterest expenses. The earnings performance analysis was based on the Banks respective net and core earnings for the twelve months ended June 30, 2018, with comparisons to the core earnings of the comparable group, all thrifts and other geographical subdivisions.
As discussed earlier, the Bank has experienced increases in its assets and loans in three of the past four fiscal years and increases in the six months ended June 30, 2018, with deposits indicating growth in all periods. The Bank has experienced lower earnings in four of the past five years with a loss in the year ended December 31, 2014, and is focused on reducing operating expenses, monitoring and controlling its balance of nonperforming assets; monitoring and
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Earnings Performance (cont.)
strengthening its ratio of interest sensitive assets relative to interest sensitive liabilities, thereby maintaining its overall interest rate risk; and strengthening its net interest margin. Historically, the Bank has been characterized with a slightly higher yield on earning assets but a higher cost of funds, resulting in a lower net interest margin, which has been modestly below industry averages, and lower than its comparable group, with the trend experiencing a minimal decrease over the past two years and its 3.13 percent net interest margin for the twelve months ended June 30, 2018, was lower than the industry average of 3.37 percent and lower than the comparable group average of 3.46 percent. During its past two years ended December 31, 2017, PyraMaxs ratio of interest expense to interest-bearing liabilities has increased noticeably from 0.79 percent in 2016 to 0.91 percent in 2017, and then to 0.96 percent in the twelve months ended June 30, 2018 The Banks ratio was higher than the average of 0.86 percent for the comparable group and higher than the average of 0.86 percent for all thrifts. Following the conversion, the Bank will strive to control its operating expenses, strive to increase its net interest margin, increase its noninterest income, gradually increase its net income, increase its return on assets, continue to control its balance of nonperforming and classified assets, and closely monitor its interest rate risk.
From December 31, 2013, to December 31, 2017, five of the seven categories of loans experienced increases in their balances, with commercial real estate and multi-family loans increasing the most in dollars. Commercial real estate and multi-family loans increased by $81.2 million or 80.0 percent, from December 31, 2013, to December 31, 2017. Other commercial business loans increased by $16.9 million or 108.4 percent from December 31, 2013, to December 31, 2017, one- to four-family loans increased $7.6 million or 7.6 percent, construction loans increased $2.4 million or 26.5 percent and consumer loans increased $93,000 or 4.5 percent. All other loan categories experienced decreases in their balances. Overall, the Banks lending activities resulted in a total loan increase of $56.4 million or 20.3 percent and a net loan increase of $57.2 million or 20.9 percent from December 31, 2013, to December 31, 2017. In the six months ended June 30, 2018, loans increased $36.9 million or 11.0 percent.
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Earnings Performance (cont.)
The impact of PyraMaxs primary lending efforts has been to generate a yield on average interest-earning assets of 4.09 percent for the twelve months ended June 30, 2018, compared to a higher 4.12 percent for the comparable group, 4.07 percent for all thrifts and a similar 4.03 percent for Wisconsin thrifts. The Banks ratio of interest income to average assets was 3.35 percent for the twelve months ended June 30, 2018, lower than the comparable group at 3.81 percent, all thrifts at 3.74 percent and lower than Wisconsin thrifts at 4.01 percent.
PyraMaxs 0.96 percent cost of interest-bearing liabilities for the twelve months ended June 30, 2018, was modestly higher than the comparable group at 0.88 percent, higher than all thrifts at 0.86 percent, higher than Midwest thrifts at 0.81 percent and higher than Wisconsin thrifts at 0.90 percent. The Banks resulting net interest spread of 3.13 percent for the twelve months ended June 30, 2018, was lower than the comparable group at 3.24 percent, lower than all thrifts at 3.22 percent, higher than Midwest thrifts at 2.98 percent and lower than Wisconsin thrifts at 3.41 percent. The Banks net interest margin of 3.13 percent, based on average interest-earning assets for the twelve months ended June 30, 2018, was lower than the comparable group at 3.39 percent, lower than all thrifts at 3.37 percent, higher than Midwest thrifts at 3.09 percent and lower than Wisconsin thrifts at 3.30 percent.
The Banks ratio of noninterest income to average assets was 0.62 percent for the twelve months ended June 30, 2018, which was moderately lower than the comparable group at 0.83 percent, lower than all thrifts at 0.84 percent, Midwest thrifts at 0.87 percent and higher than Wisconsin thrifts at 0.57 percent.
The Banks operating expenses were higher than the comparable group, all thrifts, Midwest thrifts, and Wisconsin thrifts. For the twelve months ended June 30, 2018, PyraMax had an operating expenses to assets ratio of 3.77 percent compared to 3.11 percent for the comparable group, 2.81 percent for all thrifts, 3.10 percent for Midwest thrifts and 3.66 percent for Wisconsin thrifts. PyraMax had a higher 109.5 percent efficiency ratio for the twelve months ended June 30, 2018, compared to the comparable group with an efficiency ratio of 74.1 percent. The efficiency ratio for all publicly traded thrifts was 60.7 percent for the most recent twelve months.
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Earnings Performance (cont.)
For the twelve months ended June 30, 2018, PyraMax generated a lower ratio of noninterest income, a higher ratio of noninterest expenses and a modestly lower net interest margin relative to its comparable group. The Bank had a zero percent provision for loan losses during the twelve months ended June 30, 2018, compared to the comparable group at 0.14 percent of assets, all thrifts at 0.08 percent and Midwest thrifts at 0.06 percent. The Banks allowance for loan losses to total loans of 0.83 percent was lower than the comparable group and lower than all thrifts. The Banks 167.59 percent ratio of reserves to nonperforming assets was higher than the comparable group at 107.08 percent, higher than all thrifts at 124.74 percent and higher than Midwest thrifts at 119.42 percent.
As a result of its operations, the Banks net and core income for the twelve months ended June 30, 2018, were lower than the comparable group. Based on a modest loss, the Bank had a return on average assets of (0.79) percent for the twelve months ended June 30, 2018, and a return on average assets of 0.36 percent and 0.29 percent in 2017 and 2016, respectively. The Banks core return on average assets was a higher 0.09 percent for the twelve months ended June 30, 2018, as detailed in Exhibit 7. For their most recent four quarters, the comparable group had a moderately higher net ROAA of 0.42 percent and a higher core ROAA of 0.51 percent, while all thrifts indicated a higher net ROAA and higher core ROAA of 0.84 percent and 0.87 percent, respectively. Midwest thrifts indicated a net ROAA of 0.78 percent and a core ROAA of 1.03 percent.
Following its conversion, PyraMaxs earnings will continue to be dependent on a combination of the overall trends in interest rates, the consistency, reliability and variation of its noninterest income, overhead expenses and its asset quality and its future needs for provisions for loan losses. Earnings are projected to represent a lower 0.13 percent ROAA in fiscal 2019 followed by earnings based on an ROAA of 0.27 percent in 2020 and 0.32 percent in 2021.
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Earnings Performance (cont.)
In recognition of the foregoing earnings related factors, considering PyraMaxs historical and current performance measures, as well as Business Plan projections, a moderate downward adjustment has been made to the Corporations pro forma market value for earnings performance.
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MARKET AREA
PyraMaxs market area is focused on Milwaukee, Ozaukee and Waukesha Counties, Wisconsin. Population increased minimally in Milwaukee County from 2000 to 2010, and the number of households also increased minimally. Ozaukee Countys increase in population and households was higher than that of Milwaukee County but lower than that of Waukesha County from 2000 to 2010. The per capita and median household income levels in Milwaukee County were below those of Waukesha County. The 2010 per capita income and median household income levels in Ozaukee and Waukesha Counties were above state and national levels. Milwaukee Countys unemployment rates have been above national rates. Ozaukee and Waukesha Counties unemployment rates have been lower than state and national rates. According to the 2010 Census, Milwaukee Countys median housing value was below both the state and the national median housing value, but median housing values in Waukesha County and Ozaukee County were above the state and national median levels.
The Bank holds deposits of approximately 6.5 percent of all thrift deposits in the three-county market area as of June 30, 2017, representing a minimal 0.4 percent share of the total deposit base of approximately $68.4 billion.
In recognition of the foregoing factors, we believe that a downward adjustment is warranted for the Banks market area.
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FINANCIAL CONDITION
The financial condition of PyraMax is discussed in Section I and shown in Exhibits 1, 2, 5, and 12 through 21, and is compared to the comparable group in Exhibits 38, 39, and 40. The Banks ratio of total equity to total assets was 7.81 percent at June 30, 2018, which was moderately lower than the comparable group at 13.88 percent, all thrifts at 12.60 percent and Midwest thrifts at 12.58 percent. Based on the minority offering completed at the midpoint of the valuation range, the Corporations pro forma equity to assets ratio will increase to 11.39 percent and the Banks pro forma equity to assets ratio will increase to 9.93 percent.
The Banks mix of assets and liabilities indicates both similarities to and variations from its comparable group. PyraMax had a slightly lower 76.5 percent ratio of net loans to total assets at June 30, 2018, compared to the comparable group at 77.9 percent. All thrifts indicated a lower 74.0 percent, with Midwest thrifts at a lower 70.1 percent. The Banks 5.82 percent share of cash and investments was lower than the comparable group at 9.89 percent, while all thrifts were at 11.66 percent and Midwest thrifts were at 13.78 percent. PyraMaxs 10.77 percent ratio of mortgage-backed securities to total assets was higher than the comparable group at 5.48 percent and higher than all thrifts at 7.13 percent and higher than Midwest thrifts at 7.61 percent.
The Banks 83.83 percent ratio of deposits to total assets was higher than the comparable group at 78.69 percent, higher than all thrifts at 77.83 percent and higher than Midwest thrifts at 79.03 percent. PyraMaxs higher ratio of deposits was due to its lower share of equity. PyraMax had a lower equity to asset ratio of 7.81 percent, compared to the comparable group at 13.84 percent of total assets, with all thrifts at 12.60 percent and Midwest thrifts at 12.58 percent. PyraMax had a lower share of borrowed funds to assets of 5.73 percent at June 30, 2018, lower than the comparable group at 7.87 percent and lower than all thrifts at 9.27 percent and Midwest thrifts at 8.05 percent.
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Financial Condition (cont.)
PyraMax had no goodwill and had a lower share of repossessed real estate at June 30, 2018. The Bank had no repossessed real estate at June 30, 2018. This compares to ratios of 0.55 percent for goodwill and intangible assets and 0.04 percent for real estate owned, for the comparable group. All thrifts had a goodwill and intangible assets ratio of 0.60 percent and a real estate owned ratio of 0.12 percent.
The financial condition of PyraMax has not been significantly impacted by its balance of nonperforming assets of $1,845,000 or a lower 0.38 percent of total assets at June 30, 2018, compared to a higher 1.05 percent for the comparable group, 0.65 percent for all thrifts, 0.67 percent for Midwest thrifts and 0.27 percent for Wisconsin thrifts. The Banks ratio of nonperforming assets to total assets was a higher 0.89 percent at December 31, 2016, and a higher 1.10 percent at December 31, 2017.
At June 30, 2018, PyraMax had $3,092,000 of allowances for loan losses, which represented 0.64 percent of assets and 0.83 percent of total loans. The comparable group indicated higher allowance ratios, relative to assets and relative to loans, equal to 0.93 percent of assets and a higher 1.15 percent of total loans, while all thrifts had allowances relative to assets and loans that averaged a higher 0.77 percent of assets and a higher 1.01 percent of total loans. Also of major importance is an institutions ratio of allowances for loan losses to nonperforming assets, since a portion of nonperforming assets might eventually be charged off. PyraMaxs $3,092,000 of allowances for loan losses represented a higher 167.59 percent of nonperforming assets at June 30, 2018, compared to the comparable groups 107.08 percent, with all thrifts at 124.74 percent, Midwest thrifts at a lower 119.42 percent and Wisconsin thrifts at a lower 138.83 percent. PyraMaxs ratio of net charge-offs to average total loans was zero percent for the twelve months ended June 30, 2018, compared to a higher 0.39 percent for the comparable group, 0.16 percent for all thrifts and 0.21 percent for Midwest thrifts.
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Financial Condition (cont.)
PyraMax has a modest level of interest rate risk. The change in the Banks EVE level at June 30, 2018, reflecting the most current information available, based on a rise in interest rates of 100 basis points was an 8.2 percent decrease, representing a dollar decrease in equity value of $4,354,000. The Banks exposure increases to a 16.7 percent decrease in its EVE level under a 200 basis point rise in rates, representing a dollar decrease in equity of $8,885,000.
Compared to the comparable group, with particular attention to the Banks lower level of total equity and lower share of risk-based capital, level and share of nonperforming assets and asset and liability mix and lower share of allowance for loan loss to loans but higher share to nonperforming assets, we believe that a downward adjustment is warranted for PyraMaxs current financial condition, due to the Banks lower share of total equity and risk-based capital, lower share of allowance to loans, higher share of allowance for loan losses to nonperforming assets, higher share of nonperforming assets, historically, and recently lower share currently.
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ASSET, LOAN AND DEPOSIT GROWTH
During its most recent two fiscal years, PyraMax has been characterized by a modest changes in assets, loans and deposits. The Banks average annual asset change from December 31, 2015, to December 31, 2017, was a 4.1 percent increase. This rate compares to a 3.9 percent increase for the comparable group, a lower 3.7 percent for all thrifts, and a lower 3.4 percent for Midwest thrifts. The Banks modest change in assets is less than its increase in total net loans during the period of an average annual 4.6 percent with an average annual increase in cash and investments of 2.8 percent. PyraMaxs deposits indicate an average annual increase of 3.5 percent from December 31, 2015, to December 31, 2017, compared to average growth rates of 3.4 percent for the comparable group, 2.5 percent for all thrifts and 2.7 percent for Midwest thrifts.
PyraMaxs deposits indicated an increase of 8.1 percent from December 31, 2016 to 2017. Annual deposit change was growth rates of 3.8 percent for the comparable group, 3.2 percent for all thrifts and 2.9 percent for Midwest thrifts. The Bank had $27.8 million in borrowed funds or 5.7 percent of assets at June 30, 2018, compared to the comparable group at 7.2 percent and had a higher $34.7 million in borrowed funds at December 31, 2017, or 7.4 percent of assets.
In spite of its minimal deposit increase, historically, the Bank grew moderately in 2017, and considering the demographics, competition and deposit base trends in its market area, the Banks ability to increase its asset, loan and deposit bases in the future is significantly dependent on its capital position combined with its ability to increase its market share by competitively pricing its loan and deposit products, maintaining a high quality of service to its customers and strengthening its loan origination activity, all impacted by the Banks performance by the senior management team. PyraMaxs primary market area county experienced minimal increases in population and households in Milwaukee County between 2000 and 2010, while the surrounding market area counties experienced a higher increase. The Banks primary market area county also indicated 2010 per capita income lower than Wisconsins and that of the United States, and the median household income level in Milwaukee County was also below the state and the national levels. In 2010, the median housing value in Milwaukee County was lower than that of Wisconsin and also above that of the United States, and the median rent level was also below both state and national levels.
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Asset, Loan and Deposit Growth (cont.)
The total deposit base in the three market area counties increased by 9.5 percent from June 30, 2016, to June 30, 2017; and during that period, the number of financial institution offices in the market area counties decreased by three offices. From June 30, 2016, to June 30, 2017, PyraMaxs deposit market share in Waukesha County was 0.6 percent in 2016 and 0.6 percent in 2017.
Based on the foregoing factors, we have concluded that no adjustment to the Corporations pro forma value is warranted for asset, loan and deposit growth.
DIVIDEND PAYMENTS
Due to the mid-tier holding company structure of the Corporation, the Corporation will not have the normal structure to pay dividends directly to shareholders, unlike a standard conversion. The payment of cash dividends will not occur in the future based on the current presence of an MHC. Four of the ten institutions in the comparable group paid cash dividends during the most recent year for an average dividend yield of 0.84 percent and an average payout ratio of 18.75 percent. During that twelve month period, the average dividend yield for all thrifts was a higher 1.38 percent with a payout ratio of 21.78 percent.
In our opinion, a minimal downward adjustment to the pro forma market value of the Corporation is warranted related to dividend payments.
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SUBSCRIPTION INTEREST
In 2017 and year-to-date 2018, investors interest in new issues has improved. Such interest is possibly related to the improved performance of financial institutions overall, which could be challenged in the future due to the compression of net interest margin. The selective and conservative reaction of IPO investors appears generally to be related to a number of analytical, economic and market-related factors, including the financial performance and condition of the converting thrift institution, the strength of the local economy, housing market conditions, general market conditions for financial institution stocks and stocks overall, aftermarket price trends and the expectation of increased merger/acquisition activity in the thrift industry and their higher pricing multiples.
PyraMax will direct its offering initially to depositors and residents in its market area. The board of directors and officers anticipate purchasing $460,000 or 1.9 percent of the stock offered to the public based on the appraised midpoint valuation and the 44.0 percent minority offering with 1.0 percent issued to the Foundation. The Bank will form an ESOP, which plans to purchase 3.92 percent of the total shares issued in the conversion.
The Bank has secured the services of Keefe Bruyette & Woods, Inc., Chicago, Illinois, to assist in the marketing and sale of the conversion stock.
Based on the size of the offering, recent banking conditions, current market conditions, historical local market interest, the terms of the offering, and recent subscription levels for conversions, we believe that no adjustment is warranted for the Banks anticipated subscription interest.
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LIQUIDITY/MARKETABILITY OF THE STOCK
The Corporation will offer its shares through a subscription and community offering with the assistance of Keefe Bruyette & Woods, Inc., A Stifel Company. The stock of the Corporation will be traded on the NASDAQ Capital Market.
The Banks total public offering is considerably smaller in size than the average market value of the comparable group. The comparable group has an average market value of $72.7 million for the stock outstanding compared to a midpoint public offering of $24.2 million for the Corporation, less the ESOP and the estimated 46,000 shares to be purchased by officers and directors, resulting in shares sold of just 2,374,000 or $23.7 million. The Corporations public market capitalization will be approximately 42.7 percent of the size of the public market capitalization of the comparable group. Of the ten institutions in the comparable group, all trade on Nasdaq with those ten institutions indicating an average daily trading volume of over 6,210 shares during the last four quarters.
The comparable group has an average of 4,803,580 shares outstanding compared to 2,420,000 shares outstanding for the Corporation based on the midpoint valuation, the minority offering structure, and the Foundation shares.
In addition, as a minority offering of an MHC, such structure reduces the marketability of the stock. As a group, MHCs indicate a lower ROAA and a lower ROAE compared to all publicly traded thrifts and a much lower median number of shares outstanding, recognizing the presence of two much larger publicly traded MHCs which inflates the average number of shares outstanding for MHCs. The average trading volume for MHCs is also lower as a group. Due to their control by the MHC, the positive influence of merger and acquisition activity in the overall market of publicly traded thrifts has not been paralleled for publicly traded MHCs.
Based on the higher average market capitalization, shares outstanding and daily trading volume relative to the Corporation, we have concluded that a downward adjustment to the Corporations pro forma market value is warranted relative to the liquidity of its stock.
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MANAGEMENT
Mr. Richard Hurd was appointed president and chief executive officer of PyraMax Bank in 2007. Prior to that, Mr. Hurd was the chief operating officer from 2004 to 2007. Mr. Hurd has been a board member since 2004. He joined PyraMax Bank in 2001. Prior to joining PyraMax Bank, Mr. Hurd had thirty years of banking experience at First Wisconsin National Bank, Marine Bank and Bank One Corporation. Mr. Hurds banking experience and knowledge of financial markets enhance the breadth of experience of the Banks board of directors.
Ms. Monica Baker was appointed senior vice president/chief brand officer in January 2014. Ms. Baker began with PyraMax Bank in 1993 as the vice president of marketing/human resources/savings. In August 2000, she was promoted to senior vice president of marketing/human resources and then in 2010 promoted to senior vice president of marketing/human resources/retail lending. Ms. Baker has been on the board of directors since 2006. Prior to being employed with PyraMax Bank, Ms. Baker was the human resources officer at Maritime Savings Bank. She brings over 34 years of banking experience, focused on retail banking, retail lending, human resources and marketing. Ms. Bakers extensive experience in retail banking, retail lending, human resources and marketing are valuable to our board of directors in assessing the performance of PyraMax Bank.
Mr. Richard J. Krier joined PyraMax Bank in April 2011 as the chief financial officer. Prior to that, Mr. Krier served as the chief financial officer of Partnership Community Bancshares from 2008 until 2011. Mr. Krier has over 30 years of broad-based banking experience in the areas of financial management, operations, performance measurement and decision support. Mr. Krier is also a certified public accountant.
Mr. Chuck Mauer joined PyraMax Bank in June 2010 as the Banks chief credit officer. He is responsible for the overall management of the Banks credit administration department, including loan underwriting, loan review, lending support, loan policies, procedures and processes to ensure the overall quality of the Banks loan portfolio. Mr. Mauer has over 30 years of commercial, consumer and mortgage lending as well as credit administration experience. Prior
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Management (cont.)
to working at PyraMax Bank, he was a first vice president of credit administration at Ozaukee Bank where he also managed client relationships for over 20 years. In 2007, Ozaukee Bank was acquired by BMO Harris Bank. Mr. Mauer remained with BMO Harris Bank for three more years, serving as senior vice president-concurrence officer.
Mr. Thomas K. Peterson was appointed senior vice president, chief lending officer in January 2017. Prior to being employed by PyraMax Bank, Mr. Peterson was the commercial business segment leader for the Milwaukee-Madison markets for Associated Bank. Mr. Peterson has over 36 years of banking experience, including various commercial banking roles at Ozaukee Bank, BMO Harris Bank, and Associated Bank.
During its most recent fiscal year, PyraMax has experienced a slight decrease in its net interest margin in contrast to the industry, experienced a decrease in its noninterest income and had a slight increase in its noninterest expenses to assets. The Bank experienced modest earnings in 2017 due to a tax credit and then modest losses in the first two quarters of 2018. The Banks asset quality position experienced significant change from December 31, 2013, to December 31, 2017, with nonperforming assets decreasing from 3.26 percent in 2013 to 0.89 percent in 2017 and then decreasing to 0.38 percent at June 30, 2018. The Banks management team is confident that the Bank is positioned for continued loan growth and a return to modest profitability following its conversion and minority offering.
Overall, we believe the Bank to be professionally and knowledgeably managed, as are the comparable group institutions. It is our opinion that no adjustment to the pro forma market value of the Corporation is warranted for management.
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MARKETING OF THE ISSUE
The necessity to build a new issue discount into the stock price of a new conversion continues to be a closely examined issue in recognition of uncertainty among investors as a result of the thrift industrys continued high level of competition, dependence on interest rate trends, volatility in the stock market, speculation on future changes, current proposed regulation related to the capital requirements of financial institutions and their restrictions on generating selected income.
We believe that a new issue discount applied to the price to book valuation approach is appropriate and necessary in this offering, recognizing the Banks weak and volatile earnings. In our opinion, such dependence on earnings and its volatility cause us to conclude that a modest new issue discount is warranted in the case of this offering. Consequently, at this time we have made a modest downward adjustment to the Corporations pro forma market value related to a new issue discount.
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VI. |
VALUATION METHODS |
Introduction
As indicated in Section III of this Appraisal, in order to moderate the differences among the ten comparable group companies, we will derive their pricing ratios on a fully converted basis by applying pro forma second stage conversion assumptions to their current financial structure. Our application to the Corporation of the market value adjustments relative to the comparable group determined in Section IV will be the basis for the pro forma market value of the Corporation on a fully converted basis, pursuant to regulatory guidelines.
Valuation Methods
Historically, the method most frequently used by this firm to determine the pro forma market value of common stock for thrift institutions has been the price to book value ratio method, due to the volatility of earnings in the thrift industry. As earnings in the thrift industry have stabilized and improved in 2016 and 2017, additional attention has been given to the price to core earnings method, particularly considering increases in stock prices during those years. During the past few years, however, as fluctuating earnings have continued and recently rising interest rates have had varying effects on the earnings of individual institutions, depending on the nature of their operations, the price to book value method has continued to be the valuation focus and more meaningful to the objective of discerning commonality and comparability among institutions. In our opinion, the price to book value method is the appropriate method upon which to place primary emphasis in determining the pro forma market value of the Corporation. Additional analytical and correlative attention will be given to the price to core earnings method and the price to assets method.
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Valuation Methods (cont.)
In applying each of the valuation methods, consideration was given to the adjustments to the Corporations pro forma market value discussed in Section V. Downward adjustments were made for the Banks earnings, financial condition, market area, dividends, stock liquidity, and for the marketing of the issue. No adjustments were made for subscription interest, management, and balance sheet growth.
Valuation Range
In addition to the pro forma market value, we have defined a valuation range recognizing the 44.0 percent public offering, 1.0 percent share allocation to the Foundation, and the 55.0 percent interest in the Corporation to be retained by 1895 Bancorp of Wisconsin, MHC, the parent of the Corporation. The pro forma market value or appraised value will also be referred to as the midpoint value, with the remaining points in the valuation range based on the number of shares offered to the public. The number of public shares at the minimum will be 15 percent less than at the midpoint; increasing at the maximum to 15 percent over the midpoint; and further increasing at the maximum, as adjusted, commonly referred to as the supermaximum, to 15 percent over the maximum.
Price to Book Value Method
In the valuation of thrift institutions, the price to book value method focuses on an institutions financial condition. Exhibit 44 shows the average and median price to book value ratios for the comparable group, which were 108.65 percent and 110.18 percent, respectively. The comparable group indicated a moderate range, from a low of 94.93 percent to a high of 131.47 percent. The comparable group had modestly higher average and median price to tangible book value ratios of 116.40 percent and 114.70 percent, respectively, with a range of 95.89 percent to 138.55 percent. Excluding the low and the high in the group, the comparable groups price to book value range narrowed moderately from a low of 95.89 percent to a high of 114.57; and the comparable groups price to tangible book value range narrowed modestly from a low of 106.96 percent to a high of 127.33 percent.
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Price to Book Value Method (cont.)
The Corporations book value was $37,691,000 and its tangible book value was an identical $37,691,000 at June 30, 2018. Considering the foregoing factors in conjunction with the adjustments made in Section V, we have determined a fully converted pro forma price to book value ratio of 65.42 percent and a corresponding fully converted price to tangible book value ratio of 65.42 percent at the midpoint. The fully converted price to book value ratio increases from 60.81 percent at the minimum to 73.07 percent at the maximum, as adjusted, while the fully converted price to tangible book value ratio increases from 60.81 percent at the minimum to 73.07 percent at the maximum, as adjusted.
The Corporations fully converted pro forma price to book value ratio of 65.42 percent at the midpoint, as calculated using the prescribed formulary computation indicated in Exhibit 45, is influenced by the Banks capitalization and local markets, subscription interest in thrift stocks and overall market and economic conditions. Further, the Corporations ratio of equity to assets after the completion of the minority public offering at the midpoint of the valuation range will be approximately 15.91 percent compared to 13.84 percent for the comparable group.
Price to Core Earnings Method
The foundation of the price to core earnings method is the determination of the core earnings base to be used, followed by the calculation of an appropriate price to core earnings multiple. The Corporations after tax core earnings for the twelve months ended June 30, 2018, was $438,000 (reference Exhibit 7) and its net earnings was a loss of $3,691,000 for that period. To opine the pro forma market value of the Corporation using the price to core earnings method, we applied the core earnings base of $438,000.
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Price to Core Earnings Method (cont.)
In determining the fully converted price to core earnings multiple, we reviewed the ranges of the price to core earnings and price to net earnings multiples for the comparable group and all publicly-traded thrifts. As indicated in Exhibit 44, the average price to core earnings multiple for the comparable group was 37.49, while the median was a lower 29.15. The average price to net earnings multiple was 37.56, and the median multiple was 31.53. The range of the price to core earnings multiple for the comparable group was from a low of 15.83 to a high of 92.58. The range in the price to core earnings multiple for the comparable group, excluding the high and low ranges, was from a low multiple of 17.03 to a high of 65.40 times earnings for eight of the ten institutions in the group, indicating a moderate narrowing of the range.
Consideration was given to the adjustments to the Corporations pro forma market value discussed in Section V combined with the Corporations negative actual earnings and minimal core earnings for the twelve months ended June 30, 2018. Due to the Banks minimal core resulting in an extremely high price to core earnings multiple exceeding 100, these ratios were deemed not meaningful. In recognition of these factors, the price to core earnings could not be used as a meaningful approach.
Price to Assets Method
The final valuation method is the price to assets method. This method is not frequently used, since the calculation incorporates neither an institutions equity position nor its earnings performance. Additionally, the prescribed formulary computation of value using the pro forma price to net assets method does not recognize the runoff of deposits concurrently allocated to the purchase of conversion stock or incorporate any adjustment for intangible assets, returning a pro forma price to assets ratio below its true ratio following conversion.
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Price to Assets Method (cont.)
Exhibit 44 indicates that the average price to assets ratio of the comparable group was 15.04 percent, and the median was 12.88 percent. The range in the price to assets ratios for the comparable group varied from a low of 9.76 percent to a high of 28.63 percent. The range narrows moderately with the elimination of the two extremes in the group to a low of 10.18 percent and a high of 19.95 percent.
Consistent with the previously noted adjustments, it is our opinion that an appropriate price to assets ratio for the Corporation is 10.40 percent at the midpoint, which ranges from a low of 8.96 percent at the minimum to 13.36 percent at the maximum, as adjusted.
Valuation Analysis and Summary
Exhibits 45 through 49 present the pro forma valuation analysis and conclusions, pricing ratios, use of offering proceeds and a summary of the valuation premiums or discounts relative to the three valuation approaches based on the Corporation as fully converted.
Exhibit 49 presents the discounts or premiums of the Corporations fully converted pricing ratios relative to those of the comparable group. Based on the Corporations fully converted price to book value ratio and its equity of $37,691,000 at June 30, 2018, the Banks price to book value ratio of 65.42 percent represents a midpoint discount relative to the comparable group of 39.79 percent. The Corporations fully converted price to core earnings multiple was not meaningful due to minimal earnings. Recognizing the Corporations June 30, 2018, asset base of $482,617,000, the Corporations price to assets ratio of 10.40 percent represents a midpoint discount relative to the comparable group of 30.85 percent.
Exhibits 50 through 55 present the pro forma valuation analysis and conclusions, pricing ratios, use of offering proceeds and a summary of the valuation premiums or discounts relative to the three valuation approaches based on the Corporations minority offering and the reported pricing ratios of the comparable group.
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Valuation Analysis and Summary (cont.)
Exhibit 55 presents the discounts or premiums of the Corporations minority offering pricing ratios relative to the comparable group. At the midpoint, the Corporations minority offering price to book value ratio of 93.34 percent represents a discount of 11.33 percent relative to the comparable group. The price to core earnings multiple was not meaningful for the Corporation at the midpoint or any other of the ranges due to minimal earnings. The Corporations price to assets ratio of 10.95 percent at the midpoint represents a discount of 27.19 percent.
Valuation Conclusion
As presented in Exhibit 43, the fully converted pro forma valuation range of the Corporation is from a minimum of $46,750,000 or 4,675,000 shares at $10.00 per share to a maximum of $63,250,000 or 6,325,000 shares at $10.00 per share, with a maximum, as adjusted, of $72,737,500 or 7,273,750 shares at $10.00 per share. Exhibit 43 also presents in detail the total number of shares to be issued at each valuation range and the respective number of shares issued to the mutual holding company, the public and the foundation.
It is our opinion that, as of August 7, 2018, the pro forma market value of the Corporation was $55,000,000 at the midpoint, representing a total of 5,500,000 shares at $10.00 per share, including 2,420,000 shares or 44.0 percent of the total shares offered to the public, 55,000 shares or 1.0 percent of the shares given to the newly formed foundation, and 3,025,000 shares or 55.00 percent of the total shares issued to 1895 Bancorp of Wisconsin, MHC, the mutual holding company.
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EXHIBITS
NUMERICAL
EXHIBITS
EXHIBIT 1
PYRAMAX BANK, FSB
GREENFIELD, WISCONSIN
Balance Sheet
At June 30, 2018 and at December 31, 2017
Source: PyraMax Bank, FSBs unaudited and audited financial statements
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EXHIBIT 2
PYRAMAX BANK, FSB
GREENFIELD, WISCONSIN
Balance Sheets
At December 31, 2016, 2015, 2014 and 2013
Source: PyraMax Bank, FSBs financial statements
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EXHIBIT 3
PYRAMAX BANK, FSB
GREENFIELD, WISCONSIN
Statement of Operations
For the Year Ended December 31, 2017 and the Twelve Months Ended June 30, 2018
Twelve Months
Ended June 30, 2018 |
Year Ended
December 31, 2017 |
|||||||
Interest and dividend income: |
||||||||
Loans, including fees |
$ | 13,701,752 | $ | 13,075,887 | ||||
Securities |
||||||||
Taxable |
1,961,800 | 2,101,835 | ||||||
Tax exempt |
| | ||||||
Other |
101,554 | 78,767 | ||||||
|
|
|
|
|||||
Total interest and dividend income |
15,765,106 | 15,256,489 | ||||||
Interest expense: |
||||||||
Deposits |
3,225,346 | 2,892,660 | ||||||
Advance payments by borrowers for taxes and insurance |
166 | 225 | ||||||
FHLB borrowings |
493,265 | 468,174 | ||||||
|
|
|
|
|||||
Total interest expense |
3,718,777 | 3,361,059 | ||||||
Net interest income before provision for loan losses |
12,046,329 | 11,895,430 | ||||||
Provision for loan losses |
| | ||||||
|
|
|
|
|||||
Net interest income after provision for loan losses |
12,046,329 | 11,895,430 | ||||||
Noninterest income: |
||||||||
Service fees |
844,834 | 867,135 | ||||||
Net gain on sale of loans |
696,479 | 778,535 | ||||||
Net gain on sale of securities |
849,694 | 772,225 | ||||||
Other |
530,310 | 473,808 | ||||||
|
|
|
|
|||||
Total noninterest income |
2,921,317 | 2,891,703 | ||||||
Noninterest expense: |
||||||||
Salaries and employee benefits |
9,711,982 | 8,647,708 | ||||||
Advertising and promotions |
236,763 | 182,237 | ||||||
Occupancy |
1,609,563 | 1,635,223 | ||||||
Computer services |
949,329 | 1,030,241 | ||||||
Other |
5,218,536 | 5,094,351 | ||||||
|
|
|
|
|||||
Total noninterest expense |
17,726,173 | 16,589,760 | ||||||
|
|
|
|
|||||
Income before income taxes |
(2,758,527 | ) | (1,802,627 | ) | ||||
Income tax (benefit) |
931,957 | (3,462,156 | ) | |||||
|
|
|
|
|||||
Net income |
$ | (3,690,484 | ) | $ | 1,659,529 | |||
|
|
|
|
Source: PyraMax Bank, FSBs unaudited and audited financial statements
81
EXHIBIT 4
PYRAMAX BANK, FSB
GREENFIELD, WISCONSIN
Statements of Operations
Years Ended December 31, 2013, 2014, 2015 and 2016
December 31 , | ||||||||||||||||
2016 | 2015 | 2014 | 2013 | |||||||||||||
Interest and dividend income: |
||||||||||||||||
Loans, including fees |
$ | 11,999,734 | $ | 12,159,979 | $ | 12,530,206 | $ | 12,328,214 | ||||||||
Securities |
||||||||||||||||
Taxable |
1,745,773 | 1,662,321 | 2,058,877 | 2,419,811 | ||||||||||||
Tax exempt |
10,077 | 22,973 | 23,561 | 37,313 | ||||||||||||
Other |
40,972 | 10,611 | 41,170 | 22,848 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total interest and dividend income |
13,796,556 | 13,855,884 | 14,653,814 | 14,808,186 | ||||||||||||
Interest expense: |
||||||||||||||||
Deposits |
2,409,341 | 2,064,718 | 1,863,911 | 2,169,532 | ||||||||||||
Advance payments by borrowers for taxes and insurance |
379 | 648 | 1,059 | 1,861 | ||||||||||||
FHLB borrowings |
275,293 | 490,301 | 1,274,030 | 1,589,400 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total interest expense |
2,685,013 | 2,555,667 | 3,139,000 | 3,760,793 | ||||||||||||
Net interest income before provision for (recovery of) loan losses |
11,111,543 | 11 ,300,217 | 11,514,814 | 11 ,047,393 | ||||||||||||
Provision for (recovery of) loan losses |
| (683,851 | ) | | (600,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net interest income after provision for loan losses |
11,111,543 | 11,984,068 | 11,514,814 | 11,647,393 | ||||||||||||
Noninterest income: |
||||||||||||||||
Service fees |
860,997 | 818,545 | 929,482 | 941,619 | ||||||||||||
Loan servicing income |
933,525 | 814,953 | 1,261,836 | 1,129,006 | ||||||||||||
Net gain on sale of loans |
1,712,817 | 870,219 | 352,806 | 864,674 | ||||||||||||
Net gain (loss) on sale of securities |
158,982 | 34,865 | (430,264 | ) | 1,103,227 | |||||||||||
Increase in cash value of life insurance |
448,197 | 445,902 | 435,073 | 440,836 | ||||||||||||
Net loss on sale of premises and equipment |
| (455 | ) | (350,245 | ) | (82,622 | ) | |||||||||
Other |
40,771 | 19,985 | 44,282 | 23,838 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total noninterest income |
4,155,289 | 3,004,014 | 2,242,970 | 4,420,578 | ||||||||||||
Noninterest expense: |
||||||||||||||||
Salaries and employee benefits |
7,801,681 | 7,281,943 | 6,921,165 | 6,615,117 | ||||||||||||
Foreclosed assets, net |
(64,008 | ) | 32,196 | 188,324 | 550,862 | |||||||||||
Advertising and promotions |
321,115 | 328,662 | 347,424 | 385,238 | ||||||||||||
Occupancy |
1,575,889 | 1,564,873 | 1,861,720 | 1,847,132 | ||||||||||||
Computer services |
1,014,523 | 970,075 | 1,292,272 | 1,371,048 | ||||||||||||
FHLB prepayment penalty |
| 683,851 | 3,097,940 | | ||||||||||||
FDIC assessment |
253,199 | 338,299 | 609,454 | 567,523 | ||||||||||||
Other |
3,110,498 | 3,023,047 | 2,627,717 | 3,512,771 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total noninterest expense |
14,012,897 | 14,222,946 | 16,946,016 | 14,849,691 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income before income taxes |
1,253,935 | 765,136 | (3,188,232 | ) | 1,218,280 | |||||||||||
Provision (benefit) for income taxes |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 1,253,935 | $ | 765,136 | $ | (3,188,232 | ) | $ | 1,218,280 | |||||||
|
|
|
|
|
|
|
|
Source: PyraMax Bank, FSBs financial statements
82
EXHIBIT 5
Selected Financial Information
At June 30, 2018 and At December 31, 2013, 2014, 2015, 2016 and 2017
At
June 30 2018 |
At December 31, | |||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Selected Financial Condition Data: |
||||||||||||||||||||||||
Total assets |
$ | 482,617 | $ | 468,361 | $ | 450,173 | $ | 425,674 | $ | 414,448 | $ | 429,927 | ||||||||||||
Cash and cash equivalents |
7,995 | 12,497 | 7,779 | 7,192 | 9,790 | 12,997 | ||||||||||||||||||
Securities available-for-sale |
69,296 | 88,956 | 96,458 | 73,010 | 83,885 | 106,712 | ||||||||||||||||||
Loans held-for-sale |
1,170 | 217 | 479 | 339 | 246 | 953 | ||||||||||||||||||
Loans receivable, net |
368,021 | 331,206 | 312,523 | 314,000 | 288,794 | 274,018 | ||||||||||||||||||
Premises and equipment, net |
7,601 | 7,661 | 8,925 | 9,115 | 9,491 | 10,695 | ||||||||||||||||||
Mortgage servicing rights, net |
2,163 | 2,270 | 2,421 | 2,476 | 2,673 | 2,454 | ||||||||||||||||||
Federal Home Loan Bank stock |
1,818 | 1,436 | 2,170 | 1,720 | 2,091 | 2,091 | ||||||||||||||||||
Accrued interest receivable |
1,144 | 1,214 | 1,163 | 1,160 | 1,219 | 1,362 | ||||||||||||||||||
Bank-owned life insurance |
13,931 | 13,732 | 13,321 | 12,872 | 12,426 | 11,991 | ||||||||||||||||||
Other assets |
9,479 | 9,172 | 4,934 | 3,790 | 3,833 | 6,653 | ||||||||||||||||||
444,927 | 429,367 | 412,833 | 388,841 | 378,367 | 392,418 | |||||||||||||||||||
Deposits |
404,560 | 389,291 | 358,882 | 352,979 | 350,575 | 345,398 | ||||||||||||||||||
Federal Home Loan Bank advances |
27,677 | 34,693 | 48,224 | 31,452 | 22,796 | 41,820 | ||||||||||||||||||
Accrued interest receivable |
346 | 340 | 276 | 208 | 173 | 333 | ||||||||||||||||||
Other liabilities |
12,344 | 5,043 | 5,451 | 4,202 | 4,824 | 4,868 | ||||||||||||||||||
Total stockholders equity |
37,691 | 38,994 | 37,340 | 36,833 | 36,081 | 37,509 |
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
83
EXHIBIT 6
Income and Expense Trends
For the Six Months Ended June 30, 2017 and 2018, and the Years Ended December 31, 2013, 2014, 2015, 2016 and 2017
For the Six Months
Ended June 30, |
For the Years Ended
December 31, |
|||||||||||||||||||||||||||
2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Selected Operating Data: |
||||||||||||||||||||||||||||
Interest and dividend income |
$ | 8,013 | $ | 7,500 | $ | 15,256 | $ | 13,797 | $ | 13,856 | $ | 14,654 | $ | 14,808 | ||||||||||||||
Interest expense |
1,948 | 1,591 | 3,361 | 2,685 | 2,556 | 3,139 | 3,761 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net interest income |
6,065 | 5,909 | 11,895 | 11,112 | 11,300 | 11,515 | 11,047 | |||||||||||||||||||||
Provision for loan losses |
0 | 0 | 0 | 0 | (684 | ) | 0 | (600 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net interest income after provision for loan losses |
6,065 | 5,909 | 11,895 | 11,112 | 11,984 | 11,515 | 11,647 | |||||||||||||||||||||
Noninterest income |
1,483 | 1,465 | 2,892 | 4,155 | 3,004 | 2,243 | 4,421 | |||||||||||||||||||||
Noninterest expense |
8,065 | 6,936 | 16,590 | 14,013 | 14,223 | 16,946 | 14,850 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Income (loss) before income tax expense (benefit) |
(517 | ) | 438 | (1,803 | ) | 1,254 | 765 | (3,188 | ) | 1,218 | ||||||||||||||||||
Income tax expense (benefit) |
(194 | ) | (4,588 | ) | (3,463 | ) | 0 | 0 | 0 | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income (loss) |
$ | (323 | ) | $ | 5,026 | $ | 1,660 | $ | 1,254 | $ | 765 | $ | (3,188 | ) | $ | 1,218 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
84
EXHIBIT 7
PyraMax Bank, FSB
Normalized Earnings Trends
Twelve Months Ended June 30, 2018
Twelve Months
Ended June 30, 2018 |
||||
(In thousands) | ||||
Net income before taxes |
$ | (2,759 | ) | |
Adjustments: |
||||
One-time tax expense |
1,041 | |||
Losses on sales of assets |
1,095 | |||
One-time expenses |
1,178 | |||
|
|
|||
Normalized earnings before taxes |
555 | |||
Taxes |
117 | (1) | ||
|
|
|||
Normalized earnings after taxes |
$ | 438 | ||
|
|
(1) |
Based on normal tax rate of 21.0% |
Source: PyraMax Banks audited and unaudited financial statements
85
EXHIBIT 8
Performance Indicators
At or for the Six Months Ended June 30, 2017 and 2018 and
At or for the Years Ended December 31, 2013, 2014, 2015, 2016 and 2017
At or for the Six Months
Ended June 30, |
At or for the Years Ended December 31, | |||||||||||||||||||||||||||
2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
Performance Ratios: (1) |
|
|||||||||||||||||||||||||||
Return on average assets (2) |
(0.14 | )% | 2.22 | % | 0.36 | % | 0.29 | % | 0.18 | % | (0.74 | )% | 0.29 | % | ||||||||||||||
Return on average equity (3) |
(1.68 | )% | 25.41 | % | 4.03 | % | 3.26 | % | 2.06 | % | (8.33 | )% | 3.14 | % | ||||||||||||||
Interest rate spread (4) |
2.65 | % | 2.71 | % | 2.67 | % | 2.70 | % | 2.83 | % | 2.79 | % | 2.71 | % | ||||||||||||||
Net interest margin (5) |
2.79 | % | 2.83 | % | 2.80 | % | 2.81 | % | 2.94 | % | 2.89 | % | 2.83 | % | ||||||||||||||
Efficiency ratio (6) |
106.86 | % | 94.06 | % | 112.19 | % | 91.79 | % | 99.43 | % | 123.17 | % | 96.00 | % | ||||||||||||||
Average interest-earning assets to average interest-bearing liabilities |
114.99 | % | 116.08 | % | 116.31 | % | 116.80 | % | 115.78 | % | 113.48 | % | 112.50 | % | ||||||||||||||
Loans to deposits |
90.05 | % | 84.77 | % | 85.85 | % | 87.74 | % | 89.78 | % | 83.38 | % | 80.62 | % | ||||||||||||||
Equity to assets (7) |
8.16 | % | 8.75 | % | 8.95 | % | 9.02 | % | 8.94 | % | 8.86 | % | 9.13 | % | ||||||||||||||
Capital Ratios: |
||||||||||||||||||||||||||||
Tier 1 capital (to adjusted total assets) |
7.46 | % | 8.52 | % | 7.52 | % | 8.41 | % | 8.50 | % | 8.40 | % | 8.79 | % | ||||||||||||||
Tier 1 capital (to risk-weighted assets) |
9.70 | % | 12.27 | % | 11.02 | % | 11.31 | % | 11.53 | % | 10.98 | % | 11.90 | % | ||||||||||||||
Total capital (to risk-weighted assets) |
10.55 | % | 13.24 | % | 11.98 | % | 12.22 | % | 12.52 | % | 12.16 | % | 13.11 | % | ||||||||||||||
Common equity Tier 1 capital (to risk-weighted assets) |
9.70 | % | 12.27 | % | 11.02 | % | 11.31 | % | 11.53 | % | 10.98 | % | 11.90 | % | ||||||||||||||
Asset Quality Ratios: |
||||||||||||||||||||||||||||
Allowance for loan losses as a percent of total loans |
0.83 | % | 0.95 | % | 0.93 | % | 0.95 | % | 0.97 | % | 1.28 | % | 1.38 | % | ||||||||||||||
Allowance for loan losses as a percent of nonperforming loans |
167.59 | % | 143.98 | % | 163.90 | % | 100.43 | % | 66.35 | % | 74.71 | % | 37.40 | % | ||||||||||||||
Net charge-offs to average outstanding loans during the period |
0.00 | % | 0.01 | % | 0.03 | % | (0.03 | )% | 0.01 | % | (0.03 | )% | (0.35 | )% | ||||||||||||||
Nonperforming loans as a percent of total loans |
0.50 | % | 0.66 | % | 0.56 | % | 0.95 | % | 1.47 | % | 1.71 | % | 3.68 | % | ||||||||||||||
Nonperforming assets as a percent of total assets |
0.38 | % | 0.46 | % | 0.40 | % | 0.67 | % | 1.09 | % | 1.21 | % | 2.82 | % |
(1) |
Performance ratios for the six months ended June 30, 2018 and 2017 are annualized. |
(2) |
Represents net income divided by average total assets |
(3) |
Represents net income divided by average equity. |
(4) |
Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost on average interest-bearing liabilities Tax exempt income is reported on a tax equivalent basis using a combined federal and state marginal tax rate of 29% for 2018 and 42% for the previous periods. |
(5) |
Represents net interest income as a percent of average interest-earning assets. Tax exempt income is reported on a tax equivalent basis using a combined federal and state marginal tax rate of 29% for 2018 and 42% for the previous periods. |
(6) |
Represents noninterest expense divided by the sum of net interest income and noninterest income. |
(7) |
Represents average equity dividend by average total assets. |
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
86
EXHIBIT 9
Volume/Rate Analysis
For the Six Months Ended June 30, 2017 and 2018 and the Years Ended December 31, 2016 and 2017
Six Months Ended June 30,
2018 vs. 2017 |
Year Ended December 31,
2017 vs. 2016 |
|||||||||||||||||||||||
Increase (Decrease)
Due to |
Increase (Decrease)
Due to |
|||||||||||||||||||||||
Volume | Rate | Total | Volume | Rate | Total | |||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans |
$ | 725,783 | $ | (77,132 | ) | $ | 648,651 | $ | 791,158 | $ | 330,450 | $ | 1,121,608 | |||||||||||
Securities |
(228,672 | ) | 75,968 | (152,704 | ) | 284,904 | 61,075 | 345,979 | ||||||||||||||||
Other |
(337 | ) | 13,010 | 12,673 | (6,983 | ) | 44,778 | 37,795 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total interest-earning assets |
$ | 496,774 | $ | 11,846 | $ | 508,620 | $ | 1,069,079 | $ | 436,303 | $ | 1,505,382 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
NOW |
$ | (920 | ) | $ | (5,007 | ) | $ | (5,927 | ) | $ | 1,636 | $ | 14,705 | $ | 16,341 | |||||||||
Money market accounts |
(3,987 | ) | (80,522 | ) | (84,509 | ) | (1,830 | ) | (51,462 | ) | (53,292 | ) | ||||||||||||
Savings |
684 | (6,497 | ) | (5,813 | ) | (1,463 | ) | 30,912 | 29,449 | |||||||||||||||
Certificates of deposits |
(141,815 | ) | (94,618 | ) | (236,433 | ) | (168,952 | ) | (306,857 | ) | (475,809 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total interest-bearing deposits |
$ | (146,038 | ) | $ | (186,644 | ) | $ | (332,682 | ) | $ | (170,609 | ) | $ | (312,702 | ) | $ | (483,311 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Borrowings |
18,576 | (43,667 | ) | (25,091 | ) | (167,387 | ) | (25,492 | ) | (192,879 | ) | |||||||||||||
Other |
(10 | ) | 71 | 61 | (7 | ) | 160 | 153 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total interest-bearing liabilities |
(127,472 | ) | (230,240 | ) | (357,712 | ) | (338,003 | ) | (338,034 | ) | (676,037 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Change in net interest income |
$ | 369,302 | $ | (218,394 | ) | $ | 150,908 | $ | 731,076 | $ | 98,269 | $ | 829,345 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
87
EXHIBIT 10
Yield and Cost Trends
At June 30, 2018, For the Six Months Ended June 30, 2016 and 2017, and
For the Years Ended December 31, 2015, 2016 and 2017
At June 30,
2018 |
For the
Six Months Ended June 30, |
For the Years Ended
December 31, |
||||||||||||||||||||||
2018 | 2017 | 2017 | 2016 | 2015 | ||||||||||||||||||||
Yield/
Rate (1) |
Yield/
Rate |
Yield/
Rate |
Yield/
Rate |
Yield/
Rate |
Yield/
Rate |
|||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Loans |
4.01 | % | 4.06 | % | 4.02 | % | 4.07 | % | 3.96 | % | 4.05 | % | ||||||||||||
Securities available-for-sale |
2.37 | % | 2.23 | % | 2.37 | % | 2.27 | % | 2.20 | % | 2.16 | % | ||||||||||||
Other interest-earning assets |
1.63 | % | 0.60 | % | 1.61 | % | 1.00 | % | 0.40 | % | 0.17 | % | ||||||||||||
Total interest-earning assets |
3.71 | % | 3.62 | % | 3.72 | % | 3.62 | % | 3.51 | % | 3.60 | % | ||||||||||||
Total assets |
3.43 | % | 3.34 | % | 3.43 | % | 3.34 | % | 3.25 | % | 3.33 | % | ||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
NOW accounts |
0.16 | % | 0.12 | % | 0.15 | % | 0.12 | % | 0.17 | % | 0.18 | % | ||||||||||||
Money market accounts |
0.54 | % | 0.28 | % | 0.54 | % | 0.30 | % | 0.22 | % | 0.19 | % | ||||||||||||
Savings accounts |
0.12 | % | 0.10 | % | 0.12 | % | 0.10 | % | 0.15 | % | 0.16 | % | ||||||||||||
Certificates of deposit |
1.57 | % | 1.46 | % | 1.56 | % | 1.51 | % | 1.33 | % | 1.11 | % | ||||||||||||
Total interest-bearing deposits |
1.01 | % | 0.86 | % | 1.00 | % | 0.91 | % | 0.79 | % | 0.67 | % | ||||||||||||
Federal Home Loan Bank advances |
1.37 | % | 1.14 | % | 1.36 | % | 1.21 | % | 1.12 | % | 2.71 | % | ||||||||||||
Other interest-bearing liabilities |
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.01 | % | ||||||||||||
Total interest-bearing liabilities |
1.03 | % | 0.88 | % | 1.03 | % | 0.92 | % | 0.79 | % | 0.77 | % | ||||||||||||
Interest rate spread (2) |
2.68 | % | 2.74 | % | 2.69 | % | 2.70 | % | 2.72 | % | 2.83 | % | ||||||||||||
Net interest margin (3) |
2.82 | % | 2.86 | % | 2.82 | % | 2.83 | % | 2.83 | % | 2.94 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Average interest-earning assets to interest-bearing liabilities |
115.11 | % | 116.08 | % | 115.09 | % | 116.31 | % | 116.80 | % | 115.78 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Annualized |
(2) |
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. |
(3) |
Net interest margin represents net interest income divided by average total interest-earning assets. |
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
88
EXHIBIT 11
Net Portfolio Value
At June 30, 2018
Change in Interest Rates (Basis Points) (1) |
Estimated
EVE (2) |
Estimated Increase
(Decrease) in EVE |
||||||||||
$ Amount (2) | % Change | |||||||||||
(Dollars in thousands) | ||||||||||||
+400 | $ | 37,219 | $ | (16,092 | ) | (30.2 | )% | |||||
+300 | 40,353 | (12,958 | ) | (24.3 | )% | |||||||
+200 | 44,426 | (8,885 | ) | (16.7 | )% | |||||||
+100 | 48,957 | (4,354 | ) | (8.2 | )% | |||||||
| 53,311 | 0 | | |||||||||
-100 | 55,829 | 2,518 | (4.7 | )% |
(1) |
Assumes an instantaneous uniform change in interest rates at all maturities. |
(2) |
EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts. |
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
89
EXHIBIT 12
Loan Portfolio Composition
At June 30, 2018, and,
At December 31, 2013, 2014, 2015, 2016 and 2017
(Dollars in thousands)
At December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
At June 30, 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||||||||
Residential real estate loans: |
||||||||||||||||||||||||||||||||||||||||||||||||
First mortgages |
$ | 107,433 | 29.0 | % | $ | 106,120 | 31.8 | % | $ | 103,900 | 33.0 | % | $ | 114,077 | 36.0 | % | $ | 90,325 | 30.9 | % | $ | 99,883 | 36.0 | % | ||||||||||||||||||||||||
Construction |
4,959 | 0.9 | % | 3,358 | 1.0 | % | 4,619 | 1.5 | % | 3,276 | 1.0 | % | 3,508 | 1.2 | % | 919 | 0.3 | % | ||||||||||||||||||||||||||||||
Commercial loans: |
||||||||||||||||||||||||||||||||||||||||||||||||
Real estate |
182,695 | 49.3 | % | 156,991 | 47.0 | % | 144,093 | 45.7 | % | 137,292 | 43.4 | % | 130,928 | 44.8 | % | 101,524 | 36.6 | % | ||||||||||||||||||||||||||||||
Land |
2,638 | 0.7 | % | 2,687 | 0.9 | % | 1,508 | 0.5 | % | 2,340 | 0.8 | % | 5,544 | 1.9 | % | 9,925 | 3.6 | % | ||||||||||||||||||||||||||||||
Other |
32,540 | 8.8 | % | 19,715 | 5.9 | % | 14,505 | 4.6 | % | 11,397 | 3.6 | % | 10,997 | 3.8 | % | 15,614 | 5.6 | % | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Total |
330,265 | 88.7 | % | 288,871 | 86.6 | % | 268,625 | 85.3 | % | 268,382 | 84.8 | % | 241,302 | 82.6 | % | 227,865 | 82.1 | % | ||||||||||||||||||||||||||||||
Consumer loans: |
||||||||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit |
39,770 | 10.7 | % | 42,344 | 12.7 | % | 45,162 | 14.3 | % | 46,928 | 14.8 | % | 49,455 | 16.9 | % | 47,423 | 17.1 | % | ||||||||||||||||||||||||||||||
Other consumer |
2,140 | 0.6 | % | 2,495 | 0.7 | % | 1,225 | 0.4 | % | 1,301 | 0.4 | % | 1,361 | 0.5 | % | 2,047 | 0.7 | % | ||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||
Total loans receivable |
372,175 | 100.0 | % | 333,710 | 100.0 | % | 315,012 | 100.0 | % | 316,611 | 100.0 | % | 292,118 | 100.0 | % | 277,335 | 100.0 | % | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||
Less: net deferred loan origination fees |
540 | 589 | 519 | 476 | 418 | 517 | ||||||||||||||||||||||||||||||||||||||||||
Less: allowance for loan losses |
(3,092 | ) | (3,093 | ) | (3,008 | ) | (3,087 | ) | (3,741 | ) | (3,834 | ) | ||||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||||||
Loans receivable, net |
$ | 369,623 | $ | 331,206 | $ | 312,523 | $ | 314,000 | $ | 288,795 | $ | 274,018 | ||||||||||||||||||||||||||||||||||||
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Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
90
EXHIBIT 13
Loan Maturity Schedule
At June 30, 2018 and December 31, 2017
At June 30, 2018 | At December 31, 2017 | |||||||||||||||||||||||||||||||
Amounts due in: |
Residential
Real Estate Loans |
Commercial
Loans |
Consumer
Loans |
Total |
Residential
Real Estate Loans |
Commercial
Loans |
Consumer
Loans |
Total | ||||||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||||
One year or less |
$ | 5,115 | $ | 32,022 | $ | 8,511 | $ | 45,648 | $ | 14,157 | $ | 48,281 | $ | 8,726 | $ | 71,164 | ||||||||||||||||
More than one year through five years |
17,075 | 110,976 | 28,910 | 156,961 | 19,908 | 92,278 | 16,596 | 128,782 | ||||||||||||||||||||||||
More than five years |
88,601 | 74,875 | 4,489 | 167,965 | 75,413 | 38,834 | 19,517 | 133,764 | ||||||||||||||||||||||||
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|
|
|
|||||||||||||||||
Total |
$ | 110,791 | $ | 217,873 | $ | 41,910 | $ | 370,574 | $ | 109,478 | $ | 179,393 | $ | 44,839 | $ | 333,710 | ||||||||||||||||
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|
|
Fixed and Adjustable-Rate Loan Schedule
Due After June 30, 2019 | ||||||||||||
Fixed | Adjustable | Total | ||||||||||
(Dollars in thousands) | ||||||||||||
Residential real estate loans |
$ | 80,479 | $ | 29,231 | $ | 109,710 | ||||||
Commercial loans |
152,687 | 44,059 | 196,746 | |||||||||
Consumer loans |
13,900 | 20,563 | 34,463 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 247,066 | $ | 93,853 | $ | 340,919 | ||||||
|
|
|
|
|
|
|||||||
Due after December 31, 2018 | ||||||||||||
Fixed | Adjustable | Total | ||||||||||
(Dollars in thousands) | ||||||||||||
Residential real estate loans |
$ | 87,304 | $ | 21,974 | $ | 109,278 | ||||||
Commercial loans |
112,922 | 32,514 | 145,436 | |||||||||
Consumer loans |
31,628 | 1,179 | 32,807 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 231,854 | $ | 55,667 | $ | 287,521 | ||||||
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|
|
|
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
91
EXHIBIT 14
Loans Delinquencies For
At June 30, 2018, and at December 31, 2015, 2016 and 2017
Loans Delinquent For | ||||||||||||||||
30-89 Days | 90 Days or More | |||||||||||||||
Number | Amount | Number | Amount | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
At June 30, 2018 |
||||||||||||||||
Residential real estate loans |
7 | $ | 906 | 12 | $ | 1,145 | ||||||||||
Commercial real estate loans |
1 | 152 | 7 | 328 | ||||||||||||
Commercial loans |
| | | | ||||||||||||
Consumer loans |
10 | 56 | 12 | 373 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
18 | $ | 1,114 | 31 | $ | 1,846 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
At December 31, 2017 |
||||||||||||||||
Residential real estate loans |
22 | $ | 2,156 | 5 | $ | 56 | ||||||||||
Commercial real estate loans |
1 | 6 | 2 | 303 | ||||||||||||
Commercial loans |
| | | | ||||||||||||
Consumer loans |
22 | 528 | 5 | 125 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
45 | $ | 2,690 | 12 | $ | 484 | ||||||||||
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|
|
|
|||||||||
At December 31, 2016 |
||||||||||||||||
Residential real estate loans |
14 | $ | 1,789 | 4 | $ | 398 | ||||||||||
Commercial real estate loans |
1 | 369 | 2 | 479 | ||||||||||||
Commercial loans |
| | | | ||||||||||||
Consumer loans |
12 | 336 | 2 | 35 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
27 | $ | 2,494 | 8 | $ | 912 | ||||||||||
|
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|
|
|
|
|
|
|||||||||
At December 31, 2015 |
||||||||||||||||
Residential real estate loans |
18 | $ | 2,618 | 3 | $ | 208 | ||||||||||
Commercial real estate loans |
1 | 280 | 3 | 1,062 | ||||||||||||
Commercial loans |
1 | 13 | | | ||||||||||||
Consumer loans |
15 | 513 | 1 | 77 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
Total |
35 | $ | 3,424 | 7 | $ | 1,347 | ||||||||||
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|
|
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
92
EXHIBIT 15
Nonperforming Assets
At June 30, 2018, and at December 31, 2013, 2014, 2015, 2016 and 2017
At
June 30, 2018 |
At December 31, | |||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Nonaccrual loans: |
||||||||||||||||||||||||
Residential real estate loans |
$ | 1,145 | $ | 1,128 | $ | 1,681 | $ | 3,136 | $ | 2,820 | $ | 4,162 | ||||||||||||
Commercial loans |
328 | 335 | 827 | 1,510 | 1,514 | 5,458 | ||||||||||||||||||
Consumer |
372 | 423 | 488 | 7 | 675 | 1,117 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 1,845 | $ | 1,886 | $ | 2,996 | $ | 4,653 | $ | 5,009 | $ | 10,737 | ||||||||||||
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|
|||||||||||||
Accruing loans 90 days or more past due: |
||||||||||||||||||||||||
Residential real estate loans |
$ | | $ | | $ | | $ | | $ | | $ | 1 | ||||||||||||
Consumer |
| | | | | | ||||||||||||||||||
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|
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|
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|
|
|
|||||||||||||
Total |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 1 | ||||||||||||
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|
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|
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|
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|
|
|
|
|||||||||||||
Total nonperforming loans |
$ | 1,845 | $ | 1,886 | $ | 2,996 | $ | 4,653 | $ | 5,009 | $ | 10,738 | ||||||||||||
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|
|||||||||||||
Other real estate owned |
$ | | $ | | $ | | $ | 5 | $ | 162 | $ | 1,905 | ||||||||||||
Other nonperforming assets |
| | | | | | ||||||||||||||||||
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|
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|
|
|
|
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|
|||||||||||||
Total nonperforming assets |
$ | 1,845 | $ | 1,886 | $ | 2,996 | $ | 4,658 | $ | 5,171 | $ | 12,643 | ||||||||||||
Troubled debt restructurings (accruing): |
||||||||||||||||||||||||
Residential real estate loans |
$ | 337 | $ | 483 | $ | 395 | $ | 403 | $ | 411 | $ | 421 | ||||||||||||
Commercial loans |
242 | 246 | 427 | 441 | 271 | 302 | ||||||||||||||||||
Consumer |
| | | | | | ||||||||||||||||||
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|
|
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|
|
|
|
|
|
|||||||||||||
Total |
$ | 579 | $ | 729 | $ | 822 | $ | 844 | $ | 682 | $ | 723 | ||||||||||||
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|
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|
|||||||||||||
Troubled debt restructurings (accruing) and total nonperforming assets |
$ | 2,424 | $ | 2,615 | $ | 3,818 | $ | 5,502 | $ | 5,853 | $ | 13,366 | ||||||||||||
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|
|
|
|||||||||||||
Ratios: |
||||||||||||||||||||||||
Total nonperforming loans to total loans |
0.50 | % | 0.56 | % | 0.95 | % | 1.47 | % | 1.71 | % | 3.68 | % | ||||||||||||
Total nonperforming loans to total assets |
0.38 | % | 0.40 | % | 0.67 | % | 1.09 | % | 1.21 | % | 2.82 | % | ||||||||||||
Total nonperforming assets and troubled debt restructurings (accruing) to total assets |
0.50 | % | 0.56 | % | 0.85 | % | 1.29 | % | 1.41 | % | 3.11 | % |
Source: 1895 Bancorp of Wisconsin Inc.s Prospectus
93
EXHIBIT 16
Classified Assets
At June 30, 2018, and at December 31, 2015, 2016 and 2017
(Dollars in thousands)
At
June 30, 2018 |
At December 31, | |||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||
Classification of assets: |
||||||||||||||||
Watch and special mention |
$ | 14,406 | $ | 14,964 | $ | 18,315 | $ | 12,871 | ||||||||
Substandard |
2,077 | 3,440 | 6,421 | 8,134 | ||||||||||||
Doubtful |
125 | 137 | 163 | 239 | ||||||||||||
Loss |
0 | 0 | 0 | 0 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total classified assets |
$ | 16,608 | $ | 18,541 | $ | 24,899 | $ | 21,244 | ||||||||
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|
|
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
94
EXHIBIT 17
Allowance for Loan Losses
At for the Six Months Ended June 30, 2017 and 2018, and
For the Years Ended December 31, 2013, 2014, 2015, 2016 and 2017
Six Months Ended
June 30, |
Years Ended December 31, | |||||||||||||||||||||||||||
2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Allowance for loan losses at beginning of period |
$ | 3,093 | $ | 3,008 | $ | 3,008 | $ | 3,087 | $ | 3,741 | $ | 3,834 | $ | 5,374 | ||||||||||||||
Provision (credit) for loan losses |
| | | | (684 | ) | | (600 | ) | |||||||||||||||||||
Charge-offs: |
||||||||||||||||||||||||||||
Residential real estate loans |
| | | 89 | 218 | 110 | 356 | |||||||||||||||||||||
Commercial loans |
| | | 114 | | 209 | 677 | |||||||||||||||||||||
Consumer loans |
34 | 8 | 37 | 113 | 45 | 113 | 750 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total charge-offs |
34 | 8 | 37 | 316 | 263 | 432 | 1,783 | |||||||||||||||||||||
|
|
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|
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|
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|
|
|
|
|
|
|
|||||||||||||||
Recoveries: |
||||||||||||||||||||||||||||
Residential real estate loans |
3 | 5 | 21 | 51 | 10 | 36 | 89 | |||||||||||||||||||||
Commercial loans |
12 | 11 | 24 | 45 | 119 | 207 | 644 | |||||||||||||||||||||
Consumer loans |
18 | 32 | 77 | 141 | 164 | 96 | 110 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total recoveries |
33 | 48 | 122 | 237 | 293 | 339 | 843 | |||||||||||||||||||||
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|
|
|
|
|
|
|||||||||||||||
Net charge-offs (recoveries) |
(1 | ) | 40 | 85 | (79 | ) | 30 | (93 | ) | (940 | ) | |||||||||||||||||
|
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|
|
|||||||||||||||
Allowance for loan losses at end of period |
$ | 3,092 | $ | 3,048 | $ | 3,093 | $ | 3,008 | $ | 3,087 | $ | 3,741 | $ | 3,834 | ||||||||||||||
Ratios: |
|
|||||||||||||||||||||||||||
Allowance for loan losses to nonperforming loans at end of period |
104.43 | % | 83.30 | % | 74.02 | % | 60.95 | % | 44.22 | % | 50.21 | % | 31.63 | % | ||||||||||||||
Allowance for loan losses to total loans outstanding at end of period |
0.83 | % | 0.95 | % | 0.93 | % | 0.95 | % | 0.97 | % | 1.28 | % | 1.38 | % | ||||||||||||||
Net charge-offs (recoveries) to average loans outstanding during period |
0.00 | % | 0.01 | % | 0.03 | % | (0.03 | )% | 0.01 | % | (0.03 | )% | (0.35 | )% |
Source: 1895 Bancorp of Wisconsin Inc.s Prospectus
95
EXHIBIT 18
Investment Portfolio Composition
At June 30, 2018 and at December 31, 2015, 2016 and 2017
At June 30, 2018 | At December 31, | |||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||||||||||||||
Security Type |
Amortized
Cost |
Fair Value |
Amortized
Cost |
Fair Value |
Amortized
Cost |
Fair Value |
Amortized
Cost |
Fair Value | ||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions |
$ | 11,683 | $ | 11,431 | $ | 20,545 | $ | 20,630 | $ | 21,873 | $ | 21,964 | $ | 19,706 | $ | 20,130 | ||||||||||||||||
Government-sponsored mortgage-backed securities |
55,090 | 52,914 | 61,218 | 60,024 | 66,041 | 64,949 | 41,526 | 41,414 | ||||||||||||||||||||||||
Corporate collateralized mortgage obligations |
503 | 505 | 696 | 702 | 1,254 | 1,254 | 1,914 | 1,918 | ||||||||||||||||||||||||
Asset-backed securities |
4,193 | 4,205 | 4,835 | 4,832 | 5,623 | 5,524 | 6,976 | 6,820 | ||||||||||||||||||||||||
Corporate bonds |
| | 1,496 | 1,517 | 1,495 | 1,498 | 1,494 | 1,493 | ||||||||||||||||||||||||
Certificates of deposit |
249 | 245 | 1,246 | 1,251 | 1,244 | 1,269 | 1,242 | 1,235 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | 71,718 | $ | 69,300 | $ | 90,036 | $ | 88,956 | $ | 97,530 | $ | 96,458 | $ | 72,858 | $ | 73,010 | ||||||||||||||||
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|
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|
|
|
|
|
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
96
EXHIBIT 19
Mix of Total Deposit Accounts
At June 30, 2018 and At December 31, 2015, 2016 and 2017
At December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
At June 30, 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||
Deposit type: |
Average
Balance |
Percent | Rate |
Average
Balance |
Percent | Rate |
Average
Balance |
Percent | Rate |
Average
Balance |
Percent | Rate | ||||||||||||||||||||||||||||||||||||
Noninterest-bearing demand accounts |
$ | 56,851 | 14.05 | % | 0.00 | % | $ | 62,817 | 16.14 | % | 0.00 | % | $ | 57,092 | 15.91 | % | 0.00 | % | $ | 47,555 | 13.47 | % | 0.00 | % | ||||||||||||||||||||||||
NOW accounts |
27,042 | 6.68 | % | 0.16 | % | 26,649 | 6.85 | % | 0.12 | % | 27,236 | 7.59 | % | 0.17 | % | 29,595 | 8.38 | % | 0.18 | % | ||||||||||||||||||||||||||||
Money market accounts |
64,670 | 15.99 | % | 0.52 | % | 55,016 | 14.13 | % | 0.30 | % | 57,587 | 16.05 | % | 0.22 | % | 58,456 | 16.56 | % | 0.19 | % | ||||||||||||||||||||||||||||
Savings accounts |
57,266 | 14.16 | % | 0.13 | % | 58,566 | 15.04 | % | 0.10 | % | 59,770 | 16.65 | % | 0.15 | % | 53,285 | 15.10 | % | 0.16 | % | ||||||||||||||||||||||||||||
Certificates of deposit |
198,731 | 49.12 | % | 1.46 | % | 186,243 | 47.84 | % | 1.51 | % | 157,196 | 43.80 | % | 1.33 | % | 164,088 | 46.49 | % | 1.11 | % | ||||||||||||||||||||||||||||
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|||||||||||||||||||||||||
Total deposits |
$ | 404,560 | 100.00 | % | 0.83 | % | $ | 389,291 | 100.00 | % | 0.79 | % | $ | 358,881 | 100.00 | % | 0.66 | % | $ | 352,979 | 100.00 | % | 0.59 | % | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
97
EXHIBIT 20
Certificates of Deposit By Maturity
At June 30, 2018 and at December 31, 2017
At
June 30, 2018 |
At
December 31, 2017 |
|||||||
(In thousands) | ||||||||
Three months or less |
$ | 16,799 | $ | 4,509 | ||||
Over three months through six months |
14,608 | 5,088 | ||||||
Over six months through twelve months |
7,913 | 31,455 | ||||||
Over twelve months |
24,618 | 25,238 | ||||||
|
|
|
|
|||||
Total |
$ | 63,938 | $ | 66,290 | ||||
|
|
|
|
Source: |
1895 Bancorp of Wisconsin, Inc.s Prospectus |
98
EXHIBIT 21
Borrowed Funds
At or for the Six Months Ended June 30, 2017 and 2018, and
At or for the Years Ended December 31, 2016 and 2017
At or for the Six Months
Ended June 30, |
At or for the Years
Ended December 31, |
|||||||||||||||
2018 | 2017 | 2017 | 2016 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Maximum balance outstanding at any month-end during period |
$ | 50,388 | $ | 64,922 | $ | 64,922 | $ | 48,224 | ||||||||
Average balance outstanding during period |
$ | 40,391 | $ | 44,298 | $ | 38,635 | $ | 24,675 | ||||||||
Weighted average interest rate during period |
1.37 | % | 1.14 | % | 1.21 | % | 1.12 | % | ||||||||
Balance outstanding at end of period |
$ | 27,677 | $ | 29,709 | $ | 34,693 | $ | 48,224 | ||||||||
Weighted average interest rate at end of period |
1.53 | % | 1.22 | % | 1.31 | % | 1.21 | % |
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
99
EXHIBIT 22
OFFICES OF PYRAMAX BANK, FSB
GREENFIELD, WISCONSIN
As of June 30, 2018
Location |
Year
Opened |
Square
Footage |
Owned
or Leased |
Lease
Expiration Date |
Net Book Value
at June 30, 2018 |
|||||||||||||||
Corporate Office: |
||||||||||||||||||||
7001 West Edgerton Avenue Greenfield, Wisconsin 53220 |
1980 | 21,186 | Owned | N/A | $ | 1,403,356 | ||||||||||||||
Branch Offices: |
||||||||||||||||||||
9000 West Drexel Avenue Franklin, Wisconsin 53132 |
2004 | 3,930 | Owned | N/A | 794,201 | |||||||||||||||
1150 Washington Street Grafton, Wisconsin 53024 |
2016 | N/A | Leased | 4/1/2019 | 536 | |||||||||||||||
1605 West Mitchell Street Milwaukee, Wisconsin 53204 |
1967 | 4,242 | Owned | N/A | 688,196 | |||||||||||||||
318 North Water Street Milwaukee, Wisconsin 53202 |
2005 | 4,677 | Leased | 12/31/2019 | 520 | |||||||||||||||
405 Rivercrest Court Mukwonago, Wisconsin 53149 |
1999 | 3,097 | Owned | N/A | 484,122 | |||||||||||||||
1015 Marquette Avenue South Milwaukee, Wisconsin 53172 |
1972 | 3,942 | Owned | N/A | $ | 569,509 | ||||||||||||||
1500 East Moreland Avenue Waukesha, Wisconsin 53186 |
1969 | 4,546 | Owned | N/A | $ | 1,466,090 | ||||||||||||||
8001 West National Avenue West Allis, Wisconsin 53214 |
2008 | 4,238 | Owned | N/A | $ | 806,755 | ||||||||||||||
Total |
$ | 6,213,285 |
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
100
EXHIBIT 23
DIRECTORS AND MANAGEMENT OF THE BANK
At June 30, 2018
Name |
Position |
Age |
Director
Since |
Term
Expires |
||||||||||
Monica Baker |
Sr. Vice President/Chief Brand Officer, Director | 49 | 2006 | 2019 | ||||||||||
Darrell Francis |
Chairman of the Board | 66 | 1986 | 2020 | ||||||||||
Richard Hurd |
President and Chief Executive Officer, Director | 66 | 2004 | 2020 | ||||||||||
Joseph Murphy |
Director | 70 | 2005 | 2021 | ||||||||||
James Spiegelberg |
Director | 59 | 2006 | 2019 | ||||||||||
John Talsky |
Director | 69 | 2001 | 2020 | ||||||||||
Gary Zenobi |
Director | 72 | 1992 | 2021 | ||||||||||
|
||||||||||||||
Richard J. Krier |
Chief Financial Officer | | | | ||||||||||
Chuck Mauer |
Chief Credit Officer | | | | ||||||||||
Thomas K. Peterson |
Sr. Vice President/Chief Lending Officer | | | |
Source: 1895 Bancorp of Wisconsin, Inc.s Prospectus
101
EXHIBIT 24
Key Demographic Data and Trends
Milwaukee, Ozaukee and Waukesha Counties,
Wisconsin and the United States
2000, 2010 and 2020
2000 | 2010 | % Change | 2020 | % Change | ||||||||||||||||
Population |
||||||||||||||||||||
Milwaukee County |
940,164 | 947,735 | 0.8 | % | 951,408 | 0.4 | % | |||||||||||||
Ozaukee County |
82,317 | 86,395 | 5.0 | % | 90,247 | 4.5 | % | |||||||||||||
Waukesha County |
360,767 | 389,891 | 8.1 | % | 409,364 | 5.0 | % | |||||||||||||
Wisconsin |
5,363,675 | 5,686,986 | 6.0 | % | 5,887,190 | 3.5 | % | |||||||||||||
United States |
281,421,906 | 308,745,538 | 9.7 | % | 332,139,637 | 7.6 | % | |||||||||||||
Households |
||||||||||||||||||||
Milwaukee County |
377,729 | 383,591 | 1.6 | % | 388,428 | 1.3 | % | |||||||||||||
Ozaukee County |
30,857 | 34,228 | 10.9 | % | 35,806 | 4.6 | % | |||||||||||||
Waukesha County |
135,229 | 152,663 | 12.9 | % | 159,863 | 4.7 | % | |||||||||||||
Wisconsin |
2,084,544 | 2,279,768 | 9.4 | % | 2,363,096 | 3.7 | % | |||||||||||||
United States |
105,480,101 | 116,716,292 | 10.7 | % | 125,527,510 | 7.5 | % | |||||||||||||
Per Capita Income |
||||||||||||||||||||
Milwaukee County |
$ | 19,939 | $ | 24,254 | 21.6 | % | | | ||||||||||||
Ozaukee County |
31,947 | 42,180 | 32.0 | % | | | ||||||||||||||
Waukesha County |
29,164 | 37,282 | 27.8 | % | | | ||||||||||||||
Wisconsin |
21,271 | 27,192 | 27.8 | % | | | ||||||||||||||
United States |
22,162 | 26,059 | 17.6 | % | | | ||||||||||||||
Median Household Income |
||||||||||||||||||||
Milwaukee County |
$ | 38,100 | $ | 43,599 | 14.4 | % | $ | 49,722 | 14.0 | % | ||||||||||
Ozaukee County |
62,745 | 75,854 | 20.9 | % | 86,937 | 14.6 | % | |||||||||||||
Waukesha County |
62,839 | 75,689 | 20.4 | % | 84,386 | 11.5 | % | |||||||||||||
Wisconsin |
43,791 | 52,374 | 19.6 | % | 57,579 | 9.9 | % | |||||||||||||
United States |
41,994 | 50,046 | 19.2 | % | 61,618 | 23.1 | % |
Source: U.S. Census and Business Decision
102
EXHIBIT 25
Key Housing Data
Milwaukee, Ozaukee and Waukesha Counties,
Wisconsin and the United States
2000 & 2010
2000 | 2010 | |||||||||
Occupied Housing Units |
||||||||||
Milwaukee County |
377,729 | 383,591 | ||||||||
Ozaukee County |
30,857 | 34,228 | ||||||||
Waukesha County |
135,229 | 152,663 | ||||||||
Wisconsin |
2,084,544 | 2,279,768 | ||||||||
United States |
105,480,101 | 116,716,292 | ||||||||
Occupancy Rate |
|
|||||||||
Milwaukee County |
||||||||||
Owner-Occupied | 52.6 | % | 51.3 | % | ||||||
Renter-Occupied | 47.4 | % | 48.7 | % | ||||||
Ozaukee County |
||||||||||
Owner-Occupied | 76.3 | % | 76.7 | % | ||||||
Renter-Occupied | 23.7 | % | 23.3 | % | ||||||
Waukesha County |
||||||||||
Owner-Occupied | 76.4 | % | 76.8 | % | ||||||
Renter-Occupied | 23.6 | % | 23.2 | % | ||||||
Wisconsin |
||||||||||
Owner-Occupied | 68.4 | % | 68.1 | % | ||||||
Renter-Occupied | 31.6 | % | 31.9 | % | ||||||
United States |
||||||||||
Owner-Occupied | 66.2 | % | 65.4 | % | ||||||
Renter-Occupied | 33.8 | % | 34.6 | % | ||||||
Median Housing Values |
|
|||||||||
Milwaukee County |
$ | 103,200 | $ | 162,900 | ||||||
Ozaukee County |
177,300 | 255,600 | ||||||||
Waukesha County |
170,400 | 257,700 | ||||||||
Wisconsin |
112,200 | 169,000 | ||||||||
United States |
119,600 | 186,200 | ||||||||
Median Rent |
||||||||||
Milwaukee County |
$ | 555 | $ | 786 | ||||||
Ozaukee County |
642 | 819 | ||||||||
Waukesha County |
726 | 906 | ||||||||
Wisconsin |
540 | 749 | ||||||||
United States |
602 | 871 |
Source: U.S. Census Bureau
103
EXHIBIT 26
Major Sources of Employment by Industry Group
Milwaukee, Ozaukee and Waukesha Counties
Wisconsin and the United States
2000 and 2010
2000 | ||||||||||||||||||||
Industry Group |
Milwaukee
County |
Ozaukee
County |
Waukesha
County |
Wisconsin |
United
States |
|||||||||||||||
Agriculture/Mining |
0.3 | % | 1.0 | % | 0.4 | % | 2.8 | % | 1.9 | % | ||||||||||
Construction |
4.0 | % | 4.3 | % | 6.3 | % | 5.9 | % | 6.8 | % | ||||||||||
Manufacturing |
18.5 | % | 23.7 | % | 21.2 | % | 22.2 | % | 14.1 | % | ||||||||||
Wholesale/Retail |
13.6 | % | 14.5 | % | 16.6 | % | 14.8 | % | 15.3 | % | ||||||||||
Transportation/Utilities |
5.3 | % | 2.9 | % | 4.1 | % | 4.5 | % | 5.2 | % | ||||||||||
Information |
3.0 | % | 2.5 | % | 3.1 | % | 2.2 | % | 3.1 | % | ||||||||||
Finance, Insurance & Real Estate |
7.7 | % | 8.0 | % | 7.7 | % | 6.1 | % | 6.9 | % | ||||||||||
Services |
47.6 | % | 43.1 | % | 40.6 | % | 41.5 | % | 46.7 | % |
2010 | ||||||||||||||||||||
Milwaukee
County |
Ozaukee
County |
Waukesha
County |
Wisconsin |
United
States |
||||||||||||||||
Agriculture/Mining |
0.6 | % | 1.4 | % | 0.5 | % | 2.4 | % | 1.9 | % | ||||||||||
Construction |
3.6 | % | 4.4 | % | 5.6 | % | 5.6 | % | 6.2 | % | ||||||||||
Manufacturing |
15.0 | % | 18.9 | % | 18.2 | % | 18.4 | % | 10.4 | % | ||||||||||
Wholesale/Retail |
12.9 | % | 13.2 | % | 15.8 | % | 14.2 | % | 14.5 | % | ||||||||||
Transportation/Utilities |
4.6 | % | 2.6 | % | 3.9 | % | 4.5 | % | 4.9 | % | ||||||||||
Information |
2.2 | % | 1.9 | % | 1.9 | % | 1.8 | % | 2.2 | % | ||||||||||
Finance, Insurance & Real Estate |
7.3 | % | 8.5 | % | 8.6 | % | 6.3 | % | 6.7 | % | ||||||||||
Services |
54.1 | % | 49.1 | % | 45.5 | % | 46.8 | % | 53.2 | % |
Source: Bureau of the Census
104
EXHIBIT 27
Unemployment Rates
Milwaukee Ozaukee and Waukesha Counties,
Wisconsin and the United States
For the Years 2014 through May of 2018
Location |
2014 | 2015 | 2016 | 2017 |
May
2018 |
|||||||||||||||
Milwaukee County |
6.9 | % | 5.7 | % | 5.0 | % | 4.0 | % | 3.2 | % | ||||||||||
Ozaukee County |
4.2 | % | 3.7 | % | 3.3 | % | 2.8 | % | 2.3 | % | ||||||||||
Waukesha County |
4.4 | % | 3.8 | % | 3.4 | % | 2.9 | % | 2.4 | % | ||||||||||
Wisconsin |
5.4 | % | 4.5 | % | 4.0 | % | 3.3 | % | 2.6 | % | ||||||||||
United States |
6.2 | % | 5.3 | % | 4.9 | % | 4.4 | % | 3.6 | % |
Source: Local Area Unemployment StatisticsU.S. Bureau of Labor Statistics
105
EXHIBIT 28
Market Share of Deposits
Milwaukee, Ozaukee and Waukesha Counties
June 30, 2017
Milwaukee County
Deposits ($000) |
Pyramaxs
Deposits ($000) |
Pyramaxs
Share (%) |
||||||||||
Banks |
$ | 50,731,896 | | | ||||||||
Thrifts |
2,636,079 | $ | 277,017 | 10.5 | % | |||||||
|
|
|
|
|
|
|||||||
Total |
$ | 53,367,975 | $ | 277,017 | 0.5 | % | ||||||
Ozaukee County
Deposits ($000) |
Pyramaxs
Deposits ($000) |
Pyramaxs
Share (%) |
||||||||||
Banks |
$ | 2,342,678 | | | ||||||||
Thrifts |
200,451 | $ | 31,972 | 16.0 | % | |||||||
|
|
|
|
|
|
|||||||
Total |
$ | 2,543,129 | $ | 31,972 | 1.3 | % | ||||||
Waukesha County
Deposits ($000) |
Pyramaxs
Deposits ($000) |
Pyramaxs
Share (%) |
||||||||||
Banks |
$ | 10,419,566 | | | ||||||||
Thrifts |
1,544,580 | $ | 74,463 | 4.8 | % | |||||||
|
|
|
|
|
|
|||||||
Total |
$ | 11,964,146 | $ | 74,463 | 0.6 | % | ||||||
Total
Deposits ($000) |
Pyramaxs
Deposits ($000) |
Pyramaxs
Share (%) |
||||||||||
Banks |
$ | 63,494,140 | | | ||||||||
Thrifts |
4,381,110 | $ | 383,452 | 8.8 | % | |||||||
|
|
|
|
|
|
|||||||
Total |
$ | 67,875,250 | $ | 383,452 | 0.6 | % |
Source: FDIC
106
EXHIBIT 29
National Interest Rates by Quarter
2014 - 2nd Quarter of 2018
1st Qtr.
2014 |
2nd Qtr.
2014 |
3rd Qtr.
2014 |
4th Qtr.
2014 |
|||||||||||||
Prime Rate |
3.25 | % | 3.25 | % | 3.25 | % | 3.25 | % | ||||||||
90-Day Treasury Bills |
0.05 | % | 0.04 | % | 0.13 | % | 0.07 | % | ||||||||
1-Year Treasury Bills |
0.13 | % | 0.11 | % | 0.14 | % | 0.13 | % | ||||||||
30-Year Treasury Notes |
3.56 | % | 3.34 | % | 3.07 | % | 2.75 | % | ||||||||
1st Qtr.
2015 |
2nd Qtr.
2015 |
3rd Qtr.
2015 |
4th Qtr.
2015 |
|||||||||||||
Prime Rate |
3.25 | % | 3.25 | % | 3.25 | % | 3.50 | % | ||||||||
90-Day Treasury Bills |
0.03 | % | 0.01 | % | 0.01 | % | 0.16 | % | ||||||||
1-Year Treasury Bills |
0.26 | % | 0.28 | % | 0.32 | % | 0.62 | % | ||||||||
30-Year Treasury Notes |
2.54 | % | 3.20 | % | 2.87 | % | 3.01 | % | ||||||||
1st Qtr.
2016 |
2nd Qtr.
2016 |
3rd Qtr.
2016 |
4th Qtr.
2016 |
|||||||||||||
Prime Rate |
3.50 | % | 3.50 | % | 3.50 | % | 3.75 | % | ||||||||
90-Day Treasury Bills |
0.24 | % | 0.30 | % | 0.32 | % | 0.51 | % | ||||||||
1-Year Treasury Bills |
0.53 | % | 0.58 | % | 0.57 | % | 0.81 | % | ||||||||
30-Year Treasury Notes |
2.61 | % | 2.26 | % | 2.40 | % | 2.97 | % | ||||||||
1st Qtr.
2017 |
2nd Qtr.
2017 |
3rd Qtr.
2017 |
4th Qtr.
2017 |
|||||||||||||
Prime Rate |
4.00 | % | 4.25 | % | 4.25 | % | 4.50 | % | ||||||||
90-Day Treasury Bills |
0.92 | % | 1.01 | % | 1.04 | % | 1.37 | % | ||||||||
1-Year Treasury Bills |
1.17 | % | 1.24 | % | 1.31 | % | 1.76 | % | ||||||||
30-Year Treasury Notes |
2.92 | % | 2.84 | % | 2.86 | % | 2.74 | % | ||||||||
1st Qtr.
2018 |
2nd Qtr.
2018 |
|||||||||||||||
Prime Rate |
4.75 | % | 5.00 | % | ||||||||||||
90-Day Treasury Bills |
1.74 | % | 1.89 | % | ||||||||||||
1-Year Treasury Bills |
2.09 | % | 2.33 | % | ||||||||||||
30-Year Treasury Notes |
2.97 | % | 2.98 | % |
Source: The Wall Street Journal
107
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
EXHIBIT 30
Page 1 |
SHARE DATA AND PRICING RATIOS
PUBLICLY-TRADED, FDIC-INSURED SAVINGS INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
PRICES AS OF JUNE 30, 2018
ALL RATIOS/FINANCIAL DATA AS OF MOST RECENT FOUR QUARTERS
State |
Exchange |
PER SHARE | PRICING RATIOS | |||||||||||||||||||||||||||||||||||||||||||
Price
($) |
52 Week
Change (%) |
Earnings
(EPS) ($) |
Assets
($) |
12 Month
Div. ($) |
Price/Net
Earnings (X) |
Price/Core
Earnings (X) |
Price/
Book Value (X) |
Price/Tang.
Book Value (X) |
Price/
Assets (X) |
|||||||||||||||||||||||||||||||||||||
SZBI |
SOUTHFIRST BANCSHARES |
AL | OTC PINK | 4.95 | (1.4 | ) | 0.37 | 125.38 | 0.00 | 13.38 | 9.90 | 35.69 | 35.69 | 3.95 | ||||||||||||||||||||||||||||||||
BOFI |
BOFI HOLDING |
CA | NASDAQ | 40.91 | 72.5 | 2.36 | 159.58 | 0.00 | 17.33 | 34.67 | 277.73 | 280.78 | 25.64 | |||||||||||||||||||||||||||||||||
BYFC |
BROADWAY FINANCIAL CORP |
CA | NASDAQ | 2.20 | 4.3 | 0.07 | 14.57 | 0.00 | 31.43 | 31.43 | 127.17 | 127.17 | 15.10 | |||||||||||||||||||||||||||||||||
MLGF |
MALAGA FINANCIAL CORPORATION |
CA | OTC BB | 31.25 | 20.2 | 2.30 | 165.37 | 1.00 | 13.59 | 14.33 | 153.56 | 153.56 | 18.90 | |||||||||||||||||||||||||||||||||
PROV |
PROVIDENT FINANCIAL HOLDINGS |
CA | NASDAQ | 19.08 | (0.9 | ) | 0.23 | 157.70 | 0.55 | 82.96 | 48.92 | 118.07 | 118.95 | 12.10 | ||||||||||||||||||||||||||||||||
FBNK |
FIRST CONNECTICUT BANCORP |
CT | NASDAQ | 30.60 | 19.3 | 1.07 | 196.31 | 0.57 | 28.60 | 21.40 | 176.67 | 180.21 | 15.59 | |||||||||||||||||||||||||||||||||
SIFI |
SI FINANCIAL GROUP |
CT | NASDAQ | 14.75 | (8.4 | ) | 0.45 | 130.55 | 0.21 | 32.78 | 23.05 | 106.88 | 119.43 | 11.30 | ||||||||||||||||||||||||||||||||
UBNK |
UNITED FINANCIAL BANCORP |
CT | NASDAQ | 17.52 | 5.0 | 1.11 | 139.05 | 0.36 | 15.78 | 14.60 | 128.92 | 159.42 | 12.60 | |||||||||||||||||||||||||||||||||
WSFS |
WSFS FINANCIAL CORP |
DE | NASDAQ | 53.30 | 17.5 | 2.15 | 218.35 | 0.32 | 24.79 | 19.96 | 228.56 | 305.44 | 24.41 | |||||||||||||||||||||||||||||||||
ABCB |
AMERIS BANCORP |
GA | NASDAQ | 53.35 | 10.7 | 2.06 | 209.33 | 0.40 | 25.90 | 21.51 | 235.33 | 319.08 | 25.49 | |||||||||||||||||||||||||||||||||
CHFN |
CHARTER FINANCIAL CORP |
GA | NASDAQ | 24.15 | 34.2 | 1.04 | 109.65 | 0.28 | 23.22 | 22.78 | 164.96 | 206.23 | 22.02 | |||||||||||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES |
GA | NASDAQ | 11.11 | NM | 0.01 | 38.80 | 0.00 | NM | 92.58 | 110.66 | 110.66 | 28.63 | |||||||||||||||||||||||||||||||||
TBNK |
TERRITORIAL BANCORP |
HI | NASDAQ | 31.00 | (0.6 | ) | 1.59 | 211.19 | 1.20 | 19.50 | 19.38 | 129.87 | 129.98 | 14.68 | ||||||||||||||||||||||||||||||||
WCFB |
WCF BANCORP |
IA | NASDAQ | 9.00 | NM | 0.09 | 48.57 | 0.20 | 100.00 | NM | 82.19 | 82.42 | 18.53 | |||||||||||||||||||||||||||||||||
AJSB |
AJS BANCORP |
IL | OTC BB | 14.05 | (4.4 | ) | 0.05 | 90.18 | 0.20 | NM | 48.45 | 103.77 | 103.77 | 15.58 | ||||||||||||||||||||||||||||||||
AFBA |
ALLIED FIRST BANCORP |
IL | OTC BB | 1.35 | (10.0 | ) | (0.19 | ) | 61.54 | 0.00 | NM | 2.76 | NM | NM | 2.19 | |||||||||||||||||||||||||||||||
BFFI |
BEN FRANKLIN FINANCIAL |
IL | OTC BB | 8.25 | (29.8 | ) | (0.47 | ) | 79.96 | 0.00 | NM | NM | 101.10 | 101.10 | 10.32 | |||||||||||||||||||||||||||||||
BTHT |
BEST HOMETOWN BANCORP |
IL | OTC PINK | 13.50 | NM | (0.39 | ) | 130.66 | 0.00 | NM | NM | 91.53 | 91.53 | 10.33 | ||||||||||||||||||||||||||||||||
GTPS |
GREAT AMERICAN BANCORP |
IL | OTC BB | 31.85 | 8.9 | 1.49 | 412.87 | 0.42 | 21.38 | 16.09 | 81.56 | 87.60 | 7.71 | |||||||||||||||||||||||||||||||||
IROQ |
IF BANCORP |
IL | NASDAQ | 23.90 | 21.5 | 0.48 | 159.15 | 0.10 | 49.79 | 44.26 | 113.97 | 115.07 | 15.02 | |||||||||||||||||||||||||||||||||
JXSB |
JACKSONVILLE BANCORP |
IL | NASDAQ | 33.65 | 7.0 | 1.61 | 178.23 | 0.40 | 20.90 | 16.83 | 127.80 | 137.23 | 18.88 | |||||||||||||||||||||||||||||||||
MCPH |
MIDLAND CAPITAL HOLDINGS CORP |
IL | OTC PINK | 24.00 | 26.1 | 0.25 | 315.57 | 0.16 | 96.00 | 70.59 | 82.36 | 82.36 | 7.61 | |||||||||||||||||||||||||||||||||
OTTW |
OTTAWA SAVINGS BANCORP |
IL | OTC BB | 13.88 | 0.8 | 0.29 | 78.35 | 0.24 | 47.86 | 25.24 | 92.47 | 95.00 | 17.72 |
108
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 2 |
SHARE DATA AND PRICING RATIOS
PUBLICLY-TRADED, FDIC-INSURED SAVINGS INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
PRICES AS OF JUNE 30, 2018
ALL RATIOS/FINANCIAL DATA AS OF MOST RECENT FOUR QUARTERS
State |
Exchange |
PER SHARE | PRICING RATIOS | |||||||||||||||||||||||||||||||||||||||||||
Price
($) |
52 Week
Change (%) |
Earnings
(EPS) ($) |
Assets
($) |
12 Month
Div. ($) |
Price/Net
Earnings (X) |
Price/Core
Earnings (X) |
Price/
Book Value (X) |
Price/Tang.
Book Value (X) |
Price/
Assets (X) |
|||||||||||||||||||||||||||||||||||||
RYFL |
ROYAL FINANCIAL |
IL | OTC BB | 17.45 | 46.3 | 1.15 | 171.47 | 0.00 | 15.17 | 10.71 | 96.78 | 103.68 | 10.18 | |||||||||||||||||||||||||||||||||
SUGR |
SUGAR CREEK FINANCIAL CORP |
IL | OTC BB | 12.60 | (10.0 | ) | 0.19 | 115.70 | 0.00 | 66.32 | 74.12 | 95.09 | 95.09 | 10.89 | ||||||||||||||||||||||||||||||||
FDLB |
FIDELITY FEDERAL BANCORP |
IN | OTC PINK | 25.00 | NM | 20.40 | 842.48 | 0.00 | 1.23 | 2.54 | NM | NM | 2.97 | |||||||||||||||||||||||||||||||||
FCAP |
FIRST CAPITAL |
IN | NASDAQ | 41.55 | 33.4 | 2.21 | 228.00 | 0.88 | 18.80 | 18.07 | 175.32 | 193.71 | 18.22 | |||||||||||||||||||||||||||||||||
NWIN |
NORTHWEST INDIANA BANCORP |
IN | OTC BB | 42.95 | 6.0 | 3.15 | 320.86 | 1.15 | 13.63 | 15.18 | 139.72 | 144.95 | 13.39 | |||||||||||||||||||||||||||||||||
TDCB |
THIRD CENTURY BANCORP |
IN | OTC BB | 13.95 | 13.4 | 0.45 | 107.52 | 0.22 | 31.00 | 25.83 | 128.69 | 130.37 | 12.97 | |||||||||||||||||||||||||||||||||
UCBA |
UNITED COMMUNITY BANCORP |
IN | NASDAQ | 27.20 | 43.5 | 0.85 | 130.00 | 0.39 | 32.00 | 27.47 | 161.14 | 169.47 | 20.92 | |||||||||||||||||||||||||||||||||
WEIN |
WEST END INDIANA BANCSHARES |
IN | OTC BB | 29.00 | (0.2 | ) | 0.66 | 289.03 | 0.21 | 43.94 | 23.20 | 109.27 | 112.45 | 10.03 | ||||||||||||||||||||||||||||||||
CFFN |
CAPITOL FEDERAL FINANCIAL |
KS | NASDAQ | 13.16 | (7.4 | ) | 0.70 | 66.06 | 0.89 | 18.80 | 21.57 | 133.33 | 133.33 | 19.92 | ||||||||||||||||||||||||||||||||
PBSK |
POAGE BANKSHARES |
KY | NASDAQ | 19.66 | 3.2 | (0.72 | ) | 128.62 | 0.24 | NM | NM | 112.92 | 118.29 | 15.29 | ||||||||||||||||||||||||||||||||
CTUY |
CENTURY NEXT FINANCIAL CORP |
LA | OTC BB | 34.00 | 17.2 | 2.48 | 276.01 | 0.14 | 13.71 | 11.81 | 133.54 | 133.54 | 12.32 | |||||||||||||||||||||||||||||||||
FPBF |
FPB FINANCIAL CORP |
LA | OTC PINK | 19.75 | 7.6 | 0.93 | 137.68 | 0.21 | 21.24 | 19.36 | 144.90 | 145.22 | 14.34 | |||||||||||||||||||||||||||||||||
HRGG |
HERITAGE NOLA BANCORP |
LA | OTC PINK | 12.48 | NM | 0.33 | 68.05 | 0.00 | 37.82 | 36.71 | 85.13 | 86.31 | 18.34 | |||||||||||||||||||||||||||||||||
HIBE |
HIBERNIA BANCORP |
LA | OTC BB | 31.90 | 71.5 | 0.17 | 126.03 | 0.00 | NM | NM | 176.05 | 176.05 | 25.31 | |||||||||||||||||||||||||||||||||
HFBL |
HOME FED BANCORP OF LOUISIANA |
LA | NASDAQ | 31.45 | 16.7 | 1.93 | 216.37 | 0.45 | 16.30 | 13.79 | 129.32 | 129.80 | 14.54 | |||||||||||||||||||||||||||||||||
BHBK |
BLUE HILLS BANCORP |
MA | NASDAQ | 22.20 | 24.0 | 0.58 | 99.43 | 0.90 | 38.28 | 33.64 | 150.82 | 155.14 | 22.33 | |||||||||||||||||||||||||||||||||
BLMT |
BSB BANCORP INC. |
MA | NASDAQ | 34.40 | 17.6 | 1.72 | 282.09 | 0.00 | 20.00 | 16.78 | 181.53 | 182.59 | 12.19 | |||||||||||||||||||||||||||||||||
HONE |
HARBORONE BANCORP |
MA | NASDAQ | 18.94 | (5.1 | ) | 0.34 | 82.66 | 0.00 | 55.71 | 61.10 | 179.19 | 200.42 | 22.91 | ||||||||||||||||||||||||||||||||
HIFS |
HINGHAM INSTITUTION FOR SAVINGS |
MA | NASDAQ | 219.70 | 20.8 | 13.39 | 1,050.38 | 1.00 | 16.41 | 16.17 | 251.69 | 251.69 | 20.92 | |||||||||||||||||||||||||||||||||
EBSB |
MERIDIAN BANCORP |
MA | NASDAQ | 19.15 | 13.3 | 0.85 | 101.00 | 0.18 | 22.53 | 22.01 | 157.87 | 163.68 | 18.96 | |||||||||||||||||||||||||||||||||
PLRM |
PILGRIM BANCSHARES |
MA | OTC BB | 20.15 | 8.9 | 0.58 | 116.00 | 0.30 | 34.74 | 28.38 | 134.69 | 134.69 | 17.37 | |||||||||||||||||||||||||||||||||
PVBC |
PROVIDENT BANCORP |
MA | NASDAQ | 26.20 | 16.4 | 0.84 | 92.51 | 0.00 | 31.19 | 39.10 | 214.93 | 214.93 | 28.32 | |||||||||||||||||||||||||||||||||
RNDB |
RANDOLPH BANCORP |
MA | NASDAQ | 16.80 | 5.7 | (0.37 | ) | 88.48 | 0.00 | NM | NM | 126.79 | 138.39 | 18.99 |
109
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 3 |
SHARE DATA AND PRICING RATIOS
PUBLICLY-TRADED, FDIC-INSURED SAVINGS INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
PRICES AS OF JUNE 30, 2018
ALL RATIOS/FINANCIAL DATA AS OF MOST RECENT FOUR QUARTERS
State |
Exchange |
PER SHARE | PRICING RATIOS | |||||||||||||||||||||||||||||||||||||||||||
Price
($) |
52 Week
Change (%) |
Earnings
(EPS) ($) |
Assets
($) |
12 Month
Div. ($) |
Price/
Net Earnings (X) |
Price/Core
Earnings (X) |
Price/
Book Value (X) |
Price/Tang.
Book Value (X) |
Price/
Assets (X) |
|||||||||||||||||||||||||||||||||||||
WEBK |
WELLESLEY BANCORP |
MA | NASDAQ | 33.83 | 22.1 | 1.98 | 326.98 | 0.20 | 17.09 | 14.04 | 141.08 | 141.31 | 10.35 | |||||||||||||||||||||||||||||||||
WNEB |
WESTERN NEW ENGLAND BANCORP |
MA | NASDAQ | 11.00 | 8.4 | 0.36 | 69.20 | 0.13 | 30.56 | 21.57 | 136.65 | 146.86 | 15.90 | |||||||||||||||||||||||||||||||||
IFSB |
COLOMBO BANK |
MD | OTC PINK | 0.10 | (75.0 | ) | 0.80 | 125.42 | 0.00 | 0.13 | 0.12 | NM | NM | 0.08 | ||||||||||||||||||||||||||||||||
HBK |
HAMILTON BANCORP |
MD | NASDAQ | 15.70 | 4.7 | (0.18 | ) | 154.29 | 0.00 | NM | 31.40 | 104.53 | 127.33 | 10.18 | ||||||||||||||||||||||||||||||||
MBCQ |
MB BANCORP |
MD | OTC BB | 16.60 | 10.3 | 0.01 | 7.65 | 0.00 | NM | NM | NM | NM | NM | |||||||||||||||||||||||||||||||||
SVBI |
SEVERN BANCORP |
MD | NASDAQ | 8.65 | 19.3 | 0.31 | 65.42 | 0.03 | 27.90 | 17.65 | 114.57 | 116.73 | 13.22 | |||||||||||||||||||||||||||||||||
FBC |
FLAGSTAR BANCORP |
Ml | NYSE | 34.26 | 11.2 | 1.33 | 308.99 | 0.00 | 25.76 | 12.32 | 137.81 | 176.14 | 11.09 | |||||||||||||||||||||||||||||||||
NWBB |
NEW BANCORP |
Ml | OTC BB | 19.50 | 38.4 | 1.79 | 168.95 | 0.00 | 10.89 | 10.54 | 90.82 | 97.60 | 11.54 | |||||||||||||||||||||||||||||||||
SBT |
STERLING BANCORP |
Ml | NASDAQ | 13.36 | NM | 0.81 | 57.31 | 0.06 | 16.49 | 14.68 | 245.59 | 253.03 | 23.31 | |||||||||||||||||||||||||||||||||
STBI |
STURGIS BANCORP |
Ml | OTC BB | 19.10 | 15.8 | 1.44 | 182.13 | 0.50 | 13.26 | 14.15 | 117.25 | 143.29 | 10.49 | |||||||||||||||||||||||||||||||||
HMNF |
HMN FINANCIAL |
MN | NASDAQ | 20.10 | 14.5 | 1.12 | 160.31 | 0.00 | 17.95 | 15.83 | 110.32 | 114.33 | 12.54 | |||||||||||||||||||||||||||||||||
REDW |
REDWOOD FINANCIAL |
MN | OTC PINK | 54.00 | 20.0 | 7.39 | 673.00 | 0.45 | 7.31 | 8.49 | 68.01 | 81.30 | 8.02 | |||||||||||||||||||||||||||||||||
CCFC |
CCSB FINANCIAL CORP |
MO | OTC PINK | 13.20 | 9.1 | 0.53 | 107.56 | 0.10 | 24.91 | 24.91 | 112.82 | 113.50 | 12.27 | |||||||||||||||||||||||||||||||||
CFDB |
CENTRAL FEDERAL S&L ASSN OF ROLLA |
MO | OTC PINK | 14.40 | 8.7 | 0.07 | 40.54 | 0.00 | NM | NM | 92.72 | 92.72 | 35.52 | |||||||||||||||||||||||||||||||||
NASB |
NASB FINANCIAL |
MO | OTC BB | 41.19 | 13.6 | 3.66 | 258.71 | 1.46 | 11.25 | 11.22 | 135.81 | 146.12 | 15.92 | |||||||||||||||||||||||||||||||||
QRRY |
QUARRY CITY S&L ASSN |
MO | OTC BB | 15.50 | 5.1 | 0.67 | 131.58 | 0.00 | 23.13 | 20.13 | 72.60 | 74.95 | 11.78 | |||||||||||||||||||||||||||||||||
KSBI |
KS BANCORP |
NC | OTC BB | 28.00 | 18.4 | 1.92 | 286.67 | 0.17 | 14.58 | 10.89 | 105.26 | 105.26 | 9.77 | |||||||||||||||||||||||||||||||||
LSFG |
LIFESTORE FINANCIAL GROUP |
NC | OTC PINK | 26.00 | 18.2 | 1.83 | 272.02 | 0.00 | 14.21 | 12.32 | 95.80 | 98.75 | 9.56 | |||||||||||||||||||||||||||||||||
UBNC |
UNION BANK |
NC | OTC PINK | 16.40 | NM | 0.60 | 121.63 | 0.09 | 27.33 | 19.76 | 129.85 | 166.16 | 13.48 | |||||||||||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP |
NE | NASDAQ | 10.76 | 5.0 | 0.34 | 92.12 | 0.00 | 31.65 | 26.90 | 100.09 | 106.96 | 11.68 | |||||||||||||||||||||||||||||||||
MCBK |
MADISON COUNTY FINANCIAL |
NE | OTC PINK | 26.00 | 13.0 | 1.24 | 122.58 | 0.40 | 20.97 | 16.15 | 119.43 | 124.58 | 21.21 | |||||||||||||||||||||||||||||||||
ISBC |
INVESTORS BANCORP |
NJ | NASDAQ | 12.79 | (4.8 | ) | 0.46 | 83.61 | 0.34 | 27.80 | 20.30 | 124.78 | 129.06 | 15.30 | ||||||||||||||||||||||||||||||||
KRNY |
KEARNY FINANCIAL CORP |
NJ | NASDAQ | 13.45 | (9.4 | ) | 0.21 | 62.64 | 0.24 | 64.05 | 56.04 | 106.92 | 120.09 | 21.47 |
110
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 4 |
SHARE DATA AND PRICING RATIOS
PUBLICLY-TRADED, FDIC-INSURED SAVINGS INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
PRICES AS OF JUNE 30, 2018
ALL RATIOS/FINANCIAL DATA AS OF MOST RECENT FOUR QUARTERS
State |
Exchange |
PER SHARE | PRICING RATIOS | |||||||||||||||||||||||||||||||||||||||||||
Price
($) |
52
Week Change (%) |
Earnings
(EPS) ($) |
Assets
($) |
12 Month
Div. ($) |
Price/
Net Earnings (X) |
Price/Core
Earnings (X) |
Price/
Book Value (X) |
Price/Tang.
Book Value (X) |
Price/
Assets (X) |
|||||||||||||||||||||||||||||||||||||
MGYR |
MAGYAR BANCORP |
NJ | NASDAQ | 12.88 | (1.8 | ) | 0.28 | 104.42 | 0.00 | 46.00 | 33.03 | 149.94 | 149.94 | 12.33 | ||||||||||||||||||||||||||||||||
MSBF |
MB BANCORP |
NJ | NASDAQ | 21.50 | 23.2 | 0.60 | 102.09 | 0.43 | 35.83 | 27.92 | 170.23 | 170.23 | 21.06 | |||||||||||||||||||||||||||||||||
NFBK |
NORTHFIELD BANCORP |
NJ | NASDAQ | 16.62 | (3.1 | ) | 0.51 | 82.83 | 0.36 | 32.59 | 22.46 | 126.97 | 135.34 | 20.07 | ||||||||||||||||||||||||||||||||
OCFC |
OCEANFIRST FINANCIAL CORP |
NJ | NASDAQ | 29.96 | 10.5 | 0.75 | 155.93 | 0.60 | 39.95 | 33.29 | 143.08 | 221.76 | 19.21 | |||||||||||||||||||||||||||||||||
ORIT |
ORITANI FINANCIAL CORP |
NJ | NASDAQ | 16.20 | (5.0 | ) | 0.69 | 88.89 | 1.23 | 23.48 | 17.80 | 136.13 | 136.13 | 18.22 | ||||||||||||||||||||||||||||||||
PFS |
PROVIDENT FINANCIAL SERVICES |
NJ | NYSE | 27.53 | 8.5 | 1.47 | 145.88 | 0.94 | 18.73 | 17.88 | 140.75 | 207.46 | 18.87 | |||||||||||||||||||||||||||||||||
BCTF |
BANCORP 34 |
NM | NASDAQ | 15.45 | 10.0 | 0.35 | 100.58 | 0.00 | 44.14 | 15.45 | 105.53 | 106.40 | 15.36 | |||||||||||||||||||||||||||||||||
CARV |
CARVER BANCORP |
NY | NASDAQ | 4.63 | 36.2 | 2.66 | 187.71 | 0.00 | 1.74 | NM | NM | NM | 2.47 | |||||||||||||||||||||||||||||||||
DCOM |
DIME COMMUNITY BANCSHARES |
NY | NASDAQ | 19.50 | (0.5 | ) | 1.48 | 168.76 | 0.56 | 13.18 | 15.35 | 120.22 | 132.74 | 11.55 | ||||||||||||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK |
NY | NASDAQ | 20.43 | 0.6 | 1.85 | 209.33 | 0.46 | 11.04 | 17.03 | 94.93 | 125.18 | 9.76 | |||||||||||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
NY | NASDAQ | 17.75 | 20.3 | 0.37 | 161.16 | 0.00 | 47.97 | 43.29 | 110.04 | 113.27 | 11.01 | |||||||||||||||||||||||||||||||||
NYCB |
NEW YORK COMMUNITY BANCORP |
NY | NYSE | 11.04 | (15.9 | ) | 0.96 | 101.26 | 0.68 | 11.50 | 13.97 | 79.83 | 124.75 | 10.90 | ||||||||||||||||||||||||||||||||
PCSB |
PCSB FINANCIAL CORP |
NY | NASDAQ | 19.87 | NM | 0.22 | 80.19 | 0.00 | 90.32 | 64.10 | 126.80 | 129.78 | 24.78 | |||||||||||||||||||||||||||||||||
PDLB |
PDL COMMUNITY BANCORP |
NY | NASDAQ | 15.71 | NM | 0.08 | 51.34 | 0.00 | NM | NM | 174.94 | 174.94 | 30.60 | |||||||||||||||||||||||||||||||||
SNNF |
SENECA FIN CORP |
NY | OTC PINK | 8.55 | NM | 0.29 | 92.13 | 0.00 | 29.48 | 21.38 | 92.23 | 92.23 | 9.28 | |||||||||||||||||||||||||||||||||
SNNY |
SUNNYSIDE BANCORP |
NY | OTC BB | 16.12 | 19.0 | (0.40 | ) | 106.37 | 0.00 | NM | NM | 123.24 | 123.24 | 15.15 | ||||||||||||||||||||||||||||||||
TRST |
TRUSTCO BANK CORP NY |
NY | NASDAQ | 8.90 | 14.8 | 0.49 | 51.17 | 0.26 | 18.16 | 16.48 | 185.42 | 185.80 | 17.39 | |||||||||||||||||||||||||||||||||
CNNB |
CINCINNATI BANCORP |
OH | OTC BB | 12.85 | 31.8 | 0.58 | 99.86 | 0.00 | 22.16 | 32.13 | 115.35 | 121.80 | 12.87 | |||||||||||||||||||||||||||||||||
CCSB |
COMM SAVINGS BANCORP |
OH | OTC BB | 14.60 | NM | (0.21 | ) | 118.20 | 0.00 | NM | NM | 71.53 | 71.53 | 12.35 | ||||||||||||||||||||||||||||||||
CIBN |
COMMUNITY INVESTORS BANCORP |
OH | OTC PINK | 15.50 | 2.3 | 1.89 | 274.54 | 0.30 | 8.20 | 10.62 | 62.70 | 65.65 | 5.65 | |||||||||||||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP |
OH | NASDAQ | 16.35 | NM | 0.41 | 81.94 | 0.00 | 39.88 | 65.40 | 95.89 | 95.89 | 19.95 | |||||||||||||||||||||||||||||||||
FDEF |
FIRST DEFIANCE FINANCIAL CORP |
OH | NASDAQ | 67.06 | 27.3 | 3.82 | 296.90 | 1.05 | 17.55 | 17.19 | 180.08 | 257.23 | 22.59 | |||||||||||||||||||||||||||||||||
FNFI |
FIRST NILES FINANCIAL |
OH | OTC PINK | 9.75 | (2.5 | ) | 0.36 | 89.64 | 0.18 | 27.08 | 21.67 | 97.01 | 97.01 | 10.88 |
111
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 5 |
SHARE DATA AND PRICING RATIOS
PUBLICLY-TRADED, FDIC-INSURED SAVINGS INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
PRICES AS OF JUNE 30, 2018
ALL RATIOS/FINANCIAL DATA AS OF MOST RECENT FOUR QUARTERS
State |
Exchange |
PER SHARE | PRICING RATIOS | |||||||||||||||||||||||||||||||||||||||||||
Price
($) |
52 Week
Change (%) |
Earnings
(EPS) ($) |
Assets
($) |
12 Month
Div. ($) |
Price/Net
Earnings (X) |
Price/Core
Earnings (X) |
Price/
Book Value (X) |
Price/Tang.
Book Value (X) |
Price/
Assets (X) |
|||||||||||||||||||||||||||||||||||||
HCFL |
HOME CITY FINANCIAL CORP |
OH | OTC PINK | 28.90 | 12.5 | 2.99 | 205.23 | 1.00 | 9.67 | 9.60 | 120.62 | 120.62 | 14.08 | |||||||||||||||||||||||||||||||||
HLFN |
HOME LOAN FINANCIAL CORP |
OH | OTC BB | 29.00 | 5.5 | 2.08 | 134.16 | 1.40 | 13.94 | 13.94 | 176.72 | 177.70 | 21.62 | |||||||||||||||||||||||||||||||||
MWBC |
MW BANCORP INC |
OH | OTC BB | 29.17 | 45.9 | (0.23 | ) | 183.17 | 0.61 | NM | 51.18 | 161.52 | 162.96 | 15.93 | ||||||||||||||||||||||||||||||||
PPSF |
PEOPLES-SIDNEY FINANCIAL CORP |
OH | OTC PINK | 10.10 | 12.2 | 0.45 | 83.37 | 0.32 | 22.44 | 21.96 | 94.30 | 94.30 | 12.11 | |||||||||||||||||||||||||||||||||
PFOH |
PERPETUAL FEDERAL SAVINGS BANK |
OH | OTC PINK | 29.24 | 9.5 | 2.22 | 159.91 | 1.17 | 13.17 | 12.39 | 101.39 | 101.39 | 18.29 | |||||||||||||||||||||||||||||||||
UCFC |
UNITED COMMUNITY FINANCIAL CORP |
OH | NASDAQ | 10.99 | 32.3 | 0.58 | 54.03 | 0.14 | 18.95 | 18.02 | 185.02 | 206.58 | 20.34 | |||||||||||||||||||||||||||||||||
VERF |
VERSAILLES FINANCIAL CORP |
OH | OTC BB | 24.25 | 9.7 | 0.62 | 145.75 | 0.00 | 39.11 | 25.26 | 88.76 | 88.76 | 16.64 | |||||||||||||||||||||||||||||||||
WAYN |
WAYNE SAVINGS BANCSHARES |
OH | OTC BB | 18.90 | 7.9 | 1.45 | 163.29 | 0.28 | 13.03 | 12.04 | 128.05 | 135.48 | 11.57 | |||||||||||||||||||||||||||||||||
BNCL |
BENEFICIAL MUTUAL BANCORP |
PA | NASDAQ | 16.20 | 8.0 | 0.34 | 76.96 | 0.49 | 47.65 | 30.00 | 119.91 | 144.77 | 21.05 | |||||||||||||||||||||||||||||||||
ESSA |
ESSA BANCORP |
PA | NASDAQ | 15.83 | 7.5 | 0.40 | 155.21 | 0.36 | 39.58 | 24.35 | 104.70 | 114.79 | 10.20 | |||||||||||||||||||||||||||||||||
HARL |
HARLEYSVILLE SAVINGS FINANCIAL |
PA | OTC PINK | 22.63 | 1.0 | 1.74 | 205.45 | 0.89 | 13.01 | 12.93 | 121.34 | 121.34 | 11.01 | |||||||||||||||||||||||||||||||||
NWBI |
NORTHWEST BANCSHARES |
PA | NASDAQ | 17.39 | 11.4 | 0.99 | 93.58 | 0.65 | 17.57 | 22.88 | 146.88 | 202.68 | 18.58 | |||||||||||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP |
PA | NASDAQ | 19.30 | 6.3 | 0.76 | 104.95 | 0.31 | 25.39 | 20.53 | 131.47 | 138.55 | 18.39 | |||||||||||||||||||||||||||||||||
QNTO |
QUAINT OAK BANCORP |
PA | OTC PINK | 13.35 | 1.3 | 0.83 | 128.06 | 0.20 | 16.08 | 13.22 | 116.09 | 121.36 | 10.42 | |||||||||||||||||||||||||||||||||
STND |
STANDARD FINANCIAL CORP |
PA | OTC BB | 30.26 | 7.1 | 1.25 | 203.64 | 1.43 | 24.21 | 20.31 | 108.89 | 139.70 | 14.86 | |||||||||||||||||||||||||||||||||
CWAY |
COASTWAY BANCORP |
RI | NASDAQ | 27.70 | 35.1 | 0.66 | 177.82 | 0.00 | 41.97 | 36.45 | 169.11 | 169.21 | 15.58 | |||||||||||||||||||||||||||||||||
FSGB |
FIRST FEDERAL OF SOUTH CAROLINA |
SC | OTC PINK | 10.00 | 146.9 | 0.05 | 3.51 | 0.00 | NM | NM | NM | NM | NM | |||||||||||||||||||||||||||||||||
CASH |
META FINANCIAL GROUP |
SD | NASDAQ | 97.40 | 9.4 | 4.91 | 443.49 | 0.52 | 19.84 | 17.58 | 212.94 | 315.72 | 21.96 | |||||||||||||||||||||||||||||||||
AFCB |
ATHENS BANCSHARES CORP |
TN | OTC BB | 52.15 | 44.5 | 2.72 | 266.30 | 0.20 | 19.17 | 17.62 | 194.44 | 206.94 | 19.58 | |||||||||||||||||||||||||||||||||
SFBK |
SFB BANCORP |
TN | OTC PINK | 32.00 | (1.8 | ) | 0.88 | 168.78 | 0.90 | 36.36 | 32.65 | 126.98 | 129.19 | 18.96 | ||||||||||||||||||||||||||||||||
UNTN |
UNITED TENNESSEE BANKSHARES |
TN | OTC PINK | 22.06 | 4.8 | 1.60 | 248.80 | 0.54 | 13.79 | 10.98 | 88.38 | 88.38 | 8.87 | |||||||||||||||||||||||||||||||||
BAFI |
BANCAFFILIATED |
TX | OTC PINK | 109.00 | 45.3 | 21.49 | 2,409.52 | 0.00 | 5.07 | 4.49 | 46.46 | 48.70 | 4.52 | |||||||||||||||||||||||||||||||||
TBK |
TRIUMPH BANCORP |
TX | NASDAQ | 40.75 | 66.0 | 1.82 | 163.51 | 0.00 | 22.39 | 19.59 | 210.59 | 250.31 | 24.92 |
112
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 6 |
SHARE DATA AND PRICING RATIOS
PUBLICLY-TRADED, FDIC-INSURED SAVINGS INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
PRICES AS OF JUNE 30, 2018
ALL RATIOS/FINANCIAL DATA AS OF MOST RECENT FOUR QUARTERS
State |
Exchange |
PER SHARE | PRICING RATIOS | |||||||||||||||||||||||||||||||||||||||||||
Price
($) |
52 Week
Change (%) |
Earnings
(EPS) ($) |
Assets
($) |
12 Month
Div. ($) |
Price/Net
Earnings (X) |
Price/Core
Earnings (X) |
Price/
Book Value (X) |
Price/Tang.
Book Value (X) |
Price/
Assets (X) |
|||||||||||||||||||||||||||||||||||||
ANCB |
ANCHOR BANCORP |
WA | NASDAQ | 26.15 | 4.4 | 1.07 | 193.14 | 0.00 | 24.44 | 13.69 | 98.05 | 98.42 | 13.54 | |||||||||||||||||||||||||||||||||
FSBW |
FS BANCORP |
WA | NASDAQ | 63.25 | 44.5 | 4.43 | 282.29 | 0.42 | 14.28 | 15.69 | 186.36 | 204.36 | 22.41 | |||||||||||||||||||||||||||||||||
RVSB |
RIVERVIEW BANCORP |
WA | NASDAQ | 8.44 | 27.1 | 0.45 | 51.02 | 0.03 | 18.76 | 15.07 | 162.93 | 215.86 | 16.54 | |||||||||||||||||||||||||||||||||
TSBK |
TIMBERLAND BANCORP |
WA | NASDAQ | 37.34 | 47.8 | 2.13 | 135.48 | 0.54 | 17.53 | 17.37 | 234.11 | 250.27 | 27.56 | |||||||||||||||||||||||||||||||||
FFBW |
FFBW, INC |
WI | NASDAQ | 11.09 | NM | (0.01 | ) | 39.41 | 0.00 | NM | NM | 124.19 | 124.47 | 28.14 | ||||||||||||||||||||||||||||||||
HWIS |
HOME BANCORP WISCONSIN |
WI | OTC PINK | 14.00 | 15.2 | (0.07 | ) | 159.82 | 0.00 | NM | NM | 117.45 | 117.45 | 8.76 | ||||||||||||||||||||||||||||||||
WSBF |
WATERSTONE FINANCIAL |
WI | NASDAQ | 17.05 | (9.5 | ) | 0.90 | 62.62 | 1.48 | 18.94 | 17.58 | 125.83 | 126.30 | 27.23 | ||||||||||||||||||||||||||||||||
WBBW |
WESTBURY BANCORP |
WI | OTC BB | 22.33 | NM | 0.87 | 208.12 | 0.00 | 25.67 | 20.30 | 115.46 | 116.54 | 10.73 |
113
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 7 |
SHARE DATA AND PRICING RATIOS
PUBLICLY-TRADED, FDIC-INSURED SAVINGS INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
PRICES AS OF JUNE 30, 2018
ALL RATIOS/FINANCIAL DATA AS OF MOST RECENT FOUR QUARTERS
PER SHARE | PRICING RATIOS | |||||||||||||||||||||||||||||||||||||||
Price
($) |
52 Week
Change (%) |
Earnings
(EPS) ($) |
Assets
($) |
12 Month
Div. ($) |
Price/Net
Earnings (X) |
Price/Core
Earnings (X) |
Price/
Book Value (X) |
Price/Tang.
Book Value (X) |
Price/
Assets (X) |
|||||||||||||||||||||||||||||||
ALL INSTITUTIONS |
||||||||||||||||||||||||||||||||||||||||
AVERAGE |
24.77 | 14.09 | 1.46 | 182.99 | 0.32 | 26.78 | 23.61 | 131.40 | 142.77 | 15.68 | ||||||||||||||||||||||||||||||
HIGH |
219.70 | 146.90 | 21.49 | 2,409.52 | 1.48 | 100.00 | 92.58 | 277.73 | 319.08 | 35.52 | ||||||||||||||||||||||||||||||
LOW |
0.10 | (75.00 | ) | (0.72 | ) | 3.51 | 0.00 | 0.13 | 0.12 | 35.69 | 35.69 | 0.08 | ||||||||||||||||||||||||||||
AVERAGE FOR STATE |
||||||||||||||||||||||||||||||||||||||||
WI |
16.12 | 2.85 | 0.42 | 117.49 | 0.37 | 22.31 | 18.94 | 120.73 | 121.19 | 18.72 | ||||||||||||||||||||||||||||||
AVERAGE BY REGION |
||||||||||||||||||||||||||||||||||||||||
MID-ATLANTIC |
19.01 | 1.88 | 0.72 | 118.26 | 0.44 | 26.24 | 22.10 | 119.79 | 140.14 | 14.95 | ||||||||||||||||||||||||||||||
MIDWEST |
21.53 | 10.53 | 1.39 | 177.94 | 0.33 | 20.36 | 20.56 | 114.17 | 120.84 | 14.16 | ||||||||||||||||||||||||||||||
NORTH CENTRAL |
28.61 | 8.27 | 1.88 | 194.96 | 0.37 | 25.07 | 14.80 | 112.75 | 125.99 | 17.21 | ||||||||||||||||||||||||||||||
NORTHEAST |
27.31 | 10.73 | 1.32 | 173.41 | 0.24 | 25.38 | 22.50 | 140.19 | 148.33 | 16.09 | ||||||||||||||||||||||||||||||
SOUTHEAST |
25.47 | 24.95 | 1.19 | 168.26 | 0.23 | 17.09 | 22.82 | 117.03 | 133.30 | 14.57 | ||||||||||||||||||||||||||||||
SOUTHWEST |
36.85 | 29.29 | 3.69 | 437.22 | 0.10 | 20.08 | 15.15 | 128.94 | 134.54 | 16.21 | ||||||||||||||||||||||||||||||
WEST |
28.85 | 24.37 | 1.63 | 152.26 | 0.42 | 26.65 | 23.39 | 165.32 | 175.48 | 18.50 | ||||||||||||||||||||||||||||||
AVERAGE BY EXCHANGE |
||||||||||||||||||||||||||||||||||||||||
NYSE |
24.28 | 1.27 | 1.25 | 185.38 | 0.54 | 18.66 | 14.72 | 119.46 | 169.45 | 13.62 | ||||||||||||||||||||||||||||||
NASDAQ |
26.66 | 13.23 | 1.19 | 149.46 | 0.32 | 27.59 | 24.33 | 147.19 | 162.44 | 18.29 | ||||||||||||||||||||||||||||||
OTC BB |
23.07 | 13.73 | 1.02 | 169.18 | 0.33 | 17.72 | 18.53 | 111.73 | 116.13 | 13.19 | ||||||||||||||||||||||||||||||
OTC PINK |
22.11 | 10.50 | 2.66 | 281.21 | 0.27 | 17.65 | 15.11 | 86.28 | 89.07 | 11.17 |
114
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
EXHIBIT 31
Page 1 |
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED FDIC-INSURED SAVINGS INSTITUTIONS
MOST RECENT FOUR QUARTERS
ASSETS AND EQUITY | PROFITABILITY | CAPITAL ISSUES | ||||||||||||||||||||||||||||||||||||||||
State |
Total
Assets ($000) |
Total
Equity ($000) |
Total
Tang. Equity ($000) |
ROAA
(%) |
Core
ROAA (%) |
ROAE
(%) |
Core
ROAE (%) |
Exchange |
Number of
Shares Outstanding |
Mkt. Value
of Shares ($000) |
||||||||||||||||||||||||||||||||
SZBI |
SOUTHFIRST BANCSHARES |
AL | 88,014 | 9,739 | 9,739 | 0.29 | 0.39 | 2.62 | 3.55 | OTC PINK | 702,000 | 3,475 | ||||||||||||||||||||||||||||||
BOFI |
BOFI HOLDING |
CA | 9,982,320 | 921,653 | 911,425 | 1.64 | 0.82 | 16.91 | 8.47 | NASDAQ | 62,552,868 | 2,559,038 | ||||||||||||||||||||||||||||||
BYFC |
BROADWAY FINANCIAL CORP |
CA | 399,433 | 47,445 | 47,426 | 0.43 | 0.43 | 3.81 | 3.83 | NASDAQ | 27,418,798 | 60,321 | ||||||||||||||||||||||||||||||
MLGF |
MALAGA FINANCIAL CORPORATION |
CA | 1,046,819 | 128,832 | 128,832 | 1.41 | 1.33 | 10.97 | 10.39 | OTC BB | 6,330,000 | 197,813 | ||||||||||||||||||||||||||||||
PROV |
PROVIDENT FINANCIAL HOLDINGS |
CA | 1,176,602 | 120,600 | 119,706 | 0.14 | 0.25 | 1.37 | 2.37 | NASDAQ | 7,460,804 | 142,352 | ||||||||||||||||||||||||||||||
FBNK |
FIRST CONNECTICUT BANCORP |
CT | 3,137,949 | 276,861 | 271,455 | 0.56 | 0.75 | 6.27 | 8.37 | NASDAQ | 15,984,932 | 489,139 | ||||||||||||||||||||||||||||||
SIFI |
SI FINANCIAL GROUP |
CT | 1,598,222 | 168,919 | 151,197 | 0.35 | 0.49 | 3.26 | 4.63 | NASDAQ | 12,242,434 | 180,576 | ||||||||||||||||||||||||||||||
UBNK |
UNITED FINANCIAL BANCORP |
CT | 7,088,214 | 693,000 | 560,232 | 0.81 | 0.87 | 8.22 | 8.89 | NASDAQ | 50,976,667 | 893,111 | ||||||||||||||||||||||||||||||
WSFS |
WSFS FINANCIAL CORP |
DE | 6,987,931 | 746,279 | 558,489 | 0.99 | 1.23 | 9.36 | 11.63 | NASDAQ | 32,003,414 | 1,705,782 | ||||||||||||||||||||||||||||||
ABCB |
AMERIS BANCORP |
GA | 8,022,828 | 868,944 | 640,968 | 1.02 | 1.23 | 9.71 | 11.69 | NASDAQ | 38,327,081 | 2,044,750 | ||||||||||||||||||||||||||||||
CHFN |
CHARTER FINANCIAL CORP |
GA | 1,659,791 | 221,587 | 177,328 | 0.98 | 1.00 | 7.26 | 7.41 | NASDAQ | 15,137,631 | 365,574 | ||||||||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES |
GA | 292,476 | 75,649 | 75,649 | 0.02 | 0.31 | 0.09 | 1.22 | NASDAQ | 7,538,250 | 83,750 | ||||||||||||||||||||||||||||||
TBNK |
TERRITORIAL BANCORP |
HI | 2,055,724 | 232,372 | 232,121 | 0.78 | 0.79 | 6.58 | 6.64 | NASDAQ | 9,733,830 | 301,749 | ||||||||||||||||||||||||||||||
WCFB |
WCF BANCORP |
IA | 124,421 | 28,040 | 27,980 | 0.20 | 0.06 | 0.82 | 0.24 | NASDAQ | 2,561,542 | 23,054 | ||||||||||||||||||||||||||||||
AJSB |
AJS BANCORP |
IL | 193,870 | 29,115 | 29,113 | 0.06 | 0.31 | 0.37 | 2.09 | OTC BB | 2,149,860 | 30,206 | ||||||||||||||||||||||||||||||
AFBA |
ALLIED FIRST BANCORP |
IL | 83,191 | 9,839 | 9,839 | (0.28 | ) | 0.72 | (2.58 | ) | 6.55 | OTC BB | 1,351,892 | 1,825 | ||||||||||||||||||||||||||||
BFFI |
BEN FRANKLIN FINANCIAL |
IL | 101,544 | 10,357 | 10,357 | (0.60 | ) | (0.65 | ) | (7.52 | ) | (8.13 | ) | OTC BB | 1,270,000 | 10,478 | ||||||||||||||||||||||||||
BTHT |
BEST HOMETOWN BANCORP |
IL | 107,949 | 12,186 | 12,186 | (0.29 | ) | (0.24 | ) | (2.66 | ) | (2.26 | ) | OTC PINK | 826,208 | 11,154 | ||||||||||||||||||||||||||
GTPS |
GREAT AMERICAN BANCORP |
IL | 180,924 | 17,111 | 15,931 | 0.37 | 0.49 | 3.83 | 5.08 | OTC BB | 438,206 | 13,957 | ||||||||||||||||||||||||||||||
IROQ |
IF BANCORP |
IL | 619,310 | 81,613 | 80,822 | 0.31 | 0.34 | 2.25 | 2.51 | NASDAQ | 3,891,408 | 93,005 | ||||||||||||||||||||||||||||||
JXSB |
JACKSONVILLE BANCORP |
IL | 323,400 | 47,769 | 44,499 | 0.89 | 1.10 | 6.49 | 8.03 | NASDAQ | 1,814,467 | 61,057 | ||||||||||||||||||||||||||||||
MCPH |
MIDLAND CAPITAL HOLDINGS CORP |
IL | 117,583 | 10,859 | 10,859 | 0.08 | 0.11 | 0.84 | 1.15 | OTC PINK | 372,600 | 8,942 | ||||||||||||||||||||||||||||||
OTTW |
OTTAWA SAVINGS BANCORP |
IL | 267,587 | 51,256 | 49,899 | 0.40 | 0.75 | 1.91 | 3.60 | OTC BB | 3,415,490 | 47,407 |
115
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 2 |
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED FDIC-INSURED SAVINGS INSTITUTIONS
MOST RECENT FOUR QUARTERS
ASSETS AND EQUITY | PROFITABILITY | CAPITAL ISSUES | ||||||||||||||||||||||||||||||||||||||||
State |
Total
Assets ($000) |
Total
Equity ($000) |
Total
Tang. Equity ($000) |
ROAA
(%) |
Core
ROAA (%) |
ROAE
(%) |
Core
ROAE (%) |
Exchange |
Number of
Shares Outstanding |
Mkt. Value
of Shares ($000) |
||||||||||||||||||||||||||||||||
RYFL |
ROYAL FINANCIAL |
IL | 429,887 | 45,207 | 42,201 | 0.76 | 1.07 | 7.06 | 9.99 | OTC BB | 2,507,112 | 43,749 | ||||||||||||||||||||||||||||||
SUGR |
SUGAR CREEK FINANCIAL CORP |
IL | 93,119 | 10,665 | 10,665 | 0.16 | 0.14 | 1.44 | 1.27 | OTC BB | 804,807 | 10,141 | ||||||||||||||||||||||||||||||
FDLB |
FIDELITY FEDERAL BANCORP |
IN | 711,698 | 85,222 | 83,297 | 2.64 | 1.27 | 22.13 | 10.68 | OTC PINK | 844,763 | 21,119 | ||||||||||||||||||||||||||||||
FCAP |
FIRST CAPITAL |
IN | 765,381 | 79,561 | 72,013 | 0.98 | 1.02 | 9.19 | 9.57 | NASDAQ | 3,356,964 | 139,482 | ||||||||||||||||||||||||||||||
NWIN |
NORTHWEST INDIANA BANCORP |
IN | 938,508 | 89,903 | 86,664 | 1.00 | 0.90 | 10.18 | 9.15 | OTC BB | 2,924,978 | 125,628 | ||||||||||||||||||||||||||||||
TDCB |
THIRD CENTURY BANCORP |
IN | 152,674 | 15,390 | 15,189 | 0.43 | 0.51 | 4.22 | 4.98 | OTC BB | 1,420,000 | 19,809 | ||||||||||||||||||||||||||||||
UCBA |
UNITED COMMUNITY BANCORP |
IN | 548,302 | 71,175 | 67,681 | 0.66 | 0.78 | 5.02 | 5.85 | NASDAQ | 4,217,619 | 114,719 | ||||||||||||||||||||||||||||||
WEIN |
WEST END INDIANA BANCSHARES |
IN | 308,356 | 28,315 | 27,510 | 0.23 | 0.44 | 2.45 | 4.67 | OTC BB | 1,066,858 | 30,939 | ||||||||||||||||||||||||||||||
CFFN |
CAPITOL FEDERAL FINANCIAL |
KS | 9,133,171 | 1,364,740 | 1,364,272 | 1.07 | 0.93 | 7.14 | 6.22 | NASDAQ | 138,250,235 | 1,819,373 | ||||||||||||||||||||||||||||||
PBSK |
POAGE BANKSHARES |
KY | 450,159 | 60,937 | 58,150 | (0.56 | ) | (0.61 | ) | (3.95 | ) | (4.36 | ) | NASDAQ | 3,499,846 | 68,807 | ||||||||||||||||||||||||||
CTUY |
CENTURY NEXT FINANCIAL CORP |
LA | 289,806 | 26,734 | 26,734 | 0.94 | 1.09 | 10.12 | 11.74 | OTC BB | 1,050,000 | 35,700 | ||||||||||||||||||||||||||||||
FPBF |
FPB FINANCIAL CORP |
LA | 364,858 | 36,122 | 36,044 | 0.71 | 0.78 | 7.60 | 8.31 | OTC PINK | 2,650,000 | 52,338 | ||||||||||||||||||||||||||||||
HRGG |
HERITAGE NOLA BANCORP |
LA | 112,497 | 24,239 | 23,898 | 0.48 | 0.50 | 2.66 | 2.77 | OTC PINK | 1,653,125 | 20,631 | ||||||||||||||||||||||||||||||
HIBE |
HIBERNIA BANCORP |
LA | 130,147 | 18,708 | 18,708 | 0.13 | 0.24 | 0.91 | 1.67 | OTC BB | 1,032,667 | 32,942 | ||||||||||||||||||||||||||||||
HFBL |
HOME FED BANCORP OF LOUISIANA |
LA | 412,960 | 46,410 | 46,242 | 0.88 | 1.04 | 7.98 | 9.43 | NASDAQ | 1,908,581 | 60,025 | ||||||||||||||||||||||||||||||
BHBK |
BLUE HILLS BANCORP |
MA | 2,670,738 | 395,444 | 384,280 | 0.60 | 0.68 | 4.08 | 4.61 | NASDAQ | 26,861,521 | 596,326 | ||||||||||||||||||||||||||||||
BLMT |
BSB BANCORP INC. |
MA | 2,747,954 | 184,565 | 183,512 | 0.65 | 0.77 | 9.45 | 11.27 | NASDAQ | 9,741,471 | 335,107 | ||||||||||||||||||||||||||||||
HONE |
HARBORONE BANCORP |
MA | 2,696,517 | 344,857 | 308,399 | 0.42 | 0.39 | 3.23 | 3.00 | NASDAQ | 32,622,695 | 617,874 | ||||||||||||||||||||||||||||||
HIFS |
HINGHAM INSTITUTION FOR SAVINGS |
MA | 2,240,198 | 186,158 | 186,158 | 1.29 | 1.31 | 15.76 | 15.99 | NASDAQ | 2,132,750 | 468,565 | ||||||||||||||||||||||||||||||
EBSB |
MERIDIAN BANCORP |
MA | 5,460,900 | 655,607 | 632,505 | 0.89 | 0.91 | 7.11 | 7.32 | NASDAQ | 54,068,874 | 1,035,419 | ||||||||||||||||||||||||||||||
PLRM |
PILGRIM BANCSHARES |
MA | 262,741 | 33,890 | 33,890 | 0.50 | 0.61 | 3.89 | 4.74 | OTC BB | 2,264,950 | 45,639 | ||||||||||||||||||||||||||||||
PVBC |
PROVIDENT BANCORP |
MA | 890,772 | 117,330 | 117,330 | 0.90 | 0.72 | 7.00 | 5.56 | NASDAQ | 9,628,496 | 252,267 | ||||||||||||||||||||||||||||||
RNDB |
RANDOLPH BANCORP |
MA | 533,539 | 79,871 | 73,190 | (0.43 | ) | (0.48 | ) | (2.72 | ) | (3.06 | ) | NASDAQ | 6,029,776 | 101.300 |
116
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 3 |
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED FDIC-INSURED SAVINGS INSTITUTIONS
MOST RECENT FOUR QUARTERS
ASSETS AND EQUITY | PROFITABILITY | CAPITAL ISSUES | ||||||||||||||||||||||||||||||||||||||||
State |
Total
Assets ($000) |
Total
Equity ($000) |
Total
Tang. Equity ($000) |
ROAA
(%) |
Core
ROAA (%) |
ROAE
(%) |
Core
ROAE (%) |
Exchange |
Number of
Shares Outstanding |
Mkt. Value
of Shares ($000) |
||||||||||||||||||||||||||||||||
WEBK |
WELLESLEY BANCORP |
MA | 819,586 | 60,103 | 60,002 | 0.64 | 0.77 | 8.41 | 10.23 | NASDAQ | 2,506,532 | 84,796 | ||||||||||||||||||||||||||||||
WNEB |
WESTERN NEW ENGLAND BANCORP |
MA | 2,085,531 | 242,623 | 225,832 | 0.52 | 0.75 | 4.32 | 6.25 | NASDAQ | 30,138,083 | 331,519 | ||||||||||||||||||||||||||||||
IFSB |
COLOMBO BANK |
MD | 194,655 | 21,367 | 21,367 | 0.62 | 0.63 | 5.90 | 6.03 | OTC PINK | 1,552,000 | 155 | ||||||||||||||||||||||||||||||
HBK |
HAMILTON BANCORP |
MD | 526,310 | 51,228 | 42,052 | (0.12 | ) | 0.33 | (1.03 | ) | 2.92 | NASDAQ | 3,411,075 | 53,554 | ||||||||||||||||||||||||||||
MBCQ |
MB BANCORP |
MD | 148,391 | 30,128 | 30,128 | 0.17 | (0.40 | ) | 0.80 | (1.88 | ) | OTC BB | 19,400,200 | 322,043 | ||||||||||||||||||||||||||||
SVBI |
SEVERN BANCORP |
MD | 801,183 | 92,417 | 90,814 | 0.47 | 0.75 | 4.38 | 6.92 | NASDAQ | 12,247,626 | 105,942 | ||||||||||||||||||||||||||||||
FBC |
FLAGSTAR BANCORP |
MI | 17,735,862 | 1,427,000 | 1,116,713 | 0.45 | 0.95 | 5.37 | 11.24 | NYSE | 57,399,993 | 1,966,524 | ||||||||||||||||||||||||||||||
NWBB |
NEW BANCORP |
MI | 121,562 | 15,447 | 14,373 | 1.04 | 1.07 | 8.47 | 8.73 | OTC BB | 719,531 | 14,031 | ||||||||||||||||||||||||||||||
SBT |
STERLING BANCORP |
MI | 3,037,848 | 288,512 | 279,944 | 1.55 | 1.74 | 18.58 | 20.91 | NASDAQ | 53,002,963 | 708,120 | ||||||||||||||||||||||||||||||
STBI |
STURGIS BANCORP |
MI | 444,409 | 39,742 | 32,519 | 0.84 | 0.79 | 9.11 | 8.49 | OTC BB | 2,440,000 | 46,604 | ||||||||||||||||||||||||||||||
HMNF |
HMN FINANCIAL |
MN | 722,080 | 82,056 | 79,200 | 0.70 | 0.79 | 6.28 | 7.09 | NASDAQ | 4,504,234 | 90,535 | ||||||||||||||||||||||||||||||
REDW |
REDWOOD FINANCIAL |
MN | 295,144 | 34,822 | 29,127 | 1.12 | 0.96 | 9.56 | 8.23 | OTC PINK | 438,551 | 23,682 | ||||||||||||||||||||||||||||||
CCFC |
CCSB FINANCIAL CORP |
MO | 98,629 | 10,733 | 10,668 | 0.50 | 0.50 | 4.59 | 4.57 | OTC PINK | 917,000 | 12,104 | ||||||||||||||||||||||||||||||
CFDB |
CENTRAL FEDERAL S&L ASSN OF ROLLA |
MO | 67,707 | 25,936 | 25,936 | 0.17 | 0.17 | 0.43 | 0.43 | OTC PINK | 1,670,220 | 24,051 | ||||||||||||||||||||||||||||||
NASB |
NASB FINANCIAL |
MO | 1,910,516 | 223,978 | 208,163 | 1.34 | 1.35 | 11.75 | 11.77 | OTC BB | 7,384,851 | 304,182 | ||||||||||||||||||||||||||||||
QRRY |
QUARRY CITY S&L ASSN |
MO | 53,646 | 8,703 | 8,433 | 0.51 | 0.59 | 3.17 | 3.68 | OTC BB | 407,691 | 6,319 | ||||||||||||||||||||||||||||||
KSBI |
KS BANCORP |
NC | 375,395 | 34,827 | 34,827 | 0.68 | 0.91 | 7.04 | 9.42 | OTC BB | 1,309,500 | 36,666 | ||||||||||||||||||||||||||||||
LSFG |
LIFESTORE FINANCIAL GROUP |
NC | 285,617 | 28,495 | 27,650 | 0.69 | 0.79 | 6.71 | 7.74 | OTC PINK | 1,050,000 | 27,300 | ||||||||||||||||||||||||||||||
UBNC |
UNION BANK |
NC | 707,429 | 73,441 | 57,389 | 0.56 | 0.77 | 5.38 | 7.49 | OTC PINK | 5,816,138 | 95,385 | ||||||||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP |
NE | 305,633 | 35,659 | 33,360 | 0.41 | 0.49 | 3.13 | 3.72 | NASDAQ | 3,317,670 | 35,698 | ||||||||||||||||||||||||||||||
MCBK |
MADISON COUNTY FINANCIAL |
NE | 384,889 | 68,360 | 65,526 | 1.02 | 1.32 | 5.77 | 7.51 | OTC PINK | 3,140,000 | 81,640 | ||||||||||||||||||||||||||||||
ISBC |
INVESTORS BANCORP |
NJ | 25,232,421 | 3,092,081 | 2,990,473 | 0.56 | 0.76 | 4.43 | 6.03 | NASDAQ | 301,796,438 | 3,859,976 | ||||||||||||||||||||||||||||||
KRNY |
KEARNY FINANCIAL CORP |
NJ | 4,933,700 | 991,201 | 882,037 | 0.34 | 0.38 | 1.61 | 1.83 | NASDAQ | 78,765,003 | 1,059,389 |
117
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 4 |
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED FDIC-INSURED SAVINGS INSTITUTIONS
MOST RECENT FOUR QUARTERS
ASSETS AND EQUITY | PROFITABILITY | CAPITAL ISSUES | ||||||||||||||||||||||||||||||||||||||||
State |
Total
Assets ($000) |
Total
Equity ($000) |
Total
Tang, Equity ($000) |
ROAA
(%) |
Core
ROAA (%) |
ROAE
(%) |
Core
ROAE (%) |
Exchange |
Number of
Shares Outstanding |
Mkt. Value
of Shares ($000) |
||||||||||||||||||||||||||||||||
MGYR |
MAGYAR
|
NJ | 607,831 | 50,027 | 49,974 | 0.27 | 0.38 | 3.28 | 4.59 | NASDAQ | 5,820,746 | 74,971 | ||||||||||||||||||||||||||||||
MSBF |
MB BANCORP |
NJ | 563,980 | 69,759 | 69,759 | 0.61 | 0.79 | 4.84 | 6.19 | NASDAQ | 5,524,095 | 118,768 | ||||||||||||||||||||||||||||||
NFBK |
NORTHFIELD BANCORP |
NJ | 4,069,209 | 642,926 | 603,110 | 0.63 | 0.92 | 3.94 | 5.68 | NASDAQ | 49,126,879 | 816,489 | ||||||||||||||||||||||||||||||
OCFC |
OCEANFIRST FINANCIAL CORP |
NJ | 7,501,048 | 1,007,460 | 649,856 | 0.61 | 0.73 | 5.14 | 6.18 | NASDAQ | 48,105,623 | 1,441,244 | ||||||||||||||||||||||||||||||
ORIT |
ORITANI FINANCIAL CORP |
NJ | 4,142,777 | 554,691 | 554,691 | 0.78 | 1.02 | 5.80 | 7.59 | NASDAQ | 46,604,276 | 754,989 | ||||||||||||||||||||||||||||||
PFS |
PROVIDENT FINANCIAL SERVICES |
NJ | 9,734,242 | 1,305,035 | 885,315 | 1.02 | 1.07 | 7.58 | 7.94 | NYSE | 66,729,095 | 1,837,052 | ||||||||||||||||||||||||||||||
BCTF |
BANCORP 34 |
NM | 340,840 | 49,618 | 49,216 | 0.34 | 0.99 | 2.33 | 6.69 | NASDAQ | 3,388,601 | 52,354 | ||||||||||||||||||||||||||||||
CARV |
CARVER BANCORP |
NY | 694,186 | 55,589 | 55,408 | 1.47 | (0.64 | ) | 20.22 | (8.81 | ) | NASDAQ | 3,698,247 | 17,123 | ||||||||||||||||||||||||||||
DCOM |
DIME COMMUNITY BANCSHARES |
NY | 6,325,917 | 607,957 | 550,812 | 0.87 | 0.75 | 9.35 | 8.05 | NASDAQ | 37,484,270 | 730,943 | ||||||||||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK |
NY | 553,389 | 56,886 | 43,134 | 0.87 | 0.57 | 8.03 | 5.21 | NASDAQ | 2,643,652 | 54,010 | ||||||||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
NY | 312,853 | 31,315 | 30,421 | 0.24 | 0.26 | 2.28 | 2.51 | NASDAQ | 1,941,253 | 34,457 | ||||||||||||||||||||||||||||||
NYCB |
NEW YORK COMMUNITY BANCORP |
NY | 49,654,874 | 6,780,717 | 4,339,399 | 0.96 | 0.79 | 6.93 | 5.74 | NYSE | 490,379,532 | 5,413,790 | ||||||||||||||||||||||||||||||
PCSB |
PCSB FINANCIAL CORP |
NY | 1,456,724 | 284,680 | 278,111 | 0.28 | 0.39 | 1.43 | 1.97 | NASDAQ | 18,165,110 | 360,941 | ||||||||||||||||||||||||||||||
PDLB |
PDL COMMUNITY BANCORP |
NY | 947,938 | 165,714 | 165,714 | 0.16 | 0.28 | 0.99 | 1.69 | NASDAQ | 18,463,028 | 290,054 | ||||||||||||||||||||||||||||||
SNNF |
SENECA FIN CORP |
NY | 182,328 | 18,338 | 18,338 | 0.32 | 0.45 | 3.78 | 5.26 | OTC PINK | 1,978,923 | 16,920 | ||||||||||||||||||||||||||||||
SNNY |
SUNNYSIDE BANCORP |
NY | 84,406 | 10,382 | 10,382 | (0.37 | ) | (0.04 | ) | (2.93 | ) | (0.30 | ) | OTC BB | 793,500 | 12,791 | ||||||||||||||||||||||||||
TRST |
TRUSTCO BANK CORP NY |
NY | 4,930,915 | 462,097 | 461,544 | 0.96 | 1.06 | 10.32 | 11.38 | NASDAQ | 96,358,600 | 857,592 | ||||||||||||||||||||||||||||||
CNNB |
CINCINNATI BANCORP |
OH | 175,051 | 19,527 | 18,490 | 0.60 | 0.42 | 5.33 | 3.66 | OTC BB | 1,752,947 | 22,525 | ||||||||||||||||||||||||||||||
CCSB |
COMM SAVINGS BANCORP |
OH | 52,160 | 9,006 | 9,006 | (0.18 | ) | (0.35 | ) | (1.05 | ) | (2.02 | ) | OTC BB | 441,290 | 6,443 | ||||||||||||||||||||||||||
CIBN |
COMMUNITY INVESTORS BANCORP |
OH | 144,133 | 12,980 | 12,397 | 0.69 | 0.53 | 7.76 | 6.00 | OTC PINK | 525,000 | 8,138 | ||||||||||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP |
OH | 132,160 | 27,491 | 27,491 | 0.51 | 0.31 | 2.79 | 1.68 | NASDAQ | 1,612,808 | 26,369 | ||||||||||||||||||||||||||||||
FDEF |
FIRST DEFIANCE FINANCIAL CORP |
OH | 3,022,984 | 379,214 | 265,439 | 1.31 | 1.34 | 10.49 | 10.71 | NASDAQ | 10,181,899 | 682,798 | ||||||||||||||||||||||||||||||
FNFI |
FIRST NILES FINANCIAL |
OH | 99,784 | 11,186 | 11,186 | 0.41 | 0.52 | 3.34 | 4.25 | OTC PINK | 1,113,172 | 10,853 |
118
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 5 |
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED FDIC-INSURED SAVINGS INSTITUTIONS
MOST RECENT FOUR QUARTERS
ASSETS AND EQUITY | PROFITABILITY |
CAPITAL ISSUES |
||||||||||||||||||||||||||||||||||||||||
State |
Total
Assets ($000) |
Total
Equity ($000) |
Total
Tang. Equity ($000) |
ROAA
(%) |
Core
ROAA (%) |
ROAE
(%) |
Core
ROAE (%) |
Exchange |
Number of
Shares Outstanding |
Mkt. Value
of Shares ($000) |
||||||||||||||||||||||||||||||||
HCFL |
HOME CITY FINANCIAL CORP |
OH | 167,636 | 19,575 | 19,575 | 1.47 | 1.48 | 12.91 | 12.99 | OTC PINK | 816,818 | 23,606 | ||||||||||||||||||||||||||||||
HLFN |
HOME LOAN FINANCIAL CORP |
OH | 201,246 | 24,610 | 24,482 | 1.49 | 1.49 | 13.27 | 13.28 | OTC BB | 1,500,000 | 43,500 | ||||||||||||||||||||||||||||||
MWBC |
MW BANCORP INC |
OH | 163,242 | 16,091 | 15,956 | (0.13 | ) | 0.33 | (1.22 | ) | 3.05 | OTC BB | 891,209 | 25,997 | ||||||||||||||||||||||||||||
PPSF |
PEOPLES-SIDNEY FINANCIAL CORP |
OH | 113,378 | 14,565 | 14,565 | 0.55 | 0.57 | 4.13 | 4.22 | OTC PINK | 1,360,000 | 13,736 | ||||||||||||||||||||||||||||||
PFOH |
PERPETUAL FEDERAL SAVINGS BANK |
OH | 394,980 | 71,248 | 71,248 | 1.39 | 1.48 | 7.84 | 8.34 | OTC PINK | 2,470,032 | 72,224 | ||||||||||||||||||||||||||||||
UCFC |
UNITED COMMUNITY FINANCIAL CORP |
OH | 2,695,178 | 296,195 | 265,250 | 1.10 | 1.15 | 9.87 | 10.39 | NASDAQ | 49,882,491 | 548,209 | ||||||||||||||||||||||||||||||
VERF |
VERSAILLES FINANCIAL CORP |
OH | 56,530 | 10,598 | 10,598 | 0.43 | 0.67 | 2.30 | 3.53 | OTC BB | 387,867 | 9,406 | ||||||||||||||||||||||||||||||
WAYN |
WAYNE SAVINGS BANCSHARES |
OH | 454,254 | 41,060 | 38,799 | 0.90 | 0.98 | 9.66 | 10.49 | OTC BB | 2,781,839 | 52,577 | ||||||||||||||||||||||||||||||
BNCL |
BENEFICIAL MUTUAL BANCORP |
PA | 5,792,663 | 1,016,636 | 842,514 | 0.44 | 0.70 | 2.46 | 3.95 | NASDAQ | 75,264,135 | 1,219,279 | ||||||||||||||||||||||||||||||
ESSA |
ESSA BANCORP |
PA | 1,820,924 | 177,378 | 161,792 | 0.26 | 0.43 | 2.63 | 4.26 | NASDAQ | 11,732,222 | 185,721 | ||||||||||||||||||||||||||||||
HARL |
HARLEYSVILLE SAVINGS FINANCIAL |
PA | 774,997 | 70,366 | 70,366 | 0.85 | 0.85 | 9.46 | 9.54 | OTC PINK | 3,772,166 | 85,364 | ||||||||||||||||||||||||||||||
NWBI |
NORTHWEST BANCSHARES |
PA | 9,601,600 | 1,215,254 | 880,496 | 1.07 | 0.82 | 8.43 | 6.47 | NASDAQ | 102,599,662 | 1,784,208 | ||||||||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP |
PA | 944,329 | 132,060 | 125,319 | 0.75 | 0.93 | 5.11 | 6.33 | NASDAQ | 8,998,235 | 173,666 | ||||||||||||||||||||||||||||||
QNTO |
QUAINT OAK BANCORP |
PA | 250,300 | 22,485 | 21,502 | 0.68 | 0.84 | 7.30 | 8.97 | OTC PINK | 1,954,571 | 26,094 | ||||||||||||||||||||||||||||||
STND |
STANDARD FINANCIAL CORP |
PA | 976,781 | 133,310 | 103,915 | 0.61 | 0.73 | 4.50 | 5.38 | OTC BB | 4,796,643 | 145,146 | ||||||||||||||||||||||||||||||
CWAY |
COASTWAY BANCORP |
RI | 779,976 | 71,868 | 71,815 | 0.40 | 0.46 | 4.07 | 4.68 | NASDAQ | 4,386,351 | 121,502 | ||||||||||||||||||||||||||||||
FSGB |
FIRST FEDERAL OF SOUTH CAROLINA |
SC | 84,378 | 6,039 | 5,659 | 1.30 | 1.35 | 18.54 | 19.26 | OTC PINK | 24,066,545 | 240,665 | ||||||||||||||||||||||||||||||
CASH |
META FINANCIAL GROUP |
SD | 4,301,708 | 443,703 | 299,256 | 1.00 | 1.13 | 10.91 | 12.30 | NASDAQ | 9,699,591 | 944,740 | ||||||||||||||||||||||||||||||
AFCB |
ATHENS BANCSHARES CORP |
TN | 482,009 | 48,553 | 45,613 | 1.05 | 1.15 | 10.00 | 10.92 | OTC BB | 1,810,000 | 94,392 | ||||||||||||||||||||||||||||||
SFBK |
SFB BANCORP |
TN | 67,005 | 10,006 | 9,832 | 0.54 | 0.60 | 3.49 | 3.87 | OTC PINK | 397,000 | 12,704 | ||||||||||||||||||||||||||||||
UNTN |
UNITED TENNESSEE BANKSHARES |
TN | 205,755 | 20,645 | 20,645 | 0.65 | 0.81 | 6.28 | 7.87 | OTC PINK | 827,000 | 18,244 | ||||||||||||||||||||||||||||||
BAFI |
BANCAFFILIATED |
TX | 670,930 | 65,325 | 62,329 | 0.95 | 1.07 | 9.36 | 10.57 | OTC PINK | 278,450 | 30,351 | ||||||||||||||||||||||||||||||
TBK |
TRIUMPH BANCORP |
TX | 3,405,010 | 402,944 | 339,021 | 1.20 | 1.37 | 10.14 | 11.61 | NASDAQ | 20,824,509 | 848,599 |
119
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 6 |
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED FDIC-INSURED SAVINGS INSTITUTIONS
MOST RECENT FOUR QUARTERS
ASSETS AND EQUITY | PROFITABILITY | CAPITAL ISSUES | ||||||||||||||||||||||||||||||||||||||||
State |
Total
Assets ($000) |
Total
Equity ($000) |
Total
Tang. Equity ($000) |
ROAA
(%) |
Core
ROAA (%) |
ROAE
(%) |
Core
ROAE (%) |
Exchange |
Number of
Shares Outstanding |
Mkt. Value
of Shares ($000) |
||||||||||||||||||||||||||||||||
ANCB |
ANCHOR BANCORP | WA | 479,755 | 66,253 | 65,996 | 0.57 | 1.01 | 4.03 | 7.18 | NASDAQ | 2,484,030 | 64,957 | ||||||||||||||||||||||||||||||
FSBW |
FS BANCORP | WA | 1,043,205 | 125,442 | 114,374 | 1.66 | 1.51 | 14.40 | 13.10 | NASDAQ | 3,695,552 | 233,744 | ||||||||||||||||||||||||||||||
RVSB |
RIVERVIEW BANCORP | WA | 1,151,535 | 116,901 | 88,334 | 0.90 | 1.12 | 8.82 | 10.96 | NASDAQ | 22,570,179 | 190,492 | ||||||||||||||||||||||||||||||
TSBK |
TIMBERLAND BANCORP | WA | 1,001,201 | 117,843 | 110,283 | 1.63 | 1.64 | 13.97 | 14.10 | NASDAQ | 7,390,227 | 275,951 | ||||||||||||||||||||||||||||||
FFBW |
FFBW, INC | WI | 260,573 | 59,039 | 58,940 | (0.02 | ) | 0.07 | (0.13 | ) | 0.41 | NASDAQ | 6,612,500 | 73,333 | ||||||||||||||||||||||||||||
HWIS |
HOME BANCORP
|
WI | 143,707 | 10,715 | 10,715 | (0.04 | ) | (0.05 | ) | (0.59 | ) | (0.61 | ) | OTC PINK | 899,190 | 12,589 | ||||||||||||||||||||||||||
WSBF |
WATERSTONE FINANCIAL | WI | 1,836,338 | 397,419 | 395,839 | 1.43 | 1.54 | 6.47 | 6.97 | NASDAQ | 29,323,807 | 499,971 | ||||||||||||||||||||||||||||||
WBBW |
WESTBURY BANCORP | WI | 801,259 | 74,453 | 73,748 | 0.42 | 0.53 | 4.37 | 5.57 | OTC BB | 3,850,000 | 85,971 |
120
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
Page 7 |
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED FDIC-INSURED SAVINGS INSTITUTIONS
MOST RECENT FOUR QUARTERS
ASSETS AND EQUITY | PROFITABILITY | CAPITAL ISSUES | ||||||||||||||||||||||||||||||||||||||
Total
Assets ($000) |
Total
Equity ($000) |
Total
Tang. Equity ($000) |
ROAA
(%) |
Core
ROAA (%) |
ROAE
(%) |
Core
ROAE (%) |
Exchange |
Number of
Shares Outstanding |
Mkt. Value
of Shares ($000) |
|||||||||||||||||||||||||||||||
ALL INSTITUTIONS |
|
|||||||||||||||||||||||||||||||||||||||
AVERAGE |
2,245,051 | 273,993 | 227,960 | 0.84 | 0.87 | 6.82 | 7.06 | 20,565,278 | 377,766 | |||||||||||||||||||||||||||||||
MEDIAN |
548,302 | 66,253 | 62,329 | 0.61 | 0.75 | 5.33 | 6.19 | 3,499,846 | 83,750 | |||||||||||||||||||||||||||||||
HIGH |
49,654,874 | 6,780,717 | 4,339,399 | 2.64 | 1.74 | 22.13 | 20.91 | 490,379,532 | 5,413,790 | |||||||||||||||||||||||||||||||
LOW |
52,160 | 6,039 | 5,659 | (0.60 | ) | (0.65 | ) | (7.52 | ) | (8.81 | ) | 278,450 | 155 | |||||||||||||||||||||||||||
AVERAGE FOR STATE |
||||||||||||||||||||||||||||||||||||||||
WI |
760,469 | 135,407 | 134,811 | 0.97 | 1.07 | 5.46 | 6.05 | 10,171,374 | 167,966 | |||||||||||||||||||||||||||||||
AVERAGE BY REGION |
|
|||||||||||||||||||||||||||||||||||||||
MID-ATLANTIC |
4,280,264 | 571,104 | 481,698 | 0.69 | 0.82 | 5.18 | 6.12 | 44,010,205 | 788,492 | |||||||||||||||||||||||||||||||
MIDWEST |
966,193 | 100,554 | 87,854 | 0.77 | 1.01 | 7.24 | 9.56 | 6,653,461 | 145,149 | |||||||||||||||||||||||||||||||
NORTH CENTRAL |
1,581,595 | 211,521 | 195,629 | 1.04 | 1.01 | 8.03 | 7.82 | 15,662,871 | 305,943 | |||||||||||||||||||||||||||||||
NORTHEAST |
4,089,849 | 499,365 | 383,878 | 0.85 | 0.77 | 6.86 | 6.25 | 38,812,152 | 555,907 | |||||||||||||||||||||||||||||||
SOUTHEAST |
1,115,518 | 127,084 | 100,482 | 0.94 | 1.11 | 8.33 | 9.90 | 8,816,468 | 274,810 | |||||||||||||||||||||||||||||||
SOUTHWEST |
715,881 | 83,763 | 75,274 | 1.00 | 1.19 | 8.63 | 10.20 | 4,098,242 | 141,618 | |||||||||||||||||||||||||||||||
WEST |
2,037,399 | 208,593 | 202,055 | 1.32 | 0.91 | 12.43 | 8.59 | 16,626,254 | 447,380 | |||||||||||||||||||||||||||||||
AVERAGE BY EXCHANGE |
|
|||||||||||||||||||||||||||||||||||||||
NYSE |
25,708,326 | 3,170,917 | 2,113,809 | 0.85 | 0.86 | 6.78 | 6.87 | 204,836,207 | 3,072,455 | |||||||||||||||||||||||||||||||
NASDAQ |
2,831,254 | 345,900 | 308,604 | 0.83 | 0.87 | 6.77 | 7.09 | 27,722,424 | 537,805 | |||||||||||||||||||||||||||||||
OTC |
366,001 | 41,858 | 39,499 | 0.83 | 0.89 | 7.14 | 7.70 | 2,623,130 | 62,494 | |||||||||||||||||||||||||||||||
OTC PINK |
262,922 | 30,577 | 29,309 | 0.94 | 0.88 | 8.12 | 7.60 | 2,388,134 | 36,672 |
121
EXHIBIT 32
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
RECENT STANDARD CONVERSIONS
PRICE CHANGES FROM IPO DATE
January 1, 2017 through August 7, 2018
Percentage Price Change
From Initial Trading Date |
||||||||||||||||||||||||
Company Name |
Ticker |
Conversion
Date |
Exchange |
One
Day |
One
Week |
One
Month |
Through
8/07/2018 |
|||||||||||||||||
Community Savings Bancorp |
CCSB | 1/10/2017 | OTC MKT | 30.00 | 30.00 | 30.00 | 50.00 | |||||||||||||||||
HV Bancorp, Inc. |
HVBC | 1/12/2017 | NASDAQ | 36.70 | 41.30 | 39.90 | 51.50 | |||||||||||||||||
PCSB Financial Corp. |
PCSB | 4/21/2017 | NASDAQ | 64.60 | 63.50 | 63.60 | 100.10 | |||||||||||||||||
Community First Bancshares |
CFBI | 4/28/2017 | NASDAQ | 17.40 | 33.70 | 31.50 | 16.40 | |||||||||||||||||
Eagle Financial Bancorp |
EFBI | 7/21/2017 | NASDAQ | 14.92 | 60.80 | 60.00 | 60.00 | |||||||||||||||||
FFBW, Inc. |
FFBW | 10/11/2017 | NASDAQ | 15.30 | 11.00 | 11.00 | 12.50 | |||||||||||||||||
Heritage NOLA Bancorp |
HRGG | 7/13/2017 | OTC MKT | 15.00 | 13.50 | 13.50 | 23.50 | |||||||||||||||||
Seneca Financial |
SNNF | 10/12/2017 | OTC MKT | 18.00 | (8.50 | ) | (10.00 | ) | (9.50 | ) | ||||||||||||||
SSB Bancorp |
SSPB | 1/26/2018 | OTC MKT | (5.50 | ) | (7.50 | ) | (4.00 | ) | (5.00 | ) | |||||||||||||
Columbia Financial |
CLBK | 4/20/2018 | NASDAQ | 54.20 | 66.30 | 70.70 | 68.40 | |||||||||||||||||
AVERAGE | 26.06 | % | 30.41 | % | 30.62 | % | 36.79 | % | ||||||||||||||||
MEDIAN | 17.70 | 48.35 | 30.75 | 73.50 | ||||||||||||||||||||
HIGH | 64.60 | 66.50 | 70.70 | 100.10 | ||||||||||||||||||||
LOW | (5.50 | ) | (8.50 | ) | (10.00 | ) | (9.50 | ) |
122
EXHIBIT 33
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
RECENT ACQUISITIONS AND PENDING ACQUISITIONS
COUNTY, CITY OR MARKET AREA OF PYRAMAX BANK
NONE
(that were potential comparable group candidates)
123
KELLER & COMPANY Dublin, Ohio (614) 766-1426 |
EXHIBIT 34 |
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
Most Recent Quarter
General Parameters:
Regions: Mid-Atlantic, Midwest, North Central, Northeast, Southeast
Asset Size: < $950 Million
Stock trades on: NASDAQ or NYSE
No Recent Acquisition Activity
Total
Assets ($000) |
Cash &
Securities/ Assets (%) |
MBS/
Assets (%) |
1-4 Fam.
Loans/ Assets (%) |
Total
Net Loans/ Assets (%) |
Total
Net Loans & MBS/ Assets (%) |
Borrowed
Funds/ Assets (%) |
Equity/
Assets (%) |
|||||||||||||||||||||||||||||
PYRAMAX F.S.B. |
WI | 482,617 | 5.82 | 10.77 | 25.77 | 76.50 | 87.27 | 5.73 | 7.81 | |||||||||||||||||||||||||||
DEFINED PARAMETERS FOR INCLUSION IN
|
< 950,000 | < 20.00 | <16.00 | <72.00 |
|
60.00 -
88.00 |
|
|
70.00 -
90.00 |
|
< 22.00 |
|
7.00 -
26.00 |
|
||||||||||||||||||||||
SIFI |
SI FINANCIAL GROUP | CT | 1,598,222 | 9.70 | 4.60 | 27.05 | 79.04 | 83.64 | 10.87 | 10.57 | ||||||||||||||||||||||||||
CHFN |
CHARTER FINANCIAL CORP | GA | 1,659,791 | 13.85 | 7.78 | 21.93 | 69.51 | 77.29 | 3.62 | 13.35 | ||||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES | GA | 292,476 | 10.33 | 4.54 | 52.69 | 77.66 | 82.20 | 3.55 | 25.87 | ||||||||||||||||||||||||||
WCFB |
WCF BANCORP | IA | 124,421 | 16.17 | 21.38 | 46.62 | 53.65 | 75.03 | 12.28 | 22.54 | ||||||||||||||||||||||||||
IROQ |
IF BANCORP | IL | 619,310 | 6.35 | 15.20 | 22.39 | 73.78 | 88.98 | 8.81 | 13.18 | ||||||||||||||||||||||||||
FCAP |
FIRST CAPITAL | IN | 765,381 | 24.13 | 16.33 | 16.91 | 53.21 | 69.54 | 0.01 | 10.39 | ||||||||||||||||||||||||||
UCBA |
UNITED COMMUNITY BANCORP | IN | 548,302 | 23.20 | 16.15 | 27.98 | 54.13 | 70.28 | 1.43 | 12.98 | ||||||||||||||||||||||||||
PBSK |
POAGE BANKSHARES | KY | 450,159 | 12.99 | 7.70 | 37.16 | 72.71 | 80.41 | 2.01 | 13.54 | ||||||||||||||||||||||||||
PVBC |
PROVIDENT BANCORP | MA | 890,772 | 5.53 | 3.40 | 12.50 | 85.31 | 88.71 | 5.08 | 13.17 | ||||||||||||||||||||||||||
RNDB |
RANDOLPH BANCORP | MA | 533,539 | 4.95 | 8.42 | 48.76 | 76.34 | 84.76 | 10.36 | 14.97 | ||||||||||||||||||||||||||
WEBK |
WELLESLEY BANCORP | MA | 819,586 | 12.72 | 1.76 | 53.89 | 82.91 | 84.67 | 12.87 | 7.33 | ||||||||||||||||||||||||||
HBK |
HAMILTON BANCORP | MD | 526,310 | 5.89 | 10.70 | 37.78 | 73.56 | 84.26 | 11.95 | 9.73 | ||||||||||||||||||||||||||
SVBI |
SEVERN BANCORP | MD | 801,183 | 7.50 | 3.61 | 39.58 | 82.61 | 86.22 | 12.04 | 11.54 | ||||||||||||||||||||||||||
HMNF |
HMN FINANCIAL | MN | 722,080 | 13.64 | 1.31 | 20.30 | 81.95 | 83.26 | 0.00 | 11.36 | ||||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP | NE | 305,633 | 12.28 | 0.15 | 19.97 | 83.52 | 83.67 | 2.01 | 11.67 | ||||||||||||||||||||||||||
MGYR |
MAGYAR BANCORP | NJ | 607,831 | 4.63 | 8.23 | 30.81 | 79.57 | 87.80 | 5.65 | 8.23 | ||||||||||||||||||||||||||
MSBF |
MB BANCORP | NJ | 563,980 | 5.41 | 4.12 | 30.04 | 85.25 | 89.37 | 10.66 | 12.37 | ||||||||||||||||||||||||||
CARV |
CARVER BANCORP | NY | 694,186 | 23.77 | 6.18 | 19.68 | 68.16 | 74.34 | 3.60 | 8.01 | ||||||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK | NY | 553,389 | 6.49 | 2.07 | 52.87 | 80.82 | 82.89 | 6.32 | 10.28 | ||||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES | NY | 312,853 | 7.15 | 2.51 | 70.37 | 85.20 | 87.71 | 20.63 | 10.01 | ||||||||||||||||||||||||||
PCSB |
PCSB FINANCIAL CORP | NY | 1,456,724 | 18.51 | 16.94 | 17.87 | 60.36 | 77.30 | 4.73 | 19.54 | ||||||||||||||||||||||||||
PDLB |
PDL COMMUNITY BANCORP | NY | 947,938 | 8.80 | 0.42 | 40.75 | 86.82 | 87.24 | 2.82 | 17.48 |
124
KELLER & COMPANY Dublin, Ohio (614) 766-1426 |
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
Most Recent Quarter
General Parameters:
Regions: Mid-Atlantic, Midwest, North Central, Northeast, Southeast
Asset Size: < $950 Million
Stock trades on: NASDAQ or NYSE
No Recent Acquisition Activity
Total
Assets ($000) |
Cash &
Securities/ Assets (%) |
MBS/
Assets (%) |
1-4 Fam.
Loans/ Assets (%) |
Total Net
Loans/ Assets (%) |
Total
Net Loans & MBS/Assets (%) |
Borrowed
Funds/ Assets (%) |
Equity/
Assets (%) |
|||||||||||||||||||||||||||||
PYRAMAX F.S.B. | WI | 482,617 | 5.82 | 10.77 | 25.77 | 76.50 | 87.27 | 5.73 | 7.81 | |||||||||||||||||||||||||||
DEFINED PARAMETERS FOR INCLUSION IN COMPARABLE GROUP |
< 950,000 | < 20.00 | <16.00 | <72.00 |
|
60.00 -
88.00 |
|
|
70.00 -
90.00 |
|
< 22.00 |
|
7.00 -
26.00 |
|
||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP |
OH | 132,160 | 12.00 | 0.00 | 54.57 | 77.51 | 77.51 | 0.00 | 20.80 | ||||||||||||||||||||||||||
ESSA |
ESSA BANCORP |
PA | 1,820,924 | 9.11 | 13.55 | 35.83 | 70.91 | 84.46 | 20.91 | 9.74 | ||||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP |
PA | 944,329 | 17.30 | 14.66 | 35.54 | 61.88 | 76.54 | 13.38 | 13.98 | ||||||||||||||||||||||||||
CWAY |
COASTWAY BANCORP |
RI | 779,976 | 6.25 | 0.00 | 49.83 | 84.90 | 84.90 | 27.29 | 9.21 | ||||||||||||||||||||||||||
FFBW |
FFBW, INC |
WI | 260,573 | 9.00 | 15.01 | 28.98 | 67.73 | 82.74 | 4.89 | 22.66 | ||||||||||||||||||||||||||
WSBF |
WATERSTONE FINANCIAL |
WI | 1,836,338 | 8.14 | 5.95 | 32.26 | 70.87 | 76.82 | 23.65 | 21.64 |
125
KELLER & COMPANY Dublin, Ohio (614) 766-1426 |
EXHIBIT 35 |
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY RATIOS
Most Recent Four Quarters
General Parameters:
Regions: Mid-Atlantic, Midwest, North Central, Northeast, Southeast
Asset Size: < $950 Million
Stock trades on: NASDAQ or NYSE
No Recent Acquisition Activity
OPERATING PERFORMANCE | ASSET QUALITY | |||||||||||||||||||||||||||||||||||||||
Total
Assets ($000) |
Core
ROAA (%) |
Core
ROAE (%) |
Net
Interest Margin (2) (%) |
Operating
Expenses/ Assets (%) |
Noninterest
Income/ Assets (%) |
NPA/
Assets (%) |
REO/
Assets (%) |
Reserves/
Assets (%) |
||||||||||||||||||||||||||||||||
PYRAMAX F.S.B. |
WI | 482,617 | 0.09 | 1.08 | 3.13 | 3.77 | 0.62 | 0.38 | 0.00 | 0.64 | ||||||||||||||||||||||||||||||
DEFINED PARAMETERS FOR INCLUSION IN COMPARABLE GROUP |
< 950,000 | < 1.00 | < 8.00 |
|
2.70-
4.20 |
|
|
1.50-
4.50 |
|
< 1.50 | < 2.25 | < 0.12 | > 0.40 | |||||||||||||||||||||||||||
SIFI |
SI FINANCIAL GROUP | CT | 1,598,222 | 0.49 | 4.63 | 2.93 | 2.47 | 0.69 | 0.56 | 0.07 | 0.81 | |||||||||||||||||||||||||||||
CHFN |
CHARTER FINANCIAL CORP | GA | 1,659,791 | 1.00 | 7.41 | 3.84 | 3.02 | 1.21 | 0.10 | 0.02 | 0.67 | |||||||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES | GA | 292,476 | 0.31 | 1.22 | 4.15 | 4.06 | 0.54 | 2.19 | 0.00 | 1.43 | |||||||||||||||||||||||||||||
WCFB |
WCF BANCORP | IA | 124,421 | 0.06 | 0.24 | 2.84 | 2.95 | 0.84 | 0.62 | 0.05 | 0.45 | |||||||||||||||||||||||||||||
IROQ |
IF BANCORP | IL | 619,310 | 0.34 | 2.51 | 3.07 | 2.54 | 0.78 | 1.34 | 0.05 | 0.92 | |||||||||||||||||||||||||||||
FCAP |
FIRST CAPITAL | IN | 765,381 | 1.02 | 9.57 | 3.61 | 2.66 | 0.88 | 0.88 | 0.50 | 0.47 | |||||||||||||||||||||||||||||
UCBA |
UNITED COMMUNITY BANCORP | IN | 548,302 | 0.78 | 5.85 | 2.95 | 2.73 | 0.82 | 0.13 | 0.01 | 0.69 | |||||||||||||||||||||||||||||
PBSK |
POAGE BANKSHARES | KY | 450,159 | (0.61 | ) | (4.36 | ) | 3.76 | 4.02 | 0.59 | 1.80 | 0.10 | 1.10 | |||||||||||||||||||||||||||
PVBC |
PROVIDENT BANCORP | MA | 890,772 | 0.72 | 5.56 | 4.16 | 2.75 | 1.06 | 1.08 | 0.00 | 1.15 | |||||||||||||||||||||||||||||
RNDB |
RANDOLPH BANCORP | MA | 533,539 | (0.48 | ) | (3.06 | ) | 3.25 | 5.56 | 2.24 | 0.57 | 0.04 | 0.72 | |||||||||||||||||||||||||||
WEBK |
WELLESLEY BANCORP | MA | 819,586 | 0.77 | 10.23 | 3.20 | 2.13 | 0.25 | 0.15 | 0.00 | 0.76 | |||||||||||||||||||||||||||||
HBK |
HAMILTON BANCORP | MD | 526,310 | 0.33 | 2.92 | 3.08 | 2.44 | 0.39 | 1.45 | 0.09 | 0.54 | |||||||||||||||||||||||||||||
SVBI |
SEVERN BANCORP | MD | 801,183 | 0.75 | 6.92 | 3.49 | 2.89 | 0.72 | 0.76 | 0.03 | 1.02 | |||||||||||||||||||||||||||||
HMNF |
HMN FINANCIAL | MN | 722,080 | 0.79 | 7.09 | 3.89 | 3.53 | 1.05 | 0.55 | 0.10 | 1.26 | |||||||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP |
NE | 305,633 | 0.49 | 3.72 | 3.68 | 2.86 | 0.81 | 1.48 | 0.07 | 1.50 | |||||||||||||||||||||||||||||
MGYR |
MAGYAR BANCORP |
NJ | 607,831 | 0.38 | 4.59 | 3.45 | 2.81 | 0.35 | 1.88 | 1.67 | 0.62 | |||||||||||||||||||||||||||||
MSBF |
MB BANCORP |
NJ | 563,980 | 0.79 | 6.19 | 3.42 | 0.26 | 0.15 | 0.85 | 0.00 | 0.98 | |||||||||||||||||||||||||||||
CARV |
CARVER BANCORP |
NY | 694,186 | (0.64 | ) | (8.81 | ) | 2.95 | 4.20 | 2.68 | 1.16 | 0.16 | 0.74 | |||||||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK |
NY | 553,389 | 0.57 | 5.21 | 3.38 | 2.88 | 0.97 | 0.57 | 0.01 | 0.80 | |||||||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
NY | 312,853 | 0.26 | 2.51 | 2.90 | 3.41 | 1.15 | 0.03 | 0.00 | 0.43 | |||||||||||||||||||||||||||||
PCSB |
PCSB FINANCIAL CORP |
NY | 1,456,724 | 0.39 | 1.97 | 2.90 | 2.52 | 0.18 | 0.65 | 0.01 | 0.32 | |||||||||||||||||||||||||||||
PDLB |
PDL COMMUNITY BANCORP |
NY | 947,938 | 0.28 | 1.69 | 3.98 | 3.98 | 0.34 | 0.98 | 0.00 | 1.20 |
126
KELLER & COMPANY Dublin, Ohio (614) 766-1426 |
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY RATIOS
Most Recent Four Quarters
General Parameters:
Regions: Mid-Atlantic, Midwest, North Central, Northeast, Southeast
Asset Size: < $950 Million
Stock trades on: NASDAQ or NYSE
No Recent Acquisition Activity
OPERATING PERFORMANCE | ASSET QUALITY | |||||||||||||||||||||||||||||||||||||||
Total
Assets ($000) |
Core
ROAA (%) |
Core
ROAE (%) |
Net
Interest Margin (2) (%) |
Operating
Expenses/ Assets (%) |
Noninterest
Income/ Assets (%) |
NPA/
Assets (%) |
REO /
Assets (%) |
Reserves/
Assets (%) |
||||||||||||||||||||||||||||||||
PYRAMAX F.S.B. |
WI | 482,617 | 0.09 | 1.08 | 3.13 | 3.77 | 0.62 | 0.38 | 0.00 | 0.64 | ||||||||||||||||||||||||||||||
DEFINED PARAMETERS FOR INCLUSION IN COMPARABLE GROUP |
< 950,000 | < 1.00 | < 8.00 |
|
2.70-
4.20 |
|
|
1.50-
4.50 |
|
< 1.50 | < 2.25 | < 0.12 | > 0.40 | |||||||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP | OH | 132,160 | 0.31 | 1.68 | 3.29 | 4.20 | 1.48 | 0.59 | 0.00 | 0.90 | |||||||||||||||||||||||||||||
ESSA |
ESSA BANCORP | PA | 1,820,924 | 0.43 | 4.26 | 2.79 | 2.24 | 0.47 | 0.83 | 0.07 | 0.58 | |||||||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP | PA | 944,329 | 0.93 | 6.33 | 2.94 | 1.59 | 0.24 | 1.49 | 0.01 | 0.51 | |||||||||||||||||||||||||||||
CWAY |
COASTWAY BANCORP | RI | 779,976 | 0.46 | 4.68 | 3.16 | 2.84 | 0.94 | 1.07 | 0.54 | 0.41 | |||||||||||||||||||||||||||||
FFBW |
FFBW, INC | WI | 260,573 | 0.07 | 0.41 | 4.74 | 4.41 | 0.50 | 0.48 | 0.12 | 0.69 | |||||||||||||||||||||||||||||
WSBF |
WATERSTONE FINANCIAL | Wl | 1,836,338 | 1.54 | 6.97 | 3.20 | 7.24 | 6.73 | 0.54 | 0.18 | 0.72 |
127
KELLER & COMPANY Dublin, Ohio (614) 766-1426 |
EXHIBIT 36 |
FINAL COMPARABLE GROUP
BALANCE SHEET RATIOS
Most Recent Quarter
Total
Assets ($000) |
Cash &
Securities/ Assets (%) |
MBS/
Assets (%) |
1-4 Fam.
Loans/ Assets (%) |
Total Net
Loans/ Assets (%) |
Total
Net Loans & MBS/ Assets (%) |
Borrowed
Funds/ Assets (%) |
Equity/
Assets (%) |
|||||||||||||||||||||||||||||
PYRAMAX F.S.B. |
WI |
482,617 | 5.82 | 10.77 | 25.77 | 76.50 | 87.27 | 5.73 | 7.81 | |||||||||||||||||||||||||||
DEFINED PARAMETERS FOR INCLUSION IN COMPARABLE GROUP |
< 950,000 | < 20.00 | <16.00 | <72.00 |
|
60.00 -
88.00 |
|
|
70.00 -
90.00 |
|
< 22.00 |
|
7.00 -
26.00 |
|
||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP | OH | 132,160 | 12.00 | 0.00 | 54.57 | 77.51 | 77.51 | 0.00 | 20.80 | ||||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES | GA | 292,476 | 10.33 | 4.54 | 52.69 | 77.66 | 82.20 | 3.55 | 25.87 | ||||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP | NE | 305,633 | 12.28 | 0.15 | 19.97 | 83.52 | 83.67 | 2.01 | 11.67 | ||||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES | NY | 312,853 | 7.15 | 2.51 | 70.37 | 85.20 | 87.71 | 20.63 | 10.01 | ||||||||||||||||||||||||||
HBK |
HAMILTON BANCORP | MD | 526,310 | 5.89 | 10.70 | 37.78 | 73.56 | 84.26 | 11.95 | 9.73 | ||||||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK | NY | 553,389 | 6.49 | 2.07 | 52.87 | 80.82 | 82.89 | 6.32 | 10.28 | ||||||||||||||||||||||||||
IROQ |
IF BANCORP | IL | 619,310 | 6.35 | 15.20 | 22.39 | 73.78 | 88.98 | 8.81 | 13.18 | ||||||||||||||||||||||||||
HMNF |
HMN FINANCIAL | MN | 722,080 | 13.64 | 1.31 | 20.30 | 81.95 | 83.26 | 0.00 | 11.36 | ||||||||||||||||||||||||||
SVBI |
SEVERN BANCORP | MD | 801,183 | 7.50 | 3.61 | 39.58 | 82.61 | 86.22 | 12.04 | 11.54 | ||||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP | PA | 944,329 | 17.30 | 14.66 | 35.54 | 61.88 | 76.54 | 13.38 | 13.98 | ||||||||||||||||||||||||||
AVERAGE | 520,972 | 9.89 | 5.48 | 40.60 | 77.85 | 83.32 | 7.87 | 13.84 | ||||||||||||||||||||||||||||
MEDIAN | 539,850 | 8.92 | 3.06 | 38.68 | 79.24 | 83.47 | 7.57 | 11.61 | ||||||||||||||||||||||||||||
HIGH | 944,329 | 17.30 | 15.20 | 70.37 | 85.20 | 88.98 | 20.63 | 25.87 | ||||||||||||||||||||||||||||
LOW | 132,160 | 5.89 | 0.00 | 19.97 | 61.88 | 76.54 | 0.00 | 9.73 |
128
KELLER & COMPANY Dublin, Ohio (614) 766-1426 |
EXHIBIT 37 |
FINAL COMPARABLE GROUP
OPERATING PERFORMANCE AND ASSET QUALITY RATIOS
Most Recent Four Quarters
OPERATING PERFORMANCE | ASSET QUALITY | |||||||||||||||||||||||||||||||||||||||
Total
Assets ($000) |
Core
ROAA (%) |
Core
ROAE (%) |
Net
Interest Margin (%) |
Operating
Expenses/ Assets (%) |
Noninterest
Income/ Assets (%) |
NPA/
Assets (%) |
REO /
Assets (%) |
Reserves/
Assets (%) |
||||||||||||||||||||||||||||||||
PYRAMAX F.S.B. | WI | 482,617 | 0.09 | 1.08 | 3.13 | 3.77 | 0.62 | 0.38 | 0.00 | 0.64 | ||||||||||||||||||||||||||||||
DEFINED PARAMETERS FOR INCLUSION IN COMPARABLE GROUP |
< 950,000 | < 1.00 | < 8.00 |
|
2.70-
4.20 |
|
|
1.50-
4.50 |
|
< 1.50 | < 2.25 | < 0.12 | > 40 | |||||||||||||||||||||||||||
EFBI | EAGLE FIN BANCORP | OH | 132,160 | 0.31 | 1.68 | 3.29 | 4.20 | 1.48 | 0.59 | 0.00 | 0.90 | |||||||||||||||||||||||||||||
CFBI | COMM FIRST BANCSHARES | GA | 292,476 | 0.31 | 1.22 | 4.15 | 4.06 | 0.54 | 2.19 | 0.00 | 1.43 | |||||||||||||||||||||||||||||
EQFN | EQUITABLE FINANCIAL CORP | NE | 305,633 | 0.49 | 3.72 | 3.68 | 2.86 | 0.81 | 1.48 | 0.07 | 1.50 | |||||||||||||||||||||||||||||
FSBC | FSB COMMUNITY BANKSHARES | NY | 312,853 | 0.26 | 2.51 | 2.90 | 3.41 | 1.15 | 0.03 | 0.00 | 0.43 | |||||||||||||||||||||||||||||
HBK | HAMILTON BANCORP | MD | 526,310 | 0.33 | 2.92 | 3.08 | 2.44 | 0.39 | 1.45 | 0.09 | 0.54 | |||||||||||||||||||||||||||||
ESBK | ELMIRA SAVINGS BANK | NY | 553,389 | 0.57 | 5.21 | 3.38 | 2.88 | 0.97 | 0.57 | 0.01 | 0.80 | |||||||||||||||||||||||||||||
IROQ | IF BANCORP | IL | 619,310 | 0.34 | 2.51 | 3.07 | 2.54 | 0.78 | 1.34 | 0.05 | 0.92 | |||||||||||||||||||||||||||||
HMNF | HMN FINANCIAL | MN | 722,080 | 0.79 | 7.09 | 3.89 | 3.53 | 1.05 | 0.55 | 0.10 | 1.26 | |||||||||||||||||||||||||||||
SVBI | SEVERN BANCORP | MD | 801,183 | 0.75 | 6.92 | 3.49 | 2.89 | 0.72 | 0.76 | 0.03 | 1.02 | |||||||||||||||||||||||||||||
PBIP | PRUDENTIAL BANCORP | PA | 944,329 | 0.93 | 6.33 | 2.94 | 1.59 | 0.24 | 1.49 | 0.01 | 0.51 | |||||||||||||||||||||||||||||
AVERAGE | 520,972 | 0.51 | 4.01 | 3.39 | 3.04 | 0.81 | 1.05 | 0.04 | 0.93 | |||||||||||||||||||||||||||||||
MEDIAN | 539,850 | 0.42 | 3.32 | 3.34 | 2.89 | 0.80 | 1.05 | 0.02 | 0.91 | |||||||||||||||||||||||||||||||
HIGH | 944,329 | 0.93 | 7.09 | 4.15 | 4.20 | 1.48 | 2.19 | 0.10 | 1.50 | |||||||||||||||||||||||||||||||
LOW | 132,160 | 0.26 | 1.22 | 2.90 | 1.59 | 0.24 | 0.03 | 0.00 | 0.43 |
129
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
EXHIBIT 38 |
COMPARABLE GROUP CHARACTERISTICS AND BALANCE SHEET TOTALS
Most Recent Quarter | ||||||||||||||||||||||||||||||||||||
Number
of Offices |
Exchange |
Total
Assets ($000) |
Int. Earning
Assets ($000) |
Total
Net Loans ($000) |
Goodwill
and Intang. ($000) |
Total
Deposits ($000) |
Total
Equity ($000) |
|||||||||||||||||||||||||||||
SUBJECT | ||||||||||||||||||||||||||||||||||||
PYRAMAX F.S.B. | GREENFIELD | WI | 9 | | 482,617 | 445,564 | 368,021 | 0 | 404,560 | 37,691 | ||||||||||||||||||||||||||
COMPARABLE GROUP | ||||||||||||||||||||||||||||||||||||
CFBI | COMM FIRST BANCSHARES | COVINGTON | GA | 3 | NASDAQ | 292,476 | 279,906 | 227,140 | 0 | 216,730 | 75,649 | |||||||||||||||||||||||||
EFBI | EAGLE FIN BANCORP | CINCINNATI | OH | 3 | NASDAQ | 132,160 | 114,245 | 102,434 | 0 | 108,781 | 27,491 | |||||||||||||||||||||||||
ESBK | ELMIRA SAVINGS BANK | ELMIRA | NY | 13 | NASDAQ | 553,389 | 489,968 | 447,261 | 13,752 | 456,851 | 56,886 | |||||||||||||||||||||||||
EQFN | EQUITABLE FINANCIAL CORP | GRAND ISLAND | NE | 6 | NASDAQ | 305,633 | 256,175 | 255,260 | 2,299 | 266,300 | 35,659 | |||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
FAIRPORT | NY | 5 | NASDAQ | 312,853 | 282,830 | 266,546 | 894 | 216,761 | 31,315 | |||||||||||||||||||||||||
HBK | HAMILTON BANCORP | TOWSON | MD | 5 | NASDAQ | 526,310 | 468,272 | 387,165 | 9,176 | 408,703 | 51,228 | |||||||||||||||||||||||||
HMNF | HMN FINANCIAL | ROCHESTER | MN | 13 | NASDAQ | 722,080 | 676,749 | 591,779 | 2,856 | 640,821 | 82,056 | |||||||||||||||||||||||||
IROQ | IF BANCORP | WATSEKA | IL | 6 | NASDAQ | 619,310 | 572,062 | 456,942 | 791 | 489,708 | 81,613 | |||||||||||||||||||||||||
PBIP | PRUDENTIAL BANCORP | PHILADELPHIA | PA | 6 | NASDAQ | 944,329 | 833,008 | 584,380 | 6,741 | 683,286 | 132,060 | |||||||||||||||||||||||||
SVBI | SEVERN BANCORP | ANNAPOLIS | MD | 4 | NASDAQ | 801,183 | 744,408 | 661,840 | 1,603 | 590,013 | 92,417 | |||||||||||||||||||||||||
Average | 6 | 520,972 | 471,762 | 398,075 | 3,811 | 407,795 | 66,637 | |||||||||||||||||||||||||||||
Median | 6 | 539,850 | 479,120 | 417,213 | 1,951 | 432,777 | 66,268 | |||||||||||||||||||||||||||||
High | 13 | 944,329 | 833,008 | 661,840 | 13,752 | 683,286 | 132,060 | |||||||||||||||||||||||||||||
Low | 3 | 132,160 | 114,245 | 102,434 | 0 | 108,781 | 27,491 |
130
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
EXHIBIT 39 |
BALANCE SHEET
ASSET COMPOSITIONMOST RECENT QUARTER
As a Percent of Total Assets | ||||||||||||||||||||||||||||||||||||||||||||||
Total Assets
($000) |
Cash &
Invest. (%) |
MBS
(%) |
Net
Loans (%) |
Loan Loss
Reserves (%) |
Repo-
sessed Assets (%) |
Goodwill
& Intang. (%) |
Non-Perf.
Assets (%) |
Interest
Earning Assets (%) |
Interest
Bearing Liabilities (%) |
Capitalized
Loan Servicing (%) |
||||||||||||||||||||||||||||||||||||
SUBJECT |
||||||||||||||||||||||||||||||||||||||||||||||
PYRAMAX BANK F.S.B. |
482,617 | 5.82 | 10.77 | 76.50 | 0.64 | 0.00 | 0.00 | 0.38 | 92.23 | 89.56 | 0.45 | |||||||||||||||||||||||||||||||||||
COMPARABLE GROUP |
||||||||||||||||||||||||||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP |
132,160 | 12.00 | 0.00 | 77.51 | 0.90 | 0.00 | 0.00 | 0.59 | 91.26 | 78.70 | 0.00 | ||||||||||||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES |
292,476 | 10.33 | 4.54 | 77.66 | 1.43 | 0.00 | 0.00 | 2.19 | 91.14 | 63.78 | 0.00 | ||||||||||||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP |
305,633 | 12.28 | 0.15 | 83.52 | 1.50 | 0.07 | 0.47 | 1.48 | 93.74 | 75.40 | 0.28 | ||||||||||||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
312,853 | 7.15 | 2.51 | 85.20 | 0.43 | 0.00 | 0.00 | 0.03 | 95.10 | 87.31 | 0.29 | ||||||||||||||||||||||||||||||||||
HBK |
HAMILTON BANCORP |
526,310 | 5.89 | 10.70 | 73.56 | 0.54 | 0.09 | 1.74 | 1.45 | 90.62 | 83.23 | 0.00 | ||||||||||||||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK |
553,389 | 6.49 | 2.07 | 80.82 | 0.80 | 0.01 | 2.23 | 0.57 | 88.12 | 75.50 | 0.26 | ||||||||||||||||||||||||||||||||||
IROQ |
IF BANCORP |
619,310 | 6.35 | 15.20 | 73.78 | 0.92 | 0.05 | 0.00 | 1.34 | 94.86 | 82.21 | 0.13 | ||||||||||||||||||||||||||||||||||
HMNF |
HMN FINANCIAL |
722,080 | 13.64 | 1.31 | 81.95 | 1.26 | 0.10 | 0.16 | 0.55 | 96.74 | 66.18 | 0.24 | ||||||||||||||||||||||||||||||||||
SVBI |
SEVERN BANCORP |
801,183 | 7.50 | 3.61 | 82.61 | 1.02 | 0.03 | 0.14 | 0.76 | 94.16 | 76.49 | 0.06 | ||||||||||||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP |
944,329 | 17.30 | 14.66 | 61.88 | 0.51 | 0.01 | 0.71 | 1.49 | 93.56 | 84.48 | 0.00 | ||||||||||||||||||||||||||||||||||
Average |
520,972 | 9.89 | 5.48 | 77.85 | 0.93 | 0.04 | 0.55 | 1.05 | 92.93 | 77.33 | 0.13 | |||||||||||||||||||||||||||||||||||
Median |
539,850 | 8.92 | 3.06 | 79.24 | 0.91 | 0.02 | 0.15 | 1.05 | 93.65 | 77.60 | 0.10 | |||||||||||||||||||||||||||||||||||
High |
944,329 | 17.30 | 15.20 | 85.20 | 1.50 | 0.10 | 2.23 | 2.19 | 96.74 | 87.31 | 0.29 | |||||||||||||||||||||||||||||||||||
Low |
132,160 | 5.89 | 0.00 | 61.88 | 0.43 | 0.00 | 0.00 | 0.03 | 88.12 | 63.78 | 0.00 | |||||||||||||||||||||||||||||||||||
ALL THRIFTS (122) |
||||||||||||||||||||||||||||||||||||||||||||||
Average |
2,259,729 | 11.66 | 7.13 | 74.00 | 0.77 | 0.12 | 0.60 | 0.65 | 92.84 | 74.93 | 0.12 | |||||||||||||||||||||||||||||||||||
MIDWEST THRIFTS (39) |
||||||||||||||||||||||||||||||||||||||||||||||
Average |
979,320 | 13.78 | 7.61 | 70.13 | 0.76 | 0.13 | 0.28 | 0.67 | 92.20 | 74.83 | 0.16 | |||||||||||||||||||||||||||||||||||
WISCONSIN THRIFTS (4) |
||||||||||||||||||||||||||||||||||||||||||||||
Average |
760,469 | 7.60 | 7.82 | 75.58 | 0.79 | 0.08 | 0.02 | 0.27 | 92.49 | 57.59 | 0.04 |
131
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
EXHIBIT 40 |
BALANCE SHEET COMPARISON
LIABILITIES AND EQUITYMOST RECENT QUARTER
As a Percent of Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total
Liabilities ($000) |
Total
Equity ($000) |
Total
Deposits (%) |
Total
Borrowings (%) |
Other
Liabilities (%) |
Preferred
Equity (%) |
Common
Equity (%) |
Acc. Other
Compr. Income (%) |
Retained
Earnings (%) |
Total
Equity (%) |
Tier 1
Capital (%) |
Total
Risk-Based Capital (%) |
|||||||||||||||||||||||||||||||||||||||
SUBJECT |
||||||||||||||||||||||||||||||||||||||||||||||||||
PYRAMAX BANK F.S.B. |
444,926 | 37,691 | 83.83 | 5.73 | 2.63 | 0.00 | 7.81 | (0.33 | ) | 8.18 | 7.81 | 7.46 | 10.55 | |||||||||||||||||||||||||||||||||||||
COMPARABLE GROUP |
||||||||||||||||||||||||||||||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP |
104,669 | 27,491 | 82.31 | 0.00 | (3.11 | ) | 0.00 | 20.80 | 0.00 | 10.87 | 20.80 | 15.65 | 17.50 | ||||||||||||||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES |
216,827 | 75,649 | 74.10 | 3.55 | (3.52 | ) | 0.00 | 25.87 | (0.18 | ) | 15.71 | 25.87 | 20.58 | 30.76 | |||||||||||||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP |
269,974 | 35,659 | 87.13 | 2.01 | (0.81 | ) | 0.00 | 11.67 | (0.01 | ) | 4.93 | 11.67 | 9.99 | 12.18 | |||||||||||||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
281,538 | 31,315 | 69.29 | 20.63 | 0.08 | 0.00 | 10.01 | (0.08 | ) | 6.02 | 10.01 | 9.45 | 16.32 | ||||||||||||||||||||||||||||||||||||
HBK |
HAMILTON BANCORP |
475,082 | 51,228 | 77.65 | 11.95 | 0.66 | 0.00 | 9.73 | (0.32 | ) | 6.18 | 9.73 | 8.07 | 11.66 | ||||||||||||||||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK |
496,503 | 56,886 | 82.56 | 6.32 | 0.84 | 0.00 | 10.28 | (0.05 | ) | 1.06 | 10.28 | 8.65 | 13.70 | ||||||||||||||||||||||||||||||||||||
IROQ |
IF BANCORP |
537,697 | 81,613 | 79.07 | 8.81 | (1.06 | ) | 0.00 | 13.18 | (0.47 | ) | 8.28 | 13.18 | 11.70 | 16.83 | |||||||||||||||||||||||||||||||||||
HMNF |
HMN FINANCIAL |
640,024 | 82,056 | 88.75 | 0.00 | (0.11 | ) | 0.00 | 11.36 | (0.19 | ) | 3.33 | 11.36 | 10.97 | 13.93 | |||||||||||||||||||||||||||||||||||
SVBI |
SEVERN BANCORP |
708,766 | 92,417 | 73.64 | 12.04 | 0.20 | 0.00 | 11.53 | (0.01 | ) | 3.41 | 11.54 | 10.27 | 14.98 | ||||||||||||||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP |
812,269 | 132,060 | 72.36 | 13.38 | 0.28 | 0.00 | 13.98 | (0.47 | ) | 2.91 | 13.98 | 13.09 | 21.05 | ||||||||||||||||||||||||||||||||||||
Average |
454,335 | 66,637 | 78.69 | 7.87 | (0.65 | ) | 0.00 | 13.84 | (0.18 | ) | 6.27 | 13.84 | 11.84 | 16.89 | ||||||||||||||||||||||||||||||||||||
Median |
485,793 | 66,268 | 78.36 | 7.57 | (0.02 | ) | 0.00 | 11.60 | (0.13 | ) | 5.47 | 11.60 | 10.62 | 15.65 | ||||||||||||||||||||||||||||||||||||
High |
812,269 | 132,060 | 88.75 | 20.63 | 0.84 | 0.00 | 25.87 | 0.00 | 15.71 | 25.87 | 20.58 | 30.76 | ||||||||||||||||||||||||||||||||||||||
Low |
104,669 | 27,491 | 69.29 | 0.00 | (3.52 | ) | 0.00 | 9.73 | (0.47 | ) | 1.06 | 9.73 | 8.07 | 11.66 | ||||||||||||||||||||||||||||||||||||
ALL THRIFTS (122) |
||||||||||||||||||||||||||||||||||||||||||||||||||
Average |
1,983,827 | 275,902 | 77.83 | 9.27 | 0.14 | 0.06 | 12.54 | (0.26 | ) | 6.35 | 12.60 | 11.79 | 18.88 | |||||||||||||||||||||||||||||||||||||
MIDWEST THRIFTS (39) |
||||||||||||||||||||||||||||||||||||||||||||||||||
Average |
877,240 | 102,079 | 79.03 | 8.05 | 0.28 | 0.00 | 12.58 | (0.26 | ) | 6.64 | 12.58 | 11.92 | 20.30 | |||||||||||||||||||||||||||||||||||||
WISCONSIN THRIFTS (4) |
||||||||||||||||||||||||||||||||||||||||||||||||||
Average |
625,063 | 135,407 | 74.37 | 10.67 | (0.29 | ) | 0.00 | 15.26 | (0.19 | ) | 6.78 | 15.26 | 14.50 | 20.52 |
132
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
EXHIBIT 41 |
INCOME AND EXPENSE COMPARISON
TRAILING FOUR QUARTERS
($000)
Interest
Income |
Interest
Expense |
Net
Interest Income |
Provision
for Loss |
Gain
(Loss) on Sale |
Total
Non-Int. Income |
Total
Non-Int. Expense |
Net
Income Before Taxes |
Income
Taxes |
Net
Income |
Core
Income |
||||||||||||||||||||||||||||||||||||
SUBJECT |
||||||||||||||||||||||||||||||||||||||||||||||
PYRAMAX BANK F.S.B. |
15,765 | 3,719 | 12,046 | 0 | 850 | 2,921 | 17,726 | (2,759 | ) | 932 | (3,690 | ) | 438 | |||||||||||||||||||||||||||||||||
COMPARABLE GROUP |
||||||||||||||||||||||||||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP |
4,427 | 670 | 3,757 | 92 | 0 | 1,950 | 5,545 | 620 | (48 | ) | 668 | 401 | |||||||||||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES |
12,961 | 1,338 | 11,623 | 52 | 0 | 1,593 | 11,882 | 1,443 | 1,377 | 66 | 875 | ||||||||||||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP |
11,026 | 1,608 | 9,418 | 1,263 | 0 | 2,482 | 8,730 | 2,170 | 1,051 | 1,119 | 1,330 | ||||||||||||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
11,242 | 3,031 | 8,211 | 294 | 0 | 3,608 | 10,659 | 1,217 | 498 | 719 | 790 | ||||||||||||||||||||||||||||||||||
HBK |
HAMILTON BANCORP |
18,013 | 3,613 | 14,400 | 1,575 | (2 | ) | 2,054 | 12,863 | 2,070 | 2,668 | (598 | ) | 1,698 | ||||||||||||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK |
20,546 | 3,996 | 16,550 | 897 | 0 | 5,360 | 15,958 | 5,055 | 147 | 4,903 | 3,181 | ||||||||||||||||||||||||||||||||||
IROQ |
IF BANCORP |
22,140 | 4,585 | 17,555 | 1,964 | 800 | 4,832 | 15,751 | 4,725 | 2,846 | 1,879 | 2,092 | ||||||||||||||||||||||||||||||||||
HMNF |
HMN FINANCIAL |
28,178 | 1,860 | 26,318 | (378 | ) | 0 | 7,549 | 25,461 | 9,714 | 4,659 | 5,055 | 5,712 | |||||||||||||||||||||||||||||||||
SVBI |
SEVERN BANCORP |
33,544 | 7,552 | 25,992 | (375 | ) | 2 | 5,749 | 23,190 | 8,927 | 5,149 | 3,778 | 5,977 | |||||||||||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP |
31,558 | 7,064 | 24,494 | 800 | 235 | 2,304 | 14,995 | 11,692 | 4,842 | 6,850 | 8,482 | ||||||||||||||||||||||||||||||||||
Average |
19,364 | 3,532 | 15,832 | 618 | 104 | 3,748 | 14,503 | 4,763 | 2,319 | 2,444 | 3,054 | |||||||||||||||||||||||||||||||||||
Median |
19,280 | 3,322 | 15,475 | 547 | 0 | 3,045 | 13,929 | 3,448 | 2,023 | 1,499 | 1,895 | |||||||||||||||||||||||||||||||||||
High |
33,544 | 7,552 | 26,318 | 1,964 | 800 | 7,549 | 25,461 | 11,692 | 5,149 | 6,850 | 8,482 | |||||||||||||||||||||||||||||||||||
Low |
4,427 | 670 | 3,757 | (378 | ) | (2 | ) | 1,593 | 5,545 | 620 | (48 | ) | (598 | ) | 401 | |||||||||||||||||||||||||||||||
ALL THRIFTS (122) |
||||||||||||||||||||||||||||||||||||||||||||||
Average |
76,684 | 15,104 | 61,580 | 1,687 | 487 | 19,731 | 43,761 | 29,215 | 11,371 | 18,455 | 19,107 | |||||||||||||||||||||||||||||||||||
MIDWEST THRIFTS (39) |
||||||||||||||||||||||||||||||||||||||||||||||
Average |
33,502 | 7,217 | 26,286 | 539 | 204 | 20,789 | 34,048 | 13,363 | 6,165 | 7,197 | 9,525 | |||||||||||||||||||||||||||||||||||
WISCONSIN THRIFTS (4) |
||||||||||||||||||||||||||||||||||||||||||||||
Average |
28,614 | 5,968 | 22,646 | (440 | ) | (16 | ) | 32,888 | 43,203 | 12,454 | 5,066 | 7,388 | 8,190 |
133
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
EXHIBIT 42 |
INCOME AND EXPENSE COMPARISON
AS A PERCENTAGE OF AVERAGE ASSETS
Interest
Income |
Interest
Expense |
Net
Interest Income |
Provision
for Loss |
Gain
(Loss) on Sale |
Total
Non-Int. Income |
Total
Non-Int. Expense |
Net
Income Before Taxes |
Income
Taxes |
Net
Income |
Core
Income |
||||||||||||||||||||||||||||||||||||
SUBJECT |
||||||||||||||||||||||||||||||||||||||||||||||
PYRAMAX BANK F.S.B. |
3.35 | 0.79 | 2.56 | 0.00 | 0.18 | 0.62 | 3.77 | (0.59 | ) | 0.20 | (0.79 | ) | 0.09 | |||||||||||||||||||||||||||||||||
COMPARABLE GROUP |
||||||||||||||||||||||||||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP |
3.40 | 0.51 | 2.88 | 0.07 | 0.00 | 1.50 | 4.25 | 0.48 | (0.04 | ) | 0.51 | 0.31 | |||||||||||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES |
4.55 | 0.47 | 4.08 | 0.02 | 0.00 | 0.56 | 4.18 | 0.51 | 0.48 | 0.02 | 0.31 | ||||||||||||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP |
4.04 | 0.59 | 3.45 | 0.46 | 0.00 | 0.91 | 3.20 | 0.79 | 0.38 | 0.41 | 0.49 | ||||||||||||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
3.70 | 1.00 | 2.70 | 0.10 | 0.00 | 1.19 | 3.50 | 0.40 | 0.16 | 0.24 | 0.26 | ||||||||||||||||||||||||||||||||||
HBK |
HAMILTON BANCORP |
3.49 | 0.70 | 2.79 | 0.31 | (0.00 | ) | 0.40 | 2.49 | 0.40 | 0.52 | (0.12 | ) | 0.33 | ||||||||||||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK |
3.66 | 0.71 | 2.95 | 0.16 | 0.00 | 0.95 | 2.84 | 0.90 | 0.03 | 0.87 | 0.57 | ||||||||||||||||||||||||||||||||||
IROQ |
IF BANCORP |
3.65 | 0.76 | 2.89 | 0.32 | 0.13 | 0.80 | 2.59 | 0.78 | 0.47 | 0.31 | 0.34 | ||||||||||||||||||||||||||||||||||
HMNF |
HMN FINANCIAL |
3.91 | 0.26 | 3.65 | (0.05 | ) | 0.00 | 1.05 | 3.53 | 1.35 | 0.65 | 0.70 | 0.79 | |||||||||||||||||||||||||||||||||
SVBI |
SEVERN BANCORP |
4.22 | 0.95 | 3.27 | (0.05 | ) | 0.00 | 0.72 | 2.91 | 1.12 | 0.65 | 0.47 | 0.75 | |||||||||||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP |
3.46 | 0.77 | 2.68 | 0.09 | 0.03 | 0.25 | 1.64 | 1.28 | 0.53 | 0.75 | 0.93 | ||||||||||||||||||||||||||||||||||
Average |
3.81 | 0.67 | 3.13 | 0.14 | 0.02 | 0.83 | 3.11 | 0.80 | 0.38 | 0.42 | 0.51 | |||||||||||||||||||||||||||||||||||
Median |
3.68 | 0.71 | 2.92 | 0.09 | 0.00 | 0.85 | 3.06 | 0.79 | 0.48 | 0.44 | 0.42 | |||||||||||||||||||||||||||||||||||
High |
4.55 | 1.00 | 4.08 | 0.46 | 0.13 | 1.50 | 4.25 | 1.35 | 0.65 | 0.87 | 0.93 | |||||||||||||||||||||||||||||||||||
Low |
3.40 | 0.26 | 2.68 | (0.05 | ) | (0.00 | ) | 0.25 | 1.64 | 0.40 | (0.04 | ) | (0.12 | ) | 0.26 | |||||||||||||||||||||||||||||||
ALL THRIFTS (122) |
||||||||||||||||||||||||||||||||||||||||||||||
Average |
3.74 | 0.64 | 3.09 | 0.08 | 0.01 | 0.84 | 2.81 | 1.03 | 0.40 | 0.84 | 0.87 | |||||||||||||||||||||||||||||||||||
MIDWEST THRIFTS (39) |
||||||||||||||||||||||||||||||||||||||||||||||
Average |
3.47 | 0.62 | 2.86 | 0.06 | 0.01 | 0.87 | 3.10 | 0.90 | 0.32 | 0.78 | 1.03 | |||||||||||||||||||||||||||||||||||
WISCONSIN THRIFTS (4) |
||||||||||||||||||||||||||||||||||||||||||||||
Average |
4.01 | 0.75 | 3.26 | (0.12 | ) | 0.00 | 0.57 | 3.66 | 0.79 | 0.35 | 0.96 | 1.06 |
134
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
EXHIBIT 43 |
YIELDS, COSTS AND EARNINGS RATIOS
TRAILING FOUR QUARTERS
Yield on
Int. Earning Assets (%) |
Cost of
Int. Bearing Liabilities (%) |
Net
Interest Spread (%) |
Net
Interest Margin * (%) |
ROAA
(%) |
ROAE
(%) |
Core
ROAA (%) |
Core
ROAE (%) |
|||||||||||||||||||||||||||
SUBJECT |
||||||||||||||||||||||||||||||||||
PYRAMAX BANK F.S.B. |
4.09 | 0.96 | 3.13 | 3.13 | (0.79 | ) | (9.14 | ) | 0.09 | 1.08 | ||||||||||||||||||||||||
COMPARABLE GROUP |
||||||||||||||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP |
3.88 | 0.63 | 3.24 | 3.29 | 0.51 | 2.79 | 0.31 | 1.68 | |||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES |
4.63 | 0.56 | 4.07 | 4.15 | 0.02 | 0.09 | 0.31 | 1.22 | |||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP |
4.30 | 0.68 | 3.63 | 3.68 | 0.41 | 3.13 | 0.49 | 3.72 | |||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
3.97 | 1.50 | 2.47 | 2.90 | 0.24 | 2.28 | 0.26 | 2.51 | |||||||||||||||||||||||||
HBK |
HAMILTON BANCORP |
3.85 | 0.88 | 2.97 | 3.08 | (0.12 | ) | (1.03 | ) | 0.33 | 2.92 | |||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK |
4.19 | 0.88 | 3.31 | 3.38 | 0.87 | 8.03 | 0.57 | 5.21 | |||||||||||||||||||||||||
IROQ |
IF BANCORP |
3.87 | 0.98 | 2.89 | 3.07 | 0.31 | 2.25 | 0.34 | 2.51 | |||||||||||||||||||||||||
HMNF |
HMN FINANCIAL |
4.16 | 0.30 | 3.86 | 3.89 | 0.70 | 6.28 | 0.79 | 7.09 | |||||||||||||||||||||||||
SVBI |
SEVERN BANCORP |
4.51 | 1.28 | 3.23 | 3.49 | 0.47 | 4.38 | 0.75 | 6.92 | |||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP |
3.79 | 1.09 | 2.70 | 2.94 | 0.75 | 5.11 | 0.93 | 6.33 | |||||||||||||||||||||||||
Average |
4.12 | 0.88 | 3.24 | 3.39 | 0.42 | 3.33 | 0.51 | 4.01 | ||||||||||||||||||||||||||
Median |
4.07 | 0.88 | 3.24 | 3.33 | 0.44 | 2.96 | 0.42 | 3.32 | ||||||||||||||||||||||||||
High |
4.63 | 1.50 | 4.07 | 4.15 | 0.87 | 8.03 | 0.93 | 7.09 | ||||||||||||||||||||||||||
Low |
3.79 | 0.30 | 2.47 | 2.90 | (0.12 | ) | (1.03 | ) | 0.26 | 1.22 | ||||||||||||||||||||||||
ALL THRIFTS (122) |
||||||||||||||||||||||||||||||||||
Average |
4.07 | 0.86 | 3.22 | 3.37 | 0.84 | 6.84 | 0.87 | 7.08 | ||||||||||||||||||||||||||
MIDWEST THRIFTS (39) |
||||||||||||||||||||||||||||||||||
Average |
3.75 | 0.81 | 2.98 | 3.09 | 0.78 | 7.40 | 1.03 | 9.73 | ||||||||||||||||||||||||||
WISCONSIN THRIFTS (4) |
||||||||||||||||||||||||||||||||||
Average |
4.03 | 0.90 | 3.41 | 3.30 | 0.97 | 5.46 | 1.07 | 6.05 |
* |
Based on average interest-earning assets. |
135
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
EXHIBIT 44 |
RESERVES AND SUPPLEMENTAL DATA
RESERVES AND SUPPLEMENTAL DATA | ||||||||||||||||||||||
Reserves/
Gross Loans (%) |
Reserves/
NPA (%) |
Net
Chargeoffs/ Average Loans (%) |
Provisions/
Net Chargeoffs (%) |
Effective
Tax Rate (%) |
||||||||||||||||||
SUBJECT |
||||||||||||||||||||||
PYRAMAX BANK F.S.B. |
0.83 | 167.59 | 0.00 | 0.00 | NM | |||||||||||||||||
COMPARABLE GROUP |
||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP |
0.81 | 34.32 | 0.91 | NM | 37.11 | ||||||||||||||||
SVBI |
SEVERN BANCORP |
1.18 | 135.05 | 0.17 | 0.00 | 48.26 | ||||||||||||||||
HMNF |
HMN FINANCIAL |
1.49 | 229.78 | 0.00 | (219.30 | ) | 43.11 | |||||||||||||||
IROQ |
IF BANCORP |
1.21 | 68.54 | 0.50 | 30.63 | 45.40 | ||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK |
0.97 | 140.15 | 0.24 | 82.35 | 21.52 | ||||||||||||||||
HBK |
HAMILTON BANCORP |
0.72 | 37.00 | 1.96 | 128.90 | NM | ||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
0.49 | NM | 0.00 | 0.00 | 30.14 | ||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP |
1.73 | 101.86 | (0.01 | ) | NM | 41.08 | |||||||||||||||
CFBI |
COMM FIRST BANCSHARES |
1.78 | 65.45 | (0.03 | ) | 2.39 | 52.53 | |||||||||||||||
EFBI |
EAGLE FIN BANCORP |
1.07 | 151.53 | 0.11 | 0.00 | 19.22 | ||||||||||||||||
Average |
1.15 | 107.08 | 0.39 | 3.12 | 37.60 | |||||||||||||||||
Median |
1.13 | 101.86 | 0.14 | 1.20 | 41.08 | |||||||||||||||||
High |
1.78 | 229.78 | 1.96 | 128.90 | 52.53 | |||||||||||||||||
Low |
0.49 | 34.32 | (0.03 | ) | (219.30 | ) | 19.22 | |||||||||||||||
ALL THRIFTS (122) |
||||||||||||||||||||||
Average |
1.01 | 124.74 | 0.16 | (851.87 | ) | 33.03 | ||||||||||||||||
MIDWEST THRIFTS (39) |
||||||||||||||||||||||
Average |
1.02 | 119.42 | 0.21 | (1,419.52 | ) | 31.24 | ||||||||||||||||
WISCONSIN THRIFTS (4) |
||||||||||||||||||||||
Average |
0.97 | 138.83 | 0.11 | (3,090.23 | ) | 29.66 |
136
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
EXHIBIT 45 |
FULL CONVERSION
COMPARABLE GROUP MARKET, PRICING AND FINANCIAL RATIOS
STOCK PRICES AS OF AUGUST 7, 2018
FINANCIAL DATA/ALL RATIOS MOST RECENT FOUR QUARTERS
Market Data | Pricing Ratios | Dividends | Financial Ratios | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Market
Value ($M) |
Price/
Share ($) |
12 Mo.
EPS ($) |
Bk. Value
/Share ($) |
Price/
Earnings (X) |
Price/
Book Value (%) |
Price/
Assets (%) |
Price/
Tang. Bk. Val. (%) |
Price/
Core Earnings (X) |
12 Mo.
Div./ Share ($) |
Dividend
Yield (%) |
Payout
Ratio (%) |
Equity/
Assets (%) |
Core
ROAA (%) |
Core
ROAE (%) |
||||||||||||||||||||||||||||||||||||||||||||||||
PYRAMAX BANK, F.S.B. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Appraised valuemidpoint |
55,000 | 10.00 | 0.08 | 15.29 | NM | 65.42 | 10.40 | 64.07 | NM | 0.00 | 0.00 | 0.00 | 15.89 | 0.16 | 0.99 | |||||||||||||||||||||||||||||||||||||||||||||||
Minimum |
46,750 | 10.00 | 0.08 | 16.45 | NM | 60.81 | 8.96 | 59.44 | NM | 0.00 | 0.00 | 0.00 | 14.73 | 0.15 | 1.00 | |||||||||||||||||||||||||||||||||||||||||||||||
Maximum |
63,250 | 10.00 | 0.08 | 14.43 | NM | 69.30 | 11.80 | 67.98 | NM | 0.00 | 0.00 | 0.00 | 17.02 | 0.17 | 0.99 | |||||||||||||||||||||||||||||||||||||||||||||||
Maximum, as adjusted |
72,738 | 10.00 | 0.08 | 13.69 | NM | 73.07 | 13.36 | 71.79 | NM | 0.00 | 0.00 | 0.00 | 18.28 | 0.18 | 0.98 | |||||||||||||||||||||||||||||||||||||||||||||||
ALL THRIFTS (122) |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average |
380,431 | 24.81 | 1.46 | 20.54 | 26.92 | 131.43 | 15.71 | 142.83 | 23.72 | 0.32 | 1.38 | 21.78 | 12.60 | 0.80 | 6.52 | |||||||||||||||||||||||||||||||||||||||||||||||
Median |
84,273 | 19.23 | 0.73 | 15.60 | 22.28 | 124.48 | 15.22 | 129.49 | 19.59 | 0.20 | 0.76 | 9.79 | 11.65 | 0.75 | 6.19 | |||||||||||||||||||||||||||||||||||||||||||||||
WISCONSIN THRIFTS (4) |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average |
167,966 | 16.12 | 0.42 | 13.44 | 22.31 | 120.73 | 18.72 | 121.19 | 18.94 | 0.37 | 2.17 | 0.00 | 15.26 | 0.96 | 8.11 | |||||||||||||||||||||||||||||||||||||||||||||||
Median |
79,652 | 15.53 | 0.43 | 12.74 | 22.31 | 120.82 | 18.98 | 120.96 | 18.94 | 0.00 | 0.00 | 0.00 | 15.47 | 0.30 | 2.99 | |||||||||||||||||||||||||||||||||||||||||||||||
COMPARABLE GROUP (10) |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average |
75,099 | 16.41 | 0.55 | 15.19 | 37.56 | 108.65 | 15.04 | 116.40 | 37.49 | 0.17 | 0.84 | 18.75 | 13.84 | 0.51 | 4.01 | |||||||||||||||||||||||||||||||||||||||||||||||
Median |
68,880 | 17.05 | 0.39 | 15.58 | 31.53 | 110.18 | 12.88 | 114.70 | 29.15 | 0.00 | 0.00 | 0.00 | 11.61 | 0.42 | 3.32 | |||||||||||||||||||||||||||||||||||||||||||||||
COMPARABLE GROUP |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES |
83,750 | 11.11 | 0.01 | 10.04 | 92.58 | 110.66 | 28.63 | 110.66 | 92.58 | 0.00 | 0.00 | 0.00 | 25.87 | 0.31 | 1.22 | ||||||||||||||||||||||||||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP |
26,369 | 16.35 | 0.41 | 17.05 | 39.88 | 95.89 | 19.95 | 95.89 | 65.40 | 0.00 | 0.00 | 0.00 | 20.80 | 0.31 | 1.68 | ||||||||||||||||||||||||||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK |
54,010 | 20.43 | 1.85 | 21.52 | 11.04 | 94.93 | 9.76 | 125.18 | 17.03 | 0.92 | 4.50 | 49.73 | 10.28 | 0.57 | 5.21 | ||||||||||||||||||||||||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP |
35,698 | 10.76 | 0.34 | 10.75 | 31.65 | 100.09 | 11.68 | 106.96 | 26.90 | 0.00 | 0.00 | 0.00 | 11.67 | 0.49 | 3.72 | ||||||||||||||||||||||||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
34,457 | 17.75 | 0.37 | 16.13 | 47.97 | 110.04 | 11.01 | 113.27 | 43.29 | 0.00 | 0.00 | 0.00 | 10.01 | 0.26 | 2.51 | ||||||||||||||||||||||||||||||||||||||||||||||
HBK |
HAMILTON BANCORP |
53,554 | 15.70 | (0.18 | ) | 15.02 | 31.40 | 104.53 | 10.18 | 127.33 | 31.40 | 0.00 | 0.00 | 0.00 | 9.73 | 0.33 | 2.92 | |||||||||||||||||||||||||||||||||||||||||||||
HMNF |
HMN FINANCIAL |
90,535 | 20.10 | 1.12 | 18.22 | 17.95 | 110.32 | 12.54 | 114.33 | 15.83 | 0.00 | 0.00 | 0.00 | 11.36 | 0.79 | 7.09 | ||||||||||||||||||||||||||||||||||||||||||||||
IROQ |
IF BANCORP |
93,005 | 23.90 | 0.48 | 20.97 | 49.79 | 113.97 | 15.02 | 115.07 | 44.26 | 0.36 | 1.51 | 75.00 | 13.18 | 0.34 | 2.51 | ||||||||||||||||||||||||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP |
173,666 | 19.30 | 0.76 | 14.68 | 25.39 | 131.47 | 18.39 | 138.55 | 20.53 | 0.33 | 1.71 | 43.42 | 13.98 | 0.93 | 6.33 | ||||||||||||||||||||||||||||||||||||||||||||||
SVBI |
SEVERN BANCORP |
105,942 | 8.65 | 0.31 | 7.55 | 27.90 | 114.57 | 13.22 | 116.73 | 17.65 | 0.06 | 0.69 | 19.35 | 11.54 | 0.75 | 6.92 |
137
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 46 |
VALUATION ANALYSIS AND CALCULATIONFULL CONVERSION
PYRAMAX BANK, F.S.B.
Pricing ratios and parameters:
Symbol |
Midpoint
Ratios |
Comparable Group | All Thrifts | |||||||||||||||||||
Pro Forma |
Average | Median | Average | Median | ||||||||||||||||||
Price to earnings |
P/E | NM | 37.56 | 31.53 | 26.92 | 22.28 | ||||||||||||||||
Price to core earnings |
P/CE | NM | 37.49 | 29.15 | 23.72 | 19.59 | ||||||||||||||||
Price to book value |
P/B | 65.42 | 108.65 | 110.18 | 131.43 | 124.48 | ||||||||||||||||
Price to tangible book value |
P/TB | 64.07 | 116.40 | 114.70 | 142.83 | 129.49 | ||||||||||||||||
Price to assets |
P/A | 10.40 | 15.04 | 12.88 | 15.71 | 15.22 | ||||||||||||||||
Pre conversion earnings |
(Y) | $ | (3,691,000 | ) | ||||||||||||||||||
Pre conversion core earnings |
(CY) | $ | 438,000 | |||||||||||||||||||
Pre conversion book value |
(B) | $ | 37,690,000 | |||||||||||||||||||
Pre conversion tang. book value |
(TB) | $ | 39,459,000 | |||||||||||||||||||
Pre conversion assets |
(A) | $ | 482,617,000 | |||||||||||||||||||
Conversion expense |
(X) | 2.73 | % | Percent sold | (PCT | ) | 99.00 | % | ||||||||||||||
ESOP stock purchase |
(E) | 8.00 | % | Option % granted | (OP | ) | 10.00 | % | ||||||||||||||
ESOP cost of borrowings, net |
(S) | 0.00 | % | Est. option value | (OV | ) | 29.95 | % | ||||||||||||||
ESOP term (yrs.) |
(T) | 25 | Option maturity | (OM | ) | 10 | ||||||||||||||||
RRP amount |
(M) | 4.00 | % | Option % taxable | (OT | ) | 25.00 | % | ||||||||||||||
RRP term (yrs.) |
(N) | 5 | Price per share | (P | ) | $ | 10.00 | |||||||||||||||
Tax rate |
(TAX) | 21.00 | % | |||||||||||||||||||
Investment rate of return, pretax |
2.85 | % | ||||||||||||||||||||
Investment rate of return, net |
(RR) | 2.25 | % |
Formulae to indicate value after conversion:
1. P/CE method: | Value = | P/CE*CY | = | $55,000,000 | ||||||
((1-P/CE*(PCT)*((1-X-E-M)*(RR*(1-TAX))-((1-TAX)*E/T)-((1-TAX)*M/N)-((1-TAX)*OT)*(OP*OV)/OM))) | ||||||||||
2. P/B method: | Value = | P/B*(B) | = | $55,000,000 | ||||||
(1-PB*(PCT)*(1-X-E-M)) | ||||||||||
3. P/A method: | Value = | P/A*(A) | = | $55,000,000 | ||||||
(1-PA*(PCT)*(1-X-E-M)) |
VALUATION CORRELATION AND CONCLUSIONS:
Foundation
Shares Issued |
Public
Shares Sold |
Gross Proceeds
of Public Offering |
MHC
Shares Issued |
Total
Shares Issued |
TOTAL
VALUE |
|||||||||||||||||||
Midpoint |
55,000 | 5,445,000 | $ | 54,450,000 | 0 | 5,500,000 | $ | 55,000,000 | ||||||||||||||||
Minimum |
46,750 | 4,628,250 | $ | 46,282,500 | 0 | 4,675,000 | $ | 46,750,000 | ||||||||||||||||
Maximum |
63,250 | 6,261,750 | $ | 62,617,500 | 0 | 6,325,000 | $ | 63,250,000 | ||||||||||||||||
Maximum, as adjusted |
72,738 | 7,201,013 | $ | 72,010,125 | 0 | 7,273,750 | $ | 72,737,500 |
138
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 47 |
PROJECTED EFFECT OF CONVERSION PROCEEDS
PYRAMAX BANK, F.S.B.
Minority Offering at the MINIMUM
1. Gross Offering Proceeds |
||||||||
Offering proceeds (1) |
$ | 46,282,500 | ||||||
Less: Estimated offering expenses |
1,500,000 | |||||||
|
|
|||||||
Net offering proceeds |
$ | 44,782,500 | ||||||
2. Generation of Additional Income |
||||||||
Net offering proceeds |
$ | 44,782,500 | ||||||
Less: Stock-based benefit plans (2) |
5,610,000 | |||||||
Less: Cash contribution to foundation |
100,000 | |||||||
|
|
|||||||
Net offering proceeds invested |
$ | 39,072,500 | ||||||
Investment rate, after taxes |
2.25 | % | ||||||
Earnings increasereturn on proceeds invested |
$ | 879,717 | ||||||
Less: Estimated cost of ESOP borrowings |
0 | |||||||
Less: Amortization of ESOP borrowings, net of taxes |
118,184 | |||||||
Less: Stock-based incentive plan expense, net of taxes |
295,460 | |||||||
Less: Option expense, net of applicable taxes |
132,887 | |||||||
|
|
|||||||
Net earnings increase (decrease) |
$ | 333,186 | ||||||
3. Comparative Pro Forma Earnings |
||||||||
Net | Core | |||||||
Before conversion12 months ended 6/30/18 |
$ | (3,691,000 | ) | $ | 438,000 | |||
Net earnings increase (decrease) |
333,186 | 333,186 | ||||||
|
|
|
|
|||||
After conversion |
$ | (3,357,814 | ) | $ | 771,186 | |||
4. Comparative Pro Forma Net Worth (3) |
||||||||
Total | Tangible | |||||||
Before conversion6/30/18 |
$ | 37,690,000 | $ | 39,459,000 | ||||
Net cash conversion proceeds |
39,072,500 | 39,072,500 | ||||||
Tax benefit of foundation contribution |
119,175 | 119,175 | ||||||
|
|
|
|
|||||
After conversion |
$ | 76,881,675 | $ | 78,650,675 | ||||
5. Comparative Pro Forma Assets |
||||||||
Before conversion6/30/18 |
$ | 482,617,000 | ||||||
Net cash conversion proceeds |
39,072,500 | |||||||
Tax benefit of foundation contribution |
119,175 | |||||||
|
|
|||||||
After conversion |
$ | 521,808,675 |
(1) |
Represents gross proceeds of public offering. |
(2) |
Represents ESOP and stock-based incentive plans. |
(3) |
ESOP and RRP are omitted from net worth. |
139
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 48 |
PROJECTED EFFECT OF CONVERSION PROCEEDS
PYRAMAX BANK, F.S.B.
Minority Offering at the MIDPOINT
1. Gross Offering Proceeds |
||||||||
Offering proceeds (1) |
$ | 54,450,000 | ||||||
Less: Estimated offering expenses |
1,500,000 | |||||||
|
|
|||||||
Net offering proceeds |
$ | 52,950,000 | ||||||
2. Generation of Additional Income |
||||||||
Net offering proceeds |
$ | 52,950,000 | ||||||
Less: Stock-based benefit plans (2) |
6,600,000 | |||||||
Less: Cash contribution to foundation |
100,000 | |||||||
|
|
|||||||
Net offering proceeds invested |
$ | 46,250,000 | ||||||
Investment rate, after taxes |
2.25 | % | ||||||
Earnings increasereturn on proceeds invested |
$ | 1,041,319 | ||||||
Less: Estimated cost of ESOP borrowings |
0 | |||||||
Less: Amortization of ESOP borrowings, net of taxes |
139,040 | |||||||
Less: Stock-based incentive plan expense, net of taxes |
347,600 | |||||||
Less: Option expense, net of applicable taxes |
156,338 | |||||||
|
|
|||||||
Net earnings increase (decrease) |
$ | 398,341 | ||||||
3. Comparative Pro Forma Earnings |
||||||||
Regular | Core | |||||||
Before conversion12 months ended 6/30/18 |
$ | (3,691,000 | ) | $ | 438,000 | |||
Net earnings increase |
398,341 | 398,341 | ||||||
|
|
|
|
|||||
After conversion |
$ | (3,292,659 | ) | $ | 836,341 | |||
4. Comparative Pro Forma Net Worth (3) |
||||||||
Total | Tangible | |||||||
Before conversion6/30/18 |
$ | 37,690,000 | $ | 39,459,000 | ||||
Net cash conversion proceeds |
46,250,000 | 46,250,000 | ||||||
Tax benefit of foundation contribution |
136,500 | 136,500 | ||||||
|
|
|
|
|||||
After conversion |
$ | 84,076,500 | $ | 85,845,500 | ||||
5. Comparative Pro Forma Assets |
||||||||
Before conversion6/30/18 |
$ | 482,617,000 | ||||||
Net cash conversion proceeds |
46,250,000 | |||||||
Tax benefit of foundation contribution |
136,500 | |||||||
|
|
|||||||
After conversion |
$ | 529,003,500 |
(1) |
Represents gross proceeds of public offering. |
(2) |
Represents ESOP and stock-based incentive plans. |
(3) |
ESOP and RRP are omitted from net worth. |
140
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 49 |
PROJECTED EFFECT OF CONVERSION PROCEEDS
PYRAMAX BANK, F.S.B.
Minority Offering at the MAXIMUM
1. Gross Offering Proceeds |
||||||||
Offering proceeds (1) |
$ | 62,617,500 | ||||||
Less: Estimated offering expenses |
1,500,000 | |||||||
|
|
|||||||
Net offering proceeds |
$ | 61,117,500 | ||||||
2. Generation of Additional Income |
||||||||
Net offering proceeds |
$ | 61,117,500 | ||||||
Less: Stock-based benefit plans (2) |
7,590,000 | |||||||
Less: Cash contribution to foundation |
100,000 | |||||||
|
|
|||||||
Net offering proceeds invested |
$ | 53,427,500 | ||||||
Investment rate, after taxes |
2.25 | % | ||||||
Earnings increasereturn on proceeds invested |
$ | 1,202,920 | ||||||
Less: Estimated cost of ESOP borrowings |
0 | |||||||
Less: Amortization of ESOP borrowings, net of taxes |
159,896 | |||||||
Less: Stock-based incentive plan expense, net of taxes |
399,740 | |||||||
Less: Option expense, net of applicable taxes |
179,788 | |||||||
|
|
|||||||
Net earnings increase (decrease) |
$ | 463,496 | ||||||
3. Comparative Pro Forma Earnings |
||||||||
Regular | Core | |||||||
Before conversion12 months ended 6/30/18 |
$ | (3,691,000 | ) | $ | 438,000 | |||
Net earnings increase |
463,496 | 463,496 | ||||||
|
|
|
|
|||||
After conversion |
$ | (3,227,504 | ) | $ | 901,496 | |||
4. Comparative Pro Forma Net Worth (3) |
||||||||
Total | Tangible | |||||||
Before conversion6/30/18 |
$ | 37,690,000 | $ | 39,459,000 | ||||
Net cash conversion proceeds |
53,427,500 | 53,427,500 | ||||||
Tax benefit of foundation contribution |
153,825 | 153,825 | ||||||
|
|
|
|
|||||
After conversion |
$ | 91,271,325 | $ | 93,040,325 | ||||
5. Comparative Pro Forma Assets |
||||||||
Before conversion6/30/18 |
$ | 482,617,000 | ||||||
Net cash conversion proceeds |
53,427,500 | |||||||
Tax benefit of foundation contribution |
153,825 | |||||||
|
|
|||||||
After conversion |
$ | 536,198,325 |
(1) |
Represents gross proceeds of public offering. |
(2) |
Represents ESOP and stock-based incentive plans. |
(3) |
ESOP and RRP are omitted from net worth. |
141
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 50 |
PROJECTED EFFECT OF CONVERSION PROCEEDS
PYRAMAX BANK, F.S.B.
Minority Offering at the Maximum, as adjusted
1. Gross Offering Proceeds |
||||||||
Offering proceeds (1) |
$ | 72,010,125 | ||||||
Less: Estimated offering expenses |
1,500,000 | |||||||
|
|
|||||||
Net offering proceeds |
$ | 70,510,125 | ||||||
2. Generation of Additional Income |
||||||||
Net offering proceeds |
$ | 70,510,125 | ||||||
Less: Stock-based benefit plans (2) |
8,728,500 | |||||||
Less: Cash contribution to foundation |
100,000 | |||||||
|
|
|||||||
Net offering proceeds invested |
$ | 61,681,625 | ||||||
Investment rate, after taxes |
2.25 | % | ||||||
Earnings increasereturn on proceeds invested |
$ | 1,388,762 | ||||||
Less: Estimated cost of ESOP borrowings |
0 | |||||||
Less: Amortization of ESOP borrowings, net of taxes |
183,880 | |||||||
Less: Stock-based incentive plan expense, net of taxes |
459,701 | |||||||
Less: Option expense, net of applicable taxes |
206,756 | |||||||
|
|
|||||||
Net earnings increase (decrease) |
$ | 538,424 | ||||||
3. Comparative Pro Forma Earnings |
||||||||
Regular | Core | |||||||
Before conversion12 months ended 6/30/18 |
$ | (3,691,000 | ) | $ | 438,000 | |||
Net earnings increase |
538,424 | 538,424 | ||||||
|
|
|
|
|||||
After conversion |
$ | (3,152,576 | ) | $ | 976,424 | |||
4. Comparative Pro Forma Net Worth (3) |
||||||||
Total | Tangible | |||||||
Before conversion6/30/18 |
$ | 37,690,000 | $ | 39,459,000 | ||||
Net cash conversion proceeds |
61,681,625 | 61,681,625 | ||||||
Tax benefit of foundation contribution |
173,749 | 173,749 | ||||||
|
|
|
|
|||||
After conversion |
$ | 99,545,374 | $ | 101,314,374 | ||||
5. Comparative Pro Forma Assets |
||||||||
Before conversion6/30/18 |
$ | 482,617,000 | ||||||
Net cash conversion proceeds |
61,681,625 | |||||||
Tax benefit of foundation contribution |
173,749 | |||||||
|
|
|||||||
After conversion |
$ | 544,472,374 |
(1) |
Represents gross proceeds of public offering. |
(2) |
Represents ESOP and stock-based incentive plans. |
(3) |
ESOP and RRP are omitted from net worth. |
142
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 51 |
MINORITY OFFERING SUMMARY OF VALUATION PREMIUM OR DISCOUNT
PYRAMAX BANK, F.S.B.
Premium or (discount)
from comparable group. |
||||||||||||
Pyramax Bank, F.S.B. | Averaqe | Median | ||||||||||
Midpoint: |
||||||||||||
Price/earnings |
NM x | NM | NM | |||||||||
Price/book value |
65.42 | % * | -39.79 | % | -40.63 | % | ||||||
Price/assets |
10.40 | % | -30.86 | % | -19.28 | % | ||||||
Price/tangible book value |
64.07 | % | -44.96 | % | -44.14 | % | ||||||
Price/core earnings |
NM x | NM | NM | |||||||||
Minimum of range: |
||||||||||||
Price/earnings |
NM x | NM | NM | |||||||||
Price/book value |
60.81 | % * | -44.03 | % | -44.81 | % | ||||||
Price/assets |
8.96 | % | -40.42 | % | -30.44 | % | ||||||
Price/tangible book value |
59.44 | % | -48.93 | % | -48.18 | % | ||||||
Price/core earnings |
NM x | NM | NM | |||||||||
Maximum of range: |
||||||||||||
Price/earnings |
NM x | NM | NM | |||||||||
Price/book value |
69.30 | % * | -36.22 | % | -37.10 | % | ||||||
Price/assets |
11.80 | % | -21.56 | % | -8.42 | % | ||||||
Price/tangible book value |
67.98 | % | -41.60 | % | -40.73 | % | ||||||
Price/core earnings |
NM x | NM | NM | |||||||||
Super maximum of range: |
||||||||||||
Price/earnings |
NM x | NM | NM | |||||||||
Price/book value |
73.07 | % * | -32.75 | % | -33.68 | % | ||||||
Price/assets |
13.36 | % | -11.16 | % | 3.72 | % | ||||||
Price/tangible book value |
71.79 | % | -38.32 | % | -37.41 | % | ||||||
Price/core earnings |
NM x | NM | NM |
* |
Represents pricing ratio associated with primary valuation method. |
143
KELLER & COMPANY Dublin, Ohio 614-766-1426 |
EXHIBIT 52 |
STAGE ONE MHC CONVERSION
COMPARABLE GROUP MARKET, PRICING AND FINANCIAL RATIOS
STOCK PRICES AS OF AUGUST 7, 2018
FINANCIAL DATA/ALL RATIOS MOST RECENT FOUR QUARTERS
Market Data | Pricing Ratios | Dividends | Financial Ratios | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Market
Value ($M) |
Price/
Share ($) |
12 Mo.
EPS ($) |
Bk. Value
/Share ($) |
Price/
Earnings (X) |
Price/
Book Value (%) |
Price/
Assets (%) |
Price/
Tang. Bk. Val. (%) |
Price/
Core Earnings (X) |
12 Mo.
Div./ Share ($) |
Dividend
Yield (%) |
Payout
Ratio (%) |
Equity/
Assets (%) |
Core
ROAA (%) |
Core
ROAE (%) |
||||||||||||||||||||||||||||||||||||||||||||||||
PYRAMAX BANK, F.S.B. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Appraised valuemidpoint |
55,000 | 10.00 | 0.02 | 10.38 | NM | 96.34 | 10.96 | 96.25 | NM | 0.00 | 0.00 | 0.00 | 11.37 | 0.11 | 0.98 | |||||||||||||||||||||||||||||||||||||||||||||||
Minimum |
46,750 | 10.00 | 0.02 | 11.54 | NM | 86.73 | 9.37 | 86.58 | NM | 0.00 | 0.00 | 0.00 | 10.81 | 0.11 | 0.99 | |||||||||||||||||||||||||||||||||||||||||||||||
Maximum |
63,250 | 10.00 | 0.02 | 9.53 | NM | 105.04 | 12.52 | 104.93 | NM | 0.00 | 0.00 | 0.00 | 11.93 | 0.11 | 0.96 | |||||||||||||||||||||||||||||||||||||||||||||||
Maximum, as adjusted |
72,738 | 10.00 | 0.02 | 8.78 | NM | 113.90 | 14.30 | 113.77 | NM | 0.00 | 0.00 | 0.00 | 12.56 | 0.12 | 0.95 | |||||||||||||||||||||||||||||||||||||||||||||||
ALL THRIFTS (122) |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average |
380,431 | 24.81 | 1.46 | 20.54 | 26.92 | 131.43 | 15.71 | 142.83 | 23.72 | 0.32 | 1.38 | 21.78 | 12.60 | 0.80 | 6.52 | |||||||||||||||||||||||||||||||||||||||||||||||
Median |
84,273 | 19.23 | 0.73 | 15.60 | 22.28 | 124.48 | 15.22 | 129.49 | 19.59 | 0.20 | 0.76 | 9.79 | 11.65 | 0.75 | 6.19 | |||||||||||||||||||||||||||||||||||||||||||||||
WISCONSIN THRIFTS (4) |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average |
167,966 | 16.12 | 0.42 | 13.44 | 22.31 | 120.73 | 18.72 | 121.19 | 18.94 | 0.37 | 2.17 | 0.00 | 15.26 | 0.96 | 8.11 | |||||||||||||||||||||||||||||||||||||||||||||||
Median |
79,652 | 15.53 | 0.43 | 12.74 | 22.31 | 120.82 | 18.98 | 120.96 | 18.94 | 0.00 | 0.00 | 0.00 | 15.47 | 0.30 | 2.99 | |||||||||||||||||||||||||||||||||||||||||||||||
COMPARABLE GROUP (10) |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average |
75,099 | 16.41 | 0.55 | 15.19 | 37.56 | 108.65 | 15.04 | 116.40 | 37.49 | 0.17 | 0.84 | 18.75 | 13.84 | 0.51 | 4.01 | |||||||||||||||||||||||||||||||||||||||||||||||
Median |
68,880 | 17.05 | 0.39 | 15.58 | 31.53 | 110.18 | 12.88 | 114.70 | 29.15 | 0.00 | 0.00 | 0.00 | 11.61 | 0.42 | 3.32 | |||||||||||||||||||||||||||||||||||||||||||||||
COMPARABLE GROUP |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CFBI |
COMM FIRST BANCSHARES |
83,750 | 11.11 | 0.01 | 10.04 | 92.58 | 110.66 | 28.63 | 110.66 | 92.58 | 0.00 | 0.00 | 0.00 | 25.87 | 0.31 | 1.22 | ||||||||||||||||||||||||||||||||||||||||||||||
EFBI |
EAGLE FIN BANCORP |
26,369 | 16.35 | 0.41 | 17.05 | 39.88 | 95.89 | 19.95 | 95.89 | 65.40 | 0.00 | 0.00 | 0.00 | 20.80 | 0.31 | 1.68 | ||||||||||||||||||||||||||||||||||||||||||||||
ESBK |
ELMIRA SAVINGS BANK |
54,010 | 20.43 | 1.85 | 21.52 | 11.04 | 94.93 | 9.76 | 125.18 | 17.03 | 0.92 | 4.50 | 49.73 | 10.28 | 0.57 | 5.21 | ||||||||||||||||||||||||||||||||||||||||||||||
EQFN |
EQUITABLE FINANCIAL CORP |
35,698 | 10.76 | 0.34 | 10.75 | 31.65 | 100.09 | 11.68 | 106.96 | 26.90 | 0.00 | 0.00 | 0.00 | 11.67 | 0.49 | 3.72 | ||||||||||||||||||||||||||||||||||||||||||||||
FSBC |
FSB COMMUNITY BANKSHARES |
34,457 | 17.75 | 0.37 | 16.13 | 47.97 | 110.04 | 11.01 | 113.27 | 43.29 | 0.00 | 0.00 | 0.00 | 10.01 | 0.26 | 2.51 | ||||||||||||||||||||||||||||||||||||||||||||||
HBK |
HAMILTON BANCORP |
53,554 | 15.70 | (0.18 | ) | 15.02 | 31.40 | 104.53 | 10.18 | 127.33 | 31.40 | 0.00 | 0.00 | 0.00 | 9.73 | 0.33 | 2.92 | |||||||||||||||||||||||||||||||||||||||||||||
HMNF |
HMN FINANCIAL |
90,535 | 20.10 | 1.12 | 18.22 | 17.95 | 110.32 | 12.54 | 114.33 | 15.83 | 0.00 | 0.00 | 0.00 | 11.36 | 0.79 | 7.09 | ||||||||||||||||||||||||||||||||||||||||||||||
IROQ |
IF BANCORP |
93,005 | 23.90 | 0.48 | 20.97 | 49.79 | 113.97 | 15.02 | 115.07 | 44.26 | 0.36 | 1.51 | 75.00 | 13.18 | 0.34 | 2.51 | ||||||||||||||||||||||||||||||||||||||||||||||
PBIP |
PRUDENTIAL BANCORP |
173,666 | 19.30 | 0.76 | 14.68 | 25.39 | 131.47 | 18.39 | 138.55 | 20.53 | 0.33 | 1.71 | 43.42 | 13.98 | 0.93 | 6.33 | ||||||||||||||||||||||||||||||||||||||||||||||
SVBI |
SEVERN BANCORP |
105,942 | 8.65 | 0.31 | 7.55 | 27.90 | 114.57 | 13.22 | 116.73 | 17.65 | 0.06 | 0.69 | 19.35 | 11.54 | 0.75 | 6.92 |
144
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 53 |
VALUATION ANALYSIS AND CALCULATIONFIRST STAGE MHC OFFERING
PYRAMAX BANK, F.S.B.
Pricing ratios and parameters:
Midpoint
Ratios |
Comparable Group |
All Thrifts | ||||||||||||||||||||
Pro Forma |
Symbol |
Average |
Median |
Average | Median | |||||||||||||||||
Price to earnings |
P/E | NM | 37.56 | 31.53 | 26.92 | 22.28 | ||||||||||||||||
Price to core earnings |
P/CE | NM | 37.49 | 29.15 | 23.72 | 19.59 | ||||||||||||||||
Price to book value |
P/B | 96.34 | 108.65 | 110.18 | 131.43 | 124.48 | ||||||||||||||||
Price to tangible book value |
P/TB | 96.25 | 116.40 | 114.70 | 142.83 | 129.49 | ||||||||||||||||
Price to assets |
P/A | 10.96 | 15.04 | 12.88 | 15.71 | 15.22 | ||||||||||||||||
Pre conversion earnings |
(Y) | $ | (3,691,000 | ) | ||||||||||||||||||
Pre conversion core earnings |
(CY) | $ | 438,000 | |||||||||||||||||||
Pre conversion book value |
(B) | $ | 37,690,000 | |||||||||||||||||||
Pre conversion tang. book value |
(TB) | $ | 39,459,000 | |||||||||||||||||||
Pre conversion assets |
(A) | $ | 482,617,000 | |||||||||||||||||||
Conversion expense |
(X) | 2.73 | % | Percent sold | (PCT | ) | 44.00 | % | ||||||||||||||
ESOP stock purchase |
(E) | 3.92 | % | Option % granted | (OP | ) | 4.90 | % | ||||||||||||||
ESOP cost of borrowings, net |
(S) | 0.00 | % | Est. option value | (OV | ) | 29.95 | % | ||||||||||||||
ESOP term (yrs.) |
(T) | 25 | Option maturity | (OM | ) | 10 | ||||||||||||||||
RRP amount |
(M) | 1.96 | % | Option % taxable | (OT | ) | 25.00 | % | ||||||||||||||
RRP term (yrs.) |
(N) | 5 | Price per share | (P | ) | $ | 10.00 | |||||||||||||||
Tax rate |
(TAX) | 21.00 | % | |||||||||||||||||||
Investment rate of return, pretax |
2.85 | % | ||||||||||||||||||||
Investment rate of return, net |
(RR) | 2.25 | % |
Formulae to indicate value after conversion:
1. |
P/CE method: |
Value |
= |
P/CE*CY |
= | $ | 55,000,000 | |||||||||
((1-P/CE*(PCT)*((1-X-E-M)*(RR*(1-TAX))-((1-TAX)*E/T)-((1-TAX)*M/N)-((1-TAX)*OT)*(OP*OV)/OM))) |
||||||||||||||||
2. |
P/B method: |
Value |
= |
P/B*(B) |
= | $ | 55,000,000 | |||||||||
(1-PB*(PCT)*(1-X-E-M)) |
||||||||||||||||
3. |
P/A method: |
Value |
= |
P/A*(A) |
= | $ | 55,000,000 | |||||||||
(1-PA*(PCT)*(1-X-E-M)) |
VALUATION CORRELATION AND CONCLUSIONS:
Foundation
Shares Issued |
Public
Shares Sold |
Gross Proceeds
of Public Offering |
MHC
Shares Issued |
Total
Shares Issued |
TOTAL
VALUE |
|||||||||||||||||||
Midpoint |
55,000 | 2,420,000 | $ | 24,200,000 | 3,025,000 | 5,500,000 | $ | 55,000,000 | ||||||||||||||||
Minimum |
46,750 | 2,057,000 | $ | 20,570,000 | 2,571,250 | 4,675,000 | $ | 46,750,000 | ||||||||||||||||
Maximum |
63,250 | 2,783,000 | $ | 27,830,000 | 3,478,750 | 6,325,000 | $ | 63,250,000 | ||||||||||||||||
Maximum, as adjusted |
72,738 | 3,200,450 | $ | 32,004,500 | 4,000,563 | 7,273,750 | $ | 72,737,500 |
145
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 54 |
PROJECTED EFFECT OF CONVERSION PROCEEDS
PYRAMAX BANK, F.S.B.
Minority Offering at the MINIMUM
1. Gross Offering Proceeds |
||||||||
Offering proceeds (1) |
$ | 20,570,000 | ||||||
Less: Estimated offering expenses |
1,500,000 | |||||||
|
|
|||||||
Net offering proceeds |
$ | 19,070,000 | ||||||
2. Generation of Additional Income |
||||||||
Net offering proceeds |
$ | 19,070,000 | ||||||
Less: Stock-based benefit plans (2) |
2,748,900 | |||||||
Less: Cash contribution to foundation |
100,000 | |||||||
Less: MHC capitalization |
100,000 | |||||||
|
|
|||||||
Net offering proceeds invested |
$ | 16,121,100 | ||||||
Investment rate, after taxes |
2.25 | % | ||||||
Earnings increasereturn on proceeds invested |
$ | 362,967 | ||||||
Less: Estimated cost of ESOP borrowings |
0 | |||||||
Less: Amortization of ESOP borrowings, net of taxes |
57,910 | |||||||
Less: Stock-based incentive plan expense, net of taxes |
144,775 | |||||||
Less: Option expense, net of applicable taxes |
65,115 | |||||||
|
|
|||||||
Net earnings increase (decrease) |
$ | 95,166 | ||||||
3. Comparative Pro Forma Earnings |
||||||||
Net | Core | |||||||
Before conversion -12 months ended 6/30/18 |
$ | (3,691,000 | ) | $ | 438,000 | |||
Net earnings increase (decrease) |
95,166 | 95,166 | ||||||
|
|
|
|
|||||
After conversion |
$ | (3,595,834 | ) | $ | 533,166 | |||
4. Comparative Pro Forma Net Worth (3) |
||||||||
Total | Tangible | |||||||
Before conversion6/30/18 |
$ | 37,690,000 | $ | 39,459,000 | ||||
Net cash conversion proceeds |
16,121,100 | 16,121,100 | ||||||
Tax benefit of foundation contribution |
119,175 | 119,175 | ||||||
|
|
|
|
|||||
After conversion |
$ | 53,930,275 | $ | 55,699,275 | ||||
5. Comparative Pro Forma Assets |
||||||||
Before conversion6/30/18 |
$ | 482,617,000 | ||||||
Net cash conversion proceeds |
16,121,100 | |||||||
Tax benefit of foundation contribution |
119,175 | |||||||
|
|
|||||||
After conversion |
$ | 498,857,275 |
(1) |
Represents gross proceeds of public offering. |
(2) |
Represents ESOP and stock-based incentive plans. |
(3) |
ESOP and RRP are omitted from net worth. |
146
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 55 |
PROJECTED EFFECT OF CONVERSION PROCEEDS
PYRAMAX BANK, F.S.B.
Minority Offering at the MIDPOINT
1. Gross Offering Proceeds |
||||||||
Offering proceeds (1) |
$ | 24,200,000 | ||||||
Less: Estimated offering expenses |
1,500,000 | |||||||
|
|
|||||||
Net offering proceeds |
$ | 22,700,000 | ||||||
2. Generation of Additional Income |
||||||||
Net offering proceeds |
$ | 22,700,000 | ||||||
Less: Stock-based benefit plans (2) |
3,234,000 | |||||||
Less: Cash contribution to foundation |
100,000 | |||||||
Less: MHC capitalization |
100,000 | |||||||
|
|
|||||||
Net offering proceeds invested |
$ | 19,266,000 | ||||||
Investment rate, after taxes |
2.25 | % | ||||||
Earnings increasereturn on proceeds invested |
$ | 433,774 | ||||||
Less: Estimated cost of ESOP borrowings |
0 | |||||||
Less: Amortization of ESOP borrowings, net of taxes |
68,130 | |||||||
Less: Stock-based incentive plan expense, net of taxes |
170,324 | |||||||
Less: Option expense, net of applicable taxes |
76,605 | |||||||
|
|
|||||||
Net earnings increase (decrease) |
$ | 118,715 | ||||||
3. Comparative Pro Forma Earnings |
||||||||
Regular | Core | |||||||
Before conversion12 months ended 6/30/18 |
$ | (3,691,000 | ) | $ | 438,000 | |||
Net earnings increase |
118,715 | 118,715 | ||||||
|
|
|
|
|||||
After conversion |
$ | (3,572,285 | ) | $ | 556,715 | |||
4. Comparative Pro Forma Net Worth (3) |
||||||||
Total | Tangible | |||||||
Before conversion6/30/18 |
$ | 37,690,000 | $ | 39,459,000 | ||||
Net cash conversion proceeds |
19,266,000 | 19,266,000 | ||||||
Tax benefit of foundation contribution |
136,500 | 136,500 | ||||||
|
|
|
|
|||||
After conversion |
$ | 57,092,500 | $ | 58,861,500 | ||||
5. Comparative Pro Forma Assets |
||||||||
Before conversion6/30/18 |
$ | 482,617,000 | ||||||
Net cash conversion proceeds |
19,266,000 | |||||||
Tax benefit of foundation contribution |
136,500 | |||||||
|
|
|||||||
After conversion |
$ | 502,019,500 |
(1) |
Represents gross proceeds of public offering. |
(2) |
Represents ESOP and stock-based incentive plans. |
(3) |
ESOP and RRP are omitted from net worth. |
147
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 56 |
PROJECTED EFFECT OF CONVERSION PROCEEDS
PYRAMAX BANK, F.S.B.
Minority Offering at the MAXIMUM
1. Gross Offering Proceeds |
||||||||
Offering proceeds (1) |
$ | 27,830,000 | ||||||
Less: Estimated offering expenses |
1,500,000 | |||||||
|
|
|||||||
Net offering proceeds |
$ | 26,330,000 | ||||||
2. Generation of Additional Income |
||||||||
Net offering proceeds |
$ | 26,330,000 | ||||||
Less: Stock-based benefit plans (2) |
3,719,100 | |||||||
Less: Cash contribution to foundation |
100,000 | |||||||
Less: MHC capitalization |
100,000 | |||||||
|
|
|||||||
Net offering proceeds invested |
$ | 22,410,900 | ||||||
Investment rate, after taxes |
2.25 | % | ||||||
Earnings increasereturn on proceeds invested |
$ | 504,581 | ||||||
Less: Estimated cost of ESOP borrowings |
0 | |||||||
Less: Amortization of ESOP borrowings, net of taxes |
78,349 | |||||||
Less: Stock-based incentive plan expense, net of taxes |
195,873 | |||||||
Less: Option expense, net of applicable taxes |
88,096 | |||||||
|
|
|||||||
Net earnings increase (decrease) |
$ | 142,264 | ||||||
3. Comparative Pro Forma Earnings |
||||||||
Regular | Core | |||||||
Before conversion12 months ended 6/30/18 |
$ | (3,691,000 | ) | $ | 438,000 | |||
Net earnings increase |
142,264 | 142,264 | ||||||
|
|
|
|
|||||
After conversion |
$ | (3,548,736 | ) | $ | 580,264 | |||
4. Comparative Pro Forma Net Worth (3) |
||||||||
Total | Tangible | |||||||
Before conversion6/30/18 |
$ | 37,690,000 | $ | 39,459,000 | ||||
Net cash conversion proceeds |
22,410,900 | 22,410,900 | ||||||
Tax benefit of foundation contribution |
153,825 | 153,825 | ||||||
|
|
|
|
|||||
After conversion |
$ | 60,254,725 | $ | 62,023,725 | ||||
5. Comparative Pro Forma Assets |
||||||||
Before conversion6/30/18 |
$ | 482,617,000 | ||||||
Net cash conversion proceeds |
22,410,900 | |||||||
Tax benefit of foundation contribution |
153,825 | |||||||
|
|
|||||||
After conversion |
$ | 505,181,725 |
(1) |
Represents gross proceeds of public offering. |
(2) |
Represents ESOP and stock-based incentive plans. |
(3) |
ESOP and RRP are omitted from net worth. |
148
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 57 |
PROJECTED EFFECT OF CONVERSION PROCEEDS
PYRAMAX BANK, F.S.B.
Minority Offering at the Maximum, as adjusted
1. Gross Offering Proceeds |
||||||||
Offering proceeds (1) |
$ | 32,004,500 | ||||||
Less: Estimated offering expenses |
1,500,000 | |||||||
|
|
|||||||
Net offering proceeds |
$ | 30,504,500 | ||||||
2. Generation of Additional Income |
||||||||
Net offering proceeds |
$ | 30,504,500 | ||||||
Less: Stock-based benefit plans (2) |
4,276,965 | |||||||
Less: Stock-based incentive plan expense, net of taxes |
100,000 | |||||||
Less: Option expense, net of applicable taxes |
100,000 | |||||||
|
|
|||||||
Net offering proceeds invested |
$ | 26,027,535 | ||||||
Investment rate, after taxes |
2.25 | % | ||||||
Earnings increasereturn on proceeds invested |
$ | 586,010 | ||||||
Less: Estimated cost of ESOP borrowings |
0 | |||||||
Less: Amortization of ESOP borrowings, net of taxes |
90,101 | |||||||
Less: Stock-based incentive plan expense, net of taxes |
225,253 | |||||||
Less: Option expense, net of applicable taxes |
101,311 | |||||||
|
|
|||||||
Net earnings increase (decrease) |
$ | 169,344 | ||||||
3. Comparative Pro Forma Earnings |
||||||||
Regular | Core | |||||||
Before conversion12 months ended 6/30/18 |
$ | (3,691,000 | ) | $ | 438,000 | |||
Net earnings increase |
169,344 | 169,344 | ||||||
|
|
|
|
|||||
After conversion |
$ | (3,521,656 | ) | $ | 607,344 | |||
4. Comparative Pro Forma Net Worth (3) |
||||||||
Total | Tangible | |||||||
Before conversion6/30/18 |
$ | 37,690,000 | $ | 39,459,000 | ||||
Net cash conversion proceeds |
26,027,535 | 26,027,535 | ||||||
Tax benefit of foundation contribution |
173,749 | 173,749 | ||||||
|
|
|
|
|||||
After conversion |
$ | 63,891,284 | $ | 65,660,284 | ||||
5. Comparative Pro Forma Assets |
||||||||
Before conversion6/30/18 |
$ | 482,617,000 | ||||||
Net cash conversion proceeds |
26,027,535 | |||||||
Tax benefit of foundation contribution |
173,749 | |||||||
|
|
|||||||
After conversion |
$ | 508,818,284 |
(1) |
Represents gross proceeds of public offering. |
(2) |
Represents ESOP and stock-based incentive plans. |
(3) |
ESOP and RRP are omitted from net worth . |
149
KELLER & COMPANY Columbus, Ohio 614-766-1426 |
EXHIBIT 58 |
MINORITY OFFERING SUMMARY OF VALUATION PREMIUM OR DISCOUNT
PYRAMAX BANK, F.S.B.
Premium or (discount)
from comparable group. |
||||||||||||
Pyramax Bank. F.S.B. | Average | Median | ||||||||||
Midpoint: |
||||||||||||
Price/earnings |
NM | x | NM | NM | ||||||||
Price/book value |
96.25 | % * | -11.41 | % | -12.64 | % | ||||||
Price/assets |
10.96 | % | -27.15 | % | -14.94 | % | ||||||
Price/tangible book value |
96.25 | % | -17.31 | % | -16.09 | % | ||||||
Price/core earnings |
NM | x | NM | NM | ||||||||
Minimum of range: |
||||||||||||
Price/earnings |
NM | x | NM | NM | ||||||||
Price/book value |
86.58 | % * | -20.31 | % | -21.42 | % | ||||||
Price/assets |
9.37 | % | -37.68 | % | -27.24 | % | ||||||
Price/tangible book value |
86.58 | % | -25.62 | % | -24.52 | % | ||||||
Price/core earnings |
NM | x | NM | NM | ||||||||
Maximum of range: |
||||||||||||
Price/earnings |
NM | x | NM | NM | ||||||||
Price/book value |
104.93 | % * | -3.42 | % | -4.77 | % | ||||||
Price/assets |
12.52 | % | -16.74 | % | -2.79 | % | ||||||
Price/tangible book value |
104.93 | % | -9.85 | % | -8.52 | % | ||||||
Price/core earnings |
NM | x | NM | NM | ||||||||
Super maximum of range: |
||||||||||||
Price/earnings |
NM | x | NM | NM | ||||||||
Price/book value |
113.77 | % * | 4.71 | % | 3.26 | % | ||||||
Price/assets |
14.30 | % | -4.94 | % | 10.99 | % | ||||||
Price/tangible book value |
113.77 | % | -2.26 | % | -0.81 | % | ||||||
Price/core earnings |
NM | x | NM | NM |
* |
Represents pricing ratio associated with primary valuation method. |
150
ALPHABETICAL
EXHIBITS
EXHIBIT A
KELLER & COMPANY, INC.
Financial Institution Consultants
555 Metro Place North, Suite 524 Dublin, Ohio 43017 |
614-766-1426 (fax) 614-766-1459 |
PROFILE OF THE FIRM
KELLER & COMPANY, INC. is a national consulting firm to financial institutions, serving clients throughout the United States from its office in Dublin, Ohio. Since our inception in 1985, we have provided a wide range of consulting services to over 250 financial institutions including banks, thrifts, mortgage companies, insurance companies and holding companies from Oregon to Maine.
Services offered by Keller & Company include the preparation of stock and ESOP valuations, fairness opinions, business and strategic plans, capital plans, financial models and projections, market studies, de novo charter and deposit insurance applications, incentive compensation plans, compliance policies, lending, underwriting and investment criteria, and responses to regulatory comments. Keller & Company also serves as advisor in merger/acquisition, deregistration, going private, secondary offering and branch purchase/sale transactions. Keller & Company is additionally active in loan review, director and management review, product analysis and development, performance analysis, compensation review, policy development, charter conversion, data processing, information technology systems, and conference planning and facilitation.
Keller & Company is one of the leading firms in the U.S. with regard to the completion of ESOP valuations for financial institutions and prepares over 25 ESOP valuations a year. Keller is also one of the leading conversion appraisal firms in the United States.
Keller has on-line access to current and historical financial, organizational and demographic data for every financial institution and financial institution holding company in the United States as well as daily pricing data and ratios for all publicly traded financial institutions.
Keller & Company is an experienced appraiser of financial institutions for filing conversion appraisals with the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Federal Reserve Board and numerous state government agencies, and is also approved by the Internal Revenue Service as an expert in financial institution stock valuations.
Each of the firms senior consultants has over thirty years of front line experience and accomplishment in various areas of the financial institution, regulatory and real estate sectors, offering clients distinct and diverse areas of expertise. It is the goal of Keller & Company to provide specific and ongoing relationship-based services that are pertinent, focused and responsive to the needs of the individual client institution within the changing industry environment, and to offer those services at reasonable fees on a timely basis. In recent years, Keller & Company has become one of the leading and most recognized financial institution consulting firms in the nation.
152
CONSULTANTS IN THE FIRM
MICHAEL R. KELLER has over thirty years experience as a consultant to the financial institution industry. Immediately following his graduation from college, Mr. Keller took a position as an examiner of financial institutions in northeastern Ohio with a focus on Cleveland area institutions. After working two years as an examiner, Mr. Keller entered Ohio State University full time to obtain his M.B.A. in Finance.
Mr. Keller then worked as an associate for a management consulting firm specializing in services to financial institutions immediately after receiving his M.B.A. During his eight years with the firm, he specialized in mergers and acquisitions, branch acquisitions and sales, branch feasibility studies, stock valuations, charter applications, and site selection analyses. By the time of his departure, he had attained the position of vice president, with experience in almost all facets of banking operations.
Prior to forming Keller & Company, Mr. Keller also worked as a senior consultant in a larger consulting firm. In that position, he broadened his activities and experience, becoming more involved with institutional operations, business and strategic planning, regulatory policies and procedures, performance analysis, conversion appraisals, and fairness opinions. Mr. Keller established Keller & Company in November 1985 to better serve the needs of the financial institution industry.
Mr. Keller graduated from the College of Wooster with a B.A. in Economics in 1972, and later received an M.B.A. in Finance in 1976 from the Ohio State University where he took numerous courses in corporate stock valuations.
153
Consultants in the Firm (cont.)
SUSAN H. ODONNELL has twenty years of experience in the finance and accounting areas of the banking industry.
At the start of her career, Ms. ODonnell worked in public accounting for Coopers & Lybrand in Cincinnati and earned her CPA. Her clients consisted primarily of financial institutions and health care companies.
Ms. ODonnell then joined Empire Bank of America in Buffalo, New York. During her five years with Empire, Ms. ODonnell progressed to the level of Vice President and was responsible for SEC, FHLB and internal financial reporting. She also coordinated the offering circular for its initial offering of common stock.
Ms. ODonnell later joined Banc One Corporation where she worked for eleven years. She began her career at Banc One in the Corporate Accounting Department where she was responsible for SEC, Federal Reserve and investor relations reporting and coordinated the offering documents for stock and debt offerings. She also performed acquisition work including regulatory applications and due diligence and established accounting policies and procedures for all affiliates. Ms. ODonnell later moved within Banc One to the position of chief financial officer of the Personal Trust business responsible for $225 million in revenue. She then provided leadership as the Director of Personal Trust Integration responsible for various savings and revenue enhancements related to the Bank One/First Chicago merger.
Ms. ODonnell graduated from Miami University with a B.S. in Business. She also completed the Leading Strategic Change Program at The Darden School of Business and the Banc One Leadership Development Program.
154
Consultants in the Firm (cont.)
JOHN A. SHAFFER has over thirty years experience in banking, finance, real estate lending, and development.
Following his university studies, Mr. Shaffer served as a lending officer for a large real estate investment trust, specializing in construction and development loans. Having gained experience in loan underwriting, management and workout, he later joined Chemical Bank of New York and was appointed Vice President for Loan Administration of Chemical Mortgage Company in Columbus, Ohio. At Chemical, he managed all commercial and residential loan servicing, administering a portfolio in excess of $2 billion. His responsibilities also included the analysis, management and workout of problem commercial real estate loans and equity holdings, and the structuring, negotiation, acquisition and sale of loan servicing, mortgage and equity securities and real estate projects. Mr. Shaffer later formed and managed an independent real estate and financial consulting firm, serving corporate and institutional clients, and also investing in and developing real estate.
Mr. Shaffers primary activities and responsibilities have included financial analysis, projection and modeling, asset and liability management, real estate finance and development, loan management and workout, organizational and financial administration, budgeting, cash flow management and project design.
Mr. Shaffer graduated from Syracuse University with a B.S. in Business Administration, later receiving an M.B.A. in Finance and a Ph.D. in Economics from New York University.
155
EXHIBIT B
RB 20
CERTIFICATION
I hereby certify that I have not been the subject of any criminal, civil or administrative judgments, consents, undertakings or orders, or any past administrative proceedings (excluding routine or customary audits, inspections and investigation) issued by any federal or state court, any department, agency, or commission of the U.S. Government, any state or municipality, any self-regulatory trade or professional organization, or any foreign government or governmental entity, which involve:
(i) |
commission of a felony, fraud, moral turpitude, dishonesty or breach of trust; |
(ii) |
violation of securities or commodities laws or regulations; |
(iii) |
violation of depository institution laws or regulations; |
(iv) |
violation of housing authority laws or regulations; |
(v) |
violation of the rules, regulations, codes or conduct or ethics of a self-regulatory trade or professional organization; |
(vi) |
adjudication of bankruptcy or insolvency or appointment of a receiver, conservator, trustee, referee, or guardian. |
I hereby certify that the statements I have made herein are true, complete and correct to the best of my knowledge and belief.
Conversion Appraiser | ||||
8/13/2018 |
|
|||
Date | Michael R. Keller |
156
EXHIBIT C
AFFIDAVIT OF INDEPENDENCE
STATE OF OHIO,
COUNTY OF FRANKLIN, ss:
I, Michael R. Keller, being first duly sworn hereby depose and say that:
The fee which I received directly from the applicant, PyraMax Bank, FSB, in the amount of $39,000 for the performance of my appraisal was not related to the value determined in the appraisal and that the undersigned appraiser is independent and has fully disclosed any relationships which may have a material bearing upon the question of my independence; and that any indemnity agreement with the applicant has been fully disclosed.
Further, affiant sayeth naught.
|
||
MICHAEL R. KELLER |
Sworn to before me and subscribed in my presence this 14 th day of August 2018.
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|
|
NOTARY PUBLIC |
157