|
Missouri
|
| |
6035
|
| |
47-4884908
|
|
|
(State or other jurisdiction of
incorporation or organization) |
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(Primary Standard Industrial
Classification Code Number) |
| |
(I.R.S. Employer
Identification No.) |
|
|
Leonard J. Essig
Lewis Rice LLC 600 Washington Avenue, Suite 2500 St. Louis, Missouri 63101 Telephone: (314) 444-7651 Fax: (314) 612-7651 |
| | | | |
John F. Breyer, Jr.
Breyer & Associates PC 8180 Greensboro Drive, Suite 785 McLean, Virginia 22102 Telephone: (703) 883-1100 Fax: (703) 883-2511 |
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|
Large accelerated filer
☐
|
| |
Accelerated filer
☐
|
| |
Non-accelerated filer
☐
(Do not check if a smaller reporting company) |
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Smaller reporting company ☒
|
|
|
Title of Each Class of Securities
to be Registered |
| |
Amount to be
Registered (1) |
| |
Proposed Maximum
Offering Price Per Share (3) |
| |
Proposed Maximum
Aggregate Offering Price (1) |
| |
Amount of
Registration Fee |
| ||||||||||||
|
Central Federal Bancshares, Inc. common stock, par value $0.01 per share
|
| | |
|
1,788,020
|
| | | |
$
|
10.00
|
| | | |
$
|
17,880,200
|
| | | |
$
|
2,077.68
|
| |
| | |
Minimum
|
| |
Maximum
|
| |
Maximum, as
Adjusted |
| |||||||||
Number of shares
|
| | | | 1,105,000 | | | | | | 1,495,000 | | | | | | 1,719,250 | | |
Gross offering proceeds
|
| | | $ | 11,050,000 | | | | | $ | 14,950,000 | | | | | $ | 17,192,500 | | |
Estimated offering expenses, excluding selling agent fees and expenses
|
| | | $ | 856,000 | | | | | $ | 856,000 | | | | | $ | 856,000 | | |
Estimated selling agent fees and expenses
(1)
|
| | | $ | 355,000 | | | | | $ | 355,000 | | | | | $ | 355,000 | | |
Estimated net proceeds
|
| | | $ | 9,839,000 | | | | | $ | 13,739,000 | | | | | $ | 15,981,500 | | |
Estimated net proceeds per share
|
| | | $ | 8.90 | | | | | $ | 9.19 | | | | | $ | 9.30 | | |
| | | | | 1 | | | |
| | | | | 12 | | | |
| | | | | 24 | | | |
| | | | | 27 | | | |
| | | | | 29 | | | |
| | | | | 31 | | | |
| | | | | 31 | | | |
| | | | | 32 | | | |
| | | | | 34 | | | |
| | | | | 35 | | | |
| | | | | 41 | | | |
| | | | | 42 | | | |
| | | | | 51 | | | |
| | | | | 71 | | | |
| | | | | 78 | | | |
| | | | | 79 | | | |
| | | | | 86 | | | |
| | | | | 87 | | | |
| | | | | 105 | | | |
| | | | | 108 | | | |
| | | | | 112 | | | |
| | | | | 114 | | | |
| | | | | 114 | | | |
| | | | | 114 | | | |
| | | | | 114 | | |
| | |
Shares to be sold to the
public in this offering |
| |
Shares to be sold to
the employee stock ownership plan (2) |
| |
Shares to be issued
to the charitable foundation (3) |
| |
Total shares of
common stock to be outstanding after the offering |
| ||||||||||||||||||||||||||||||||||||
| | |
Amount
|
| |
%
(1)
|
| |
Amount
|
| |
%
(1)
|
| |
Amount
|
| |
%
|
| |
Amount
|
| |
%
|
| ||||||||||||||||||||||||
Minimum
|
| | | | 1,013,064 | | | | | | 88.2 % | | | | | | 91,936 | | | | | | 8.0 % | | | | | | 44,200 | | | | | | 3.8 % | | | | | | 1,149,200 | | | | | | 100 % | | |
Midpoint
|
| | | | 1,191,840 | | | | | | 88.2 | | | | | | 108,160 | | | | | | 8.0 | | | | | | 52,000 | | | | | | 3.8 | | | | | | 1,352,000 | | | | | | 100 | | |
Maximum
|
| | | | 1,370,616 | | | | | | 88.2 | | | | | | 124,384 | | | | | | 8.0 | | | | | | 59,800 | | | | | | 3.8 | | | | | | 1,554,800 | | | | | | 100 | | |
Maximum, as adjusted
|
| | | | 1,576,208 | | | | | | 88.2 | | | | | | 143,042 | | | | | | 8.0 | | | | | | 68,770 | | | | | | 3.8 | | | | | | 1,788,020 | | | | | | 100 | | |
| | |
Price to Book
Value Ratio |
| |
Price to
Tangible Book Value Ratio |
| ||||||
Central Federal Bancshares (pro forma) | | | | | | | | | | | | | |
Minimum
|
| | | | 51.7 % | | | | | | 51.7 % | | |
Midpoint
|
| | | | 56.4 | | | | | | 56.4 | | |
Maximum
|
| | | | 60.5 | | | | | | 60.5 | | |
Maximum, as adjusted
|
| | | | 64.6 | | | | | | 64.6 | | |
Peer group companies as of August 31, 2015: | | | | | | | | | | | | | |
Average
|
| | | | 88.2 | | | | | | 91.1 | | |
Median
|
| | | | 91.8 | | | | | | 92.4 | | |
(In thousands)
|
| |
Minimum
1,105,000 Shares at $10.00 per Share |
| |
Maximum
1,495,000 Shares at $10.00 per Share |
| ||||||||
Offering proceeds
|
| | | $ | 11,050 | | | | | $ | 14,950 | | | ||
Less estimated offering expenses
|
| | | | (1,211 ) | | | | | | (1,211 ) | | | ||
Net offering proceeds
|
| | | $ | 9,839 | | | | | $ | 13,739 | | | ||
Less: | | | | | | | | | | | | | | ||
Proceeds contributed to Central Federal
|
| | | $ | (4,920 ) | | | | | $ | (6,870 ) | | | ||
Proceeds used for loan to employee stock ownership plan
|
| | | | (919 ) | | | | | | (1,244 ) | | | ||
Proceeds contributed to charitable foundation
|
| | | | (100 ) | | | | | | (100 ) | | | ||
Proceeds remaining for Central Federal Bancshares
|
| | | $ | 3,900 | | | | | $ | 5,525 | | | ||
|
| | |
June 30,
|
| |
December 31,
|
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| | |
2015
|
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2014
|
| |
2013
|
| |||||||||
| | |
(In thousands)
|
| |||||||||||||||
Selected Financial Condition Data | | | | | | | | | | | | | | | | | | | |
Total assets
|
| | | $ | 62,424 | | | | | $ | 63,977 | | | | | $ | 64,763 | | |
Cash and cash equivalents
|
| | | | 8,636 | | | | | | 7,902 | | | | | | 7,258 | | |
Certificates of deposit in other financial institutions
|
| | | | 2,480 | | | | | | 2,480 | | | | | | 2,480 | | |
Securities available-for-sale at fair value
|
| | | | 33 | | | | | | 31 | | | | | | 44 | | |
Loans, net
|
| | | | 49,624 | | | | | | 52,184 | | | | | | 53,559 | | |
Premises and equipment, net
|
| | | | 709 | | | | | | 739 | | | | | | 735 | | |
Foreclosed assets
|
| | | | 508 | | | | | | 243 | | | | | | 243 | | |
Deposits
|
| | | | 48,642 | | | | | | 50,282 | | | | | | 51,175 | | |
Other liabilities
|
| | | | 118 | | | | | | 113 | | | | | | 117 | | |
Total equity
|
| | | | 13,664 | | | | | | 13,582 | | | | | | 13,471 | | |
| | |
For the Six Months Ended
June 30, |
| |
For the Year Ended
December 31, |
| ||||||||||||||||||||||
| | |
2015
|
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2014
|
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2014
|
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2013
|
| ||||||||||||||||
| | |
(In thousands)
|
| |||||||||||||||||||||||||
Selected Operating Data: | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Total interest income
|
| | | $ | 1,222 | | | | | $ | 1,230 | | | | | $ | 2,466 | | | | | $ | 2,723 | | | ||||
Total interest expense
|
| | | | 236 | | | | | | 250 | | | | | | 494 | | | | | | 548 | | | ||||
Net interest income
|
| | | | 986 | | | | | | 980 | | | | | | 1,972 | | | | | | 2,175 | | | ||||
Provision for loan losses
|
| | | | — | | | | | | 60 | | | | | | 60 | | | | | | — | | | ||||
Net interest income after provision for loan losses
|
| | | | 986 | | | | | | 920 | | | | | | 1,912 | | | | | | 2,175 | | | ||||
Total noninterest income
|
| | | | 32 | | | | | | 37 | | | | | | 72 | | | | | | (23 ) | | | ||||
Total noninterest expense
|
| | | | 893 | | | | | | 895 | | | | | | 1,805 | | | | | | 1,786 | | | ||||
Income before income taxes
|
| | | | 125 | | | | | | 62 | | | | | | 179 | | | | | | 366 | | | ||||
Income tax expense
|
| | | | 44 | | | | | | 24 | | | | | | 60 | | | | | | 137 | | | ||||
Net income
|
| | | $ | 81 | | | | | $ | 38 | | | | | $ | 119 | | | | | $ | 229 | | | ||||
|
| | |
At or For the
Six Months Ended June 30, |
| |
At or For the
Year Ended December 31, |
| ||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||
Performance Ratios: (1) | | | | | | | | | | | | | | | | | | | | | | | | | |
Return on average assets
|
| | | | 0.26 % | | | | | | 0.12 % | | | | | | 0.18 % | | | | | | 0.36 % | | |
Return on average equity
|
| | | | 1.18 | | | | | | 0.56 | | | | | | 0.88 | | | | | | 1.71 | | |
Net interest rate spread
(2)
|
| | | | 2.99 | | | | | | 2.89 | | | | | | 2.90 | | | | | | 3.22 | | |
Net interest margin
(3)
|
| | | | 3.22 | | | | | | 3.12 | | | | | | 3.15 | | | | | | 3.46 | | |
Noninterest expense to average assets
|
| | | | 2.8 | | | | | | 2.8 | | | | | | 2.8 | | | | | | 2.7 | | |
Efficiency ratio
(4)
|
| | | | 87.7 | | | | | | 88.0 | | | | | | 88.3 | | | | | | 83.0 | | |
Average interest-earning assets to average interest-bearing liabilities
|
| | | | 130.1 | | | | | | 129.8 | | | | | | 131.4 | | | | | | 127.9 | | |
Average equity to average assets
|
| | | | 21.5 | | | | | | 20.9 | | | | | | 21.0 | | | | | | 20.5 | | |
| | |
At or For the
Six Months Ended June 30, |
| |
At or For the
Year Ended December 31, |
| ||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||
Asset Quality Ratios: | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-performing assets to total assets
|
| | | | 1.6 % | | | | | | 2.0 % | | | | | | 1.9 % | | | | | | 1.7 % | | |
Non-performing loans to total loans
|
| | | | 0.9 | | | | | | 2.1 | | | | | | 1.8 | | | | | | 1.6 | | |
Allowance for loan losses to non-performing loans
|
| | | | 59.7 | | | | | | 37.9 | | | | | | 29.2 | | | | | | 39.6 | | |
Allowance for loan losses to total loans
|
| | | | 0.6 | | | | | | 0.8 | | | | | | 0.5 | | | | | | 0.7 | | |
Regulatory Capital Ratios: | | | | | | | | | | | | | | | | | | | | | | | | | |
Tier 1 capital (to adjusted total assets)
|
| | | | 21.4 | | | | | | 20.6 | | | | | | 21.2 | | | | | | 20.8 | | |
Tier 1 capital (to risk-weighted assets)
|
| | | | 38.4 | | | | | | 32.3 | | | | | | 33.9 | | | | | | 33.0 | | |
Total risk-based capital (to risk-weighted assets)
|
| | | | 39.2 | | | | | | 33.3 | | | | | | 34.7 | | | | | | 33.9 | | |
Common equity Tier 1 (to risk-weighted assets)
(5)
|
| | | | 38.4 | | | | | | N/A | | | | | | N/A | | | | | | N/A | | |
Other Data: | | | | | | | | | | | | | | | | | | | | | | | | | |
Number of full service offices
|
| | | | 1 | | | | | | 1 | | | | | | 1 | | | | | | 1 | | |
| | |
Minimum of
Offering Range |
| |
Midpoint of
Offering Range |
| |
Maximum of
Offering Range |
| |
15% Above Maximum,
of Offering Range |
| ||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands)
|
| |
1,105,000
Shares at $10.00 Per Share |
| |
Percent
of Net Proceeds |
| |
1,300,000
Shares at $10.00 Per Share |
| |
Percent
of Net Proceeds |
| |
1,495,000
Shares at $10.00 Per Share |
| |
Percent
of Net Proceeds |
| |
1,719,250
Shares at $10.00 Per Share |
| |
Percent
of Net Proceeds |
| ||||||||||||||||||||||||||||||||
Offering proceeds
|
| | | $ | 11,050 | | | | | | | | | | | $ | 13,000 | | | | | | | | | | | $ | 14,950 | | | | | | | | | | | $ | 17,193 | | | | | | | | | ||||||||
Less: estimated offering expenses
|
| | | | (1,211 ) | | | | | | | | | | | | (1,211 ) | | | | | | | | | | | | (1,211 ) | | | | | | | | | | | | (1,211 ) | | | | | | | | | ||||||||
Net offering proceeds
|
| | | $ | 9,839 | | | | | | 100.0 % | | | | | $ | 11,789 | | | | | | 100.0 % | | | | | $ | 13,739 | | | | | | 100.0 % | | | | | $ | 15,982 | | | | | | 100.0 % | | | ||||||||
Less: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
Proceeds contributed to Central Federal
|
| | | | (4,920 ) | | | | | | (50.0 ) | | | | | | (5,895 ) | | | | | | (50.0 ) | | | | | | (6,870 ) | | | | | | (50.0 ) | | | | | | (7,991 ) | | | | | | (50.0 ) | | | ||||||||
Proceeds used for loan to
employee stock ownership plan |
| | | | (919 ) | | | | | | (9.3 ) | | | | | | (1,082 ) | | | | | | (9.2 ) | | | | | | (1,244 ) | | | | | | (9.1 ) | | | | | | (1,430 ) | | | | | | (8.9 ) | | | ||||||||
Proceeds contributed to foundation
|
| | | | (100 ) | | | | | | (1.0 ) | | | | | | (100 ) | | | | | | (0.8 ) | | | | | | (100 ) | | | | | | (0.7 ) | | | | | | (100 ) | | | | | | (0.6 ) | | | ||||||||
Proceeds remaining for Central Federal Bancshares
(1)
|
| | | $ | 3,900 | | | | | | 39.7 % | | | | | $ | 4,712 | | | | | | 40.0 % | | | | | $ | 5,525 | | | | | | 40.2 % | | | | | $ | 6,461 | | | | | | 40.5 % | | | ||||||||
|
| | | | | | | | |
Pro Forma Capitalization
Based Upon the Sale of |
| ||||||||||||||||||||||||||
(Dollars in thousands)
|
| |
Capitalization
as of June 30, 2015 |
| |
1,105,000
Shares at $10.00 Per Share |
| |
1,300,000
Shares at $10.00 Per Share |
| |
1,495,000
Shares at $10.00 Per Share |
| |
1,719,250
Shares at $10.00 Per Share |
| ||||||||||||||||||||
Deposits (1) | | | | $ | 48,642 | | | | | $ | 48,642 | | | | | $ | 48,642 | | | | | $ | 48,642 | | | | | $ | 48,642 | | | |||||
Borrowings
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | |||||
Total deposits and borrowed funds
|
| | | $ | 48,642 | | | | | $ | 48,642 | | | | | $ | 48,642 | | | | | $ | 48,642 | | | | | $ | 48,642 | | | |||||
Shareholders’ equity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Preferred stock, 1,000,000 shares, $0.01 par value per share,
authorized; none issued or outstanding |
| | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | |||||
Common stock, 10,000,000 shares, $0.01 par value per
share, authorized; specific number of shares to be issued and outstanding (2) |
| | | $ | — | | | | | $ | 11 | | | | | $ | 14 | | | | | $ | 16 | | | | | $ | 18 | | | |||||
Additional paid-in capital
|
| | | | — | | | | | | 10,270 | | | | | | 12,295 | | | | | | 14,321 | | | | | | 16,651 | | | |||||
Retained earnings
(3)
|
| | | | 13,652 | | | | | | 13,652 | | | | | | 13,652 | | | | | | 13,652 | | | | | | 13,652 | | | |||||
Accumulated other comprehensive income
|
| | | | 12 | | | | | | 12 | | | | | | 12 | | | | | | 12 | | | | | | 12 | | | |||||
Less: | | | | | | | ||||||||||||||||||||||||||||||
Common stock acquired by employee stock ownership plan
(4)
|
| | | | — | | | | | | (919 ) | | | | | | (1,082 ) | | | | | | (1,244 ) | | | | | | (1,430 ) | | | |||||
Common stock to be acquired by equity incentive plan
(5)
|
| | | | — | | | | | | (460 ) | | | | | | (541 ) | | | | | | (622 ) | | | | | | (715 ) | | | |||||
Expense of stock contribution to charitable foundation
|
| | | | — | | | | | | (442 ) | | | | | | (520 ) | | | | | | (598 ) | | | | | | (688 ) | | | |||||
Expense of cash contribution to charitable foundation
|
| | | | — | | | | | | (100 ) | | | | | | (100 ) | | | | | | (100 ) | | | | | | (100 ) | | | |||||
Plus: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Tax benefit of contribution to charitable foundation
|
| | | | — | | | | | | 209 | | | | | | 239 | | | | | | 269 | | | | | | 304 | | | |||||
Total shareholders’ equity
|
| | | $ | 13,664 | | | | | $ | 22,233 | | | | | $ | 23,969 | | | | | $ | 25,706 | | | | | $ | 27,705 | | | |||||
Shareholders’ equity to total assets
(1)
|
| | | | 21.89 % | | | | | | 31.32 % | | | | | | 32.96 % | | | | | | 34.52 % | | | | | | 36.23 % | | | |||||
|
| | |
Pro Forma at June 30, 2015
(3)
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | |
MINIMUM
|
| |
MIDPOINT
|
| |
MAXIMUM
|
| |
ADJ. MAXIMUM
|
| ||||||||||||||||||||||||||||||||||||||||||||||
| | |
Historical at
June 30, 2015 |
| |
1,105,000 Shares
at $10.00 Per Share |
| |
1,300,000 Shares
at $10.00 Per Share |
| |
1,495,000 Shares
at $10.00 Per Share |
| |
1,719,250 Shares
at $10.00 Per Share |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands)
|
| |
Amount
|
| |
% of
Assets (1) |
| |
Amount
|
| |
% of
Assets |
| |
Amount
|
| |
% of
Assets |
| |
Amount
|
| |
% of
Assets |
| |
Amount
|
| |
% of
Assets |
| ||||||||||||||||||||||||||||||||||||||||
Total capital under GAAP
|
| | | $ | 13,664 | | | | | | 21.89 % | | | | | $ | 17,205 | | | | | | 25.72 % | | | | | $ | 17,936 | | | | | | 26.46 % | | | | | $ | 18,668 | | | | | | 27.18 % | | | | | $ | 19,510 | | | | | | 27.99 % | | | ||||||||||
Tier 1 leverage capital
(2)
|
| | | | 13,563 | | | | | | 21.35 | | | | | | 17,104 | | | | | | 25.16 | | | | | | 17,835 | | | | | | 25.89 | | | | | | 18,567 | | | | | | 26.61 | | | | | | 19,409 | | | | | | 27.41 | | | ||||||||||
Requirement
|
| | | | 2,541 | | | | | | 4.00 | | | | | | 2,719 | | | | | | 4.00 | | | | | | 2,755 | | | | | | 4.00 | | | | | | 2,791 | | | | | | 4.00 | | | | | | 2,832 | | | | | | 4.00 | | | ||||||||||
Excess
|
| | | $ | 11,022 | | | | | | 17.35 % | | | | | $ | 14,385 | | | | | | 21.16 % | | | | | $ | 15,080 | | | | | | 21.89 % | | | | | $ | 15,776 | | | | | | 22.61 % | | | | | $ | 16,577 | | | | | | 23.41 % | | | ||||||||||
Common equity tier 1 risk-based capital
(2)(3)
|
| | | $ | 13,563 | | | | | | 38.39 % | | | | | $ | 17,104 | | | | | | 47.22 % | | | | | | 17,835 | | | | | | 49.00 % | | | | | | 18,567 | | | | | | 50.76 % | | | | | | 19,409 | | | | | | 52.76 % | | | ||||||||||
Requirement
|
| | | | 1,590 | | | | | | 4.50 | | | | | | 1,630 | | | | | | 4.50 | | | | | | 1,638 | | | | | | 4.50 | | | | | | 1,646 | | | | | | 4.50 | | | | | | 1,655 | | | | | | 4.50 | | | ||||||||||
Excess
|
| | | $ | 11,973 | | | | | | 33.89 % | | | | | $ | 15,474 | | | | | | 42.72 % | | | | | | 16,197 | | | | | | 44.50 % | | | | | | 16.921 | | | | | | 46.26 % | | | | | | 17,754 | | | | | | 48.26 % | | | ||||||||||
Tier 1 risk-based capital
(2)(3)
|
| | | $ | 13,563 | | | | | | 38.39 % | | | | | $ | 17,104 | | | | | | 47.22 % | | | | | $ | 17,835 | | | | | | 49.00 % | | | | | $ | 18,567 | | | | | | 50.76 % | | | | | $ | 19,409 | | | | | | 52.76 % | | | ||||||||||
Requirement
|
| | | | 2,120 | | | | | | 6.00 | | | | | | 2,173 | | | | | | 6.00 | | | | | | 2,184 | | | | | | 6.00 | | | | | | 2,195 | | | | | | 6.00 | | | | | | 2,207 | | | | | | 6.00 | | | ||||||||||
Excess
|
| | | $ | 11,443 | | | | | | 32.39 % | | | | | $ | 14,931 | | | | | | 41.22 % | | | | | $ | 15,651 | | | | | | 43.00 % | | | | | $ | 16,372 | | | | | | 44.76 % | | | | | $ | 17,202 | | | | | | 46.76 % | | | ||||||||||
Total risk-based capital
(2)(3)
|
| | | $ | 13,841 | | | | | | 39.18 % | | | | | $ | 17,382 | | | | | | 47.99 % | | | | | $ | 18,113 | | | | | | 49.76 % | | | | | $ | 18,845 | | | | | | 51.52 % | | | | | $ | 19,687 | | | | | | 53.52 % | | | ||||||||||
Requirement
|
| | | | 2,826 | | | | | | 8.00 | | | | | | 2,898 | | | | | | 8.00 | | | | | | 2,912 | | | | | | 8.00 | | | | | | 2,926 | | | | | | 8.00 | | | | | | 2,943 | | | | | | 8.00 | | | ||||||||||
Excess
|
| | | $ | 11,015 | | | | | | 31.18 % | | | | | $ | 14,484 | | | | | | 39.99 % | | | | | $ | 15,201 | | | | | | 41.76 % | | | | | $ | 15,919 | | | | | | 43.52 % | | | | | $ | 16,744 | | | | | | 45.52 % | | | ||||||||||
Reconciliation of capital infusion to Central Federal | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net proceeds of offering
|
| | | | | | | | | | | | | | | $ | 9,839 | | | | | | | | | | | $ | 11,789 | | | | | | | | | | | $ | 13,739 | | | | | | | | | | | $ | 15,982 | | | | | | | | | ||||||||||
Proceeds to Central Federal
|
| | | | | | | | | | | | | | | | 4,920 | | | | | | | | | | | | 5,895 | | | | | | | | | | | | 6,870 | | | | | | | | | | | | 7,991 | | | | | | | | | ||||||||||
Less: stock acquired by ESOP
|
| | | | | | | | | | | | | | | | (919 ) | | | | | | | | | | | | (1,082 ) | | | | | | | | | | | | (1,244 ) | | | | | | | | | | | | (1,430 ) | | | | | | | | | ||||||||||
Less: stock acquired by equity incentive plan
|
| | | | | | | | | | | | | | | | (460 ) | | | | | | | | | | | | (541 ) | | | | | | | | | | | | (622 ) | | | | | | | | | | | | (715 ) | | | | | | | | | ||||||||||
Pro forma increase in GAAP and regulatory
capital |
| | | | | | | | | | | | | | | $ | 3,541 | | | | | | | | | | | $ | 4,272 | | | | | | | | | | | $ | 5,004 | | | | | | | | | | | $ | 5,846 | | | | | | | | | ||||||||||
|
| | |
At or For the Six Months Ended June 30, 2015
|
||||||||||||||||||||
(Dollars in thousands, except per share amounts)
|
| |
Minimum of
Offering Range 1,105,000 Shares at $10.00 Per Share |
| |
Midpoint of
Offering Range 1,300,000 Shares at $10.00 Per Share |
| |
Maximum of
Offering Range 1,495,000 Shares at $10.00 Per Share |
| |
Maximum,
as Adjusted, of Offering Range 1,719,250 Shares at $10.00 Per Share |
|||||||||||
Gross Proceeds
|
| | | $ | 11,050 | | | | | $ | 13,000 | | | | | $ | 14,950 | | | | | $ | 17,193 |
Plus: Value of shares issued to foundation
|
| | | | 442 | | | | | | 520 | | | | | | 598 | | | | | | 688 |
Pro forma market capitalization
|
| | | $ | 11,492 | | | | | $ | 13,520 | | | | | $ | 15,548 | | | | | $ | 17,881 |
Gross Proceeds
|
| | | $ | 11,050 | | | | | $ | 13,000 | | | | | $ | 14,950 | | | | | $ | 17,193 |
Less: estimated offering expenses
|
| | | | (1,211 ) | | | | | | (1,211 ) | | | | | | (1,211 ) | | | | | | (1,211 ) |
Estimated net conversion proceeds
|
| | | | 9,839 | | | | | | 11,789 | | | | | | 13,739 | | | | | | 15,982 |
Less: cash contribution to foundation
|
| | | | (100 ) | | | | | | (100 ) | | | | | | (100 ) | | | | | | (100 ) |
Less: common stock acquired by employee stock ownership plan
(1)
|
| | | | (919 ) | | | | | | (1,082 ) | | | | | | (1,244 ) | | | | | | (1,430 ) |
Less: common stock acquired by restricted stock award expense
(2)
|
| | | | (460 ) | | | | | | (541 ) | | | | | | (622 ) | | | | | | (715 ) |
Net investable proceeds
|
| | | $ | 8,360 | | | | | $ | 10,066 | | | | | $ | 11,773 | | | | | $ | 13,737 |
Pro Forma Net Income: | | | | | | | | | | | | | | | | | | | | | | | |
Historical
|
| | | $ | 81 | | | | | $ | 81 | | | | | $ | 81 | | | | | $ | 81 |
Pro forma income on net investable proceeds
|
| | | | 16 | | | | | | 20 | | | | | | 23 | | | | | | 27 |
Pro forma employee stock ownership plan adjustments
(1)
|
| | | | (11 ) | | | | | | (13 ) | | | | | | (15 ) | | | | | | (18 ) |
Pro forma restricted stock award expense
(2)
|
| | | | (28 ) | | | | | | (33 ) | | | | | | (38 ) | | | | | | (44 ) |
Pro forma stock option expense
(3)
|
| | | | (35 ) | | | | | | (41 ) | | | | | | (47 ) | | | | | | (54 ) |
Pro forma net income (loss)
|
| | | $ | 23 | | | | | $ | 14 | | | | | $ | 4 | | | | | ($ | 8 ) |
Pro Forma Net Income Per Share: | | | | | | | | | | | | | | | | | | | | | | | |
Historical
|
| | | $ | 0.08 | | | | | $ | 0.07 | | | | | $ | 0.06 | | | | | $ | 0.05 |
Pro forma income on net investable proceeds
|
| | | | 0.02 | | | | | | 0.02 | | | | | | 0.02 | | | | | | 0.02 |
Pro forma employee stock ownership plan adjustments
(1)
|
| | | | (0.01 ) | | | | | | (0.01 ) | | | | | | (0.01 ) | | | | | | (0.01 ) |
Pro forma restricted stock award expense
(2)
|
| | | | (0.03 ) | | | | | | (0.03 ) | | | | | | (0.03 ) | | | | | | (0.03 ) |
Pro forma stock option expense
(3)
|
| | | | (0.04 ) | | | | | | (0.04 ) | | | | | | (0.04 ) | | | | | | (0.03 ) |
Pro forma net income (loss) per share
|
| | | $ | 0.02 | | | | | $ | 0.01 | | | | | $ | 0.00 | | | | | $ | 0.00 |
Offering price to annualized pro forma net income (loss) per share
|
| | | | 250.00 | | | | | | 500.00 | | | | | | NM | | | | | | NM |
Number of shares for pro forma net income (loss) per share
(4)
|
| | | | 1,059,103 | | | | | | 1,246,003 | | | | | | 1,432,904 | | | | | | 1,647,839 |
Pro Forma Shareholders’ Equity: | | | | | | | | | | | | | | | | | | | | | | | |
Historical
|
| | | $ | 13,664 | | | | | $ | 13,664 | | | | | $ | 13,664 | | | | | $ | 13,664 |
Estimated net proceeds
|
| | | | 9,839 | | | | | | 11,789 | | | | | | 13,739 | | | | | | 15,982 |
Plus: common stock issued to the foundation
|
| | | | 442 | | | | | | 520 | | | | | | 598 | | | | | | 688 |
Plus: tax benefit of contribution to foundation
|
| | | | 209 | | | | | | 239 | | | | | | 269 | | | | | | 304 |
Less: common stock acquired by employee stock ownership plan
(1)
|
| | | | (919 ) | | | | | | (1,082 ) | | | | | | (1,244 ) | | | | | | (1,430 ) |
Less: common stock to be acquired by equity incentive plan
(2)
|
| | | | (460 ) | | | | | | (541 ) | | | | | | (622 ) | | | | | | (715 ) |
Less: foundation contribution expense
|
| | | | (542 ) | | | | | | (620 ) | | | | | | (698 ) | | | | | | (788 ) |
Pro forma shareholders’ equity
|
| | | $ | 22,233 | | | | | $ | 23,969 | | | | | $ | 25,706 | | | | | $ | 27,705 |
Pro Forma Shareholders’ Equity Per Share: (4) | | | | | | | | | | | | | | | | | | | | | | | |
Historical
|
| | | $ | 11.89 | | | | | $ | 10.11 | | | | | $ | 8.79 | | | | | $ | 7.64 |
Estimated net proceeds
|
| | | | 8.56 | | | | | | 8.72 | | | | | | 8.84 | | | | | | 8.94 |
Plus: common stock issued to the foundation
|
| | | | 0.39 | | | | | | 0.38 | | | | | | 0.38 | | | | | | 0.38 |
Plus: tax benefit of contribution to foundation
|
| | | | 0.18 | | | | | | 0.18 | | | | | | 0.17 | | | | | | 0.17 |
Less: common stock acquired by employee stock ownership plan
(1)
|
| | | | (0.80 ) | | | | | | (0.80 ) | | | | | | (0.80 ) | | | | | | (0.80 ) |
Less: common stock to be acquired by equity incentive plan
(2)
|
| | | | (0.40 ) | | | | | | (0.40 ) | | | | | | (0.40 ) | | | | | | (0.40 ) |
Less: foundation contribution expense
|
| | | | (0.47 ) | | | | | | (0.46 ) | | | | | | (0.45 ) | | | | | | (0.44 ) |
Pro forma book value
|
| | | $ | 19.35 | | | | | $ | 17.73 | | | | | $ | 16.53 | | | | | $ | 15.49 |
Offering price to pro forma book value
|
| | | | 51.7 % | | | | | | 56.4 % | | | | | | 60.5 % | | | | | | 64.6 % |
Number of shares for pro forma book value
(4)
|
| | | | 1,149,200 | | | | | | 1,352,000 | | | | | | 1,554,800 | | | | | | 1,788,020 |
| | |
At or For the Year Ended December 31, 2014
|
||||||||||||||||||||
(Dollars in thousands, except per share amounts)
|
| |
Minimum of
Offering Range 1,105,000 Shares at $10.00 Per Share |
| |
Midpoint of
Offering Range 1,300,000 Shares at $10.00 Per Share |
| |
Maximum of
Offering Range 1,495,000 Shares at $10.00 Per Share |
| |
Maximum,
as Adjusted, of Offering Range 1,719,250 Shares at $10.00 Per Share |
|||||||||||
Gross Proceeds
|
| | | $ | 11,050 | | | | | $ | 13,000 | | | | | $ | 14,950 | | | | | $ | 17,193 |
Plus: Value of shares issued to foundation
|
| | | | 442 | | | | | | 520 | | | | | | 598 | | | | | | 688 |
Pro forma market capitalization
|
| | | $ | 11,492 | | | | | $ | 13,520 | | | | | $ | 15,548 | | | | | $ | 17,881 |
Gross Proceeds
|
| | | $ | 11,050 | | | | | $ | 13,000 | | | | | $ | 14,950 | | | | | $ | 17,193 |
Less: estimated offering expenses
|
| | | | (1,211 ) | | | | | | (1,211 ) | | | | | | (1,211 ) | | | | | | (1,211 ) |
Estimated net conversion proceeds
|
| | | | 9,839 | | | | | | 11,789 | | | | | | 13,739 | | | | | | 15,982 |
Less: cash contribution to foundation
|
| | | | (100 ) | | | | | | (100 ) | | | | | | (100 ) | | | | | | (100 ) |
Less: common stock acquired by employee stock ownership plan
(1)
|
| | | | (919 ) | | | | | | (1,082 ) | | | | | | (1,244 ) | | | | | | (1,430 ) |
Less: common stock acquired by restricted stock award expense
(2)
|
| | | | (460 ) | | | | | | (541 ) | | | | | | (622 ) | | | | | | (715 ) |
Net investable proceeds
|
| | | $ | 8,360 | | | | | $ | 10,066 | | | | | $ | 11,773 | | | | | $ | 13,737 |
Pro Forma Net Income: | | | | | | | | | | | | | | | | | | | | | | | |
Historical
|
| | | $ | 119 | | | | | $ | 119 | | | | | $ | 119 | | | | | $ | 119 |
Pro forma income on net investable proceeds
|
| | | | 33 | | | | | | 39 | | | | | | 46 | | | | | | 54 |
Pro forma employee stock ownership plan adjustments
(1)
|
| | | | (23 ) | | | | | | (27 ) | | | | | | (31 ) | | | | | | (35 ) |
Pro forma restricted stock award expense
(2)
|
| | | | (56 ) | | | | | | (66 ) | | | | | | (76 ) | | | | | | (88 ) |
Pro forma stock option expense
(3)
|
| | | | (70 ) | | | | | | (82 ) | | | | | | (94 ) | | | | | | (108 ) |
Pro forma net income (loss)
|
| | | $ | 3 | | | | | ($ | 17 ) | | | | | ($ | 36 ) | | | | | ($ | 58 ) |
Pro Forma Net Income Per Share: | | | | | | | | | | | | | | | | | | | | | | | |
Historical
|
| | | $ | 0.10 | | | | | $ | 0.10 | | | | | $ | 0.08 | | | | | $ | 0.07 |
Pro forma income on net investable proceeds
|
| | | | 0.03 | | | | | | 0.03 | | | | | | 0.03 | | | | | | 0.03 |
Pro forma employee stock ownership plan adjustments
(1)
|
| | | | (0.02 ) | | | | | | (0.02 ) | | | | | | (0.02 ) | | | | | | (0.02 ) |
Pro forma restricted stock award expense
(2)
|
| | | | (0.05 ) | | | | | | (0.05 ) | | | | | | (0.05 ) | | | | | | (0.05 ) |
Pro forma stock option expense
(3)
|
| | | | (0.06 ) | | | | | | (0.07 ) | | | | | | (0.07 ) | | | | | | (0.07 ) |
Pro forma net income (loss) per share
|
| | | $ | 0.00 | | | | | ($ | 0.01 ) | | | | | ($ | 0.03 ) | | | | | ($ | 0.04 ) |
Offering price to pro forma net income (loss) per share
|
| | | | NM | | | | | | NM | | | | | | NM | | | | | | NM |
Number of shares for pro forma net income (loss) per share
(4)
|
| | | | 1,060,941 | | | | | | 1,248,166 | | | | | | 1,435,391 | | | | | | 1,650,700 |
Pro Forma Shareholders’ Equity: | | | | | | | | | | | | | | | | | | | | | | | |
Historical
|
| | | $ | 13,582 | | | | | $ | 13,582 | | | | | $ | 13,582 | | | | | $ | 13,582 |
Estimated net proceeds
|
| | | | 9,839 | | | | | | 11,789 | | | | | | 13,739 | | | | | | 15,982 |
Plus: common stock issued to the foundation
|
| | | | 442 | | | | | | 520 | | | | | | 598 | | | | | | 688 |
Plus: tax benefit of contribution to foundation
|
| | | | 209 | | | | | | 239 | | | | | | 269 | | | | | | 304 |
Less: common stock acquired by employee stock ownership plan
(1)
|
| | | | (919 ) | | | | | | (1,082 ) | | | | | | (1,244 ) | | | | | | (1,430 ) |
Less: common stock to be acquired by equity incentive plan
(2)
|
| | | | (460 ) | | | | | | (541 ) | | | | | | (622 ) | | | | | | (715 ) |
Less: foundation contribution expense
|
| | | | (542 ) | | | | | | (620 ) | | | | | | (698 ) | | | | | | (788 ) |
Pro forma shareholders’ equity
|
| | | $ | 22,151 | | | | | $ | 23,887 | | | | | $ | 25,624 | | | | | $ | 27,623 |
Pro Forma Shareholders’ Equity Per Share: (4) | | | | | | | | | | | | | | | | | | | | | | | |
Historical
|
| | | $ | 11.82 | | | | | $ | 10.05 | | | | | $ | 8.75 | | | | | $ | 7.60 |
Estimated net proceeds
|
| | | | 8.56 | | | | | | 8.72 | | | | | | 8.84 | | | | | | 8.94 |
Plus: common stock issued to the foundation
|
| | | | 0.38 | | | | | | 0.38 | | | | | | 0.38 | | | | | | 0.38 |
Plus: tax benefit of contribution to foundation
|
| | | | 0.18 | | | | | | 0.18 | | | | | | 0.17 | | | | | | 0.17 |
Less: common stock acquired by employee stock ownership plan
(1)
|
| | | | (0.80 ) | | | | | | (0.80 ) | | | | | | (0.80 ) | | | | | | (0.80 ) |
Less: common stock to be acquired by equity incentive plan
(2)
|
| | | | (0.40 ) | | | | | | (0.40 ) | | | | | | (0.40 ) | | | | | | (0.40 ) |
Less: foundation contribution expense
|
| | | | (0.47 ) | | | | | | (0.46 ) | | | | | | (0.45 ) | | | | | | (0.44 ) |
Pro forma book value
|
| | | $ | 19.27 | | | | | $ | 17.67 | | | | | $ | 16.49 | | | | | $ | 15.45 |
Offering price to pro forma book value
|
| | | | 51.9 % | | | | | | 56.6 % | | | | | | 60.7 % | | | | | | 64.7 % |
Number of shares for pro forma book value
(4)
|
| | | | 1,149,200 | | | | | | 1,352,000 | | | | | | 1,554,800 | | | | | | 1,788,020 |
| | |
At or For the Six Months Ended June 30, 2015
|
|||||||||||||||||||||||||||||||||||||||||||||
| | |
At the Minimum
of Estimated Price Range |
| |
At the Midpoint
of Estimated Price Range |
| |
At the Maximum
of Estimated Price Range |
| |
At the Maximum,
As Adjusted, of Estimated Price Range |
||||||||||||||||||||||||||||||||||||
(Dollars in thousands, except per
share amounts) |
| |
With
Foundation |
| |
No
Foundation |
| |
With
Foundation |
| |
No
Foundation |
| |
With
Foundation |
| |
No
Foundation |
| |
With
Foundation |
| |
No
Foundation |
||||||||||||||||||||||||
Estimated offering amount
|
| | | $ | 11,050 | | | | | $ | 11,900 | | | | | $ | 13,000 | | | | | $ | 14,000 | | | | | $ | 14,950 | | | | | $ | 16,100 | | | | | $ | 17,193 | | | | | $ | 18,515 | |
Pro forma market capitalization
|
| | | | 11,492 | | | | | | 11,900 | | | | | | 13,520 | | | | | | 14,000 | | | | | | 15,548 | | | | | | 16,100 | | | | | | 17,880 | | | | | | 18,515 | |
Pro forma total assets
|
| | | | 70,993 | | | | | | 71,685 | | | | | | 72,729 | | | | | | 73,533 | | | | | | 74,466 | | | | | | 75,381 | | | | | | 76,465 | | | | | | 77,506 | |
Pro forma total liabilities
|
| | | | 48,760 | | | | | | 48,760 | | | | | | 48,760 | | | | | | 48,760 | | | | | | 48,760 | | | | | | 48,760 | | | | | | 48,760 | | | | | | 48,760 | |
Pro forma shareholders’ equity
|
| | | | 22,233 | | | | | | 22,925 | | | | | | 23,969 | | | | | | 24,773 | | | | | | 25,706 | | | | | | 26,621 | | | | | | 27,705 | | | | | | 28,746 | |
Pro forma net income
|
| | | | 23 | | | | | | 22 | | | | | | 14 | | | | | | 13 | | | | | | 4 | | | | | | 2 | | | | | | (8 ) | | | | | | (9 ) | |
Pro forma shareholders’ equity
per share |
| | | $ | 19.35 | | | | | $ | 19.26 | | | | | $ | 17.73 | | | | | $ | 17.70 | | | | | $ | 16.53 | | | | | $ | 16.53 | | | | | | 15.49 | | | | | $ | 15.53 | |
Pro forma net income per share
|
| | | $ | 0.02 | | | | | $ | 0.02 | | | | | $ | 0.01 | | | | | $ | 0.01 | | | | | $ | 0.00 | | | | | $ | 0.00 | | | | | $ | 0.00 | | | | | ($ | 0.01 ) | |
Pro Forma Pricing Ratios: | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||
Offering price as a percentage pro forma shareholders’ equity per share
|
| | | | 51.7 % | | | | | | 51.9 % | | | | | | 56.4 % | | | | | | 56.5 % | | | | | | 60.5 % | | | | | | 60.5 % | | | | | | 64.6 % | | | | | | 64.4 % | |
Offering price to annualized pro
forma net income per share (1) |
| | | | 250.0x | | | | | | 250.0x | | | | | | 500.0x | | | | | | 500.0x | | | | | | NM | | | | | | NM | | | | | | NM | | | | | | NM | |
Pro Forma Financial Ratios: | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||
Return on assets (annualized)
|
| | | | 0.06 % | | | | | | 0.06 % | | | | | | 0.04 % | | | | | | 0.04 % | | | | | | 0.01 % | | | | | | 0.01 % | | | | | | (0.02 %) | | | | | | (0.02 %) | |
Return on shareholders’ equity
(annualized) |
| | | | 0.21 % | | | | | | 0.19 % | | | | | | 0.12 % | | | | | | 0.10 % | | | | | | 0.03 % | | | | | | 0.02 % | | | | | | (0.06 %) | | | | | | (0.06 %) | |
Shareholders’ equity to total assets
|
| | | | 31.32 % | | | | | | 31.98 % | | | | | | 32.96 % | | | | | | 33.69 % | | | | | | 34.52 % | | | | | | 35.32 % | | | | | | 36.23 % | | | | | | 37.09 % | |
Total shares issued
|
| | | | 1,149,200 | | | | | | 1,190,000 | | | | | | 1,352,000 | | | | | | 1,400,000 | | | | | | 1,554,800 | | | | | | 1,610,000 | | | | | | 1,788,020 | | | | | | 1,851,500 |
| | |
June 30, 2015
|
| |
December 31, 2014
|
| ||||||||||||||||||||||
Category
|
| |
Amount
|
| |
Percent of
Gross Loans |
| |
Amount
|
| |
Percent of
Gross Loans |
| ||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||
Owner-occupied one- to four-family
|
| | | $ | 17,730 | | | | | | 35.5 % | | | | | $ | 18,786 | | | | | | 35.8 % | | | ||||
Non-owner occupied one- to four-family
|
| | | | 10,161 | | | | | | 20.4 | | | | | | 11,759 | | | | | | 22.4 | | | ||||
Construction, one- to four-family
|
| | | | 1,200 | | | | | | 2.4 | | | | | | 718 | | | | | | 1.3 | | | ||||
Home equity line of credit and junior liens
|
| | | | 1,709 | | | | | | 3.4 | | | | | | 1,771 | | | | | | 3.4 | | | ||||
Land
|
| | | | 995 | | | | | | 2.0 | | | | | | 1,145 | | | | | | 2.2 | | | ||||
| | | | $ | 31,795 | | | | | | 63.7 % | | | | | $ | 34,179 | | | | | | 65.1 % | | | ||||
|
| | |
June 30, 2015
|
| |
December 31, 2014
|
| ||||||||||||||||||||||
Category
|
| |
Amount
|
| |
Percent of
Gross Loans |
| |
Amount
|
| |
Percent of
Gross Loans |
| ||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||
Multi-Family
|
| | | $ | 9,552 | | | | | | 19.2 % | | | | | $ | 9,634 | | | | | | 18.4 % | | | ||||
Multi-Family Line of Credit
|
| | | | — | | | | | | 0.0 | | | | | | 35 | | | | | | 0.1 | | | ||||
Multi-Family Construction
|
| | | | 55 | | | | | | 0.1 | | | | | | — | | | | | | 0.0 | | | ||||
Commercial Real Estate
|
| | | | 5,456 | | | | | | 10.9 | | | | | | 5,587 | | | | | | 10.6 | | | ||||
Commercial Real Estate Lines of Credit
|
| | | | 652 | | | | | | 1.3 | | | | | | 629 | | | | | | 1.2 | | | ||||
Commercial Real Estate Construction
|
| | | | 92 | | | | | | 0.2 | | | | | | 108 | | | | | | 0.2 | | | ||||
| | | | $ | 15,807 | | | | | | 31.7 % | | | | | $ | 15,993 | | | | | | 30.5 % | | | ||||
|
| | |
June 30, 2015
|
| |
December 31, 2014
|
| ||||||||||||||||||||||
Category
|
| |
Amount
|
| |
Percent of
Gross Loans |
| |
Amount
|
| |
Percent of
Gross Loans |
| ||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||
Personal Auto Loans
|
| | | $ | 250 | | | | | | 0.5 % | | | | | $ | 227 | | | | | | 0.4 % | | | ||||
Personal Unsecured Loans
|
| | | | 57 | | | | | | 0.1 | | | | | | 56 | | | | | | 0.1 | | | ||||
Share Loans
|
| | | | 47 | | | | | | 0.1 | | | | | | 81 | | | | | | 0.2 | | | ||||
Overdraft
|
| | | | 21 | | | | | | — | | | | | | 21 | | | | | | — | | | ||||
Other Secured Loans
|
| | | | 40 | | | | | | 0.1 | | | | | | 47 | | | | | | 0.1 | | | ||||
| | | | $ | 415 | | | | | | 0.8 % | | | | | $ | 432 | | | | | | 0.8 % | | | ||||
|
| | |
June 30, 2015
|
| |||||||||
| | |
(Dollars in thousands)
|
| |||||||||
| | |
Amount
|
| |
Weighted
Average Rate |
| ||||||
Certificates of Deposit in Other Financial Institutions Maturing In: | | | | ||||||||||
2015
|
| | | $ | 496 | | | | | | 1.20 % | | |
2016
|
| | | | 248 | | | | | | 1.30 | | |
2017
|
| | | | 248 | | | | | | 1.60 | | |
2019
|
| | | | 992 | | | | | | 1.73 | | |
2020
|
| | | | 496 | | | | | | 2.18 | | |
| | | | | 2,480 | | | | | | 1.67 % | | |
Securities available-for-sale
|
| | | | 33 | | | | |||||
Total
|
| | | $ | 2,513 | | | | |||||
|
| | |
June 30,
|
| |
December 31,
|
| ||||||||||||||||||||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2013
|
| |||||||||||||||||||||||||||||||||
| | |
Amount
|
| |
Percent
|
| |
Amount
|
| |
Percent
|
| |
Amount
|
| |
Percent
|
| ||||||||||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||||||||||||||
Commercial Business
|
| | | $ | 1,905 | | | | | | 3.8 % | | | | | $ | 1,880 | | | | | | 3.6 % | | | | | $ | 1,329 | | | | | | 2.5 % | | | ||||||
Commercial and Multi-Family Real Estate
|
| | | | 15,807 | | | | | | 31.7 | | | | | | 15,993 | | | | | | 30.5 | | | | | | 17,469 | | | | | | 32.4 | | | ||||||
Residential Real Estate
|
| | | | 31,795 | | | | | | 63.7 | | | | | | 34,179 | | | | | | 65.1 | | | | | | 34,639 | | | | | | 64.2 | | | ||||||
Consumer and Other
|
| | | | 415 | | | | | | 0.8 | | | | | | 432 | | | | | | 0.8 | | | | | | 498 | | | | | | 0.9 | | | ||||||
Total Loans
|
| | | | 49,922 | | | | | | 100.0 % | | | | | | 52,484 | | | | | | 100.0 % | | | | | | 53,935 | | | | | | 100.0 % | | | ||||||
Allowance for loan losses
|
| | | | (278 ) | | | | | | | | | | | | (279 ) | | | | | | | | | | | | (351 ) | | | | | | | | | ||||||
Net deferred loan fees
|
| | | | (20 ) | | | | | | | | | | | | (21 ) | | | | | | | | | | | | (25 ) | | | | | | | | | ||||||
Net Loans
|
| | | $ | 49,624 | | | | | | | | | | | $ | 52,184 | | | | | | | | | | | $ | 53,559 | | | | | | | | | ||||||
|
| | |
Commercial
Business |
| |
Commercial
and Multi- Family Real Estate |
| |
Residential
Real Estate |
| |
Consumer
and Other |
| |
Total
Loans |
| ||||||||||||||||||||
| | |
(In thousands)
|
| ||||||||||||||||||||||||||||||||
As of December 31, 2014, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Due in One Year or Less
|
| | | $ | 841 | | | | | $ | 1,808 | | | | | $ | 10,151 | | | | | $ | 272 | | | | | $ | 13,072 | | | |||||
Due after One through Five Years
|
| | | | 123 | | | | | | 4,588 | | | | | | 14,361 | | | | | | 147 | | | | | | 19,219 | | | |||||
Due after Five Years
|
| | | | 916 | | | | | | 9,597 | | | | | | 9,667 | | | | | | 13 | | | | | | 20,193 | | | |||||
| | | | $ | 1,880 | | | | | $ | 15,993 | | | | | $ | 34,179 | | | | | $ | 432 | | | | | $ | 52,484 | | | |||||
|
| | |
Fixed Rates
|
| |
Floating or
Adjustable Rates |
| |
Total
|
| ||||||||||||
| | |
(In thousands)
|
| ||||||||||||||||||
Secured by real estate: | | | | | | | | | | | | | | | | | | | | |||
Commercial and Multi-Family
|
| | | $ | 11,064 | | | | | $ | 3,121 | | | | | $ | 14,185 | | | |||
Residential
|
| | | | 11,053 | | | | | | 12,975 | | | | | | 24,028 | | | |||
Other Loans: | | | | | ||||||||||||||||||
Commercial Business
|
| | | | 1,039 | | | | | | — | | | | | | 1,039 | | | |||
Consumer and Other
|
| | | | 160 | | | | | | — | | | | | | 160 | | | |||
Total loans
|
| | | $ | 23,316 | | | | | $ | 16,096 | | | | | $ | 39,412 | | | |||
|
Industry Type
|
| |
Number of Loans
|
| |
Balance
|
| ||||||||
| | | | | | | | |
(Dollars in thousands)
|
| |||||
Multi-family
|
| | | | 21 | | | | | $ | 9,607 | | | ||
Church
|
| | | | 2 | | | | | | 1,956 | | | ||
Health and beauty
|
| | | | 6 | | | | | | 1,535 | | | ||
Retail
|
| | | | 7 | | | | | | 800 | | | ||
Construction
|
| | | | 1 | | | | | | 391 | | | ||
Golf course
|
| | | | 1 | | | | | | 333 | | | ||
Restaurant
|
| | | | 1 | | | | | | 252 | | | ||
Other
|
| | | | 13 | | | | | | 933 | | | ||
Total
|
| | | | 52 | | | | | $ | 15,807 | | | ||
|
| | |
Six Months Ended June 30,
|
| |
Year Ended December 31,
|
| ||||||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||||||
| | |
(In thousands)
|
| |||||||||||||||||||||||||
Total loans at beginning of Period
|
| | | $ | 52,484 | | | | | $ | 53,935 | | | | | $ | 53,935 | | | | | $ | 57,574 | | | ||||
Loans originated: | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Commercial Business
|
| | | | 234 | | | | | | 734 | | | | | | 800 | | | | | | 189 | | | ||||
Commercial and Multi-Family Real Estate
|
| | | | 1,572 | | | | | | 1,628 | | | | | | 1,736 | | | | | | 1,431 | | | ||||
Residential Real Estate
|
| | | | 2,567 | | | | | | 1,400 | | | | | | 5,303 | | | | | | 4,973 | | | ||||
Consumer and Other
|
| | | | 147 | | | | | | 176 | | | | | | 291 | | | | | | 325 | | | ||||
Total loans originated
|
| | | | 4,520 | | | | | | 3,938 | | | | | | 8,130 | | | | | | 6,918 | | | ||||
Deduct: | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Loan principal repayment (amortization and payoffs)
|
| | | | (7,080 ) | | | | | | (4,964 ) | | | | | | (9,448 ) | | | | | | (10,553 ) | | | ||||
Charge-offs
|
| | | | (2 ) | | | | | | (4 ) | | | | | | (133 ) | | | | | | (4 ) | | | ||||
Net loan activity
|
| | | | (2,562 ) | | | | | | (1,030 ) | | | | | | (1,451 ) | | | | | | (3,639 ) | | | ||||
Total loans at end of period
|
| | | $ | 49,922 | | | | | $ | 52,905 | | | | | $ | 52,484 | | | | | $ | 53,935 | | | ||||
|
| | |
June 30,
2015 |
| |
December 31,
|
| ||||||||||||||||||||||||||||||||||||
| | |
2014
|
| |
2013
|
| ||||||||||||||||||||||||||||||||||||
| | |
Amortized
Cost |
| |
Fair
Value |
| |
Amortized
Cost |
| |
Fair
Value |
| |
Amortized
Cost |
| |
Fair
Value |
| ||||||||||||||||||||||||
| | |
(In thousands)
|
| |||||||||||||||||||||||||||||||||||||||
Securities available-for-sale: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Federal Home Loan Mortgage Corp. Stock
|
| | | $ | 15 | | | | | $ | 33 | | | | | $ | 15 | | | | | $ | 31 | | | | | $ | 15 | | | | | $ | 44 | | | ||||||
|
| | |
Six Months Ended June 30,
|
| |
Six Months Ended June 30,
|
| ||||||||||||||||||||||||||||||||||||
| | |
2015
|
| |
2014
|
| ||||||||||||||||||||||||||||||||||||
| | |
Average
Balance |
| |
Percent
|
| |
Weighted
Average Rate |
| |
Average
Balance |
| |
Percent
|
| |
Weighted
Average Rate |
| ||||||||||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||||||||||||||
Certificates of deposit
|
| | | $ | 24,342 | | | | | | 48.9 % | | | | | | 1.46 % | | | | | $ | 27,645 | | | | | | 54.0 % | | | | | | 1.45 % | | | ||||||
Savings
|
| | | | 3,701 | | | | | | 7.4 | | | | | | 0.32 | | | | | | 3,455 | | | | | | 6.7 | | | | | | 0.29 | | | ||||||
Money Market
|
| | | | 9,738 | | | | | | 19.6 | | | | | | 0.51 | | | | | | 10,229 | | | | | | 20.0 | | | | | | 0.53 | | | ||||||
NOW
|
| | | | 9,274 | | | | | | 18.6 | | | | | | 0.58 | | | | | | 7,051 | | | | | | 13.8 | | | | | | 0.48 | | | ||||||
Noninterest-bearing DDA
|
| | | | 2,704 | | | | | | 5.5 | | | | | | — | | | | | | 2,808 | | | | | | 5.5 | | | | | | — | | | ||||||
Total Deposits
|
| | | $ | 49,759 | | | | | | 100.0 % | | | | | | | | | | | $ | 51,188 | | | | | | 100.0 % | | | | | | | | | ||||||
|
| | |
Year Ended December 31,
|
| |||||||||||||||||||||||||||||||||||||||
| | |
2014
|
| |
2013
|
| ||||||||||||||||||||||||||||||||||||
| | |
Average
Balance |
| |
Percent
|
| |
Weighted
Average Rate |
| |
Average
Balance |
| |
Percent
|
| |
Weighted
Average Rate |
| ||||||||||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||||||||||||||
Certificates of deposit
|
| | | $ | 26,850 | | | | | | 52.7 % | | | | | | 1.46 % | | | | | $ | 29,768 | | | | | | 57.3 % | | | | | | 1.54 % | | | ||||||
Savings
|
| | | | 3,555 | | | | | | 7.0 | | | | | | 0.31 | | | | | | 3,388 | | | | | | 6.5 | | | | | | 0.32 | | | ||||||
Money Market
|
| | | | 9,930 | | | | | | 19.5 | | | | | | 0.52 | | | | | | 10,428 | | | | | | 20.1 | | | | | | 0.53 | | | ||||||
NOW
|
| | | | 7,257 | | | | | | 14.3 | | | | | | 0.55 | | | | | | 5,613 | | | | | | 10.8 | | | | | | 0.41 | | | ||||||
Noninterest-bearing DDA
|
| | | | 3,285 | | | | | | 6.5 | | | | | | — | | | | | | 2,722 | | | | | | 5.3 | | | | | | — | | | ||||||
Total Deposits
|
| | | $ | 50,877 | | | | | | 100.0 % | | | | | | | | | | | $ | 51,919 | | | | | | 100.0 % | | | | | | | | | ||||||
|
| | | | | | | | | | | | | | |
At December 31,
|
| |||||||||||||||||||||||||||
| | |
At June 30, 2015
|
| |
2014
|
| |
2013
|
| |||||||||||||||||||||||||||||||||
| | |
Amount
|
| |
Percent
|
| |
Amount
|
| |
Percent
|
| |
Amount
|
| |
Percent
|
| ||||||||||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||||||||||||||
Noninterest-bearing DDA
|
| | | $ | 2,186 | | | | | | 4.5 % | | | | | $ | 2,640 | | | | | | 5.2 % | | | | | $ | 2,116 | | | | | | 4.1 % | | | ||||||
NOW and Money Market Deposit Accounts
|
| | | | 19,292 | | | | | | 39.7 | | | | | | 18,936 | | | | | | 37.7 | | | | | | 17,350 | | | | | | 33.9 | | | ||||||
Savings
|
| | | | 3,783 | | | | | | 7.8 | | | | | | 3,625 | | | | | | 7.2 | | | | | | 3,361 | | | | | | 6.6 | | | ||||||
Certificates of deposit
|
| | | | 23,381 | | | | | | 48.0 | | | | | | 25,081 | | | | | | 49.9 | | | | | | 28,348 | | | | | | 55.4 | | | ||||||
Total Deposits
|
| | | $ | 48,642 | | | | | | 100.0 % | | | | | $ | 50,282 | | | | | | 100.0 % | | | | | $ | 51,175 | | | | | | 100.0 % | | | ||||||
|
Maturity Period at June 30, 2015
|
| |
Amount
|
| ||||
| | |
(In thousands)
|
| ||||
Three months or less
|
| | | $ | 476 | | | |
Over three months through six months
|
| | | | 524 | | | |
Over six months through twelve months
|
| | | | 3,386 | | | |
Over twelve months
|
| | | | 4,969 | | | |
Total
|
| | | $ | 9,355 | | | |
|
Maturity Period at June 30, 2015
|
| |
Amount
|
| ||||
| | |
(In thousands)
|
| ||||
Three months or less
|
| | | $ | 3,168 | | | |
Over three months through six months
|
| | | | 2,872 | | | |
Over six months through one year
|
| | | | 6,574 | | | |
Over one year through three years
|
| | | | 9,255 | | | |
Over three years
|
| | | | 1,512 | | | |
Total
|
| | | $ | 23,381 | | | |
|
| | |
June 30,
2015 |
| |
December 31,
|
| |||||||||||||||
| | |
2014
|
| |
2013
|
| |||||||||||||||
| | |
(In thousands)
|
| ||||||||||||||||||
Less than 1.00%
|
| | | $ | 10,722 | | | | | $ | 10,547 | | | | | $ | 12,159 | | | |||
1.00 - 1.99
|
| | | | 3,085 | | | | | | 4,015 | | | | | | 4,444 | | | |||
2.00 - 2.99
|
| | | | 9,046 | | | | | | 9,980 | | | | | | 10,862 | | | |||
3.00 - 3.99
|
| | | | 2 | | | | | | 2 | | | | | | 433 | | | |||
4.00 - 4.99
|
| | | | 7 | | | | | | 7 | | | | | | 6 | | | |||
5.00 - 6.00
|
| | | | 519 | | | | | | 530 | | | | | | 444 | | | |||
Total
|
| | | $ | 23,381 | | | | | $ | 25,081 | | | | | $ | 28,348 | | | |||
|
| | |
Amount Due
|
| | | |||||||||||||||||||||||||||||||||||||
| | |
One Year
or Less |
| |
More Than
One Year to Two Years |
| |
More Than
Two Years to Three Years |
| |
More Than
Three Years |
| |
Total
|
| |
Percent of
Total Time Deposits |
| ||||||||||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||||||||||||||
Less than 1.00%
|
| | | $ | 7,598 | | | | | $ | 2,220 | | | | | $ | 904 | | | | | $ | — | | | | | $ | 10,722 | | | | | | 45.9 % | | | ||||||
1.00 - 1.99
|
| | | | 251 | | | | | | 511 | | | | | | 811 | | | | | | 1,512 | | | | | | 3,085 | | | | | | 13.2 | | | ||||||
2.00 - 2.99
|
| | | | 4,244 | | | | | | 4,003 | | | | | | 799 | | | | | | — | | | | | | 9,046 | | | | | | 38.7 | | | ||||||
3.00 - 3.99
|
| | | | 2 | | | | | | — | | | | | | — | | | | | | — | | | | | | 2 | | | | | | 0.0 | | | ||||||
4.00 - 4.99
|
| | | | — | | | | | | 7 | | | | | | — | | | | | | — | | | | | | 7 | | | | | | 0.0 | | | ||||||
5.00 - 6.00
|
| | | | 519 | | | | | | — | | | | | | — | | | | | | — | | | | | | 519 | | | | | | 2.2 | | | ||||||
Total
|
| | | $ | 12,614 | | | | | $ | 6,741 | | | | | $ | 2,514 | | | | | $ | 1,512 | | | | | $ | 23,381 | | | | | | 100.0 % | | | ||||||
|
| | |
Six Months Ended June 30,
|
| |
Year Ended December 31,
|
| ||||||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||||||
| | |
(In thousands)
|
| |||||||||||||||||||||||||
Beginning balance
|
| | | $ | 50,282 | | | | | $ | 51,175 | | | | | $ | 51,175 | | | | | $ | 51,825 | | | ||||
Net increase (decrease) in Deposits
|
| | | | (1,640 ) | | | | | | 605 | | | | | | (893 ) | | | | | | (650 ) | | | ||||
Ending Balance
|
| | | $ | 48,642 | | | | | $ | 51,780 | | | | | $ | 50,282 | | | | | $ | 51,175 | | | ||||
|
| | | | | | | | |
Six Months Ended June 30,
|
| |||||||||||||||||||||||||||||||||
| | | | | | | | |
2015
|
| |
2014
|
| ||||||||||||||||||||||||||||||
| | |
At June 30,
2015 |
| |
Average
Balance |
| |
Interest
and Dividends |
| |
Yield/
Cost (4) |
| |
Average
Balance |
| |
Interest
and Dividends |
| |
Yield/
Cost (4) |
| |||||||||||||||||||||
| | | | | | | | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||||||||
Interest-earning assets: | | | | | | | | | |||||||||||||||||||||||||||||||||||
Loans receivable, net of fees
|
| | | | 4.54 % | | | | | $ | 50,732 | | | | | $ | 1,192 | | | | | | 4.70 % | | | | | $ | 53,164 | | | | | $ | 1,205 | | | | | | 4.53 % | | |
Securities and other interest bearing assets
|
| | | | 0.58 % | | | | | | 10,475 | | | | | | 30 | | | | | | 0.57 % | | | | | | 9,644 | | | | | | 25 | | | | | | 0.52 % | | |
Total interest-earning assets
|
| | | | 3.89 % | | | | | | 61,207 | | | | | | 1,222 | | | | | | 3.99 % | | | | | | 62,808 | | | | | | 1,230 | | | | | | 3.92 % | | |
Non-interest-earning assets
|
| | | | | | | | | | 2,627 | | | | | | | | | | | | | | | | | | 2,356 | | | | | ||||||||||
Allowance for loan losses
|
| | | | | | | | | | (313 ) | | | | | | | | | | | | | | | | | | (379 ) | | | | | ||||||||||
Total assets
|
| | | | | | | | | $ | 63,521 | | | | | | | | | | | | | | | | | $ | 64,785 | | | | | ||||||||||
Interest-bearing liabilities: | | | | | | | | | |||||||||||||||||||||||||||||||||||
Certificates of deposit
|
| | | | 1.45 % | | | | | | 24,342 | | | | | | 178 | | | | | | 1.46 % | | | | | | 27,645 | | | | | | 201 | | | | | | 1.45 % | | |
Savings
|
| | | | 0.25 % | | | | | | 3,701 | | | | | | 6 | | | | | | 0.32 % | | | | | | 3,455 | | | | | | 5 | | | | | | 0.29 % | | |
Money Market
|
| | | | 0.52 % | | | | | | 9,738 | | | | | | 25 | | | | | | 0.51 % | | | | | | 10,229 | | | | | | 27 | | | | | | 0.53 % | | |
NOW
|
| | | | 0.59 % | | | | | | 9,274 | | | | | | 27 | | | | | | 0.58 % | | | | | | 7,051 | | | | | | 17 | | | | | | 0.48 % | | |
Total interest-bearing deposits
|
| | | | 0.98 % | | | | | | 47,055 | | | | | | 236 | | | | | | 1.00 % | | | | | | 48,380 | | | | | | 250 | | | | | | 1.03 % | | |
Non-interest-bearing deposits
|
| | | | | | | | | | 2,704 | | | | | | | | | | | | | | | | | | 2,808 | | | | | | | | | | | | | | |
Other non-interest-bearing liabilities
|
| | | | | | | | | | 77 | | | | | | | | | | | | | | | | | | 74 | | | | | ||||||||||
Total liabilities
|
| | | | | | | | | | 49,836 | | | | | | | | | | | | | | | | | | 51,262 | | | | | ||||||||||
Total equity
|
| | | | | | | | | | 13,685 | | | | | | | | | | | | | | | | | | 13,523 | | | | | ||||||||||
Total liabilities and equity
|
| | | | | | | | | $ | 63,521 | | | | | | | | | | | | | | | | | $ | 64,785 | | | | | ||||||||||
Net interest income
|
| | | | | | | | | | | | | | | $ | 986 | | | | | | | | | | | | | | | | | $ | 980 | | | | |||||
Net interest rate spread
(1)
|
| | | | 2.91 % | | | | | | | | | | | | | | | | | | 2.99 % | | | | | | | | | | | | | | | | | | 2.89 % | | |
Net interest-earning assets
(2)
|
| | | | | | | | | $ | 14,152 | | | | | | | | | | | | | | | | | $ | 14,428 | | | | | ||||||||||
Net interest margin
(3)
|
| | | | | | | | | | | | | | | | 3.22 % | | | | | | | | | | | | | | | | | | 3.12 % | | | | |||||
Ratio of average interest-earning assets to average interest-bearing liabilities
|
| | | | | | | | | | 130.1 % | | | | | | | | | | | | | | | | | | 129.8 % | | | | | ||||||||||
|
| | |
Year Ended December 31,
|
| |||||||||||||||||||||||||||||||||
| | |
2014
|
| |
2013
|
| ||||||||||||||||||||||||||||||
| | |
Average
Balance |
| |
Interest and
Dividends |
| |
Yield/Cost
|
| |
Average
Balance |
| |
Interest and
Dividends |
| |
Yield/Cost
|
| ||||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||||||||
Interest-earning assets: | | | | | | | | ||||||||||||||||||||||||||||||
Loans receivable, net of fees
|
| | | $ | 52,915 | | | | | | 2,411 | | | | | | 4.56 % | | | | | $ | 56,067 | | | | | | 2,669 | | | | | | 4.76 % | | |
Securities and other interest bearing assets
|
| | | | 9,613 | | | | | | 55 | | | | | | 0.57 % | | | | | | 6,834 | | | | | | 54 | | | | | | 0.79 % | | |
Total interest-earning assets
|
| | | | 62,528 | | | | | | 2,466 | | | | | | 3.94 % | | | | | | 62,901 | | | | | | 2,723 | | | | | | 4.33 % | | |
Non-interest-earning assets
|
| | | | 2,396 | | | | | | | | | | | | | | | | | | 2,873 | | | | | ||||||||||
Allowance for loan losses
|
| | | | (393 ) | | | | | | | | | | | | | | | | | | (353 ) | | | | | ||||||||||
Total assets
|
| | | $ | 64,531 | | | | | | | | | | | | | | | | | $ | 65,421 | | | | | ||||||||||
Interest-bearing liabilities: | | | | | | | | ||||||||||||||||||||||||||||||
Certificates of deposit
|
| | | | 26,850 | | | | | | 391 | | | | | | 1.46 % | | | | | | 29,768 | | | | | | 459 | | | | | | 1.54 % | | |
Savings
|
| | | | 3,555 | | | | | | 11 | | | | | | 0.31 % | | | | | | 3,388 | | | | | | 11 | | | | | | 0.32 % | | |
Money Market
|
| | | | 9,930 | | | | | | 52 | | | | | | 0.52 % | | | | | | 10,428 | | | | | | 55 | | | | | | 0.53 % | | |
NOW
|
| | | | 7,257 | | | | | | 40 | | | | | | 0.55 % | | | | | | 5,613 | | | | | | 23 | | | | | | 0.41 % | | |
Total interest-bearing deposits
|
| | | | 47,592 | | | | | | 494 | | | | | | 1.04 % | | | | | | 49,197 | | | | | | 548 | | | | | | 1.11 % | | |
Non-interest-bearing deposits
|
| | | | 3,285 | | | | | | | | | | | | | | | | | | 2,722 | | | | | ||||||||||
Other non-interest-bearing liabilities
|
| | | | 106 | | | | | | | | | | | | | | | | | | 80 | | | | | ||||||||||
Total liabilities
|
| | | | 50,983 | | | | | | | | | | | | | | | | | | 51,999 | | | | | ||||||||||
Total equity
|
| | | | 13,548 | | | | | | | | | | | | | | | | | | 13,422 | | | | | ||||||||||
Total liabilities and equity
|
| | | $ | 64,531 | | | | | | | | | | | | | | | | | $ | 65,421 | | | | | ||||||||||
|
| | |
Year Ended December 31,
|
| |||||||||||||||||||||||||||||||||
| | |
2014
|
| |
2013
|
| ||||||||||||||||||||||||||||||
| | |
Average
Balance |
| |
Interest and
Dividends |
| |
Yield/Cost
|
| |
Average
Balance |
| |
Interest and
Dividends |
| |
Yield/Cost
|
| ||||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||||||||
Net interest income
|
| | | | | | | | | $ | 1,972 | | | | | | | | | | | | | | | | | | 2,175 | | | | |||||
Net interest rate spread
(1)
|
| | | | | | | | | | | | | | | | 2.90 % | | | | | | | | | | | | | | | | | | 3.22 % | | |
Net interest-earning assets
(2)
|
| | | $ | 14,936 | | | | | | | | | | | | | | | | | $ | 13,704 | | | | | ||||||||||
Net interest margin
(3)
|
| | | | | | | | | | 3.15 % | | | | | | | | | | | | | | | | | | 3.46 % | | | | |||||
Ratio of average interest-earning assets to
average interest-bearing liabilities |
| | | | 131.4 % | | | | | | | | | | | | | | | | | | 127.9 % | | | | | ||||||||||
|
| | |
Six Months Ended June 30, 2015 vs. 2014
|
| |
Years Ended December 31, 2014 vs. 2013
|
| ||||||||||||||||||||||||||||||||||||
| | |
Increase (Decrease) due to
|
| |
Total
Increase (Decrease) |
| |
Increase (Decrease) due to
|
| |
Total
Increase (Decrease) |
| ||||||||||||||||||||||||||||||
| | |
Volume
|
| |
Rate
|
| |
Volume
|
| |
Rate
|
| ||||||||||||||||||||||||||||||
| | |
(In thousands)
|
| |||||||||||||||||||||||||||||||||||||||
Interest-earning assets: | | | | | | | | ||||||||||||||||||||||||||||||||||||
Loans
|
| | | $ | (57 ) | | | | | $ | 44 | | | | | $ | (13 ) | | | | | $ | (148 ) | | | | | $ | (110 ) | | | | | $ | (258 ) | | | ||||||
Securities and Other Interest-earning assets
|
| | | | 2 | | | | | | 3 | | | | | | 5 | | | | | | 18 | | | | | | (17 ) | | | | | | 1 | | | ||||||
Total interest-earning assets
|
| | | | (55 ) | | | | | | 47 | | | | | | (8 ) | | | | | | (130 ) | | | | | | (127 ) | | | | | | (257 ) | | | ||||||
Interest-bearing liabilities: | | | | | | | | ||||||||||||||||||||||||||||||||||||
Certificates of deposit
|
| | | | (24 ) | | | | | | 1 | | | | | | (23 ) | | | | | | (44 ) | | | | | | (24 ) | | | | | | (68 ) | | | ||||||
Savings
|
| | | | — | | | | | | 1 | | | | | | 1 | | | | | | — | | | | | | — | | | | | | — | | | ||||||
Money Market
|
| | | | (1 ) | | | | | | (1 ) | | | | | | (2 ) | | | | | | (2 ) | | | | | | (1 ) | | | | | | (3 ) | | | ||||||
Interest-bearing DDA
|
| | | | 6 | | | | | | 4 | | | | | | 10 | | | | | | 8 | | | | | | 9 | | | | | | 17 | | | ||||||
Total interest-bearing liabilities
|
| | | | (19 ) | | | | | | 5 | | | | | | (14 ) | | | | | | (38 ) | | | | | | (16 ) | | | | | | (54 ) | | | ||||||
Change in net interest income
|
| | | $ | (36 ) | | | | | $ | 42 | | | | | $ | 6 | | | | | $ | (92 ) | | | | | $ | (111 ) | | | | | $ | (203 ) | | | ||||||
|
| | |
June 30,
2015 |
| |
December 31,
|
| ||||||||||||
| | |
2014
|
| |
2013
|
| ||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||
Non-accrual loans: | | | | | |||||||||||||||
Residential Real Estate
|
| | | $ | 466 | | | | | $ | 590 | | | | | $ | 685 | | |
Commercial and Multi-Family Real Estate
|
| | | | — | | | | | | 51 | | | | | | 57 | | |
Consumer and Other
|
| | | | — | | | | | | 3 | | | | | | 3 | | |
Total
|
| | | | 466 | | | | | | 644 | | | | | | 745 | | |
Accruing loans 90 days or more past due: | | | | | |||||||||||||||
Residential real estate
|
| | | | — | | | | | | 312 | | | | | | 142 | | |
Total non-performing loans
|
| | | | 466 | | | | | | 956 | | | | | | 887 | | |
Foreclosed assets
|
| | | | 508 | | | | | | 243 | | | | | | 243 | | |
Total non-performing assets
|
| | | $ | 974 | | | | | $ | 1,199 | | | | | $ | 1,130 | | |
Troubled debt restructurings (TDR): | | | | | |||||||||||||||
Commercial and Multi-Family Real Estate
|
| | | $ | 387 | | | | | $ | 391 | | | | | $ | 402 | | |
Total non-performing assets and troubled debt restructurings
|
| | | $ | 1,361 | | | | | $ | 1,590 | | | | | $ | 1,532 | | |
Ratios: | | | | | |||||||||||||||
Total non-performing loans to total loans
|
| | | | 0.9 % | | | | | | 1.8 % | | | | | | 1.6 % | | |
Total non-performing assets to total assets
|
| | | | 1.6 | | | | | | 1.9 | | | | | | 1.7 | | |
Total non-performing loans and TDRs to total loans
|
| | | | 1.7 | | | | | | 2.6 | | | | | | 2.4 | | |
Total non-performing assets and TDRs to total assets
|
| | | | 2.2 | | | | | | 2.5 | | | | | | 2.4 | | |
| | |
June 30,
2015 |
| |
December 31,
|
| ||||||||||||
| | |
2014
|
| |
2013
|
| ||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||
Total non-performing loans
|
| | | $ | 466 | | | | | $ | 956 | | | | | $ | 887 | | |
Less partially charged off non-performing loans
|
| | | | (2 ) | | | | | | (257 ) | | | | | | (6 ) | | |
Adjusted non-performing loans
|
| | | $ | 464 | | | | | $ | 699 | | | | | $ | 881 | | |
Total non-performing loans and accruing troubled debt restructurings
|
| | | | 853 | | | | | | 1,347 | | | | | | 1,289 | | |
Adjusted non-performing loans and accruing troubled debt
restructurings |
| | | | 851 | | | | | | 1,090 | | | | | | 1,283 | | |
Adjusted non-performing loans to total assets
|
| | | | 0.7 % | | | | | | 1.1 % | | | | | | 1.4 % | | |
Adjusted non-performing loans and accruing troubled debt
restructurings to total assets |
| | | | 1.4 | | | | | | 1.7 | | | | | | 2.0 | | |
Allowance for loan losses to adjusted non-performing
loans and accruing troubled debt restructurings at end of period |
| | | | 32.7 | | | | | | 25.6 | | | | | | 27.4 | | |
| | |
June 30,
2015 |
| |
December 31,
|
| |||||||||||||||
| | |
2014
|
| |
2013
|
| |||||||||||||||
| | |
(In thousands)
|
| ||||||||||||||||||
Special mention
|
| | | $ | 112 | | | | | $ | 877 | | | | | $ | 482 | | | |||
Substandard
|
| | | | 714 | | | | | | 759 | | | | | | 1,832 | | | |||
Total criticized and classified loans
|
| | | | 826 | | | | | | 1,636 | | | | | | 2,314 | | | |||
Foreclosed assets
|
| | | | 508 | | | | | | 243 | | | | | | 243 | | | |||
Total criticized and classified assets
|
| | | $ | 1,334 | | | | | $ | 1,879 | | | | | $ | 2,557 | | | |||
|
| | |
Loans Delinquent For
|
| | | |||||||||||||||||||||||||||||||||||||
| | |
30 – 89 Days
|
| |
90 Days or More
|
| |
Total
|
| |||||||||||||||||||||||||||||||||
| | |
Number
|
| |
Amount
|
| |
Number
|
| |
Amount
|
| |
Number
|
| |
Amount
|
| ||||||||||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||||||||||||||
At June 30, 2015 | | | | | | | | ||||||||||||||||||||||||||||||||||||
Residential Real Estate
|
| | | | 3 | | | | | $ | 98 | | | | | | 2 | | | | | $ | 166 | | | | | | 5 | | | | | $ | 264 | | | ||||||
Consumer and Other
|
| | | | 2 | | | | | | 12 | | | | | | — | | | | | | — | | | | | | 2 | | | | | | 12 | | | ||||||
Total
|
| | | | 5 | | | | | $ | 110 | | | | | | 2 | | | | | $ | 166 | | | | | | 7 | | | | | $ | 276 | | | ||||||
At December 31, 2014 | | | | | | | | ||||||||||||||||||||||||||||||||||||
Commercial and Multi-Family Real Estate
|
| | | | 1 | | | | | $ | 51 | | | | | | — | | | | | $ | — | | | | | | 1 | | | | | $ | 51 | | | ||||||
Residential Real Estate
|
| | | | 2 | | | | | | 145 | | | | | | 5 | | | | | | 773 | | | | | | 7 | | | | | | 918 | | | ||||||
Consumer and Other
|
| | | | 2 | | | | | | 12 | | | | | | 2 | | | | | | 3 | | | | | | 4 | | | | | | 15 | | | ||||||
Total
|
| | | | 5 | | | | | $ | 208 | | | | | | 7 | | | | | $ | 776 | | | | | | 12 | | | | | $ | 984 | | | ||||||
At December 31, 2013 | | | | | | | | ||||||||||||||||||||||||||||||||||||
Residential Real Estate
|
| | | | 5 | | | | | $ | 279 | | | | | | 11 | | | | | $ | 683 | | | | | | 16 | | | | | $ | 962 | | | ||||||
Consumer and Other
|
| | | | 4 | | | | | | 18 | | | | | | 3 | | | | | | 3 | | | | | | 7 | | | | | | 21 | | | ||||||
Total
|
| | | | 9 | | | | | $ | 297 | | | | | | 14 | | | | | $ | 686 | | | | | | 23 | | | | | $ | 983 | | | ||||||
|
| | |
June 30, 2015
|
| |||||||||||||||
| | |
Amount
|
| |
Percent of
Allowance to Total Allowance |
| |
Percent of Loans
in Category to Total Loans |
| |||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||
Commercial Business
|
| | | $ | 4 | | | | | | 1.4 % | | | | | | 3.8 % | | |
Commercial and Multi-Family Real Estate
|
| | | | 31 | | | | | | 11.2 | | | | | | 31.7 | | |
Residential Real Estate
|
| | | | 143 | | | | | | 51.5 | | | | | | 63.7 | | |
Consumer and Other
|
| | | | 4 | | | | | | 1.4 | | | | | | 0.8 | | |
Total allocated allowance
|
| | | | 182 | | | | | | 65.5 | | | | | | 100.0 | | |
Unallocated allowance
|
| | | | 96 | | | | | | 34.5 | | | | |||||
Total allowance for loan losses
|
| | | $ | 278 | | | | | | 100.0 % | | | | |||||
|
| | |
December 31,
|
| |||||||||||||||||||||||||||||||||
| | |
2014
|
| |
2013
|
| ||||||||||||||||||||||||||||||
| | |
Amount
|
| |
Percent of
Allowance to Total Allowance |
| |
Percent of
Loans in Category to Total Loans |
| |
Amount
|
| |
Percent of
Allowance to Total Allowance |
| |
Percent of
Loans in Category to Total Loans |
| ||||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||||||||||
Commercial Business
|
| | | $ | 4 | | | | | | 1.4 % | | | | | | 3.6 % | | | | | $ | 3 | | | | | | 0.8 % | | | | | | 2.5 % | | |
Commercial and Multi-Family Real Estate
|
| | | | 46 | | | | | | 16.5 | | | | | | 30.5 | | | | | | 142 | | | | | | 40.5 | | | | | | 32.4 | | |
Residential Real Estate
|
| | | | 193 | | | | | | 69.2 | | | | | | 65.1 | | | | | | 149 | | | | | | 42.5 | | | | | | 64.2 | | |
Consumer and Other
|
| | | | 4 | | | | | | 1.4 | | | | | | 0.8 | | | | | | 4 | | | | | | 1.1 | | | | | | 0.9 | | |
Total allocated allowance
|
| | | | 247 | | | | | | 88.5 | | | | | | 100.0 % | | | | | | 298 | | | | | | 84.9 | | | | | | 100.0 % | | |
Unallocated allowance
|
| | | | 32 | | | | | | 11.5 | | | | | | | | | | | | 53 | | | | | | 15.1 | | | | |||||
Total allowance for loan losses
|
| | | $ | 279 | | | | | | 100.0 % | | | | | | | | | | | $ | 351 | | | | | | 100.0 % | | | | |||||
|
| | |
Six Months Ended June 30,
|
| |
Year Ended December 31,
|
| ||||||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||||||
Allowance at beginning of period
|
| | | $ | 279 | | | | | $ | 351 | | | | | $ | 351 | | | | | $ | 355 | | | ||||
Charge-offs: | | | | | | ||||||||||||||||||||||||
Residential real estate
|
| | | | — | | | | | | — | | | | | | (129 ) | | | | | | (2 ) | | | ||||
Consumer and other
|
| | | | (2 ) | | | | | | (4 ) | | | | | | (4 ) | | | | | | (2 ) | | | ||||
Total charge-offs
|
| | | | (2 ) | | | | | | (4 ) | | | | | | (133 ) | | | | | | (4 ) | | | ||||
Recoveries
|
| | | | 1 | | | | | | 1 | | | | | | 1 | | | | | | — | | | ||||
Net charge-offs
|
| | | | (1 ) | | | | | | (3 ) | | | | | | (132 ) | | | | | | (4 ) | | | ||||
Provision for loan losses
|
| | | | — | | | | | | 60 | | | | | | 60 | | | | | | — | | | ||||
Allowance at end of period
|
| | | $ | 278 | | | | | $ | 408 | | | | | $ | 279 | | | | | $ | 351 | | | ||||
|
| | |
Six Months Ended June 30,
|
| |
Year Ended December 31,
|
| ||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||
| | |
(Dollars in thousands)
|
| |||||||||||||||||||||
Ratios: | | | | | | ||||||||||||||||||||
Net charge-offs to average loans outstanding
|
| | | | — | | | | | | — | | | | | | 0.2 % | | | | | | — | | |
Allowance for loan losses to non-performing loans at end of period
|
| | | | 59.7 % | | | | | | 37.9 % | | | | | | 29.2 % | | | | | | 39.6 % | | |
Allowance for loan losses to total loans at end of period
|
| | | | 0.6 % | | | | | | 0.8 % | | | | | | 0.5 % | | | | | | 0.7 % | | |
| | | | | | | | | | | | | | | | | | | | |
NPV as a Percentage of
Present Value of Assets (3) |
| |||||||||
| | | | | | | | |
Estimated Increase
(Decrease) in NPV |
| |
NPV
Ratio (4) |
| |
Increase
(Decrease) (basis points) |
| |||||||||||||||
Change in Interest Rates
(basis points) (1) |
| |
Estimated
NPV (2) |
| |
Amount
|
| |
Percent
|
| |||||||||||||||||||||
(Dollars in thousands)
|
| ||||||||||||||||||||||||||||||
+300
|
| | | $ | 15,103 | | | | | $ | (2,741 ) | | | | | | (15.36 )% | | | | | | 24.90 % | | | | | | (222 ) | | |
+200
|
| | | | 15,957 | | | | | | (1,887 ) | | | | | | (10.58 | | | | | | 25.61 | | | | | | (151 ) | | |
+100
|
| | | | 16,873 | | | | | | (971 ) | | | | | | (5.44 ) | | | | | | 26.35 | | | | | | (77 ) | | |
-------
|
| | | | 17,844 | | | | | | — | | | | | | — | | | | | | 27.12 | | | | | | — | | |
-100
|
| | | | 18,690 | | | | | | 846 | | | | | | 4.74 | | | | | | 27.72 | | | | | | 60 | | |
Name and Principal Position
|
| |
Year
|
| |
Salary
|
| |
Bonus
(1)
|
| |
All Other
Compensation (2) |
| |
Total
|
| ||||||||||||
| | | | | | | | |
($)
|
| |
($)
|
| |
($)
|
| |
($)
|
| |||||||||
William A. Stoltz
President & Chief Executive Officer |
| | |
|
2014
2013 |
| | | |
|
140,225
136,141 |
| | |
10,000
6,000 |
| | |
|
14,966
13,859 |
| | | |
|
165,191
156,000 |
| |
Larry D. Thomas
Executive Vice President |
| | |
|
2014
2013 |
| | | |
|
95,009
92,241 |
| | |
8,000
4,200 |
| | |
|
10,029
10,029 |
| | | |
|
113,038
106,470 |
| |
| | |
Mr. Stoltz
|
| |
Mr. Thomas
|
| ||||||
Board meeting fees: | | | | $ | 6,000 | | | | | $ | 6,000 | | |
Life insurance premiums paid: | | | | $ | 2,966 | | | | | $ | 1,029 | | |
Annuity: | | | | $ | 6,000 | | | | | $ | 3,000 | | |
Name
|
| |
Fees Earned or
Paid in Cash ($) |
| |
All Other
Compensation ($) |
| |
Total
($) |
| | |||||||||||
Michael E. Estey
|
| | | | 6,000 | | | | | | — | | | | | | 6,000 | | | | ||
Jeffrey L. McKune
|
| | | | 6,000 | | | | | | — | | | | | | 6,000 | | | | ||
Robert R. Thompson
|
| | | | 6,000 | | | | | | — | | | | | | 6,000 | | | | ||
Michael Tucker
(1)
|
| | | | 5,000 | | | | | | — | | | | | | 5,000 | | | | ||
John D. Wiggins
|
| | | | 6,000 | | | | | | — | | | | | | 6,000 | | | | | |
| | |
Proposed Purchase of Stock in the Offering
|
| | | | ||||||||||||||||||
Name
|
| |
Number of
Shares |
| |
Dollar
Amount |
| |
Percent of Common
Stock Outstanding at Minimum of Offering Range (including Shares Contributed to Charitable Foundation) |
| | | | ||||||||||||
Directors : | | | | | | | | | | | | | | | | | | | | ||||||
Stephen L. Bowles
|
| | | | 1,000 | | | | | $ | 10,000 | | | |
*
|
| | | | ||||||
Michael E. Estey
|
| | | | 1,000 | | | | | | 10,000 | | | |
*
|
| | | | ||||||
Jeffrey L. McKune
|
| | | | 100 | | | | | | 1,000 | | | |
*
|
| | | | ||||||
James R. Sowers
|
| | | | 5,000 | | | | | | 50,000 | | | |
0.5
|
| | | | ||||||
Robert R. Thompson
|
| | | | 2,000 | | | | | | 20,000 | | | |
0.2
|
| | | | ||||||
John D. Wiggins
|
| | | | 2,000 | | | | | | 20,000 | | | |
0.2
|
| | | | ||||||
Executive Officers : | | | | | | | | | | | | | | | | | | | | | | | | | |
William A. Stoltz
|
| | | | 2,000 | | | | | | 20,000 | | | |
0.2
|
| | | | ||||||
Larry D. Thomas
|
| | | | 200 | | | | | | 2,000 | | | |
*
|
| | | | ||||||
Barbara E. Hamilton
|
| | | | 200 | | | | | | 2,000 | | | |
*
|
| | | | ||||||
All directors and executive officers as a group (9 persons)
|
| | | | 13,500 | | | | | $ | 135,000 | | | |
1.2
|
| | | | ||||||
|
Company
|
| |
Ticker
Symbol |
| |
Headquarters
|
| |
Total
Assets ($mil.) |
| |||
Central Federal Corporation | | | CFBK | | | Worthington, OH | | | | $ | 339 | | |
First Federal of Northern Michigan Bancorp, Inc. | | | FFNM | | | Alpena, MI | | | | | 326 | | |
HMN Financial, Inc. | | | HMNF | | | Rochester, MN | | | | | 564 | | |
IF Bancorp, Inc. | | | IROQ | | | Watseka, IL | | | | | 564 | | |
Jacksonville Bancorp, Inc. | | | JXSB | | | Jacksonville, IL | | | | | 306 | | |
LaPorte Bancorp, Inc. | | | LPSB | | | La Porte, IN | | | | | 521 | | |
Madison County Financial, Inc. | | | MCBK | | | Madison, NE | | | | | 318 | | |
Poage Bankshares, Inc. | | | PBSK | | | Ashland, KY | | | | | 432 | | |
United Community Bancorp | | | UCBA | | | Lawrenceburg, IN | | | | | 521 | | |
Wayne Savings Bancshares, Inc. | | | WAYN | | | Wooster, OH | | | | | 421 | | |
Wolverine Bancorp, Inc. | | | WBKC | | | Midland, MI | | | | | 358 | | |
| | |
Price to
Book Value Ratio |
| |
Price to
Tangible Book Value Ratio |
| ||||||
Central Federal Bancshares (pro forma) | | | | ||||||||||
Minimum
|
| | | | 51.7 % | | | | | | 51.7 % | | |
Midpoint
|
| | | | 56.4 | | | | | | 56.4 | | |
Maximum
|
| | | | 60.5 | | | | | | 60.5 | | |
Maximum, as adjusted
|
| | | | 64.6 | | | | | | 64.6 | | |
Peer group companies as of August 31, 2015: | | | | ||||||||||
Average
|
| | | | 88.2 | | | | | | 91.1 | | |
Median
|
| | | | 91.8 | | | | | | 92.4 | | |
| | The common stock of Central Federal Bancshares will represent nonwithdrawable capital, will not be an account of any type, and will not be insured by the FDIC or any other government agency. | | |
| | |
Page
|
||
| | | | F-2 | |
| | | | F-3 | |
| | | | F-4 | |
| | | | F-5 | |
| | | | F-6 | |
| | | | F-7 | |
| | | | F-8 |
| | |
June 30,
2015 |
| |
December 31,
2014 |
| |
December 31,
2013 |
| ||||||||||||
| | |
(Unaudited)
|
| | | ||||||||||||||||
ASSETS
|
| | | | | | | | | | | | | | | | | | | |||
Cash and Due from Financial Institutions
|
| | | $ | 8,536,000 | | | | | $ | 7,802,000 | | | | | $ | 7,158,000 | | | |||
Federal Funds Sold
|
| | | | 100,000 | | | | | | 100,000 | | | | | | 100,000 | | | |||
Cash and Cash Equivalents
|
| | | | 8,636,000 | | | | | | 7,902,000 | | | | | | 7,258,000 | | | |||
Certificates of Deposit in Other Financial Institutions
|
| | | | 2,480,000 | | | | | | 2,480,000 | | | | | | 2,480,000 | | | |||
Securities Available-for-Sale at Fair Value (Amortized cost is $15,000 at June 30, 2015, December 31, 2014, and December 31, 2013)
|
| | | | 33,000 | | | | | | 31,000 | | | | | | 44,000 | | | |||
Federal Home Loan Bank (FHLB) Stock, at Cost
|
| | | | 77,000 | | | | | | 78,000 | | | | | | 78,000 | | | |||
Loans, Net of Allowance for Loan Losses of $278,000 in 2015,
$279,000 in 2014 and $351,000 in 2013 |
| | | | 49,624,000 | | | | | | 52,184,000 | | | | | | 53,559,000 | | | |||
Foreclosed Assets
|
| | | | 508,000 | | | | | | 243,000 | | | | | | 243,000 | | | |||
Premises and Equipment, Net
|
| | | | 709,000 | | | | | | 739,000 | | | | | | 735,000 | | | |||
Accrued Interest Receivable
|
| | | | 126,000 | | | | | | 122,000 | | | | | | 140,000 | | | |||
Deferred Tax Asset, Net
|
| | | | 93,000 | | | | | | 144,000 | | | | | | 118,000 | | | |||
Income Taxes Receivable
|
| | | | 27,000 | | | | | | — | | | | | | 35,000 | | | |||
Other Assets
|
| | | | 111,000 | | | | | | 54,000 | | | | | | 73,000 | | | |||
Total Assets
|
| | | $ | 62,424,000 | | | | | $ | 63,977,000 | | | | | $ | 64,763,000 | | | |||
LIABILITIES AND EQUITY
|
| | | | | | | | | | | | | | | | | | | |||
LIABILITIES | | | | | | | | | | | | | | | | | | | | |||
Deposits: | | | | | | | | | | | | | | | | | | | | |||
Noninterest-Bearing
|
| | | $ | 2,186,000 | | | | | $ | 2,640,000 | | | | | $ | 2,116,000 | | | |||
Interest-Bearing
|
| | | | 46,456,000 | | | | | | 47,642,000 | | | | | | 49,059,000 | | | |||
Total Deposits
|
| | | | 48,642,000 | | | | | | 50,282,000 | | | | | | 51,175,000 | | | |||
Other Liabilities
|
| | | | 118,000 | | | | | | 113,000 | | | | | | 117,000 | | | |||
Total Liabilities
|
| | | | 48,760,000 | | | | | | 50,395,000 | | | | | | 51,292,000 | | | |||
EQUITY | | | | | | | | | | | | | | | | | | | | |||
Retained Earnings − Substantially Restricted
|
| | | | 13,652,000 | | | | | | 13,571,000 | | | | | | 13,452,000 | | | |||
Accumulated Other Comprehensive Income
|
| | | | 12,000 | | | | | | 11,000 | | | | | | 19,000 | | | |||
Total Equity
|
| | | | 13,664,000 | | | | | | 13,582,000 | | | | | | 13,471,000 | | | |||
Total Liabilities and Equity
|
| | | $ | 62,424,000 | | | | | $ | 63,977,000 | | | | | $ | 64,763,000 | | | |||
|
| | |
Six Months Ended
June 30, |
| |
Year Ended
December 31, |
| ||||||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||||||
| | |
(Unaudited)
|
| | | |||||||||||||||||||||||
INTEREST INCOME | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Loans, Including Fees
|
| | | $ | 1,192,000 | | | | | $ | 1,205,000 | | | | | $ | 2,411,000 | | | | | $ | 2,669,000 | | | ||||
Securities and Other
|
| | | | 30,000 | | | | | | 25,000 | | | | | | 55,000 | | | | | | 54,000 | | | ||||
Total Interest Income
|
| | | | 1,222,000 | | | | | | 1,230,000 | | | | | | 2,466,000 | | | | | | 2,723,000 | | | ||||
INTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Deposits
|
| | | | 236,000 | | | | | | 250,000 | | | | | | 494,000 | | | | | | 548,000 | | | ||||
Total Interest Expense
|
| | | | 236,000 | | | | | | 250,000 | | | | | | 494,000 | | | | | | 548,000 | | | ||||
NET INTEREST INCOME
|
| | | | 986,000 | | | | | | 980,000 | | | | | | 1,972,000 | | | | | | 2,175,000 | | | ||||
PROVISION FOR LOAN LOSSES
|
| | | | — | | | | | | 60,000 | | | | | | 60,000 | | | | | | — | | | ||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
|
| | | | 986,000 | | | | | | 920,000 | | | | | | 1,912,000 | | | | | | 2,175,000 | | | ||||
NONINTEREST INCOME | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Customer Service Fees
|
| | | | 22,000 | | | | | | 24,000 | | | | | | 49,000 | | | | | | 48,000 | | | ||||
Loss on Sale of Foreclosed Assets
|
| | | | — | | | | | | — | | | | | | — | | | | | | (100,000 ) | | | ||||
Other Income
|
| | | | 10,000 | | | | | | 13,000 | | | | | | 23,000 | | | | | | 29,000 | | | ||||
Total Noninterest Income
|
| | | | 32,000 | | | | | | 37,000 | | | | | | 72,000 | | | | | | (23,000 ) | | | ||||
NONINTEREST EXPENSE | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Compensation and Employee Benefits
|
| | | | 525,000 | | | | | | 525,000 | | | | | | 1,054,000 | | | | | | 1,006,000 | | | ||||
Data Processing and Other Outside Services
|
| | | | 122,000 | | | | | | 124,000 | | | | | | 256,000 | | | | | | 247,000 | | | ||||
FDIC Insurance and Regulatory Assessment
|
| | | | 40,000 | | | | | | 41,000 | | | | | | 83,000 | | | | | | 87,000 | | | ||||
Occupancy and Equipment
|
| | | | 108,000 | | | | | | 108,000 | | | | | | 215,000 | | | | | | 220,000 | | | ||||
Legal and Professional Services
|
| | | | 26,000 | | | | | | 29,000 | | | | | | 54,000 | | | | | | 55,000 | | | ||||
Supplies, Telephone, and Postage
|
| | | | 22,000 | | | | | | 22,000 | | | | | | 46,000 | | | | | | 40,000 | | | ||||
Foreclosed Assets
|
| | | | 9,000 | | | | | | 5,000 | | | | | | 11,000 | | | | | | 27,000 | | | ||||
Other
|
| | | | 41,000 | | | | | | 41,000 | | | | | | 86,000 | | | | | | 104,000 | | | ||||
Total Noninterest Expense
|
| | | | 893,000 | | | | | | 895,000 | | | | | | 1,805,000 | | | | | | 1,786,000 | | | ||||
INCOME BEFORE INCOME TAXES
|
| | | | 125,000 | | | | | | 62,000 | | | | | | 179,000 | | | | | | 366,000 | | | ||||
INCOME TAX EXPENSE
|
| | | | 44,000 | | | | | | 24,000 | | | | | | 60,000 | | | | | | 137,000 | | | ||||
NET INCOME
|
| | | $ | 81,000 | | | | | $ | 38,000 | | | | | $ | 119,000 | | | | | $ | 229,000 | | | ||||
|
| | |
Six Months Ended
June 30, |
| |
Year Ended
December 31, |
| ||||||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||||||
| | |
(Unaudited)
|
| | | |||||||||||||||||||||||
NET INCOME
|
| | | $ | 81,000 | | | | | $ | 38,000 | | | | | $ | 119,000 | | | | | $ | 229,000 | | | ||||
Other Comprehensive Income (Loss): | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Unrealized Gains/(Losses) on Securities Available-for-Sale
|
| | | | 2,000 | | | | | | 15,000 | | | | | | (13,000 ) | | | | | | 40,000 | | | ||||
Income Tax (Expense)/Benefit
|
| | | | (1,000 ) | | | | | | (5,000 ) | | | | | | 5,000 | | | | | | (15,000 ) | | | ||||
Total Other Comprehensive Income (Loss), net of tax
|
| | | | 1,000 | | | | | | 10,000 | | | | | | (8,000 ) | | | | | | 25,000 | | | ||||
TOTAL COMPREHENSIVE INCOME
|
| | | $ | 82,000 | | | | | $ | 48,000 | | | | | $ | 111,000 | | | | | $ | 254,000 | | | ||||
|
| | |
Retained
Earnings |
| |
Accumulated
Other Comprehensive Income (Loss) |
| |
Total
|
| ||||||||||||
BALANCE, JANUARY 1, 2013
|
| | | $ | 13,223,000 | | | | | $ | (6,000 ) | | | | | $ | 13,217,000 | | | |||
Net Income
|
| | | | 229,000 | | | | | | — | | | | | | 229,000 | | | |||
Other Comprehensive Income
|
| | | | — | | | | | | 25,000 | | | | | | 25,000 | | | |||
BALANCE, DECEMBER 31, 2013
|
| | | | 13,452,000 | | | | | | 19,000 | | | | | | 13,471,000 | | | |||
Net Income
|
| | | | 119,000 | | | | | | — | | | | | | 119,000 | | | |||
Other Comprehensive Loss
|
| | | | — | | | | | | (8,000 ) | | | | | | (8,000 ) | | | |||
BALANCE, DECEMBER 31, 2014
|
| | | | 13,571,000 | | | | | | 11,000 | | | | | | 13,582,000 | | | |||
Net Income
|
| | | | 81,000 | | | | | | — | | | | | | 81,000 | | | |||
Other Comprehensive Income
|
| | | | — | | | | | | 1,000 | | | | | | 1,000 | | | |||
BALANCE, JUNE 30, 2015
|
| | | $ | 13,652,000 | | | | | $ | 12,000 | | | | | $ | 13,664,000 | | | |||
|
| | |
Six Months Ended
June 30, |
| |
Year Ended
December 31, |
| ||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||
| | |
(Unaudited)
|
| |
(Unaudited)
|
| | | | | | | | | | | | | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Net Income
|
| | | $ | 81,000 | | | | | $ | 38,000 | | | | | $ | 119,000 | | | | | $ | 229,000 | | |
Adjustments to Reconcile Net Income to Net Cash
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Provided by Operating Activities:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Provision for Loan Losses
|
| | | | — | | | | | | 60,000 | | | | | | 60,000 | | | | | | — | | |
Depreciation
|
| | | | 38,000 | | | | | | 35,000 | | | | | | 73,000 | | | | | | 70,000 | | |
Deferred Income Tax
|
| | | | 50,000 | | | | | | (26,000 ) | | | | | | (21,000 ) | | | | | | 28,000 | | |
Loss on Sale of Foreclosed Assets
|
| | | | — | | | | | | — | | | | | | — | | | | | | 100,000 | | |
Net Changes in:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Accrued Interest Receivable
|
| | | | (4,000 ) | | | | | | 6,000 | | | | | | 18,000 | | | | | | 4,000 | | |
Income Taxes Receivable
|
| | | | (27,000 ) | | | | | | 51,000 | | | | | | 35,000 | | | | | | (60,000 ) | | |
Other Assets
|
| | | | (57,000 ) | | | | | | (1,000 ) | | | | | | 19,000 | | | | | | 101,000 | | |
Other Liabilities
|
| | | | 5,000 | | | | | | (13,000 ) | | | | | | (4,000 ) | | | | | | 10,000 | | |
Net Cash Provided by Operating Activities
|
| | | | 86,000 | | | | | | 150,000 | | | | | | 299,000 | | | | | | 482,000 | | |
CASH FLOWS FROM INVESTING ACTIVITIES
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Net Change in Certificates of Deposit in Other Financial Institutions
|
| | | | — | | | | | | (1,488,000 ) | | | | | | — | | | | | | 388,000 | | |
Net Change in FHLB Stock
|
| | | | 1,000 | | | | | | — | | | | | | — | | | | | | (1,000 ) | | |
Net Decrease in Loans
|
| | | | 2,295,000 | | | | | | 1,026,000 | | | | | | 1,315,000 | | | | | | 3,353,000 | | |
Purchases of Premises and Equipment
|
| | | | (8,000 ) | | | | | | (68,000 ) | | | | | | (77,000 ) | | | | | | (72,000 ) | | |
Proceeds from Sale of Foreclosed Assets
|
| | | | — | | | | | | — | | | | | | — | | | | | | 812,000 | | |
Net Cash Provided by (Used in) Investing
Activities |
| | | | 2,288,000 | | | | | | (530,000 ) | | | | | | 1,238,000 | | | | | | 4,480,000 | | |
CASH FLOWS FROM FINANCING ACTIVITIES
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Net Decrease in Deposits
|
| | | | (1,640,000 ) | | | | | | 605,000 | | | | | | (893,000 ) | | | | | | (650,000 ) | | |
Net Cash Provided by (Used in) Financing Activities
|
| | | | (1,640,000 ) | | | | | | 605,000 | | | | | | (893,000 ) | | | | | | (650,000 ) | | |
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
| | | | 734,000 | | | | | | 225,000 | | | | | | 644,000 | | | | | | 4,312,000 | | |
Cash and Cash Equivalents at Beginning of Period
|
| | | | 7,902,000 | | | | | | 7,258,000 | | | | | | 7,258,000 | | | | | | 2,946,000 | | |
CASH AND CASH EQUIVALENTS AT END OF
PERIOD |
| | | $ | 8,636,000 | | | | | $ | 7,483,000 | | | | | $ | 7,902,000 | | | | | $ | 7,258,000 | | |
SUPPLEMENTAL CASH FLOW DISCLOSURE
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest Paid on Deposits
|
| | | $ | 231,000 | | | | | $ | 245,000 | | | | | $ | 494,000 | | | | | $ | 548,000 | | |
Income Taxes Paid, Net of Refunds Received
|
| | | $ | 21,000 | | | | | $ | 37,000 | | | | | $ | 46,000 | | | | | $ | 170,000 | | |
Noncash Investing Activities:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Transfer of Loans to Foreclosed Assets
|
| | | $ | 265,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
| | |
June 30,
2015 |
| |
December 31,
|
| |||||||||||||||
| | |
2014
|
| |
2013
|
| |||||||||||||||
| | |
(Unaudited)
|
| | | | | | | | | | | | | ||||||
Certificates of Deposit at Cost Maturing In: | | | | | | | | | | | | | | | | | | | | |||
One Year or Less
|
| | | $ | 496,000 | | | | | $ | 496,000 | | | | | $ | 1,488,000 | | | |||
One Year to Five Years
|
| | | | 1,984,000 | | | | | | 1,488,000 | | | | | | 992,000 | | | |||
Over Five Years
|
| | | | — | | | | | | 496,000 | | | | | | — | | | |||
| | | | $ | 2,480,000 | | | | | $ | 2,480,000 | | | | | $ | 2,480,000 | | | |||
|
| | |
June 30, 2015
|
| |||||||||||||||||||||||||
| | |
Amortized
Cost |
| |
Gross
Unrealized Gains |
| |
Gross
Unrealized Losses |
| |
Fair
Value |
| ||||||||||||||||
| | |
(Unaudited)
|
| |||||||||||||||||||||||||
Federal Home Loan Mortgage Corp. Stock
|
| | | $ | 15,000 | | | | | $ | 18,000 | | | | | $ | — | | | | | $ | 33,000 | | | ||||
|
| | |
December 31, 2014
|
| |||||||||||||||||||||||||
| | |
Amortized
Cost |
| |
Gross
Unrealized Gains |
| |
Gross
Unrealized Losses |
| |
Fair
Value |
| ||||||||||||||||
Federal Home Loan Mortgage Corp. Stock
|
| | | $ | 15,000 | | | | | $ | 16,000 | | | | | $ | — | | | | | $ | 31,000 | | | ||||
|
| | |
December 31, 2013
|
| |||||||||||||||||||||||||
| | |
Amortized
Cost |
| |
Gross
Unrealized Gains |
| |
Gross
Unrealized Losses |
| |
Fair
Value |
| ||||||||||||||||
Federal Home Loan Mortgage Corp. Stock
|
| | | $ | 15,000 | | | | | $ | 29,000 | | | | | $ | — | | | | | $ | 44,000 | | | ||||
|
| | |
June 30,
2015 |
| |
December 31,
|
| |||||||||||||||
| | |
2014
|
| |
2013
|
| |||||||||||||||
| | |
(Unaudited)
|
| | | ||||||||||||||||
Commercial Business
|
| | | $ | 1,905,000 | | | | | $ | 1,880,000 | | | | | $ | 1,329,000 | | | |||
Commercial and Multi-Family Real Estate
|
| | | | 15,807,000 | | | | | | 15,993,000 | | | | | | 17,469,000 | | | |||
Residential Real Estate
|
| | | | 31,795,000 | | | | | | 34,179,000 | | | | | | 34,639,000 | | | |||
Consumer and Other
|
| | | | 415,000 | | | | | | 432,000 | | | | | | 498,000 | | | |||
| | | | | 49,922,000 | | | | | | 52,484,000 | | | | | | 53,935,000 | | | |||
Allowance for Loan Losses
|
| | | | (278,000 ) | | | | | | (279,000 ) | | | | | | (351,000 ) | | | |||
Net Deferred Loan Fees
|
| | | | (20,000 ) | | | | | | (21,000 ) | | | | | | (25,000 ) | | | |||
Loans, Net
|
| | | $ | 49,624,000 | | | | | $ | 52,184,000 | | | | | $ | 53,559,000 | | | |||
|
June 30, 2015 (Unaudited)
|
| |
Commercial
Business |
| |
Commercial
and Multi-Family Real Estate |
| |
Residential
Real Estate |
| |
Consumer
and Other |
| |
Unallocated
|
| |
Total
|
| ||||||||||||||||||||||||
Allowance for Loan Losses: | | | | | | | | ||||||||||||||||||||||||||||||||||||
Balance at Beginning of Period
|
| | | $ | 4,000 | | | | | $ | 46,000 | | | | | $ | 193,000 | | | | | $ | 4,000 | | | | | $ | 32,000 | | | | | $ | 279,000 | | | ||||||
Provision for Loan Losses
|
| | | | — | | | | | | (15,000 ) | | | | | | (51,000 ) | | | | | | 2,000 | | | | | | 64,000 | | | | | $ | — | | | ||||||
Loans Charged-Off
|
| | | | — | | | | | | — | | | | | | — | | | | | | (2,000 ) | | | | | | — | | | | | $ | (2,000 ) | | | ||||||
Recoveries of Loans
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Previously Charged-Off
|
| | | | — | | | | | | — | | | | | | 1,000 | | | | | | — | | | | | | — | | | | | $ | 1,000 | | | ||||||
Balance at End of Period
|
| | | $ | 4,000 | | | | | $ | 31,000 | | | | | $ | 143,000 | | | | | $ | 4,000 | | | | | $ | 96,000 | | | | | $ | 278,000 | | | ||||||
Ending Balance: Individually | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | — | | | | | $ | — | | | | | $ | 15,000 | | | | | $ | — | | | | | $ | — | | | | | $ | 15,000 | | | ||||||
Ending Balance: Collectively | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | 4,000 | | | | | $ | 31,000 | | | | | $ | 128,000 | | | | | $ | 4,000 | | | | | $ | 96,000 | | | | | $ | 263,000 | | | ||||||
Loans: | | | | | | | | ||||||||||||||||||||||||||||||||||||
Ending Balance: Individually | | | | | | | | ||||||||||||||||||||||||||||||||||||
Evaluated for Impairment
|
| | | $ | — | | | | | $ | 387,000 | | | | | $ | 466,000 | | | | | $ | — | | | | | | | | | | | $ | 853,000 | | | ||||||
Ending Balance: Collectively | | | | | | | | ||||||||||||||||||||||||||||||||||||
Evaluated for Impairment
|
| | | $ | 1,905,000 | | | | | $ | 15,420,000 | | | | | $ | 31,329,000 | | | | | $ | 415,000 | | | | | | | | | | | $ | 49,069,000 | | | ||||||
|
June 30, 2014 (Unaudited)
|
| |
Commercial
Business |
| |
Commercial
and Multi-Family Real Estate |
| |
Residential
Real Estate |
| |
Consumer
and Other |
| |
Unallocated
|
| |
Total
|
| ||||||||||||||||||||||||
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||
Balance at Beginning of Period
|
| | | $ | 3,000 | | | | | $ | 142,000 | | | | | $ | 149,000 | | | | | $ | 4,000 | | | | | $ | 53,000 | | | | | $ | 351,000 | | | ||||||
Provision for Loan Losses
|
| | | | 1,000 | | | | | | 94,000 | | | | | | 15,000 | | | | | | 2,000 | | | | | | (52,000 ) | | | | | $ | 60,000 | | | ||||||
Loans Charged-Off
|
| | | | — | | | | | | — | | | | | | — | | | | | | (4,000 ) | | | | | | — | | | | | $ | (4,000 ) | | | ||||||
Recoveries of Loans
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Previously Charged-Off
|
| | | | — | | | | | | — | | | | | | — | | | | | | 1,000 | | | | | | — | | | | | $ | 1,000 | | | ||||||
Balance at End of Period
|
| | | $ | 4,000 | | | | | $ | 236,000 | | | | | $ | 164,000 | | | | | $ | 3,000 | | | | | $ | 1,000 | | | | | $ | 408,000 | | | ||||||
Ending Balance: Individually | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | — | | | | | $ | — | | | | | $ | 20,000 | | | | | $ | — | | | | | $ | — | | | | | $ | 20,000 | | | ||||||
Ending Balance: Collectively | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | 4,000 | | | | | $ | 236,000 | | | | | $ | 144,000 | | | | | $ | 3,000 | | | | | $ | 1,000 | | | | | $ | 388,000 | | | ||||||
|
December 31, 2014
|
| |
Commercial
Business |
| |
Commercial
and Multi-Family Real Estate |
| |
Residential
Real Estate |
| |
Consumer
and Other |
| |
Unallocated
|
| |
Total
|
| ||||||||||||||||||||||||
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||
Balance at Beginning of Year
|
| | | $ | 3,000 | | | | | $ | 142,000 | | | | | $ | 149,000 | | | | | $ | 4,000 | | | | | $ | 53,000 | | | | | $ | 351,000 | | | ||||||
Provision for Loan Losses
|
| | | | 1,000 | | | | | | (96,000 ) | | | | | | 173,000 | | | | | | 3,000 | | | | | | (21,000 ) | | | | | | 60,000 | | | ||||||
Loans Charged-Off
|
| | | | — | | | | | | — | | | | | | (129,000 ) | | | | | | (4,000 ) | | | | | | — | | | | | | (133,000 ) | | | ||||||
Recoveries of Loans
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Previously Charged-Off
|
| | | | — | | | | | | — | | | | | | — | | | | | | 1,000 | | | | | | — | | | | | | 1,000 | | | ||||||
Balance at End of Year
|
| | | $ | 4,000 | | | | | $ | 46,000 | | | | | $ | 193,000 | | | | | $ | 4,000 | | | | | $ | 32,000 | | | | | $ | 279,000 | | | ||||||
Ending Balance: Individually | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | ||||||
Ending Balance: Collectively | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | 4,000 | | | | | $ | 46,000 | | | | | $ | 193,000 | | | | | $ | 4,000 | | | | | $ | 32,000 | | | | | $ | 279,000 | | | ||||||
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Ending Balance: Individually | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | — | | | | | $ | 442,000 | | | | | $ | 590,000 | | | | | $ | 3,000 | | | | | | | | | | | $ | 1,035,000 | | | ||||||
Ending Balance: Collectively | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | 1,880,000 | | | | | $ | 15,551,000 | | | | | | 33,589,000 | | | | | $ | 429,000 | | | | | | | | | | | $ | 51,449,000 | | | ||||||
|
December 31, 2013
|
| |
Commercial
Business |
| |
Commercial
and Multi-Family Real Estate |
| |
Residential
Real Estate |
| |
Consumer
and Other |
| |
Unallocated
|
| |
Total
|
| ||||||||||||||||||||||||
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||
Balance at Beginning of Year
|
| | | $ | 2,000 | | | | | $ | 171,000 | | | | | $ | 153,000 | | | | | $ | 1,000 | | | | | $ | 28,000 | | | | | $ | 355,000 | | | ||||||
Provision for Loan Losses
|
| | | | 1,000 | | | | | | (29,000 ) | | | | | | (2,000 ) | | | | | | 5,000 | | | | | | 25,000 | | | | | | — | | | ||||||
Loans Charged-Off
|
| | | | — | | | | | | — | | | | | | (2,000 ) | | | | | | (2,000 ) | | | | | | | | | | | | (4,000 ) | | | ||||||
Recoveries of Loans
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Previously Charged-Off
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||||||
Balance at End of Year
|
| | | $ | 3,000 | | | | | $ | 142,000 | | | | | $ | 149,000 | | | | | $ | 4,000 | | | | | $ | 53,000 | | | | | $ | 351,000 | | | ||||||
Ending Balance: Individually | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | ||||||
Ending Balance: Collectively | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | 3,000 | | | | | $ | 142,000 | | | | | $ | 149,000 | | | | | $ | 4,000 | | | | | $ | 53,000 | | | | | $ | 351,000 | | | ||||||
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Ending Balance: Individually | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | — | | | | | $ | 459,000 | | | | | $ | 685,000 | | | | | $ | 3,000 | | | | | | | | | | | $ | 1,147,000 | | | ||||||
Ending Balance: Collectively | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||
Evaluated for Impairment
|
| | | $ | 1,329,000 | | | | | $ | 17,010,000 | | | | | $ | 33,954,000 | | | | | $ | 495,000 | | | | | | | | | | | $ | 52,788,000 | | | ||||||
|
| | |
Credit Risk Profile by Risk Rating
|
| ||||||||||||||||||||||||||||||||
June 30, 2015 (Unaudited)
|
| |
Commercial
Business |
| |
Commercial
and Multi-Family Real Estate |
| |
Residential
Real Estate |
| |
Consumer
and Other |
| |
Total
|
| ||||||||||||||||||||
Risk Rating: | | | | | | | ||||||||||||||||||||||||||||||
Unclassified
|
| | | $ | 1,905,000 | | | | | $ | 15,807,000 | | | | | $ | 30,969,000 | | | | | $ | 415,000 | | | | | $ | 49,096,000 | | | |||||
Special Mention
|
| | | | — | | | | | | — | | | | | | 112,000 | | | | | | — | | | | | | 112,000 | | | |||||
Substandard
|
| | | | — | | | | | | — | | | | | | 714,000 | | | | | | — | | | | | | 714,000 | | | |||||
Total
|
| | | $ | 1,905,000 | | | | | $ | 15,807,000 | | | | | $ | 31,795,000 | | | | | $ | 415,000 | | | | | $ | 49,922,000 | | | |||||
|
| | |
Credit Risk Profile by Risk Rating
|
| ||||||||||||||||||||||||||||||||
December 31, 2014
|
| |
Commercial
Business |
| |
Commercial
and Multi-Family Real Estate |
| |
Residential
Real Estate |
| |
Consumer
and Other |
| |
Total
|
| ||||||||||||||||||||
Risk Rating: | | | | | | | ||||||||||||||||||||||||||||||
Unclassified
|
| | | $ | 1,631,000 | | | | | $ | 15,993,000 | | | | | $ | 32,795,000 | | | | | $ | 429,000 | | | | | $ | 50,848,000 | | | |||||
Special Mention
|
| | | | 198,000 | | | | | | — | | | | | | 679,000 | | | | | | — | | | | | | 877,000 | | | |||||
Substandard
|
| | | | 51,000 | | | | | | — | | | | | | 705,000 | | | | | | 3,000 | | | | | | 759,000 | | | |||||
Total
|
| | | $ | 1,880,000 | | | | | $ | 15,993,000 | | | | | $ | 34,179,000 | | | | | $ | 432,000 | | | | | $ | 52,484,000 | | | |||||
|
| | |
Credit Risk Profile by Risk Rating
|
| ||||||||||||||||||||||||||||||||
December 31, 2013
|
| |
Commercial
Business |
| |
Commercial
and Multi-Family Real Estate |
| |
Residential
Real Estate |
| |
Consumer
and Other |
| |
Total
|
| ||||||||||||||||||||
Risk Rating: | | | | | | | ||||||||||||||||||||||||||||||
Unclassified
|
| | | $ | 1,329,000 | | | | | $ | 16,587,000 | | | | | $ | 33,210,000 | | | | | $ | 495,000 | | | | | $ | 51,621,000 | | | |||||
Special Mention
|
| | | | — | | | | | | — | | | | | | 482,000 | | | | | | — | | | | | | 482,000 | | | |||||
Substandard
|
| | | | — | | | | | | 882,000 | | | | | | 947,000 | | | | | | 3,000 | | | | | | 1,832,000 | | | |||||
Total
|
| | | $ | 1,329,000 | | | | | $ | 17,469,000 | | | | | $ | 34,639,000 | | | | | $ | 498,000 | | | | | $ | 53,935,000 | | | |||||
|
| | |
Accruing Interest
|
| | | ||||||||||||||||||||||||||||||
June, 30 2015 (Unaudited)
|
| |
Current
|
| |
30 – 89 Days
Past Due |
| |
90 Days or More
Past Due |
| |
Total
Nonaccrual |
| |
Total
Loans |
| ||||||||||||||||||||
Commercial Business
|
| | | $ | 1,905,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 1,905,000 | | | |||||
Commercial and Multi-Family Real Estate
|
| | | | 15,807,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | 15,807,000 | | | |||||
Residential Real Estate
|
| | | | 31,231,000 | | | | | | 98,000 | | | | | | — | | | | | | 466,000 | | | | | | 31,795,000 | | | |||||
Consumer and Other
|
| | | | 403,000 | | | | | | 12,000 | | | | | | — | | | | | | — | | | | | | 415,000 | | | |||||
| | | | $ | 49,346,000 | | | | | $ | 110,000 | | | | | $ | — | | | | | $ | 466,000 | | | | | $ | 49,922,000 | | | |||||
|
| | |
Accruing Interest
|
| | | ||||||||||||||||||||||||||||||
December 31, 2014
|
| |
Current
|
| |
30 – 89 Days
Past Due |
| |
90 Days or More
Past Due |
| |
Total
Nonaccrual |
| |
Total
Loans |
| ||||||||||||||||||||
Commercial Business
|
| | | $ | 1,880,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 1,880,000 | | | |||||
Commercial and Multi-Family Real Estate
|
| | | | 15,942,000 | | | | | | — | | | | | | — | | | | | | 51,000 | | | | | | 15,993,000 | | | |||||
Residential Real Estate
|
| | | | 33,132,000 | | | | | | 145,000 | | | | | | 312,000 | | | | | | 590,000 | | | | | | 34,179,000 | | | |||||
Consumer and Other
|
| | | | 417,000 | | | | | | 12,000 | | | | | | — | | | | | | 3,000 | | | | | | 432,000 | | | |||||
| | | | $ | 51,371,000 | | | | | $ | 157,000 | | | | | $ | 312,000 | | | | | $ | 644,000 | | | | | $ | 52,484,000 | | | |||||
|
| | |
Accruing Interest
|
| | | ||||||||||||||||||||||||||||||
December 31, 2013
|
| |
Current
|
| |
30 – 89 Days
Past Due |
| |
90 Days or More
Past Due |
| |
Total
Nonaccrual |
| |
Total
Loans |
| ||||||||||||||||||||
Commercial Business
|
| | | $ | 1,329,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 1,329,000 | | | |||||
Commercial and Multi-Family Real Estate
|
| | | | 17,412,000 | | | | | | — | | | | | | — | | | | | | 57,000 | | | | | | 17,469,000 | | | |||||
Residential Real Estate
|
| | | | 33,533,000 | | | | | | 279,000 | | | | | | 142,000 | | | | | | 685,000 | | | | | | 34,639,000 | | | |||||
Consumer and Other
|
| | | | 477,000 | | | | | | 18,000 | | | | | | — | | | | | | 3,000 | | | | | | 498,000 | | | |||||
| | | | $ | 52,751,000 | | | | | $ | 297,000 | | | | | $ | 142,000 | | | | | $ | 745,000 | | | | | $ | 53,935,000 | | | |||||
|
June 30, 2015 (Unaudited)
|
| |
Recorded
Investment |
| |
Unpaid
Principal Balance |
| |
Related
Allowance |
| |
Average
Recorded Investment |
| |
Interest
Income Recognized |
| ||||||||||||||||||||
Loans With No Related Allowance Recorded: | | | | | | | ||||||||||||||||||||||||||||||
Commercial and Multi-Family Real Estate
|
| | | $ | 387,000 | | | | | $ | 387,000 | | | | | $ | — | | | | | $ | 389,000 | | | | | $ | 12,000 | | | |||||
Residential Real Estate
|
| | | | 167,000 | | | | | | 298,000 | | | | | | — | | | | | | 170,000 | | | | | | 3,000 | | | |||||
Total Loans With No Related Allowance
|
| | | | | | ||||||||||||||||||||||||||||||
Recorded
|
| | | $ | 554,000 | | | | | $ | 685,000 | | | | | $ | — | | | | | $ | 559,000 | | | | | $ | 15,000 | | | |||||
Loans With an Allowance Recorded: | | | | | | | ||||||||||||||||||||||||||||||
Residential Real Estate
|
| | | $ | 299,000 | | | | | $ | 309,000 | | | | | $ | 15,000 | | | | | $ | 306,000 | | | | | $ | — | | | |||||
Total Impaired Loans: | | | | | | | ||||||||||||||||||||||||||||||
Commercial and Multi-Family Real Estate
|
| | | $ | 387,000 | | | | | $ | 387,000 | | | | | $ | — | | | | | $ | 389,000 | | | | | $ | 12,000 | | | |||||
Residential Real Estate
|
| | | | 466,000 | | | | | | 607,000 | | | | | | 15,000 | | | | | | 476,000 | | | | | | 3,000 | | | |||||
Total
|
| | | $ | 853,000 | | | | | $ | 994,000 | | | | | $ | 15,000 | | | | | $ | 865,000 | | | | | $ | 15,000 | | | |||||
|
December 31, 2014
|
| |
Recorded
Investment |
| |
Unpaid
Principal Balance |
| |
Related
Allowance |
| |
Average
Recorded Investment |
| |
Interest
Income Recognized |
| ||||||||||||||||||||
Loans With No Related Allowance Recorded:
|
| | | | | | ||||||||||||||||||||||||||||||
Commercial and Multi-Family Real Estate
|
| | | $ | 442,000 | | | | | $ | 471,000 | | | | | $ | — | | | | | $ | 456,000 | | | | | $ | 12,000 | | | |||||
Residential Real Estate
|
| | | | 590,000 | | | | | | 837,000 | | | | | | — | | | | | | 598,000 | | | | | | 2,000 | | | |||||
Consumer and Other
|
| | | | 3,000 | | | | | | 3,000 | | | | | | — | | | | | | 3,000 | | | | | | — | | | |||||
Total Impaired Loans
|
| | | $ | 1,035,000 | | | | | $ | 1,311,000 | | | | | $ | — | | | | | $ | 1,057,000 | | | | | $ | 14,000 | | | |||||
|
December 31, 2013
|
| |
Recorded
Investment |
| |
Unpaid
Principal Balance |
| |
Related
Allowance |
| |
Average
Recorded Investment |
| |
Interest
Income Recognized |
| ||||||||||||||||||||
Loans With No Related Allowance Recorded:
|
| | | | | | ||||||||||||||||||||||||||||||
Commercial and Multi-Family Real Estate
|
| | | $ | 459,000 | | | | | $ | 485,000 | | | | | $ | — | | | | | $ | 540,000 | | | | | $ | 1,000 | | | |||||
Residential Real Estate
|
| | | | 685,000 | | | | | | 821,000 | | | | | | — | | | | | | 777,000 | | | | | | 11,000 | | | |||||
Consumer and Other
|
| | | | 3,000 | | | | | | 3,000 | | | | | | — | | | | | | 4,000 | | | | | | — | | | |||||
Total Impaired Loans:
|
| | | $ | 1,147,000 | | | | | $ | 1,309,000 | | | | | $ | — | | | | | $ | 1,321,000 | | | | | $ | 12,000 | | | |||||
|
| | |
Year Ended December 31, 2013
|
| ||||||||||||||||||||||||||||||||
| | |
Troubled Debt Restructurings
|
| |
Troubled Debt Restructurings That
Subsequently Defaulted |
| |||||||||||||||||||||||||||||
| | |
Number of
Loans |
| |
Post-
Modification Outstanding Balance |
| |
Number of
Loans |
| |
Post-
Modification Outstanding Balance |
| |
Specific
Allowance |
| ||||||||||||||||||||
Commercial and Multi-Family
Real Estate |
| | | | 1 | | | | | $ | 402,000 | | | | | | — | | | | | $ | — | | | | | $ | — | | | |||||
|
| | |
Six Months Ended
June 30, 2015 |
| |
Year Ended December 31,
|
| |||||||||||||||
| | |
2014
|
| |
2013
|
| |||||||||||||||
| | |
(Unaudited)
|
| | | | | | | | | | | | | ||||||
Balance at Beginning of Year
|
| | | $ | 243,000 | | | | | $ | 243,000 | | | | | $ | 1,155,000 | | | |||
Additions
|
| | | | 265,000 | | | | | | — | | | | | | — | | | |||
Sales
|
| | | | — | | | | | | — | | | | | | (812,000 ) | | | |||
Loss on Sale
|
| | | | — | | | | | | — | | | | | | (100,000 ) | | | |||
Balance at End of Period
|
| | | $ | 508,000 | | | | | $ | 243,000 | | | | | $ | 243,000 | | | |||
|
| | |
June 30,
2015 |
| |
December 31,
|
| |||||||||||||||
| | |
2014
|
| |
2013
|
| |||||||||||||||
| | |
(Unaudited)
|
| | | | | | | | | | | | | ||||||
Land | | | | $ | 229,000 | | | | | $ | 229,000 | | | | | $ | 229,000 | | | |||
Building and Improvements
|
| | | | 1,115,000 | | | | | | 1,115,000 | | | | | | 1,058,000 | | | |||
Furniture, Fixtures and Equipment
|
| | | | 483,000 | | | | | | 475,000 | | | | | | 500,000 | | | |||
Automobile | | | | | 13,000 | | | | | | 13,000 | | | | | | 13,000 | | | |||
| | | | | 1,840,000 | | | | | | 1,832,000 | | | | | | 1,800,000 | | | |||
Less: Accumulated Depreciation
|
| | | | 1,131,000 | | | | | | 1,093,000 | | | | | | 1,065,000 | | | |||
Premises and Equipment, Net
|
| | | $ | 709,000 | | | | | $ | 739,000 | | | | | $ | 735,000 | | | |||
|
| | |
June 30,
2015 |
| |
December 31,
2015 |
| |||||||||||||||
| | |
2014
|
| |
2013
|
| |||||||||||||||
| | |
(Unaudited)
|
| | | | | | | | | | | | | ||||||
Noninterest-Bearing Demand Deposits
|
| | | $ | 2,186,000 | | | | | $ | 2,640,000 | | | | | $ | 2,116,000 | | | |||
NOW and Money Market Deposit Accounts
|
| | | | 19,292,000 | | | | | | 18,936,000 | | | | | | 17,350,000 | | | |||
Savings
|
| | | | 3,783,000 | | | | | | 3,625,000 | | | | | | 3,361,000 | | | |||
Certificates of Deposit
|
| | | | 23,381,000 | | | | | | 25,081,000 | | | | | | 28,348,000 | | | |||
Total
|
| | | $ | 48,642,000 | | | | | $ | 50,282,000 | | | | | $ | 51,175,000 | | | |||
|
| | |
June 30,
2015 |
| |
December 31,
2014 |
| ||||||||
| | |
(Unaudited)
|
| | | | | | | |||||
Certificates of Deposit: | | | | ||||||||||||
2015
|
| | | $ | — | | | | | $ | 12,429,000 | | | ||
2016
|
| | | | 12,614,000 | | | | | | 5,809,000 | | | ||
2017
|
| | | | 6,741,000 | | | | | | 5,465,000 | | | ||
2018
|
| | | | 2,514,000 | | | | | | 758,000 | | | ||
2019
|
| | | | 919,000 | | | | | | 529,000 | | | ||
2020
|
| | | | 502,000 | | | | | | — | | | ||
Thereafter
|
| | | | 91,000 | | | | | | 91,000 | | | ||
Total
|
| | | $ | 23,381,000 | | | | | $ | 25,081,000 | | | ||
|
| | |
Six Months Ended June 30,
|
| |
Year Ended December 31,
|
| ||||||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||||||
| | |
(Unaudited)
|
| | | | | | | | | | | | | |||||||||||||
NOW and Money Market Deposit Accounts
|
| | | $ | 52,000 | | | | | $ | 44,000 | | | | | $ | 92,000 | | | | | $ | 78,000 | | | ||||
Savings | | | | | 6,000 | | | | | | 5,000 | | | | | | 11,000 | | | | | | 11,000 | | | ||||
Certificates of Deposit
|
| | | | 178,000 | | | | | | 201,000 | | | | | | 391,000 | | | | | | 459,000 | | | ||||
Total
|
| | | $ | 236,000 | | | | | $ | 250,000 | | | | | $ | 494,000 | | | | | $ | 548,000 | | | ||||
|
| | |
June 30,
2015 |
| |
December 31,
|
| |||||||||||||||
| | |
2014
|
| |
2013
|
| |||||||||||||||
| | |
(Unaudited)
|
| | | | | | | | | | | | | ||||||
Balance at Beginning of Period
|
| | | $ | 821,000 | | | | | $ | 716,000 | | | | | $ | 676,000 | | | |||
Change in Related Parties
|
| | | | 1,350,000 | | | | | | — | | | | | | — | | | |||
New Loans and Advances
|
| | | | 213,000 | | | | | | 171,000 | | | | | | 70,000 | | | |||
Repayments | | | | | (31,000 ) | | | | | | (66,000 ) | | | | | | (30,000 ) | | | |||
Balance at End of Period
|
| | | $ | 2,353,000 | | | | | $ | 821,000 | | | | | $ | 716,000 | | | |||
|
| | |
Six Months Ended June 30,
|
| |
Year Ended December 31,
|
| ||||||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||||||
| | |
(Unaudited)
|
| | | | | | | | | | | | | |||||||||||||
Current: | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Federal
|
| | | $ | (5,000 ) | | | | | $ | 41,000 | | | | | $ | 71,000 | | | | | $ | 96,000 | | | ||||
State
|
| | | | (1,000 ) | | | | | | 9,000 | | | | | | 10,000 | | | | | | 13,000 | | | ||||
| | | | | (6,000 ) | | | | | | 50,000 | | | | | | 81,000 | | | | | | 109,000 | | | ||||
Deferred: | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Federal
|
| | | | 44,000 | | | | | | (23,000 ) | | | | | | (18,000 ) | | | | | | 23,000 | | | ||||
State
|
| | | | 6,000 | | | | | | (3,000 ) | | | | | | (3,000 ) | | | | | | 5,000 | | | ||||
| | | | | 50,000 | | | | | | (26,000 ) | | | | | | (21,000 ) | | | | | | 28,000 | | | ||||
| | | | $ | 44,000 | | | | | $ | 24,000 | | | | | $ | 60,000 | | | | | $ | 137,000 | | | ||||
|
| | |
Six Months Ended June 30,
|
| |
Year Ended December 31,
|
|||||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
|||||||||||||||
| | |
(Unaudited)
|
| | | | | | | | | | | |||||||||||||
Expected Tax Provision at a 34% Rate
|
| | | $ | 43,000 | | | | | $ | 21,000 | | | | | $ | 61,000 | | | | | $ | 124,000 | ||||
Graduated Tax Rate – Benefit
|
| | | | (10,000 ) | | | | | | (3,000 ) | | | | | | (8,000 ) | | | | | | — | ||||
State Tax (Net of Federal Tax Benefit)
|
| | | | 7,000 | | | | | | 4,000 | | | | | | 6,000 | | | | | | 18,000 | ||||
Nondeductible Meals and Entertainment
|
| | | | — | | | | | | — | | | | | | — | | | | | | 1,000 | ||||
Other | | | | | 4,000 | | | | | | 2,000 | | | | | | 1,000 | | | | | | (6,000 ) | ||||
Total
|
| | | $ | 44,000 | | | | | $ | 24,000 | | | | | $ | 60,000 | | | | | $ | 137,000 | ||||
|
| | |
June 30,
2015 |
| |
December 31,
|
| |||||||||||||||
| | |
2014
|
| |
2013
|
| |||||||||||||||
| | |
(Unaudited)
|
| | | | | | | | | | | | | ||||||
Deferred Tax Assets: | | | | | ||||||||||||||||||
Allowance for Loan Losses
|
| | | $ | 107,000 | | | | | $ | 148,000 | | | | | $ | 136,000 | | | |||
Deferred Loan Fees
|
| | | | 8,000 | | | | | | 9,000 | | | | | | 9,000 | | | |||
Nonaccrual Loan Interest
|
| | | | 4,000 | | | | | | 17,000 | | | | | | 12,000 | | | |||
Other
|
| | | | 21,000 | | | | | | 21,000 | | | | | | 21,000 | | | |||
Deferred Tax Liabilities: | | | | | | | | | | | | | | | | | | | | |||
Accumulated Depreciation
|
| | | | (31,000 ) | | | | | | (36,000 ) | | | | | | (44,000 ) | | | |||
Unrealized Gains on Securities Available-for-Sale
|
| | | | (6,000 ) | | | | | | (5,000 ) | | | | | | (10,000 ) | | | |||
Other
|
| | | | (10,000 ) | | | | | | (10,000 ) | | | | | | (6,000 ) | | | |||
Net Deferred Tax Asset
|
| | | $ | 93,000 | | | | | $ | 144,000 | | | | | $ | 118,000 | | | |||
|
| | |
June 30,
2015 |
| |
December 31,
|
| |||||||||||||||
| | |
2014
|
| |
2013
|
| |||||||||||||||
| | |
(Unaudited)
|
| | | | | | | | | | | | | ||||||
Commitments to Extend Credit
|
| | | $ | 3,996,000 | | | | | $ | 2,589,000 | | | | | $ | 1,886,000 | | | |||
Standby Letters of Credit
|
| | | | 15,000 | | | | | | 15,000 | | | | | | 15,000 | | | |||
| | | | $ | 4,011,000 | | | | | $ | 2,604,000 | | | | | $ | 1,901,000 | | | |||
Range of Rates on Fixed Rate Commitments
|
| | | | 2.0 – 18.0 % | | | | | | 2.4 – 18.0 % | | | | | | 2.4 – 18.0 % | | | |||
|
| | |
Actual
|
| |
Minimum Capital
Requirement |
| |
Minimum to be
Well Capitalized |
| |||||||||||||||||||||||||||
| | |
Amount
|
| |
Ratio
|
| |
Amount
|
| |
Ratio
|
| |
Amount
|
| |
Ratio
|
| ||||||||||||||||||
June 30, 2015 (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Capital to Risk Weighted Assets
|
| | | $ | 13,841,000 | | | | | | 39.2 % | | | | | $ | 2,826,000 | | | | | | 8.0 % | | | | | $ | 3,533,000 | | | | | | 10.0 % | | |
Tier 1 Capital to Risk Weighted Assets
|
| | | | 13,563,000 | | | | | | 38.4 % | | | | | | 2,120,000 | | | | | | 6.0 % | | | | | | 2,826,000 | | | | | | 8.0 % | | |
Common Equity Tier 1 Capital to Risk Weighted Assets
|
| | | | 13,563,000 | | | | | | 38.4 % | | | | | | 1,590,000 | | | | | | 4.5 % | | | | | | 2,296,000 | | | | | | 6.5 % | | |
Tier 1 Capital to Average Assets
|
| | | | 13,563,000 | | | | | | 21.4 % | | | | | | 2,541,000 | | | | | | 4.0 % | | | | | | 3,176,000 | | | | | | 5.0 % | | |
December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Capital to Risk Weighted Assets
|
| | | $ | 13,863,000 | | | | | | 34.7 % | | | | | $ | 3,199,000 | | | | | | 8.0 % | | | | | $ | 3,998,000 | | | | | | 10.0 % | | |
Tier 1 Capital to Risk Weighted Assets
|
| | | | 13,571,000 | | | | | | 33.9 % | | | | | | 1,599,000 | | | | | | 4.0 % | | | | | | 2,399,000 | | | | | | 6.0 % | | |
Tier 1 Capital to Average Assets
|
| | | | 13,571,000 | | | | | | 21.2 % | | | | | | 2,558,000 | | | | | | 4.0 % | | | | | | 3,198,000 | | | | | | 5.0 % | | |
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Capital To Risk Weighted Assets
|
| | | $ | 13,817,000 | | | | | | 33.9 % | | | | | $ | 3,260,000 | | | | | | 8.0 % | | | | | $ | 4,075,000 | | | | | | 10.0 % | | |
Tier 1 Capital to Risk Weighted Assets
|
| | | | 13,452,000 | | | | | | 33.0 % | | | | | | 1,630,000 | | | | | | 4.0 % | | | | | | 2,445,000 | | | | | | 6.0 % | | |
Tier 1 Capital to Average Assets
|
| | | | 13,452,000 | | | | | | 20.8 % | | | | | | 2,591,000 | | | | | | 4.0 % | | | | | | 3,238,000 | | | | | | 5.0 % | | |
| | |
Level 1
|
| |
Level 2
|
| |
Level 3
|
| |
Total
|
| ||||||||||||||||
June 30, 2015 (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Securities Available-for-Sale | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Federal Home Loan Mortgage Corp. Stock
|
| | | $ | 33,000 | | | | | $ | — | | | | | $ | — | | | | | $ | 33,000 | | | ||||
December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Securities Available-for-Sale | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Federal Home Loan Mortgage Corp. Stock
|
| | | $ | 31,000 | | | | | $ | — | | | | | $ | — | | | | | $ | 31,000 | | | ||||
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Securities Available-for-Sale | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Federal Home Loan Mortgage Corp. Stock
|
| | | $ | 44,000 | | | | | $ | — | | | | | $ | — | | | | | $ | 44,000 | | | ||||
|
| | |
Level 1
|
| |
Level 2
|
| |
Level 3
|
| |
Impairment Losses
|
| ||||||||||||
June 30, 2015 (Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans
|
| | | $ | — | | | | | $ | — | | | | | $ | 284,000 | | | | | $ | 15,000 | | |
December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans
|
| | | | — | | | | | | — | | | | | | 265,000 | | | | | | 104,000 | | |
December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | |
Valuation Techniques
|
| |
Unobservable Inputs
|
| |
Range (Average)
|
|
|
Impaired Loans
|
| | Evaluation of Collateral | | | Estimation of Value | | |
NM
*
|
|
| | |
June 30, 2015
|
| |
December 31, 2014
|
| |
December 31, 2013
|
| | | | | | | |||||||||||||||||||||||||||
| | |
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | |
Carrying
Amount |
| |
Fair
Value |
| |
Carrying
Amount |
| |
Fair
Value |
| |
Carrying
Amount |
| |
Fair
Value |
| |
Input
Level |
| |||||||||||||||||||||
Financial Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and Cash Equivalents
|
| | | $ | 8,636,000 | | | | | $ | 8,636,000 | | | | | $ | 7,902,000 | | | | | $ | 7,902,000 | | | | | $ | 7,258,000 | | | | | $ | 7,258,000 | | | | | | 1 | | |
Certificates of
Deposit in Other Financial Institutions |
| | | | 2,480,000 | | | | | | 2,526,000 | | | | | | 2,480,000 | | | | | | 2,519,000 | | | | | | 2,480,000 | | | | | | 2,497,000 | | | | | | 2 | | |
FHLB Stock
|
| | | | 77,000 | | | | | | 77,000 | | | | | | 78,000 | | | | | | 78,000 | | | | | | 78,000 | | | | | | 78,000 | | | | | | 2 | | |
Loans, Net
|
| | | | 49,624,000 | | | | | | 49,257,000 | | | | | | 52,184,000 | | | | | | 52,031,000 | | | | | | 53,559,000 | | | | | | 53,497,000 | | | | | | 3 | | |
Accrued Interest Receivable
|
| | | | 126,000 | | | | | | 126,000 | | | | | | 122,000 | | | | | | 122,000 | | | | | | 140,000 | | | | | | 140,000 | | | | | | 2 | | |
Financial Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits
|
| | | | 48,642,000 | | | | | | 48,895,000 | | | | | | 50,282,000 | | | | | | 50,623,890 | | | | | | 51,175,000 | | | | | | 51,672,000 | | | | | | 3 | | |
Accrued Interest Payable
|
| | | | 6,000 | | | | | | 6,000 | | | | | | 1,000 | | | | | | 1,000 | | | | | | 1,000 | | | | | | 1,000 | | | | | | 2 | | |
Item
|
| |
Amount
|
|
Securities and Exchange Commission registration fee (1) | | |
$2,100
|
|
FINRA filings fees (1) | | |
$3,200
|
|
Blue Sky Fee and Expenses | | |
$20,000
|
|
EDGAR, printing, postage, and mailing | | |
$74,000
|
|
Legal fees and expenses | | |
$400,000
|
|
Accounting fees and expenses | | |
$225,000
|
|
Appraiser’s fees and expenses | | |
$40,000
|
|
Marketing firm expenses (including legal fees) | | |
$355,000
|
|
Conversion agent fees and expenses | | |
$40,000
|
|
Business plan fees and expenses | | |
$33,500
|
|
Transfer agent and registration fees | | |
$10,000
|
|
Miscellaneous | | |
$8,000
|
|
Total
|
| |
$1,210,800
|
|
| | | | Central Federal Bancshares, Inc. | | |||
| | | | By: | | |
/s/ William A. Stoltz
William A. Stoltz President and Chief Executive Officer |
|
|
Signature
|
| |
Title
|
| |
Date
|
|
|
/s/ William A. Stoltz
William A. Stoltz
|
| | President and Chief Executive Officer (principal executive officer, principal financial officer, & principal accounting officer) | | |
September 11, 2015
|
|
|
/s/ Michael E. Estey
Michael E. Estey
|
| | Chairman of the Board of Directors and Director | | |
September 11, 2015
|
|
|
/s/ Stephen L. Bowles
Stephen L. Bowles
|
| | Director | | |
September 11, 2015
|
|
|
/s/ Jeffrey L. McKune
Jeffrey L. McKune
|
| | Director | | |
September 11, 2015
|
|
|
/s/ James R. Sowers
James R. Sowers
|
| | Director | | |
September 11, 2015
|
|
|
/s/ Robert S. Thompson
Robert R. Thompson
|
| | Director | | |
September 11, 2015
|
|
|
/s/ John D. Wiggins
John D. Wiggins
|
| | Director | | |
September 11, 2015
|
|
|
Exhibit
No. |
| |
Description
|
| |
Location
|
|
|
1.1
|
| | Engagement Letters with Keefe, Bruyette & Woods, Inc. as financial advisor and conversion agent | | | Filed herewith | |
|
1.2
|
| | Agency Agreement with Keefe, Bruyette & Woods, Inc. | | |
To be filed by amendment
|
|
|
2.0
|
| | Plan of Conversion | | | Filed herewith | |
|
3.1
|
| | Articles of Incorporation of Central Federal Bancshares, Inc. | | | Filed herewith | |
|
3.2
|
| | Bylaws of Central Federal Bancshares, Inc. | | | Filed herewith | |
|
4.0
|
| | Specimen Common Stock Certificate of Central Federal Bancshares, Inc. | | | Filed herewith | |
|
5.0
|
| | Opinion of Lewis Rice LLC regarding legality of shares | | | Filed herewith | |
|
8.1
|
| | Federal Tax Opinion of Lewis Rice LLC | | | Filed herewith | |
|
8.2
|
| | State Tax Opinion of Lewis Rice LLC | | | Filed herewith | |
|
10.1
|
| | Form of Central Federal Savings and Loan Association of Rolla Employee Stock Ownership Plan and Trust Agreement and Loan Documents | | | Filed herewith | |
|
10.2
|
| | Form of Central Federal Savings and Loan Association of Rolla and Central Federal Bancshares, Inc. Employment Agreement | | | Filed herewith | |
|
10.3
|
| | Form of Central Federal Savings and Loan Association of Rolla Change in Control Agreement | | | Filed herewith | |
|
23.1
|
| | Consent of Lewis Rice LLC | | |
See Exhibits 5.0, 8.1, & 8.2
|
|
|
23.2
|
| | Consent of Lewis Rice LLC | | |
See Exhibits 5.0, 8.1, & 8.2
|
|
|
23.3
|
| | Consent of Feldman Financial Advisors, Inc. | | | Filed herewith | |
|
23.4
|
| | Consent of Michael Trokey & Company, P.C. | | | Filed herewith | |
|
24.1
|
| | Power of Attorney (included on signature pages) | | | Filed herewith | |
|
99.1
|
| | Appraisal Report | | | Filed herewith | |
|
99.2
|
| | Letter of Agreement with RP Financial, LC. regarding business plan | | | Filed herewith | |
|
99.3
|
| | Letter of Agreement with Feldman Financial Advisors, Inc. regarding independent appraisal | | | Filed herewith | |
Exhibit 1.1
April 30, 2015
Central Federal Savings and Loan Association of Rolla
210 West 10 th Street
Rolla, MO 65401
Attention: | Mr. William A. Stoltz |
President & CEO
Gentlemen:
This letter confirms the engagement of Keefe, Bruyette & Woods, Inc. (“KBW”) to act as the exclusive financial advisor to Central Federal Savings and Loan Association of Rolla Bank’s proposed conversion from the mutual to stock form of organization pursuant to the Bank’s Plan of Conversion (the “Conversion”), including the offer and sale of certain shares of the common stock (the “Common Stock”) of a holding company (the “Holding Company”) to be formed by the Bank 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 in connection with the Offerings pursuant to the terms of a separate agreement between the Bank and KBW. The Bank and the 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 Company's exclusive financial advisor , KBW will provide financial and logistical advice to the Company and will assist the Company’s management, legal counsel, accountants and other advisors in connection with the Reorganization 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 Reorganization 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; |
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); |
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 2 of 9
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 Reorganization and the Offerings as may be agreed upon by KBW and the Company. |
2. Due Diligence Review
The Company acknowledges and agrees that KBW’s 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 my 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 Company’s 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.
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 Reorganization 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 Company’s counsel shall serve as counsel with respect to blue sky
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 3 of 9
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 KBW’s 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 $35,000 (the “Management Fee”) shall be payable by the Company to KBW, as follows: (i) $17,500 shall be paid immediately upon the execution of this Agreement and (ii) the remaining $17,500 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 shall be paid based on 1.0% of the aggregate purchase price of Common Stock sold in the Subscription Offering and 2.0% of the aggregate purchase price of Common Stock sold in the Community Offering, excluding shares purchased by the Company’s officers, directors, or employees (or members of their immediate family), including any IRAs for the benefit of such persons, any ESOP, tax-qualified or stock based compensation plans or similar plan created by the Company for some or all of its directors or employees, or any charitable foundation established by the Company (or any shares contributed to such a foundation), subject to the payment of a minimum success fee of $225,000. 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 to assist in a Syndicated Community Offering, 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 Reorganization. In the event of a Syndicated Community Offering, KBW will be paid, in addition to (and not in lieu of) the Success Fee, 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. From this fee, KBW will pass onto selected broker-dealers (if any), who |
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 4 of 9
assist in the Syndicated Community Offering, an 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 FINRA’s 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 Company's 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 $30,000 (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 $100,000 (subject to the
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 5 of 9
provisions of this paragraph). These expense caps assume no unusual circumstances or delays, and no re-solicitation 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 $25,000 in the case of additional fees and expenses of KBW’s legal counsel. In no event shall out-of-pocket expenses, including fees and expenses of counsel, exceed $165,000. 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 KBW’s 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 Reorganization 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 Company’s 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 KBW’s 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 Company's debt or equity securities, or the debt or equity securities of the Company's affiliates
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 6 of 9
or other entities that may be involved in the transactions contemplated by this Agreement. In 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 KBW’s role as financial advisor and sole book-running 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
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 7 of 9
11. Indemnification
As KBW will be acting on behalf of the Company in connection with the Reorganization 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 Reorganization 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 KBW’s 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 KBW's 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 Reorganization 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,
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 8 of 9
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 KBW’s 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 KBW's 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 KBW’s provision of services in connection with the Reorganization 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 KBW’s 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
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 9 of 9
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.
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: | /s/ Patricia A. McJoynt | Date: | 4-30-15 | |
Patricia A. McJoynt | ||||
Managing Director |
Central Federal Savings and Loan Association of Rolla
By: | /s/ William A. Stoltz | Date: | 5/13/15 | |
William A. Stoltz | ||||
President & CEO |
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
April 30, 2015
Central Federal Savings and Loan Association of Rolla
210 West 10 th Street
Rolla, MO 65401
Attention: | Mr. William A. Stoltz |
President & CEO
Re: Services of Conversion Agent and Data Processing Records Management Agent
Dear Mr. Stoltz:
This letter agreement (this “Agreement”) confirms the engagement of Keefe, Bruyette & Woods, Inc. (“KBW”) by Central Federal Savings and Loan Association of Rolla, 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 Bank’s proposed reorganization from a mutual bank to the full stock form of organization , including the offer and sale of the common stock (the “Conversion”) pursuant to the Company’s Plan of Conversion (the “Plan of Conversion”). The sale will be 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”).
This Agreement sets forth the terms and conditions of KBW’s engagement solely in its capacity as Agent. It is acknowledged that the terms of KBW’s engagement by the Company as exclusive financial advisor in the Conversion and as sole book running 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”).
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 2 of 12
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 |
· | Provide software for the operation of the Company’s 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 Company’s financial printer with labeling of proxy materials for voting and subscribing for shares of Common Stock; |
· | Provide support for any follow-up mailings to members, as needed, including proxy grams and additional solicitation materials; |
· | Proxy and ballot tabulation; and |
· | Act as Inspector of Election for the Company’s special meeting of members, if requested, 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; |
· | Advise on the physical location of the Stock Information Center including logistical and materials requirements; |
· | Assist in educating Company personnel; |
· | Establish recordkeeping and reporting procedures; |
· | Supervise the Stock Information Center during the Offerings; |
· | Assist the Company’s 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 Company’s legal counsel for “blue sky” research and applicable registration; |
· | Assist the Company’s transfer agent with the generation and mailing of stock certificates; |
· | Perform interest and refund calculations and provide a file to enable the Company or its transfer agent to generate interest and refund checks; and |
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 3 of 12
· | Create 1099-INT forms for interest reporting, as well as magnetic media reporting to the IRS, for subscribers paid $10 or more in interest for subscriptions paid by check, if this service is not provided by the Company’s transfer agent. |
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). |
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 KBW’s 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 KBW’s 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.”
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 4 of 12
Fees Payable to KBW.
For the Services described above, the Company agrees to pay KBW a non-refundable cash fee of $40,000 (the “Services Fee”) . Such fee is based upon the requirements of current banking regulations, the Company’s 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 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 payable to KBW. The Services Fee shall be payable as follows: (i) $5,000 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.
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 Company’s 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.
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 Company’s 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
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 5 of 12
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 KBW’s 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 KBW’s obligations or performance under this Agreement.
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.
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 6 of 12
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 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 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.
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 7 of 12
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 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 KBW’s 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 KBW's 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 KBW’s 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
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 8 of 12
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.
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 KBW’s 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 KBW’s engagement or this Agreement.
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
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 9 of 12
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.
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.
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
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 10 of 12
competent jurisdiction all property in KBW’s 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 employee’s hourly rate determined by his annual salary) and reasonable attorneys’ fees and expenses in connection with any such action.
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 Company’s 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.
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 11 of 12
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.
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.
Keefe, Bruyette & Woods • 70 West Madison, Suite 2401 • Chicago, IL 60602
312.423.8200 • 800.929.6113 • Fax 312.423. 8232 • www.kbw.com
Central Federal Savings and Loan Association of Rolla
April 30, 2015
Page 12 of 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: Patricia A. McJoynt
Telephone: (312) 423-8272
Fax: (312) 423-8232
If to the Company:
Central Federal Savings and Loan Association of Rolla
210 West 10 th Street
Rolla, MO 65401
Attn: William A. Stoltz
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.
Very truly yours,
KEEFE, BRUYETTE & WOODS, INC. | |||||
By: | /s/ Patricia A. McJoynt | Date: | 4-30-15 | ||
Patricia A. McJoynt | |||||
Managing Director | |||||
Central Federal Savings and Loan Association of Rolla | |||||
By: | /s/ William A. Stoltz | Date: | 5-1-15 | ||
William A. Stoltz | |||||
President & CEO |
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 2.0
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA
PLAN OF CONVERSION
ADOPTED ON AUGUST 4, 2015
(as amended on September 8, 2015)
TABLE OF CONTENTS
PAGE | ||||
1. | Introduction | 1 | ||
2. | Definitions | 1 | ||
3. | General Procedure for the Conversion | 5 | ||
4. | Total Number of Shares and Purchase Price of Common Stock | 6 | ||
5. | Subscription Rights of Eligible Account Holders (First Priority) | 7 | ||
6. | Subscription Rights of Tax-Qualified Employee Stock Benefit Plans (Second Priority) | 8 | ||
7. | Subscription Rights of Supplemental Eligible Account Holders (Third Priority) | 8 | ||
8. | Subscription Rights of Other Members (Fourth Priority) | 9 | ||
9. | Community Offering, Syndicated Community Offering, Public Offering and Other Offerings | 9 | ||
10. | Limitations on Subscriptions and Purchases of Common Stock | 11 | ||
11. | Timing of Subscription Offering; Manner of Exercising Subscription Rights and Order Forms | 12 | ||
12. | Payment for Common Stock | 13 | ||
13. | Account Holders in Nonqualified States or Foreign Countries | 14 | ||
14. | Requirements Following the Conversion for Registration, Market Making and Stock Exchange Listing | 15 | ||
15. | Liquidation Account | 15 | ||
16. | Establishment and Funding of Charitable Foundation. | 16 | ||
17. | Completion of the Conversion | 17 | ||
18. | Requirements for Stock Purchases by Directors and Officers Following the Conversion | 17 | ||
19. | Restrictions on Transfer of Stock | 17 | ||
20. | Stock Compensation Plans | 18 | ||
21. | Dividend and Repurchase Restrictions on Stock | 18 | ||
22. | Amendment or Termination of the Plan | 18 | ||
23. | Interpretation of the Plan | 18 |
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1. Introduction.
For purposes of this section, all capitalized terms have the meanings ascribed to them in Section 2.
This Plan of Conversion provides for the conversion of Central Federal Savings Association of Rolla (the “Association”) from a federally chartered mutual savings association into a federally chartered stock savings association. The Plan provides that the Association will operate as a wholly owned subsidiary of a savings and loan holding company (the “Holding Company”).
The Board of Directors of the Association has considered the alternatives available to the Association with respect to its corporate structure, and has determined that a mutual to stock conversion, as described in this Plan, will be in the best interests of the Association and its customers. The Conversion will raise capital which will enable the Association to: (a) support future lending and operational growth, including branching activities and acquisitions of other financial institutions or financial services companies; (b) increase its ability to render services to the communities it serves; (c) compete more effectively with commercial banks and other financial institutions for new business opportunities; and (d) increase its equity capital base and access the capital markets when needed. The Conversion will also enable the Holding Company and the Association to adopt stock benefit plans that will make the Association more competitive in providing incentive compensation to management and employees.
The Plan provides that non-transferable subscription rights to purchase the Common Stock of the Holding Company shall be granted to certain Members of the Association pursuant to the Plan and in accordance with the rules and regulations of the Office of the Comptroller of the Currency. The price of the Common Stock to be sold in the Conversion will be based upon an independent appraisal of the Association and will reflect its estimated pro forma market value, as converted. No change will be made in the Board of Directors or management of the Association as a result of the Conversion.
The Plan was adopted by the Association’s Board of Directors on August 4, 2015 and amended on September 8, 2015. The Plan is subject to the approval of the OCC 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 at the Special Meeting.
After the Conversion, the Association will continue to be regulated by the OCC, as its chartering authority, and by the FDIC, which insures the Association’s deposits. In addition, the Association will continue to be a member of the Federal Home Loan Bank System and all insured savings deposits will continue to be insured by the FDIC up to the maximum limit provided by law.
2. Definitions.
As used in this Plan, the terms set forth below have the following meaning:
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 Stock Benefit Plan will not be deemed to be acting in concert with its trustee or a person who serves in a similar fiduciary capacity solely for the purpose of determining whether stock held by the trustee and stock held by the plan will be aggregated and participants or beneficiaries of any such Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in concert solely as a result of their common interests as participants or beneficiaries.
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When Persons act together for such purpose, their group is deemed to have acquired their stock. The determination of whether a group is Acting in Concert shall be made solely by the Boards of Directors of the Holding Company and the Association or Officers delegated by such Boards and may be based on any evidence upon which the Board or such delegatee chooses to rely, including, without limitation, joint account relationships or the fact that such Persons share a common address (whether or not related by blood or marriage) or have filed joint Schedules 13D or Schedules 13G with the SEC with respect to other companies. Directors of the Holding Company and the Association shall not be deemed to be Acting in Concert solely as a result of their membership on such board or boards.
Actual Purchase Price means the price per share at which the Common Stock is ultimately sold by the Holding Company in the Offerings in accordance with the terms hereof.
Affiliate means a Person who, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with the Person specified.
Associate of a Person means (i) a corporation or organization (other than the Holding Company, the Association or a majority-owned subsidiary of the Holding Company or the Association), if the 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) a 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, provided, however, that such term shall not include any Tax-Qualified Employee Stock Benefit Plan of the Holding Company or the Association in which such Person has a substantial beneficial interest or serves as a trustee or in a similar fiduciary capacity, and (iii) any person who is related by blood or marriage to such Person and who lives in the same home as the Person or who is a director or senior officer of the Holding Company or the Association or any of their subsidiaries.
Association means Central Federal Savings and Loan Association of Rolla.
Association Benefit Plan includes, but is not limited to, Tax-Qualified Employee Stock Benefit Plans and Non-Tax Qualified Employee Stock Benefit Plans.
Code means the Internal Revenue Code of 1986, as amended.
Common Stock means the shares of common stock to be issued and sold by the Holding Company in the Offerings, all pursuant to the Plan. The Common Stock will not be insured by the Federal Deposit Insurance Corporation.
Community Offering means the offering for sale by the Holding Company of any shares of Common Stock not subscribed for in the Subscription Offering to such Persons as may be selected by the Holding Company and the Association in their sole discretion and to whom a copy of the Prospectus is delivered by or on behalf of the Holding Company.
Control (including the terms “controlling,” “controlled by,” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
Conversion means the conversion of the Association to stock form pursuant to this Plan, and all steps incident thereto.
Deposit Account means any withdrawable account as defined in Section 161.42 of the Rules and Regulations of the OCC, including a demand account as defined in Section 161.16 of the Rules and Regulations of the OCC.
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Eligible Account Holder means any Person holding a Qualifying Deposit on the Eligibility Record Date for purposes of determining Subscription Rights.
Eligibility Record Date means the date for determining Qualifying Deposits of Eligible Account Holders and is the close of business on June 30, 2014.
ESOP means a Tax-Qualified Employee Stock Benefit Plan adopted by the Holding Company or the Association in connection with the Conversion, the purpose of which shall be to acquire shares of Common Stock.
Estimated Price Range means the range of the estimated aggregate pro forma market value of the total number of shares of Common Stock to be issued in the Offerings, as determined by the Independent Appraiser in accordance with Section 4 hereof.
FDIC means the Federal Deposit Insurance Corporation, or any successor thereto.
Foundation means any new and/or existing charitable foundation intended to qualify as an exempt organization under Section 501(c)(3) of the Code that will receive Holding Company Common Stock and/or cash in connection with the Offerings.
FRB means the Board of Governors of the Federal Reserve System or any successor thereto.
Holding Company means the stock corporation that will hold all of the outstanding capital stock of the Association upon completion of the Conversion.
Independent Appraiser means the independent financial consulting firm retained by the Holding Company and the Association to prepare an appraisal of the estimated pro forma market value of the Common Stock.
Initial Purchase Price means the price per share to be paid initially by Participants for shares of Common Stock subscribed for in the Subscription Offering and by Persons for shares of Common Stock ordered in the Community Offering and/or Syndicated Community Offering.
Local Community means Phelps County, Missouri.
Management Person means any Officer or director of the Association or the Holding Company or any Affiliate of the Association or the Holding Company and any person Acting in Concert with such Officer or director.
Member means any Person qualifying as a member of the Association in accordance with its mutual charter and bylaws and the laws of the United States.
OCC means the Office of the Comptroller of the Currency, or any successor thereto.
Offerings mean the offering of Common Stock in the Subscription Offering, the Community Offering, the Syndicated Community Offering or the Public Offering.
Officer means the chairman of the board, president, chief executive officer, vice-president, secretary, treasurer or principal financial officer, comptroller or principal accounting officer and any other person performing similar functions with respect to any organization whether incorporated or unincorporated.
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Order Form means the form or forms to be provided by the Holding Company, containing all such terms and provisions as set forth in Section 11 hereof, to a Participant or other Person by which Common Stock may be ordered in the Offerings.
Other Member means a Voting Member who is not an Eligible Account Holder or a Supplemental Eligible Account Holder.
Participant means any Eligible Account Holder, Tax-Qualified Employee Stock Benefit Plan, Supplemental Eligible Account Holder or Other Member.
Person means an individual, a corporation, a partnership, an association, a joint-stock company, a limited liability company, a trust, an unincorporated organization or a government or any political subdivision of a government.
Plan of Conversion means this Plan of Conversion as adopted by the Board of Directors of the Association and any amendment hereto approved as provided herein.
Preferred Subscribers means natural persons and trusts of natural persons residing in the Local Community.
Prospectus means the one or more documents to be used in offering the Common Stock in the Offerings.
Public Offering means an underwritten firm commitment offering to the public through one or more underwriters.
Qualifying Deposit means the aggregate balance of all Deposit Accounts in the Association of (i) an Eligible Account Holder at the close of business on the Eligibility Record Date, provided such aggregate balance is not less than $50.00, and (ii) a Supplemental Eligible Account Holder at the close of business on the Supplemental Eligibility Record Date, provided such aggregate balance is not less than $50.00.
SEC means the Securities and Exchange Commission, or any successor thereto.
Special Meeting means the special meeting of members of the Association called for the purpose of submitting this Plan to the Members for their approval, including any adjournments or postponements of such meeting.
Subscription Offering means the offering of the Common Stock to Participants.
Subscription Rights mean nontransferable rights to subscribe for Common Stock granted to Participants pursuant to the terms of this Plan.
Supplemental Eligible Account Holder means any Person, except directors and Officers of the Association or the Holding Company and their Associates (unless the OCC grants a waiver to permit a director or Officer or Associate to be included), holding a Qualifying Deposit at the close of business on the Supplemental Eligibility Record Date.
Supplemental Eligibility Record Date , if applicable, means the date for determining Supplemental Eligible Account Holders and shall be required if the Eligibility Record Date is more than 15 months before the date of the approval of the Conversion by the OCC. If applicable, the Supplemental Eligibility Record Date shall be the last day of the calendar quarter preceding OCC approval of the Conversion.
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Syndicated Community Offering means the offering for sale by a syndicate of broker-dealers to the general public of shares of Common Stock not purchased in the Subscription Offering and the Community Offering.
Tax - Qualified Employee Stock Benefit Plan means any defined benefit plan or defined contribution plan, such as an employee stock ownership plan, stock bonus plan, profit-sharing plan or other plan, which is established for the benefit of the employees of the Holding Company and/or the Association and any Affiliate thereof and which, with its related trust, meets the requirements to be “qualified” under Section 401 of the Code as from time to time in effect. A “Non-Tax-Qualified Employee Stock Benefit Plan” is any defined benefit plan or defined contribution stock benefit plan that is not so qualified.
Voting Member means a Person who, at the close of business on the Voting Record Date, is entitled to vote as a Member of the Association in accordance with its mutual charter and bylaws.
Voting Record Date means the date or dates for determining the eligibility of Members to vote at the Special Meeting.
3. General Procedure for the Conversion.
(a) Organization of the Holding Company and the Association. The Association will apply to the OCC to have the Holding Company retain up to 50% of the net proceeds of the Offerings, or such other amount as may be determined by the Board of Directors. The Association may distribute additional capital to the Holding Company following the Conversion, subject to the FRB regulations governing capital distributions.
(b) Effect on Deposit Accounts and Borrowings. Each deposit account in the Association on the effective date of the Conversion, will remain a deposit account in the Association after the Conversion 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 each deposit account existed in the Association immediately before the Conversion. Holders of deposit accounts in the Association shall not, as such holders, have any voting rights. Upon consummation of the Conversion, all loans and other borrowings from the Association shall retain the same status with the Association after the Conversion, as they had with the Association immediately before the Conversion.
(c) The Association. Upon completion of the Conversion, the Association 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 banks under federal law. The Conversion will not result in any reduction of the amount of retained earnings and general loss reserves will be accounted for by the Holding Company and the Association on a consolidated basis in accordance with generally accepted accounting principles. Copies of the proposed federal stock charter and bylaws of the Association are attached hereto and made a part of this Plan. By their approval of this Plan, the Voting Members shall have approved and adopted the federal stock charter and bylaws of the Association.
The initial members of the Board of Directors of the Association upon the completion of the Conversion will be the members of the Board of Directors of the Association at the time of the adoption of the Plan of Conversion who continue to be directors of the Association at the time of the closing of the Conversion. Following the Conversion, the Association will be wholly owned by the Holding Company. The Holding Company will be wholly owned by its stockholders who will initially consist of the persons who purchase Common Stock in the Offerings.
(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
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companies under federal law and regulations. The initial members of the Board of Directors of the Holding Company will be appointed by the Association. Thereafter, the voting stockholders of the Holding Company will elect approximately one-third of the Holding Company’s directors annually. The total shares of Common Stock authorized under the Holding Company articles of incorporation will exceed the shares of Common Stock to be issued in the Conversion.
(e) Applications and Regulatory and Member Approval. The Association will take the necessary steps to prepare and file an Application for Conversion, including the Plan, together with all requisite material, with the OCC for approval. The Association also will cause notice of the adoption of the Plan by the Board of Directors of the Association to be given by publication in a newspaper having general circulation in each community in which an office of the Association is located, and will cause copies of the Plan to be made available at each office of the Association for inspection by Members. The Association will post the notice of the adoption of the Plan in each of its offices. Once the Application for Conversion is filed, the Association will again cause to be published, in accordance with the requirements of applicable regulations of the OCC, notice of the filing of the Application for Conversion with the OCC, and will post notice of the filing of the Application for Conversion in each office of the Association.
As soon as practicable after the adoption of the Plan by the Board of Directors of the Association, the proposed Board of Directors of the Holding Company shall adopt the Plan by at least a two-thirds vote. The proposed Board of Directors of the Holding Company shall cause to be filed with the FRB such applications as may be required for approval of the Holding Company’s acquisition of the Association and filed with the SEC a Registration Statement to register the Common Stock under the Securities Act of 1933, as amended. The proposed Board of Directors of the Holding Company shall also register or qualify the Common Stock under any applicable state securities laws, subject to Section 13 hereof.
Promptly following receipt of requisite approval of the OCC, the Plan will be submitted to the Voting Members for their consideration and approval at the Special Meeting. The Association may, at its option, mail to all Voting Members, at their last known address appearing on the records of the Association, a proxy statement in either long form, or to the extent permitted by applicable laws and regulations, summary form, describing the Plan, which will be submitted to a vote of the Voting Members at the Special Meeting. If the Plan is approved by the affirmative vote of a majority of the total number of votes eligible to be cast by Voting Members at the Special Meeting, the Association shall take all other necessary organizational steps pursuant to applicable laws and regulations to amend its charter and bylaws to authorize the issuance of its capital stock to the Holding Company at the time the Conversion is consummated.
(f) Expenses. The Holding Company and the Association may retain and pay for the services of financial and other advisors and investment bankers to assist in connection with any or all aspects of the Conversion, including in connection with the Offerings, the payment of fees to brokers for assisting Persons in completing and/or submitting Order Forms. The Association shall use its best efforts to ensure that all fees, expenses, retainers and similar items shall be reasonable.
4. Total Number of Shares and Purchase Price of Common Stock.
(a) The aggregate price at which shares of Common Stock shall be sold in the Offerings shall be based on a pro forma valuation of the aggregate market value of the Common Stock prepared by the Independent Appraiser. The valuation shall be based on financial information relating to the Holding Company and the Association, market, financial and economic conditions, a comparison of the Holding Company and the Association with selected publicly held financial institutions and holding companies and with comparable financial institutions and holding companies and such other factors as the Independent Appraiser may deem to be important, including, but not limited to, the projected operating results and financial condition of the Holding Company and Association. The valuation shall be stated in
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terms of an Estimated Price Range, the maximum of which shall be no more than 15% above the average of the minimum and maximum of such price range and the minimum of which shall be no more than 15% below such average. The valuation shall be updated during the Conversion as market and financial conditions warrant and as may be required by the OCC.
(b) Based upon the independent valuation, the Boards of Directors of the Holding Company and the Association shall fix the Initial Purchase Price and the number of shares of Common Stock to be offered in the Offerings. The purchase price per share for the Common Stock shall be a uniform price determined in accordance with applicable OCC rules and regulations. The Actual Purchase Price and the total number of shares of Common Stock to be issued in the Offerings shall be determined by the Boards of Directors of the Holding Company and the Association upon conclusion of the Offerings in consultation with the Independent Appraiser and any financial advisor or investment banker retained by the Holding Company in connection with such offering.
(c) Subject to the approval of the OCC, the Estimated Price Range may be increased or decreased to reflect market, financial and economic conditions before completion of the Conversion or to fill the Order of the Tax-Qualified Employee Stock Benefit Plans, and under such circumstances the Holding Company and the Association may increase or decrease the total number of shares of Common Stock to be issued in the Conversion to reflect any such change. Notwithstanding anything to the contrary contained in this Plan, no resolicitation of subscribers shall be required and subscribers shall not be permitted to modify or cancel their subscriptions unless the gross proceeds from the sale of the Common Stock in the Offerings are less than the minimum or more than 15% above the maximum of the Estimated Price Range set forth in the Prospectus. In the event of an increase in the total number of shares offered in the Offerings due to an increase in the Estimated Price Range, the priority of share allocation shall be as set forth in this Plan.
5. Subscription Rights of Eligible Account Holders (First Priority).
(a) Each Eligible Account Holder shall receive, as first priority and without payment, Subscription Rights to purchase up to the greater of (i) $300,000 of Common Stock (or such maximum purchase limitation as may be established for the Community Offering and/or Syndicated Community Offering), (ii) one-tenth of 1% of the total offering of shares in the Subscription Offering, or (iii) 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of Common Stock offered in the Subscription Offering by a fraction, of which the numerator is the amount of the Qualifying Deposits of the Eligible Account Holder and the denominator is the total amount of all Qualifying Deposits of all Eligible Account Holders, in each case subject to Sections 10 and 13 hereof.
(b) In the event of an oversubscription for shares of Common Stock pursuant to Section 5(a), available shares shall be allocated among subscribing Eligible Account Holders so as to permit each such Eligible Account Holder, to the extent possible, to purchase a number of shares which will make his or her total allocation equal to the lesser of the number of shares subscribed for or 100 shares. Any available shares remaining after each subscribing Eligible Account Holder has been allocated the lesser of the number of shares subscribed for or 100 shares shall be allocated among the subscribing Eligible Account Holders whose subscriptions remain unsatisfied in the proportion that the Qualifying Deposit of each such subscribing Eligible Account Holder bears to the total Qualifying Deposits of all such subscribing Eligible Account Holders whose orders are unfilled, provided that no fractional shares shall be issued.
Subscription Rights of Eligible Account Holders who are also directors or Officers of the Holding Company or the Association and their Associates shall be subordinated to those of other Eligible Account Holders to the extent that they are attributable to increased deposits during the one-year period preceding the Eligibility Record Date.
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6. Subscription Rights of Tax-Qualified Employee Stock Benefit Plans (Second Priority).
Tax-Qualified Employee Stock Benefit Plans shall receive, without payment, Subscription Rights to purchase in the aggregate up to 10% of the Common Stock sold in the Offerings, including any shares of Common Stock to be issued as a result of an increase in the Estimated Price Range after commencement of the Subscription Offering and before completion of the Offerings and including any shares issued to the Foundation. The subscription rights granted to Tax-Qualified Employee Stock Benefit Plans shall be subject to the availability of shares of Common Stock after taking into account the shares of Common Stock purchased by Eligible Account Holders; provided, however, that if the total number of shares of Common Stock is increased to any amount greater than the number of shares representing the maximum of the Estimated Price Range as set forth in the Prospectus (“Maximum Shares”), the ESOP shall have a priority right to purchase any such shares exceeding the Maximum Shares up to an aggregate of 10% of Common Stock sold in the Offerings. Shares of Common Stock purchased by any individual participant (“Plan Participant”) in a Tax-Qualified Employee Stock Benefit Plan using funds therein pursuant to the exercise of subscription rights granted to such Participant in his individual capacity as an Eligible Account Holder and/or Supplemental Eligible Account Holder and/or purchases by such Plan Participant in the Community Offering shall not be deemed to be purchases by a Tax-Qualified Employee Stock Benefit Plan for purposes of calculating the maximum amount of Common Stock that Tax-Qualified Employee Stock Benefit Plans may purchase pursuant to the first sentence of this Section 6 if the individual Plan Participant controls or directs the investment authority with respect to such account or subaccount. Consistent with applicable laws and regulations and policies and practices of the OCC, the Tax-Qualified Employee Stock Benefit Plans may use funds contributed by the Holding Company or the Association and/or borrowed from the Holding Company or an independent financial institution to exercise such Subscription Rights, and the Holding Company and the Association may make scheduled discretionary contributions thereto, provided that such contributions do not cause the Association to fail to meet any applicable regulatory capital requirement. The Tax-Qualified Employee Stock Benefit Plans may fill their orders to purchase Common Stock, in whole or in part, through open market purchases after the closing of the Offerings, subject to approval of the OCC.
The Tax-Qualified Employee Stock Benefit Plans shall not be deemed to be an Associate or Affiliate of or Person Acting in Concert with any Management Person.
7. Subscription Rights of Supplemental Eligible Account Holders (Third Priority).
(a) In the event that the Eligibility Record Date is more than 15 months before the date of OCC approval of the Plan, then, and only in that event, a Supplemental Eligibility Record Date shall be set and each Supplemental Eligible Account Holder shall receive, without payment, Subscription Rights to purchase up to the greater of (i) $300,000 of Common Stock (or such maximum purchase limitation as may be established for the Community Offering and/or Syndicated Community Offering), (ii) one-tenth of 1% of the total offering of shares in the Subscription Offering or (iii) 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of Common Stock offered in the Subscription Offering by a fraction, of which the numerator is the amount of the Qualifying Deposits of the Supplemental Eligible Account Holder and the denominator is the total amount of all Qualifying Deposits of all Supplemental Eligible Account Holders, in each case subject to Sections 10 and 13 hereof and the availability of shares of Common Stock for purchase after taking into account the shares of Common Stock purchased by Eligible Account Holders and Tax-Qualified Employee Stock Benefit Plans through the exercise of Subscription Rights under Sections 5 and 6 hereof.
(b) In the event of an oversubscription for shares of Common Stock pursuant to Section 7(a), available shares shall be allocated among subscribing Supplemental Eligible Account Holders so as to permit each such Supplemental Eligible Account Holder, to the extent possible, to purchase a number of shares sufficient to make his or her total allocation (including the number of shares, if any, allocated in
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accordance with Section 5(a)) equal to the lesser of the number of shares subscribed for or 100 shares. Any remaining available shares shall be allocated among subscribing Supplemental Eligible Account Holders whose subscriptions remain unsatisfied in the proportion that the amount of their respective Qualifying Deposits bears to the total amount of the Qualifying Deposits of all such subscribing Supplemental Eligible Account Holders whose orders are unfilled, provided that no fractional shares shall be issued.
8. Subscription Rights of Other Members (Fourth Priority).
(a) Each Other Member shall receive, without payment, Subscription Rights to purchase up to the greater of (i) $300,000 of Common Stock (or such maximum purchase limitation as may be established for the Community Offering and/or Syndicated Community Offering) and (ii) one-tenth of 1% of the total offering of shares in the Subscription Offering, subject to Sections 10 and 13 hereof and the availability of shares of Common Stock for purchase after taking into account the shares of Common Stock purchased by Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans and Supplemental Eligible Account Holders, if any, through the exercise of Subscription Rights under Sections 5, 6 and 7 hereof.
(b) If, pursuant to this Section 8, Other Members subscribe for a number of shares of Common Stock in excess of the total number of shares of Common Stock remaining, available shares shall be allocated among subscribing Other Members so as to permit each such Other Member, to the extent possible, to purchase a number of shares which will make his or her total allocation equal to the lesser of the number of shares subscribed for or 100 shares. Any remaining available shares shall be allocated among subscribing Other Members whose subscriptions remain unsatisfied on a pro rata basis in the same proportion as each such Other Member’s subscription bears to the total subscriptions of all such subscribing Other Members, provided that no fractional shares shall be issued.
9. Community Offering, Syndicated Community Offering, Public Offering and Other Offerings.
(a) If less than the total number of shares of Common Stock offered by the Holding Company is sold in the Subscription Offering, it is anticipated that all remaining shares of Common Stock shall, if practicable, be sold in a Community Offering. Subject to the requirements set forth herein, the manner in which the Common Stock is sold in the Community Offering shall have as the objective the achievement of the widest possible distribution of such stock.
(b) In the event of a Community Offering, all shares of Common Stock that are not subscribed for in the Subscription Offering shall be offered for sale by means of a direct community marketing program, which may provide for the use of brokers, dealers or investment banking firms experienced in the sale of financial institution securities. Any available shares in excess of those not subscribed for in the Subscription Offering will be available for purchase by members of the general public to whom a Prospectus is delivered by the Holding Company or on its behalf, with preference given first to Preferred Subscribers.
(c) A Prospectus and Order Form shall be furnished to such Persons as the Holding Company and the Association may select in connection with the Community Offering, and each order for Common Stock in the Community Offering shall be subject to the absolute right of the Holding Company and the Association to accept or reject any such order in whole or in part either at the time of receipt of an order or as soon as practicable following completion of the Community Offering. Available shares will be allocated first to each Preferred Subscriber whose order is accepted in an amount equal to the lesser of 100 shares or the number of shares subscribed for by each such Preferred Subscriber, if possible. Thereafter, unallocated shares shall be allocated among the Preferred Subscribers whose accepted orders remain unsatisfied in the same proportion that the unfilled order bears to the total unfilled orders of all
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Preferred Subscribers whose accepted orders remain unsatisfied, provided that no fractional shares shall be issued. If there are any shares remaining after all accepted orders by Preferred Subscribers have been satisfied, such remaining shares shall be allocated to other members of the general public who purchase in the Community Offering, applying the same allocation described above for Preferred Subscribers.
(d) The amount of Common Stock that any Person may purchase in the Community Offering shall not exceed $300,000 of Common Stock, provided, however, that this amount may be increased to up to 5% of the total offering of shares of Common Stock or decreased to less than $300,000 subject to any required regulatory approval but without the further approval of the Members or the resolicitation of subscribers; and provided further that to the extent applicable, and subject to the preferences set forth in Section 9(b) and (c) of this Plan and the limitations on purchases of Common Stock set forth in this Section 9(d) and Section 10 of this Plan, orders for Common Stock in the Community Offering shall first be filled to a maximum of 2% of the total number of shares of Common Stock sold in the Offerings and thereafter any remaining shares shall be allocated on an equal number of shares basis per order until all orders have been filled, provided no fractional shares shall be issued. The Holding Company and the Association may commence the Community Offering concurrently with, at any time during, or as soon as practicable after the end of, the Subscription Offering, and the Community Offering must be completed within 45 days after the completion of the Subscription Offering, unless extended by the Holding Company and the Association with any required regulatory approval.
(e) Subject to such terms, conditions and procedures as may be determined by the Holding Company and the Association, all shares of Common Stock not subscribed for in the Subscription Offering or ordered in the Community Offering may be sold by a syndicate of broker-dealers to the general public in a Syndicated Community Offering. Each order for Common Stock in the Syndicated Community Offering shall be subject to the absolute right of the Holding Company and the Association to accept or reject any such order in whole or in part either at the time of receipt of an order or as soon as practicable after completion of the Syndicated Community Offering. The amount of Common Stock that any Person may purchase in the Syndicated Community Offering shall not exceed $300,000 of Common Stock, provided, however, that this amount may be increased to up to 5% of the total offering of shares of Common Stock or decreased to less than $300,000, subject to any required regulatory approval but without the further approval of the Members or the resolicitation of subscribers; and provided further that, to the extent applicable, and subject to the limitations on purchases of Common Stock set forth in this Section 9(e) and Section 10 of this Plan, orders for Common Stock in the Syndicated Community Offering shall first be filled to a maximum of 2% of the total number of shares of Common Stock sold in the Offerings and thereafter any remaining shares shall be allocated on an equal number of shares basis per order until all orders have been filled, provided no fractional shares shall be issued. The Holding Company and the Association may commence the Syndicated Community Offering concurrently with, at any time during, or as soon as practicable after the end of, the Subscription Offering and/or Community Offering, and the Syndicated Community Offering must be completed within 45 days after the completion of the Subscription Offering, unless extended by the Holding Company and the Association with any required regulatory approval.
(f) The Holding Company and the Association may sell any shares of Common Stock remaining following the Subscription Offering, Community Offering and/or the Syndicated Community Offering in a Public Offering. The provisions of Section 10 hereof shall not be applicable to the sales to underwriters for purposes of the Public Offering but shall be applicable to sales by the underwriters to the public. The price to be paid by the underwriters in such an offering shall be equal to the Actual Purchase Price less an underwriting discount to be negotiated among such underwriters and the Holding Company and the Association, subject to any required regulatory approval or consent.
(g) If for any reason a Syndicated Community Offering or Public Offering of shares of Common Stock not sold in the Subscription Offering and the Community Offering cannot be effected, or if any
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insignificant residue of shares of Common Stock is not sold in the Subscription Offering, Community Offering or Syndicated Community Offering, the Holding Company and the Association shall use their best efforts to obtain other purchasers for such shares in such manner and upon such conditions as may be satisfactory to the OCC.
10. Limitations on Subscriptions and Purchases of Common Stock.
The following limitations shall apply to all purchases of Common Stock in the Offerings:
(a) The maximum amount of Common Stock that may be subscribed for or purchased in all categories of the Offerings by any Person, together with any Associate or group of Persons Acting in Concert, shall not exceed $300,000 except for Tax-Qualified Employee Stock Benefit Plans.
(b) The maximum number of shares of Common Stock which may be purchased in the Conversion by the ESOP shall not exceed 10%, and all Tax-Qualified Employee Stock Benefit Plans shall not exceed 10% of the total number of shares of Holding Company Common Stock issued in the Conversion, in each instance, including any shares which may be issued in the event of an increase in the maximum Estimated Price Range to reflect changes in market, financial and economic conditions after commencement of the Subscription Offering and before completion of the Offerings and including any shares issued to the Foundation; provided, however, that purchases of Common Stock which are made by Plan Participants pursuant to the exercise of Subscription Rights granted to such Plan Participant in his or her individual capacity as a Participant or purchases by a Plan Participant in the Community Offering using the funds thereof held in Tax-Qualified Employee Stock Benefit Plans shall not be deemed to be purchases by a Tax-Qualified Employee Stock Benefit Plan for purposes of this Section 10(b).
(c) No Person may purchase fewer than 25 shares of Common Stock in the Offerings, to the extent such shares are available; provided, however, that if the Actual Purchase Price is greater than $20.00 per share, such minimum number of shares shall be adjusted so that the aggregate Actual Purchase Price for such minimum shares will not exceed $500.00.
(d) The maximum amount of Common Stock that directors and officers of the Holding Company or the Association and their Associates may purchase in the aggregate in the Offerings shall not exceed 34% of the total number of shares of Common Stock sold in the Offerings, including any shares which may be issued in the event of an increase in the maximum of the Estimated Price Range to reflect changes in market, financial and economic conditions after commencement of the Subscription Offering and before completion of the Offerings.
(e) For purposes of the foregoing limitations and the determination of Subscription Rights, (i) directors, Officers and employees of the Holding Company, the Association or their subsidiaries shall not be deemed to be Associates or a group Acting in Concert solely as a result of their capacities as such, (ii) shares purchased by Tax-Qualified Employee Stock Benefit Plans shall not be attributable to the individual trustees or beneficiaries of any such plan for purposes of determining compliance with the limitations set forth in Section 10(b) hereof, and (iii) shares purchased by a Tax-Qualified Employee Stock Benefit Plan pursuant to instructions of an individual in an account in such plan in which the individual has the right to direct the investment, including any plan of the Association qualified under Section 401(k) of the Code, shall be aggregated and included in that individual’s purchases and not attributed to the Tax-Qualified Employee Stock Benefit Plan.
(f) Subject to any required regulatory approval and the requirements of applicable laws and regulations, but without further approval of the Members, the Holding Company and the Association may increase or decrease any of the individual or aggregate purchase limitations set forth herein to a percentage which does not exceed 5% of the total offering of shares of Common Stock in the Offerings
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whether before, during or after the Subscription Offering, Community Offering and/or Syndicated Community Offering. If an individual purchase limitation is increased after commencement of the Subscription Offering or any other offering, the Holding Company and the Association shall permit any Person who subscribed for the maximum number of shares of Common Stock to purchase an additional number of shares, so that such Person shall be permitted to subscribe for the then maximum number of shares permitted to be subscribed for by such Person, subject to the rights and preferences of any Person who has priority Subscription Rights. If any of the individual or aggregate purchase limitations are decreased after commencement of the Subscription Offering or any other offering, the orders of any Person who subscribed for more than the new purchase limitation shall be decreased by the minimum amount necessary so that such Person shall be in compliance with the then maximum number of shares permitted to be subscribed for by such Person. In the event that the maximum purchase limitation is increased to 5% of the shares sold in the Offerings, such limitation may be further increased to 9.99%, provided that orders for Common Stock exceeding 5% of the shares of Common Stock sold in the Offerings shall not exceed in the aggregate 10% of the total shares of Common Stock sold in the Offerings.
(g) The Holding Company and the Association shall have the right to take all such action as they may, in their sole discretion, deem necessary, appropriate or advisable to monitor and enforce the terms, conditions, limitations and restrictions contained in this Section 10 and elsewhere in this Plan and the terms, conditions and representations contained in the Order Form, including, but not limited to, the absolute right (subject only to any necessary regulatory approvals or concurrences) to reject, limit or revoke acceptance of any subscription or order and to delay, terminate or refuse to consummate any sale of Common Stock that they believe might violate, or is designed to, or is any part of a plan to, evade or circumvent such terms, conditions, limitations, restrictions and representations. Any such action shall be final, conclusive and binding on all persons, and the Holding Company, the Association and their respective Boards shall be free from any liability to any Person on account of any such action.
11. Timing of Subscription Offering; Manner of Exercising Subscription Rights and Order Forms.
(a) The Offerings shall be conducted in compliance with Part 197 of the Rules and Regulations of the OCC, to the extent applicable, and Form OC.
(b) The exact timing of the commencement of the Subscription Offering shall be determined by the Holding Company and the Association in consultation with the Independent Appraiser and any financial or advisory or investment banking firm retained by them in connection with the Conversion. The Holding Company and the Association may consider a number of factors, including, but not limited to, their current and projected future earnings, local and national economic conditions, and the prevailing market for stocks in general and stocks of financial institutions in particular. The Holding Company and the Association shall have the right to withdraw, terminate, suspend, delay, revoke or modify any such Subscription Offering, at any time and from time to time, as they in their sole discretion may determine, without liability to any Person, subject to compliance with applicable securities laws and any necessary regulatory approval or concurrence.
(c) Promptly after the SEC has declared the Registration Statement, which includes the Prospectus, effective and all required regulatory approvals have been obtained, the Holding Company shall, distribute or make available the Prospectus, together with Order Forms for the purchase of Common Stock, to all Participants for the purpose of enabling them to exercise their respective Subscription Rights, subject to Section 13 hereof.
(d) A single Order Form for all Deposit Accounts maintained with the Association by an Eligible Account Holder and any Supplemental Eligible Account Holder may be furnished, irrespective of the number of Deposit Accounts maintained with the Association on the Eligibility Record Date and
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Supplemental Eligibility Record Date, respectively. No person holding a Subscription Right may exceed any otherwise applicable purchase limitation by submitting multiple orders for Common Stock. Multiple orders are subject to adjustment, as appropriate, on a pro rata basis and deposit balances will be divided equally among such orders in allocating shares in the event of an oversubscription.
(e) The recipient of an Order Form shall have no less than 20 days and no more than 45 days from the date of mailing of the Order Form (with the exact termination date to be set forth on the Order Form) to properly complete and execute the Order Form and deliver it to the Holding Company. The Holding Company may extend such period by such amount of time as it determines is appropriate. Failure of any Participant to deliver a properly executed Order Form to the Holding Company, along with full payment (or authorization for full payment by withdrawal) for the shares of Common Stock subscribed for, within the time limits prescribed, shall be deemed a waiver and release by such person of any rights to subscribe for shares of Common Stock. Each Participant shall be required to confirm to the Holding Company by executing an Order Form that such Person has fully complied with all of the terms, conditions, limitations and restrictions in the Plan.
(f) The Holding Company and the Association shall have the absolute right, in their sole discretion and without liability to any Participant or other Person, to reject any Order Form, including, but not limited to, any Order Form that is (i) improperly completed or executed; (ii) not timely received; (iii) not accompanied by the proper and full payment (or authorization of withdrawal for full payment) or, in the case of institutional investors in the Community Offering, not accompanied by an irrevocable order together with a legally binding commitment to pay the full amount of the purchase price before 48 hours before the completion of the Offerings; or (iv) submitted by a Person whose representations the Holding Company and the Association believe to be false or who they otherwise believe, either alone, or Acting in Concert with others, is violating, evading or circumventing, or intends to violate, evade or circumvent, the terms and conditions of the Plan. Furthermore, in the event Order Forms (i) are not delivered and are returned to the Holding Company by the United States Postal Service or the Holding Company is unable to locate the addressee, or (ii) are not mailed pursuant to a “no mail” order placed in effect by the account holder, the Subscription Rights of the Person to which such rights have been granted will lapse as though such Person failed to return the contemplated Order Form within the time period specified thereon. The Holding Company and the Association may, but will not be required to, waive any irregularity on any Order Form or may require the submission of corrected Order Forms or the remittance of full payment for shares of Common Stock by such date as they may specify. The interpretation of the Holding Company and the Association of the terms and conditions of the Order Forms shall be final and conclusive.
12. Payment for Common Stock.
(a) Payment for shares of Common Stock subscribed for by Participants in the Subscription Offering and payment for shares of Common Stock ordered by Persons in the Community Offering shall be equal to the Initial Purchase Price multiplied by the number of shares that are being subscribed for or ordered, respectively. Such payment may be made in cash, if delivered in person, or by check, bank draft or money order at the time the Order Form is delivered to the Holding Company, provided that checks will only be accepted subject to collection. The Holding Company and the Association, in their sole and absolute discretion, may also elect to receive payment for shares of Common Stock by wire transfer. In addition, the Holding Company may elect to provide Participants and/or other Persons who have a Deposit Account with the Association the opportunity to pay for shares of Common Stock by authorizing the Association to withdraw from such Deposit Account an amount equal to the aggregate Initial Purchase Price of such shares. Payment may also be made by a Participant using funds held for such Participant’s benefit by an Association Benefit Plan to the extent that such plan allows participants or any related trust established for the benefit of such participants to direct that some or all of their individual accounts or sub-accounts be invested in Common Stock. If the Actual Purchase Price is less than the Initial Purchase Price, the Holding Company shall refund the difference to all Participants and other Persons, unless the
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Holding Company chooses to provide Participants and other Persons the opportunity on the Order Form to elect to have such difference applied to the purchase of additional whole shares of Common Stock. If the Actual Purchase Price is more than the Initial Purchase Price, the Holding Company shall reduce the number of shares of Common Stock ordered by Participants and other Persons and refund any remaining amount that is attributable to a fractional share interest, unless the Holding Company chooses to provide Participants and other Persons the opportunity to increase the Actual Purchase Price submitted by them.
(b) Notwithstanding the above, if the Tax-Qualified Employee Stock Benefit Plans subscribe for shares during the Subscription Offering, such plans will not be required to pay for the shares at the time they subscribe but rather may pay for such shares of Common Stock subscribed for by such plans at the Actual Purchase Price upon consummation of the Conversion, provided that, in the case of the Employee Stock Ownership Plan, there is in force from the time of its subscription until the consummation of the Offerings, a loan commitment to lend to the Employee Stock Ownership Plan, at such time, the aggregate price of the shares for which it subscribed.
(c) If a Participant or other Person authorizes the Association to withdraw the amount of the Initial Purchase Price from his or her Deposit Account, the Association shall have the right to make such withdrawal or to freeze funds equal to the aggregate Initial Purchase Price upon receipt of the Order Form. Notwithstanding any regulatory provisions regarding penalties for early withdrawals from certificate accounts, the Association may allow payment by means of withdrawal from certificate accounts without the assessment of such penalties. In the case of an early withdrawal of only a portion of such account, the certificate evidencing such account shall be canceled if any applicable minimum balance requirement ceases to be met. In such case, the remaining balance will earn interest at the regular passbook rate. However, where any applicable minimum balance is maintained in such certificate account, the rate of return on the balance of the certificate account shall remain the same as before such early withdrawal. This waiver of the early withdrawal penalty applies only to withdrawals made in connection with the purchase of Common Stock and is entirely within the discretion of the Holding Company and the Association.
(d) The subscription funds will be held by the Association in a segregated account. The Holding Company shall pay interest, at not less than the Association’s passbook rate, for all amounts paid in cash, by check, bank draft or money order to purchase shares of Common Stock in the Subscription Offering and the Community Offering from the date payment is received until the date the Offerings are completed or terminated.
(e) The Holding Company will not offer or sell any of the Common Stock proposed to be issued to any Person whose purchase would be financed by funds loaned, directly or indirectly, to the Person by the Association.
(f) Each share of Common Stock shall be non-assessable upon payment in full of the Actual Purchase Price.
13. Account Holders in Nonqualified States or Foreign Countries.
The Holding Company and the Association shall make reasonable efforts to comply with the securities laws of all jurisdictions in the United States in which Participants reside. However, no Participant will be offered or receive any Common Stock under the Plan if such Participant resides in a foreign country or resides in a jurisdiction of the United States with respect to which any of the following apply: (a) there are few Participants otherwise eligible to subscribe for shares under this Plan who reside in such jurisdiction; (b) the granting of Subscription Rights or the offer or sale of shares of Common Stock to such Participants would require any of the Holding Company or the Association or their respective directors and Officers, under the laws of such jurisdiction, to register as a broker-dealer,
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salesman or selling agent or to register or otherwise qualify the Common Stock for sale in such jurisdiction, or any of the Holding Company or the Association would be required to qualify as a foreign corporation or file a consent to service of process in such jurisdiction; or (c) such registration, qualification or filing in the judgment of the Holding Company and the Association would be impracticable or unduly burdensome for reasons of cost or otherwise.
14. Requirements Following the Conversion for Registration, Market Making and Stock Exchange Listing.
In connection with the Conversion, the Holding Company shall register the Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, and shall undertake not to deregister such stock for a period of three years thereafter. The Holding Company also shall use its best efforts to (a) encourage and assist a market maker to establish and maintain a market for the Common Stock, and (b) list the Common Stock on a national or regional securities exchange.
15. Liquidation Account.
(a) At the time of the Conversion, the Association shall establish a liquidation account in an amount equal to the Association’s net worth as reflected in its statement of financial condition contained in the Prospectus used in the Conversion. The function of the liquidation account will be to preserve the rights of certain holders of Deposit Accounts in the Association who maintain such accounts in the Association following the Conversion to a priority to distributions in the unlikely event of a liquidation of the Association subsequent to the Conversion.
(b) The liquidation account shall be maintained for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders, if any, who maintain their Deposit Accounts in the Association after the Conversion. Each such account holder will, with respect to each Deposit Account held, have a related inchoate interest in a portion of the liquidation account balance, which interest will be referred to in this Section 15 as the “subaccount balance.” All Deposit Accounts having the same social security number will be aggregated for purposes of determining the initial subaccount balance with respect to such Deposit Accounts, except as provided in Section 15(d) hereof.
(c) In the event of a complete liquidation of the Association subsequent to the Conversion (and only in such event), each Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall be entitled to receive a liquidation distribution from the liquidation account in the amount of the then current subaccount balances for Deposit Accounts then held (adjusted as described below) before any liquidation distribution may be made with respect to the capital stock of the Association. No merger, consolidation, sale of bulk assets or similar combination transaction with another FDIC-insured institution in which the Association is not the surviving entity shall be considered a complete liquidation for this purpose. In any such transaction, the liquidation account shall be assumed by the surviving entity.
(d) The initial subaccount balance for a Deposit Account held by an Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall be determined by multiplying the opening balance in the liquidation account by a fraction, of which the numerator is the amount of the Qualifying Deposits of such account holder and the denominator is the total amount of Qualifying Deposits of all Eligible Account Holders and Supplemental Eligible Account Holders, if any. For Deposit Accounts in existence at both the Eligibility Record Date and the Supplemental Eligibility Record Date, if any, separate initial subaccount balances shall be determined on the basis of the Qualifying Deposits in such Deposit Accounts on each such record date. Initial subaccount balances shall not be increased, and shall be subject to downward adjustment as provided below.
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(e) If the aggregate deposit balance in the Deposit Account(s) of any Eligible Account Holder or Supplemental Eligible Account Holder, if any, at the close of business on any annual closing date (which date is the Association’s fiscal year end), commencing on or after the effective date of the Conversion, is less than the lesser of (i) the aggregate deposit balance in such Deposit Account(s) at the close of business on any other annual closing date subsequent to such record dates or (ii) the aggregate deposit balance in such Deposit Account(s) as of the Eligibility Record Date or the Supplemental Eligibility Record Date, if any, the subaccount balance for such Deposit Account(s) shall be adjusted by reducing such subaccount balance in an amount proportionate to the reduction in such deposit balance. In the event of such a downward adjustment, the subaccount balance shall not be subsequently increased, notwithstanding any subsequent increase in the deposit balance of the related Deposit Account(s). The subaccount balance of an Eligible Account Holder or Supplemental Eligible Account Holder, if any, will be reduced to zero if the Account Holder ceases to maintain a Deposit Account at the Association that has the same social security number as appeared on his Deposit Account(s) at the Eligibility Record Date or, if applicable, the Supplemental Eligibility Record Date.
(f) After the Conversion, the Association may not pay cash dividends generally on deposit accounts and/or capital stock of the Association, or repurchase any of the capital stock of the Association, if such dividend or repurchase would reduce the Association’s regulatory capital below the aggregate amount of the then current subaccount balances for Deposit Accounts then held; otherwise, the existence of the liquidation account shall not operate to restrict the use or application of any of the net worth accounts of the Association.
(g) For purposes of this Section 15, a Deposit Account includes a predecessor or successor account which is held by an Account Holder with the same social security number.
16. Establishment and Funding of Charitable Foundation.
(a) As part of the Conversion, the Holding Company and the Association intend to establish the Foundation, which will qualify as an exempt organization under Section 501(c)(3) of the Code, and to donate to the Foundation cash and/or shares of Common Stock, in an aggregate amount up to 8% of the value of the shares of Common Stock sold in the Offerings. The Foundation is being formed in connection with the Conversion in order to complement the Association’s existing community reinvestment activities and to share with the Association’s local community a part of the Association’s financial success as a community-based financial institution. The funding of the Foundation with Common Stock accomplishes this goal as it enables the community to share in the growth and profitability of the Holding Company and the Association over the long- term.
(b) The Foundation will be 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 maintain its Section 501(c)(3) qualification, the Foundation may sell, on an annual basis, a limited portion of the Common Stock contributed to it by the Holding Company.
(c) The board of directors of the Foundation will include persons who are officers or directors of the Holding Company or the Association. For at least five years after the organization of the Holding Company, except for temporary periods resulting from death, resignation, removal or disqualification, at least (i) one director of the Foundation will be an independent director who is unaffiliated with the Association or the Holding Company, who is from the Association’s local community and who has
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experience with local community charitable organizations and grant making, and (ii) at least one director will be a person who is also a member of the Board of Directors of the Association.
(d) The board of directors of the Foundation will be responsible for establishing the policies of the Foundation with respect to grants or donations, consistent with the stated purposes of the Foundation.
(e) The establishment of the Foundation and contribution of stock and cash to the Foundation in connection with the Conversion will require the prior approval of the OCC.
17. Completion of the Conversion.
The effective date of the Conversion shall be the date of the closing of the sale of all shares of Common Stock. The closing of the sale of all shares of Common Stock sold in the Offerings shall occur simultaneously and shall be conditioned upon the prior receipt of all requisite regulatory and other approvals.
18. Requirements for Stock Purchases by Directors and Officers Following the Conversion.
For a period of three years following the Conversion, the directors and Officers of the Holding Company and the Association and their Associates may not purchase Common Stock without the prior written approval of the OCC except from a broker-dealer registered with the SEC. This prohibition shall not apply, however, to (a) a negotiated transaction involving more than 1% of the outstanding Common Stock, and (b) purchases of stock made by and held by any Tax-Qualified Employee Stock Benefit Plan (and purchases of stock made by and held by any Non-Tax-Qualified Employee Stock Benefit Plan following the receipt of shareholder approval of such plan) even if such Common Stock may be attributable to individual Officers or directors and their Associates. The foregoing restriction on purchases of Common Stock shall be in addition to any restrictions that may be imposed by federal and state securities laws.
19. Restrictions on Transfer of Stock.
All shares of Common Stock that are purchased by Persons other than directors and Officers of the Holding Company or the Association shall be transferable without restriction. Shares of Common Stock purchased by directors and Officers of the Holding Company or the Association on original issue from the Holding Company (by subscription or otherwise) shall be subject to the restriction that such shares shall not be sold or otherwise disposed of for value for a period of one year following the date of purchase, except for any disposition of such shares following the death of the original purchaser. The shares of Common Stock issued by the Holding Company to such directors and Officers shall bear the following legend giving appropriate notice of such one-year restriction:
“The shares of stock evidenced by this Certificate are restricted as to transfer for a period of one year from the date of this Certificate. These shares may not be transferred during such one-year period without a legal opinion of counsel for the Company that said transfer is permissible under the provisions of applicable law and regulation. This restrictive legend shall be deemed null and void after one year from the date of this Certificate.”
In addition, the Holding Company shall give appropriate instructions to the transfer agent for the Holding Company with respect to the applicable restrictions relating to the transfer of restricted stock. Any shares issued at a later date as a stock dividend, stock split or otherwise with respect to any such restricted stock shall be subject to the same holding period restrictions as may then be applicable to such restricted stock. The foregoing restriction on transfer shall be in addition to any restrictions on transfer that may be imposed by federal and state securities laws.
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20. Stock Compensation Plans.
(a) The Holding Company and the Association are authorized to adopt Tax-Qualified Employee Stock Benefit Plans in connection with the Conversion, including without limitation an ESOP.
(b) Subsequent to the Conversion, the Holding Company and the Association are authorized to adopt Non-Tax Qualified Employee Stock Benefit Plans, including without limitation, stock option plans and restricted stock plans. In addition, any such plan implemented during the one-year period subsequent to the date of consummation of the Conversion: (i) shall be disclosed in the Prospectus; (ii) in the case of stock option plans and employee recognition or grant plans, shall be submitted for approval by the holders of the Common Stock no earlier than six months following consummation of the Conversion; and (iii) shall comply with all other applicable requirements of the OCC or the FRB as applicable.
(c) Existing, as well as any newly created, Tax-Qualified Employee Stock Benefit Plans may purchase shares of Common Stock in the Offerings, to the extent permitted by the terms of such benefit plans and this Plan.
(d) The Holding Company and the Association are authorized to enter into employment or severance agreements with their executive officers.
21. Dividend and Repurchase Restrictions on Stock.
(a) Following consummation of the Conversion, any repurchases of shares of capital stock by the Holding Company will be made in accordance with then applicable laws and regulations.
(b) The Association may not declare or pay a cash dividend on, or repurchase any of, its capital stock if the effect thereof would cause the regulatory capital of the Association to be reduced below the amount required for the liquidation account established in accordance with Section 15 herein. Any dividend declared or paid on, or repurchase of, the Association’s capital stock also shall be in compliance with then applicable laws and regulations.
22. Amendment or Termination of The Plan.
If deemed necessary or desirable by the Boards of Directors of the Holding Company and the Association, this Plan may be substantively amended, as a result of comments from regulatory authorities or otherwise, at any time before the solicitation of proxies from Voting Members to vote on the Plan and at any time thereafter with the concurrence of the OCC.
Before the Special Meeting, this Plan may be terminated by the Boards of Directors of the Holding Company and the Association without approval of the OCC. After the Special Meeting, the Boards of Directors of the Holding Company and the Association may terminate this Plan only with the concurrence of the OCC.
This Plan shall terminate if the Conversion is not completed within 24 months from the date that the Plan is approved by the Voting Members at the Special Meeting.
23. Interpretation of the Plan.
All interpretations of this Plan and application of its provisions to particular circumstances by a majority of each of the Board of Directors of the Holding Company and the Board of Directors of the Association shall be final, subject to the authority of the OCC.
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Federal Stock Charter
Central Federal Savings and Loan Association of Rolla
FEDERAL STOCK CHARTER
OF
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA
Section 1. Corporate Title. The full corporate title of the savings association is Central Federal Savings and Loan Association of Rolla (the “Association”).
Section 2. Office. The Association’s home office shall be located in the City of Rolla, Missouri.
Section 3. Duration. The duration of the Association is perpetual.
Section 4. Purpose and Powers. The purpose of the Association 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 Association has the authority to issue is 11,000, of which 10,000 shares shall be common stock, par value $1.00 per share, and of which 1,000 shares shall be serial preferred stock, par value $1.00 per share. The shares may be issued from time to time as authorized by the board of directors without further approval of 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 value. Neither promissory notes nor future services shall constitute payment or part payment for the issuance of shares of the Association. 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 Association), labor, or services actually performed for the Association, 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 Association, 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 Association 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 Association or in connection with the conversion of the Association from the mutual to 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 Association other than as part of a general public offering or as qualifying shares to a director, unless their issuance or the plan under which they would be issued has been approved by a majority of the total votes eligible to be cast at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary sections hereto) shall entitle the holders of any class or series of capital stock to vote as a separate class or series or to more than one vote per share; provided, however, that this restriction on voting separately by class or series shall not apply:
(i) to any provision that 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 that would require the holders of preferred stock, voting as a class or series, to approve the merger or consolidation of the Association 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 Association if the preferred stock is exchanged for securities of such other corporation; provided, however, 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 that 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 that increases the number of authorized shares of any class or series of capital stock, or substitutes the surviving association in a merger or consolidation for the Association, shall not be considered to be such an adverse change.
A description of the different classes and series (if any) of the Association’s capital stock and a statement of the designations, and the relative rights, preferences, and limitations of the shares of each class of and series (if any) of capital stock are as follows:
A. Common Stock. Except as provided in this Section 5 (or in any supplementary sections hereto) the holders of the 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 each holder and there shall be no right to cumulate votes in an 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 Association, 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 Association available for distribution remaining after: (i) payment or provision for payment of the Association’s debts and liabilities; (ii) distributions or provisions 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 Association. 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 Association 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:
(i) The distinctive serial designation and the number of shares constituting such series;
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(ii) 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;
(iii) The voting powers, full or limited, if any, of shares of such series;
(iv) 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;
(v) The amount(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Association;
(vi) 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;
(vii) Whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of stock of the Association 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;
(viii) The price or other consideration for which the shares of such series shall be issued; and
(ix) 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 Association shall file with the Secretary of 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 Association shall not be entitled to preemptive rights with respect to any shares of the Association which may be issued.
Section 7. Directors. The Association shall be under the direction of a board of directors. The authorized number of directors, as stated in the Association’s bylaws, shall not be fewer than five nor more than 15, except when a greater or lesser number is approved by the Director of the OCC, or his or her delegate.
Section 8. Certain Provisions Applicable for Five Years. Notwithstanding anything contained in the Association’s charter and or bylaws to the contrary, for a period of five years from the
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date of completion of the conversion of the Association 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 Association. This limitation shall not apply to a transaction in which the Association 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 shares by a tax-qualified employee stock benefit plan which is exempt from the approval requirements under 174.3(c)(2)(i)(E) of the OCC’s regulations.
In the event shares are acquired in violation of this Section 8, all shares beneficially owned by any person in excess of 10 percent shall be considered “excess shares” and shall not be counted as shares entitled to vote and shall not be voted by any person or counted as voting shares in connection with any matters submitted to the shareholders for a vote.
For the purposes of this Section 8, the following definitions apply:
(i) 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 Association.
(ii) 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.
(iii) The term “acquire” includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise.
(iv) 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.
B. Call for Special Meetings. Special meetings of shareholders relating to changes in control of the Association or amendments to its charter shall be called only upon direction of the board of directors.
Section 9. Liquidation Account. Under OCC regulations, the Association must establish and maintain a liquidation account for the benefit of its savings account holders as of June 30, 2014 and [ supplemental eligibility record date ]. If the Association undergoes a complete liquidation, it must comply with OCC regulations with respect to the amount and priorities on liquidation of each of the savings account holders’ interests in the liquidation account. A savings account holder’s interest in the liquidation account does not entitle the savings account holder to any voting rights.
Section 10. 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 Association, 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.
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Federal Stock Bylaws
Central Federal Savings and Loan Association of Rolla
STOCK BYLAWS
OF
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA
Article I– Home Office
The home office of Central Federal Savings and Loan Association of Rolla (the “Association”) shall be at 210 West 10 th Street, in the City of Rolla, in the State of Missouri.
Article II– Shareholders
Section 1. Place of Meetings. All annual and special meetings of shareholders shall be held at the home office of the Association or at such other convenient place as the Board of Directors (the “Board”) may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the Association for the election of Directors and for the transaction of any other business of the Association shall be held annually on a date and time within 150 days after the end of the Association’s fiscal year.
Section 3. Special Meetings. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by the regulations of the Office of the Comptroller of the Currency (the “OCC”), may be called at any time by the chairman of the Board, the chief executive officer, or a majority of the Board, and shall be called by the chairman of the Board, the chief executive officer, or the secretary upon the written request of the holders of not less than one-tenth of all the outstanding capital stock of the Association entitled to vote at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered at the home office of the Association addressed to the chairman of the Board, the chief executive officer, or the secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be conducted in accordance with the most current edition of Robert’s Rules of Order unless otherwise prescribed by regulations of the OCC or these bylaws or the Board adopts another written procedure for the conduct of meetings. The Board shall designate, when present, either the chairman of the Board or chief executive officer 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 chief executive officer, 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 Association as of the record date prescribed in Section 6 of this Article II with postage prepaid. When any shareholders’ meeting, either annual or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than 30 days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken.
Section 6. Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board 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 Association 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 Association and shall be subject to inspection by any shareholder of record or the shareholder’s agent at any time during usual business hours for a period of 20 days prior to such meeting. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder of record or any shareholder’s agent during the entire time of the meeting. The original stock transfer book shall constitute prima facie evidence of the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. In lieu of making the shareholder list available for inspection by shareholders as provided in the preceding paragraph, the Board may elect to follow the procedures prescribed in § 152.6(d) of the OCC’s regulations as now or hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the Association 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. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to constitute 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 so 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. No proxy shall be valid more than eleven months from the date of its execution except for a proxy coupled with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons. When ownership stands in the name of two or more persons, in the absence of written directions to the Association to the contrary, at any meeting of the shareholders of the Association any one or more of such shareholders may cast, in person or by proxy, all votes to which such ownership is entitled. In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such stock and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree.
Section 11. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by any officer, agent, or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the Board of such corporation may determine. Shares held by an
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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 Association 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 Association 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 Association, 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. Inspectors of Election. In advance of any meeting of shareholders, the Board 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 chief executive officer 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 in advance of the meeting or at the meeting by the chairman of the Board or the chief executive officer.
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. Nominating Committee. The Board 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 Association. 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 Association 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 Association. 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.
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Section 14. 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 Association at least five days before the date of the annual meeting, and all other 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 15. Informal Action by Shareholders. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of shareholders, may be taken without a meeting if consent in writing, setting forth the action so taken, shall be given by all of the shareholders entitled to vote with respect to the subject matter.
Article III– Board
Section 1. General Powers. The business and affairs of the Association shall be under the direction of its Board. The Board 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 chief executive officer to preside at its meetings.
Section 2. Number and Term. The Board shall consist of six 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 shall be held without other notice than this bylaw following the annual meeting of shareholders. The Board 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 conference telephone or similar communications device through which all persons participating can hear each other at the same time. Participation by such means shall constitute presence in person for all purposes.
Section 4. Qualification. Each Director shall at all times be the beneficial owner of not less than 100 shares of capital stock of the Association unless the Association is a wholly owned subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the Board may be called by or at the request of the chairman of the Board, the chief executive officer, or one-third of the Directors. The persons authorized to call special meetings of the Board may fix any place, within the Association’s normal lending territory, as the place for holding any special meeting of the Board called by such persons. Members of the Board 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 to 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
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delivered to the telegraph company if sent by telegram, or when the Association 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 need be specified in the notice of waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of Directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the Board; 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 6 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, unless a greater number is prescribed by regulation of the OCC or by these bylaws.
Section 9. Action Without a Meeting. Any action required or permitted to be taken by the Board 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 Association addressed to the chairman of the Board or the chief executive officer. Unless otherwise specified, such resignation shall take effect upon receipt by the chairman of the Board or the chief executive officer. 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.
Section 11. Vacancies. Any vacancy occurring on the Board may be filled by the affirmative vote of a majority of the remaining Directors although less than a quorum of the Board. 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 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, 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. Members of either standing or special committees may be allowed such compensation for attendance at committee meetings as the Board may determine.
Section 13. Presumption of Assent. A Director of the Association who is present at a meeting of the Board at which action on any Association 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 Association within five days after the date a copy of the minutes of the meeting is received. Such right to dissent shall not apply to a Director who voted in favor of such action.
Section 14. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any Director may be removed only for cause by a vote of the holders of a majority of the shares then
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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 15. Integrity of Directors. A person is not qualified to serve as Director if he or she: (a) 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, or (b) is a person against who 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 not subject to appeal, or (c) has been found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (i) breached a fiduciary duty involving personal profit or (ii) 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.
Section 16. Advisory Directors. The Board may by resolution appoint advisory Directors to the Board, who may also serve as Directors emeriti, and shall have such authority and receive such compensation and reimbursement as the Board shall provide. Advisory Directors or Directors emeriti shall not have the authority to participate by vote in the transaction of business.
Section 17. Age Limitation. No person shall be eligible for election, reelection, appointment, or reappointment to the Board if such person is then more than 75 years of age. Any Director who attains age 75 during the term shall be allowed to complete the term. This Section 17 of this Article III does not apply to a Director who was serving as a Director of Central Federal Savings and Loan Association of Rolla on [ date of issuance of federal stock charter] . Persons may serve as Advisory Directors without regard to age.
Article IV– Executive and Other Committees
Section 1. Appointment. The Board, by resolution adopted by a majority of the full Board, may designate the chief executive officer 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, or any Director, of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the Board is not in session, shall have and may exercise all of the authority of the Board 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 with reference to: the declaration of dividends; the amendment of the charter or bylaws of the Association, 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 Association otherwise than in the usual and regular course of its business; a voluntary dissolution of the Association; 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 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 day’s notice stating the place, date, and hour of the meeting, which notice may be written or oral. Any member of the executive committee may waive notice of any meeting and no notice of any meeting need 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.
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. 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 for its information at the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The Board 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 Association and may prescribe the duties, constitution, and procedures thereof.
Article V– Officers
Section 1. Positions. The officers of the Association shall be a chief executive officer, a president, one or more vice presidents, a secretary, and a treasurer or comptroller, each of whom shall be elected by the Board. The Board 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 may designate one or more vice presidents as executive vice president or senior vice president. The Board may also elect or authorize the appointment of such other officers as the business of the Association may require. The officers shall have such authority and perform such duties as the Board may from time to time authorize or determine. In the absence of action by the Board, 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 Association shall be elected annually at the first meeting of the Board 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
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officer shall hold office until a successor has been duly elected and qualified or until the officer’s death, resignation, or removal in the manner hereinafter provided. Election or appointment of an officer, employee, or agent shall not of itself create contractual rights. The Board may authorize the Association 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 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 whenever in its judgment the best interests of the Association 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 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.
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 may authorize any officer, employee, or agent of the Association to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Association. Such authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the Association and no evidence of indebtedness shall be issued in its name unless authorized by the Board. 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 Association shall be signed by one or more officers, employees, or agents of the Association in such manner as shall from time to time be determined by the Board.
Section 4. Deposits. All funds of the Association not otherwise employed shall be deposited from time to time to the credit of the Association in any duly authorized depositories as the Board may select.
Article VII– Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Certificates representing shares of capital stock of the Association shall be in such form as shall be determined by the Board and approved by the OCC. Such certificates shall be signed by the chief executive officer or by any other officer of the Association authorized by the Board, 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 Association itself or one of its employees. Each certificate for shares of capital stock shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Association. All certificates surrendered to the Association for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares has been surrendered and cancelled, except that in the
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case of a lost or destroyed certificate, a new certificate may be issued upon such terms and indemnity to the Association as the Board may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of the Association 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 Association. Such transfer shall be made only on surrender for cancellation of the certificate for such shares. The person in whose name the shares of capital stock stand on the books of the Association shall be deemed by the Association to be the owner for all purposes.
Article VIII– Fiscal Year
The fiscal year of the Association shall end on the 31st 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 Association’s charter and the regulations and orders of the OCC, the Board may, from time to time, declare, and the Association may pay, dividends on its outstanding shares of capital stock.
Article X– Corporate Seal
The Board shall provide an Association seal, which shall be two concentric circles between which shall be the name of the Association. 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: (1) approval of the amendment by a majority vote of the authorized Board, or by a majority vote of the votes cast by the shareholders of the Association at any legal meeting, and (2) receipt of any applicable regulatory approval. When the Association 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.
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Exhibit 3.1
ARTICLES OF INCORPORATION
OF
Central Federal Bancshares, Inc.
The undersigned natural person of the age of 18 years or more, for the purpose of forming a corporation under the laws of the State of Missouri, hereby adopts the following Articles of Incorporation pursuant to Section 351.055 of The General and Business Corporation Law of Missouri (the “GBCL”):
ARTICLE I - CORPORATE TITLE
1.1. The name of the Corporation is Central Federal Bancshares, Inc.
ARTICLE II – REGISTERED OFFICE AND AGENT
2.1. The address, including street and number, of the Corporation’s initial registered office in this State is: 210 West 10 th Street, Rolla, Missouri 65401, and the name of its initial registered agent at such address is William A. Stoltz.
ARTICLE III – CAPITAL STOCK
3.1. The Corporation shall have authority to issue shares as set forth in this Section 3.1:
(a) The Corporation may issue 10,000,000 shares of voting Common Stock with a par value of $0.01 per share (“Common Stock”). Subject to all of the rights of the preferred stock as expressly provided in these Articles of Incorporation, the Corporation’s Bylaws or by the Board of Directors in a resolution(s) pursuant to this Article III, the common stock of the Corporation shall possess all such rights and privileges as are afforded to capital stock by Missouri law in the absence of any express grant of rights or privileges in these Articles of Incorporation, including, without limiting the generality of the foregoing, the following:
(i) holders of the common stock shall be entitled to one vote per share on each matter submitted to a vote at a meeting of shareholders; provided, however, that as provided in Section 3.4, there shall not be any cumulative voting of the common stock;
(ii) dividends may be declared and paid or set aside for payment upon the common stock out of any assets or funds of the Corporation legally available therefor; and
(iii) upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, its net assets shall be distributed ratably to holders of the common stock.
(b) The Corporation may issue 1,000,000 shares of Preferred Stock with a par value of $0.01 per share (“Preferred Stock”). The terms of the shares of each series of preferred stock shall be as stated and expressed in these Articles of Incorporation, or in the resolution or resolutions providing for the issuance of such series of preferred stock adopted by the Board of Directors of the Corporation. Subject to the requirements of the GBCL and the provisions of these Articles of Incorporation, the Board of Directors of the Corporation is expressly authorized to cause any number of authorized and undesignated shares of preferred stock to be issued from time to time in one or more series of preferred stock with such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, if any, as the Board of Directors of the Corporation may fix by resolution or resolutions, prior to the issuance of any shares of such series of preferred stock, each of which series may differ from any and all other series, including, without limiting the generality of the foregoing, the following:
(i) the number of shares constituting such series of preferred stock and the designations thereof;
(ii) the dividend rate, if any, on the shares of such series of preferred stock, whether and the extent to which any such dividends shall be cumulative or non-cumulative, the relative rights of priority, if any, of payments of any dividends, and the time at which, and the terms and conditions on which, any dividends shall be paid;
(iii) the right, if any, of the holders of such series of preferred stock to vote and the manner of voting, except as may otherwise be provided by the GBCL and the provisions of these Articles of Incorporation;
(iv) whether or not the shares of such series shall be made convertible into or exchangeable for other securities of the Corporation, including shares of the common stock or shares of any other series of the preferred stock, now or hereafter authorized, the price or prices or the rate or rates at which conversion or exchange may be made, any provision for future adjustment in the conversion or exchange rate, and the terms and conditions upon which the conversion or exchange right shall be exercised;
(v) the redemption or purchase price or prices of the shares of the series of preferred stock, if any, and the times at which, and the terms and conditions under which, the shares of such series of preferred stock may be redeemed or purchased;
(vi) the terms of the sinking fund, if any, to be provided for such series of preferred stock, and the terms and amount of any such sinking fund;
(vii) the rights of the holders of shares of such series of preferred stock in the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation and the relative rights of priority, if any, of such holders with respect thereto; and
(viii) any other relative powers, preferences and rights, and any qualifications, limitations or restrictions thereof, of such series of preferred stock.
3.2. (a) Notwithstanding any other provision of these Articles of Incorporation, in no event shall any record owner of any outstanding Common Stock which is beneficially owned, directly or indirectly, by a person who, as of any record date for the determination of shareholders entitled to vote on any matter, beneficially owns in excess of 10% of the then-outstanding shares of Common Stock (the “Limit”), be entitled, or permitted to any vote in respect of the shares held in excess of the Limit, unless a majority of the Whole Board (as defined in Article X) shall have by resolution granted in advance such entitlement or permission. The number of votes which may be cast by any record owner by virtue of the provisions hereof in respect of Common Stock beneficially owned by such person owning shares in excess of the Limit shall be a number equal to the total number of votes which a single record owner of all Common Stock owned by such person would be entitled to cast, multiplied by a fraction, the numerator of which is the number of shares of such class or series which are both beneficially owned by such person and owned of record by such record owner and the denominator of which is the total number of shares of Common Stock beneficially owned by such person owning shares in excess of the Limit.
(b) The following definitions shall apply to this Section 3.2.
(i) “Affiliate” shall have the meaning ascribed to it in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on the date of filing of these Articles of Incorporation.
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(ii) “Beneficial ownership” shall be determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 (or any successor rule or statutory provision), or, if said Rule 13d-3 shall be rescinded and there shall be no successor rule or provision thereto, pursuant to said Rule 13d-3 as in effect on the date of filing of these Articles of Incorporation; provided, however, that a person shall, in any event, also be deemed the “beneficial owner” of any Common Stock:
(A) which such person or any of its affiliates beneficially owns, directly or indirectly; or
(B) which such person or any of its affiliates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of an agreement, contract, or other arrangement with this Corporation to effect any transaction which is described in any one or more of clauses (i) through (v) of Section 10.1 of Article X or upon the exercise of conversion rights, exchange rights, warrants, or options or otherwise, or (ii) sole or shared voting or investment power with respect thereto pursuant to any agreement, arrangement, understanding, relationship or otherwise (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of a revocable proxy granted for a particular meeting of shareholders, pursuant to a public solicitation of proxies for such meeting, with respect to shares of which neither such person nor any such affiliate is otherwise deemed the beneficial owner); or
(C) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its affiliates acts as a partnership, limited partnership, syndicate or other group pursuant to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of this Corporation; and provided further, however , that (i) no Director or Officer of this Corporation (or any affiliate of any such Director or Officer) shall, solely by reason of any or all of such Directors of Officers acting in their capacities as such, be deemed, for any purposes hereof, to beneficially own any Common Stock beneficially owned by any other such Director or Officer (or any affiliate thereof), and (ii) neither any employee stock ownership or similar plan of this Corporation or any subsidiary of this Corporation, nor any trustee with respect thereto or any affiliate of such trustee (solely by reason of such capacity of such trustee), shall be deemed, for any purposes hereof, to beneficially own any Common Stock held under any such plan. For purposes of computing the percentage beneficial ownership of Common Stock of a person, the outstanding Common Stock shall include shares deemed owned by such person through application of this subsection but shall not include any other Common Stock which may be issuable by this Corporation pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. For all other purposes, the outstanding Common Stock shall include only Common Stock then outstanding and shall not include any Common Stock which may be issuable by this Corporation pursuant to any agreement, or upon the exercise of conversion rights, warrants or options, or otherwise.
(iii) A “person” shall mean any individual, firm, corporation, or other entity.
(c) The Board of Directors shall have the power to construe and apply the provisions of this Section and to make all determinations necessary or desirable to implement such provisions, including but not limited to matters with respect to (i) the number of shares of Common Stock beneficially owned by any person, (ii) whether a person is an Affiliate of another, (iii) whether a person has an agreement, arrangement, or understanding with another as to the matters referred to in the definition of beneficial ownership, (iv) the application of any other definition or operative provision of this Section to the given facts, or (v) any other matter relating to the applicability or effect of this Section.
(d) The Board of Directors shall have the right to demand that any person who is reasonably believed to beneficially own Common Stock in excess of the Limit (or holds of record Common Stock beneficially owned by any person in excess of the Limit) supply the Corporation with complete information
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as to (i) the record owner(s) of all shares beneficially owned by such person who is reasonably believed to own shares in excess of the Limit, and (ii) any other factual matter relating to the applicability or effect of this section as may reasonably be requested of such person.
(e) Except as otherwise provided by law or expressly provided in this Section 3.2, the presence, in person or by proxy, of the holders of record of shares of capital stock of the Corporation entitling the holders thereof to cast a majority of the votes (after giving effect, if required, to the provisions of this Section 3.2) entitled to be cast by the holders of shares of capital stock of the Corporation entitled to vote shall constitute a quorum at all meetings of the shareholders, and every reference in these Articles of Incorporation to a majority or other proportion of capital stock (or the holders thereof) for purposes of determining any quorum requirement or any requirement for shareholder consent or approval shall be deemed to refer to such majority or other proportion of the votes (or the holders thereof) then entitled to be cast in respect of such capital stock.
(f) Any constructions, applications, or determinations made by the Board of Directors pursuant to this Section in good faith and on the basis of such information and assistance as was then reasonably available for such purpose shall be conclusive and binding upon the Corporation and its shareholders. Any alteration, amendment or repeal of this Section 3.2 shall be made in compliance with Section 10.7.
(g) In the event any provision (or portion thereof) of this Section 3.2 shall be found to be invalid, prohibited or unenforceable for any reason, the remaining provisions (or portions thereof) of this Section shall remain in full force and effect, and shall be construed as if such invalid, prohibited or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of this Corporation and its shareholders that each such remaining provision (or portion thereof) of this Section 3.2 remain, to the fullest extent permitted by law, applicable and enforceable as to all shareholders, including shareholders owning an amount of stock over the Limit, notwithstanding any such finding.
3.3. Except as otherwise specifically required by the GBCL, or by these Articles of Incorporation, or by the Corporation’s Bylaws, or by any authorizing resolution of the Board of Directors providing for the issuance of a class or series of Preferred Stock, whenever the holders of shares of stock of the Corporation shall be entitled to vote as a class with respect to any matter, the affirmative vote of a majority of the outstanding shares of such class shall be required to constitute the act of such class.
3.4. There shall be no right to cumulative voting.
ARTICLE IV – PREEMPTIVE RIGHTS
4.1. No holder of shares of any class of stock of the Corporation, either now or hereafter authorized or issued, shall have any preemptive or preferential right of subscription to any shares of any class of stock of the Corporation, either now or hereafter authorized, or to any securities convertible into stock of any class of the Corporation, issued or sold, nor any right of subscription to any such security, other than such, if any, as the Board of Directors in its discretion may from time to time determine and at such prices as the Board of Directors may from time to time fix, pursuant to the authority conferred by these Articles of Incorporation.
ARTICLE V - INCORPORATOR
5.1. The name and address of the incorporator is: Leonard J. Essig, 600 Washington Avenue, St. Louis, Missouri 63101.
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ARTICLE VI – DIRECTORS
6.1. The number of directors to constitute the initial Board of Directors shall be six; provided , however, that such number may be fixed, from time to time, at not less than five nor more than 15, by, or in the manner provided in, the Bylaws of the Corporation. The directors shall be divided into three classes: Class I, Class II and Class III. The number of directors in any such class shall not exceed the number of directors in any other class by more than one. The term of office of the initial Class I Directors shall expire at the annual meeting of shareholders of the Corporation in 2016; the term of office of the initial Class II Directors shall expire at the annual meeting of shareholders of the Corporation in 2017; and the term of office of the initial Class III Directors shall expire at the annual meeting of shareholders of the Corporation in 2018; or in each case thereafter until their respective successors are duly elected and qualified. At each annual election held after 2015, the Directors chosen to succeed those whose terms then expire shall be identified as being of the same class as the Directors they succeed and shall be elected for a term of three years expiring at the third succeeding annual shareholder meeting or thereafter until their respective successors are duly elected and qualified. If the number of Directors is changed, any increase or decrease in the number of Directors shall be apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible.
6.2. Any vacancy on the Board (whether such vacancy is caused by death, resignation, or removal for cause or is the result of an increase in the number of directors) shall be filled by a majority of the Directors then in office. Any Director elected to fill a vacancy in any class (whether such vacancy is caused by death, resignation, or removal with cause, or is the result of an increase in the number of directors in such class) shall hold office for a term which shall expire at the next election of Directors by the shareholders of the Corporation except that a Director elected by the Board pursuant to this Article VI to fill a vacancy or to a newly created directorship need not be presented for election by the shareholders until the class to which the Director has been so elected by the Board is presented for election by the shareholders.
6.3. At a meeting called expressly for that purpose, the entire Board of Directors, or any individual Director or Directors, may be removed, but only for cause, and only upon the affirmative vote of the holders of at least 66- 2/3% of the total votes to which all of the shares then entitled to vote at a meeting of shareholders called for an election of Directors are entitled.
6.4. In addition to any affirmative vote required by law or otherwise, any amendment, alteration, change or repeal of the provisions of this Article VI shall require the affirmative vote of the holders of at least 80% of the total votes to which all of the shares then entitled to vote at a meeting of shareholders called for an election of Directors are entitled, unless such amendment, alteration, change or repeal has previously been expressly approved by the Board of Directors of the Corporation by the affirmative vote or consent of at least 66- 2/3% of the number of Directors then authorized by, or in the manner provided in, the Bylaws, in which case the shareholder vote required by this Section 6.4 shall not apply.
6.5. The persons to constitute the initial Board of Directors of the Corporation are:
(a) Class I Directors (term to expire in 2016):
(i) Michael E. Estey
(ii) Jeffrey L. McKune
(b) Class II Directors (term to expire in 2017):
(i) Robert R. Thompson
(ii) John D. Wiggins
(c) Class III Directors (term to expire in 2018):
(i) Steven L. Bowles
(ii) James R. Sowers
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ARTICLE VII – DURATION
7.1. The duration of the Corporation is perpetual.
ARTICLE VIII – PURPOSE AND POWERS
8.1. The Corporation is formed for the following purposes:
(a) To conduct business as a thrift holding company and to provide financial services through subsidiary corporations;
(b) To own, hold, rent, lease, operate, manage, hypothecate, sell and convey such real and personal property as may be useful and desirable in the operation of the Corporation’s business; and
(c) To possess and enjoy all rights, powers and privileges as are granted to corporations under the Missouri General and Business Corporation Law.
ARTICLE IX - INDEMNIFICATION
9.1. The Corporation shall and does hereby indemnify any person who is or was a Director or executive officer of the Corporation or any subsidiary against any and all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement and reasonably incurred by such person in connection with any threatened, pending or completed civil, criminal, administrative or investigative action, suit, proceeding or claim (including any action by or in the right of the Corporation or a subsidiary) by reason of the fact that such person is or was serving in such capacity; provided, however , that no such person shall be entitled to any indemnification pursuant to this Article IX on account of (i) conduct which is finally adjudged to have been knowingly fraudulent or deliberately dishonest or to have constituted willful misconduct, or (ii) an accounting for profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended from time to time, or pursuant to a successor statute or regulation.
9.2. The Corporation may, to the extent that the Board of Directors deems appropriate and as set forth in a Bylaw or authorizing resolution, indemnify any person who is or was a non-executive officer, or employee or agent of the Corporation or any subsidiary or who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including an employee benefit plan) against any and all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement and reasonably incurred by such person in connection with any threatened, pending or completed civil, criminal, administrative or investigative action, suit, proceeding or claim (including an action by or in the right of the Corporation or a subsidiary) by reason of the fact that such person is or was serving in such capacity; provided, however , that no such person shall be entitled to any indemnification pursuant to this Section 9.2 on account of (i) conduct which is finally adjudged to have been knowingly fraudulent or deliberately dishonest or to have constituted willful misconduct, or (ii) an accounting for profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended from time to time, or pursuant to a successor statute or regulation.
9.3. The Corporation may, to the extent that the Board of Directors deems appropriate, make advances of expenses, including attorneys’ fees, incurred prior to the final disposition of a civil, criminal, administrative or investigative action, suit, proceeding or claim (including an action by or in the right of the Corporation or a subsidiary) to any person to whom indemnification is or may be available under this Article IX; provided, however, that prior to making any advances, the Corporation shall receive a written
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undertaking by or on behalf of such person to repay such amounts advanced in the event that it shall be ultimately determined that such person is not entitled to such indemnification.
9.4. The indemnification and other rights provided by this Article IX shall not be deemed exclusive of any other rights to which a person to whom indemnification is or otherwise may be available (under these Articles of Incorporation or the Bylaws or any agreement or vote of shareholders or disinterested Directors or otherwise), may be entitled. The Corporation is authorized to purchase and maintain insurance on behalf of the Corporation or any person to whom indemnification is or may be available against any liability asserted against such person in, or arising out of, such person’s status as Director, officer, employee or agent of the Corporation, any of its subsidiaries or another corporation, partnership, joint venture, trust or other enterprise (including an employee benefit plan) which such person is serving at the request of the Corporation.
9.5. Each person to whom indemnification is granted under this Article IX is entitled to rely upon the indemnification and other rights granted hereby as a contract with the Corporation and such person and such person’s heirs, executors, administrators and estate shall be entitled to enforce against the Corporation all indemnification and other rights granted to such person by Sections 9.1 and 9.3. The indemnification and other rights granted by Sections 9.1 and 9.3 and this Section 9.5 shall survive amendment, modification or repeal of this Article IX, and no such amendment, modification or repeal shall act to reduce, terminate or otherwise adversely affect the rights to indemnification granted hereby, with respect to any expenses, judgments, fines and amounts paid in settlement incurred by a person to whom indemnification is granted under this Article IX with respect to an action, suit, proceeding or claim that arises out of acts or omissions of such person that occurred prior to the effective date of such amendment, modification or repeal.
Any indemnification granted by the Board of Directors pursuant this Article IX shall inure to the person to whom the indemnification is granted and such person’s heirs, executors, administrators and estate; provided, however, that such indemnification may be changed, modified or repealed, at any time or from time to time, at the discretion of the Board of Directors, and the survival of such indemnification shall be in accordance with terms determined by the Board of Directors.
9.6. For the purposes of this Article IX, “subsidiary” shall mean any corporation, partnership, joint venture, trust or other enterprise of which a majority of the voting power, equity or ownership interest is directly or indirectly owned by the Corporation.
ARTICLE X – CERTAIN BUSINESS COMBINATIONS
10.1. (a) In addition to any affirmative vote required by law, any other provision of these Articles of Incorporation or by any resolution or resolutions of the Board of Directors providing for the issue of any class or series of Preferred Stock (a “Preferred Stock Designation”), and except as otherwise expressly provided in Section 10.2:
(i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Shareholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of 25% or more of the assets of the Corporation or any Subsidiary; or
(iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Shareholder or any Affiliate of any Interested Shareholder in exchange for any assets, cash, securities or
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other property (or a combination thereof) which equals or exceeds 25% of the Fair Market Value (as hereinafter defined) of the Common Stock of the Holding Company; or
(iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Shareholder; or
(v) any reclassification of securities (including any reverse stock split) or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries, or any other transaction (whether or not with or into or otherwise involving any Interested Shareholder), which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity securities of the Corporation of any Subsidiary which is Beneficially Owned (as hereinafter defined) by any Interested Shareholder or any Affiliate of any Interested Shareholder;
shall require the affirmative vote of (x) the holders of at least 80% of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (the “Voting Stock”), voting together as a single class, and (y) the holders of at least a majority of the voting power of all of the then-outstanding shares of the Voting Stock not Beneficially Owned by such Interested Shareholder, or any of its Affiliates or Associates (as hereinafter defined), voting together as a single class. Such affirmative vote shall be required notwithstanding any provision of law or of any agreement with any national securities exchange or otherwise which might otherwise permit a lesser vote or no vote.
(b) The term “Business Combination” as used in this Article X shall mean any transaction which is referred to in any one or more of subparagraphs (i) through (v) of paragraph (a) of this Section 10.1.
10.2. The provisions of Section 10.1 shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by laws, any other provision of these Articles of Incorporation and any Preferred Stock Designation, if a majority of the Whole Board (as defined below) shall have approved such Business Combination, or a memorandum of understanding or similar document or instrument with the Interested Shareholder with respect to, and on substantially the same terms as, such Business Combination, in each case prior to the time such Interested Shareholder or any Affiliate or Associate of such Interested Shareholder became an Interested Shareholder.
10.3. For the purposes of this Article X:
(a) A “person” means any individual, limited partnership, general partnership, corporation or other firm or entity.
(b) “Interested Shareholder” means any person (other than the Corporation or any Subsidiary) who or which:
(i) is the Beneficial Owner, directly or indirectly, of 10% or more of the voting power (with respect to voting generally in the election of directors) of the outstanding Voting Stock; or
(ii) is an Affiliate or an Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the Beneficial Owner, directly or indirectly, of 5% or more of the voting power (with respect to voting generally in the election of directors) of the then-outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question Beneficially Owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a
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transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended.
(c) A person shall be a “Beneficial Owner” of, and shall “Beneficially Own,” any Voting Stock:
(i) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly, within the meaning of the Securities Exchange Act of 1934, as in effect on the date of filing these Articles of Incorporation; or
(ii) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding (but neither such person nor any such Affiliate or Associate shall be deemed to be the Beneficial Owner of any shares of Voting Stock solely by reason of a revocable proxy granted for a particular meeting of shareholders, pursuant to a public solicitation of proxies for such meeting, if such person, Affiliate or Associate is not otherwise deemed the Beneficial Owner of such shares); or
(iii) which are beneficially owned, directly or indirectly, within the meaning of the Securities Exchange Act of 1934, as in effect on the date of filing these Articles of Incorporation, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (other than solely by reason of a revocable proxy as described in subparagraph (ii) of this paragraph (c)) or disposing of any shares of Voting Stock; provided, however , that in the case of any employee stock ownership or similar plan of the Corporation or of any Subsidiary in which the beneficiaries thereof possess the right to vote any shares of Voting Stock held by such plan, no such plan nor any trustee with respect thereto (nor any Affiliate of such trustee), solely by reason of such capacity of such trustee, shall be deemed, for any purposes hereof, to Beneficially Own any shares of Voting Stock held under any such plan; and provided, however , that in case of any individual retirement account or similar plan for which any Subsidiary serves as trustee or custodian and for which the beneficiary thereof possesses the right to vote any shares of Voting Stock held by such account or plan, no such account or plan nor any trustee or custodian with respect thereto (nor any Affiliate of such trustee or custodian) solely by reason of such capacity as trustee or custodian, shall be deemed, for any purposes hereof, to Beneficially Own any shares of Voting Stock held under any such plan or account.
(d) For the purposes of determining whether a person is an Interested Shareholder pursuant to paragraph (b) of this Section 10.3, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed to be Beneficially Owned by such person through application of paragraph (c) of this Section 10.3 but shall not include any other unissued shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
(e) “Affiliate” or “Associate” shall have the respective meaning ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on the date of filing these Articles of Incorporation.
(f) “Subsidiary” means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph (b) of this Section 10.3, the term “Subsidiary” shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation.
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(g) “Whole Board” means the total number of directors which the Corporation would have if there were no vacancies on the Board of Directors;
(h) The “Fair Market Value” of any assets, securities or other property shall mean the fair market value thereof, as determined by a majority of the Whole Board in good faith after reasonable inquiry.
10.4. A majority of the Whole Board shall have the power and duty to determine in good faith, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article X, including, without limitation, (i) whether a person is an Interested Shareholder, (ii) the number of shares of Voting Stock Beneficially Owned by any person, and (iii) whether a person is an Affiliate or Associate of another.
10.5. A majority of the Whole Board shall have the right to demand that any person who is reasonably believed to be an Interested Shareholder (or to hold or record shares of Voting Stock Beneficially Owned by any Interested Shareholder) supply the Corporation with complete information as to (a) the record owner(s) of all shares Beneficially Owned by such person who is reasonably believed to be an Interested Shareholder (or to hold of record any such Shares), (b) the number of, and class or series of, shares Beneficially Owned by such person who is reasonably believed to be an Interested Shareholder (or to hold of record any such Shares) and held or record by each such record owner and the number(s) of the stock certificate(s) evidencing such shares, and (c) any other factual matter relating to the applicability or effect of this Article X, as may be reasonably requested of such person, and such person shall furnish such information within 10 days after receipt of such demand.
10.6. Nothing contained in this Article X shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law.
10.7. Notwithstanding any other provisions of these Articles of Incorporation or any provision of law which might otherwise provide for lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, these Articles of Incorporation or any Preferred Stock Designation, the affirmative vote of (a) the holders of at least 80% of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class, and (b) the holders of at least a majority of the voting power of all of the then-outstanding shares of the Voting Stock not Beneficially Owned by any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder, voting together as single class, shall be required to alter, amend or repeal this Article X or Section 3.2.
ARTICLE XI – AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
11.1. Except as otherwise specifically set forth in these Articles of Incorporation, the Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, and amendments to the Articles of Incorporation shall be made in the manner prescribed by the Missouri General and Business Corporation Law.
11.2. The power to make, alter, amend, or repeal the Bylaws of the Corporation shall be vested exclusively in the Board of Directors, unless otherwise provided in such Bylaws.
ARTICLE XII – FURTHER POWERS OF BOARD OF DIRECTORS
The Board of Directors shall have and exercise such further powers as are provided to it under present or future laws of the State of Missouri.
* * *
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IN WITNESS WHEREOF, these Articles of Incorporation have been signed this 19 th day of August, 2015.
/s/ Leonard J. Essig | |
Leonard J. Essig, Incorporator |
[Signature Page – Central Federal Bancshares, Inc. Articles of Incorporation]
Exhibit 3.2
BYLAWS
OF
Central Federal Bancshares, Inc.
ARTICLE I - OFFICES
The principal office of Central Federal Bancshares, Inc. (the “Corporation”) in the State of Missouri shall be located in Phelps County. The Corporation may have such other offices, either within or without the State of Missouri, as the business of the Corporation may require from time to time.
The registered office of the Corporation required by the General and Business Corporation Law of Missouri (“GBCL”) to be maintained in the State of Missouri may be, but need not be, identical to the principal office in the State of Missouri, and the address of the registered office may be changed from time to time by the Board of Directors of the Corporation.
ARTICLE II - SHAREHOLDERS
Section 1. | ANNUAL MEETING |
The annual meeting of the shareholders of the Corporation shall be held annually on a date and time within 150 days after the end of the Corporation’s fiscal year, or at such other date and time as the Board of Directors may deem as appropriate. The business to be transacted at the annual meeting shall include the election of Directors and any other business properly brought before the meeting in accordance with these Bylaws.
Section 2 . | SPECIAL MEETINGS |
A special meeting of the shareholders may be called at any time for any purpose(s) only (a) by the Chairman of the Board, (b) by the President or (c) by two-thirds of the total number of Directors which the Corporation would have if there were no vacancies on the Board of Directors. Business transacted at any special meeting shall be confined to the purpose(s) stated in the notice of such meeting.
Section 3. | PLACE OF MEETING |
The Board of Directors may designate any place, either within or without the State of Missouri, as the place of meeting for any annual or special meeting of shareholders.
Section 4. | NOTICE OF MEETING; WAIVER OF NOTICE |
Not less than 10 days nor more than 70 days before the date of every shareholders meeting, the Secretary shall give to each shareholder entitled to vote at or to notice of such meeting, written notice stating the place, date and time of the meeting and, in the case of a special meeting, the purpose(s) for which the meeting is called, either by mail to his or her address as it appears on the records of the Corporation or by presenting it to him or her personally or by leaving it at his or her residence or usual place of business. Notwithstanding the foregoing provisions, a written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be equivalent to notice. Attendance of a person entitled to notice at a meeting, in person or by proxy, shall constitute a waiver of notice of such meeting, except when such person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided however, that if the date of the adjourned meeting is more than 90 days after the record date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date and time of the adjourned meeting shall be given in conformity herewith.
Section 5. | QUORUM |
At any meeting of shareholders, the presence of a quorum for all purposes shall be determined as provided in the Corporation’s Articles of Incorporation unless or except to the extent that the presence of a larger number may be required by law.
If a quorum fails to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are represented in person or by proxy may adjourn the meeting to any place, date and time without further notice to a date not more than 90 days after the original record date. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting originally called. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of shareholders to leave less than a quorum.
Section 6. | CONDUCT OF BUSINESS |
(a) The chairman of any meeting of shareholders shall determine the order of business and the procedures at the meeting, including such regulation of the manner of voting and the conduct of discussion. The date and time of the opening and closing of the polls for each matter upon which the shareholders will vote at the meeting shall be announced at the meeting.
(b) At any annual meeting of the shareholders, only such business shall be conducted as shall have been brought before the meeting either by or at the direction of the Board of Directors or by any shareholder of the Corporation who is entitled to vote with respect thereto and who complies with the notice procedures set forth in this Article II, Section 6(b). For business to be properly brought before an annual meeting by a shareholder, the business must relate to a proper subject matter for shareholder action and the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice must be delivered or mailed to and received at the principal executive office of the Corporation not less than 90 days prior to the date of the annual meeting; provided, however, that in the event that less than 100 days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A shareholder’s notice to the Secretary shall set forth as to each matter such shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address, as they appear on the Corporation’s books, of the shareholder proposing such business; (iii) the class and number of shares of the Corporation’s capital stock that are beneficially owned by such shareholder; (iv) a statement disclosing (A) whether such shareholder is acting with or on behalf of any other person and (B) if applicable, the identity of such person; and (v) any material interest of such shareholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be brought before or conducted at an annual meeting except in accordance with the provisions of this Article II, Section 6(b). The Chairman of the Board or other person presiding over the annual meeting shall, if the facts so warrant, determine and declare to the
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meeting that business was not properly brought before the meeting in accordance with the provisions of this Article II, Section 6(b) and, if he or she should so determine, he or she shall so declare to the meeting and any such business so determined to be not properly brought before the meeting shall not be transacted. Nothing in this Article II, Section 6 shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The provisions of this Article II, Section 6 shall also govern what constitutes timely notice for purposes of Rule 14a-4(c) under the Exchange Act.
At any special meeting of the shareholders, only such business shall be conducted as shall have been brought before the meeting in accordance with Article II, Section 2.
(c) Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders at which Directors are to be elected only (i) by or at the direction of the Board of Directors; or (ii) by any shareholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Article II, Section 6(c). Such nominations, other than those made by or at the direction of the Board of Directors, shall be made by timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice shall be delivered or mailed to and received at the principal executive office of the Corporation not less than 90 days prior to the date of the meeting; provided, however, that in the event that less than 100 days’ notice or prior disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such shareholder’s notice shall set forth (i) as to each person whom such shareholder proposes to nominate for election or re-election as a Director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); and (ii) as to the shareholder giving the notice (A) the name and address, as they appear on the Corporation’s books, of such shareholder, (B) the class and number of shares of the Corporation’s capital stock that are beneficially owned by such shareholder, and (C) a statement disclosing (1) whether such shareholder or any nominee thereof is acting with or on behalf of any other person and (2) if applicable, the identity of such person.
Section 7. | VOTING; ACTION BY CONSENT |
On all matters to be voted on by holders of voting stock of the Corporation, each outstanding share of voting stock of the Corporation shall have one vote. If a quorum is present, the affirmative vote of a majority of the shares represented in person or by proxy and entitled to vote at the meeting shall be the act of the shareholders unless the vote of greater number of shares is required by the Corporation’s Articles of Incorporation, by these Bylaws or by law. No person shall be admitted to vote on any shares belonging or hypothecated to the Corporation. A shareholder may vote either in person or by proxy.
Unless otherwise prescribed by the Corporation’s Articles of Incorporation, any action required or permitted to be taken by the shareholders of the Corporation may, if otherwise allowed by law, be taken without a meeting of shareholders only if consents in writing, setting forth the action so taken, are signed by all of the shareholders entitled to vote with respect to the subject matter thereof.
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Section 8. | PROXIES |
At all meetings of shareholders, a shareholder may vote the shares owned of record by him or her either in person or by proxy executed in writing by the shareholder or by his or her duly authorized attorney-in-fact. Any facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this paragraph may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.
Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after 11 months from the date of its execution, unless otherwise provided in the proxy. A proxy is revocable by a shareholder at any time without condition or qualification unless the proxy states that it is irrevocable and the proxy is coupled with an interest. A proxy may be made irrevocable for as long as it is coupled with an interest. The interest with which a proxy may be coupled includes an interest in the stock to be voted under the proxy or another general interest in the Corporation or its assets or liabilities.
Section 9. | CONTROL SHARE ACQUISITION ACT |
Notwithstanding any other provision of the Articles of Incorporation or these Bylaws, Section 351.407 of the GBCL (or any successor provision) shall not apply to any acquisition by any person of shares of stock of the Corporation. This Article II, Section 9 may be repealed at any time, in whole or in part, by a majority vote of the Corporation’s Board of Directors, whether before or after an acquisition of Control Shares (as such term is defined in Section 351.015.5 of the GBCL, or any successor provision) and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent Control Share Acquisition (as such term is defined in Section 351.015.4 of the GBCL, or any successor provision).
ARTICLE III - DIRECTORS
Section 1. | GENERAL POWERS |
The business and affairs of the Corporation shall be managed by its Board of Directors. The Board of Directors may exercise all the powers of the Corporation, except those conferred on or reserved to the shareholders by statute or by the Corporation’s Articles of Incorporation or these Bylaws. The Board may adopt such rules and regulations for the conduct of its meetings and the management of the Corporation as it may deem proper, and which are not inconsistent with these Bylaws and with the GBCL.
The Board of Directors shall annually elect a Chairman of the Board from among its members. The Chairman of the Board shall serve in a general oversight capacity and shall preside at all meetings of the Corporation’s Board of Directors. The Chairman of the Board shall perform all duties and have all powers which are commonly included in the office of the Chairman of the Board or which are delegated to him by the Board of Directors.
Section 2. | NUMBER |
The number of Directors of the Corporation shall, by virtue of the Corporation’s election made hereby to be governed by Section 351.315 of the GBCL, be fixed from time to time exclusively by vote of
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the Board of Directors; provided, however, that such number of Directors shall never be less than the minimum number of directors required by the GBCL.
Section 3. | QUALIFICATIONS |
No person shall be eligible for election, reelection, appointment or reappointment to the Board of Directors if such person is then more than 75 years of age or older. Any Director who attains age 75 during the term shall be allowed to complete the term. Section 3 of this Article III does not apply to a Director who was serving as a director of Central Federal Savings and Loan Association of Rolla as of the date of issuance of the federal stock charter of Central Federal Savings and Loan Association of Rolla. Persons may serve as Advisory Directors without regard to age.
Section 4. | VACANCIES AND NEWLY CREATED DIRECTORSHIPS |
Any vacancies in the Board of Directors resulting from an increase in the size of the Board of Directors or the death, resignation or removal of a Director may be filled only by a majority of the Directors then in office, although less than a quorum, or by a sole remaining Director, until the next election of directors by the shareholders of the Corporation, except that, if the Board of Directors is divided into classes, a Director elected by the Board pursuant to this Article III, Section 4 to fill a vacancy or to a newly created directorship need not be presented for election by the shareholders until the class to which the Director has been so elected by the Board is presented for election by the shareholders. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director.
Section 5. | REGULAR MEETINGS |
Regular meetings of the Board of Directors shall be held at such dates, such times and such places, either within or without the State of Missouri, as shall have been designated by the Board of Directors and publicized among all Directors.
Section 6. | SPECIAL MEETINGS |
Special meetings of the Board of Directors may be called by the Chairman of the Board, by the Chief Executive Officer, or by two-thirds of the members of the Board of Directors in writing. The person(s) authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Missouri, as the place for holding the special meeting of the Board of Directors called by them.
Section 7. | NOTICE |
A notice of a regular meeting shall not be required. The Secretary shall give notice to each Director of the date, time and place of each special meeting of the Board of Directors. Notice is given to a Director when it is delivered personally to him or her, left at his or her residence or usual place of business, or sent by telephone, telegraph, or similar means of transmission at least 24 hours before the time of the meeting, or in the alternative, when it is mailed to his or her address as it appears on the records of the Corporation, at least 72 hours before the time of the meeting. Any Director may waive notice of any meeting either before or after the holding thereof by written waiver filed with the records of the meeting. 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, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
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Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.
Section 8. | TELEPHONIC MEETINGS |
Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Article III, Section 8 shall constitute presence in person at such meeting.
Section 9. | QUORUM |
At any meeting of the Board of Directors, a majority of the total number of Directors shall constitute a quorum for the transaction of business, but if less than such quorum is present at a meeting, a majority of the Directors present may adjourn the meeting without further notice or waiver thereof.
Section 10. | MANNER OF ACTING |
The vote of the majority of the Directors present at a meeting at which a quorum is present shall be the action of the Board of Directors unless the concurrence of a greater proportion is required for such action by the Corporation’s Articles of Incorporation. In accordance with Section 351.340 of the GBCL, if all the Directors severally or collectively consent in writing to any action taken or to be taken by the Directors, such consents have the same force and effect as a unanimous vote of the Directors at a meeting duly held, and may be stated as such in any certificate or document filed with the Secretary of State of the State of Missouri or any other state in the United States of America. Consent by any Director by electronic transmission, as defined in Section 351.245 of the GBCL, and including transmission by email, shall satisfy the unanimous consent requirements of this Article III, Section 10. The Secretary of the Corporation is to file such consents with the minutes of the meetings of the Board of Directors. Formal meetings of the Directors need not be held where the action of all the Directors are consented to in writing.
Section 11. | RESIGNATION |
A Director may resign at any time by giving written notice to the Board, the President or the Secretary of the Corporation. Unless otherwise specified in the notice, the resignation shall take effect upon receipt thereof by the Board or such officer, and the acceptance of the resignation shall not be necessary to make it effective.
Section 12. | COMPENSATION |
By resolution of the Board of Directors, a fixed sum and expenses, if any, for attendance at each regular or special meeting of the Board of Directors or of committees thereof, and other compensation for their services as such or on such committees, may be paid to Directors, as compensation for such attendance at meetings and other services as a Director may render to the Corporation.
Section 13. | COMMITTEES |
The Board of Directors, by a vote of a majority of the Board of Directors, may from time to time designate committees of the Board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for these committees and any others provided for herein, elect a Director(s) to serve as the member(s), designating, if it desires, other Directors as alternate
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members who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that any such committee shall have no power or authority with reference to (a) declaring dividends or distributions on stock; (b) issuing stock other than as authorized by the Board of Directors, (c) recommending to the shareholders any action which requires shareholder approval; (d) amending the Bylaws; and (e) approving a merger or share exchange which does not require shareholder approval. In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member(s) of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.
Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to committee members of all meetings. The quorum requirements for each such committee shall be a majority of the members of such committee. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing, and the writing(s) is filed with the minutes of the proceedings of such committee.
Section 14. | INTEGRITY OF DIRECTORS |
A person is not qualified to serve as Director if he or she: (a) 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, or (b) is a person against who a banking agency has, within the past 10 years, issued a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and not subject to appeal, or (c) has been found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (i) breached a fiduciary duty involving personal profit or (ii) 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.
Section 15. | ADVISORY DIRECTORS |
The Board of Directors may by resolution appoint Advisory Directors to the Board, who may also serve as Directors Emeriti, and shall have such authority and receive such compensation and reimbursement as the Board of Directors shall provide. Advisory Directors or Directors Emeriti shall not have the authority to participate by vote in the transaction of business.
ARTICLE IV - OFFICERS
Section 1. | EXECUTIVE AND OTHER OFFICERS |
The officers of the Corporation shall be at least a President, a Secretary and a Treasurer. The Board of Directors may designate who shall serve as Chief Executive Officer, having general supervision of the business and affairs of the Corporation, and as Chief Operating Officer, having supervision of the operations of the Corporation; in the absence of a designation the President shall serve as Chief Executive Officer and Chief Operating Officer. The Board of Directors may appoint such other officers as it may deem proper. A person may hold more than one office in the Corporation but may not serve concurrently as both President and Vice President of the Corporation.
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Section 2. | CHIEF EXECUTIVE OFFICER |
The Chief Executive Officer shall be the principal executive officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board of Directors, he or she shall have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of the Chief Executive Officer or which are delegated to him or her by the Board of Directors. He or she shall have the power to sign all contracts, agreements, and other instruments of the Corporation which are authorized and shall have general supervision and direction of all of the other officers (except the Chairman of the Board), employees, and agents of the Corporation.
Section 3. | VICE PRESIDENT(S) |
The Vice President(s) shall perform the duties of the President in his or her absence or during his or her inability to act. In addition, the Vice President(s) shall perform the duties and exercise the powers usually incident to his or her or their respective offices and/or such other duties and powers as may be properly assigned to him or her or them by the Board of Directors or the President. A Vice President(s) may be designated as Executive Vice President or Senior Vice President.
Section 4. | SECRETARY |
The Secretary shall keep the minutes of the meetings of the shareholders, of the Board of Directors and of any committees, in books provided for that purpose; he or she shall see that all notices are duly given in accordance with the provisions of the Bylaws or as required by law; he or she shall be custodian of the records of the Corporation; he or she shall witness all documents on behalf of the Corporation, the execution of which is duly authorized, see that the corporate seal is affixed where such document is required to be under its seal, and, when so affixed, may attest to the same; and, in general, he or she shall perform all duties incident to the office of a secretary of a corporation, and such other duties as may from time to time be assigned to him or her by the Board of Directors or the President.
Section 5. | TREASURER |
The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all monies or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by the Board of Directors. In general, he or she shall perform all the duties incident to the office of a treasurer of a corporation, and such other duties as may from time to time be assigned to him or her by the Board of Directors or the President.
Section 6. | SUBORDINATE OFFICERS |
The Corporation may have such subordinate officers as the Board of Directors may from time to time deem desirable. Each such officer shall hold office for such period and perform such duties as the Board of Directors, the Chief Executive Officer or the committee or officer designated pursuant to these Bylaws may prescribe.
Section 7. | COMPENSATION |
The Board of Directors shall have power to fix the salaries and other compensation and remuneration, of whatever kind, of all officers of the Corporation. It may authorize any committee or
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officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the salaries, compensation and remuneration of such subordinate officers.
Section 8. | ELECTION, TENURE AND REMOVAL OF OFFICERS |
The Board of Directors shall elect the officers. The Board of Directors may from time to time authorize any committee or officer to appoint subordinate officers. An officer serves for one year or until his or her successor is elected and qualified. If the Board of Directors in its judgment finds that the best interests of the Corporation will be served, it may remove any officer or agent of the Corporation. The removal of an officer or agent does not prejudice any of his or her contract rights. The Board of Directors (or any committee or officer authorized by the Board of Directors) may fill a vacancy which occurs in any office for the unexpired portion of the term of that office.
ARTICLE V - STOCK
Section 1. | CERTIFICATES FOR STOCK |
Each shareholder shall be entitled to certificates which represent and certify the shares of stock he or she holds in the Corporation. Each stock certificate shall include on its face the name of the Corporation, the name of the shareholder and the class of stock and number of shares represented by the certificate and be in such form, not inconsistent with law or with the Articles of Incorporation, as shall be approved by the Board of Directors or any officer(s) designated for such purpose by resolution of the Board of Directors. Each stock certificate shall be signed by the President or Vice President, and countersigned by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer. Each certificate may be sealed with the actual corporate seal or a facsimile of it or in any other form and the signatures on each certificate may be either manual or facsimile signatures. A certificate is valid and may be issued whether or not an officer who signed it is still an officer of the Corporation when it is issued.
Notwithstanding anything to the contrary herein, the Board of Directors may provide by resolution that some or all of the shares of any or all classes or series of the Corporation’s capital stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation.
Section 2. | TRANSFERS |
The Board of Directors shall have power and authority to make such rules and regulations as it may deem expedient concerning the issuance, transfer and registration of certificates of stock or uncertificated shares of stock, and may appoint transfer agents and registrars thereof. The duties of transfer agent and registrar may be combined.
Section 3. | RECORD DATE AND CLOSING OF TRANSFER BOOKS |
In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 70 nor less than 10 days before the date of such meeting, nor more than 70 days prior to any other action. The transfer books may not be closed for a period longer than 20 days. In the case of a meeting of shareholders, the closing of the transfer books shall be at least 10 days before the date of the meeting.
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Section 4. | STOCK LEDGER |
The Corporation shall maintain a stock ledger which contains the name and address of each shareholder and the number of shares of stock of each class registered in the name of each shareholder. The stock ledger may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. The original or a duplicate of the stock ledger shall be kept at the offices of a transfer agent for the particular class of stock, within or without the State of Missouri, or, if none, at the principal office or the principal executive offices of the Corporation in the State of Missouri.
Section 5. | CERTIFICATION OF BENEFICIAL OWNERS |
The Board of Directors may adopt by resolution a procedure by which a shareholder of the Corporation may certify in writing to the Corporation that any shares of stock registered in the name of the shareholder are held for the account of a specified person other than the shareholder.
Section 6. | LOST, STOLEN OR DESTROYED STOCK CERTIFICATES |
The Board of Directors of the Corporation may determine the conditions for issuing a new stock certificate or uncertificated shares in place of a stock certificate that is purportedly alleged to have been lost, stolen or destroyed, or the Board of Directors may delegate such power to any officer(s) of the Corporation. In its discretion, the Board of Directors or such officer(s) may refuse to issue such new certificate or uncertificated shares except upon the order of a court having jurisdiction in the premises.
ARTICLE VI - FINANCE
Section 1. | 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 Corporation are to be signed by such officer or officers, agent or agents of the Corporation and in such manner as from time to time may be determined by resolution of the Board of Directors of the Corporation.
Section 2. | FISCAL YEAR |
The fiscal year of the Corporation shall commence on the first day of January and end on the last day of December in each year.
ARTICLE VII - MISCELLANEOUS PROVISIONS
Section 1. | CORPORATE SEAL |
The Board of Directors may provide a suitable seal, bearing the name of the Corporation, which shall be in the charge of the Secretary. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.
Section 2. | VOTING UPON SHARES IN OTHER CORPORATIONS |
Stock of other corporations or associations, registered in the name of the Corporation, may be voted by the Chief Executive Officer, the President, a Vice President or a proxy appointed by any of them. The Board of Directors, however, may by resolution appoint some other person to vote such
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shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution.
Section 3. |
Any notice or other document which is required by these Bylaws to be mailed shall be deposited in the United States mail, postage prepaid.
Section 4. | AMENDMENT OF BYLAWS |
These Bylaws may be amended in the manner set forth in the Corporation’s Articles of Incorporation.
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Exhibit 4.0
COMMON STOCK | COMMON STOCK |
CERTIFICATE NO. __ | SEE REVERSE FOR CERTAIN DEFINITIONS |
CUSIP |
CENTRAL FEDERAL BANCSHARES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MISSOURI
THIS CERTIFIES THAT [SPECIMEN]
is the owner of:
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK,
$0.01 PAR VALUE PER SHARE, OF CENTRAL FEDERAL BANCSHARES, INC.
The shares represented by this certificate are transferable only on the stock transfer books of Central Federal Bancshares, Inc. (the “Company”) by the holder of record hereof, or by his duly authorized attorney or legal representative, upon the surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Articles of Incorporation of the Company and any amendments thereto (copies of which are on file with the Corporate Secretary of the Company), to all of which provisions the holder by acceptance hereof, assents. This certificate is not valid until countersigned and registered by the Company’s Transfer Agent and Registrar.
The shares evidenced by this certificate are not of an insurable type and are not insured by the Federal Deposit Insurance Corporation.
IN WITNESS WHEREOF, Central Federal Bancshares, Inc. has caused this certificate to be executed by the facsimile signatures of its duly authorized officers and has caused a facsimile of its corporate seal to be hereunto affixed.
Dated: __________ | [SEAL] | ||
President | Corporate Secretary |
CENTRAL FEDERAL BANCSHARES, INC.
The shares represented by this certificate are subject to a limitation contained in the Articles of Incorporation to the effect that in no event shall any record owner of any outstanding common stock which is beneficially owned, directly or indirectly, by a person who beneficially owns in excess of 10% of the outstanding shares of common stock (the “Limit”) be entitled or permitted to any vote in respect of shares held in excess of the Limit.
The Board of Directors of the Company is authorized by resolution(s), from time to time adopted, to provide for the issuance of serial preferred stock in series and to fix and state the voting powers, designations, preferences and relative, participating, optional, or other special rights of the shares of each such series and the qualifications, limitations and restrictions thereof. The Company will furnish to any shareholder upon request and without charge a full description of each class of stock and any series thereof.
The shares represented by this Certificate may not be cumulatively voted on any matter.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common |
UNIF GIFTS MIN ACT - __________ custodian __________ (Cust) (Minor) |
TEN ENT - as tenants by the entireties |
Under Uniform Gifts to Minors Act _______________ (State) |
JT TEN - as joint tenants with right of survivorship and not as tenants in common |
Additional abbreviations may also be used though not in the above list.
For value received __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER OF ASSIGNEE
Please print or typewrite name and address including postal zip code of assignee.
shares of the common represented constitute and appoint , attorney, to transfer the said stock on the books of the within-named corporation with full power of substitution in the premises.
DATED | |||
NOTICE: The signature to this assignment must | |||
correspond with the name as written upon the face | |||
of the certificate in every particular without | |||
alteration or enlargement or any change whatever. |
SIGNATURE GUARANTEED: |
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
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Exhibit 5.0
314.444.7600 (direct) 314.241.6056 (fax) www.lewisrice.com |
Attorneys at Law |
600 Washington Avenue Suite 2500 St. Louis, Missouri 63101 |
September 11, 2015
Board of Directors
Central Federal Bancshares, Inc.
210 West 10
th
Street
Rolla, Missouri 65401
RE: | Registration Statement on Form S-1; Up to 1,788,020 shares of Central Federal Bancshares, Inc. Common Stock, par value $0.01 per share |
Gentlemen:
We have acted as counsel to Central Federal Bancshares, Inc., a Missouri corporation (the “Company”), in connection with the proposed issuance of up to 1,788,020 shares of the Company’s common stock (the “Shares”) pursuant to the Company’s registration statement on Form S-1 (the “Registration Statement”), filed by the Company with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”). This opinion letter is being furnished to the Company in accordance with the requirements of Item 601(b)(5) under Regulation S-K of the Securities Act, and no opinion is expressed herein as to any matter pertaining to the contents of the Registration Statement or related prospectus (the “Prospectus”), other than as expressly stated herein with respect to the issue of the Shares.
As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this letter. With your consent, we have relied upon certificates and other assurances of officers of the Company and others as to factual matters without having independently verified such factual matters. We are opining herein as to the General and Business Corporation Law of Missouri and the Securities Act, and we express no opinion with respect to any other laws.
In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of: (i) the Articles of Incorporation of the Company, as amended through the date hereof (the “Articles of Incorporation”); (ii) the Bylaws of the Company, as amended through the date hereof (the “Bylaws”); (iii) certain resolutions of the Board of Directors of the Company relating to the issuance, sale and registration of the Shares under the Registration Statement and the Prospectus; and (iv) the Registration Statement and Prospectus. In addition, we have examined originals or copies, certified or otherwise identified to our satisfaction, of certain other corporate records, documents, instruments and certificates of public officials and of the Company, and we have made such inquiries of officers of the Company and public officials and considered such questions of law as we have deemed necessary for purposes of rendering the opinions set forth herein. As to the facts upon which this opinion is based, we have relied upon certificates of public officials and certificates and written statements of officers, directors, employees and representatives of the Company.
In rendering this opinion, we have assumed the genuineness and authenticity of all signatures on original documents; the authenticity of all documents submitted to us as originals; the conformity to originals of all documents submitted to us as copies; the legal capacity of natural persons who are signatories to the documents examined by us; the accuracy, completeness and authenticity of certificates of public officials; the due authorization, execution and delivery of all documents where authorization,
Established 1909
Central Federal Bancshares, Inc.
September 11, 2015
Page 2
execution and delivery are prerequisites to the effectiveness of such documents; and the legal power and authority of all persons (other than officers of the Company) signing on behalf of the parties to all documents.
Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, the Shares have been duly authorized by all necessary corporate action of the Company, and, when the Shares shall have been duly registered on the books of the transfer agent or registrar therefor in the name of or on behalf of the purchasers, and have been issued by the Company against payment therefor in the circumstances contemplated by the form of underwriting agreement most recently filed as an exhibit to the Registration Statement, the Shares will be validly issued, fully paid and nonassessable.
This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Securities Act. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained in the Prospectus under the heading “Legal and Tax Opinions.” We further consent to your filing this opinion as an exhibit to the Form AC filed by Central Federal Savings and Loan Association of Rolla with the Office of the Comptroller of the Currency, and as an exhibit to the Application on Form H-(e)1-S filed by the Company with the Board of Governors of the Federal Reserve System, both in connection with the Registration Statement. By giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.
Very Truly Yours, | |
LEWIS RICE LLC | |
/s/ Lewis Rice LLC |
Exhibit 8.1
314.444.7600 (direct) 314.241.6056 (fax) www.lewisrice.com |
Attorneys at Law |
600 Washington Avenue Suite 2500 St. Louis, Missouri 63101 |
September 10, 2015
Board of Directors
Central Federal Savings and Loan Association of Rolla
210 West 10th Street
Rolla, Missouri 65401
Re: | Federal Income Tax Opinion Relating to the Conversion of Central Federal Savings and Loan Association of Rolla from a Federally-Chartered Mutual Savings Association to a Federally-Chartered Stock Savings Association |
Gentlemen:
You have asked for our opinion regarding the material U.S. federal income tax consequences of (i) the conversion of Central Federal Savings and Loan Association of Rolla from a federally chartered mutual savings association (the “Association”) to a federally chartered stock savings association (the “Converted Association”); (ii) the acquisition of the Converted Association’s capital stock by Central Federal Bancshares, Inc., a Missouri corporation (the “Holding Company”); and, (iii) the issuance of common stock by the Holding Company in the Offerings. These transactions are collectively referred to herein as the “Conversion”. The Conversion will be carried out pursuant to a plan of conversion adopted by the Board of Directors of the Association on August 4, 2015 (the “Plan of Conversion”). All capitalized terms used but not defined herein shall have the meanings assigned to them in the Plan of Conversion.
For the purposes of our opinion, we have examined and relied upon originals, or copies certified or otherwise identified to our satisfaction, of the Plan of Conversion, as amended through the date hereof, 1 and of such corporate records of the parties to the Conversion as we have deemed necessary or appropriate, including, but not limited to, the Holding Company’s Registration Statement on Form S-1 relating to the proposed issuance of common stock, and the Articles of Incorporation and Bylaws of Holding Company. We have also relied upon, without independent verification, the representations of the Association and Holding Company contained in their letter to us dated August 4, 2015. We have assumed that such representations are true.
We have assumed that the Conversion contemplated by the Plan of Conversion will be consummated in accordance therewith and as described in the prospectus included as part of the Registration Statement on Form S-l filed by the Holding Company.
Our opinion is limited solely to the U.S. federal income tax consequences of the proposed Conversion and does not analyze or address any other taxes, jurisdictions, transactions, or issues. Our opinion is based the existing provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the U.S. Treasury Regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as of the date hereof, and all of which are subject to change, possibly with retroactive effect. Changes in the tax laws could affect the continued validity of the opinions expressed below. Furthermore, there can be no assurance that the opinions expressed herein would be adopted by the Internal Revenue Service (the “IRS”) or a court of law.
1 The Board of Directors of the Association adopted an amendment to the Plan of Conversion, on September 8, 2015.
Established 1909
Central Federal Savings and Loan Association of Rolla
September 10, 2015
Page 2
We specifically express no opinion concerning tax matters relating to the Plan of Conversion under state and local tax laws. Our opinions under U.S. federal income tax laws are based on the documents and assumptions described above.
The initial purchase price of the common stock of the Converted Association to be issued after the Conversion, and the number of shares of such common stock to be offered for sale, will be decided by the Boards of Directors of the Holding Company and Association, based upon a valuation of the Association by an independent appraiser.
Based on and subject to the foregoing, it is our opinion that for U.S. federal income tax purposes, under current law:
1. | The Conversion of the Association from a federally chartered mutual savings association to a federally chartered stock savings association will qualify as a reorganization within the meaning of Section 368(a)(1)(F) of the Code, and no gain or loss will be recognized by account holders or by the Association by reason of such conversion. See Rev. Rul. 80-105, 1980-1 C.B. 78. |
2. | No gain or loss will be recognized by the Converted Association on the receipt of money from the Holding Company in exchange for its shares. Code Section 1032(a). |
3. | No gain or loss will be recognized by the Holding Company upon the receipt of money from the sale of its common stock in the Offerings. Code Section 1032(a). |
4. | The assets of the Association will have the same basis in the hands of the Converted Association as they had in the hands of the Association immediately prior to the Conversion. Code Section 362(b). |
5. | The holding period of the Association’s assets to be received by the Converted Association will include the period during which the assets were held by the Association prior to the Conversion. Code Section 1223(2). |
6. | Account holders of the Association will recognize no gain or loss upon the issuance to them of withdrawable deposit accounts in the Converted Association immediately after the Conversion, in the same dollar amounts and on the same terms and conditions as their deposit accounts in the Association. Code Section 354(a). |
7. | No gain or loss will be recognized by the Eligible Account Holders or the Supplemental Eligible Account Holders upon receipt by them of an interest in the Liquidation Account of the Converted Association in exchange for their ownership interests in the Association. Code Section 354(a). |
8. | The basis of the account holders’ withdrawable deposit accounts in the Converted Association will be the same as the basis of their deposit accounts in the Association surrendered in exchange therefor. The basis of each Eligible Account Holder’s and Supplemental Eligible Account Holder’s interests in the Liquidation Account of the Converted Association will be zero. Code Section 358(a). |
Central Federal Savings and Loan Association of Rolla
September 10, 2015
Page 3
9. | It is more likely than not that the fair market value of the non-transferable subscription rights to purchase shares of common stock of the Holding Company (the “Subscription Rights”) to be issued to Eligible Account Holders, Supplemental Eligible Account Holders, and Other Members is zero, and, accordingly, that no income will be realized by Eligible Account Holders, Supplemental Eligible Account Holders, and Other Members upon the issuance to them of Subscription Rights or upon the exercise of the Subscription Rights. Code Section 356(a); Rev. Rul. 56-572, 1956-2 C.B. 182. |
10. | It is more likely than not that the tax basis to the holders of shares of common stock purchased in the Subscription Offering pursuant to the exercise of Subscription Rights will be the amount paid therefor, and that the holding period for such shares of common stock will begin on the date of the completion of the Offerings. Code Section 1223(5). |
11. | The holding period for shares of common stock purchased in the Community Offering or Syndicated Community Offering will begin on the day after the date of completion of such Offering. Rev. Rul. 70-598, 1970-2 C.B. 168. |
12. | For purposes of Section 381 of the Code, the Converted Association will be treated as if there had been no reorganization. Accordingly, the taxable year of the Association will not end on the effective date of the Conversion, and the Association will not be required to file a federal income tax return for any portion of such taxable year solely by reason of the Conversion. Treas. Reg. Section 1.381(b)-(1)(a)(2); See Rev. Rul. 57-276, 1957-1 C.B. 126. |
13. | The Converted Association will succeed to the tax attributes of the Association enumerated in Code Section 381(c), as if there had been no reorganization. Treas. Reg. Section 1.381(b)-(1)(a)(2). |
Notwithstanding any reference to Code Section 381 above, no opinion is expressed or intended to be expressed herein as to the effect, if any, of the Conversion or Offerings on the continued existence of, the carryover or carryback of, or the limitation on, any net operating losses of the Association or its successor, Converted Association, under the Code. Additionally, no opinion is expressed as to the effect of the Conversion or Offerings on the use of net operating loss carry-forwards, excess credits, or pre-acquisition losses of the Association, if any, under Sections 382, 383, or 384.
The reasoning in support of our opinions set forth in paragraphs 9 and 10 above is as follows:
· | Whether the Subscription Rights have a market value for federal income tax purposes is a question of fact, and depends upon all of the relevant facts and circumstances. The IRS will not issue rulings on whether the Subscription Rights have a market value. We are unaware of any instance in which the IRS has taken the position that nontransferable subscription rights issued by a converting financial institution have a market value. |
· | In addition, our opinion under paragraph 9 above is predicated on the representation given by the Association and the Holding Company that no person |
Central Federal Savings and Loan Association of Rolla
September 10, 2015
Page 4
shall receive any payment, whether in money or property, in lieu of the issuance of Subscription Rights.
· | Our opinion under paragraphs 9 and 10 is based on the assumption 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 recipients with the right only to purchase shares of common stock at the same price to be paid by members of the general public in the Offerings. |
· | If the Subscription Rights are subsequently found to have value, income may be recognized by various recipients of the Subscription Rights (in certain cases, whether or not the rights are exercised) and the Holding Company and/or Converted Association may be taxable on the distribution of the Subscription Rights. |
No opinion is expressed or intended to be expressed herein as to whether the charitable foundation to be established by the Holding Company, the Central Federal Community Foundation (the “Foundation”), will qualify for or be granted tax-exempt status under either Federal or Missouri State law. Additionally, no opinion is expressed or intended to be expressed herein as to whether the Holding Company will be entitled to claim a deduction for Federal or Missouri State income tax purposes for its contributions, including contributions of its common stock, to the Foundation.
Except as set forth above, we express no opinion to any party as to the tax consequences, whether federal, state, local or foreign, of the Conversion or of any transaction related thereto or contemplated by the Plan of Conversion. This opinion may not be referred to in any document without our prior express written consent. We consent to the filing of this opinion as an exhibit to the Application for Conversion on Form AC filed by the Association with the Office of the Comptroller of the Currency, as an exhibit to the Application on Form H-(e)1-S filed by the Holding Company with the Board of Governors of the Federal Reserve System, and as an exhibit to the Registration Statement on Form S-1 filed by the Holding Company with the Securities and Exchange Commission, each filed in connection with the Conversion. We further consent to the reference to our firm and to this opinion in the prospectus included in the Registration Statement on Form S-1, under the heading “The Conversion and Stock Offering — Material Income Tax Consequences.” In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.
Our opinion is issued as of the date hereof, and we disclaim any obligation to revise or supplement our opinion should the current U.S. federal income tax laws be changed by any legislation, administrative interpretations or rulings, judicial decisions or otherwise.
Very truly yours, | |
LEWIS RICE, LLC | |
/s/ Lewis Rice LLC |
Exhibit 8.2
314.444.7600 (direct) 314.241.6056 (fax) www.lewisrice.com |
Attorneys at Law |
600 Washington Avenue Suite 2500 St. Louis, Missouri 63101 |
September 10, 2015
Board of Directors
Central Federal Savings and Loan Association of Rolla
210 West 10th Street
Rolla, Missouri 65401
Re: | State Income Tax Opinion Relating to the Conversion of Central Federal Savings and Loan Association of Rolla from a Federally Chartered Mutual Savings Association to a Federally Chartered Stock Savings Association |
Gentlemen:
You have requested our opinion regarding the Missouri state income tax consequences of (i) the conversion of Central Federal Savings and Loan Association of Rolla from a federally chartered mutual savings association (the “Association”) to a federally chartered stock savings association (the “Converted Association”); (ii) the acquisition of the Converted Association’s capital stock by Central Federal Bancshares, Inc., a Missouri corporation (the “Holding Company”); and, (iii) the issuance of common stock by the Holding Company in the Offerings. These transactions are collectively referred to herein as the “Conversion”. The Conversion will be carried out pursuant to a Plan of Conversion initially adopted by the Board of Directors of the Association on August 4, 2015 (the “Plan of Conversion”). All capitalized terms used but not defined herein shall have the meanings assigned to them in the Plan of Conversion.
For the purposes of our opinion, we have examined and relied upon originals, or copies certified or otherwise identified to our satisfaction, of the Plan of Conversion, as amended through the date hereof, 1 and of such corporate records of the parties to the Conversion as we have deemed necessary or appropriate, including, but not limited to, the Holding Company’s Registration Statement on Form S-1 relating to the proposed issuance of common stock, and the Articles of Incorporation and Bylaws of the Holding Company. We have also relied upon, without independent verification, the representations of the Association and Holding Company contained in their letter to us dated August 4, 2015. We have assumed that such representations are true.
We have assumed that the Conversion contemplated by the Plan of Conversion will be consummated in accordance therewith and as described in the prospectus included as part of the Registration Statement on Form S-l filed by the Holding Company.
Our opinion is limited solely to the Missouri state income tax consequences of the proposed Conversion and does not analyze or address any other taxes, jurisdictions, transactions, or issues. Our opinion is based on the savings and loan association income tax provisions of the Revised Statutes of Missouri, existing regulations and current administrative and judicial interpretations thereof, all in effect as of the date hereof, and all subject to change, possibly with retroactive effect. Changes in the tax laws could affect the continued validity of the opinions expressed below.
1 The Board of Directors of the Association adopted an amendment to the Plan of Conversion on September 8, 2015.
Established 1909
Central Federal Savings and Loan Association of Rolla
September 10, 2015
Page 2
We specifically express no opinion herein concerning tax matters relating to the Plan of Conversion under U.S. federal income tax laws, including but not limited to the U.S. Internal Revenue Code of 1986, as amended (the “Code”). Our opinions under Missouri state income tax laws are based on the documents and assumptions described above. Our opinion will not bind the Missouri Department of Revenue or any court, and, therefore, the Missouri Department of Revenue and Missouri courts are not precluded from asserting a contrary position.
The initial purchase price of the common stock of the Converted Association to be issued after the Conversion, and the number of shares of such common stock to be offered for sale, shall be decided by the Boards of Directors of the Holding Company and Association, based upon a valuation of the Association by an independent appraiser.
Federal Tax Opinion of Lewis Rice LLC
In addition to this opinion, we have issued an opinion, of even date herewith, that addresses the material U.S. federal income tax consequences of the Conversion (the “Federal Opinion”). The Federal Opinion, which relies upon standard factual representations given by the Association, concludes, as follows:
1. | The Conversion of the Association from a federally chartered mutual savings association to a federally chartered stock savings association will qualify as a reorganization within the meaning of Section 368(a)(1)(F) of the Code, and no gain or loss will be recognized by account holders or by the Association by reason of such conversion. See Rev. Rul. 80-105, 1980-1 C.B. 78. |
2. | No gain or loss will be recognized by the Converted Association on the receipt of money from the Holding Company in exchange for its shares. Code Section 1032(a). |
3. | No gain or loss will be recognized by the Holding Company upon the receipt of money from the sale of shares of its common stock in the Offerings. Code Section 1032(a). |
4. | The assets of the Association will have the same basis in the hands of the Converted Association as they had in the hands of the Association immediately prior to the Conversion. Code Section 362(b). |
5. | The holding period of the Association’s assets to be received by the Converted Association will include the period during which the assets were held by the Association prior to the Conversion. Code Section 1223(2). |
6. | Account holders of the Association will recognize no gain or loss upon the issuance to them of withdrawable deposit accounts in the Converted Association immediately after the Conversion, in the same dollar amounts and on the same terms and conditions as their deposit accounts in the Association. Code Section 354(a). |
Central Federal Savings and Loan Association of Rolla
September 10, 2015
Page 3
7. | No gain or loss will be recognized by the Eligible Account Holders or the Supplemental Eligible Account Holders upon receipt by them of an interest in the Liquidation Account of the Converted Association in exchange for their ownership interests in the Association. Code Section 354(a). |
8. | The basis of the account holders’ withdrawable deposit accounts in the Converted Association will be the same as the basis of their deposit accounts in the Association surrendered in exchange therefor. The basis of each Eligible Account Holder’s and Supplemental Eligible Account Holder’s interests in the Liquidation Account of the Converted Association will be zero. Code Section 358(a). |
9. | It is more likely than not that the fair market value of the non-transferable subscription rights to purchase shares of common stock of the Holding Company (the “Subscription Rights”) to be issued to Eligible Account Holders, Supplemental Eligible Account Holders, and Other Members is zero, and, accordingly, that no income will be realized by Eligible Account Holders, Supplemental Eligible Account Holders, and Other Members upon the issuance to them of Subscription Rights or upon the exercise of the Subscription Rights. Code Section 356(a); Rev. Rul. 56-572, 1956-2 C.B. 182. |
10. | It is more likely than not that the tax basis to the holders of shares of common stock purchased in the Subscription Offering pursuant to the exercise of Subscription Rights will be the amount paid therefor, and that the holding period for such shares of common stock will begin on the date of the completion of the Offerings. Code Section 1223(5). |
11. | The holding period for shares of common stock purchased in the Community Offering or Syndicated Community Offering will begin on the day after the date of completion of such Offering. Rev. Rul. 70-598, 1970-2 C.B. 168. |
12. | For purposes of Section 381 of the Code, the Converted Association will be treated as if there had been no reorganization. Accordingly, the taxable year of the Association will not end on the effective date of the Conversion, and the Association will not be required to file a federal income tax return for any portion of such taxable year solely by reason of the Conversion. Treas. Reg. Section 1.381(b)-(1)(a)(2); See Rev. Rul. 57-276, 1957-1 C.B. 126. |
13. | The Converted Association will succeed to the tax attributes of the Association enumerated in Code Section 381(c), as if there had been no reorganization. Treas. Reg. Section 1.381(b)-(1)(a)(2). |
Discussion Related to Missouri State Income Tax Consequences
Chapters 143 and 148 of the Revised Statutes of Missouri (the “Revised Statutes”) contain the provisions that dictate the income taxation of savings and loan associations in the State of Missouri. Missouri law does not prescribe requirements for a transaction to qualify as a reorganization, nor does
Central Federal Savings and Loan Association of Rolla
September 10, 2015
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Missouri law include any exceptions or modifications relating to Code Section 368(a)(1)(F) (an “F reorganization”) or to any of the related Code provisions that determine the income tax consequences of a an F reorganization. See Mo. Rev. Stat. §§ 143.105, 143.111, and 143.091. Thus, Missouri law does not modify the federal law that determines the holding period and basis of assets transferred in an F reorganization. Instead, Missouri law conforms to the provisions of the Code, as in effect for the taxable year, including the provisions relating to recognition of gain or loss on reorganizations under Code Sections 368, 354 and 361.
Missouri uses U.S. federal taxable income as the starting point for computing Missouri taxable income. See Mo. Rev. Stat . §§ 143.105, 143.431, 143.011, 143.111, 143.121, and 143.091. The Missouri taxable income of a savings and loan association is its net income for the taxable year, from whatever sources derived, as determined under Section 148.603 of the Revised Statutes and as adjusted under subsections 3 and 5 thereof. Missouri follows the Code and all of its definitions for determining the taxable income of banking institutions in Missouri. Mo. Rev. Stat. § 148.70. The Federal Opinion, which states that no income or loss is recognized for U.S. federal income tax purposes by any of the parties to the Conversion described above, therefore provides the basis upon which we conclude that such conversion will result in no gain or loss under Missouri income tax law.
Missouri also follows the Code and all of its definitions for determining the taxable income of individuals. Mo. Rev. Stat. § 143.091. Additionally, individual taxable income is defined as adjusted gross income as defined in the Code, as in effect for the taxable year. Mo. Rev. Stat. § 143.121. As such, the various entities that are party to the Conversion, and the Eligible Account Holders, Supplemental Eligible Account Holders and Other Members of the Association will receive the same treatment for Missouri income tax purposes as for federal income tax purposes.
Accordingly, based on the facts and representations stated herein and the existing law, it is our opinion that for Missouri state income tax purposes:
1. | No gain or loss will be recognized by the Association or by its account holders by reason of the Association’s conversion from a federally chartered mutual association to a federally chartered stock association. |
2. | No gain or loss will be recognized by the Converted Association on the receipt of money from the Holding Company in exchange for its shares. |
3. | No gain or loss will be recognized by the Holding Company upon the receipt of money from the sale of its common stock in the Offerings. |
4. | The assets of the Association will have the same basis in the hands of the Converted Association as they had in the hands of Association immediately prior to the Conversion. |
5. | The holding period of the Association’s assets to be received by the Converted Association will include the period during which the assets were held by the Association prior to the Conversion. |
6. | Account holders of the Association will recognize no gain or loss upon the issuance to them of withdrawable deposit accounts in the Converted Association immediately after |
Central Federal Savings and Loan Association of Rolla
September 10, 2015
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the Conversion, in the same dollar amounts and on the same terms and conditions as their deposit accounts in the Association.
7. | No gain or loss will be recognized by the Eligible Account Holders or the Supplemental Eligible Account Holders upon receipt by them of an interest in the Liquidation Account of the Converted Association in exchange for their ownership interests in the Association. |
8. | The basis of the account holders’ withdrawable deposit accounts in the Converted Association will be the same as the basis of their deposit accounts in the Association surrendered in exchange therefor. The basis of each Eligible Account Holder’s and Supplemental Eligible Account Holder’s interests in the Liquidation Account of the Converted Association will be zero. |
9. | It is more likely than not that the fair market value of the non-transferable subscription rights to purchase shares of common stock of the Holding Company (the “Subscription Rights”) to be issued to Eligible Account Holders, Supplemental Eligible Account Holders, and Other Members is zero, and, accordingly, that no income will be realized by the Eligible Account Holders, Supplemental Eligible Account Holders, and Other Members upon the issuance to them of Subscription Rights or upon the exercise of the Subscription Rights. |
10. | It is more likely than not that the tax basis to the holders of shares of common stock purchased in the Offering pursuant to the exercise of Subscription Rights will be the amount paid therefor, and that the holding period for such shares of common stock will begin on the date of the completion of the Offering. |
11. | The holding period for shares of common stock purchased in the Community Offering or Syndicated Community Offering will begin on the day after the date of completion of such Offering. |
No opinion is expressed or intended to be expressed herein as to the effect, if any, of the Conversion or Offerings on the continued existence of, the carryover or carryback of, or the limitation on, any net operating losses or other tax attributes of the Association or its successor, Converted Association.
The reasoning in support of our opinions set forth in paragraphs 9 and 10 above is as follows:
· | Whether the Subscription Rights have a market value for federal income tax purposes is a question of fact, and depends upon all of the relevant facts and circumstances. The IRS will not issue rulings on whether the Subscription Rights have a market value. We are unaware of any instance in which the IRS has taken the position that nontransferable subscription rights issued by a converting financial institution have a market value. |
· | In addition, our opinion under paragraph 9 above is predicated on the representations given by the Association and the Holding Company that no person shall receive any payment, whether in money or property, in lieu of the issuance of Subscription Rights. |
Central Federal Savings and Loan Association of Rolla
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· | Our opinion under paragraphs 9 and 10 is based on the assumption 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 recipients with the right only to purchase shares of common stock at the same price to be paid by members of the general public in the Offerings. |
· | If the Subscription Rights are subsequently found to have value, income may be recognized by various recipients of the Subscription Rights (in certain cases, whether or not the rights are exercised) and the Holding Company and/or Converted Association may be taxable on the distribution of the Subscription Rights. |
No opinion is expressed or intended to be expressed herein as to whether the charitable foundation to be established by the Holding Company, the Central Federal Community Foundation (the “Foundation”), will qualify for or be granted tax-exempt status under either Federal or Missouri State law. Additionally, no opinion is expressed or intended to be expressed herein as to whether the Holding Company will be entitled to claim a deduction for Federal or Missouri State income tax purposes for its contributions, including contributions of its common stock, to the Foundation.
This opinion is given solely for the benefit of the Association, the Holding Company, Eligible Account Holders, Supplemental Account Holders and Other Members described in the Plan of Conversion who will receive Subscription Rights and may not be relied upon by any other party or entity. Except as set forth above, we express no opinion to any party as to the tax consequences, whether federal, state, local or foreign, of the Conversion or of any transaction related thereto or contemplated by the Plan of Conversion. This opinion may not be referred to in any document without our prior express written consent. We consent to the filing of this opinion as an exhibit to the Application for Conversion on Form AC filed by the Association with the Office of the Comptroller of the Currency, as an exhibit to the Application on Form H-(e)1-S filed by the Holding Company with the Board of Governors of the Federal Reserve System, and as an exhibit to the Registration Statement on Form S-1 filed by the Holding Company with the Securities and Exchange Commission, each filed in connection with the Conversion. We further consent to the reference to our firm and to this opinion in the prospectus included in the Registration Statement on Form S-1, under the heading “THE CONVERSION AND STOCK OFFERING — Material Income Tax Consequences.” In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.
Our opinion is issued as of the date hereof, and we disclaim any obligation to revise or supplement our opinion should the current Missouri state income tax laws be changed by any legislation, administrative interpretations or rulings, judicial decisions or otherwise.
Very truly yours, | |
LEWIS RICE LLC | |
/s/ Lewis Rice LLC |
Exhibit 10.1
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA
FORM OF
EMPLOYEE STOCK OWNERSHIP PLAN
Effective [ ]
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA
FORM OF
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
Section 1 - Introduction | 1 |
Section 2 - Definitions | 1 |
Section 3 - Eligibility and Participation | 8 |
Section 4 - Contributions | 10 |
Section 5 - Plan Accounting | 12 |
Section 6 - Vesting | 18 |
Section 7 - Distributions | 20 |
Section 8 - Voting of Company Stock and Tender Offers | 27 |
Section 9 - The Committee and Plan Administration | 28 |
Section 10 - Rules Governing Benefit Claims | 30 |
Section 11 - The Trust | 31 |
Section 12 - Adoption, Amendment and Termination | 32 |
Section 13 - General Provisions | 33 |
Section 14 - Top-Heavy Provisions | 34 |
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA
EMPLOYEE STOCK OWNERSHIP PLAN
SECTION 1
INTRODUCTION
1.01 Nature of the Plan . Effective as of (the “Effective Date”), Central Federal Savings and Loan Association of Rolla (the “Association”) hereby adopts the Central Federal Savings and Loan Association of Rolla Employee Stock Ownership Plan (the “Plan”). The Plan enables Eligible Employees (as defined in Section 2.01(q) of the Plan) to acquire stock ownership interests in Central Federal Bancshares, Inc. (the “Company”), the holding company of the Association. The Association intends this Plan to be a tax-qualified stock bonus plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and an employee stock ownership plan within the meaning of Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and Sections 409 and 4975(e)(7) of the Code. The Plan is designed to invest primarily in the common stock of the Company, which stock constitutes “qualifying employer securities” within the meaning of Section 407(d)(5) of ERISA and Sections 409(l) and 4975(e)(8) of the Code. Accordingly, the Plan and Trust Agreement (as defined in Section 2.01(oo) of the Plan) shall be interpreted and applied in a manner consistent with the Association’s intent for it to be a tax-qualified plan designed to invest primarily in qualifying employer securities.
1.02 Employers and Affiliates . The Association and each of its Affiliates (as defined in Section 2.01(c) of the Plan) which, with the consent of the Association, adopt the Plan pursuant to the provisions of Section 12.01 of the Plan are collectively referred to as the “Employers” and individually as an “Employer.” The Plan shall be treated as a single plan with respect to all participating Employers. No Employer is a Subchapter-S corporation as of the Effective Date.
SECTION 2
DEFINITIONS
2.01 Definitions . In this Plan, whenever the context so indicates, the singular or the plural number and the masculine or feminine gender shall be deemed to include the other, the terms “he,” “his,” and “him,” shall refer to a Participant or Beneficiary, as the case may be, and, except as otherwise provided, or unless the context otherwise requires, the following bolded and capitalized terms have the meanings set forth below.
(a) Account or Accounts mean a Participant’s or Beneficiary’s Company Stock Account and/or his Other Investments Account, as the context so requires.
(b) Acquisition Loan means a loan (or other extension of credit, including an installment obligation to a “party in interest” (as defined in Section 3(14) of ERISA)) incurred by the Trustee in connection with the purchase of Company Stock.
(c) Affiliate means any corporation, trade or business, which, at the time of reference, is together with the Association, a member of a controlled group of corporations, a group of trades or businesses (whether or not incorporated) under common control, or an affiliated service group, as described in Sections 414(b), 414(c), and 414(m) of the Code, respectively, or any other organization treated as a single employer with the Association under Section 414(o) of the Code; provided, however, that, where the context so requires, the term “Affiliate” shall be construed to give full effect to the provisions of Sections 409(l)(4) and 415(h) of the Code. The Association, Company and any other Affiliate are sometimes collectively referred to as the “Control Group”.
(d) Association means Central Federal Savings and Loan Association of Rolla and any entity which succeeds to the business of the Association and which adopts this Plan in accordance with the provisions of Section 12.02 of the Plan or by written agreement assuming the obligations under the Plan.
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(e) Beneficiary means any person or the persons (natural or otherwise) designated by a Participant to receive benefits under the Plan following a Participant’s death or in the absence of any such designated persons), such other persons as determined to be the beneficiary under Section 7.03 of the Plan.
(f) Break In Service means any Plan Year, in which an Employee has 500 or fewer Hours of Service. Solely for this purpose, an Employee shall be considered employed for his normal hours of paid employment during a Recognized Absence (the Employee shall not be credited with more than 501 Hours of Service to avoid a Break in Service), unless he does not resume his Service at the end of the Recognized Absence. Further, if an Employee is absent for any period (i) by reason of the Employee’s pregnancy, (ii) by reason of the birth of the Employee’s child, (iii) by reason of the placement of a child with the Employee in connection with the Employee’s adoption of the child, or (iv) for purposes of caring for such child for a period beginning immediately after such birth or placement, the Employee shall be credited with the Hours of Service which would normally have been credited but for such absence, up to a maximum of 501 Hours of Service. Hours of Service shall be credited only in the year in which the absence from work begins, if a Participant would be prevented from incurring a one-year Break in Service in such year solely because the period of absence is treated as Hours of Service, or in any other case, in the immediately following year.
(g) Change in Control means the occurrence of any one of the events set forth below.
(i) Merger : The Company or the Association merges into or consolidates with another corporation, or merges another corporation into the Company or the Association, 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 Association immediately before the merger or consolidation.
(ii) Acquisition of Significant Share Ownership : The Company files, or is required to file, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Exchange Act, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of twenty-five percent (25%) or more of a class of the Company’s voting securities, but this clause (b) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty (50%) or more of its outstanding voting securities.
(iii) Change in Board Composition : During any period of two consecutive years, individuals who constitute the Company’s or the Association’s board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Association’s or the Company’s board of directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board of directors (or first nominated by the board of directors for election by the stockholders) 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.
(iv) Sale of Assets : The Company or the Association sells to a third party all or substantially all of its assets.
(h) Code means the Internal Revenue Code of 1986, as amended.
(i) Committee means the individual(s) responsible for the administration of the Plan in accordance with Section 9 of the Plan.
(j) Company means Central Federal Bancshares, Inc., a Missouri corporation, and any entity which succeeds to the business of Central Federal Bancshares, Inc.
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(k) Company Stock means the common stock of Central Federal Bancshares, Inc. and any other common stock issued by another corporation which is a member of the same group of controlled corporations. Company Stock shall also include any securities substituted for such stock by way of recapitalization, reorganization, merger or consolidation. The Plan shall not hold or invest in any Company Stock unless such securities are: (i) common stock which is readily tradable in an established market; or (ii) if there is no such readily tradable common stock, then common stock having a combination of voting power and dividend rights equal to or in excess of that class of common stock having the greatest voting power and that class of common stock having the greatest dividend rights; provided that noncallable preferred stock which is convertible at any time at a reasonable price into common stock having the characteristics described above may be held or purchased as Plan investments.
(l) Company Stock Account means the account established and maintained in the name of each Participant or Beneficiary to reflect his share of the Trust Fund invested in Company Stock.
(m) Compensation means a Participant’s compensation paid by the Employer for the Employer’s fiscal year, as reflected on IRS Form W-2, including wages, salary, overtime pay, commissions and bonuses of all kinds. Compensation shall also include amounts not currently includible in gross income by reason of the application of Sections 125 (cafeteria plan), 132(f)(4) (qualified transportation fringe), 402(e)(3) (401(k) plan), 402(h)(1)(B) (simplified employee pension plan), 414(h) (employer pickup contributions under a governmental plan), 403(b) (tax sheltered annuity) or 457(b) (eligible deferred compensation plan) of the Code. Notwithstanding the foregoing, to the extent the definition of Compensation does not satisfy the requirements of Section 414(s) of the Code for any particular Plan Year, then, for that Plan Year, the definition of Compensation shall have the meaning provided in Section 5.05(c) of this Plan.
A Participant’s Compensation shall not exceed the limit set forth in Section 401(a)(17) of the Code ($265,000 for the Plan Years beginning January 1, 2015). If the Plan Year for which a Participant’s Compensation is measured is less than twelve (12) calendar months, then the amount of Compensation taken into account for such Plan Year shall be the adjusted amount for such Plan Year, as prescribed by the Secretary of the Treasury under Section 401(a)(17) of the Code, multiplied by a fraction, the numerator of which is the number of months taken into account for such Plan Year and the denominator of which is twelve (12). In determining the dollar limitation hereunder, Compensation received from an Affiliate shall be recognized as Compensation.
(n) Disability means a physical or mental impairment, certified by one or more physician(s) designated by the Committee, which prevents him from doing any substantial gainful activity for which he is fitted by education, training or experience, and which is expected to last at least 12 months or to result in death.
(o) Effective Date means .
(p) Eligibility Computation Period means a twelve (12) consecutive month period. An Employee’s first Eligibility commencement period shall begin on the date he first performs an Hour of Service for the Employer ( i.e., “employment commencement date”). Subsequent Eligibility Computation Periods shall be the Plan Year, commencing with the first Plan Year that includes the first anniversary date of the Employee’s employment commencement date. To determine the first Eligibility Computation Period after a one year Break in Service, the Plan shall use the twelve (12) consecutive month period beginning on the date the Employee again performs an Hour of Service for the Employer.
(q) Eligible Employee means any Employee who is not precluded from participating in the Plan by reason of the provisions of Section 3.02 of the Plan.
(r) Employee means any individual who is or has been employed or self-employed by an Employer. “Employee” also means an individual employed by a leasing organization who, pursuant to an agreement between an Employer and the leasing organization, has performed services for the Employer and any
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related persons (within the meaning of Section 414(n)(6) of the Code) on a substantially full-time basis for more than one year, if such services are performed under the primary direction or control of the Employer. However, such a “leased employee” shall not be considered an Employee if (i) he participates in a money purchase pension plan sponsored by the leasing organization which provides for immediate participation, immediate full vesting, and an annual contribution of at least 10 percent of the Employee’s Compensation, and (ii) leased employees do not constitute more than 20 percent of the Employer’s total work force (including leased employees, but excluding Highly Compensated Employees and any other Employees who have not performed services for the Employer on a substantially full-time basis for at least one year).
(s) Employer or Employers means the Association and its Affiliates, which adopt the Plan in accordance with the provisions of Section 12.01 of the Plan, and any entity which succeeds to the business of the Association or its Affiliates and which adopts the Plan in accordance with the provisions of Section 12.02 of the Plan or by written agreement assumes the obligations under the Plan.
(t) Entry Date means January 1st and July 1st.
(u) ERISA means the Employee Retirement Income Security Act of 1974, as amended.
(v) Exchange Act means the Securities Exchange Act of 1934, as amended.
(w) Fiduciaries means the named fiduciaries, who shall be the Company, each Employer, the Plan Administrator, the Committee responsible for plan administration and the Trustee, and other parties designated as fiduciaries by such named fiduciaries in accordance with the powers herein provided, but only with respect to the specific responsibilities of the Plan as set forth herein.
(x) Financed Shares means shares of Company Stock acquired by the Trustee with the proceeds of an Acquisition Loan, which shall constitute “qualifying employer securities” under Section 409(l) of the Code and any shares of Company Stock received upon conversion or exchange of such shares.
(y) Highly Compensated Employee means an Employee who, for a particular Plan Year, satisfies one of the following conditions:
(i) was a “5-percent owner” (as defined in Section 414(q)(2) of the Code) during the year or the preceding year; or
(ii) for the preceding year, had “compensation” (as defined in Section 414(q)(4) of the Code) from the Association and its Affiliates exceeding the limit in Section 414(q)(l) of the Code ($120,000 for Plan Years beginning January 1, 2015). The applicable year for which a determination is being made is called a “determination year” and the preceding 12-month period is called “look-back year.”
(z) Hours of Service means hours to be credited to an Employee under the rules set forth below.
(i) Each hour for which an Employee is paid or is entitled to be paid for services to an Employer is an Hour of Service.
(ii) Each hour for which an Employee is directly or indirectly paid or is entitled to be paid for a period of vacation, holidays, illness, disability, lay-off, jury duty, temporary military duty, or leave of absence is an Hour of Service. However, except as otherwise specifically provided, no more than 501 Hours of Service shall be credited for any single continuous period which an Employee performs no duties. No more than 501 Hours of Service will be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period). Further, no Hours of Service shall be credited on account of payments made solely under a plan maintained to comply with worker’s compensation, unemployment compensation, or disability insurance laws, or to reimburse an Employee for medical expenses.
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(iii) Each hour for which back pay (ignoring any mitigation of damages) is either awarded or agreed to by an Employer is an Hour of Service. However, no more than 501 Hours of Service shall be credited for any single continuous period during which an Employee would not have performed any duties. The same Hours of Service will not be credited both under paragraph (i) or (ii) as the case may be, and under this paragraph. These hours will be credited to the employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award agreement or payment is made.
(iv) Hours of Service shall be credited in any one period only under one of the foregoing paragraphs (i), (ii) and (iii); an Employee may not get double credit for the same period.
(v) If an Employer finds it impractical to count the actual Hours of Service for any class or group of non-hourly Employees, each Employee in that class or group shall be credited with 90 Hours of Service for each bi-weekly pay period in which he has at least one Hour of Service. However, an Employee shall be credited only for his normal working hours during a paid absence.
(vi) Hours of Service to be credited on account of a payment to an Employee (including back pay) shall be recorded in the period of Service for which the payment was made. If the period overlaps two or more Plan Years, the Hours of Service credit shall be allocated in proportion to the respective portions of the period included in the several Plan Years. However, in the case of periods of 31 days or less, the Committee may apply a uniform policy of crediting the Hours of Service to either the first Plan Year or the second.
(vii) In all respects an Employee’s Hours of Service shall be counted as required by Section 2530.200b-2(b) and (c) of the Department of Labor’s regulations under Title I of ERISA.
Notwithstanding anything of the Plan to the contrary, Hours of Service credited under the Plan with respect to qualified military service shall be determined in accordance with Section 414(u) of the Code.
(aa) Loan Suspense Account means that portion of the Trust Fund consisting of Company Stock acquired with an Acquisition Loan which has not yet been allocated to the Participants’ Accounts.
(bb) Normal Retirement Age means the date the Employee attains age sixty-five (65).
(cc) Normal Retirement Date means the first day of the month coincident with or next following the Participant’s attainment of Normal Retirement Age.
(dd) Other Investments Account means the account established and maintained in the name of each Participant or Beneficiary to reflect his share of the Trust Fund, other than Company Stock.
(ee) Participant means any active Employee who has become a participant in accordance with Section 3.01 of the Plan or any other person with an Account balance under the Plan.
(ff) Plan means this Central Federal Savings and Loan Association of Rolla Employee Stock Ownership Plan, as amended from time to time.
(gg) Plan Year means the calendar year.
(hh) Postponed Retirement Date means the first day of the month coincident with or next following a Participant’s date of actual retirement which occurs after his Normal Retirement Date.
(ii) Recognized Absence means a period for which:
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(i) an Employer grants an Employee a leave of absence for a limited period of time, but only if an Employer grants such leaves of absence on a nondiscriminatory basis to all Eligible Employees; or
(ii) an Employee is temporarily laid off by an Employer because of a change in the business conditions of the Employer; or
(iii) an Employee is on active military duty, but only to the extent that his employment rights are protected by the Military Selective Service Act of 1967 (38 U.S.C. sec. 2021).
(jj) Reemployment After a Period of Uniformed Service has the meaning set forth below.
(i) An Eligible Employee has returned to employment with a participating Employer, within the time frame set forth in subparagraph (ii) below, after a Period of Uniformed Service (that is, the period of time in which an Employee serves in the Uniformed Services) and the following rules corresponding to provisions of the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”) apply: (1) he gives sufficient notice of leave to the Employer prior to commencing a Period of Uniformed Service, or is excused from providing such notice; (2) his employment with the Employer prior to a Period of Uniformed Service was not of a brief, non-recurrent nature that would preclude a reasonable expectation that the employment would continue indefinitely or for a significant period; (3) the Employer’s circumstances have not changed so that reemployment is unreasonable or an undue hardship to the Employer, and (4) the applicable cumulative Periods of Uniformed Service under USERRA equals five years or less, unless service in the Uniformed Services:
(A) in excess of five years is required to complete an initial Period of Uniformed Service;
(B) prevents the Participant from obtaining orders releasing him or her from such Period of Uniformed Service prior to the expiration of a five-year period (through no fault of the Participant);
(C) is required in the National Guard for drill and instruction, field exercises or active duty training, or to fulfill necessary additional training, or to fulfill necessary additional training requirements certified in writing by the Secretary of the branch of Uniformed Services concerned; or
(D) for a Participant is:
1. required other than for training under any provisions of law during a war or national emergency declared by the President or Congress;
2. required (other than for training) in support of an operational mission for which personnel have been ordered to active duty other than during war or national emergency;
3. required in support of a critical mission or requirement of the Uniformed Services; or
4. the result of being called into service as a member of the National Guard by the President in the case of rebellion or danger of rebellion against the authority of the United States Government or if the President is unable to execute the laws of the United States with the regular forces.
(ii) The applicable statutory time frames within which an Employee must report to an Employer after a Period of Uniformed Service are set forth below.
(A) If the Period of Uniformed Service was less than 31 days,
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1. not later than the beginning of the first full regularly scheduled work period on the first full calendar day following the completion of the Period of Uniformed Service and the expiration of eight hours after a period of time allowing for the safe transportation of the Employee from the place of service in the Uniformed Services to the Employee’s residence; or
2. as soon as possible after the expiration of the eight-hour period of time referred to in clause (ii)(A)1, if reporting within the period referred to in such clause is impossible or unreasonable through no fault of the Employee.
(B) In the case of an Employee whose Period of Uniformed Service was for more than 30 days but less than 181 days, by submitting an application for reemployment with a participating Employer not later than 14 days after the completion of the Period of Uniformed Service or, if submitting such application within such period is impossible or unreasonable through no fault of the Employee, the next first full calendar day when submission of such application becomes reasonable.
(C) In the case of an Employee whose Period of Uniformed Service was for more than 180 days, by submitting an application for reemployment with a participating Employer not later than 90 days after the completion of the Period of Uniformed Service.
(D) In the case of an Employee who is hospitalized for, or convalescing from, an illness or injury related to the Period of Uniformed Service the Employee shall apply for reemployment with an Employer at the end of the period that is necessary for the Employee to recover. Such period of recovery shall not exceed two years, unless circumstances beyond the Employee’s control make reporting as above unreasonable or impossible.
(iii) Notwithstanding subparagraph (i), Reemployment After a Period of Uniformed Service terminates upon the occurrence of any of the following:
(A) a dishonorable or bad conduct discharge from the Uniformed Services;
(B) any other discharge from the Uniformed Services under circumstances other than an honorable condition;
(C) a discharge of a commissioned officer from the Uniformed Services by court martial, by commutation of sentence by court martial, or, in time of war, by the President; or
(D) a demotion of a commissioned officer in the Uniformed Services for absence without authorized leave of at least 3 months confinement under a sentence by court martial, or confinement in a federal or state penitentiary after being found guilty of a crime under a final sentence.
(kk) Retirement Date means a Participant’s Normal Retirement Date or Postponed Retirement Date, whichever is applicable.
(ll) Service means an Employee’s period(s) of employment or self-employment with an Employer, excluding for initial eligibility purposes any period in which the individual was a nonresident alien and did not receive from an Employer any earned income which constituted income from sources within the United States. An Employee’s Service shall include any Service which constitutes Service with a predecessor Employer within the meaning of Section 414(a) of the Code, provided, however, that Service with an acquired entity shall not be considered Service under the Plan unless required by applicable law or agreed to by the parties to such transaction. An Employee’s Service shall also include any Service with an entity which is not an Employer, but only either (i) in which the other entity is a member of a controlled group of corporations or is under common control with other trades and businesses within the meaning of Sections 414(b) or 414(c) of the Code, and a member of the controlled group or one of the trades and businesses is an Employer, (ii) in which the other entity
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is a member of an affiliated service group within the meaning of Section 414(m) of the Code, and a member of the affiliated service group is an Employer, or (iii) all Employers aggregated with the Employer under Section 414(o) of the Code (but not until the Proposed Regulations under Section 414(o) become effective). Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code.
(mm) Treasury Regulations means the regulations promulgated by the Department of Treasury under the Code.
(nn) Trust means the Central Federal Savings and Loan Association of Rolla Employee Stock Ownership Plan Trust created in connection with the establishment of the Plan.
(oo) Trust Agreement means the trust agreement entered into by and between the Association and the Trustee in accordance herewith for the purpose of holding and investing the Trust Funds.
(pp) Trust Fund means the assets held in the Trust for the benefit of Participants and their Beneficiaries.
(qq) Trustee means the person or persons serving as trustee of the Trust Fund, or any successor(s) thereto.
(rr) Uniformed Service means the performance of duty on a voluntary or involuntary basis in the uniformed service of the United States, including the U.S. Public Health Services, under competent authority and includes active duty, active duty for training, initial activity duty for training, inactive duty training, full-time National Guard duty, and the period for which a person is absent from a position of employment for purposes of an examination to determine the fitness of the person to perform any such duty.
(ss) Valuation Date means the last day of the Plan Year and each other date as of which the Committee shall determine the investment experience of the Trust Fund and adjust the Participants’ Accounts accordingly.
(tt) Valuation Period means the period following a Valuation Date and ending with the next Valuation Date.
(uu) Year of Service means, unless otherwise stated in the Plan, the applicable 12 consecutive month period in which an Employee performs service for the Employer, regardless of hours worked.
SECTION 3
ELIGIBILITY AND PARTICIPATION
3.01 Initial Participation .
(a) All Eligible Employees on the closing date of the Association’s conversion from the mutual holding company form of organization who are age 18 or older shall enter the Plan and become Participants as of the later of (i) the Effective Date, or (ii) the Eligible Employee’s date of hire. An Eligible Employee on the closing date of the Association’s conversion from the mutual holding company form of organization who has not attained age 18 shall be a Participant on the Entry Date following his attainment of age 18.
(b) An Eligible Employee who is first employed by an Employer after the closing date of the Association’s mutual to stock conversion shall be a Participant on the Entry Date following their attainment of age 18 and completion of one Year of Service during an Eligibility Computation Period.
3.02 Certain Employees Ineligible . The following Employees are ineligible to participate in the Plan:
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(a) Employees covered by a collective bargaining agreement between the Employer and the Employee’s collective bargaining representative if:
(i) retirement benefits have been the subject of good faith bargaining between the Employer and the representative, and
(ii) the collective bargaining agreement does not expressly provide that Employees of such unit be covered under the Plan;
(b) Leased Employees;
(c) Employees who are nonresident aliens and who receive no earned income from an Employer which constitutes income from sources within the United States; and
(d) Employees of an Affiliate that has not adopted the Plan pursuant to Sections 12.01 or 12.02 of the Plan.
3.03 Transfer to and from Eligible Employment .
(a) If an Employee ineligible to participate in the Plan by reason of Section 3.02 of the Plan transfers to employment as an Eligible Employee, he shall enter the Plan as of the later of:
(i) the first Entry Date after the date of transfer, or
(ii) the first Entry Date on which he could have become a Participant pursuant to Section 3.01 of the Plan if his prior employment with the Association or Affiliate had been as an Eligible Employee.
(b) If a Participant transfers to a position of employment that is not eligible to participate in the Plan by reason of Section 3.02 of the Plan, he shall cease active participation in the Plan as of the date of such transfer and his transfer shall be treated for all purposes of the Plan as any other termination of Service.
3.04 Participation After Reemployment
(a) Any Employee re-entering Service with an Employer after a One Year Break in Service who has never satisfied the eligibility requirements of Section 3.01(a) of the Plan shall not receive credit for prior Service with an Employer and shall be required to meet the eligibility requirements of Section 3.01(a) of the Plan before becoming a Participant.
(b) An Employee who has satisfied the eligibility requirements of Section 3.01(a) of the Plan but who terminates Service prior to entering the Plan and becoming a Participant in accordance with Section 3.01(b) of the Plan will become a Participant on the later of:
(i) the first Entry Date on which he would have entered the Plan had he not terminated Service, or
(ii) the date he re-commences Service.
(c) A Participant whose Service terminates will re-enter the Plan as a Participant on the date he recommences Service.
3.05 Participation Not Guarantee of Employment . Participation in the Plan does not constitute a guarantee or contract of employment and will not give any Employee the right to be retained in the employ of
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the Association or any of its Affiliates nor any right or claim to any benefit under the terms of the Plan unless such right or claim has specifically accrued under the Plan.
3.06 Omission of Eligible Employee . If, in any Plan Year, any Eligible Employee who should be included as a Participant in the Plan is erroneously omitted and discovery of such omission is not made until after a contribution by his Employer for the year has been made, the Employer shall make a subsequent contribution with respect to the omitted Eligible Employee in the amount which the said Employer would have contributed regardless of whether or not it is deductible in whole or in part in any taxable year under applicable provisions of the Code.
3.07 Inclusion of Ineligible Employee . If, in any Plan Year, any person who should not have been included as a Participant in the Plan is erroneously included and discovery of such incorrect inclusion is not made until after a contribution for the year has been made, the Employer shall not be entitled to recover the contribution made with respect to the ineligible person regardless of whether or not a deduction is allowable with respect to such contribution. In such event, the amount contributed with respect to the ineligible person shall constitute a forfeiture for the fiscal year in which the discovery is made. Any person who, after the close of a Plan Year, is retroactively treated by the Association, an affiliated company or any other party as an Employee for such prior Plan Year shall not, for purposes of the Plan, be considered an Employee for such prior Plan Year unless expressly so treated as such by the Association.
SECTION 4
CONTRIBUTIONS
4.01 Employer Contributions .
(a) Discretionary Contributions . Each Plan Year, each Employer, in its discretion, may make a contribution to the Trust. Each Employer making a contribution for any Plan Year under this Section 4.01(a) will contribute to the Trustee cash equal to, or Company Stock or other property having an aggregate fair market value equal to, such amount as the Board of Directors of the Employer shall determine by resolution. Notwithstanding the Employer’s discretion with respect to the medium of contribution, an Employer shall not make a contribution in any medium which would make such contribution a prohibited transaction (for which no exemption is provided) under Section 406 of ERISA or Section 4975 of the Code. Upon a Participant’s Reemployment After a Period of Uniformed Service, the Employer shall make an additional contribution on behalf of such Participant that would have been made on his behalf during the Plan Year or Years corresponding to the Participant’s Period of Uniformed Service,
(b) Employer Contributions for Acquisition Loans . Each Plan Year, the Employers shall, subject to the provisions of the Association’s “Plan of Conversion” (as filed with the appropriate governmental agencies in connection with the Association’s conversion from a mutual to stock form of organization) and any related regulatory prohibitions, contribute an amount of cash sufficient to enable the Trustee to discharge any indebtedness incurred with respect to an Acquisition Loan pursuant to the terms of the Acquisition Loan. The Employers’ obligation to make contributions under this Section 4.01(b) shall be reduced to the extent of any investment earnings attributable to such contributions and any cash dividends paid with respect to Company Stock held by the Trustee in the Loan Suspense Account. If there is more than one Acquisition Loan, the Employers shall designate the one to which any contribution pursuant to this Section 4.01(b) is to be applied.
4.02 Limitations on Contributions .
In no event shall an Employer’s contribution(s) made under Section 4.01 of the Plan for any Plan Year exceed the lesser of:
(a) the maximum amount deductible under Section 404 of the Code by that Employer as an expense for Federal income tax purposes; and
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(b) the maximum amount which can be credited for that Plan Year in accordance with the allocation limitation provisions of Section 5.05 of the Plan.
4.03 Acquisition Loans . The Trustee may incur Acquisition Loans from time to time to finance the acquisition of Company Stock for the Trust or to repay a prior Acquisition Loan. An Acquisition Loan shall be for a specific term, shall bear a reasonable rate of interest, and shall not be payable on demand except in the event of default, and shall be primarily for the benefit of Participants and Beneficiaries of the Plan. An Acquisition Loan may be secured by a collateral pledge of the Financed Shares so acquired and any other Plan assets which are permissible security within the provisions of Section 54.4975-7(b) of the Treasury Regulations. No other assets of the Plan or Trust may be pledged as collateral for an Acquisition Loan, and no lender shall have recourse against any other Trust assets. Any pledge of Financed Shares must provide for the release of shares so pledged on a basis equal to the principal and interest (or if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), paid by the Trustee on the Acquisition Loan. The released Financed Shares shall be allocated by Participants’ Accounts in accordance with the provisions of Sections 5.04 or 5.08 of the Plan, whichever is applicable. Payment of principal and interest on any Acquisition Loan shall be made by the Trustee only from the Employer contributions paid in cash to enable the Trustee to repay such loan in accordance with Section 4.01(b) of the Plan, from earnings attributable to such contributions, and any cash dividends received by the Trustee on Financed Shares acquired with the proceeds of the Acquisition Loan (including contributions, earnings and dividends received during or prior to the year of repayment less such payments in prior years), whether or not allocated. Financed Shares shall initially be credited to the Loan Suspense Account and shall be transferred for allocation to the Company Stock Account of Participants only as payments of principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan are made by the Trustee. The number of Financed Shares to be released from the Loan Suspense Account for allocation to Participants’ Company Stock Account for each Plan Year shall be based on the ratio that the payments of principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan for that Plan Year bears to the sum of the payments of principal and interest on the Acquisition Loan for that Plan Year plus the total remaining payment of principal and interest projected (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan over the duration of the Acquisition Loan repayment period, subject to the provisions of Section 5.05 of the Plan.
4.04 Conditions as to Contributions . In addition to the provisions of Section 12.03 of the Plan for the return of an Employer’s contributions in connection with a failure of the Plan to qualify initially under the Code, any amount contributed by an Employer due to a good faith mistake of fact, or based upon a good faith but erroneous determination of its deductibility under Section 404 of the Code, shall be returned to the Employer within one year after the date on which the Employer originally made such contribution, or within one year after its nondeductibility has been finally determined. However, the amount to be returned shall be reduced to take account for any adverse investment experience within the Trust in order that the balance credited to each Participant’s Accounts is not less that it would have been if the contribution had never been made by the Employer.
4.05 Employee Contributions . Employee contributions are neither required nor permitted under the Plan.
4.06 Rollover Contributions . Rollover contributions of assets from other tax-qualified retirement plans are not permitted under the Plan.
4.07 Trustee-to-Trustee Transfers . Trustee-to-trustee transfer of assets from other tax-qualified retirement plans are not permitted under the Plan.
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SECTION 5
PLAN ACCOUNTING
5.01 Accounting for Allocations . The Committee shall establish the Accounts (and sub-accounts, if deemed necessary) for each Participant, and the accounting procedures for the purpose of making the allocations to the Participants’ Accounts provided for in this Section 5. The Committee shall maintain adequate records of the cost basis of shares of Company Stock allocated to each Participant’s Company Stock Account. The Committee also shall keep separate records of Financed Shares attributable to each Acquisition Loan and of contributions made by the Employers (and any earnings thereon) made for the purpose of enabling the Trustee to repay any Acquisition Loan. From time to time, the Committee may modify its accounting procedures for the purpose of achieving equitable and nondiscriminatory allocations among the Accounts of Participants, in accordance with the provisions of this Section 5 and the applicable requirements of the Code and ERISA. In accordance with Section 9 of the Plan, the Committee may delegate the responsibility for maintaining Accounts and records.
5.02 Maintenance of Participants’ Company Stock Accounts . As of each Valuation Date, the Trustee shall determine, in such reasonable ways and from such information as it deems appropriate, the fair market value of the Trust Fund. In making this determination, the value of Company Stock shall be its fair market value on the Valuation Date as determined by an independent appraisal by a person selected by the Committee and acceptable to the Trustee who customarily makes such appraisals and meets the requirements of the regulations under Section 170(a)(1) of the Code. After such determination is made of the fair market value of the Trust Fund, the Committee (or its designee) shall adjust the Company Stock Account of each Participant to reflect activity during the Valuation Period as follows:
(a) first, charge to each Participant’s Company Stock Account all distributions and payments made to him that have not been previously charged;
(b) next, credit to each Participant’s Company Stock Account the shares of Company Stock, if any, that have been purchased with amounts from his Other Investments Account, and adjust such Other Investments Account in accordance with the provisions of Section 5.03 of the Plan;
(c) next, credit to each Participant’s Company Stock Account the shares of Company Stock representing contributions made by the Employers in the form of Company Stock and the number of Financed Shares released from the Loan Suspense Account under Section 4.03 of the Plan that are to be allocated and credited as of that date in accordance with the provisions of Section 5.04 of the Plan; and
(d) finally, credit to each Participant’s Company Stock Account the shares of Company Stock released from the Loan Suspense Account that are to be allocated in accordance with the provisions of Section 5.08 of the Plan.
5.03 Maintenance of Participants’ Other Investments Accounts . Except as otherwise provided for under Section 5.09 of the Plan, as of each Valuation Date, the Committee shall adjust the Other Investments Account of each Participant to reflect activity during the Valuation Period as follows:
(a) first, charge to each Participant’s Other Investments Account all distributions and payments made to him that have not previously been charged;
(b) next, if Company Stock is purchased with assets from a Participant’s Other Investments Account, the Participant’s Other Investments Account shall be charged accordingly;
(c) next, subject to the dividend provisions of Section 5.08 of the Plan, credit to the Other Investments Account of each Participant any cash dividends paid to the Trustee on shares of Company Stock held in that Participant’s Company Stock Account (as of the record date for such cash dividends) and dividends paid on shares of Company Stock held in the Loan Suspense Account that have not been used to repay any
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Acquisition Loan. Cash dividends that have not been used to repay an Acquisition Loan and have been credited to a Participant’s Other Investments Account shall be applied by the Trustee to purchase shares of Company Stock, which shares shall then be credited to the Company Stock Account of such Participant. The Participant’s Other Investments Account shall then be charged by the amount of cash used to purchase such Company Stock or used to repay any Acquisition Loan. In addition, any earnings on:
(i) the Other Investments Accounts, including cash proceeds from the sale or disposition of Company Stock pursuant to Section 5.09 of the Plan, will be allocated to Participants’ Other Investments Account, pro rata, based on such Other Investment Accounts balances as of the first day of the Valuation Period, and
(ii) the Loan Suspense Account, other than dividends used to repay the Acquisition Loan, will be allocated to Participants’ Other Investments Accounts, pro rata, based on their Other Investment Account Balances as of the first day of the Valuation Period; provided, however, that shares of Company Stock allocated pursuant to Section 5.09 of the Plan shall be allocated to the Participants’ Company Stock Account in accordance with the provisions of Section 5.09 of the Plan;
(d) next, allocate and credit the Employer contributions made pursuant to Section 4.01(b) of the Plan for the purpose of repaying any Acquisition Loan in accordance with Section 5.04 of the Plan. Such amount shall then be used to repay any Acquisition Loan and such Participant’s Other Investments Account shall be charged accordingly; and
(e) finally, allocate and credit the Employer contributions (other than amounts contributed to repay an Acquisition Loan) that are made in cash (or property other than Company Stock) for the Plan Year to the Other Investments Account of each Participant in accordance with Section 5.04 of the Plan.
5.04 Allocation and Crediting of Employer Contributions .
(a) Except as otherwise provided for in Sections 5.08 and 5.09 of the Plan, as of the Valuation Date for each Plan Year:
(i) the Company Stock released from the Loan Suspense Account for that year and shares of Company Stock contributed directly to the Plan by an Employer shall be allocated and credited to each Active Participant’s (as defined in paragraph (b) of this Section 5.04) Company Stock Account based on the ratio that each Active Participant’s Compensation bears to the aggregate Compensation of all Active Participants for the Plan Year, provided, however, that, for purposes of this Section, an Active Participant’s Compensation shall not be considered for any part of a Plan Year prior to the date the Participant commenced participation in the Plan, and then
(ii) the cash contributions not used to repay an Acquisition Loan and any other property (other than shares of Company Stock) contributed for that year shall be allocated and credited to each Active Participant’s Other Investments Account based on the ratio determined by comparing each Active Participant’s Compensation to the aggregate Compensation of all Active Participants for the Plan Year.
(b) For purposes of this Section 5.04, the term “Active Participant” means those Employees who:
(i) were employed by that Employer, including Employees on a Recognized Absence, on the last day of the Plan Year, or
(ii) who terminated employment during the Plan Year by reason of death, Disability, or attainment of their Normal Retirement Age.
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5.05 Limitations on Allocations .
(a) In General . This Section 5.05 is intended as good faith compliance with the final Treasury Regulations issued under Section 415 of the Code (the “Final Regulations”), and it should be construed accordingly. Further, Section 415 of the Code and the Final Regulations are hereby incorporated herein by reference.
(b) Limitations on Annual Additions . The limitations set forth below shall apply to the allocations to each Participant’s Accounts in any Plan Year. If the Annual Additions are exceeded for any Participant, then the Plan may correct such excess in accordance with the Employee Plans Compliance Resolution System (EPCRS) as set forth in Revenue Procedure 2013-12, or any superseding guidance, including, but not limited to, the preamble of the Final Regulations, or by any other method specifically permitted by the Internal Revenue Service.
(i) As used in the Plan, a Participant’s “Annual Additions” shall mean the sum for any Plan Year of the following amounts allocated to a Participant’s Accounts:
(A) the Participant’s share of Employer contributions; plus
(B) the Participant’s share of any forfeitures; plus
(C) the Participant’s allocable share of the Employer’s contributions to any individual medical benefit account (within the meaning of Section 415(l)(2) of the Code) that is part of a pension or annuity plan maintained by the Employer; plus
(D) with respect to any Participant who is a key employee, any amount that is derived from the Employer’s contributions paid or accrued that are attributable to post-retirement medical benefits allocated to such Participant’s account under a welfare benefit fund (within the meaning of Section 419(e) of the Code) maintained by the Employer; and plus
(E) the Participant’s share of any allocations under a simplified employee pension maintained by the Employer.
Any excess amount applied under Section 5.05(b)(iii) in a Plan Year to reduce the Employer contributions on behalf of any Participant shall be considered to be an Annual Addition for such Participant for such Plan Year.
(ii) Subject to the adjustments set forth below, and except for catch-up contributions under Section 414(v) of the Code, during any Plan Year the maximum Annual Additions for any Participant shall in no event exceed the lesser of:
(A) $53,000, (for 2015) as adjusted by the cost of living adjustment factor prescribed by the Secretary of the Treasury under Section 415(d) of the Code; or
(B) 100% of the Participant’s Compensation for the Plan Year.
(iii) The earnings limitation referred to in Section 5.05(b)(ii)(B) shall not apply to:
(A) any contribution for medical benefits (within the meaning of Sections 401(h) or 419A(f)(2) of the Code) after separation from service that is otherwise treated as an Annual Addition, or
(B) any amount otherwise treated as an Annual Addition under Section 415(l)(1) of the Code.
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(iv) If, for any Plan Year, it is necessary to limit the Annual Additions of any Participant to comply with this Section 5.05, the methods as authorized pursuant to the Final Regulations shall be utilized.
(v) The limitations of this Article with respect to any Participant who, at any time, has been a participant in any other defined contribution plan (whether or not terminated) or in more than one defined benefit plan (whether or not terminated) maintained by the Employer shall apply as if all such defined contribution plans or all such defined benefit plans in which the Participant has been a participant were one plan.
(c) Definition of Compensation . For purposes of this Section 5.05, Compensation shall be adjusted to reflect the general rule of Section 1.415(c)-2 of the Final Regulations. Notwithstanding the preceding sentence, Compensation for a Participant who is permanently and totally disabled (as defined in Section 22(e)(3) of the Code) is the compensation the Participant would have received for the Limitation Year if the Participant had been paid at the rate of compensation paid immediately before becoming permanently and totally disabled if the conditions under the Final Regulations are met. In addition, payments made within the later of (i) 2 ½ months after severance from employment (within the meaning of Final Regulation Section 1.415(a)-1(f)(5)), or (ii) the end of the Limitation Year that contains the date of severance (the “Post Severance Period”) will be Compensation within the meaning of Section 415(c)(3) of the Code if they are payments that, absent a severance from employment, would have been paid to the Participant while the Participant continued in employment with the Employer and are regular compensation for services during the Participant’s regular working hours, compensation for services outside the Participant’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar compensation.
(d) Definition of Annual Additions . For purposes of this Section 5.05, the Plan’s definition of “Annual Additions” is modified as follows:
(i) Restorative Payments . Annual Additions for purposes of Section 415 of the Code shall not include restorative payments. A restorative payment is a payment made to restore losses to the Plan resulting from actions by a fiduciary for which there is reasonable risk of liability for breach of a fiduciary duty under ERISA or under other applicable federal or state law, where Participants who are similarly situated are treated similarly with respect to the payments. Generally, payments are restorative payments only if the payments are made in order to restore some or all of the Plan’s losses due to an action (or a failure to act) that creates a reasonable risk of liability for such a breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). This includes payments to the Plan made pursuant to a Department of Labor order, the Department of Labor’s Voluntary Fiduciary Correction Program, or a court-approved settlement, to restore losses to a qualified defined contribution plan on account of the breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). Payments made to the Plan to make up for losses due merely to market fluctuations and other payments that are not made on account of a reasonable risk of liability for breach of a fiduciary duty under ERISA are not restorative payments and generally constitute contributions that are considered Annual Additions.
(ii) Other Amounts . Annual Additions for purposes of Section 415 of the Code shall not include: (1) the direct transfer of a benefit or employee contributions from a qualified plan to this Plan; (2) rollover contributions (as described in Sections 401(a)(31), 402(c)(1), 403(a)(4), 403(b)(8), 408(d)(3) and 457(e)(16) of the Code); (3) repayments of loans made to a Participant from the Plan; and (4) repayments of amounts described in Section 411(a)(7)(B) of the Code (in accordance with Section 411(a)(7)(C)) of the Code and Section 411(a)(3)(D) of the Code or repayment of contributions to a governmental plan (as defined in Section 414(d) of the Code) as described in Section 415(k)(3) of the Code, as well as Employer restorations of benefits that are required pursuant to such repayments.
(e) Limitation Year . The “Limitation Year” (within the meaning of Section 415 of the Code) shall be the calendar year. The Limitation Year may only be changed by a Plan amendment. If the Plan is terminated effective as of a date other than the last day of a Limitation Year, the Plan is deemed to have been amended to
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change its Limitation Year to end on the Plan’s termination date. As a result of such deemed amendment, the Section 415(c)(1)(A) of the Code dollar limit shall be prorated under the short Limitation Year rules under the Final Regulations.
(f) Multiple Defined Contribution Plans . In any case where a Participant also participates in another defined contribution plan of the Association or its Affiliates, the appropriate committee of such other plan shall first reduce the after-tax contributions under any such plan, shall then reduce any elective deferrals under any such plan subject to Section 401(k) of the Code, shall then reduce all other contributions under any other such plan and, if necessary, shall then reduce contributions under this Plan, subject to the provisions of paragraph (h) of this Section 5.05.
(g) Excess Allocations . If, after applying the allocation provisions under Section 5.04 of the Plan, allocations under Section 5.04 of the Plan would otherwise result in a Participant’s account being in violation of Section 415 of the Code, the Committee shall reduce the Employer contributions for the next limitation year (and succeeding limitation years, as necessary) for that Participant if that Participant is covered by the Plan as of the end of the limitation year. However, if that Participant is not covered by the Plan as of the end of the limitation year, then the excess amounts shall be held unallocated in a suspense account for the limitation year and allocated and reallocated in the next limitation year to all the remaining Participants in the Plan; furthermore, the excess amounts shall be used to reduce Employer contributions for the next limitation year (and succeeding limitation years, as necessary) for all the remaining Participants in the Plan.
(h) Allocations Pursuant to Section 5.09 . For purposes of this Section 5.05, no amount credited to any Participant’s Account pursuant to Section 5.09 of the Plan shall be counted as an “annual addition” for purposes of Section 415 of the Code. In the event any amount cannot be allocated to Affected Participants (as defined in Section 5.09 of the Plan) under the Plan pursuant to Section 5.09 of the Plan in the year of a Change in Control, the amount which may not be so allocated in the year of the Change in Control shall be treated in accordance with this paragraph (h) of Section 5.05.
5.06 Other Limitations . Aside from the limitations set forth in Sections 5.05 of the Plan, in no event shall more than one-third of the Employer contributions to the Plan be allocated to the Accounts of Highly Compensated Employees. In the event more than one-third of the Employer Contributions to the Plan are allocated to the Accounts of Highly Compensated Employees, the Committee shall determine the allocation of the reduced amount among the Highly Compensated Employees such that the relative share of the Employer Contributions allocable to a Highly Compensated Employee is equal to such Highly Compensated Employee’s share of the contributions allocable to all Highly Compensated Employees if this Section 5.06 were inapplicable.
5.07 Limitations as to Certain Section 1042 Transactions . To the extent that a shareholder of Company Stock sells qualifying Company Stock to the Plan and elects (with the consent of the Association) nonrecognition of gain under Section 1042 of the Code, no portion of the Company Stock purchased in such nonrecognition transaction (or dividends or other income attributable thereto) may accrue or be allocated during the nonallocation period (the ten (10) year period beginning on the later of the date of the sale of the qualified Company Stock or the date of the Plan allocation attributable to the final payment of an Acquisition Loan incurred in connection with such sale) for the benefit of:
(a) the selling shareholder;
(b) the spouse, brothers or sisters (whether by the whole or half blood), ancestors or lineal descendants of the selling shareholder or descendant referred to in (a) above; or
(c) any other person who owns, after application of Section 318(a) of the Code, more than twenty- five percent (25%) of:
(i) any class of outstanding stock of the Association or any Affiliate, or
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(ii) the total value of any class of outstanding stock of the Association or any Affiliate.
For purposes of this Section 5.07, Section 318(a) of the Code shall be applied without regard to the employee trust exception of Section 318(a)(2)(B)(i) of the Code.
5.08 Dividends .
(a) Stock Dividends . Dividends on Company Stock which are received by the Trustee in the form of additional Company Stock shall be retained in the portion of the Trust Fund consisting of Company Stock, and shall be allocated among the Participant’s Accounts and the Loan Suspense Account in accordance with their holdings of the Company Stock on which the dividends have been paid.
(b) Cash Dividends on Allocated Shares . Dividends on Company Stock credited to Participants’ Accounts which are received by the Trustee in the form of cash shall, at the direction of the Association, either:
(i) be credited to Participants’ Accounts in accordance with Section 5.03 of the Plan and invested as part of the Trust Fund;
(ii) be distributed immediately to the Participants;
(iii) be distributed to the Participants within 90 days of the close of the Plan Year in which paid; or
(iv) be used to repay first principal and then, if available, interest on the Acquisition Loan used to acquire Company Stock on which the dividends were paid.
In addition to the alternatives specified in the preceding paragraph regarding the treatment of cash dividends paid with respect to shares of Company Stock credited to Participants’ Accounts, if authorized by the Committee for the Plan Year, a Participant may elect that cash dividends paid on Company Stock credited to the Participant’s Account shall either be:
(i) paid to the Plan, reinvested in Company Stock and credited to the Participant’s Account;
(ii) distributed in cash to the Participant; or
(iii) distributed to the Participant within 90 days of the close of the Plan Year in which paid.
Dividends subject to an election under this paragraph (and any Company Stock acquired therewith pursuant to a Participant’s election) shall at all times be fully vested. To the extent the Committee authorizes dividend elections pursuant to this paragraph, the Committee shall establish policies and procedures relating to Participant elections and, if applicable, the reinvestment of cash dividends in Company Stock, which are consistent with guidance issued under Section 404(k) of the Code.
(c) Cash Dividends on Unallocated Shares . Dividends on Company Stock held in the Loan Suspense Account which are received by the Trustee in the form of cash shall be applied as soon as practicable to payments of first principal and then, if available, interest under the Acquisition Loan incurred with the purchase of the Company Stock.
(d) Financed Shares . Financed Shares released from the Loan Suspense Account by reason of dividends paid with respect to such Company Stock shall be allocated under Sections 5.03 and 5.04 of the Plan as follows:
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(i) first, Financed Shares with a fair market value at least equal to the dividends paid with respect the Company Stock allocated to Participants’ Accounts shall be allocated among and credited to the Accounts of such Participants, pro rata, according to the number of shares of Company Stock held in such accounts on the date such dividend is declared by the Company; and
(ii) then, any remaining Financed Shares released from the Loan Suspense Account by reason of dividends paid with respect to Company Stock held in the Loan Suspense Account shall be allocated among and credited to the Accounts of all Participants, pro rata, according to each Participant’s Compensation.
5.09 Allocations Upon Termination Prior to Satisfaction of Acquisition Loan .
(a) Notwithstanding any other provision of the Plan, in the event of a Change in Control, the Plan shall terminate as of the effective date of the Change in Control and, as soon as practicable thereafter, the Trustee shall repay in full any outstanding Acquisition Loan. In connection with such repayment, the Trustee shall: (i) apply cash, if any, received by the Plan in connection with the transaction constituting a Change in Control, with respect to the unallocated shares of Company Stock acquired with the proceeds of the Acquisition Loan, and (ii) to the extent additionally required to effect the repayment of the Acquisition Loan, obtain cash through the sale of any stock or security received by the Plan in connection with such transaction, with respect to such unallocated shares of Company Stock. After repayment of the Acquisition Loan, all remaining shares of Company Stock held in the Loan Suspense Account, all other stock or securities, and any cash proceeds from the sale or other disposition of any shares of Company Stock held in the Loan Suspense Account, shall be allocated among the Accounts of all Participants who were employed by an Employer on the date immediately preceding the effective date of the Change in Control. Such allocations of shares or cash proceeds shall be credited as earnings for purposes of Section 5.05 of the Plan and Section 415 of the Code, as of the effective date of the Change in Control, to the Account of each Participant who is either in active Service with an Employer, or is on a Recognized Absence, on the date immediately preceding the effective date of the Change of Control (each an “Affected Participant”), in proportion to the opening balances in their Company Stock Accounts as of the first day of the current Valuation Period. As of the effective date of a Change in Control, all Participant Accounts shall be fully vested and nonforfeitable.
(b) In the event of a termination of the Plan in connection with a Change in Control, this Section 5.09 shall have no force and effect unless the price paid for the Company Stock in connection with a Change in Control is greater than the average basis of the unallocated Company Stock held in the Loan Suspense Account as of the date of the Change in Control.
5.10 Erroneous Allocations . No Participant shall be entitled to any annual additions or other allocations to his Account in excess of those permitted under this Section 5. If it is determined at any time that the administrator and/or Trustee have erred in accepting and allocating any contributions or forfeitures under this Plan, or in allocating investment adjustments, or in excluding or including any person as a Participant, then the administrator, in a uniform and nondiscriminatory manner, shall determine the manner in which such error shall be corrected, after taking into consideration Sections 3.6 and 3.7 and any revenue procedure or other notice published by the Internal Revenue Service regarding permissible correction methods, if applicable, and shall promptly advise the Trustee in writing of such error and of the method for correcting such error. The Accounts of any or all Participants may be revised, if necessary, in order to correct such error.
SECTION 6
VESTING
6.01 Deferred Vesting in Accounts .
(a) A Participant shall become vested in his Accounts in accordance with the schedule set forth below.
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Completed Years of Service | Vested Percentage | |||
Less than two (2) Years of Service | 0 | % | ||
Two (2) Years of Service | 20 | % | ||
Three (3) Years of Service | 40 | % | ||
Four (4) Years of Service | 60 | % | ||
Five (5) Years of Service | 80 | % | ||
Six (6) Years of Service | 100 | % |
(b) For purposes of determining a Participant’s Years of Service under this Section 6.01, employment with the Association or an Affiliate shall be deemed employment with the Employer. With respect to Employees who enter the Plan pursuant to Section 3.01(a) of the Plan, for purposes of determining a Participant’s vested percentage, all Years of Service with the Employer shall be included. Notwithstanding any provision of the Plan to the contrary, calculation of Service for determining a Participant’s Vested Percentage with respect to qualified military service will be provided in accordance with Section 414(u) of the Code.
6.02 Immediate Vesting in Certain Situations .
(a) Notwithstanding Section 6.01(a) of the Plan, a Participant shall become fully vested in his Accounts upon the earlier of:
(i) termination of the Plan or upon the permanent and complete discontinuance of contributions by his Employer to the Plan; provided, however, that in the event of a partial termination, the interest of each Participant shall fully vest only with respect to that part of the Plan which is terminated;
(ii) the Participant’s Normal Retirement Age;
(iii) a Change in Control; or
(iv) termination of employment by reason of death or Disability.
(b) For purposes of this Section 6.02, benefits payable in the event of a Participant’s death or Disability while performing qualified military service shall fully vest in accordance with Section 414(u)(9) of the Code.
6.03 Treatment of Forfeitures .
(a) If a Participant who is not fully vested in his Accounts terminates employment, that portion of his Accounts in which he is not vested shall be forfeited upon the earlier of:
(i) the date the Participant receives a distribution of his entire vested benefits under the Plan, or
(ii) the date at which the Participant incurs five (5) consecutive Breaks in Service.
(b) If a Participant who has terminated employment and has received a distribution of his entire vested benefits under the Plan is subsequently reemployed by an Employer prior to incurring five (5) consecutive Breaks in Service, he shall have the portion of his Accounts which was previously forfeited restored to his Accounts, provided he repays to the Trustee within five (5) years of his subsequent employment date an amount equal to the distribution. The amount restored to the Participant’s Account shall be credited to his Account as of the last day of the Plan Year in which the Participant repays the distributed amount to the Trustee and the restored amount shall come from other Employees’ forfeitures and, if such forfeitures are insufficient, from a special contribution by his Employer for that year. If a Participant’s employment terminates prior to his
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Account having become vested, such Participant shall be deemed to have received a distribution of his entire vested interest as of the Valuation Date next following his termination of employment.
(c) If a Participant who has terminated employment but has not received a distribution of his entire vested benefits under the Plan is subsequently reemployed by an Employer subsequent to incurring five (5) consecutive Breaks in Service, any undistributed balance of his Accounts from his prior participation which was not forfeited shall be maintained as a fully vested subaccount with his Account.
(d) If a portion of a Participant’s Account is forfeited, assets other than Company Stock must be forfeited before any Company Stock may be forfeited.
(e) Forfeitures shall be reallocated among the other Participants in the Plan.
6.04 Accounting for Forfeitures . A forfeiture shall be charged to the Participant’s Account as of the first day of the first Valuation Period in which the forfeiture becomes certain pursuant to Section 6.03 of the Plan. Except as otherwise provided in Section 6.03 of the Plan, a forfeiture shall be added to the contributions of the terminated Participant’s Employer which are to be credited to other Participants pursuant to Section 4 as of the last day of the Plan Year in which the forfeiture becomes certain.
6.05 Vesting Upon Reemployment .
(a) If an Employee is not vested in his Accounts, incurs a Break in Service and again performs an Hour of Service, such Employee shall receive credit for his Years of Service prior to his Break in Service only if the number of consecutive Breaks in Service is less than the greater of: (i) five (5) years or (ii) the aggregate number of his Years of Service credited before his Break in Service.
(b) If a Participant is partially vested in his Accounts, incurs a Break in Service and again performs an Hour of Service, such Participant shall receive credit for his Years of Service prior to his Break in Service; provided, however, that after five (5) consecutive Breaks in Service, a former Participant’s vested interest in his Accounts attributable to Years of Service prior to his Break in Service shall not be increased as a result of his Years of Service following his reemployment date.
(c) If a Participant is fully vested in his Accounts, incurs a Break in Service and again performs an Hour of Service, such Participant shall receive credit for all his Years of Service prior to his Breaks in Service.
SECTION 7
DISTRIBUTIONS
7.01 Distribution of Benefit Upon a Termination of Employment .
(a) Subject to Section 7.01(b) and the other provisions of this Section 7, a Participant whose employment terminates for any reason (other than death) shall receive the entire vested portion of his Accounts in a single payment within 60 days after the end of the Plan Year in which the Participant’s employment terminates; provided, however, that if payment in full is not feasible within the time limits prescribed by this Section (e.g., the Employer has not received the final valuation report for the applicable Valuation Date), the Committee may direct interim payments from the Accounts of such Participant, and and any remaining amount owed such Participant, if any, shall be paid to such Participant within 60 days after the receipt by the Employer of the final valuation report for the applicable Valuation Period, but in no event later than the last day of the Plan Year in which the initial interim payment was made.
The benefits from that portion of the Participant’s Other Investments Account shall be calculated on the basis of the most recent Valuation Date before the date of payment. Subject to the provisions of Section 7.05 of the Plan, if the Committee so provides, a Participant may elect that his benefits be distributed to him in the form
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of Company Stock, cash, or some combination thereof. In addition, if a Participant did not receive a distribution of his vested Account balance but his non-vested Account balance was forfeited after a one-year Break in Service, such nonvested Account balance shall be restored if the Plan terminates before the Participant has a five-year Break in Service. If the Participant did not receive a distribution of his vested Account balance, any forfeiture restored shall include earnings that would have been credited to the Account but for the forfeiture.
(b) Notwithstanding Section 7.01(a), if the vested balance credited to a Participant’s Accounts exceeds, at the time such benefits are distributable, $1,000, his benefits shall not be paid before the latest of his 65th birthday or the tenth anniversary of the year in which he commenced participation in the Plan, unless he elects an earlier payment date in a written election filed with the Committee. Such an election is not valid unless it is made after the Participant has received the required notice under Section 1.411(a)-11(c) of the Treasury Regulations that provides a general description of the material features of a lump sum distribution and the Participant’s right to defer receipt of his benefits under the Plan. The notice shall be provided no less than 30 days and no more than 90 days before the first day on which all events have occurred which entitle the Participant to such benefit. Written consent of the Participant to the distribution generally may not be made within 30 days of the date the Participant receives the notice and shall not be made more than 90 days from the date the Participant receives the notice. However, a distribution may be made less than 30 days after the notice provided under Section 1.411(a)-11(c) of the Treasury Regulations is given, if:
(i) the Committee clearly informs the Participant that he has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and if applicable, a particular distribution option), and
(ii) the Participant, after receiving the notice, affirmatively elects a distribution.
A Participant may modify such an election at any time, provided any new benefit payment date is at least 30 days after a modified election is delivered to the Committee.
(c) Notwithstanding any other provision of the Plan, any benefits payable under the Plan to a Participant that are valued at less than $1,000 at the time they are distributable shall be paid in a single lump sum payment to the Participant without the Participant’s consent.
7.02 Minimum Distribution Requirements .
(a) General Rules .
(i) Precedence . The requirements of this Section 7.02 will take precedence over any inconsistent provisions of the Plan.
(ii) Requirements of Treasury Regulations Incorporated . All distributions required under this Section will be determined and made in accordance with the Treasury Regulations under Section 401(a)(9) of the Internal Revenue Code.
(b) Time and Manner of Distribution .
(i) Required Beginning Date . The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s required beginning date.
(ii) Death of Participant Before Distributions Begin . If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as set forth below.
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(A) If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary (as defined below), then distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70 ½, if later.
(B) If the Participant’s surviving spouse is not the Participant’s sole Designated Beneficiary, then distributions to the Designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.
(C) If there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.
(D) If the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this Section (b)(ii), other than Section (b)(ii)(A), will apply as if the surviving spouse were the Participant.
(iii) Forms of Distribution . All distributions under this Plan will be made in a single lump sum.
(c) Required Minimum Distributions During Participant’s Lifetime .
(i) Amount of Required Minimum Distribution For Each Distribution Calendar Year . During the Participant’s lifetime, the minimum amount that will be distributed for each Distribution Calendar Year (as defined below) is the lesser of:
(A) the quotient obtained by dividing the Participant’s Account Balance (as defined below) by the distribution period in the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s age as of the Participant’s birthday in the Distribution Calendar Year; or
(B) if the Participant’s sole Designated Beneficiary for the Distribution Calendar Year is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account Balance by the number in the Joint and Last Survivor Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the Distribution Calendar Year.
(ii) Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death . Required minimum distributions will be determined under this Section (c) beginning with the first Distribution Calendar Year and up to and including the Distribution Calendar Year that includes the Participant’s date of death.
(d) Required Minimum Distributions After Participant’s Death .
(i) Death On or After Date Distributions Begin .
(A) Participant Survived by Designated Beneficiary . If the Participant dies on or after the date distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the longer of the remaining Life Expectancy (as defined below) of the Participant or the remaining Life Expectancy of the Participant’s Designated Beneficiary, determined as follows:
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1. the Participant’s remaining Life Expectancy is calculated using the age of the participant in the year of death, reduced by one for each subsequent year;
2. if the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, the remaining Life Expectancy of the surviving spouse is calculated for each Distribution Calendar Year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For Distribution Calendar Years after the year of the surviving spouse’s death, the remaining Life Expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year; or
3. if the Participant’s surviving spouse is not the Participant’s sole Designated Beneficiary, the Designated Beneficiary’s remaining Life Expectancy is calculated using the age of the beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.
(B) No Designated Beneficiary . If the Participant dies on or after the date distributions begin and there is no Designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the Participant’s remaining Life Expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.
(ii) Death Before Date Distributions Begin .
(A) Participant Survived by Designated Beneficiary . If the Participant dies before the date distributions begin and there is a Designated Beneficiary, the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the remaining Life Expectancy of the Participant’s Designated Beneficiary, determined as provided in this Section.
(B) No Designated Beneficiary . If the Participant dies before the date distributions begin and there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.
(C) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin . If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole Designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse, this Section will apply as if the surviving spouse were the Participant.
(e) Definitions for Section 7.02 .
(i) Designated Beneficiary . “Designated Beneficiary” means the individual who is designated as the beneficiary under the Plan and is the designated beneficiary under Section 401(a)(9) of the Internal Revenue Code and Section 1.401(a)(9)-1, Q&A-4, of the Treasury Regulations.
(ii) Distribution Calendar Year . “Distribution Calendar Year” means a calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first “Distribution Calendar Year” is the calendar year immediately preceding the calendar year which contains the Participant’s required beginning date. For distributions beginning after the Participant’s death, the first “Distribution Calendar Year” is the calendar year in which distributions are required to begin under Section (b)(ii) of this Section 7.02. The required minimum distribution for the Participant’s first Distribution Calendar Year will be made on or before the Participant’s required beginning date. The required minimum distribution
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for other Distribution Calendar Years, including the required minimum distribution for the Distribution Calendar Year in which the Participant’s required beginning date occurs, will be made on or before December 31 of that Distribution Calendar Year.
(iii) Life Expectancy . “Life Expectancy” means the life expectancy as computed by use of the Single Life Table in Section 1.401(a)(9)-9 of the Treasury Regulations.
(iv) Participant’s Account Balance . “Participant’s Account Balance” means the account balance as of the last valuation date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over transferred to the plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.
7.03 Benefits on a Participant’s Death .
(a) If a Participant dies before his benefits are paid pursuant to Section 7.01 of the Plan, the balance credited to his Accounts shall be paid to his Beneficiary in a single distribution on or before the 60th day after the end of the Plan Year in which the Participant died. If the Participant has not named a Beneficiary or if his named Beneficiary should not survive him, then the balance in his Account shall be paid to his estate. The benefits from that portion of the Participant’s Other Investments Account shall be calculated on the basis of the most recent Valuation Date before the date of payment.
(b) If a married Participant dies before his benefit payments begin, then, unless he has specifically elected otherwise, the Committee shall cause the balance in his Accounts to be paid to his spouse, as Beneficiary. A married Participant may name an individual other than his spouse as his Beneficiary, provided that such election is accompanied by the spouse’s written consent, which must:
(i) acknowledge the effect of the election;
(ii) explicitly provide either that the designated Beneficiary may not subsequently be changed by the Participant without the spouse’s further consent or that it may be changed without such consent; and
(iii) must be witnessed by the Committee, its representative, or a notary public.
This requirement shall not apply if the Participant establishes to the Committee’s satisfaction that the spouse may not be located.
(c) The Committee shall from time to time take whatever steps it deems appropriate to keep informed of each Participant’s marital status. Each Employer shall provide the Committee with the most reliable information in the Employer’s possession regarding its Participants’ marital status, and the Committee may, in its discretion, require a notarized affidavit from any Participant as to his marital status. The Committee, the Plan, the Trustee, and the Employers shall be fully protected and discharged from any liability to the extent of any benefit payments made as a result of the Committee’s good faith and reasonable reliance upon information obtained from a Participant as to the Participant’s marital status.
7.04 Delay in Benefit Determination . If the Committee is unable to determine the benefits payable to a Participant or Beneficiary on or before the latest date prescribed for payment pursuant to this Section 7, the benefits shall in any event be paid within 60 days after they can first be determined, with whatever makeup payments may be appropriate in view of the delay.
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7.05 Options to Receive and Sell Stock .
(a) Unless ownership of virtually all Company Stock is restricted to active Employees and qualified retirement plans for the benefit of Employees pursuant to the certificates of incorporation or by-laws of the Employers issuing Company Stock, a terminated Participant or the Beneficiary of a deceased Participant may instruct the Committee to distribute the Participant’s entire vested interest in his Accounts in the form of Company Stock. In that event, the Committee shall apply the Participant’s vested interest in his Other Investments Account to purchase sufficient Company Stock to make the required distribution.
(b) Any Participant who receives Company Stock pursuant to this Section 7.05, and any person who has received Company Stock from the Plan or from such a Participant by reason of the Participant’s death or incompetency, by reason of divorce or separation from the Participant, or by reason of a rollover distribution described in Section 402(c) of the Code, shall have the right to require the Employer which issued the Company Stock to purchase the Company Stock for its current fair market value (hereinafter referred to as the “put right”). The put right shall be exercisable by written notice to the Committee during the first 60 days after the Company Stock is distributed by the Plan, and, if not exercised in that period, during the first 60 days in the following Plan Year after the Committee has communicated to the Participant its determination as to the Company Stock’s current fair market value. If the put right is exercised, the Trustee may, if so directed by the Committee in its sole discretion, assume the Employer’s rights and obligations with respect to purchasing the Stock. However, the put right shall not apply to the extent that the Company Stock, at the time the put right would otherwise be exercisable, may be sold on an established market in accordance with federal and state securities laws and regulations.
(c) With respect to a put right, the Employer or the Trustee, as the case may be, may elect to pay for the Company Stock in equal periodic installments, not less frequently than annually, over a period not longer than five (5) years from the 30th day after the put right is exercised pursuant to paragraph (b) of this Section 7.05, with adequate security and interest at a reasonable rate on the unpaid balance, all such terms to be set forth in a promissory note delivered to the seller with normal terms as to acceleration upon any uncured default.
(d) Nothing contained in this Section 7.05 shall be deemed to obligate any Employer to register any Company Stock under any federal or state securities law or to create or maintain a public market to facilitate the transfer or disposition of any Company Stock. The put right described in this Section 7.05 may only be exercised by a person described in paragraph (b) of this Section 7.05, and may not be transferred with any Company Stock to any other person. As to all Company Stock purchased by the Plan in exchange for any Acquisition Loan, the put right shall be nonterminable. The put right for Company Stock acquired through an Acquisition Loan shall continue with respect to such Company Stock after the Acquisition Loan is repaid or the Plan ceases to be an employee stock ownership plan. Except as provided above, in accordance with the provisions of Sections 54.4975-7(b)(4) of the Treasury Regulations, no Company Stock acquired with the proceeds of an Acquisition Loan may be subject to any put, call or other option or buy-sell or similar arrangement while held by, and when distributed from, the Plan, whether the Plan is then an employee stock ownership plan.
7.06 Restrictions on Disposition of Stock . Except in the case of Company Stock which is traded on an established market, a Participant who receives Company Stock pursuant to this Section 7, and any person who has received Company Stock from the Plan or from such a Participant by reason of the Participant’s death or incompetency, by reason of divorce or separation from the Participant, or by reason of a rollover distribution described in Section 402(c) of the Code, shall, prior to any sale or other transfer of the Company Stock to any other person, first offer the Company Stock to the issuing Employer and to the Plan at its current fair market value. This restriction shall apply to any transfer, whether voluntary, involuntary, or by operation of law, and whether for consideration or gratuitous. Either the Employer or the Trustee may accept the offer within 14 days after it is delivered. Any Company Stock distributed by the Plan shall bear a conspicuous legend describing the right of first refusal under this Section 7.06, as applicable, as well as any other restrictions upon the transfer of the Company Stock imposed by federal and state securities laws and regulations.
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7.07 Direct Transfer of Eligible Plan Distributions .
(a) Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under this Section, a distributee (as defined below) may elect to have any portion of an eligible rollover distribution (as defined below) paid directly to an eligible retirement plan (as defined below) specified by the distributee in a direct rollover (as defined below). A “distributee” includes a Participant or former Participant. In addition, the Participant’s or former Participant’s surviving spouse and the Participant’s or former Participant’s spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. For purposes of this Section 7.07, a “direct rollover” is a payment by the Plan to the eligible retirement plan specified by the distributee.
(b) To effect such a direct transfer, the distributee must notify the Committee that a direct rollover is desired and provide to the Committee sufficient information regarding the eligible retirement plan to which the payment is to be made. Such notice shall be made in such form and at such time as the Committee may prescribe. Upon receipt of such notice, the Committee shall direct the Trustee to make a trustee-to-trustee transfer of the eligible rollover distribution to the eligible retirement plan so specified.
(c) For purposes of this Section 7.07, an “eligible rollover distribution” shall have the meaning set forth in Section 402(c)(4) of the Code and any Treasury Regulations promulgated thereunder. To the extent such meaning is not inconsistent with the above references, an eligible rollover distribution shall mean any distribution of all or any portion of the Participant’s Account, except that such term shall not include any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made (i) for the life (or life expectancy) of the Participant or the joint lives (or joint life expectancies) of the Participant and a designated Beneficiary, or (ii) for a period of ten (10) years or more. Further, the term “eligible rollover distribution” shall not include any distribution required to be made under Section 401(a)(9) of the Code or, the portion of any distribution that is not includible in gross income (determined without regard to the exclusions for net unrealized appreciation with respect to Company Stock). To the extent applicable under the Plan, “eligible rollover distributions” shall also not include any hardship distribution described in Section 401(k)(2)(B)(i)(IV) of the Code.
(d) For purposes of this Section 7.07, an “eligible retirement plan” shall have the meaning set forth in Section 402(c)(8) of the Code and any Treasury Regulations promulgated thereunder. To the extent such meaning is not inconsistent with the above references, an eligible retirement plan shall mean: (i) an individual retirement account described in Section 408(a) of the Code, (ii) an individual retirement annuity described in Section 408(b) of the Code, (iii) an annuity or annuity plan described in Section 403(a) or Section 403(b) of the Code, (iv) a qualified trust described in Section 401(a) of the Code, or (v) a governmental plan under Section 457 of the Code that accepts the distributee’s eligible rollover distribution. However, in the case of an eligible rollover distribution to a surviving spouse, an eligible retirement plan means an individual retirement account or individual retirement annuity.
(e) An eligible retirement plan shall also mean an annuity contract described in Section 403(b) of the Code and an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state which agrees to separately account for amounts transferred into such plan from this Plan. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order as defined in Section 414(p) of the Code.
7.08 Waiver of 30-Day Period After Notice of Distribution . If a distribution is one to which Sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than 30 days after the notice required under Treasury Regulations Section 1.411(a)-11(c) is given, provided that:
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(i) the Trustee or Committee, as applicable, clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular option), and
(ii) the Participant, after receiving the notice, affirmatively elects a distribution.
7.09 Non-Spouse Beneficiary Direct Rollover . If a non-spouse Beneficiary who is a distributee of any “eligible rollover distribution” (within the meaning of Section 401(a)(31) of the Code) (i) elects to have a distribution paid directly to an individual retirement account described in Sections 408(a) or 408(b) of the Code that is established for the purpose of receiving the distribution on behalf of a designated Beneficiary (as defined in Section 401(a)(9)(E) of the Code) who is a non-spouse beneficiary (a “Non-spouse IRA”) and (ii) specifies the Non-spouse IRA to which such distribution is to be paid (in such form and at such time as the Committee may prescribe), then such distribution shall be made in the form of a direct trustee-to-trustee transfer to such Non-spouse IRA, provided that such Non-spouse IRA accepts such a transfer. The foregoing sentence shall apply only to the extent that such eligible rollover distribution would be includable in gross income if not transferred as provided in such sentence (determined without regard to Section 402(c) of the Code). The direct rollover must be made to a Non-spouse IRA on behalf of the designated beneficiary that will be treated as an inherited IRA pursuant to the provisions of Section 402(c)(11) of the Code. A non-spouse beneficiary may not roll over an amount that is a required minimum distribution, as determined under applicable Treasury regulations and other Internal Revenue Service guidance. If the Participant dies before his required beginning date and the non-spouse beneficiary rolls over to a Non-spouse IRA the maximum amount eligible for rollover, the beneficiary may elect to use either the 5-year rule or the life expectancy rule, pursuant to Treasury Regulations Section 1.401(a)(9)-3, Q&A-4(c), in determining the required minimum distributions from the Non-spouse IRA that receives the non-spouse beneficiary’s distribution.
7.10 Roth IRA Rollover . A Participant may elect to roll over directly an eligible rollover distribution to a Roth IRA described in Section 408A(b) of the Code.
SECTION 8
VOTING OF COMPANY STOCK AND TENDER OFFERS
8.01 Voting of Company Stock .
(a) In General . The Trustee shall generally vote all shares of Company Stock held in the Trust in accordance with the provisions of this Section 8.01.
(b) Allocated Shares . Shares of Company Stock which have been allocated to Participants’ Accounts shall be voted by the Trustee in accordance with the Participants’ written instructions (including abstain if so directed) timely received by the Trustee.
(c) Uninstructed and Unallocated Shares . The Trustee shall vote (i) all Company Stock not allocated to Participants’ Accounts, and (ii) all Company Stock credited to Participants’ Accounts with respect to which the Trustee has not received timely direction, in the same proportion as the Company Stock specified in Section 8.01(b) above (disregarding any shares specified in 8.01(b) above with respect to which the Trustee has received a direction to abstain). Notwithstanding the preceding sentence, all shares of Company Stock which have been allocated to Participants’ Accounts and for which the Trustee has not timely received written instructions regarding voting and all unallocated shares of Company Stock must be voted by the Trustee in a manner determined by the Trustee to be for the exclusive benefit of the Participants and Beneficiaries.
(d) Voting Prior to Allocation . In the event no shares of Company Stock have been allocated to Participants’ Accounts at the time Company Stock is to be voted, each Participant shall be deemed to have one share of Company Stock allocated to his Accounts for the sole purpose of providing the Trustee with voting instructions.
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(e) Procedure and Confidentiality . Whenever such voting rights are to be exercised, the Employers, the Committee, and the Trustee shall see that all Participants and Beneficiaries are provided with the same notices and other materials as are provided to other holders of the Company Stock, and are provided with adequate opportunity to deliver their instructions to the Trustee regarding the voting of Company Stock allocated to their Accounts or deemed allocated to their Accounts for purposes of voting. The instructions of the Participants with respect to the voting of shares of Company Stock shall be confidential.
8.02 Tender Offers . In the event of a tender offer, Company Stock shall be tendered by the Trustee in the same manner set forth in Section 8.01 of the Plan regarding the voting of Company Stock.
SECTION 9
THE COMMITTEE AND PLAN ADMINISTRATION
9.01 Identity of the Committee . The Committee shall consist of three or more individuals selected by the Association. Any individual, including a director, trustee, shareholder, officer, or Employee of an Employer, shall be eligible to serve as a member of the Committee. The Association shall have the power to remove any individual serving on the Committee at any time without cause upon ten (10) days written notice to such individual and any individual may resign from the Committee at any time without reason upon ten (10) days written notice to the Association. The Association shall notify the Trustee of any change in membership of the Committee.
9.02 Authority of Committee .
(a) The Committee shall be the “plan administrator” within the meaning of ERISA and shall have exclusive responsibility and authority to control and manage the operation and administration of the Plan, including the interpretation and application of its provisions, except to the extent such responsibility and authority are otherwise specifically:
(i) allocated to the Association, the Employers, or the Trustee under the Plan and Trust Agreement;
(ii) delegated in writing to other persons by the Association, the Employers, the Committee, or the Trustee; or
(iii) allocated to other parties by operation of law.
(b) The Committee shall have exclusive responsibility regarding decisions concerning the payment of benefits under the Plan.
(c) The Committee shall have full investment responsibility with respect to the Investment Fund (as defined below in Section 11.04) except to the extent, if any, specifically provided in the Trust Agreement.
(d) In the discharge of its duties, the Committee may employ accountants, actuaries, legal counsel, and other agents (who also may be employed by an Employer or the Trustee in the same or some other capacity) and may pay such individuals reasonable compensation and expenses for their services rendered with respect to the operation or administration of the Plan to the extent such payments are not otherwise prohibited by law.
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9.03 Duties of Committee .
(a) The Committee shall keep whatever records may be necessary in connection with the maintenance of the Plan and shall furnish to the Employers whatever reports may be required from time to time by the Employers. The Committee shall furnish to the Trustee whatever information may be necessary to properly administer the Trust. The Committee shall see to the filing with the appropriate government agencies of all reports and returns required with respect to the Plan under ERISA and the Code and other applicable laws.
(b) The Committee shall have exclusive responsibility and authority with respect to the Plan’s holdings of Company Stock and shall direct the Trustee in all respects regarding the purchase, retention, sale, exchange, and pledge of Company Stock and the creation and satisfaction of any Acquisition Loan to the extent such responsibilities are not set forth in the Trust Agreement.
(c) The Committee shall at all times act consistently with the Association’s long-term intention that the Plan, as an employee stock ownership plan, be invested primarily in Company Stock. Subject to the direction of the Committee with respect to any Acquisition Loan pursuant to the provisions of Section 4.03 of the Plan, and subject to the provisions of Sections 7.05 and 11.04 of the Plan as to Participants’ rights under certain circumstances to have their Accounts invested in Company Stock or in assets other than Company Stock, the Committee shall determine, in its sole discretion, the extent to which assets of the Trust shall be used to repay any Acquisition Loan, to purchase Company Stock, or to invest in other assets selected by the Committee or an investment manager. No provision of the Plan relating to the allocation or vesting of any interests in the Company Stock or investments other than Company Stock shall restrict the Committee from changing any holdings of the Trust Fund, whether the changes involve an increase or a decrease in the Company Stock or other assets credited to Participants’ Accounts. In determining the proper extent of the Trust Fund’s investment in Company Stock, the Committee shall be authorized to employ investment counsel, legal counsel, appraisers, and other agents and to pay their reasonable compensation and expenses to the extent such payments are not prohibited by law.
(d) If the valuation of any Company Stock is not established by reported trading on a generally recognized public market, then the Committee shall have the exclusive authority and responsibility to determine value of the Company Stock for all purposes under the Plan. Such value shall be determined as of each Valuation Date and on any other date as of which the Trustee purchases or sells Company Stock in a manner consistent with Section 4975 of the Code and the Treasury Regulations thereunder. The Committee shall use generally accepted methods of valuing stock of similar corporations for purposes of arm’s length business and investment transactions, and in this connection the Committee shall obtain, and shall be protected in relying upon, the valuation of Company Stock as determined by an independent appraiser experienced in preparing valuations of similar businesses.
9.04 Compliance with ERISA and the Code . The Committee shall perform all acts necessary to ensure the Plan’s compliance with ERISA and the Code. Each individual member of the Committee shall discharge his duties in good faith and in accordance with the applicable requirements of ERISA and the Code.
9.05 Action by Committee . All actions of the Committee shall be governed by the affirmative vote of a number of the members of the Committee which is a majority of the total number of the members of the Committee. The members of the Committee may meet informally and may take any action without meeting as a group.
9.06 Execution of Documents . Any instrument executed by the Committee may be signed by any member of the Committee.
9.07 Adoption of Rules . The Committee shall adopt such rules and regulations of uniform applicability as it deems necessary or appropriate for the proper operation, administration and interpretation of the Plan.
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9.08 Responsibilities to Participants . The Committee shall determine which Employees qualify to participate in the Plan. The Committee shall furnish to each Eligible Employee whatever summary plan descriptions, summary annual reports, and other notices and information may be required under ERISA. The Committee also shall determine when a Participant or his Beneficiary qualifies for the payment of benefits under the Plan. The Committee shall furnish to each such Participant or Beneficiary whatever information is required under ERISA or the Code (or is otherwise appropriate) to enable the Participant or Beneficiary to make whatever elections may be available pursuant to Section 7, and the Committee shall provide for the payment of benefits in the proper form and amount from the Trust. The Committee may decide in its sole discretion to permit modifications of elections and to defer or accelerate benefits to the extent consistent with the terms of the Plan, applicable law, and the best interests of the individuals concerned.
9.09 Alternative Payees in Event of Incapacity . If the Committee finds at any time that an individual qualifying for benefits under this Plan is a minor or is incompetent, the Committee may direct the benefits to be paid, in the case of a minor, to his parents, his legal guardian, a custodian for him under the Uniform Transfers to Minors Act, or the person having actual custody of him, or, in the case of an incompetent, to his spouse, his legal guardian, or the person having actual custody of him. The Committee and the Trustee shall not be obligated to inquire as to the actual use of the funds by the person receiving them under this Section 9.09, and any such payment shall completely discharge the obligations of the Plan, the Trustee, the Committee, and the Employers to the extent of the payment.
9.10 Indemnification by Employers . Except as separately agreed in writing, the Committee, and any member or employee of the Committee, shall be indemnified and held harmless by the Employers, jointly and severally, to the fullest extent permitted by law against any and all costs, damages, expenses, and liabilities reasonably incurred by or imposed upon the Committee or such individual in connection with any claim made against the Committee or such individual or in which the Committee or such individual may be involved by reason of being, or having been, the Committee, or a member or employee of the Committee, to the extent such amounts are not paid by insurance.
9.11 Abstention by Interested Member . Any member of the Committee who also is a Participant in the Plan shall take no part in any determination specifically relating to his own participation or benefits under the Plan, unless his abstention would render the Committee incapable of acting on the matter.
SECTION 10
RULES GOVERNING BENEFIT CLAIMS
10.01 Claim for Benefits . Any Participant or Beneficiary who qualifies for the payment of benefits shall file a claim for his benefits with the Committee on a form provided by the Committee. The claim, including any election of an alternative benefit form, shall be filed at least 30 days before the date on which the benefits are to begin. If a Participant or Beneficiary fails to file a claim by the 30th day before the date on which benefits become payable, he shall be presumed to have filed a claim for payment for the Participant’s benefits in the standard form prescribed by Section 7 of the Plan.
10.02 Notification by Committee . Within 90 days after receiving a claim for benefits (or within 180 days, if special circumstances require an extension of time and written notice of the extension is given to the Participant or Beneficiary within 90 days after receiving the claim for benefits), the Committee shall notify the Participant or Beneficiary whether the claim has been approved or denied. If the Committee denies a claim in any respect, the Committee shall set forth in a written notice to the Participant or Beneficiary:
(a) each specific reason for the denial;
(b) specific references to the pertinent Plan provisions on which the denial is based;
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(c) a description of any additional material or information which could be submitted by the Participant or Beneficiary to support his claim, with an explanation of the relevance of such information; and
(d) an explanation of the claims review procedures set forth in Section 10.03 of the Plan.
10.03 Claims Review Procedure . Within 60 days after a Participant or Beneficiary receives notice from the Committee that his claim for benefits has been denied in any respect, he may file with the Committee a written notice of appeal setting forth his reasons for disputing the Committee’s determination. In connection with his appeal the Participant or Beneficiary or his representative may inspect or purchase copies of pertinent documents and records to the extent not inconsistent with other Participants’ and Beneficiaries’ rights of privacy. Within 60 days after receiving a notice of appeal from a prior determination (or within 120 days, if special circumstances require an extension of time and written notice of the extension is given to the Participant or Beneficiary and his representative within 60 days after receiving the notice of appeal), the Committee shall furnish to the Participant or Beneficiary and his representative, if any, a written statement of the Committee’s final decision with respect to his claim, including the reasons for such decision and the particular Plan provisions upon which it is based.
SECTION 11
THE TRUST
11.01 Creation of Trust Fund . All amounts received under the Plan from an Employer and investments shall be held in a Trust Fund pursuant to the terms of this Plan and the Trust Agreement. The benefits described in this Plan shall be payable only from the assets of the Trust Fund. Neither the Association, any other Employer, its board of directors or trustees, its stockholders, its officers, its employees, the Committee, nor the Trustee shall be liable for payment of any benefit under this Plan except from the Trust Fund.
11.02 Company Stock and Other Investments . The Trust Fund held by the Trustee shall be divided into Company Stock and investments other than Company Stock. The Trustee shall have no investment responsibility for the portion of the Trust Fund consisting of Company Stock, but shall accept any Employer contributions made in the form of Company Stock, and shall acquire, sell, exchange, distribute, and otherwise deal with and dispose of Company Stock in accordance with the instructions of the Committee.
11.03 Acquisition of Company Stock . From time to time the Committee may, in its sole discretion, direct the Trustee to acquire Company Stock from the issuing Employer or from shareholders, including shareholders who are or have been Employees, Participants, or fiduciaries with respect to the Plan. The Trustee shall pay for such Company Stock no more than its fair market value, which shall be determined conclusively by the Committee pursuant to Section 9.03(d) of the Plan. The Committee may direct the Trustee to finance the acquisition of Company Stock through an Acquisition Loan subject to the provisions of Section 4.03 of the Plan.
11.04 Participants’ Option to Diversify . The Committee shall provide for a procedure under which each Participant may, during the qualified election period, elect to “diversify” a portion of the Company Stock allocated to his Account, as provided in Section 401(a)(28)(B) of the Code. An election to diversify must be made on the prescribed form and filed with the Committee within the period specified herein. For each of the first five (5) Plan years in the qualified election period, the Participant may elect to diversify an amount which does not exceed 25% of the number of shares allocated to his Account since the inception of the Plan, less all shares with respect to which an election under this Section has already been made. For the last year of the qualified election period, the Participant may elect to have up to 50% of the value of his Account committed to other investments, less all shares with respect to which an election under this Section has already been made. For purposes hereof, the term “qualified election period” means the six (6) Plan Year period beginning with the first Plan Year in which a Participant has both attained age 55 and completed 10 years of participation in the Plan. A Participant’s election to diversify his Account may be made within each year of the qualified election period and shall continue for the 90 day period immediately following the last day of each year in the qualified election period. Once a Participant makes such election, the Committee shall direct the Trustee to complete
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diversification in accordance with such election within 90 days after the end of the period during which the election could be made for the Plan Year. In the discretion of the Committee, the Plan may satisfy the diversification requirement by any of the following methods:
(a) the Plan may distribute all or part of the amount subject to the diversification election;
(b) the Plan may offer the Participant at least three other distinct investment options within an “Investment Fund,” if available under the Plan. The other investment options must satisfy the requirements of Regulations under Section 404(c) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); or
(c) the Plan may transfer the portion of the Participant’s Account subject to the diversification election to another qualified defined contribution plan of the Employer that offers at least three investment options satisfying the requirements of the Regulations under Section 404(c) of ERISA.
SECTION 12
ADOPTION, AMENDMENT AND TERMINATION
12.01 Adoption of Plan by Other Employers . With the consent of the Association, any entity may become a participating Employer under the Plan by:
(a) taking such action as shall be necessary to adopt the Plan;
(b) becoming a party to the Trust Agreement establishing the Trust Fund; and
(c) executing and delivering such instruments and taking such other action as may be necessary or desirable to put the Plan into effect with respect to the entity’s Employees.
12.02 Adoption of Plan by Successor . In the event that any Employer shall be reorganized by way of merger, consolidation, transfer of assets or otherwise, so that an entity other than an Employer shall succeed to all or substantially all of the Employer’s business, the successor entity may be substituted for the Employer under the Plan by adopting the Plan and becoming a party to the Trust Agreement. Contributions by the Employer shall be automatically suspended from the effective date of any such reorganization until the date upon which the substitution of the successor entity for the Employer under the Plan becomes effective. If, within 90 days following the effective date of any such reorganization, the successor entity shall not have elected to become a party to the Plan, or if the Employer shall adopt a plan of complete liquidation other than in connection with a reorganization, the Plan shall be automatically terminated with respect to Employees of the Employer as of the close of business on the 90th day following the effective date of the reorganization, or as of the close of business on the date of adoption of a plan of complete liquidation, as the case may be.
12.03 Plan Adoption Subject to Qualification . Notwithstanding any other provision of the Plan, the adoption of the Plan and the execution of the Trust Agreement are conditioned upon their being determined initially by the Internal Revenue Service to meet the qualification requirements of Section 401(a) of the Code, so that the Employers may deduct currently for federal income tax purposes their contributions to the Trust and so that the Participants may exclude the contributions from their gross income and recognize income only when they receive benefits. In the event that this Plan is held by the Internal Revenue Service not to qualify initially under Section 401(a) of the Code, the Plan may be amended retroactively to the earliest date permitted by the Code and the applicable Treasury Regulations in order to secure qualification under Section 401(a) of the Code. If this Plan is held by the Internal Revenue Service not to qualify initially under Section 401(a) of the Code either as originally adopted or as amended, each Employer’s contributions to the Trust under this Plan (including any earnings thereon) shall be returned to it and this Plan shall be terminated. In the event that this Plan is amended after its initial qualification and the Plan as amended is held by the Internal Revenue Service not to qualify under Section 401(a) of the Code, the amendment may be modified retroactively to the earliest
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date permitted by the Code and the applicable Treasury Regulations in order to secure approval of the amendment under Section 401(a) of the Code.
12.04 Right to Amend or Terminate . The Association intends to continue this Plan as a permanent program. However, each participating Employer separately reserves the right to suspend, supersede, or terminate the Plan at any time and for any reason, as it applies to that Employer’s Employees, and the Association reserves the right to amend, suspend, supersede, merge, consolidate, or terminate the Plan at any time and for any reason, as it applies to the Employees of all Employers. No amendment, suspension, supersession, merger, consolidation, or termination of the Plan shall reduce any Participant’s or Beneficiary’s proportionate interest in the Trust Fund, or shall divert any portion of the Trust Fund to purposes other than the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan. Except as is required for purposes of compliance with the Code or ERISA, neither the provisions of Section 4.04 relating to the crediting of contributions, forfeitures and shares of Company Stock released from the Loan Suspense Account, nor any other provision of the Plan relating to the allocation of benefits to Participants, may be amended more frequently than once every six months. Moreover, there shall not be any transfer of assets to a successor plan or merger or consolidation with another plan unless, in the event of the termination of the successor plan or the surviving plan immediately following such transfer, merger, or consolidation, each participant or beneficiary would be entitled to a benefit equal to or greater than the benefit he would have been entitled to if the plan in which he was previously a participant or beneficiary had terminated immediately prior to such transfer, merger, or consolidation. Following a termination of this Plan by the Association, the Trustee shall continue to administer the Trust and pay benefits in accordance with the Plan and the Committee’s instructions.
SECTION 13
GENERAL PROVISIONS
13.01 Nonassignability of Benefits . The interests of Participants and other persons entitled to benefits under the Plan shall not be subject to the claims of their creditors and may not be voluntarily or involuntarily assigned, alienated, pledged, encumbered, sold, or transferred. The prohibitions set forth in this Section 13.01 shall also apply any judgment, decree, or order (including approval of a property or settlement agreement) which relates to the provision of child support, alimony, or property rights to a present or former spouse, child, or other dependent of a Participant pursuant to a domestic relations order, unless such judgment, decree or order is determined to be a “qualified domestic relations order” as defined in Section 414(p) of the Code.
13.02 Limit of Employer Liability . The liability of the Employers with respect to Participants and other persons entitled to benefits under the Plan shall be limited to making contributions to the Trust from time to time, in accordance with Section 4 of the Plan.
13.03 Plan Expenses . All expenses incurred by the Committee or the Trustee in connection with administering the Plan and Trust shall be paid by the Trustee from the Trust Fund to the extent the expenses have not been paid or assumed by the Employers or by the Trustee.
13.04 Nondiversion of Assets . Except as provided in Sections 5.05 and 12.03 of the Plan, under no circumstances shall any portion of the Trust Fund be diverted to or used for any purpose other than the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan.
13.05 Separability of Provisions . If any provision of the Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan.
13.06 Service of Process . The agent for the service of process upon the Plan shall be the President of the Association and the Trustee, or such other person as may be designated from time to time by the Association.
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13.07 Governing Law . The Plan is established under, and its validity, construction and effect shall be governed by the laws of the State of Missouri to the extent those laws are not preempted by federal law, including the provisions of ERISA.
13.08 Special Rules for Persons Subject to Section 16(b) Requirements . Notwithstanding anything herein to the contrary, any former Participant who is subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934, who becomes eligible to again participate in the Plan, may not become a Participant prior to the date that is six months from the date such former Participant terminated participation in the Plan. In addition, any person subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934 receiving a distribution of Company Stock from the Plan must hold such Company Stock for a period of six months commencing with the date of distribution. However, this restriction will not apply to Company Stock distributions made in connection with death, retirement, disability or termination of employment, or made pursuant to the terms of a qualified domestic relations order.
13.09 Military Service .
(a) Notwithstanding any other provision of this Plan to the contrary, contributions, benefits and Service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code.
(b) If a Participant dies while performing “Qualified Military Service” (as defined below), the survivors of the Participant shall be entitled to any additional benefits (other than benefit accruals relating to the period of Qualified Military Service) provided under the Plan as if the Participant had resumed and then terminated employment on account of death.
(c) Continued benefit accruals under the Plan are not provided pursuant to the HEART Act.
(d) If an individual on Qualified Military Service receives a differential wage payment, (i) he shall be treated as an Employee of the Employer making the payment, (ii) the differential wage payment shall be treated as Compensation except for purposes of determining contributions and benefits under the Plan. For purposes of the foregoing, “differential wage payment” shall have the meaning given such term by Code Section 3401(h)(2).
(e) For purposes of this provision, “Qualified Military Service” shall mean any service in the uniformed services (as defined in USERRA) by any Employee if such Employee is entitled to re-employment rights under USERRA with respect to such service.
13.10 Use of Electronic Media to Provide Notices and Make Participant Elections . Pursuant to Treasury Regulations Section 1.401(a)-21, the Plan may elect to use electronic media to provide notices required to be provided to Participants under the Plan and will accept elections from Participants communicated to the Plan using such electronic media.
SECTION 14
TOP-HEAVY PROVISIONS
14.01 Top-Heavy Provisions . Anything contained in the Plan to the contrary notwithstanding, in the event the Plan becomes a Top Heavy Plan (as defined below) in any Plan Year, then the following provisions of this Section 14 shall apply.
(a) Aggregation Group Defined . “Aggregation Group” means (a) each pension, profit sharing, stock bonus, and employee stock ownership plan of the Control Group in which a key employee is a participant, and (b) each other plan of the Control Group which enables any plan described in subclause (a) to meet the requirements of Section 401(a)(4) or 410 of the Code. In addition, the term “Aggregation Group” shall include
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any plan designated by the Association as being part of the group if the group would continue to meet the requirements of Sections 401(a)(4) and 410 of the Code with that plan being taken into account.
(b) Determination Date Defined . “Determination Date” means with respect to any Plan Year the last day of the preceding Plan Year or, in the case of the first Plan Year of the Plan, the last day of such Plan Year.
(c) Key Employee Defined . For purposes of this Section 14, “Key Employee” means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having annual compensation greater than $160,000 (as adjusted under Section 416(i)(l) of the Code), a 5% owner of the Employer or a 1% owner of the Employer having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.
(d) Top Heavy Plan Defined . “Top Heavy Plan” means if, as of the Determination Date, the aggregate of the accounts of Participants who are Key Employees under this Plan and under any plan included in the Aggregation Group exceeds 60% of the aggregate of the accounts of all employees under such plans . For purposes of determining the amounts of account balances of Participants as of the Determination Date, the rules set forth below will apply.
(i) Distributions During Year Ending on the Determination Date . The amounts of account balances of a Participant as of the Determination Date shall be increased by the distributions made with respect to the Participant under the Plan and any Plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death or disability, this provision shall be applied by substituting “5-year period” for “1-year period.”
(ii) Participants Not Performing Services During the Year Ending on the Determination Date . The accrued benefits and accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account.
14.02 Plan Modifications Upon Becoming Top-Heavy .
(a) Minimum Accruals . If the Plan is a Top Heavy Plan, Section 5.04 of the Plan will be modified to provide that the aggregate amount of Employer contributions allocated in each Plan Year to the Accounts of each Participant who is a non-Key Employee, and who is employed by an Employer as of the last day of the Plan Year, may not be less than the lesser of:
(i) three percent (3%) of his Compensation for the Plan Year; and
(ii) a percentage of his Compensation equal to the largest percentage obtained by dividing the sum of the amount credited to the Accounts of any Key Employee by that Key Employee’s Compensation.
(b) The preceding provision will remain in effect for the period in which the Plan is a Top Heavy Plan. If, for any particular year thereafter, the Plan is no longer a Top Heavy Plan, the provisions contained in this Section 14.02 shall cease to apply, except that any previously vested portion of any Account balance shall remain nonforfeitable.
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IN WITNESS WHEREOF, this Plan is executed as of the date set forth below _____ day of ______________ by an authorized representative of the Association.
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA | ||
By: |
Print Name: |
Title: | ||
Date: |
[Signature Page – ESOP]
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FORM OF
LOAN AGREEMENT
THIS LOAN AGREEMENT (“Loan Agreement”) is made and entered into as of _________, by and between _____________________ , AS THE TRUSTEES FOR THE CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA EMPLOYEE STOCK OWNERSHIP PLAN TRUST (“Borrower”), a trust forming part of the Central Federal Savings and Loan Association of Rolla Employee Stock Ownership Plan (“ESOP”); and CENTRAL FEDERAL BANCSHARES, INC. (“Lender”), a corporation organized and existing under the laws of Missouri.
W I T N E S S E T H
WHEREAS, the Borrower is authorized to purchase shares of common stock of Central Federal Bancshares, Inc. (“Common Stock”), either directly from Central Federal Bancshares, Inc. or in open market purchases in an amount not to exceed _________________ (___________) shares of Common Stock.
WHEREAS, the Borrower is authorized to borrow funds from the Lender for the purpose of financing authorized purchases of Common Stock; and
WHEREAS, the Lender is willing to make a loan to the Borrower for such purpose.
NOW, THEREFORE, the parties agree hereto to the provisions set forth below.
ARTICLE I
DEFINITIONS
The following definitions shall apply for purposes of this Loan Agreement, except to the extent that a different meaning is plainly indicated by the context:
“Business Day” means any day other than a Saturday, Sunday or other day on which banks are authorized or required to close under federal or local law or regulation.
“Code” means the Internal Revenue Code of 1986, as amended (including the corresponding provisions of any succeeding law).
“Default” means an event or condition which would constitute an Event of Default. The determination as to whether an event or condition would constitute an Event of Default shall be determined without regard to any applicable requirements of notice or lapse of time.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended (including the corresponding provisions of any succeeding law).
“Event of Default” means an event or condition described in Article 5 of this Loan Agreement.
“Loan ” means the loan described in Section 2.1 of this Loan Agreement.
“Loan Documents” means, collectively, the Loan Agreement, the Promissory Note and the Pledge Agreement and all other documents now or hereafter executed and delivered in connection with such documents, including all amendments, modifications and supplements of or to all such documents.
“Pledge Agreement” means the agreement described in Section 2.8(a) of this Loan Agreement.
“Principal Amount” means the face amount of the Promissory Note, determined as set forth in Section 2.1(c) of this Loan Agreement.
“ Promissory Note” means the promissory note described in Section 2.3 of this Loan Agreement.
“Register ” means the register described in Section 2.9 of this Loan Agreement.
ARTICLE II
THE LOAN; PRINCIPAL AMOUNT;
INTEREST; SECURITY; INDEMNIFICATION
Section 2.1 The Loan; Principal Amount .
(a) The Lender hereby agrees to lend to the Borrower such amount, and at such time, as shall be determined under this Section 2.1; provided, however, that in no event shall the aggregate amount lent under this Loan Agreement from time to time exceed the greater of (i) __________________ ($_________) or (ii) the aggregate amount paid by the Borrower to purchase up to __________________ (_________) shares of Common Stock.
(b) Subject to the limitations of Section 2.1(a), the Borrower shall determine the amounts borrowed under this Agreement, and the time at which such borrowings are effected. Each such determination shall be evidenced in a writing which shall set forth the amount to be borrowed and the date on which the Lender shall disburse such amount, and such writing shall be furnished to the Lender by notice from the Borrower. The Lender shall disburse to the Borrower the amount specified in each such notice on the date specified therein or, if later, as promptly as practicable following the Lender’s receipt of such notice; provided, however, that the Lender shall have no obligation to disburse funds pursuant to this Agreement following the occurrence of a Default or an Event of Default until such time as such Default or Event of Default shall have been cured.
(c) For all purposes of this Loan Agreement, the Principal Amount on any date shall be equal to the excess, if any, of:
(i) the aggregate amount disbursed by the Lender pursuant to Section 2.1(b) on or before such date; over
(ii) the aggregate amount of any repayments of such amounts made before such date.
The Lender shall maintain on the Register a record of, and shall record in the Promissory Note, the Principal Amount, any changes in the Principal Amount and the effective date of any changes in the Principal Amount.
Section 2.2 Interest .
(a) The Borrower shall pay to the Lender interest on the Principal Amount, for the period commencing with the first disbursement of funds under this Loan Agreement and continuing until the Principal Amount shall be paid in full, at the rate of ___________ percent (___%) per annum. Interest payable under this Agreement shall be computed on the basis of a year of 365 days and actual days elapsed (including the first day but excluding the last) occurring during the period to which the computation relates.
(b) Accrued interest on the Principal Amount shall be payable by the Borrower on the dates set forth in Schedule I to the Promissory Note. All interest on the Principal Amount shall be paid by the Borrower in immediately available funds.
(c) Anything in this Loan Agreement or the Promissory Note to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender’s receipt thereof would not be permissible under the law or laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Any such payment referred to in the preceding sentence shall be made by the Borrower to the Lender on the
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earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such deferred interest shall not bear interest.
Section 2.3 Promissory Note . The Loan shall be evidenced by the Promissory Note of the Borrower attached hereto as an Exhibit, payable to the order of the Lender in the Principal Amount and otherwise duly completed.
Section 2.4 Payment of Trust Loan . The Principal Amount of the Loan shall be repaid in accordance with Schedule I to the Promissory Note on the dates specified therein until fully paid.
Section 2.5 Prepayment . The Borrower shall be entitled to prepay the Loan in whole or in part, at any time and from time to time; provided, however, that the Borrower shall give notice to the Lender of any such prepayment; and provided, further, that any partial prepayment of the Loan shall be in an amount not less than $1,000. Any such prepayment shall be: (a) permanent and irrevocable; (b) accompanied by all accrued interest through the date of such prepayment; (c) made without premium or penalty; and (d) applied on the inverse order of the maturity of the installment thereof unless the Lender and the Borrower agree to apply such prepayments in some other order.
Section 2.6 Method of Payments .
(a) All payments of principal and interest payable hereunder shall be made in lawful money of the United States, in immediately available funds, to the Lender at the address specified herein or pursuant to this Loan Agreement for notices to the Lender, on the date on which such payment shall become due. Any such payment made on such date but after such time shall, if the amount paid bears interest, and except as expressly provided to the contrary herein, be deemed to have been made on, and interest shall continue to accrue and be payable thereon until, the next succeeding Business Day. If any payment of principal or interest becomes due on a day other than a Business Day, such payment may be made on the next succeeding Business Day, and when paid, such payment shall include interest to the day on which payment is in fact made.
(b) Notwithstanding anything to the contrary contained in this Loan Agreement or the Promissory Note, the Borrower shall not be obligated to make any payment, repayment or pre-payment on the Promissory Note if doing so would cause the ESOP to cease to be an employee stock ownership plan within the meaning of Section 4975(e)(7) of the Code or qualified under Section 401(a) of the Code or cause the Borrower to cease to be a tax exempt trust under Section 501(a) of the Code or if such act or failure to act would cause the Borrower to engage in any “prohibited transaction” as such term is defined in the Section 4975(c) of the Code and the regulations promulgated thereunder which is not exempted by Section 4975(c)(2) or (d) of the Code and the regulations promulgated thereunder or in Section 406 of ERISA and the regulations promulgated thereunder which is not exempted by Section 408(b) of ERISA and the regulations promulgated thereunder; provided, however, that in each case, the Borrower, may act or refrain from acting pursuant to this Section 2.6(b) on the basis of an opinion of counsel. The Borrower may consult with counsel, and any opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such opinion of counsel. Nothing contained in this Section 2.6(b) shall be construed as imposing a duty on the Borrower to consult with counsel. Any obligation of the Borrower to make any payment, repayment or prepayment on the Promissory Note or refrain from taking any other act hereunder or under the Promissory Note which is excused pursuant to this Section 2.6(b) shall be considered a binding obligation of the Borrower, or both, as the case may be, for the purposes of determining whether a Default or Event of Default has occurred hereunder or under the Promissory Note and nothing in this Section 2.6(b) shall be construed as providing a defense to any remedies otherwise available upon a Default or an Event of Default hereunder (other than the remedy of specific performance).
Section 2.7 Use of Proceeds of Loan . The entire proceeds of the Loan shall be used solely for acquiring shares of Common Stock, and for no other purpose whatsoever.
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Section 2.8 Security .
(a) In order to secure the due payment and performance by the Borrower of all of its obligations under this Loan Agreement, simultaneously with the execution and delivery of this Loan Agreement by the Borrower, the Borrower shall:
(i) | pledge to the Lender as Collateral (as defined in the Pledge Agreement), and grant to the Lender a first priority lien on and security interest in, the Common Stock purchased with the Principal Amount, by the execution and delivery to the lender of the Pledge Agreement attached hereto as an exhibit; and |
(ii) | execute and deliver, or cause to be executed and delivered, such other agreement, instruments and documents as the Lender may reasonably require in order to effect the purposes of the Pledge Agreement and this Loan Agreement. |
(b) The Lender shall release from encumbrance under the Pledge Agreement and transfer to the Borrower, as of the date on which any payment or repayment of the Principal Amount is made, a number of shares of Common Stock held as Collateral determined pursuant to the applicable provisions of the ESOP.
Section 2.9 Registration of the Promissory Note .
(a) The Lender shall maintain a Register providing for the registration of the Principal Amount and any stated interest and of transfer and exchange of the Promissory Note. Transfer of the Promissory Note may be effected only by the surrender of the old instrument and either the reissuance by the Borrower of the old instrument to the new holder or the issuance by the Borrower of a new instrument to the new holder. The old Promissory Note so surrendered shall be canceled by the Lender and returned to the Borrower after such cancellation.
(b) Any new Promissory Note issued pursuant to Section 2.9(a) shall carry the same rights to interest (unpaid and to accrue) carried by the Promissory Note so transferred or exchanged so that there will not be any loss or gain of interest on the note surrender. Such new Promissory Note shall be subject to all of the provisions and entitled to all of the benefits of this Agreement. Prior to due presentment for registration or transfer, the Borrower may deem and treat the registered holder of any Promissory Note as the holder thereof for purposes of payment and other purposes. A notation shall be made on each new Promissory Note of the amount of all payments of principal and interest theretofore paid.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower hereby represents and warrants to the Lender as follows:
Section 3.1 Power, Authority, Consents . The Borrower has the power to execute, deliver and perform this Loan Agreement, the Promissory Note and Pledge Agreement, all of which have been duly authorized by all necessary and proper corporate or other action.
Section 3.2 Due Execution, Validity, Enforceability . Each of the Loan Documents, including, without limitation, this Loan Agreement, the Promissory Note and the Pledge Agreement, has been duly executed and delivered by the Borrower; and each constitutes the valid and legally binding obligation of the Borrower, enforceable in accordance with its terms.
Section 3.3 Properties, Priority of Liens . The liens which have been created and granted by the Pledge Agreement constitute valid, first liens on the properties and assets covered by the Pledge Agreement, subject to no prior or equal lien.
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Section 3.4 No Defaults, Compliance with Laws . The Borrower is not in default in any material respect under any agreement, ordinance, resolution, decree, bond, note, indenture, order or judgment to which it is a party or by which it is bound, or any other agreement or other instrument by which any of the properties or assets owned by it is materially affected.
Section 3.5 Purchase of Common Stock . Upon consummation of any purchase of Common Stock by the Borrower with the proceeds of the Loan, the Borrower shall acquire valid, legal and marketable title to all of the Common Stock so purchased, free and clear of any liens, other than a pledge to the Lender of the Common Stock so purchased pursuant to the Pledge Agreement. Neither the execution and delivery of the Loan Documents nor the performance of any obligation thereunder violates any provisions of law or conflicts with or results in a breach of or creates (with or without the giving of notice of lapse of time, or both) a default under any agreement to which the Borrower is a party or by which it is bound or any of its properties is affected. No consent of any federal, state, or local governmental authority, agency, or other regulatory body, the absence of which could have a materially adverse effect on the Borrower or the Trustee, is or was required to be obtained in connection with the execution, delivery, or performance of the Loan Documents and the transaction contemplated therein or in connection therewith, including without limitation, with respect to the transfer of the shares of Common Stock purchased with the proceeds of the Loan pursuant thereto.
Section 3.6 ESOP; Contributions . The ESOP will qualify as an “employee stock ownership plan” as defined in Section 4975(e)(7) of the Code. The ESOP provides that the ESOP sponsor may make contributions to the ESOP in an amount necessary to enable the Trustee to amortize the Loan in accordance with the terms of the Promissory Note; provided, however, that no such contributions shall be required if they would adversely affect the qualification of the ESOP under Section 401(a) of the Code.
Section 3.7 Trustee . The trustee of the ESOP has been duly appointed by the ESOP sponsor.
Section 3.8 Compliance with Laws; Actions . Neither the execution and delivery by the Borrower of this Loan Agreement or any instruments required thereby, nor compliance with the terms and provisions of any such documents by the lender, constitutes a violation of any provision of any law or any regulation, order, writ, injunction or decree of any court or governmental instrumentality, or an event of default under any agreement, to which the Borrower is a party, to which the Borrower is bound or to which the Borrower is subject, which violation or event of default would have a material adverse effect on the Borrower. There is no action or proceeding pending or threatened against either the ESOP or the Borrower before any court or administrative agency.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE LENDER
The Lender hereby represents and warrants to the Borrower as follows:
Section 4.1 Power, Authority, Consents . The Lender has the power to execute, deliver and perform this Loan Agreement, the Pledge Agreement and all documents executed by the Lender in connection with the Loan, all of which have been duly authorized by all necessary and proper corporate or other action. No consent, authorization or approval or other action by any governmental authority or regulatory body, and no notice by the Lender to, or filing by the Lender with, any governmental authority or regulatory body is required for the due execution, delivery and performance of this Loan Agreement.
Section 4.2 Due Execution, Validity, Enforceability . This Loan Agreement and the Pledge Agreement have been duly executed and delivered by the Lender, and each constitutes a valid and legally binding obligation of the Lender, enforceable in accordance with its terms.
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ARTICLE V
EVENTS OF DEFAULT
Section 5.1 Events of Default under Loan Agreement . Each of the following events shall constitute an “Event of Default” hereunder:
(a) failure to make any payment or mandatory prepayment of principal of the Promissory Note when due, or failure to make any payment of interest on the Promissory Note not later than five (5) Business Days after the date when due;
(b) failure by the Borrower to perform or observe any term, condition or covenant of this Loan Agreement or of any of the other Loan Documents, including, without limitation, the Promissory Note and the Pledge Agreement; or
(c) any representation or warranty made in writing to the Lender in any of the Loan Documents, or any certificate, statement or report made or delivered in compliance with this Loan Agreement, shall have been false or misleading in any material respect when made or delivered.
Section 5.2 Lender’s Rights upon Event of Default . If an Event of Default under this Loan Agreement shall occur and be continuing, the Lender shall have no rights to assets of the Borrower other than: (a) contributions (other than contributions of Common Stock) that are made by the ESOP sponsor to enable the Borrower to meet its obligations pursuant to this Loan Agreement and earnings attributable to the investment of such contributions and (b) “Eligible Collateral” (as defined in the Pledge Agreement); provided, however, that: (i) the value of the Borrower’s assets transferred to the Lender following an Event of Default in satisfaction of the due and unpaid amount of the Loan shall not exceed the amount in default; (ii) the Borrower’s assets shall be transferred to the Lender following an Event of Default only to the extent of the failure of the Borrower to meet the payment schedule of the Loan; and (iii) all rights of the Lender to the Common Stock purchased with the proceeds of the Loan covered by the Pledge Agreement following an Event of Default shall be governed by the terms of the Pledge Agreement.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Payments . All payments hereunder and under the Promissory Note shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments shall not be less than the amounts otherwise specified to be paid under this Loan Agreement and the Promissory Note, subject to any applicable tax withholding requirements. Upon payment in full of the Promissory Note, the Lender shall mark such Promissory Note “Paid” and return it to the Borrower.
Section 6.2 Survival . All agreements, representations and warranties made herein shall survive the delivery of this Loan Agreement and the Promissory Note.
Section 6.3 Modifications, Consents and Waivers; Entire Agreement . No modification, amendment or waiver of or with respect to any provision of this Loan Agreement, the Promissory Note, the Pledge Agreement, or any of the other Loan Documents, nor consent to any departure from any of the terms or conditions thereof, shall in any event be effective unless it shall be in writing and signed by the party against whom enforcement thereof is sought. Any such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No consent to or demand on a party in any case shall, of itself, entitle it to any other or further notice or demand in similar or other circumstances. This Loan Agreement embodies the entire agreement and understanding between the Lender and the Borrower and supersedes all prior agreements and understandings relating to the subject matter hereof.
Section 6.4 Remedies Cumulative . Each and every right granted to the Lender hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of the Lender or the holder of the Promissory Note to
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exercise, and no delay in exercising, any right shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or future exercise thereof or the exercise of any other right. The due payment and performance of the obligations under the Loan Documents shall be without regard to any counterclaim, right of offset or any other claim whatsoever which the Borrower may have against the Lender and without regard to any other obligation of any nature whatsoever which the Lender may have to the Borrower, and no such counterclaim or offset shall be asserted by the Borrower in any action, suit or proceeding instituted by the Lender for payment or performance of such obligations.
Section 6.5 Further Assurances; Compliance with Covenants . At any time and from time to time, upon the request of the Lender, the Borrower shall execute, deliver and acknowledge or cause to be executed, delivered and acknowledged, such further documents and instruments and do such other acts and things as the Lender may reasonably request in order to fully effect the terms of this Loan Agreement, the Promissory Note, the Pledge Agreement, the other Loan Documents and any other agreements, instruments and documents delivered pursuant hereto or in connection with the Loan.
Section 6.6 Notices . Except as otherwise specifically provided for herein, all notices, requests, reports and other communications pursuant to this Loan Agreement shall be in writing, either by letter (delivered by hand or commercial messenger service or sent by registered or certified mail, return receipt requested, except for routine reports delivered in compliance with Article VI hereof which may be sent by ordinary first-class mail) or telex or telecopier addressed as follows:
(a) | If to the Borrower: |
Central Federal Savings and Loan Association of Rolla Employee Stock Ownership Plan Trust
___________________________________
___________________________________
Attn:_______________________________
(b) | If to the Lender: |
Central Federal Bancshares, Inc.
210 West 10 th Street
Rolla, Missouri 65401
Attn:_____________
Any notice, request or communication hereunder shall be deemed to have been given on the day on which it is delivered by hand or by commercial messenger service, or sent by telex or telecopier, to such party at its address specified above, or, if sent by mail, on the third Business Day after the day deposited in the mail, postage prepaid, addressed as aforesaid. Any party may change the person or address to whom or which notices are to be given hereunder, by notice duly given hereunder; provided, however, that any such notice shall be deemed to have been given only when actually received by the party to whom it is addressed.
Section 6.7 Counterparts . This Loan Agreement may be signed in any number of counterparts which, when taken together, shall constitute one and the same document.
Section 6.8 Construction; Governing Law . The headings used in the table of contents and in this Loan Agreement are for convenience only and shall not be deemed to constitute a part hereof. All uses herein of any gender or of singular or plural terms shall be deemed to include uses of the other genders or plural or singular terms, as the context may require. All references in this Loan Agreement of an Article or Section shall be to an Article or Section of this Loan Agreement, unless otherwise specified. This Loan Agreement, the Promissory Note, the Pledge Agreement and the other Loan Documents shall be governed by, and construed and interpreted in accordance with, the laws of the State of Missouri.
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Section 6.9 Severability . Wherever possible, each provision of this Loan Agreement shall be interpreted in such manner as to be effective and valid under applicable law; however, the provisions of this Loan Agreement are severable, and if any clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provisions in this Loan Agreement in any jurisdiction. Each of the covenants, agreements and conditions contained in this Loan Agreement are independent, and compliance by a party with any of them shall not excuse non-compliance by such party with any other. The Borrower shall not take any action the effect of which shall constitute a breach or violation of any provision of this Loan Agreement.
Section 6.10 Binding Effect: No Assignment or Delegation . This Loan Agreement shall be binding upon and inure to the benefit of the Borrower and its successors and the Lender and its successors and assigns. The rights and obligations of the Borrower under this Agreement shall not be assigned or delegated without the prior written consent of the Lender, and any purported assignment or delegation without such consent shall be void.
* * * * *
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IN WITNESS WHEREOF, the parties have caused this Loan Agreement to be executed as of the date first written above.
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA EMPLOYEE STOCK OWNERSHIP PLAN TRUST |
By: |
Print Name: |
Title: | Trustee |
CENTRAL FEDERAL BANCSHARES, INC. |
By: |
Print Name: |
By: |
[Signature Page – ESOP Loan Agreement]
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FORM OF
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (“Pledge Agreement”) is made as of _______________, by and between ______________ , AS TRUSTEES FOR THE CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA EMPLOYEE STOCK OWNERSHIP PLAN TRUST (“Pledgor”), and CENTRAL FEDERAL BANCSHARES, INC. (“Pledgee”).
W I T N E S S E T H
WHEREAS, this Pledge Agreement is being executed and delivered to the Pledgee pursuant to the terms of a Loan Agreement (“Loan Agreement”), by and between the Pledgor and the Pledgee;
NOW, THEREFORE, in consideration of the mutual agreements contained herein and in the Loan Agreement, the parties hereto do hereby covenant and agree to the provisions set forth below.
Section 1. Definitions . The following definitions shall apply for purposes of this Pledge Agreement, except to the extent that a different meaning is plainly indicated by the context; all capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Loan Agreement.
“ Collateral” shall mean the Pledged Shares and, subject to Section 5 hereof, and to the extent permitted by applicable law, all rights with respect thereto, and all proceeds of such Pledged Shares and rights.
“ ESOP” shall mean the Central Federal Savings and Loan Association of Rolla Employee Stock Ownership Plan.
“ Event of Default” shall mean an event so defined in the Loan Agreement.
“ Liabilities” shall mean the amounts the Pledgor owes to the Pledgee under the Loan Agreement and the Promissory Note and any amendments thereto.
“ Pledged Shares” shall mean all the Shares of Common Stock of the Pledgee purchased by the Pledgor with the proceeds of the loan made by the Pledgee to the Pledgor pursuant to the Loan Agreement, but excluding any such shares previously released pursuant to Section 4 of this Pledge Agreement.
Section 2. Pledge . To secure the payment of and performance of all the Liabilities, the Pledgor hereby pledges to the Pledgee, and grants to the Pledgee, a security interest in, and lien upon, the Collateral.
Section 3. Representations and Warranties of the Pledgor . The Pledgor represents, warrants, and covenants to the Pledgee as follows:
(a) the execution, delivery and performance of this Pledge Agreement and the pledging of the Collateral hereunder do not and will not conflict with, result in a violation of, or constitute a default under, any agreement binding upon the Pledgor;
(b) the Pledged Shares are and will continue to be owned by the Pledgor free and clear of any liens or rights of any other person except the lien hereunder and under the Loan Agreement in favor of the Pledgee, and the security interest of the Pledgee in the Pledged Shares and the proceeds thereof is and will continue to be prior to and senior to the rights of all others;
(c) this Pledge Agreement is the legal, valid, binding and enforceable obligation of the Pledgor in accordance with its terms;
(d) the Pledgor shall, from time to time, upon request of the Pledgee, promptly deliver to the Pledgee such stock powers, proxies, and similar documents, satisfactory in form and substance to the Pledgee, with respect to the Collateral as the Pledgee may reasonably request; and
(e) subject to the first sentence of Section 4(b) of this Pledge Agreement, the Pledgor shall not, so long as any Liabilities are outstanding, sell, assign, exchange, pledge or otherwise transfer or encumber any of its rights in and to any of the Collateral.
Section 4. Eligible Collateral .
(a) As used herein the term “Eligible Collateral” shall mean the amount of Collateral which has an aggregate fair market value equal to the amount by which the Pledgor is in default or such lesser amount of Collateral as may be required pursuant to Section 13 of this Pledge Agreement.
(b) The Pledged Shares shall be released from this Pledge Agreement in a manner conforming to the requirements of Treasury Regulations Section 54.4975-7(b)(8), as the same may be from time to time amended or supplemented, and the applicable provisions of the ESOP. Subject to the Treasury Regulations, the Pledgee may from time to time, after any Default or Event of Default, and without prior notice to the Pledgor, transfer all or any part of the Eligible Collateral in the name of the Pledgee or its nominee, without disclosing that such Eligible Collateral is subject to any rights of the Pledgor and may from time to time, whether before or after any of the Liabilities shall become due and payable, without notice to the Pledgor, take all or any of the following actions: (i) notify the parties obligated on any of the Eligible Collateral to make payment to the Pledgee of any amounts due or due to become due thereunder, (ii) release or exchange all or any part of the Eligible Collateral, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, and (iii) take control of any proceeds of the Eligible Collateral.
Section 5. Delivery .
(a) The Pledgor shall deliver to the Pledgee upon execution of this Pledge Agreement (i) either (A) certificates for the Pledged Shares, each certificate duly signed in blank by the Pledgor or accompanied by a stock transfer power duly signed in blank by the Pledgor and each such certificate accompanied by all required documentary or stock transfer tax stamps or (B) if the Trustee does not yet have possession of the Pledged Shares, an assignment by the Pledgor of all the Pledgor’s rights to and interest in the Pledged Shares, and (ii) an irrevocable proxy, in form and substance satisfactory to the Pledgee, signed by the Pledgor with respect to the Pledged Shares.
(b) Subject to Section 6 of this Pledge Agreement, (i) the Pledgor shall be entitled to exercise any and all voting and other rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement, and (ii) the Pledgor shall be entitled to receive any and all cash dividends or other distributions paid in respect of the Collateral.
Section 6. Events of Default .
(a) If a Default or Event of Default shall be existing, in addition to the rights it may have under the Loan Agreement, the Promissory Note, and this Pledge Agreement, or by virtue of any other instrument, (i) the Pledgee may exercise, with respect to the Eligible Collateral, from time to time, any rights and remedies available to it under the Uniform Commercial Code as in effect from time to time in the State of Missouri or otherwise available to it, and (ii) the Pledgee shall have the right, for and in the name, place and stead of the Pledgor, to execute endorsement, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Eligible Collateral. Written notification of intended disposition of any of the Eligible Collateral shall be given by the Pledgee to the Pledgor at least three (3) Business Days before such disposition. No action of the Pledgee permitted hereunder shall impair or affect its rights in and to the Eligible Collateral. All rights and remedies of the Pledgee expressed hereunder are in addition to all other rights and remedies possessed by it, including, without limitation, those contained in the documents referred to in the definition of Liabilities in Section 1 hereof.
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(b) In any sale of any of the Eligible Collateral after a Default or an Event of Default shall have occurred, the Pledgee is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid violation of applicable law (including, without limitation, compliance with such procedures as may restrict the number of prospective bidders and purchasers or further restrict such prospective bidders or purchasers to persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Eligible Collateral), or in order to obtain such required approval of the sale or of the purchase by any governmental regulatory authority or official, and the Pledgor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Pledgee be liable or accountable to the Pledgor for any discount allowed by reason of the fact that such Eligible Collateral is sold in compliance with any such limitation or restriction.
Section 7. Payment in Full . Upon the payment in full of all outstanding Liabilities, this Pledge Agreement shall terminate and the Pledgee shall forthwith assign, transfer and deliver to the Pledgor, against receipt and without recourse to the Pledgee, all Collateral then held by the Pledgee pursuant to the Pledge Agreement.
Section 8. No Waiver . No failure or delay on the part of the Pledgee in exercising any right or remedy hereunder or under any other document which confers or grants any rights to the Pledgee in respect of the Liabilities shall operate as a waiver thereof nor shall any single or partial exercise of any such rights or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy of the Pledgee.
Section 9. Binding Effect; No Assignment or Delegation . This Pledge Agreement shall be binding upon and inure to the benefit of the Pledgor, the Pledgee and their respective successors and assigns, except that the Pledgor may not assign or transfer its rights hereunder without the prior written consent of the Pledgee (which consent shall not unreasonably be withheld). Each duty or obligation of the Pledgor to the Pledgee pursuant to the provisions of this Pledge Agreement shall be performed in favor of any person or entity designated by the Pledgee, and any duty or obligation of the Pledgee to the Pledgor may be performed by any other person or entity designated by the Pledgee.
Section 10. Governing Law . This Pledge Agreement shall be governed by and construed in accordance with the laws of the State of Missouri applicable to agreements to be performed wholly within the State of Missouri.
Section 11. Notices . All notices, requests, instructions or documents hereunder shall be in writing and delivered personally or sent by United States mail, registered or certified, return receipt requested, with proper postage prepaid as follows:
(a) | If to the Pledgor: |
Central Federal Savings and Loan Association of Rolla Employee Stock Ownership Plan Trust
___________________________________
___________________________________
Attn: _______________________________
(b) | If to the Pledgee: |
Central Federal Bancshares, Inc.
210 West 10 th Street
Rolla, Missouri 65401
Attn:_____________
or at such other address as either of the parties may designate by written notice to the other party. If delivered personally, the date on which a notice, request, instruction or document is delivered shall be the date on which such delivery is made, and, if delivered by mail, the date on which such notice, request, instruction, or document is
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deposited in the mail shall be the date of delivery. Each notice, request, instruction or document shall bear the date on which it is delivered.
Section 12. Interpretation . Wherever possible each provision of this Pledge Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision herein shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions hereof.
Section 13. Construction . All provisions hereof shall be construed so as to maintain (a) the ESOP as a tax-qualified leveraged employee stock ownership plan under Sections 401(a) and 4975(e)(7) of the Internal Revenue Code of 1986 (the “Code”), (b) the Trust as exempt from taxation under Section 501(a) of the Code and (c) the loan as an exempt loan under Section 54.4975-7(b) of the Treasury Regulations and as described in Department of Labor Regulation Section 2550.408b-3.
IN WITNESS WHEREOF, this Pledge Agreement has been duly executed by the parties hereto as of the day and year first above written.
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA EMPLOYEE STOCK OWNERSHIP PLAN TRUST |
By: |
Print Name: |
Title: | Trustee |
CENTRAL FEDERAL BANCSHARES, INC. |
By: |
Print Name: |
By: |
[Signature Page – ESOP Pledge Agreement]
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FORM OF
PROMISSORY NOTE
FOR VALUE RECEIVED , the undersigned, ________________ AS THE TRUSTEES FOR THE CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA EMPLOYEE STOCK OWNERSHIP PLAN TRUST (the “Borrower”), hereby promises to pay to the order of CENTRAL FEDERAL BANCSHARES, INC. (the “Lender”) up _______________________ dollars ($_______) payable in accordance with the Loan Agreement made and entered into between the Borrower and the Lender of even date herewith (“Loan Agreement”) pursuant to which this Promissory Note is issued.
The Principal Amount of this Promissory Note shall be payable in accordance with the schedule attached hereto (“Schedule I”).
This Promissory Note shall bear interest at the rate per annum set forth or established under the Loan Agreement, such interest to be payable in accordance with Schedule I.
Anything herein to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender’s receipt thereof would not be permissible under the law or laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Any such payments of interest which are not made as a result of the limitation referred to in the preceding sentence shall be made by the Borrower to the Lender on the earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such deferred interest shall not bear interest.
Payments of both principal and interest on this Promissory Note are to be made at the principal office of the Lender or such other place as the holder hereof shall designate to the Borrower in writing, in lawful money of the United States of America in immediately available funds.
Failure to make any payments of principal on this Promissory Note when due, or failure to make any payment of interest on this Promissory Note not later than five (5) Business Days after the date when due, shall constitute a default hereunder, whereupon the principal amount of accrued interest on this Promissory Note shall immediately become due and payable in accordance with the terms of the Loan Agreement.
This Promissory Note is secured by a Pledge Agreement between the Borrower and the Lender of even date herewith and is entitled to the benefits thereof.
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA EMPLOYEE STOCK OWNERSHIP PLAN TRUST | ||
Trustee |
Exhibit 10.2
FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into on _________, 20__, by and among CENTRAL FEDERAL BANCSHARES, INC. , a Missouri corporation (“Bancshares”), CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA (the “Association,” and collectively with Bancshares, the “Company”), and William A. Stoltz (the “Executive”).
WHEREAS, the Executive serves in positions of substantial responsibility with the Company; and
WHEREAS , the Company and the Executive wish to set forth the terms of the Executive’s employment with the Company and enter into this Agreement;
NOW THEREFORE, in consideration of these premises, the mutual covenants contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
1. Employment.
(a) Employment . The Company hereby employs the Executive to serve as President and Chief Executive Officer (“CEO”) of Bancshares and the Association according to the terms and conditions of this Agreement and for the period stated in Section 1(c) of this Agreement. The Executive hereby accepts employment according to the terms and conditions of this Agreement and for the period stated in Section 1(c) of this Agreement.
(b) Duties . As President and CEO, the Executive shall report directly to the boards of directors of Bancshares and the Association. The Executive shall serve the Company faithfully, diligently, competently, and to the best of the Executive’s ability. It is contemplated by this Agreement that the Executive’s duties shall be comparable to those presently undertaken by the Executive. The duties of employment shall include such additional executive duties on behalf of the Company and its operations of a character in keeping with the Executive’s position as may, from time to time, be assigned to the Executive by the boards of directors of the Company. The Executive shall exclusively devote full working time, energy, and attention to the business of the Company throughout the term of this Agreement. Without the prior written consent of the boards of directors of the Company during the term of this Agreement, the Executive shall not render services to or for any person, firm, corporation, or other entity or organization in exchange for compensation, regardless of the form in which the compensation is paid and regardless of whether it is paid directly or indirectly to the Executive. Nothing in this Section 1(b) shall prevent the Executive from managing personal investments and affairs, provided that doing so does not interfere with the proper performance of the Executive’s duties and responsibilities under this Agreement.
(c) Term .
(i) The term of this Agreement shall include: (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the third anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 1(c).
(ii) Commencing as of the first anniversary of the Effective Date, and continuing on each anniversary of the Effective Date thereafter, the disinterested members of the boards of directors may extend the Agreement term for an additional year, so that the remaining term of the Agreement again becomes 36 months from the applicable anniversary date, unless the Executive elects not to extend the term of this Agreement by giving proper written notice. The boards of directors will review the Agreement and Executive’s performance annually for purposes of determining whether to extend the Agreement term and
will include the rationale and results of its review in the minutes of the meetings. The boards of directors will notify the Executive as soon as possible after each annual review whether it has determined to extend the Agreement.
(iii) Nothing in this Agreement shall mandate or prohibit a continuation of the Executive’s employment following the expiration of the term of this Agreement, upon such terms and conditions as the Company and the Executive may mutually agree.
2. Compensation and Benefits.
(a) Base Salary . In consideration of the Executive’s performance of the obligations under this Agreement, the Company shall pay or cause to be paid to the Executive a salary at the annual rate of $ _________ , payable according to the regular payroll practices of the Company. The Executive’s salary shall be subject to annual review. The Executive’s salary, as the same may be modified from time to time, is referred to in this Agreement as the “Base Salary.” All compensation under this Agreement shall be subject to customary income tax withholding and such other employment taxes as are imposed by law.
(b) Benefit Plans and Perquisites . For as long as the Executive is employed by the Company, the Executive shall be eligible: (i) to participate in any and all officer or employee compensation, incentive compensation and benefit plans in effect from time to time, including without limitation plans providing retirement, medical, dental, disability, and group life benefits and including incentive or bonus plans existing on the date of this Agreement or adopted after the date of this Agreement, provided that the Executive satisfies the eligibility requirements for any the plans or benefits, and (ii) to receive any and all other fringe and other benefits provided from time to time, including the following:
(i) Reimbursement of business expenses . The Executive shall be entitled to reimbursement for all reasonable business expenses incurred while performing his obligations under this Agreement, including but not limited to all reasonable business travel and entertainment expenses incurred while acting at the request of or in the service of the Company, and reasonable expenses for attendance at annual and other periodic meetings of trade associations. Expenses will be reimbursed if they are submitted in accordance with the Company’s policies and procedures.
(ii) Facilities . The Company will furnish the Executive with the working facilities and staff customary for executive officers with the comparable titles and duties of the Executive as set forth in Sections 1(a) and 1(b) of this Agreement and as are necessary for the Executive to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Company, or at such other site or sites customary for such offices and as agreed to by the parties.
(c) Vacation; Leave . The Executive shall be entitled to sick leave and ___ weeks’ paid annual vacation in accordance with policies established from time to time by the Company. In addition to paid vacations and other leave, the boards of directors may grant the Executive a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the boards of directors may determine. Vacation time must be taken during the calendar year in which it is accrued and may be carried over into succeeding calendar years or paid out to the Executive in accordance with the policies of the Company. The Executive shall take his vacation at a reasonable time or times taking into consideration the needs of the Company.
(d) Insurance . The Company shall maintain or cause to be maintained liability insurance covering the Executive throughout the term of this Agreement.
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3. Employment Termination.
(a) Termination Because of Death or Disability .
(i) Death . The Executive’s employment and this Agreement shall terminate automatically at the Executive’s death. If the Executive dies in active service to the Company, the Executive’s estate shall receive any sums due to the Executive as Base Salary and reimbursement of expenses through the end of the month in which death occurs.
(ii) Disability . By delivery of written notice 30 days in advance to the Executive, the Company may terminate the Executive’s employment and this Agreement due to the Executive’s Disability (as defined below). In the event that the Executive’s employment hereunder terminates due to his Disability, no termination benefits shall be payable to or in respect of the Executive. For purposes of this Agreement, “Disability” shall mean a physical or mental condition due to which the Executive shall have been absent from her duties on a full-time basis for a 12 consecutive month period. The Executive’s employment shall be deemed to have terminated as a result of Disability on the date provided in the notice of termination provided to the Executive by the Company. The Executive shall not be considered Disabled, however, if the Executive has returned to employment on a full-time basis within 30 days of receiving such notice.
(b) Involuntary Termination with Cause . The boards of directors may, by written notice to the Executive, immediately terminate the Executive’s employment and this Agreement at any time for Cause, in which case the Executive shall be entitled to receive only the unpaid Base Salary that has accrued through the date of termination. The Company shall deliver to the Executive a copy of the resolution duly adopted by the boards of directors of Bancshares and the Association (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the boards of directors, such meeting and the opportunity to be heard to be held prior to, or as soon as reasonably practicable following, termination, but in no event later than 30 days following such termination), finding that the Executive was guilty of conduct constituting Cause. The notice provided to the Executive pursuant hereto shall specify in detail the particulars of the conduct constituting Cause. If the boards of directors thereafter determines that such conduct did not constitute Cause and the Executive’s employment hereunder is reinstated, then the Executive shall be entitled to receive back pay for the period following termination and continuing through reinstatement, which amount will be paid in a single lump sum within 15 business days following reinstatement. If the Executive’s employment is not reinstated as contemplated by the preceding sentence, then the termination of employment shall be deemed to have occurred pursuant to Section 3(d) of this Agreement and the Executive shall be entitled to the compensation and benefits provided therein. For the purposes of this Agreement “Cause” means any of the following:
(1) a material act of personal dishonesty in performing Executive’s duties on behalf of the Company;
(2) a willful misconduct that in the judgment of the boards of directors will likely cause economic damage to the Company or its affiliates or injury to the business reputation of the Company or its affiliates;
(3) a breach of fiduciary duty involving personal profit;
(4) the intentional failure to perform stated duties under this Agreement after written notice thereof from the boards of directors;
(5) a willful violation of any law, rule or regulation (other than minor or routine traffic violations or similar offenses) that reflects adversely on the reputation of the Company or its
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affiliates, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order;
(6) a material breach by the Executive of any provision of this Agreement.
No act, or failure to act, on the Executive’s part shall be considered “willful” unless he has acted, or failed to act, with an absence of good faith and without reasonable belief that his action or failure to act was in the best interest of the Company.
(c) Voluntary Termination by the Executive Without Good Reason . If the Executive terminates employment without Good Reason, the Executive shall receive the Base Salary and expense reimbursement to which the Executive is entitled through the date on which termination becomes effective.
(d) Involuntary Termination Without Cause and Voluntary Termination with Good Reason . With written notice to the Executive 30 days in advance, the Company may terminate the Executive’s employment and this Agreement without Cause. Termination shall take effect at the end of the 30 day period. With advance written notice to the Company as provided in clause (y), the Executive may terminate employment for Good Reason. If the Executive’s employment terminates involuntarily without Cause or voluntarily but with Good Reason, the Executive shall be entitled to the benefits specified in Section 4 of this Agreement. For purposes of this Agreement a voluntary termination by the Executive shall be considered a voluntary termination with Good Reason if the conditions stated in both clauses (x) and (y) of this Section 3(d) are satisfied:
(x) a voluntary termination by the Executive shall be considered a voluntary termination with Good Reason if any of the following occur without the Executive’s written consent, and the term Good Reason shall mean the occurrence of any of the following without the Executive’s written consent:
(1) a material diminution of the Executive’s Base Salary (unless the reduction is part of a Company-wide or executive-level restructuring of compensation),
(2) a material diminution of the Executive’s authority, duties, or responsibilities, or
(3) a change in the geographic location at which the Executive must perform services for the Company by more than 25 miles from such location at the effective date.
(y) the Executive must give notice to the Company of the existence of one or more of the conditions described in clause (x) within 60 days after the initial existence of the condition, and the Company shall have 30 days thereafter to remedy the condition. In addition, the Executive’s voluntary termination because of the existence of one or more of the conditions described in clause (x) must occur within six months after the initial existence of the condition.
4. Severance Compensation.
(a) Subject to the possibility that cash severance after employment termination might be delayed under Section 4(b), if the Executive’s employment terminates involuntarily but without Cause or if the Executive voluntarily terminates employment with Good Reason, the Executive shall for 36 months and in accordance with the Company’s regular pay practices continue to receive the Base Salary in effect at termination of employment. However, the
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Company and the Executive acknowledge and agree that the compensation and benefits under this Section 4(a) shall not be payable if compensation and benefits are payable or shall have been paid to the Executive under Section 5 of this Agreement.
(b) If when employment termination occurs the Executive is a “specified employee” within the meaning of Section 409A of the Code, if the cash severance payment under Section 4(a) would be considered deferred compensation under Section 409A of the Code, and finally if an exemption from the six-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available, the Executive’s continued Base Salary under Section 4(a) for the first six months after employment termination shall be paid to the Executive in a single lump sum without interest on the first business day of the seventh month after the month in which the Executive’s employment terminates.
5. Change in Control Benefits.
(a) Change in Control Benefits . If a Change in Control occurs during the term of this Agreement and, thereafter during the then remaining term of the Agreement, the Executive’s employment terminates involuntarily but without Cause or if the Executive voluntarily terminates employment with Good Reason, the Company shall make or cause to be made a lump-sum payment to the Executive in an amount in cash equal to three times the Executive’s average annual compensation. For this purpose, average annual compensation means the Executive’s taxable income reported by the Company or its affiliates for the five calendar years immediately preceding the calendar year in which the Change in Control occurs. The payment required under this paragraph is payable no later than five business days after the Executive’s termination of employment. If the Executive receives payment under Section 5(a), the Executive shall not be entitled to any additional severance benefits under Section 4(a) of this Agreement.
(b) Change in Control Defined . For purposes of this Agreement “Change in Control” means a change in control of the Company as defined in Internal Revenue Section 409A of the Code and rules, regulations, and guidance of general application thereunder issued by the Department of the Treasury, including a “change in ownership,” “change in effective control” or “change in ownership of a substantial portion of assets.”
(c) Potential Limitation of Benefits Under Certain Circumstances . Notwithstanding any other provisions of this Agreement, in the event that the aggregate payments or benefits to be made or afforded to the Executive under this Agreement or otherwise, which are deemed to be parachute payments as defined in Section 280G of the Code or any successor thereof (the “Termination Benefits”), would be deemed to include an “excess parachute payment” under Section 280G of the Code, then the Termination Benefits shall be reduced to a value which is $1.00 less than an amount equal to three times the Executive’s “base amount,” as determined in accordance with Section 280G of the Code. The allocation of the reduction required hereby among the Termination Benefits shall first be made from any cash severance benefit due under Section 5(a) of this Agreement. Nothing contained in this Agreement shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment other than pursuant to Sections 4 and 5 hereof, or a reduction in the payments and benefits specified, below zero.
6. Confidentiality and Creative Work.
(a) Non-disclosure . The Executive covenants and agrees not to reveal to any person, firm, or corporation any confidential information of any nature concerning the Company or its business, or anything connected therewith. As used in this Section 6 the term “confidential information” means all of the Company’s or the Association’s and the Company’s affiliates’ confidential and proprietary information and
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trade secrets in existence on the date hereof or existing at any time during the term of this Agreement, including but not limited to:
(i) the whole or any portion or phase of any business plans, financial information, purchasing data, supplier data, accounting data, or other financial information,
(ii) the whole or any portion or phase of any research and development information, design procedures, algorithms or processes, or other technical information,
(iii) the whole or any portion or phase of any marketing or sales information, sales records, customer lists, prices, sales projections, or other sales information, and
(iv) trade secrets, as defined from time to time by the laws of Missouri. This Section 6(a) does not prohibit disclosure required by an order of a court having jurisdiction or a subpoena from an appropriate governmental agency or disclosure made by the Executive in the ordinary course of business and within the scope of the Executive’s authority.
(b) Return of Materials . The Executive agrees to immediately deliver or return to the Company upon termination, upon expiration of this Agreement, or as soon thereafter as possible, all written information and any other similar items furnished by the Company or prepared by the Executive in connection with the Executive’s services hereunder and to immediately delete all electronically stored data of the Company maintained on the Executive’s personal computers and to return all Company-provided computers or communication devices. The Executive will retain no copies thereof after termination of this Agreement or termination of the Executive’s employment.
(c) Creative Work . The Executive agrees that all creative work and work product, including but not limited to all technology, business management tools, processes, software, patents, trademarks, and copyrights developed by the Executive during the term of this Agreement, regardless of when or where such work or work product was produced, constitutes work made for hire, all rights of which are owned by the Company. The Executive hereby assigns to the Company all rights, title, and interest, whether by way of copyrights, trade secret, trademark, patent, or otherwise, in all such work or work product, regardless of whether the same is subject to protection by patent, trademark, or copyright laws.
(d) Affiliates’ Confidential Information is Covered; Confidentiality Obligation Survives Termination . For purposes of this Agreement, the term “affiliate” of the Company includes any entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Company. The rights and obligations set forth in this 6 shall survive termination of this Agreement.
(e) Injunctive Relief . The Executive acknowledges that it is impossible to measure in money the damages that will accrue to the Company if the Executive fails to observe the obligations imposed by this Section 6. Accordingly, if the Company institutes an action to enforce the provisions hereof, the Executive hereby waives the claim or defense that an adequate remedy at law is available to the Company, and the Executive agrees not to urge in any such action the claim or defense that an adequate remedy at law exists. The confidentiality and remedies provisions of this Section 6 shall be in addition to and shall not be deemed to supersede or restrict, limit, or impair the Company’s rights under applicable state or federal statute or regulation dealing with or providing a remedy for the wrongful disclosure, misuse, or misappropriation of trade secrets or proprietary or confidential information.
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7. Competition After Employment Termination.
(a) Covenant Not to Solicit Employees . The Executive agrees not to, directly or indirectly, solicit or employ the services of any officer or employee of the Company (including an individual who was an officer or employee of the Company during the one year period following the Executive’s termination) for two years after the Executive’s employment termination.
(b) Covenant Not to Compete .
(i) The Executive covenants and agrees not to compete directly or indirectly with the Company for one year after employment termination. For purposes of this Section 7(b):
(1) the term compete means:
(i) providing financial products or services on behalf of any financial institution for any person residing in the territory,
(ii) assisting (other than through the performance of ministerial or clerical duties) any financial institution in providing financial products or services to any person residing in the territory, or
(iii) inducing or attempting to induce any person who was a customer of the Company at the date of the Executive’s employment termination to seek financial products or services from another financial institution.
(2) the words directly or indirectly mean:
(i) acting as a consultant, officer, director, independent contractor, or employee of any financial institution in competition with the Company in the territory, or
(ii) communicating to such financial institution the names or addresses or any financial information concerning any person who was a customer of the Company when the Executive’s employment terminated.
(3) the term customer means any person to whom the Company is providing financial products or services on the date of the Executive’s employment termination or within one year thereafter.
(4) the term financial institution means any bank, savings association, or bank or savings association holding company, or any other institution, the business of which is engaging in activities that are financial in nature or incidental to such financial activities as described in Section 4(k) of the Association Holding Company Act of 1956, other than the Company or any of its affiliated corporations.
(5) financial product or service means any product or service that a financial institution or a financial holding company could offer by engaging in any activity that is financial in nature or incidental to such a financial activity under Section 4(k) of the Association Holding Company Act of 1956 and that is offered by the Company or an affiliate on the date of the Executive’s employment termination, including but not limited to banking activities and activities that are closely related and a proper incident to banking.
(6) the term person means any individual or individuals, corporation, partnership, fiduciary or association.
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(7) the term territory means the area within a 25-mile radius of any office of the Company at the date of the Executive’s employment termination.
(ii) If any provision of this section or any word, phrase, clause, sentence or other portion thereof (including, without limitation, the geographical and temporal restrictions contained therein) is held to be unenforceable or invalid for any reason, the unenforceable or invalid provision or portion shall be modified or deleted so that the provisions hereof, as modified, are legal and enforceable to the fullest extent permitted under applicable law.
(iii) The Executive acknowledges that the Company’s willingness to enter into this Agreement and to make the payments contemplated by Sections 3 and 4 of this Agreement is conditioned on the Executive’s acceptance of the covenants set forth in Sections 6 and 7 of this Agreement and that the Company would not have entered into this Agreement without such covenants in force.
(c) Injunctive and Other Relief . Because of the unique character of the services to be rendered by the Executive hereunder, the Executive understands that the Company would not have an adequate remedy at law for the material breach or threatened breach by the Executive of any one or more of the Executive’s covenants in this Section 7. Accordingly, the Executive agrees that the Company’s remedies for a breach of this Section 7 include, but are not limited to, (x) forfeiture of any money representing accrued salary, contingent payments, or other fringe benefits (including any amount payable pursuant to Section 4) due and payable to the Executive during the period of any breach by Executive, and (y) a suit in equity by the Company to enjoin the Executive from the breach or threatened breach of such covenants. The Executive hereby waives the claim or defense that an adequate remedy at law is available to the Company and the Executive agrees not to urge in any such action the claim or defense that an adequate remedy at law exists. Nothing herein shall be construed to prohibit the Company from pursuing any other or additional remedies for the breach or threatened breach.
(d) Section 7 Survives Termination But Is Void After a Change in Control . The rights and obligations set forth in this Section 7 shall survive termination of this Agreement. However, Section 7 shall become null and void effective immediately upon a Change in Control.
8. Compliance with Internal Revenue Code Section 409A.
(a) The Executive will be deemed to have a termination of employment for purposes of determining the timing of any payments that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A.
(b) If at the time of the Executive’s separation from service, (i) the Executive is a “specified employee” (within the meaning of Section 409A and using the methodology selected by the Company) and (ii) the Company makes a good faith determination that an amount payable or the benefits to be provided hereunder constitutes deferred compensation (within the meaning of Section 409A), the payment of which is required to be delayed pursuant to the six-month delay rule of Section 409A in order to avoid taxes or penalties under Section 409A, then the Company will not pay the entire amount on the otherwise scheduled payment date but will instead pay on the scheduled payment date the maximum amount permissible in order to comply with Section 409A (i.e., any amount that satisfies an exception under the Section 409A rules from being categorized as deferred compensation) and will pay the remaining amount (if any) in a lump sum on the first business day of the seventh month after the month in which the Executive’s employment terminates.
(c) To the extent the Executive would be subject to an additional 20% tax imposed on certain deferred compensation arrangements pursuant to Section 409A as a result of any provision of this Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid application
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of such tax and the parties shall promptly execute any amendment reasonably necessary to implement this Section 8. The Executive and the Company agree to cooperate to make such amendment to the terms of this Agreement as may be necessary to avoid the imposition of penalties and taxes under Section 409A; provided, however, that the Executive agrees that any such amendment shall provide the Executive with economically equivalent payments and benefits, and the Executive agrees that any such amendment will not materially increase the cost to, or liability of, the Company with respect to any payment.
(d) To the extent that any right to reimbursement of expenses or payment of any in-kind benefit under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A of the Code), (i) any such expense reimbursement shall be made by the Company no later than the last day of the taxable year following the taxable year in which such expense was incurred by Executive, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.
(e) For purposes of this Agreement, Section 409A shall refer to Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury regulations and any other authoritative guidance issued thereunder.
9. Miscellaneous.
(a) Successors and Assigns .
(i) This Agreement shall be binding upon the Company and any successor to the Company, including any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company by purchase, merger, consolidation, reorganization, or otherwise. But this Agreement and the Company’s obligations under this Agreement are not otherwise assignable, transferable, or delegable by the Company. By agreement in form and substance satisfactory to the Executive, the Company shall require any successor to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform had no succession occurred.
(ii) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, and legatees.
(iii) Without written consent of the other parties, no party shall assign, transfer, or delegate this Agreement or any rights or obligations under this Agreement, except as expressly provided herein. Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder is not assignable or transferable, whether by pledge, creation of a security interest, or otherwise, except for a transfer by the Executive’s will or by the laws of descent and distribution. If the Executive attempts an assignment or transfer that is contrary to this Section 9(a), the Company shall have no liability to pay any amount to the assignee or transferee.
(b) Governing Law, Jurisdiction and Forum . This Agreement shall be construed under and governed by the internal laws of the State of Missouri, without giving effect to any conflict of laws provision or rule that would cause the application of the laws of any jurisdiction other than Missouri. By entering into this Agreement, the Executive acknowledges that the Executive is subject to the jurisdiction of both the federal and state courts in Missouri.
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(c) Entire Agreement . This Agreement sets forth the entire agreement of the parties concerning the employment of the Executive by the Company. Any oral or written statements, representations, agreements, or understandings made or entered into prior to or contemporaneously with the execution of this Agreement are hereby rescinded, revoked, and rendered null and void by the parties.
(d) Notices . All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid. Unless otherwise changed by notice, notice shall be properly addressed to the Executive if addressed to the address of the Executive on the books and records of the Company at the time of the delivery of such notice, and properly addressed to the Company if addressed to the boards of directors of Bancshares and the Association.
(e) Severability . If there is a conflict between any provision of this Agreement and any statute, regulation, or judicial precedent, the latter shall prevail, but the affected provisions of this Agreement shall be curtailed and limited solely to the extent necessary to bring them within the requirements of law. If any provisions of this Agreement is held by a court of competent jurisdiction to be indefinite, invalid, void or voidable, or otherwise unenforceable, the remainder of this Agreement shall continue in full force and effect unless that would clearly be contrary to the intentions of the parties or would result in an injustice.
(f) Captions and Counterparts . The captions in this Agreement are solely for convenience. The captions do not define, limit, or describe the scope or intent of this Agreement. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
(g) No Duty to Mitigate . The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment. Moreover, provided the Executive is not in breach of any obligation under Sections 6 and 7 of this Agreement, the amount of any payment provided for in this Agreement shall not be reduced by any compensation earned or benefits provided as the result of employment of the Executive or as a result of the Executive being self-employed after employment termination.
(h) Amendment and Waiver . This Agreement may not be amended, released, discharged, abandoned, changed, or modified in any manner, except by an instrument in writing signed by each of the parties hereto. The failure of any party hereto to enforce at any time any of the provisions of this Agreement shall not be construed to be a waiver of any such provision, nor affect the validity of this Agreement or any part thereof or the right of any party thereafter to enforce each and every such provision. No waiver or any breach of this Agreement shall be held to be a waiver of any other or subsequent breach.
(i) Required Provisions . Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to, and conditioned upon, their compliance with 12 U.S.C. Section 1828(k) and FDIC Regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.
(j) Source of Payments . Notwithstanding any provision in this Agreement to the contrary, to the extent payments and benefits, as provided for under this Agreement, are paid or received by the Executive under an employment agreement in effect between the Executive and the Association, the payments and benefits paid by the Association will be subtracted from any amount or benefit due simultaneously to the Executive under similar provisions of this Agreement. Payments will be allocated in proportion to the level of activity and the time expended by the Executive on activities related to the Company, respectively, as determined by the Company.
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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first written above.
CENTRAL FEDERAL BANCSHARES, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA |
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By: | ||||
Name: | ||||
Title: | ||||
EXECUTIVE | |
[NAME] |
[Signature Page –Bancshares & Association Employment Agreement]
Exhibit 10.3
FORM OF
CENTRAL FEDERAL SAVINGS AND LOAN ASSOCIATION OF ROLLA
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT is entered into as of _____________, 20___, by and between Central Federal Savings and Loan Association of Rolla (the “Association”), Barbara E. Hamilton (the “Executive”) and Central Federal Bancshares, Inc. (“Bancshares”), a Missouri corporation and the holding company of the Association, as guarantor (the “Agreement”).
WHEREAS , the Association recognizes the importance of Executive to the Association’s operations and wishes to protect her position with the Association in the event of a change in control of the Association or Bancshares for the period provided for in this Agreement.
NOW THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
1. Term of Agreement.
(a) The term of this Agreement shall include: (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the first anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to Section 1(b) of this Agreement.
(b) On or before the 90 th day prior to the first anniversary date of this Agreement and on or before the 90 th day prior to each anniversary thereafter, the Board of Directors of the Association or designated committee of the Board (“Board”) shall consult with the Chief Executive Officer of the Association for purposes of determining whether to extend the term of the Agreement beyond the expiration date set forth in Section 1(a) of this Agreement or as extended under this Section 1(b) of this Agreement.
(c) Notwithstanding anything in this Section 1 to the contrary, this Agreement shall terminate if Executive or the Association terminates Executive’s employment prior to a Change in Control (as defined in this Agreement).
2. Change in Control.
(a) Upon the occurrence of a Change in Control of the Association or Bancshares followed at any time during the term of this Agreement by the termination of Executive’s employment and in accordance with the terms of this Agreement, other than for Just Cause, as defined in Section 2(c) of this Agreement, the provisions of Section 3 of this Agreement shall apply. Upon the occurrence of a Change in Control, Executive shall have the right to elect to voluntarily terminate her employment at any time during the term of this Agreement following an event constituting “Good Reason.”
“Good Reason” means, unless Executive has consented in writing thereto, the occurrence following a Change in Control, of any of the following:
(i) a material diminution of the Executive’s Base Salary (unless the reduction is part of a company-wide or executive-level restructuring of compensation),
(ii) a material diminution of the Executive’s authority, duties, or responsibilities, or
(iii) a change in the geographic location at which the Executive must perform services for the Association by more than 25 miles from such location at the Effective Date.
(b) For purposes of this Agreement, a “Change in Control” means a change in control of the Association or Bancshares as defined in Internal Revenue Section 409A of the Code and rules, regulations, and guidance of general application thereunder issued by the Department of the Treasury, including a “change in ownership,” “change in effective control” or “change in ownership of a substantial portion of assets.”
(c) Executive shall not have the right to receive termination benefits pursuant to Section 3 hereof upon termination for Just Cause. The Board may, by written notice to the Executive, immediately terminate the Executive’s employment and this Agreement at any time for Just Cause. The Association shall deliver to the Executive a copy of the resolution duly adopted by the Board (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board, such meeting and the opportunity to be heard to be held prior to, or as soon as reasonably practicable following, termination, but in no event later than 30 days following such termination), finding that the Executive was guilty of conduct constituting Just Cause. The notice provided to the Executive pursuant hereto shall specify in detail the particulars of the conduct constituting Just Cause. Executive shall not have the right to receive compensation or other benefits for any period after termination for Just Cause. During the period beginning on the date of the Notice of Termination for Just Cause pursuant to Section 4 hereof through the Date of Termination, stock options granted to Executive under any stock option plan shall not be exercisable nor shall any unvested stock awards granted to Executive under any stock benefit plan of the Association, the Company or any subsidiary or affiliate thereof, vest. At the Date of Termination, such stock options and any such unvested stock awards shall become null and void and shall not be exercisable by or delivered to Executive at any time subsequent to such termination for Just Cause. If the Board thereafter determines that such conduct did not constitute Cause, the Executive’s employment hereunder is reinstated, and the Executive shall be entitled to receive back pay for the period following termination and continuing through reinstatement, which amount will be paid in a single lump sum within 15 business days following reinstatement. If the Executive’s employment is not reinstated as contemplated by the preceding sentence, then the termination of employment shall be deemed to have occurred pursuant to Section 2(a) of this Agreement and the Executive shall be entitled to the compensation and benefits provided herein. For the purposes of this Agreement “Just Cause” means any of the following:
(1) a material act of personal dishonesty in performing Executive’s duties on behalf of the Association;
(2) a willful misconduct that in the judgment of the Board will likely cause economic damage to the Association or its affiliates or injury to the business reputation of the Association or its affiliates;
(3) a breach of fiduciary duty involving personal profit;
(4) the intentional failure to perform stated duties under this Agreement after written notice thereof from the Board;
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(5) a willful violation of any law, rule or regulation (other than minor or routine traffic violations or similar offenses) that reflects adversely on the reputation of the Association or its affiliates, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order;
(6) a material breach by the Executive of any provision of this Agreement.
No act, or failure to act, on the Executive’s part shall be considered “willful” unless she has acted, or failed to act, with an absence of good faith and without reasonable belief that her action or failure to act was in the best interest of the Association.
3. Termination Benefits.
(a) If Executive’s employment is voluntarily (in accordance with Section 2(a) of this Agreement) or involuntarily terminated within one year of a Change in Control, Executive shall receive a lump sum cash payment equal to 12 months of Executive’s base salary. Such payment shall be based on Executive’s base salary in effect as of her termination date and made not later than five days following Executive’s termination of employment under this Section 3.
(b) Notwithstanding the preceding provisions of this Section 3, in no event shall the aggregate payments or benefits to be made or afforded to Executive under said paragraphs (the “Termination Benefits”) constitute an “excess parachute payment” under Section 280G of the Code or any successor thereto, and to avoid such a result, Termination Benefits will be reduced, if necessary, to an amount (the “Non-Triggering Amount”), the value of which is $1.00 less than an amount equal to three times Executive’s “base amount,” as determined in accordance with said Section 280G. Nothing contained in this Agreement shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment other than pursuant to Section 3.
4. Notice of Termination.
(a) Any purported termination by the Association or by Executive shall be communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.
(b) “Date of Termination” shall mean the date specified in the Notice of Termination (which, in the case of a termination for Just Cause, shall not be less than 30 days from the date such Notice of Termination is given).
5. Source of Payments.
All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Association. Bancshares, however, unconditionally guarantees payment and provision of all amounts and benefits due hereunder to Executive and, if such amounts and benefits due from the Association are not timely paid or provided by the Association, such amounts and benefits shall be paid or provided by Bancshares.
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6. Effect on Prior Agreements and Existing Benefit Plans.
This Agreement contains the entire understanding between the parties hereto and supersedes any prior agreement between the Association 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 her without reference to this Agreement. Nothing in this Agreement shall confer upon Executive the right to continue in the employ of the Association or shall impose on the Association any obligation to employ or retain Executive in its employ for any period.
7. No Attachment.
(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 affect 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, the Association and their respective successors and assigns.
8. 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 or as to any act other than that specifically waived.
9. Required Provisions.
The provisions of this Section 9 shall apply notwithstanding any other provision of this Agreement to the contrary.
(a) The Board may terminate the Executive’s employment at any time, but any termination by the Association, other than termination for Just Cause, shall not prejudice the Executive’s right to compensation or other benefits under this Agreement. The Executive shall not have the right to receive compensation or other benefits for any period after termination for Just Cause as defined in this Agreement.
(b) If the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Association’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1818(e)(3) or (g)(1), the Association’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Association may, in its discretion: (i) pay the Executive all or part of the compensation withheld while its contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.
(c) If the Executive is removed and/or permanently prohibited from participating in the conduct of the Association’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1818(e)(4) or (g)(1), all obligations of the Association under this
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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 Association is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(x)(1), all obligations 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 terminate, except to the extent determined that continuation of the Agreement is necessary for the continued operation of the Association: (i) by the Comptroller of the Currency, or his or her designee (the “Comptroller”), at the time the Federal Deposit Insurance Corporation (FDIC) enters into an agreement to provide assistance to or on behalf of the Association under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1823(c), or (ii) by the Comptroller at the time the Comptroller approves a supervisory merger to resolve problems related to the operations of the Association or when the Association is determined by the Comptroller 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) Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to, and conditioned upon, their compliance with 12 U.S.C. Section 1828(k) and FDIC Regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.
10. Section 409A of the Code.
(a) The Executive will be deemed to have a termination of employment for purposes of determining the timing of any payments that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A.
(b) If at the time of the Executive’s separation from service, (i) the Executive is a “specified employee” (within the meaning of Section 409A and using the methodology selected by the Association) and (ii) the Association makes a good faith determination that an amount payable or the benefits to be provided hereunder constitutes deferred compensation (within the meaning of Section 409A), the payment of which is required to be delayed pursuant to the six-month delay rule of Section 409A in order to avoid taxes or penalties under Section 409A, then the Association will not pay the entire amount on the otherwise scheduled payment date but will instead pay on the scheduled payment date the maximum amount permissible in order to comply with Section 409A (i.e., any amount that satisfies an exception under the Section 409A rules from being categorized as deferred compensation) and will pay the remaining amount (if any) in a lump sum on the first business day of the seventh month after the month in which the Executive’s employment terminates.
(c) To the extent the Executive would be subject to an additional 20% tax imposed on certain deferred compensation arrangements pursuant to Section 409A as a result of any provision of this Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid application of such tax and the parties shall promptly execute any amendment reasonably necessary to implement this Section 10(c). The Executive and the Association agree to cooperate to make such amendment to the terms of this Agreement as may be necessary to avoid the imposition of penalties and taxes under Section 409A; provided, however, that the Executive agrees that any such amendment shall provide the Executive with economically equivalent payments and benefits, and the Executive agrees that any such amendment will not materially increase the cost to, or liability of, the Association with respect to any payment.
(d) To the extent that any right to reimbursement of expenses or payment of any in-kind benefit under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A
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of the Code), (i) any such expense reimbursement shall be made by the Association no later than the last day of the taxable year following the taxable year in which such expense was incurred by Executive, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.
(e) For purposes of this Agreement, Section 409A shall refer to Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury regulations and any other authoritative guidance issued thereunder.
11. Miscellaneous.
(a) 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.
(b) 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. In addition, references herein to the masculine shall apply to both the masculine and the feminine.
(c) Except to the extent preempted by federal law, the validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of Missouri, without regard to principles of conflicts of law of that State.
(d) All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Association, only if Executive is successful pursuant to a legal judgment, arbitration or settlement.
(e) The Association and Bancshares shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Association or Bancshares, expressly and unconditionally to assume and agree to perform the Association’s and Bancshares’s obligations under this Agreement, in the same manner and to the same extent that the Association and Bancshares would be required to perform if no such succession or assignment had taken place.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
CENTRAL FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ROLLA |
||||
By: | ||||
Name: | ||||
Title: | ||||
CENTRAL FEDERAL BANCSHARES, INC. | ||||
(as guarantor of Central Federal Savings and Loan Association of Rolla hereunder) | ||||
By: | ||||
Name: | ||||
Title: | ||||
EXECUTIVE | |
[NAME] |
[Signature Page – Association Change in Control Agreement]
Exhibit 23.3
Feldman Financial Advisors, Inc.
1001 Connecticut Avenue, NW · Suite 840
Washington, DC 20036
202-467-6862 · (Fax) 202-467-6963
September 11, 2015
Board of Directors
Central Federal Savings and Loan
Association of Rolla
210 West 10th Street
Rolla, Missouri 65401
Members of the Board:
We hereby consent to the use of our firm’s name in the Application for Conversion, and amendments thereto, filed by Central Federal Savings and Loan Association of Rolla with the Office of the Comptroller of the Currency. We also consent to the use of our firm’s name in the Registration Statement on Form S-1, and amendments thereto, filed by Central Federal Bancshares, Inc. with the Securities and Exchange Commission. Additionally, we consent to the inclusion of, summary of, and reference to our Conversion Valuation Appraisal Report in such filings and amendments, including the Prospectus of Central Federal Bancshares, Inc.
Sincerely, |
/s/ Feldman Financial Advisors, Inc. |
Feldman Financial Advisors, Inc. |
Exhibit 23.4
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
Central Federal Bancshares, Inc.
We hereby consent to the use in this Registration Statement on Form S-1 of Central Federal Bancshares, Inc. of our report dated September 10, 2015 appearing in the Prospectus, which is part of this Form S-1, and to the references to our Firm under the heading "Experts" in such Prospectus.
/s/ | Michael Trokey & Company, P.C. | |
Certified Public Accountants |
September 10, 2015
St. Louis, Missouri
Exhibit 99.1
Feldman Financial Advisors, Inc.
1001 Connecticut Avenue, NW · Suite 840
Washington, DC 20036
202-467-6862 · (Fax) 202-467-6963
Central Federal Savings and Loan
Rolla, Missouri
Conversion Valuation Appraisal Report
Valued as of August 31, 2015
Prepared By
Feldman Financial Advisors, Inc . Washington, DC
|
Feldman Financial Advisors, Inc.
1001 Connecticut Avenue, NW · Suite 840
Washington, DC 20036
202-467-6862 · (Fax) 202-467-6963
August 31, 2015
Board of Directors
Central Federal Savings and Loan
Association of Rolla
210 West 10th Street
Rolla, Missouri 65401
Members of the Board:
At your request, we have completed and hereby provide an independent appraisal ("Appraisal") of the estimated pro forma market value of Central Federal Savings and Loan Association of Rolla ("Central Federal" or the "Association") in connection with the simultaneous conversion of the Association from the mutual to stock form of ownership, the issuance of the Association's capital stock to Central Federal Bancshares, Inc. (the "Company"), and the offering of shares of common stock of the Company for sale to eligible depositors of the Association, employee benefit plans of the Association, and other members of the general public (collectively referred to herein as the "Conversion"). In connection with the Conversion, Central Federal also plans to establish and fund a charitable foundation with a contribution of cash and shares of common stock issued by the Company in the offering. This Appraisal is furnished pursuant to the Association's filing of the Application for Conversion ("Application") with the Office of the Comptroller of the Currency ("OCC").
Feldman Financial Advisors, Inc. ("Feldman Financial") is a financial consulting firm that specializes in financial valuations and analyses of businesses and securities in the thrift, banking, and mortgage industries. The background of Feldman Financial is presented in Exhibit I. In preparing the Appraisal, we conducted an analysis of the Association that included discussions with the Association's management, the Association's legal counsel, Lewis Rice LLC, and the Association's independent auditor, Michael Trokey & Company, P.C. In addition, where appropriate, we considered information based on other available sources that we believe are reliable; however, we cannot guarantee the accuracy and completeness of such information.
We also reviewed, among other factors, the economy in the Association's primary market area and compared the Association's financial condition and operating performance with that of selected publicly traded thrift institutions. We reviewed conditions in the securities markets in general and in the market for thrift institution common stocks in particular.
FELDMAN FINANCIAL ADVISORS, INC.
Board of Directors
Central Federal Savings and Loan
Association of Rolla
August 31, 2015
Page Two
The Appraisal is based on the Association's representation that the information contained in the Application and additional evidence furnished to us by the Association and its independent auditor are truthful, accurate, and complete. We did not independently verify the financial statements and other information provided by the Association and its independent auditor, nor did we independently value the assets or liabilities of the Association. The Appraisal considers the Association only as a going concern and should not be considered as an indication of the liquidation value of the Association.
It is our opinion that, as of August 31, 2015, the estimated aggregate pro forma market value of Central Federal (including the shares of common stock to be issued to the charitable foundation) was within a range (the "Valuation Range") of $11,492,000 to $15,548,000 with a midpoint of $13,520,000. The Valuation Range was based upon a 15% decrease from the midpoint to determine the minimum and a 15% increase from the midpoint to establish the maximum. Based on an offering price of $10.00 per share, this Valuation Range equates to total shares outstanding of 1,149,200 at the minimum to 1,554,800 at the maximum with a midpoint of 1,352,000 shares. Assuming an additional 15% increase above the maximum value would result in an adjusted maximum of $17,880,200 or 1,788,020 shares.
The charitable foundation will be funded by a contribution of $100,000 in cash and shares of common stock of the Company equal to 4.0% of the amount of shares sold in the offering. The number of shares issued to the foundation amount to 44,200 at the minimum, 52,000 at the midpoint, 59,800 at the maximum, and 68,770 at the adjusted maximum. Based on the Valuation Range and the contribution of shares to the foundation, the Company will offer for sale a minimum of 1,105,000 shares, a midpoint of 1,300,000 shares, a maximum of 1,495,000 shares, and an adjusted maximum of 1,719,250 shares. The resulting offering range reflects an aggregate amount of $11,050,000 at the minimum, $13,000,000 at the midpoint, $14,950,000 at the maximum, and $17,192,500 at the adjusted maximum.
Our Appraisal is not intended, and must not be construed, to be a recommendation of any kind as to the advisability of purchasing shares of common stock in the Conversion. Moreover, because the Appraisal is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of stock in the Conversion will thereafter be able to sell such shares at prices related to the foregoing estimate of the Association's pro forma market value. Feldman Financial is not a seller of securities within the meaning of any federal or state securities laws and any report prepared by Feldman Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities.
FELDMAN FINANCIAL ADVISORS, INC.
Board of Directors
Central Federal Savings and Loan
Association of Rolla
August 31, 2015
Page Two
The Valuation Range reported herein will be updated as appropriate. These updates will consider, among other factors, any developments or changes in the Association's operating performance, financial condition, or management policies, and current conditions in the securities markets for thrift institution common stocks. Should any such new developments or changes be material, in our opinion, to the valuation of the Association, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in detail at that time.
Respectfully submitted, | |
Feldman Financial Advisors, Inc . | |
Trent R. Feldman | |
President | |
Peter W. L. Williams | |
Principal |
FELDMAN FINANCIAL ADVISORS, INC.
TABLE OF CONTENTS
TAB | PAGE | ||
INTRODUCTION | 1 | ||
I. | Chapter One – BUSINESS OF CENTRAL FEDERAL | ||
General Overview | 4 | ||
Financial Condition | 10 | ||
Income and Expense Trends | 21 | ||
Interest Rate Risk Management | 27 | ||
Asset Quality | 31 | ||
Subsidiary Activity | 34 | ||
Office Facilities | 35 | ||
Legal Proceedings | 36 | ||
Market Area | 37 | ||
Summary Outlook | 43 | ||
II. | Chapter Two – COMPARISONS WITH PUBLICLY TRADED THRIFTS | ||
General Overview | 44 | ||
Selection Criteria | 45 | ||
Recent Financial Comparisons | 49 | ||
III. | Chapter Three – MARKET VALUE ADJUSTMENTS | ||
General Overview | 63 | ||
Earnings Prospects | 64 | ||
Financial Condition | 65 | ||
Market Area | 66 | ||
Management | 66 | ||
Dividend Policy | 68 | ||
Liquidity of the Issue | 68 | ||
Subscription Interest | 70 | ||
Recent Acquisition Activity | 71 | ||
Effect of Government Regulations and Regulatory Reform | 71 | ||
Stock Market Conditions | 72 | ||
Adjustments Conclusion | 78 | ||
Valuation Approach | 79 | ||
Valuation Conclusion | 82 | ||
IV. | Appendix – EXHIBITS | ||
I | Background of Feldman Financial Advisors, Inc. | I-1 | |
II-1 | Balance Sheets | II-1 | |
II-2 | Income Statements | II-2 | |
II-3 | Loan Portfolio Composition | II-3 | |
II-4 | Cash and Investments Composition | II-4 | |
II-5 | Deposit Account Distribution | II-5 | |
III | Financial and Market Data for All Public Thrifts | III-1 | |
IV-1 | Pro Forma Assumptions for Conversion Stock Offering | IV-1 | |
IV-2 | Pro Forma Conversion Valuation Range | IV-2 | |
IV-3 | Pro Forma Conversion Analysis at the Maximum Valuation | IV-3 | |
IV-4 | Comparative Valuation Ratio Differential | IV-4 |
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FELDMAN FINANCIAL ADVISORS, INC.
LIST OF TABLES
TAB | PAGE | ||
I. | Chapter One – BUSINESS OF CENTRAL FEDERAL | ||
Table 1 | Selected Financial Condition Data | 10 | |
Table 2 | Relative Balance Sheet Concentrations | 11 | |
Table 3 | Income Statement Summary | 22 | |
Table 4 | Income Statement Ratios | 23 | |
Table 5 | Yield and Cost Summary | 25 | |
Table 6 | Interest Rate Risk Analysis | 30 | |
Table 7 | Non-performing Asset Summary | 32 | |
Table 8 | Allowance for Loan Losses | 33 | |
Table 9 | Selected Demographic Data | 39 | |
Table 10 | Deposit Market Share in Phelps County | 41 | |
Table 11 | Residential Mortgage Lending Market Share in Phelps County | 42 | |
II. | Chapter Two – COMPARISONS WITH PUBLICLY TRADED THRIFTS | ||
Table 12 | Comparative Group Operating Summary | 48 | |
Table 13 | Key Financial Comparisons | 50 | |
Table 14 | General Operating Characteristics | 57 | |
Table 15 | Summary Financial Performance Ratios | 58 | |
Table 16 | Income and Expense Analysis | 59 | |
Table 17 | Yield-Cost Structure and Growth Rates | 60 | |
Table 18 | Balance Sheet Composition | 61 | |
Table 19 | Regulatory Capital, Credit Risk, and Loan Composition | 62 | |
III. | Chapter Three – MARKET VALUE ADJUSTMENTS | ||
Table 20 | Summary of Recent Missouri Acquisition Activity | 73 | |
Table 21 | Comparative Stock Index Performance | 74 | |
Table 22 | Summary of Recent Standard Conversion Offerings | 76 | |
Table 23 | Comparative Pro Forma Market Valuation Analysis | 84 |
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FELDMAN FINANCIAL ADVISORS, INC.
INTRODUCTION
As requested, we have completed and hereby provide an independent appraisal ("Appraisal") of the estimated pro forma market value of Central Federal Savings and Loan Association ("Central Federal" or the "Association") in connection with the simultaneous conversion of the Association from the mutual to stock form of ownership, the issuance of the Association's capital stock to Central Federal Bancshares, Inc. (the "Company"), and the offering of shares of common stock of the Company for sale to eligible depositors of the Association, employee benefit plans of the Association, and other members of the general public (collectively referred to herein as the "Conversion"). This appraisal report is furnished pursuant to the Association's filing of the Application for Conversion ("Application") with the Office of the Comptroller of the Currency ("OCC"). Our estimate of the pro forma market value of Central Federal is expressed in the form of a range (the "Valuation Range") based on regulatory guidelines.
In connection with the Conversion, Central Federal also plans to establish and fund a charitable foundation, the Central Federal Community Foundation, with a contribution of cash and shares of common stock issued by the Company in the offering. The charitable foundation will be funded by a contribution of $100,000 in cash and shares of common stock of the Company equal to 4.0% of the amount of shares sold in the offering
In the course of preparing the Appraisal, we reviewed and discussed with the Association's management and the Association's independent accountants, Michael Trokey & Company, P.C., the audited financial statements of the Association's operations as of and for the years ended December 31, 2013 and 2014 and the unaudited financial statements as of and for
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FELDMAN FINANCIAL ADVISORS, INC.
the six months ended June 30, 2014 and 2015. We also reviewed and discussed with management other financial matters of the Association. Where appropriate, we considered information based upon other available public sources, which we believe to be reliable; however, we cannot guarantee the accuracy or completeness of such information. We visited the Association's primary market area and examined the prevailing economic conditions. We also examined the competitive environment within which the Association operates and assessed the Association's relative strengths and weaknesses.
We examined and compared the Association's financial performance with selected segments of the thrift industry and selected publicly traded thrift institutions. We reviewed conditions in the securities markets in general and the market for thrift institution common stocks in particular. We included in our analysis an examination of the potential effects of the Conversion on the Association's operating characteristics and financial performance as they relate to the estimated pro forma market value of the Association.
In preparing the Appraisal, we have relied upon and assumed the accuracy and completeness of financial and statistical information provided by the Association and its independent accountants. We did not independently verify the financial statements and other information provided by the Association and its independent accountants, nor did we independently value the assets or liabilities of the Association. The Appraisal considers the Association only as a going concern and should not be considered as an indication of the liquidation value of the Association.
Our Appraisal is not intended, and must not be construed, to be a recommendation of any kind as to the advisability of purchasing shares of common stock in the Conversion.
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FELDMAN FINANCIAL ADVISORS, INC.
Moreover, because such the Appraisal is necessarily based on estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of common stock in the Conversion will thereafter be able to sell such shares at prices related to the foregoing estimate of the Association's pro forma market value. Feldman Financial is not a seller of securities within the meaning of any federal and state securities laws and any report prepared by Feldman Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities.
The Valuation Range reported in this Appraisal will be updated as appropriate. These updates will consider, among other factors, any developments or changes in the Association's financial performance or management policies, and current conditions in the securities market for thrift institution common stocks. Should any such developments or changes be material, in our opinion, to the valuation of the Association, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in detail at that time.
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FELDMAN FINANCIAL ADVISORS, INC.
I. BUSINESS OF CENTRAL FEDERAL
General Overview
Central Federal is a federal savings association operating out of its single office in Rolla, Missouri. The Association is a community-oriented financial institution, dedicated to serving the financial needs of customers within its market area since it was established in 1952. Central Federal's market area generally consists of Phelps County, Missouri, although it also services customers in the contiguous Missouri counties of Dent, Texas, Crawford, Pulaski, and Maries. The Association offers a variety of loan and deposit products to meet the banking needs of its customers. Central Federal's real estate loans consist primarily of residential mortgage loans, which include owner-occupied and non-owner occupied one- to four-family residential mortgage loans, as well as multi-family residential mortgage loans. The Association also offers commercial loans, primarily secured by commercial real estate, and consumer loans, including automobile and recreational vehicle loans.
As of June 30, 2015, Central Federal had total assets of $62.4 million, net loans of $49.6 million, total deposits of $48.6 million, and total equity capital of $13.7 million or 21.89% of total assets. The Association is subject to extensive regulation, examination, and supervision by the OCC, its primary federal regulator, and the Federal Deposit Insurance Corporation ("FDIC"), its deposit insurer. The Association is a member of the Federal Home Loan Bank ("FHLB") of Des Moines.
Central Federal has amassed a strong capital foundation by emphasizing its financial strength and leveraging its excellent reputation with customers and communities in its market area. The Association continues to stress high quality, personal customer service through an
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honest, straightforward, and upfront marketing approach and has developed a loyal customer base. Central Federal relies on its experienced and committed staff to meet the needs of customers and effectively deliver banking products and services.
The Association's business consists primarily of accepting deposits from the general public in its market area and investing those deposits and funds generated from operations, primarily in residential and commercial real estate loans. At June 30, 2015, residential mortgage loans totaled $31.8 million or 63.7% of the Association's loan portfolio and commercial and multi-family real estate loans amounted to $15.8 million or 31.7% of total loans. Commercial business loans amounted to $1.9 million or 3.8% of total loans, while consumer and other loans totaled $415,000 or 0.8% of total loans as of June 30, 2015. The Association's non-performing assets totaled $974,000 or 1.56% of total assets at June 30, 2015.
Central Federal strives to operate as a strongly capitalized and profitable community financial institution dedicated to providing quality customer service. The Association's current business objectives emphasize residential and commercial/multi-family mortgage lending and Central Federal will continue to offer these types of loans. Another principal business objective of the Association is to build on Central Federal's historic strength of customer loyalty and expand product and service offerings that allow it to increase net interest income while reducing the overall exposure risk from interest rate fluctuations.
The Association believes that its community orientation is attractive to customers and distinguishes it from the larger banks that operate in the local area. Central Federal is presently focused on strengthening and expanding customer relationships to generate additional internal growth from its franchise. Central Federal's business strategy focuses primarily on creating
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sustainable profitability that enables asset growth while enhancing capital. Highlights of the Association's business strategy are as follows:
● | Building on its strengths as a community-oriented financial institution. Central Federal has operated continuously as a community-oriented financial institution since it was founded in 1952. The Association is committed to meeting the financial needs of the local community and is dedicated to providing quality personal service to customers. In that regard, Central Federal is focused on building its customer base in the communities it serves through the enhancement of its products and additional marketing of these products and services. Further, the Association wants to provide its customers the opportunity to become shareholders through the offering of shares for sale in the Conversion. |
● | Increasing loan production while maintaining asset quality. Central Federal's amount of total loans outstanding has declined slightly over the past few years due to active competition from lenders in the local market area and secondary market loan pricing. Through additional marketing and the potential addition of more lending personnel, the Association aims to grow its loan portfolio. In growing the loan portfolio, Central Federal will seek to maintain strong asset quality by following prudent underwriting guidelines and utilizing its knowledge of the local market area. |
● | Strengthening capital to protect against rising interest rates . Central Federal currently has a strong capital base that is sufficient for interest rate risk purposes in the current low interest rate environment given its interest rate risk profile. The Association recognizes that if interest rates rise, having a strong capital base will provide it with additional strength to withstand the impact of rising interest rates. Further, the cash proceeds generated from the Conversion could be used to fund loans or purchase investment securities at higher interest rate levels should interest rates rise, providing additional net interest income. |
Central Federal believes that opportunities exist to leverage its staff capabilities and creativity by cultivating its existing customer base and developing new products and services. The Association is considering ways to strengthen its full service capability, including implementing an effective and competitive pricing strategy and introducing incentives that reward customer loyalty with discounts and cost incentives. Further, the Association may explore upgrading its information technology infrastructure to expand electronic banking
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products and services. The Association recognizes that new product implementation, especially with regard to loans, will require cross training of personnel to assist the loan officers in originating, underwriting, and completing loan transactions. The Association plans to hire a Chief Financial Officer and seek recruitment of an additional loan officer to fulfill identified staffing needs.
While the Association's present equity capital level is solid at 21.89% of total assets as of June 30, 2015, Central Federal believes it must raise additional capital in order to facilitate its growth objectives and loan generation, and provide a greater cushion in response to the risk profile associated with uncertain economic conditions and unproven expansion opportunities. Due to a slowdown in profitability, the buildup of retained earnings and capital from net income has been curtailed and asset growth has been stagnant. The Association reported earnings of $229,000 and $119,000 for the years ended December 31, 2013 and 2014, respectively. Central Federal's return on average assets ("ROA") declined from 0.35% in 2013 to $0.18% for 2014. For the six months ended June 30, 2015, the Association reported net income of $81,000 for an annualized ROA of 0.26%.
As a stock company upon completion of the Conversion, the Association will be organized in the form used by commercial banks, most major corporations, and a majority of savings institutions. The ability to raise new equity capital through the issuance and sale of capital stock will allow the Association the flexibility to increase its equity capital position more rapidly than by accumulating earnings.
The Association also believes that the ability to attract new capital also will help address the needs of the communities it serves and enhance its ability to expand or to make acquisitions.
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After the Conversion, the Association will have increased ability to merge with or acquire other financial institutions or business enterprises. Finally, the Association expects to benefit from its employees and directors having stock ownership in its business, since that is viewed as an effective performance incentive and a means of attracting, retaining, and compensating employees and directors.
In summary, Central Federal's primary reasons for implementing the Conversion and undertaking the offering are to:
● | increase the capital base of the Association and support the implementation of its business plan; |
● | improve profitability and earnings through reinvesting and leveraging the capital proceeds, primarily through the Association's traditional lending and investing activities; |
● | strengthen the Association's capital base from a safety and soundness perspective in light of the current regulatory and economic environment, thereby enhancing its ability to manage risk; |
● | enhance the competitive position of the Association through expanded capacity for organic growth, branch expansion, or acquisitions of other financial institutions; |
● | implement equity compensation plans to retain and attract qualified directors, officers, and staff; and |
● | help the Association to maintain and further expand philanthropic endeavors to the communities it serves through the formation and funding of the charitable foundation. |
The remainder of Chapter I examines in more detail the trends addressed in this section, including the impact of changes in the Association's economic and competitive environment, and recent management initiatives. The discussion is supplemented by the exhibits in the Appendix. Exhibit II-1 summarizes the Association's balance sheets as December 31, 2013 and 2014 and
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June 30, 2015. Exhibit II-2 presents the Association's income statements for the years ended December 31, 2013 and 2014 and for the six months ended June 30, 2014 and 2015.
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Financial Condition
Table 1 presents selected data concerning the Association's financial position as of December 31, 2013 and 2014 and June 30, 2015. Table 2 displays relative balance sheet concentrations for the Association as of similar periods.
Table 1
Selected Financial Condition Data
As of December 31, 2013 and 2014 and June 30, 2015
(Dollars in Thousands)
June 30, | December 31, | |||||||
2015 | 2014 | 2013 | ||||||
Total assets | $ 62,424 | $ 63,977 | $ 64,763 | |||||
Cash and cash equivalents | 8,636 | 7,902 | 7,258 | |||||
Certificates of deposit | 2,480 | 2,480 | 2,480 | |||||
Securities available for sale | 33 | 31 | 44 | |||||
Federal Home Loan Bank stock | 77 | 78 | 78 | |||||
Total loans, net | 49,624 | 52,184 | 53,559 | |||||
Premises and equipment, net | 709 | 739 | 735 | |||||
Foreclosed assets | 508 | 243 | 243 | |||||
Total deposits | 48,642 | 50,282 | 51,175 | |||||
Other liabilities | 118 | 113 | 117 | |||||
Total equity | 13,664 | 13,582 | 13,471 | |||||
Source: Central Federal, financial statements.
Asset Composition
The Association's total assets amounted to $62.4 million at June 30, 2015, reflecting approximately a 2.8% or $1.6 million decrease from total assets of $64.0 million at December 31, 2014. The decline in total assets was primarily attributable to shrinkage of the loan portfolio by $2.6 million from $52.2 million at December 31, 2014 to $49.6 million at June 30, 2015. Central Federal's total assets declined by $786,000 from $64.8 million at December 31, 2013 to
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$64.0 million at December 31, 2014 as net total loans declined by $1.4 million over the corresponding period. While the loan portfolio decreased by $2.3 million between December 31, 2013 and June 30, 2015, cash and cash equivalents increased by $1.4 million over the same period. The recent decrease of the Association's loan portfolio was primarily attributable to weak loan demand and competitive interest rates in the local market area.
As a result of the decrease in loans outstanding, the ratio of net total loans to total assets declined from 82.7% at December 31, 2013 to 79.5% at June 30, 2015. Conversely, the aggregate balance of cash and investments increased from 15.2% at December 31, 2013 to 18.0% at June 30, 2015. Total deposits have also exhibited a downward trend and the ratio of total deposits to total assets declined from 79.0% at December 31, 2013 to 77.9% at June 30, 2015.
Table 2
Relative Balance Sheet Concentrations
As of December 31, 2013 and 2014 and June 30, 2015
(Percent of Total Assets)
June 30, | December 31, | |||||||
2015 | 2014 | 2013 | ||||||
Cash and investments | 17.98 | % | 16.40 | % | 15.22 | % | ||
Total loans, net | 79.50 | 81.57 | 82.70 | |||||
Premises and equipment, net | 1.14 | 1.16 | 1.13 | |||||
Foreclosed assets | 0.81 | 0.38 | 0.38 | |||||
Other assets | 0.57 | 0.50 | 0.57 | |||||
Total assets | 100.00 | % | 100.00 | % | 100.00 | % | ||
Total deposits | 77.92 | % | 78.59 | % | 79.02 | % | ||
Other liabilities | 0.19 | 0.18 | 0.18 | |||||
Total liabilities | 78.11 | 78.77 | 79.20 | |||||
Total equity | 21.89 | 21.23 | 20.80 | |||||
Total liabilities and equity | 100.00 | % | 100.00 | % | 100.00 | % | ||
Source: Central Federal, financial statement data.
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Lending is the principal business activity of Central Federal, and its loan portfolio constitutes the largest portion of its assets and is the predominant source of its income. The largest segment of the Association's loan portfolio is real estate mortgage loans, consisting primarily of residential mortgage loans (including one- to four-family and multi-family and home equity loans), and, to a lesser extent, commercial real estate loans, commercial business loans, construction loans and consumer loans. Central Federal is a portfolio lender and retains in its portfolio substantially all loans that it originates. Virtually all of the Association's secured loans are secured by properties located in Central Federal's primary lending area, which it defines as Phelps County, Missouri.
As presented in Exhibit II-3, the Association's current loan portfolio is comprised almost entirely of real estate loans. At June 30, 2015, real estate lending comprised in excess of 98% of the total loan portfolio and included residential mortgage loans and commercial real estate loans (generally consisting of loans secured by non-owned occupied multi-family residential real estate, retail stores, and other commercial real estate). The Association intends to continue to emphasize residential and commercial lending with a focus on full-service relationship banking in its primary market area.
For the year ended December 31, 2014, Central Federal originated $8.1 million of total loans. Residential mortgage loans accounted for $5.3 million of total loan originations in 2014, followed by $1.7 million of commercial and multi-family real estate loans and $800,000 of commercial business loans. For the six months ended June 30, 2015, the Association originated $4.5 million of loans, reflecting an increase from $3.9 million in the prior year's period.
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Residential loan originations accounted for $2.6 million and commercial and multi-family loan originations totaled $1.6 million during the first half of 2015.
At June 30, 2015, Central Federal had $31.8 million in residential mortgage loans, which represented 63.7% of its total loan portfolio and was comprised of one- to four-family residential mortgage loans ($17.7 million), non-owner occupied one- to four-family real estate loans ($10.2 million), one- to four-family construction loans ($1.2 million), home equity lines of credit and other junior lien loans ($1.7 million), and land loans ($995,000). Residential real estate loans have declined from $35.6 million at December 31, 2013 to $34.2 million at December 31, 2013 and $31.8 million at June 30, 2015. At year-end 2014, approximately 46.0% of the Association's residential loans that were due after one year had fixed interest rates and 54.0% had floating or adjustable interest rates.
The Association's origination of residential mortgage loans enables borrowers to purchase or refinance existing one- to four-family residences, virtually all of which are located in Central Federal's primary market area. The Association offers adjustable-rate and fixed-rate residential mortgage loans with terms of up to 30 years. Because it has not historically sold any of the one- to four-family residential real estate loans that it originated, the Association has not originated these loans in conformance with either Fannie Mae or Freddie Mac underwriting guidelines (although the Association believes its underwriting guidelines are substantially similar). Central Federal generally does not originate or fund fixed-rate mortgage loans to hold in its loan portfolio at the present time; however, it has previously made long-term, fixed-rate loans as part of its lending program. Approximately $15.8 million of such loans remained in its portfolio as of June 30, 2015.
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To the extent that it currently participates in the origination of long-term, fixed-rate residential mortgage loans, the Association does so under the terms of loan brokerage arrangements that it has entered into with another financial institution. Under this arrangement, Central Federal assists in the completion of a loan application and obtains certain financial information about the applicant on behalf of the originating institution, which then underwrites the loan pursuant to its own lending policies, and, if it approves the loan, funds the loan directly. The Association receives a fee for its services as described above. Central Federal does not offer residential mortgages with negative amortization, and it does not make interest-only residential mortgages. Furthermore, the Association does not offer, and has not offered, subprime or no-documentation mortgage loans.
Central Federal has observed a significant demand for residential real property used for investment or income purposes in its primary market area. This demand arises primarily from a high demand for off-campus housing for students attending the Missouri University of Science and Technology. The Association underwrites and prices one- to four-family residential real estate loans that are non-owner occupied as commercial real estate loans. Such loans are subject to a maximum loan-to-value ratio of 80% and are offered at fixed rates with a term of one, three or five years and with payments based on a 25-year amortization schedule. Residential real estate loans secured by one- to four-family, non-owner occupied properties amounted to $10.2 million at June 30, 2015.
The Association makes home equity lines of credit and, on occasion, other junior lien loans. Home equity lines of credit are made for terms of up to 20 years at adjustable rates, with the amount of the home equity line, when combined with the amount outstanding under any first
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mortgage, limited to an 80% loan to value ratio. All of the Association's home equity lines of credit currently offered are adjustable-rate loans with rates tied to the prime rate as reported in The Wall Street Journal . The Association's home equity lines of credit are not necessarily secured by residential real estate on which it also maintains the first mortgage. As of June 30, 2015, the Association had $1.7 million of home equity and other junior lien loans.
At June 30, 2015, Central Federal had $15.8 million in commercial mortgage loans, which represented 31.7% of its total loan portfolio and was comprised of loans and lines of credit secured by commercial real estate, including multi-family residential real estate and owner-occupied commercial property. The Association offers multi-family residential real property loans with fixed rates, with a one, three or five year maturity, with payments on a 25-year amortization schedule, and that are subject to a loan-to-value ratio of 80% of the lesser of appraised value or the purchase price. Central Federal also offers multi-family residential construction loans and commercial construction loans with a maximum loan-to-value ratio of 80%. The Association offers commercial (non-residential) real estate loans with a maximum loan-to-value ratio of 80% of the lower of the appraised value or the purchase price of the property, with one, three or five year terms and payments on a 25-year amortization schedule. Commercial real estate lines of credit are made available with a one year maturity.
Almost all of the Association's commercial real estate loans are collateralized by office buildings, mixed-use properties, and non owner-occupied, residential real estate located in Phelps County. Multi-family rental properties, churches, health and beauty businesses and other retail establishments are the predominant forms of real estate collateral in the Association’s commercial real estate loan portfolio. Loans secured by one- to four-family investment
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properties generally involve a greater degree of risk than one- to four-family owner occupied mortgage loans. Because payments on loans secured by one- to four-family investment properties are often dependent on successful operation or management of the properties, repayment of such loans may be affected by adverse conditions in the real estate market or the economy. Central Federal requires all properties securing commercial mortgage loans to be appraised by a licensed, independent appraiser.
Commercial business loans amounted to $1.9 million or 3.8% of total loans at June 30, 2015. Central Federal makes a relatively limited amount of commercial business loans that are either secured by assets other than real property or that are not secured. For secured commercial loans and lines of credit, the interest rate and other terms are determined based upon the financial condition, including net worth, of the borrower as well as the type of collateral to secure the loan. Collateral for secured commercial business loans generally consists of the borrower’s accounts receivable, inventory, and furniture, fixtures and equipment, although deposit accounts at Central Federal may also be pledged. The Association makes unsecured commercial extensions of credit if the financial condition of the borrower is sufficient to support the loan. Most of the Association's unsecured commercial credits consist of lines of credit. Central Federal is currently evaluating supplementing its commercial business loan originations with some limited purchases of the guaranteed portion of Small Business Administration ("SBA") loans, which are short term loans with fixed rates. The Association anticipates that commercial business loan may become a slightly larger component of its loan portfolio composition through originations supplemented with purchases of SBA loans.
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The Association's consumer lending consists primarily of loans secured by used automobiles or other personal vehicles and, to a lesser extent, unsecured personal loans and loans secured by deposit accounts at Central Federal. As of June 30, 2014, the Association had consumer loans of $415,000 or 0.8% of the total loan portfolio.
Exhibit II-4 presents a summary of the Association's portfolio of cash, liquidity, and investments as of December 31, 2013 and 2014 and June 30, 2015. Central Federal's primary investment objectives are: (i) to provide and maintain liquidity; (ii) to fully employ the available funds of the Association; (iii) to earn an average rate of return on invested funds competitive with comparable institutions; (iv) to manage interest rate risk; and (v) to limit credit and interest rate risk. In recent periods, the Association has placed a heavy emphasis on liquid holdings and maintained a limited amount of investment securities. At June 30, 2015, the Association's cash and investments amounted to $11.2 million or 18.0% of total assets. Cash and cash equivalents along with certificates of deposit in other financial institutions amounted to $11.1 million or 99.0% of the Association's total cash and investments as of June 30, 2015. The Association's securities portfolio consisted of $33,000 of stock in the Federal Home Loan Mortgage Corporation ("Freddie Mac"). The Association also owned $77,000 of stock in the FHLB of Des Moines as of June 30, 2015. As the Association's loan portfolio decreased in recent periods, its holdings of cash and investments increased from $9.9 million at December 31, 2013 to $11.2 million at June 30, 2015.
Liability Composition
Deposits are the Association's primary external source of funds for lending and other investment purposes. The Association has not historically used borrowings actively and had no
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outstanding borrowings at June 30, 2015. Exhibit II-5 presents a summary of the Association's deposit composition as of December 31, 2013 and 2014 and June 30, 2015. Total deposits amounted to $48.6 million or 77.9% of total assets and 99.8% of total liabilities at June 30, 2015. Total deposits decreased by $2.6 million from $51.2 million at December 31, 2013 to $48.6 million at June 30, 2015 as the Association did not aggressively price its deposit rates to attract rollovers of maturing certificate of deposits due to declining liquidity needs. Certificate accounts declined from $28.3 million at December 31, 2013 to $23.4 million at June 30, 2015.
Central Federal generally attracts deposits from within its market area through the offering of a broad selection of deposit instruments, including non-interest bearing demand deposits (such as checking accounts), interest-bearing demand accounts (such as NOW and money market accounts), statement savings accounts, and certificates of deposit. On occasion, Central Federal will accept deposits, typically in the form of certificates of deposit in denominations in excess of $100,000, from other financial institutions. The Association does not have a formal program or policy with respect to such deposits, which are typically initiated by the other institution; rather, it will accept the deposits if, when the opportunity to accept the deposit arises, its management determine that the deposit is appropriate for the Association. As of June 30, 2015, the amount of deposits from such other financial institutions was $5.5 million.
Central Federal relies on competitive pricing and customer service to attract and retain deposits. The Association offers a variety of deposit accounts with a range of interest rates and terms. The Association periodically reviews and establishes interest rates, maturity terms, service fees, and withdrawal penalties for its deposit accounts. Deposit rates and terms are based primarily on current operating strategies, market interest rates, liquidity requirements, interest
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rates paid by competitors, and deposit growth goals. The Association's deposit pricing strategy has typically emphasized competitive rates on all types of deposits accounts with selective rate pricing implemented periodically in order to attract deposits of a specific type or term.
Certificates of deposit have traditionally been the largest deposit category at Central Federal and accounted for $23.4 million or 48.1% of total deposits at June 30, 2015, as compared to $28.3 million or 55.4% of total deposits at December 31, 2013. Approximately 53.9% or $12.6 million of certificate accounts at June 30, 2015 had remaining maturities of one year or less. The Association has been successful in increasing its transaction accounts, including non-interest bearing demand, NOW, and money market deposit accounts. Transaction accounts have increased from $19.5 million or 38.0% of total deposits at December 31, 2013 to $21.5 million or 44.2% of total deposits at June 30, 2015. For the six months ended June 30, 2015, the annualized cost of the Association's total deposits was 0.95% and the annualized cost of certificate accounts was 1.46%.
As a member of the FHLB of Des Moines, Central Federal is eligible to obtain FHLB borrowings based upon the security of FHLB common stock owned and certain residential real estate loans. The Association also is eligible, upon the satisfaction of collateral security and other requirements, to borrow from the Federal Reserve Bank ("FRB") of St. Louis. While Central Federal has obtained FHLB advances in the past, it had no outstanding borrowings from the FHLB or FRB at June 30, 2015 or December 31, 2014 or 2013.
Equity Capital
Central Federal has historically maintained solid capital levels. In addition, the Association has pursued moderate growth in an effort to preserve its capital strength. The
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Association's total assets have declined from $65.2 million at December 31, 2012 to $62.4 million at June 30, 2015. Over the same period, total equity advanced moderately from $13.2 million at December 31, 2012 to $13.7 million at June 30, 2015. As a result, Central Federal's ratio of total equity to assets increased from 20.32% at December 31, 2012 to 21.89% at June 30, 2015. Because of the Association's consistently low level of profitability, its incremental equity accumulation has been slow. Over the ten-year period from year-end 2004 to year-end 2014, Central Federal's total equity increased at a compound annual growth rate of 0.7%.
Central Federal's capital level remains strong in comparison to minimum regulatory requirements. The Association's regulatory capital ratios of tier 1 leverage capital, tier 1 risk-based capital, common equity tier 1 risk-based capital, and total risk-based capital were 21.35%, 38.39%, 38.39%, and 39.18%, respectively, as of June 30, 2015. In comparison, the minimum regulatory requirements under FDIC guidelines were 4.00%, 4.50%, 6.00%, and 8.00%, and the threshold requirements for regulatory "well capitalized" levels were 5.00%, 6.50%, 8.00%, and 10.00%, respectively. Based on these regulatory capital ratios and requirements, the Association was considered well capitalized for regulatory purposes as of June 30, 2015.
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Income and Expense Trends
Table 3 displays the main components of Central Federal's earnings performance for the years ended December 31, 2013 and 2014 and for the six months ended June 30, 2014 and 2015. Table 4 displays the Association's principal income and expense ratios as a percent of average assets for the corresponding periods. Table 5 displays the Association's weighted average yields on interest-earning assets and weighted average costs of interest-bearing liabilities for the years ended December 31, 2013 and 2014 and for the six months ended June 30, 2014 and 2015.
General Overview
Over the past several years, Central Federal has generated a record of low to moderate profitability. The Association's average ROA for the past five fiscal years ended December 31, 2014 was approximately 0.30%. Central Federal's profitability trends can be characterized by slightly below average net interest spreads and low levels of non-interest income, offset partially by low levels of provision for loan losses and relatively low operating expenses.
The Association's earnings amounted to $229,000 in 2103 and $119,000 in 2014, reflecting ROA results of 0.35% and 0.18%, respectively, and return on average equity ("ROE") results of 1.71% and 0.88%, respectively. Central Federal's very low ROE results stem also from its exceptionally high capital levels in addition to the Association's fundamental earnings components. Central Federal reported net income of $81,000 for the six months ended June 30, 2015, as compared to $38,000 for the six months ended June 30. 2014. The Association realized an annualized ROA of 0.26% for the first half of 2015, as compared to an annualized ROA of 0.12% for the first half of 2014. The annualized ROE for the Association was 1.18% for the six months ended June 30, 2015 versus 0.56% for the six months ended June 30, 2014.
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Table 3
Income Statement Summary
For the Years Ended December 31, 2013 and 2014
And the Six Months Ended June 30, 2014 and 2015
(Dollars in Thousands)
Six Months Ended | Year Ended | |||||||||
June 30, | December 31, | |||||||||
2015 | 2014 | 2014 | 2013 | |||||||
Interest income | $ 1,222 | $ 1,230 | $ 2,466 | $ 2,723 | ||||||
Interest expense | 236 | 250 | 494 | 548 | ||||||
Net interest income | 986 | 980 | 1,972 | 2,175 | ||||||
Provision for loan losses | - | 60 | 60 | - | ||||||
Net interest income after provision | 986 | 920 | 1,912 | 2,175 | ||||||
Non-interest income | 32 | 37 | 72 | (23 | ) | |||||
Non-interest expense | 893 | 895 | 1,805 | 1,786 | ||||||
Income before income taxes | 125 | 62 | 179 | 366 | ||||||
Income tax expense | 44 | 24 | 60 | 137 | ||||||
Net income | $ 81 | $ 38 | $ 119 | $ 229 | ||||||
Source: Central Federal, financial statements.
Six Months Ended June 30, 2014 and 2015
Net income increased from approximately $38,000 for the six months ended June 30, 2014 to $81,000 for the six months ended June 30, 2015. The improvement in earnings was attributable mainly to the reduction in the Association's provision for loan losses from $60,000 in the 2014 period to zero for the 2015 period. Pre-tax income increased by $63,000 from $62,000 for the six months ended June 30, 2014 to $125,000 for the six months ended June 30, 2015. The Association's non-accruing loans declined from $979,000 or 1.85% of total loans at June 30, 2014 to $466,000 or 0.93% of total loans at June 30, 2015. Net loan charge-offs were insignificant for both six-month periods in 2014 and 2015.
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Table 4
Income Statement Ratios
For the Years Ended December 31, 2013 and 2014
And the Six Months Ended June 30, 2014 and 2015
(Percent of Average Assets)
Six Months Ended | Year Ended | |||||||||
June 30, | December 31, | |||||||||
2015 | (1) | 2014 | (1) | 2014 | 2013 | |||||
Interest income | 3.85 | % | 3.80 | % | 3.82 | % | 4.16 | % | ||
Interest expense | 0.74 | 0.77 | 0.77 | 0.84 | ||||||
Net interest income | 3.10 | 3.03 | 3.06 | 3.32 | ||||||
Provision for loan losses | 0.00 | 0.19 | 0.09 | 0.00 | ||||||
Net interest income after provision | 3.10 | 2.84 | 2.96 | 3.32 | ||||||
Non-interest income | 0.10 | 0.11 | 0.11 | (0.04 | ) | |||||
Non-interest expense | 2.81 | 2.76 | 2.80 | 2.73 | ||||||
Income before income taxes | 0.39 | 0.19 | 0.28 | 0.56 | ||||||
Income tax expense | 0.14 | 0.07 | 0.09 | 0.21 | ||||||
Net income | 0.26 | 0.12 | 0.18 | 0.35 | ||||||
(1) Annualized for the six month periods ended June 30, 2014 and 2015.
Source: Central Federal, financial statement data; Feldman Financial calculations.
Non-interest income, consisting largely of customer service fees, declined from $37,000 in the six months ended June 30, 2014 to $32,000 for the six months ended June 30, 2015. The level of annualized non-interest income in relation to average assets declined from 0.11% for the first half of 2014 to 0.10% for the first half of 2015. Non-interest expense was almost unchanged, totaling $895,000 in the 2014 period versus $893,000 in the 2015 period. However, on an annualized basis in relation to average assets, non-interest expense increased from 2.76% to 2.81%. Compensation and employee benefits is the main operating expense category and equaled $525,000 in both 2014 and 2015 periods.
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FELDMAN FINANCIAL ADVISORS, INC.
Year Ended December 31, 2013 and 2014
Central Federal reported net income of $119,000 for the year ended December 31, 2014, as compared to net income of $229,000 for the year ended December 31, 2013. The $110,000, or 48.0%, decrease in net income between the periods was primarily a result of net interest income decreasing $203,000 from the year ended December 31, 2013 to the same period in 2014, and a provision for loan loss of $60,000 in 2014. This decrease was partially offset by a loss on the sale of foreclosed assets of $100,000 during the year ended December 31, 2013, but no such loss occurring in the year ended December 31, 2014.
Net interest income decreased by $203,000 or 9.3% to $2.0 million in 2014 from $2.2 million for 2013. Interest income on loans decreased by $258,000 from 2013 to 2014, while deposit interest expense decreased by $54,000 during that same period. The decrease in loan interest income was primarily a result of the average balance in loans receivable decreasing from $56.1 million for the year ended December 31, 2013 to $52.9 million for the year ended December 31, 2014. Interest expense was $494,000 for the year ended December 31, 2014, which was a $54,000 decrease from interest expense of $548,000 for the year ended December 31, 2013. The decrease in interest expense was a result of average interest-bearing deposits decreasing by $1.6 million from $49.2 million for 2013 to $47.6 million for 2014.
The Association's net interest spread declined by 32 basis points from 3.22% in 2013 to 2.90% in 2014. The reduction in the net interest spread resulted from a decrease of 39 basis points in the yield on interest-earning assets from 4.33% to 3.94%, while the cost of interest-bearing liabilities declined by only 7 basis points from 1.11% to 1.04%. The continued decline of average balances of loans outstanding contributed to the decline in the net interest spread.
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FELDMAN FINANCIAL ADVISORS, INC.
Table 5
Yield and Cost Summary
For the Years Ended December 31, 2013 and 2014
And the Six Months Ended June 30, 2014 and 2015
Six Months Ended | Year Ended | |||||||||
June 30, | December 31, | |||||||||
2015 | 2014 | 2014 | 2013 | |||||||
Weighted Average Yields (1) | ||||||||||
Loan receivable | 4.70 | % | 4.53 | % | 4.56 | % | 4.76 | % | ||
Securities and other interest-earning assets | 0.57 | 0.52 | 0.57 | 0.79 | ||||||
Total interest-earning assets | 3.99 | 3.92 | 3.94 | 4.33 | ||||||
Weighted Average Costs (1) | ||||||||||
Certificate of deposit accounts | 1.46 | 1.45 | 1.46 | 1.54 | ||||||
Savings accounts | 0.32 | 0.29 | 0.31 | 0.32 | ||||||
Money market accounts | 0.51 | 0.53 | 0.52 | 0.53 | ||||||
NOW accounts | 0.58 | 0.48 | 0.55 | 0.41 | ||||||
Total interest-bearing deposits | 1.00 | 1.03 | 1.04 | 1.11 | ||||||
Net interest rate spread (2) | 2.99 | 2.89 | 2.90 | 3.22 | ||||||
Net interest margin (3) | 3.22 | 3.12 | 3.15 | 3.46 | ||||||
(1) Annualized for the six months ended June 30, 2014 and 2015.
(2) Yield on interest-earning assets less cost of interest-bearing liabilities.
(3) Net interest income divided by average total interest-earning assets.
Source: Central Federal Bancshares, Inc., preliminary prospectus.
Central Federal recorded a $60,000 provision for loan losses for the year ended December 31, 2014, while no provision for loan losses was taken for the year ended December 31, 2013. Net charge-offs increased from $4,000 in 2013 to $132,000 in 2014. The increase in net charge-offs was largely due to one single-family residential loan with a partial charge-off of $104,000 during 2014. Central Federal subsequently proceeded with collections during the six months ended June 30, 2015, during which time this loan was transferred to foreclosed assets.
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FELDMAN FINANCIAL ADVISORS, INC.
Non-interest income increased by $95,000 to $72,000 for the year ended December 31, 2014 from a deficit of -$23,000 for the year ended December 31, 2013. This was mainly attributable to a $100,000 loss on the sale of foreclosed assets occurring in 2013, while there were no gains or losses on sale of foreclosed assets in 2014. Non-interest income amounted to 0.11% of average assets in 2014, compared to -0.04% of average assets in 2013.
Non-interest expense increased by $19,000 in 2014 compared to 2013 due to an increase in compensation and benefits expense of $48,000, which was offset by a decrease in other non-interest expenses of $18,000 and a decrease in foreclosed asset expense of $16,000 from the year ended December 31, 2013 to the same period in 2014. In relation to average assets, non-interest expense increased from 2.73% in 2013 to 2.80% in 2014.
Primarily due to the decrease in net interest income during the year, pre-tax income declined by 51.0% from $366,000 in 2013 to $179,000 in 2014. The Association incurred income tax expense of $137,000 and $60,000 for the years ended December 31, 2013 and 2014, respectively. The decrease in income tax expense reflected a decrease in pre-tax income from 2013 to 2014. The effective tax rate declined slightly from 37.4% for the year ended December 31, 2013 to 37.4% for the year ended December 31, 2014.
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FELDMAN FINANCIAL ADVISORS, INC.
Interest Rate Risk Management
The Association seeks to reduce its earnings vulnerability and capital risk to changes in market interest rates by managing the mismatch between asset and liability maturities and interest rates. Management actively monitors and manages the Association's interest rate risk exposure. The principal objective of the Association's interest rate risk management function is to evaluate the interest rate risk embedded in certain balance sheet accounts, determine the level of risk appropriate given the Association's business strategy, operating environment, capital and liquidity requirements and performance objectives, and manage the risk consistent with guidelines approved by the Board of Directors. The Association strives to maintain an acceptable balance between maximizing net interest spread potential and limiting its exposure to changes in interest rates. Central Federal manages the interest rate sensitivity of its interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment.
A major source of interest rate risk is a difference in the repricing of assets as compared to the repricing of liabilities. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturity of deposits. As a result, sharp increases in interest rates may adversely affect the Association's earnings while decreases in interest rates may beneficially affect its earnings. The Association seeks to reduce the potential volatility of our earnings by continually improving the matching between our asset and liability maturities and rates.
Central Federal’s goal is to manage asset and liability positions to moderate the effect of interest rate fluctuations on its earnings, while also controlling exposure to interest rate risk
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FELDMAN FINANCIAL ADVISORS, INC.
within policy limits approved by its Board of Directors. These limits and guidelines reflect the Association's tolerance for interest rate risk over both short-term and long-term horizons. The Association also relies on balance sheet management tools such as emphasizing increased liquidity and maintaining very strong capital levels in attempting to mitigate its interest rate risk exposure.
Central Federal currently utilizes economic value of equity ("EVE") analysis to review its level of interest rate risk. The Association measure its interest rate risk through the use of a financial model provided by an outside consulting firm. This model measures interest rate risk by capturing changes in the economic value of assets and liabilities, based on a range of assumed changes in market interest rates. Economic value represents the market value of assets and liabilities. These analyses assess the risk of loss in market risk-sensitive instruments in the event of a sudden and sustained 100 to 300 basis point increase or 100 basis point decrease in market interest rates, with no effect given to any steps that the Association might take to counter the effect of such interest rate movement.
Table 6 presents the change in the economic value of the Association's equity at June 30, 2015 that would occur in the event of an immediate change in interest rates based on assumptions that it considers to be reasonable. As mentioned previously, these results do not reflect any action that the Association might implement to counteract the change in interest rates. Because of the current level of interest rates, scenarios of down 200-plus basis points have not been considered. As shown in Table 6, the Association's EVE would be negatively impacted by an increase in interest rates and positively impacted from a decrease in interest rates from current
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FELDMAN FINANCIAL ADVISORS, INC.
levels. As interest rates rise, the market value of fixed-rate loans tends to decline due to both the rate increases and slowing prepayments.
Table 6 indicates that the Association's EVE was $17.8 million or 27.12% of the present value of portfolio assets as of December 31, 2013. Based upon the assumptions utilized, an immediate 200 basis point increase in market interest rates would result in a $1.9 million decrease in the Association's EVE and would result in a decrease of 151 basis points in the EVE ratio to 26.35%. An immediate 100 basis point increase in market interest rates would result in a $971,000 decrease in the Association's EVE and a 77 basis point increase in the EVE ratio to 26.35%. Conversely, an immediate 100 basis point decrease in market interest rates would result in an $846,000 increase in the Association's EVE and a 60 basis point increase in the EVE ratio to 27.72%.
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FELDMAN FINANCIAL ADVISORS, INC.
Table 6
Interest Rate Risk Analysis
Economic Value of Equity
As of June 30, 2015
(Dollars in Thousands)
Change in
Interest Rates (1) (basis points) |
Estimated EVE (2) |
Change
from Base (000s) |
Change
from Base (%) |
EVE
Ratio (3) |
Basis Point
Change in EVE Ratio |
+ 300 b.p. | $15,103 | $(2,741) | (15.36)% | 24.90% | (222) b.p. |
+ 200 b.p. | 15,957 | (1,887) | (10.58)% | 25.61% | (151) b.p. |
+ 100 b.p. | 16,873 | (971) | (5.44)% | 26.35% | (77) b.p. |
0 b.p. | 17,844 | — | — | 27.12% | — |
- 100 b.p. | 18,690 | 846 | 4.74% | 27.72% | 60 b.p. |
(1) Assumes instantaneous and sustained parallel shifts in interest rates.
(2) EVE is the discounted present value of expected cash flows from assets, liabilities, and off-balance sheet items.
(3) EVE divided by the portfolio value of assets.
Source: Central Federal Bancshares, Inc., preliminary prospectus.
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FELDMAN FINANCIAL ADVISORS, INC.
Asset Quality
Table 7 summarizes the Association's total non-performing assets ("NPAs") as of December 31, 2013 and 2014 and June 30, 2015. Central Federal has a sustained record of reporting satisfactory asset quality. Total NPAs increased marginally from $1.1 million at year-end 2013 to $1.2 million at year-end 2014, before declining to $974,000 at June 30, 2015. In relation to total assets, NPAs measured 1.7% and 1.9% at December 31, 2013 and 2014, respectively, and declined to 1.6% at June 30, 2015. Including troubled debt restructurings ("TDRs") of $387,000 at June 30, 2015, total NPAs and TDRs amounted to $1.4 million at June 30, 2015 or 2.2% of total assets.
Non-accruing loans at June 30, 2015 consisted of four residential real estate loans totaling $466,000. Non-accruing loans have declined in recent periods from $745,000 at year-end 2013 and $644,000 at year-end 2014. Foreclosed assets at June 30, 2015 consisted of two properties totaling $508,000. The increase in foreclosed assets from $243,000 at year-end 2013 and 2014 was due to a single-family residential property in Cuba, Missouri being foreclosed on during the first half of 2015. The prior years' amount of foreclosed assets represented one commercial real estate property. At June 30, 2015, the Association had one loan (secured by commercial real estate) that was considered a troubled debt restructuring.
Table 8 summarizes the Association's allowance for loan losses as of and for the year ended December 31, 2013 and 2014 and the six months ended June 30, 2014 and 2015. The allowance for loan losses declined from $351,000 at year-end 2013 to $279,000 at year-end 2014 and $278,000 at June 30, 2015. Central Federal recorded a provision for loan losses of $60,000 in 2013, but made no provision in 2014 or for the first half of 2015.
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FELDMAN FINANCIAL ADVISORS, INC.
Table 7
Non-performing Asset Summary
As of December 31, 2013 and 2014 and June 30, 2015
(Dollars in Thousands)
June 30, | December 31, | |||||||
2015 | 2014 | 2013 | ||||||
Non-accruing Loans | ||||||||
Residential real estate | $ 466 | $ 590 | $ 685 | |||||
Commercial and multi-family real estate | - | 51 | 57 | |||||
Consumer and other | - | 3 | 3 | |||||
Total | 466 | 644 | 745 | |||||
Accruing Loans 90 Days or More Past Due: | ||||||||
Residential real estate | - | 312 | 142 | |||||
Total | - | 312 | 142 | |||||
Total non-performing loans (NPLs) | 466 | 956 | 887 | |||||
Foreclosed assets | 508 | 243 | 243 | |||||
Total non-performing assets (NPAs) | $ 974 | $ 1,199 | $ 1,130 | |||||
Troubled debt restructurings (TDRs) | $ 387 | $ 391 | $ 402 | |||||
Total NPA and TDRs | $ 1,361 | $ 1,590 | $ 1,532 | |||||
Total NPLs to total loans | 0.9% | 1.8% | 1.6% | |||||
Total NPAs to total assets | 1.6% | 1.9% | 1.7% | |||||
Total NPLs and TDRs to total loans | 1.7% | 2.6% | 2.4% | |||||
Total NPLs and TDRs to total assets | 2.2% | 2.5% | 2.4% | |||||
Source: Central Federal Bancshares, Inc., preliminary prospectus.
Net charge-offs to average loans outstanding increased from $4,000 in 2013 to $132,000 in 2014 due primarily to the write-down of one single-family residential loan. This loan was transferred to foreclosed assets in January 2015. The ratio of allowance for loan losses to NPLs decreased from year-end 2013 to 2014 as a result of the decline in the adjusted experience loss ratio for commercial and multi-family real estate loans. The corresponding ratio increased in the first half of 2015 due to a decrease in the level non-performing loans.
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FELDMAN FINANCIAL ADVISORS, INC.
Table 8
Allowance for Loan Losses
As of or For the Years Ended December 31, 2013 and 2014
And the Six Months Ended June 30, 2014 and 2015
(Dollars in Thousands)
Six Months Ended | Year Ended | |||||||||
June 30, | December 31, | |||||||||
2015 | 2014 | 2014 | 2013 | |||||||
Allowance at beginning of period | $ 279 | $ 351 | $ 351 | $ 355 | ||||||
Charge-offs: | ||||||||||
Residential real estate | - | - | (129 | ) | (2 | ) | ||||
Consumer and other | (2 | ) | (4 | ) | (4 | ) | (2 | ) | ||
Total charge-offs | (2 | ) | (4 | ) | (133 | ) | (4 | ) | ||
Recoveries | 1 | 1 | 1 | - | ||||||
Net charge-offs | (1 | ) | (3 | ) | (132 | ) | (4 | ) | ||
Provision for loan losses | - | 60 | 60 | - | ||||||
Allowance at end of period | $ 278 | $ 408 | $ 279 | $ 351 | ||||||
Net charge-offs to average loans | 0.0% | 0.0% | 0.0% | 0.0% | ||||||
Allowance to NPLs at end of period | 59.7% | 37.9% | 29.2% | 39.6% | ||||||
Allowance to total loans at end of period | 0.6% | 0.6% | 0.5% | 0.7% | ||||||
Source: Central Federal Bancshares, Inc., preliminary prospectus.
There was no provision for loan losses for the six months ended June 30, 2015, compared to a $60,000 provision for loan losses for the six months ended June 30, 2014. Net charge-offs were insignificant for both periods. Management reviews the level of the allowance for loan losses on a quarterly basis based on a variety of factors. This analysis resulted in no provision for loan losses being required for the six months ended June 30, 2015. The reduction in the level of provision for loan losses reflects lower levels of specific allowances related to impaired loans individually evaluated for impairment, a decrease in non-performing loans, and the stabilization of the quantitative and qualitative factors during the six months ended June 30, 2015.
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FELDMAN FINANCIAL ADVISORS, INC.
Subsidiary Activity
Central Federal has no subsidiaries.
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FELDMAN FINANCIAL ADVISORS, INC.
Office Facilities
Central Federal currently conducts business solely from its office in Rolla, Missouri. The Association owns its headquarters office building, which is located at 210 West 10th Street, Rolla, Missouri 65401. The net book value of the premises and equipment at Central Federal was $709,000 as of June 30, 2015.
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FELDMAN FINANCIAL ADVISORS, INC.
Legal Proceedings
Periodically, there may be various claims and lawsuits against Central Federal, such as claims to enforce liens, condemnation proceedings on properties in which it holds hold security interests, claims involving the making and servicing of real property loans, and other issues incident to its business. The Association is not currently a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition, operating results, or cash flows.
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FELDMAN FINANCIAL ADVISORS, INC.
Market Area
Overview of Market Area
Central Federal is headquartered and maintains its sole office in Rolla, Missouri. Rolla is the largest city and county seat of Phelps County, which had an estimated population of approximately 44,500 in 2015. Rolla is located along Interstate 44 in south-central Missouri, less than 100 miles from major Missouri population centers of St. Louis, Jefferson City, Columbia and Springfield. The Association consider its primary market area to be Phelps County, and it also services customers in the contiguous Missouri counties of Dent, Texas, Crawford, Pulaski, and Maries. Other towns in Phelps County include St. James, Newburg, and Doolittle.
Rolla has an estimated population of approximately 20,200 and is the home of Missouri University of Science and Technology ("Missouri S&T"), a public institution of higher education. Previously known as University of Missouri-Rolla, Missouri S&T was founded in 1870 as one of the first technological schools west of the Mississippi and today is one of the nation's top technological research universities. Most of the approximately 8,600 students at Missouri S&T major in engineering or computer science. Missouri S&T also offers majors in the humanities, social sciences, arts, sciences, and business. Missouri S&T occupies a 284 acre campus in Rolla and is the second largest employer in the city with over 1,300 employees.
The largest employers in the Rolla area include: Phelps County Regional Medical Center (hospital), Missouri S&T (education), Walmart Distribution Center (distribution/warehouse), Rolla Public Schools (education), Walmart Supercenter (retail), Brewer Science (electronics technology), Mercy (healthcare system), Great Circle (youth education and development), U.S. Geological Survey - Rolla Federal Center (government), and the city of Rolla (government).
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FELDMAN FINANCIAL ADVISORS, INC.
Table 9 presents comparative demographic data for the United States, the state of Missouri, Phelps County, and the city of Rolla. Missouri had an estimated population in 2015 of 6.1 million. Population growth in the state measured 1.4% in past five years, behind the national growth rate of 3.5%. For the projected 2015-2020 period, Missouri's population is expected to increase by 1.5%, compared to the national growth rate of 3.5%. Phelps County experienced a 1.4% decline in population during the 2010-2015 period, and is projected to decline by 0.8% in the 2015-2020 period. Rolla exhibited a population increase of 3.1% in the 2010-2015 period, but is expected to slow to 0.2% in the 2015-2020 period.
Reflecting the concentration of college-age population residing in the city, the median age of Rolla is 28.7 years as compared to the state and national median of 38.5 and 37.9 years, respectively. Approximately 43.5% of Rolla's 2015 population was represented by the 15-to-34 year age group, compared to 26.8% and 27.2% for the state and national population aggregates, respectively. The large concentration of college students also contributed to Rolla's below average income levels.
Estimated median household income in 2015 was $36,464 for Rolla and $43,527 for Phelps County. These income levels were below the state median household income of $47,593 and the national median of $53,706. The unemployment rate for June 2015 was 6.5% in Phelps County, compared to the state and national rates of 5.8% and 5.3%, respectively. The unemployment rate for June 2014 was 6.3% in Phelps County. Reflecting the college-age population in the local market, approximately 49.8% of Rolla's total housing units consisted of renter occupied units. In comparison, the state and national aggregates displayed 27.3% and 31.0% levels, respectively, of renter occupied units to total housing units.
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FELDMAN FINANCIAL ADVISORS, INC.
Table 9
Selected Demographic Data
United | Phelps | City of | ||||
States | Missouri | County | Rolla | |||
Total Population | ||||||
2015 - Current | 319,459,991 | 6,069,767 | 44,538 | 20,156 | ||
2020 - Projected | 330,689,365 | 6,160,843 | 44,191 | 20,196 | ||
% Change 2010-15 | 3.47% | 1.35% | -1.37% | 3.05% | ||
% Change 2015-20 | 3.52% | 1.50% | -0.78% | 0.20% | ||
Age Distribution, 2015 | ||||||
0 - 14 Age Group | 19.12% | 19.03% | 17.45% | 16.16% | ||
15 - 34 Age Group | 27.23% | 26.80% | 33.18% | 43.53% | ||
35 - 54 Age Group | 26.27% | 25.47% | 22.39% | 19.37% | ||
55- 69 Age Group | 17.60% | 18.19% | 16.55% | 12.26% | ||
70+ Age Group | 9.77% | 10.51% | 10.43% | 8.68% | ||
Median Age (years) | 37.9 | 38.5 | 34.5 | 28.7 | ||
Total Households | ||||||
2015 - Current | 121,099,157 | 2,418,499 | 17,269 | 7,902 | ||
2020 - Projected | 125,616,498 | 2,461,693 | 17,148 | 7,978 | ||
% Change 2015-20 | 3.73% | 1.79% | -0.70% | 0.96% | ||
Household Income, 2015 | ||||||
< $25,000 | 23.51% | 25.92% | 29.17% | 37.61% | ||
$25,000 - $49,999 | 23.85% | 26.48% | 27.85% | 24.21% | ||
$50,000 - $99,999 | 29.79% | 30.18% | 29.71% | 25.93% | ||
$100,000 - $199,999 | 17.87% | 14.42% | 11.56% | 10.59% | ||
$200,000+ | 4.98% | 3.00% | 1.71% | 1.66% | ||
Median Household Income | ||||||
2015 - Current | $53,706 | $47,593 | $43,527 | $36,464 | ||
2020 - Projected | $57,294 | $49,964 | $46,163 | $38,413 | ||
% Change 2015-20 | 6.68% | 4.98% | 6.06% | 5.34% | ||
Average Household Income | ||||||
2015 - Current | $74,165 | $63,793 | $55,364 | $50,857 | ||
2020 - Projected | $79,486 | $67,904 | $59,688 | $54,441 | ||
% Change 2015-20 | 7.17% | 6.44% | 7.81% | 7.05% | ||
Per Capita Income | ||||||
2015 - Current | $28,840 | $26,171 | $23,023 | $22,684 | ||
2020 - Projected | $30,954 | $27,930 | $24,868 | $24,481 | ||
% Change 2015-20 | 7.33% | 6.72% | 8.01% | 7.92% | ||
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FELDMAN FINANCIAL ADVISORS, INC.
Table 9 (continued)
Selected Demographic Data
United | Phelps | City of | ||||
States | Missouri | County | Rolla | |||
Total Housing Units | ||||||
2015 - Current | 136,668,489 | 2,772,166 | 19,612 | 8,811 | ||
2020 - Projected | 141,550,772 | 2,826,663 | 19,754 | 8,985 | ||
% Change 2015-20 | 3.57% | 1.97% | 0.72% | 1.97% | ||
Housing Units, 2015 | ||||||
Owner Occupied | 78,696,952 | 1,661,864 | 10,542 | 3,517 | ||
Renter Occupied | 42,402,205 | 756,635 | 6,727 | 4,385 | ||
Vacant | 15,569,332 | 353,667 | 2,343 | 909 | ||
Owner Occupied | 57.58% | 59.95% | 53.75% | 39.92% | ||
Renter Occupied | 31.03% | 27.29% | 34.30% | 49.77% | ||
Vacant | 11.39% | 12.76% | 11.95% | 10.32% | ||
Unemployment Rates | ||||||
June 2014 | 6.1% | 6.6% | 6.3% | NA | ||
June 2015 | 5.3% | 5.8% | 6.5% | NA | ||
% Change | -13.1% | -12.1% | 3.2% | NA | ||
Source: SNL Financial; Nielsen.
Market Share Analysis
Table 10 displays branch deposit data for financial institutions in Phelps County as of June 30, 2014 (with deposit data adjusted for pending and completed mergers). Central Federal ranked 6th in Phelps County out of 11 financial institutions with total deposits of $51.8 million as of June 30, 2014 and a market share of 6.1%. The Association also ranked 6th in Phelps County as of June 30, 2013 with deposits of $52.1 million. The financial institutions in Phelps County mostly include small community banks, including deposit market share leaders Phelps County Bank and Citizens Bank of Newburg. Large out-of-state regional banks, such as U.S. Bank (Minnesota) and Regions Bank (Alabama) also compete for deposits in Phelps County.
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FELDMAN FINANCIAL ADVISORS, INC.
Table 10
Deposit Market Share in Phelps County (Missouri)
Data as of June 30, 2014
(Adjusted for Pending and Completed Mergers)
Deposit | ||||||||
Market | Total | |||||||
Financial | Branch | Share | Deposits | |||||
Rank | Institution | Type | Count | (%) | ($000) | |||
1 | Phelps County Bank (MO) | Bank | 4 | 35.11 | 300,478 | |||
2 | Citizens Bank of Newburg (MO) | Bank | 2 | 14.91 | 127,552 | |||
3 | U.S. Bank NA (MN) | Bank | 3 | 13.13 | 112,389 | |||
4 | Town & Country Bank (MO) | Bank | 3 | 12.80 | 109,578 | |||
5 | Mid America Bank & Trust Co. (MO) | Bank | 1 | 7.40 | 63,300 | |||
6 | Central Federal S&LA of Rolla (MO) | Thrift | 1 | 6.05 | 51,791 | |||
7 | First State Community Bank (MO) | Bank | 1 | 3.37 | 28,864 | |||
8 | First Community National Bank (MO) | Bank | 2 | 2.88 | 24,633 | |||
9 | Maries County Bank (MO) | Bank | 1 | 1.98 | 16,954 | |||
10 | Regions Bank (AL) | Bank | 1 | 1.93 | 16,535 | |||
11 | Legends Bank (MO) | Bank | 1 | 0.43 | 3,688 | |||
Total | 20 | 100.00 | 855,762 | |||||
Source: SNL Financial.
Table 11 provides residential mortgage market share data for the top 25 lenders in Phelps County in calendar 2013. Not all companies in the market report the sourced data. Out-of-state lenders such as U.S. Bank, Quicken Loans, Regions Bank, Wells Fargo, USAA, Bank of America, and JPMorgan Chase ranked among the top ten residential lenders in the local market area, with U.S. Bank originating $18.2 million and Quicken Loans originating $8.2 million in 2013. In-state lenders among the top ten in 2013 were Town & Country Bank ($8.7 million), First Community National Bank ($7.3 million), and Maries County Bank ($4.8 million). The average residential mortgage loan funded in Phelps County was approximately $125,700 in 2013.
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FELDMAN FINANCIAL ADVISORS, INC.
Table 11
Residential Mortgage Lending
Market Share in Phelps County (Missouri)
Data for 2013
(Adjusted for Pending and Completed Mergers)
Total | Total | |||||||
No. of | Market | Funded | ||||||
Funded | Share | Loans | ||||||
Rank | Company | Type | Loans | (%) | ($000) | |||
1 | U.S. Bank NA (MN) | Bank | 154 | 17.92 | 18,178 | |||
2 | Town & Country Bank (MO) | Bank | 77 | 8.57 | 8,696 | |||
3 | Quicken Loans Inc. (MI) | Mortg. Bank | 57 | 8.07 | 8,185 | |||
4 | First Community National Bank (MO) | Bank | 57 | 7.16 | 7,259 | |||
5 | Maries County Bank (MO) | Bank | 41 | 4.77 | 4,841 | |||
6 | Regions Bank (AL) | Bank | 39 | 3.91 | 3,963 | |||
7 | Wells Fargo Bank NA (CA) | Bank | 34 | 3.43 | 3,480 | |||
8 | USAA FSB (TX) | Thrift | 17 | 2.96 | 3,003 | |||
9 | Bank of America NA (NC) | Bank | 25 | 2.74 | 2,780 | |||
10 | JPMorgan Chase Bank NA (NY) | Bank | 24 | 2.54 | 2,579 | |||
11 | DAS Acquisition Co. LLC (MO) | Mortg. Bank | 18 | 2.47 | 2,505 | |||
12 | Equitable Mortgage Corp. (MO) | Mortg. Bank | 22 | 2.27 | 2,302 | |||
13 | Mortgage Research Center LLC (MO) | Mortg. Bank | 14 | 2.17 | 2,201 | |||
14 | Crescent Mortgage Co. (GA) | Mortg. Bank | 19 | 2.12 | 2,146 | |||
15 | Flat Branch Mortgage Inc. (MO) | Mortg. Bank | 13 | 1.85 | 1,873 | |||
16 | Navy FCU (VA) | Credit Union | 9 | 1.40 | 1,422 | |||
17 | Freedom Mortgage Corp. (NJ) | Mortg. Bank | 7 | 1.29 | 1,307 | |||
18 | Plaza Home Mortgage Inc. (CA) | Mortg. Bank | 12 | 1.28 | 1,295 | |||
19 | Mortgage Solutions of CO LLC (CO) | Mortg. Bank | 9 | 1.18 | 1,193 | |||
20 | Berkadia Commercial Mrtg LLC (PA) | Mortg. Bank | 1 | 1.17 | 1,185 | |||
21 | Citibank NA (SD) | Bank | 13 | 1.14 | 1,156 | |||
22 | Heritage Community Bank (MO) | Bank | 1 | 1.09 | 1,108 | |||
23 | Fifth Third Mortgage Co. (OH) | Mortg. Bank | 5 | 0.88 | 890 | |||
24 | Flagstar Bank FSB (MI) | Thrift | 6 | 0.86 | 873 | |||
25 | Central Trust Bank (MO) | Bank | 3 | 0.83 | 840 | |||
Total | 807 | 100.00 | 101,425 | |||||
Source: | SNL Financial; prepared from Home Mortgage Disclosure Act data compiled annually by the Federal Financial Institutions Examination Council. |
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FELDMAN FINANCIAL ADVISORS, INC.
Summary Outlook
Central Federal has reported moderate levels of profitability over the past five years with an average ROA of approximately 0.30%. The Association's earnings declined from $229,000 in 2013 (ROA of 0.35%) to $119,000 (ROA of 0.18%) in 2014. For the six months ended June 30, 2015, Central Federal had net income of $81,000 for an annualized ROA of 0.26%. While recent earning results have benefited from little to no provision for loan losses in various periods, the declining balance of loans outstanding place additional pressure on the Association's ability to increase net interest income and drive earnings growth. The trend of a declining net interest margin at Central Federal showed signs of reversing in the first half of 2015, but loan growth will be necessary to sustain any improvements in its net interest margin.
The Association's earnings fundamentals reflect a below average net interest spread and very low levels of revenue generated from non-interest income sources. These factors are offset by a relatively low level of operating expenses and no significant impairment of earnings from asset quality problems. As a result of operating as a traditional thrift institution from one office, the Association has not required an extensive complement of officers and employees. As of June 30, 2015, Central Federal had 13 full-time equivalent employees . However, as it begins to operate as a public company and implement plans to reinvigorate growth, the Association now needs to add a Chief Financial Officer and may also soon need to replace an Executive Vice President and Senior Lending Officer who intends to retire after completion of the Conversion. These personnel actions are likely to contribute to additional pressure on operating expenses and integration risks in the near term. Further, the Company will be challenged to manage operating expenses as stock benefit plans in connection with the Conversion are implemented.
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FELDMAN FINANCIAL ADVISORS, INC.
II. COMPARISONS WITH PUBLICLY TRADED THRIFTS
General Overview
The comparative market approach provides a sound basis for determining estimates of going-concern valuations where a regular and active market exists for the stocks of peer institutions. The comparative market approach was utilized in determining the estimated pro forma market value of the Association because: (i) reliable market and financial data are readily available for comparable institutions; (ii) the comparative market method is required by the applicable regulatory guidelines; and (iii) other alternative valuation methods (such as income capitalization, liquidation analysis, or discounted cash flow) are unlikely to produce a valuation relevant to the future trading patterns of the related equity interest. The generally employed valuation method in initial public offerings, where possible, is the comparative market approach, which also can be relied upon to determine pro forma market value in a thrift stock conversion.
The comparative market approach derives valuation benchmarks from the trading patterns of selected peer institutions which, due to certain factors such as financial performance and operating strategies, enable the appraiser to estimate the potential value of the subject institution in a stock conversion offering. The pricing and trading history of recent initial public offerings of thrifts are also examined to provide evidence of the "new issue discount" that must be considered. In Chapter II, our valuation analysis focuses on the selection and comparison of the Association with a comparable group of publicly traded thrift institutions (the "Comparative Group"). Chapter III will detail any additional discounts or premiums that we believe are appropriate to the Association's pro forma market value.
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FELDMAN FINANCIAL ADVISORS, INC.
Selection Criteria
Selected market price and financial performance data for all public thrifts listed on major stock exchanges are shown in Exhibit III. The list excludes companies that are subject to being acquired under a pending transaction and companies that have a majority ownership interest controlled by a mutual holding company ("MHC"). Several criteria, discussed below, were used to select the individual members of the Comparative Group from the overall universe of publicly traded thrifts.
· | Operating characteristics – An institution's operating characteristics are the most important factors because they affect investors' expected rates of return on a company's stock under various business/economic scenarios, and they influence the market's general perception of the quality and attractiveness of a given company. Operating characteristics, which may vary in importance during the business cycle, include financial variables such as profitability, balance sheet growth, capitalization, asset quality, and other factors such as lines of business and management strategies. |
· | Degree of marketability and liquidity – Marketability of a stock reflects the relative ease and promptness with which a security may be sold when desired, at a representative current price, without material concession in price merely because of the necessity of sale. Marketability also connotes the existence of buying interest as well as selling interest and is usually indicated by trading volumes and the spread between the bid and asked price for a security. Liquidity of the stock issue refers to the organized market exchange process whereby the security can be converted into cash. We attempted to limit our selection to companies that have access to a regular trading market or price quotations, and therefore only considered companies listed on major stock exchanges. We eliminated from the Comparative Group companies with market prices that were materially influenced by announced acquisitions or other unusual circumstances. However, the expectation of continued industry consolidation is currently embedded in thrift equity valuations. |
· | Geographic Location – The region of the country where a company operates is also of importance in selecting the comparative group. The operating environment for thrift institutions varies from region to region with respect to business and economic environments, real estate market conditions, speculative takeover activity, and investment climates. Economic and investor climates can also vary greatly within a region, particularly due to takeover activity. |
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FELDMAN FINANCIAL ADVISORS, INC.
The operations of the Association fit the general profile of a small traditional thrift institution, concentrating primarily on residential mortgage lending in its local market and relying significantly on certificates of deposit as a funding source. One- to four-family residential loans remain the core product in the Association's loan portfolio, drawing upon Central Federal's roots as a home lender. However, the Association has diversified its loan mix through the origination of non-owner occupied residential loans, commercial and multi-family real estate loans, residential construction loans, and home equity lines of credit.
In determining the Comparative Group composition, we focused on Central Federal's geographic location, asset size, capitalization, asset quality, and earnings fundamentals. Attempting to concentrate on the Association's performance characteristics and to develop a meaningful number of comparables for valuation purposes, we expanded the criteria for comparable thrifts to include a statistically significant number of companies. In addition, because of the scarcity of candidates meeting the criteria precisely, we increased the asset size constraint to generate a meaningful number of comparables while maintaining non-size related characteristics. As with any composition of a group of comparable companies, the selection criteria were broadened sufficiently to assemble a meaningful number of members. We performed a screening of publicly traded thrifts headquartered in the Midwest region of the United States with total assets less than $600 million. We then expanded the selection criteria and applied the following overall selection criteria:
· | Publicly traded thrift – stock-form thrift whose shares are traded on the New York, NYSE Amex, or NASDAQ stock markets. |
· | Non-acquisition target – company is not subject to a pending acquisition. |
· | Excludes mutual holding companies – company's majority ownership interest is not held by an MHC. |
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FELDMAN FINANCIAL ADVISORS, INC.
· | Geographic location – based in the Midwest region of the country. |
· | Seasoned trading issue – company has been publicly traded for at least one year. |
· | Financial reporting history – company has reported at least four quarters of financial data as fully converted stock company. |
· | Asset size – total assets of less than $600 million. |
· | Capitalization – tangible equity to assets ratio greater than or equal to 8.5%. |
· | Asset quality – non-performing assets to total assets ratio less than 3.0%. |
As a result of applying the stated criteria, the screening process produced a reliable representation of public thrifts. A general operating summary of the eleven companies included in the Comparative Group is presented in Table 12. All of the selected companies are traded on the NASDAQ market. The Comparative Group ranged in asset size from $326.0 million at First Federal of Northern Michigan Bancorp to $564.0 million at HMN Financial. The median asset size of the Comparative Group was $421.4 million, larger than Central Federal's total assets of $62.4 million. There are a seven publicly traded thrifts in the Midwest that have assets below $100 million, but none of them are traded on a major stock exchange. In addition, there are three publicly traded thrifts altogether in Missouri, but none are traded on a major stock exchange.
Four of the Comparative Group members are located in Midwest states contiguous to Missouri (IF Bancorp and Jacksonville Bancorp in Illinois, Madison County Financial in Nebraska, and Poage Bankshares in Kentucky). The remainder of the Comparative Group is distributed among the Midwest states of Indiana, Minnesota, and Ohio. While some differences inevitably may exist between Central Federal and the individual companies, we believe that the chosen Comparative Group on the whole provides a meaningful basis of financial comparison for valuation purposes.
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FELDMAN FINANCIAL ADVISORS, INC. |
Table 12
Comparative Group Operating Summary
As of June 30, 2015
Tang. | ||||||||
Total | Equity/ | |||||||
No. of | IPO | Assets | Assets | |||||
Company | City | St. | Offices | Date | ($Mil.) | (%) | ||
Central Federal S&LA | Rolla | MO | 1 | NA | $ 62.4 | 21.89 | ||
Comparative Group | ||||||||
Central Federal Corporation | Worthington | OH | 4 | 12/30/98 | 339.3 | 10.30 | ||
First Federal of Northern Mich. | Alpena | MI | 8 | 04/04/05 | 326.0 | 9.21 | ||
HMN Financial, Inc. | Rochester | MN | 13 | 06/30/94 | 564.0 | 11.97 | ||
IF Bancorp, Inc. | Watseka | IL | 6 | 07/08/11 | 563.7 | 14.27 | ||
Jacksonville Bancorp, Inc. | Jacksonville | IL | 6 | 07/15/10 | 305.9 | 14.14 | ||
La Porte Bancorp, Inc. | La Porte | IN | 7 | 10/05/12 | 521.2 | 14.58 | ||
Madison County Financial, Inc. | Madison | NE | 6 | 10/04/12 | 318.3 | 19.45 | ||
Poage Bankshares, Inc. | Ashland | KY | 9 | 09/13/11 | 432.4 | 15.76 | ||
United Community Bancorp | Lawrenceburg | IN | 8 | 01/10/13 | 521.2 | 13.22 | ||
Wayne Savings Bancshares, Inc. | Wooster | OH | 12 | 01/09/03 | 421.4 | 8.99 | ||
Wolverine Bancorp, Inc. | Midland | MI | 3 | 01/20/11 | 357.9 | 17.30 | ||
Source: Central Federal; SNL Financial.
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FELDMAN FINANCIAL ADVISORS, INC. |
Recent Financial Comparisons
Table 13 summarizes certain key financial comparisons between Central Federal and the Comparative Group. Tables 14 through 19 contain the detailed financial comparisons of the Association with the individual Comparative Group companies based on measures of profitability, income and expense components, yield-cost structure, capital levels, balance sheet composition, asset quality, and growth rates. Financial data for Central Federal, the Comparative Group, and All Public Thrift aggregate were utilized for the latest available period as of or for the last twelve months ("LTM") ended June 30, 2015.
Central Federal's LTM ROA was 0.25%, reflecting profitability below the Comparative Group median of 0.85% and the All Public Thrift median of 0.71%. The Association's lower ROA was attributable mainly to a lower level of non-interest income and a higher level of operating expenses. The Association's LTM ROE was 1.19% and further lagged the Comparative Group median of 5.49%. Central Federal's net interest spread of 2.96% was below the Comparative Group median of 3.13% due to the Association's higher cost of interest-bearing liabilities. The Association's funding base is heavily dependent on certificate accounts and its cost of interest-bearing liabilities was 1.02% versus the Comparative Group median of 0.72%.
Based on core earnings as adjusted to exclude intangibles amortization expense and non-recurring income and expense items, Central Federal's core profitability ratios were equal to its LTM ROA and ROE results. The Association's core ROA of 0.25% was positioned below the Comparative Group median of 0.73% and the All Public Thrift median of 0.72%. The Association's core ROE of 1.19% trailed the Comparative Group median of 5.23% and the All Public Thrift median of 5.33%.
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FELDMAN FINANCIAL ADVISORS, INC. |
Table 13
Key Financial Comparisons
Central Federal and the Comparative Group
As of or For the Last Twelve Months Ended June 30, 2015
Comp. | All Public | ||||||||
Central | Group | Thrift | |||||||
Federal | Median | Median | |||||||
Profitability | |||||||||
LTM Return on Average Assets (ROA) | 0.25 | % | 0.85 | % | 0.71 | % | |||
LTM Return on Average Equity (ROE) | 1.19 | 5.49 | 5.54 | ||||||
Core Return on Avg. Assets (Core ROA) | 0.25 | 0.73 | 0.72 | ||||||
Core Return on Avg. Equity (Core ROE) | 1.19 | 5.23 | 5.33 | ||||||
Income and Expense (% of avg. assets) | |||||||||
Total Interest Income | 3.85 | 3.58 | 3.51 | ||||||
Total Interest Expense | 0.75 | 0.54 | 0.58 | ||||||
Net Interest Income | 3.10 | 3.12 | 2.95 | ||||||
Provision for Loan Losses | 0.00 | 0.08 | 0.08 | ||||||
Other Operating Income | 0.10 | 0.60 | 0.56 | ||||||
Net Secs. Gains and Non-rec. Income | 0.00 | 0.00 | 0.02 | ||||||
General and Administrative Expense | 2.82 | 2.59 | 2.79 | ||||||
Intangibles Amortization Expense | 0.00 | 0.00 | 0.00 | ||||||
Non-recurring Expense | 0.00 | 0.00 | 0.00 | ||||||
Pre-tax Core Earnings | 0.38 | 0.93 | 0.91 | ||||||
Efficiency Ratio | 88.17 | 72.32 | 75.00 | ||||||
Yield-Cost Data | |||||||||
Yield on Interest-earning Assets | 3.98 | 3.90 | 3.81 | ||||||
Cost of Interest-bearing Liabilities | 1.02 | 0.72 | 0.77 | ||||||
Net Interest Spread | 2.96 | 3.13 | 3.05 | ||||||
Net Interest Margin | 3.20 | 3.32 | 3.15 | ||||||
Asset Utilization (% of total assets) | |||||||||
Avg. Interest-earning Assets | 96.60 | 92.89 | 91.19 | ||||||
Avg. Interest-bearing Liabilities | 73.44 | 70.73 | 71.37 | ||||||
Avg. Net Interest-earning Assets | 23.16 | 19.52 | 19.82 | ||||||
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FELDMAN FINANCIAL ADVISORS, INC. |
Table 13 (continued)
Key Financial Comparisons
Central Federal and the Comparative Group
As of or For the Last Twelve Months Ended June 30, 2015
Comp. | All Public | ||||||||
Central | Group | Thrift | |||||||
Federal | Median | Median | |||||||
Balance Sheet Composition ( % of total assets) | |||||||||
Cash and Securities | 17.98 | % | 29.38 | % | 21.10 | % | |||
Loans Receivable, net | 79.50 | 64.68 | 71.27 | ||||||
Real Estate Owned | 0.81 | 0.10 | 0.14 | ||||||
Intangible Assets | 0.00 | 0.36 | 0.02 | ||||||
Other Assets | 1.71 | 4.77 | 7.47 | ||||||
Total Deposits | 77.92 | 78.72 | 73.25 | ||||||
Borrowed Funds | 0.00 | 5.87 | 11.58 | ||||||
Other Liabilities | 0.19 | 0.92 | 2.91 | ||||||
Total Equity | 21.89 | 14.27 | 12.15 | ||||||
Loan Portfolio (% of total loans) | |||||||||
Residential Mortgage Loans | 60.62 | 32.85 | 39.86 | ||||||
Other Real Estate Mortgage Loans | 34.66 | 44.61 | 35.42 | ||||||
Non-mortgage Loans | 4.72 | 14.16 | 24.72 | ||||||
Growth Rates | |||||||||
Total Assets | (4.54 | ) | 1.44 | 5.91 | |||||
Total Loans | (5.39 | ) | 5.88 | 8.65 | |||||
Total Deposits | (6.08 | ) | 2.71 | 3.92 | |||||
Regulatory Capital Ratios | |||||||||
Tier 1 Leverage Ratio | 21.35 | 11.47 | 11.47 | ||||||
Tier 1 Risk-based Capital | 38.39 | 18.16 | 17.13 | ||||||
Total Risk-based Capital | 39.18 | 19.33 | 18.40 | ||||||
Credit Risk Ratios | |||||||||
Non-performing Loans (1) /Total Loans | 1.71 | 1.98 | 1.36 | ||||||
Non-performing Assets (1) / Total Assets | 2.18 | 1.35 | 1.22 | ||||||
Reserves / Total Loans | 0.56 | 1.55 | 0.99 | ||||||
Reserves / Non-performing Assets (1) | 20.41 | 41.82 | 59.83 | ||||||
(1) Includes troubled debt restructurings.
Source: Central Federal; SNL Financial; Feldman Financial.
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FELDMAN FINANCIAL ADVISORS, INC. |
As shown in Table 15, the Association's net interest margin of 3.20% trailed the Comparative Group median of 3.32%. The Association's 3.98% yield on interest-earning assets measured favorably against the Comparative Group median of 3.90% due to its heavy concentration of assets allocated to loans versus investments. As of June 30, 2015, Central Federal had net loans equal to 79.5% of total assets versus the Comparative Group median of 64.7%. However, the Association's higher cost of interest-bearing liabilities offset the yield advantage with respect to the Comparative Group.
The Association's non-interest operating income totaled 0.10% of average assets, noticeably lagging behind the Comparative Group and All Public Thrift medians of 0.60% and 0.56%, respectively. Similar to many other small financial institutions, the Association has not developed a broad range of other banking-related services and products that are potential contributors to a larger stream of non-interest revenue. Further, the Association has not sought to increase service charges sharply on banking accounts in order to maintain customer loyalty. The Association's non-interest income ratio at 0.10% of average assets would have ranked below all of the Comparative Group companies. The Association generated no gains on sale of investments or any other non-recurring income for the LTM period.
The Association's operating expense ratio at 2.82% of average assets was slightly higher than the Comparative Group median of 2.59% and All Public Thrift median of 2.79%. The Association's operating expense ratio was lower than the corresponding ratios reported by five of eleven Comparative Group companies. The Association operates from only one office with a substantial deposit size, with a large percentage of deposits comprising certificate of deposit accounts that require limited overhead to service. However, the Association's smaller asset size
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FELDMAN FINANCIAL ADVISORS, INC. |
does not lend itself to profuse operating efficiencies in the form of economies of scale and leveraging the core infrastructure to support an expansive franchise.
The Association's operating expenses are expected to increase in the near term as a result of operating as a public company, establishing employee stock benefit plans, and adding new employees. The Association's efficiency ratio (non-interest expense less intangibles amortization expense as a percent of net interest income before provision plus non-interest operating income) was relatively high at 88.2% versus the Comparative Group and All Public Thrift medians of 72.3% and 75.0%, respectively. Central Federal's unfavorable efficiency ratio versus the Comparative Group is related chiefly to its lower level of non-interest income and slightly higher level of non-interest expense.
The Association made no provision for loan losses in the LTM period. In contrast, the median level of loan loss provisions was 0.08% of average assets for the Comparative Group and the All Public Thrift aggregate. Several members of the Comparative Group also reported no provision or net recoveries for the recent LTM period as asset quality continues to stabilize across the thrift industry.
As reflected in Table 18, the overall balance sheet composition of the Association is skewed toward a higher concentration of loans versus that of the Comparative Group. The Association's net total loans amounted to 79.5% of total assets as of June 30, 2015, higher than the median of 64.7% for the Comparative Group. The Association's ratio of cash and securities to total assets was 18.0% and lower than the median of 29.4% of the Comparative Group. The Association had no goodwill or other intangible assets on its balance sheet as of June 30, 2015. The Association's real estate owned measured 0.8% of total assets and was higher than the 0.1%
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FELDMAN FINANCIAL ADVISORS, INC. |
level reflected by the Comparative Group median. The Association's ratio of other assets measured 1.7% and was lower than the Comparative Group median of 4.8%.
The Association had no borrowings as of June 30, 2015, as compared to the median borrowed funds as a percentage of total assets of the Comparative Group of 5.9%. The Association's deposit level at 77.9% of total assets was similar to the Comparative Group's median deposit level of 78.7% of total assets. The Association's equity level before the Conversion was 21.9% relative to total assets, which exceeded the Comparative Group and All Public Thrift medians of 14.3% and 12.2%, respectively.
As indicated earlier, Central Federal has historically been a residential mortgage lender, as evidenced in its portfolio mix and its loan mix is not as varied as that of the Comparative Group. The Association's level of residential mortgage loans measured 60.6% of total loans based on regulatory financial data as of June 30, 2015, above the Comparative Group and All Public Thrift medians of 32.9% and 39.9%, respectively. Three members of the Comparative Group, Poage Bankshares, United Community Bancorp, and Wayne Savings Bancshares, also exhibited residential mortgage loan concentrations in excess of 60% of total loans. Conversely, the Association's concentration ratios of non-residential real estate and non-mortgage loans were lower. The Association's ratio of other non-residential mortgage loans was 34.7% of total loans versus the Comparative Group median of 44.6%, and its ratio of non-mortgage loans was 4.7% versus the Comparative Group median of 14.2%.
The Association's recent emphasis on restrained balance sheet growth is reflected in the comparative growth rates. The Association's asset growth rate measured negative 4.5% over the recent LTM period, opposite that of the Comparative Group median growth rate of 1.4% (four
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FELDMAN FINANCIAL ADVISORS, INC. |
Comparative Group members recorded asset shrinkage). The Association also exhibited negative growth rates of loans and deposits, while the Comparative Group reported positive median growth rates that measured 5.9% for loans and 2.7% for deposits.
The Association's 2.18% ratio of non-performing assets (including troubled debt restructurings) was positioned above the Comparative Group median of 1.35% and the All Public Thrift median of 1.22%. While Central Federal's asset quality ratios have been maintained at satisfactory levels historically, the delinquency or foreclosure of a single loan can cause its non-performing asset ratios to spurt upward due to its small asset size. The Association's ratio of reserves to total loans was 0.56% versus the Comparative Group and All Public Thrift medians of 1.55% and 0.99%, respectively. Central Federal's 20.4% ratio of reserves to non-performing assets was below the Comparative Group and All Public Thrift medians of 41.8% and 59.8%, respectively.
In summary, the Association's recent earnings performance was below the results exhibited by the Comparative Group, while its asset quality was comparable and its capital position was superior. The Association's profitability is characterized by a slightly below average net interest spread and low levels of non-interest income. The Association's net interest margin is bolstered by the strong capital level which allows for a large concentration of interest-earning assets to be supported by equity as opposed to interest-bearing liabilities. However, Central Federal's net interest spread is still restrained by the yield potential of its residential mortgage loan portfolio along with the higher costs associated with certificate of deposit funding versus transaction accounts. Central Federal's earnings growth outlook will depend largely on the Association's ability to sustain satisfactory loan quality as its grows the portfolio, improve the
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FELDMAN FINANCIAL ADVISORS, INC. |
net interest margin across movements in the interest rate environment, and control non-interest expense as it seeks to expand its operations, add new personnel, and transition to a public company.
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FELDMAN FINANCIAL ADVISORS, INC. |
Table 14 |
General Operating Characteristics |
As of June 30, 2015 |
Tang. | |||||||||
Total | Total | Total | Common | ||||||
No. of | IPO | Assets | Deposits | Equity | Equity | ||||
City/State | Ticker | Exchange | Offices | Date | ($000s) | ($000s) | ($000s) | ($000s) | |
Central Federal S&LA | Rolla, MO | NA | NA | 1 | NA | 62,424 | 48,642 | 13,664 | 13,664 |
Comparative Group | |||||||||
Central Federal Corporation | Worthington, OH | CFBK | NASDAQ | 4 | 12/30/98 | 339,313 | 282,049 | 34,946 | 23,577 |
First Federal of No. Michigan Bancorp | Alpena, MI | FFNM | NASDAQ | 8 | 04/04/05 | 325,976 | 269,979 | 31,069 | 29,904 |
HMN Financial, Inc. | Rochester, MN | HMNF | NASDAQ | 13 | 06/30/94 | 564,001 | 481,476 | 67,494 | 67,494 |
IF Bancorp, Inc. | Watseka, IL | IROQ | NASDAQ | 6 | 07/08/11 | 563,668 | 415,544 | 80,436 | 80,436 |
Jacksonville Bancorp, Inc. | Jacksonville, IL | JXSB | NASDAQ | 6 | 07/15/10 | 305,926 | 238,524 | 45,602 | 42,875 |
La Porte Bancorp, Inc. | La Porte, IN | LPSB | NASDAQ | 7 | 10/05/12 | 521,183 | 351,598 | 83,344 | 74,736 |
Madison County Financial, Inc. | Madison, NE | MCBK | NASDAQ | 6 | 10/04/12 | 318,266 | 221,612 | 62,676 | 61,735 |
Poage Bankshares, Inc. | Ashland, KY | PBSK | NASDAQ | 9 | 09/13/11 | 432,445 | 340,416 | 70,518 | 67,705 |
United Community Bancorp | Lawrenceburg, IN | UCBA | NASDAQ | 8 | 01/10/13 | 521,185 | 432,537 | 71,437 | 68,488 |
Wayne Savings Bancshares, Inc. | Wooster, OH | WAYN | NASDAQ | 12 | 01/09/03 | 421,362 | 353,289 | 39,433 | 37,714 |
Wolverine Bancorp, Inc. | Midland, MI | WBKC | NASDAQ | 3 | 01/20/11 | 357,882 | 235,537 | 61,902 | 61,902 |
Source: Central Federal; SNL Financial; Feldman Financial.
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FELDMAN FINANCIAL ADVISORS, INC. |
Table 15 |
General Financial Performance Ratios |
As of or For the Last Twelve Months Ended June 30, 2015 |
Total | Tang. | Net | ||||||||
Total | Total | Equity/ | Equity/ | Interest | Effcy. | LTM | LTM | Core | Core | |
Assets | Deposits | Assets | Assets | Margin | Ratio | ROA | ROE | ROA | ROE | |
($000s) | ($000s) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | |
Central Federal S&LA | 62,424 | 48,642 | 21.89 | 21.89 | 3.20 | 88.17 | 0.25 | 1.19 | 0.25 | 1.19 |
Comparative Group Average | 424,655 | 329,324 | 13.94 | 13.56 | 3.35 | 73.80 | 0.77 | 5.47 | 0.72 | 5.00 |
Comparative Group Median | 421,362 | 340,416 | 14.27 | 14.14 | 3.32 | 72.32 | 0.85 | 5.49 | 0.73 | 5.23 |
All Public Thrift Average | 3,056,235 | 2,033,827 | 13.62 | 12.79 | 3.17 | 73.52 | 0.79 | 6.53 | 0.75 | 6.10 |
All Public Thrift Median | 987,230 | 704,084 | 12.26 | 11.84 | 3.15 | 75.00 | 0.71 | 5.54 | 0.72 | 5.33 |
Comparative Group | ||||||||||
Central Federal Corporation | 339,313 | 282,049 | 10.30 | 10.30 | 3.31 | 83.12 | 0.42 | 3.85 | 0.42 | 3.87 |
First Federal of No. Michigan Bancorp | 325,976 | 269,979 | 9.53 | 9.21 | 3.05 | 88.77 | 0.85 | 8.88 | 0.50 | 5.23 |
HMN Financial, Inc. | 564,001 | 481,476 | 11.97 | 11.97 | 3.37 | 86.61 | 0.73 | 5.81 | 0.73 | 5.81 |
IF Bancorp, Inc. | 563,668 | 415,544 | 14.27 | 14.27 | 2.98 | 70.67 | 0.60 | 3.92 | 0.60 | 3.94 |
Jacksonville Bancorp, Inc. | 305,926 | 238,524 | 14.91 | 14.14 | 3.62 | 71.47 | 1.02 | 6.92 | 0.92 | 6.26 |
La Porte Bancorp, Inc. | 521,183 | 351,598 | 15.99 | 14.58 | 3.32 | 69.39 | 0.90 | 5.59 | 0.90 | 5.57 |
Madison County Financial, Inc. | 318,266 | 221,612 | 19.69 | 19.45 | 3.80 | 56.12 | 1.06 | 5.20 | 1.09 | 5.33 |
Poage Bankshares, Inc. | 432,445 | 340,416 | 16.31 | 15.76 | 4.20 | 72.32 | 0.97 | 6.01 | 0.85 | 5.25 |
United Community Bancorp | 521,185 | 432,537 | 13.71 | 13.22 | 2.68 | 80.81 | 0.49 | 3.55 | 0.56 | 4.06 |
Wayne Savings Bancshares, Inc. | 421,362 | 353,289 | 9.36 | 8.99 | 3.11 | 75.07 | 0.47 | 4.94 | 0.47 | 4.94 |
Wolverine Bancorp, Inc. | 357,882 | 235,537 | 17.30 | 17.30 | 3.41 | 57.42 | 0.98 | 5.49 | 0.84 | 4.70 |
Source: Central Federal; SNL Financial; Feldman Financial.
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FELDMAN FINANCIAL ADVISORS, INC. |
Table 16 |
Income and Expense Analysis |
For the Last Twelve Months Ended June 30, 2015 |
As a Percent of Average Assets | ||||||||||||
Net | Other | Gains & | Loan | Gen. & | Amort. | Pre-tax | ||||||
Interest | Interest | Interest | Oper. | Non-rec. | Loss | Admin. | of | Non-rec. | Core | |||
Income | Expense | Income | Income | Income | Prov. | Expense | Intang. | Expense | Earnings | |||
Central Federal S&LA | 3.85 | 0.75 | 3.10 | 0.10 | 0.00 | 0.00 | 2.82 | 0.00 | 0.00 | 0.38 | ||
Comparative Group Average | 3.71 | 0.54 | 3.18 | 0.68 | 0.12 | 0.08 | 2.86 | 0.02 | 0.02 | 0.90 | ||
Comparative Group Median | 3.58 | 0.54 | 3.12 | 0.60 | 0.00 | 0.08 | 2.59 | 0.00 | 0.00 | 0.93 | ||
All Public Thrift Average | 3.56 | 0.60 | 2.97 | 0.88 | 0.06 | 0.05 | 2.88 | 0.01 | 0.07 | 0.92 | ||
All Public Thrift Median | 3.51 | 0.58 | 2.95 | 0.56 | 0.02 | 0.08 | 2.79 | 0.00 | 0.00 | 0.91 | ||
Comparative Group | ||||||||||||
Central Federal Corporation | 3.83 | 0.72 | 3.12 | 0.55 | (0.00 | ) | 0.10 | 3.15 | 0.00 | 0.00 | 0.42 | |
First Federal of No. Michigan Bancorp | 3.30 | 0.38 | 2.92 | 0.57 | 0.66 | 0.08 | 3.10 | 0.07 | 0.05 | 0.24 | ||
HMN Financial, Inc. | 3.45 | 0.22 | 3.23 | 1.26 | 0.00 | (0.58 | ) | 3.85 | 0.00 | 0.00 | 1.21 | |
IF Bancorp, Inc. | 3.44 | 0.59 | 2.85 | 0.60 | (0.00 | ) | 0.08 | 2.44 | 0.00 | 0.00 | 0.93 | |
Jacksonville Bancorp, Inc. | 3.78 | 0.42 | 3.36 | 1.18 | 0.15 | 0.08 | 3.24 | 0.00 | 0.00 | 1.21 | ||
La Porte Bancorp, Inc. | 3.58 | 0.54 | 3.04 | 0.49 | 0.02 | 0.00 | 2.47 | 0.01 | 0.00 | 1.06 | ||
Madison County Financial, Inc. | 4.27 | 0.59 | 3.68 | 0.66 | 0.00 | 0.45 | 2.44 | 0.04 | 0.00 | 1.41 | ||
Poage Bankshares, Inc. | 4.50 | 0.54 | 3.96 | 0.68 | 0.42 | 0.24 | 3.40 | 0.08 | 0.15 | 0.91 | ||
United Community Bancorp | 2.93 | 0.46 | 2.47 | 0.71 | (0.08 | ) | (0.07 | ) | 2.57 | 0.02 | 0.00 | 0.65 |
Wayne Savings Bancshares, Inc. | 3.44 | 0.47 | 2.96 | 0.45 | 0.00 | 0.23 | 2.59 | 0.00 | 0.00 | 0.59 | ||
Wolverine Bancorp, Inc. | 4.34 | 0.97 | 3.37 | 0.33 | 0.22 | 0.30 | 2.16 | 0.00 | 0.00 | 1.24 |
Source: Central Federal; SNL Financial; Feldman Financial.
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Table 17 |
Yield-Cost Structure and Growth Rates |
For the Last Twelve Months Ended June 30, 2015 |
Avg. | Avg. | Avg. Net | |||||||||||
Int. Earn. | Int.-Bear. | Earning | Avg. | Yield on | Cost of | Net | Asset | Loan | Deposit | ||||
Assets/ | Liabs./ | Assets/ | Equity/ | Int.-Earn. | Int-Bear. | Interest | Growth | Growth | Growth | ||||
Assets | Assets | Assets | Assets | Assets | Liabs. | Spread | Rate | Rate | Rate | ||||
Central Federal S&LA | 96.60 | 73.44 | 23.16 | 21.33 | 3.98 | 1.02 | 2.96 | (4.54 | ) | (5.39 | ) | (6.08 | ) |
Comparative Group Average | 92.74 | 73.16 | 19.58 | 13.91 | 3.91 | 0.71 | 3.20 | 6.40 | 7.82 | 7.11 | |||
Comparative Group Median | 92.89 | 70.73 | 19.52 | 14.78 | 3.90 | 0.72 | 3.13 | 1.44 | 5.88 | 2.71 | |||
All Public Thrift Average | 89.92 | 72.15 | 17.76 | 13.10 | 3.81 | 0.79 | 3.07 | 8.95 | 14.46 | 8.45 | |||
All Public Thrift Median | 91.19 | 71.37 | 19.82 | 12.26 | 3.81 | 0.77 | 3.05 | 5.91 | 8.65 | 3.92 | |||
Comparative Group | |||||||||||||
Central Federal Corporation | 87.32 | 70.30 | 17.03 | 10.05 | 4.07 | 0.94 | 3.13 | 15.23 | 14.03 | 16.20 | |||
First Federal of No. Michigan Bancorp | 91.62 | 68.86 | 22.76 | 9.22 | 3.45 | 0.53 | 2.92 | 48.31 | 22.36 | 59.75 | |||
HMN Financial, Inc. | 98.96 | 66.81 | 32.16 | 13.00 | 3.60 | 0.34 | 3.26 | (7.52 | ) | 0.69 | (7.91 | ) | |
IF Bancorp, Inc. | 93.28 | 79.37 | 13.91 | 14.81 | 3.59 | 0.72 | 2.87 | 2.24 | 7.96 | 2.71 | |||
Jacksonville Bancorp, Inc. | 93.38 | 76.04 | 17.34 | 14.78 | 4.07 | 0.56 | 3.51 | (0.94 | ) | 6.14 | (5.38 | ) | |
La Porte Bancorp, Inc. | 90.25 | 70.73 | 19.52 | 15.87 | 3.90 | 0.74 | 3.16 | (2.61 | ) | 5.88 | (1.47 | ) | |
Madison County Financial, Inc. | 92.89 | 69.84 | 23.05 | 19.53 | 4.41 | 0.81 | 3.60 | 9.34 | 10.59 | 3.63 | |||
Poage Bankshares, Inc. | 91.06 | 69.72 | 21.33 | 15.64 | 4.78 | 0.75 | 4.03 | 0.68 | 5.40 | 4.72 | |||
United Community Bancorp | 92.05 | 80.31 | 11.74 | 13.69 | 3.18 | 0.57 | 2.61 | (1.75 | ) | 3.86 | (1.61 | ) | |
Wayne Savings Bancshares, Inc. | 94.41 | 81.09 | 13.32 | 9.34 | 3.61 | 0.58 | 3.03 | 1.44 | 4.80 | 1.10 | |||
Wolverine Bancorp, Inc. | 94.89 | 71.67 | 23.22 | 17.13 | 4.40 | 1.31 | 3.09 | 5.96 | 4.32 | 6.46 |
Source: Central Federal; SNL Financial; Feldman Financial.
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Table 18 |
Balance Sheet Composition |
As of June 30, 2015 |
As a Percent of Total Assets | ||||||||||
Cash & | Net | Real | Intang. | Other | Total | Borrowed | Other | Total | Total | |
Securities | Loans | Estate | Assets | Assets | Deposits | Funds | Liabs. | Liabs. | Equity | |
Central Federal S&LA | 17.98 | 79.50 | 0.81 | 0.00 | 1.71 | 77.92 | 0.00 | 0.19 | 78.11 | 21.89 |
Comparative Group Average | 25.32 | 67.03 | 0.22 | 0.44 | 4.46 | 77.41 | 7.59 | 1.07 | 86.06 | 13.94 |
Comparative Group Median | 29.38 | 64.68 | 0.10 | 0.36 | 4.77 | 78.72 | 5.87 | 0.92 | 85.73 | 14.27 |
All Public Thrift Average | 22.75 | 69.97 | 0.24 | 0.64 | 6.40 | 72.36 | 12.51 | 1.51 | 86.38 | 13.62 |
All Public Thrift Median | 21.10 | 71.27 | 0.14 | 0.02 | 7.47 | 73.25 | 11.58 | 2.91 | 87.74 | 12.26 |
Comparative Group | ||||||||||
Central Federal Corporation | 11.75 | 84.33 | 0.48 | 0.00 | 3.44 | 83.12 | 5.79 | 0.78 | 89.70 | 10.30 |
First Federal of No. Michigan Bancorp | 43.50 | 50.84 | 0.64 | 0.36 | 4.66 | 82.82 | 7.12 | 0.52 | 90.47 | 9.53 |
HMN Financial, Inc. | 29.38 | 66.33 | 0.48 | 0.00 | 3.81 | 85.37 | 1.77 | 0.89 | 88.03 | 11.97 |
IF Bancorp, Inc. | NA | 63.19 | 0.01 | 0.00 | NA | 73.72 | 11.00 | 1.00 | 85.73 | 14.27 |
Jacksonville Bancorp, Inc. | 32.94 | 60.50 | 0.10 | 0.89 | 5.57 | 77.97 | 4.76 | 2.37 | 85.09 | 14.91 |
La Porte Bancorp, Inc. | 29.63 | 63.22 | 0.11 | 1.65 | 5.40 | 67.46 | 15.38 | 1.17 | 84.01 | 15.99 |
Madison County Financial, Inc. | 16.77 | 77.88 | 0.00 | 0.30 | 5.06 | 69.63 | 9.27 | 1.41 | 80.31 | 19.69 |
Poage Bankshares, Inc. | 20.11 | 73.42 | 0.34 | 0.65 | 5.49 | 78.72 | 4.09 | 0.89 | 83.69 | 16.31 |
United Community Bancorp | NA | 48.70 | 0.05 | 0.57 | NA | 82.99 | 2.49 | 0.81 | 86.29 | 13.71 |
Wayne Savings Bancshares, Inc. | 30.07 | 64.68 | 0.07 | 0.41 | 4.77 | 83.84 | 5.87 | 0.92 | 90.64 | 9.36 |
Wolverine Bancorp, Inc. | 13.78 | 84.19 | 0.09 | 0.00 | 1.93 | 65.81 | 15.93 | 0.96 | 82.70 | 17.30 |
Source: Central Federal; SNL Financial; Feldman Financial.
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Table 19 |
Regulatory Capital, Credit Risk, and Loan Composition |
As of or For the Last Twelve Months Ended June 30, 2015 |
Tier 1 | Tier 1 | Total | Resid. | Other | ||||||
Leverage | Risk- | Risk- | 1-4 | Real Est. | Non-mtg. | |||||
Capital | based | based | NPLs(1)/ | NPAs(1)/ | Resrvs./ | Resrvs./ | Mtgs./ | Mtgs./ | Loans/ | |
Ratio | Capital | Capital | Loans | Assets | NPAs | Loans | Loans | Loans | Loans | |
Central Federal S&LA | 21.35 | 38.39 | 39.18 | 1.71 | 2.18 | 20.41 | 0.56 | 60.62 | 34.66 | 4.72 |
Comparative Group Average | 11.84 | 19.06 | 20.20 | 2.10 | 1.59 | 53.58 | 1.71 | 38.78 | 43.62 | 17.60 |
Comparative Group Median | 11.47 | 18.16 | 19.33 | 1.98 | 1.35 | 41.82 | 1.55 | 32.85 | 44.61 | 14.16 |
All Public Thrift Average | 12.05 | 20.04 | 21.22 | 2.02 | 1.74 | 77.45 | 1.15 | 42.15 | 35.32 | 22.53 |
All Public Thrift Median | 11.47 | 17.13 | 18.40 | 1.36 | 1.22 | 59.83 | 0.99 | 39.86 | 35.42 | 24.72 |
Comparative Group | ||||||||||
Central Federal Corporation | 10.85 | 11.88 | 13.14 | 2.23 | 2.41 | 79.28 | 2.21 | 20.72 | 48.29 | 30.99 |
First Federal of No. Michigan Bancorp | 9.06 | 17.05 | 17.90 | 2.00 | 1.25 | 41.82 | 0.89 | 48.36 | 37.48 | 14.16 |
HMN Financial, Inc. | 12.88 | 16.84 | 18.11 | 1.39 | 2.67 | 75.92 | 2.20 | 32.85 | 53.13 | 14.02 |
IF Bancorp, Inc. | 11.93 | 18.16 | 19.33 | 1.49 | 0.99 | 75.18 | 1.17 | 42.32 | 45.07 | 12.61 |
Jacksonville Bancorp, Inc. | 13.12 | 18.42 | 19.68 | 1.80 | 1.20 | 79.43 | 1.55 | 28.69 | 44.61 | 26.70 |
La Porte Bancorp, Inc. | 16.16 | 30.87 | 32.12 | 1.71 | 1.20 | 59.77 | 1.12 | 18.99 | 36.30 | 44.71 |
Madison County Financial, Inc. | 17.56 | 16.44 | 17.70 | 2.09 | 0.06 | 30.06 | 3.17 | 16.40 | 63.95 | 19.65 |
Poage Bankshares, Inc. | 8.31 | 22.22 | 22.96 | 1.29 | 1.35 | 35.88 | 0.65 | 62.85 | 22.81 | 14.34 |
United Community Bancorp | 11.47 | 22.54 | 23.80 | 4.89 | 2.48 | 39.21 | 1.97 | 66.65 | 28.63 | 4.72 |
Wayne Savings Bancshares, Inc. | 8.81 | 13.82 | 14.82 | 2.26 | 1.49 | 37.71 | 0.97 | 62.08 | 31.76 | 6.16 |
Wolverine Bancorp, Inc. | 10.13 | 21.38 | 22.66 | 1.98 | 2.40 | 35.14 | 2.96 | 26.62 | 67.83 | 5.55 |
(1) Includes troubled debt restructurings.
Source: Central Federal; SNL Financial; Feldman Financial.
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III. MARKET VALUE ADJUSTMENTS
General Overview
This concluding chapter of the Appraisal identifies certain additional adjustments to the Association's estimated pro forma market value relative to the Comparative Group selected in Chapter II. The adjustments discussed in this chapter are made from the viewpoints of potential investors, which would include depositors holding subscription rights and unrelated parties who may purchase stock in a community offering. It is assumed that these potential investors are aware of all relevant and necessary facts as they would pertain to the value of the Association relative to other publicly traded thrift institutions and relative to alternative investments.
Our appraised value is predicated on a continuation of the current operating environment for the Association and thrift institutions in general. Changes in the Association's operating performance along with changes in the local and national economy, the stock market, interest rates, the regulatory environment, and other external factors may occur from time to time, often with great unpredictability, which could impact materially the pro forma market value of the Association or thrift stocks in general. Therefore, the Valuation Range provided herein is subject to a more current re-evaluation prior to the actual completion of the Conversion.
In addition to the comparative operating fundamentals discussed in Chapter II, it is important to address additional market value adjustments based on certain financial and other criteria, which include, among other factors:
(1) | Earnings Prospects |
(2) | Financial Condition |
(3) | Market Area |
(4) | Management |
(5) | Dividend Policy |
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(6) | Liquidity of the Issue |
(7) | Subscription Interest |
(8) | Recent Acquisition Activity |
(9) | Effect of Government Regulations and Regulatory Reform |
(10) | Stock Market Conditions |
Earnings Prospects
Earnings prospects are dependent upon the sensitivity of asset yields and liability costs to changes in market rates, the credit quality of assets, the stability of non-interest components of income and expense, and the ability to leverage the balance sheet. Each of the foregoing is an important factor for investors in assessing earnings prospects. The Association's profitability in recent years has varied from low to moderate due to a combination of earnings fundamentals reflecting a declining net interest spread and low levels of non-interest income, offset partially by limited loan loss provisions and controlled operating expenses.
Central Federal's earnings compared unfavorably to the Comparative Group for the recent LTM period. The Association's core earnings amounted to 0.25% of average assets versus the Comparative Group median of 0.73%. The Association's lower net interest spread and lower level of non-interest income were the chief factors contributing to the Association's disadvantage in earnings generation. As discussed earlier, the Association's historical operating strategy has focused on emphasizing residential mortgage lending, maintaining strong capital levels, and operating efficiently.
As its net interest margin is likely to encounter added pressure due to increased competition and possible adverse changes in interest rates, the Association has not yet developed significant sources of non-interest revenue to sustain earnings growth from other business channels. The Association's increased capital position following the Conversion will help to improve its net interest margin across changing interest rate and business cycles, provide added
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interest rate risk protection, and additional leverage capacity to grow the balance sheet. Based on the Association's current earnings fundamentals and recent operating results, we believe that a downward adjustment is warranted to the Association's pro forma market value for earnings prospects relative to the Comparative Group.
Financial Condition
As discussed and summarized in Chapter I, the Association's balance sheet composition reflects a large concentration of real estate loans, a limited amount of investment securities, and a liquidity portfolio comprising cash and cash equivalents along with certificates of deposit in other financial institutions. While Central Federal's loan portfolio has gradually become more varied to include a broader mix in addition to one- to four-family, owner occupied residential loans, the Comparative Group displayed a more diversified loan portfolio mix.
The Association relies on its deposit base as a funding source and has not utilized any borrowed debt in recent years. Certificates of deposit have declined as a percentage of total deposits, but still compose almost half of the Association's deposit base. Based on the financial comparisons reviewed in the prior chapter, we note that the Association has a stronger capital level than the Comparative Group overall but also exhibited a higher level of non-performing assets and smaller level of loan loss reserves. Before the infusion of net capital proceeds, the Association's equity ratio at 21.89% of assets exceeded the 14.27% median of the Comparative Group. The selection criteria for the Comparative Group ensured a collection of companies with solid capital positions and satisfactory asset quality, similar to the Association's financial profile. Therefore, on the whole, we believe that no adjustment is warranted for the Association's financial condition relative to the Comparative Group.
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FELDMAN FINANCIAL ADVISORS, INC. |
Market Area
The members of the Comparative Group were drawn from the Midwest region of the country. With only a few exceptions, the overwhelming majority of the Comparative Group companies are not based in a major metropolitan area, similar to Central Federal's geographic location. The Association is located in Rolla, Missouri, which is the county seat of Phelps County. The Rolla-Phelps County area is considered a micropolitan statistical area. Micropolitan areas do not have the economic or political importance of large cities, but are nevertheless significant centers of population and economic production, drawing employees and consumer from a wide local area.
The Comparative Group companies are characterized by a cross-section of market areas that encompass smaller to mid-sized metropolitan areas in the Midwest with relatively stable economies, steady housing values, and moderate population growth prospects, similar to that experienced by the Association's market area. In recognition of these factors, we believe that no adjustment is warranted for market area.
Management
Management's principal challenges are to generate profitable results, monitor credit risks, and control operating costs while the Association competes in an increasingly challenging financial services environment. The normal challenges facing the Association in attempting to deliver earnings growth and enhance its competitiveness remain paramount as it attempts to leverage the stock offering proceeds. Central Federal is led by its President and Chief Executive Officer ("CEO"), Mr. William A. Stoltz, who has a long tenure at Central Federal and extensive experience in the local banking marketplace.
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Historically, as a result of operating a traditional and small thrift institution from one office, the Association has relied on very few officers and employees. Mr. Stoltz has a significant amount of responsibility for the operations of Central Federal and performs a number of different roles, including those of principal financial and accounting officer. The loss of Mr. Stoltz could have a material adverse impact on the operations of Central Federal since he has been instrumental in managing the business affairs of Central Federal.
As a result of its growth plans and transition to a public company, the Association's now needs to add a Chief Financial Officer and additional lending and credit administrative officers, particularly since Mr. Larry D. Thomas, its Executive Vice President and Senior Lending Officer, has expressed the intent to retire after completion of the Conversion. These new employees will be important to Central Federal's operations, but the timing of additional hires is unclear at the present time. The process of hiring these executive officers and integrating them into the Association's organization will impact going-forward operations and must be successfully integrated to have a positive effect on future operating results.
As reflected by its historical financial performance, we believe that investors will view that that the Association is professionally and capably managed currently by an experienced management team. Investors will likely rely upon actual earnings results as the means of evaluating the future performance of Central Federal's management as the Association pursues its growth objectives following the Conversion. Therefore, we have taken the overall set of facts and circumstances regarding the management uncertainties into consideration.
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Dividend Policy
Following completion of the Conversion, the Board of Directors of the Company will have the authority to declare cash dividends the shares of common stock, subject to statutory and regulatory requirements. However, no decision has been made by the Board at this time with respect to the payment of dividends. In determining whether to declare or pay any dividends, the Company will take into account its financial condition and results of operations, tax considerations, capital requirements, industry standards, and economic conditions. In the future, the Board may declare and pay regular cash dividends or periodic special cash dividends. No assurances are given by Central Federal that any dividends will be paid or that, if paid, will not be reduced or eliminated in future periods.
Payment of cash dividends has become commonplace among publicly traded thrifts with relatively high capital levels. Of the eleven members of the Comparative Group, nine currently pay regular cash dividends. The average dividend yield of the Comparative Group was 1.33% and the median was 1.36% as of August 31, 2015. The average and median dividend yield of the All Public Thrift aggregate was 1.47% and 1.29%, respectively, as of August 31, 2015. Although Central Federal has yet to establish a policy of paying regular cash dividends, we believe that investors will take note of its solid dividend-paying capacity as evidenced by strong pro forma capital ratios. Therefore, we have concluded that no adjustment is warranted for purposes of dividend policy.
Liquidity of the Issue
With the increased number of market makers and institutional investors following thrift stocks, the majority of thrift stock conversions are able to develop a public market for their new
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stock issues. Most publicly traded thrift stocks continue to be traded on the NASDAQ market. All eleven members of the Comparative Group are listed on the NASDAQ market. In conjunction with the Conversion, Central Federal will not apply to have its common stock listed for trading on the NASDAQ market. Instead, the Company intends to lists its common stock for quotation on the OTC Pink marketplace, which functions as electronic quotation system that displays real-time quotes, last sale prices, and volume information for many over-the-counter ("OTC") securities that are not listed on the NASDAQ or a national stock exchange.
The development and maintenance of a public market, having the desirable characteristics of depth, liquidity and orderliness, depend on the existence of willing buyers and sellers. The number of active buyers and sellers of shares of common stock at any particular time may be more limited on the OTC Pink marketplace versus a national market such as NASDAQ, which may have an adverse effect on the price at which shares of common stock can be sold. Therefore, purchasers of the Company's shares are likely to encounter a limited trading market for this common stock issue. Because of the Association's comparatively smaller capital amount and asset size, its resulting market capitalization will also be smaller than the average $51.2 million and median $57.2 million market value of the Comparative Group. Of the eleven companies in the Comparative Group, all are traded on NASDAQ and indicated a median overall average daily trading volume of approximately 4,000 shares during the past year with each company exceeding a minimum average of approximately 1,100 shares per day. The Association's smaller stock issue and OTC Pink listing do not offer the relative depth of liquidity afforded by the Comparative Group's larger market values and NASDAQ trading history. Therefore, we have concluded that a downward adjustment to the Association's pro forma market value is warranted to address the anticipated illiquidity of its common stock issue.
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Subscription Interest
Central Federal has retained the services of Keefe, Bruyette & Woods to assist in the marketing and sale of the stock offering. The Association's employee stock ownership plan ("ESOP") plans to purchase 8.0% of the total amount of shares to be issued in the stock offering (including shares issued to the foundation). Central Federal expects its directors, executive officers and their associates, to purchase 13,500 shares of common stock in the offering for an aggregate amount of $135,000 based on a $10.00 offering price per share. Except for the ESOP, no person (either alone or together with associates of or persons acting in concert with such person) may purchase in the aggregate more than $300,000 of common stock or 30,000 shares sold in the offering. The minimum purchase in the offering will be 25 shares or an aggregate amount of $250.
Recent subscription interest in thrift stock conversion offerings has been varied. Of the six standard conversion transactions that were completed in the past twelve months, four were fully subscribed by eligible record holders in the subscribed phase and closed at the adjusted maximum of the offering range and two were closed at levels between the midpoint and maximum with the assist of a community offering. As shown in Table 22, the after-market performance of recently converted thrifts has also been mixed with most of the OTC Pink issues notably experiencing no material price change in the near term after-market following the initial public offering ("IPO"). We are not currently aware of any meaningful market evidence or characteristics that may help predict the likely level of interest in Central Federal's subscription offering. Accordingly, absent actual results of the subscription offering, we believe that subscription interest is currently a neutral factor and at present requires no further adjustment.
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Recent Acquisition Activity
Table 20 summarizes recent acquisition activity involving banks and thrifts based in Missouri. Thus far in 2015, there have been eight announced acquisition transactions involving Missouri banks and thrift as selling institutions. Notably, six of the eight acquisition targets had total assets of less than $100 million. Many industry observers believe that the recent banking reform legislation has heightened the regulatory compliance burden in particular on small community banks and thrifts and accelerated the consolidation of smaller institutions into larger banking organizations. Most of the recent Missouri acquisition activity has involved in-state acquirers. However, the two largest selling banks in Missouri during recent years were purchased by two highly acquisitive out-of-state companies: Simmons First National Corporation (Arkansas) and Midland States Bancorp (Illinois). The acquisition valuation ratios paid in the Missouri transactions generally have been similar to nationwide valuation trends for bank and thrift acquisitions. Given that there are significant regulatory restrictions on the ability to acquire control of the Company for a period of three years following the Conversion, we do not believe that acquisition premiums are a significant factor to consider in determining the Company's pro forma market value.
Effect of Government Regulations and Regulatory Reform
In response to the financial crisis of 2008 and early 2009, Congress took actions that were intended to strengthen confidence and encourage liquidity in financial institutions. The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") was enacted on July 21, 2010, and provided for new restrictions and an expanded framework of regulatory oversight for financial institutions and their holding companies. The legislation also created the Consumer Financial Protection Bureau that has broad authority to issue regulations governing the services
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and products provided by financial institutions. Community bankers unanimously believe that the implemented legislation will increase compliance costs, raise regulatory capital requirements, alter loan loss provisioning practices, and otherwise adversely impact operations of banks and thrifts. The potential also exists for additional federal or state laws and regulations, or changes in policy, affecting lending and funding practices and liquidity standards.
As a fully converted stock thrift insured by the FDIC and supervised by its primary regulators, Central Federal will continue to operate in the same regulatory environment that is substantially similar to that faced by the Comparative Group companies. As of June 30, 2015, the Association was considered well capitalized, similar to all the members of the Comparative Group. Therefore, given these factors, we believe that no specific adjustment is necessary for the effect of government regulations and regulatory reform.
Stock Market Conditions
Table 21 displays the performance of the SNL All Public Thrift, SNL All Midwest Thrift, SNL <$250 Million-Asset Thrift indexes, as compared to the Standard & Poor's 500-Stock Index ("S&P 500") and the Dow Jones Industrials Average ("DJIA") over various periods. Table 21 also includes the comparative performance the SNL Thrift Pink index of over-the-counter companies. The various public thrift indexes generally tracked directionally the cyclical trends of the broader stock index from 2012 through 2014. The All Public Thrift Index increased by 24.9% in 2013, trailing the 29.6% improvement in the S&P 500, while the SNL Mid-Atlantic Thrift Index advanced 21.3% during this period. The All Public Thrift Index advanced 4.6% in 2014, while the S&P 500 rose 11.4% in 2014. The SNL Thrift Pink Index lagged the All Public Thrift Index in 2013 but eclipsed the larger aggregate in 2014.
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Table 20
Summary of Recent Missouri Acquisition Activity
Transactions Announced Since January 1, 2013
Seller's Prior Financial Data | Offer Value to | ||||||||||||||||
Total | Equity/ | LTM | LTM | Offer | Book | Tang. | LTM | Total | |||||||||
B/T | Assets | Assets | ROA | ROE | Date | Status | Value | Value | Book | EPS | Assets | ||||||
Buyer | State | Seller | (1) | ($mil.) | (%) | (%) | (%) | Anncd. | (2) | ($mil.) | (%) | (%) | (x) | (%) | |||
Average | 209.3 | 10.81 | 0.42 | 3.42 | NA | NA | 35.0 | 131.1 | 139.4 | 14.8 | 13.61 | ||||||
Median | 66.8 | 9.57 | 0.62 | 6.49 | NA | NA | 7.2 | 119.5 | 135.0 | 13.2 | 12.47 | ||||||
Citizens Bank | MO | Bank of Macks Creek | B | 20.6 | 5.37 | (0.74) | (12.52) | 07/28/15 | P | NA | NA | NA | NA | NA | |||
Bank of Missouri | MO | Bank Star of the BootHeel | B | 93.7 | 9.31 | 0.99 | 11.28 | 07/23/15 | P | NA | NA | NA | NA | NA | |||
First State Bancshares, Inc. | MO | Central Bank | B | 264.3 | 11.29 | 1.49 | 13.16 | 07/09/15 | P | NA | NA | NA | NA | NA | |||
Bear State Financial, Inc. | AR | Metropolitan National Bank | B | 442.4 | 13.31 | 0.25 | 1.94 | 06/22/15 | P | 70.0 | 118.9 | 133.2 | NM | 15.82 | |||
Wells Bank of Platte City | MO | Bedison Bancshares, Inc. | B | 61.1 | 9.02 | 0.99 | 12.20 | 04/30/15 | P | 5.0 | 108.4 | 108.7 | 9.1 | 10.24 | |||
Connections Bancshares, Inc. | MO | Calvert Financial Corporation | B | 47.5 | 12.54 | (1.25) | (10.29) | 04/28/15 | P | 3.4 | 99.2 | 126.4 | NM | 12.59 | |||
Systematic Savings Bank | MO | Home Savings Bank | T | 24.9 | 8.55 | (1.24) | (14.11) | 04/08/15 | P | NA | NA | NA | NA | NA | |||
Farmers Bank | MO | Flowers National Bank | B | 41.3 | 13.23 | 0.33 | 2.55 | 01/29/15 | P | NA | NA | NA | NA | NA | |||
Midwest BankCentre | MO | Southern Bancshares Corp. | B | 510.3 | 11.80 | 0.62 | 6.49 | 12/22/14 | C | 74.5 | 148.7 | 148.7 | 19.7 | 14.60 | |||
Alliance Bank | MO | Tammcorp, Inc. | B | 201.3 | 9.26 | 0.72 | 7.54 | 11/18/14 | P | NA | NA | NA | NA | NA | |||
Sterling Bancshares, Inc. | MO | Bootheel Bancorp, Inc. | B | 283.1 | 8.39 | 0.67 | 8.52 | 10/10/14 | C | NA | NA | NA | NA | NA | |||
Northern Missouri Bancshares | MO | Concordia Banc-Management | B | 59.7 | 9.59 | 1.48 | 14.83 | 07/02/14 | C | 5.1 | 120.1 | 120.1 | 11.2 | 10.69 | |||
Metcalf Bank | MO | Bank of Belton | B | 43.2 | 4.58 | (1.79) | (34.48) | 06/24/14 | C | 2.7 | 136.8 | 136.8 | NM | 6.26 | |||
Simmons First National Corp. | AR | Liberty Bancshares, Inc. | B | 1,062.3 | 9.55 | 1.48 | 16.67 | 05/28/14 | C | 206.9 | 203.9 | 212.1 | 13.2 | 21.42 | |||
JamesMark Bankshares, Inc. | MO | Bank of Ash Grove | B | 70.9 | 17.20 | 1.13 | 6.97 | 03/24/14 | C | 8.4 | 147.9 | 147.9 | 10.0 | 13.04 | |||
Southern Missouri Bancorp | MO | Peoples Service Company | B | 272.7 | 10.66 | 0.53 | 4.99 | 02/25/14 | C | 23.2 | 116.6 | 116.6 | 18.5 | 11.96 | |||
Farmers State Bank | MO | St. Joseph Bancorp, Inc. | T | 34.7 | 19.75 | NA | NA | 10/04/13 | C | 8.1 | 118.3 | 118.3 | NA | 23.44 | |||
Bank 21 | MO | First National Bank of Carrollton | B | 48.8 | 9.55 | 0.67 | 6.53 | 09/23/13 | C | NA | NA | NA | NA | NA | |||
Midland States Bancorp, Inc. | IL | Love Savings Holding Company | B | 845.0 | 7.74 | 1.32 | 19.08 | 09/12/13 | C | NA | NA | NA | NA | NA | |||
Southern Bank | MO | Ozarks Legacy Community Fin'l | B | 79.8 | 9.64 | 0.48 | 5.02 | 06/21/13 | C | 6.2 | 110.5 | 161.0 | 22.3 | 12.34 | |||
Wildcat Bancshares, Inc. | MO | CBR Bancshares Corp. | B | 62.6 | 7.87 | 0.28 | 3.51 | 05/03/13 | C | 6.4 | 143.6 | 143.6 | NM | 10.93 | |||
Preferred Bank | MO | Napoleon Bank | B | 33.8 | 19.65 | 0.40 | 1.93 | 04/16/13 | C | NA | NA | NA | NA | NA | |||
(1) B=bank; T=thrift.
(2) P=pending; C=completed.
Source: SNL Financial.
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Table 21
Comparative Stock Index Performance
12/31/12- | 12/31/13- | 12/31/14- | 12/31/12- | |||||||
Index | 12/31/13 | 12/31/14 | 08/31/15 | 08/31/15 | ||||||
SNL All Public Thrift | 24.9% | 4.6% | 7.0% | 39.6% | ||||||
SNL Midwest Thrift | 21.3% | 11.9% | 10.2% | 49.6% | ||||||
SNL Thrift <$250 Million | 16.1% | -1.9% | 9.4% | 24.5% | ||||||
SNL Thrift Pink | 18.7% | 14.5% | 6.1% | 44.2% | ||||||
S&P 500 | 29.6% | 11.4% | -4.2% | 38.3% | ||||||
Dow Jones Industrials | 26.5% | 7.5% | -7.3% | 26.1% | ||||||
Source: SNL Financial.
More recently, the overall market has turned decidedly weaker and volatile. The broad market sell-off in August 2015 was spawned by concerns over the economic slowdown in China, declining prices for oil and other commodities, and the uncertain timing of any action by the Federal Reserve to raise interest rates. The DJIA Average fell by 500-plus points in each of two consecutive trading days in late August and entered correction territory (greater than 10% decline from recent peak) as it dipped below 16,000. Through year-to-date August 31, 2015, the DJIA and S&P 500 were down 7.3% and 4.2%, respectively. Before the month of August, financial stocks had outperformed the overall market and managed to preserve some of the year-to-date price appreciation despite the recent sell-off. Concerns over the sustainability of earnings in the banking system related to interest rate pressures, increased expenses stemming from Dodd-Frank reform, and capital adequacy scrutiny related to Basel III continue to place pressure on financial stock issues; however, there also appears to be increased market speculation on merger activity.
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A "new issue" discount that reflects investor concerns and investment risks inherent in all IPOs is a factor to be considered for purposes of valuing converting thrifts. The magnitude of the new issue discount typically expands during periods of declining thrift stock prices as investors require larger inducements, and narrows during strong market conditions. The thrift conversion market continues to respond to the after-market performance of recent offerings. Table 22 presents a summary of standard full conversion offerings since January 1, 2012.
There were seven standard conversion offerings completed in 2012, three in 2013, nine in 2014, and two thus far in 2015. The after-market price performance of standard thrift conversion IPOs has been generally characterized by stock price increases. Of the 21 standard conversion offerings completed since January 1, 2012, the average and median one-month price changes were 16.3% and 20.0%, respectively. The nine recent OTC Pink conversion issues did not experience the same level of price appreciation and exhibited average and median one-month price changes of 6.7% and 6.1%, respectively. As shown in Table 22, the cumulative price changes for OTC Pink listed conversions reflected an average of 30.4% and median of 22.6%, compared to the NASDAQ listed conversions posting cumulative average and median price gains of 62.2% and 58.7%, respectively.
Historically, newly converted thrifts had been trading upward to a range approaching existing thrift stock valuation levels, but found resistance approaching book value until a discernible trend in earnings improvement was evident. Pricing a new offering at a relatively high ratio in relation to pro forma book value, because of the mathematics of the calculation, would require very large increases in valuations resulting in non-sustainable price-to-earnings ratios and very marginal returns on equity.
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Table 22
Summary of Recent Standard Conversion Offerings
Transactions Completed Since January 1, 2012
Pro Forma Ratios | After-Market Trading | |||||||||||||||||
Gross | Price/ | Price/ | Price/ | 8/31/15 | Price Change | Change | ||||||||||||
Conversion | Total | Offering | Book | Tang. | LTM | IPO | Closing | One | One | One | Thru | |||||||
Stock | Offering | Assets | Proceeds | Value | Book | EPS | Price | Price | Day | Week | Month | 8/31/15 | ||||||
Company | State | Exchange | Date | ($mil.) | ($mil.) | (%) | (%) | (x) | ($) | ($) | (%) | (%) | (%) | (%) | ||||
Standard — Average | 410.2 | 50.9 | 62.0 | 62.5 | 28.3 | NA | NA | 16.3 | 17.0 | 16.3 | 48.6 | |||||||
Standard — Median | 225.2 | 27.2 | 61.1 | 61.1 | 23.3 | NA | NA | 15.0 | 19.0 | 20.0 | 40.9 | |||||||
OTC Listings — Average | 117.5 | 11.1 | 59.9 | 60.4 | 28.5 | NA | NA | 7.2 | 9.1 | 6.7 | 30.4 | |||||||
OTC Listings — Median | 114.7 | 8.8 | 60.6 | 60.6 | 25.1 | NA | NA | 7.5 | 6.0 | 6.1 | 22.6 | |||||||
Standard Offerings | ||||||||||||||||||
First Northwest Bancorp | WA | NASDAQ | 01/30/15 | 924.2 | 121.7 | 70.2 | 70.2 | 62.5 | 10.00 | 12.00 | 21.8 | 23.5 | 25.2 | 20.0 | ||||
MW Bancorp, Inc. | OH | OTC Pink | 01/30/15 | 90.4 | 8.8 | 56.8 | 56.8 | NM | 10.00 | 14.15 | 15.0 | 24.9 | 20.0 | 41.5 | ||||
MB Bancorp, Inc. | MD | OTC Pink | 12/30/14 | 136.1 | 21.2 | 60.6 | 60.6 | NM | 10.00 | 12.26 | 4.5 | 6.0 | 6.1 | 22.6 | ||||
Melrose Bancorp, Inc. | MA | NASDAQ | 10/22/14 | 194.7 | 27.2 | 64.9 | 64.9 | 54.0 | 10.00 | 14.30 | 30.5 | 31.2 | 31.5 | 43.0 | ||||
Pilgrim Bancshares, Inc. | MA | OTC Pink | 10/13/14 | 166.3 | 21.8 | 73.3 | 73.3 | 50.0 | 10.00 | 12.75 | 11.5 | 9.4 | 8.2 | 27.5 | ||||
Entegra Financial Corp. | NC | NASDAQ | 10/01/14 | 820.3 | 65.5 | 66.5 | 66.5 | 7.6 | 10.00 | 17.56 | 32.8 | 30.7 | 34.0 | 75.6 | ||||
Blue Hills Bancorp, Inc. | MA | NASDAQ | 07/22/14 | 1,823.1 | 277.7 | 72.0 | 74.8 | NM | 10.00 | 14.15 | 23.8 | 21.5 | 29.7 | 41.5 | ||||
Sunshine Bancorp, Inc. | FL | NASDAQ | 07/15/14 | 201.4 | 42.3 | 67.8 | 67.8 | NM | 10.00 | 14.09 | 20.3 | 19.0 | 19.3 | 40.9 | ||||
Home Bancorp Wisconsin, Inc. | WI | OTC Pink | 04/24/14 | 114.7 | 9.0 | 64.6 | 64.6 | NM | 10.00 | 7.75 | (3.9) | (7.4) | (17.5) | (22.5) | ||||
Edgewater Bancorp, Inc. | MI | OTC Pink | 01/17/14 | 119.5 | 6.7 | 52.7 | 55.0 | NM | 10.00 | 12.25 | 0.0 | 2.5 | 2.5 | 22.5 | ||||
Coastway Bancorp, Inc. | RI | NASDAQ | 01/15/14 | 380.5 | 48.3 | 72.2 | 72.2 | NM | 10.00 | 11.08 | 9.2 | 8.5 | 1.9 | 10.8 | ||||
Quarry City Savings and Loan Assn. | MO | OTC Pink | 07/26/13 | 40.3 | 4.1 | 54.2 | 56.4 | 13.9 | 10.00 | 12.00 | 7.5 | 2.0 | 0.5 | 20.0 | ||||
Sunnyside Bancorp, Inc. | NY | OTC Pink | 07/16/13 | 90.6 | 7.9 | 63.0 | 63.0 | NM | 10.00 | 9.99 | 5.0 | 4.5 | 0.1 | (0.1) | ||||
Westbury Bancorp, Inc. | WI | NASDAQ | 04/10/13 | 523.8 | 50.9 | 57.7 | 57.7 | NM | 10.00 | 17.43 | 35.2 | 35.1 | 33.3 | 74.3 | ||||
Meetinghouse Bancorp, Inc. | MA | OTC Pink | 11/20/12 | 74.1 | 6.6 | 64.7 | 64.7 | 29.4 | 10.00 | 14.04 | 12.5 | 27.5 | 20.0 | 40.4 | ||||
Hamilton Bancorp, Inc. | MD | NASDAQ | 10/10/12 | 315.8 | 37.0 | 55.7 | 58.3 | NM | 10.00 | 13.67 | 19.0 | 17.0 | 12.5 | 36.7 | ||||
Madison County Financial, Inc. | NE | NASDAQ | 10/04/12 | 233.4 | 31.9 | 55.2 | 56.6 | 6.9 | 10.00 | 19.40 | 48.9 | 46.1 | 45.1 | 94.0 | ||||
HomeTrust Bancshares, Inc. | NC | NASDAQ | 07/11/12 | 1,564.4 | 211.6 | 59.7 | 59.7 | NM | 10.00 | 18.19 | 17.0 | 20.0 | 24.5 | 81.9 | ||||
FS Bancorp, Inc. | WA | NASDAQ | 07/10/12 | 300.8 | 32.4 | 61.1 | 61.1 | 25.6 | 10.00 | 23.25 | 0.1 | 0.7 | 2.1 | 132.5 | ||||
Wellesley Bancorp, Inc. | MA | NASDAQ | 01/26/12 | 274.4 | 22.5 | 59.7 | 59.7 | 12.6 | 10.00 | 19.50 | 20.0 | 20.9 | 22.9 | 95.0 | ||||
West End Indiana Bancshares, Inc. | IN | OTC Pink | 01/11/12 | 225.2 | 13.6 | 49.1 | 49.1 | 20.9 | 10.00 | 22.15 | 12.6 | 12.5 | 20.0 | 121.5 | ||||
Source: SNL Financial.
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Accordingly, thrift conversions continue to be priced at discounts to publicly traded companies. This is due to the relatively high pro forma equity ratios, expected low returns on equity, and the uncertainty regarding the prospects of an institution to leverage the balance sheet prudently and effectively in the current low interest rate environment and against the backdrop of unsteady real estate and economic conditions.
The FDIC recently reported that for the quarter ended March 31, 2015, the banking industry reported net income of $39.8 billion, an increase of 6.9% over profits earned in the first quarter of 2014. The average annualized ROA rose slightly to 1.02% from 1.01% in the first quarter of 2014. Almost two out of every three financial institutions reported higher profits than the year before, while only 5.6% were unprofitable. This is lowest percentage of unprofitable institutions since the second quarter of 2005. The average net interest margin fell to 3.02% from 3.16% a year earlier, as higher yielding assets matured and were replaced by lower yielding assets in a low interest rate environment. The average non-current loan rate declined to 1.83% of total loans, marking a seven-year low. Loan loss reserves continue to decline and the average ratio of reserves to total loans fell to 1.45%, the lowest level since the fourth quarter of 2007.
The number of FDIC- insured commercial banks and savings institutions declined from 6,509 to 6,419 in the first quarter. Mergers absorbed 86 institutions, while four insured institutions failed. For a fifth consecutive quarter, no new charters were added. The number of institutions on the FDIC's "Problem List" declined for the 16th consecutive quarter, falling from 291 to 253. Total assets of problem institutions fell from $86.7 billion to $60.3 billion. The average equity to assets ratio for all FDIC-insured institutions increased to 11.18% in the recent quarter, compared to 11.15% n the prior year's quarter.
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Bank and thrift industry earnings results have recently been sustained by stabilizing net interest margins and have been bolstered by significant reductions in provisions for loan losses. Industry operating expenses generally continue to rise in the face of a stabilizing net interest margin and little growth has occurred in non-interest operating income or securities gains. Generally, over the past year, financial institutions have experienced relied on reductions in loan loss provisions to a more normalized level as asset quality has improved to increase net income. While bank and thrift industry capital levels remain strong and asset quality has improved, there continue to be volatile swings in the market for bank and thrift stocks. However, we believe that some of the economic uncertainty has dissipated and believe no adjustment is necessary for stock market conditions.
Adjustments Conclusion
It is our opinion that the Association's pro forma valuation should be discounted relative to the Comparative Group because of factors associated with earnings prospects, management uncertainties, and liquidity of the issue. Individual discounts and premiums are not necessarily additive and may, to some extent, offset or overlay each other. Currently, converting thrifts are often valued at meaningful discounts to peer institutions relative to price-to-book and price-to-tangible book ratios. Due to initially low post-conversion earnings from the reinvestment of net offering proceeds at historically low rates, price-to-earnings ratios may be priced at a premium to established traded companies. It is the judgment of the appraiser to balance the relative dynamics of price-to-book and price-to-earnings discounts or premiums.
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Valuation Approach
In determining the estimated pro forma market value of Central Federal, we have employed the comparative company approach and considered the following pricing ratios: price-to-earnings per share ("P/E"), price-to-book value per share ("P/B"), price-to-tangible book value per share ("P/TB"), and price-to-assets ("P/A"). Table 23 presents the trading market valuation ratios of the Comparative Group and All Public Thrift averages and medians as of August 31, 2015. As shown in Table 23, the average and median P/B ratios for the Comparative Group were 88.2% and 91.8%, respectively. The average and median P/TB ratios for the Comparative Group were 91.1% and 92.4%, respectively. The average and median P/E ratios were 17.9x and 16.1x, respectively. On a core earnings basis, the average and median core P/E ratios of the Comparative Group were 18.7x and 16.3x, respectively. Some companies within the All Public Thrift aggregate reported P/E ratios that were either distortedly high due to low levels of profitability or negative due to losses. Such ratios are represented as not meaningful ("NM") and are not utilized for comparative analysis.
Investors continue to make decisions to purchase thrift conversion stocks and more seasoned thrift issues based upon consideration of core earnings profitability and P/B comparisons. The P/E ratio remains an important valuation ratio in the current thrift stock. However, as noted above, the P/E ratio is not useful for companies reporting negative or low earnings. The Association's LTM earnings and core earnings for the period ended June 30, 2015 December 31, 2013 amounted to $162,000. On a pro forma basis, after making adjustments for re-investment of net offering proceeds and expensing charges related to the implementation various stock benefit plans including the employee stock ownership plan ("ESOP"), a restricted stock plan ("RSP") and stock option plan, Central Federal's earnings are reduced to even lower
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levels close to breakeven or negative profitability depending on the offering assumptions. In the absence of meaningful P/E ratios to compare and apply, more reliance is on placed on the P/B and P/TB ratios to determine trading valuation benchmarks.
Based on our comparative financial and valuation analyses, we concluded that the Association should be discounted relative to the trading valuation ratios of the overall Comparative Group. In consideration of the foregoing factors along with the additional adjustments discussed in this chapter, we have determined a pro forma P/B and P/TB ratio of 56.4% for the Association, which reflects an aggregate midpoint of approximately $13.5 million for the Valuation Range (including shares to be issued to the charitable foundation) based on the assumptions summarized in Exhibit IV. Employing a range of 15% above and below the midpoint, the resulting minimum value of $11.5 million reflects a 51.7% P/B ratio and the resulting maximum value of $15.5 million reflects a 60.5% P/B ratio. The adjusted maximum, computed as an additional 15.0% above the maximum, is positioned at approximately $17.9 million and a P/B ratio of 64.6%. Central Federal's pro forma P/B and P/TB ratios are equivalent since the Association had no intangible assets as of June 30, 2015.
The Association's pro forma midpoint P/B and P/TB ratios of 56.4% reflect a discount of 36.0% to the Comparative Group average P/B ratio of 88.8% and a 38.1% discount to the Comparative Group median P/TB ratio of 91.1%. The Association's pro forma maximum P/B and P/TB of 60.5% reflect a discount of 31.4% to the Comparative Group average P/B and a discount of 33.6% to the Comparative Group average P/TB ratio. At the adjusted maximum, the Association's pro forma P/B and P/TB ratio of 64.6% is positioned at a 26.8% discount to the Comparative Group average P/B and a discount of 29.2% to the Comparative Group median
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FELDMAN FINANCIAL ADVISORS, INC. |
P/TB ratio. Based on the Valuation Range as indicated above, the Association's pro forma P/E ratios reflected NM results since the resulting P/E ratios would, if computed, measure 250.0x, 500.0x, 0.0x, and -1,000.0x at the minimum, midpoint, maximum, and adjusted maximum, respectively, of the Valuation Range.
Based on the price-to-assets valuation metric, the Association's pro forma midpoint of the Valuation Range at $13.5 million reflects a corresponding P/A ratio of 18.59%, ranging from 16.19% at the minimum valuation to 20.88% and 23.38% at the maximum and adjusted maximum, respectively. The Association's strong capitalization level resulted in P/A ratios above those of the Comparative Group. At the midpoint of the Valuation Range, Central Federal's pro forma P/A ratio was 18.59% as compared to the Comparative Group average and median P/As ratio of 12.11% and 12.40%, respectively. While the Association's pro forma P/B and P/TB ratios reflect discounts to the Comparative Group, the pro forma P/A ratios represent sizeable premiums to the average Comparative Group P/A ratio of 12.11%, with the premiums measuring 33.6% at the valuation minimum, 53.5% at the midpoint, 72.4% at the maximum, and 93.0% at the adjusted maximum.
On a pro forma basis, the Company's ratio of total equity to assets ranges from 31.32% at the valuation minimum and 32.96% at the midpoint to 34.52% and 36.23% at the maximum and adjusted maximum, respectively, providing a further challenge to produce meaningful returns on equity. In contrast, the Comparative Group's average and median ratios of total equity to assets were 13.94% and 14.27%, respectively.
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FELDMAN FINANCIAL ADVISORS, INC. |
Valuation Conclusion
It is our opinion that, as of August 31, 2015, the estimated aggregate pro forma market value of Central Federal (including the shares of common stock to be issued to the charitable foundation) was within a Valuation Range of $11,492,000 to $15,548,000 with a midpoint of $13,520,000. The Valuation Range was based upon a 15% decrease from the midpoint to determine the minimum and a 15% increase from the midpoint to establish the maximum. Based on an offering price of $10.00 per share, this Valuation Range equates to total shares outstanding of 1,149,200 at the minimum to 1,554,800 at the maximum with a midpoint of 1,352,000 shares. Assuming an additional 15% increase above the maximum value would result in an adjusted maximum of $17,880,200 or 1,788,020 shares.
In connection with the Conversion, a charitable foundation will be established by Central Federal and funded by a contribution of $100,000 in cash and shares of common stock of the Company equal to 4.0% of the amount of shares sold in the offering. The number of shares issued to the foundation amount to 44,200 at the minimum, 52,000 at the midpoint, 59,800 at the maximum, and 68,770 at the adjusted maximum. Based on the Valuation Range and the contribution of shares to the foundation, the Company will offer for sale a minimum of 1,105,000 shares, a midpoint of 1,300,000 shares, a maximum of 1,495,000 shares, and an adjusted maximum of 1,719,250 shares. The resulting offering range reflects an aggregate amount of $11,050,000 at the minimum, $13,000,000 at the midpoint, $14,950,000 at the maximum, and $17,192,500 at the adjusted maximum.
Exhibit IV-1 displays the assumptions utilized in calculating the pro forma financial consequences of the stock offering. Exhibit IV-2 displays the pro forma financial data at each
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FELDMAN FINANCIAL ADVISORS, INC. |
level of the Valuation Range. Exhibit IV-3 provides more detailed data at the maximum valuation. Exhibit IV-4 compares the Association's pro forma valuation ratios with the averages and medians reported by the Comparative Group and All Public Thrifts.
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Table 23
Comparative Pro Forma Market Valuation Analysis
Computed from Market Price Data as of August 31, 2015
Current | Total | Price/ | Price/ | Price/ | Price/ | Price/ | Total | Tang. | Current | |||
Stock | Market | LTM | Core | Book | Tang. | Total | Equity/ | Equity/ | Dividend | |||
Price | Value | EPS | EPS | Value | Book | Assets | Assets | Assets | Yield | |||
Company | ($) | ($mil.) | (x) | (x) | (%) | (%) | (%) | (%) | (%) | (%) | ||
Central Federal S&LA (1) | ||||||||||||
Pro Forma Minimum | 10.00 | 11.5 | NM | NM | 51.7 | 51.7 | 16.19 | 31.32 | 31.32 | 0.00 | ||
Pro Forma Midpoint | 10.00 | 13.5 | NM | NM | 56.4 | 56.4 | 18.59 | 32.96 | 32.96 | 0.00 | ||
Pro Forma Maximum | 10.00 | 15.5 | NM | NM | 60.5 | 60.5 | 20.88 | 34.52 | 34.52 | 0.00 | ||
Pro Forma Adj. Maximum | 10.00 | 17.9 | NM | NM | 64.6 | 64.6 | 23.38 | 36.23 | 36.23 | 0.00 | ||
Comparative Group Average | NA | 51.2 | 17.9 | 18.7 | 88.2 | 91.1 | 12.11 | 13.94 | 13.56 | 1.33 | ||
Comparative Group Median | NA | 57.2 | 16.1 | 16.3 | 91.8 | 92.4 | 12.40 | 14.27 | 14.14 | 1.36 | ||
All Public Thrift Average (2) | NA | 457.1 | 21.6 | 26.7 | 110.9 | 120.8 | 14.19 | 13.62 | 12.79 | 1.47 | ||
All Public Thrift Median (2) | NA | 125.0 | 17.3 | 18.3 | 101.5 | 107.0 | 13.61 | 12.26 | 11.84 | 1.29 | ||
Comparative Group | ||||||||||||
Central Federal Corporation | 1.37 | 21.7 | 34.3 | 34.3 | 91.9 | 91.9 | 6.61 | 10.30 | 10.30 | 0.00 | ||
First Federal of No. Michigan | 6.39 | 23.8 | 8.1 | 13.9 | 76.7 | 79.6 | 7.31 | 9.53 | 9.21 | 1.88 | ||
HMN Financial, Inc. | 11.50 | 51.6 | 15.1 | 15.1 | 76.4 | 76.4 | 9.14 | 11.97 | 11.97 | 0.00 | ||
IF Bancorp, Inc. | 16.85 | 68.7 | 20.3 | 20.1 | 85.5 | 85.5 | 12.19 | 14.27 | 14.27 | 0.59 | ||
Jacksonville Bancorp, Inc. | 23.56 | 42.2 | 13.5 | 15.0 | 92.5 | 98.3 | 13.78 | 14.91 | 14.14 | 1.36 | ||
La Porte Bancorp, Inc. | 14.05 | 78.2 | 16.1 | 16.2 | 94.2 | 105.1 | 15.07 | 15.99 | 14.58 | 1.14 | ||
Madison County Financial, Inc. | 19.40 | 57.6 | 16.7 | 16.3 | 91.8 | 93.2 | 18.09 | 19.69 | 19.45 | 1.29 | ||
Poage Bankshares, Inc. | 15.43 | 60.9 | 13.8 | 15.9 | 86.5 | 90.1 | 14.10 | 16.31 | 15.76 | 1.56 | ||
United Community Bancorp | 13.95 | 64.6 | 24.5 | 21.4 | 90.0 | 93.9 | 12.40 | 13.71 | 13.22 | 1.72 | ||
Wayne Savings Bancshares, Inc. | 13.02 | 36.2 | 18.3 | 18.3 | 91.9 | 96.0 | 8.60 | 9.36 | 8.99 | 2.76 | ||
Wolverine Bancorp, Inc. | 25.90 | 57.2 | 16.1 | 18.8 | 92.4 | 92.4 | 15.98 | 17.30 | 17.30 | 2.32 | ||
(1) Pro forma ratios assume an offering range reflecting gross proceeds of $11.05 million at the minimum, $13.5 million at the midpoint, $14.95 million at the maximum, and $17.1925 million at the adjusted maximum and the issuance of shares to the foundation equal to 4.0% of the amount sold in the offering.
(2) Companies traded on a major exchange; excludes mutual holding companies and companies being acquired in announced merger transactions.
Source: Central Federal; SNL Financial; Feldman Financial.
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Exhibit I
Background of Feldman Financial Advisors, Inc.
Overview of Firm
Feldman Financial Advisors provides consulting and advisory services to financial institutions and mortgage companies in the areas of corporate valuations, mergers and acquisitions, strategic planning, branch sales and purchases, developing and implementing regulatory business and capital plans, and expert witness testimony and analysis. Our senior staff members have been involved in the stock conversion process since 1982 and have valued more than 350 converting institutions.
Feldman Financial Advisors was incorporated in February 1996 by a group of consultants who were previously associated with Credit Suisse First Boston and Kaplan Associates. Each of the principals at Feldman Financial Advisors has more than 10 years experience in consulting and all were officers of their prior firm. Our senior staff collectively has worked with more than 1,000 banks, thrifts and mortgage companies nationwide. The firm's office is located in Washington, D.C.
Background of Senior Professional Staff
Trent Feldman - President. Trent is a nationally recognized expert in providing strategic advice to and valuing service companies, and advising on mergers and acquisitions. Trent was with Kaplan Associates for 14 years and was one of three founding principals at that firm. Trent also has worked at the Federal Home Loan Bank Board and with the California legislature. Trent holds Bachelors and Masters Degrees from the University of California, Los Angeles.
Peter Williams - Principal. Peter specializes in merger and acquisition analysis, mutual-to-stock conversion valuations, corporate valuations, strategic business plans and retail delivery analysis. Peter previously was with Kaplan Associates for 13 years. Peter also served as a Corporate Planning Analyst with the Wilmington Trust Company in Delaware. Peter holds a BA in Economics from Yale University and an MBA in Finance and Investments from George Washington University.
I- 1 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit II-1
Balance Sheets
Central Federal Savings and Loan Association of Rolla
As of December 31, 2013 and 2014 and June 30, 2015
(Dollars in Thousands)
June 30, | December 31, | ||||||
2015 | 2014 | 2013 | |||||
Assets | |||||||
Cash and due from financial institutions | $ 8,536 | $ 7,802 | $ 7,158 | ||||
Federal funds sold | 100 | 100 | 100 | ||||
Cash and cash equivalents | 8,636 | 7,902 | 7,258 | ||||
Certificates of deposit in financial institutions | 2,480 | 2,480 | 2,480 | ||||
Investment securities available for sale | 33 | 31 | 44 | ||||
Federal Home Loan Bank stock | 77 | 78 | 78 | ||||
Loans receivable, net | 49,624 | 52,184 | 53,559 | ||||
Foreclosed assets | 508 | 243 | 243 | ||||
Premises and equipment, net | 709 | 739 | 735 | ||||
Accrued interest receivable | 126 | 122 | 140 | ||||
Deferred tax asset, net | 93 | 104 | 118 | ||||
Income taxes receivable | 27 | 40 | 35 | ||||
Other assets | 111 | 54 | 73 | ||||
Total Assets | $ 62,424 | $ 63,977 | $ 64,763 | ||||
Liabilities and Equity | |||||||
Deposits: | |||||||
Non-interest bearing deposits | $ 2,186 | $ 2,640 | $ 2,116 | ||||
Interest-bearing deposits | 46,456 | 47,642 | 49,059 | ||||
Total Deposits | 48,642 | 50,282 | 51,175 | ||||
Other liabilities | 118 | 113 | 117 | ||||
Total Liabilities | 48,760 | 50,395 | 51,292 | ||||
Retained earnings | 13,652 | 13,571 | 13,452 | ||||
Accumulated other comprehensive income | 12 | 11 | 19 | ||||
Total Equity | 13,664 | 13,582 | 13,471 | ||||
Total Liabilities and Equity | $ 62,424 | $ 63,977 | $ 64,763 | ||||
Source: Central Federal, financial statements.
II- 1 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit II-2
Income Statements
Central Federal Savings and Loan Association of Rolla
For the Years Ended December 31, 2013 and 2014
And the Six Months Ended June 30, 2014 and 2015
(Dollars in Thousands)
Six Months Ended | Year Ended | ||||||||
June 30, | December 31, | ||||||||
2015 | 2014 | 2014 | 2013 | ||||||
Total interest income | $ 1,222 | $ 1,230 | $ 2,466 | $ 2,723 | |||||
Total interest expense | 236 | 250 | 494 | 548 | |||||
Net interest income | 986 | 980 | 1,972 | 2,175 | |||||
Provision for loan losses | - | 60 | 60 | - | |||||
Net interest income after provision | 986 | 920 | 1,912 | 2,175 | |||||
Non-interest income | |||||||||
Customer service fees | 22 | 24 | 49 | 48 | |||||
Loss on sale of foreclosed assets | - | - | - | (100 | ) | ||||
Other income | 10 | 13 | 23 | 29 | |||||
Total non-interest income | 32 | 37 | 72 | (23 | ) | ||||
Non-interest expense | |||||||||
Compensation and employee benefits | 525 | 525 | 1,054 | 1,006 | |||||
Data processing and other outside services | 122 | 124 | 256 | 247 | |||||
Occupancy and equipment | 108 | 108 | 215 | 220 | |||||
FDIC insurance and regulatory assessment | 40 | 41 | 83 | 87 | |||||
Legal and professional services | 26 | 29 | 54 | 55 | |||||
Supplies, telephone, and postage | 22 | 22 | 46 | 40 | |||||
Foreclosed assets | 9 | 5 | 11 | 27 | |||||
Other expenses | 41 | 41 | 86 | 104 | |||||
Total non-interest expense | 893 | 895 | 1,805 | 1,786 | |||||
Income before income taxes | 125 | 62 | 179 | 366 | |||||
Income tax expense | 44 | 24 | 60 | 137 | |||||
Net Income | $ 81 | $ 38 | $ 119 | $ 229 | |||||
Source: Central Federal, financial statements.
II- 2 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit II-3
Loan Portfolio Composition
Central Federal Savings and Loan Association of Rolla
As of December 31, 2013 and 2014 and June 30, 2015
(Dollars in Thousands)
December 31, | ||||||||||||||
June 30, 2015 | 2014 | 2015 | ||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | |||||||||
(000s) | (%) | (000s) | (%) | (000s) | (%) | |||||||||
Residential real estate | $ 31,795 | 63.69 | $ 34,179 | 65.12 | $ 34,639 | 64.22 | ||||||||
Commercial and multi-family real estate | 15,807 | 31.66 | 15,993 | 30.47 | 17,469 | 32.39 | ||||||||
Commercial business | 1,905 | 3.82 | 1,880 | 3.58 | 1,329 | 2.46 | ||||||||
Consumer and other | 415 | 0.83 | 432 | 0.82 | 498 | 0.92 | ||||||||
Total Loans | 49,922 | 100.00 | 52,484 | 100.00 | 53,935 | 100.00 | ||||||||
Allowance for loan losses | (278 | ) | (279 | ) | (351 | ) | ||||||||
Net deferred loan fees | (20 | ) | (21 | ) | (25 | ) | ||||||||
Total Loans, Net | $ 49,624 | $ 52,184 | $ 53,559 | |||||||||||
Source: Central Federal, financial statements.
II- 3 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit II-4
Cash and Investments Composition
Central Federal Savings and Loan Association of Rolla
As of December 31, 2013 and 2014 and June 30, 2015
(Dollars in Thousands)
December 31, | |||||||||||||
June 30, 2015 | 2014 | 2013 | |||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | ||||||||
(000s) | (%) | (000s) | (%) | (000s) | (%) | ||||||||
Cash and due from fin'l institutions | $ 8,536 | 76.04 | $ 7,802 | 74.37 | $ 7,158 | 72.60 | |||||||
Federal funds sold | 100 | 0.89 | 100 | 0.95 | 100 | 1.01 | |||||||
Certificates of deposit | 2,480 | 22.09 | 2,480 | 23.64 | 2,480 | 25.15 | |||||||
Securities available for sale | 33 | 0.29 | 31 | 0.30 | 44 | 0.45 | |||||||
Federal Home Loan Bank stock | 77 | 0.69 | 78 | 0.74 | 78 | 0.79 | |||||||
Total cash and investments | $ 11,226 | 100.00 | $ 10,491 | 100.00 | $ 9,860 | 100.00 | |||||||
Source: Central Federal, financial statements.
II- 4 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit II-5
Deposit Account Distribution
Central Federal Savings and Loan Association of Rolla
As of December 31, 2013 and 2014 and June 30, 2015
(Dollars in Thousands)
December 31, | |||||||||||||
June 30, 2015 | 2014 | 2013 | |||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | ||||||||
(000s) | (%) | (000s) | (%) | (000s) | (%) | ||||||||
Non-interest bearing demand | $ 2,186 | 4.49 | $ 2,640 | 5.25 | $ 2,116 | 4.13 | |||||||
NOW and money market | 19,293 | 39.66 | 18,936 | 37.66 | 17,350 | 33.90 | |||||||
Savings accounts | 3,783 | 7.78 | 3,625 | 7.21 | 3,361 | 6.57 | |||||||
Certificates of deposit | 23,381 | 48.07 | 25,081 | 49.88 | 28,348 | 55.39 | |||||||
Total Deposits | $ 48,642 | 100.00 | $ 50,282 | 100.00 | $ 51,175 | 100.00 | |||||||
Source: Central Federal, financial statements.
II- 5 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit III
Financial and Market Data for All Public Thrifts
Total | Tang. | Closing | Total | Price/ | Price/ | Price/ | Price/ | Price/ | |||||||
Total | Equity/ | Equity/ | LTM | LTM | Price | Market | LTM | Core | Book | Tang. | Total | Div. | |||
Assets | Assets | Assets | ROA | ROE | 8/31/15 | Value | EPS | EPS | Value | Book | Assets | Yield | |||
Company | State | Ticker | ($mil.) | (%) | (%) | (%) | (%) | ($) | ($mil.) | (x) | (x) | (%) | (%) | (%) | (%) |
All Public Thrifts (1) | |||||||||||||||
Anchor Bancorp | WA | ANCB | 379 | 16.80 | 16.80 | 2.58 | 16.50 | 21.98 | 56.0 | 5.5 | 5.4 | 88.0 | 88.0 | 14.78 | 0.00 |
Anchor BanCorp Wisconsin Inc. | WI | ABCW | 2,206 | 15.53 | 15.53 | 5.87 | 54.64 | 40.91 | 392.8 | 3.1 | NA | 114.6 | 114.6 | 17.81 | 0.00 |
ASB Bancorp, Inc. | NC | ASBB | 783 | 12.28 | 12.28 | 0.35 | 2.74 | 24.35 | 106.8 | 36.9 | 38.9 | 110.9 | 110.9 | 13.61 | 0.00 |
Astoria Financial Corporation | NY | AF | 15,295 | 10.65 | 9.55 | 0.60 | 5.82 | 16.17 | 1,629.8 | 19.3 | 19.3 | 108.7 | 124.1 | 10.75 | 0.99 |
Athens Bancshares Corporation | TN | AFCB | 308 | 14.23 | 14.21 | 0.89 | 6.37 | 27.00 | 48.8 | 17.6 | 17.3 | 111.4 | 111.6 | 15.85 | 0.74 |
Atlantic Coast Financial Corp. | FL | ACFC | 810 | 9.63 | 9.63 | 0.95 | 9.47 | 5.30 | 82.2 | 11.8 | 8.1 | 105.3 | 105.3 | 10.14 | 0.00 |
Bank Mutual Corporation | WI | BKMU | 2,420 | 11.53 | 11.53 | 0.65 | 5.41 | 7.23 | 332.1 | 21.9 | NA | 119.3 | 119.3 | 13.76 | 2.77 |
BankFinancial Corporation | IL | BFIN | 1,440 | 14.71 | 14.61 | 2.96 | 21.32 | 12.30 | 252.2 | 5.9 | 5.8 | 119.1 | 120.0 | 17.52 | 1.30 |
Beneficial Bancorp, Inc. | PA | BNCL | 4,736 | 23.26 | 21.14 | 0.51 | 2.86 | 12.44 | 1,030.3 | 42.0 | 38.7 | 93.5 | 105.7 | 21.75 | 0.00 |
Blue Hills Bancorp, Inc. | MA | BHBK | 1,845 | 22.43 | 21.90 | 0.16 | 0.70 | 14.15 | 402.6 | NA | NA | 97.4 | 100.4 | 21.84 | 0.57 |
BofI Holding, Inc. | CA | BOFI | 5,824 | 9.16 | 9.16 | 1.61 | 18.20 | 115.84 | 1,811.8 | 21.6 | 21.3 | 340.2 | 340.2 | 30.90 | 0.00 |
Broadway Financial Corporation | CA | BYFC | 359 | 11.04 | 11.04 | 1.13 | 11.38 | 1.46 | 31.3 | 9.7 | 10.4 | 107.1 | 107.1 | 11.82 | 0.00 |
BSB Bancorp, Inc. | MA | BLMT | 1,552 | 9.09 | 9.09 | 0.40 | 4.06 | 20.92 | 190.1 | 32.7 | 32.7 | 134.6 | 134.6 | 12.24 | 0.00 |
Cape Bancorp, Inc. | NJ | CBNJ | 1,555 | 11.11 | 9.75 | 0.82 | 6.61 | 11.10 | 157.1 | 14.2 | 18.0 | 90.9 | 105.2 | 10.10 | 3.60 |
Capitol Federal Financial, Inc. | KS | CFFN | 9,131 | 15.62 | 15.62 | 0.72 | 5.34 | 12.05 | 1,668.0 | 20.8 | 20.8 | 117.1 | 117.1 | 18.30 | 2.82 |
Carver Bancorp, Inc. | NY | CARV | 671 | 8.09 | 8.09 | 0.01 | 0.14 | 6.26 | 23.1 | 56.9 | 32.6 | 252.3 | 252.3 | 3.70 | 0.00 |
Central Federal Corporation | OH | CFBK | 339 | 10.30 | 10.30 | 0.42 | 3.85 | 1.37 | 21.7 | 34.3 | 34.3 | 91.9 | 91.9 | 6.61 | 0.00 |
Charter Financial Corporation | GA | CHFN | 1,005 | 20.79 | 20.41 | 0.61 | 2.77 | 12.55 | 205.0 | 33.9 | 32.8 | 98.5 | 100.9 | 20.49 | 1.59 |
Cheviot Financial Corp. | OH | CHEV | 581 | 16.53 | 14.98 | 0.40 | 2.39 | 14.32 | 97.3 | 40.9 | 43.9 | 101.3 | 113.9 | 16.75 | 2.79 |
Chicopee Bancorp, Inc. | MA | CBNK | 672 | 13.20 | 13.20 | 0.30 | 2.11 | 16.30 | 85.9 | 44.1 | 44.1 | 96.8 | 96.8 | 12.78 | 1.96 |
Clifton Bancorp Inc. | NJ | CSBK | 1,153 | 30.17 | 30.17 | 0.72 | 2.38 | 13.79 | 356.2 | 40.6 | 50.9 | 102.9 | 102.9 | 31.06 | 1.74 |
Coastway Bancorp, Inc. | RI | CWAY | 499 | 14.18 | 14.18 | 0.17 | 1.10 | 11.08 | 54.3 | 61.6 | 61.6 | 76.8 | 76.8 | 10.89 | 0.00 |
Dime Community Bancshares, Inc. | NY | DCOM | 4,645 | 10.29 | 9.20 | 1.06 | 10.19 | 17.03 | 633.3 | 13.0 | 14.1 | 132.5 | 150.0 | 13.64 | 3.29 |
Elmira Savings Bank | NY | ESBK | 573 | 9.47 | 7.46 | 0.65 | 6.34 | 19.67 | 53.6 | 20.7 | 21.9 | 120.4 | 167.0 | 9.51 | 4.68 |
Entegra Financial Corp. | NC | ENFC | 970 | 13.11 | 13.11 | 2.56 | 24.81 | 17.56 | 115.0 | 5.0 | 4.9 | 90.4 | 90.4 | 11.86 | 0.00 |
Equitable Financial Corp. | NE | EQFN | NA | NA | NA | NA | NA | 8.03 | 27.9 | NA | NA | 134.1 | 134.1 | 13.89 | 0.00 |
ESSA Bancorp, Inc. | PA | ESSA | 1,599 | 10.72 | 10.03 | 0.63 | 5.74 | 12.93 | 147.6 | 13.9 | 13.7 | 86.2 | 92.8 | 9.24 | 2.78 |
EverBank Financial Corp | FL | EVER | 24,120 | 7.54 | 7.35 | 0.64 | 7.88 | 19.78 | 2,465.0 | 19.6 | NA | 147.6 | 152.1 | 10.28 | 1.21 |
First Capital, Inc. | IN | FCAP | 477 | 12.25 | 11.25 | 1.17 | 9.59 | 26.77 | 73.9 | 13.5 | 13.4 | 126.7 | 139.6 | 15.49 | 3.14 |
First Connecticut Bancorp, Inc. | CT | FBNK | 2,626 | 9.10 | 9.10 | 0.47 | 4.90 | 17.00 | 270.7 | 21.8 | 23.8 | 113.2 | 113.2 | 10.31 | 1.41 |
First Defiance Financial Corp. | OH | FDEF | 2,197 | 12.57 | 9.96 | 1.22 | 9.58 | 37.69 | 349.7 | 13.7 | 13.8 | 126.6 | 164.5 | 15.92 | 2.12 |
First Federal of No. Mich. Bancorp | MI | FFNM | 326 | 9.53 | 9.21 | 0.85 | 8.88 | 6.39 | 23.8 | 8.1 | 13.9 | 76.7 | 79.6 | 7.31 | 1.88 |
First Financial Northwest, Inc. | WA | FFNW | 944 | 18.80 | 18.80 | 1.10 | 5.67 | 12.24 | 176.5 | 17.0 | 17.0 | 100.3 | 100.3 | 18.86 | 1.96 |
III- 1 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit III (continued)
Financial and Market Data for All Public Thrifts
Total | Tang. | Closing | Total | Price/ | Price/ | Price/ | Price/ | Price/ | |||||||
Total | Equity/ | Equity/ | LTM | LTM | Price | Market | LTM | Core | Book | Tang. | Total | Div. | |||
Assets | Assets | Assets | ROA | ROE | 8/31/15 | Value | EPS | EPS | Value | Book | Assets | Yield | |||
Company | State | Ticker | ($mil.) | (%) | (%) | (%) | (%) | ($) | ($mil.) | (x) | (x) | (%) | (%) | (%) | (%) |
First Northwest Bancorp | WA | FNWB | 937 | 20.35 | NA | (0.58) | (4.13) | 12.00 | 157.2 | NM | 119.7 | 82.4 | NA | 16.78 | 0.00 |
Flagstar Bancorp, Inc. | MI | FBC | 12,139 | 11.95 | 11.95 | 0.57 | 4.32 | 20.33 | 1,147.3 | 35.7 | 13.7 | 96.9 | 96.9 | 9.66 | 0.00 |
Fox Chase Bancorp, Inc. | PA | FXCB | 1,090 | 15.95 | 15.95 | 0.86 | 5.30 | 17.26 | 199.6 | 20.8 | 20.1 | 114.9 | 114.9 | 18.32 | 3.24 |
FS Bancorp, Inc. | WA | FSBW | 569 | 12.46 | 12.46 | 1.48 | 11.50 | 23.25 | 75.3 | 9.2 | 9.2 | 106.3 | 106.3 | 13.25 | 1.20 |
Georgetown Bancorp, Inc. | MA | GTWN | 272 | 11.37 | 11.37 | 0.54 | 4.81 | 18.97 | 34.7 | 23.1 | 23.1 | 112.2 | 112.2 | 12.76 | 1.00 |
Hamilton Bancorp, Inc. | MD | HBK | 291 | 20.69 | 19.92 | (0.00) | (0.01) | 13.67 | 46.7 | NM | NM | 77.5 | 81.2 | 16.03 | 0.00 |
Hingham Institution for Savings | MA | HIFS | 1,634 | 7.94 | 7.94 | 1.18 | 14.83 | 116.98 | 249.0 | 13.7 | 13.7 | 191.9 | 191.9 | 15.24 | 0.96 |
HMN Financial, Inc. | MN | HMNF | 564 | 11.97 | 11.97 | 0.73 | 5.81 | 11.50 | 51.6 | 15.1 | 15.1 | 76.4 | 76.4 | 9.14 | 0.00 |
Home Federal Bancorp, Inc. | LA | HFBL | 370 | 11.73 | 11.73 | 0.96 | 7.51 | 22.00 | 46.4 | 13.3 | 13.4 | 107.0 | 107.0 | 12.55 | 1.45 |
HomeStreet, Inc. | WA | HMST | 4,866 | 9.20 | 8.81 | 0.87 | 9.33 | 22.26 | 491.3 | 12.0 | 10.7 | 109.7 | 115.0 | 10.09 | 0.00 |
IF Bancorp, Inc. | IL | IROQ | 564 | 14.27 | 14.27 | 0.60 | 3.92 | 16.85 | 68.7 | 20.3 | 20.1 | 85.5 | 85.5 | 12.19 | 0.59 |
Investors Bancorp, Inc. | NJ | ISBC | 20,037 | 17.01 | 16.63 | 0.91 | 4.81 | 11.78 | 4,070.0 | 24.0 | 23.7 | 120.2 | 123.5 | 20.44 | 1.70 |
Jacksonville Bancorp, Inc. | IL | JXSB | 306 | 14.91 | 14.14 | 1.02 | 6.92 | 23.56 | 42.2 | 13.5 | 15.0 | 92.5 | 98.3 | 13.78 | 1.36 |
Kearny Financial Corp. | NJ | KRNY | 4,237 | 27.55 | NA | 0.15 | 0.98 | 11.35 | 1,061.5 | NM | 89.2 | 90.9 | 273.1 | 25.05 | 0.00 |
La Porte Bancorp, Inc. | IN | LPSB | 521 | 15.99 | 14.58 | 0.90 | 5.59 | 14.05 | 78.2 | 16.1 | 16.2 | 94.2 | 105.1 | 15.07 | 1.14 |
Lake Sunapee Bank Group | NH | LSBG | 1,512 | 9.44 | 6.15 | 0.69 | 7.15 | 14.59 | 121.9 | 11.9 | 11.4 | 90.3 | 149.2 | 8.10 | 3.84 |
Madison County Financial, Inc. | NE | MCBK | 318 | 19.69 | 19.45 | 1.06 | 5.20 | 19.40 | 57.6 | 16.7 | 16.3 | 91.8 | 93.2 | 18.09 | 1.29 |
Malvern Bancorp, Inc. | PA | MLVF | 624 | 12.79 | 12.79 | 0.47 | 3.59 | 15.53 | 101.9 | 34.5 | 38.3 | 127.6 | 127.6 | 16.32 | 0.00 |
Melrose Bancorp, Inc. | MA | MELR | 218 | 21.00 | 21.00 | (0.11) | (0.64) | 14.30 | 40.5 | NA | NA | 88.4 | 88.4 | 18.57 | 0.00 |
Meridian Bancorp, Inc. | MA | EBSB | 3,302 | 17.82 | 17.48 | 0.74 | 4.32 | 12.74 | 700.3 | 28.3 | 33.4 | 119.0 | 121.8 | 21.21 | 0.94 |
Meta Financial Group, Inc. | SD | CASH | 2,310 | 9.06 | 8.20 | 0.76 | 8.80 | 43.42 | 301.7 | 17.0 | 14.3 | 144.1 | 160.8 | 13.06 | 1.20 |
MSB Financial Corp. | NJ | MSBF | 417 | 9.90 | 9.90 | 0.11 | 0.98 | 11.20 | 66.7 | NM | 159.6 | 155.0 | 155.0 | 15.34 | 0.00 |
New York Community Bancorp, Inc. | NY | NYCB | 48,649 | 11.95 | 7.30 | 1.02 | 8.53 | 17.66 | 7,846.7 | 15.8 | 15.8 | 135.0 | 232.6 | 16.13 | 5.66 |
Northfield Bancorp, Inc. | NJ | NFBK | 3,147 | 17.72 | 17.28 | 0.64 | 3.15 | 14.97 | 684.4 | 35.6 | 35.5 | 123.3 | 127.1 | 21.85 | 1.87 |
Northwest Bancshares, Inc. | PA | NWBI | 7,865 | 13.58 | 11.58 | 0.84 | 6.20 | 12.84 | 1,305.4 | 17.6 | 17.5 | 113.9 | 136.7 | 15.47 | 4.36 |
Ocean Shore Holding Co. | NJ | OSHC | 1,019 | 10.49 | 10.04 | 0.64 | 6.23 | 15.78 | 101.0 | 14.6 | 14.5 | 92.4 | 97.0 | 9.69 | 1.52 |
OceanFirst Financial Corp. | NJ | OCFC | 2,395 | 9.25 | 9.25 | 0.87 | 9.36 | 18.42 | 320.2 | 14.9 | 15.2 | 139.0 | 139.0 | 12.86 | 2.82 |
Oritani Financial Corp. | NJ | ORIT | 3,353 | 15.44 | 15.44 | 1.44 | 9.10 | 15.08 | 663.7 | 13.7 | 16.5 | 128.2 | 128.2 | 19.79 | 4.64 |
Pathfinder Bancorp, Inc. | NY | PBHC | 600 | 11.67 | 10.97 | 0.50 | 4.52 | 10.92 | 47.5 | 17.0 | 19.0 | 83.9 | 91.5 | 8.10 | 1.10 |
Poage Bankshares, Inc. | KY | PBSK | 432 | 16.31 | 15.76 | 0.97 | 6.01 | 15.43 | 60.9 | 13.8 | 15.9 | 86.5 | 90.1 | 14.10 | 1.56 |
Polonia Bancorp, Inc. | PA | PBCP | 291 | 13.39 | 13.39 | 0.03 | 0.25 | 12.29 | 41.0 | NM | NM | 105.0 | 105.0 | 14.06 | 0.00 |
Provident Financial Holdings, Inc. | CA | PROV | 1,175 | 12.02 | 12.02 | 0.87 | 6.81 | 16.39 | 141.5 | 15.3 | 15.3 | 100.3 | 100.3 | 12.05 | 2.93 |
Provident Financial Services, Inc. | NJ | PFS | 8,751 | 13.34 | 8.84 | 0.96 | 7.12 | 18.94 | 1,236.8 | 14.5 | 13.7 | 105.9 | 168.2 | 14.13 | 3.38 |
Prudential Bancorp, Inc. | PA | PBIP | 504 | 24.22 | 24.22 | 0.50 | 2.02 | 14.51 | 125.0 | 53.7 | 134.8 | 105.3 | 105.3 | 25.49 | 0.83 |
III- 2 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit III (continued)
Financial and Market Data for All Public Thrifts
Total | Tang. | Closing | Total | Price/ | Price/ | Price/ | Price/ | Price/ | |||||||
Total | Equity/ | Equity/ | LTM | LTM | Price | Market | LTM | Core | Book | Tang. | Total | Div. | |||
Assets | Assets | Assets | ROA | ROE | 8/31/15 | Value | EPS | EPS | Value | Book | Assets | Yield | |||
Company | State | Ticker | ($mil.) | (%) | (%) | (%) | (%) | ($) | ($mil.) | (x) | (x) | (%) | (%) | (%) | (%) |
Riverview Bancorp, Inc. | WA | RVSB | 860 | 12.21 | 9.52 | 0.64 | 5.24 | 4.42 | 99.5 | 18.4 | 18.7 | 95.3 | 126.1 | 11.57 | 1.13 |
Severn Bancorp, Inc. | MD | SVBI | 782 | 10.89 | 10.85 | 0.62 | 5.84 | 4.85 | 48.9 | 19.4 | 19.4 | 83.6 | 84.1 | 6.48 | 0.00 |
SI Financial Group, Inc. | CT | SIFI | 1,409 | 10.83 | 9.65 | 0.33 | 2.88 | 11.34 | 138.7 | 31.5 | 29.5 | 90.9 | 103.3 | 9.84 | 1.41 |
Sunshine Bancorp, Inc. | FL | SBCP | 477 | 14.01 | 12.31 | (1.15) | (4.53) | 14.09 | 59.6 | NA | NA | 97.5 | 114.9 | 12.65 | 0.00 |
Territorial Bancorp Inc. | HI | TBNK | 1,743 | 12.53 | 12.53 | 0.84 | 6.58 | 25.96 | 252.3 | 17.0 | 17.8 | 115.6 | 115.6 | 14.48 | 2.62 |
Timberland Bancorp, Inc. | WA | TSBK | 790 | 11.05 | 10.41 | 0.92 | 8.32 | 10.35 | 73.0 | 10.5 | 10.8 | 83.6 | 89.4 | 9.24 | 2.71 |
TrustCo Bank Corp NY | NY | TRST | 4,741 | 8.49 | 8.48 | 0.92 | 10.81 | 5.92 | 563.3 | 13.1 | 13.3 | 139.8 | 140.0 | 11.87 | 4.43 |
United Community Bancorp | IN | UCBA | 521 | 13.71 | 13.22 | 0.49 | 3.55 | 13.95 | 64.6 | 24.5 | 21.4 | 90.0 | 93.9 | 12.40 | 1.72 |
United Community Financial Corp. | OH | UCFC | 1,923 | 12.30 | 12.30 | 0.74 | 5.61 | 4.99 | 238.4 | 18.5 | 18.8 | 100.8 | 100.8 | 12.40 | 2.00 |
United Financial Bancorp, Inc. | CT | UBNK | 5,681 | 10.77 | 8.79 | 0.70 | 6.04 | 12.55 | 621.3 | 16.7 | 11.9 | 101.5 | 127.2 | 10.93 | 3.82 |
Waterstone Financial, Inc. | WI | WSBF | 1,737 | 23.11 | 23.08 | 0.86 | 3.48 | 12.88 | 386.8 | 26.8 | 26.9 | 98.5 | 98.7 | 22.77 | 1.55 |
Wayne Savings Bancshares, Inc. | OH | WAYN | 421 | 9.36 | 8.99 | 0.47 | 4.94 | 13.02 | 36.2 | 18.3 | 18.3 | 91.9 | 96.0 | 8.60 | 2.76 |
Wellesley Bancorp, Inc. | MA | WEBK | 562 | 8.98 | 8.98 | 0.38 | 4.05 | 19.50 | 48.0 | 22.7 | 22.7 | 95.0 | 95.0 | 8.53 | 0.62 |
Westbury Bancorp, Inc. | WI | WBB | 629 | 12.23 | 12.23 | 0.21 | 1.50 | 17.43 | 76.9 | 60.1 | 46.3 | 99.9 | 99.9 | 12.22 | 0.00 |
Westfield Financial, Inc. | MA | WFD | 1,362 | 10.27 | 10.27 | 0.44 | 4.11 | 7.50 | 138.7 | 22.7 | 27.4 | 99.2 | 99.2 | 10.19 | 1.60 |
Wolverine Bancorp, Inc. | MI | WBKC | 358 | 17.30 | 17.30 | 0.98 | 5.49 | 25.90 | 57.2 | 16.1 | 18.8 | 92.4 | 92.4 | 15.98 | 2.32 |
WSFS Financial Corporation | DE | WSFS | 5,077 | 9.85 | 8.84 | 1.03 | 10.12 | 27.53 | 768.0 | 15.9 | 13.9 | 153.6 | 173.1 | 15.13 | 0.73 |
WVS Financial Corp. | PA | WVFC | 330 | 9.72 | 9.72 | 0.43 | 4.22 | 10.91 | 22.3 | 16.5 | NA | 69.5 | 69.5 | 6.75 | 1.47 |
Average | 3,056 | 13.62 | 12.79 | 0.79 | 6.53 | 988.75 | 457.1 | 21.6 | 26.7 | 110.9 | 120.8 | 14.19 | 1.47 | ||
Median | 987 | 12.26 | 11.84 | 0.71 | 5.54 | 14.51 | 125.0 | 17.3 | 18.3 | 101.5 | 107.0 | 13.61 | 1.29 |
(1) Public thrifts traded on NYSE, NYSE Amex, and NASDAQ; excludes companies subject to pending acquisitions or mutual holding company ownership.
Source: SNL Financial; Feldman Financial.
III- 3 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit IV-1
Pro Forma Assumptions for Conversion Stock Offering
1. | The total amount of the net offering proceeds was fully invested at the beginning of the applicable period. |
2. | In connection with the Conversion, it is assumed that a charitable foundation will be established by the Association and funded with a contribution of $100,000 in cash along with the issuance of common stock shares equal to 4.0% of the total shares sold in the stock offering. |
3. | The net offering proceeds are invested to yield a return of 0.64%, which represented the yield on two-year U.S. Treasury securities at June 30, 2015. The effective combined federal and state income tax rate was assumed to be 38.6%, resulting in a net after-tax yield of 0.39%. |
4. | It is assumed that 8.0% of the total shares of common stock to be sold in the offering will be acquired by the Association's employee stock ownership plan ("ESOP"). Pro forma adjustments have been made to earnings and equity to reflect the impact of the ESOP. The annual expense is estimated based on a 25-year loan to the ESOP from the Company. No re-investment is assumed on proceeds used to fund the ESOP. |
5. | It is assumed that that the Association's restricted stock plan ("RSP") will purchase in the open market a number of shares equal to 4.0% of the total shares sold in the offering. Also, it is assumed that these shares are acquired at the initial public offering price of $10.00 per share. Pro forma adjustments have been made to earnings and equity to reflect the impact of the RSP. The annual expense is estimated based on a five-year vesting period. No re-investment is assumed on proceeds used to fund the RSP. |
6. | It is assumed that an additional 10.0% of the total shares sold in the offering will be reserved for issuance by the Association's stock option plan. The pro forma net income has been adjusted to reflect the expense associated with the granting of options at an assumed options value of $3.35 per share. It is further assumed that options for all shares reserved under the plan were granted to plan participants at the beginning of the period and 25% were non-qualified options for income tax purposes, the options would vest at a rate of 20% per year, and compensation expense will be recognized on a straight-line basis over the five-year vesting period |
7. | The fair value of stock options has been estimated at $3.35 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; dividend yield of 0.00%; an expected option life of 10 years; a risk-free interest rate of 2.35%; and a volatility rate of 19.30% based on an index of publicly traded thrift institutions. |
8. | Total offering expenses are estimated at $1,211,000. |
9. | No effect has been given to withdrawals from deposit accounts for the purpose of purchasing common stock in the offering. |
10. | No effect has been given in the pro forma equity calculation for the assumed earnings on the net proceeds. |
IV- 1 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit IV-2
Central Federal Savings and Loan Association of Rolla
Pro Forma Conversion Valuation Range
Historical Financial Data as of June 30, 2015
(Dollars in Thousands, Except Per Share Data)
Minimum | Midpoint | Maximum | Adj. Max. | |||||
Total shares outstanding | 1,149,200 | 1,352,000 | 1,554,800 | 1,788,020 | ||||
Shares sold in the offering | 1,105,000 | 1,300,000 | 1,495,000 | 1,719,250 | ||||
Shares issued to foundation | 44,200 | 52,000 | 59,800 | 68,770 | ||||
Offering price | $10.00 | $10.00 | $10.00 | $10.00 | ||||
Pro forma market value | $11,492 | $13,520 | $15,548 | $17,880 | ||||
Gross proceeds | $11,050 | $13,000 | $14,950 | $17,193 | ||||
Less: estimated offering expenses | (1,211 | ) | (1,211 | ) | (1,211 | ) | (1,211 | ) |
Net conversion proceeds | 9,839 | 11,789 | 13,739 | 15,982 | ||||
Less: cash contribution to foundation | (100 | ) | (100 | ) | (100 | ) | (100 | ) |
Less: ESOP purchase | (919 | ) | (1,082 | ) | (1,244 | ) | (1,430 | ) |
Less: RSP purchase | (460 | ) | (541 | ) | (622 | ) | (715 | ) |
Net investable proceeds | $8,360 | $10,066 | $11,773 | $13,737 | ||||
Net Income: | ||||||||
Historical LTM ended 6/30/15 | $162 | $162 | $162 | $162 | ||||
Pro forma income on net proceeds | 33 | 39 | 46 | 54 | ||||
Pro forma ESOP adjustment | (23 | ) | (27 | ) | (31 | ) | (35 | ) |
Pro forma RSP adjustment | (56 | ) | (66 | ) | (76 | ) | (88 | ) |
Pro forma option adjustment | (70 | ) | (82 | ) | (94 | ) | (108 | ) |
Pro forma net income [excl. contribution] | $46 | $26 | $7 | ($15 | ) | |||
Pro forma earnings per share | $0.04 | $0.02 | $0.00 | ($0.01 | ) | |||
Core Earnings: | ||||||||
Historical LTM ended 6/30/15 | $162 | $162 | $162 | $162 | ||||
Pro forma income on net proceeds | 33 | 39 | 46 | 54 | ||||
Pro forma ESOP adjustment | (23 | ) | (27 | ) | (31 | ) | (35 | ) |
Pro forma RSP adjustment | (56 | ) | (66 | ) | (76 | ) | (88 | ) |
Pro forma option adjustment | (70 | ) | (82 | ) | (94 | ) | (108 | ) |
Pro forma core earnings [excl. contribution] | $46 | $26 | $7 | ($15 | ) | |||
Pro forma core earnings per share | $0.04 | $0.02 | $0.00 | ($0.01 | ) | |||
Total Equity | $13,664 | $13,664 | $13,664 | $13,664 | ||||
Net conversion proceeds | 9,839 | 11,789 | 13,739 | 15,982 | ||||
Plus: common stock issued to foundation | 442 | 520 | 598 | 688 | ||||
Less: charitable contribution expense, net | (333 | ) | (381 | ) | (429 | ) | (484 | ) |
Less: ESOP purchase | (919 | ) | (1,082 | ) | (1,244 | ) | (1,430 | ) |
Less: RSP purchase | (460 | ) | (541 | ) | (622 | ) | (715 | ) |
Pro forma total equity | $22,233 | $23,969 | $25,706 | $27,705 | ||||
Pro forma book value | $19.35 | $17.73 | $16.53 | $15.49 | ||||
Tangible Equity | $13,664 | $13,664 | $13,664 | $13,664 | ||||
Net conversion proceeds | 9,839 | 11,789 | 13,739 | 15,982 | ||||
Plus: common stock issued to foundation | 442 | 520 | 598 | 688 | ||||
Less: charitable contribution expense, net | (333 | ) | (381 | ) | (429 | ) | (484 | ) |
Less: ESOP purchase | (919 | ) | (1,082 | ) | (1,244 | ) | (1,430 | ) |
Less: RSP purchase | (460 | ) | (541 | ) | (622 | ) | (715 | ) |
Pro forma tangible equity | $22,233 | $23,969 | $25,706 | $27,705 | ||||
Pro forma tangible book value | $19.35 | $17.73 | $16.53 | $15.49 | ||||
Total Assets | $62,424 | $62,424 | $62,424 | $62,424 | ||||
Net conversion proceeds | 9,839 | 11,789 | 13,739 | 15,982 | ||||
Plus: common stock issued to foundation | 442 | 520 | 598 | 688 | ||||
Less: charitable contribution expense, net | (333 | ) | (381 | ) | (429 | ) | (484 | ) |
Less: ESOP purchase | (919 | ) | (1,082 | ) | (1,244 | ) | (1,430 | ) |
Less: RSP purchase | (460 | ) | (541 | ) | (622 | ) | (715 | ) |
Pro forma total assets | $70,993 | $72,729 | $74,466 | $76,465 |
IV- 2 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit IV-3
Pro Forma Conversion Analysis at the Maximum Valuation
Central Federal Savings and Loan Association of Rolla
Historical Financial Data as of June 30, 2015
IV- 3 |
FELDMAN FINANCIAL ADVISORS, INC. |
Exhibit IV-4
Comparative Valuation Ratio Differential
Pro Forma Conversion Valuation
Computed from Market Price Data as of August 31, 2015
Comparative | All Public | ||||||||||||
Valuation | Central | Group | Thrifts (1) | ||||||||||
Ratio | Symbol | Federal | Average | Median | Average | Median | |||||||
Price / LTM EPS | P/E | 17.9 | 16.1 | 21.6 | 17.3 | ||||||||
Minimum | (x) | NM | NA | NA | NA | NA | |||||||
Midpoint | NM | NA | NA | NA | NA | ||||||||
Maximum | NM | NA | NA | NA | NA | ||||||||
Adj. Maximum | NM | NA | NA | NA | NA | ||||||||
Price / Core EPS | P/E | 18.7 | 16.3 | 26.7 | 18.3 | ||||||||
Minimum | (x) | NM | NA | NA | NA | NA | |||||||
Midpoint | NM | NA | NA | NA | NA | ||||||||
Maximum | NM | NA | NA | NA | NA | ||||||||
Adj. Maximum | NM | NA | NA | NA | NA | ||||||||
Price / Book Value | P/B | 88.2 | 91.8 | 110.9 | 101.5 | ||||||||
Minimum | (%) | 51.7 | -41.4% | -43.7% | -53.4% | -49.1% | |||||||
Midpoint | 56.4 | -36.0% | -38.6% | -49.1% | -44.4% | ||||||||
Maximum | 60.5 | -31.4% | -34.1% | -45.4% | -40.4% | ||||||||
Adj. Maximum | 64.6 | -26.8% | -29.7% | -41.8% | -36.4% | ||||||||
Price / Tangible Book | P/TB | 91.1 | 92.4 | 120.8 | 107.0 | ||||||||
Minimum | (%) | 51.7 | -43.3% | -44.0% | -57.2% | -51.7% | |||||||
Midpoint | 56.4 | -38.1% | -38.9% | -53.3% | -47.3% | ||||||||
Maximum | 60.5 | -33.6% | -34.5% | -49.9% | -43.5% | ||||||||
Adj. Maximum | 64.6 | -29.2% | -30.1% | -46.6% | -39.7% | ||||||||
Price / Total Assets | P/A | 12.1 | 12.4 | 14.2 | 13.6 | ||||||||
Minimum | (%) | 16.2 | 33.6% | 30.6% | 14.0% | 18.9% | |||||||
Midpoint | 18.6 | 53.5% | 50.0% | 31.0% | 36.6% | ||||||||
Maximum | 20.9 | 72.4% | 68.4% | 47.1% | 53.4% | ||||||||
Adj. Maximum | 23.4 | 93.0% | 88.6% | 64.7% | 71.8% | ||||||||
(1) Excludes companies subject to MHC ownership or pending acquisition.
IV- 4 |
Exhibit 99.2
RP ® FINANCIAL, LC. | |
Advisory | Planning | Valuation |
April 28, 2015
Mr. William A. Stoltz
President and Chief Executive Officer
Central Federal Savings & Loan Association of Rolla
210 West 10 th Street
Rolla, MO 65401
Dear Mr. Stoltz:
This letter sets forth the agreement between Central Federal Savings & Loan Association of Rolla, Missouri (the “Association”), and RP ® Financial, LC. (“RP Financial”), whereby the Association has engaged RP Financial to provide certain strategic planning services as well as the preparation of the written business plan and financial projections to be adopted by the Board of Directors in conjunction with the filing of the regulatory application for the proposed mutual-to-stock conversion. In addition, RP Financial will prepare the related presentation materials for any pre-filing meetings with the regulators that may be required in advance of the conversion application filing, as well as summary materials for review by the Board.
These business plan services, timetable, deliverables and fee schedule are described in greater detail below. The undersigned will direct this engagement, and will be assisted by other members of our staff, including a Director, supported by a Consulting Associate or an Associate.
Description of Proposed Services
RP Financial’s business planning services will include: preliminary strategic planning with the Board and/or management; the preparation of pro forma financial projections reflecting post-conversion strategies; the preparation of presentation materials for any pre-filling meetings that may be required by the regulators in advance of filing the application, as well as for review by the Board; and the preparation of the written business plan consistent with the interagency business planning requirements for application purposes. Finally, if necessary, RP Financial will prepare amendments to the business plan reflecting required changes by the regulators, or updates or amendments to the plan required by the Association, to reflect changes in strategies, external factors and structural changes to the conversion transaction that may have a significant on the business plan and projected financial results.
Specifically, RP Financial’s business planning services will include the following:
(1) | Evaluating the Association’s current financial and operating condition, business strategies and anticipated strategies in the future, taking into account the pro forma impact of the conversion offering proceeds on earnings, capital, ability to grow, etc.; |
(2) | Analyzing and quantifying the impact of business strategies, incorporating the net offering proceeds in the short and long term at both the Association and holding company levels; |
Mr. William A. Stoltz
April 28, 2015
Page 2
(3) | Preparing detailed financial projections on a quarterly basis for at least three years following the anticipated close of the offering to reflect the impact of Board approved business strategies and use of proceeds; |
(4) | Preparing the written business plan document which conforms with the applicable interagency regulatory guidelines, including the description of the use of proceeds and the manner in which the convenience and needs of the community will be addressed on a post-conversion basis; and |
(5) | Preparing the detailed schedules of the capitalization of the Association and holding company and related cash flows, including anticipated dividends and stock repurchases, deposits of holding company cash into the Association, and, intercompany transactions. |
Consistent with the interagency regulatory business plan guidelines, specific contents of the business plan will include: Executive Summary; Description of Business; Marketing Plan; Management Plan; Records, Systems and Controls; Financial Management Plan; Monitoring and Revising the Plan; and Alternative Business Strategy.
RP Financial agrees to prepare the business plan and accompanying financial projections in writing such that the business plan conforming to regulatory guidelines can be filed with the appropriate federal and state regulatory agencies in conjunction with the filing of the regulatory applications. It is anticipated that the Board of Directors will approve the business plan and financial projections prior to the regulatory filing.
RP Financial will be responsible for preparing the business plan document and financial projections in a format consistent with the regulatory guidelines and which incorporates the Association’s post-offering balance sheet, use of proceeds, organization, operations and strategic initiatives. The Association’s responsibilities will be to provide RP Financial with requested information, meet with RP Financial to discuss the Association’s financial condition, strategies and proposed conversion and review the documents and financial projections on a timely basis to support RP Financial’s ability to respond to the timetables to be developed (this will include any review the Board of Directors may require).
Fee Structure and Payment Schedule
The Association agrees to compensate RP Financial for preparation and delivery of the business plan as shown below, plus reimbursable expenses. Payment of these fees shall be made accordingly to the following schedule:
· | $7,500 upon execution of this letter of agreement engaging RP Financial’s business plan services; |
· | $7,500 for the preparation of the presentation materials reflecting the strategic plan and financial projections for approval by the Board and submission to the regulators in conjunction with the application pre-filing requirements; and, |
Mr. William A. Stoltz
April 28, 2015
Page 3
· | $15,000 upon delivery of the completed business plan and financial projections to accompany the conversion application. |
The Association will reimburse RP Financial for reasonable out-of-pocket expenses incurred in preparation of the business plan. Such out-of-pocket expenses will likely include travel, printing, telephone, facsimile, shipping, reasonable counsel fees, computer and data services, and will not exceed $3,500 in the aggregate, without the Association’s authorization to exceed this level.
If an update to the business plan is required by either the Association or the regulators for changes in the Association’s financial characteristics, anticipated strategies, structure of the conversion, external factors, or for other reasons, the Association will compensate RP Financial with a fixed fee of $5,000 payable upon delivery of each required update plus reimbursable expenses. In the event that the processing of the conversion application is suspended or delayed by the Association or the regulators, then the Association and RP Financial will negotiate the subsequent update fee based on the length of the delay and the nature of the changes occurring in the interim period.
If during the course of the planning engagement, unforeseen events occur so as to materially change the nature or the work content of the business planning services described in this contract, the terms of said contract shall be subject to renegotiation by the Association and RP Financial. Such unforeseen events may include changes in regulatory requirements as it specifically relates to the Association or potential transactions that significantly impact the Association such as an acquisition or restructuring transaction.
In the event the Association shall, for any reason, discontinue this planning engagement prior to delivery of the completed business plan and payment of the progress payment fees, the Association agrees to compensate RP Financial according to RP Financial’s standard billing rates for consulting services based on accumulated and verifiable time expenses, not to exceed the fixed fee described above, plus reimbursable expenses incurred. RP Financial’s standard billing rates range from $75 per hour for associates to $450 per hour for managing directors.
Representations and Warranties
The Association and RP Financial agree to the following:
1. The Association agrees to make available or to supply to RP Financial such information with respect to its business and financial condition as RP Financial may reasonably request in order to provide the aforesaid business planning services. Such information heretofore or hereafter supplied or made available to RP Financial shall include: annual financial statements, periodic regulatory filings and material agreements, debt instruments, off balance sheet assets or liabilities, commitments and contingencies, unrealized gains or losses and corporate books and records. All information provided by the Association to RP Financial shall remain strictly confidential (unless such information is otherwise made available to the public other than as a result of a breach of this agreement by RP Financial). RP Financial agrees that (i) it will restrict disclosure of such information to only those representatives of RP Financial who reasonably need to have access to it; and (ii) it will use such information only for providing the services contemplated herein. If the conversion offering is not consummated or the services of
Mr. William A. Stoltz
April 28, 2015
Page 4
RP Financial are terminated hereunder, RP Financial shall upon request promptly return to the Association the original and any copies of such information and will destroy any analysis or other work derived from such information.
2. (a) The Association agrees that it will indemnify and hold harmless RP Financial, any affiliates of RP Financial, the respective directors, officers, agents and employees of RP Financial or their successors and assigns who act for or on behalf of RP Financial in connection with the services called for under this agreement (hereinafter referred to as “RP Financial”), from and against any and all losses, claims, damages and liabilities (including, but not limited to, all losses and expenses in connection with claims under the federal securities laws) actually incurred by RP Financial and attributable to (i) any untrue statement of a material fact contained in the financial statements or other information furnished or otherwise provided by an authorized officer of the Association to RP Financial, (ii) the omission of a material fact from the financial statements or other information furnished or otherwise made available by an authorized officer of the Association to RP Financial or (iii) any action or omission to act by the Association, or the Association’s respective officers, directors, employees or agents which action or omission is willful. Notwithstanding the foregoing, the Association will be under no obligation to indemnify RP Financial hereunder if a court determines that RP Financial was negligent or acted in bad faith or willfully with respect to any actions or omissions of RP Financial related to a matter for which indemnification is sought hereunder.
(b) RP Financial shall give written notice to the Association of such claim or facts within twenty days of the assertion of any claim or discovery of material facts upon which the RP Financial intends to base a claim for indemnification hereunder. In the event the Association elects, within fourteen days of the receipt of the original notice thereof, to contest such claim by written notice to RP Financial, RP Financial will be entitled to be paid any amounts payable by the Association hereunder, together with interest on such costs from the date incurred at the rate of the prime rate per annum within five days after the final determination of such contest either by written acknowledgement of the Association or a final judgment of a court of competent jurisdiction. If the Association does not so elect, RP Financial shall be paid promptly and in any event within thirty days after receipt by the Association of the notice of the claim.
(c) The Association shall pay for or reimburse the reasonable expenses, including attorneys’ fees, incurred by RP Financial in advance of the final disposition of any proceeding within thirty days of the receipt of such request if RP Financial furnishes the Association: (1) a written statement of RP Financial’s good faith belief that it is entitled to indemnification hereunder; and (2) a written undertaking to repay the advance if it ultimately is determined in a final adjudication of such proceeding that it or he is not entitled to such indemnification. RP Financial and any other indemnified person will endeavor in good faith to retain a single counsel unless doing so would present a conflict of interest.
(d) In the event the Association does not pay any indemnified loss or make advance reimbursements of expenses in accordance with the terms of this agreement, RP Financial shall have all remedies available at law or in equity to enforce such obligation. This agreement constitutes the entire understanding of the Association and RP Financial concerning the subject matter addressed herein. This agreement may not be modified, supplemented or amended except by written agreement executed by both parties.
Mr. William A. Stoltz
April 28, 2015
Page 5
The Association and RP Financial are not affiliated, and neither the Association nor RP Financial has an economic interest in, or is held in common with, the other and has not derived a significant portion of its gross revenues, receipts or net income for any period from transactions with the other.
* * * * * * * * * * *
Please acknowledge your agreement to the foregoing by signing as indicated below and returning to RP Financial a signed copy of this letter and the initial retainer of $7,500.
Sincerely,
/s/ Ronald S. Riggins
Ronald S. Riggins
President and Managing Director
Agreed To and Accepted By: | Mr. William A. Stoltz | /s/ William A. Stoltz |
President |
With Board of Directors Approval of Central Federal Savings & Loan Association of Rolla, MO
Date Executed: | May 4, 2015 |
Exhibit 99.3
Feldman Financial Advisors, Inc.
1001 Connecticut Avenue, NW, Suite 840
Washington, DC 20036
(202) 467-6862 • Fax (202) 467-6963
May 5, 2015 |
Confidential
Board of Directors
Central Federal Savings and Loan
Association of Rolla
210 West 10th Street
Rolla, Missouri 65401
Members of the Board:
This letter sets forth the agreement (“Agreement”) between Central Federal Savings and Loan Association of Rolla (“Central” or the “Association”) and Feldman Financial Advisors, Inc. (“FFA”), whereby Central has engaged FFA to provide an independent appraisal of the estimated aggregate pro forma market value (the “Valuation”) of the shares of common stock that are to be issued and sold by the Association (or, if applicable, its newly formed holding company) in connection with the conversion (“Conversion”) of the Association from the mutual form of organization to the stock form.
FFA agrees to deliver the Valuation, in a written report, to Central at the address above on or before a mutually agreed upon date. Further, FFA agrees to perform such other services as are necessary or required of the independent appraiser in connection with comments from Central’s regulatory authorities and subsequent updates of the Valuation as from time to time may be necessary, both after initial approval by Central’s regulatory authorities and prior to the time the Conversion is completed. If requested, FFA will assist Central in responding to all regulatory inquiries regarding the Valuation and will also assist Central at all meetings with the regulatory authorities concerning the Valuation.
Central agrees to pay FFA a professional consulting fee for FFA’s appraisal services related to preparation of the initial appraisal report and subsequent appraisal updates. Central also agrees to reimburse FFA for certain out-of-pocket expenses necessary and incident to the completion of the services described above. These expenses shall not exceed $2,500 without the prior consent of Central. Reimbursable expenses for copying, report reproduction, data materials, express mail delivery, and travel shall be paid to FFA as incurred and billed. Payment of the professional consulting fee shall be made according to the following schedule:
· | $ 5,000 upon execution of this Agreement; |
· | $25,000 upon delivery of the completed appraisal report to Central; and, |
· | $ 5,000 upon completion of each updated appraisal as necessary. |
Feldman Financial Advisors, Inc.
Board of Directors
Central Federal Savings and Loan
Association of Rolla
May 5, 2015
Page 2
If, during the course of the Conversion, unforeseen events occur so as to materially change the nature of the work content of the appraisal services described above such that FFA must supply services beyond that contemplated at the time this contract was executed, the terms of this Agreement shall be subject to renegotiation by Central and FFA. Such unforeseen events shall include, but not be limited to, material changes in regulations governing the Conversion, material changes in mutual-to-stock appraisal guidelines or processing procedures as administered by the relevant regulatory authorities, major changes in Central’s management or operating policies, and excessive delays or suspension of processing of the Conversion.
In the event Central shall for any reason discontinue the Conversion prior to delivery of the completed appraisal report and payment of the progress payment fee totaling $25,000, Central agrees to compensate FFA according to FFA’s standard billing rates for consulting appraisal services based on accumulated and verifiable time expended, provided that the total of such charges shall not exceed $25,000 plus reimbursable expenses.
In order to induce FFA to render the aforesaid services, Central agrees to the following:
1. | Central agrees to supply FFA such information with respect to Central’s business and financial condition as FFA may reasonably request in order for FFA to perform the appraisal services. Such information shall include, without limitation: annual financial statements, periodic regulatory filings and material agreements, corporate books and records, and such other documents as are material for the performance by FFA of the appraisal services. |
2. | Central hereby represents and warrants to FFA (i) that to its best knowledge any information provided to FFA by or on behalf of Central, will not, at any relevant time, contain any untrue statement of a material fact or fail to state a material fact necessary to make the information or statements therein not false or misleading, (ii) that Central will not use the product of FFA’s services in any manner, including in a proxy or offering circular, in connection with any untrue statement of a material fact or in connection with the failure to state a material fact necessary to make other statements not false or misleading, and (iii) that all documents incorporating or relying upon FFA’s services or the product of FFA’s services will otherwise comply with all applicable federal and state laws and regulations. |
Feldman Financial Advisors, Inc.
Board of Directors
Central Federal Savings and Loan
Association of Rolla
May 5, 2015
Page 3
3. | Any valuations or opinions issued by FFA may be included in its entirety in any communication by Central in any regulatory application, proxy statement or offering prospectus; provided that, such valuation or opinion may not be disclosed in the prospectus, nor reproduced and distributed, nor may FFA be referred to in the prospectus without FFA’s prior written consent. |
4. | FFA’s Valuation will be based upon Central’s representation that the information contained in the Conversion application and additional information furnished to us by Central and its independent auditors is truthful, accurate, and complete in all material respects. FFA will not independently verify the financial statements and other information provided by Central and its independent auditors, nor will FFA independently value the assets or liabilities of Central. The Valuation will consider Central only as a going concern and will not be considered as an indication of the liquidation value of Central. |
5. | FFA’s Valuation is not intended, and must not be represented to be, a recommendation of any kind as to the advisability of purchasing shares of common stock in the Conversion. 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, FFA will give no assurance that persons who purchase shares of common stock in the Conversion will thereafter be able to sell such shares at prices related to FFA’s Valuation. |
6. | Central agrees to indemnify FFA and its affiliates and all persons employed by or associated with FFA or its affiliates against all claims, liabilities and related expenses, as incurred, arising out of this engagement, unless, upon final adjudication, such claims, liabilities and expenses are found to have resulted primarily from FFA’s bad faith, willful misconduct or gross negligence. No termination, completion or modification hereof shall limit or affect such indemnification obligation. In the event FFA becomes aware of a claim or a possible claim arising out of this Agreement, it shall notify Central as soon as possible. Central will attempt to resolve the claim. In the event Central is not able to resolve the claim, it has the option to retain legal counsel on behalf of FFA to defend the claim. |
Feldman Financial Advisors, Inc.
Board of Directors
Central Federal Savings and Loan
Association of Rolla
May 5, 2015
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7. | Central and FFA are not affiliated, and neither Central nor FFA has an economic interest in, or is held in common with, the other and has not derived a significant portion of its gross revenues, receipts or net income for any period from transactions with the other. It is understood that FFA is not a seller of securities within the scope of any federal or state securities law and any report prepared by FFA shall not be used as an offer or solicitation with respect to the purchase or sale of any security, it being understood that the foregoing shall not be construed to prohibit the filing of any such report as part of the Application for Conversion or Securities and Exchange Commission and blue sky filings or customary references thereto in applications, filings, proxy statements and prospectuses. |
Please acknowledge your concurrence with the foregoing by signing as indicated below and returning to FFA a signed copy of this Agreement and the $5,000 initial payment.
Sincerely, | |
Feldman Financial Advisors, Inc. | |
/s/ Trent R. Feldman | |
Trent R. Feldman | |
President |
AGREED TO AND ACCEPTED FOR | ||
Central Federal Savings and Loan Association of Rolla | ||
By: | /s/ William A. Stoltz | |
Name: | William A. Stoltz | |
Title: | President | |
Date: | May 12, 2015 |