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0001188112-10-001277.txt : 20100628
0001188112-10-001277.hdr.sgml : 20100628
20100511165503
ACCESSION NUMBER: 0001188112-10-001277
CONFORMED SUBMISSION TYPE: S-1/A
PUBLIC DOCUMENT COUNT: 9
FILED AS OF DATE: 20100511
DATE AS OF CHANGE: 20100517
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: Jacksonville Bancorp, Inc.
CENTRAL INDEX KEY: 0001484949
STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035]
IRS NUMBER: 000000000
STATE OF INCORPORATION: MD
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-1/A
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-165466
FILM NUMBER: 10821638
BUSINESS ADDRESS:
STREET 1: 1211 WEST MORTON AVENUE
CITY: JACKSONVILLE
STATE: IL
ZIP: 62650
BUSINESS PHONE: (217) 245-4111
MAIL ADDRESS:
STREET 1: 1211 WEST MORTON AVENUE
CITY: JACKSONVILLE
STATE: IL
ZIP: 62650
S-1/A
1
t67987_s1a.htm
S-1/A (PRE-EFFECTIVE AMENDMENT NO. 2)
t67987_s1a.htm
As
filed with the Securities and Exchange Commission on May
11 , 2010
Registration
No. 333-165466
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
PRE-EFFECTIVE
AMENDMENT NO. 2 TO THE FORM S-1
REGISTRATION
STATEMENT UNDER
THE
SECURITIES ACT OF 1933
Jacksonville
Bancorp, Inc. and
Jacksonville
Savings Bank 401(k) Profit Sharing Plan
(Exact
Name of Registrant as Specified in Its Charter)
Maryland |
6712 |
36-4670835 |
(State or Other
Jurisdiction of |
(Primary Standard
Industrial |
(I.R.S.
Employer |
Incorporation or
Organization) |
Classification Code
Number) |
Identification
Number) |
1211
West Morton Avenue
Jacksonville,
Illinois 62650
(217)
245-4111
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of
Registrant’s
Principal Executive Offices)
Mr.
Richard A. Foss
President
and Chief Executive Officer
1211
West Morton Avenue
Jacksonville,
Illinois 62650
(217)
245-4111
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of
Agent for
Service)
Copies
to:
Eric
Luse, Esq.
Alan
Schick, Esq.
Benjamin
Azoff, Esq.
Luse
Gorman Pomerenk & Schick, P.C.
5335
Wisconsin Avenue, N.W., Suite 780
Washington,
D.C. 20015
(202)
274-2000
Approximate date of commencement of
proposed sale to the public: As soon as practicable after this
registration statement becomes effective.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box: x
If this
Form is filed to register additional shares for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering: o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering: o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated
filer |
o |
|
Accelerated
filer |
o |
Non-accelerated
filer |
o |
|
Smaller reporting
company |
x |
(Do not check if a
smaller reportingcompany) |
|
|
CALCULATION
OF REGISTRATION FEE
Title
of each class of
securities
to be registered
|
Amount
to be
registered
|
Proposed
maximum
offering
price per share
|
Proposed
maximum
aggregate
offering price
|
Amount
of
registration
fee
|
Common
Stock, $0.01 par value per share
|
2,873,515
shares
|
$10.00
|
$28,735,150
(1)
|
$2,049(2)
|
Participation
interests
|
630,516
interests (3)
|
|
|
(3)
|
|
(1)
|
Estimated
solely for the purpose of calculating the registration
fee.
|
|
(2)
|
Previously
paid.
|
|
(3)
|
The
securities of Jacksonville Bancorp, Inc. to be purchased by Jacksonville
Savings Bank 401(k) Profit Sharing Plan are included in the amount shown
for the common stock. Accordingly, no separate fee is required for the
participation interests. In accordance with Rule 457(h) of the Securities
Act of 1933, as amended, the registration fee has been calculated on the
basis of the number of shares of common stock that may be purchased with
the current assets of such
plan.
|
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
Prospectus
Supplement
Interests
in
JACKSONVILLE
SAVINGS BANK
401(k)
PROFIT SHARING PLAN
Offering
of Participation Interests in up to 630,516 Shares of
JACKSONVILLE
BANCORP, INC.
Common
Stock
In
connection with the conversion of Jacksonville Bancorp, MHC from the mutual to
the stock form of organization, Jacksonville Bancorp, Inc., a newly
formed Maryland corporation (“Jacksonville Bancorp-Maryland”), is offering
shares of common stock for sale. Accordingly, in connection with the
conversion, Jacksonville Bancorp-Maryland is allowing participants in the
Jacksonville Savings Bank 401(k) Profit Sharing Plan (the “Plan”) to invest all
or a portion of their accounts in participation interests in the common stock of
Jacksonville Bancorp-Maryland (“Jacksonville Bancorp-Maryland Common Stock”).
Based upon the value of the Plan assets at December 31, 2009, the trustee of the
Plan could purchase up to 630,516 shares of Jacksonville Bancorp-Maryland Common
Stock, at the purchase price of $10.00 per share. This prospectus
supplement relates to the initial election of Plan participants to direct the
trustee of the Plan to invest all or a portion of their Plan accounts in
Jacksonville Bancorp-Maryland Common Stock at the time of the stock
offering.
The
prospectus of Jacksonville Bancorp-Maryland dated _______, 2010, is provided
with this prospectus supplement. It contains detailed information
regarding the reorganization and stock offering of Jacksonville Bancorp-Maryland
and the financial condition, results of operations and business of Jacksonville
Bancorp, Inc., the federal mid-tier holding company of Jacksonville Savings Bank
(“Jacksonville Bancorp-Federal”) and Jacksonville Savings Bank. This
prospectus supplement provides information regarding the Plan. You should read
this prospectus supplement together with the prospectus and keep both for future
reference.
________________________________
For
a discussion of risks that you should consider, see “Risk Factors” beginning on
page _____ of the prospectus.
The
interests in the Plan and the offering of the shares of Jacksonville
Bancorp-Maryland Common Stock have not been approved or disapproved by the
Office of Thrift Supervision, the Securities and Exchange Commission or any
other federal or state agency. Any representation to the contrary is
a criminal offense.
The
securities offered in this prospectus supplement are not deposits or accounts
and are not insured or guaranteed by the Federal Deposit Insurance Corporation
or any other government agency.
This
prospectus supplement may be used only in connection with offers and sales by
Jacksonville Bancorp-Maryland, in the stock offering, of participation interests
in Jacksonville Bancorp-Maryland Common Stock acquired by the
Plan. No one may use this prospectus supplement to reoffer or resell
interests in shares of Jacksonville Bancorp-Maryland Common Stock acquired
through the Plan.
You
should rely only on the information contained in this prospectus supplement and
the prospectus. Jacksonville Bancorp-Maryland, Jacksonville Savings
Bank and the Plan have not authorized anyone to provide you with information
that is different.
This
prospectus supplement does not constitute an offer to sell or solicitation of an
offer to buy any securities in any jurisdiction to any person to whom it is
unlawful to make an offer or solicitation in that
jurisdiction. Neither the delivery of this prospectus supplement and
the prospectus nor any sale of Jacksonville Bancorp-Maryland Common Stock or
participation interests representing an ownership interest in Jacksonville
Bancorp-Maryland Common Stock shall under any circumstances imply that there has
been no change in the affairs of Jacksonville Bancorp-Maryland, Jacksonville
Bancorp-Federal, Jacksonville Savings Bank, or the Plan since the date of this
prospectus supplement, or that the information contained in this prospectus
supplement or incorporated by reference is correct as of any time after the date
of this prospectus supplement.
The date
of this prospectus supplement is _________, 2010.
TABLE
OF CONTENTS
THE
OFFERING |
1
|
|
|
|
|
Securities
Offered
|
1
|
|
Election
to Purchase Common Stock
|
1
|
|
Purchase
Priorities
|
2
|
|
Minimum
and Maximum Investment
|
4
|
|
Value
of Plan Assets
|
4
|
|
How
to Order
|
4
|
|
Order
Deadline
|
5
|
|
Irrevocability
of Transfer Direction
|
6
|
|
Future
Direction to Purchase Common Stock
|
6
|
|
Voting
Rights of Common Stock
|
6
|
|
|
|
DESCRIPTION
OF THE PLAN |
8
|
|
|
|
|
Introduction
|
8
|
|
Eligibility
and Participation
|
8
|
|
Contributions
Under the Plan
|
9
|
|
Limitations
on Contributions
|
9
|
|
Benefits
Under the Plan
|
9
|
|
Withdrawals
and Distributions from the Plan
|
10
|
|
Investment
of Contributions and Account Balances
|
11
|
|
Performance
History and Description of Funds
|
12
|
|
Administration
of the Plan
|
15
|
|
Amendment
and Termination
|
15
|
|
Merger,
Consolidation or Transfer
|
16
|
|
Federal
Income Tax Consequences
|
16
|
|
Additional
Employee Retirement Income Security Act (“ERISA”)
Considerations
|
17
|
|
Securities
and Exchange Commission Reporting and Short-Swing Profit
Liability
|
17
|
|
Financial
Information Regarding Plan Assets
|
18
|
|
|
|
LEGAL
OPINION |
19
|
Securities
Offered
|
Jacksonville
Bancorp-Maryland is offering participation interests in shares of common
stock of Jacksonville Bancorp-Maryland (“Jacksonville Bancorp-Maryland
Common Stock”) acquired by the Jacksonville Savings Bank 401(k) Profit
Sharing Plan (the “Plan”). The participation interests
represent your indirect ownership of shares of Jacksonville
Bancorp-Maryland Common Stock through the Plan. At the purchase
price of $10.00 per share, the Plan may acquire up to 630,516 shares of
Jacksonville Bancorp-Maryland Common Stock in the stock offering, based on
the fair market value of the Plan’s assets as of December 31,
2009.
|
|
|
|
Only
employees of Jacksonville Savings Bank may become participants in the Plan
and only participants may purchase participation interests in shares of
Jacksonville Bancorp-Maryland Common Stock. Your investment in
shares of Jacksonville Bancorp-Maryland Common Stock in connection with
the stock offering is subject to the purchase priorities listed
below. |
|
|
|
Information
with regard to the Plan is contained in this prospectus supplement and
information with regard to the financial condition, results of operations
and business of Jacksonville Bancorp-Maryland and Jacksonville Savings
Bank is contained in the accompanying prospectus. The address
of the principal executive office of Jacksonville Bancorp-Maryland and
Jacksonville Savings Bank is 1211 West Morton Avenue, P.O. Box 880,
Jacksonville, IL 62651-0880. Jacksonville Savings Bank’s
telephone number at this address is (217) 245-4111. |
|
|
|
All
questions about this Prospectus Supplement should be addressed to Diana
Tone, Chief Financial Officer at Jacksonville Savings Bank; telephone
number: (217) 245-4111; email: dtone@jacksonvillesavings.com
|
|
|
|
Questions
about the common stock being offered or about the prospectus may be
directed to the Stock Information Center at
______________________.
|
Election
to Purchase Common Stock
|
In
connection with the stock offering, you may elect to transfer all or part
of your account balances in the Plan to be used to purchase shares of
Jacksonville Bancorp-Maryland Common Stock sold in the stock
offering. The trustee of the Plan will purchase Jacksonville
Bancorp-Maryland Common Stock in accordance with your directions. However,
such directions are subject to purchase priorities and purchase
limitations, as described below. Following the stock offering,
the Trustee will then transfer your purchased shares of Jacksonville
Bancorp-Maryland Common Stock to a brokerage account that is set up within
the Plan on your behalf.
|
|
|
|
Shares
of Jacksonville Bancorp-Maryland Common Stock being sold in the stock
offering are different from the common stock of Jacksonville
Bancorp-Federal, the federal mid-tier holding company of
Jacksonville Savings Bank, that is currently held by the
Plan. Jacksonville Bancorp-Federal will be eliminated in the
reorganization of Jacksonville Bancorp, MHC into Jacksonville
Bancorp-Maryland, which will become the newly formed stock holding company
of Jacksonville Savings Bank. At the close of the
reorganization and offering, shares of common stock of Jacksonville
Bancorp-Federal held in the Plan will be exchanged for shares of
Jacksonville Bancorp-Maryland Common Stock pursuant to an exchange ratio
(discussed in greater detail in the accompanying
prospectus).
|
|
|
|
Purchase
Priorities
|
All
Plan participants are eligible to purchase participation interests in
Jacksonville Bancorp-Maryland Common Stock sold in the
offering. The shares of Jacksonville Bancorp-Maryland Common
Stock are being offered at $10.00 per share in a subscription offering and
community offering in the following descending order of
priority:
|
|
|
|
|
Subscription
Offering:
|
|
|
|
|
(1)
|
Depositors
of Jacksonville Savings Bank with $50 or more on deposit as of the close
of business on December 31, 2008, get first priority.
|
|
|
|
|
(2)
|
Jacksonville
Savings Bank’s tax-qualified plans, including the employee
stock ownership plan, get second priority.
|
|
|
|
|
(3)
|
Depositors
of Jacksonville Savings Bank with $50 or more on deposit as of the close
of business on March 31, 2010, get third priority.
|
|
|
|
|
(4)
|
Depositors
of Jacksonville Savings Bank as of the close of business on May 10,
2010, get fourth priority.
|
|
|
|
|
Community
Offering:
|
|
|
|
|
(5)
|
Residents
of the Illinois counties of Cass, Greene, Macoupin, Montgomery, Morgan,
Pike, Sangamon and Scott get fifth
priority.
|
|
(6)
|
Public
stockholders of Jacksonville Bancorp-Federal as of the close of business
on May 10, 2010, get sixth priority.
|
|
|
|
|
If
you fall into subscription offering categories (1), (3)
or (4), you have subscription rights to purchase Jacksonville
Bancorp-Maryland Common Stock in the subscription offering and you may use
funds in the Plan to pay for the shares of Jacksonville Bancorp-Maryland
Common Stock. You may also be able to purchase shares of
Jacksonville Bancorp-Maryland Common Stock in the subscription offering
even though you are ineligible to purchase through subscription offering
categories (1), (3) or (4) if Jacksonville Bancorp-Maryland determines to
allow the Plan to purchase stock through subscription offering category
(2), reserved for its tax-qualified employee plans. If the Plan
is not included in category (2), then any order for shares of Jacksonville
Bancorp-Maryland Common Stock placed by those ineligible to subscribe in
categories (1), (3), and (4) will be considered an order placed in the
community offering to members of the general
public. Subscription offering orders, however, will have
preference over orders placed in a community offering.
|
|
|
|
|
The
trustee of the Plan will purchase shares of Jacksonville Bancorp-Maryland
Common Stock sold in the stock offering in accordance with your
directions. No later than the end of the subscription and
community offering period, the amount that you elect to transfer from your
existing Plan account balance for the purchase of shares of Jacksonville
Bancorp-Maryland Common Stock in connection with the stock offering will
be removed from the investment funds you select and transferred to an
interest-bearing savings account maintained by Jacksonville Savings Bank
as an investment in the Plan, pending the closing of the stock
offering. Following the offering period, we will determine
whether all, or any portion of, your order will be filled (if the offering
is oversubscribed, you may not receive any, or all of, your order,
depending on your purchase priority, as described above, and whether the
Plan will purchase through category 2). The amount that can be
used toward your order will be applied to the purchase of shares of
Jacksonville Bancorp-Maryland Common Stock.
|
|
|
|
|
In
the event the offering is oversubscribed, i.e., there are more
orders for Jacksonville Bancorp-Maryland Common Stock than shares
available for sale in the offering, and the trustee is unable to use the
full amount allocated by you to purchase participation interests in
Jacksonville Bancorp-Maryland Common Stock in the offering, the amount
that cannot be invested in Jacksonville Bancorp-Maryland Common Stock, and
any interest earned on such amount, will be transferred from the
interest-bearing savings account maintained by Jacksonville Savings Bank
(as an investment in the Plan) and reinvested in the existing investment
funds of the Plan, in accordance with your then existing investment
election (in proportion to your investment direction for future
contributions). The prospectus describes the allocation
procedures in the event of an oversubscription. If you choose
not to direct the investment of your account balances towards the purchase
of any participation interests in Jacksonville Bancorp-Maryland Common
Stock sold in the offering, your account balances will remain in the
investment options of the Plan as previously directed by
you.
|
Minimum
and Maximum Investment
|
In
connection with the stock offering, the Plan will permit you to direct the
trustee to transfer all, or part of, your assets in the Plan to be used to
purchase participation interests in Jacksonville Bancorp-Maryland Common
Stock sold in the offering. The trustee of the Plan will then
subscribe for shares of Jacksonville Bancorp-Maryland Common Stock offered
for sale in the offering, in accordance with each participant’s
direction. The trustee will pay $10.00 per share, which will be
the same price paid by all other persons who purchase shares in the
subscription and community offerings. In order to purchase participation
interests in Jacksonville Bancorp-Maryland Common Stock through the Plan,
the minimum investment is $250, which will purchase 25
shares. The maximum investment any individual can make through
the Plan and outside the Plan is $250,000, which will purchase 25,000
shares.
|
|
|
|
Value
of Plan Assets
|
As
of December 31, 2009, the market value of the assets of the Plan was
approximately $6,305,169, which is eligible to purchase Jacksonville
Bancorp-Maryland Common Stock in the offering. The Plan administrator
informed each participant of the value of his or her account balance under
the Plan as of December 31, 2009.
|
|
|
|
How
to Order
|
Enclosed
is a Special Investment Election Form on which you can elect to purchase
participation interests in Jacksonville Bancorp-Maryland Common Stock sold
in the offering. Please note the following stipulations
concerning this election:
|
|
|
|
|
●
|
You
can direct all or a portion of your current Plan account to purchase
Jacksonville Bancorp-Maryland Common Stock in increments of
$10.00.
|
|
|
|
|
●
|
Your
election is subject to a minimum purchase of 25 shares, which equals
$250.
|
|
|
|
|
●
|
Your
election, plus any order you placed outside the Plan, are together subject
to a maximum purchase of 25,000 shares, which equals
$250,000.
|
|
●
|
The
election period opens ______________, 2010 and closes __________________
p.m., ____________ Time, on ______________________,
2010.
|
|
|
|
|
●
|
During
the stock offering period, you will not be permitted to change the
investment amounts that you designated to be used to purchase shares of
Jacksonville Bancorp-Maryland Common Stock on your Special Investment
Election Form.
|
|
|
|
|
●
|
After
the election period ends, the dollar amounts you designated will be
transferred to an interest-bearing savings account maintained by
Jacksonville Savings Bank. If you elect to transfer a dollar
amount from a particular investment option under the Plan and, at the time
that the transfer is made, you do not
have a sufficient dollar amount in that investment option to process your
entire election due to market fluctuation, the trustee will withdraw up to
100% of your balance in that investment option (rounded down to the
nearest $10.00 increment) and apply only the amount withdrawn to the
purchase of shares of Jacksonville Bancorp-Maryland Common Stock for your
Plan account.
|
|
|
|
|
●
|
The
amount transferred to the interest-bearing savings account maintained by
Jacksonville Savings Bank will be held separately until the offering
closes. Therefore, this money is not available for
distributions, loans, or withdrawals until the transaction is completed,
which is after the closing of the subscription offering
period.
|
|
|
|
|
If
you wish to use all or part of your account balance in the Plan to
purchase participation interests in shares of Jacksonville
Bancorp-Maryland Common Stock issued in the stock offering, you should
indicate that decision on the Special Investment Election
Form. If you
do not wish to make an election, you should check the box at the bottom of
the Special Investment Election Form and return the form to _Diana Tone,
Chief Financial Officer, at Jacksonville Savings Bank, 1211 West Morton
Avenue, P.O. Box 880, Jacksonville, Illinois 62651-0880 or by faxing it to
(217)- 245-2010, by no later than ________ p.m., ____________
Central Time, on ___________.
|
|
|
|
Order
Deadline
|
If
you wish to purchase participation interests in shares of Jacksonville
Bancorp-Maryland Common Stock with all or a part of your Plan account
balance, you must return
your Special Investment Election Form to Diana Tone, Chief Financial
Officer, at Jacksonville Savings Bank, 1211 West Morton Avenue, P.O.
Box 880, Jacksonville, Illinois 62651-0880 or by faxing it to
(217)-245-2010, by no later than _______ p.m. ____________ , Central Time,
on _________, 2010. You may return your Special Investment
Election Form by hand delivery, mail or by faxing it so long as it is
returned by the time
specified.
|
Irrevocability
of Transfer Direction
|
Once you make an election to
transfer amounts in your Plan account to purchase participation interests
in shares of Jacksonville Bancorp-Maryland Common Stock in connection with
the stock offering, you may not change your election. Your
election is irrevocable until after the stock offering has
concluded. You will, however, continue to have the ability to
transfer amounts not directed towards the purchase of participation
interests in shares of Jacksonville Bancorp-Maryland Common Stock among
all of the other investment options in the Plan on a daily
basis.
|
|
|
Future
Direction to Purchase and Sell Common Stock
|
You
will be able to purchase or sell participation interests in shares of
Jacksonville Bancorp-Maryland Common Stock through your established
brokerage account within the Plan after the offering. Please note that if you
are an officer of Jacksonville Savings Bank that is restricted by the
regulations of the Office of Thrift Supervision from selling shares of
Jacksonville Bancorp-Maryland Common Stock acquired in the stock offering
for one year, the shares that you purchased in the stock offering will not
be tradable until the one-year trading restriction has
lapsed. Any common stock that you held in the Plan prior to the
stock offering is freely tradable and not subject to this one-year trading
restriction.
|
|
|
|
You
may also elect to transfer your future contributions or your account
balance in the Plan to your brokerage account to be used to purchase
shares of Jacksonville Bancorp-Maryland Common Stock. After the
offering, to the extent that shares are available, the trustee of the Plan
will acquire shares of Jacksonville Bancorp-Maryland Common Stock at your
election through your established brokerage account in open market
transactions at the prevailing price, which may be less than or more than
$10.00 per share. You may change your investment allocation on
a daily basis. Special restrictions may apply to purchasing
shares of Jacksonville Bancorp-Maryland Common Stock by the participants
who are subject to the provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended, relating to the purchase and sale of
securities by officers, directors and principal stockholders of
Jacksonville Bancorp-Maryland.
|
Voting
Rights of Common Stock
|
The
Plan provides that you may direct the trustee as to how to vote any shares
of Jacksonville Bancorp-Maryland Common Stock held by the Plan, and the
interest in such shares that is credited to your account. If
the trustee does not receive your voting instructions, the Plan
administrator will exercise these rights as it determines in its
discretion and will direct the trustee accordingly. All voting
instructions will be kept
confidential.
|
DESCRIPTION
OF THE PLAN
Introduction
Jacksonville
Savings Bank originally adopted the Jacksonville Savings Bank 401(k) Profit
Sharing Plan (the “Plan”) effective as of January 1, 1989, and subsequently
amended and restated the Plan effective January 1, 2007. The Plan is
a tax-qualified plan with a cash or deferred compensation feature established in
accordance with the requirements under Section 401(a) and Section 401(k) of the
Internal Revenue Code of 1986, as amended (the “Code”).
Jacksonville
Savings Bank intends that the Plan, in operation, will comply with the
requirements under Section 401(a) and Section 401(k) of the
Code. Jacksonville Savings Bank will adopt any amendments to the Plan
that may be necessary to ensure the continuing qualified status of the Plan
under the Code and applicable Treasury Regulations.
Employee Retirement Income Security
Act (“ERISA”). The Plan is an “individual account
plan” other than a “money purchase pension plan” within the meaning of
ERISA. As such, the Plan is subject to all of the provisions of Title
I (Protection of Employee Benefit Rights) and Title II (Amendments to the Code
Relating to Retirement Plans) of ERISA, except for the funding requirements
contained in Part 3 of Title I of ERISA which by their terms do not apply to an
individual account plan (other than a money purchase plan). The Plan
is not subject to Title IV (Plan Termination Insurance) of ERISA. The
funding requirements contained in Title IV of ERISA are not applicable to
participants or beneficiaries under the Plan.
Reference to Full Text of Plan.
The following portions of this prospectus supplement summarize certain
provisions of the Plan. They are not complete and are qualified in their
entirety by the full text of the Plan. Copies of the Plan are
available to all employees by filing a request with the Plan administrator at
Jacksonville Savings
Bank, 1211 West Morton Avenue, P.O. Box 880, Jacksonville, Illinois
62651-0880. You are urged to read carefully the full text of
the Plan.
Eligibility
and Participation
Employees
who are at least age 21 and have one year of service with Jacksonville Savings
Bank in which they complete 1,000 hours of service are eligible to enter the
Plan on the first day of the quarter coincident with or next following the date
on which the employee meets the eligibility requirements. Certain members of a
collective bargaining unit, non-resident aliens and independent contractors are
not eligible to participate in the Plan. The Plan year is January 1
to December 31 (the “Plan Year”).
As of
December 31, 2009, there were approximately 110 employees and former employees
eligible to participate in the Plan and 90 employees participating by making
elective deferral contributions.
Contributions
Under the Plan
Salary Deferrals. You are permitted to
defer, on a pre-tax basis, up to 100% of your compensation, subject to certain
restrictions imposed by the Code, and to have that amount contributed to the
Plan on your behalf. For purposes of the Plan, “compensation” means
your total wages received from Jacksonville Savings Bank, excluding your salary
deferrals under Code Section 402(h)(1)(B) (SEP deferrals), 125 (cafeteria plan),
132(f)(4) (transportation), 402(e)(3) (401(k) deferrals), 403(b) and
457(b). In 2010, the annual compensation of each participant taken
into account under the Plan is limited to $245,000. (Limits
established by the Internal Revenue Service are subject to increase pursuant to
an annual cost-of-living adjustment, as permitted by the Code). You
may elect to modify the amount contributed to the Plan by filing a new elective
deferral agreement in accordance with the policy set by Jacksonville Savings
Bank.
Employer Matching
Contributions. In its discretion,
Jacksonville Savings Bank may make matching contributions to the Plan, equal to
a fixed percentage of your salary deferrals. The fixed percentage
will be determined annually by Jacksonville Savings Bank.
Discretionary Employer
Contributions. Jacksonville Savings Bank may make
discretionary employer contributions to the Plan.
Limitations
on Contributions
Limitations on Employee Salary
Deferrals. For the Plan Year
beginning January 1, 2010, the amount of your before-tax contributions may not
exceed $16,500 per calendar year. In addition, if you are 50 years
old in 2010, you will be able to make a “catch-up” contribution of up to $5,500
in addition to the $16,500 limit. The “catch-up” contribution limit
may be adjusted periodically by law, based on changes in the cost of
living. Contributions in excess of these limits, as applicable to
you, are known as excess deferrals. If you defer amounts in excess of
these limitations, as applicable to you, your gross income for federal income
tax purposes will include the excess in the year of the deferral. In
addition, unless the excess deferral is distributed before April 15 of the
following year, it will be taxed again in the year
distributed. Income on the excess deferral distributed by April 15 of
the immediately succeeding year will be treated, for federal income tax
purposes, as earned and received by you in the tax year in which the
contribution is made.
Contribution Limit. Generally, the law
imposes a maximum limit on the amount of contributions you may receive under the
Plan. This limit applies to all contributions to the Plan, including
your salary deferrals and all other employer contributions made on your behalf
during the year, excluding earnings and any transfers/rollovers. For
the Plan Year beginning January 1, 2010, this total cannot exceed the lesser of
$49,000 or 100% of your annual base compensation.
Benefits
Under the Plan
Vesting. At all times, you have
a fully vested, nonforfeitable interest in the salary deferrals you have made
and in employer matching contributions. Employer discretionary
contributions are subject to a 6-year graded vesting schedule in which such
amounts vest at the rate of 20% each year after two years of service until a
participant is 100% vested upon completion of 6 years of service. In
the event of your death or disability, your employer discretionary contributions
would immediately become fully vested.
Withdrawals
and Distributions from the Plan
Applicable
federal law requires the Plan to impose substantial restrictions on the right of
a Plan participant to withdraw amounts held for his or her benefit under the
Plan prior to the participant’s termination of employment with the
employer.
Withdrawal upon
Retirement. You may withdraw from your account upon attainment
of your Normal Retirement Date (attain age 65) or Early Retirement Date (age 55
and completion of 7 years of service). However, if you continue
working past your Normal Retirement Date or Early Retirement Date, the
distribution of your benefits will be postponed until you actually retire,
unless you elect to receive an in-service distribution (as described
below). You may also leave your account in the Plan and defer
commencement of receipt of your vested balance until April 1 of the calendar
year following the calendar year in which you attain age 70½, except that
distributions to a participant (other than a 5% owner) with respect to benefits
accrued after the later of the adoption of the Plan or the effective date of the
amendment of the Plan must commence no later than the April 1 of the calendar
year following the later of the calendar year in which the participant attains
age 70½ or the calendar year in which the participant retires.
Withdrawal upon
Termination. You may request a distribution from your account
if your termination of employment occurs before your Normal Retirement Date or
Early Retirement Date.
Withdrawal upon
Disability. If you are disabled in accordance with the
definition of disability under the Plan, you will be entitled to the same
withdrawal rights as if you had terminated your employment.
Withdrawal upon
Death. If you die while you are a participant in the Plan, the
value of your entire account will be payable to your beneficiary.
In-Service
Distribution. While employed, you are eligible to receive an
in-service distribution from your account after your attainment of age 59½,
provided the amounts in your account have been allocated for at least 2 years,
or you have been a participant in the Plan for at least 5 years. You
may also receive an in-service distribution after you have attained your Normal
Retirement Date. However, you will be eligible to request
a distribution of your rollover contributions at any time.
Hardship. In the
event you incur a financial hardship, you may request an in-service withdrawal
of a portion of your Plan account attributable to your salary
deferrals.
Form of
Distribution. Your benefits under the Plan will be distributed
to you or your beneficiary as a single lump-sum payment.
Investment
of Contributions and Account Balances
All
amounts credited to your accounts under the Plan are held in the Plan trust (the
“Trust”) which is administered by the trustee appointed by Jacksonville Savings
Bank’s Board of Directors.
Prior to
the effective date of the offering, you were provided the opportunity to direct
the investment of your account into one of the following investment
options:
|
1.
|
Jacksonville
Savings Bank Certificate of Deposit (CD)
|
|
2.
|
The
Bond Fund of America
|
|
3.
|
American
Balanced Fund
|
|
4.
|
The
Income Fund of America
|
|
5.
|
Capital
World Growth and Income Fund
|
|
6.
|
Fundamental
Investors
|
|
7.
|
The
Investment Company of America
|
|
8.
|
Washington
Mutual Investors Fund
|
|
9.
|
AMCAP
Fund
|
|
10.
|
New
Perspective Fund
|
|
11.
|
SMALLCAP
World Fund
|
|
12.
|
The
Growth Fund of America
|
|
13.
|
American
Funds Target Date Retirement 2010
|
|
14.
|
American
Funds Target Date Retirement 2015
|
|
15.
|
American
Funds Target Date Retirement 2020
|
|
16.
|
American
Funds Target Date Retirement 2025
|
|
17.
|
American
Funds Target Date Retirement 2030
|
|
18.
|
American
Funds Target Date Retirement 2035
|
|
19.
|
American
Funds Target Date Retirement 2040
|
|
20.
|
American
Funds Target Date Retirement 2045
|
|
21.
|
American
Funds Target Date Retirement 2050
|
|
22.
|
Jacksonville
Bancorp-Federal Common Stock
|
In
connection with the offering, the Plan now provides that in addition to the
investment options specified above, you may direct the trustee, or its
representative, to invest all or a portion of your account in shares of
Jacksonville Bancorp-Maryland Common Stock. You may elect to have
both past contributions and earnings, as well as future contributions to your
account invested among the options listed above. If you fail to
provide an effective investment direction, your contributions will not be
contributed to the Plan. Transfers of past contributions and the
earnings thereon do not affect the investment mix of future contributions. You
may change your investment directions at any time. This may be done
either by telephone or electronic medium. You may also redirect the investment
of your investment accounts such that a fixed dollar amount of any one or more
investment accounts may be transferred to any one or more other investment
accounts either by telephone or electronic medium.
Performance
History and Description of Funds
The
following provides performance data with respect to the investment options
available under the Plan:
|
|
Performance as
of December 31, 2009
|
|
|
|
|
|
|
|
|
|
Total
Return
Annualized
3
Yrs1
|
|
|
Total
Return
Annualized
5
Yrs1
|
|
|
Total
Return
Annualized
10 Yrs1
|
|
Jacksonville
Savings Bank CD
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
American
Balanced Fund
|
|
|
21.08 |
% |
|
|
21.08 |
% |
|
|
-1.40 |
% |
|
|
2.02 |
% |
|
|
5.68 |
% |
The
Income Fund of America
|
|
|
24.51 |
% |
|
|
24.51 |
% |
|
|
-2.77 |
% |
|
|
2.72 |
% |
|
|
6.01 |
% |
Capital
World Growth and Income Fund
|
|
|
32.25 |
% |
|
|
32.25 |
% |
|
|
-1.43 |
% |
|
|
6.10 |
% |
|
|
7.16 |
% |
Fundamental
Investors
|
|
|
33.36 |
% |
|
|
33.36 |
% |
|
|
-2.98 |
% |
|
|
3.99 |
% |
|
|
3.61 |
% |
The
Investment Company of America
|
|
|
27.18 |
% |
|
|
27.18 |
% |
|
|
-4.19 |
% |
|
|
1.73 |
% |
|
|
2.50 |
% |
Washington
Mutual Investors Fund
|
|
|
18.99 |
% |
|
|
18.99 |
% |
|
|
-6.11 |
% |
|
|
0.23 |
% |
|
|
2.81 |
% |
AMCAP
Fund
|
|
|
39.21 |
% |
|
|
39.21 |
% |
|
|
-2.30 |
% |
|
|
1.62 |
% |
|
|
2.51 |
% |
New
Perspective Fund
|
|
|
37.43 |
% |
|
|
37.43 |
% |
|
|
-0.29 |
% |
|
|
5.75 |
% |
|
|
3.97 |
% |
SMALLCAP
World Fund
|
|
|
53.49 |
% |
|
|
53.49 |
% |
|
|
-3.10 |
% |
|
|
5.45 |
% |
|
|
2.28 |
% |
The
Growth Fund of America
|
|
|
34.48 |
% |
|
|
34.48 |
% |
|
|
-3.13 |
% |
|
|
2.87 |
% |
|
|
2.34 |
% |
American
Funds 2010 Target Date
|
|
|
23.34 |
% |
|
|
23.34 |
% |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
American
Funds 2015 Target Date
|
|
|
24.59 |
% |
|
|
24.59 |
% |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
American
Funds 2020 Target Date
|
|
|
26.79 |
% |
|
|
26.79 |
% |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
American
Funds 2025 Target Date
|
|
|
29.44 |
% |
|
|
29.44 |
% |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
American
Funds 2030 Target Date
|
|
|
31.07 |
% |
|
|
31.07 |
% |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
American
Funds 2035 Target Date
|
|
|
31.34 |
% |
|
|
31.34 |
% |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
American
Funds 2040 Target Date
|
|
|
31.55 |
% |
|
|
31.55 |
% |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
American
Funds 2045 Target Date
|
|
|
31.56 |
% |
|
|
31.56 |
% |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
American
Funds 2050 Target Date
|
|
|
31.63 |
% |
|
|
31.63 |
% |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
Jacksonville
Bancorp-Federal Common Stock
|
|
|
29.00 |
%2 |
|
|
29.00 |
%2 |
|
|
-4.00 |
%2 |
|
|
-5.00 |
%2 |
|
|
-5.50 |
%2 |
1 Returns
do not reflect sale charges, which would result in a lower total return on your
investment.
2
Performance history provided by Morningstar Equity Research as of March
5, 2010.
The
following is a description of each of the Plan’s investment funds and other
investments:
Jacksonville Savings Bank Certificate
of Deposit (CD). This investment option allows participants to
hold their Plan assets in an interest-bearing savings account within the
Plan.
The Bond Fund of
America. The fund seeks to provide as high a level of current
income as is consistent with preservation of capital. The fund is
broadly diversified fixed-income fund with flexibility to respond to various
bond market conditions.
American Balance
Fund. The fund seeks to provide conservation of capital,
current income and long-term growth of capital and income by investing in
stocks, bonds, and other fixed-income securities. The fund takes a
balanced approach and is managed as if it constitutes the complete investment
program of the prudent investor.
The Income Fund of
America. The fund seeks to provide current income and,
secondarily, growth of capital through a flexible mix of equity and debt
instruments. The fund seeks investments in both the stock and bond
markets that provide an opportunity for above-average current income and
long-term capital growth. The fund has typically provided income well
in excess of that provided by stocks in general.
Capital World Growth and Income
Fund. The fund seeks to provide long-term growth of capital
with current income by investing in established, growing companies all over the
world including the United States. With the flexibility to take
advantage of opportunities around the world, the fund invests primarily in blue
chip stocks issued by companies in the world’s largest stock
markets. The fund is conservatively managed and focuses on
established companies that pay regular dividends.
Fundamental
Investors. The fund seeks to provide long-term growth of
capital and income primarily through investments in common
stocks. Using principles of fundamental analysis, the fund seeks
undervalued and overlooked opportunities with the potential for long-term
growth. Companies under consideration for the portfolio often have
strong balance sheets, high-quality products and leading market
share. The fund’s holdings typically represent good value and possess
above-average potential for growth in sales, earnings and
dividends.
The Investment Company of
America. The fund seeks to provide long-term growth of capital
and income, placing greater emphasis on future dividends than on current
income. The fund is one of the nation’s oldest and largest mutual
funds. It emphasizes investments in well-established blue chip
companies, representing a wide cross section of the U.S. economy.
Washington Mutual Investors
Fund. The fund seeks to provide current income and the
opportunity for growth of principal consistent with sound common-stock
investing. The fund seeks to be at least 95% invested in equity-type
securities. The fund invests in stocks that meet strict standards
evolving from requirements originally established by the U.S. District Court for
the District of Columbia for the investment of trust funds. The fund
may not invest in companies that derive their primary revenues from alcohol or
tobacco.
AMCAP Fund. The
fund seeks to provide long-term growth of capital. The fund invests
in established growth companies of any size with proven records of steady,
above-average earnings and the potential to grow faster than the general
market. Special emphasis is given to companies with rapid growth
potential in expanding sectors of the U.S. economy.
New Perspective
Fund. The fund seeks to provide long-term growth of capital
through investments all over the world, including the United
States. The fund diversifies among blue chip companies in the United
States and abroad, emphasizing multinational or global companies and focusing on
opportunities generated by changes in global trade patterns and economic and
political relationships.
SMALLCAP World
Fund. The fund seeks to provide long-term growth of capital by
investing in the stocks of smaller companies in the United States and around the
world. The fund is one of the few small-company growth funds that
invests globally. Normally, at least 80% of assets will be invested
in equities of issuers typically having market capitalizations up to $3.5
billion.
The Growth Fund of America.
The fund seeks to
provide long-term growth of capital through a diversified portfolio of common
stocks. The fund has the flexibility to invest wherever the best
growth opportunities may be. The fund emphasizes companies that
appear to offer opportunities for long-term growth, and may invest in cyclical
companies, turnarounds, and value situations.
American Fund Target Date Retirement
Series. The series consists of ten target date fund
portfolios, each with a retirement date ranging from 2010 through 2055 in
five-year increments. Each target date fund serves as a single
diversified retirement portfolio with an underlying investment strategy aligned
with that expected retirement date. The target funds are designed to
address two of the major challenges facing those saving for
retirement. First, they seek to help younger investors achieve higher
growth potential over time by including a higher allocation of
equities. Second, for investors closer to retirement, the funds
lessen the impact of the market volatility by gradually moving to a more
income-oriented focus over time.
Jacksonville Bancorp-Federal Common
Stock. Jacksonville Bancorp-Federal is a federally chartered
majority-owned subsidiary of Jacksonville Bancorp, MHC, a mutual holding
company. Following the offering, Jacksonville Bancorp-Federal, a
federal corporation, will cease to exist, but will be succeeded by a new
Maryland corporation with the name Jacksonville Bancorp, Inc. (Jacksonville
Bancorp-Maryland), which will be 100% owned by its public
stockholders. Shares of Jacksonville Bancorp-Federal, which were held
by the Plan prior to the conversion and offering will be converted into new
shares of Jacksonville Bancorp-Maryland Common Stock, in accordance with the
exchange ratio as provided in the prospectus.
Jacksonville
Bancorp-Maryland Common
Stock. In
connection with the stock offering, you may, in the manner described earlier,
direct the trustee to invest all or a portion of your Plan account in
Jacksonville Bancorp-Maryland Common Stock. The trustee will use all
amounts elected by participants to acquire shares of Jacksonville
Bancorp-Maryland Common Stock in the conversion and common stock
offering. After the offering, you may elect to invest all or a
portion of your payroll deduction contributions or matching contributions in
Jacksonville Bancorp-Maryland Common Stock. You may also elect
to invest in the Jacksonville Bancorp-Maryland Common Stock with all or a
portion of your accounts currently invested in other funds under the
Plan. It is expected that all purchases will be made at prevailing
market prices. Under certain circumstances, the trustee may be
required to limit the daily volume of shares purchased. Pending
investment in Jacksonville Bancorp-Maryland Common Stock, amounts allocated
towards the purchase of shares in the offering will be held in an
interest-bearing savings account maintained by Jacksonville Savings
Bank. In the event of an oversubscription, any earnings that result
therefrom will be reinvested among the other funds of the Plan in accordance
with your then existing investment election.
Performance
of Jacksonville Bancorp-Maryland Common Stock will depend on a number of
factors, including the financial condition and profitability of Jacksonville
Bancorp-Maryland and Jacksonville Savings Bank and market conditions for
Jacksonville Bancorp-Maryland Common Stock generally.
An
investment in any of the funds listed above is not a deposit of a bank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. As with any mutual fund investment, there is
always a risk that you may lose money on your investment in any of the funds
listed above.
Administration
of the Plan
The Trustee and
Custodian. The trustee of the Plan is Jacksonville Savings
Bank Trust Department. Jacksonville Savings Bank Trust Department
serves as trustee for all the investments funds under the Plan, including during
the offering period for Jacksonville Bancorp-Maryland Common Stock.
Plan
Administrator. Pursuant to the
terms of the Plan, the Plan is administered by the Plan administrator,
Jacksonville Savings Bank. The address of the Plan administrator is
1211 West Morton Avenue, P.O. Box 880, Jacksonville, IL 62651-0880, telephone
number is (217) 245-4111. The Plan administrator is responsible for
the administration of the Plan, interpretation of the provisions of the Plan,
prescribing procedures for filing applications for benefits, preparation and
distribution of information explaining the Plan, maintenance of Plan records,
books of account and all other data necessary for the proper administration of
the Plan, preparation and filing of all returns and reports relating to the Plan
which are required to be filed with the U.S. Department of Labor and the
Internal Revenue Service, and for all disclosures required to be made to
participants, beneficiaries and others under Sections 104 and 105 of
ERISA.
Reports to Plan
Participants. The Plan administrator will furnish you a
statement at least quarterly showing the balance in your account as of the end
of that period, the amount of contributions allocated to your account for that
period, and any adjustments to your account to reflect earnings or losses (if
any).
Amendment
and Termination
It is the
intention of Jacksonville Savings Bank to continue the Plan
indefinitely. Nevertheless, Jacksonville Savings Bank may terminate
the Plan at any time. If the Plan is terminated in whole or in part,
then regardless of other provisions in the Plan, you will have a fully vested
interest in your accounts. Jacksonville Savings Bank reserves the
right to make any amendment or amendments to the Plan which do not cause any
part of the trust to be used for, or diverted to, any purpose other than the
exclusive benefit of participants or their beneficiaries; provided, however,
that Jacksonville Savings Bank may make any amendment it determines necessary or
desirable, with or without retroactive effect, to comply with
ERISA.
Merger,
Consolidation or Transfer
In the
event of the merger or consolidation of the Plan with another plan, or the
transfer of the trust assets to another plan, the Plan requires that you would,
if either the Plan or the other plan terminates, receive a benefit immediately
after the merger, consolidation or transfer which is equal to or greater than
the benefit you would have been entitled to receive immediately before the
merger, consolidation or transfer, if the Plan had then terminated.
Federal
Income Tax Consequences
The
following is a brief summary of the material federal income tax aspects of the
Plan. You should not rely on this summary as a complete or definitive
description of the material federal income tax consequences relating to the
Plan. Statutory provisions change, as do their interpretations, and
their application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws. Please consult your tax
advisor with respect to any distribution from the Plan and transactions
involving the Plan.
As a
“tax-qualified retirement plan,” the Code affords the Plan special tax
treatment, including:
|
(1)
|
the
sponsoring employer is allowed an immediate tax deduction for the amount
contributed to the Plan each year;
|
|
|
|
|
(2)
|
participants
pay no current income tax on amounts contributed by the employer on their
behalf; and
|
|
|
|
|
(3)
|
earnings
of the Plan are tax-deferred, thereby permitting the tax-free accumulation
of income and gains on
investments.
|
Jacksonville
Savings Bank will administer the Plan to comply with the requirements of the
Code as of the applicable effective date of any change in the law.
Lump-Sum Distribution. A
distribution from the Plan to a participant or the beneficiary of a participant
will qualify as a lump-sum distribution if it is made within one taxable year,
on account of the participant’s death, disability or separation from service, or
after the participant attains age 59½, and consists of the balance credited to
participants under the Plan and all other profit sharing plans, if any,
maintained by Jacksonville Savings Bank. The portion of any lump-sum
distribution required to be included in your taxable income for federal income
tax purposes consists of the entire amount of the lump-sum distribution, less
the amount of after-tax contributions, if any, you have made to this Plan and
any other profit sharing plans maintained by Jacksonville Savings Bank, which is
included in the distribution.
Jacksonville Bancorp-Maryland Common
Stock Included in Lump-Sum Distribution. If a lump-sum distribution
includes Jacksonville Bancorp-Maryland Common Stock, the distribution generally
will be taxed in the manner described above, except that the total taxable
amount may be reduced by the amount of any net unrealized appreciation with
respect to Jacksonville Bancorp-Maryland Common Stock; that is, the excess of
the value of Jacksonville Bancorp-Maryland at the time of the distribution over
its cost or other basis of the securities to the trust. The tax basis
of Jacksonville Bancorp-Maryland Common Stock, for purposes of computing gain or
loss on its subsequent sale, equals the value of Jacksonville Bancorp-Maryland
Common Stock at the time of distribution, less the amount of net unrealized
appreciation. Any gain on a subsequent sale or other taxable
disposition of Jacksonville Bancorp-Maryland Common Stock, to the extent of the
amount of net unrealized appreciation at the time of distribution, will
constitute long-term capital gain, regardless of the holding period of
Jacksonville Bancorp-Maryland Common Stock. Any gain on a subsequent
sale or other taxable disposition of Jacksonville Bancorp-Maryland Common Stock,
in excess of the amount of net unrealized appreciation at the time of
distribution, will be considered long-term capital gain. The
recipient of a distribution may elect to include the amount of any net
unrealized appreciation in the total taxable amount of the distribution, to the
extent allowed by regulations to be issued by the Internal Revenue
Service.
Distributions: Rollovers and Direct
Transfers to Another Qualified Plan or to an IRA. You may roll over
virtually all distributions from the Plan to another qualified plan or to an
individual retirement account in accordance with the terms of the other plan or
account.
Additional
Employee Retirement Income Security Act (“ERISA”) Considerations
As noted
above, the Plan is subject to certain provisions of ERISA, including special
provisions relating to control over the Plan’s assets by participants and
beneficiaries. The Plan’s feature that allows you to direct the
investment of your account balances is intended to satisfy the requirements of
Section 404(c) of ERISA relating to control over plan assets by a participant or
beneficiary. The effect of this is two-fold. First, you
will not be deemed a “fiduciary” because of your exercise of investment
discretion. Second, no person who otherwise is a fiduciary, such as
Jacksonville Savings Bank, the Plan administrator, or the Plan’s trustee is
liable under the fiduciary responsibility provision of ERISA for any loss which
results from your exercise of control over the assets in your Plan
account.
Because
you will be entitled to invest all or a portion of your account balance in the
Plan in Jacksonville Bancorp-Maryland Common Stock, the regulations under
Section 404(c) of the ERISA require that the Plan establish procedures that
ensure the confidentiality of your decision to purchase, hold, or sell employer
securities, except to the extent that disclosure of such information is
necessary to comply with federal or state laws not preempted by
ERISA. These regulations also require that your exercise of voting
and similar rights with respect to Jacksonville Bancorp-Maryland Common Stock be
conducted in a way that ensures the confidentiality of your exercise of these
rights.
Securities
and Exchange Commission Reporting and Short-Swing Profit Liability
Section
16 of the Securities Exchange Act of 1934 imposes reporting and liability
requirements on officers, directors, and persons beneficially owning more than
10% of public companies such as Jacksonville
Bancorp-Maryland. Section 16(a) of the Securities Exchange Act
of 1934 requires the filing of reports of beneficial
ownership. Within 10 days of becoming an officer, director or person
beneficially owning more than 10% of the shares of Jacksonville
Bancorp-Maryland, a Form 3 reporting initial beneficial ownership must be filed
with the Securities and Exchange Commission. Changes in beneficial
ownership, such as purchases, sales and gifts generally must be reported
periodically, either on a Form 4 within two business days after the change
occurs, or annually on a Form 5 within 45 days after the close of Jacksonville
Bancorp-Maryland’s fiscal year. Discretionary transactions in and
beneficial ownership of Jacksonville Bancorp-Maryland Common Stock by officers,
directors and persons beneficially owning more than 10% of Jacksonville
Bancorp-Maryland Common Stock generally must be reported to the Securities and
Exchange Commission by such individuals.
In
addition to the reporting requirements described above, Section 16(b) of the
Securities Exchange Act of 1934 provides for the recovery by Jacksonville
Bancorp-Maryland of profits realized by an officer, director or any person
beneficially owning more than 10% of Jacksonville Bancorp-Maryland Common Stock
resulting from non-exempt purchases and sales of Jacksonville Bancorp-Maryland
Common Stock within any six-month period.
The
Securities and Exchange Commission has adopted rules that provide exemptions
from the profit recovery provisions of Section 16(b) for all transactions in
employer securities within an employee benefit plan, provided certain
requirements are met. These requirements generally involve
restrictions upon the timing of elections to acquire or dispose of employer
securities for the accounts of Section 16(b) persons.
Except
for distributions of Jacksonville Bancorp-Maryland Common Stock due to death,
disability, retirement, termination of employment or under a qualified domestic
relations order, persons affected by Section 16(b) are required to hold shares
of Jacksonville Bancorp-Maryland Common Stock distributed from the Plan for six
months following such distribution and are prohibited from directing additional
purchases of Jacksonville Bancorp-Maryland Common Stock for six months after
receiving such a distribution.
Financial
Information Regarding Plan Assets
Financial
information representing the net assets available for Plan benefits and the
change in net assets available for Plan benefits at December 31, 2009, is
available upon written request to the Plan administrator at the address shown
above.
LEGAL
OPINION
The
validity of the issuance of Jacksonville Bancorp-Maryland Common Stock has been
passed upon by Luse Gorman Pomerenk & Schick, P.C., Washington, D.C., which
firm acted as special counsel to Jacksonville Savings Bank in connection with
Jacksonville Bancorp-Maryland’s stock offering.
PROSPECTUS
JACKSONVILLE
BANCORP, INC.
(Proposed
Holding Company for Jacksonville Savings Bank)
Up
to 1,351,250 Shares of Common Stock
(Subject
to increase to up to 1,553,938 shares)
Jacksonville
Bancorp, Inc., a Maryland corporation (“Jacksonville Bancorp-Maryland”), is
offering shares of common stock for sale in connection with the “second step”
conversion of Jacksonville Bancorp, MHC from the mutual to the stock form of
organization. The shares of common stock we are offering represent the 54.1%
ownership interest in Jacksonville Bancorp, Inc. (“Jacksonville
Bancorp-Federal”), a federally chartered company, now owned by Jacksonville
Bancorp, MHC. The existing shares of Jacksonville Bancorp-Federal
common stock held by the public will be exchanged for shares of common stock of
Jacksonville Bancorp-Maryland. All shares of common stock are being
offered for sale at a price of $10.00 per share. Jacksonville Bancorp-Federal’s
common stock is currently traded on the Nasdaq Capital Market under the symbol
“JXSB.” We expect that shares of Jacksonville Bancorp-Maryland common stock also
will trade on the Nasdaq Capital Market under the symbol “JXSBD” for a period of
20 trading days after the completion of the offering. Thereafter, Jacksonville
Bancorp-Maryland’s trading symbol will revert to “JXSB.”
If
you are or were a depositor of Jacksonville Savings Bank:
●
|
You
may have priority rights to purchase shares of common
stock.
|
If
you are currently a stockholder of Jacksonville Bancorp-Federal:
●
|
Each
of your shares of common stock will be exchanged at the conclusion of the
offering for between 0.9615 and 1.3009 shares (subject to adjustment to up
to 1.4960 shares) of common stock of Jacksonville
Bancorp-Maryland.
|
●
|
Your
percentage ownership will remain the same as your current percentage
ownership interest in Jacksonville Bancorp-Federal, exclusive of
additional shares that you may purchase in the offering and your receipt
of cash in lieu of fractional exchange
shares.
|
●
|
You
may have the opportunity to purchase additional shares of common stock in
the subscription offering, based on your priority rights as a depositor,
or in the community offering after priority orders are
filled.
|
If
you fit none of the categories above, but are interested in purchasing shares of
our common stock:
●
|
You
may have the opportunity to purchase shares of common stock after priority
orders are filled.
|
We are
offering up to 1,351,250 shares of common stock for sale on a best efforts
basis. We may sell up to 1,553,938 shares of common stock because of
demand for the shares or changes in market conditions, without resoliciting
subscribers. In addition to the shares we are selling, we also will
simultaneously issue up to 1,147,459 shares of common stock to current
stockholders of Jacksonville Bancorp-Federal in exchange for their existing
shares. The number of shares to be issued in the exchange may be
increased to up to 1,319,578 shares, if we sell enough shares to reach the
adjusted maximum of the offering range. We must sell a minimum of
998,750 shares in the offering, and we must issue at least 848,122 shares in the
exchange in order to complete the offering and the exchange of existing
shares. We reserve the right to have the employee stock ownership
plan purchase more than 4% of the shares of common stock sold in the
offering if necessary to complete the offering at the minimum of the offering
range.
The
minimum number of shares you may order is 25. The offering is
expected to expire at 12:00 noon, Central Time, on [expiration
date]. We may extend this expiration date without notice to you until
[extension date], unless the Office of Thrift Supervision approves a later date,
which may not be beyond [final expiration date]. Once submitted,
orders are irrevocable unless the offering is terminated or is extended beyond
[extension date], or the number of shares of common stock to be sold is
increased to more than 1,553,938 shares or decreased to less than 998,750
shares. If the offering is extended beyond [extension date], or if
the number of shares of common stock to be sold is increased to more than
1,553,938 shares or decreased to less than 998,750 shares, we will resolicit
subscribers, and you will have the opportunity to maintain, change or cancel
your order. If you do not provide us with a written indication of
your intent, your funds will be returned to you, with interest. Funds received
prior to the completion of the subscription offering and community offering will
be held in a segregated account at Jacksonville Savings Bank. All subscriptions
received will bear interest at Jacksonville Savings Bank’s statement savings
rate, which is currently 0.50% per annum. Keefe, Bruyette & Woods, Inc. will
assist us in selling our shares of common stock on a best efforts basis in the
subscription offering. Shares of common stock not
purchased in the subscription offering may be offered for sale to the general
public in a community offering, with a preference given first to natural persons
residing in the counties of Cass, Greene, Macoupin, Montgomery, Morgan, Pike,
Sangamon and Scott, Illinois, and then to Jacksonville Bancorp-Federal public
stockholders as of May 10, 2010. The community offering, if held, may
begin concurrently with, during or promptly after the subscription offering as
we may determine at any time. We also may offer for sale shares of
common stock not purchased in the subscription offering or community offering
through a syndicated community offering managed by Keefe, Bruyette & Woods,
Inc. Keefe, Bruyette & Woods, Inc. is not required to purchase any shares of
the common stock that are being offered for sale. Purchasers will not pay a
commission to purchase shares of common stock in the offering.
OFFERING
SUMMARY
Price:
$10.00 per Share
|
|
Minimum
|
|
|
Midpoint
|
|
|
Maximum
|
|
|
Adjusted
Maximum
|
|
Number
of shares:
|
|
|
998,750 |
|
|
|
1,175,000 |
|
|
|
1,351,250 |
|
|
|
1,553,938 |
|
Gross
offering proceeds:
|
|
$ |
9,987,500 |
|
|
$ |
11,750,000 |
|
|
$ |
13,512,500 |
|
|
$ |
15,539,375 |
|
Estimated
offering expenses, excluding
selling
agent commissions and expenses:
|
|
$ |
912,500 |
|
|
$ |
912,500 |
|
|
$ |
912,500 |
|
|
$ |
912,500 |
|
Selling
agent commissions and expenses (1):
|
|
$ |
328,679 |
|
|
$ |
373,888 |
|
|
$ |
419,096 |
|
|
$ |
471,085 |
|
Estimated
net proceeds:
|
|
$ |
8,746,321 |
|
|
$ |
10,463,613 |
|
|
$ |
12,180,904 |
|
|
$ |
14,155,790 |
|
Estimated
net proceeds per share:
|
|
$ |
8.76 |
|
|
$ |
8.91 |
|
|
$ |
9.01 |
|
|
$ |
9.11 |
|
(1)
|
For
information regarding compensation to be received by Keefe, Bruyette &
Woods, Inc. and the other broker-dealers that may participate in the
syndicated community offering, including the assumptions regarding the
number of shares that may be sold in the subscription and community
offerings and the syndicated community offering to determine the estimated
offering expenses, see “Pro Forma Data” on page ___ and “The Conversion
and Offering——Plan of Distribution; Selling Agent
Compensation” on page
____.
|
This
investment involves a degree of risk, including the possible loss of
principal.
Please
read “Risk Factors” beginning on page ___.
These
securities are not deposits or accounts and are not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government
agency. Neither the Securities and Exchange Commission, the Office of
Thrift Supervision, nor any state securities regulator has approved or
disapproved of these securities or determined if this Prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
Keefe,
Bruyette & Woods
For
assistance, please contact the Stock Information Center at (877)
860-2070.
The date
of this prospectus is ______________.
TABLE
OF CONTENTS
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167
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JACKSONVILLE BANCORP-FEDERAL INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
F-1 |
The
following summary explains the significant aspects of the conversion, the
offering and the exchange of existing shares of Jacksonville Bancorp-Federal
common stock for shares of Jacksonville Bancorp-Maryland common stock. It may
not contain all of the information that is important to you. For additional
information before making an investment decision, you should read this entire
document carefully, including the consolidated financial statements and the
notes to the consolidated financial statements, and the section entitled “Risk
Factors.”
The
Companies
Jacksonville
Bancorp, MHC
Jacksonville
Bancorp, MHC is the federally chartered mutual holding company of Jacksonville
Bancorp-Federal, a federal corporation. It is regulated exclusively by the
Office of Thrift Supervision. Jacksonville Bancorp, MHC’s principal
business activity is the ownership of 1,038,738 shares of common stock of
Jacksonville Bancorp-Federal, or 54.1% of the issued and outstanding shares as
of December 31, 2009. Upon completion of the conversion and offering,
Jacksonville Bancorp, MHC will no longer exist.
Jacksonville
Bancorp, MHC’s executive offices are located at 1211 West Morton Avenue,
Jacksonville, Illinois 62650. Its telephone number at this address is
(217) 245-4111.
Jacksonville
Bancorp-Federal
Jacksonville
Bancorp-Federal is a federally chartered corporation that owns all of the
outstanding common stock of Jacksonville Savings Bank, an Illinois chartered
savings bank with seven offices. It is regulated exclusively by the Office of
Thrift Supervision. At December 31, 2009, Jacksonville
Bancorp-Federal had consolidated assets of $288.8 million, deposits of $254.7
million and stockholders’ equity of $25.3 million. After the
completion of the conversion and offering, Jacksonville Bancorp-Federal will
cease to exist, and will be succeeded by a new Maryland corporation with the
name Jacksonville Bancorp, Inc. As of December 31, 2009, Jacksonville
Bancorp-Federal had 1,920,817 shares of common stock issued and
outstanding. As of that date, Jacksonville Bancorp, MHC owned
1,038,738 shares of common stock of Jacksonville Bancorp-Federal, representing
54.1% of the issued and outstanding shares of common stock. The
remaining shares were owned by the public.
Jacksonville
Bancorp-Federal’s executive offices are located at 1211 West Morton Avenue,
Jacksonville, Illinois 62650. Its telephone number at this address is
(217) 245-4111.
Jacksonville
Bancorp-Maryland
Jacksonville
Bancorp-Maryland is a newly formed Maryland corporation that will own all of the
outstanding common stock of Jacksonville Savings Bank upon completion of the
conversion and the offering. Jacksonville Bancorp-Maryland will be
the successor to Jacksonville Bancorp-Federal. It will be regulated exclusively
by the Office of Thrift Supervision. We chose to incorporate under
the laws of the state of Maryland because Maryland has a comprehensive corporate
statute similar in many respects to the corporate law of Illinois, the state in
which we are located, and Delaware corporate law, the jurisdiction where many
large corporations choose to incorporate. However, Maryland has a
lower franchise tax than Illinois or Delaware. Our annual cost to be
a Maryland corporation is estimated to be $300 as compared to approximately
$26,000 in Illinois and approximately $180,000 in Delaware.
Jacksonville
Bancorp-Maryland’s executive offices are located at 1211 West Morton Avenue,
Jacksonville, Illinois 62650. Its telephone number at this address is
(217) 245-4111.
Jacksonville
Savings Bank
Jacksonville
Savings Bank is an Illinois-chartered savings bank headquartered in
Jacksonville, Illinois. We conduct our business from our main office
and six branch offices, two of which are located in Jacksonville and one of
which is located in each of the following Illinois communities: Virden,
Litchfield, Chapin, and Concord. We were originally chartered in 1916
as a state-chartered savings and loan association and converted to a
state-chartered savings bank in 1992. We have been a member of the
Federal Home Loan Bank System since 1932. In 1995, Jacksonville
Savings Bank converted to an Illinois chartered stock savings bank and
reorganized from the mutual to the mutual holding company form of
organization. In 1997 and 2000, Jacksonville Savings Bank acquired
Litchfield
Community Savings, S.B. and
Chapin State Bank, respectively. In 2002, Jacksonville Savings
Bank reorganized into the “two-tiered” mutual holding company form of
organization.
We are a
community-oriented savings bank engaged primarily in the business of attracting
retail deposits from the general public in our market area and using such funds,
together with borrowings and funds from other sources, to primarily originate
mortgage loans secured by one- to four-family residential real estate,
commercial and agricultural real estate loans and consumer loans. We also
originate commercial and agricultural business loans and multi-family real
estate loans. Additionally, we invest in United States Government
agency securities, bank-qualified, general obligation municipal issues, and
mortgage-backed securities issued or guaranteed by the United States Government
or agencies thereof. We maintain a portion of our assets in liquid
investments, such as overnight funds at the Federal Home Loan Bank. We also
operate an investment center at our main office. The investment
center is operated through Financial Resources Group, Inc., Jacksonville Savings
Bank’s wholly-owned subsidiary.
Jacksonville
Savings Bank is subject to comprehensive regulation and examination by the
Federal Deposit Insurance Corporation and the Illinois Department of Financial
and Professional Regulation.
Jacksonville
Savings Bank’s executive offices are located at 1211 West Morton Avenue,
Jacksonville, Illinois 62650. Its telephone number at this address is
(217) 245-4111 and its website address is www.jacksonvillesavings.com. Information
on this website is not and should not be considered to be a part of this
prospectus.
Our
Current Organizational Structure
In 1995,
Jacksonville Savings Bank’s mutual predecessor reorganized into the mutual
holding company form of organization and sold approximately 46% of its shares of
common stock to depositors of Jacksonville Savings Bank and issued the remaining
54% of its common stock to Jacksonville Bancorp, MHC. In 2002, Jacksonville
Savings Bank reorganized into a two-tier mutual holding company structure by
creating Jacksonville Bancorp-Federal as a mid-tier stock holding
company. As part of the reorganization, each share of Jacksonville
Savings Bank common stock held by public stockholders and by Jacksonville
Bancorp, MHC was exchanged for a share of Jacksonville Bancorp-Federal, and
Jacksonville Savings Bank became a wholly-owned subsidiary of Jacksonville
Bancorp-Federal.
Pursuant
to the terms of Jacksonville Bancorp, MHC’s plan of conversion and
reorganization, Jacksonville Bancorp, MHC will convert from the mutual holding
company to the stock holding company corporate structure. As part of
the conversion, we are offering for sale in a subscription offering and possibly
in a community offering and syndicated community offering the majority ownership
interest in Jacksonville Bancorp-Federal that is currently held by Jacksonville
Bancorp, MHC. Upon the completion of the conversion and offering,
Jacksonville Bancorp, MHC will cease to exist, and we will complete the
transition from partial to full public stock ownership. Upon
completion of the conversion, each public stockholder of Jacksonville
Bancorp-Federal will receive shares of common stock of Jacksonville
Bancorp-Maryland in exchange for such stockholder’s shares of Jacksonville
Bancorp-Federal common stock pursuant to an exchange ratio that ensures that the
public stockholders will own the same percentage of common stock of Jacksonville
Bancorp-Maryland after the conversion as they held in Jacksonville
Bancorp-Federal immediately prior to the conversion (excluding any new shares
purchased by them in the offering).
The
following diagram shows our current organizational structure, which is commonly
referred to as the “two-tier” mutual holding company structure:
After the
conversion and offering are completed, we will be organized as a fully public
stock holding company, as follows:
Business
Strategy
Our goal
is to operate and grow as a well-capitalized and profitable financial
institution. We seek to accomplish this goal by:
●
|
remaining
a community-oriented financial
institution;
|
●
|
increasing
our commercial and agricultural real estate
lending;
|
●
|
operating
our business profitability while managing
risks;
|
●
|
increasing
our share of lower-cost deposits;
and
|
●
|
increasing
and diversifying our sources of non-interest
income.
|
See
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations-Business Strategy” for a more detailed discussion of our business
strategy.
Reasons
for the Conversion
We are
converting to the fully public stock form of ownership and conducting the
offering at this time in order to increase our capital to enhance our capacity
to grow and to respond to changing regulatory and market conditions, as well as
greater flexibility to effect acquisitions of banks and other financial
institutions. We believe that our conversion to a fully public
company and the capital we will raise from the sale of our common stock will
facilitate our continued growth and the successful implementation of our
business strategy:
●
|
to
increase our capital to support internal growth through lending in the
communities we serve;
|
●
|
to
enhance existing products and services and support the development of new
products and services;
|
●
|
to
facilitate growth through branch and whole bank acquisitions, as
opportunities arise;
|
●
|
to
improve our overall competitive position;
and
|
●
|
to
improve the liquidity of our shares of common stock and enhance
stockholder returns through more flexible capital management
strategies.
|
As a
fully converted stock holding company, we will have greater flexibility in
structuring mergers and acquisitions, including the form of consideration that
we can use to pay for an acquisition. Our current mutual holding
company structure limits our ability to offer shares of our common stock as
consideration in a merger or acquisition since Jacksonville Bancorp, MHC is
required to own a majority of Jacksonville Bancorp-Federal’s outstanding shares
of common stock. Potential sellers often want stock for at least part
of the purchase price. Our new stock holding company structure will
enable us to offer stock or cash consideration, or a combination of stock and
cash, and therefore will enhance our ability to compete with other bidders when
acquisition opportunities arise. We currently have no arrangements or
understandings regarding any specific acquisition.
We also
are undertaking the conversion at this time to reduce the uncertainty to
Jacksonville Bancorp-Federal and its stockholders associated with potential
changes in applicable statutes, regulations and policies affecting mutual
holding companies. In this regard, recent legislative proposals would
eliminate our primary federal regulator, the Office of Thrift Supervision, and
make the Board of Governors of the Federal Reserve System the exclusive
regulator of all holding companies, including mutual holding
companies. The Federal Reserve Board currently does not allow mutual
holding companies to waive the receipt of dividends from their mid-tier holding
company subsidiaries, and any waived dividends are considered in determining
whether the ownership interests of minority stockholders are diluted in the
event of a second-step conversion.
Terms
of the Conversion and Offering
Pursuant
to Jacksonville Bancorp, MHC’s plan of conversion and reorganization, our
organization will convert from a partially public to a fully public holding
company structure. In the conversion, we are selling shares that
represent the ownership interest in Jacksonville Bancorp-Federal currently held
by Jacksonville Bancorp, MHC.
We are
offering between 998,750 and 1,351,250 shares of common stock to eligible
depositors of Jacksonville Savings Bank, to our tax-qualified employee benefit
plans and, to the extent shares remain available, to residents of the counties
of Cass, Greene, Macoupin, Montgomery, Morgan, Pike, Sangamon and Scott,
Illinois, then to our existing public stockholders and to the general
public. The number of shares of common stock to be sold may be
increased to up to 1,553,938 shares as a result of regulatory considerations,
demand for the shares of common stock in the offering, or changes in the market
for financial institution stocks in particular. Unless the number of
shares of common stock to be offered is increased to more than 1,553,938 shares
or decreased to fewer than 998,750 shares, or the offering is extended beyond
[extension date], subscribers will not have the opportunity to change or cancel
their stock orders once submitted. If the number of shares of common
stock to be sold is increased to more than 1,553,938 shares or decreased to
fewer than 998,750 shares, or if the offering is extended beyond [extension
date], subscribers will have the right to maintain, change or cancel their
orders. If we do not receive a written response from a subscriber regarding any
resolicitation, the subscriber’s order will be canceled and all funds received
will be returned promptly with interest, and deposit account withdrawal
authorizations will be canceled. No extension may last longer than 90 days. All
extensions, in the aggregate, may not last beyond _______________.
The
purchase price of each share of common stock to be offered for sale in the
offering is $10.00. All investors will pay the same purchase price
per share. Investors will not be charged a commission to purchase
shares of common stock in the offering. Keefe, Bruyette & Woods,
Inc., our marketing advisor and sales agent in the offering, will use its best
efforts to assist us in selling shares of our common stock. Keefe,
Bruyette & Woods, Inc. is not obligated to purchase any shares of common
stock in the offering.
Persons
Who May Order Shares of Common Stock in the Offering
We are
offering the shares of common stock in a “subscription offering” in the
following descending order of priority:
(i)
|
First,
to depositors with accounts at Jacksonville Savings Bank with aggregate
balances of at least $50.00 at the close of business on December 31,
2008.
|
(ii)
|
Second,
to Jacksonville Savings Bank’s tax-qualified employee benefit plans,
including our employee stock ownership plan and 401(k) plan, who will
receive, without payment therefor, nontransferable subscription rights to
purchase in the aggregate up to 10% of the shares of common stock sold in
the offering. Our employee stock ownership plan currently intends to
purchase up to 4% of the shares of common stock sold in the offering, with
the remaining shares in this purchase priority allocated to our 401(k)
plan.
|
(iii)
|
Third,
to depositors with accounts at Jacksonville Savings Bank with aggregate
balances of at least $50.00 at the close of business on March 31,
2010.
|
(iv)
|
Fourth,
to depositors of Jacksonville Savings Bank at the close of business on May
10, 2010.
|
Shares of
common stock not purchased in the subscription offering may be offered for sale
to the general public in a “community offering,” with a preference given first
to natural persons (including trusts of natural persons) and then other persons
(including any corporation, partnership, association, joint-stock company,
limited liability company, trust, unincorporated organization, or government or
political subdivision of a government) residing in the counties of Cass, Greene,
Macoupin, Montgomery, Morgan, Pike, Sangamon and Scott, Illinois, and then to
Jacksonville Bancorp-Federal public stockholders as of May 10,
2010. The community offering, if held, may begin concurrently with,
during or promptly after the subscription offering as we may determine at any
time. We also may offer for sale shares of common stock not purchased
in the subscription offering or community offering through a “syndicated
community offering” managed by Keefe, Bruyette & Woods,
Inc.
We have
the right to accept or reject, in our sole discretion, orders received in the
community offering or syndicated community offering. We have not
established any set criteria for determining whether to accept or reject a
purchase order in the community offering or the syndicated community offering
and, accordingly, any determination to accept or reject purchase orders in the
community offering and the syndicated community offering will be based on the
facts and circumstances available to management at the time of the
determination.
If we
receive orders for more shares than we are offering, we may not be able to fully
or partially fill your order. Shares will be allocated first to
categories in the subscription offering. A detailed description of
share allocation procedures can be found in the section of this prospectus
entitled “The Conversion and Offering.”
How
We Determined the Offering Range and the $10.00 Per Share Stock
Price
The
amount of common stock we are offering is based on an independent appraisal of
the estimated market value of Jacksonville Bancorp-Maryland, assuming the
conversion and offering are completed. RP Financial, LC., our
independent appraiser, has estimated that, as of February 19, 2010, this market
value ranged from $18.5 million to $25.0 million, with a midpoint of $21.7
million. Based on this valuation, the ownership interest of
Jacksonville Bancorp, MHC being sold in the offering and the $10.00 per share
price, the number of shares of common stock being offered for sale by
Jacksonville Bancorp-Maryland will range from 998,750 shares to 1,351,250
shares. If market conditions warrant, the market value of
Jacksonville Bancorp-Maryland can be increased to $28.7 million and the number
of shares being offered for sale can be increased to 1,553,938
shares. The $10.00 per share price was selected primarily because it
is the price most commonly used in mutual-to-stock conversions of financial
institutions. The appraisal is based in part on Jacksonville
Bancorp-Federal’s financial condition and results of operations, the pro forma
effect of the additional capital raised by the sale of shares of common stock in
the offering, and an analysis of a peer group of 10 publicly traded savings bank
and thrift holding companies that RP Financial, LC. considered comparable to
Jacksonville Bancorp-Federal.
The peer
group consists of 10 thrift holding companies with assets between $198 million
and $1.0 billion as of December 31, 2009.
Company
Name and Ticker Symbol
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
Citizens
Community Bancorp, Inc. (CZWI)
|
|
NASDAQ
|
|
Eau
Claire, WI
|
|
$ |
567 |
|
FFD
Financial Corp. (FFDF)
|
|
NASDAQ
|
|
Dover,
OH
|
|
|
198 |
|
First
Capital, Inc. (FCAP)
|
|
NASDAQ
|
|
Corydon,
IN
|
|
|
457 |
|
First
Savings Financial Group (FSFG)
|
|
NASDAQ
|
|
Clarksville,
IN
|
|
|
491 |
|
HopFed
Bancorp, Inc. (HFBC)
|
|
NASDAQ
|
|
Hopkinsville,
KY
|
|
|
1,022 |
|
Liberty
Bancorp, Inc. (LBCP)
|
|
NASDAQ
|
|
Liberty,
MO
|
|
|
406 |
|
LSB
Financial Corp. (LSBI)
|
|
NASDAQ
|
|
Lafayette,
IN
|
|
|
364 |
|
River
Valley Bancorp (RIVR)
|
|
NASDAQ
|
|
Madison,
IN
|
|
|
385 |
|
Wayne
Savings Bancshares (WAYN)
|
|
NASDAQ
|
|
Wooster,
OH
|
|
|
403 |
|
WVS
Financial Corp. (WVFC)
|
|
NASDAQ
|
|
Pittsburgh,
PA
|
|
|
392 |
|
The
following are average financial ratios for the peer group
companies:
●
|
average
assets of $469 million;
|
●
|
average
non-performing assets of 1.72% of total
assets;
|
●
|
average
loans of 68.2% of total assets;
|
●
|
average
equity of 9.15% of total assets;
and
|
●
|
average
net income of 0.27% of average
assets.
|
The
following table presents a summary of selected pricing ratios for the peer group
companies and Jacksonville Bancorp-Maryland (on a pro forma basis) based on
annualized earnings and other information as of and for the twelve months ended
December 31, 2009, and stock price information for the peer group companies as
of February 19, 2010, as reflected in the appraisal report. Compared
to the average pricing of the peer group, our pro forma pricing ratios at the
maximum of the offering range indicated a 19.5% premium on a price-to-earnings
basis, a premium of 4.4% on a price-to-book basis and a premium of 6.9% on a
price-to-tangible book basis. Premium pricing ratios result from our
generally higher level of equity, more favorable credit quality and higher
earnings. Our board of directors, in reviewing and approving the
appraisal, considered the range of price-to-earnings multiples and the range of
price-to-book value and price-to-tangible book value ratios at the different
amounts of shares to be sold in the offering, and did not consider one valuation
approach to be more important than the other. Instead, in approving
the appraisal, the board concluded that these ranges represented the appropriate
balance of the two approaches to establishing our valuation, and the number of
shares to be sold, in comparison to the peer group institutions. The
estimated appraised value and the resulting premium/discount took into
consideration the potential financial impact of the conversion and offering as
well as the trading price of Jacksonville Bancorp-Federal common stock. The
closing price of the common stock was $10.00 per share on January 22, 2010, the
last trading day immediately preceding the announcement of the conversion, and
$11.89 per share on February 19, 2010, the effective date of the
appraisal.
|
|
Price-to-
earnings
multiple (1)
|
|
|
Price-to-book
value
ratio
|
|
Price-to-tangible
book
value ratio
|
Jacksonville
Bancorp-Maryland (on a pro forma basis, assuming completion of the
conversion)
|
|
|
|
|
|
|
|
|
|
Adjusted
Maximum
|
|
|
25.36x |
|
|
|
72.52 |
% |
|
|
77.88 |
% |
Maximum
|
|
|
22.61x |
|
|
|
66.23 |
% |
|
|
71.38 |
% |
Midpoint
|
|
|
20.09x |
|
|
|
60.20 |
% |
|
|
65.15 |
% |
Minimum
|
|
|
17.47x |
|
|
|
53.65 |
% |
|
|
58.28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation
of peer group companies, all of which are fully converted (on an
historical basis)
|
|
|
|
|
|
|
|
|
|
|
|
|
Averages
|
|
|
18.92x |
|
|
|
63.46 |
% |
|
|
66.79 |
% |
Medians
|
|
|
17.70x |
|
|
|
62.98 |
% |
|
|
65.09 |
% |
(1)
|
Price-to-earnings
multiples calculated by RP Financial, LC. in the independent appraisal are
based on an estimate of “core,” or recurring, earnings. These
ratios are different than those presented in “Pro Forma
Data.”
|
The
independent appraisal does not indicate market value. Do not assume
or expect that our valuation as indicated in the appraisal means that after the
conversion and offering the shares of our common stock will trade at or above
the $10.00 per share purchase price. Furthermore, the pricing ratios
presented in the appraisal were utilized by RP Financial, LC. to estimate our
market value and not to compare the relative value of shares of our common stock
with the value of the capital stock of the peer group. The value of
the capital stock of a particular company may be affected by a number of factors
such as financial performance, asset size and market location.
The
independent appraisal will be updated prior to the completion of the conversion.
If the appraised value changes to either below $18.5 million or above $28.7
million, we will resolicit persons who submitted stock orders. See
“The Conversion and Offering—Stock Pricing and Number of Shares to be
Issued.”
Benefits
to Management and Potential Dilution to Stockholders Resulting from the
Conversion
Employee Stock
Ownership Plan. Our tax-qualified employee stock ownership
plan currently expects to purchase up to 4% of the shares of common stock we
sell in the offering, or 62,158 shares of common stock, assuming we sell the
maximum, as adjusted, number of shares proposed to be sold which, when combined
with the existing employee stock ownership plan, will be less than 8% of the
shares outstanding following the conversion. If we receive orders for
more shares of common stock than the maximum of the offering range, the employee
stock ownership plan will have first priority to purchase shares over this
maximum, up to a total of 4% of the shares of common
stock sold in the offering. We reserve the right to purchase shares
of common stock in the open market following the offering in order to fund all
or a portion of the employee stock ownership plan, subject to Office of Thrift
Supervision approval. Assuming the employee stock ownership plan
purchases 47,000 shares in the offering, at the midpoint of the offering range,
we will recognize additional compensation expense of approximately $23,500
annually (or approximately $14,377 after tax) over a 20-year period, assuming
the loan to the employee stock ownership plan has a 20-year term and an interest
rate equal to the prime rate as published in The Wall Street Journal, and
the shares of common stock have a fair market value of $10.00 per share for the
full 20-year
period. If, in the future, the shares of common stock have a fair
market value greater or less than $10.00, the compensation expense will increase
or decrease accordingly. We also reserve the right to have the
employee stock ownership plan purchase more than 4% of the shares of
common stock sold in the offering if necessary to complete the offering at the
minimum of the offering range. When combined with the common stock purchased by
the employee stock ownership plan in the 1995 stock offering of Jacksonville
Savings Bank (and subsequently converted to Jacksonville Bancorp-Federal common
stock) that are converted to shares of Jacksonville Bancorp-Maryland (pursuant
to the exchange ratio), the total shares purchased by the plan will be not
greater than 8% of the shares of Jacksonville Bancorp-Maryland that will be
outstanding following the conversion, as required by the Office of Thrift
Supervision regulations. Assuming the maximum of the offering range, the most
shares that could be purchased by the employee stock ownership plan in the
offering would be approximately 112,442 shares.
Under the
terms of the employee stock ownership plan, shares that are allocated to
employees will be voted by the plan trustee based on directions received by the
employee. Unallocated shares will be voted by the plan trustee in the
same proportion as allocated shares pursuant to directions received by the
employees.
Stock-Based
Benefit Plan. We also currently intend to implement a new
stock-based benefit plan no earlier than six months after completion of the
conversion. Stockholder approval of this plan would be
required. We currently anticipate seeking stockholder approval after
one year from the completion of the conversion. The terms and
conditions of such a stock-based benefit plan, including the number of shares
available per award under the plan and the types of awards, have not been
determined at this time. If the stock-based benefit plan is
implemented within 12 months following the completion of the conversion, the
plan will reserve a number of shares up to 10% of the shares of common stock
sold in the offering, or up to 117,500 shares of common stock at the midpoint of
the offering range, for issuance pursuant to grants of stock options to key
employees and directors, subject to adjustment as may be required by Office of
Thrift Supervision regulations or policy to reflect stock options previously
granted by Jacksonville Bancorp-Federal or Jacksonville Savings
Bank. If the shares of common stock issued upon the exercise of
options come from authorized but unissued shares of common stock, stockholders
would experience dilution of up to 5.13% in their ownership interest in
Jacksonville Bancorp-Maryland. Stock option grants made pursuant to a
plan implemented within 12 months following the completion of the conversion and
the offering would be subject to Office of Thrift Supervision regulations,
including a requirement that stock options vest over a period of not less than
five years. If the stock-based benefit plan is adopted more than one
year after the completion of the conversion, the plan would not be subject to
Office of Thrift Supervision restrictions described above, including limits on
the total number of options or shares available for award under the plan, and we
may elect to implement a stock-based benefit plan containing features that are
different from those described above. Shares underlying stock options may not be
voted on corporate matters put to a stockholder vote. For a
description of our current stock-based benefit plans, see “Management—Benefit
Plans.”
The following table
summarizes the number of shares of common stock and the aggregate dollar value
of grants that are expected under the new stock-based benefit plan as a result
of the conversion. The table also shows the dilution to stockholders
if all such shares are issued from authorized but unissued shares, instead of
shares purchased in the open market. A portion of the stock grants
shown in the table below may be made to non-management
employees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilution
Resulting
From
Issuance
of
Shares
for
Stock-Based
Benefit
plans
(3)
|
|
|
|
|
|
|
|
Number
of Shares to be Granted or Purchased (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
a
Percentage
of
Common
Stock
to be
Sold
in the
Offering
|
|
|
|
|
|
Value
of Grants, in Thousands (2) |
|
|
|
|
At
Minimum
of
Offering
Range
|
|
|
|
At
Maximum
as
adjusted
of
Offering
Range
|
|
|
|
|
|
|
|
|
|
At
Minimum
of
Offering
Range
|
|
|
|
At
Maximum,
as
adjusted,
of
Offering
Range
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
stock ownership plan
|
|
|
39,950 |
|
|
|
62,158 |
|
|
|
4.0 |
% |
|
|
0.00 |
% |
|
$ |
400 |
|
|
$ |
622 |
|
Stock options
|
|
|
99,875 |
|
|
|
155,394 |
|
|
|
10.0 |
|
|
|
5.13 |
% |
|
|
222 |
|
|
|
345 |
|
Total
|
|
|
139,825 |
|
|
|
217,552 |
|
|
|
14.0 |
% |
|
|
5.13 |
% |
|
$ |
622 |
|
|
$ |
967 |
|
(1)
|
The
table assumes that the stock-based benefit plan awards a number of options
equal to 10% of the shares of common stock sold in the offering as if the
plan is implemented within one year after the completion of the conversion
and offering. If the stock-based benefit plan is implemented
more than 12 months after the completion of the conversion and offering,
grants of options may exceed these percentage
limitations.
|
(2)
|
For
purposes of this table, fair value for stock awards is assumed to be the
same as the offering price of $10.00 per share. The fair value
of stock options has been estimated at $2.22 per option using the
Black-Scholes option pricing model, adjusted for the exchange ratio, with
the following assumptions: a grant-date share price and option
exercise price of $10.00; an expected option life of ten years; a dividend
yield of 3.0%; a risk-free interest rate of 3.85%; and a volatility rate
of 21.42%. The actual value of option grants will be determined by the
grant-date fair value of the options, which will depend on a number of
factors, including the valuation assumptions used in the option pricing
model ultimately adopted.
|
(3)
|
Represents
the dilution of stock ownership interest. No dilution is
reflected for the employee stock ownership plan because such shares are
assumed to be purchased in the
offering.
|
We may
fund our stock-based benefit plan through open market purchases, as opposed to
new issuances of stock; however, if any options previously granted under our
existing 1996 and 2001 Stock Option Plans are exercised during the first year
following completion of the offering, they will be funded with newly issued
shares as Office of Thrift Supervision regulations do not permit us to
repurchase our shares during the first year following the completion of this
offering except under extraordinary circumstances. We have been
advised by the staff of the Office of Thrift Supervision that the exercise of
outstanding options and cancellation of treasury shares in the conversion will
not constitute an extraordinary circumstance for purposes of this
test.
The
following table presents information as of December 31, 2009 regarding our
employee stock ownership plan, our 1996 and 2001 Stock Option Plans, our 1996
Recognition and Retention Plan and our proposed stock-based benefit
plan. The table below assumes that 2,498,709 shares are outstanding
after the offering, which includes the sale of 1,351,250 shares in the offering
at the maximum of the offering range and the issuance of 1,147,459 shares in
exchange for shares of Jacksonville Bancorp-Federal using an exchange ratio of
1.3009. It also assumes that the value of the stock is $10.00 per
share.
Existing
and New Stock Benefit Plans
|
|
|
|
Shares
at Maximum
of
Offering Range
|
|
|
Estimated
Value of
Shares
|
|
|
Percentage
of
Shares
Outstanding
After
the
Conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
Stock Ownership Plan:
|
|
Employees
|
|
|
|
|
|
|
|
|
|
Shares
purchased in 1995 offering (1)
|
|
|
|
|
87,031 |
(2) |
|
$ |
870,310 |
|
|
|
3.5 |
% |
Shares
to be purchased in this offering
|
|
|
|
|
54,050 |
|
|
|
540,500 |
|
|
|
2.2 |
|
Total
employee stock ownership plan shares
|
|
|
|
|
141,081 |
|
|
$ |
1,410,810 |
|
|
|
5.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock Awards:
|
|
Directors
and Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
1996
Recognition and Retention Plan(1)
|
|
|
|
|
43,515 |
(3) |
|
$ |
435,150 |
(4) |
|
|
1.7 |
% |
Total
shares of restricted stock
|
|
|
|
|
43,515 |
|
|
$ |
435,150 |
|
|
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Options:
|
|
Directors
and Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
1996 Stock Option
Plan (1)
|
|
|
|
|
108,787 |
(5) |
|
$ |
1,087,870 |
|
|
|
4.4 |
% |
2001 Stock Option
Plan (1)
|
|
|
|
|
111,877 |
(6) |
|
|
1,118,770 |
|
|
|
4.5 |
|
New stock
options
|
|
|
|
|
135,125 |
|
|
$ |
1,351,250 |
(7) |
|
|
5.4 |
|
Total stock
options
|
|
|
|
|
355,789 |
|
|
$ |
3,557,890 |
|
|
|
14.3 |
%
(8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
of stock benefit plans
|
|
|
|
|
540,385 |
|
|
$ |
5,403,850 |
|
|
|
21.7 |
% |
(1) The
number of shares indicated has been adjusted for the 1.3009 exchange ratio at
the maximum of the offering range.
(2)
|
As
of December 31, 2009, all of these shares, or 66,901 shares prior to
adjustment for the exchange, have been
allocated.
|
(3)
|
As
of December 31, 2009, all of these shares, or 33,450 shares prior to
adjustment for the exchange, have been awarded, and all of the shares
prior to adjustment for the exchange, have
vested.
|
(4)
|
The
value of restricted stock awards is determined based on their fair value
as of the date grants are made. For purposes of this table, the
fair value of awards under the new stock-based benefit plan is assumed to
be the same as the offering price of $10.00 per
share.
|
(5)
|
As
of December 31, 2009, options to purchase 108,787 of these shares, or
83,625 shares prior to adjustment for the exchange, have been awarded, and
no options remain available for future grants. At December 31,
2009, 4,500 unexercised and fully vested options were outstanding under
this plan prior to adjustment for the
exchange.
|
(6)
|
As
of December 31, 2009, options to purchase 111,877 of these shares, or
86,000 shares prior to adjustment for the exchange, have been awarded, and
options to purchase 1,430 of these shares, or 1,100 shares prior to
adjustment for the exchange, remain available for future grants. At
December 31, 2009, 28,845 unexercised and fully vested options were
outstanding under this plan prior to adjustment for the
exchange.
|
(7)
|
The
weighted-average fair value of stock options has been estimated at $2.22
per option, adjusted for the exchange rate, using the Black-Scholes option
pricing model. The fair value of stock options uses the
Black-Scholes option pricing model with the following assumptions:
exercise price, $10.00; trading price on date of grant, $10.00; dividend
yield, 3.00%; expected life, 10 years; expected volatility, 21.42%; and
risk-free interest rate, 3.85%.
|
(8)
|
The
number of stock options set forth in the table would exceed regulatory
limits if a stock-based benefit plan was adopted within one year of the
completion of the conversion. Accordingly, the number of new
stock options set forth in the table would have to be reduced such that
the aggregate amount of stock options would be 10% or less, unless we
obtain a waiver from the Office of Thrift Supervision, or we implement the
plan after twelve months following the completion of the
conversion. Our current intention is to implement a new
stock-based benefit plan no earlier than twelve months after completion of
the conversion.
|
The
grant-date fair value of the options granted under the stock-based benefit plan
will be based in part on the price of shares of common stock of Jacksonville
Bancorp-Maryland at the time the options are granted. The value also will depend
on the various assumptions utilized in the option pricing model ultimately
adopted. The following table presents the total estimated fair value
of the options to be available for grant under the stock-based benefit plan
using the Black-Scholes option pricing model, assuming the market price and
exercise price for the stock options are equal and the range of market prices
for the shares is $8.00 per share to $14.00 per share. The
Black-Scholes option pricing model provides an estimate only of the fair value
of the options, and the actual value of the options may differ significantly
from the value set forth in this table.
Exercise
Price |
|
Grant-Date
Fair
Value
Per Option
|
|
|
99,875
Options
at
Minimum
of Range
|
|
|
117,500
Options
at
Midpoint
of Range
|
|
|
135,125
Options
at
Maximum
of Range
|
|
|
155,394
Options
at
Maximum
of
Range,
As Adjusted
|
|
$ |
|
8.00
|
|
$ |
1.78 |
|
|
$ |
177,778 |
|
|
$ |
209,150 |
|
|
$ |
240,523 |
|
|
$ |
276,601 |
|
|
|
10.00
|
|
|
2.22 |
|
|
|
221,723 |
|
|
|
260,850 |
|
|
|
299,978 |
|
|
|
344,975 |
|
|
|
12.00
|
|
|
2.66 |
|
|
|
265,668 |
|
|
|
312,550 |
|
|
|
359,433 |
|
|
|
413,348 |
|
|
|
14.00
|
|
|
3.11 |
|
|
|
310,611 |
|
|
|
365,425 |
|
|
|
420,239 |
|
|
|
483,275 |
|
The
tables presented above are provided for informational purposes
only. There can be no assurance that our stock price will not trade
below $10.00 per share. Before you make an investment decision, we
urge you to read this prospectus carefully, including, but not limited to, the
section entitled “Risk Factors” beginning on page ___.
The
Exchange of Existing Shares of Jacksonville Bancorp-Federal Common
Stock
If you
are currently a stockholder of Jacksonville Bancorp-Federal, your shares will be
canceled at the conclusion of the offering and become the right to receive
shares of common stock of Jacksonville Bancorp-Maryland. The number
of shares of common stock you receive will be based on an exchange ratio
determined as of the closing of the conversion, which will depend upon our final
appraised value. The following table shows how the exchange ratio
will adjust, based on the valuation of Jacksonville Bancorp-Maryland and the
number of shares of common stock issued in the offering. The table
also shows the number of shares of Jacksonville Bancorp-Maryland common stock a
hypothetical owner of Jacksonville Bancorp-Federal common stock would receive in
exchange for 100 shares of Jacksonville Bancorp-Federal common stock owned at
the consummation of the conversion, depending on the number of shares of common
stock issued in the offering.
|
|
|
Shares
to be Sold in This
Offering
|
|
|
|
Shares
of Jacksonville Bancorp-
Maryland
to be Issued for
Shares
of Jacksonville Bancorp-
Federal
|
|
|
|
Total
Shares of
Common
Stock
to
be Issued in
Conversion
and
Offering
|
|
|
|
Exchange
Ratio |
|
|
Equivalent
Value
of Shares
Based
Upon
Current
Market
Price (1)
|
|
|
|
Shares
to be
Received
for
100
Existing
Shares
|
|
|
|
|
|
Amount
|
|
|
|
Percent
|
|
|
|
Amount
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
998,750 |
|
|
|
54.08 |
% |
|
|
848,122 |
|
|
|
45.92 |
% |
|
|
1,846,872 |
|
|
|
0.9615 |
|
|
$ |
9.62 |
|
|
|
96 |
|
|
Midpoint
|
|
|
1,175,000 |
|
|
|
54.08 |
|
|
|
997,790 |
|
|
|
45.92 |
|
|
|
2,172,790 |
|
|
|
1.1312 |
|
|
|
11.31 |
|
|
|
113 |
|
|
Maximum
|
|
|
1,351,250 |
|
|
|
54.08 |
|
|
|
1,147,459 |
|
|
|
45.92 |
|
|
|
2,498,709 |
|
|
|
1.3009 |
|
|
|
13.01 |
|
|
|
130 |
|
|
15%
above Maximum
|
|
|
1,553,938 |
|
|
|
54.08 |
|
|
|
1,319,578 |
|
|
|
45.92 |
|
|
|
2,873,515 |
|
|
|
1.4960 |
|
|
|
14.96 |
|
|
|
149 |
|
|
(1) Represents
the value of shares of Jacksonville Bancorp-Maryland common stock received in
the conversion by a holder of one share of Jacksonville Bancorp-Federal, at the
exchange ratio, assuming the market price of $10.00 per
share.
If you
own shares of Jacksonville Bancorp-Federal common stock in a brokerage account
in “street name,” you do not need to take any action to exchange your shares of
common stock. If you own shares in the form of Jacksonville
Bancorp-Federal stock certificates, you will receive a transmittal form with
instructions to surrender your stock certificates after consummation of the
conversion. New certificates of Jacksonville Bancorp-Maryland common stock will
be mailed to you within five business days after the exchange agent receives
properly executed transmittal forms and your Jacksonville Bancorp-Federal stock
certificates.
You
should not submit a stock certificate until you receive a transmittal
form.
No
fractional shares of Jacksonville Bancorp-Maryland common stock will be issued
to any public stockholder of Jacksonville Bancorp-Federal. For each
fractional share that otherwise would be issued, Jacksonville Bancorp-Maryland
will pay in cash an amount equal to the product obtained by multiplying the
fractional share interest to which the holder otherwise would be entitled by the
$10.00 per share subscription price.
Outstanding
options to purchase shares of Jacksonville Bancorp-Federal common stock also
will convert into and become options to purchase new shares of Jacksonville
Bancorp-Maryland common stock. The number of shares of common stock to be
received upon exercise of these options will be determined pursuant to the
exchange ratio. The aggregate exercise price, duration and vesting schedule of
these options will not be affected by the conversion. At December 31,
2009, there were 33,345outstanding options to purchase shares of Jacksonville
Bancorp-Federal common stock, all of which have vested. Such
outstanding options will be converted into options to purchase 32,061 shares of
common stock at the minimum of the offering range and 43,378 shares of common
stock at the maximum of the offering range. Because Office of Thrift
Supervision regulations prohibit us from repurchasing our common stock during
the first year following the conversion unless compelling business reasons exist
for such repurchases, we may use authorized but unissued shares to fund option
exercises that occur during the first year following the
conversion. If all existing options were exercised for authorized,
but unissued shares of common stock following the conversion, stockholders would
experience dilution of approximately 1.71% at both the minimum and the maximum
of the offering range.
Limits
on How Much Common Stock You May Purchase
The
minimum number of shares of common stock that may be purchased is
25.
If
you are not currently a Jacksonville Bancorp-Federal stockholder –
No
individual may purchase more than 25,000 shares ($250,000) of common
stock. If any of the following persons purchases shares of common
stock, their purchases, in all categories of the offering, when combined with
your purchases, cannot exceed 50,000 shares ($500,000) of common
stock:
●
|
your
spouse or relatives of you or your spouse living in your
house;
|
●
|
most
companies, trusts or other entities in which you are a trustee, have a
substantial beneficial interest or hold a senior position;
or
|
●
|
other
persons who may be your associates or persons acting in concert with
you.
|
Unless we
determine otherwise, persons having the same address and persons exercising
subscription rights through qualifying deposit accounts registered to the same
address will be subject to the overall purchase limitation of 50,000 shares
($500,000).
See the
detailed description of “acting in concert” and “associate” in the section of
this prospectus headed “The Conversion and Offering—Limitations on Common Stock
Purchases.”
If
you are currently a Jacksonville Bancorp-Federal stockholder –
In
addition to the above purchase limitations, there is an ownership limitation for
stockholders other than our employee stock ownership plan. Shares of
common stock that you purchase in the offering individually and together with
persons described above, plus
any shares you and they receive in exchange for existing shares of Jacksonville
Bancorp-Federal common stock, may not exceed 5% of the total shares of common
stock to be issued and outstanding after the completion of the
conversion.
Subject
to Office of Thrift Supervision approval, we may increase or decrease the
purchase and ownership limitations at any time.
How
You May Purchase Shares of Common Stock
In the
subscription offering and community offering, you may pay for your shares only
by:
(i)
|
personal
check, bank check or money order made payable directly to Jacksonville
Bancorp, Inc.; or
|
(ii)
|
authorizing
us to withdraw funds from Jacksonville Savings Bank savings and
certificate of deposit accounts (not checking accounts) designated on the
stock order form.
|
Jacksonville
Savings Bank is not permitted to lend funds to anyone for the purpose of
purchasing shares of common stock in the offering. Additionally, you
may not use a Jacksonville Savings Bank line of credit check or third party
check to pay for shares of common stock. Please do not submit
cash.
You can
subscribe for shares of common stock in the offering by delivering a signed and
completed original stock order form, together with full payment payable to
Jacksonville Bancorp, Inc. or authorization to withdraw funds from one or more
of your Jacksonville Savings Bank deposit accounts, provided that we receive the
stock order form before 12:00 noon, Central Time, on [expiration date], which is
the end of the offering period. Checks and money orders will be
deposited with Jacksonville Savings Bank upon receipt. If
permitted by the Office of Thrift Supervision, in the event we resolicit large
purchasers, such purchasers who wish to increase their purchases will not be
able to use personal checks to pay for the additional shares .We will pay
interest at Jacksonville Savings Bank’s statement savings rate from the date
funds are processed until completion or termination of the conversion, at which
time subscribers will receive interest checks. You may not designate
a withdrawal from Jacksonville Savings Bank accounts with check-writing
privileges. Please provide a check instead, because we cannot place
holds on checking accounts. If you request that we do so, we reserve
the right to interpret that as your authorization to treat those funds as if we
had received a check for the designated amount, and we will immediately withdraw
the amount from your checking account(s). You may not designate a
withdrawal from a Jacksonville Savings Bank individual retirement
account. If you wish to use funds in such an account, please see
“—Using IRA Funds.”
Withdrawals
from certificates of deposit to purchase shares of common stock in the offering
may be made without incurring an early withdrawal penalty. If a
withdrawal results in a certificate account with a balance less than the
applicable minimum balance requirement, the certificate will be canceled at the
time of withdrawal without penalty and the remaining balance will earn interest
at the current passbook rate subsequent to the withdrawal.
All funds
authorized for withdrawal from deposit accounts at Jacksonville Savings Bank
must be in the accounts at the time the stock order is received. However, funds
will not be withdrawn from the accounts until the completion of the offering and
will earn interest within the account at the applicable deposit account rate
until that time. A hold will be placed on those funds when your stock
order is received, making the designated funds unavailable to you.
Funds
withdrawn from deposit accounts at Jacksonville Savings Bank may reduce or
eliminate the depositor’s liquidation rights. Please see the section
of this prospectus entitled “The Conversion and Offering—Liquidation Rights” for
further information.
By
signing the stock order form, you are acknowledging both receipt of this
prospectus and that the shares of common stock are not deposits or savings
accounts that are federally insured or otherwise guaranteed by Jacksonville
Savings Bank, Jacksonville Bancorp-Maryland or the federal
government. After we receive an order for shares of our common stock,
the order cannot be cancelled or changed.
Using
IRA Funds
You may
be able to subscribe for shares of common stock using funds in your individual
retirement account, or IRA. However, shares of common stock must be
held in a self-directed retirement account, such as those offered by a brokerage
firm. By regulation, Jacksonville Savings Bank’s individual retirement accounts
are not self-directed, so they cannot be invested in our common stock. If you
wish to use some or all of the funds in your Jacksonville Savings Bank
individual retirement account, the applicable funds must be transferred to a
self-directed account maintained by an independent trustee, such as a brokerage
firm. If you do not have such an account, you will need to establish one before
placing your stock order. An annual administrative fee may be payable to the
independent trustee. Because individual circumstances differ and processing of
retirement fund orders takes additional time, we recommend that you contact our
Stock Information Center promptly, preferably at least two weeks before the
[expiration date] offering deadline, for assistance with purchases using your
individual retirement account or other retirement account that you may have at
Jacksonville Savings Bank or elsewhere. Whether you may use such
funds for the purchase of shares in the stock offering may depend on timing
constraints and, possibly, limitations imposed by the institution where the
funds are held.
Delivery
of Stock Certificates
Certificates
representing shares of common stock sold in the subscription offering and
community offering will be mailed to the persons entitled thereto at the
certificate registration address noted by them on the order form, as soon as
practicable following consummation of the offering and receipt of all necessary
regulatory approvals. It
is possible that until certificates for the common stock are delivered to
purchasers, purchasers might not be able to sell the shares of common stock that
they ordered, even though the common stock will have begun
trading. If you are currently a stockholder of Jacksonville
Bancorp-Federal, see “The Conversion and Offering—Exchange of Existing
Stockholders’ Stock Certificates.”
How
We Intend to Use the Proceeds From the Offering
We
estimate net proceeds from the offering will be between $8.7 million and $12.2
million, or $14.2 million if the offering range is increased by
15%. Jacksonville Bancorp-Maryland intends to retain between $4.0
million and $5.6 million of the net proceeds, or $6.5 million if the offering
range is increased by 15%. Approximately $4.4 million to $6.1 million
of the net proceeds (or $7.1 million if the offering range is increased by 15%)
will be invested in Jacksonville Savings Bank.
A portion
of the net proceeds retained by Jacksonville Bancorp-Maryland will be loaned to
the employee stock ownership plan to fund its purchase of shares of common stock
in the offering (between 39,950 shares and 54,050 shares, or 62,158 shares if
the offering is increased by 15%). The employee stock ownership plan
was established in connection with our 1995 stock offering. As of
December 31, 2009, there were no shares remaining unallocated in the plan. The
remainder of the net proceeds will be used for general corporate purposes,
including paying cash dividends and repurchasing shares of our common stock when
permissible under Office of Thrift Supervision regulations. Funds
invested in Jacksonville Savings Bank will be used to reduce wholesale funding
and support increased lending and new products and services. The net
proceeds retained by Jacksonville Bancorp-Maryland and Jacksonville Savings Bank
also may be used to
expand our retail banking franchise by acquiring new branches or by acquiring
other financial institutions, or other financial services companies as
opportunities arise, although we do not currently have any agreements or
understandings regarding any acquisition transaction and it is impossible to
determine when, if ever, such opportunities may arise. We currently have no
arrangements or understandings regarding any specific
acquisition. Initially, a substantial portion of the net proceeds
will be invested in short-term investments, investment-grade debt obligations
and mortgage-backed securities.
Please
see the section of this prospectus entitled “How We Intend to Use the Proceeds
from the Offering” for more information on the proposed use of the proceeds from
the offering.
You
May Not Sell or Transfer Your Subscription Rights
Office of
Thrift Supervision regulations prohibit you from transferring your subscription
rights. If you order shares of common stock in the subscription
offering, you will be required to state that you are purchasing the common stock
for yourself and that you have no agreement or understanding to sell or transfer
your subscription rights. We intend to take legal action, including
reporting persons to federal agencies, against anyone who we believe has sold or
transferred his or her subscription rights. We will not accept your
order if we have reason to believe that you have sold or transferred your
subscription rights. On the order form, you may not add the names of
others for joint stock registration who do not have subscription rights or who
qualify only in a lower subscription offering priority than you
do. You may add only those who were eligible to purchase shares of
common stock in the subscription offering at your date of
eligibility. In addition, the stock order form requires that you list
all deposit accounts, giving all names on each account and the account number at
the applicable eligibility date. Failure to provide this information,
or providing incomplete or incorrect information, may result in a loss of part
or all of your share allocation, if there is an oversubscription.
Deadline
for Orders of Common Stock
If you
wish to purchase shares of common stock, a properly completed and signed
original stock order form, together with full payment for the shares of common
stock, must be received (not postmarked) by the Stock Information Center no
later than 12:00 noon, Central Time, on [expiration date], unless we extend this
deadline. You may submit your order form and payment either by mail
using the stock order return envelope provided, by overnight delivery to the
indicated address on the order form or by delivering your order form in person
at any of Jacksonville Savings Bank’s branch offices. Once submitted, your order
is irrevocable unless the offering is terminated or extended beyond [extension
date] or the number of shares of common stock to be sold is increased to more
than 1,553,938 shares or decreased to fewer than 998,750 shares. In
either of these cases, purchasers will have the right to maintain, change or
cancel their orders. If we do not receive a written response from a purchaser
regarding any resolicitation, the purchaser’s order will be canceled and all
funds received will be returned promptly with interest, and deposit account
withdrawal authorizations will be canceled. No extension may last longer than 90
days. All extensions, in the aggregate, may not last beyond
_______________.
Although
we will make reasonable attempts to provide this prospectus and offering
materials to holders of subscription rights, the subscription offering and all
subscription rights will expire at 12:00 noon, Central Time, on [expiration
date], whether or not we have been able to locate each person entitled to
subscription rights.
TO ENSURE THAT EACH PERSON
RECEIVES A PROSPECTUS AT LEAST 48 HOURS PRIOR TO THE EXPIRATION DATE OF [EXPIRATION
DATE] IN ACCORDANCE WITH FEDERAL LAW, NO PROSPECTUS WILL BE MAILED ANY
LATER THAN FIVE DAYS PRIOR TO [EXPIRATION
DATE] OR HAND-DELIVERED ANY LATER THAN TWO DAYS PRIOR TO [EXPIRATION
DATE].
Steps
We May Take if We Do Not Receive Orders for the Minimum Number of
Shares
If we do
not receive orders for at least 998,750 shares of common stock, we may take
several steps in order to issue the minimum number of shares of common stock in
the offering range. Specifically, we may:
|
(i)
|
increase
the purchase and ownership
limitations;
|
|
(ii)
|
seek
regulatory approval to extend the offering beyond the [extension date]
expiration date, provided that any such extension will require us to
resolicit subscriptions received in the offering;
and/or
|
(iii)
|
Increase
the purchase of shares by the employee stock ownership
plan.
|
Purchases
by Officers and Directors
We expect
our directors and executive officers, together with their associates, to
subscribe for 100,000 shares of common stock in the offering. The
purchase price paid by them will be the same $10.00 per share price paid by all
other persons who purchase shares of common stock in the
offering. Following the conversion, our directors and executive
officers, together with their associates, are expected to own 317,655 shares,
356,068 shares or 394,485 shares of common stock, or 17.2%, 16.4% or
15.8% of our total outstanding shares of common stock at the minimum, midpoint
or maximum of the offering range, respectively.
Market
for Common Stock
Existing
publicly held shares of Jacksonville Bancorp-Federal’s common stock are traded
on the Nasdaq Capital Market under the symbol “JXSB.” Upon completion of the
conversion, the shares of common stock of Jacksonville Bancorp-Maryland will
replace the existing shares. We expect the new shares will trade on the Nasdaq
Capital Market under the symbol “JXSBD” for a period of 20 trading days after
the completion of the offering. Thereafter, our trading symbol will revert to
“JXSB.” In order to list our stock on the Nasdaq Capital Market, we are required
to have at least three broker-dealers who will make a market in our common
stock. Jacksonville Bancorp-Federal currently has more than three
market makers, including Keefe, Bruyette & Woods, Inc., and Keefe, Bruyette
& Woods, Inc. has advised us that it intends to make a market in our common
stock following the offering, but it is under no obligation to do
so.
Our
Dividend Policy
We have
paid quarterly cash dividends since the second quarter of 2005. We
currently pay a quarterly cash dividend of $0.075 per share, or $0.30 on an
annualized basis. After we complete the conversion, we intend to
continue to pay dividends on our outstanding shares of common
stock. We expect that the level of cash dividends per share after the
conversion and offering will be consistent with the current amount of dividends
per share we pay on our common stock, as adjusted for the additional shares
issued pursuant to the exchange ratio. For example, based on the
current annualized cash dividend of $0.30 per share and an assumed exchange
ratio of 1.1312 at the midpoint of the offering range, the annualized cash
dividend, if paid, would be approximately $0.26 per share, which represents an
annual dividend yield of 2.6% at the midpoint of the offering range, based upon
a stock price of $10.00 per share. However, the dividend rate
and the continued payment of dividends will depend on a number of factors
including our capital requirements, our financial condition and results of
operations, the rate of tax on dividends, statutory and regulatory limitations,
and general economic conditions. We cannot assure you that we will
not reduce or eliminate dividends in the future.
See
“Selected Consolidated Financial and Other Data of Jacksonville Bancorp-Federal
and Subsidiary” and “Market for the Common Stock” for information regarding our
historical dividend payments.
Tax
Consequences
As a
general matter, the conversion will not be a taxable transaction for purposes of
federal or state income taxes to Jacksonville Bancorp, MHC, Jacksonville
Bancorp-Federal, Jacksonville Savings Bank, Jacksonville Bancorp-Maryland,
persons eligible to subscribe in the subscription offering, or existing
stockholders of Jacksonville Bancorp-Federal. Existing stockholders
of Jacksonville Bancorp-Federal who receive cash in lieu of fractional share
interests in shares of Jacksonville Bancorp-Maryland will recognize a gain or
loss equal to the difference between the cash received and the tax basis of the
fractional share.
Conditions
to Completion of the Conversion
We cannot
complete the conversion and offering unless:
●
|
The
plan of conversion and reorganization is approved by at least a
majority of votes eligible to be cast by members of Jacksonville
Bancorp, MHC;
|
●
|
The
plan of conversion and reorganization is approved by at least two-thirds of the outstanding
shares of common stock of Jacksonville Bancorp-Federal as of
_______________, including shares held by Jacksonville Bancorp, MHC.
(Because Jacksonville Bancorp, MHC owns 54.1% of the outstanding shares of
Jacksonville Bancorp-Federal common stock, Jacksonville Bancorp, MHC and
its executive officers and directors will significantly influence the
outcome of this vote);
|
●
|
The
plan of conversion and reorganization is approved by at least a
majority of the outstanding shares of common stock of Jacksonville
Bancorp-Federal as of _______________, excluding those shares held by
Jacksonville Bancorp, MHC;
|
●
|
We
sell at least the minimum number of shares of common stock offered;
and
|
●
|
We
receive the final approval of the Office of Thrift Supervision to complete
the conversion and offering; however, such approval does not constitute a
recommendation or endorsement of the plan of conversion and reorganization
by that agency.
|
Jacksonville
Bancorp, MHC intends to vote its ownership interest in favor of the plan of
conversion and reorganization. At December 31, 2009, Jacksonville
Bancorp, MHC owned 54.1% of the outstanding shares of common stock of
Jacksonville Bancorp-Federal. At _______, 2010, the directors and
executive officers of Jacksonville Bancorp-Federal and their affiliates owned
226,369 shares of Jacksonville Bancorp-Federal, or 11.8% of the outstanding
shares of common stock and 25.7% of the outstanding shares of common stock,
excluding shares owned by Jacksonville Bancorp, MHC. They intend to vote those
shares in favor of the plan of conversion and reorganization.
How
You Can Obtain Additional Information—Stock Information Center
Our
banking personnel may not, by law, assist with investment-related questions
about the offering. If you have any questions regarding the
conversion or offering, please call our Stock Information Center, Monday through
Friday between 9:00 a.m. and 5:00 p.m., Central Time. The Stock
Information Center will be closed on weekends and bank holidays. The
toll-free phone number is (877) 860-2070. In addition, a representative of
Keefe, Bruyette and Woods, Inc. will be available to meet with you in person
between 9:00 a.m. and 5:00 p.m. on June ___, ___, and ___, 2010, at Jacksonville
Savings Bank’s main office at 1211 W. Morton Avenue, Jacksonville,
Illinois.
You
should consider carefully the following risk factors in evaluating an investment
in the shares of common stock.
Risks
Related to Our Business
Non-residential
loans increase our exposure to credit risks.
Over the
last several years, we have increased our non-residential lending in order to
improve the average yield of our interest-earning assets and reduce the average
maturity of our loan portfolio. At December 31, 2009, our portfolio
of commercial and agricultural real estate loans totaled $56.7 million, or 32.6%
of our total loans, compared to $33.9 million, or 23.8% of our total loans at
December 31, 2005. The largest category of these loans is secured by farmland.
Our portfolio of commercial business and agricultural business loans totaled
$34.4 million, or 19.8% of our total loans at December 31, 2009, compared to
$28.7 million, or 20.2% of our total loans at December 31, 2005. These loans are
typically secured by equipment or inventory. It is difficult to assess the
future performance of our non-residential loan portfolio due to the recent
origination or purchase of many of these loans. These loans may have
delinquency or charge-off rates above our historical experience, which could
adversely affect our future performance. Non-residential loans, consisting of
commercial and agricultural real estate loans, commercial and agricultural
business loans and multifamily loans, 30 days or more delinquent were $1.4
million or 1.52% of non-residential loans at December 31, 2009 as compared to
$952,000 or 0.99% of non-residential loans at December 31, 2008. We
try to mitigate the risk associated with non-residential loans by limiting the
term of these types of loans to generally no more than five years and making
such loans to borrowers with whom we have done business with in the past.
Purchased non-residential loans may have higher risk due to longer durations and
borrowers with whom we have had no existing relationship. Purchased loans 30
days or more delinquent consisted of one loan with a balance totaling $493,000
as of December 31, 2009.
Non-residential
loans generally have more risk than one- to four-family residential mortgage
loans. Because the repayment of commercial and agricultural real
estate loans and commercial and agricultural business loans depends on the
successful management and operation of the borrower’s properties or related
businesses, repayment of these loans can be affected by adverse conditions in
the real estate market or the local economy. Loans secured by agricultural real
estate and agricultural businesses which rely on the successful operation of a
farm can be adversely affected by fluctuations in crop prices and changes in
weather conditions. These developments may result in smaller harvests and less
income for farmers which may adversely impact such borrower’s ability to repay a
loan. Many of our borrowers also have more than one commercial and agricultural
real estate loan or commercial and agricultural business loan outstanding with
us. Consequently, an adverse development with respect to one loan or
one credit relationship can expose us to significantly greater risk of loss
compared to an adverse development with respect to a one- to four-family
residential mortgage loan. Finally, if we foreclose on a commercial
and agricultural real estate or commercial loan, our holding period for the
collateral, if any, typically is longer than for one- to four-family residential
mortgage loans because there are fewer potential purchasers of the collateral.
Because we plan to continue to increase our originations of commercial and
agricultural real estate and commercial loans, it may be necessary to increase
the level of our allowance for loan losses because of the increased risk
characteristics associated with these types of loans. Any such increase to our
allowance for loan losses would adversely affect our earnings.
Our
loan portfolio has significant concentrations among a small number of borrowers
and, as a result, we could be adversely affected by difficulties experienced by
a small number of borrowers.
As a result of large loan
concentrations among a relatively small number of borrowers, we could incur
significant losses if these borrowers are unable to repay their loans. At
December 31, 2009, we had 16 borrowers with aggregate loan balances of $41.6
million, which represented 23.6% of our total loan portfolio at that date. These
loans are primarily commercial and agricultural real estate loans and commercial
and agricultural business loans, including purchased loan participations.
Aggregate loan balances to these borrowers ranged from $1.0 million to $5.5
million for our largest borrower. While we seek to control our risk and minimize
losses on these large loan concentrations, if one or more of our large borrowers
were to default on their loans we could incur significant
losses.
A
portion of our loan portfolio consists of loan participations secured by
properties outside our market area. Loan participations may have a
higher risk of loss than loans we originate because we are not the lead lender
and we have limited control over credit monitoring.
We
occasionally purchase commercial real estate and commercial business loan
participations secured by properties outside our market area in which we are not
the lead lender. We have purchased loan participations secured by properties in
diverse geographic areas such as in Nebraska, Iowa, Minnesota, Arizona and
Florida. These participations are secured by various types of
collateral such as hotels, senior living facilities, stores and condominium
developments. Loan participations may have a higher risk of loss than loans we
originate because we rely on the lead lender to monitor the performance of the
loan. Moreover, our decision regarding the classification of a loan
participation and loan loss provisions associated with a loan participation are
made in part based upon information provided by the lead lender. A lead lender
also may not monitor a participation loan in the same manner as we would for
loans that we originate. At December 31, 2009, our loan
participations totaled $12.6 million, or 7.3% of our loan
portfolio. At December 31, 2009, commercial real estate loan
participations outside our market area totaled $9.8 million, or 17.3% of the
commercial and agricultural real estate loan portfolio, and commercial business
loan participations outside our market area totaled $1.3 million, or 3.7% of the
commercial and agricultural business loan portfolio. At December 31, 2009, loan
participations delinquent 60 days or more totaled $493,000. If our underwriting
of these participation loans is not sufficient, our non-performing loans may
increase and our earnings may decrease.
If
the allowance for loan losses is not sufficient to cover actual loan losses, our
earnings could decrease.
Our customers may not
repay their loans according to the original terms, and the collateral, if any,
securing the payment of these loans may be insufficient to pay any remaining
loan balance. We may experience significant loan losses, which may
have a material adverse effect on our operating results. We make
various assumptions and judgments about the collectability of the loan
portfolio, including the creditworthiness of borrowers and the value of the real
estate and other assets serving as collateral for the repayment of
loans. If our assumptions are incorrect, the allowance for loan
losses may not be sufficient to cover losses inherent in our loan portfolio,
which would require additions to the allowance. Additions to the
allowance would decrease our net income. At December 31, 2009, our allowance for
loan losses was $2.3 million, or 1.30% of total loans and 117.20% of
non-performing loans, compared to $1.9 million, or 1.05% of total loans and
162.47% of non-performing loans, at December 31, 2008.
In
determining the amount of the allowance for loan losses, management reviews
delinquent loans for potential impairments in our carrying
value. Additionally, we apply a factor to the loan portfolio
principally based on historical loss experience applied to the composition of
the loan portfolio and integrated with management’s perception of risk in the
economy. Since we use assumptions regarding individual loans and the
economy, the current allowance for loan losses may not be sufficient to cover
actual loan losses, and increases in the allowance may be
necessary. Consequently, we may need to significantly increase the
provision for losses on loans, particularly if one or more of our larger loans
or credit relationships becomes delinquent or if we expand non-residential
lending such as commercial and agricultural real estate loans. As we continue to
increase our originations of such loans, increased provisions for loan losses
may be necessary, which would decrease our earnings.
Bank
regulators periodically review our allowance for loan losses and may require an
increase to the provision for loan losses or further loan charge-offs. Any
increase in our allowance for loan losses or loan charge-offs as required by
these regulatory authorities may have a material adverse effect on our financial
condition and results of operations.
If
our non-performing assets increase, our earnings will suffer.
At
December 31, 2009, our non-performing assets (which consist of non-accrual
loans, loans 90 days or more delinquent, and foreclosed real estate assets)
totaled $2.3 million, which is an increase of $368,000 or 18.7% from our
non-performing assets at December 31, 2008. Delinquent loans 30 days or greater
increased to $3.8 million, or 2.14% of total loans at December 31, 2009 from
$3.2 million, or 1.72% of total loans at December 31,
2008. Delinquent loans may become non-performing if the borrower does
not bring the loan current. Our non-performing assets adversely
affect our net income in various ways. We do not record interest income on
non-accrual loans or real estate owned. We must provide for probable losses
which results in additional provisions for loan losses. As circumstances
warrant, we must write down the value of properties in our other real estate
owned portfolio to reflect changing market values. Additionally, we have legal
fees associated with the resolution of problem assets as well as additional
costs such as taxes, insurance and maintenance related to our other real estate
owned. The resolution of non-performing assets also requires the active
involvement of management, which can adversely affect the amount of time we
devote to the income-producing activities of Jacksonville Savings
Bank. If our estimate of the allowance for loan losses is inadequate,
we will have to increase the allowance accordingly.
We
could experience further impairment losses on the value of our mortgage
servicing rights.
A
significant aspect of our business is the origination of one- to four-family
residential mortgage loans for sale on a servicing retained basis. The fees we
receive for servicing such loans are referred to as mortgage servicing rights.
At December 31, 2009, the unpaid principal balances of mortgage loans serviced
for others was $148.0 million. Mortgage servicing rights fair values are
sensitive to movements in interest rates as expected future net servicing income
depends on the projected outstanding principal balances of the underlying loans,
which can be greatly reduced by prepayments. Prepayments usually
increase when mortgage interest rates decline and decrease when mortgage
interest rates rise. If the fair value of our mortgage servicing rights is less
than the carrying value of such rights, we may be required to recognize an
impairment loss. Such impairment can occur due to changes in interest rates,
loan performance or prepayment of the underlying mortgage. At
December 31, 2008, we recognized an impairment loss related to our mortgage
servicing rights of $428,000. Subsequently, during 2009, we recorded
a recovery of $123,000.
Changes
in interest rates could adversely affect our financial condition and results of
operations.
Our financial condition
and results of operations are significantly affected by changes in interest
rates. Our results of operations depend substantially on our net
interest income, which is the difference between the interest income we earn on
our interest-earning assets, such as loans and securities, and the interest
expense we pay on our interest-bearing liabilities, such as deposits and
borrowings. Because our interest-bearing liabilities generally
reprice or mature more quickly than our interest-earning assets, an increase in
interest rates generally would tend to result in a decrease in net interest
income.
Changes in interest rates
may also affect the average life of loans and mortgage-related securities.
Decreases in interest rates can result in increased prepayments of loans and
mortgage-related securities, as borrowers refinance to reduce their borrowing
costs. Under these circumstances, we are subject to reinvestment risk
to the extent that we are unable to reinvest the cash received from such
prepayments at rates that are comparable to the rates on existing loans and
securities. Additionally, increases in interest rates may decrease loan demand
and make it more difficult for borrowers to repay adjustable rate loans. Also,
increases in interest rates may extend the life of fixed-rate assets, which
would restrict our ability to reinvest in higher yielding alternatives, and may
result in customers withdrawing certificates of deposit early so long as the
early withdrawal penalty is less than the interest they could receive from
higher interest rates.
Changes
in interest rates also affect the current fair value of our interest-earning
securities portfolio. Generally, the value of securities moves
inversely with changes in interest rates. At December 31, 2009, the
fair value of our portfolio of investment securities and mortgage-backed
securities totaled $78.2 million. Gross unrealized losses on these
securities totaled $159,000 at December 31, 2009.
Any rise in market
interest rates may result in increased payments for borrowers who have
adjustable rate mortgage loans, thereby increasing the possibility of
default.
Higher
Federal Deposit Insurance Corporation insurance premiums and special assessments
will adversely affect our earnings.
Recent bank failures
coupled with deteriorating economic conditions have significantly reduced the
Deposit Insurance Fund’s reserve ratio. On February 27, 2009, the Federal
Deposit Insurance Corporation issued a final rule that alters the way the
Federal Deposit Insurance Corporation calculates federal deposit insurance
assessment rates. Under the rule, the Federal Deposit Insurance Corporation
first establishes an institution’s initial base assessment rate. This
initial base assessment rate ranges from 12 to 45 basis points, depending on the
risk category of the institution. The Federal Deposit Insurance
Corporation then adjusts the initial base assessment (higher or lower) to obtain
the total base assessment rate. The adjustments to the initial base
assessment rate are based upon an institution’s levels of unsecured debt,
secured liabilities, and brokered deposits. The total base assessment
rate ranges from 7 to 77.5 basis points of the institution’s deposits. At
December 31, 2009, our assessment rate was 14.66 basis points. In addition,
on
May 22, 2009, the Federal Deposit Insurance Corporation adopted a final rule
levying a five basis point special assessment on each insured depository
institution’s assets minus Tier 1 capital as of June 30, 2009. We
recorded an expense of $137,000 during the quarter ended June 30, 2009, to
reflect the special assessment. Any further special assessments that
the Federal Deposit Insurance Corporation levies will be recorded as an expense
during the appropriate period.
The Federal Deposit
Insurance Corporation also has adopted a rule pursuant to which all insured
depository institutions were required to prepay their estimated assessments for
the fourth quarter of 2009, and for all of 2010, 2011 and 2012. This
pre-payment was due on December 30, 2009. The assessment rate for the
fourth quarter of 2009 and for 2010 was based on each institution’s total base
assessment rate for the third quarter of 2009, modified to assume that the
assessment rate in effect on September 30, 2009 had been in effect for the
entire third quarter, and the assessment rate for 2011 and 2012 was equal to the
modified third quarter assessment rate plus an additional three basis
points. In addition, each institution’s base assessment rate for each
period was calculated using its third quarter assessment base, adjusted
quarterly for an estimated 5% annual growth rate in the assessment base through
the end of 2012. We are required to record the pre-payment as a
prepaid expense, which will be amortized to expense as incurred each
quarter. Our prepayment amount totaled $1.4
million.
These
actions will significantly increase our noninterest expense in 2010 and in
future years as long as the increased premiums are in place.
If
we are unable to borrow funds, we may not be able to meet the cash flow
requirements of our depositors, creditors, and borrowers, or the operating cash
needed to fund corporate expansion and other corporate activities.
Liquidity
is the ability to meet cash flow needs on a timely basis at a reasonable
cost. Our liquidity is used to make loans and to repay deposit
liabilities as they become due or are demanded by
customers. Liquidity policies and procedures are established by the
board, with operating limits set based upon the ratio of loans to deposits and
percentage of assets funded with non-core or wholesale funding. We
regularly monitor our overall liquidity position to ensure various alternative
strategies exist to cover unanticipated events that could affect
liquidity. We also establish policies and monitor guidelines to
diversify our wholesale funding sources to avoid concentrations in any one
market source. Wholesale funding sources include federal funds
purchased, securities sold under repurchase agreements, non-core deposits, and
debt. Jacksonville Savings Bank is a member of the Federal Home Loan
Bank of Chicago, which provides funding through advances to members that are
collateralized with mortgage-related assets.
We
maintain a portfolio of available-for-sale securities that can be used as a
secondary source of liquidity. There are other sources of liquidity
available to us should they be needed. These sources include the sale
of loans, the ability to acquire national market, non-core deposits, issuance of
additional collateralized borrowings such as Federal Home Loan Bank advances and
federal funds purchased, and the issuance of preferred or common
securities.
If
our stock price remains below book value, we will continue to evaluate our
goodwill balances for impairment quarterly, and if the values of our businesses
have declined, we could recognize an impairment charge for our
goodwill.
We
performed a quarterly goodwill assessment as of December 31,
2009. Based upon our analyses, we concluded that the fair value of
capital exceeded the fair value of our assets and liabilities and, therefore,
goodwill was not considered impaired as of that date. It is possible
that our assumptions and conclusions regarding the valuation of our business
could change adversely, which could result in the recognition of impairment for
our goodwill, which could have a material adverse effect on our financial
condition and results of operations.
Our
business may continue to be adversely affected by the continued weakness in the
national and local economies.
Our
operations are significantly affected by national and local economic conditions.
Substantially all of our loans, excluding purchased loan participations, are to
businesses and individuals in Cass, Morgan, Macoupin and Montgomery
Counties, Illinois and surrounding communities. All of
our branches and most of our deposit customers are also located in these
counties. The severe economic recession of 2008 and 2009, as well as the
continuing weakness of the economic recovery both nationally and in our market
area could have a material adverse effect on our business, financial condition,
results of operations and prospects. In particular, these counties have
experienced declines in real estate values, increased foreclosures and higher
unemployment rates.
A further
deterioration in economic conditions in our market area could result in the
following consequences, any of which could have a material adverse effect on our
business, financial condition and results of operations:
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demand
for our products and services may
decline;
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loan
delinquencies, problem assets and foreclosures may
increase;
|
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collateral
for our loans may continue to decline in value;
and
|
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the
amount of our low-cost or non-interest bearing deposits may
decrease.
|
The
United States economy remains weak and unemployment levels are
high. The prolonged economic downturn will adversely affect our
business and financial results.
The United States
experienced a severe economic recession in 2008 and 2009. While
economic growth has resumed recently, the rate of growth has been slow and
unemployment remains at very high levels and is not expected to improve in the
near future. Loan portfolio quality has deteriorated at many
financial institutions reflecting, in part, the weak national economy and high
unemployment. In addition, the values of real estate collateral
supporting many commercial loans and home mortgages have declined and may
continue to decline. The continuing real estate downturn also has
resulted in reduced demand for the construction of new housing and increased
delinquencies in construction, residential and commercial mortgage loans. Bank
and bank holding company stock prices have declined substantially, and it is
significantly more difficult for banks and bank holding companies to raise
capital or borrow in the debt markets.
The Federal Deposit
Insurance Corporation Quarterly Banking Profile has reported that the ratio of
noncurrent assets plus other real estate owned to assets as a percentage of
assets for Federal Deposit Insurance Corporation-insured financial institutions
rose to 3.32% as of December 31, 2009, from 0.95% as of December 31,
2007. For the twelve months ended December 31, 2009, the Federal
Deposit Insurance Corporation Quarterly Banking Profile has reported that
annualized return on average assets was 0.09% for Federal Deposit Insurance
Corporation-insured financial institutions compared to 0.81% for the year ended
December 31, 2007. The Nasdaq Bank Index declined 38% between
December 31, 2007 and December 31, 2009. At December 31, 2009, our
non-performing assets as a percentage of assets was 0.81%, and our return on
average assets was 0.47% for the year ended December 31,
2009.
Continued negative
developments in the financial services industry and the domestic and
international credit markets may significantly affect the markets in which we do
business, the market for and value of our loans and investments, and our ongoing
operations, costs and profitability. Moreover, continued declines in
the stock market in general, or stock values of financial institutions and their
holding companies specifically, could adversely affect our stock
performance.
Strong
competition may limit growth and profitability.
Competition in the banking
and financial services industry is intense. We compete with
commercial banks, savings institutions, mortgage brokerage firms, credit unions,
finance companies, government sponsored entities, mutual funds, insurance
companies, and brokerage and investment banking firms operating locally and
elsewhere. Many of these competitors (whether regional or national
institutions) have substantially greater resources and lending limits than we
have and may offer certain services that we do not or cannot
provide. Our profitability depends upon our ability to successfully
compete in our market areas.
We
operate in a highly regulated environment and we may be adversely affected by
changes in laws and regulations.
We are subject to
extensive regulation, supervision and examination by the Illinois Department of
Financial and Professional Regulation, the Office of Thrift Supervision and the
Federal Deposit Insurance Corporation. Such regulators govern the activities in
which we may engage, primarily for the protection of depositors and the Deposit
Insurance Fund. These regulatory authorities have extensive
discretion in connection with their supervisory and enforcement activities,
including the ability to impose restrictions on a bank’s operations, reclassify
assets, determine the adequacy of a bank’s allowance for loan losses and
determine the level of deposit insurance premiums assessed. Any
change in such regulation and oversight, whether in the form of regulatory
policy, new regulations or legislation or additional deposit insurance premiums,
could have a material impact on our operations. Because our business
is highly regulated, the laws and applicable regulations are subject to frequent
change. Any new laws, rules and regulations could make compliance
more difficult or expensive or otherwise adversely affect our business,
financial condition or prospects.
Legislative
proposals have been introduced that would eliminate the Office of Thrift
Supervision, Jacksonville Bancorp-Federal’s primary federal regulator, which
would require Jacksonville Bancorp-Maryland to become regulated by different
bank regulatory agencies.
Legislation
has been introduced in the United States Senate and House of Representatives
that would implement sweeping changes to the current bank regulatory
structure. A bill passed by the House of Representatives would eliminate
our current primary federal regulator, the Office of Thrift Supervision, by
merging the Office of Thrift Supervision into the Comptroller of the Currency
(the primary federal regulator for national banks). The House legislation would
grant the Board of Governors of the Federal Reserve System exclusive authority
to regulate all bank and thrift holding companies. If the House bill is
enacted, Jacksonville Bancorp-Maryland would become a holding company subject to
supervision by the Federal Reserve Board as opposed to the Office of Thrift
Supervision, and would become subject to the Federal Reserve’s regulations,
including holding company capital requirements, that Jacksonville
Bancorp-Maryland would not be subject to as a savings and loan holding company
regulated by the Office of Thrift Supervision.
Under the Senate bill, the Office of
Thrift Supervision would also be eliminated by merging it into the Office of the
Comptroller of the Currency. The Federal Reserve Board would be
responsible for promulgating regulations for bank and savings and loan holding
companies such as Jacksonville Bancorp-Maryland with the Federal Deposit
Insurance Corporation being responsible for the application and enforcement of
such regulations.
Both the House bill and the Senate
proposal would establish new government entities to write consumer protection
rules, and in certain cases, to conduct examinations and to implement
enforcement actions relating to consumer protection. Compliance
with new regulations and being supervised by one or more new regulatory
agencies would
likely increase our operating expenses.
Changes
in laws and regulations and the cost of regulatory compliance with new laws and
regulations may adversely affect our operations and our
income.
In response to the financial crisis of
2008 and early 2009, Congress has taken actions that are intended to strengthen
confidence and encourage liquidity in financial institutions, and the Federal
Deposit Insurance Corporation has taken actions to increase insurance coverage
on deposit accounts. In addition, there have been proposals made by members of
Congress that would reduce the amount delinquent borrowers are otherwise
contractually obligated to pay on their mortgage loans and limit the ability of
lenders to foreclose on mortgage collateral.
The potential exists for additional
federal or state laws and regulations, or changes in policy, affecting lending
and funding practices and liquidity standards. Moreover, bank
regulatory agencies have been active in responding to concerns and trends
identified in examinations, and have issued many formal enforcement orders
requiring capital ratios in excess of regulatory requirements. Bank regulatory
agencies, such as the Illinois Department of Financial and Professional
Regulation, the Office of Thrift Supervision and the Federal Deposit Insurance
Corporation, govern the activities in which we may engage, primarily for the
protection of depositors, and not for the protection or benefit of potential
investors. In addition, new laws and regulations may increase our costs of
regulatory compliance and of doing business, and otherwise affect our
operations. New laws and regulations may significantly affect the markets in
which we do business, the markets for and value of our loans and investments,
the fees we can charge, and our ongoing operations, costs and profitability.
Legislative proposals limiting our rights as a creditor may result in credit
losses or increased expense in pursuing our remedies as a creditor.
If
our investment in the Federal Home Loan Bank of Chicago becomes impaired, our
earnings and stockholders’ equity could decrease.
We are required to own common stock of
the Federal Home Loan Bank of Chicago to qualify for membership in the Federal
Home Loan Bank System and to be eligible to borrow funds under the Federal Home
Loan Bank’s advance program. The aggregate cost of our Federal Home
Loan Bank common stock as of December 31, 2009 was $1.1
million. Federal Home Loan Bank common stock is not a marketable
security and can only be redeemed by the Federal Home Loan
Bank. However, the Federal Home Loan Bank of Chicago is currently
prohibited by its regulator from repurchasing or redeeming its outstanding stock
until its financial condition improves.
Federal Home Loan Banks may be subject
to accounting rules and asset quality risks that could materially lower their
regulatory capital. In an extreme situation, it is possible that the
capitalization of a Federal Home Loan Bank, including the Federal Home Loan Bank
of Chicago, could be substantially diminished or reduced to zero. Consequently,
we believe that there is a risk that our investment in Federal Home Loan Bank of
Chicago common stock could be deemed impaired at some time in the future, and if
this occurs, it would cause our earnings and stockholders’ equity to decrease by
the amount of the impairment charge.
System
failure or breaches of our network security could subject us to increased
operating costs as well as litigation and other liabilities.
The
computer systems and network infrastructure we use could be vulnerable to
unforeseen problems. Our operations are dependent upon our ability to protect
our computer equipment against damage from physical theft, fire, power loss,
telecommunications failure or a similar catastrophic event, as well as from
security breaches, denial of service attacks, viruses, worms and other
disruptive problems caused by hackers. Any damage or failure that causes an
interruption in our operations could have a material adverse effect on our
financial condition and results of operations. Computer break-ins, phishing and
other disruptions could also jeopardize the security of information stored in
and transmitted through our computer systems and network infrastructure, which
may result in significant liability to us and may cause existing and potential
customers to refrain from doing business with us. Although we, with the help of
third-party service providers, intend to continue to implement security
technology and establish operational procedures to prevent such damage, there
can be no assurance that these security measures will be successful. In
addition, advances in computer capabilities, new discoveries in the field of
cryptography or other developments could result in a compromise or breach of the
algorithms we and our third-party service providers use to encrypt and protect
customer transaction data. A failure of such security measures could have a
material adverse effect on our financial condition and results of
operations.
Risks
Related to the Offering
The
future price of the shares of common stock may be less than the $10.00 purchase
price per share in the offering.
If you purchase shares of common stock
in the offering, you may not be able to sell them later at or above the $10.00
purchase price in the offering. In several cases, shares of common
stock issued by newly converted savings institutions or mutual holding companies
have traded below the initial offering price. The aggregate purchase
price of the shares of common stock sold in the offering will be based on an
independent appraisal. The independent appraisal is not intended, and should not
be construed, as a recommendation of any kind as to the advisability of
purchasing shares of common stock. The independent appraisal is based on certain
estimates, assumptions and projections, all of which are subject to change from
time to time. After our shares begin trading, the trading price of
our common stock will be determined by the marketplace, and may be influenced by
many factors, including prevailing interest rates, the overall performance of
the economy, investor perceptions of Jacksonville Bancorp-Maryland and the
outlook for the financial services industry in general. Price
fluctuations may be unrelated to the operating performance of particular
companies.
Our
failure to effectively deploy the net proceeds may have an adverse impact on our
financial performance and the value of our common stock.
Jacksonville Bancorp-Maryland intends
to invest between $4.4 million and $6.1 million of the net proceeds of the
offering (or $7.1 million at the adjusted maximum of the offering range) in
Jacksonville Savings Bank. Jacksonville Bancorp-Maryland may use the
remaining net proceeds to invest in short-term investments, repurchase shares of
common stock, pay dividends or for other general corporate
purposes. Jacksonville Bancorp-Maryland also expects to use a portion
of the net proceeds it retains to fund a loan for the purchase of shares of
common stock in the offering by the employee stock ownership
plan. Jacksonville Savings Bank may use the net proceeds it receives
to fund new loans, purchase investment securities, acquire financial
institutions or financial services companies, build new branches or acquire
branches, or for other general corporate purposes. However, with the
exception of the loan to the employee stock ownership plan, we have not
allocated specific amounts of the net proceeds for any of these purposes, and we
will have significant flexibility in determining the amount of the net proceeds
we apply to different uses and the timing of such applications. We have not
established a timetable for reinvesting of the net proceeds, and we cannot
predict how long we will require to reinvest the net proceeds.
Our
return on equity will be low following the stock offering. This could
negatively affect the trading price of our shares of common stock.
Net
income divided by average equity, known as “return on equity,” is a ratio many
investors use to compare the performance of a financial institution to its
peers. Following the stock offering, we expect our consolidated equity to be
between $34.4 million at the minimum of the offering range and $39.6 million at
the adjusted maximum of the offering range. Based upon our income for the year
ended December 31, 2009, and these pro forma equity levels, our return on equity
would be 4.05% and 3.52% at the minimum and adjusted maximum of the offering
range, respectively. We expect our return on equity to remain low until we are
able to leverage the additional capital we receive from the stock offering.
Although we will be able to increase net interest income using proceeds of the
stock offering, our return on equity will be negatively affected by higher
expenses from the costs of being a public company and added expenses associated
with our employee stock ownership plan and the stock-based benefit plan we
intend to adopt. Until we can increase our net interest income and non-interest
income and leverage the capital raised in the stock offering, we expect our
return on equity to remain low, which may reduce the market price of our shares
of common stock.
The
implementation of a stock-based benefit plan may dilute your ownership
interest.
We intend to adopt a new stock-based
benefit plan following the offering, subject to receipt of stockholder approval.
This stock-based benefit plan may be funded either through open market purchases
or from the issuance of authorized but unissued shares of common stock of
Jacksonville Bancorp-Maryland. While our intention is to fund this plan through
open market purchases, stockholders would experience a 5.13% reduction in
ownership interest at the adjusted maximum of the offering range in the event
newly issued shares of our common stock are used to fund stock options under the
plan in an amount equal to up to 10.0% of the shares sold in the
offering. In the event we adopt the plan within one year following
the conversion, shares of common stock reserved for issuance pursuant to grants
of options under the stock-based benefit plan would be limited to 10.0% of the total shares sold in the offering,
subject to adjustment as may be required by Office of Thrift Supervision
regulations or policy to reflect stock options previously granted by
Jacksonville Bancorp-Federal or Jacksonville Savings Bank. In
the event we adopt the plan more than one year following the conversion, the
plan will not be subject to these limitations, including limits on the total
number of options or shares available for award under the plan, and we may elect
to implement a stock-based benefit plan containing features that are different
from those described above.
Implementing
a stock-based benefit plan would increase our compensation and benefit
expenses and adversely affect our profitability.
We intend
to adopt a new stock-based benefit plan after the offering, subject to
stockholder approval, which would increase our annual employee compensation and
benefit expenses related to the stock options granted to participants under our
stock-based benefit plan. The actual amount of these new
stock-related compensation and benefit expenses will depend on the number of
options actually granted under the plan, the fair market value of our stock
options on the date of grant, the vesting period and other factors which we
cannot predict at this time. If the stock-based benefit plan is
implemented within one year of the completion of the offering, the number of
shares of common stock reserved for issuance for grants of options under such
stock-based benefit plan may not exceed 10.0% of the shares sold in the
offering, subject to adjustment as may be required by Office of Thrift
Supervision regulations or policy to reflect stock options previously granted by
Jacksonville Bancorp-Federal or Jacksonville Savings Bank. Assuming
the market price of the common stock is $10.00 per share; the options are
granted with an exercise price of $10.00 per share; the dividend yield on the
stock is 3.0%; the expected option life is ten years; the risk-free interest
rate is 3.85% and the volatility rate on the shares of common stock is 21.42%,
the estimated grant-date fair value of the options using a Black-Scholes option
pricing analysis is $2.22 per option granted. Assuming this value is
amortized over a five-year vesting period, the corresponding annual expense
associated with all the stock options would be approximately $68,995 ($62,000
after tax) at the adjusted maximum of the offering range. If we award
options or other stock awards in excess of these amounts under a stock-based
benefit plan adopted more than one year after the completion of the offering,
our costs would increase further.
In
addition, we would recognize expense for our employee stock ownership plan when
shares are committed to be released to participants’ accounts (i.e., as the loan
used to acquire these shares is repaid), and we would recognize expense for
stock options over the vesting period of awards made to
recipients. The expense in the first year following the offering has
been estimated to be approximately $31,079 ($19,014 after tax) at the adjusted
maximum of the offering range as set forth in the pro forma financial
information under “Pro Forma Data,” assuming the $10.00 per share purchase price
as fair market value. Actual expenses, however, may be higher or lower,
depending on the price of our common stock. For further discussion of
our proposed stock-based plans, see “Management—Compensation Discussion and
Analysis—Long-Term Stock-Based Compensation.”
Various
factors may make takeover attempts more difficult to achieve.
Our board of directors has no current
intention to sell control of Jacksonville Bancorp-Maryland. Provisions of our
articles of incorporation and bylaws, federal regulations, Maryland law and
various other factors may make it more difficult for companies or persons to
acquire control of Jacksonville Bancorp-Maryland without the consent of our
board of directors. You may want a takeover attempt to succeed
because, for example, a potential acquiror could offer a premium over the then
prevailing price of our common stock. The factors that may discourage
takeover attempts or make them more difficult include:
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Office of
Thrift Supervision Regulations. Office of
Thrift Supervision regulations prohibit, for three years following the
completion of a conversion, the direct or indirect acquisition of more
than 10% of any class of equity security of a savings and loan holding
company regulated by the Office of Thrift Supervision without the prior
approval of the Office of Thrift
Supervision.
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Articles of
incorporation of Jacksonville Bancorp-Maryland and statutory
provisions. Provisions of the
articles of incorporation and bylaws of Jacksonville Bancorp-Maryland and
Maryland law may make it more difficult and expensive to pursue a takeover
attempt that management opposes, even if the takeover is favored by a
majority of our stockholders. These provisions also would make
it more difficult to remove our current board of directors or management,
or to elect new directors. Specifically, under Sections
3-601 through 3-605 of the Maryland General Corporation Law, any person
who acquires more than 10% of the common stock of Jacksonville
Bancorp-Maryland without the prior approval of its board of directors
would be prohibited from engaging in any type of business combination with
Jacksonville Bancorp-Maryland for a five-year period. Any business
combination after the five year prohibition would be subject to
super-majority stockholder approval or minimum price requirements.
Additional provisions include limitations on voting rights of beneficial
owners of more than 10% of our common stock, the election of directors to
staggered terms of three years and not permitting cumulative voting in the
election of directors. Our bylaws also contain provisions
regarding the timing and content of stockholder proposals and nominations
and qualification for service on the board of
directors.
|
●
|
Articles of
incorporation of Jacksonville Savings Bank. The articles
of incorporation of Jacksonville Savings Bank will provide that for a
period of five years from the closing of the conversion and offering, no
person other than Jacksonville Bancorp-Maryland may offer directly or
indirectly to acquire the beneficial ownership of more than 10% of any
class of equity security of Jacksonville Savings Bank. This
provision will not apply to any tax-qualified employee benefit plan of
Jacksonville Savings Bank or Jacksonville Bancorp-Maryland or to an
underwriter or member of an underwriting or selling group involving the
public sale or resale of securities of Jacksonville Bancorp-Maryland or
any of its subsidiaries, so long as after the sale or resale, no
underwriter or member of the selling group is a beneficial owner, directly
or indirectly, of more than 10% of any class of equity securities of
Jacksonville Savings Bank. In addition, during this five-year
period, all shares owned over the 10% limit may not be voted on any matter
submitted to stockholders for a
vote.
|
●
|
Issuance of
stock options. We also
intend to grant stock options to key employees and directors that will
require payments to these persons in the event of a change in control of
Jacksonville Bancorp-Maryland. These payments may have the effect of
increasing the costs of acquiring Jacksonville Bancorp-Maryland, thereby
discouraging future takeover
attempts.
|
●
|
Employment
and change in control agreements. Jacksonville
Bancorp-Federal has employment agreements with certain of its executive
officers that will remain in effect following the stock offering.
Jacksonville Bancorp-Maryland intends to enter into a change in control
agreement with its Chief Financial Officer following the stock
offering. These agreements may have the effect of increasing
the costs of acquiring Jacksonville Bancorp-Maryland, thereby discouraging
future takeover attempts.
|
There
may be a decrease in stockholders’ rights for existing stockholders of
Jacksonville Bancorp-Federal.
As a
result of the conversion, existing stockholders of Jacksonville Bancorp-Federal
will become stockholders of Jacksonville Bancorp-Maryland. In addition to the
provisions discussed above that may discourage takeover attempts that are
favored by stockholders, some rights of stockholders of Jacksonville
Bancorp-Maryland will be reduced compared to the rights stockholders currently
have in Jacksonville Bancorp-Federal. The reduction in stockholder
rights results from differences between the federal and Maryland charters and
bylaws, and from distinctions between federal and Maryland law. Many
of the differences in stockholder rights under the articles of incorporation and
bylaws of Jacksonville Bancorp-Maryland are not mandated by Maryland law but
have been chosen by management as being in the best interests of Jacksonville
Bancorp-Maryland and its stockholders. The articles of incorporation
and bylaws of Jacksonville Bancorp-Maryland differ from the charter and bylaws
of Jacksonville Bancorp-Federal with respect to the following provisions: (i)
allowing the board of directors to change the authorized number of shares
without stockholder approval; (ii) the restriction on the payment of dividends
under Maryland corporate law; (iii) filling vacancies on the board of directors;
(iv) limitations on liability for directors and officers; (v) indemnification of
directors, officers, employees and agents; (vi) the calling of special meetings
of stockholders; (vii) greater lead time required for stockholders to submit
proposals for new business or to nominate directors; (viii) the right of a
stockholder to examine the books and records of the company; (vix) limitations
on the voting rights of stockholders owning more than 10% of our voting shares;
(x) restrictions on certain types of business combinations with interested
stockholders; (xi) consideration by the board of directors of certain factors
when considering a change in control of the company; and (xii) approval by at
least 80% of the outstanding shares of capital stock entitled to vote generally
is required to amend the bylaws and certain provisions of the articles of
incorporation. See “Comparison of Stockholders’ Rights For Existing Stockholders
of Jacksonville Bancorp-Federal” for a discussion of these
differences.
You
may not revoke your decision to purchase Jacksonville Bancorp-Maryland common
stock in the subscription offering after you send us your
subscription.
Funds submitted or automatic
withdrawals authorized in the connection with a purchase of shares of common
stock in the subscription offering will be held by us until the completion or
termination of the conversion and offering, including any extension of the
expiration date. Because completion of the conversion and offering
will be subject to regulatory approvals and an update of the independent
appraisal prepared by RP Financial, LC., among other factors, there may be one
or more delays in the completion of the conversion and
offering. Orders submitted in the subscription offering are
irrevocable, and subscribers will have no access to subscription funds unless
the offering is terminated, or extended beyond [extension date], or the number
of shares to be sold in the offering is increased to more than 1,553,938 shares
or decreased to fewer than 998,750 shares.
There
may be a limited market for our common stock, which may lower our stock price
and make it more difficult for investors to sell their shares of our common
stock.
We
currently trade on the Nasdaq Capital Market and plan to continue to do so
following the conversion. However, we cannot guarantee that the shares of common
stock will be regularly traded. Even if a liquid market develops for our common
stock, there is no assurance that it can be maintained. An active,
orderly trading market depends on the presence and participation of willing
buyers and sellers which neither Jacksonville Bancorp-Maryland nor the market
makers in the common stock can control. This may affect your ability
to sell your shares on short notice, and the sale of a large number of shares at
one time could temporarily depress the market price of our common
stock. For these reasons, our common stock should not be viewed as a
short-term investment.
Additionally,
the aggregate purchase price of common stock sold in the offering is based on an
independent appraisal. After our shares begin trading, the
marketplace will determine the price per share, which may be influenced by
various factors, such as prevailing interest rates, investor perceptions of
Jacksonville Bancorp-Maryland, economic conditions and the outlook for financial
institutions. Price fluctuations may be unrelated to the operating
performance of particular companies. In several cases, due to market
volatility, shares of common stock of newly converted savings institutions
traded below the price at which the shares were sold in the companies’ initial
public offerings. We cannot assure you that, after the conversion,
the trading price of our common stock will be at or above $10.00.
The
summary financial information presented below is derived in part from the
consolidated financial statements of Jacksonville
Bancorp-Federal. The following is only a summary and you should read
it in conjunction with the consolidated financial statements and notes beginning
on page F-1. The information at December 31, 2009 and 2008 and for
the years ended December 31, 2009 and 2008 is derived in part from the audited
consolidated financial statements of Jacksonville Bancorp-Federal that appear in
this prospectus. The information at December 31, 2007, 2006 and 2005
and for the years ended December 31, 2007, 2006 and 2005 is derived in part from
audited consolidated financial statements that do not appear in this
prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
Selected
Financial Condition Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
288,846 |
|
|
$ |
288,275 |
|
|
$ |
288,489 |
|
|
$ |
267,372 |
|
|
$ |
253,946 |
|
Cash
and cash equivalents
|
|
|
15,696 |
|
|
|
7,145 |
|
|
|
12,175 |
|
|
|
9,331 |
|
|
|
6,681 |
|
Investment
securities
|
|
|
38,455 |
|
|
|
50,988 |
|
|
|
66,295 |
|
|
|
79,978 |
|
|
|
80,821 |
|
Mortgage-backed
securities
|
|
|
40,984 |
|
|
|
27,795 |
|
|
|
15,415 |
|
|
|
8,210 |
|
|
|
8,646 |
|
Loans,
net(1)
|
|
|
173,683 |
|
|
|
182,948 |
|
|
|
175,867 |
|
|
|
154,838 |
|
|
|
142,272 |
|
Federal
Home Loan Bank of Chicago stock, at cost
|
|
|
1,109 |
|
|
|
1,109 |
|
|
|
1,109 |
|
|
|
1,109 |
|
|
|
1,539 |
|
Foreclosed
assets, net
|
|
|
383 |
|
|
|
769 |
|
|
|
364 |
|
|
|
152 |
|
|
|
456 |
|
Bank
owned life insurance
|
|
|
4,095 |
|
|
|
3,907 |
|
|
|
3,186 |
|
|
|
334 |
|
|
|
311 |
|
Deposits
|
|
|
254,700 |
|
|
|
238,151 |
|
|
|
245,721 |
|
|
|
232,913 |
|
|
|
218,370 |
|
Federal
Home Loan Bank of Chicago advances
|
|
|
— |
|
|
|
13,500 |
|
|
|
10,000 |
|
|
|
4,000 |
|
|
|
8,000 |
|
Short-term
borrowings
|
|
|
3,789 |
|
|
|
7,633 |
|
|
|
4,936 |
|
|
|
5,035 |
|
|
|
3,350 |
|
Stockholders’
equity
|
|
|
25,263 |
|
|
|
24,259 |
|
|
|
22,618 |
|
|
|
21,145 |
|
|
|
20,103 |
|
|
|
For
the Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands, except per share amounts)
|
|
Selected
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
14,420 |
|
|
$ |
15,908 |
|
|
$ |
15,609 |
|
|
$ |
13,978 |
|
|
$ |
12,423 |
|
Interest
expense
|
|
|
5,432 |
|
|
|
7,716 |
|
|
|
9,056 |
|
|
|
7,031 |
|
|
|
4,986 |
|
Net
interest income
|
|
|
8,988 |
|
|
|
8,192 |
|
|
|
6,553 |
|
|
|
6,947 |
|
|
|
7,437 |
|
Provision
for loan losses
|
|
|
2,575 |
|
|
|
310 |
|
|
|
155 |
|
|
|
60 |
|
|
|
245 |
|
Net
interest income after provision for loan losses
|
|
|
6,413 |
|
|
|
7,882 |
|
|
|
6,398 |
|
|
|
6,887 |
|
|
|
7,192 |
|
Noninterest
income
|
|
|
4,209 |
|
|
|
3,161 |
|
|
|
2,492 |
|
|
|
2,235 |
|
|
|
2,174 |
|
Noninterest
expense
|
|
|
9,126 |
|
|
|
9,221 |
|
|
|
8,261 |
|
|
|
7,893 |
|
|
|
8,054 |
|
Income
before income tax
|
|
|
1,497 |
|
|
|
1,822 |
|
|
|
629 |
|
|
|
1,229 |
|
|
|
1,312 |
|
Provision
for income taxes
|
|
|
101 |
|
|
|
304 |
|
|
|
10 |
|
|
|
334 |
|
|
|
412 |
|
Net
income
|
|
$ |
1,396 |
|
|
$ |
1,518 |
|
|
$ |
619 |
|
|
$ |
895 |
|
|
$ |
900 |
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.72 |
|
|
$ |
0.76 |
|
|
$ |
0.31 |
|
|
$ |
0.45 |
|
|
$ |
0.46 |
|
Diluted
|
|
$ |
0.72 |
|
|
$ |
0.76 |
|
|
$ |
0.31 |
|
|
$ |
0.45 |
|
|
$ |
0.45 |
|
Dividends
per share
|
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
0.30 |
|
(1)
|
Excludes
loans held for sale of $814,000, $1.4 million, $1.9 million, $426,000 and
$499,000 at December 31, 2009, 2008, 2007, 2006 and 2005,
respectively.
|
|
|
At
or For the Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected
Financial Ratios and Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
on average assets (ratio of net income to average total
assets)
|
|
|
0.47 |
% |
|
|
0.52 |
% |
|
|
0.22 |
% |
|
|
0.35 |
% |
|
|
0.36 |
% |
Return
on average equity (ratio of net income to average equity)
|
|
|
5.69 |
% |
|
|
6.59 |
% |
|
|
2.86 |
% |
|
|
4.37 |
% |
|
|
4.44 |
% |
Interest
rate spread(1)
|
|
|
3.08 |
% |
|
|
2.70 |
% |
|
|
2.15 |
% |
|
|
2.48 |
% |
|
|
2.99 |
% |
Net
interest margin(2)
|
|
|
3.30 |
% |
|
|
3.01 |
% |
|
|
2.53 |
% |
|
|
2.85 |
% |
|
|
3.18 |
% |
Efficiency
ratio(3)
|
|
|
69.15 |
% |
|
|
81.22 |
% |
|
|
91.33 |
% |
|
|
85.97 |
% |
|
|
83.80 |
% |
Dividend
pay-out ratio(4)
|
|
|
18.96 |
% |
|
|
18.75 |
% |
|
|
45.94 |
% |
|
|
31.69 |
% |
|
|
30.98 |
% |
Non-interest
expense to average total assets
|
|
|
3.10 |
% |
|
|
3.14 |
% |
|
|
2.95 |
% |
|
|
3.05 |
% |
|
|
3.19 |
% |
Average
interest-earning assets to average interest-bearing
liabilities
|
|
|
111.14 |
% |
|
|
110.66 |
% |
|
|
110.69 |
% |
|
|
112.81 |
% |
|
|
109.07 |
% |
Average
equity to average total assets
|
|
|
8.33 |
% |
|
|
7.85 |
% |
|
|
7.79 |
% |
|
|
7.90 |
% |
|
|
8.03 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing
assets to total assets
|
|
|
0.81 |
% |
|
|
0.68 |
% |
|
|
0.51 |
% |
|
|
0.56 |
% |
|
|
0.65 |
% |
Non-performing
loans to total loans
|
|
|
1.11 |
% |
|
|
0.64 |
% |
|
|
0.61 |
% |
|
|
0.86 |
% |
|
|
0.82 |
% |
Allowance
for loan losses to non-performing loans
|
|
|
117.20 |
% |
|
|
162.47 |
% |
|
|
161.90 |
% |
|
|
137.90 |
% |
|
|
156.75 |
% |
Allowance
for loan losses to total loans(5)
|
|
|
1.30 |
% |
|
|
1.05 |
% |
|
|
0.99 |
% |
|
|
1.19 |
% |
|
|
1.28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
capital (to risk-weighted assets)
|
|
|
11.83 |
% |
|
|
10.94 |
% |
|
|
11.32 |
% |
|
|
12.34 |
% |
|
|
12.83 |
% |
Tier
I capital (to risk-weighted assets)
|
|
|
10.70 |
% |
|
|
10.02 |
% |
|
|
10.38 |
% |
|
|
11.25 |
% |
|
|
11.66 |
% |
Tier
I capital (to total assets)
|
|
|
7.44 |
% |
|
|
7.30 |
% |
|
|
7.02 |
% |
|
|
7.45 |
% |
|
|
7.31 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of full service offices
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
Full
time equivalent employees
|
|
|
110 |
|
|
|
110 |
|
|
|
114 |
|
|
|
115 |
|
|
|
116 |
|
(1)
|
The
interest rate spread represents the difference between the
weighted-average yield on interest-earning assets and the weighted-
average cost of interest-bearing liabilities for the
period.
|
(2)
|
The
net interest margin represents net interest income as a percent of average
interest-earning assets for the
period.
|
(3)
|
The
efficiency ratio represents non-interest expense divided by the sum of net
interest income and non-interest
income.
|
(4)
|
The
dividend payout ratio represents dividends declared per share divided by
net income per share. The following table sets forth total
cash dividends paid per year, which is calculated by multiplying the
dividends declared per share by the number of shares outstanding as of the
applicable record date.
|
|
|
For
the Year Ended December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
Thousands)
|
|
Dividends
paid to public stockholders
|
|
$ |
265 |
|
|
$ |
285 |
|
|
$ |
284 |
|
|
$ |
284 |
|
|
$ |
279 |
|
Dividends
paid to Jacksonville Bancorp, MHC
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total
dividends paid
|
|
$ |
265 |
|
|
$ |
285 |
|
|
$ |
284 |
|
|
$ |
284 |
|
|
$ |
279 |
|
Total
dividends waived by Jacksonville Bancorp, MHC
|
|
$ |
312 |
|
|
$ |
312 |
|
|
$ |
312 |
|
|
$ |
312 |
|
|
$ |
312 |
|
Total
dividends paid and total dividends waived by Jacksonville Bancorp,
MHC
|
|
$ |
577 |
|
|
$ |
597 |
|
|
$ |
596 |
|
|
$ |
596 |
|
|
$ |
591 |
|
(5)
|
Total
loans exclude loans held for
sale.
|
The
following tables set forth selected consolidated historical financial and other
data of Jacksonville Bancorp-Federal and its subsidiaries for the periods and at
the dates indicated. The information at December 31, 2009 is derived
in part from, and should be read together with, the audited consolidated
financial statements and notes thereto of Jacksonville Bancorp-Federal beginning
at page F-1 of this prospectus. The information at March 31, 2010 and
for the three months ended March 31, 2010 and 2009 is unaudited, but reflects
all normal recurring adjustments that are, in the opinion of management,
necessary for a fair presentation of the results for the interim periods
presented. The results of operations for the three months ended March
31, 2010 are not necessarily indicative of the results to be achieved for the
remainder of 2010.
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
Selected
Financial Condition Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
289,432 |
|
|
$ |
288,846 |
|
Cash
and cash
equivalents
|
|
|
14,792 |
|
|
|
15,696 |
|
Investment
securities
|
|
|
46,710 |
|
|
|
37,346 |
|
Mortgage-backed
securities
|
|
|
36,642 |
|
|
|
40,984 |
|
Loans,
net(1)
|
|
|
170,669 |
|
|
|
173,683 |
|
Federal
Home Loan Bank of Chicago stock, at cost
|
|
|
1,109 |
|
|
|
1,109 |
|
Foreclosed
assets, net
|
|
|
629 |
|
|
|
383 |
|
Bank
owned life insurance
|
|
|
4,145 |
|
|
|
4,095 |
|
Deposits
|
|
|
255,138 |
|
|
|
254,700 |
|
Short-term
borrowings
|
|
|
3,280 |
|
|
|
3,789 |
|
Stockholders’
equity
|
|
|
25,587 |
|
|
|
25,263 |
|
|
|
For
The Three Months
Ended
March 31,
|
|
|
|
|
|
|
|
|
|
|
(In
thousands, except per
share
amounts)
|
|
Selected
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
3,234 |
|
|
$ |
3,774 |
|
Interest
expense
|
|
|
1,055 |
|
|
|
1,491 |
|
Net
interest income
|
|
|
2,179 |
|
|
|
2,283 |
|
Provision
for loan losses
|
|
|
275 |
|
|
|
350 |
|
Net
interest income after provision for loan losses
|
|
|
1,904 |
|
|
|
1,933 |
|
Noninterest
income
|
|
|
951 |
|
|
|
905 |
|
Noninterest
expense
|
|
|
2,247 |
|
|
|
2,216 |
|
Income
before income tax
|
|
|
608 |
|
|
|
622 |
|
Provision
for income taxes
|
|
|
109 |
|
|
|
121 |
|
Net
income
|
|
$ |
499 |
|
|
$ |
501 |
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.26 |
|
|
$ |
0.26 |
|
Diluted
|
|
$ |
0.26 |
|
|
$ |
0.26 |
|
Dividends
per share
|
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
(1)
|
Excludes
loans held for sale of $150,000 and $814,000 at March 31, 2010 and
December 31, 2009, respectively.
|
|
|
|
At
or For the Three
Months
Ended
March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected
Financial Ratios and Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Ratios:
|
|
|
|
|
|
|
|
Return
on average assets (ratio of net income to average total assets)(1)
|
|
|
0.70 |
% |
|
|
0.68 |
% |
|
Return
on average equity (ratio of net income to average equity)(1)
|
|
|
7.85 |
% |
|
|
8.26 |
% |
|
Interest
rate spread(2)
|
|
|
3.13 |
% |
|
|
3.15 |
% |
|
Net
interest margin(1)(3)
|
|
|
3.31 |
% |
|
|
3.40 |
% |
|
Efficiency
ratio(4)
|
|
|
71.80 |
% |
|
|
69.49 |
% |
|
Dividend
pay-out ratio(5)
|
|
|
13.26 |
% |
|
|
13.21 |
% |
|
Non-interest
expense to average total assets(1)
|
|
|
3.15 |
% |
|
|
3.02 |
% |
|
Average
interest-earning assets to average
interest-bearing
liabilities
|
|
|
111.43 |
% |
|
|
111.27 |
% |
|
Average
equity to average total assets
|
|
|
8.90 |
% |
|
|
8.28 |
% |
|
|
|
|
|
|
|
|
|
|
|
Asset
Quality Ratios:
|
|
|
|
|
|
|
|
|
|
Non-performing
assets to total assets
|
|
|
1.02 |
% |
|
|
0.67 |
% |
|
Non-performing
loans to total loans
|
|
|
1.33 |
% |
|
|
0.90 |
% |
|
Allowance
for loan losses to non-performing loans
|
|
|
110.62 |
% |
|
|
138.01 |
% |
|
Allowance
for loan losses to total loans
|
|
|
1.48 |
% |
|
|
1.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
Capital
Ratios:
|
|
|
|
|
|
|
|
|
|
Total
capital (to risk-weighted assets)
|
|
|
12.23 |
% |
|
|
11.07 |
% |
|
Tier
I capital (to risk-weighted assets)
|
|
|
10.98 |
% |
|
|
9.97 |
% |
|
Tier
I capital (to average assets)
|
|
|
7.79 |
% |
|
|
7.18 |
% |
|
|
|
|
|
|
|
|
|
|
|
Other
Data:
|
|
|
|
|
|
|
|
|
|
Number
of full service offices
|
|
|
4 |
|
|
|
4 |
|
|
Full
time equivalent employees
|
|
|
106 |
|
|
|
109 |
|
|
(2)
|
The
interest rate spread represents the difference between the
weighted-average yield on interest-earning assets and the weighted-average
cost of interest-bearing liabilities for the
period.
|
|
(3)
|
The
net interest margin represents net interest income as a percent of average
interest-earning assets for the
period.
|
|
(4)
|
The
efficiency ratio represents non-interest expense divided by the sum of net
interest income and non-interest
income.
|
|
(5)
|
The
dividend payout ratio represents dividends declared per share divided by
net income per share. The following table sets forth total cash
dividends paid per quarter, which is calculated by multiplying the
dividends declared per share by the number of shares outstanding as of the
applicable record date.
|
|
|
|
For
the Threes Months Ended
March
31
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
Dividends
paid to public stockholders
|
|
$ |
66 |
|
|
$ |
66 |
|
|
Dividends
paid to Jacksonville Bancorp, MHC
|
|
|
— |
|
|
|
— |
|
|
Total
dividends
paid
|
|
$ |
66 |
|
|
$ |
66 |
|
|
Total
dividends waived by Jacksonville Bancorp, MHC
|
|
$ |
78 |
|
|
$ |
78 |
|
|
Total
dividends paid and total dividends waived by Jacksonville Bancorp,
MHC
|
|
$ |
144 |
|
|
$ |
144 |
|
Comparison
of Financial Condition at March 31, 2010 and December 31, 2009
Total
assets increased by $585,000 to $289.4 million at March 31, 2010 from $288.8
million at December 31, 2009. Net loans decreased $3.0 million, or
1.7%, to $170.7 million at March 31, 2010 from $173.7 million at December 31,
2009. The decrease in net loans reflected decreases of $2.2 million
in commercial and agricultural real estate loans and $925,000 in commercial and
agricultural business loans, due to both payoffs and the seasonal nature of
agricultural business loan originations. Available-for-sale
investment securities increased $9.4 million, or 25.2%, to $46.6 million at
March 31, 2010 from $37.2 million at December 31, 2009 primarily due to
reinvestment of funds from calls, payments on mortgage-backed securities and
decreased loan volume. Mortgage-backed securities decreased $4.4
million, or 10.6%, to $36.6 million at March 31, 2010 from $41.0 million at
December 31, 2009 due primarily to principal payments. In order to
increase variable interest rate securities in our mortgage-backed securities
portfolio during the first quarter of 2010, we increased the balance of our
variable rate mortgage-backed securities portfolio by $5.2 million to $8.3
million as of March 31, 2010. Cash and cash equivalents decreased
$904,000 to $14.8 million at March 31, 2010 from $15.7 million at December 31,
2009.
Nonperforming
assets increased $602,000 to $2.9 million, or 1.02% of total assets, as of March
31, 2010, compared to $2.3 million, or 0.81% of total assets, as of December 31,
2009. The increase in nonperforming assets was due to a $356,000
increase in nonperforming loans and a $246,000 increase in real estate
owned. Within nonperforming assets, nonperforming loans increased to
$2.3 million as of March 31, 2010, from $2.0 million at December 31,
2009. The increase in nonperforming loans primarily reflected the
non-accruing status of one commercial real estate loan totaling
$493,000. This loan is secured by a mortgage on a new hotel and
management believes the loan has been adequately reserved. The increase in real
estate owned reflected the addition of two properties totaling $311,000 during
the first quarter of 2010. Both of these properties are under
contract for sale and no additional losses are expected.
Total
deposits increased $438,000 to $255.1 million at March 31, 2010, primarily due
to a $1.8 million increase in transaction accounts, which was partially offset
by a $1.2 million decrease in time deposits. Other borrowings, which
consisted of overnight repurchase agreements, decreased $509,000 to $3.3 million
at March 31, 2010.
Stockholders’
equity increased $324,000 to $25.6 million at March 31, 2010. The
increase in stockholders’ equity was the result of net income of $499,000, which
was partially offset by the payment of $66,000 in dividends and $109,000 in
other comprehensive loss. Other comprehensive loss consisted of the
decrease in net unrealized gains, net of tax, on available-for-sale
securities reflecting changes in market prices for securities in our portfolio.
Other comprehensive loss does not include changes in the fair value of other
financial instruments included on the balance sheet.
Comparison
of Operating Results for the Three Months Ended March 31, 2010 and
2009
General.
Net income for the three months ended March 31, 2010 was $499,000, or $0.26 per
common share, basic and diluted, compared to net income of $501,000, or $0.26
per common share, basic and diluted, for the three months ended March 31,
2009. The $2,000 decrease in net income was due to a $103,000
decrease in net interest income and a $32,000 increase in non-interest expense,
partially offset by a $75,000 decrease in the provision for loan losses, a
$12,000 decrease in income taxes and a $46,000 increase in non-interest
income. Our net interest income continues to benefit from a steep
yield curve. Low short-term market interest rates have resulted in
our cost of funds decreasing faster than the yield on our loans. Our
interest income has been negatively affected by a decrease in interest income
from mortgage-backed securities.
Interest
Income. Total interest
income for the three months ended March 31, 2010 decreased $539,000, or 14.3%,
to $3.2 million from $3.8 million for the same period of 2009. The
decrease in interest income reflected a $307,000 decrease in interest income on
loans, a $62,000 decrease in interest income on investment securities, a
$168,000 decrease in interest income on mortgage-backed securities and a $2,000
decrease in other interest-earning assets.
Interest
income on loans decreased $307,000 to $2.7 million for the first quarter of 2010
from $3.0 million for the first quarter of 2009 due to decreases in the average
yield on loans and the average balance of loans. The average yield
decreased to 6.11% during the first quarter of 2010 from 6.46% during the first
quarter of 2009. The 35 basis point decrease primarily reflected the
low interest rate environment. The average balance of the loan
portfolio decreased $9.6 million to $174.9 million for the first quarter of
2010. The decrease in the average balance of the loan portfolio
reflected a decrease in residential real estate loans due to higher loan sales
to the secondary market during 2009.
Interest
income on investment securities decreased $62,000 to $400,000 for the first
quarter of 2010 from $462,000 for the first quarter of 2009. The decrease
reflected a $6.3 million decrease in the average balance of the investment
securities portfolio to $40.3 million during the first quarter of 2010, compared
to $46.6 million for the first quarter of 2009. The decrease in the
average balance was primarily due to calls of U.S. agency securities, the
majority of which were reinvested in tax-free municipal bonds, as well as
mortgage-backed securities. The average yield of investment
securities was unchanged at 3.97% during the first quarters of 2010 and
2009. The average yield does not reflect the benefit of the higher
tax-equivalent yield of our municipal bonds, which is reflected in income tax
expense.
Interest
income on mortgage-backed securities decreased $168,000 to $161,000 for the
first quarter of 2010, compared to $329,000 for the first quarter of
2009. The decrease reflected a 306 basis point decrease in the
average yield of mortgage-backed securities to 1.66% for the first quarter of
2010, compared to 4.72% for the first quarter of 2009. The average
yield has been affected by accelerated premium amortization resulting from
higher national prepayment speeds on mortgage-backed securities. The
amortization of premiums on mortgage-backed securities, which reduces the
average yield, increased to $330,000 during the first quarter of 2010, compared
to $40,000 during the first quarter of 2009. The decrease in the
average yield was partially offset by a $10.9 million increase in the average
balance of mortgage-backed securities to $38.9 million during the first quarter
of 2010.
Interest
income on other interest-earning assets, which consisted of interest-earning
deposit accounts and federal funds sold, decreased $2,000 during the first
quarter of 2010 primarily due to a decrease in the average yield. The
average yield on other interest-earning assets decreased to 0.10% during the
first quarter of 2010 from 0.19% during the first quarter of
2009. The average balance of these accounts increased $139,000 to
$9.4 million for the three months ended March 31, 2010 compared to $9.2 million
for the three months ended March 31, 2009.
Interest
Expense. Total interest expense decreased $436,000, or 29.3%, to $1.1
million for the three months ended March 31, 2010 compared to $1.5 million for
the three months ended March 31, 2009. The lower interest expense was
due to a $387,000 decrease in the cost of deposits and a $49,000 decrease in the
cost of borrowed funds.
Interest
expense on deposits decreased $387,000 to $1.1 million for the three months
ended March 31, 2010 compared to $1.4 million for the three months ended March
31, 2009. The decrease in interest expense on deposits was primarily
due to a 72 basis point decrease in the average rate paid to 1.81% during the
first quarter of 2010 from 2.53% during the first quarter of
2009. The decrease reflected low short-term market interest rates
which continued during the first quarter of 2010. The decrease in the
average rate paid was partially offset by a $5.7 million increase in the average
balance of deposits to $233.2 million for the first quarter of
2010. The increase was primarily due to a $7.7 million increase in
the average balance of transaction accounts.
Interest
paid on borrowed funds decreased $49,000 to $2,200 for the first quarter of 2010
due to decreases in the average cost and in the average balance of
borrowings. The average rate paid on borrowed funds decreased to
0.27% during the first quarter of 2010 compared to 1.52% during the first
quarter of 2009, reflecting the decrease in market rates. The average
balance of borrowed funds also decreased to $3.2 million during the first
quarter of 2010 compared to $13.6 million during the same period of
2009. The decrease was primarily due to the repayment of all our FHLB
advances which had an average balance in the first quarter of 2009 of $7.4
million. We had no FHLB advances during the first quarter of
2010.
Net Interest
Income. As a result of the changes in interest income and
interest expense noted above, net interest income decreased by $103,000, or
4.5%, to $2.2 million for the three months ended March 31, 2010 from $2.3
million for the three months ended March 31, 2009. Our interest rate
spread decreased by two basis points to 3.13% during the first quarter of 2010
from 3.15% during the first quarter of 2009. Our net interest margin
decreased nine basis points to 3.31% for the first quarter of 2010 from 3.40%
for the first quarter of 2009. The decrease in our interest rate
spread and net interest margin reflected the negative impact of accelerated
premium amortization on our mortgage-backed securities resulting from higher
national prepayment speeds.
Provision for
Loan Losses. The provision for loan
losses was determined by management as the amount needed to replenish the
allowance for loan losses, after net charge-offs have been deducted, to a level
considered adequate to absorb inherent losses in the loan portfolio, in
accordance with accounting principles generally accepted in the United States of
America.
The
provision for loan losses totaled $275,000 during the first quarter of 2010,
compared to $350,000 during the first quarter of 2009. The decrease
in the provision for loan losses reflected the decline in loan volume during the
first quarter of 2010 and a lower level of specific allocations to the allowance
for loan losses related to impaired loans. The allowance for loan losses
increased $273,000 to $2.6 million at March 31, 2010 from $2.3 million at March
31, 2009. Loans delinquent 30 days or more decreased $1.1
million during the first quarter of 2010 to $2.7 million, or 1.54% of total
loans as of March 31, 2010 from $3.8 million, or 2.14% of total loans as of
December 31, 2009. Loans delinquent 30 days or more totaled $2.6 million, or
1.44% of total loans at March 31, 2009.
Provisions
for loan losses have been made to bring the allowance for loan losses to a level
deemed adequate following management’s evaluation of the repayment capacity and
collateral protection afforded by each problem credit. This review
also considered the local economy and the level of bankruptcies and foreclosures
in our market area.
Non-Interest
Income. Non-interest income
increased $46,000, or 5.0%, to $951,000 for the three months ended March 31,
2010 from $905,000 for the same period in 2009. The increase in
non-interest income resulted primarily from increases of $124,000 in commission
income, $82,000 in service charges on deposits, and $80,000 in gains on the sale
of available-for-sale securities, partially offset by a decrease of $233,000 in
income from mortgage banking operations. The increase in commission
income reflected improved market conditions and growth in customer
accounts. Service charges on deposits benefitted from the increase in
insufficient fund fees related to the overdraft privilege program implemented
during the second quarter of 2009. The gains on the sale of
securities reflected a higher volume of sales during the first quarter of 2010
as we changed the composition of a portion of the securities portfolio to
include a greater percentage of variable-rate mortgage-backed securities and
shorter term U.S. Agency securities. The decrease in mortgage banking
income was due to a lower volume of loan sales in 2010, as we sold $4.9 million
of loans to the secondary market during the first quarter of 2010, compared to
$32.6 million during the same period of 2009. The decrease in loan
sales in 2010 reflected higher loan originations for sale in 2009 as the decline
in mortgage interest rates in 2009 resulted in a higher level of mortgage
originations during the first quarter of 2009.
Non-Interest
Expense. Total non-interest
expense increased $32,000 to $2.25 million for the three months ended March 31,
2010 from $2.22 million for the same period of 2009. The increase in
non-interest expense consisted mainly of increases of $37,000 in compensation
and benefits expense and $25,000 in data processing expense, partially offset by
a $12,000 decrease in occupancy and equipment expense. The increase
in compensation and benefits expense resulted from normal salary and benefits
increases. Data processing expense increased due to a higher cost of
software maintenance agreements. Occupancy expense decreased due to
lower depreciation expense during the first quarter of 2010, compared to the
first quarter of 2009.
Income
Taxes. The provision for income
taxes decreased $12,000 to $109,000 during the first quarter of 2010 compared to
the same period of 2009. The decrease in the income tax provision
reflected a decrease in taxable income due to lower income and an increase in
the benefit of tax-exempt income. The effective tax rate was 17.9%
and 19.5% for the first quarters of 2010 and 2009, respectively.
This
prospectus contains forward-looking statements, which can be identified by the
use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,”
“plan,” “seek,” “expect” and words of similar meaning. These forward-looking
statements include, but are not limited to:
●
|
statements
of our goals, intentions and
expectations;
|
●
|
statements
regarding our business plans, prospects, growth and operating
strategies;
|
●
|
statements
regarding the asset quality of our loan and investment portfolios;
and
|
●
|
estimates
of our risks and future costs and
benefits.
|
These
forward-looking statements are based on current beliefs and expectations of our
management and are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are beyond our
control. In addition, these forward-looking statements are subject to
assumptions with respect to future business strategies and decisions that are
subject to change.
The
following factors, among others, could cause actual results to differ materially
from the anticipated results or other expectations expressed in the
forward-looking statements:
●
|
general
economic conditions, either nationally or in our market areas, that are
worse than expected;
|
●
|
competition
among depository and other financial
institutions;
|
●
|
changes
in the interest rate environment that reduce our margins or reduce the
fair value of financial
instruments;
|
●
|
adverse
changes in the securities markets;
|
●
|
changes
in laws or government regulations or policies affecting financial
institutions, including changes in regulatory fees and capital
requirements;
|
●
|
our
ability to enter new markets successfully and capitalize on growth
opportunities;
|
●
|
our
ability to successfully integrate acquired
entities;
|
●
|
changes
in consumer spending, borrowing and savings
habits;
|
●
|
changes
in accounting policies and practices, as may be adopted by the bank
regulatory agencies and the Financial Accounting Standards Board;
and
|
●
|
changes
in our organization, compensation and benefit
plans.
|
Because
of these and other uncertainties, our actual future results may be materially
different from the results indicated by these forward-looking
statements. Please see “Risk Factors” beginning on
page ___.
Although
we cannot determine what the actual net proceeds from the sale of the shares of
common stock in the offering will be until the offering is completed, we
anticipate that the net proceeds will be between $8.8 million and $12.2 million,
or $14.2 million if the offering range is increased by
15%. Jacksonville Bancorp-Maryland expects to invest in Jacksonville
Savings Bank not less than 50% of the net proceeds, or between $4.4 million and
$6.1 million, or $7.1 million if the offering range is increased by
15%. Between $400,000 and $541,000 (or $622,000 if the offering range
is increased by 15%) will be used for the loan to the employee stock ownership
plan for its purchase of up to 4% of the shares of common stock sold in the
offering. After funding the loan to the employee stock ownership plan, we intend
to retain between $4.0 million and $5.6 million of the net proceeds, or $6.5
million if the offering range is increased by 15%.
A summary
of the anticipated net proceeds at the minimum, midpoint, maximum and adjusted
maximum of the offering range and of the distribution of the net proceeds is as
follows:
|
|
Based
Upon the Sale at $10.00 Per Share of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering
proceeds
|
|
$ |
9,988 |
|
|
|
|
|
$ |
11,750 |
|
|
|
|
|
$ |
13,513 |
|
|
|
|
|
$ |
15,539 |
|
|
|
|
Less
offering expenses
|
|
|
1,241 |
|
|
|
|
|
|
1,286 |
|
|
|
|
|
|
1,332 |
|
|
|
|
|
|
1,384 |
|
|
|
|
Net
offering proceeds
|
|
$ |
8,746 |
|
|
|
100.0 |
% |
|
$ |
10,464 |
|
|
|
100.0 |
% |
|
$ |
12,181 |
|
|
|
100.0 |
% |
|
$ |
14,156 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
of net proceeds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To
Jacksonville Savings Bank
|
|
$ |
4,373 |
|
|
|
50.0 |
% |
|
$ |
5,232 |
|
|
|
50.0 |
% |
|
$ |
6,090 |
|
|
|
50.0 |
% |
|
$ |
7,078 |
|
|
|
50.0 |
% |
To
fund loan to employee stock ownership plan
|
|
$ |
400 |
|
|
|
4.6 |
% |
|
$ |
470 |
|
|
|
4.5 |
% |
|
$ |
541 |
|
|
|
4.4 |
% |
|
$ |
622 |
|
|
|
4.4 |
% |
Retained
by Jacksonville Bancorp-Maryland
|
|
$ |
3,974 |
|
|
|
45.4 |
% |
|
$ |
4,762 |
|
|
|
45.5 |
% |
|
$ |
5,550 |
|
|
|
45.6 |
% |
|
$ |
6,456 |
|
|
|
45.6 |
% |
(1)
|
As
adjusted to give effect to an increase in the number of shares, which
could occur due to a 15% increase in the offering range to reflect demand
for the shares, changes in market or general financial conditions
following the commencement of the offering, or regulatory
considerations.
|
Payments
for shares of common stock made through withdrawals from existing deposit
accounts will not result in the receipt of new funds for investment but will
result in a reduction of Jacksonville Savings Bank’s deposits. The
net proceeds may vary because total expenses relating to the offering may be
more or less than our estimates. For example, our expenses would
increase if a syndicated community offering were used to sell shares of common
stock not purchased in the subscription and community offerings.
Jacksonville
Bancorp-Maryland May Use the Proceeds it Retains From the Offering:
●
|
to
fund a loan to the employee stock ownership plan to purchase up to 4% of
the shares of common stock sold in the offering (between $400,000 and
$541,000, or $622,000 if the offering is increased by
15%);
|
●
|
to
pay cash dividends to stockholders;
|
●
|
to
repurchase shares of our common
stock;
|
●
|
to
invest in securities;
|
●
|
to
finance the acquisition of financial institutions, or other financial
services companies as opportunities arise, although we do not currently
have any agreements or understandings regarding any specific acquisition
transaction; and
|
●
|
for
other general corporate purposes.
|
Initially,
a substantial portion of the net proceeds will be invested in short-term
investments, investment-grade debt obligations and mortgage-backed
securities.
Under
current Office of Thrift Supervision regulations, we may not repurchase shares
of our common stock during the first year following the completion of the
conversion, except when extraordinary circumstances exist and with prior
regulatory approval.
Jacksonville
Savings Bank May Use the Net Proceeds it Receives From the
Offering:
●
|
to
fund new loans, including one- to four-family residential mortgage loans,
commercial and agricultural real estate loans, commercial and agricultural
business loans and consumer loans;
|
●
|
to
enhance existing products and services and to support the development of
new products and services;
|
●
|
to
reduce wholesale funding;
|
●
|
to
invest in securities;
|
●
|
to
expand its retail banking franchise by acquiring new branches or by
acquiring other financial institutions, or other financial services
companies as opportunities arise, although we do not currently have any
agreements to acquire a financial institution or other entity;
and
|
●
|
for
other general corporate purposes.
|
Initially,
a substantial portion of the net proceeds will be invested in short-term
investments, investment-grade debt obligations and mortgage-backed
securities.
We expect
our return on equity to decrease as compared to our performance in recent years,
until we are able to reinvest effectively the additional capital raised in the
offering. Until we can increase our net interest income and
non-interest income, we expect our return on equity to be below the industry
average, which may negatively affect the value of our common stock. See “Risk
Factors—Our failure to effectively deploy the net proceeds may have an adverse
impact on our financial performance and the value of our common
stock.”
We have
paid quarterly cash dividends since the second quarter of 2005. We
currently pay a quarterly cash dividend of $0.075 per share, or $0.30 on an
annualized basis. After we complete the conversion, we intend to
continue to pay dividends on our outstanding shares of common
stock. We expect that the level of cash dividends per share after the
conversion and offering will be consistent with the current amount of dividends
per share we pay on our common stock, as adjusted for the additional shares
issued pursuant to the exchange ratio. For example, based on the
current annualized cash dividend of $0.30 per share and an assumed exchange
ratio of 1.1312 at the midpoint of the offering range, the annualized cash
dividend, if paid, would be approximately $0.26 per share, which represents an
annual dividend yield of 2.6% of the midpoint of the offering range, based upon
a stock price of $10.00 per share. However, the dividend rate
and the continued payment of dividends will depend on a number of factors
including our capital requirements, our financial condition and results of
operations, tax considerations, statutory and regulatory limitations, and
general economic conditions. We cannot assure you that we will not
reduce or eliminate dividends in the future.
Under the
rules of the Illinois Department of Financial and Professional Regulation and
the plan of conversion and reorganization, Jacksonville Savings Bank will not be
permitted to pay dividends on its capital stock to Jacksonville
Bancorp-Maryland, its sole stockholder, if Jacksonville Savings Bank’s
stockholder’s equity would be reduced below the amount of the liquidation
account established in connection with the conversion or any regulatory capital
requirements applicable to Jacksonville Bancorp-Maryland. In
addition, Jacksonville Savings Bank will not be permitted to pay dividends or
make a capital distribution to Jacksonville Bancorp-Maryland if its equity would
be reduced below the amount of its liquidation account established in connection
with the conversion, or if after making such distribution, it would be
undercapitalized. See “The Conversion and Offering—Liquidation
Rights.” For information concerning additional federal and state law and
regulations regarding the ability of Jacksonville Savings Bank to make capital
distributions, including the payment of dividends to Jacksonville
Bancorp-Federal, see “Taxation—Federal Taxation” and “Supervision and
Regulation—Federal Banking Regulation.”
Unlike Jacksonville Savings Bank,
Jacksonville Bancorp-Maryland is not restricted by Illinois Department of
Financial and Professional Regulation regulations on the payment of dividends to
its stockholders, although the source of dividends will depend on the net
proceeds retained by us and earnings thereon, and dividends from Jacksonville
Savings Bank. In addition, Jacksonville Bancorp-Maryland will be
subject to state law limitations on the payment of dividends. Maryland law
generally limits dividends to an amount equal to the excess of our capital
surplus over payments that would be owed upon dissolution to stockholders whose
preferential rights upon dissolution are superior to those receiving the
dividend, and to an amount that would not make us insolvent. Finally,
pursuant to Office of Thrift Supervision regulations, during the three-year
period following the conversion, we will not take any action to declare an
extraordinary dividend to stockholders that would be treated by recipients as a
tax-free return of capital for federal income tax purposes.
See “Selected Consolidated Financial
and Other Data of Jacksonville Bancorp-Federal” and “Market for the Common
Stock” for information regarding our historical dividend payments.
Jacksonville
Bancorp-Federal’s common stock is currently traded on the Nasdaq Capital Market
under the symbol “JXSB.” Upon completion of the conversion, the new shares of
common stock of Jacksonville Bancorp-Maryland will replace the existing shares.
We expect the new shares will trade on the Nasdaq Capital Market under the
symbol “JXSBD” for a period of 20 trading days after the completion of the
offering. Thereafter, our trading symbol will revert to “JXSB.” In order to list
our stock on the Nasdaq Capital Market, we are required to have at least three
broker-dealers who will make a market in our common
stock. Jacksonville Bancorp-Federal currently has more than three
market makers, including Keefe, Bruyette & Woods, Inc. Keefe, Bruyette &
Woods, Inc. has advised us that it intends to make a market in our common stock
following the offering, but it is under no obligation to do so.
The
development of a public market having the desirable characteristics of depth,
liquidity and orderliness depends on the existence of willing buyers and
sellers, the presence of which is not within our control or that of any market
maker. The number of active buyers and sellers of our common stock at
any particular time may be limited, which may have an adverse effect on the
price at which our common stock can be sold. There can be no
assurance that persons purchasing the common stock will be able to sell their
shares at or above the $10.00 price per share in the
offering. Purchasers of our common stock should have a long-term
investment intent and should recognize that there may be a limited trading
market in our common stock.
The
following table sets forth the high and low trading prices for shares of
Jacksonville Bancorp-Federal common stock and cash dividends paid per share for
the periods indicated. As of ______________, there were 882,079
publicly held shares of Jacksonville Bancorp-Federal common stock issued and
outstanding (excluding shares held by Jacksonville Bancorp, MHC). In connection
with the conversion, each existing publicly held share of common stock of
Jacksonville Bancorp-Federal will be converted into a right to receive a number
of shares of Jacksonville Bancorp-Maryland common stock, based upon the exchange
ratio that is described in other parts of this prospectus. See “The
Conversion and Offering—Share Exchange Ratio for Current
Stockholders.”
At the
close of business on ______________, there were 1,920,817 shares
outstanding. The high and low closing prices for the quarterly
periods noted below were obtained from Nasdaq.
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
quarter (through _______________)
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
First
quarter
|
|
|
16.00 |
|
|
|
9.00 |
|
|
|
0.075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth
quarter
|
|
$ |
10.38 |
|
|
$ |
8.14 |
|
|
$ |
0.075 |
|
Third
quarter
|
|
|
11.48 |
|
|
|
8.12 |
|
|
|
0.075 |
|
Second
quarter
|
|
|
11.49 |
|
|
|
7.84 |
|
|
|
0.075 |
|
First
quarter
|
|
|
9.75 |
|
|
|
7.01 |
|
|
|
0.075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth
quarter
|
|
$ |
10.00 |
|
|
$ |
7.80 |
|
|
$ |
0.075 |
|
Third
quarter
|
|
|
10.15 |
|
|
|
9.03 |
|
|
|
0.075 |
|
Second
quarter
|
|
|
12.60 |
|
|
|
10.15 |
|
|
|
0.075 |
|
First
quarter
|
|
|
13.25 |
|
|
|
9.00 |
|
|
|
0.075 |
|
On
January 22, 2010, the business day immediately preceding the public announcement
of the conversion, and on __________________, the closing prices of Jacksonville
Bancorp-Federal common stock as reported on the Nasdaq Capital Market were
$10.00 per share and $____ per share, respectively. At
__________, Jacksonville Bancorp-Federal had approximately _______ stockholders
of record. On the effective date of the conversion, all publicly held shares of
Jacksonville Bancorp-Federal common stock, including shares of common stock held
by our officers and directors, will be converted automatically into and become
the right to receive a number of shares of Jacksonville Bancorp-Maryland common
stock determined pursuant to the exchange ratio. See “The Conversion
and Offering—Share Exchange Ratio for Current Stockholders.” Options
to purchase shares of Jacksonville Bancorp-Federal common stock will be
converted into options to purchase a number of shares of Jacksonville
Bancorp-Maryland common stock determined pursuant to the exchange ratio, for the
same aggregate exercise price. See “Beneficial Ownership of Common
Stock.”
At
December 31, 2009, Jacksonville Savings Bank exceeded all of the applicable
regulatory capital requirements and was considered “well capitalized.” The table
below sets forth the historical equity capital and regulatory capital of
Jacksonville Savings Bank at December 31, 2009, and the pro forma regulatory
capital of Jacksonville Savings Bank, after giving effect to the sale of shares
of common stock at a $10.00 per share purchase price and assuming the receipt by
Jacksonville Savings Bank of between $4.4 million and $6.1 million of the net
offering proceeds at the minimum and maximum of the offering range,
respectively. The table assumes the receipt by Jacksonville Savings Bank of 50%
of the net offering proceeds.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma at December 31, 2009, Based Upon the Sale in the Offering
of |
|
|
|
Jacksonville Savings Bank
Historical at December
31, 2009 |
|
|
998,750
Shares
|
|
|
1,175,000
Shares
|
|
|
1,351,250
Shares
|
|
|
1,553,938
Shares (1)
|
|
|
|
Amount
|
|
|
Percent of
Assets (2) |
|
|
Amount
|
|
|
Percent of
Assets (2) |
|
|
Amount
|
|
|
Percent of
Assets (2) |
|
|
Amount
|
|
|
Percent of
Assets (2) |
|
|
Amount
|
|
|
Percent of
Assets (2) |
|
|
|
(Dollars
in thousands) |
|
|
|
|
|
Equity
capital
|
|
$ |
25,024 |
|
|
|
8.67 |
% |
|
$ |
29,821 |
|
|
|
10.18 |
% |
|
$ |
30,610 |
|
|
|
10.42 |
% |
|
$ |
31,397 |
|
|
|
10.66 |
% |
|
$ |
32,304 |
|
|
|
10.93 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
1 risk-based capital(4)(5)
|
|
$ |
21,601 |
|
|
|
10.70 |
% |
|
$ |
26,398 |
|
|
|
13.02 |
% |
|
$ |
27,187 |
|
|
|
13.40 |
% |
|
$ |
27,974 |
|
|
|
13.78 |
% |
|
$ |
28,881 |
|
|
|
14.21 |
% |
Tier
1 risk-based requirement(3)
|
|
|
8,073 |
|
|
|
4.00 |
|
|
|
8,108 |
|
|
|
4.00 |
|
|
|
8,115 |
|
|
|
4.00 |
|
|
|
8,122 |
|
|
|
4.00 |
|
|
|
8,130 |
|
|
|
4.00 |
|
Excess
|
|
$ |
13,528 |
|
|
|
6.70 |
% |
|
$ |
18,290 |
|
|
|
9.02 |
% |
|
$ |
19,072 |
|
|
|
9.40 |
% |
|
$ |
19,852 |
|
|
|
9.78 |
% |
|
$ |
20,751 |
|
|
|
10.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
(leverage) capital(5)
|
|
$ |
21,601 |
|
|
|
7.44 |
% |
|
$ |
26,398 |
|
|
|
8.96 |
% |
|
$ |
27,187 |
|
|
|
9.20 |
% |
|
$ |
27,974 |
|
|
|
9.44 |
% |
|
$ |
28,881 |
|
|
|
9.71 |
% |
Core
(leverage) requirement (3)
|
|
|
11,611 |
|
|
|
4.00 |
|
|
|
11,786 |
|
|
|
4.00 |
|
|
|
11,820 |
|
|
|
4.00 |
|
|
|
11,854 |
|
|
|
4.00 |
|
|
|
11,894 |
|
|
|
4.00 |
|
Excess
|
|
$ |
9,990 |
|
|
|
3.44 |
% |
|
$ |
14,612 |
|
|
|
4.96 |
% |
|
$ |
15,367 |
|
|
|
5.20 |
% |
|
$ |
16,120 |
|
|
|
5.44 |
% |
|
$ |
16,987 |
|
|
|
5.71 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
risk-based capital
(4)(5)
|
|
$ |
23,891 |
|
|
|
11.83 |
% |
|
$ |
28,688 |
|
|
|
14.15 |
% |
|
$ |
29,477 |
|
|
|
14.53 |
% |
|
$ |
30,264 |
|
|
|
14.91 |
% |
|
$ |
31,171 |
|
|
|
15.34 |
% |
Risk-based
requirement
|
|
|
16,146 |
|
|
|
8.00 |
|
|
|
16,216 |
|
|
|
8.00 |
|
|
|
16,230 |
|
|
|
8.00 |
|
|
|
16,243 |
|
|
|
8.00 |
|
|
|
16,259 |
|
|
|
8.00 |
|
Excess
|
|
$ |
7,745 |
|
|
|
3.83 |
% |
|
$ |
12,472 |
|
|
|
6.15 |
% |
|
$ |
13,247 |
|
|
|
6.53 |
% |
|
$ |
14,021 |
|
|
|
6.91 |
% |
|
$ |
14,912 |
|
|
|
7.34 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Proceeds Infused
|
|
|
|
|
|
|
|
|
|
$ |
4,373 |
|
|
|
|
|
|
$ |
5,232 |
|
|
|
|
|
|
$ |
6,090 |
|
|
|
|
|
|
$ |
7,078 |
|
|
|
|
|
MHC
capital contribution
|
|
|
|
|
|
|
|
|
|
|
824 |
|
|
|
|
|
|
|
824 |
|
|
|
|
|
|
|
824 |
|
|
|
|
|
|
|
824 |
|
|
|
|
|
Less:
ESOP
|
|
|
|
|
|
|
|
|
|
|
(400 |
) |
|
|
|
|
|
|
(470 |
) |
|
|
|
|
|
|
(541 |
) |
|
|
|
|
|
|
(622 |
) |
|
|
|
|
Pro
Forma Increase
|
|
|
|
|
|
|
|
|
|
$ |
4,797 |
|
|
|
|
|
|
$ |
5,586 |
|
|
|
|
|
|
$ |
6,373 |
|
|
|
|
|
|
$ |
7,280 |
|
|
|
|
|
(1) |
As
adjusted to give effect to an increase in the number of shares that could
occur due to a 15% increase in the offering range to reflect demand for
the shares, changes in market or general financial conditions following
the commencement of the offering, or regulatory
considerations.
|
(2) |
Tangible
and core capital levels are shown as a percentage of total adjusted
assets. Risk-based capital levels are shown as a percentage of
risk-weighted assets.
|
(3) |
The
current core capital requirement for financial institutions is 3% of total
adjusted assets for financial institutions that receive the highest
supervisory rating for safety and soundness and a 4% to 5% core capital
ratio requirement for all other financial institutions. In
addition, the Federal Deposit Insurance Corporation requires a Tier 1
risk-based capital ratio of 4% or greater.
|
(4) |
Pro
forma amounts and percentages assume net proceeds are invested in assets
that carry a 20% risk weighting.
|
(5) |
Pro
forma capital levels assume that the employee stock ownership plan
purchases 4.0% of the shares of common stock to be outstanding immediately
following the stock offering with funds we lend. Pro forma GAAP
and regulatory capital have been reduced by the amount required to fund
this plan. See “Management” for a discussion of the employee
stock ownership plan.
|
The
following table presents the historical consolidated capitalization of
Jacksonville Bancorp-Federal at December 31, 2009 and the pro forma consolidated
capitalization of Jacksonville Bancorp-Maryland after giving effect to the
conversion and offering, based upon the assumptions set forth in the “Pro Forma
Data” section.
|
|
|
|
|
Pro
Forma at December 31, 2009, Based upon the Sale in the Offering
of |
|
|
|
Jacksonville Bancorp-Federal Historical
at December 31, 2009
|
|
|
Minimum 998,750 Shares
at $10.00
per Share
|
|
|
Midpoint 1,175,000 Shares
at $10.00 per Share
|
|
|
Maximum 1,351,250 Shares
at $10.00 per Share
|
|
|
Maximum
as adjusted 1,553,938 Shares
at $10.00
per Share
(1)
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
(2)
|
|
$ |
254,700 |
|
|
$ |
253,890 |
|
|
$ |
253,890 |
|
|
$ |
253,890 |
|
|
$ |
253,890 |
|
Borrowed
funds
|
|
|
3,789 |
|
|
|
3,789 |
|
|
|
3,789 |
|
|
|
3,789 |
|
|
|
3,789 |
|
Total deposits and borrowed funds
|
|
$ |
258,489 |
|
|
$ |
257,679 |
|
|
$ |
257,679 |
|
|
$ |
257,679 |
|
|
$ |
257,679 |
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value, 10,000,000 shares authorized (post-conversion)
(3)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Common
stock, $.01 par value, 25,000,000 shares authorized (post-conversion);
shares to be issued as reflected (3) (4)
|
|
|
20 |
|
|
|
18 |
|
|
|
22 |
|
|
|
25 |
|
|
|
29 |
|
Additional
paid-in capital (3)
|
|
|
6,634 |
|
|
|
15,383 |
|
|
|
17,096 |
|
|
|
18,810 |
|
|
|
20,781 |
|
MHC
capital contribution (3)
|
|
|
— |
|
|
|
824 |
|
|
|
824 |
|
|
|
824 |
|
|
|
824 |
|
Retained
earnings (5)
|
|
|
18,399 |
|
|
|
18,399 |
|
|
|
18,399 |
|
|
|
18,399 |
|
|
|
18,399 |
|
Accumulated
other comprehensive income
|
|
|
696 |
|
|
|
696 |
|
|
|
696 |
|
|
|
696 |
|
|
|
696 |
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
stock
|
|
|
(486 |
) |
|
|
(486 |
) |
|
|
(486 |
) |
|
|
(486 |
) |
|
|
(486 |
) |
Common
stock held by employee stock ownership plan (6)
|
|
|
— |
|
|
|
(400 |
) |
|
|
(470 |
) |
|
|
(541 |
) |
|
|
(622 |
) |
Total
stockholders’ equity
|
|
$ |
25,263 |
|
|
$ |
34,434 |
|
|
$ |
36,081 |
|
|
$ |
37,727 |
|
|
$ |
39,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares outstanding
|
|
|
1,920,817 |
|
|
|
1,846,872 |
|
|
|
2,172,790 |
|
|
|
2,498,709 |
|
|
|
2,873,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange shares issued
|
|
|
— |
|
|
|
848,122 |
|
|
|
997,790 |
|
|
|
1,147,459 |
|
|
|
1,319,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares offered for sale
|
|
|
— |
|
|
|
998,750 |
|
|
|
1,175,000 |
|
|
|
1,351,250 |
|
|
|
1,553,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity as a percentage of total assets (2)
|
|
|
8.75 |
% |
|
|
11.92 |
% |
|
|
12.49 |
% |
|
|
13.06 |
% |
|
|
13.72 |
% |
Tangible
equity ratio
|
|
|
7.80 |
% |
|
|
10.98 |
% |
|
|
11.55 |
% |
|
|
12.12 |
% |
|
|
12.77 |
% |
(1)
|
As
adjusted to give effect to an increase in the number of shares of common
stock that could occur due to a 15% increase in the offering range to
reflect demand for shares, changes in market or general financial
conditions following the commencement of the subscription and community
offerings, or regulatory
considerations.
|
(2)
|
Does
not reflect withdrawals from deposit accounts for the purchase of shares
of common stock in the conversion and offering. These withdrawals would
reduce pro forma deposits and assets by the amount of the
withdrawals. On a pro forma basis, reflects elimination of
$810,000 of cash in Jacksonville Bancorp, MHC held as deposits of
Jacksonville Savings Bank.
|
(3)
|
Jacksonville
Bancorp-Federal currently has 10.0 million authorized shares of preferred
stock and 20.0 million authorized shares of common stock, par value $0.01
per share. On a pro forma basis, Jacksonville Bancorp-Maryland
common stock and additional paid-in capital have been revised to reflect
the number of shares of Jacksonville Bancorp-Maryland common stock to be
outstanding, which is 1,846,872 shares, 2,172,790 shares, 2,498,709 shares
and 2,873,515 shares at the minimum, midpoint, maximum and adjusted
maximum of the offering range, respectively. On a pro forma
basis, reflects transfer to equity of $824,000 of net assets in
Jacksonville Bancorp, MHC.
|
(4)
|
No
effect has been given to the issuance of additional shares of Jacksonville
Bancorp-Maryland common stock pursuant to the exercise of options under a
stock-based benefit plan. If this plan is implemented within the first
year after the closing of the offering, an amount up to 10% of the shares
of Jacksonville Bancorp-Maryland common stock sold in the offering will be
reserved for issuance upon the exercise of options under the
plan. No effect has been given to the exercise of options
currently outstanding. See
“Management.”
|
(5)
|
The
retained earnings of Jacksonville Savings Bank will be substantially
restricted after the conversion. See “The Conversion and
Offering—Liquidation Rights” and “Supervision and Regulation—Federal
Banking Regulation.”
|
(6)
|
Assumes
that 4.0% of the
shares sold in the offering will be acquired by the employee stock
ownership plan financed by a loan from Jacksonville
Bancorp-Maryland. The loan will be repaid principally from
Jacksonville Savings Bank’s contributions to the employee stock ownership
plan. Since Jacksonville Bancorp-Maryland will finance the
employee stock ownership plan debt, this debt will be eliminated through
consolidation and no liability will be reflected on Jacksonville
Bancorp-Maryland’s consolidated financial
statements. Accordingly, the amount of shares of common stock
acquired by the employee stock ownership plan is shown in this table as a
reduction of total stockholders’
equity.
|
The
following table summarizes historical data of Jacksonville Bancorp-Federal and
pro forma data at and for the fiscal year ended December 31,
2009. This information is based on assumptions set forth below and in
the tables, and should not be used as a basis for projections of market value of
the shares of common stock following the conversion and
offering. Moreover, pro forma stockholders’ equity per share does not
give effect to the liquidation account to be established in the conversion or,
in the unlikely event of a liquidation of Jacksonville Savings Bank, to the tax
effect of the recapture of the bad debt reserve. See “The Conversion
and Offering—Liquidation Rights.”
The net
proceeds in the tables are based upon the following assumptions:
(i)
|
100,000
shares of common stock will be purchased by our executive officers and
directors, and their associates;
|
(ii)
|
our
employee stock ownership plan will purchase 4.0% of the shares of common
stock sold in the offering, with a loan from Jacksonville
Bancorp-Maryland. The loan will be repaid in substantially
equal payments of principal and interest over a period of 20
years;
|
(iii)
|
Keefe,
Bruyette & Woods, Inc. will receive a fee equal to 1.5% of the dollar
amount of shares of common stock sold in the subscription offering, 2.5%
of the dollar amount of shares of common stock sold in the community
offering and 6.0% of the dollar amount of shares sold in the syndicated
offering and 75% of the total
shares will be subscribed for in the subscription offering. No
fee will be paid with respect to shares of common stock purchased by our
qualified and non-qualified employee stock benefit plans, or stock
purchased by our officers, directors and employees, and their immediate
families; and
|
(iv)
|
total
expenses of the offering, including the marketing fees to be paid to
Keefe, Bruyette & Woods, Inc., will be between $1.2 million at the
minimum of the offering range and $1.4 million at the maximum of the
offering range, as adjusted.
|
We
calculated pro forma consolidated net earnings for the fiscal year ended
December 31, 2009 as if the estimated net proceeds we received had been invested
at the beginning of the year at an assumed interest rate of 3.30% (2.02% on an
after-tax basis), which represented a blended yield assuming 50% of the proceeds
are invested at the 15-year conventional mortgage-backed securities rate and 50%
are invested at the five year Treasury rate. In light of current
market interest rates, we consider this method to more accurately reflect the
pro forma reinvestment rate than the arithmetic average of the weighted average
yield earned on our interest earning assets and the weighted average rate paid
on our deposits, which is the reinvestment rate generally required by Office of
Thrift Supervision regulations. The assumed 15-year fixed-rate mortgage backed
securities yield was 3.91% based on the 15-year average rate from Freddie Mac’s
Primary Mortgage Market Survey® for the week ending December 31, 2009 for a 15
year fixed rate mortgage (4.54%), less a servicing fee of 0.25% and a guarantee
fee of 0.38%. The assumed U.S. Treasury Note yield was 2.69% based on
the five-year U.S. Treasury Note yield reported by SNL Financial as of December
31, 2009. This method reflects the approximate use of proceeds
anticipated by Jacksonville Bancorp-Maryland. The effect of
withdrawals from deposit accounts for the purchase of shares of common stock has
not been reflected. Historical and pro forma per share amounts have
been calculated by dividing historical and pro forma amounts by the indicated
number of shares of common stock. No effect has been given in the pro forma
stockholders’ equity calculations for the assumed earnings on the net
proceeds.
The pro
forma table gives effect to the implementation of a stock-based benefit
plan. Subject to the receipt of stockholder approval, we have assumed
that the stock-based benefit plan will grant options to acquire shares of common
stock equal to 10% of our outstanding shares of common stock. In
preparing the table below, we assumed that stockholder approval was obtained,
that the exercise price of the stock options and the market price of the stock
at the date of grant were $10.00 per share and that the stock options had a term
of ten years and vested over five years. We applied the Black-Scholes
option pricing model to estimate a grant-date fair value of $2.22 for each
option. In addition to the terms of the options described above, the
Black-Scholes option pricing model assumed an estimated volatility rate of
21.42% for the shares of common stock, a dividend yield of 3.0%, an expected
option life of ten years and a risk-free interest rate of
3.85%. Finally, we assumed that 25% of the stock options were
non-qualified options granted to directors, resulting in a tax benefit (at an
assumed tax rate of 38.82%) for a deduction equal to the grant date fair value
of the options.
We may
grant options under a stock-based benefit plan in excess of 10%, of the shares
sold in the offering and may include stock or equity awards in addition to
options if the stock-based benefit plan is adopted more than one year following
the stock offering. In addition, we may grant options that vest
sooner than over a five-year period if the stock-based benefit plan is adopted
more than one year following the stock offering.
As
discussed under “How We Intend to Use the Proceeds from the Offering,” we intend
to contribute at least 50% of the net proceeds from the stock offering to
Jacksonville Savings Bank, and we will retain the remainder of the net proceeds
from the stock offering. We will use a portion of the proceeds we
retain for the purpose of making a loan to the employee stock ownership plan and
retain the rest of the proceeds for future use.
The pro
forma table does not give effect to:
●
|
withdrawals
from deposit accounts for the purpose of purchasing shares of common stock
in the stock offering;
|
●
|
our
results of operations after the stock offering;
or
|
●
|
changes
in the market price of the shares of common stock after the stock
offering.
|
The
following pro forma information may not represent the financial effects of the
stock offering at the date on which the stock offering actually occurs and you
should not use the table to indicate future results of
operations. Pro forma stockholders’ equity represents the difference
between the stated amount of our assets and liabilities, computed in accordance
with GAAP. We did not increase or decrease stockholders’ equity to
reflect the difference between the carrying value of loans and other assets and
their market value. Pro forma stockholders’ equity is not intended to
represent the fair market value of the shares of common stock and may be
different than the amounts that would be available for distribution to
stockholders if we liquidated. Pro forma stockholders’ equity does
not give effect to the impact of intangible assets, bad debt reserve or the
liquidation account we will establish in the conversion in the unlikely event we
are liquidated.
|
|
At
or for the Fiscal Year Ended December 31, 2009
Based
upon the Sale at $10.00 Per Share of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
proceeds of offering
|
|
|
9,988 |
|
|
|
11,750 |
|
|
|
13,513 |
|
|
|
15,539 |
|
Less: Expenses
|
|
$ |
1,241 |
|
|
$ |
1,286 |
|
|
$ |
1,332 |
|
|
$ |
1,384 |
|
Estimated
Net Proceeds
|
|
|
8,746 |
|
|
|
10,464 |
|
|
|
12,181 |
|
|
|
14,156 |
|
Less:
Common stock purchased by employee stock ownership plan
|
|
|
(400 |
) |
|
|
(470 |
) |
|
|
(541 |
) |
|
|
(622 |
) |
Estimated
net proceeds, as adjusted
|
|
$ |
8,347 |
|
|
$ |
9,994 |
|
|
$ |
11,640 |
|
|
$ |
13,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$ |
1,396 |
|
|
$ |
1,396 |
|
|
$ |
1,396 |
|
|
$ |
1,396 |
|
Pro
forma adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
on adjusted net proceeds
|
|
|
169 |
|
|
|
202 |
|
|
|
235 |
|
|
|
273 |
|
Employee
stock ownership plan (2)
|
|
|
(12 |
) |
|
|
(14 |
) |
|
|
(17 |
) |
|
|
(19 |
) |
Options
granted under the stock-based benefit plan (3)
|
|
|
(40 |
) |
|
|
(47 |
) |
|
|
(54 |
) |
|
|
(62 |
) |
Pro
forma net income
|
|
$ |
1,512 |
|
|
|
1,536 |
|
|
$ |
1,560 |
|
|
$ |
1,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share (4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$ |
0.78 |
|
|
$ |
0.66 |
|
|
$ |
0.57 |
|
|
$ |
0.49 |
|
Pro
form adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
on adjusted net proceeds
|
|
|
0.09 |
|
|
|
0.09 |
|
|
|
0.10 |
|
|
|
0.10 |
|
Employee
stock ownership plan (2)
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
Options
granted under the stock-based benefit plan (3)
|
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
Pro
forma net income per share (4) (5)
|
|
$ |
0.84 |
|
|
$ |
0.72 |
|
|
$ |
0.64 |
|
|
$ |
0.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering
price to pro forma net income per share
|
|
|
11.90 |
x |
|
|
13.89 |
x |
|
|
15.63 |
x |
|
|
17.86 |
x |
Number
of shares used in net income per share calculations (4)
|
|
|
1,808,919 |
|
|
|
2,128,140 |
|
|
|
2,447,361 |
|
|
|
2,814,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$ |
25,263 |
|
|
$ |
25,263 |
|
|
$ |
25,263 |
|
|
$ |
25,263 |
|
Estimated
net proceeds
|
|
|
8,746 |
|
|
|
10,464 |
|
|
|
12,181 |
|
|
|
14,156 |
|
Equity
increase from MHC
|
|
|
824 |
|
|
|
824 |
|
|
|
824 |
|
|
|
824 |
|
Less: Common
stock acquired by employee stock ownership plan (2)
|
|
|
(400 |
) |
|
|
(470 |
) |
|
|
(541 |
) |
|
|
(622 |
) |
Pro
forma stockholders’ equity
|
|
|
34,434 |
|
|
|
36,081 |
|
|
|
37,727 |
|
|
|
39,621 |
|
Less: Intangible
assets
|
|
|
(2,727 |
) |
|
|
(2,727 |
) |
|
|
(2,727 |
) |
|
|
(2,727 |
) |
Pro
forma tangible stockholders’ equity
|
|
$ |
31,707 |
|
|
$ |
33,354 |
|
|
$ |
35,000 |
|
|
$ |
36,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity per share:(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$ |
13.67 |
|
|
$ |
11.63 |
|
|
$ |
10.12 |
|
|
$ |
8.79 |
|
Estimated
net proceeds
|
|
|
4.74 |
|
|
|
4.82 |
|
|
|
4.87 |
|
|
|
4.93 |
|
Plus: Assets
received from the MHC
|
|
|
0.45 |
|
|
|
0.38 |
|
|
|
0.33 |
|
|
|
0.29 |
|
Less: Common
stock acquired by employee stock ownership plan
|
|
|
(0.22 |
) |
|
|
(0.22 |
) |
|
|
(0.22 |
) |
|
|
(0.22 |
) |
Pro
forma stockholders’ equity per share (5) (6)
|
|
$ |
18.64 |
|
|
$ |
16.61 |
|
|
$ |
15.10 |
|
|
$ |
13.79 |
|
Intangible
assets per share
|
|
$ |
(1.48 |
) |
|
$ |
(1.26 |
) |
|
$ |
(1.09 |
) |
|
$ |
(0.95 |
) |
Pro
forma tangible stockholders’ equity per share (5) (6)
|
|
$ |
17.16 |
|
|
$ |
15.35 |
|
|
$ |
14.01 |
|
|
$ |
12.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering price as percentage of pro forma stockholders’ equity per
share
|
|
|
53.65 |
% |
|
|
60.20 |
% |
|
|
66.23 |
% |
|
|
72.52 |
% |
Offering price as percentage of pro forma tangible stockholders’ equity
per share
|
|
|
58.28 |
% |
|
|
65.15 |
% |
|
|
71.38 |
% |
|
|
77.88 |
% |
Number of shares outstanding for pro forma book value per share
calculations
|
|
|
1,846,872 |
|
|
|
2,172,790 |
|
|
|
2,498,709 |
|
|
|
2,873,515 |
|
(1)
|
As
adjusted to give effect to an increase in the number of shares that could
occur due to a 15% increase in the offering range to reflect demand for
the shares, changes in market and financial conditions following the
commencement of the offering, or regulatory
considerations.
|
(2)
|
Assumes
that 4.0% of shares of common stock sold in the offering will be purchased
by the employee stock ownership plan. For purposes of this
table, the funds used to acquire these shares are assumed to have been
borrowed by the employee stock ownership plan from Jacksonville
Bancorp-Maryland. Jacksonville Savings Bank intends to make
annual contributions to the employee stock ownership plan in an amount at
least equal to the required principal and interest payments on the
debt. Jacksonville Savings Bank’s total annual payments on the
employee stock ownership plan debt are based upon 20 equal annual
installments of principal and interest. ASC 7-18 requires that
an employer record compensation expense in an amount equal to the fair
value of the shares committed to be released to employees. The
pro forma adjustments assume that the employee stock ownership plan shares
are allocated in equal annual installments based on the number of loan
repayment installments assumed to be paid by Jacksonville Savings Bank,
the fair value of the common stock remains equal to the subscription price
and the employee stock ownership plan expense reflects an effective
combined federal and state tax rate of 38.82%. The unallocated
employee stock ownership plan shares are reflected as a reduction of
stockholders’ equity. No reinvestment is assumed on proceeds
contributed to fund the employee stock ownership plan. The pro
forma net income further assumes that 1,998, 2,350, 2,703 and 3,108 shares
were committed to be released during the period at the minimum, midpoint,
maximum, and adjusted maximum of the offering range, respectively, and in
accordance with ASC 7-18, only the employee stock ownership plan shares
committed to be released during the period were considered outstanding for
purposes of net income per share
calculations.
|
(3)
|
If
approved by Jacksonville Bancorp-Maryland’s stockholders, the stock-based
benefit plan may grant options to acquire an aggregate number of shares of
common stock equal to 10% of the shares to be sold in the
offering. If the plan is implemented more than one year after
completion of the conversion, the number of options may exceed 10% of the
shares sold in the offering, and the plan may include stock or equity
awards in addition to options. Stockholder approval of
the stock-based benefit plan may not occur earlier than six months after
the completion of the conversion. In calculating the pro forma
effect of the stock-based benefit plan, it is assumed that the exercise
price of the stock options and the trading price of the common stock at
the date of grant were $10.00 per share, the estimated grant-date fair
value determined using the Black-Scholes option pricing model was $2.22
for each option, the aggregate grant-date fair value of the stock options
was amortized to expense on a straight-line basis over a five-year vesting
period of the options, and that 25% of the amortization expense (or the
assumed portion relating to options granted to directors) resulted in a
tax benefit using an assumed tax rate of 38.82%. The actual
expense of the stock-based benefit plan will be determined by the
grant-date fair value of the options, which will depend on a number of
factors, including the valuation assumptions used in the option pricing
model ultimately adopted. Under the above assumptions, the
adoption of the stock-based benefit plan will result in no additional
shares under the treasury stock method for purposes of calculating
earnings per share. There can be no assurance that the actual
exercise price of the stock options will be equal to the $10.00 price per
share. If a portion of the shares to satisfy the exercise of
options under the stock-based benefit plan is obtained from the issuance
of authorized but unissued shares, our net income per share and
stockholders’ equity per share would decrease. The issuance of
authorized but unissued shares of common stock pursuant to the exercise of
options under such plan would dilute stockholders’ ownership and voting
interests by approximately 5.13% at the maximum of the offering
range.
|
(4)
|
Per
share figures include publicly held shares of Jacksonville Bancorp-Federal
common stock that will be exchanged for shares of Jacksonville
Bancorp-Maryland common stock in the conversion. See “The
Conversion and Offering—Share Exchange Ratio for Current
Stockholders.” Net income per share computations are determined
by taking the number of shares assumed to be sold in the offering and the
number of new shares assumed to be issued in exchange for publicly held
shares and, in accordance with ASC 7-18, subtracting the employee stock
ownership plan shares which have not been committed for release during the
respective periods. See note 2. The number of shares of
common stock actually sold and the corresponding number of exchange shares
may be more or less than the assumed amounts. Pro forma net
income per share has been annualized for purposes of calculating the
offering price to pro forma net earnings per
share.
|
(5)
|
The
retained earnings of Jacksonville Savings Bank will be substantially
restricted after the conversion. See “Our Dividend Policy,” “The
Conversion and Offering—Liquidation Rights” and “Supervision and
Regulation—Federal Banking Regulation—Capital
Distributions.”
|
(6)
|
Per
share figures include publicly held shares of Jacksonville Bancorp-Federal
common stock that will be exchanged for shares of Jacksonville
Bancorp-Maryland common stock in the conversion. Stockholders’ equity per
share calculations are based upon the sum of (i) the number of
subscription shares assumed to be sold in the offering and (ii)
shares to be issued in exchange for publicly held shares at the minimum,
midpoint, maximum and adjusted maximum of the offering range,
respectively. The exchange shares reflect an exchange ratio of 0.9615,
1.1312, 1.3009 and 1.4960 at the minimum, midpoint, maximum and adjusted
maximum of the offering range, respectively. The number of subscription
shares actually sold and the corresponding number of exchange shares may
be more or less than the assumed
amounts.
|
AND
RESULTS OF OPERATIONS
This
discussion and analysis reflects our consolidated financial statements and other
relevant statistical data, and is intended to enhance your understanding of our
financial condition and results of operations. The information in
this section has been derived from the audited consolidated financial
statements, which appear beginning on page F-1 of this
prospectus. You should read the information in this section in
conjunction with the business and financial information regarding Jacksonville
Bancorp-Federal provided in this prospectus.
Overview
Our
business consists principally of attracting deposits from the general public and
using deposits and borrowings to originate mortgage loans secured by one- to
four-family residences, commercial real estate and agricultural real estate. In
addition, we originate commercial and agricultural business loans and consumer
loans. Our net income, like other financial institutions, is
primarily dependent on our net interest income, which is the difference between
the income earned on our interest-earning assets, such as loans and investments,
and the cost of our interest-bearing liabilities, primarily deposits and
borrowings. Our net income is also affected by provisions for loan
losses and other operating income and expenses. An important source of income is
income from servicing loans which we have originated but sold into the secondary
market. General economic conditions, particularly changes in market
interest rates, government legislation, monetary policies, and attendant actions
of the regulatory authorities are the external influences affecting many of the
factors of our net income.
Management
has implemented various strategies designed to enhance our
profitability. These strategies include reducing our exposure to
interest rate risk by selling fixed-rate loans and offering other fee-based
services to our customers. We recognize the need to establish and
adhere to strict loan underwriting criteria and guidelines. We
generally limit our investment portfolio to securities issued by the United
States Government and Government sponsored entities, mortgage-backed securities
collateralized by United States Government sponsored entities, and
bank-qualified general obligation municipal issues.
The 2008
and 2009 recession had a severe impact on the entire banking industry which
caused increased bank failures nationwide and resulted in a decline in market
interest rates. The low interest rate environment resulted in increased
originations of our fixed-rate residential loans for sale to the secondary
market during 2009. The Federal Home Loan Bank discontinued its Mortgage
Partnership Program as of October 31, 2008. However, we continue to sell loans
to Freddie Mac. During the year ended December 31, 2009, we sold $66.7 million
of fixed-rate residential mortgage loans. Market conditions and lower
market interest rates resulted in our recognizing an impairment charge on our
mortgage servicing rights during 2008. Improved market conditions and
higher long-term market interest rates during 2009 resulted in our recognition
of a partial recovery of the impairment charge during 2009. We do not
have a subprime mortgage loan product. Our investment portfolio has
not been affected by the recession and financial crisis, since all our
mortgage-backed securities are issued by United States Government or United
States Government sponsored entities. Since the real estate values in
our market area did not increase as dramatically as they did in other parts of
the nation prior to 2008, we have not experienced dramatic decreases in home
values during the current recession. While our level of
non-performing assets increased during 2009, we attribute the increase more to
specific borrower circumstances, rather than the economy in
general.
We
continue to service our existing borrowers and originate new loans to credit
worthy borrowers in an effort to meet the credit needs of our
community. We intend to remain a community-oriented financial
institution dedicated to meeting the credit and financial services needs of our
customers in our market area.
Business
Strategy
Our
business strategy is to operate as a well-capitalized and profitable community
bank dedicated to providing exceptional personal service to our individual and
business customers. Historically, our principal lending activity has been the
origination of mortgage loans to finance or refinance one- to four-family
residential real estate in our local market area, and we plan to continue to
emphasize this type of lending. Over the past several years, we have
increased our origination of commercial and agricultural real estate loans, and
we intend to increase our origination of these loans in the
future. We cannot assure you that we will be able to successfully
implement our business strategy.
Highlights
of our business strategy are as follows:
Remaining a
Community-Oriented Financial Institution. We were established
in 1916 and have been operating continuously since that time. We have
grown internally and through two acquisitions that occurred in 1997 and 2000. In
addition to traditional banking services, we offer our customers trust services
and, through our wholly owned subsidiary, Financial Resources Group, Inc., we
offer investment and brokerage products and services. We have been, and continue
to be, committed to meeting the financial needs of the communities in which we
operate, and we are dedicated to providing quality personal service to our
customers. For example, our business strategy emphasizes meeting the
home ownership needs of our local community. We implement this strategy by using
our mortgage banking operations to sell our one- to four-family residential
mortgage loan originations with terms of 15 years or more to Freddie Mac with
servicing retained. By selling these loans into the secondary market,
we are able to increase our level of new originations, and by retaining the
servicing rights we are able to maintain a relationship with our local
customers.
Increasing our
Commercial and Agricultural Real Estate Lending. We intend to
continue to increase our originations of commercial and agricultural real estate
loans as a means of increasing our interest income and improving our net
interest margin. These loans are generally originated with rates that are fixed
for five years or less, which assists us in managing our interest rate risk. In
2007, we hired a new Chief Lending Officer who had expertise in commercial
lending, as well as local contacts in our market area, which has contributed to
the growth in this portfolio. In support of this initiative, we have enhanced
our internal loan review process. At December 31, 2009, our
commercial and agricultural real estate loans increased to $56.7 million or
32.6% of our total loan portfolio, as compared to $33.9 million or 23.8% of our
total loan portfolio at December 31, 2005. The additional capital
raised in this offering will further increase our commercial lending capacity by
enabling us to originate more loans and loans with larger
balances. Originating more commercial and agricultural real estate
loans exposes us to increased risks. See “Risk Factors —Risks Related
to our Business— Non-residential loans increase our exposure to credit
risks.”
Operating Our
Business Profitability While Managing Risks. We have been
profitable in each of the last five years. During this time we have
emphasized identifying risks associated with our business and making business
decisions that will ensure continued profitable operations while minimizing
potential losses due to changes in economic conditions. For example,
we have a comprehensive internal loan review process and conservative
underwriting criteria that are designed to minimize non-performing loans and
assets as a percentage of total loans and assets. At December 31,
2009, our non-performing loans totaled $2.0 million, or 1.11% of total loans,
and our non-performing assets totaled $2.3 million, or 0.81% of total
assets. In addition, we evaluate the risks associated with our
investments and make adjustments to our investment portfolio that reflect the
perceived risks of our investments. During the economic downturn and
historically low interest rate environment, we maintained a higher level of our
assets in mortgage-backed securities issued or guaranteed by the United States
Government or Government sponsored entities which provide a higher yield than
cash or cash equivalent investments and is more liquid than loans. We
believe that we can maintain profitability by balancing the risks and potential
returns associated with each investment that we make.
Increasing our
Share of Lower-Cost Deposits. We remain committed to
generating lower-cost and more stable core deposits. We attract and
retain transaction accounts by offering competitive products and rates,
excellent customer service and a comprehensive marketing program. Our efforts to attract
and retain transaction accounts have resulted in an increase in the total number
of accounts and balances. Our core deposits (consisting of checking accounts,
money market accounts and savings accounts) increased $11.4 million to $109.1
million at December 31, 2009 from $97.7 million at December 31, 2008. At
December 31, 2009, core deposits comprised 42.8% of our total deposits, compared
to 41.0% of our total deposits at December 31, 2008.
Increasing and
Diversifying our Sources of Non-interest Income. In order to reduce our
reliance on net interest income and the impact of market rates on our financial
results, we have sought to diversify our revenue stream by increasing our fee
income. We offer a full-service trust department which primarily manages farms
and personal estates. As of December 31, 2009, our trust department
managed or administered 100 trust accounts and had $50.1 million of trust assets
under management. Through Financial Resources Group, Inc.,
a subsidiary of Jacksonville Savings Bank, we offer our customers the
ability to buy and sell stocks, bonds, annuities and mutual funds. At December 31, 2009, we
also were servicing $148.0 million in loans for which we received servicing
income of $360,000 during the year ended December 31, 2009.
Expected
Increase in Non-Interest Expense as a Result of the Conversion
Following
the completion of the conversion, our non-interest expense is expected to
increase because of the increased compensation expenses associated with the
purchase of shares of common stock by our employee stock ownership plan and the
possible implementation of a stock-based benefit plan, if approved by our
stockholders.
Assuming
that 1,553,938 shares are sold in the offering:
(i)
|
the
employee stock ownership plan will acquire 62,158 shares of common stock
with a $622,000 loan that is expected to be repaid over 20 years,
resulting in an annual pre-tax expense of approximately $31,100 (assuming
that the shares of common stock maintain a value of $10.00 per share);
and
|
(ii)
|
the
new stock-based benefit plan would award options to purchase a number of
shares equal to 10% of the shares sold in the offering, or 155,394 shares,
to eligible participants, and such options would be expensed as the
options vest. Assuming all options are awarded under the
stock-based benefit plan at a price of $10.00 per share, and that the
options vest over a minimum of five years, the corresponding annual
pre-tax expense associated with options awarded under the stock-based
benefit plan would be approximately $68,995 (assuming a grant-date fair
value of $2.22 per option, using the Black-Scholes option valuation
methodology).
|
The
actual expense that will be recorded for the employee stock ownership plan will
be determined by the market value of the shares of common stock as they are
released to employees over the term of the loan, and whether the loan is repaid
faster than its contractual term. Accordingly, increases in the stock
price above $10.00 per share will increase the total employee stock ownership
plan expense, and accelerated repayment of the loan will increase the employee
stock ownership plan expense for those periods in which accelerated or larger
loan repayments are made. Further, the actual expense of the shares
awarded under the stock-based benefit plan will be determined by the fair market
value of the stock on the grant date, which might be greater than $10.00 per
share.
Critical
Accounting Policies
In the
ordinary course of business, we have made a number of estimates and assumptions
relating to the reporting of results of operations and financial condition in
preparing our financial statements in conformity with accounting principles
generally accepted in the United States of America. Actual results
could differ significantly from those estimates under different assumptions and
conditions. Management believes the following discussion addresses
our most critical accounting policies and significant estimates, which are those
that are most important to the portrayal of our financial condition and results
and require management’s most difficult, subjective and complex judgments, often
as a result of the need to make estimates about the effect of matters that are
inherently uncertain. For a discussion of recent accounting pronouncements, see
Note 1 of the Notes to Financial Statements.
Allowance for
Loan Losses. We
believe the allowance for loan losses is the critical accounting policy that
requires the most significant judgments and assumptions used in the preparation
of the consolidated financial statements. The allowance for loan
losses is a material estimate that is particularly susceptible to significant
changes in the near term and is established through a provision for loan
losses. The allowance is based upon past loan experience and other
factors which, in management’s judgment, deserve current recognition in
estimating loan losses. The evaluation includes a review of all loans
on which full collectability may not be reasonably assured. Other
factors considered by management include the size and character of the loan
portfolio, concentrations of loans to specific borrowers or industries, existing
economic conditions and historical losses on each portfolio
category. In connection with the determination of the allowance for
loan losses, management uses independent appraisals for significant properties,
which collateralize loans. Management uses the available information
to make such determinations. If circumstances differ substantially
from the assumptions used in making determinations, future adjustments to the
allowance for loan losses may be necessary and results of operations could be
affected. While we believe we have established our existing allowance
for loan losses in conformity with accounting principles generally accepted in
the United States of America, there can be no assurance that regulators, in
reviewing our loan portfolio, will not request an increase in the allowance for
loan losses. Because future events affecting borrowers and collateral
cannot be predicted with certainty, there can be no assurance that increases to
the allowance will not be necessary if loan quality deteriorates.
Other Real Estate
Owned. Other
real estate owned acquired through loan foreclosures are initially recorded at
fair value less costs to sell when acquired, establishing a new cost
basis. The adjustment at the time of foreclosure is recorded through
the allowance for loan losses. Due to the subjective nature of
establishing fair value when the asset is acquired, the actual fair value of the
other real estate owned could differ from the original estimate. If
it is determined that fair value declines subsequent to foreclosure, the asset
is written down through a charge to non-interest expense. Operating
costs associated with the assets after acquisition are also recorded as
non-interest expense. Gains and losses on the disposition of other
real estate owned are netted and posted to non-interest expense.
Deferred Income
Tax Assets/Liabilities. Our net deferred income tax
asset arises from differences in the dates that items of income and expense
enter into our reported income and taxable income. Deferred tax
assets and liabilities are established for these items as they
arise. From an accounting standpoint, deferred tax assets are
reviewed to determine that they are realizable based upon the historical level
of our taxable income, estimates of our future taxable income and the reversals
of deferred tax liabilities. In most cases, the realization of the
deferred tax asset is based on our future profitability. If we were
to experience net operating losses for tax purposes in a future period, the
realization of our deferred tax assets would be evaluated for a potential
valuation reserve.
Impairment of
Goodwill. Goodwill, an intangible
asset with an indefinite life, was recorded on our balance sheet in prior
periods as a result of acquisition activity. Goodwill is evaluated
for impairment annually, unless there are factors present that indicate a
potential impairment, in which case, the goodwill impairment test is performed
more frequently. During 2009, goodwill was evaluated quarterly due to market
conditions.
Mortgage
Servicing Rights. Mortgage servicing
rights are very sensitive to movements in interest rates as expected future net
servicing income depends on the projected outstanding principal balances of the
underlying loans, which can be greatly reduced by
prepayments. Prepayments usually increase when mortgage interest
rates decline and decrease when mortgage interest rates rise.
Fair Value
Measurements.
The fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. We estimate the fair
value of financial instruments using a variety of valuation
methods. Where financial instruments are actively traded and have
quoted market prices, quoted market prices are used for fair
value. When the financial instruments are not actively traded, other
observable market inputs, such as quoted prices of securities with similar
characteristics, may be used, if available, to determine fair
value. When observable market prices do not exist, we estimate fair
value. Other factors such as model assumptions and market
dislocations can affect estimates of fair value.
Comparison
of Financial Condition at December 31, 2009 and 2008
Total
assets increased to $288.8 million at December 31, 2009, from $288.3 million at
December 31, 2008. Net loans decreased $9.3 million, or 5.1%, to
$173.7 million as of December 31, 2009. The decrease in net loans
reflected an $8.2 million decrease in one- to four-family residential mortgage
loans, primarily refinanced loans which were sold in the secondary market during
2009 with servicing retained. Cash and cash equivalents increased
$8.6 million to $15.7 million at December 31, 2009 from $7.1 million at December
31, 2008. Available for sale investment securities decreased $12.4
million, or 25.1%, to $37.2 million at December 31, 2009 from $49.6 million at
December 31, 2008, primarily due to $16.1 million in calls and $19.9 million in
sales of U.S. Government securities and municipal bonds, partially offset by
purchases of $23.3 million of U.S. Government securities and tax-free municipal
bonds. Mortgage-backed securities increased $13.2 million, or 47.5%,
to $41.0 million at December 31, 2009 from $27.8 million at December 31,
2008.
At
December 31, 2009, we owned $1.1 million of Federal Home Loan Bank of Chicago
stock. Management reviews this investment on a quarterly basis, in
light of the Federal Home Loan Bank’s financial performance. At
December 31, 2009, management deemed that the Federal Home Loan Bank of Chicago
stock was not impaired. We also hold $2.7 million in goodwill associated with
our prior acquisition of Chapin State Bank. In 2009, management
reviewed goodwill for impairment quarterly. Given the current market
conditions and the fact that our common stock was trading below our book value,
we performed our most recent analysis as of December 31, 2009. This
analysis, which considered recent market data for bank and thrift transactions,
resulted in management’s conclusion to not take an impairment in
2009.
At
December 31, 2009, we had $850,000 in mortgage servicing rights. Our
mortgage servicing rights asset represents approximately 57 basis points of the
$148.0 million in loans that we serviced. We obtain an independent
valuation of the mortgage servicing rights at least annually. Our
updated valuation as of December 31, 2009, resulted in a higher value due to the
increased value of the mortgage servicing rights originated prior to
2009. Consequently, we recognized a recovery of $123,000 of an
impairment charge of $428,000 that we recognized during 2008.
Total
deposits increased $16.5 million, or 7.0%, to $254.7 million as of December 31,
2009, primarily due to increases of $11.4 million in transaction accounts and
$5.1 million in time deposits. Management believes the increase in deposits
reflected customers preferring to have their assets in FDIC insured deposits
during the recession, as well as the effect of recent bank failures in our
market area. As a result of our increase in deposits, we were able to
decrease our borrowings by $17.3 million to $3.8 million at December 31,
2009.
Stockholders’
equity increased $1.0 million to $25.3 million at December 31,
2009. The increase resulted primarily from net income of $1.4 million
and $358,000 in other comprehensive income, partially offset by the payment of
$265,000 in dividends. Stockholders’ equity was also affected by the
repurchase of $486,000 of our common stock during the first quarter of
2009. Other comprehensive income consisted of the increase in net
unrealized gains, net of tax, on available for sale securities. The
change in net unrealized gains or losses on securities classified as
available-for-sale is affected by market conditions and, therefore, can
fluctuate daily. Other comprehensive income does not include changes
in the fair value of other financial instruments included on the balance
sheet.
Comparison
of Operating Results for the Years Ended December 31, 2009 and 2008
General.
Net income for the year ended December 31, 2009 totaled $1.4 million, or
$0.72 per common share, basic and diluted, compared to net income for the year
ended December 31, 2008 of $1.5 million, or $0.76 per common share, basic and
diluted. The decrease of $122,000 in net income reflected a $2.3
million increase in the provision for loan losses, which primarily related to
the deterioration of two commercial business relationships during
2009. The increase in the provision for loan losses was partially
offset by increases of $1.0 million in non-interest income and $796,000 in net
interest income and decreases of $204,000 in income taxes and $95,000 in
non-interest expense. Our operations have benefited from the
steepening yield curve in 2008 and 2009 as lower short-term interest rates
resulted in our deposits repricing downward faster than our loans, which have
yields tied to longer-term interest rates.
Interest
Income. Interest income decreased to $14.4 million for the year ended
December 31, 2009 from $15.9 million for the year ended December 31,
2008. The $1.5 million decrease in interest income resulted from
decreased income of $434,000 on loans, $518,000 on investment securities,
$318,000 on mortgage-backed securities, and $218,000 on other interest-earning
assets.
Interest
income on loans decreased $434,000 to $11.6 million for 2009 from $12.0 million
for 2008 due primarily to a decrease in the average yield of the loan portfolio,
partially offset by an increase in the average balance of the loan
portfolio. The average yield of the loan portfolio decreased 42 basis
points to 6.34% for 2009 from 6.76% for 2008. The decrease in the average yield
reflected lower market interest rates in 2009. The average balance of
loans increased $4.9 million to $182.8 million during 2009. The
increase in the average balance of loans was primarily due to an increase in the
average balance of commercial real estate loans, including participations
purchased from other institutions.
Interest
income on investment securities decreased $518,000 to $1.6 million in 2009 from
$2.1 million for 2008, reflecting a $12.7 million decrease in the average
balance of the investment securities portfolio to $40.7 million during 2009 from
$53.4 million during 2008 and a slight decrease in the average
yield. The decrease in the average balance reflected an increase in
calls and sales, a portion of which were reinvested in tax-free municipal bonds
and mortgage-backed securities. The average yield of investment
securities decreased to 3.81% for 2009 from 3.88% for 2008. This
average yield does not reflect the benefit of the higher tax-equivalent yield of
our municipal bonds, which was reflected as a reduction in income tax
expense.
Interest
income on mortgage-backed securities decreased $318,000 to $1.3 million in 2009
from $1.6 million in 2008, reflecting a 182 basis point decrease in the average
yield of these securities to 3.13% for 2009 from 4.44% for 2008. The
decrease in the average yield was primarily due to accelerated premium
amortization resulting from higher prepayments on mortgage-backed
securities. The decrease in the average yield was partially offset by
a $8.5 million increase in the average balance of mortgage-backed securities to
$40.4 million in 2009 from $31.9 million in 2008.
Interest
income from other interest-earning assets, which consisted of interest-earning
deposit accounts and federal funds sold, decreased $218,000 to $12,000 during
2009 primarily due to a 232 basis point decrease in the average
yield. The average yield of these other interest-earning assets
decreased to 0.15% for 2009 from 2.47% for 2008, reflecting the decrease in
short-term market interest rates. The average balance of these assets
decreased $1.1 million to $8.2 million during 2009 compared to
2008.
Interest
Expense. Total interest expense decreased $2.3 million to $5.4 million
during 2009 from $7.7 million during 2008. The decrease in interest
expense was due to decreases of $1.9 million in the cost of deposits and
$432,000 in the cost of borrowings.
The cost
of deposits decreased $1.9 million to $5.3 million in 2009 from $7.2 million in
2008 due primarily to a decrease in the average rate paid on
deposits. The average rate paid decreased 87 basis points to 2.27%
during 2009 from 3.14% during 2008, reflecting a decrease in market interest
rates as short-term interest rates decreased significantly at the end of 2008
and throughout 2009. The average balance of deposits increased $6.1
million during 2009 to $234.3 million from $228.3 million during
2008.
The cost
of borrowed funds decreased $432,000 to $116,000 in 2009 from $548,000 in 2008,
primarily due to a 194 basis point decrease in the average rate paid on borrowed
funds as well as a lower average balance of borrowed funds. The average rate
paid decreased to 1.10% for 2009 from 3.04% for 2008, reflecting the decrease in
market interest rates. The average balance of borrowed funds also
decreased $7.5 million to $10.5 million during 2009, primarily due to a $6.7
million decrease in the average balance of advances from the Federal Home Loan
Bank. The remainder of the balance consisted of securities sold under
agreements to repurchase.
Net Interest
Income. Net interest income increased by $796,000, or 9.7%, to
$8.9 million for the year ended December 31, 2009 from $8.2 million for the year
ended December 31, 2008, primarily due to the improvement in our net interest
rate spread and net interest margin. Our interest rate spread
increased by 38 basis points to 3.08% during 2009 from 2.70% during
2008. Our interest rate spread was 3.61% at December 31,
2009. Our net interest margin improved 29 basis points to 3.30% for
the year ended December 31, 2009 from 3.01% for the year ended December 31,
2008. The improvement in our net interest rate spread and net
interest margin reflected the steepening yield curve as short-term market
interest rates used to price our deposits declined significantly in 2008 and
2009, and the resulting decrease in the cost of our deposits and other
liabilities was greater than the decrease in the yield on our loans and
investments.
Provision for
Loan Losses. The provision for loan losses is determined by management as
the amount needed to replenish the allowance for loan losses, after net
charge-offs have been deducted, to a level considered adequate to absorb known
and probable losses in the loan portfolio, in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”).
We
recorded a provision for loan losses of $2.6 million for the year ended December
31, 2009, compared to $310,000 during 2008. The increase in the
provision reflected charges to the allowance for loan losses due to the
deterioration of two commercial business loan relationships during 2009. For a
further discussion of the details of these two commercial business loan
relationships, please see “Business of Jacksonville Savings Bank—Delinquencies
and Classified Assets—Non-Performing Assets and Delinquent
Loans.” Charge-offs totaling $1.9 million were recognized during 2009
and additional specific provisions of $380,000 have been added to the allowance
to absorb potential estimated losses related to these two loans. The
remainder of the increase in the provision for loan losses reflected an increase
in the average balance of the loan portfolio and an increase in classified and
special mention assets. Net charge-offs increased during 2009 to $2.2
million from $142,000 during 2008. The allowance for loan losses
increased $356,000 to $2.3 million at December 31, 2009.
The
provisions in 2009 and 2008 were made to bring the allowance for loan losses to
a level deemed adequate following management’s evaluation of the repayment
capacity and collateral protection afforded by each problem loan identified by
management. The review also considered the local economy and the
level of bankruptcies and foreclosures in our market area.
Non-Interest
Income. Non-interest income increased $1.0 million to $4.2 million for
the year ended December 31, 2009 from $3.2 million for the year ended December
31, 2008. The increase in non-interest income resulted primarily from
increases of $541,000 in net income from mortgage banking operations, $556,000
in gains on sales of securities, and $102,000 in service charges on deposit
accounts, which were partially offset by a decrease of $152,000 in commission
income. The increase in gains on sales of securities reflected the
sale of $57.4 million in securities during 2009 in order to realize gains on the
securities, and to restructure a portion of the portfolio into lower
risk-weighted investments. The increase in mortgage banking income
was due to secondary market sales totaling $66.7 million in 2009 as compared to
sales of $30.1 million in 2008, and an increase in the net capitalization of
mortgage servicing rights. We expect the level of mortgage banking activity to
moderate in 2010. The increase in service charges on deposits
reflected an increase in non-sufficient fund fees in 2009. The
decrease in commission income was due to reduced brokerage activity, which
reflected current market conditions.
Non-Interest
Expense. Non-interest expense decreased $95,000 to $9.1 million during
the year ended December 31, 2009, compared to the year ended December 31,
2008. The decrease in non-interest expense reflected a $123,000
recovery in the impairment of mortgage servicing rights during 2009, compared to
an impairment charge of $428,000 during 2008. The recovery reflected
an increase in the value of mortgage servicing rights due to improved market
conditions and reduced prepayment speeds as of December 31, 2009. The
lower level of non-interest expense also reflected a $71,000 decrease in data
processing expense following the conversion of our core processing system during
the third quarter of 2008. The decrease in non-interest expense was partially
offset by a $508,000 increase in FDIC deposit insurance premiums. The
increase in FDIC premiums reflected the higher assessment rates for 2009 and
approximately $137,000 related to the second quarter FDIC special
assessment. The increase in FDIC premiums also reflected an
additional $2,000 in assessments related to our participation in the Temporary
Liquidity Guarantee Program. The increase compared to 2008 also
reflected the remainder of a one-time FDIC credit for past contributions to the
insurance fund of $107,000 that was used in 2008.
Income
Taxes. The provision for income taxes decreased $204,000 to $101,000
during 2009 compared to 2008. The provision reflected a decrease in taxable
income due to lower income and an increase in the benefit of tax-exempt
investment securities. Our effective tax rate was 6.7% for 2009 as
compared to 16.7% for 2008 due to the increase in our tax-exempt investment
securities.
Average
Balances and Yields
The
following tables set forth average balance sheets, average yields and costs, and
certain other information for the periods indicated. All average
balances are daily average balances. Non-accrual loans were included
in the computation of average balances, but have been reflected in the table as
loans carrying a zero yield. The yields set forth below include the
effect of deferred fees, discounts and premiums that are amortized or accreted
to interest income or expense.
|
|
At December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Years Ended December 31,
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Yield/ Rate
|
|
|
Average Outstanding Balance
|
|
|
Interest
|
|
|
Yield/ Rate
|
|
|
Average Outstanding Balance
|
|
|
Interest
|
|
|
Yield/ Rate
|
|
|
Average Outstanding Balance
|
|
|
Interest
|
|
|
Yield/ Rate
|
|
|
|
(Dollars
in thousands)
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
(1)
|
|
|
6.23 |
%
|
|
$ |
182,813 |
|
|
$ |
11,592 |
|
|
|
6.34 |
% |
|
$ |
177,963 |
|
|
$ |
12,026 |
|
|
|
6.76 |
% |
|
$ |
165,715 |
|
|
$ |
11,736 |
|
|
|
7.08 |
% |
Investment
securities (2)
|
|
|
3.91 |
|
|
|
40,732 |
|
|
|
1,554 |
|
|
|
3.81 |
(6) |
|
|
53,392 |
|
|
|
2,072 |
|
|
|
3.88 |
(6) |
|
|
79,630 |
|
|
|
3,189 |
|
|
|
4.00 |
(6) |
Mortgage-backed
securities
|
|
|
4.05 |
|
|
|
40,381 |
|
|
|
1,262 |
|
|
|
3.13 |
|
|
|
31,921 |
|
|
|
1,580 |
|
|
|
4.95 |
|
|
|
12,282 |
|
|
|
596 |
|
|
|
4.85 |
|
Cash
and cash equivalents
|
|
|
0.04 |
|
|
|
8,231 |
|
|
|
12 |
|
|
|
0.15 |
|
|
|
9,313 |
|
|
|
230 |
|
|
|
2.47 |
|
|
|
1,838 |
|
|
|
88 |
|
|
|
4.83 |
|
Total
interest-earning assets
|
|
|
5.50 |
|
|
|
272,157 |
|
|
|
14,420 |
|
|
|
5.30 |
|
|
|
272,589 |
|
|
|
15,908 |
|
|
|
5.83 |
|
|
|
259,465 |
|
|
|
15,609 |
|
|
|
6.02 |
|
Non-interest-earning
assets
|
|
|
|
|
|
|
22,626 |
|
|
|
|
|
|
|
|
|
|
|
20,642 |
|
|
|
|
|
|
|
|
|
|
|
18,169 |
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
|
|
$ |
294,783 |
|
|
|
|
|
|
|
|
|
|
$ |
293,231 |
|
|
|
|
|
|
|
|
|
|
$ |
277,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
bearing checking
|
|
|
0.32 |
% |
|
$ |
29,009 |
|
|
$ |
94 |
|
|
|
0.32 |
% |
|
$ |
28,572 |
|
|
$ |
199 |
|
|
|
0.70 |
% |
|
$ |
25,820 |
|
|
$ |
302 |
|
|
|
1.17 |
% |
Savings
accounts
|
|
|
0.86 |
|
|
|
24,849 |
|
|
|
218 |
|
|
|
0.88 |
|
|
|
22,677 |
|
|
|
224 |
|
|
|
0.99 |
|
|
|
22,774 |
|
|
|
227 |
|
|
|
1.00 |
|
Certificates
of deposit
|
|
|
2.65 |
|
|
|
149,124 |
|
|
|
4,586 |
|
|
|
3.08 |
|
|
|
147,891 |
|
|
|
6,112 |
|
|
|
4.13 |
|
|
|
145,325 |
|
|
|
6,846 |
|
|
|
4.71 |
|
Money
market savings
|
|
|
1.02 |
|
|
|
26,750 |
|
|
|
378 |
|
|
|
1.41 |
|
|
|
24,442 |
|
|
|
584 |
|
|
|
2.39 |
|
|
|
22,502 |
|
|
|
989 |
|
|
|
4.40 |
|
Money
market deposits
|
|
|
0.85 |
|
|
|
4,616 |
|
|
|
40 |
|
|
|
0.86 |
|
|
|
4,700 |
|
|
|
50 |
|
|
|
1.06 |
|
|
|
4,957 |
|
|
|
70 |
|
|
|
1.41 |
|
Total
interest-bearing deposits
|
|
|
1.92 |
|
|
|
234,348 |
|
|
|
5,316 |
|
|
|
2.27 |
|
|
|
228,282 |
|
|
|
7,169 |
|
|
|
3.14 |
|
|
|
221,378 |
|
|
|
8,434 |
|
|
|
3.81 |
|
Federal
Home Loan Bank advances
|
|
|
|
|
|
|
5,359 |
|
|
|
104 |
|
|
|
1.94 |
|
|
|
12,018 |
|
|
|
469 |
|
|
|
3.91 |
|
|
|
8,598 |
|
|
|
433 |
|
|
|
5.04 |
|
Short-term
borrowings
|
|
|
0.19 |
|
|
|
5,168 |
|
|
|
12 |
|
|
|
0.94 |
|
|
|
6,028 |
|
|
|
78 |
|
|
|
1.29 |
|
|
|
4,438 |
|
|
|
189 |
|
|
|
4.26 |
|
Total
borrowings
|
|
|
0.19 |
|
|
|
10,527 |
|
|
|
116 |
|
|
|
1.10 |
|
|
|
18,046 |
|
|
|
548 |
|
|
|
3.04 |
|
|
|
13,036 |
|
|
|
622 |
|
|
|
4.78 |
|
Total
interest-bearing liabilities
|
|
|
1.89 |
|
|
|
244,875 |
|
|
|
5,432 |
|
|
|
2.22 |
% |
|
|
246,328 |
|
|
|
7,716 |
|
|
|
3.13 |
% |
|
|
234,414 |
|
|
|
9,056 |
|
|
|
3.86 |
% |
Non-interest-bearing
liabilities(7)
|
|
|
|
|
|
|
25,360 |
|
|
|
|
|
|
|
|
|
|
|
23,881 |
|
|
|
|
|
|
|
|
|
|
|
21,586 |
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
|
|
|
|
270,235 |
|
|
|
|
|
|
|
|
|
|
|
270,209 |
|
|
|
|
|
|
|
|
|
|
|
256,000 |
|
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
|
|
|
|
24,548 |
|
|
|
|
|
|
|
|
|
|
|
23,022 |
|
|
|
|
|
|
|
|
|
|
|
21,634 |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
|
|
|
|
$ |
294,783 |
|
|
|
|
|
|
|
|
|
|
$ |
293,231 |
|
|
|
|
|
|
|
|
|
|
$ |
277,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
|
|
|
|
|
$ |
8,988 |
|
|
|
|
|
|
|
|
|
|
$ |
8,192 |
|
|
|
|
|
|
|
|
|
|
$ |
6,553 |
|
|
|
|
|
Net
interest rate spread (3)
|
|
|
3.61 |
% |
|
|
|
|
|
|
|
|
|
|
3.08 |
% |
|
|
|
|
|
|
|
|
|
|
2.70 |
% |
|
|
|
|
|
|
|
|
|
|
2.15 |
% |
Net
interest-earning assets (4)
|
|
|
|
|
|
|
|
|
|
$ |
27,282 |
|
|
|
|
|
|
|
|
|
|
$ |
26,261 |
|
|
|
|
|
|
|
|
|
|
$ |
25,051 |
|
|
|
|
|
Net
interest margin (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.30 |
% |
|
|
|
|
|
|
|
|
|
|
3.01 |
% |
|
|
|
|
|
|
|
|
|
|
2.53 |
% |
Average
interest-earning assets to average interest-bearing
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111.14 |
% |
|
|
|
|
|
|
|
|
|
|
110.66 |
% |
|
|
|
|
|
|
|
|
|
|
110.69 |
% |
(1)
|
Includes
non-accrual loans and loans held for sale and fees of $110,000 for 2009,
$54,000 for 2008 and $93,000 for
2007.
|
(2)
|
Includes
Federal Home Loan Bank stock and U.S. Agency
securities.
|
(3)
|
Net
interest rate spread represents the difference between the yield on
average interest-earning assets and the cost of average interest-bearing
liabilities.
|
(4)
|
Net
interest-earning assets represents total interest-earning assets less
total interest-bearing liabilities.
|
(5)
|
Net
interest margin represents net interest income divided by average total
interest-earning assets.
|
(6)
|
We
used an assumed 34% tax rate in computing tax equivalent adjustments. The
tax equivalent yield of investment securities was 5.14%, 4.82%, and 4.26%
for the years ended December 31, 2009, 2008 and 2007,
respectively. Tax equivalent adjustments to income on
investment securities was $542,000, $503,000 and $203,000 for the years
ended December 31, 2009, 2008 and 2007,
respectively.
|
(7)
|
Includes
non-interest bearing deposits of $19.8 million, $18.5 million and $16.2
million for the years ended December 31, 2009, 2008 and 2007,
respectively.
|
Rate/Volume
Analysis
The
following table presents the effects of changing rates and volumes on our net
interest income for the fiscal years indicated. The rate column shows
the effects attributable to changes in rate (changes in rate multiplied by prior
volume). The volume column shows the effects attributable to changes
in volume (changes in volume multiplied by prior rate). The net
column represents the sum of the prior columns. For purposes of this
table, changes attributable to both rate and volume, which cannot be segregated,
have been allocated proportionately, based on the changes due to rate and the
changes due to volume.
|
|
Years
Ended December 31,
2009
vs 2008
|
|
|
Years
Ended December 31,
2008
vs 2007
|
|
|
|
Increase
(Decrease) Due to
|
|
|
|
|
|
Increase
(Decrease) Due
to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$ |
(756 |
) |
|
$ |
322 |
|
|
$ |
(434 |
) |
|
$ |
(553 |
) |
|
$ |
843 |
|
|
$ |
290 |
|
Investment
securities
|
|
|
(34 |
) |
|
|
(484 |
) |
|
|
(518 |
) |
|
|
(96 |
) |
|
|
(1,021 |
) |
|
|
(1,117 |
) |
Mortgage-backed
securities
|
|
|
(672 |
) |
|
|
354 |
|
|
|
(318 |
) |
|
|
12 |
|
|
|
972 |
|
|
|
984 |
|
Cash
and cash equivalents
|
|
|
(194 |
) |
|
|
(24 |
) |
|
|
(218 |
) |
|
|
(62 |
) |
|
|
204 |
|
|
|
142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-earning assets
|
|
$ |
(1,656 |
) |
|
$ |
168 |
|
|
$ |
(1,488 |
) |
|
$ |
(699 |
) |
|
$ |
998 |
|
|
$ |
299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
bearing checking
|
|
$ |
(108 |
) |
|
$ |
3 |
|
|
$ |
(105 |
) |
|
$ |
(132 |
) |
|
$ |
29 |
|
|
$ |
(103 |
) |
Savings
accounts
|
|
|
(26 |
) |
|
|
20 |
|
|
|
(6 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(3 |
) |
Certificates
of deposit
|
|
|
(1,577 |
) |
|
|
51 |
|
|
|
(1,526 |
) |
|
|
(853 |
) |
|
|
119 |
|
|
|
(734 |
) |
Money
market savings
|
|
|
(257 |
) |
|
|
51 |
|
|
|
(206 |
) |
|
|
(484 |
) |
|
|
79 |
|
|
|
(405 |
) |
Money
market deposits
|
|
|
(9 |
) |
|
|
(1 |
) |
|
|
(10 |
) |
|
|
(16 |
) |
|
|
(4 |
) |
|
|
(20 |
) |
Total
interest-bearing deposits
|
|
|
(1,977 |
) |
|
|
124 |
|
|
|
(1,853 |
) |
|
|
(1,487 |
) |
|
|
222 |
|
|
|
(1,265 |
) |
Federal
Home Loan Bank advances
|
|
|
(174 |
) |
|
|
(192 |
) |
|
|
(366 |
) |
|
|
(111 |
) |
|
|
147 |
|
|
|
36 |
|
Short-term
borrowings
|
|
|
(56 |
) |
|
|
(9 |
) |
|
|
(65 |
) |
|
|
(163 |
) |
|
|
52 |
|
|
|
(111 |
) |
|
|
|
(230 |
) |
|
|
(202 |
) |
|
|
(431 |
) |
|
|
(274 |
) |
|
|
199 |
|
|
|
(75 |
) |
Total
interest-bearing liabilities
|
|
|
(2,207 |
) |
|
|
(77 |
) |
|
|
(2,284 |
) |
|
|
(1,761 |
) |
|
|
421 |
|
|
|
(1,340 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in net interest income
|
|
$ |
551 |
|
|
$ |
245 |
|
|
$ |
796 |
|
|
$ |
1,062 |
|
|
$ |
577 |
|
|
$ |
1,639 |
|
Management
of Market Risk
As a
financial institution, we face risk from interest rate volatility. Fluctuations
in interest rates affect both our level of income and expense on a large portion
of our assets and liabilities. Fluctuations in interest rates also affect the
market value of all interest-earning assets.
The
primary goal of our interest rate risk management strategy is to maximize net
interest income while maintaining an acceptable interest rate risk profile. We
seek to coordinate asset and liability decisions so that, under changing
interest rate scenarios, portfolio equity and net interest income remain within
an acceptable range.
Our
policy in recent years has been to reduce our interest rate risk by better
matching the maturities of our interest rate sensitive assets and liabilities,
selling our long-term fixed-rate residential mortgage loans with terms of 15
years or more to the secondary market, originating adjustable rate loans,
balloon loans with terms ranging from three to five years, and originating
consumer and commercial business loans, which typically are for a shorter
duration and at higher rates of interest than one- to four-family residential
mortgage loans. Our portfolio of mortgage-backed securities,
including both fixed and variable rates, also provides monthly cash
flow. The remaining investment portfolio has been structured to
better match the maturities and rates of our interest-bearing
liabilities. With respect to liabilities, we have attempted to
increase our savings and transaction deposit accounts, which management believes
are more resistant to changes in interest rates than certificate
accounts. The board of directors appoints the Asset-Liability
Management Committee (“ALCO”), which is responsible for reviewing our asset and
liability policies. The ALCO meets quarterly to review interest rate
risk and trends, as well as liquidity and capital requirements.
We use
comprehensive asset/liability software provided by a third-party vendor to
perform interest rate sensitivity analysis for all product
categories. The primary focus of our analysis is the effect of
interest rate increases and decreases on net interest
income. Management believes that this analysis reflects the potential
effects on current earnings of interest rate changes. Call criteria
and prepayment assumptions are taken into consideration for investment
securities and loans. All of our interest sensitive assets and
liabilities are analyzed by product type and repriced based upon current
offering rates. The software performs interest rate sensitivity
analysis by performing rate shocks of plus or minus 300 basis points in 100
basis point increments.
The
following table shows projected results at December 31, 2009 and 2008, of the
impact on net interest income from an immediate change in interest rates, as
well as the benchmarks established by ALCO. The results are shown as
a dollar and percentage change in net interest income over the next twelve
months.
|
|
Change
in Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+300
basis points
|
|
|
174 |
|
|
|
1.71 |
|
|
|
(143 |
) |
|
|
(1.46 |
) |
>(20.00)%
|
+200
basis points
|
|
|
220 |
|
|
|
2.16 |
|
|
|
(68 |
) |
|
|
(0.69 |
) |
>(20.00)%
|
+100
basis points
|
|
|
184 |
|
|
|
1.80 |
|
|
|
33 |
|
|
|
0.34 |
|
>(12.50)%
|
(100)
basis points
|
|
|
(271 |
) |
|
|
(2.66 |
) |
|
|
95 |
|
|
|
0.97 |
|
>(12.50)%
|
(200)
basis points
|
|
|
(412 |
) |
|
|
(4.05 |
) |
|
|
(12 |
) |
|
|
(0.12 |
) |
>(20.00)%
|
(300)
basis points
|
|
|
(589 |
) |
|
|
(5.78 |
) |
|
|
(205 |
) |
|
|
(2.10 |
) |
>(20.00)%
|
The table
above indicates that at December 31, 2009, in the event of a 200 basis point
increase in interest rates, we would experience a 2.16% increase in net interest
income. In the event of a 100 basis point decrease in interest rates,
we would experience a 2.66% decrease in net interest income.
The effects of interest rates on net
interest income are not predictable. Computations of prospective effects of
hypothetical interest rate changes are based on numerous assumptions, including
relative levels of market interest rates, prepayments, and deposit run-offs, and
should not be relied upon as indicative of actual results. Certain shortcomings
are inherent in these computations. Although some assets and liabilities may
have similar maturity or periods of repricing, they may react at different times
and in different degrees to changes in market interest rates. Rates on other
types of assets and liabilities may lag behind changes in market interest rates.
Assets, such as adjustable rate mortgage loans, generally have features that
restrict changes in interest rates on a short-term basis and over the life of
the asset. After a change in interest rates, prepayments and early withdrawal
levels could deviate significantly from those assumed in making the calculations
set forth above. Additionally, increased credit risk may result if our borrowers
are unable to meet their repayment obligations as interest rates increase.
Liquidity
and Capital Resources
Liquidity
is the ability to meet current and future short-term financial
obligations. Our ALCO Committee is responsible for establishing and
monitoring our liquidity targets and strategies in order to ensure that
sufficient liquidity exists for meeting the borrowing needs of our customers as
well as unanticipated contingencies. At December 31, 2009, we had
access to immediately available funds of approximately $22.2 million from the
Federal Home Loan Bank of Chicago and $32.1 million in overnight federal funds
purchased.
We
regularly adjust our investments in liquid assets based upon our assessment of
expected loan demand, expected deposit flows, yields available on
interest-earning deposits and securities, and the objectives of our
asset/liability management program. Excess liquid assets are invested
generally in interest-earning deposits and short- and intermediate-term
securities.
Our most
liquid assets are cash and cash equivalents. The levels of these
assets are dependent on our operating, financing, and investing
activities. At December 31, 2009 and 2008, cash and cash equivalents
totaled $15.7 million and $7.1 million, respectively. Our primary
sources of funds include customer deposits, proceeds from sales of loans,
maturities and sales of investments, and principal repayments from loans and
mortgage-backed securities (both scheduled and prepayments). During
the years ended December 31, 2009 and 2008, the most significant sources of
funds have been deposit growth, investment calls, sales, and principal payments,
and advances from the Federal Home Loan Bank. These funds have been
used for new loan originations.
Our cash
and cash equivalents increased $8.6 million during the year ended December 31,
2009, compared to a decrease of $5.0 million during the year ended December 31,
2008. Net cash provided by operating activities increased to $3.5
million during 2009 from $1.6 million during 2008. Net cash provided
by investing activities increased to $6.5 million during 2009 from the $5.0
million in cash used during 2008. Cash provided by net loan
originations and payments increased to $6.6 million during 2009 from the net
cash used of $7.9 million during 2008. Cash used in financing
activities decreased to $1.5 million during 2009 from the $1.6 million in cash
provided during 2008. The decrease was primarily due to the increase
in deposits of $16.5 million partially offset by the decrease in Federal Home
Loan Bank advances of $13.5 million during 2009.
While
loan sales and principal repayments on mortgage-backed securities are relatively
predictable, deposit flows and early prepayments are more influenced by interest
rates, general economic conditions, and competition. We attempt to
price our deposits to meet asset/liability objectives and stay competitive with
local market conditions.
Liquidity
management is both a short- and long-term responsibility of
management. We adjust our investments in liquid assets based upon
management’s assessment of expected loan demand, projected purchases of
investment and mortgage-backed securities, expected deposit flows, yields
available on interest-bearing deposits, and liquidity of its asset/liability
management program. Excess liquidity is generally invested in
interest-earning overnight deposits, federal funds sold, and other short-term
U.S. agency obligations. We use securities sold under agreements to
repurchase as an additional funding source. The agreements represent
our obligations to third parties and are secured by investments which we pledge
as collateral. At December 31, 2009, we had $3.8 million in
outstanding repurchase agreements, which were for overnight
funding.
If we
require funds beyond our ability to generate them internally, we have the
ability to borrow funds from the Federal Home Loan Bank. We may
borrow from the Federal Home Loan Bank under a blanket agreement which assigns
all investments in Federal Home Loan Bank stock as well as qualifying first
mortgage loans equal to 150% of the outstanding balance as collateral to secure
the amounts borrowed. This borrowing arrangement is limited to the
lesser of 30% of our total assets, 75% of the balance of qualifying one- to
four-family residential loans, or twenty times the balance of Federal Home Loan
Bank stock held by us. At December 31, 2009, we had no outstanding
advances and a borrowing capacity of approximately $22.2 million.
We
maintain levels of liquid assets as established by the board of
directors. Our liquidity ratio, adjusted for pledged assets, at
December 31, 2009 and 2008 was 30.7% and 24.1%, respectively. This
ratio represents the volume of short-term liquid assets as a percentage of net
deposits and borrowings due within one year.
We must
also maintain adequate levels of liquidity to ensure the availability of funds
to satisfy loan commitments. We anticipate that we will have
sufficient funds available to meet our current commitments principally through
the use of current liquid assets and through our borrowing capacity discussed
above. The following table summarizes our outstanding loan
commitments at December 31, 2009 and 2008. The commitments listed
below include loans committed for sale to the secondary market of $895,000 and
$12.4 million as of December 31, 2009 and 2008, respectively.
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
Commitments
to fund loans
|
|
$ |
36,946 |
|
|
$ |
50,723 |
|
Standby
letters of credit
|
|
|
488 |
|
|
|
774 |
|
Quantitative
measures established by regulation to ensure capital adequacy require
Jacksonville Savings Bank to maintain minimum amounts and ratios (set forth in
the table below) of total and Tier I capital to risk-weighted assets and Tier I
capital to average assets. At December 31, 2009, Jacksonville Savings
Bank meets all capital adequacy requirements to which it is
subject.
The
Director of the Illinois Department of Financial and Professional Regulation is
authorized to require a savings bank to maintain a minimum capital level based
upon the savings bank’s financial condition or history, management or earnings.
If a savings bank’s core capital ratio falls below the required level, the
Director may direct the savings bank to adhere to a specific written plan
established by the Director to correct the savings bank’s capital deficiency, as
well as a number of other restrictions on the savings bank’s operations,
including a prohibition on the declaration of dividends by the savings bank’s
board of directors. At December 31, 2009, Jacksonville Savings Bank’s
core capital ratio was 7.44% of total adjusted average assets, which exceeded
the required ratio of 4.00%.
As of
December 31, 2009, the Federal Deposit Insurance Corporation categorized
Jacksonville Savings Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as adequately
capitalized, Jacksonville Savings Bank must maintain minimum total risk-based,
Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below.
There are no conditions or events since that notification that management
believes have changed Jacksonville Savings Bank’s
category. Jacksonville Savings Bank’s actual capital ratios at
December 31, 2009 and 2008 are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
1 Capital to Average Assets
|
|
|
4.00 |
% |
|
|
7.44 |
% |
|
|
7.30 |
% |
Tier
1 Capital to Risk-Weighted Assets
|
|
|
4.00 |
% |
|
|
10.70 |
% |
|
|
10.02 |
% |
Total
Capital to Risk-Weighted Assets
|
|
|
8.00 |
% |
|
|
11.83 |
% |
|
|
10.94 |
% |
Off-Balance
Sheet Arrangements and Aggregate Contractual Obligations
Commitments. As a financial services
provider, we routinely are a party to various financial instruments with
off-balance-sheet risks, such as commitments to extend credit, standby letters
of credit and unused lines of credit. While these contractual
obligations represent our future cash requirements, a significant portion of
commitments to extend credit may expire without being drawn
upon. Such commitments are subject to the same credit policies and
approval process accorded to loans made by us.
Contractual
Obligations. In the ordinary course of our operations, we
enter into certain contractual obligations. Such obligations include
operating leases for premises and equipment, agreements with respect to borrowed
funds and deposit liabilities and agreements with respect to
investments.
Recent
Accounting Pronouncements
In June
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, “The FASB Accounting Standards
Codification TM and the Hierarchy of Generally Accepted Accounting Principles—a
replacement of FASB Statement No. 162.” Effective for
financial statements issued for interim and annual periods ending after
September 15, 2009, the FASB Accounting Standards Codification TM (“ASC”) is now
the source of authoritative U.S. GAAP recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the
Securities and Exchange Commission under the authority of federal securities
laws are also sources of authoritative GAAP for Securities and Exchange
Commission registrants. The ASC superseded all then-existing non
Securities and Exchange Commission accounting and reporting
standards. All other non-grandfathered non Securities and Exchange
Commission accounting literature not included in the ASC became
non-authoritative. Following this Statement, the FASB will no longer issue new
standards in the form of Statements, FASB Staff Positions (“FSP”) or Emerging
Issues Task Force Abstracts. Instead, it will issue Accounting Standards
Updates. The FASB will not consider Accounting Standards Updates as
authoritative in their own right. Accounting Standards Updates will
serve only to update the ASC, provide background information about the guidance,
and provide the bases for conclusions on the change(s) in the
ASC. This SFAS was codified within ASC 105. The impact of
adoption was not material on us.
In April
2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly,” which was codified into ASC 820. This FSP provides
additional guidance for estimating fair value in accordance with SFAS No. 157,
“Fair Value
Measurements,” when the volume and level of activity for the asset or
liability have significantly decreased. This FSP also includes
guidance on identifying circumstances that indicate a transaction is not
orderly.
In April
2009, the FASB issued FSP FAS 115-2 and FSP FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments,” which were codified into ASC
320. This FSP amends the other-than-temporary-impairment (“OTTI”)
guidance in U.S. GAAP for debt securities to make the guidance more operational
and to improve the presentation and disclosure of OTTI on debt and equity
securities in the financial statements. This FSP does not amend
existing recognition and measurement guidance related to OTTI of equity
securities. FSP FAS 115-2 and 124-2 was effective for interim and
annual periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009 if FSP FAS 157-4 was adopted early as
well. We adopted FSP FAS 115-2 and 124-2 and FSP FAS 157-4 during
2009 and there was no material impact to our financial statements.
In April
2009, the FASB issued FSP FAS 141(R)-1, “Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies” which was codified into ASC 805. This FSP
amends and clarifies SFAS No. 141(R), “Business Combinations,” to
address application issues raised by preparers, auditors, and members of the
legal profession on initial recognition and measurement, subsequent measurement
and accounting, and disclosure of assets and liabilities arising from
contingencies in a business combination. This FSP was effective for
assets or liabilities arising from contingencies in business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. There has
been no impact during 2009 from adoption of FSP FAS 141(R)-1 on January 1,
2009.
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of
Financial Assets—an amendment of FASB Statement No. 140” which was
codified into ASC Topic 860. Topic 860 seeks to improve the
relevance, representational faithfulness, and comparability of the information
that a reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor’s continuing involvement, if any,
in transferred financial assets. Topic 860 addresses (1) practices
that have developed since the issuance of SFAS No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,” that
are not consistent with the original intent and key requirements of that
Statement and (2) concerns of financial statement users that many of the
financial assets (and related obligations) that have been derecognized should
continue to be reported in the financial statements of
transferors. This standard must be applied as of the beginning of
each reporting entity’s first annual reporting period that begins after November
15, 2009, for interim periods within that first annual reporting period and for
interim and annual reporting periods thereafter. Earlier application
is prohibited. This standard must be applied to transfers occurring
on or after the effective date. The impact of adoption is not
expected to be material to us.
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R) ,” which was codified into ASC Topic 810. Topic 810
seeks to improve financial reporting by enterprises involved with variable
interest entities by addressing (1) the effects on certain provisions of FASB
Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest
Entities,” as a result of the elimination of the qualifying
special-purpose entity concept in SFAS No. 166, and (2) constituent concerns
about the application of certain key provisions of Interpretation 46(R),
including those in which the accounting and disclosures under the Interpretation
do not always provide timely and useful information about an enterprise’s
involvement in a variable interest entity. This Statement shall be effective as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period, and for interim and annual reporting periods
thereafter. Earlier application is prohibited. The impact
of adoption is not expected to be material to us.
Impact
of Inflation and Changing Prices
The
consolidated financial statements and related notes of Jacksonville
Bancorp-Federal have been prepared in accordance with GAAP. GAAP
generally requires the measurement of financial position and operating results
in terms of historical dollars without consideration of changes in the relative
purchasing power of money over time due to inflation. The impact of
inflation is reflected in the increased cost of our
operations. Unlike industrial companies, our assets and liabilities
are primarily monetary in nature. As a result, changes in market
interest rates have a greater impact on performance than the effects of
inflation.
Jacksonville
Bancorp-Maryland is a Maryland corporation, organized in March
2010. Upon completion of the conversion, Jacksonville
Bancorp-Maryland will become the holding company of Jacksonville Savings Bank
and will succeed to all of the business and operations of Jacksonville
Bancorp-Federal, and each of Jacksonville Bancorp-Federal and Jacksonville
Bancorp, MHC will cease to exist. We chose to incorporate under the laws of the
state of Maryland because Maryland has a comprehensive corporate statute similar
in many respects to the corporate law of Illinois, the state in which we are
located, and Delaware corporate law, the jurisdiction where many large
corporations choose to incorporate. However, Maryland has a lower
franchise tax than Illinois or Delaware. Our annual cost to be a
Maryland corporation is estimated to be $300 as compared to approximately
$26,000 in Illinois and approximately $180,000 in Delaware.
Initially
following the completion of the conversion, Jacksonville Bancorp-Maryland will
have no significant assets other than owning 100% of the outstanding common
stock of Jacksonville Savings Bank, the net proceeds it retains from the
offering, part of which will be used to make a loan to the Jacksonville Savings
Bank Employee Stock Ownership Plan, and will have no significant
liabilities. See “How We Intend to Use the Proceeds From the
Offering.” Jacksonville Bancorp-Maryland intends to use the support
staff and offices of Jacksonville Savings Bank and will pay Jacksonville Savings
Bank for these services. If Jacksonville Bancorp-Maryland expands or
changes its business in the future, it may hire its own employees.
Jacksonville
Bancorp-Maryland intends to invest the net proceeds of the offering as discussed
under “How We Intend to Use the Proceeds From the Offering.” In the
future, we may pursue other business activities, including mergers and
acquisitions, investment alternatives and diversification of
operations. There are, however, no current understandings or
agreements for these activities.
AND
JACKSONVILLE SAVINGS BANK
Jacksonville
Bancorp, Inc.
Jacksonville Bancorp, Inc. is a Federal
corporation. Our only significant asset is our investment in
Jacksonville Savings Bank. We are majority owned by Jacksonville
Bancorp, MHC, a Federally-chartered mutual holding company. At
December 31, 2009, Jacksonville Bancorp, Inc. had consolidated assets of $288.8
million, total deposits of $254.7 million, and stockholders’ equity of $25.3
million.
Jacksonville
Savings Bank
Jacksonville Savings Bank is an
Illinois-chartered savings bank headquartered in Jacksonville,
Illinois. We conduct our business from our main office and six
branches, two of which are located in Jacksonville and one of which is located
in each of the following Illinois communities: Virden, Litchfield, Chapin, and
Concord. We were originally chartered in 1916 as an
Illinois-chartered mutual savings and loan association and converted to a mutual
savings bank in 1992. In 1995, Jacksonville Savings Bank converted to
an Illinois chartered stock savings bank and reorganized from the mutual to the
mutual holding company form of organization. In 1997 and 2000, Jacksonville
Savings Bank acquired Litchfield Community Savings, S.B. and Chapin State Bank,
respectively. In 2002, Jacksonville Savings Bank reorganized into the two-tiered
mutual holding company form of organization. We have been
a member of the Federal Home Loan Bank System since 1932. Our
deposits are insured by the Federal Deposit Insurance Corporation.
We are a community-oriented savings
bank engaged primarily in the business of attracting retail deposits from the
general public in our market area and using such funds, together with borrowings
and funds from other sources, to originate mortgage loans secured by one- to
four-family residential real estate, commercial and agricultural real estate and
consumer loans. We also originate commercial and agricultural business loans and
multi-family real estate loans. Additionally, we invest in United
States Government agency securities, bank-qualified, general obligation
municipal issues, and mortgage-backed securities issued or guaranteed by the
United States Government or agencies thereof. We maintain a portion
of our assets in liquid investments, such as overnight funds at the Federal Home
Loan Bank.
Our principal sources of funds are
customer deposits, proceeds from the sale of loans, funds received from the
repayment and prepayment of loans and mortgage-backed securities, and the sale,
call, or maturity of investment securities. Principal sources of
income are interest income on loans and investments, sales of loans and
securities, service charges, commissions, loan servicing fees and other
fees. Our principal expenses are interest paid on deposits, employee
compensation and benefits, occupancy and equipment expense and Federal Deposit
Insurance Corporation insurance premiums.
We operate an investment center at our
main office. The investment center is operated through Financial
Resources Group, Inc., Jacksonville Savings Bank’s wholly-owned
subsidiary.
Our principal executive office is
located at 1211 W. Morton, Jacksonville, Illinois, and our telephone number at
that address is (217) 245-4111. Our website address is
www.jacksonvillesavings.com. Information on this website is not and
should not be considered to be a part of this prospectus.
Market
Area
Our market area is Morgan, Macoupin,
Montgomery and Cass counties, Illinois. Our offices are located in
communities that can generally be characterized as stable to low growth
residential communities of predominantly one- to four-family
residences. Our market for deposits is concentrated in the
communities surrounding our main office and six branch offices. We
are the largest independent financial institution headquartered in our market
area.
The economy of our market area consists
primarily of agriculture and related businesses, light industry and state and
local government. The largest employers in our market area are Pactiv
Corporation, Passavant Area Hospital, and the State of
Illinois. During 2008 and continuing into 2009, the local economy
experienced a downturn, although not as severe as the nationwide recession. As
of December 2009, unemployment rates in our market area were: 8.0% in Cass
County, 11.1% in Macoupin County, 14.1% in Montgomery County and 9.5% in Morgan
County. This compared with unemployment rates of 10.8% in Illinois and 9.7 % in
the United States as a whole. While increased layoffs have resulted
in higher unemployment levels, we have not seen a significant impact on our
business.
Competition
We encounter significant competition
both in attracting deposits and in originating real estate and other
loans. Our most direct competition for deposits historically has come
from commercial banks, other savings banks, savings associations and credit
unions in our market area, and we expect continued strong competition from such
financial institutions in the foreseeable future. We compete for
deposits by offering depositors a high level of personal service and expertise
together with a wide range of financial services. Our deposit sources are
primarily concentrated in the communities surrounding our banking offices
located in Morgan, Macoupin and Montgomery counties, Illinois. As of
June 30, 2009, we ranked first in FDIC-insured deposit market share (out of 33
bank and thrift institutions with offices in Morgan, Macoupin and Montgomery
Counties, Illinois) with a 11.2% market share. Such data does not reflect
deposits held by credit unions.
The competition for real estate and
other loans comes principally from commercial banks, mortgage banking companies,
government sponsored entities and other savings banks and savings
associations. This competition for loans has increased substantially
in recent years as a result of the large number of institutions competing in our
market areas as well as the increased efforts by commercial banks to increase
mortgage loan originations.
We compete for loans primarily through
the interest rates and loan fees we charge and the efficiency and quality of
services we provide to borrowers and home builders. Factors that
affect competition include general and local economic conditions, current
interest rate levels and the volatility of the mortgage markets.
Lending
Activities
General. Historically,
our principal lending activity has been the origination of mortgage loans
secured by one- to four-family residential properties in our local market
area. Over the past several years, we have increased our emphasis on
originating loans secured by commercial and agricultural real estate. We also
originate commercial and agricultural business loans secured by collateral other
than real estate as well as unsecured commercial and agricultural business
loans. We also originate consumer loans, primarily home equity loans
and loans secured by automobiles. At December 31, 2009, our loans receivable
totaled $176.0 million, of which $38.6 million, or 22.2%, consisted of one- to
four-family residential mortgage loans. One- to four-family
residential mortgage loans decreased $8.2 million, or 17.6%, during 2009
primarily due to the refinancing of loans in our portfolio which were
subsequently sold in the secondary mortgage market. The remainder of
our loans receivable at December 31, 2009 consisted of commercial and
agricultural real estate loans totaling $56.7 million, or 32.6% of total loans,
consumer loans totaling $42.1 million, or 24.2% of total loans, commercial and
agricultural business loans totaling $34.4 million, or 19.8% of total loans, and
multi-family residential loans totaling $4.3 million, or 2.5% of total
loans. Of the amount included in consumer loans, $28.1 million, or
16.2% of total loans consisted of home equity and home improvement loans, and
$6.1 million, or 3.5% of total loans, consisted of automobile
loans. The outstanding balance of unsecured loans totaled $4.4
million, or 2.5% of total loans, and $4.7 million, or 2.6% of total loans, as of
December 31, 2009 and 2008, respectively.
We have made our interest-earning
assets more interest rate sensitive by, among other things, originating variable
interest rate loans, such as adjustable-rate mortgage loans and balloon loans
with terms ranging from three to five years, as well as medium-term consumer
loans and commercial business loans. Our ability to originate
adjustable-rate mortgage loans is substantially affected by market interest
rates.
We originate fixed-rate residential
mortgage loans secured by one- to four-family residential properties with terms
up to 30 years. We sell a significant portion of our one- to
four-family fixed-rate residential mortgage loan originations directly to
Freddie Mac. We also sold one- to four-family fixed-rate residential
mortgage loan originations to the Federal Home Loan Bank Mortgage Partnership
Finance Program until the program was discontinued as of October 31,
2008. During the years ended December 31, 2009 and 2008, we sold
$66.7 million and $30.1 million of fixed-rate residential mortgage loans,
respectively. Loans are generally sold without recourse and with
servicing retained.
At
December 31, 2009, we were servicing $148.0 million in loans for which we
received servicing income of $360,000 for the year ended December 31, 2009.
Servicing fee income is recorded for fees earned for servicing
loans. The fees are based on a contractual percentage of the
outstanding principal and are recorded as income when earned as loan servicing
fees in non-interest income. The amortization of mortgage servicing
rights is netted from the gains on sale of loans, both cash gains as well as the
capitalized gains, and is included in mortgage banking operations, net, in
non-interest income. As a result of the low interest rate environment in 2008,
we recognized an impairment of $428,000 against the value of our mortgage
servicing income. Subsequently, as long term interest rates began to rise, we
were able to recognize a partial recovery of $123,000 during 2009. For further
information, see “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and Note 7 to our Consolidated Financials
Statements.
Loan Portfolio
Composition. Set forth below are
selected data relating to the composition of our loan portfolio, by type of loan
as of the dates indicated, excluding loans held for sale of $814,000, $1.4
million, $1.9 million, $426,000 and $499,000 for the years ended December 31,
2009, 2008, 2007, 2006 and 2005, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in Thousands)
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential (1)
|
|
$ |
38,581 |
|
|
|
22.2 |
% |
|
$ |
46,807 |
|
|
|
25.6 |
% |
|
$ |
50,459 |
|
|
|
28.7 |
% |
|
$ |
40,635 |
|
|
|
26.2 |
% |
|
$ |
40,126 |
|
|
|
28.2 |
% |
Commercial
and agricultural (2)
|
|
|
56,650 |
|
|
|
32.6 |
|
|
|
56,516 |
|
|
|
30.9 |
|
|
|
44,100 |
|
|
|
25.1 |
|
|
|
39,592 |
|
|
|
25.6 |
|
|
|
33,859 |
|
|
|
23.8 |
|
Multi-family
residential
|
|
|
4,344 |
|
|
|
2.5 |
|
|
|
4,518 |
|
|
|
2.5 |
|
|
|
4,741 |
|
|
|
2.7 |
|
|
|
5,877 |
|
|
|
3.8 |
|
|
|
6,010 |
|
|
|
4.2 |
|
Total
real estate loans
|
|
|
99,575 |
|
|
|
57.3 |
|
|
|
107,841 |
|
|
|
59.0 |
|
|
|
99,300 |
|
|
|
56.5 |
|
|
|
86,104 |
|
|
|
55.6 |
|
|
|
79,995 |
|
|
|
56.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and agricultural business loans
|
|
|
34,393 |
|
|
|
19.8 |
|
|
|
35,356 |
|
|
|
19.3 |
|
|
|
36,539 |
|
|
|
20.8 |
|
|
|
32,837 |
|
|
|
21.2 |
|
|
|
28,679 |
|
|
|
20.2 |
|
Consumer
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity/home improvement (3)
|
|
|
28,119 |
|
|
|
16.2 |
|
|
|
30,002 |
|
|
|
16.4 |
|
|
|
30,087 |
|
|
|
17.1 |
|
|
|
27,202 |
|
|
|
17.6 |
|
|
|
26,382 |
|
|
|
18.5 |
|
Automobile
|
|
|
6,118 |
|
|
|
3.5 |
|
|
|
5,842 |
|
|
|
3.2 |
|
|
|
5,334 |
|
|
|
3.0 |
|
|
|
5,275 |
|
|
|
3.4 |
|
|
|
4,580 |
|
|
|
3.2 |
|
Other
|
|
|
7,837 |
|
|
|
4.5 |
|
|
|
5,950 |
|
|
|
3.2 |
|
|
|
6,402 |
|
|
|
3.6 |
|
|
|
5,313 |
|
|
|
3.4 |
|
|
|
4,657 |
|
|
|
3.3 |
|
Total
consumer loans
|
|
|
42,074 |
|
|
|
24.2 |
|
|
|
41,794 |
|
|
|
22.8 |
|
|
|
41,823 |
|
|
|
23.7 |
|
|
|
37,790 |
|
|
|
24.4 |
|
|
|
35,619 |
|
|
|
25.0 |
|
Total
loans receivable
|
|
|
176,042 |
|
|
|
101.3 |
|
|
|
184,991 |
|
|
|
101.1 |
|
|
|
177,662 |
|
|
|
101.0 |
|
|
|
156,731 |
|
|
|
101.2 |
|
|
|
144,293 |
|
|
|
101.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned
premium on purchased loans, unearned
discount and deferred loan fees,
net
|
|
|
69 |
|
|
|
— |
|
|
|
109 |
|
|
|
— |
|
|
|
29 |
|
|
|
— |
|
|
|
29 |
|
|
|
— |
|
|
|
175 |
|
|
|
0.1 |
|
Allowance
for loan losses
|
|
|
2,290 |
|
|
|
1.3 |
|
|
|
1,934 |
|
|
|
1.1 |
|
|
|
1,766 |
|
|
|
1.0 |
|
|
|
1,864 |
|
|
|
1.2 |
|
|
|
1,846 |
|
|
|
1.3 |
|
Total
loans receivable, net
|
|
$ |
173,683 |
|
|
|
100.0 |
% |
|
$ |
182,948 |
|
|
|
100.0 |
% |
|
$ |
175,867 |
|
|
|
100.0 |
% |
|
$ |
154,838 |
|
|
|
100.0 |
% |
|
$ |
142,272 |
|
|
|
100.0 |
% |
(1)
|
Includes
one- to four-family real estate construction loans of $54,000, $596,000,
$352,000, $183,000 and $546,000 for the years ended
December 31, 2009, 2008, 2007, 2006 and 2005,
respectively.
|
(2)
|
Includes
commercial and agricultural real estate construction loans of $4.2
million, $2.5 million, $472,000, $0 and $193,000 for the years ended
December 31, 2009, 2008, 2007, 2006 and 2005,
respectively.
|
(3)
|
Includes
real estate construction loans of $3.6 million, $1.1 million, $1.4
million, $370,000 and $1.9 million for the years ended
December 31, 2009, 2008, 2007, 2006 and 2005,
respectively.
|
One- to
Four-Family Mortgage Loans. Historically our
primary lending origination activity has been one- to four-family,
owner-occupied, residential mortgage loans secured by property located in our
market area. We generate loans through our marketing efforts,
existing customers and referrals, real estate brokers, builders and local
businesses. We generally limit our one- to four-family loan
originations to the financing of loans secured by properties located within our
market area. At December 31, 2009, $38.6 million, or 22.2% of our net
loan portfolio, was invested in mortgage loans secured by one- to four-family
residences.
Our fixed-rate one- to four-family
residential mortgage loans are generally conforming loans, underwritten
according to Freddie Mac guidelines. We generally originate both fixed- and
adjustable-rate mortgage loans in amounts up to the maximum conforming loan
limits established by the Federal Housing Finance Agency for Freddie Mac, which
is currently $417,000 for single-family homes. At December 31, 2009, we had no
one- to four-family residential mortgage loans with principal balances in excess
of $417,000, commonly referred to as jumbo loans.
We originate for resale to Freddie Mac
fixed-rate one- to four-family residential mortgage loans with terms of 15 years
or more. Our fixed-rate mortgage loans amortize monthly with
principal and interest due each month. Residential real estate loans
often remain outstanding for significantly shorter periods than their
contractual terms because borrowers may refinance or prepay loans at their
option. We offer fixed-rate one- to four-family residential mortgage
loans with terms of up to 30 years without prepayment penalty.
We
currently offer adjustable-rate mortgage loans for terms ranging up to 30
years. We generally offer adjustable-rate mortgage loans that adjust
between one and five years on the anniversary date of
origination. Interest rate adjustments are up to two hundred basis
points per year, with a cap of up to six hundred basis points on interest rate
increases over the life of the loan. In a rising interest rate environment, such
rate limitations may prevent adjustable-rate mortgage loans from repricing to
market interest rates, which would have an adverse effect on our net interest
income. In the low interest rate environment that has existed over
the past two years, our adjustable-rate portfolio has repriced downward
resulting in lower interest income from this portion of our loan portfolio. We
do not offer “teaser rates,” which are rates that are initially lower than
market rates during the initial period of the loan. Our
adjustable-rate mortgage loans are generally underwritten at the then current market rate unless such loan qualifies as a “higher priced
mortgage loan” in accordance
with new federal regulations which require such loans to be underwritten at the
fully indexed rate. In determining whether to underwrite
adjustable-rate mortgage loans that are not underwritten at the fully indexed
rate, we consider factors such as a borrower’s loan-to-value ratio,
debt-to-income ratio, job stability and historical repayment performance with
Jacksonville Savings Bank. We have used different interest
indices for adjustable-rate mortgage loans in the past such as the average yield
on U.S. Treasury securities, adjusted to a constant maturity of either one year,
three years or five years. Adjustable-rate mortgage loans secured by
one- to four-family residential real estate totaled $11.8 million, or 30.6% of
our total one- to four-family residential real estate loans receivable at
December 31, 2009. The origination of fixed-rate mortgage loans
versus adjustable-rate mortgage loans is monitored on an ongoing basis and is
affected significantly by the level of market interest rates, customer
preference, our interest rate risk position and our competitors’ loan
products. During 2009, we originated $66.8 million of fixed-rate
residential mortgage loans which were all subsequently sold in the secondary
mortgage market and $5.3 million of adjustable-rate mortgage and balloon loans
which were held in our portfolio.
The primary purpose of offering
adjustable-rate mortgage loans is to make our loan portfolio more interest rate
sensitive and to provide an alternative for those borrowers who meet our
underwriting criteria, but are unable to qualify for a fixed-rate
mortgage. However, as the interest income earned on adjustable-rate
mortgage loans varies with prevailing interest rates, such loans do not offer
predictable cash flows in the same manner as long-term, fixed-rate
loans. Adjustable-rate mortgage loans carry increased credit risk
associated with potentially higher monthly payments by borrowers as general
market interest rates increase. It is possible that during periods of
rising interest rates that the risk of delinquencies and defaults on
adjustable-rate mortgage loans may increase due to the upward adjustment of
interest costs to the borrower, resulting in increased loan losses.
Our residential first mortgage loans
customarily include due-on-sale clauses, which give us the right to declare a
loan immediately due and payable in the event, among other things, that the
borrower sells or otherwise disposes of the underlying real property serving as
collateral for the loan. Due-on-sale clauses are a means of imposing
assumption fees and increasing the interest rate on our mortgage portfolio
during periods of rising interest rates.
When underwriting residential real
estate loans, we review and verify each loan applicant’s income and credit
history. Management believes that stability of income and past credit
history are integral parts in the underwriting process. Generally,
the applicant’s total monthly mortgage payment, including all escrow amounts, is
limited to 28% of the applicant’s total monthly income. In addition,
total monthly obligations of the applicant, including mortgage payments, should
not generally exceed 38% of total monthly income. Written appraisals
are generally required on real estate property offered to secure an applicant’s
loan. For one- to four-family real estate
loans with loan to value ratios of over 80%, we require private mortgage
insurance. We require fire and casualty insurance on all properties securing
real estate loans. We may require title insurance, or an attorney’s
title opinion, as circumstances warrant.
We do not
offer an “interest only” mortgage loan product on one- to four-family
residential properties (where the borrower pays interest for an initial period,
after which the loan converts to a fully amortizing loan). We also do not offer
loans that provide for negative amortization of principal, such as “Option ARM”
loans, where the borrower can pay less than the interest owed on the loan,
resulting in an increased principal balance during the life of the
loan. We do not offer a “subprime loan” program (loans that generally
target borrowers with weakened credit histories typically characterized by
payment delinquencies, previous charge-offs, judgments, bankruptcies, or
borrowers with questionable repayment capacity as evidenced by low credit scores
or high debt-burden ratios) or Alt-A loans (traditionally defined as loans
having less than full documentation).
Commercial and
Agricultural Real Estate and Multi-Family Residential Real Estate
Loans. We originate and purchase commercial and agricultural
real estate and multi-family residential real estate loans. At
December 31, 2009, $56.7 million, or 32.6%, of our total loan portfolio
consisted of commercial and agricultural real estate loans and $4.3 million, or
2.5%, consisted of multi-family real estate loans. During 2009, loan
originations secured by commercial and agricultural real estate totaled $9.2
million, as compared to $23.0 million in 2008. In 2008, commercial and
agricultural real estate loan originations were greater than our historical
levels. The increase in originations in 2008 was due to greater demand in our
market area whereby we could make more loans to borrowers who were already known
to us. Our commercial and agricultural real estate loans are secured
primarily by improved properties such as farms, retail facilities and office
buildings, churches and other non-residential buildings. At December
31, 2009, our commercial and agricultural real estate loan portfolio included
$26.2 million in loans secured by farmland and $30.5 million in loans secured by
other commercial properties. The maximum loan-to-value ratio for
commercial and agricultural real estate loans we originate is generally 80%. Our
commercial and agricultural real estate loans are generally written up to terms
of five years with adjustable interest rates. Our
adjustable—rate commercial
and agricultural real estate loans are generally underwritten at the then
current market rate. The rates are generally tied to the prime rate
and generally have a specified floor. Many of our adjustable-rate commercial
real estate loans are not fully amortizing and therefore require a “balloon”
payment at maturity. We have $2.4 million of interest only commercial and
agricultural real estate loans. We purchase from time to time commercial real
estate loan participations primarily from outside our market area where we are
not the lead lender. All participation loans are approved following a review to
ensure that the loan satisfies our underwriting standards. At December 31, 2009,
commercial real estate loan participations totaled $10.8 million, or 19.1% of
the commercial and agricultural real estate loan portfolio consisting primarily
of loan participations outside of our market area which totaled $9.8 million, or
17.3% of the commercial and agricultural real estate loan portfolio. At December
31, 2009, loan participations delinquent 60 days or more totaled
$493,000.
At December 31, 2009, our largest
agricultural real estate loan was secured by farmland, had a principal balance
of $3.1 million and was performing in accordance with its terms. At
the same date, the largest commercial real estate loan was secured by a funeral
home with a principal balance of $3.2 million and was performing in accordance
with its terms. At December 31, 2009, the largest multi-family residential real
estate loan was secured by an apartment building with a principal balance of
$2.2 million and was performing in accordance with its terms. At December 31,
2009, our largest commercial real estate loan participation was secured by
condominiums with a principal balance of $2.3 million and was performing in
accordance with its terms.
Our
underwriting standards for commercial and agricultural real estate and
multi-family residential real estate loans include a determination of the
applicant’s credit history and an assessment of the applicant’s ability to meet
existing obligations and payments on the proposed loan. The income
approach is primarily utilized to determine whether income generated from the
applicant’s business or real estate offered as collateral is adequate to repay
the loan. We emphasize the ratio of the property’s projected net cash flow to
the loan’s debt service requirement (generally requiring a minimum ratio of
120%). In underwriting a loan, we consider the value of the real
estate offered as collateral in relation to the proposed loan
amount. Generally, the loan amount cannot be greater than 80% of the
value of the real estate. We usually obtain written appraisals from
either licensed or certified appraisers on all multi-family, commercial, and
agricultural real estate loans in excess of $250,000. We assess the
creditworthiness of the applicant by reviewing a credit report, financial
statements and tax returns of the applicant, as well as obtaining other public
records regarding the applicant.
Loans secured by commercial,
agricultural, and multi-family real estate generally involve a greater degree of
credit risk than one- to four-family residential mortgage loans and carry larger
loan balances. This increased credit risk is a result of several
factors, including the effects of general economic conditions on income
producing properties and the successful operation or management of the
properties securing the loans. Furthermore, the repayment of loans
secured by commercial, agricultural, and multi-family real estate is typically
dependent upon the successful operation of the related business and real estate
property. If the cash flow from the project is reduced, the
borrower’s ability to repay the loan may be impaired.
Commercial and
Agricultural Business Loans. We originate
commercial and agricultural business loans to borrowers located in our market
area which are secured by collateral other than real estate or which can be
unsecured. We also purchase participations of commercial business
loans from other lenders, which may be made to borrowers outside our market
area. Commercial and agricultural business loans totaled $34.4 million, or
19.8%, of our total loan portfolio at December 31, 2009. Of this amount,
commercial business loan participations outside of our market area represented
$1.3 million, or 3.7% of the commercial and agricultural business loan
portfolio. At December 31, 2009, commercial business loan participations totaled
$1.8 million, or 5.3% of the commercial and agricultural business loan
portfolio. Commercial and agricultural business loans are generally
secured by equipment and inventory. Commercial and
agricultural business loans are generally offered with adjustable
rates underwritten at the then current market
rate tied to the prime rate or the average yield on U.S. Treasury
securities, adjusted to a constant maturity of either one year, three years or
five years and various terms of maturity generally from three years to five
years. On a limited basis, we will originate unsecured business loans
in those instances where the applicant’s financial strength and creditworthiness
has been established. Commercial and agricultural business loans
generally bear higher interest rates than residential loans, but they also may
involve a higher risk of default since their repayment is generally dependent on
the successful operation of the borrower’s business. We generally
obtain personal guarantees from the borrower or a third party as a condition to
originating its business loans. During the year ended December 31,
2009, we originated $27.3 million in commercial and agricultural business
loans. At that date, our largest commercial business loan was a $5.0
million line of credit with a principal balance of $1.5 million. This
loan was performing in accordance with its terms at December 31,
2009. At December 31, 2009, our largest agricultural business loan
was a line of credit of $4.5 million with no principal balance
outstanding.
Our underwriting standards for
commercial and agricultural business loans include a determination of the
applicant’s ability to meet existing obligations and payments on the proposed
loan from normal cash flows generated in the applicant’s business. We
assess the financial strength of each applicant through the review of financial
statements and tax returns provided by the applicant. The
creditworthiness of an applicant is derived from a review of credit reports as
well as a search of public records. We periodically review business
loans following origination. We request financial statements at least annually
and review them for substantial deviations or changes that might affect
repayment of the loan. Our loan officers also visit the premises of
borrowers to observe the business premises, facilities, and personnel and to
inspect the pledged collateral. Underwriting standards for business
loans are different for each type of loan depending on the financial strength of
the applicant and the value of collateral offered as security.
Consumer
Loans. As
of December 31, 2009, consumer loans totaled $42.1million, or 24.2%, of our
total loan portfolio. The principal types of consumer loans we offer
are home equity loans and lines of credit and automobile loans. We also
originate loans secured by deposit accounts, unsecured loans and mobile home
loans. We generally offer consumer loans on a fixed-rate
basis. At December 31, 2009, home equity and home improvement loans
totaled $28.1 million, or 16.2%, of our total loan portfolio. Our home equity
loans and lines of credit are generally secured by the borrower’s principal
residence. The maximum amount of a home equity loan or line of credit
is generally 95% of the appraised value of a borrower’s real estate collateral
less the amount of any prior mortgages or related liabilities. Home
equity loans and lines of credit are approved with both fixed and adjustable
interest rates which we determine based upon market conditions. Such
loans may be fully amortized over the life of the loan or have a balloon
feature. Generally, the maximum term for home equity loans is 10
years.
At December 31, 2009, consumer loans
secured by automobiles totaled $6.1 million, or 3.5% of our total
loan portfolio. We offer automobile loans with maturities of up to 60
months for new automobiles. Loans secured by used automobiles will
have maximum terms which vary depending upon the age of the
automobile. We generally originate automobile loans with a
loan-to-value ratio below the greater of 80% of the purchase price or 100% of
NADA loan value, although in the case of a new car loan the loan-to-value ratio
may be greater or less depending on the borrower’s credit history, debt to
income ratio, home ownership and other banking relationships with
us.
Our underwriting standards for consumer
loans include a determination of the applicant’s credit history and an
assessment of the applicant’s ability to meet existing obligations and payments
on the proposed loan. The stability of the applicant’s monthly income
may be determined by verification of gross monthly income from primary
employment, and additionally from any verifiable secondary income. We
also consider the length of employment with the borrower’s present employer as
well as the amount of time the borrower has lived in the local
area. Creditworthiness of the applicant is of primary consideration;
however, the underwriting process also includes a comparison of the value of the
collateral in relation to the proposed loan amount. Of the consumer
loans 90 days or more delinquent at December 31, 2009, 85.3% are home equity
loans or lines of credit. The largest loan in this category at
December 31, 2009 had a principal balance of $44,000 and was secured by a
residential mortgage. No assurance can be given, however, that our
delinquency rate or loss experience on consumer loans will not increase in the
future.
Consumer loans entail greater risks
than one- to four-family residential mortgage loans, particularly consumer loans
secured by rapidly depreciating assets such as automobiles or loans that are
unsecured. In such cases, collateral repossessed after a default may
not provide an adequate source of repayment of the outstanding loan balance
because of damage, loss or depreciation. Further, consumer loan
payments are dependent on the borrower’s continuing financial stability, and
therefore are more likely to be adversely affected by job loss, divorce, illness
or personal bankruptcy. Such events would increase our risk of loss
on unsecured loans. Finally, the application of various Federal and
state laws, including Federal and state bankruptcy and insolvency laws, may
limit the amount which can be recovered on such loans in the event of a
default. At December 31, 2009, consumer loans 90 days or more
delinquent, including those for which the accrual of interest has been
discontinued, totaled $475,000, or 1.13%, of our total consumer
loans.
Loan
Portfolio Maturities and Yields. The following table
summarizes the scheduled repayments of our loan portfolio at December 31,
2009. Demand loans, loans having no stated repayment schedule or
maturity, and overdraft loans are reported as being due in one year or
less.
|
|
One-
to Four-Family Real
Estate
|
|
|
Commercial
and
Agricultural
Real Estate
|
|
|
|
|
|
Commercial
and
Agricultural
Business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
Due
During the Years
Ending
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
$ |
3,748 |
|
|
|
7.51 |
% |
|
$ |
11,647 |
|
|
|
6.06 |
% |
|
$ |
15 |
|
|
|
9.50 |
% |
|
$ |
14,906 |
|
|
|
5.72 |
% |
2011
|
|
|
5,071 |
|
|
|
7.23 |
|
|
|
5,192 |
|
|
|
4.77 |
|
|
|
356 |
|
|
|
6.84 |
|
|
|
2,032 |
|
|
|
6.42 |
|
2012
|
|
|
4,051 |
|
|
|
7.27 |
|
|
|
1,809 |
|
|
|
6.23 |
|
|
|
167 |
|
|
|
6.50 |
|
|
|
3,462 |
|
|
|
5.54 |
|
2013 to 2014
|
|
|
3,689 |
|
|
|
7.10 |
|
|
|
1,694 |
|
|
|
6.21 |
|
|
|
106 |
|
|
|
6.00 |
|
|
|
9,364 |
|
|
|
5.85 |
|
2015 to 2019
|
|
|
3,641 |
|
|
|
5.67 |
|
|
|
2,515 |
|
|
|
5.98 |
|
|
|
37 |
|
|
|
6.50 |
|
|
|
1,717 |
|
|
|
5.62 |
|
2020 to 2024
|
|
|
3,592 |
|
|
|
6.35 |
|
|
|
8,575 |
|
|
|
5.34 |
|
|
|
— |
|
|
|
— |
|
|
|
1,225 |
|
|
|
5.66 |
|
2025 and beyond
|
|
|
14,789 |
|
|
|
6.22 |
|
|
|
25,218 |
|
|
|
5.78 |
|
|
|
3,663 |
|
|
|
5.69 |
|
|
|
1,687 |
|
|
|
6.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
38,581 |
|
|
|
6.63 |
% |
|
$ |
56,650 |
|
|
|
5.71 |
% |
|
$ |
4,344 |
|
|
|
5.84 |
% |
|
$ |
34,393 |
|
|
|
5.82 |
% |
|
|
Home
Equity/Home
Improvement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
Due
During the Years
Ending
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
$ |
4,730 |
|
|
|
6.74 |
% |
|
$ |
368 |
|
|
|
8.84 |
% |
|
$ |
2,451 |
|
|
|
6.08 |
% |
|
$ |
37,865 |
|
|
|
6.16 |
% |
2011
|
|
|
3,577 |
|
|
|
7.37 |
|
|
|
1,060 |
|
|
|
8.28 |
|
|
|
888 |
|
|
|
7.61 |
|
|
|
18,176 |
|
|
|
6.53 |
|
2012
|
|
|
4,217 |
|
|
|
7.46 |
|
|
|
1,502 |
|
|
|
7.62 |
|
|
|
833 |
|
|
|
8.10 |
|
|
|
16,041 |
|
|
|
6.88 |
|
2013 to 2014
|
|
|
5,921 |
|
|
|
6.88 |
|
|
|
3,114 |
|
|
|
7.25 |
|
|
|
1,006 |
|
|
|
7.84 |
|
|
|
24,894 |
|
|
|
6.55 |
|
2015 to 2019
|
|
|
7,359 |
|
|
|
5.69 |
|
|
|
74 |
|
|
|
8.72 |
|
|
|
551 |
|
|
|
7.40 |
|
|
|
15,894 |
|
|
|
5.80 |
|
2020 to 2024
|
|
|
1,620 |
|
|
|
7.15 |
|
|
|
— |
|
|
|
— |
|
|
|
894 |
|
|
|
8.12 |
|
|
|
15,906 |
|
|
|
5.94 |
|
2025 and beyond
|
|
|
695 |
|
|
|
6.77 |
|
|
|
— |
|
|
|
— |
|
|
|
1,214 |
|
|
|
9.43 |
|
|
|
47,266 |
|
|
|
6.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
28,119 |
|
|
|
6.71 |
% |
|
$ |
6,118 |
|
|
|
7.63 |
% |
|
$ |
7,837 |
|
|
|
7.54 |
% |
|
$ |
176,042 |
|
|
|
6.23 |
% |
The following table sets
forth at December 31, 2009, the dollar amount of all fixed-rate and
adjustable-rate loans due after December 31, 2010. At December 31,
2009, fixed-rate loans include $12.9 million in fixed-rate balloon payment loans
with original maturities of five years or less. The total dollar
amount of fixed-rate loans and adjustable-rate loans due after December 31,
2010, was $69.9 million and $68.3 million, respectively.
|
|
Due
after December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
Thousands)
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
One-
to four-family
residential
|
|
$ |
25,829 |
|
|
$ |
9,003 |
|
|
$ |
34,832 |
|
Commercial
and
agricultural
|
|
|
5,497 |
|
|
|
39,507 |
|
|
|
45,004 |
|
Multi-family
residential
|
|
|
629 |
|
|
|
3,700 |
|
|
|
4,329 |
|
Commercial
and agricultural business loans
|
|
|
13,186 |
|
|
|
6,301 |
|
|
|
19,487 |
|
Consumer
loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity/home improvement
|
|
|
14,180 |
|
|
|
9,210 |
|
|
|
23,390 |
|
Automobile
|
|
|
5,750 |
|
|
|
— |
|
|
|
5,750 |
|
Other
|
|
|
4,803 |
|
|
|
582 |
|
|
|
5,385 |
|
Total
loans
|
|
$ |
69,874 |
|
|
$ |
68,303 |
|
|
$ |
138,177 |
|
Loan
Origination, Solicitation and Processing. Loan originations
are derived from a number of sources such as real estate broker referrals,
existing customers, builders, attorneys and walk-in customers. Upon
receipt of a loan application, a credit report is obtained to verify specific
information relating to the applicant’s employment, income, and credit
standing. In the case of a real estate loan, an appraisal of the real
estate intended to secure the proposed loan is undertaken by an independent
appraiser approved by us. A loan application file is first reviewed
by a loan officer in our loan department who checks applications for accuracy
and completeness, and verifies the information provided. The
financial resources of the borrower and the borrower’s credit history, as well
as the collateral securing the loan, are considered an integral part of each
risk evaluation prior to approval. The board of directors has
established individual lending authorities for each loan officer by loan
type. Loans over an individual officer’s lending limits must be
approved by the officers’ loan committee consisting of the chairman of the
board, president, chief lending officer and all lending officers, which meets
three times a week, and has lending authority up to $500,000 depending on the
type of loan. Loans with a principal balance over this limit, up to
$1.0 million, must be approved by the directors’ loan committee, which meets
weekly and consists of the chairman of the board, president, senior vice
president, chief lending officer and at least two outside directors, plus all
lending officers as non-voting members. The board of directors
approves all loans with a principal balance over $1.0 million. The
board of directors ratifies all loans we originate. Once the loan is
approved, the applicant is informed and a closing date is
scheduled. We typically fund loan commitments within 30
days.
If the loan is approved,
the borrower must provide proof of fire and casualty insurance on the property
serving as collateral which insurance must be maintained during the full term of
the loan; flood insurance is required in certain instances. Title
insurance or an attorney’s opinion based on a title search of the property is
generally required on loans secured by real property.
Origination,
Purchase and Sale of Loans. Set forth below is a table showing
our loan originations, purchases, sales and repayments for the years
indicated. It is our policy to originate for sale into the secondary
market fixed-rate mortgage loans with maturities of 15 years or more and to
originate for retention in our portfolio adjustable-rate mortgage loans and
loans with balloon payments. Purchased loans consist of
participations in commercial real estate and commercial business loans
originated by other financial institutions. We usually obtain
commitments prior to selling fixed-rate mortgage loans.
|
|
For
the Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
Thousands)
|
|
|
|
|
|
Total
loans receivable at beginning of year
|
|
$ |
184,991 |
|
|
$ |
177,662 |
|
|
$ |
156,731 |
|
|
$ |
144,293 |
|
|
$ |
127,855 |
|
Originations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
residential
|
|
|
72,109 |
|
|
|
38,717 |
|
|
|
30,104 |
|
|
|
25,708 |
|
|
|
31,551 |
|
Commercial and
agricultural
|
|
|
9,163 |
|
|
|
23,038 |
|
|
|
8,897 |
|
|
|
10,808 |
|
|
|
16,826 |
|
Multi-family
residential
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,862 |
|
|
|
5,076 |
|
Commercial
and agricultural business loans
|
|
|
27,295 |
|
|
|
31,027 |
|
|
|
29,404 |
|
|
|
31,510 |
|
|
|
19,532 |
|
Consumer
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity/home
improvement
|
|
|
11,698 |
|
|
|
20,133 |
|
|
|
19,309 |
|
|
|
17,874 |
|
|
|
19,021 |
|
Automobile
|
|
|
4,017 |
|
|
|
4,188 |
|
|
|
3,777 |
|
|
|
4,336 |
|
|
|
3,697 |
|
Other
|
|
|
7,206 |
|
|
|
5,072 |
|
|
|
6,360 |
|
|
|
4,916 |
|
|
|
4,560 |
|
Total originations
|
|
|
131,488 |
|
|
|
122,175 |
|
|
|
97,851 |
|
|
|
97,014 |
|
|
|
100,263 |
|
Participation loans
purchased
|
|
|
(2,113 |
) |
|
|
(11,569 |
) |
|
|
(6,231 |
) |
|
|
(3,736 |
) |
|
|
(4,634 |
) |
Transfer
of mortgage loans to foreclosed real estate owned
|
|
|
(308 |
) |
|
|
(667 |
) |
|
|
(819 |
) |
|
|
(329 |
) |
|
|
(933 |
) |
Repayments
|
|
|
(75,542 |
) |
|
|
(95,671 |
) |
|
|
(72,176 |
) |
|
|
(71,422 |
) |
|
|
(66,258 |
) |
Loan sales to
secondary market
|
|
|
66,700 |
|
|
|
30,077 |
|
|
|
10,156 |
|
|
|
16,561 |
|
|
|
21,268 |
|
Total loans receivable at end of year
|
|
$ |
176,042 |
|
|
$ |
184,991 |
|
|
$ |
177,662 |
|
|
$ |
156,731 |
|
|
$ |
144,293 |
|
Loan
Origination and Other Fees. In addition to interest earned on
loans, we may charge loan origination fees. Our ability to charge
loan origination fees is influenced by the demand for mortgage loans and
competition from other lenders in our market area. To the extent that
loans are originated or acquired for our portfolio, accounting standards require
that we defer loan origination fees and costs and amortize such amounts as an
adjustment of yield over the life of the loan by use of the level yield
method. Fees deferred are recognized into income immediately upon the
sale of the related loan. At December 31, 2009, we had $158,000
of gross deferred loan fees. Loan origination fees are a
volatile source of income. Such fees vary with the volume and type of
loans and commitments made and purchased and with competitive conditions in the
mortgage markets, which in turn respond to the demand and availability of
money.
In addition to loan
origination fees, we also receive other fees that consist primarily of extension
fees and late charges. We recognized fees of $110,000, $54,000 and
$93,000 for the years ended December 31, 2009, 2008, and 2007,
respectively.
Loan
Concentrations. With
certain exceptions, an Illinois-chartered savings bank may not make a loan or
exceed credit for secured and unsecured loans for business, commercial,
corporate or agricultural purposes to a single borrower in excess of 25% of the
Jacksonville Savings Bank’s total capital, as defined by
regulation. At December 31, 2009, our loans-to-one borrower limit was
$6.0 million. At December 31, 2009 we had no lending relationships in
excess of our loans-to-one borrower limitation. At December 31, 2009,
we had 16 loans in excess of $1.0 million totaling in the aggregate $41.6
million or 23.6% of our total loan portfolio.
Delinquencies
and Classified Assets
Our collection procedures
provide that when a mortgage loan is either ten days (in the case of
adjustable-rate mortgage and balloon loans) or 15 days (in the case of
fixed-rate loans) past due, a computer-generated late charge notice is sent to
the borrower requesting payment and assessing a late charge. If the mortgage
loan remains delinquent, a telephone call is made or a letter is sent to the
borrower stressing the importance of reinstating the loan and obtaining reasons
for the delinquency. We also send a 30 day notice pursuant to Illinois law if a
borrower’s primary residence is the collateral at issue. When a loan
continues in a delinquent status for 60 days or more, and a repayment schedule
has not been made or kept by the borrower, a notice of intent to foreclose upon
the underlying property is then sent to the borrower, giving 10 days to cure the
delinquency. If not cured, foreclosure proceedings are
initiated. Consumer loans receive a ten-day grace period before a
late charge is assessed. Collection efforts begin after the grace
period expires. At December 31, 2009, 2008, and 2007 the percentage
of non-performing loans to total loans receivable were 1.11%, 0.64% and 0.61%,
respectively. At December 31, 2009, 2008, and 2007, the percentage of
non-performing assets to total assets was 0.81%, 0.68%, and 0.51%,
respectively.
Non-performing
Assets and Delinquent Loans. Loans are reviewed on a regular
basis and are placed on nonaccrual status when, in the opinion of management,
the collection of additional interest is doubtful. The accrual of
interest on loans is discontinued at the time the loan is 90 days past due
unless the loan is well secured and in the process of collection. Interest
accrued and unpaid at the time a loan is placed on nonaccrual status is charged
against interest income. Subsequent payments are either applied to
the outstanding principal balance or recorded as interest income, depending on
management’s assessment of the ultimate collectability of the
loan.
Loans
which were modified and not accounted for as troubled debt restructurings
totaled $1.5 million during 2009. These modifications were made to
borrowers who were not experiencing financial difficulties. Most of the
modifications were made to reduce the interest rate of a loan to a competitive
market rate in order to maintain the borrowing relationship. These
borrowers would qualify for the reduced rates in a new loan origination and
would be able to obtain these rates from a competing financial
institution. We do collect both the principal and contractual interest
due, including the interest accrued during any extension periods. We would
consider those extensions less than three months to be
short-term.
Any
changes or modifications made to loans are carefully reviewed to determine
whether they are troubled debt restructurings. Any loan modifications made
due to financial difficulties of the borrower where a concession is made are
reported as troubled debt restructurings. Any other changes or
modifications made for borrowers who are not experiencing financial difficulties
are done on an infrequent basis and of an immaterial
amount.
Management monitors all
past due loans and non-performing assets. Such loans are placed under
close supervision with consideration given to the need for additions to the
allowance for loan losses and (if appropriate) partial or full
charge-off. At December 31, 2009, we had $357,000 of loans 90 days or
more delinquent that were still accruing interest. Non-performing assets
increased by $368,000 to $2.3 million at December 31, 2009 as compared to $2.0
million at December 31, 2008. The increase in the level of
non-performing assets primarily reflected the delinquency of three impaired
commercial borrowers totaling $719,000 as of December 31,
2009.
The first
borrower had loans with an aggregate principal balance of $2.6 million at
December 31, 2008 secured by commercial trailers and, to a lesser extent,
commercial real estate. During 2009, the borrower’s business experienced a
significant decline in financial condition and management determined that the
value of the remaining collateral was not sufficient to secure the balance of
the loans. We recognized charge-offs totaling $1.7 million on loans to this
borrower during 2009. Principal reductions of approximately $545,000
were received from this borrower during 2009, which reduced the outstanding
principal balance to $400,000 at December 31, 2009. The
non-performing portion of this lending relationship was $144,000 at December 31,
2009. We have provided an additional $138,000 to the allowance for loan losses
during 2009 after the charge-offs noted above for any additional probable losses
on this lending relationship.
The
second borrower had loans with an aggregate principal balance of $1.3 million at
December 31, 2008 secured primarily by mobile homes. During 2009, the borrower’s
business experienced a significant decline in financial condition and management
determined that the value of the remaining collateral was not sufficient to
secure the balance of the loans. We recognized charge-offs totaling
$224,000 on loans to this borrower during 2009. Principal reductions
of approximately $211,000 were received from this borrower during 2009, which
reduced the outstanding principal balance to $901,000 as of December 31,
2009. The non-performing portion of this lending relationship was
$99,000 at December 31, 2009. We have provided an additional $242,000 to the
allowance for loan losses during 2009 after the charge-offs noted above for any
additional probable losses on this lending relationship.
The third
borrower had loans with an aggregate balance of $526,000 at December 31, 2008
secured by the borrower’s personal residence and commercial real estate.
Principal reductions of approximately $50,000 were received from this borrower
during 2009, which reduced the outstanding principal balance to $476,000 as of
December 31, 2009. The loans became non-performing in 2009. The
borrower has been involved in a business-related dispute with his former partner
and has been forced to file for bankruptcy. He is attempting to sell
his personal residence and all of the commercial properties in order to cure
this delinquency. We have provided $29,000 during 2009 to the
allowance for loan losses for probable losses related to this lending
relationship.
Management believes the
increase in non-performing assets can be partially attributed to unique borrower
circumstances as well as the economy in general. We have an
experienced chief lending officer and collections and loan review departments
which monitor the loan portfolio and actively seek to prevent any deterioration
of asset quality.
Real estate acquired
through foreclosure or by deed-in-lieu of foreclosure is classified as real
estate owned until such time as it is sold. When real estate owned is
acquired, it is recorded at the lower of the unpaid principal balance of the
related loan, or its fair market value, less estimated selling
expenses. Any further write-down of real estate owned is charged
against earnings. At December 31, 2009, we owned $383,000 of property
classified as real estate owned.
Non-Performing
Assets. The table below sets forth the amounts and categories
of our non-performing assets at the dates indicated. At December 31,
2009, 2008, 2007, 2006 and 2005, we had troubled debt restructurings (loans for
which a portion of interest or principal has been forgiven and loans modified at
interest rates materially less than current market rates) of $1.3 million,
$435,000, $323,000, $273,000 and $292,000, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
Non-accrual
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential
|
|
$ |
484 |
|
|
$ |
445 |
|
|
$ |
310 |
|
|
$ |
435 |
|
|
$ |
624 |
|
Commercial
and agricultural
|
|
|
98 |
|
|
|
34 |
|
|
|
218 |
|
|
|
100 |
|
|
|
— |
|
Multi-family residential
|
|
|
132 |
|
|
|
152 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial
and agricultural business loans
|
|
|
416 |
|
|
|
48 |
|
|
|
82 |
|
|
|
704 |
|
|
|
290 |
|
Consumer
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity/home improvement
|
|
|
407 |
|
|
|
318 |
|
|
|
89 |
|
|
|
100 |
|
|
|
222 |
|
Automobile
|
|
|
8 |
|
|
|
3 |
|
|
|
12 |
|
|
|
1 |
|
|
|
1 |
|
Other
|
|
|
52 |
|
|
|
5 |
|
|
|
12 |
|
|
|
8 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-accrual loans
|
|
|
1,597 |
|
|
|
1,005 |
|
|
|
723 |
|
|
|
1,348 |
|
|
|
1,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
delinquent 90 days or greater and still accruing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential
|
|
|
349 |
|
|
|
163 |
|
|
|
203 |
|
|
|
— |
|
|
|
2 |
|
Commercial
and agricultural
|
|
|
— |
|
|
|
— |
|
|
|
156 |
|
|
|
— |
|
|
|
— |
|
Multi-family residential
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial
and agricultural business loans
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity/home improvement
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Automobile
|
|
|
3 |
|
|
|
18 |
|
|
|
— |
|
|
|
— |
|
|
|
17 |
|
Other
|
|
|
5 |
|
|
|
5 |
|
|
|
9 |
|
|
|
4 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
loans delinquent 90 days or greater and still accruing
|
|
|
357 |
|
|
|
186 |
|
|
|
368 |
|
|
|
4 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-performing loans
|
|
|
1,954 |
|
|
|
1,191 |
|
|
|
1,091 |
|
|
|
1,352 |
|
|
|
1,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
real estate owned and foreclosed assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential
|
|
|
324 |
|
|
|
565 |
|
|
|
115 |
|
|
|
37 |
|
|
|
276 |
|
Commercial
and agricultural
|
|
|
59 |
|
|
|
204 |
|
|
|
249 |
|
|
|
115 |
|
|
|
180 |
|
Multi-family residential
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial
and agricultural business loans
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity/home improvement
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Automobile
|
|
|
— |
|
|
|
9 |
|
|
|
23 |
|
|
|
— |
|
|
|
15 |
|
Other
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other
real estate owned and foreclosed assets
|
|
|
383 |
|
|
|
778 |
|
|
|
387 |
|
|
|
152 |
|
|
|
471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-performing assets
|
|
$ |
2,337 |
|
|
$ |
1,969 |
|
|
$ |
1,478 |
|
|
$ |
1,504 |
|
|
$ |
1,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans to total loans
|
|
|
1.11 |
% |
|
|
0.64 |
% |
|
|
0.61 |
% |
|
|
0.86 |
% |
|
|
0.82 |
% |
Non-performing
assets to total assets
|
|
|
0.81 |
|
|
|
0.68 |
|
|
|
0.51 |
|
|
|
0.56 |
|
|
|
0.65 |
|
For the
year ended December 31, 2009, gross interest income that would have been
recorded had our non-accruing loans and troubled debt restructurings been
current in accordance with their original terms was
$197,000. Interest income recognized on such loans for the year ended
December 31, 2009 was $70,000.
At
December 31, 2009, we had no loans that were not currently classified as
nonaccrual, 90 days past due or troubled debt restructurings but where known
information about possible credit problems of borrowers caused management to
have serious concerns as to the ability of the borrowers to comply with present
loan repayment terms and that may result in disclosure as nonaccrual, 90 days
past due or troubled debt restructurings.
The
following table sets forth certain information with respect to our loan
portfolio delinquencies at the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential
|
|
|
6 |
|
|
$ |
215 |
|
|
|
13 |
|
|
$ |
907 |
|
|
|
19 |
|
|
$ |
1,122 |
|
Commercial
and agricultural
|
|
|
3 |
|
|
|
668 |
|
|
|
2 |
|
|
|
75 |
|
|
|
5 |
|
|
|
743 |
|
Multi-family residential
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial
and agricultural business loans
|
|
|
1 |
|
|
|
14 |
|
|
|
2 |
|
|
|
109 |
|
|
|
3 |
|
|
|
123 |
|
Consumer
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity/home improvement
|
|
|
4 |
|
|
|
43 |
|
|
|
11 |
|
|
|
203 |
|
|
|
15 |
|
|
|
246 |
|
Automobile
|
|
|
2 |
|
|
|
7 |
|
|
|
2 |
|
|
|
4 |
|
|
|
4 |
|
|
|
11 |
|
Other
|
|
|
3 |
|
|
|
1 |
|
|
|
7 |
|
|
|
31 |
|
|
|
10 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
19 |
|
|
$ |
948 |
|
|
|
37 |
|
|
$ |
1,329 |
|
|
|
56 |
|
|
$ |
2,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential
|
|
|
4 |
|
|
$ |
436 |
|
|
|
15 |
|
|
$ |
695 |
|
|
|
19 |
|
|
$ |
1,131 |
|
Commercial
and agricultural
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Multi-family residential
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial
and agricultural business loans
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity/home improvement
|
|
|
7 |
|
|
|
102 |
|
|
|
9 |
|
|
|
188 |
|
|
|
16 |
|
|
|
290 |
|
Automobile
|
|
|
5 |
|
|
|
22 |
|
|
|
5 |
|
|
|
18 |
|
|
|
10 |
|
|
|
40 |
|
Other
|
|
|
9 |
|
|
|
32 |
|
|
|
7 |
|
|
|
6 |
|
|
|
16 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
25 |
|
|
$ |
592 |
|
|
|
36 |
|
|
$ |
907 |
|
|
|
61 |
|
|
$ |
1,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential
|
|
|
1 |
|
|
$ |
79 |
|
|
|
12 |
|
|
$ |
610 |
|
|
|
13 |
|
|
$ |
689 |
|
Commercial
and agricultural
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
102 |
|
|
|
1 |
|
|
|
102 |
|
Multi-family residential
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial
and agricultural business loans
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
115 |
|
|
|
2 |
|
|
|
115 |
|
Consumer
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity/home improvement
|
|
|
5 |
|
|
|
76 |
|
|
|
4 |
|
|
|
78 |
|
|
|
9 |
|
|
|
154 |
|
Automobile
|
|
|
4 |
|
|
|
21 |
|
|
|
3 |
|
|
|
15 |
|
|
|
7 |
|
|
|
36 |
|
Other
|
|
|
3 |
|
|
|
23 |
|
|
|
4 |
|
|
|
6 |
|
|
|
7 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
13 |
|
|
$ |
199 |
|
|
|
26 |
|
|
$ |
926 |
|
|
|
39 |
|
|
$ |
1,125 |
|
|
|
Loans
Delinquent For
|
|
|
|
|
|
|
60-89
Days
|
|
|
90
Days and Over
|
|
|
Total
|
|
|
|
Number |
|
|
Amount |
|
|
Number |
|
|
Amount |
|
|
Number |
|
|
Amount |
|
|
|
(Dollars
in thousands)
|
|
At
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential
|
|
|
9 |
|
|
$ |
323 |
|
|
|
6 |
|
|
$ |
270 |
|
|
|
15 |
|
|
$ |
593 |
|
Commercial
and agricultural
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
145 |
|
|
|
2 |
|
|
|
145 |
|
Multi-family residential
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial
and agricultural business loans
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
659 |
|
|
|
1 |
|
|
|
659 |
|
Consumer
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity/home improvement
|
|
|
7 |
|
|
|
146 |
|
|
|
5 |
|
|
|
191 |
|
|
|
12 |
|
|
|
337 |
|
Automobile
|
|
|
2 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
3 |
|
|
|
2 |
|
Other
|
|
|
2 |
|
|
|
7 |
|
|
|
2 |
|
|
|
7 |
|
|
|
4 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
20 |
|
|
$ |
477 |
|
|
|
17 |
|
|
$ |
1,273 |
|
|
|
37 |
|
|
$ |
1,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-
to four-family residential
|
|
|
6 |
|
|
$ |
155 |
|
|
|
9 |
|
|
$ |
465 |
|
|
|
15 |
|
|
$ |
620 |
|
Commercial
and agricultural
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
260 |
|
|
|
3 |
|
|
|
260 |
|
Multi-family residential
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial
and agricultural business loans
|
|
|
2 |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
5 |
|
Consumer
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity/home improvement
|
|
|
6 |
|
|
|
134 |
|
|
|
5 |
|
|
|
213 |
|
|
|
11 |
|
|
|
347 |
|
Automobile
|
|
|
4 |
|
|
|
13 |
|
|
|
3 |
|
|
|
18 |
|
|
|
7 |
|
|
|
31 |
|
Other
|
|
|
3 |
|
|
|
12 |
|
|
|
3 |
|
|
|
30 |
|
|
|
6 |
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
21 |
|
|
$ |
319 |
|
|
|
23 |
|
|
$ |
986 |
|
|
|
44 |
|
|
$ |
1,305 |
|
Classified
Assets. Federal and state regulations require that each
insured savings institution classify its assets on a regular
basis. In addition, in connection with examination of insured
institutions, Federal examiners have authority to identify problem assets and,
if appropriate, classify them. There are three categories for
classified assets: “substandard,” “doubtful” and
“loss.” Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful
assets have the weaknesses of substandard assets with the additional
characteristic that the weaknesses make collection or liquidation in full on the
basis of currently existing facts, conditions and values questionable, and there
is a high possibility of loss. An asset classified loss is considered
uncollectible and of such little value that continuance as an asset of the
institution is not warranted. For assets classified “substandard” and
“doubtful,” the institution is required to establish general loan loss
allocations in accordance with accounting principles generally accepted in the
United States of America. Assets classified “loss” must be either
completely written off or supported by a 100% specific allocation. We
also maintain a category designated “special mention” which is established and
maintained for assets not considered classified but having potential weaknesses
or risk characteristics that could result in future problems. An
institution is required to develop an in-house program to classify its assets,
including investments in subsidiaries, on a regular basis and set aside
appropriate loss allocations on the basis of such classification. As
part of the periodic exams of Jacksonville Savings Bank by the Federal Deposit
Insurance Corporation and the Illinois Department of Financial and Professional
Regulation, the staff of such agencies reviews our classifications and determine
whether such classifications are adequate. Such agencies have, in the
past, and may in the future require us to classify certain assets which
management has not otherwise classified or require a classification more severe
than established by management. At December 31, 2009, our classified
assets totaled $4.9 million, all of which were classified as
substandard.
The total
amount of classified and special mention assets increased $1.6 million, or
16.4%, to $11.4 million at December 31, 2009 from $9.8 million at December 31,
2008. The increase in classified and special mention assets during
2009 was primarily due to an increase of $2.5 million in substandard loans,
partially offset by a decrease of $880,000 in special mention
loans. The decrease in special mention loans was primarily due to
$2.4 million in loans that were downgraded to a substandard rating and $500,000
in principal reductions on these loans, partially offset by $2.1 million in
additional loans rated as special mention during 2009. The $2.5
million increase in substandard loans was primarily related to the downgrade of
$2.4 million of loans from the special mention rating and $847,000 of additional
loans rated as substandard during 2009, partially offset by charge-offs of
$427,000 and principal reductions of $164,000. The following table shows the
principal amount of potential problem loans at December 31, 2009 and December
31, 2008.
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
Special
Mention loans
|
|
$ |
6,489 |
|
|
$ |
7,369 |
|
Substandard
loans
|
|
|
4,865 |
|
|
|
2,388 |
|
Total
Special Mention and Substandard loans
|
|
$ |
11,354 |
|
|
$ |
9,757 |
|
Allowance
for Loan Losses
The allowance for loan
losses is maintained at a level that, in management’s judgment, is adequate to
cover probable credit losses inherent in the loan portfolio at the balance sheet
date. The allowance for loan losses is established as losses are
estimated to have occurred through a provision for loan losses charged to
earnings. Loan losses are charged against the allowance when
management believes the uncollectability of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the
allowance.
The
allowance for loan losses is evaluated on a regular basis by management and is
based upon management’s periodic review of the collectability of the loans in
light of historical experience, the nature and volume of the loan portfolio,
adverse situations that may affect the borrower’s ability to repay, estimated
value of any underlying collateral and prevailing economic
conditions. This evaluation is inherently subjective as it requires
estimates that are susceptible to significant revision as more information
becomes available.
The
allowance consists of allocated and general components. The allocated
component relates to loans that are classified as impaired. For those
loans that are classified as impaired, an allowance is established when the
discounted cash flows (or collateral value or observable market price) of the
impaired loan is lower than the carrying value of that loan.
A loan is
considered impaired when, based on current information and events, it is
probable that we will be unable to collect the scheduled payments of principal
or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment
include payment status, collateral value and the probability of collecting
scheduled principal and interest payments when due. Loans that
experience insignificant payment delays and payment shortfalls generally are not
classified as impaired. Management determines the significance of
payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower’s
prior payment record and the amount of the shortfall in relation to the
principal and interest owed. Impairment is measured on a loan-by-loan
basis for commercial and agricultural loans by either the present value of
expected future cash flows discounted at the loan’s effective interest rate, the
loan’s obtainable market price or the fair value of the collateral if the loan
is collateral dependent.
Groups of
loans with similar risk characteristics are collectively evaluated for
impairment based on the group’s historical loss experience adjusted for changes
in trends, conditions and other relevant factors that affect repayment of the
loans. Accordingly, we do not separately identify individual consumer
and residential loans for impairment measurements, unless such loans are the
subject of a restructuring agreement due to financial difficulties of the
borrower.
The
general component covers non-classified loans and is based on historical
charge-off experience and expected loss given our internal risk rating
process. The loan portfolio is stratified into homogeneous groups of
loans that possess similar loss characteristics and an appropriate loss ratio
adjusted for other qualitative factors is applied to the homogeneous pools of
loans to estimate the incurred losses in the loan portfolio. The
other qualitative factors considered by management include, but are not limited
to, the following:
●
|
changes
in lending policies and procedures, including underwriting standards and
collection practices;
|
●
|
changes
in national and local economic and business conditions and developments,
including the condition of various market segments and changes in market interest
rates;
|
●
|
changes
in the nature and volume of the loan
portfolio;
|
●
|
changes
in the experience, ability and depth of management and the lending
staff;
|
●
|
changes
in the trend of the volume and severity of the past due, nonaccrual, and
classified loans;
|
●
|
changes
in the quality of our loan review system and the degree of oversight by
the board of directors;
|
●
|
the
existence of any concentrations of credit, and changes in the level of
such concentrations; and
|
●
|
the
effect of external factors, such as competition and legal and regulatory
requirements on the level of estimated credit losses in our current
portfolio.
|
Commercial
and agricultural real estate loans generally have higher credit risks compared
to one- to four-family residential mortgage loans, as they typically involve
larger loan balances concentrated with single borrowers or groups of related
borrowers. In addition, payment experience on loans secured by
income-producing properties typically depend on the successful operation of the
related real estate project and this may be subject to a greater extent to
adverse conditions in the real estate market and in the general
economy.
Commercial
and agricultural business loans involve a greater risk of default than one- to
four-residential mortgage loans of like duration since their repayment generally
depends on the successful operation of the borrower’s business and the
sufficiency of collateral if any. The repayment of agricultural loans
can be greatly affected by weather conditions and commodity prices.
The
allowance for loan losses increased $356,000, or 18.4%, to $2.3 million at
December 31, 2009 from $1.9 million at December 31, 2008. The increase in the
allowance for loan losses was due primarily to an increase in net charge-offs
and an increase in non-performing assets during 2009. Net charge-offs
increased to $2.2 million during 2009 as compared to $142,000 during
2008. The higher level of net charge-offs and the resulting increase
to the allowance for loan losses primarily reflected the deterioration of two
commercial loan relationships during 2009.
The
first borrower had loans with an aggregate principal balance of $2.6 million at
December 31, 2008 secured by commercial trailers and, to a lesser extent,
commercial real estate. During 2009, the borrower’s business experienced a
significant decline in financial condition and management determined that the
value of the remaining collateral was not sufficient to secure the balance of
the loans. We recognized
charge-offs totaling $1.7 million on loans to this borrower during
2009. Principal reductions of approximately $545,000 were received
from this borrower during 2009, which reduced the outstanding principal balance
to $400,000 at December 31, 2009. The non-performing portion of this
lending relationship was $144,000 at December 31, 2009. We have
provided an additional $138,000 to the allowance for loan losses during 2009
after the charge-offs noted above for any additional probable losses on this
lending relationship.
The
second borrower had loans with an aggregate principal balance of $1.3 million at
December 31, 2008 secured primarily by mobile homes. During 2009, the borrower’s
business experienced a significant decline in financial condition and management
determined that the value of the remaining collateral was not sufficient to
secure the balance of the loans. We recognized
charge-offs totaling $224,000 on loans to this borrower during
2009. Principal reductions of approximately $211,000 were received
from this borrower during 2009, which reduced the outstanding principal balance
to $901,000 as of December 31, 2009. The non-performing portion of
this lending relationship was $99,000 at December 31, 2009. We have
provided an additional $242,000 to the allowance for loan losses during 2009
after the charge-offs noted above for any additional probable losses on this
lending relationship.
The
increase in the allowance for loan losses was also due to an increase in
non-performing assets. Non-performing assets increased $368,000 to
$2.3 million at December 31, 2009, compared to $2.0 million at December 31,
2008. The increase in non-performing assets was due to an increase of
$763,000 in non-performing loans, partially offset by a decrease of $395,000 in
foreclosed assets held at December 31, 2009 as compared to at December 31,
2008. The allowance for loan losses to non-performing loans decreased
to 117.20% at December 31, 2009 as compared to 162.47% at December 31, 2008.
This decrease was primarily due to lower specific provisions associated with the
non-performing loans at December 31, 2009.
Although we maintain our allowance for
loan losses at a level which we consider to be adequate to provide for potential
losses, there can be no assurance that such losses will not exceed the estimated
amounts or that we will not be required to make additions to the allowance for
loan losses in the future. Future additions to our allowance for loan
losses and changes in the related ratio of the allowance for loan losses to
non-performing loans are dependent upon the economy, changes in real estate
values and interest rates, the view of the regulatory authorities toward
adequate loan loss allocation levels, and inflation. Management will
continue to review the entire loan portfolio to determine the extent, if any, to
which further additional loan loss provisions may be deemed
necessary.
Analysis
of the Allowance for Loan Losses. The following table
summarizes changes in the allowance for loan losses by loan categories for each
year indicated and additions to the allowance for loan losses, which have been
charged to operations. There were no charge-offs in multi-family
residential real estate during the years presented.
|
|
For
the Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of
year
|
|
$ |
1,934 |
|
|
$ |
1,766 |
|
|
$ |
1,864 |
|
|
$ |
1,846 |
|
|
$ |
1,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
residential
|
|
|
147 |
|
|
|
149 |
|
|
|
165 |
|
|
|
55 |
|
|
|
161 |
|
Commercial and
agricultural real estate
|
|
|
112 |
|
|
|
— |
|
|
|
38 |
|
|
|
30 |
|
|
|
53 |
|
Commercial and
agricultural business
|
|
|
1,883 |
|
|
|
— |
|
|
|
35 |
|
|
|
16 |
|
|
|
8 |
|
Home equity/home
improvement
|
|
|
58 |
|
|
|
46 |
|
|
|
18 |
|
|
|
101 |
|
|
|
145 |
|
Automobile
|
|
|
20 |
|
|
|
8 |
|
|
|
— |
|
|
|
2 |
|
|
|
30 |
|
Other
consumer
|
|
|
23 |
|
|
|
3 |
|
|
|
45 |
|
|
|
14 |
|
|
|
36 |
|
Total
charge-offs
|
|
|
2,243 |
|
|
|
206 |
|
|
|
301 |
|
|
|
218 |
|
|
|
433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
residential
|
|
|
1 |
|
|
|
14 |
|
|
|
5 |
|
|
|
78 |
|
|
|
14 |
|
Commercial and
agricultural real estate
|
|
|
4 |
|
|
|
15 |
|
|
|
6 |
|
|
|
8 |
|
|
|
— |
|
Commercial and
agricultural business
|
|
|
— |
|
|
|
16 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Home equity/home
improvement
|
|
|
4 |
|
|
|
4 |
|
|
|
3 |
|
|
|
34 |
|
|
|
98 |
|
Automobile
|
|
|
7 |
|
|
|
5 |
|
|
|
13 |
|
|
|
17 |
|
|
|
17 |
|
Other
consumer
|
|
|
8 |
|
|
|
10 |
|
|
|
21 |
|
|
|
39 |
|
|
|
17 |
|
Total recoveries
|
|
|
24 |
|
|
|
64 |
|
|
|
48 |
|
|
|
176 |
|
|
|
146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loans
charge-offs
|
|
|
2,219 |
|
|
|
142 |
|
|
|
253 |
|
|
|
42 |
|
|
|
287 |
|
Additions
charged to
operations
|
|
|
2,575 |
|
|
|
310 |
|
|
|
155 |
|
|
|
60 |
|
|
|
245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at end of
year
|
|
$ |
2,290 |
|
|
$ |
1,934 |
|
|
$ |
1,766 |
|
|
$ |
1,864 |
|
|
$ |
1,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
loans
outstanding
|
|
$ |
176,042 |
|
|
$ |
184,991 |
|
|
$ |
177,662 |
|
|
$ |
156,731 |
|
|
$ |
144,293 |
|
Average
net loans
outstanding
|
|
$ |
182,813 |
|
|
$ |
177,963 |
|
|
$ |
165,715 |
|
|
$ |
149,238 |
|
|
$ |
137,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses as a percentage of total loans at end of
year
|
|
|
1.30 |
% |
|
|
1.05 |
% |
|
|
0.99 |
% |
|
|
1.19 |
% |
|
|
1.28 |
% |
Net
loans charged off as a percent of average net loans
outstanding
|
|
|
1.21 |
% |
|
|
0.08 |
% |
|
|
0.15 |
% |
|
|
0.03 |
% |
|
|
0.21 |
% |
Allowance
for loan losses to non-performing loans
|
|
|
117.20 |
% |
|
|
162.47 |
% |
|
|
161.90 |
% |
|
|
137.90 |
% |
|
|
156.75 |
% |
Allowance
for loan losses to total non-performing assets at end of
year
|
|
|
97.99 |
% |
|
|
98.22 |
% |
|
|
119.49 |
% |
|
|
123.94 |
% |
|
|
111.95 |
% |
The
allowance for loan losses to non-performing loans decreased to 117.20% at
December 31, 2009 from 162.47% at December 31, 2008. This decrease was
primarily due to the lower specific allocations associated with the
non-performing loans at December 31, 2009. Non-performing loans increased
$763,000 during 2009. The increase in non-performing loans primarily
reflected the delinquency of three impaired commercial lending relationships
totaling $719,000 as of December 31, 2009. Two of these commercial lending
relationships contributed $1.9 million of the $2.2 million in total charge-offs
recognized during 2009. The recognition of these charge-offs has reduced
the required amount of specific allocations to the allowance for loan
losses for non-performing loans. The circumstances
surrounding these two borrowers were unique in that the losses resulted from
poor management of the respective businesses in responding to changing economic
conditions. These specific losses and the economy in general were also
considered in the qualitative factors affecting the calculation of our allowance
for loan losses. This level of
charge-offs from 2009 is not expected to
continue in 2010. For a discussion of the two borrowers, please see “—Allowance
for Loan Losses” above.
Allocation
of Allowance for Loan Losses. The following table sets forth
the allocation of allowance for loan losses by loan category at the dates
indicated. The table reflects the allowance for loan losses as a percentage of
total loans receivable. Management believes that the allowance can be
allocated by category only on an approximate basis. The allocation of
the allowance by category is not necessarily indicative of future losses and
does not restrict the use of the allowance to absorb losses in any
category.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
of
Loans
in Each
Category
to
Total
Loans
|
|
|
|
|
|
Percent
of
Loans
in Each
Category
to
Total
Loans
|
|
|
|
|
|
Percent
of
Loans
in Each
Category
to
Total
Loans
|
|
|
|
(Dollars
in Thousands)
|
|
|
|
|
|
One- to four-family
residential
|
|
$ |
392 |
|
|
|
21.9 |
% |
|
$ |
510 |
|
|
|
25.3 |
% |
|
$ |
595 |
|
|
|
28.4 |
% |
Commercial
and agricultural real estate
|
|
|
739 |
|
|
|
32.2 |
|
|
|
537 |
|
|
|
30.6 |
|
|
|
346 |
|
|
|
24.8 |
|
Multi-family
residential
|
|
|
73 |
|
|
|
2.5 |
|
|
|
12 |
|
|
|
2.4 |
|
|
|
28 |
|
|
|
2.7 |
|
Commercial
and agricultural business
|
|
|
653 |
|
|
|
19.5 |
|
|
|
304 |
|
|
|
19.1 |
|
|
|
146 |
|
|
|
20.6 |
|
Home
equity/home improvement
|
|
|
249 |
|
|
|
16.0 |
|
|
|
301 |
|
|
|
16.2 |
|
|
|
465 |
|
|
|
16.9 |
|
Automobile
|
|
|
26 |
|
|
|
3.5 |
|
|
|
33 |
|
|
|
3.2 |
|
|
|
74 |
|
|
|
3.0 |
|
Other consumer
|
|
|
62 |
|
|
|
4.4 |
|
|
|
52 |
|
|
|
3.2 |
|
|
|
112 |
|
|
|
3.6 |
|
Unallocated
|
|
|
96 |
|
|
|
— |
|
|
|
185 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total
|
|
$ |
2,290 |
|
|
|
100 |
% |
|
$ |
1,934 |
|
|
|
100 |
% |
|
$ |
1,766 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
Loans
in Each
Category
to
Total
Loans
|
|
|
|
|
|
Percent
of
Loans
in Each
Category
to
Total
Loans
|
|
|
|
(Dollars
in Thousands)
|
|
|
|
|
|
|
|
|
One- to four-family
residential
|
|
$ |
512 |
|
|
|
25.9 |
% |
|
$ |
448 |
|
|
|
27.8 |
% |
Commercial
and agricultural real estate
|
|
|
244 |
|
|
|
25.3 |
|
|
|
199 |
|
|
|
23.4 |
|
Multi-family
residential
|
|
|
37 |
|
|
|
3.7 |
|
|
|
40 |
|
|
|
4.2 |
|
Commercial
and agricultural business
|
|
|
275 |
|
|
|
21.0 |
|
|
|
129 |
|
|
|
19.9 |
|
Home
equity/home improvement
|
|
|
561 |
|
|
|
17.3 |
|
|
|
785 |
|
|
|
18.3 |
|
Automobile
|
|
|
96 |
|
|
|
3.4 |
|
|
|
110 |
|
|
|
3.2 |
|
Other consumer
|
|
|
139 |
|
|
|
3.4 |
|
|
|
135 |
|
|
|
3.2 |
|
Total
|
|
$ |
1,864 |
|
|
|
100 |
% |
|
$ |
1,846 |
|
|
|
100 |
% |
Investment
Activities
General. The
asset/liability management committee, consisting of our Chairman of the Board,
President, Senior Vice President, Vice President of Operations, Chief Financial
Officer, and two outside directors from the board, has primary responsibility
for establishing our investment policy and overseeing its implementation,
subject to oversight by our entire board of directors. Authority to
make investments under approved guidelines is delegated to the Senior Vice
President. The committee meets at least quarterly. All investment
transactions are reported to the board of directors for ratification
quarterly.
The
investment policy is reviewed at least annually by the full board of
directors. This policy dictates that investment decisions be made
based on providing liquidity, meeting pledging requirements, generating a
reasonable rate of return, minimizing our tax liability through the purchase of
municipal securities, minimizing exposure to credit risk and ensuring
consistency with our interest rate risk management strategy.
Our
current investment policy permits us to invest in U.S. treasuries, federal
agency securities, mortgage-backed securities, investment grade corporate bonds,
municipal bonds, short-term instruments, and other
securities. Investments in municipal bonds will be correlated with
Jacksonville Savings Bank’s current level of taxable income, the need for
tax-exempt income, and investment in the community. The investment
policy also permits investments in certificates of deposit, securities purchased
under an agreement to resell, bankers acceptances, commercial paper and federal
funds.
Our
current investment policy generally does not permit investment in stripped
mortgage-backed securities, short sales, derivatives, or in other high-risk
securities. Federal and Illinois state law generally limit our investment
activities to those permissible for a national bank.
The accounting rules
require that, at the time of purchase, we designate a security as held to
maturity, available-for-sale, or trading, depending on our ability and
intent. Securities available for sale are reported at fair value,
while securities held to maturity are reported at amortized cost. We only
maintain a securities available-for-sale portfolio.
The portfolio
consists primarily of mortgage-backed securities, municipal bonds and U.S.
government and agency securities all of which are classified as available for
sale. Mortgage-backed securities totaled $41.0 million at December 31,
2009. General obligation municipal bonds, most of which have been
issued within the States of Illinois and Missouri totaled $28.1
million at December 31, 2009. Our portfolio of U.S. Government and agency
securities totaled $9.1 million at December 31, 2009. We expect the
composition of our investment portfolio to continue to change based on liquidity
needs associated with loan origination activities. During the year
ended December 31, 2009, we had no investment securities that were deemed to be
other than temporarily impaired.
Under Federal regulations,
we are required to maintain a minimum amount of liquid assets that may be
invested in specified short-term securities and certain other
investments. Liquidity levels may be increased or decreased depending
upon the yields on investment alternatives and upon management’s judgment as to
the attractiveness of the yields then available in relation to other
opportunities and its expectation of the level of yield that will be available
in the future, as well as management’s projections as to the short-term demand
for funds to be used in our loan originations and other
activities.
Mortgage-Backed
Securities. We invest in mortgage-backed securities insured or
guaranteed by the United States Government or government sponsored
enterprises. These securities, which consist of mortgage-backed
securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, had an amortized
cost of $40.4 million, $27.4 million and $15.5 million at December 31, 2009,
2008, and 2007, respectively. The fair value of our mortgage-backed
securities portfolio was $41.0 million, $27.8 million and $15.4 million at
December 31, 2009, 2008, and 2007, respectively, and the weighted average rate
as of December 31, 2009, 2008, and 2007 was 4.21%, 4.95% and 4.85%,
respectively. At December 31, 2009, $37.9 million of the mortgage-backed
securities in the investment portfolio had fixed-rates of interest and $3.1
million had variable rates of interest.
Mortgage-backed
securities are created by pooling mortgages and issuing a security with an
interest rate that is less than the interest rate on the underlying
mortgages. Mortgage-backed securities typically represent a
participation interest in a pool of single-family or multi-family mortgages,
although we invest primarily in mortgage-backed securities backed by one- to
four-family mortgages. The issuers of such securities pool and resell
the participation interests in the form of securities to investors such as
Jacksonville Savings Bank. Some securities pools are guaranteed as to
payment of principal and interest to investors. Mortgage-backed
securities generally yield less than the loans that underlie such securities
because of the cost of payment guarantees and credit
enhancements. However, mortgage-backed securities are more liquid
than individual mortgage loans since there is an active trading market for such
securities. In addition, mortgage-backed securities may be used to
collateralize our specific liabilities and obligations. Finally,
mortgage-backed securities are assigned lower risk weightings for purposes of
calculating our risk-based capital level.
Investments
in mortgage-backed securities involve a risk that actual payments will be
greater or less than the prepayment rate estimated at the time of purchase,
which may require adjustments to the amortization of any premium or acceleration
of any discount relating to such interests, thereby affecting the net yield on
our securities. We periodically review current prepayment speeds to
determine whether prepayment estimates require modification that could cause
amortization or accretion adjustments.
Municipal
Bonds. At December 31, 2009, we held municipal bonds with a fair value of
$28.1 million. All of our municipal bonds are general obligation bonds with full
taxing authority and ratings (when available) of A or above. Nearly all of our
municipal bonds are issued in Illinois or Missouri.
U.S.
Government and Agency Securities. At December 31, 2009, we
held U.S. Government and agency securities with a fair value of $9.1 million.
These securities have an average expected life of 2.44 years. While these
securities generally provide lower yields than other investments such as
mortgage-backed securities, our current investment strategy is to maintain
investments in such instruments to the extent appropriate for liquidity
purposes, as collateral for borrowings, and for prepayment
protection.
Investment
Securities Portfolio. The following table sets forth the
composition of our investment securities portfolio at the dates indicated.
Investment securities do not include Federal Home Loan Bank of Chicago stock of
$1.1 million. All of such securities were classified as available for
sale.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie
Mae
|
|
$ |
10,646 |
|
|
$ |
10,855 |
|
|
$ |
14,422 |
|
|
$ |
14,654 |
|
|
$ |
7,439 |
|
|
$ |
7,433 |
|
Freddie
Mac
|
|
|
6,938 |
|
|
|
7,096 |
|
|
|
6,085 |
|
|
|
6,192 |
|
|
|
4,561 |
|
|
|
4,536 |
|
Ginnie
Mae
|
|
|
22,844 |
|
|
|
23,034 |
|
|
|
6,877 |
|
|
|
6,949 |
|
|
|
3,495 |
|
|
|
3,446 |
|
Total
mortgage-backed securities
|
|
|
40,428 |
|
|
|
40,985 |
|
|
|
27,384 |
|
|
|
27,795 |
|
|
|
15,495 |
|
|
|
15,415 |
|
U.S.
government and agencies
|
|
|
9,037 |
|
|
|
9,080 |
|
|
|
19,472 |
|
|
|
19,834 |
|
|
|
50,107 |
|
|
|
49,962 |
|
Municipal
bonds
|
|
|
27,661 |
|
|
|
28,116 |
|
|
|
30,067 |
|
|
|
29,805 |
|
|
|
14,796 |
|
|
|
14,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
77,126 |
|
|
$ |
78,181 |
|
|
$ |
76,923 |
|
|
$ |
77,434 |
|
|
$ |
80,398 |
|
|
$ |
80,310 |
|
Portfolio
Maturities and Yields. The composition and maturities of the
investment securities portfolio at December 31, 2009 are summarized in the
following table. Maturities are based on the final contractual
payment dates, and do not reflect the impact of prepayments or early redemptions
that may occur. All of such securities were classified as available for
sale.
|
|
|
|
|
More
than One Year through Five Years
|
|
|
More
than Five Years through Ten Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie
Mae
|
|
$ |
— |
|
|
|
— |
% |
|
$ |
— |
|
|
|
— |
% |
|
$ |
— |
|
|
|
— |
% |
|
$ |
10,646 |
|
|
|
4.30 |
% |
|
$ |
10,646 |
|
|
$ |
10,855 |
|
|
|
4.30 |
% |
FreddieMac
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,938 |
|
|
|
4.34 |
|
|
|
6,938 |
|
|
|
7,096 |
|
|
|
4.34 |
|
Ginnie
Mae
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22,844 |
|
|
|
4.13 |
|
|
|
22,844 |
|
|
|
23,034 |
|
|
|
4.13 |
|
Total
mortgage-backed securities
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
40,428 |
|
|
|
4.21 |
|
|
|
40,428 |
|
|
|
40,985 |
|
|
|
4.21 |
|
U.S.
government and agencies
|
|
|
— |
|
|
|
— |
|
|
|
1,000 |
|
|
|
4.25 |
|
|
|
5,481 |
|
|
|
4.35 |
|
|
|
2,556 |
|
|
|
3.84 |
|
|
|
9,037 |
|
|
|
9,080 |
|
|
|
4.20 |
|
Municipal bonds(1)
|
|
|
270 |
|
|
|
3.31 |
|
|
|
2,627 |
|
|
|
3.30 |
|
|
|
13,137 |
|
|
|
3.56 |
|
|
|
11,627 |
|
|
|
4.16 |
|
|
|
27,661 |
|
|
|
28,116 |
|
|
|
3.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
270 |
|
|
|
3.31 |
% |
|
$ |
3,627 |
|
|
|
3.59 |
% |
|
$ |
18,618 |
|
|
|
3.79 |
% |
|
$ |
54,611 |
|
|
|
4.18 |
% |
|
$ |
77,126 |
|
|
$ |
78,181 |
|
|
|
4.06 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
We
used an assumed 34% tax rate in computing tax equivalent adjustments. The
tax equivalent yield of municipal bonds was 5.01% for maturities of one
year or less, 5.00% for maturities of more than one year through five
years, 5.40% for maturities for more than five years through ten years,
6.31% for maturities of more than 10 years and 5.76% for the total
municipal bonds securities portfolio at December 31, 2009. The tax
equivalent adjustments to interest income of municipal bonds was $5,000
for maturities of one year or less, $45,000 for maturities of more than
one year through five years, $242,000 for maturities for more than five
years through ten years, $250,000 for maturities of more than 10 years and
$542,000 for the total municipal bonds securities portfolio for the year
ended December 31, 2009.
|
Sources
of Funds
General. Deposits
and borrowings are our major sources of funds for lending and other investment
purposes. In addition, we derive funds from the repayment and
prepayment of loans and mortgage-backed securities, operations, sales of loans
into the secondary market, and the sale, call, or maturity of investment
securities. Scheduled loan principal repayments are a relatively
stable source of funds, while deposit inflows and outflows and loan prepayments
are influenced significantly by general interest rates and market
conditions. Other sources of funds include advances from the Federal
Home Loan Bank. For further information see
“—Borrowings.” Borrowings may be used on a short-term basis to
compensate for reductions in the availability of funds from other sources or on
a longer term basis for general business purposes.
Deposits. We
attract consumer and commercial deposits principally from within our market
areas through the offering of a broad selection of deposit instruments including
interest-bearing checking accounts, noninterest-bearing checking accounts,
savings accounts, money market accounts, term certificate accounts and
individual retirement accounts. We will accept deposits of $100,000
or more and may offer negotiated interest rates on such deposits. At December
31, 2009, we had deposits of $100,000 or more from public entities that totaled
$25.0 million. Deposit account terms vary according to the minimum
balance required, the time periods the funds must remain on deposit and the
interest rate, among other factors. We regularly evaluate our
internal cost of funds, survey rates offered by competing institutions, review
our cash flow requirements for lending and liquidity and execute rate changes
when deemed appropriate. We do not obtain funds through brokers, nor
do we solicit funds outside our market area.
The
following tables set forth the distribution of our average deposit accounts, by
account type, for the years indicated.
|
|
For
the Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposit
type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
bearing checking
|
|
$ |
19,791 |
|
|
|
7.8 |
% |
|
|
— |
% |
|
$ |
18,479 |
|
|
|
7.5 |
% |
|
|
— |
% |
|
$ |
16,214 |
|
|
|
6.8 |
% |
|
|
— |
% |
Interest-bearing
checking
|
|
|
29,009 |
|
|
|
11.4 |
|
|
|
0.32 |
% |
|
|
28,572 |
|
|
|
11.6 |
|
|
|
0.70 |
% |
|
|
25,820 |
|
|
|
10.9 |
|
|
|
1.17 |
% |
Savings
accounts
|
|
|
24,849 |
|
|
|
9.8 |
|
|
|
0.88 |
% |
|
|
22,677 |
|
|
|
9.2 |
|
|
|
0.99 |
% |
|
|
22,774 |
|
|
|
9.6 |
|
|
|
1.00 |
% |
Money
market deposits
|
|
|
4,616 |
|
|
|
1.8 |
|
|
|
0.86 |
% |
|
|
4,700 |
|
|
|
1.9 |
|
|
|
1.06 |
% |
|
|
4,957 |
|
|
|
2.1 |
|
|
|
1.41 |
% |
Money
market savings
|
|
|
26,750 |
|
|
|
10.5 |
|
|
|
1.41 |
% |
|
|
24,442 |
|
|
|
9.9 |
|
|
|
2.39 |
% |
|
|
22,502 |
|
|
|
9.4 |
|
|
|
4.40 |
% |
Certificates
of deposit
|
|
|
149,124 |
|
|
|
58.7 |
|
|
|
3.08 |
% |
|
|
147,891 |
|
|
|
59.9 |
|
|
|
4.13 |
% |
|
|
145,325 |
|
|
|
61.2 |
|
|
|
4.71 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
deposits
|
|
$ |
254,139 |
|
|
|
100.00 |
% |
|
|
2.09 |
% |
|
$ |
246,761 |
|
|
|
100.00 |
% |
|
|
2.90 |
% |
|
$ |
237,592 |
|
|
|
100.00 |
% |
|
|
3.55 |
% |
The
following table sets forth certificates of deposit classified by interest rate
as of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate:
|
|
|
|
|
|
|
|
|
|
Less
than 2.00%
|
|
$ |
51,683 |
|
|
$ |
1,006 |
|
|
$ |
129 |
|
2.00%
to 2.99%
|
|
|
40,734 |
|
|
|
36,001 |
|
|
|
5,618 |
|
3.00%
to 3.99%
|
|
|
37,674 |
|
|
|
67,714 |
|
|
|
23,208 |
|
4.00%
to 4.99%
|
|
|
6,677 |
|
|
|
17,269 |
|
|
|
40,876 |
|
5.00%
to 5.99%
|
|
|
8,852 |
|
|
|
18,420 |
|
|
|
80,414 |
|
6.00%
to 6.99%
|
|
|
— |
|
|
|
86 |
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
145,620 |
|
|
$ |
140,496 |
|
|
$ |
150,333 |
|
The
following table sets forth, by interest rate ranges and scheduled maturity,
information concerning our certificates of deposit at December 31,
2009.
|
|
At
December 31, 2009 |
|
|
|
Period
to Maturity |
|
|
|
Less
Than or Equal to One
Year
|
|
|
|
|
|
More
Than Two to Three Years
|
|
|
More
Than Three Years
|
|
|
Total
|
|
|
Percent
of Total
|
|
|
|
(Dollars
in thousands) |
|
Interest
Rate Range:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
than 2.00%
|
|
$ |
44,055 |
|
|
$ |
7,622 |
|
|
$ |
— |
|
|
$ |
6 |
|
|
$ |
51,683 |
|
|
|
35.5 |
% |
2.00%
to 2.99%
|
|
|
29,580 |
|
|
|
9,000 |
|
|
|
1,686 |
|
|
|
468 |
|
|
|
40,734 |
|
|
|
27.9 |
|
3.00%
to 3.99%
|
|
|
24,513 |
|
|
|
5,624 |
|
|
|
1,825 |
|
|
|
5,712 |
|
|
|
37,674 |
|
|
|
25.9 |
|
4.00%
to 4.99%
|
|
|
3,686 |
|
|
|
1,780 |
|
|
|
954 |
|
|
|
257 |
|
|
|
6,677 |
|
|
|
4.6 |
|
5.00%
to 5.99%
|
|
|
6,265 |
|
|
|
1,633 |
|
|
|
526 |
|
|
|
428 |
|
|
|
8,852 |
|
|
|
6.1 |
|
6.00%
to 6.99%
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
108,099 |
|
|
$ |
25,659 |
|
|
$ |
4,991 |
|
|
$ |
6,871 |
|
|
$ |
145,620 |
|
|
|
100.00 |
% |
As of
December 31, 2009, the aggregate amount of outstanding certificates of deposit
in amounts greater than or equal to $100,000 was approximately $58.1 million, of
which $16.9 million were deposits from public entities. The following
table set forth the maturity of those certificates as of December 31,
2009.
|
|
|
|
|
|
(In
Thousands)
|
|
|
|
|
|
Three
months or less
|
|
$ |
11,961 |
|
Over
three months through six months
|
|
|
12,937 |
|
Over
six months through one year
|
|
|
21,889 |
|
Over
one year to three years
|
|
|
7,677 |
|
Over
three years
|
|
|
3,662 |
|
|
|
|
|
|
Total
|
|
$ |
58,126 |
|
Borrowings.
Deposits are our primary source of funds for lending and investment
activities. If the need arises, we may rely upon advances from the
Federal Home Loan Bank to supplement our supply of available funds and to fund
deposit withdrawals. We typically secure advances from the Federal
Home Loan Bank with one- to four-family residential mortgage loans, United
States Government and agency securities and mortgage-backed
securities. The Federal Home Loan Bank functions as a central reserve
bank providing credit for us and other member savings associations and financial
institutions. As a member, we are required to own capital stock in
the Federal Home Loan Bank and are authorized to apply for advances on the
security of such stock and certain of our home mortgages, provided certain
standards related to creditworthiness have been met. Advances are
made pursuant to several different programs. Each credit program has
its own interest rate and range of maturities. Depending on the
program, limitations on the amount of advances are based either on a fixed
percentage of a member institution’s stockholders’ equity or on the Federal Home
Loan Bank’s assessment of the institution’s creditworthiness. At
December 31, 2009, we had no Federal
Home Loan Bank advances outstanding.
Other borrowings consist
of securities sold under agreements to repurchase which are swept daily from
commercial deposit accounts. We may be required to provide additional
collateral based on the fair value of the underlying
securities.
Our
borrowings consist of advances from the Federal Home Loan Bank of Chicago and
funds borrowed under repurchase agreements. At December 31, 2009, we
had access to additional Federal Home Loan Bank advances of up to $22.2
million. The following table sets forth information concerning
balances and interest rates on our Federal Home Loan Bank advances at the dates
and for the periods indicated.
|
|
At
or For the Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at end of period
|
|
$ |
— |
|
|
$ |
13,500 |
|
|
$ |
10,000 |
|
Average
balance during period
|
|
$ |
5,349 |
|
|
$ |
12,029 |
|
|
$ |
8,629 |
|
Maximum
outstanding at any month end
|
|
$ |
10,000 |
|
|
$ |
21,000 |
|
|
$ |
18,000 |
|
Weighted
average interest rate at end of period
|
|
|
— |
% |
|
|
2.59 |
% |
|
|
4.98 |
% |
Average
interest rate during period
|
|
|
1.94 |
% |
|
|
3.91 |
% |
|
|
5.02 |
% |
The
following table sets forth information concerning balances and interest rates on
our repurchase agreements at the dates and for the periods
indicated.
|
|
At
or For the Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at end of period
|
|
$ |
3,789 |
|
|
$ |
7,633 |
|
|
$ |
4,936 |
|
Average
balance during period
|
|
$ |
5,160 |
|
|
$ |
6,031 |
|
|
$ |
4,665 |
|
Maximum
outstanding at any month end
|
|
$ |
6,920 |
|
|
$ |
7,633 |
|
|
$ |
5,838 |
|
Weighted
average interest rate at end of period
|
|
|
0.24 |
% |
|
|
0.03 |
% |
|
|
2.89 |
% |
Average
interest rate during period
|
|
|
0.19 |
% |
|
|
1.29 |
% |
|
|
4.26 |
% |
Trust
Services
We operate a full-service
trust department. We primarily manage farms and personal estates. As
of December 31, 2009, our trust department managed or administered 100 trust
accounts and had $50.1 million in trust assets under
management. Trust fees collected in 2009 and 2008 totaled $166,000
and $221,000, respectively. The decrease in fees is due to additional
trust work performed during 2008.
Subsidiary
Activities
Jacksonville Savings Bank
has one wholly owned subsidiary, Financial Resources Group, Inc. (“Financial
Resources”), an Illinois corporation. Financial Resources operates an
investment center engaged in the business of buying and selling stocks, bonds,
annuities and mutual funds for its customers’ accounts. In addition,
Financial Resources is engaged in the business of originating commercial
business loans and commercial real estate loans. For the years ended
December 31, 2009 and 2008, Financial Resources had gross revenues of $1.0
million and $1.2 million, respectively.
Properties
We conduct our business
through our main office and two branch offices located in Jacksonville, and
branch offices located in Virden, Litchfield, Chapin, and Concord,
Illinois. The following table sets forth certain information
concerning the main office and each branch office at December 31,
2009. At December 31, 2009, our premises and equipment had an
aggregate net book value of approximately $5.8 million. We believe
that our branch facilities are adequate to meet the present and immediately
foreseeable needs. All facilities are owned.
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
Book
Value
|
|
|
|
|
Year
|
|
|
at
December 31,
|
|
Location
|
|
|
Occupied
|
|
|
2009
|
|
|
|
|
|
|
|
(In
Thousands)
|
|
Main
Office
|
|
|
|
|
|
|
|
1211
West Morton Avenue
|
|
|
|
|
|
|
|
Jacksonville,
Illinois
|
|
|
|
1994 |
|
|
$ |
3,727 |
|
|
|
|
|
|
|
|
|
|
|
Branch Office (1)
|
|
|
|
|
|
|
|
|
|
211
West State Street
|
|
|
|
|
|
|
|
|
|
Jacksonville,
Illinois
|
|
|
|
1961 |
|
|
|
603 |
|
|
|
|
|
|
|
|
|
|
|
Branch Office (1)
|
|
|
|
|
|
|
|
|
|
903
South Main
|
|
|
|
|
|
|
|
|
|
Jacksonville,
Illinois
|
|
|
|
1989 |
|
|
|
184 |
|
|
|
|
|
|
|
|
|
|
|
Branch
Office
|
|
|
|
|
|
|
|
|
|
501
North State Street
|
|
|
|
|
|
|
|
|
|
Litchfield,
Illinois
|
|
|
|
1997 |
|
|
|
573 |
|
|
|
|
|
|
|
|
|
|
|
Branch
Office
|
|
|
|
|
|
|
|
|
|
100
North Dye
|
|
|
|
|
|
|
|
|
|
Virden,
Illinois
|
|
|
|
1986 |
|
|
|
185 |
|
|
|
|
|
|
|
|
|
|
|
Branch
Office
|
|
|
|
|
|
|
|
|
|
510
Superior
|
|
|
|
|
|
|
|
|
|
Chapin,
Illinois
|
|
|
|
2000 |
|
|
|
465 |
|
|
|
|
|
|
|
|
|
|
|
Branch Office (1)
|
|
|
|
|
|
|
|
|
|
202
State
|
|
|
|
|
|
|
|
|
|
Concord,
Illinois
|
|
|
|
2000 |
|
|
|
29 |
|
(1) Transaction
facilities only.
Legal
Proceedings
At
December 31, 2009, we were not involved in any pending legal proceedings other
than routine legal proceedings occurring in the ordinary course of business
which, in the aggregate, involve amounts which management believes are
immaterial to our financial condition, our results of operations and our cash
flows.
Personnel
As of
December 31, 2009, we had 99 full-time employees and 19 part-time
employees. Our employees are not represented by any collective
bargaining group. Management believes that we have good relations
with our employees.
General
Jacksonville
Bancorp-Federal and Jacksonville Bancorp, MHC are nondiversified savings and
loan holding companies within the meaning of the Home Owners’ Loan
Act. As such, they are registered with the Office of Thrift
Supervision and are subject to regulation by the Office of Thrift
Supervision. Jacksonville Savings Bank is an Illinois-chartered
savings bank subject to extensive regulation by the Illinois Department of
Financial and Professional Regulation and the Federal Deposit Insurance
Corporation. Jacksonville Savings Bank’s deposit accounts are insured
up to applicable limits by the Federal Deposit Insurance
Corporation. Jacksonville Savings Bank must file reports with the
Illinois Department of Financial and Professional Regulation and the Federal
Deposit Insurance Corporation concerning its activities and financial condition,
in addition to obtaining regulatory approvals prior to entering into certain
transactions such as mergers or acquisitions with other depository
institutions. There are periodic examinations of the Bank by the
Illinois Department of Financial and Professional Regulation and the Federal
Deposit Insurance Corporation to review Jacksonville Savings Bank’s compliance
with various regulatory requirements. Jacksonville Savings Bank is
also subject to certain reserve requirements established by the Board of
Governors of the Federal Reserve. This regulation and supervision
establishes a comprehensive framework of activities in which a savings bank can
engage and is intended primarily for the protection of the Federal Deposit
Insurance Corporation and depositors. The regulatory structure also
gives the regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss allocations for regulatory purposes. Any change in
such regulation, whether by the Illinois Department of Financial and
Professional Regulation, the Federal Deposit Insurance Corporation, or Congress
could have a material impact on the operations of Jacksonville Savings
Bank.
As a
savings and loan holding company following the conversion, Jacksonville
Bancorp-Maryland will be required to comply with the rules and regulations of
the Office of Thrift Supervision, and will be required to file certain reports
with and will be subject to examination by the Office of Thrift
Supervision. Jacksonville Bancorp-Maryland will also be subject to
the rules and regulations of the Securities and Exchange Commission under the
federal securities laws.
Set forth below is a brief
description of certain regulatory requirements that are or will be applicable to
Jacksonville Bancorp-Maryland and Jacksonville Savings Bank. The
description below is limited to certain material aspects of the statutes and
regulations addressed, and is not intended to be a complete description of such
statutes and regulations and their effects on Jacksonville Bancorp-Maryland and
Jacksonville Savings Bank.
Proposed
Federal Legislation
Legislation
has been introduced in the United States Senate and House of Representatives
that would implement sweeping changes to the current bank regulatory
structure. A bill passed by the House of Representatives would eliminate
our current primary federal regulator, the Office of Thrift Supervision, by
merging the Office of Thrift Supervision into the Comptroller of the Currency
(the primary federal regulator for national banks). The House legislation would
grant the Board of Governors of the Federal Reserve System exclusive authority
to regulate all bank and thrift holding companies. If the House bill is
enacted, Jacksonville Bancorp-Maryland would become a holding company subject to
supervision by the Federal Reserve Board as opposed to the Office of Thrift
Supervision, and would become subject to the Federal Reserve’s regulations,
including holding company capital requirements, that Jacksonville
Bancorp-Maryland would not be subject to as a savings and loan holding company
regulated by the Office of Thrift Supervision.
Under the
Senate bill, the Office of Thrift Supervision would also be eliminated by
merging it into the Office of the Comptroller of the Currency. The
Federal Reserve Board would be responsible for promulgating regulations for bank
and savings and loan holding companies such as Jacksonville Bancorp-Maryland
with the Federal Deposit Insurance Corporation being responsible for the
application and enforcement of such regulations.
Both the House bill and the Senate
proposal would establish new government entities to write consumer protection
rules, and in certain cases, to conduct examinations and to implement
enforcement actions relating to consumer protection. Compliance with new
regulations and being supervised by one or more new regulatory agencies would
likely increase our operating expenses.
Illinois
Savings Bank Regulation
As an Illinois-chartered
savings bank, Jacksonville Savings Bank is subject to regulation and supervision
by the Illinois Department of Financial and Professional
Regulation. The Illinois Department of Financial and Professional
Regulation’s regulation of Jacksonville Savings Bank covers, among other things,
Jacksonville Savings Bank’s internal organization (i.e.,
charter, bylaws, capital requirements, transactions with directors and officers,
and composition of the board of directors), as well as supervision of
permissible activities and mergers and acquisitions. Jacksonville
Savings Bank is required to file periodic reports with, and is subject to
periodic examinations at least once within every 18-month period by the Illinois
Department of Financial and Professional Regulation. The lending and
investment authority of Jacksonville Savings Bank is prescribed by Illinois law
and regulations, as well as applicable Federal laws and regulations, and
Jacksonville Savings Bank is prohibited from engaging in any activities not
permitted by such laws and regulations.
Under Illinois law,
savings banks are required to maintain a minimum core capital to total assets
ratio of 3%. The Illinois Department of Financial and Professional
Regulation is authorized to require a savings bank to maintain a higher minimum
capital level if the Illinois Department of Financial and Professional
Regulation determines that the savings bank’s financial condition or history,
management or earnings prospects are not adequate. If a savings
bank’s core capital ratio falls below the required level, the Illinois
Department of Financial and Professional Regulation may direct the savings bank
to adhere to a specific written plan established by the Illinois Department of
Financial and Professional Regulation to correct the savings bank’s capital
deficiency, as well as a number of other restrictions on the savings bank’s
operations, including a prohibition on the declaration of dividends by the
savings bank’s board of directors.
Under Illinois law, a
savings bank may make both secured and unsecured loans. However,
loans for business, corporate, commercial or agricultural purposes, whether
secured or unsecured, may not in the aggregate exceed 15% of a savings bank’s
total assets unless authorized by the Illinois Department of Financial and
Professional Regulation. With the prior written consent of the
Illinois Department of Financial and Professional Regulation, savings banks may
also engage in real estate development activities, provided that the total
investment in any one project may not exceed 15% of total capital, and the total
investment in all projects may not exceed 50% of total capital. The
total loans and extensions of credit outstanding at one time, both direct and
indirect, by a savings bank to any borrower may not exceed 25% of the savings
bank’s total capital. At December 31, 2009, Jacksonville Savings Bank
did not have any loans-to-one borrower which exceeded these
limitations.
Illinois-chartered savings
banks generally have all lending, investment and other powers which are
possessed by federal savings banks based in Illinois. Recent federal
and state legislative developments have reduced distinctions between commercial
banks and savings institutions in Illinois with respect to lending and
investment authority. As federal law has expanded the authority of
federally chartered savings institutions to engage in activities previously
reserved for commercial banks, Illinois legislation and regulations (“parity
legislation”) have given Illinois-chartered savings institutions, such as the
Bank, the powers of federally chartered savings
institutions.
The board of directors of
a savings bank may declare dividends on its capital stock based upon the savings
bank’s annualized net profits except (1) dividends may not be declared if the
bank fails to meet its capital requirements, (2) dividends are limited to 100%
of net income in that year and (3) if total capital is less than 6% of total
assets, dividends are limited to 50% of net income without prior approval of the
Illinois Department of Financial and Professional
Regulation.
An Illinois-chartered
savings bank may not make a loan to a person owning 10% or more of its stock, an
affiliated person, an agent or an attorney of the savings bank, either
individually or as an agent or partner of another, except under the rules of the
Illinois Department of Financial and Professional Regulation and regulations of
the Federal Deposit Insurance Corporation. This restriction does not
apply, however, to loans made (i) on the security of single-family residential
property used by the borrower as his or her residence, and (ii) to a non-profit,
religious, charitable or fraternal organization or a corporation in which the
savings bank has been authorized to invest by the Illinois Department of
Financial and Professional Regulation. Furthermore, a savings bank
may not purchase, lease or acquire a site for an office building or an interest
in real estate from an officer, director, employee or the holder of more than
10% of the savings bank’s stock or certain affiliated persons as set forth in
Illinois law, unless the prior written approval of the Illinois Department of
Financial and Professional Regulation is obtained.
Illinois law provides that
any depository institution may merge into a savings bank operating under the
Illinois Savings Bank Act. The board of directors of each merging
institution must approve a plan of merger by resolution adopted by majority vote
of all members of the respective boards. After such approval, the
plan of merger must be submitted to the Illinois Department of Financial and
Professional Regulation for approval. The Illinois Department of
Financial and Professional Regulation may make an examination of the affairs of
each merging institution (and their affiliates). The Illinois
Department of Financial and Professional Regulation shall not approve a merger
agreement unless he finds that, among other things, (i) the resulting
institution meets all requirements of the Illinois Savings Bank Act; (ii) the
merger agreement is fair to all persons affected; and (iii) the resulting
institution will be operated in a safe and sound manner. If approved
by the Illinois Department of Financial and Professional Regulation, the plan of
merger must be submitted to stockholders of the depository institution for
approval, and may be required to be submitted to members if a mutual savings
bank is one of the constituent entities. A two-thirds affirmative
vote is required for approval of the plan of merger.
Branching
and Interstate Banking. The establishment of branches by Jacksonville
Savings Bank is subject to approval of the Illinois Department of Financial and
Professional Regulation and Federal Deposit Insurance Corporation and geographic
limits established by state laws. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the “Riegle-Neal Act”) facilitates the
interstate expansion and consolidation of banking organizations by permitting,
among other things, (i) bank holding companies that are adequately capitalized
and managed to acquire banks located in states outside their home state
regardless of whether such acquisitions are authorized under the law of the host
state, (ii) the interstate merger of banks, subject to the right of
individual states to “opt out” of this authority, and (iii) banks to
establish new branches on an interstate basis provided that such action is
specifically authorized by the law of the host state.
Qualified
Thrift Lender Test. In order for Jacksonville Bancorp-Maryland
to be regulated as a savings and loan holding company by the Office of Thrift
Supervision (rather than as a bank holding company by the Board of Governors of
the Federal Reserve System), Jacksonville Savings Bank must qualify as a
“qualified thrift lender” under Office of Thrift Supervision regulations or
satisfy the “domestic building and loan association” test under the Internal
Revenue Code. Under the qualified thrift lender test, an institution is required
to maintain at least 65% of its “portfolio assets” (total assets less: (i)
specified liquid assets up to 20% of total assets; (ii) goodwill and other
intangible assets; and (iii) the value of property used to conduct business) in
certain “qualified thrift investments” (primarily residential mortgages and
related investments, including certain mortgage-backed and related securities)
in at least nine out of each 12 month period. Jacksonville Savings
Bank currently maintains the majority of its portfolio assets in qualified
thrift investments and has met the qualified thrift lender test in each of the
last 12 months.
Transactions
with Related Parties. A savings bank’s authority to engage in
transactions with its affiliates is limited by Sections 23A and 23B of the
Federal Reserve Act and Regulation W promulgated by the Board of Governors of
the Federal Reserve System. An affiliate is generally a company that
controls, is controlled by, or is under common control with an insured
depository institution such as Jacksonville Savings
Bank. Jacksonville Bancorp-Federal is an affiliate of Jacksonville
Savings Bank. In general, transactions between an insured depository
institution and its affiliates are subject to certain quantitative and
collateral requirements. In addition, applicable regulations prohibit
a savings bank from lending to any of its affiliates that are engaged in
activities that are not permissible for bank holding companies and from
purchasing the securities of any affiliate, other than a
subsidiary. Finally, transactions with affiliates must be consistent
with safe and sound banking practices, not involve low-quality assets and be on
terms that are as favorable to the institution as comparable transactions with
non-affiliates. Applicable regulators require savings banks to
maintain detailed records of all transactions with
affiliates.
Jacksonville
Savings Bank’s authority to extend credit to its directors, executive officers
and 10% or greater stockholders, as well as to entities controlled by such
persons, is governed by the requirements of Sections 22(g) and 22(h) of the
Federal Reserve Act and Regulation O promulgated by the Board of Governors of
the Federal Reserve System. Among other things, these provisions
require that extensions of credit to insiders:
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(i)
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be
made on terms that are substantially the same as, and follow credit
underwriting procedures that are not less stringent than, those prevailing
for comparable transactions with unaffiliated persons and that do not
involve more than the normal risk of repayment or present other
unfavorable features, and
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(ii)
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not
exceed certain limitations on the amount of credit extended to such
persons, individually and in the aggregate, which limits are based, in
part, on the amount of Jacksonville Savings Bank’s
capital.
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In
addition, extensions of credit in excess of certain limits must be approved in
advance by Jacksonville Savings Bank’s board of directors.
Capital
Maintenance. Under Federal Deposit Insurance Corporation
regulations, Jacksonville Savings Bank must maintain minimum levels of
capital. The regulations establish a minimum leverage capital
requirement of not less than 3% core capital to total assets for banks in the
strongest financial and managerial condition, with the highest supervisory
rating of the federal regulators for banks. For all other banks, the
minimum leverage capital requirement is between 4% and 5% of total
assets. Core capital is composed of the sum of common stockholders’
equity, noncumulative perpetual preferred stock (including any related surplus)
and minority interests in consolidated subsidiaries, minus all intangible assets
(other than qualifying mortgage servicing rights and qualifying supervisory
intangible core deposits), identified losses, investments in certain
subsidiaries, and unrealized gains (losses) on investment
securities.
The Federal Deposit
Insurance Corporation also requires that savings banks meet a risk-based capital
standard. The risk-based capital standard requires the maintenance of
total capital (which is defined as core capital and supplementary capital) to
risk weighted assets of 8.0%. In determining the amount of
risk-weighted assets, all assets, including certain off balance sheet assets,
are multiplied by a risk-weight of 0% to 100%, based on the risks the federal
regulators believe are inherent in the type of asset. The components
of core capital are equivalent to those discussed earlier under the 3% leverage
requirement. The components of supplementary capital currently
include cumulative perpetual preferred stock, long-term perpetual preferred
stock, mandatory convertible securities, subordinated debt and intermediate
preferred stock and allowance for loan and lease losses. Allowance
for loan and lease losses includible in supplementary capital is limited to a
maximum of 1.25% of risk-weighted assets. Overall, the amount of
capital counted toward supplementary capital cannot exceed 100% of core
capital. At December 31, 2009, Jacksonville Savings Bank exceeded its
applicable capital requirements.
Insurance
of Deposit Accounts. Jacksonville
Savings Bank is a member of the Deposit Insurance Fund, which is administered by
the Federal Deposit Insurance Corporation. Deposit accounts at Jacksonville
Savings Bank are insured by the Federal Deposit Insurance Corporation, generally
up to a maximum of $100,000 for each separately insured depositor and up to a
maximum of $250,000 for self-directed retirement accounts. However, the Federal
Deposit Insurance Corporation increased the deposit insurance available on all
deposit accounts to $250,000, effective until December 31, 2013. In
addition, certain noninterest-bearing transaction accounts maintained with
financial institutions participating in the Federal Deposit Insurance
Corporation’s Temporary Liquidity Guarantee Program are fully insured regardless
of the dollar amount until June 30, 2010. Jacksonville Savings Bank
has opted to participate in the Federal Deposit Insurance Corporation’s
Temporary Liquidity Guarantee Program. See “—Temporary Liquidity
Guarantee Program.”
The
Federal Deposit Insurance Corporation imposes an assessment against institutions
for deposit insurance. This assessment is based on the risk category
of the institution and, prior to 2009, ranged from 5 to 43 basis points of the
institution’s deposits. On December 22, 2008, the Federal Deposit
Insurance Corporation published a final rule that raised the current deposit
insurance assessment rates uniformly for all institutions by 7 basis points (to
a range from 12 to 50 basis points) effective for the first quarter of
2009. On February 27, 2009, the Federal Deposit Insurance Corporation
issued a final rule that altered the way the Federal Deposit Insurance
Corporation calculates federal deposit insurance assessment rates beginning in
the second quarter of 2009 and thereafter.
Under the
rule, the Federal Deposit Insurance Corporation first establishes an
institution’s initial base assessment rate. This initial base
assessment rate ranges, depending on the risk category of the institution, from
12 to 45 basis points. The Federal Deposit Insurance Corporation then
adjusts the initial base assessment (higher or lower) to obtain the total base
assessment rate. The adjustments to the initial base assessment rate
are based upon an institution’s levels of unsecured debt, secured liabilities,
and brokered deposits. The total base assessment rate ranges from 7
to 77.5 basis points of the institution’s deposits. At December 31, 2009, our
base assessment was 14.66 basis points. Additionally, on May 22,
2009, the Federal Deposit Insurance Corporation issued a final rule that imposed
a special 5 basis points assessment on each FDIC-insured depository
institution’s assets, minus its Tier 1 capital on June 30, 2009, which was
collected on September 30, 2009. The special assessment was capped at 10 basis
points of an institution’s domestic deposits. Future special assessments could
also be assessed. Based upon Jacksonville Savings Bank’s review of the Federal
Deposit Insurance Corporation’s new rule, its Federal Deposit Insurance
Corporation premium assessment for 2009 increased by approximately $508,000,
including the special assessment.
The
Federal Deposit Insurance Corporation has adopted a final rule pursuant to which
all insured depository institutions will be required to prepay their estimated
assessments for the fourth quarter of 2009, and for all of 2010, 2011 and
2012. Under the rule, this pre-payment was due on December 30,
2009. The assessment rate for the fourth quarter of 2009 and for 2010
was based on each institution’s total base assessment rate for the third quarter
of 2009, modified to assume that the assessment rate in effect on September 30,
2009 had been in effect for the entire third quarter, and the assessment rate
for 2011 and 2012 was equal to the modified third quarter assessment rate plus
an additional 3 basis points. In addition, each institution’s base
assessment rate for each period was calculated using its third quarter
assessment base, adjusted quarterly for an estimated 5% annual growth rate in
the assessment base through the end of 2012. Our prepayment amount was
approximately $1.4 million.
Insurance of
deposits may be terminated by the Federal Deposit Insurance Corporation upon a
finding that an institution has engaged in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the Federal
Deposit Insurance Corporation. We do not currently know of any practice,
condition or violation that may lead to termination of our deposit
insurance.
In addition to the Federal
Deposit Insurance Corporation assessments, the Financing Corporation (“FICO”) is
authorized to impose and collect, with the approval of the Federal Deposit
Insurance Corporation, assessments for anticipated payments, issuance costs and
custodial fees on bonds issued by the FICO in the 1980s to recapitalize the
former Federal Savings and Loan Insurance Corporation. The bonds issued by the
FICO are due to mature in 2017 through 2019. For the quarter ended December 31,
2009, the annualized FICO assessment was equal to 1.0 basis point for each $100
in domestic deposits maintained at an institution.
Temporary
Liquidity Guarantee Program. On October 14, 2008, the Federal
Deposit Insurance Corporation announced a new program – the Temporary Liquidity
Guarantee Program, which guarantees newly issued senior unsecured debt of a
participating organization, up to certain limits established for each
institution, issued between October 14, 2008 and June 30, 2009. The Federal
Deposit Insurance Corporation will pay the unpaid principal and interest on
FDIC-guaranteed debt instruments upon the uncured failure of the participating
entity to make timely payments of principal or interest in accordance with the
terms of the instrument. The guarantee will remain in effect until
June 30, 2012. In return for the Federal Deposit Insurance Corporation’s
guarantee, participating institutions will pay the Federal Deposit Insurance
Corporation a fee based on the amount and maturity of the debt. We
opted not to participate in this part of the Temporary Liquidity Guarantee
Program.
The other
part of the Temporary Liquidity Guarantee Program provides full federal deposit
insurance coverage for noninterest-bearing transaction deposit accounts,
regardless of dollar amount, until December 31, 2009. An annualized 10 basis
point assessment on balances in noninterest-bearing transaction accounts that
exceed the existing deposit insurance limit of $250,000 will be assessed on a
quarterly basis to insured depository institutions that have not opted out of
this component of the Temporary Liquidity Guarantee Program. We opted
to participate in this component of the Temporary Liquidity Guarantee Program.
On August 26, 2009, the Federal Deposit Insurance Corporation extended the
program until June 30, 2010. Institutions had until November 2, 2009 to decide
whether they would opt out of the extension which took effect on January 1,
2010. An annualized assessment rate between 15 and 25 basis points on balances
in noninterest-bearing transaction accounts that exceed the existing deposit
insurance limit of $250,000 will be assessed depending on the institution’s risk
category. We opted into the extension. On April 13, 2010, the Federal
Deposit Insurance Corporation announced its intention to extend the program
again until December 31, 2010 and retaining the discretion to further extend the
program until December 31, 2011. Institutions must elect to opt out of the
extension before it takes effect on July 1, 2010. The assessment rate remains
the same from the prior extension. We anticipate opting into the
extension.
U.S.
Treasury’s Troubled Asset Relief Program Capital Purchase Program. The
Emergency Economic Stabilization Act of 2008, which was enacted on October 3,
2008, provides the U.S. Secretary of the Treasury with broad authority to
implement certain actions to help restore stability and liquidity to U.S.
financial markets. One of the programs resulting from the legislation is the
Troubled Asset Relief Program Capital Purchase Program (“CPP”), which provides
direct equity investment by the U.S. Treasury Department in perpetual preferred
stock of qualified financial institutions. The program is voluntary and requires
an institution to comply with a number of restrictions and provisions, including
limits on executive compensation, stock redemptions and declaration of
dividends. The CPP provides for a minimum investment of one percent
of total risk-weighted assets and a maximum investment equal to the lesser of
three percent of total risk-weighted assets or $25 billion. Participation in the
program is not automatic and is subject to approval by the U.S. Treasury
Department. We opted not to participate in the
CPP.
Community
Reinvestment Act. Under
the Community Reinvestment Act (“CRA”), as implemented by Federal Deposit
Insurance Corporation regulations, a savings institution has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit an
institution’s discretion to develop the types of products and services that it
believes are best suited to its particular community, consistent with the
CRA. The CRA requires the Federal Deposit Insurance Corporation, in
connection with its examination of a savings institution, to assess the
institution’s record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such
institution.
Federal
Home Loan Bank System. Jacksonville Savings Bank is a member
of the Federal Home Loan Bank System, which consists of 12 regional Federal Home
Loan Banks. The Federal Home Loan Bank System provides a central
credit facility primarily for member institutions as well as other entities
involved in home mortgage lending. As a member of the Federal Home
Loan Bank of Chicago, Jacksonville Savings Bank is required to acquire and hold
shares of capital stock in the Federal Home Loan Bank. As of December
31, 2009, Jacksonville Savings Bank was in compliance with this
requirement.
Prompt
Corrective Regulatory Action. The Federal Deposit Insurance
Corporation Improvement Act requires, among other things, that federal bank
regulatory authorities take “prompt corrective action” with respect to
institutions that do not meet minimum capital requirements. For these purposes,
the statute establishes five capital tiers: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized.
The
Federal Deposit Insurance Corporation may order savings banks which have
insufficient capital to take corrective actions. For example, a savings bank
which is categorized as “undercapitalized” would be subject to growth
limitations and would be required to submit a capital restoration plan, and a
holding company that controls such a savings bank would be required to guarantee
that the savings bank complies with the restoration plan. A “significantly
undercapitalized” savings bank would be subject to additional restrictions.
Savings banks deemed by the Federal Deposit Insurance Corporation to be
“critically undercapitalized” would be subject to the appointment of a receiver
or conservator.
At
December 31, 2009, Jacksonville Savings Bank is “well capitalized” under the
prompt corrective action rules.
Bank Owned Life
Insurance. The purchase of bank-owned life insurance is
limited as outlined in the Interagency Statement on the Purchase and Risk
Management of Life Insurance (“Statement”) dated December 7,
2004. The Statement highlights five areas of guidance for use by
institutions in the purchase and ongoing risk management of bank-owned life
insurance (“BOLI”). These areas include a comprehensive risk
management process, effective senior management and board oversight, policies
and procedures with risk limits, sound pre-purchase analysis, and an ongoing
monitoring of BOLI risks. The Statement also recommends limiting BOLI
holdings to 25% or less of Tier 1 capital. We performed a
comprehensive pre-purchase analysis prior to the purchase of our BOLI
assets. Our Board has adopted policies and procedures which limit our
BOLI holdings to 25% or less of Tier 1 capital and the value of policies from
any one insurance carrier to 15% of Tier 1 capital. As of December
31, 2009, we held $4.1 million in cash surrender value of life insurance, which
totaled 19% of Tier 1 capital. These policies are divided between
four different insurance carriers. We also conduct an annual risk
assessment and monitor the performance of our insurance carriers on a regular
basis.
Federal
Reserve System
Federal
Reserve Board regulations require savings banks to maintain noninterest-earning
reserves against their transaction accounts, such as negotiable order of
withdrawal and regular checking accounts. At December 31, 2009,
Jacksonville Savings Bank was in compliance with these reserve
requirements.
Other
Regulations
Interest
and other charges collected or contracted for by Jacksonville Savings Bank are
subject to state usury laws and federal laws concerning interest
rates. Jacksonville Savings Bank’s operations are also subject to
federal and state laws applicable to credit transactions, such as
the:
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Truth-In-Lending
Act, governing disclosures of credit terms to consumer
borrowers;
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Home
Mortgage Disclosure Act, requiring financial institutions to provide
information to enable the public and public officials to determine whether
a financial institution is fulfilling its obligation to help meet the
housing needs of the community it
serves;
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Equal
Credit Opportunity Act, prohibiting discrimination on the basis of race,
creed or other prohibited factors in extending
credit;
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Fair
Credit Reporting Act, governing the use and provision of information to
credit reporting agencies;
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Fair
Debt Collection Act, governing the manner in which consumer debts may be
collected by collection agencies;
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Illinois
High Risk Home Loan Act, which protects borrowers who enter into high risk
home loans;
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Illinois
Predatory Lending Database Program, which helps provide counseling for
homebuyers in connection with certain loans;
and
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rules
and regulations of the various federal and state agencies charged with the
responsibility of implementing such
laws.
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The operations
of Jacksonville Savings Bank also are subject to the:
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Right
to Financial Privacy Act, which imposes a duty to maintain confidentiality
of consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial
records;
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Electronic
Funds Transfer Act and Regulation E promulgated thereunder, which govern
automatic deposits to and withdrawals from deposit accounts and customers’
rights and liabilities arising from the use of automated teller machines
and other electronic banking
services;
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Check Clearing for
the 21st
Century Act (also known as “Check 21”), which gives “substitute checks,”
such as digital check images and copies made from that image, the same
legal standing as the original paper
check;
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The
USA PATRIOT Act, which requires savings banks operating to, among other
things, establish broadened anti-money laundering compliance programs, due
diligence policies and controls to ensure the detection and reporting of
money laundering. Such required compliance programs are intended to
supplement existing compliance requirements, also applicable to financial
institutions, under the Bank Secrecy Act and the Office of Foreign Assets
Control regulations; and
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The
Gramm-Leach-Bliley Act, which places limitations on the sharing of
consumer financial information by financial institutions with unaffiliated
third parties. Specifically, the Gramm-Leach-Bliley Act requires all
financial institutions offering financial products or services to retail
customers to provide such customers with the financial institution’s
privacy policy and provide such customers the opportunity to “opt out” of
the sharing of certain personal financial information with unaffiliated
third parties.
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Holding
Company Regulation
General. Upon
completion of the conversion, Jacksonville Bancorp-Maryland will be a
non-diversified unitary savings and loan holding company within the meaning of
the Home Owners’ Loan Act. As such, Jacksonville Bancorp-Maryland
will be registered with the Office of Thrift Supervision and subject to Office
of Thrift Supervision regulations, examinations, supervision and reporting
requirements. In addition, the Office of Thrift
Supervision will
have enforcement authority over Jacksonville Bancorp-Maryland and its
subsidiaries. Among other things, this authority permits the Office
of Thrift Supervision to restrict or prohibit activities that are determined to
be a serious risk to the subsidiary savings institution. Unlike bank
holding companies, federal savings and loan holding companies are not subject to
any regulatory capital requirements or to supervision by the Federal Reserve
Board.
Permissible
Activities. Under present law, the business activities of Jacksonville
Bancorp-Maryland will be generally limited to those activities permissible for
financial holding companies under Section 4(k) of the Bank Holding Company Act
of 1956, as amended, or for multiple savings and loan holding
companies. A financial holding company may engage in activities that
are financial in nature, including underwriting equity securities and insurance
as well as activities that are incidental to financial activities or
complementary to a financial activity. A multiple savings and loan
holding company is generally limited to activities permissible for bank holding
companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the
prior approval of the Office of Thrift Supervision, and certain additional
activities authorized by Office of Thrift Supervision
regulations.
Federal
law prohibits a savings and loan holding company, including Jacksonville
Bancorp-Maryland, directly or indirectly, or through one or more subsidiaries,
from acquiring more than 5% of another savings institution or holding company
thereof, without prior written approval of the Office of Thrift
Supervision. It also prohibits the acquisition or retention of, with
certain exceptions, more than 5% of a nonsubsidiary company engaged in
activities that are not closely related to banking or financial in nature, or
acquiring or retaining control of an institution that is not federally
insured. In evaluating applications by holding companies to acquire
savings institutions, the Office of Thrift Supervision must consider the
financial and managerial resources, future prospects of the company and
institution involved, the effect of the acquisition on the risk to the federal
deposit insurance fund, the convenience and needs of the community and
competitive factors.
The
Office of Thrift Supervision is prohibited from approving any acquisition that
would result in a multiple savings and loan holding company controlling savings
institutions in more than one state, subject to two exceptions:
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(i)
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the
approval of interstate supervisory acquisitions by savings and loan
holding companies; and
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(ii)
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the
acquisition of a savings institution in another state if the laws of the
state of the target savings institution specifically permit such
acquisition.
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The
states vary in the extent to which they permit interstate savings and loan
holding company acquisitions.
Federal
Securities Laws
Jacksonville
Bancorp-Maryland common stock will be registered with the Securities and
Exchange Commission after the conversion and stock
offering. Jacksonville Bancorp-Maryland will be subject to the
information, proxy solicitation, insider trading restrictions and other
requirements under the Securities Exchange Act of 1934.
The
registration under the Securities Act of 1933 of shares of common stock issued
in Jacksonville Bancorp-Maryland’s public offering does not cover the resale of
those shares. Shares of common stock purchased by persons who are not
affiliates of Jacksonville Bancorp-Maryland may be resold without
registration. Shares purchased by an affiliate of Jacksonville
Bancorp-Maryland will be subject to the resale restrictions of Rule 144 under
the Securities Act of 1933. If Jacksonville Bancorp-Maryland meets
the current public information requirements of Rule 144 under the Securities Act
of 1933, each affiliate of Jacksonville Bancorp-Maryland that complies with the
other conditions of Rule 144, including those that require the affiliate’s sale
to be aggregated with those of other persons, would be able to sell in the
public market, without registration, a number of shares not to exceed, in any
three-month period, the greater of 1% of the outstanding shares of Jacksonville
Bancorp-Maryland, or the average weekly volume of trading in the shares during
the preceding four calendar weeks. In the future, Jacksonville Bancorp-Maryland
may permit affiliates to have their shares registered for sale under the
Securities Act of 1933.
Sarbanes-Oxley
Act of 2002
The
Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance,
auditing and accounting, executive compensation, and enhanced and timely
disclosure of corporate information. As directed by the Sarbanes-Oxley Act, our
Chief Executive Officer and Chief Financial Officer will be required to certify
that our quarterly and annual reports do not contain any untrue statement of a
material fact. The rules adopted by the Securities and Exchange Commission under
the Sarbanes-Oxley Act have several requirements, including having these
officers certify that: they are responsible for establishing, maintaining and
regularly evaluating the effectiveness of our internal control over financial
reporting; they have made certain disclosures to our auditors and the audit
committee of the board of directors about our internal control over financial
reporting; and they have included information in our quarterly and annual
reports about their evaluation and whether there have been changes in our
internal control over financial reporting or in other factors that could
materially affect internal control over financial reporting. We will
be subject to further reporting and audit requirements beginning with the fiscal
year ending December 31, 2010 under the requirements of the Sarbanes-Oxley
Act. We will prepare policies, procedures and systems designed to
ensure compliance with these regulations.
Federal
Taxation
General. Jacksonville
Bancorp-Federal and Jacksonville Savings Bank are, and Jacksonville
Bancorp-Maryland will be, subject to federal income taxation in the same general
manner as other corporations, with some exceptions discussed
below. The following discussion of federal taxation is intended only
to summarize certain pertinent federal income tax matters and is not a
comprehensive description of the tax rules applicable to Jacksonville
Bancorp-Federal, Jacksonville Bancorp-Maryland or Jacksonville Savings Bank.
Jacksonville Savings Bank’s federal income tax returns have not been audited by
the Internal Revenue Service during the past five years.
Method
of Accounting. For
federal income tax purposes, Jacksonville Bancorp-Federal currently reports its
income and expenses on the accrual method of accounting and uses a tax year
ending December 31 for filing its federal and state income tax
returns.
Bad
Debt Reserves. Historically,
Jacksonville Savings Bank has been subject to special provisions in the tax law
regarding allowable tax bad debt deductions and related reserves. Tax
law changes were enacted in 1996, pursuant to the Small Business Protection Act
of 1996 (the “1996 Act”), that repealed the percentage of taxable income method
by qualifying savings institutions to determine deductions for bad
debts. This change was effective for taxable years beginning after
1995 and required the recapture of “applicable excess reserves” of a savings
institution, of which Jacksonville Savings Bank is, into taxable income over a
six year period. The applicable excess reserve is generally the
excess of its bad debt reserves as of the close of its last taxable year
beginning before January 1, 1996 over the balance of such reserves as of the
close of its last taxable year beginning before January 1,
1988.
Currently,
Jacksonville Savings Bank utilizes the experience method to account for bad debt
deductions for income tax purposes as defined in Internal Revenue Code Section
585. Under this method, the annual deduction is the amount necessary
to increase the balance of the reserve at the close of the taxable year to the
greater of the amount which bears the same ratio to loans outstanding at the
close of the taxable year as the total net charge offs sustained during the
current and preceding five taxable years bear to the sum of the loans
outstanding at the close of those six years or the lower of (i) the balance in
the reserve account at the close of the base year, (the last taxable
year beginning before 1988), or (ii) if the amount of outstanding loans at the
close of the taxable year is less than the amount of outstanding loans at the
close of the base year, the amount which bears the same ratio to outstanding
loans at the close of the taxable year as the balance of the reserve at the
close of the base year bears to the amount of outstanding loans at the close of
the base year.
Taxable
Distributions and Recapture. Prior to the
1996 Act, bad debt reserves created prior to January 1, 1988 were subject to
recapture into taxable income if Jacksonville Savings Bank failed to meet
certain thrift asset and definitional tests.
At
December 31, 2009, Jacksonville Savings Bank’s total federal pre-base year
reserve was approximately $2.6 million. However, under current law,
base-year reserves remain subject to recapture if Jacksonville Savings Bank
makes certain non-dividend distributions, repurchases any of its stock, pays
dividends in excess of tax earnings and profits, or ceases to maintain a bank
charter.
Alternative
Minimum Tax. The Internal
Revenue Code of 1986, as amended (the “Code”), imposes an alternative minimum
tax (“AMT”) at a rate of 20% on a base of regular taxable income plus certain
tax preferences (“alternative minimum taxable income” or “AMTI”). The
AMT is payable to the extent such AMTI is in excess of an exemption amount and
the AMT exceeds the regular income tax. Net operating losses can
offset no more than 90% of AMTI. Certain payments of AMT may be used
as credits against regular tax liabilities in future
years. Jacksonville Bancorp-Federal and Jacksonville Savings Bank
have not been subject to the AMT and have no such amounts available as credits
for carryover.
Net Operating
Loss Carryovers. Generally, a financial institution may carry back
net operating losses to the preceding two taxable years and forward to the
succeeding 20 taxable years. However, as a result of recent legislation,
subject to certain limitations, the carryback period for net operating losses
incurred in 2008 or 2009 (but not both years) has been expanded to five
years. At December 31, 2009, Jacksonville Bancorp, MHC had a federal tax
loss carryforward of approximately $400,000. There is also a
remaining Illinois carryforward of approximately $3.5 million at December 31,
2009, of which $3.3 million is attributable to Jacksonville
Bancorp-Federal.
Corporate
Dividends-Received Deduction. Jacksonville
Bancorp-Federal (and Jacksonville Bancorp-Maryland) may exclude from its federal
taxable income 100% of dividends received from Jacksonville Savings Bank as a
wholly owned subsidiary. The corporate dividends-received deduction
is 80% when the dividend is received from a corporation having at least 20% of
its stock owned by the recipient corporation. A 70%
dividends-received deduction is available for dividends received from
corporations owning less than 20% by the recipient corporation.
State
Taxation
The State of Illinois imposes a tax on
the Illinois taxable income of corporations, including savings banks, at the
rate of 7.30%. Illinois taxable income is generally similar to
federal taxable income except that interest from state and municipal obligations
is taxable and no deduction is allowed for state income
taxes. However, a deduction is allowed for certain U.S. Government
and agency obligations. Jacksonville Savings Bank’s state income tax
returns have not been audited by Illinois tax authorities during the past five
years.
As a
Maryland business corporation, Jacksonville Bancorp-Maryland will be required to
file annual returns and pay annual fees to the State of Maryland.
Shared
Management Structure
The
directors of Jacksonville Bancorp-Maryland are the same persons who are the
directors of Jacksonville Savings Bank. In addition, certain
executive officers of Jacksonville Bancorp-Maryland are also executive officers
of Jacksonville Savings Bank. Both Jacksonville Bancorp-Maryland and
Jacksonville Savings Bank may choose to appoint additional or different persons
as directors and executive officers in the future. We expect that
Jacksonville Bancorp-Maryland and Jacksonville Savings Bank will continue to
have some common executive officers until there is a business reason to
establish separate management structures. To date, executive officers
have been compensated only for their services to Jacksonville Savings
Bank. Our directors will receive additional compensation for their
services to Jacksonville Bancorp-Maryland.
Executive
Officers of Jacksonville Bancorp-Maryland and Jacksonville Savings
Bank
The
following table sets forth information regarding the executive officers of
Jacksonville Bancorp-Maryland and Jacksonville Savings
Bank. Positions listed relate to offices of Jacksonville
Bancorp-Federal and Jacksonville Bancorp-Maryland, unless otherwise stated. The
executive officers of Jacksonville Bancorp-Maryland and Jacksonville Savings
Bank are elected annually. Ages are as of December 31, 2009.
|
|
|
|
|
|
|
|
|
|
Andrew
F. Applebee
|
|
60
|
|
Chairman
of the Board of Directors
|
Richard
A. Foss
|
|
59
|
|
President,
Chief Executive Officer and Director
|
Diana
S. Tone
|
|
41
|
|
Chief
Financial Officer
|
John
C. Williams
|
|
60
|
|
Senior
Vice President, Trust Officer and Director
|
John
D. Eilering
|
|
47
|
|
Vice
President of Operations and Secretary
|
Laura
A. Marks
|
|
51
|
|
Senior
Vice President of Retail Banking
|
Chris
A. Royal
|
|
54
|
|
Vice
President and Chief Lending Officer
|
Directors
of Jacksonville Bancorp-Maryland and Jacksonville Savings Bank
Jacksonville
Bancorp-Maryland has eight directors. Directors serve three-year
staggered terms so that approximately one-third of the directors are elected at
each annual meeting. Directors of Jacksonville Savings Bank will be
elected by Jacksonville Bancorp-Maryland as its sole stockholder. The
following table states our directors’ names, their ages as of December 31, 2009,
the years when they began serving as directors of Jacksonville Savings Bank and
when their current term expires.
|
|
Position(s)
Held With
Jacksonville
Bancorp- Maryland
|
|
|
|
|
|
|
Andrew
F. Applebee
|
|
Chairman
of the Board of Directors
|
|
60
|
|
1982
|
|
2013
|
Emily
J. Osburn
|
|
Director
|
|
68
|
|
1982
|
|
2013
|
Dean
H. Hess
|
|
Director
|
|
61
|
|
2000
|
|
2011
|
John
C. Williams
|
|
Director,
Senior Vice President and Trust Officer
|
|
60
|
|
2000
|
|
2011
|
Harmon
B. Deal, III
|
|
Director
|
|
49
|
|
2003
|
|
2011
|
John
L. Eyth
|
|
Director
|
|
58
|
|
2005
|
|
2012
|
Richard
A. Foss
|
|
President,
Chief Executive Officer and Director
|
|
59
|
|
1993
|
|
2012
|
John
M. Buchanan
|
|
Director
|
|
58
|
|
2009
|
|
2012
|
(1) The
mailing address for each person listed is 1211 West Morton Avenue, Jacksonville,
Illinois 62650. Each of the persons listed as a director is also a
director of Jacksonville Savings Bank, as well as Jacksonville Bancorp,
MHC.
Board
Independence
The board
of directors has determined that each of our directors, with the exception of
Andrew F. Applebee, John C. Williams and Richard A. Foss is “independent” as
defined in the listing standards of the Nasdaq Stock Market. Andrew
F. Applebee, John C. Williams and Richard A. Foss are not independent because
they are one of our executive officers. There were no
transactions that the board of directors needed to review that are not required
to be reported under “—Transactions With Certain Related Persons,” below that
would bear in the determination of the independence of the directors listed
above.
Meetings
and Committees of the Board of Directors
We conduct business through meetings of
our board of directors and its committees. During the year ended
December 31, 2009, the boards of directors of Jacksonville Savings Bank and
Jacksonville Bancorp-Federal each met 12 times. Jacksonville
Bancorp-Maryland did not exist in fiscal 2009. The board of directors
of Jacksonville Bancorp-Maryland has established the following standing
committees: the Compensation Committee, the Nominating Committee and
the Audit Committee. Each of these committees operates under a
written charter, which governs its composition, responsibilities and
operations.
The table below sets forth the directors of each of the standing
committees as of December 31, 2009, and the number of meetings held by the
comparable committee of Jacksonville Bancorp-Federal during fiscal
2009. The members of each committee are independent directors as
defined under the Nasdaq Stock Market listing standards. Director
John L. Eyth has been designated as an “Audit Committee Financial Expert” for
the Audit Committee, as that term is defined by the rules and regulations of the
Securities and Exchange Commission.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emily
J. Osburn
|
|
|
|
|
|
X |
|
|
|
X |
|
Dean
H. Hess
|
|
|
X* |
|
|
|
X |
|
|
|
X |
|
Harmon
B. Deal, III
|
|
|
X |
|
|
|
X* |
|
|
|
|
|
John
L. Eyth
|
|
|
X |
|
|
|
X |
|
|
|
X* |
|
John
M. Buchanan
|
|
|
X |
|
|
|
X |
|
|
|
X |
|
Meetings
in Fiscal 2009
|
|
|
1 |
|
|
|
1 |
|
|
|
4 |
|
*
|
Denotes
committee chair as of December 31,
2009.
|
Audit
Committee. The committee oversees and monitors the financial
reporting process and internal control system, reviews and evaluates the audit
performed by the outside independent certified public accounting firm, and
reports any substantive issues found during the audit to the board of
directors. The committee is directly responsible for the appointment,
compensation and oversight of the work of the independent certified public
accounting firm. The committee will also review and approve
transactions (other than loans, which are approved by the full board of
directors) with affiliated parties.
Compensation
Committee. The committee provides advice and recommendation to
the board of directors in the areas of employee salaries, benefit programs and
general human resources policies and practices.
Nominating
Committee. The committee is responsible for nominating persons
for election to the board of directors and also reviews whether stockholder
nominations (if any) comply with the notice procedures set forth in our
bylaws.
The
Business Background of Our Directors and Executive Officers
The
business experience for the past five years of each of our directors and
executive officers is set forth below. Unless otherwise indicated,
directors and executive officers have held their positions for the past five
years.
Directors:
Andrew F.
Applebee was elected Chairman of the board of directors in January
1994. In addition, Mr. Applebee acted as our Chief Executive Officer
until January 2001. Prior thereto, Mr. Applebee was our
President. Mr. Applebee has been employed by us since
1976. Mr. Applebee is active in community and civic
organizations.
Emily J.
Osburn is retired. Prior to her retirement she was the manager
of radio stations WLDS and WEAI, which are located in Jacksonville,
Illinois. Her experience in managing a small business and her
community involvement led to her appointment to the board in 1982.
Dean H.
Hess is a grain and livestock farmer in Morgan County. Prior
to the merger of Chapin State Bank with us, Mr. Hess had served on the board of
directors of Chapin State Bank since 1981. He holds a bachelor’s
degree in agricultural economics and currently serves on the board of Lincoln
Land FS and several community organizations.
John C.
Williams is our Senior Vice President and Trust Officer, and manages the
Chapin branch facility. Prior to our merger with Chapin State Bank,
he was the Chairman of the Board, President and Trust Officer of Chapin State
Bank and had been employed by such bank since 1972. He currently
serves as the treasurer of Tri-County Community Development Corporation and is a
member of several community organizations.
Harmon B. Deal,
III has
been the President of Deal & Co., Inc., which is the general partner of Deal
Partners, L.P., an investment partnership, located in Jacksonville, Illinois
since 1997. Prior to that time, he was a partner and principal in
Rowe, Henry and Deal Investment Securities from 1986 to 1996. He
holds a bachelor’s degree in general business and currently serves as a trustee
for Illinois College and the Jacksonville Regional
Economic Development Corporation. His investment knowledge and
community involvement led to his appointment to the board in 2003.
John L.
Eyth is a certified public accountant. He has been a principal
in the accounting firm of Zumbahlen, Eyth, Surratt, Foote, & Flynn, Ltd.,
located in Jacksonville, Illinois, since 1980. He holds a bachelor’s
degree in accountancy and economics. He has been a member of several
professional organizations and community groups. His accounting
experience qualifies him to serve as our “audit committee financial expert” and
as chairman of our Audit Committee, which led to his appointment to the board in
2005.
Richard A.
Foss has been our President and Chief Executive Officer since
2001. From 1994 until 2001 he served as our President and Chief
Operating Officer. From 1992 until his appointment as President, Mr.
Foss was our Executive Vice President. Mr. Foss joined Jacksonville
Savings Bank in 1986 when he was named Vice President. In addition,
Mr. Foss is President of Financial Resources Group, Inc., our wholly owned
subsidiary. He is the past chairman of the Illinois League of
Financial Institutions and has been active in local economic development
groups.
John M.
Buchanan is a certified funeral service practitioner. He is
the president of Buchanan & Cody Funeral Home and Crematory, Inc., located
in Jacksonville, Illinois. He holds a bachelor’s degree in business
and economics. He currently serves as the chairman of the local
public building commission and public schools foundation and has served in many
local community organizations. His experience as a small business
owner and community knowledge led to his appointment to the board in
2009.
Executive
Officers Who are Not Directors
John D.
Eilering has been our Vice President of Operations since July
2000. He has also served as the Corporate Secretary and Human
Resources Officer since July 2002. From 1998 to 2000, he served as an
Assistant Vice President of Information Systems. He has been employed
by us since 1987.
Diana S.
Tone has been our Chief Financial Officer since July 2002. She
has also served as the Compliance Officer since June 2000. Prior to
this time, she spent ten years with the Federal Deposit Insurance Corporation as
a federal bank examiner.
Laura A.
Marks has been our Senior Vice President of Retail Banking since January
2005. She has also served as Marketing Officer since February
2000. Prior to this time, she spent 20 years in retail banking, human
resources, and marketing with another financial institution.
Chris A.
Royal has been our Vice President and Chief Lending Officer since March
2007. From 2003 to 2007, Mr. Royal was a Middle Market Lending and
Relationship Manager at JPMorgan Chase Bank, N.A., Springfield,
Illinois. Prior to this time, he spent 25 years with National City
Bank, Springfield, Illinois in lending and retail banking.
Executive
Compensation
Summary
Compensation Table. The following table shows the compensation
of Richard A. Foss, our principal executive officer, and the two highest
compensated executive officers who received total compensation of $100,000
during the past fiscal year for services to us or any of our subsidiaries during
the year ended December 31, 2009.
Summary
Compensation Table (3)
|
|
Name
and
Principal
Position
|
|
|
|
|
|
|
|
|
|
|
Change
in pension value and non-qualified deferred compensation earnings
(1)
($)
|
|
|
All
other compensation (2) ($)
|
|
|
|
|
Richard
A. Foss, President and Chief Executive Officer
|
|
|
2009
2008
|
|
|
|
185,016
156,000
|
|
|
|
12,900
12,000
|
|
|
|
42,529 37,902
|
|
|
|
24,985
23,379
|
|
|
|
265,430
229,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
C. Williams
Senior
Vice President and Trust Officer
|
|
|
2009
2008
|
|
|
|
104,520
100,750
|
|
|
|
7,200
6,700
|
|
|
|
41,732 39,056
|
|
|
|
13,604
13,464
|
|
|
|
167,056
159,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chris
A. Royal
Vice
President and Chief Lending Officer
|
|
|
2009
2008
|
|
|
|
114,348 108,914 |
|
|
|
9,000
8,600
|
|
|
|
12,943 12,192
|
|
|
|
5,031
2,732
|
|
|
|
141,322
132,438
|
|
|
(1)
|
Amounts
reported include the change in pension value for Messrs. Foss, Williams
and Royal of $28,152, $32,251, and $12,943, respectively, for 2009 and
$26,516, $30,378, and $12,192, respectively, for 2008 under the
Jacksonville Savings Bank Salary Continuation Plan 1. Mr.
Williams also received a change in pension value of $8,898 for 2009 and
$8,216for 2008 under his deferred compensation agreements with Chapin
State Bank that were assumed by Jacksonville Bancorp-Federal in the
acquisition of Chapin State Bank on July 3, 2000. In addition,
amounts reported for Messrs. Foss and Williams include non-qualified
deferred compensation earnings of $14,377 and $583, respectively, for 2009
and $11,386 and $462, respectively, for 2008 under the Jacksonville
Savings Bank Long-Term Deferred Compensation
Plan.
|
|
(2)
|
All
other compensation in 2009 consisted of our matching contributions under
the 401(k) Profit Sharing Plan and life insurance premiums paid by
Jacksonville Bancorp-Federal. This amounted to $9,134, $4,604,
and $5,031 for Messrs. Foss, Williams and Royal,
respectively. All other compensation in 2009 for Messrs. Foss
and Williams also included board fees from Jacksonville Bancorp-Federal
totaling $10,500 and $9,000, respectively. In addition,
in 2009 Mr. Foss was reimbursed $5,351 to pay for family health
insurance coverage. All other compensation in 2008 consisted of
our matching contributions under the 401(k) Profit Sharing Plan and life
insurance premiums paid by Jacksonville Bancorp-Federal. This
amounted to $8,076, $4,464, and $2,732 for Mr. Foss, Mr. Williams and Mr.
Royal, respectively. All other compensation in 2008 for Messrs.
Foss and Williams also included board fees from Jacksonville
Bancorp-Federal totaling $10,500 and $9,000, respectively. In
addition, in 2008 Mr. Foss was reimbursed $4,803 to pay for family health
insurance coverage.
|
|
(3)
|
During
the year ended December 31, 2009 no stock or option awards were granted to
the named executive officers in
2009.
|
Jacksonville
Savings Bank has entered into separate amended and restated employment
agreements with Andrew F. Applebee, the Chairman of the Board, and Mr. Foss, who
is also a member of the board of directors (referred to below as the
“executives” or “executive”) on March 17, 2009 and September 2, 2008,
respectively. The employment agreements were amended and restated in
order to comply with Section 409A of the Internal Revenue Code. The
employment agreements ensure that Jacksonville Savings Bank maintains a stable
and competent management base. The continued success of Jacksonville
Savings Bank depends on the skill and competence of the Chairman of the Board,
and the President and Chief Executive Officer.
Each
employment agreement provides for a three-year term. Commencing on
the anniversary date and continuing each anniversary date thereafter, the board
of directors may extend each employment agreement for an additional year unless
written notice of nonrenewal is given by the board of directors after conducting
a performance evaluation of the executive. The current base salary
under the employment agreements is $42,016 and $190,554 for
Messrs. Applebee and Foss, respectively. Each executive’s base
salary will be reviewed annually. In addition to the base salary,
each executive will receive all benefits provided to permanent full-time
employees of Jacksonville Savings Bank, including among other things,
participation in stock benefit plans and other fringe benefits applicable to
executive personnel, and will be entitled to receive directors fees while
serving on the board of directors.
Each
executive will be entitled to severance payments and benefits in the event of
his termination of employment under specified circumstances, including his (A)
termination of employment for reasons other than cause, disability, or
retirement, or (B) in the event the executive resigns during the term of his
agreement for any of the following reasons:
(1)
|
the
failure to elect or reelect or appoint or reappoint the executive to his
current position with Jacksonville Bancorp-Federal and Jacksonville
Savings Bank, or for Mr. Applebee, the failure to elect or reelect the
executive as the Chairman of the
Board;
|
(2)
|
a
material change in the executive’s duties that are in effect as of the
effective date of the agreement that would cause the executive’s position
to become one of lesser responsibility or importance or a material
reduction in the benefits and perquisites being provided to the
executive;
|
(3)
|
a
relocation of the executive’s principal place of employment by more than
30 miles from his current location;
|
(4)
|
liquidation
or dissolution of Jacksonville Bancorp-Federal or Jacksonville Savings
Bank other than liquidations or dissolutions that are caused by
reorganizations that do not affect the status of the executive;
or
|
(5)
|
any
breach of the employment agreement.
|
In the event of the executive’s
involuntary termination or resignation from employment following the occurrence
of one of the circumstances identified above, the executive will be entitled to
receive a cash lump sum payment within 30 days after his termination date (but a
six month delay may apply if the executive is a “specified employee”
as defined in Section 409A of the Internal Revenue Code) in an amount equal to
the greater of (i) the payments due under the remaining term of the executive’s
employment agreement or (ii) three times the average of the three preceding
years’ base salary, including bonuses and other cash compensation paid to
executive, and also the amount of any benefits received by the executive
pursuant to any employee benefits plan maintained by Jacksonville Savings
Bank. Each executive will also be entitled to continuation of life,
insurance and non-taxable medical and dental coverage during the remaining term
of the agreement. In the event the executive resigns without the
occurrence of one of the circumstances identified above, the board of directors
may choose to pay the executive a discretionary severance payment not to exceed
the amounts described above.
In the event of the executive’s
termination of employment, whether voluntary or involuntary, following a change
in control of Jacksonville Savings Bank or Jacksonville Bancorp-Federal during
the term of the agreement, the executive will be entitled to receive a cash lump
sum payment within 30 days after his termination date (but a six month delay may
apply if the executive is a “specified employee” as defined in
Section 409A of the Internal Revenue Code) in an amount equal to the greater of
(i) the payments due under the remaining term of the employment agreement or
(ii) 2.99 times his average annual compensation received over the five years
preceding his termination date, which includes base salary, bonuses and any
other compensation paid to the executive, and also the benefits received under
any employee benefits plan maintained by Jacksonville Savings
Bank In addition, Jacksonville Savings Bank would continue
each executive’s life insurance and non-taxable medical and dental coverage for
the remaining term of his employment agreement. In the event any
severance payments or benefits provided to the executive constitute an “excess
parachute payment” as defined in Section 280G of the Internal Revenue Code, the
severance payments or benefits under each employment agreement will be reduced
accordingly to avoid penalties.
The
employment agreements provide that for a period of one year following
termination, other than following a change in control, each executive agrees not
to compete with Jacksonville Savings Bank in any city, town or county in which
it maintains an office or has filed an application to establish an
office.
In
addition, Jacksonville Savings Bank has entered into an amended and restated
employment agreement with John Williams, a Senior Vice President of Jacksonville
Savings Bank, who is also a member of the Board of Directors. The
employment agreement was amended and restated in order to comply with Section
409A of the Internal Revenue Code. The term of the employment
agreement is for one year and will automatically be extended for an additional
year unless notice of nonrenewal is provided to the executive. The
executive’s current base salary under the employment agreement is
$107,668. In addition to the base salary, the executive will receive
all benefits provided to permanent full-time employees of Jacksonville Savings
Bank, including among other things, participation in stock benefit plans and
other fringe benefits applicable to executive personnel, and will be entitled to
receive directors fees while serving on the board of directors.
The
executive will be entitled to severance payments and benefits in the event of
his termination of employment under specified circumstances, including his (A)
termination of employment for reasons other than cause, disability, or
retirement; (B) termination of employment, whether voluntary or involuntary,
following a change in control of Jacksonville Bancorp-Federal or Jacksonville
Savings Bank; or (C) in the event the executive resigns during the term of his
agreement for any of the following reasons:
(1)
|
the
failure to elect or reelect or appoint or reappoint the executive to his
current position with Jacksonville Savings
Bank;
|
(2)
|
a
material change in the executive’s duties that are in effect as of the
effective date of the agreement that would cause the executive’s position
to become one of lesser responsibility or
importance;
|
(3)
|
liquidation
or dissolution of Jacksonville Bancorp-Federal or Jacksonville Savings
Bank other than liquidations or dissolutions that are caused by
reorganizations that do not affect the status of the executive;
or
|
(4)
|
any
breach of the employment agreement.
|
In the event of the executive’s
termination as a result of one of the specified circumstances identified above,
the executive will be entitled to receive a cash lump sum payment within 30 days
after his termination date (but a six month delay may apply if the executive
is a “specified employee” as defined in Section 409A of the Internal
Revenue Code) in an amount equal to the greater of: (i) the payments due under
the remaining term of his employment agreement, or (ii) one times his base
salary earned during the preceding 12 months, including bonuses and any other
cash compensation paid during such period, and also any benefits received by the
executive under any employee benefit plan maintained by Jacksonville Savings
Bank. The executive will also be entitled to continuation of life
insurance and non-taxable medical and dental coverage during the remaining term
of the agreement. In the event any severance payments or benefits provided to
the executive constitutes an “excess parachute payment” as defined in Section
280G of the Internal Revenue Code, the severance payments or benefits under each
employment agreement will be reduced accordingly to avoid
penalties.
The
employment agreements provide that for a period of one year following
termination, other than following a change in control, the executive agrees not
to compete with Jacksonville Savings Bank in any city, town or county in which
it maintains an office or has filed an application to establish an
office.
Change
in Control Agreements
Following
the conversion, Jacksonville Savings Bank intends to enter into a change in
control agreement with Diana Tone, Chief Financial
Officer. Commencing on the anniversary date of the effective date of
the agreement and continuing each anniversary date thereafter, the board of
directors may extend the agreement for an additional year such that remaining
term of the agreement will always be for two years unless written notice of
nonrenewal is given by the board of directors after conducting a performance
evaluation of the executive.
In the event of a change in control of
Jacksonville Bancorp-Maryland or Jacksonville Savings Bank, followed by the
executive’s voluntary termination for “good reason” or involuntary termination,
other than for cause, the executive will be entitled to the severance payments
and benefits set forth below. “Good reason” is defined as
follows:
|
(1) |
the
failure to elect or reelect or appoint or reappoint the executive to her
current position with Jacksonville Bancorp-Maryland and Jacksonville
Savings Bank, |
|
|
|
|
(2) |
a
material change in the executive’s position to become one of lesser
responsibility or importance than the position the executive held
immediately prior to the change in control, or a material reduction in the
benefits and perquisites provided to the executive from those being
provided immediately prior to the change in control;
|
|
|
|
|
(3) |
a
relocation of the executive’s principal place of employment by more than
30 miles from her current location,
|
|
|
|
|
(4) |
liquidation
or dissolution of Jacksonville Bancorp-Maryland or Jacksonville Savings
Bank other than liquidations or dissolutions that are caused by
reorganizations that do not affect the status of the executive;
or |
|
|
|
|
(5) |
any
breach of the agreement by Jacksonville Savings
Bank.
|
In the
event of a change in control followed by the executive’s involuntary termination
other than for cause or resignation from employment for “good reason” during the
remaining term of the agreement, the executive will be entitled to a severance
payment equal to two times the sum of: (i) the average annual base salary, bonus
and any other cash compensation earned by the executive during the two years
immediately prior to the year in which the executive’s date of termination
occurs; and (ii) the average amount of benefits received by the executive
pursuant to the employee benefit plans maintained by Jacksonville Savings Bank
during the two years immediately prior to the year in which the executive’s date
of termination occurs. In addition, the executive will be entitled to
receive continued life insurance coverage and non-taxable medical and dental
insurance coverage for two years following her date of
termination. Any cash severance payment will be made in a lump sum
within 30 days following the executive’s date of termination. The
agreement provides that in the event the severance payments and the benefits
would include an “excess parachute payment” under Section 280G of the Internal
Revenue Code, such benefits will be reduced accordingly to avoid
penalties.
Outstanding
Equity Awards at Year End. The following
table sets forth information with respect to our outstanding equity awards as of
December 31, 2009 for our named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Equity Awards at Fiscal Year-End (2)
|
|
|
|
Option
awards
|
|
Name
|
|
Number
of securities underlying unexercised options
(#) exercisable (1)
|
|
|
Number
of securities underlying unexercised options
(#) unexercisable
|
|
|
Equity incentive plan awards: number
of securities underlying unexercised earned options (#)
|
|
|
Option exercise price ($)
|
|
|
Option expiration Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
A. Foss, President and Chief Executive Officer
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
C. Williams Senior Vice President and Trust Officer
|
|
|
4,383 |
|
|
|
— |
|
|
|
— |
|
|
|
10.00 |
|
|
04/30/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chris
A. Royal Vice President and Chief Lending
Officer
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
(1) |
Represents
options granted under the Jacksonville Savings Bank 2001 Stock Option
Plan.
|
|
(2) |
There
are no outstanding unvested stock awards under the Jacksonville Savings
Bank and Jacksonville Bancorp, MHC 1996 Recognition and Retention
Plan.
|
Benefit
Plans
Stock Option
Plans. Jacksonville Savings Bank adopted the 2001 Stock Option
Plan (the “2001 Option Plan”), which authorized the issuance of up to 87,100
shares of common stock pursuant to grants of stock option awards to employees
and outside directors. A stock option award gives the recipient the
right to purchase shares of common stock of Jacksonville Bancorp-Federal at a
specified price at a specified period of time. Awards may be granted
as either incentive or nonstatutory stock options. Incentive stock
options have certain tax advantages and must comply with the requirements of
Section 422 of the Internal Revenue Code. Only employees are eligible
to receive incentive stock options. Shares of common purchased upon
exercise of a stock option must be paid for in full at the time of exercise
either in cash or with common stock that was owned by the
recipient. The 2001 Option Plan permits the grant of dividend
equivalent rights and reload options. During the year ended December
31, 2009, no additional stock option awards were granted to the named executive
officers under the 2001 Option Plan. At December 31, 2009, 28,845 options under
the 2001 Option Plan remain outstanding.
In
addition, Jacksonville Savings Bank and Jacksonville Bancorp, MHC adopted the
1996 Stock Option Plan (the “1996 Option Plan”), which authorized the issuance
of 55,750 shares (83,625 shares as adjusted for a 3 for 2 stock split in 1998)
of common stock pursuant to grants of stock option awards to employees, outside
directors, and directors emeritus. All stock option awards were
issued under the 1996 Option Plan. 4,500 forfeited stock option awards that were
reissued in 2004 remain outstanding at December 31, 2009.
1996 Recognition
and Retention Plan. Jacksonville Savings Bank and Jacksonville
Bancorp, MHC adopted the 1996 Recognition and Retention Plan (the “1996
Recognition Plan”). The 1996 Recognition Plan authorized the issuance
of up to 22,300 shares (33,450 shares as adjusted for a 3 for 2 stock split in
1998) of common stock of Jacksonville Bancorp-Federal pursuant to grants of
restricted stock awards. Employees, outside directors, and directors
emeritus are eligible to receive awards under the 1996 Recognition Plan. All
shares under the 1996 Recognition Plan have been awarded.
Supplemental Life
Insurance Plan. Effective January 1, 2008, Jacksonville
Savings Bank adopted the Supplemental Life Insurance Plan for the benefit of
certain executive officers who have been selected to participate in the
plan. The plan provides for a lump sum payment of $100,000 to the
participant’s beneficiary in the event of his or her death while employed with
Jacksonville Savings Bank. If the participant dies after his or her
termination of employment with Jacksonville Savings Bank, the participant’s
beneficiary will not be entitled to any benefits under the plan. The
plan is funded by the purchase of single-premium bank-owned life insurance
policies. Messrs. Applebee, Foss, Williams and Royal are participants
in the plan.
Salary
Continuation Plans. On September 2, 2008, Jacksonville Savings
Bank adopted the Salary Continuation Plan 1 and the Salary Continuation Plan 2
for a select group of management and highly compensated employees, as determined
by the board of directors. Two separate plans were adopted so that
each plan would receive “top-hat” treatment and would be exempt from certain
requirements under the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”). The plans provide supplemental retirement benefits
to a participant if he or she retires at age 65 or later, or dies while still
employed with Jacksonville Savings Bank prior to attaining age 65, in an amount
equal to the annual normal retirement benefit specified in the participant’s
individual participation agreement. Upon termination of employment on
or after attaining age 55 with 5 years of service but prior to attaining age 65,
the participant will be paid an annual early retirement benefit equal to his or
her accrued benefit as of the last day of the month preceding
termination. Under the plans, the participant will be 100% vested in
his or her annual early retirement benefit. If the participant
terminates employment due to disability, the participant will be entitled to his
or her accrued benefit as of the date of termination. In the event of
a change in control followed by the participant’s termination of employment
prior to attaining age 65, the participant will be entitled to the change in
control benefit equal to the full annual normal retirement benefit, provided,
however that such benefit is limited so that it will not constitute an “excess
parachute payment” under Code Section 280G. All benefits under the
plans will be paid in equal monthly installments for ten years, with the
exception of the participant’s change in control benefit, which will be payable
for fifteen years. Notwithstanding the foregoing, in the event a
participant is a “specified employee,” as defined under Code Section 409A, all
payments under the plans that are scheduled to be made during the first six
months following the participant’s termination of employment for any reason
other than death or disability will be accumulated and paid in a lump sum on the
first day of the seventh month following such termination. Messrs.
Applebee, Foss, Williams and Royal are participants in the Salary Continuation
Plan 1, and are eligible to receive a normal retirement benefit of $25,000,
$35,000, $25,000, and $30,000, respectively, payable for 10 years.
Long-Term
Deferred Compensation Plan. Effective January 1, 1996,
Jacksonville Savings Bank adopted the Long-Term Deferred Compensation Plan for a
select group of management and highly compensated employee, as determined by the
board of directors. The plan was frozen, effective December 31, 2004,
such that no contributions were made to the plan thereafter. The plan
allowed for a participant to elect to defer a portion of his or her base salary
and bonus payable during the year into the plan. In addition,
Jacksonville Savings Bank made a mandatory annual contribution on behalf of each
participant in an amount equal to the contribution amount specified in the
participant’s individual participation agreement, and also reserved the right to
make an additional discretionary contribution on behalf of each
participant. All amounts contributed to the plan are credited to a
bookkeeping account established on behalf of each participant, and will be
payable to the participant following the earlier of his or her termination of
employment, death, or disability in a lump sum or annual installments over a
period not to exceed 15 years.
Deferred
Compensation Agreements. Mr. Williams entered into the
deferred compensation agreement and the director’s compensation agreement with
Chapin State Bank on August 3, 1987 and July 1, 1982,
respectively. The agreements were assumed by Jacksonville
Bancorp-Federal in connection with the acquisition of Chapin State Bank on July
3, 2000. Mr. Williams is entitled to receive a retirement benefit of
$117,316 and $108,360, respectively, under each agreement. The
retirement benefits under the agreements will commence upon Mr. Williams’
65th
birthday and will be payable in 120 monthly installments
thereafter. Mr. Williams’ retirement benefits under the agreements
have been funded by bank-owned life insurance policies.
Tax-Qualified
Benefit Plans
401(k)
Plan. Jacksonville Savings
Bank maintains the Jacksonville Savings Bank 401(k) Profit Sharing Plan and
Trust, a tax-qualified defined contribution retirement plan, for all employees
who have satisfied the 401(k) Plan’s eligibility requirements. All
eligible employees can begin participation in the 401(k) plan on the first entry
date that coincides with or next follows the date the employee attains age 21
and has one year of service. A participant may contribute up to 100%
of his or her compensation to the 401(k) plan, on a pre-tax basis, subject to
the limitations imposed by the Internal Revenue Code. For 2009 and
2010, the salary deferral contribution was $16,500, provided, however that a
participant over age 50 may contribute an additional $5,500 to the 401(k)
Plan. In addition to salary deferral contributions, Jacksonville
Savings Bank will make matching contributions equal to a certain percentage
(determined annually) of the participant’s salary deferral contributions for the
plan year, and may also provide a discretionary employer
contribution. A participant is always 100% vested in his or her
salary deferral contributions and employer matching
contributions. All other employer discretionary contributions vest at
a rate of 20% per year, starting upon completion of two years of credited
service, and will be fully vested upon completion of six years of credited
service. However, a participant will immediately become 100% vested
in any discretionary employer contributions received upon the participant’s
death, disability, or attainment of age 65 while employed with Jacksonville
Savings Bank. Generally, unless the participant elects otherwise, the
participant’s benefit under the 401(k) plan will be payable in the form of a
lump sum payment by no later than the last day of the plan year immediately
following the participant’s date of termination.
Each
participant has an individual account under the 401(k) plan and may direct the
investment of his or her account among a variety of investment options or
vehicles available, which includes investing in the common stock of Jacksonville
Bancorp-Federal. In addition, participants in the 401(k) plan will be
able to purchase shares of Jacksonville Bancorp-Maryland common stock through
the 401(k) plan in connection with the conversion. Upon the
consummation of the conversion, all shares of Jacksonville Bancorp-Federal
common stock currently held in the 401(k) plan will automatically be converted
into shares of Jacksonville Bancorp-Maryland common stock pursuant to the
exchange ratio.
Employee Stock
Ownership Plan. Jacksonville
Savings Bank maintains the Jacksonville Savings Bank Restated Employee Stock
Ownership Plan. Employees who are at least 21 years old with at least
one year of service are eligible to participate in the plan. The employee stock
ownership plan borrowed funds from Jacksonville Bancorp-Federal and used those
funds to purchase shares of common stock for the plan in connection with
Jacksonville Savings Bank’s 1995 stock offering. The loan was fully
repaid in 1999, and all the common stock that was purchased with the loan has
been fully allocated to the participants’ accounts. In connection
with the conversion, all shares of Jacksonville Bancorp-Federal common stock
currently held by the employee stock ownership plan will automatically be
converted into shares of Jacksonville Bancorp-Maryland common stock pursuant to
the exchange ratio.
The
employee stock ownership plan trustee is expected to purchase, on behalf of the
employee stock ownership plan, 4% of the total number of
shares of Jacksonville Bancorp-Maryland common stock sold in the
offering. When combined with the common stock purchased by the
employee stock ownership plan in the 1995 stock offering of Jacksonville Savings
Bank (and subsequently converted to Jacksonville Bancorp-Federal common stock)
that are converted to shares of Jacksonville Bancorp-Maryland (pursuant to the
exchange ratio), the total shares purchased by the plan will be not
greater than 8% of the shares of Jacksonville Bancorp-Maryland that
will be outstanding following the conversion, as required by the Office of
Thrift Supervision regulations. Assuming the maximum of the offering range, the
most shares that could be purchased by the employee stock ownership plan in the
offering would be approximately 112,442 shares. We anticipate that
the employee stock ownership plan will fund its stock purchase with a loan from
Jacksonville Bancorp-Maryland equal to the aggregate purchase price of the
common stock. The loan will be repaid principally through
Jacksonville Savings Bank’s contribution to the employee stock ownership plan
and dividends payable on the common stock held by the employee stock ownership
plan over the anticipated 20-year term of the loan. The interest rate
for the employee stock ownership plan loan is expected to be an adjustable-rate
equal to the prime rate, as published in The Wall Street Journal, on
the closing date of the offering. Thereafter the interest rate will
adjust annually.
The
trustee will hold the shares purchased by the employee stock ownership plan in
an unallocated suspense account, and shares will be released to the
participants’ accounts as the loan is repaid. Shares released from
the unallocated suspense account will be allocated to each eligible
participant’s plan account based on the ratio of each participant’s compensation
to the total compensation of all eligible participants. Under the
terms of the employee stock ownership plan, shares that are allocated to
employees will be voted by the plan trustee based on directions received by the
employee. Unallocated shares will be voted by the plan trustee in the same
proportion as allocated shares pursuant to directions received by the
employees. Vested benefits are payable generally upon the
participants’ termination of employment, and are paid in the form of common
stock, or to the extent participants’ accounts contain cash, benefits will be
paid in cash. However, participants have the right to elect to
receive their benefits entirely in the form of cash or common stock, or a
combination of both.
Under
applicable accounting requirements, Jacksonville Savings Bank will record a
compensation expense for the employee stock ownership plan at the fair market
value of the shares as they are committed to be released from the unallocated
suspense account to participants’ accounts. The compensation expense
resulting from the release of the common stock from the suspense account and
allocation to plan participants will result in a corresponding reduction in
Jacksonville Bancorp-Maryland’s earnings.
Directors’
Compensation
Directors’
Summary Compensation Table. Set forth below
is summary compensation for each of our non-employee directors for the fiscal
year ended December 31, 2009. Director compensation paid to directors
who also are named executive officers is reflected above in the “Executive
Compensation – Summary Compensation Table.”
Director
Compensation(3)(4)
|
|
|
|
Fees
earned or paid in cash
($)
|
|
|
Change
in pension value and non- qualified
deferred compensation earnings (1) ($)
|
|
|
All
other compensation (2) ($)
|
|
|
|
|
Andrew
F. Applebee
|
|
|
10,500 |
|
|
|
48,916 |
|
|
|
52,952 |
|
|
|
112,368 |
|
John
M. Buchanan
|
|
|
9,150 |
|
|
|
— |
|
|
|
— |
|
|
|
9,150 |
|
Harmon
B. Deal, III
|
|
|
10,615 |
|
|
|
— |
|
|
|
— |
|
|
|
10,615 |
|
John
L. Eyth
|
|
|
11,105 |
|
|
|
— |
|
|
|
— |
|
|
|
11,105 |
|
Dean
H. Hess
|
|
|
10,775 |
|
|
|
8,576 |
|
|
|
— |
|
|
|
19,351 |
|
Emily
J. Osburn
|
|
|
9,725 |
|
|
|
— |
|
|
|
— |
|
|
|
9,725 |
|
|
(1)
|
Amounts
reported in 2009 consisted of a $26,375 change in pension value for Mr.
Applebee under the Salary Continuation Plan 1 and $22,541 in above market
earnings on his deferred compensation under the Long-Term Deferred
Compensation Plan. Mr. Hess also received a change in pension
value under his deferred compensation agreements with Chapin State Bank
that were assumed by Jacksonville Bancorp-Federal in the acquisition of
Chapin State Bank on July 3, 2000.
|
|
(2)
|
All
other compensation for Mr. Applebee includes salary of $42,016 under his
employment agreement, bonus of $3,200, matching contributions of
$1,943 under our 401(k) Plan, health insurance premiums of $5,351 and life
insurance premiums of $442. Please see descriptions of the
employment agreement and 401(k) Plan under the “Executive Compensation
-Summary Compensation Table” for further
details.
|
|
(3)
|
No
stock awards, option grants or non-equity incentive plan compensation
awards was made to the directors during
2009.
|
|
(4)
|
As
of December 31, 2009, the directors have the following outstanding equity
awards: Mr. Deal has 1,200 option awards and Ms. Osburn has 1,200 option
awards.
|
Cash
Compensation. Members of the
board of directors each received $9,000 during the year ended
December 31, 2009. We paid a total of $81,000 in directors’ fees for
the year ended December 31, 2009.
Other
Compensation Arrangements. Jacksonville Savings Bank entered
into an amended and restated employment agreement with Mr.
Applebee. Please see the description of the employment agreement set
forth above under the “Executive Compensation – Summary Compensation Table” for
further details. Mr. Applebee is also a participant in the Salary
Continuation Plan 1 and the Long-Term Deferred Compensation
Plan. Please see the descriptions of each plan set forth above under
the “Executive Compensation – Outstanding Equity Awards Table” for further
details.
Mr. Hess
entered into the deferred compensation agreement and the director’s compensation
agreement with Chapin State Bank on August 3, 1987 and July 1, 1982,
respectively. The agreements were assumed by Jacksonville
Bancorp-Federal in connection with the acquisition of Chapin State Bank on July
3, 2000. Mr. Hess is entitled to receive a retirement benefit of
$105,492 and $95,400, respectively, under each agreement. The
retirement benefits under the agreements will commence upon Mr. Hess’ 65th
birthday and will be payable in 120 monthly installments thereafter. Mr. Hess’
retirement benefits under the agreements have been funded by bank-owned life
insurance policies.
Benefits
to be Considered Following Completion of the Conversion
Stock-Based
Benefit plan. Following the
stock offering, we intend to adopt a new stock-based benefit plan that will
provide for grants of stock options. The number of options granted
under the plan may not exceed 10% of the shares sold in the stock offering if
the stock-based benefit plan is adopted within one year after the stock
offering, in accordance with Office of Thrift Supervision regulations and
policy.
The
stock-based benefit plan will not be established sooner than six months after
the stock offering and if adopted within one year after the stock offering would
require the approval by stockholders owning a majority of the outstanding shares
of Jacksonville Bancorp-Maryland common stock eligible to be cast. If
the stock-based benefit plan is established after one year after the stock
offering, it would require the approval of our stockholders by a majority of
votes cast. The following additional restrictions would apply
to our stock-based benefit plan only if the plan is adopted within one year
after the stock offering:
●
|
non-employee
directors in the aggregate may not receive more than 30% of the options
and restricted stock awards authorized under the
plan;
|
●
|
any
one non-employee director may not receive more than 5% of the options and
restricted stock awards authorized under the
plan;
|
●
|
any
officer or employee may not receive more than 25% of the options and
restricted stock awards authorized under the
plan;
|
●
|
any
tax-qualified employee stock benefit plans and management stock benefit
plans, in the aggregate, may not hold more than 10% of the shares sold in
the offering, unless Jacksonville Savings Bank has tangible capital of 10%
or more, in which case any tax-qualified employee stock benefit plans and
management stock benefit plans, may be increased to up to 12% of the
shares sold in the offering;
|
●
|
the
options and restricted stock awards may not vest more rapidly than 20% per
year, beginning on the first anniversary of stockholder approval of the
plan;
|
●
|
accelerated
vesting is not permitted except for death, disability or upon a change in
control of Jacksonville Savings Bank or Jacksonville Bancorp-Maryland;
and
|
●
|
our
executive officers or directors must exercise or forfeit their options in
the event that Jacksonville Savings Bank becomes critically
undercapitalized, is subject to enforcement action or receives a capital
directive.
|
We
currently anticipate that we will present the stock-based benefit plan for
stockholder approval more than 12 months after the completion of the
conversion. If the stock-based benefit plan is adopted more than 12
months after the completion of the conversion, the plan would not be subject to
Office of Thrift Supervision restrictions described below, including limits on
the total number of options or shares available for award under the plan, and we
may elect to implement a stock-based benefit plan containing features that are
different from those described above. The terms and conditions of such a
stock-based benefit plan, including the number of shares available per award
under the plan and the types of awards, have not been determined at this time.
Shares underlying stock options may not be voted on corporate matters put to a
stockholder vote.
In the
event either federal or state regulators change their regulations or policies
regarding stock-based benefit plans, including any regulations or policies
restricting the size of awards and vesting of benefits as described above, the
restrictions described above may not be applicable.
Transactions
With Certain Related Persons
We intend
that all transactions between us and our executive officers, directors, holders
of 10% or more of the shares of any class of its common stock and affiliates
thereof, will contain terms consistent with the provisions of federal and state
regulation, which governs loans to directors and executive officers and will be
approved by a majority of our independent outside directors not having any
interest in the transaction. At December 31, 2009, we had loans with
an aggregate balance of $4.2 million outstanding to our executive officers and
directors. In addition, we had loans with an aggregate balance of
$1.1 million to related parties of our executive officers and
directors. All such loans were made in the ordinary course of
business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
persons not related to Jacksonville Savings Bank, and did not involve more than
the normal risk of collectability or present other unfavorable
features.
There
were no transactions or series of transactions since the beginning of our last
fiscal year or any currently proposed transaction where we were or are a
participant and the amount involved exceeds $120,000, and in which any related
person had or will have a direct or indirect material interest.
Section 402 of the Sarbanes-Oxley
Act of 2002 generally prohibits an issuer from: (1) extending or
maintaining credit; (2) arranging for the extension of credit; or
(3) renewing an extension of credit in the form of a personal loan for an
officer or director. There are several exceptions to this general
prohibition, one of which is applicable to us. Sarbanes-Oxley does
not apply to loans made by a depository institution that is insured by the
Federal Deposit Insurance Corporation and is subject to the insider lending
restrictions of the Federal Reserve Act. All loans to our directors
and officers are made in conformity with the Federal Reserve Act and applicable
regulations.
Indemnification
of Directors and Officers
The
officers, directors, agents and employees of Jacksonville Bancorp-Maryland are
indemnified with respect to certain actions pursuant to Jacksonville
Bancorp-Maryland’s articles of incorporation and Maryland
law. Maryland law allows Jacksonville Bancorp-Maryland to indemnify
any person for expenses, liabilities, settlements, judgments and fines in suits
in which such person has been made a party by reason of the fact that he or she
is or was a director, officer or employee of Jacksonville
Bancorp-Maryland. No such indemnification may be given (i) to the
extent that it is proved that the person actually received an improper benefit
or profit in money, property or services for the amount of the benefit or profit
in money, property or services actually received, (ii) to the extent that a
judgment or other final adjudication adverse to the person is entered in a
proceeding based on a finding that the person’s action, or failure to act, was
the result of active and deliberate dishonesty and was material to the cause of
action adjudicated, or (iii) to the extent otherwise provided by Maryland
law. The right to indemnification includes the right to be paid the
expenses incurred in advance of final disposition of a proceeding.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to our directors, officers and controlling persons by our bylaws or
otherwise, we have been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable.
The
following table provides the beneficial ownership of our common stock held by
our directors and executive officers, individually and as a group, and all
individuals known to management to own more than 5% of our common stock as of
________, 2010. The business address of each director and executive
officer is 1211 West Morton Avenue, Jacksonville, Illinois
62650. Unless otherwise indicated, each of the named individuals has
sole voting power and sole investment power with respect to the number of shares
shown.
|
|
Total
Shares Beneficially Owned (1)
|
|
|
Percent
of All Common Stock Outstanding
|
|
|
|
|
|
|
|
|
Directors:
|
|
|
|
|
|
|
Andrew
F. Applebee
|
|
|
67,332 |
(2) |
|
|
3.5 |
% |
Emily
J. Osburn
|
|
|
11,600 |
(3) |
|
|
* |
|
Dean
H. Hess
|
|
|
29,000 |
(4) |
|
|
1.5 |
% |
John
C. Williams
|
|
|
14,397 |
(5) |
|
|
* |
|
Harmon
B. Deal, III
|
|
|
22,550 |
(6) |
|
|
1.2 |
% |
John
L. Eyth
|
|
|
4,011 |
(7) |
|
|
* |
|
Richard
A. Foss
|
|
|
59,843 |
(8) |
|
|
3.1 |
% |
John
M. Buchanan
|
|
|
1,000 |
(9) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
Executive
Officers Other
Than
Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
D. Eilering
|
|
|
11,835 |
(10) |
|
|
* |
|
Diana
S. Tone
|
|
|
3,701 |
(11) |
|
|
* |
|
Laura
A Marks
|
|
|
1,101 |
(12) |
|
|
* |
|
Chris
A. Royal
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
All
directors and executive officers as a group (12 persons)
|
|
|
226,369 |
|
|
|
11.8 |
% |
|
|
|
|
|
|
|
|
|
Jacksonville
Bancorp, MHC
1211
West Morton Avenue,
Jacksonville,
Illinois 62650
|
|
|
1,038,738 |
|
|
|
54.1 |
% |
|
|
|
|
|
|
|
|
|
Jacksonville
Bancorp, MHC and all directors and executive officers as a
group
|
|
|
1,265,107 |
|
|
|
65.9 |
% |
|
(*)
|
Less
than 1%.
|
|
(1)
|
Shares
of common stock are held directly unless indicated
otherwise.
|
|
(2)
|
Mr.
Applebee has shared voting and investment power over 24,163 shares and
sole voting and investment power over 43,169 shares; includes 5,100 shares
awarded pursuant to our restricted stock plan.
|
|
(3)
|
Ms.
Osburn has sole voting and investment power over 11,600 shares; includes
600 shares awarded pursuant to our restricted stock
plan.
|
|
(4)
|
Mr.
Hess has shared voting and investment power over 11,480 shares of common
stock and sole voting power over 17,520 shares.
|
|
(5)
|
Mr.
Williams has sole voting and investment power over 14,397 shares of common
stock, including options to purchase 4,383 shares of common
stock.
|
|
(6)
|
Mr.
Deal has sole voting and investment power over 22,550 shares of common
stock, including options to purchase 1,200 shares of common
stock.
|
|
(7)
|
Mr.
Eyth has sole voting and investment power over 4,011 shares of common
stock.
|
|
(8)
|
Mr.
Foss has shared voting and investment power over 16,600 shares and sole
voting and investment power over 43,243 shares; includes 4,800 shares
awarded pursuant to our restricted stock plan.
|
|
(9)
|
Mr.
Buchanan has sole voting and investment power over 1,000
shares.
|
|
(10)
|
Mr.
Eilering has sole voting and investment power over 11,835 shares of common
stock, including options to purchase 3,000 shares of common
stock.
|
|
(11)
|
Ms.
Tone has sole voting and investment power over 3,701 shares of common
stock, including options to purchase 1,100 shares of common
stock.
|
|
(12)
|
Ms.
Marks has sole voting and investment power over 1,101 shares of common
stock.
|
The table
below sets forth, for each of Jacksonville Bancorp-Maryland’s directors and
executive officers and for all of the directors and executive officers as a
group, the following information:
|
(i)
|
the
number of exchange shares to be held upon consummation of the conversion,
based upon their beneficial ownership of Jacksonville Bancorp-Federal
common stock as of May 10, 2010;
|
|
(ii)
|
the
proposed purchases of subscription shares, assuming sufficient shares of
common stock are available to satisfy their subscriptions;
and
|
|
(iii)
|
the
total amount of Jacksonville Bancorp-Maryland common stock to be held upon
consummation of the conversion.
|
In each
case, it is assumed that subscription shares are sold at the midpoint of the
offering range. See “The Conversion and Offering—Limitations on Common Stock
Purchases.” Regulations of the Office of Thrift Supervision prohibit
our directors and officers from selling the shares they purchase in the offering
for one year after the date of purchase. Subscriptions by management through our
401(k) plan will be counted as part of the maximum number of shares such
individuals’ may subscribe for in the stock offering and own following the
conversion.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed
Purchases of Stock in the Offering (1)
|
|
|
Total
Common Stock to be Held
|
|
Name
of Beneficial Owner
|
|
|
Number
of Exchange Shares to Be Held (2)
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Number
of Shares
|
|
|
Percentage
of Shares Outstanding (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
F. Applebee
|
|
|
76,165 |
|
|
|
5,000 |
|
|
|
50,000 |
|
|
|
81,165 |
|
|
|
3.7 |
% |
Emily
J. Osburn
|
|
|
13,122 |
|
|
|
1,000 |
|
|
|
10,000 |
|
|
|
14,122 |
|
|
|
* |
|
Dean
H. Hess
|
|
|
32,805 |
|
|
|
25,000 |
|
|
|
250,000 |
|
|
|
57,805 |
|
|
|
2.7 |
% |
John
C. Williams
|
|
|
16,286 |
|
|
|
15,000 |
|
|
|
150,000 |
|
|
|
31,286 |
|
|
|
1.4 |
% |
Harmon
B. Deal, III
|
|
|
25,509 |
|
|
|
30,000 |
|
|
|
300,000 |
|
|
|
55,509 |
|
|
|
2.6 |
% |
John
L. Eyth
|
|
|
4,537 |
|
|
|
2,000 |
|
|
|
20,000 |
|
|
|
6,537 |
|
|
|
* |
|
Richard
A. Foss
|
|
|
67,694 |
|
|
|
7,500 |
|
|
|
75,000 |
|
|
|
75,194 |
|
|
|
3.5 |
% |
John
M. Buchanan
|
|
|
1,131 |
|
|
|
2,500 |
|
|
|
25,000 |
|
|
|
3,631 |
|
|
|
* |
|
John
D. Eilering
|
|
|
13,388 |
|
|
|
3,000 |
|
|
|
30,000 |
|
|
|
16,388 |
|
|
|
* |
|
Diana
S. Tone
|
|
|
4,187 |
|
|
|
2,000 |
|
|
|
20,000 |
|
|
|
6,187 |
|
|
|
* |
|
Laura
A Marks
|
|
|
1,245 |
|
|
|
5,000 |
|
|
|
50,000 |
|
|
|
6,245 |
|
|
|
* |
|
Chris
A. Royal
|
|
|
— |
|
|
|
2,000 |
|
|
|
20,000 |
|
|
|
2,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
for Directors and Executive Officers
|
|
|
256,069 |
|
|
|
100,000 |
|
|
$ |
1,000,000 |
|
|
|
356,069 |
|
|
|
16.4 |
% |
(1)
|
Includes
proposed subscriptions, if any, by associates and proposed purchases to be
made through the 401(k)
plan.
|
(2)
|
Based
on information presented in “Beneficial Ownership of Common Stock”
assuming an exchange ratio of 1.1312 at the midpoint of the offering
range.
|
(3)
|
Based
upon 2,172,790 total shares outstanding at the midpoint of the offering
range.
|
The
boards of directors of Jacksonville Bancorp-Federal, Jacksonville Bancorp, MHC
and Jacksonville Savings Bank have approved the plan of conversion and
reorganization. The plan of conversion and reorganization must also
be approved by the members of Jacksonville Bancorp, MHC (depositors of
Jacksonville Savings Bank) and the stockholders of Jacksonville
Bancorp-Federal. A special meeting of members and a special meeting
of stockholders have been called for this purpose. The Office of Thrift
Supervision has conditionally approved the plan of conversion and
reorganization; however, such approval does not constitute a recommendation or
endorsement of the plan of conversion and reorganization by that
agency.
General
The
respective boards of directors of Jacksonville Bancorp, MHC, Jacksonville
Bancorp-Federal and Jacksonville Savings Bank adopted the plan of conversion and
reorganization on January 19, 2010 as amended on March 5,
2010. Pursuant to the plan of conversion and reorganization, our
organization will convert from the mutual holding company form of organization
to the fully stock form. Jacksonville Bancorp, MHC, the mutual
holding company parent of Jacksonville Bancorp-Federal, will be merged into
Jacksonville Bancorp-Federal, and Jacksonville Bancorp, MHC will no longer
exist. Jacksonville Bancorp-Federal, which owns 100% of Jacksonville
Savings Bank, will be succeeded by a new Maryland corporation named Jacksonville
Bancorp, Inc. As part of the conversion, the ownership interest of
Jacksonville Bancorp, MHC in Jacksonville Bancorp-Federal will be offered for
sale in the stock offering. When the conversion is completed, all of
the outstanding common stock of Jacksonville Savings Bank will be owned by
Jacksonville Bancorp-Maryland, and all of the outstanding common stock of
Jacksonville Bancorp-Maryland will be owned by public stockholders. A
diagram of our corporate structure before and after the conversion is set forth
in the Summary of this prospectus.
Under the
plan of conversion and reorganization, at the conclusion of the conversion and
offering, each share of Jacksonville Bancorp-Federal common stock owned by
persons other than Jacksonville Bancorp, MHC will be converted automatically
into the right to receive new shares of Jacksonville Bancorp-Maryland common
stock determined pursuant to an exchange ratio. The exchange ratio
will ensure that immediately after the exchange of existing shares of
Jacksonville Bancorp-Federal for new shares, the public stockholders will own
the same aggregate percentage of shares of common stock of Jacksonville
Bancorp-Maryland that they owned in Jacksonville Bancorp-Federal immediately
prior to the conversion, excluding any shares they purchased in the offering and
cash paid in lieu of fractional shares.
Jacksonville
Bancorp-Maryland intends to retain between $4.0 million and $5.6 million of the
net proceeds of the offering (excluding the loan to the employee stock ownership
plan) and to invest the balance of the net proceeds in Jacksonville Savings
Bank. The conversion will be consummated only upon the issuance
of at least the minimum number of shares of our common stock offered pursuant to
the plan of conversion and reorganization.
The plan
of conversion and reorganization provides that we will offer shares of common
stock for sale in the subscription offering to eligible account holders, our
tax-qualified employee benefit plans, including our 401(k) plan and employee
stock ownership plan, supplemental eligible account holders and other
depositors. If all shares are not subscribed for in the subscription offering,
we may, at our discretion, offer common stock for sale in a community offering
to members of the general public, with a preference given in the following
order:
|
(i)
|
Natural
persons (including trusts of natural persons) and then other persons
(including any corporation, partnership, association, joint-stock company,
limited liability company, trust, unincorporated organization, or
government or political subdivision of a government) residing in the
counties of Cass, Greene, Macoupin, Montgomery, Morgan, Pike, Sangamon and
Scott, Illinois; and
|
|
(ii)
|
Jacksonville
Bancorp-Federal’s public stockholders as of May 10,
2010.
|
We have
the right to accept or reject, in whole or in part, any orders to purchase
shares of the common stock received in the community offering. The community
offering, if any, may begin at the same time as, during, or after the
subscription offering and must be completed within 45 days after the completion
of the subscription offering unless otherwise extended by the Office of Thrift
Supervision. See “—Community Offering.”
We also
may offer for sale shares of common stock not purchased in the subscription or
community offering through a syndicated community offering to be managed by
Keefe, Bruyette & Woods, Inc. For a more complete description of
the syndicated community offering, see “– Syndicated Community Offering”
herein.
We
determined the number of shares of common stock to be offered in the offering
based upon an independent valuation appraisal of the estimated pro forma market
value of Jacksonville Bancorp-Maryland. All shares of common stock to
be sold in the offering will be sold at $10.00 per share. Investors will not be
charged a commission to purchase shares of common stock. The
independent valuation will be updated and the final number of the shares of
common stock to be issued in the offering will be determined at the completion
of the offering. See “—Stock Pricing and Number of Shares to be Issued” for more
information as to the determination of the estimated pro forma market value of
the common stock.
The
following is a brief summary of the conversion and is qualified in its entirety
by reference to the provisions of the plan of conversion and reorganization. A
copy of the plan of conversion and reorganization is available for inspection at
each branch office of Jacksonville Savings Bank and at the Central Regional and
the Washington, D.C. offices of the Office of Thrift Supervision. The plan of
conversion and reorganization is also filed as an exhibit to Jacksonville
Bancorp, MHC’s application to convert from mutual to stock form of which this
prospectus is a part, copies of which may be obtained from the Office of Thrift
Supervision. See “Where You Can Find Additional Information.”
Reasons
for the Conversion
We are
converting to the fully public stock form of ownership and conducting the
offering at this time in order to increase our capital to enhance our capacity
to grow and to respond to changing regulatory and market conditions, as well as
greater flexibility to effect acquisitions of banks and other financial
institutions. We believe that our conversion to a fully public
company and the capital we will raise from the sale of our common stock will
facilitate our continued growth and the successful implementation of our
business strategy:
●
|
to
increase our capital to support internal growth through lending in the
communities we serve;
|
●
|
to
enhance existing products and services and support the development of new
products and services;
|
●
|
to
facilitate growth through branch and whole bank acquisitions, as
opportunities arise;
|
●
|
to
improve our overall competitive position;
and
|
●
|
to
improve the liquidity of our shares of common stock and enhance
stockholder returns through more flexible capital management
strategies.
|
As a
fully converted stock holding company, we will have greater flexibility in
structuring future mergers and acquisitions, including the form of consideration
that we can use to pay for an acquisition. Our current mutual holding
company structure and our relatively small asset size limit our ability to offer
shares of our common stock as consideration for a merger or acquisition since
Jacksonville Bancorp, MHC is required to own a majority of our shares of common
stock. Potential sellers often want stock for at least part of the
purchase price. Our new stock holding company structure will enable
us to offer stock or cash consideration, or a combination of stock and cash, and
will therefore enhance our ability to compete with other bidders when
acquisition opportunities arise. We do not currently have any
agreement or understanding as to any specific acquisition.
We also
are undertaking the conversion at this time to ensure that current stockholders
of Jacksonville Bancorp-Federal do not have the value of their investment
diluted by potential changes in applicable statutes and regulations affecting
mutual holding companies. Recent legislative proposals would
eliminate our primary federal regulator, the Office of Thrift Supervision, and
make the Board of Governors of the Federal Reserve System the exclusive
regulator of mutual holding companies. If Jacksonville Bancorp, MHC
were to convert to a stock holding company under current Federal Reserve policy
regarding second-step conversions, the value of dividends waived by Jacksonville
Bancorp, MHC over the years would be considered in determining the percentage of
Jacksonville Bancorp-Maryland that the existing stockholders of Jacksonville
Bancorp-Federal would receive in the conversion. As a result,
existing stockholders would receive less value for their shares of Jacksonville
Bancorp-Federal common stock in the second-step conversion.
Approvals
Required
The
affirmative vote of a majority of the total eligible votes of the members of
Jacksonville Bancorp, MHC is required to approve the plan of conversion and
reorganization. By their approval of the plan of conversion and reorganization,
the members of Jacksonville Bancorp, MHC will also be approving the merger of
Jacksonville Bancorp, MHC into Jacksonville Bancorp-Federal. The
affirmative vote of the holders of at least two-thirds of the outstanding shares
of common stock of Jacksonville Bancorp-Federal and the affirmative vote of the
holders of a majority of the outstanding shares of common stock of Jacksonville
Bancorp-Federal held by the public stockholders of Jacksonville Bancorp-Federal
are also required to approve the plan of conversion and reorganization. The plan
of conversion and reorganization also must be approved by the Office of Thrift
Supervision, which has given its conditional approval.
Share
Exchange Ratio for Current Stockholders
Office of
Thrift Supervision regulations provide that in a conversion of a mutual holding
company to fully stock form, the public stockholders will be entitled to
exchange their shares for common stock of the new holding company, provided that
the mutual holding company demonstrates to the satisfaction of the Office of
Thrift Supervision that the basis for the exchange is fair and
reasonable. On the effective date of the conversion, each publicly
held share of Jacksonville Bancorp-Federal common stock will be automatically
converted into the right to receive a number of shares of Jacksonville
Bancorp-Maryland common stock. The number of shares of common stock
will be determined pursuant to the exchange ratio, which ensures that the public
stockholders will own the same percentage of common stock in Jacksonville
Bancorp-Maryland after the conversion as they held in Jacksonville
Bancorp-Federal immediately prior to the conversion, exclusive of their purchase
of additional shares of common stock in the offering or their receipt of cash in
lieu of fractional exchange shares. The exchange ratio is not dependent on the
market value of Jacksonville Bancorp-Maryland common stock. The
exchange ratio is based on the percentage of Jacksonville Bancorp-Federal common
stock held by the public, the independent valuation of Jacksonville
Bancorp-Maryland prepared by RP Financial, LC. and the number of shares of
common stock issued in the offering. The exchange ratio is expected to range
from approximately 0.9615 exchange shares for each publicly held share of
Jacksonville Bancorp-Federal at the minimum of the offering range to 1.4960
exchange shares for each publicly held share of Jacksonville Bancorp-Federal at
the adjusted maximum of the offering range.
If you
are currently a stockholder of Jacksonville Bancorp-Federal, your existing
shares will be canceled and exchanged for shares of Jacksonville
Bancorp-Maryland. The number of shares you receive will be based on
the final exchange ratio determined as of the closing of the
conversion.
The
following table shows how the exchange ratio will adjust, based on the number of
shares of common stock issued in the offering. The table also shows
how many shares of Jacksonville Bancorp-Maryland a hypothetical owner of
Jacksonville Bancorp-Federal common stock would receive in the exchange for 100
shares of Jacksonville Bancorp-Federal common stock owned at the consummation of
the conversion, depending on the number of shares issued in the
offering.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
of Jacksonville Bancorp- Maryland to be Issued for Shares of
Jacksonville Bancorp- Federal |
|
|
Total
Shares of Common Stock to be Issued in Conversion
and Offering |
|
|
|
|
|
Equivalent Value
of Shares Based Upon Current Market Price (1) |
|
|
Shares
to be Received for 100 Existing Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
to be Sold in This Offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange Ratio |
|
|
|
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
998,750 |
|
|
|
54.08 |
% |
|
|
848,122 |
|
|
|
45.92 |
% |
|
|
1,846,872 |
|
|
|
0.9615 |
|
|
$ |
9.62 |
|
|
|
96 |
|
Midpoint
|
|
|
1,175,000 |
|
|
|
54.08 |
|
|
|
997,790 |
|
|
|
45.92 |
|
|
|
2,172,790 |
|
|
|
1.1312 |
|
|
|
11.31 |
|
|
|
113 |
|
Maximum
|
|
|
1,351,250 |
|
|
|
54.08 |
|
|
|
1,147,459 |
|
|
|
45.92 |
|
|
|
2,498,709 |
|
|
|
1.3009 |
|
|
|
13.01 |
|
|
|
130 |
|
15%
above Maximum
|
|
|
1,553,938 |
|
|
|
54.08 |
|
|
|
1,319,578 |
|
|
|
45.92 |
|
|
|
2,873,515 |
|
|
|
1.4960 |
|
|
|
14.96 |
|
|
|
149 |
|
(1)
|
Represents
the value of shares of Jacksonville Bancorp-Maryland common stock received
in the conversion by a holder of one share of Jacksonville
Bancorp-Federal, at the exchange ratio, assuming the market price of
$10.00 per share.
|
Options to purchase shares of
Jacksonville Bancorp-Federal common stock which are outstanding immediately
prior to the consummation of the conversion will be converted into options to
purchase shares of Jacksonville Bancorp-Maryland common stock, with the number
of shares subject to the option and the exercise price per share to be adjusted
based upon the exchange ratio. The aggregate exercise price, term and
vesting period of the options will remain unchanged.
Exchange
of Existing Stockholders’ Stock Certificates
The
conversion of existing outstanding shares of Jacksonville Bancorp-Federal common
stock into the right to receive shares of Jacksonville Bancorp-Maryland common
stock will occur automatically on the effective date of the conversion. As soon
as practicable after the effective date of the conversion, our exchange agent
will send a transmittal form to each public stockholder of Jacksonville
Bancorp-Federal who holds stock certificates. The transmittal forms
will contain instructions on how to exchange stock certificates of Jacksonville
Bancorp-Federal common stock for stock certificates of Jacksonville
Bancorp-Maryland common stock. We expect that stock certificates
evidencing shares of Jacksonville Bancorp-Maryland common stock will be
distributed within five business days after we receive properly executed
transmittal forms, Jacksonville Bancorp-Federal stock certificates and other
required documents. Shares held by public stockholders in street name
(such as in a brokerage account) will be exchanged automatically upon the
effective date of the conversion; no transmittal forms will be mailed relating
to these shares.
No
fractional shares of Jacksonville Bancorp-Maryland common stock will be issued
to any public stockholder of Jacksonville Bancorp-Federal when the conversion is
completed. For each fractional share that would otherwise be issued to a
stockholder who holds a stock certificate, we will pay by check an amount equal
to the product obtained by multiplying the fractional share interest to which
the holder would otherwise be entitled by the $10.00 offering purchase price per
share. Payment for fractional shares will be made as soon as practicable after
the receipt by the exchange agent of the transmittal forms and the surrendered
Jacksonville Bancorp-Federal stock certificates. If your shares of
common stock are held in street name, you will automatically receive cash in
lieu of fractional shares.
You
should not forward your stock certificates until you have received transmittal
forms, which will include forwarding instructions. After the
conversion, stockholders will not receive shares of Jacksonville
Bancorp-Maryland common stock and will not be paid dividends on the shares of
Jacksonville Bancorp-Maryland common stock until existing certificates
representing shares of Jacksonville Bancorp-Federal common stock are surrendered
for exchange in compliance with the terms of the transmittal form. When
stockholders surrender their certificates, any unpaid dividends will be paid
without interest. For all other purposes, however, each certificate that
represents shares of Jacksonville Bancorp-Federal common stock outstanding at
the effective date of the conversion will be considered to evidence ownership of
shares of Jacksonville Bancorp-Maryland common stock into which those shares
have been converted by virtue of the conversion.
If a
certificate for Jacksonville Bancorp-Federal common stock has been lost, stolen
or destroyed, our exchange agent will issue a new stock certificate upon receipt
of appropriate evidence as to the loss, theft or destruction of the certificate,
appropriate evidence as to the ownership of the certificate by the claimant, and
appropriate and customary indemnification, which is normally effected by the
purchase of a bond from a surety company at the stockholder’s
expense.
All
shares of Jacksonville Bancorp-Maryland common stock that we issue in exchange
for existing shares of Jacksonville Bancorp-Federal common stock will be
considered to have been issued in full satisfaction of all rights pertaining to
such shares of common stock, subject, however, to our obligation to pay any
dividends or make any other distributions with a record date prior to the
effective date of the conversion that may have been declared by us on or prior
to the effective date, and which remain unpaid at the effective
date.
Effects
of Conversion on Depositors, Borrowers and Members
Continuity.
While the conversion is being accomplished, the normal business of Jacksonville
Savings Bank of accepting deposits and making loans will continue without
interruption. Jacksonville Savings Bank will continue to be an
Illinois-chartered savings bank and will continue to be regulated by the
Illinois Department of Financial and Professional Regulation and the Federal
Deposit Insurance Corporation. After the conversion, Jacksonville Savings Bank
will continue to offer existing services to depositors, borrowers and other
customers. The directors serving Jacksonville Bancorp-Federal at the
time of the conversion will be the directors of Jacksonville Bancorp-Maryland
after the conversion.
Effect
on Deposit Accounts. Pursuant
to the plan of conversion and reorganization, each depositor of Jacksonville
Savings Bank at the time of the conversion will automatically continue as a
depositor after the conversion, and the deposit balance, interest rate and other
terms of such deposit accounts will not change as a result of the conversion.
Each such account will be insured by the Federal Deposit Insurance Corporation
to the same extent as before the conversion. Depositors will continue to hold
their existing certificates, passbooks and other evidences of their
accounts.
Effect
on Loans.
No loan outstanding from Jacksonville Savings Bank will be affected by the
conversion, and the amount, interest rate, maturity and security for each loan
will remain as it was contractually fixed prior to the
conversion.
Effect
on Voting Rights of Members.
At present, all depositors of Jacksonville Savings Bank are members of, and have
voting rights in, Jacksonville Bancorp, MHC as to all matters requiring
membership action. Upon completion of the conversion, Jacksonville Bancorp, MHC
will cease to exist and depositors will no longer have voting rights. Upon
completion of the conversion, all voting rights in Jacksonville Savings Bank
will be vested in Jacksonville Bancorp-Maryland as the sole stockholder of
Jacksonville Savings Bank. The stockholders of Jacksonville
Bancorp-Maryland will possess exclusive voting rights with respect to
Jacksonville Bancorp-Maryland common stock.
Tax
Effects.
We will receive an opinion of counsel or tax advisor with regard to federal and
state income tax consequences of the conversion to the effect that the
conversion will not be taxable for federal or state income tax purposes to
Jacksonville Bancorp, MHC, Jacksonville Bancorp-Federal, the public stockholders
of Jacksonville Bancorp-Federal, members of Jacksonville Bancorp, MHC, eligible
account holders, supplemental eligible account holders, or Jacksonville Savings
Bank. See “—Material Income Tax Consequences.”
Effect
on Liquidation Rights. Each
depositor in Jacksonville Savings Bank has both a deposit account in
Jacksonville Savings Bank and a pro rata ownership interest in the net worth of
Jacksonville Bancorp, MHC based upon the deposit balance in his or her account.
This ownership interest is tied to the depositor’s account and has no tangible
market value separate from the deposit account. This interest may only be
realized in the event of a complete liquidation of Jacksonville Bancorp, MHC and
Jacksonville Savings Bank. Any depositor who opens a deposit account
obtains a pro rata ownership interest in Jacksonville Bancorp, MHC without any
additional payment beyond the amount of the deposit. A depositor who reduces or
closes his or her account receives a portion or all of the balance in the
deposit account but nothing for his or her ownership interest in the net worth
of Jacksonville Bancorp, MHC, which is lost to the extent that the balance in
the account is reduced or closed.
Consequently,
depositors in a stock subsidiary of a mutual holding company normally have no
way of realizing the value of their ownership interest, which has realizable
value only in the unlikely event that Jacksonville Bancorp, MHC and Jacksonville
Savings Bank are liquidated. If this occurs, the depositors of record at that
time, as owners, would share pro rata in any residual surplus and reserves of
Jacksonville Bancorp, MHC after other claims, including claims of depositors to
the amounts of their deposits, are paid.
Under the
plan of conversion and reorganization, however, certain depositors will receive
rights in liquidation accounts maintained by Jacksonville Bancorp-Maryland and
Jacksonville Savings Bank representing the amount of (i) Jacksonville Bancorp,
MHC’s ownership interest in Jacksonville Bancorp-Federal’s total stockholders’
equity as of the date of the latest statement of financial condition used in
this prospectus plus (ii) the value of the net assets of Jacksonville Bancorp,
MHC as of the date of the latest statement of financial condition of
Jacksonville Bancorp, MHC prior to the consummation of the conversion (excluding
its ownership of Jacksonville Bancorp-Federal). Jacksonville Bancorp-Maryland
and Jacksonville Savings Bank shall continue to hold the liquidation accounts
for the benefit of Eligible Account Holders and Supplemental Eligible Account
Holders who continue to maintain deposits in Jacksonville Savings
Bank. The liquidation accounts are also designed to provide payments
to depositors of their liquidation interests in the event of a liquidation of
Jacksonville Bancorp-Maryland and Jacksonville Savings Bank or of Jacksonville
Savings Bank alone. The liquidation account in Jacksonville Savings Bank would
be used only in the event that Jacksonville Bancorp-Maryland does not have
sufficient capital to fund its obligations under its liquidation
account. The total obligation of Jacksonville Savings Bank and
Jacksonville Bancorp-Maryland under their respective liquidation accounts will
never exceed the dollar amount of the Jacksonville Bancorp-Maryland liquidation
account. See “—Liquidation Rights.”
Stock
Pricing and Number of Shares to be Issued
The plan
of conversion and reorganization and federal regulations require that the
aggregate purchase price of the common stock sold in the offering must be based
on the appraised pro forma market value of the common stock, as determined by an
independent valuation. Jacksonville Savings Bank and Jacksonville
Bancorp-Federal have retained RP Financial, LC. to prepare an independent
valuation appraisal. For its services in preparing the initial valuation, RP
Financial, LC. will receive a fee of $25,000 and $10,000 for expenses and an
additional $5,000 for each valuation update, as necessary. Jacksonville Savings
Bank and Jacksonville Bancorp-Federal have agreed to indemnify RP Financial, LC.
and its employees and affiliates against specified losses, including any losses
in connection with claims under the federal securities laws, arising out of its
services as independent appraiser, except where such liability results from its
negligence or bad faith.
The
independent valuation appraisal considered the pro forma impact of the offering.
Consistent with the Office of Thrift Supervision appraisal guidelines, the
appraisal applied three primary methodologies: the pro forma price-to-book value
approach applied to both reported book value and tangible book value; the pro
forma price-to-earnings approach applied to reported and core earnings; and the
pro forma price-to-assets approach. The market value ratios applied in the three
methodologies were based upon the current market valuations of the peer group
companies, subject to valuation adjustments applied by RP Financial, LC. to
account for differences between Jacksonville Bancorp-Federal and the peer group.
RP Financial, LC. placed the greatest emphasis on the price-to-earnings and
price-to-book approaches in estimating pro forma market value.
The
independent valuation was prepared by RP Financial, LC. in reliance upon the
information contained in this prospectus, including the consolidated financial
statements of Jacksonville Bancorp-Federal. RP Financial, LC. also considered
the following factors, among others:
●
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the
present results and financial condition of Jacksonville Bancorp-Federal
and the projected results and financial condition of Jacksonville
Bancorp-Maryland;
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●
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the
economic and demographic conditions in Jacksonville Bancorp-Federal’s
existing market area;
|
●
|
certain
historical, financial and other information relating to Jacksonville
Bancorp-Federal;
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●
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a
comparative evaluation of the operating and financial characteristics of
Jacksonville Bancorp-Federal with those of other similarly situated
publicly traded savings institutions located in Illinois and other states
in the Midwestern United States;
|
●
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the
aggregate size of the offering of the shares of common
stock;
|
●
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the
impact of the conversion and offering on Jacksonville Bancorp-Federal’s
stockholders’ equity and earnings
potential;
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●
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the
proposed dividend policy of Jacksonville Bancorp-Maryland;
and
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●
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the
trading market for securities of comparable institutions and general
conditions in the market for such
securities.
|
Included
in RP Financial, LC.’s independent valuation were certain assumptions as to the
pro forma earnings of Jacksonville Bancorp-Maryland after the conversion that
were utilized in determining the appraised value. These assumptions
included estimated expenses, an assumed after-tax rate of return of 2.02% for
the twelve months ended December 31, 2009 on the net offering proceeds. See “Pro
Forma Data” for additional information concerning these assumptions. The use of
different assumptions may yield different results.
The
independent valuation states that as of February 19, 2010, the estimated pro
forma market value, or valuation range, of Jacksonville Bancorp-Maryland ranged
from a minimum of $18.5 million to a maximum of $25.0 million, with a midpoint
of $21.7 million. The board of directors of Jacksonville
Bancorp-Maryland decided to offer the shares of common stock for a price of
$10.00 per share. The aggregate offering price of the shares will be equal to
the valuation range multiplied by the percentage of Jacksonville Bancorp-Federal
common stock owned by Jacksonville Bancorp, MHC. The number of shares
offered will be equal to the aggregate offering price of the shares divided by
the price per share. Based on the valuation range, the percentage of
Jacksonville Bancorp-Federal common stock owned by Jacksonville Bancorp, MHC and
the $10.00 price per share, the minimum of the offering range will be 998,750
shares, the midpoint of the offering range will be 1,175,000 shares and the
maximum of the offering range will be 1,351,250 shares.
The board
of directors of Jacksonville Bancorp-Maryland reviewed the independent valuation
and, in particular, considered the following:
●
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Jacksonville
Bancorp-Federal’s financial condition and results of
operations;
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●
|
comparison
of financial performance ratios of Jacksonville Bancorp-Federal to those
of other financial institutions of similar
size;
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●
|
market
conditions generally and in particular for financial institutions;
and
|
●
|
the
historical trading price of the publicly held shares of Jacksonville
Bancorp-Federal common stock.
|
All of
these factors are set forth in the independent valuation. The board of directors
also reviewed the methodology and the assumptions used by RP Financial, LC. in
preparing the independent valuation and believes that such assumptions were
reasonable. The offering range may be amended with the approval of the Office of
Thrift Supervision, if required, as a result of subsequent developments in the
financial condition of Jacksonville Bancorp-Federal or Jacksonville Savings Bank
or market conditions generally. In the event the independent valuation is
updated to amend the pro forma market value of Jacksonville Bancorp-Maryland to
less than $18.5 million or more than $28.7 million, the appraisal will be filed
with the Securities and Exchange Commission by a post-effective amendment to
Jacksonville Bancorp-Maryland’s registration statement.
The
independent valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing our shares of
common stock. RP Financial, LC. did not independently verify our consolidated
financial statements and other information that we provided to them, nor did RP
Financial, LC. independently value our assets or liabilities. The independent
valuation considers Jacksonville Savings Bank as a going concern and should not
be considered as an indication of the liquidation value of Jacksonville Savings
Bank. Moreover, because the valuation is necessarily based upon
estimates and projections of a number of matters, all of which may change from
time to time, no assurance can be given that persons purchasing our common stock
in the offering will thereafter be able to sell their shares at prices at or
above the $10.00 price per share.
Following
commencement of the subscription offering, the maximum of the valuation range
may be increased by up to 15%, or up to $28.7 million, without resoliciting
subscribers, which will result in a corresponding increase of up to 15% in the
maximum of the offering range to up to 1,553,938 shares, to reflect changes in
the market and financial conditions or demand for the shares. We will
not decrease the minimum of the valuation range and the minimum of the offering
range without a resolicitation of subscribers. The subscription price
of $10.00 per share will remain fixed. See “—Limitations on Common
Stock Purchases” as to the method of distribution of additional shares to be
issued in the event of an increase in the offering range of up to 1,553,938
shares.
If the
update to the independent valuation at the conclusion of the offering results in
an increase in the maximum of the valuation range to more than $28.7 million and
a corresponding increase in the offering range to more than 1,553,938 shares, or
a decrease in the minimum of the valuation range to less than $18.5 million and
a corresponding decrease in the offering range to fewer than 998,750 shares,
then, after consulting with the Office of Thrift Supervision, we may terminate
the plan of conversion and reorganization, cancel deposit account withdrawal
authorizations and promptly return by check all funds received with interest at
Jacksonville Savings Bank’s statement savings rate of
interest. Alternatively, we may establish a new offering range,
extend the offering period and commence a resolicitation of purchasers or take
other actions as permitted by the Office of Thrift Supervision in order to
complete the offering. In the event that we extend the offering and
conduct a resolicitation, purchasers would have the opportunity to maintain,
change or cancel their stock orders within a specified period. If a
purchaser does not respond during the period, his or her stock order will be
canceled and payment will be returned promptly, with interest at Jacksonville
Savings Bank’s statement savings rate, and deposit account withdrawal
authorizations will be canceled. Any single offering extension will
not exceed 90 days; aggregate extensions may not conclude beyond _____________,
2012, which is two years after the special meeting of members to vote on the
conversion. An increase in the number of shares to be issued in the offering
would decrease both a subscriber’s ownership interest and Jacksonville
Bancorp-Maryland’s pro forma earnings and stockholders’ equity on a per share
basis while increasing pro forma earnings and stockholders’ equity on an
aggregate basis. A decrease in the number of shares to be issued in the offering
would increase both a subscriber’s ownership interest and Jacksonville
Bancorp-Maryland’s pro forma earnings and stockholders’ equity on a per share
basis, while decreasing pro forma earnings and stockholders’ equity on an
aggregate basis. For a presentation of the effects of these changes, see “Pro
Forma Data.”
Copies of
the independent valuation appraisal report of RP Financial, LC. and the detailed
memorandum setting forth the method and assumptions used in the appraisal report
are available for inspection at the main office of Jacksonville Savings Bank and
as specified under “Where You Can Find Additional Information.”
Subscription
Offering and Subscription Rights
In
accordance with the plan of conversion and reorganization, rights to subscribe
for shares of common stock in the subscription offering have been granted in the
following descending order of priority. The filling of all
subscriptions that we receive will depend on the availability of common stock
after satisfaction of all subscriptions of all persons having priority rights in
the subscription offering and to the maximum, minimum and overall purchase and
ownership limitations set forth in the plan of conversion and reorganization and
as described below under “—Limitations on Common Stock Purchases.”
Priority
1: Eligible Account Holders.
Each Jacksonville Savings Bank depositor with aggregate deposit account balances
of $50.00 or more (a “Qualifying Deposit”) at the close of business on December
31, 2008 (an “Eligible Account Holder”) will receive, without payment therefor,
nontransferable subscription rights to purchase up to the greater of $250,000
(25,000 shares) of our common stock, 0.10% of the total number of shares of
common stock issued in the offering, or 15 times the number of subscription
shares offered multiplied by a fraction of which the numerator is the aggregate
Qualifying Deposit account balances of the Eligible Account Holder and the
denominator is the aggregate Qualifying Deposit account balances of all Eligible
Account Holders, subject to the overall purchase limitations. See
“—Limitations on Common Stock Purchases.” If there are not sufficient
shares available to satisfy all subscriptions, shares will first be allocated so
as to permit each Eligible Account Holder to purchase a number of shares
sufficient to make his or her total allocation equal to the lesser of 100 shares
or the number of shares for which he or she subscribed. Thereafter, unallocated
shares will be allocated to each Eligible Account Holder whose subscription
remains unfilled in the proportion that the amount of his or her Qualifying
Deposit bears to the total amount of Qualifying Deposits of all subscribing
Eligible Account Holders whose subscriptions remain unfilled. If an amount so
allocated exceeds the amount subscribed for by any one or more Eligible Account
Holders, the excess shall be reallocated among those Eligible Account Holders
whose subscriptions are not fully satisfied until all available shares have been
allocated.
To ensure
proper allocation of our shares of common stock, each Eligible Account Holder
must list on his or her stock order form all deposit accounts in which he or she
had an ownership interest on December 31, 2008. In the event of
oversubscription, failure to list an account could result in fewer shares being
allocated than if all accounts had been disclosed. In the event of an
oversubscription, the subscription rights of Eligible Account Holders who are
also directors or executive officers of Jacksonville Bancorp-Federal or their
associates will be subordinated to the subscription rights of other Eligible
Account Holders to the extent attributable to increased deposits in the twelve
months preceding December 31, 2008.
Priority
2: Tax-Qualified Plans. Our
tax-qualified employee benefit plans, including our employee stock ownership
plan and 401(k) plan, will receive, without payment therefor, nontransferable
subscription rights to purchase in the aggregate up to 10% of the shares of
common stock sold in the offering. Our employee stock ownership plan intends to
purchase up to 4% of
the shares of common stock sold in the offering with the remaining shares in
this purchase priority allocated to our 401(k) plan. If market conditions
warrant, in the judgment of its trustees, the employee stock ownership plan may
elect to purchase shares in the open market following the completion of the
conversion.
Priority
3: Supplemental Eligible Account Holders. To
the extent that there are sufficient shares of common stock remaining after
satisfaction of subscriptions by Eligible Account Holders and our tax-qualified
employee stock benefit plans, each Jacksonville Savings Bank depositor with a
Qualifying Deposit at the close of business on March 31, 2010 who is not an
Eligible Account Holder (“Supplemental Eligible Account Holder”) will receive,
without payment therefor, nontransferable subscription rights to purchase up to
the greater of $250,000 (25,000 shares) of common stock, 0.10% of the total
number of shares of common stock issued in the offering, or 15 times the number
of subscription shares offered multiplied by a fraction of which the numerator
is the aggregate Qualifying Deposit account balances of the Supplemental
Eligible Account Holder and the denominator is the aggregate Qualifying Deposit
account balances of all Supplemental Eligible Account Holders, subject to the
overall purchase limitations. See “—Limitations on Common Stock Purchases.” If
there are not sufficient shares available to satisfy all subscriptions, shares
will be allocated so as to permit each Supplemental Eligible Account Holder to
purchase a number of shares sufficient to make his or her total allocation equal
to the lesser of 100 shares of common stock or the number of shares for which he
or she subscribed. Thereafter, unallocated shares will be allocated to each
Supplemental Eligible Account Holder whose subscription remains unfilled in the
proportion that the amount of his or her Qualifying Deposit bears to the total
amount of Qualifying Deposits of all Supplemental Eligible Account Holders whose
subscriptions remain unfilled. If an amount so allocated exceeds the amount
subscribed for by any one or more Supplemental Eligible Account Holders, the
excess shall be reallocated among those Supplemental Eligible Account Holders
whose subscriptions are not fully satisfied until all available shares have been
allocated.
To ensure
proper allocation of common stock, each Supplemental Eligible Account Holder
must list on the stock order form all deposit accounts in which he or she had an
ownership interest at March 31, 2010. In the event of
oversubscription, failure to list an account could result in fewer shares being
allocated than if all accounts had been disclosed.
Priority
4: Other Depositors.
To the extent that there are shares of common stock remaining after satisfaction
of subscriptions by Eligible Account Holders, our tax-qualified employee stock
benefit plans, and Supplemental Eligible Account Holders, each depositor of
Jacksonville Savings Bank as of the close of business on May 10, 2010 who is not
an Eligible Account Holder or Supplemental Eligible Account Holder (“Other
Depositors”) will receive, without payment therefor, nontransferable
subscription rights to purchase up to the greater of $250,000 (25,000 shares) of
common stock or 0.10% of the total number of shares of common stock issued in
the offering, subject to the overall purchase limitations. See “—Limitations on
Common Stock Purchases.” If there are not sufficient shares available to satisfy
all subscriptions, shares will be allocated so as to permit each Other Depositor
to purchase a number of shares sufficient to make his or her total allocation
equal to the lesser of 100 shares of common stock or the number of shares for
which he or she subscribed. Thereafter, available shares will be
allocated in the proportion that the amount of the subscription of each Other
Depositor bears to the total amount of the subscriptions of all Other Depositors
whose subscriptions remain unsatisfied. To ensure proper allocation of common
stock, each Other Depositor must list on the stock order form all deposit
accounts in which he or she had an ownership interest at May 10,
2010. In the event of oversubscription, failure to list an account
could result in fewer shares being allocated than if all accounts had been
disclosed.
Expiration
Date. The subscription offering will expire at 12:00 noon, Central Time,
on [expiration date], unless extended by us for up to 45 days or such additional
periods with the approval of the Office of Thrift Supervision, if necessary.
Subscription rights will expire whether or not each eligible depositor can be
located. We may decide to extend the expiration date of the
subscription offering for any reason, whether or not subscriptions have been
received for shares at the minimum, midpoint or maximum of the offering range.
Subscription rights which have not been exercised prior to the expiration date
will become void.
We will
not execute orders until at least the minimum number of shares of common stock
have been sold in the offering. If at least 998,750 shares have not
been sold in the offering within 45 days after [final expiration date] and the
Office of Thrift Supervision has not consented to an extension, all funds
delivered to us to purchase shares of common stock in the offering will be
returned promptly to the subscribers with interest at Jacksonville Savings
Bank’s statement savings rate and all deposit account withdrawal authorizations
will be canceled. If an extension beyond _______________, 2010 is granted by the
Office of Thrift Supervision, we will resolicit purchasers in the offering as
described under “—Procedures for Purchasing Shares—Expiration
Date.”
Community
Offering
To the
extent that shares of common stock remain available for purchase after
satisfaction of all subscriptions of Eligible Account Holders, our tax-qualified
employee stock benefit plans, Supplemental Eligible Account Holders and Other
Depositors, we may offer shares pursuant to the plan of conversion and
reorganization to members of the general public in a community
offering. Shares may be offered with the following
preferences:
(i)
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Natural
persons (including trusts of natural persons) and then other persons
(including any corporation, partnership, association, joint-stock company,
limited liability company, trust, unincorporated organization, or
government or political subdivision of a government) residing in the
counties of Cass, Greene, Macoupin, Montgomery, Morgan, Pike, Sangamon and
Scott, Illinois;
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(ii)
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Jacksonville
Bancorp-Federal’s public stockholders as of May 10, 2010;
and
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(iii)
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Other
members of the general public.
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Subscribers in the
community offering may purchase up to 25,000 shares of common stock, subject to
the overall purchase limitations. See “—Limitations on Common Stock Purchases.”
The minimum purchase is 25 shares. The
opportunity to purchase shares of common stock in the community offering
category is subject to our right, in our sole discretion, to accept or reject
any such orders in whole or in part either at the time of receipt of an order or
as soon as practicable following the expiration date of the
offering.
If we do
not have sufficient shares of common stock available to fill the orders of
natural persons residing in the counties of Cass, Greene, Macoupin, Montgomery,
Morgan, Pike, Sangamon and Scott, Illinois, we will allocate the available
shares among those persons in a manner that permits each of them, to the extent
possible, to purchase the lesser of 100 shares or the number of shares
subscribed for by such person. Thereafter, unallocated shares will be allocated
on an equal number of shares basis per order. If oversubscription occurs due to
the orders of public stockholders of Jacksonville Bancorp-Federal as of May
10, 2010 or to other members of the general public, the allocation
procedures described above will apply to the stock orders of such persons.
Unallocated shares will be allocated in the community offering to fill those
orders that remain unsatisfied up to a maximum of 2% of the shares sold in the
offering, and thereafter any remaining shares will be allocated on an equal
number of shares basis per order.
The term
“residing” or “resident” as used in this prospectus means any person who
occupies a dwelling within the counties of Cass, Greene, Macoupin, Montgomery,
Morgan, Pike, Sangamon and Scott, Illinois, has a present intent to remain
within this community for a period of time, and manifests the genuineness of
that intent by establishing an ongoing physical presence within the community,
together with an indication that this presence within the community is something
other than merely transitory in nature. We may utilize deposit or
loan records or other evidence provided to us to decide whether a person is a
resident. In all cases, however, the determination shall be in our sole
discretion.
Expiration
Date. The community offering, if any, may begin during or
after the subscription offering, and is currently expected to terminate at the
same time as the subscription offering, and must terminate no more than 45 days
following the subscription offering. Jacksonville Bancorp-Maryland may decide to
extend the community offering for any reason and is not required to give
purchasers notice of any such extension unless such period extends beyond [final
expiration date], in which event we will resolicit purchasers in the offering as
described under “—Procedures for Purchasing Shares—Expiration
Date.”
Syndicated
Community Offering
As a
final step in the conversion, the plan of conversion and reorganization provides
that, if feasible, all shares of common stock not purchased in the subscription
offering and community offering, if any, may be offered for sale to selected
members of the general public in a syndicated community offering through a
syndicate of registered broker-dealers managed by Keefe, Bruyette & Woods,
Inc. as agent of Jacksonville Bancorp-Maryland. We call this the
syndicated community offering. We expect that the syndicated
community offering will begin as soon as practicable after termination of the
subscription offering and the community offering, if any. We, in our
sole discretion, have the right to reject orders in whole or in part received in
the syndicated community offering. Neither Keefe, Bruyette &
Woods, Inc. nor any registered broker-dealer shall have any obligation to take
or purchase any shares of common stock in the syndicated community offering;
however, Keefe, Bruyette & Woods, Inc. has agreed to use its best efforts in
the sale of shares in any syndicated community offering. The syndicated
community offering would terminate no later than _________, 2010, unless
extended by us, with approval of the Office of Thrift Supervision.
The price
at which common stock is sold in the syndicated community offering will be the
same price at which shares are offered and sold in the subscription offering and
community offering. No person may purchase more than $250,000 (25,000
shares) of common stock in the syndicated community offering, subject to the
maximum purchase limitations. See “– Limitations on Common Stock
Purchases.” Unless
the Office of Thrift Supervision permits otherwise, accepted orders for
Jacksonville Bancorp-Maryland common stock in the syndicated community offering
will first be filled up to a maximum of two percent (2%) of the shares sold in
the offering, and thereafter any remaining shares will be allocated on an equal
number of shares basis per order until all shares have been
allocated.
If a
syndicated community offering is held, Keefe, Bruyette & Woods, Inc. will
serve as sole book running manager. In such capacity, Keefe, Bruyette
& Woods, Inc. may form a syndicate of other broker-dealers who are Financial
Industry Regulatory Authority member firms. Neither Keefe, Bruyette
& Woods, Inc. nor any registered broker-dealer will have any obligation to
take or purchase any shares of the common stock in the syndicated community
offering. The syndicated community offering will be conducted in
accordance with certain Securities and Exchange Commission rules applicable to
best efforts offerings. Generally under those rules, Keefe, Bruyette
& Woods, Inc., a broker-dealer, will deposit funds it receives prior to
closing from interested investors into a separate non-interest-bearing bank
account at a bank other than Jacksonville Savings Bank. The closing
of the syndicated community offering is subject to conditions set forth in an
agency agreement among Jacksonville Bancorp-Federal, Jacksonville
Bancorp-Maryland, Jacksonville Bancorp, MHC and Jacksonville Savings Bank on one
hand and Keefe, Bruyette & Woods, Inc. on the other hand. If and
when all the conditions for the closing are met, funds for common stock sold in
the syndicated community offering, less fees and commissions payable by us, will
be delivered promptly to us. If the offering is consummated, but some
or all of an interested investor’s funds are not accepted by us, those funds
will be returned to the interested investor promptly after closing, without
interest. If the offering is not consummated, funds in the account
will be returned promptly, without interest, to the potential
investor. Normal customer ticketing will be used for order
placement. In the syndicated community offering, order forms will not
be used.
The
syndicated community offering will be completed within 45 days after the
termination of the subscription offering, unless extended by Jacksonville
Savings Bank with the approval of the Office of Thrift Supervision.
If for
any reason we cannot effect a syndicated community offering of shares of common
stock not purchased in the subscription and community offerings, or in the event
that there is an insignificant number of shares remaining unsold after the
subscription, community and syndicated community offerings, we will try to make
other arrangements for the sale of unsubscribed shares, if possible. The Office
of Thrift Supervision must approve any such arrangements.
Limitations
on Common Stock Purchases
The plan
of conversion and reorganization includes the following limitations on the
number of shares of common stock that may be purchased in the
offering:
(i)
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No
person may purchase fewer than 25 shares of common stock or more than
25,000 shares ($250,000);
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(ii)
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Tax
qualified employee benefit plans, including our employee stock ownership
plan and 401(k) plan, may purchase in the aggregate up to 10% of the
shares of common stock issued in the offering, including shares issued in
the event of an increase in the offering range of up to
15%;
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(iii)
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Except
for the employee stock ownership plan and 401(k) plan, as described above,
no person or entity, together with associates or persons acting in concert
with such person or entity, may purchase more than 50,000 shares
($500,000) in all categories of the offering
combined;
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(iv)
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Current
stockholders of Jacksonville Bancorp-Federal are subject to an ownership
limitation. As previously described, current stockholders of
Jacksonville Bancorp-Federal will receive shares of Jacksonville
Bancorp-Maryland common stock in exchange for their existing shares of
Jacksonville Bancorp-Federal common stock. The number of shares of common
stock that a stockholder may purchase in the offering, together with
associates or persons acting in concert with such stockholder, when
combined with the shares that the stockholder and his or her associates
will receive in exchange for existing Jacksonville Bancorp-Federal common
stock, may not exceed 5% of the shares of common stock of Jacksonville
Bancorp-Maryland to be issued and outstanding at the completion of the
conversion; and
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(v)
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The
maximum number of shares of common stock that may be purchased in all
categories of the offering by senior officers and directors of
Jacksonville Savings Bank and their associates, in the aggregate, when
combined with shares of common stock issued in exchange for existing
shares, may not exceed 30% of the shares issued in the
conversion.
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Depending
upon market or financial conditions, our board of directors, with the approval
of the Office of Thrift Supervision and without further approval of members of
Jacksonville Bancorp, MHC, may decrease or increase the purchase and ownership
limitations. If a purchase limitation is increased, subscribers in
the subscription offering who ordered the maximum amount will be given, and, in
our sole discretion, some other large subscribers who through their
subscriptions evidence a desire to purchase the maximum allowable number of
shares may be given, the opportunity to increase their subscriptions up to the
then applicable limit. The effect of this type of resolicitation will
be an increase in the number of shares of common stock owned by subscribers who
choose to increase their subscriptions. In the event that the maximum
purchase limitation is increased to 5% of the shares sold in the offering, such
limitation may be further increased to 9.99%, provided that orders for
Jacksonville Bancorp-Maryland common stock exceeding 5% of the shares sold in
the offering shall not exceed in the aggregate 10% of the total shares sold in
the offering.
In the
event of an increase in the offering range of up to 1,553,938 shares of common
stock, shares will be allocated in the following order of priority in accordance
with the plan of conversion and reorganization:
(i)
|
to
fill the subscriptions of our tax-qualified employee benefit plans,
including the employee stock ownership plan, for up to 10% of the total
number of shares of common stock issued in the
offering;
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(ii)
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in
the event that there is an oversubscription at the Eligible Account
Holder, Supplemental Eligible Account Holder or Other Depositor levels, to
fill unfilled subscriptions of these subscribers according to their
respective priorities; and
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(iii)
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to
fill unfilled subscriptions in the community offering, with preference
given first to natural persons residing in the counties of Cass, Greene,
Macoupin, Montgomery, Morgan, Pike, Sangamon and Scott, Illinois, then to
Jacksonville Bancorp-Federal’s public stockholders as of May 10,
2010 and then to members of the general
public.
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The term
“associate” of a person means:
(i)
|
any
corporation or organization, other than Jacksonville Bancorp-Federal,
Jacksonville Savings Bank or a majority-owned subsidiary of Jacksonville
Savings Bank, of which the person is a senior officer, partner
or 10% beneficial stockholder;
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(ii)
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any
trust or other estate in which the person has a substantial beneficial
interest or serves as a trustee or in a similar fiduciary capacity;
provided, however, it does not include any employee stock benefit plan in
which the person has a substantial beneficial interest or serves as
trustee or in a similar fiduciary capacity;
and
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(iii)
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any
blood or marriage relative of the person, who either has the same home as
the person or who is a director or officer of Jacksonville Bancorp-Federal
or Jacksonville Savings Bank.
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The term
“acting in concert” means:
(i)
|
knowing
participation in a joint activity or interdependent conscious parallel
action towards a common goal whether or not pursuant to an express
agreement; or
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(ii)
|
a
combination or pooling of voting or other interests in the securities of
an issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or
otherwise.
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A person
or company that acts in concert with another person or company (“other party”)
will 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 capacity solely for the purpose of
determining whether common stock held by the trustee and common stock held by
the employee stock benefit plan will be aggregated.
We have
the sole discretion to determine whether prospective purchasers are “associates”
or “acting in concert.” Persons having the same address, and persons
exercising subscription rights through qualifying deposits registered at the
same address will be deemed to be acting in concert unless we determine
otherwise.
Our
directors are not treated as associates of each other solely because of their
membership on the board of directors. Common stock purchased in the offering
will be freely transferable except for shares purchased by executive officers
and directors of Jacksonville Bancorp-Maryland or Jacksonville Savings Bank and
except as described below. Any purchases made by any associate of
Jacksonville Bancorp-Maryland or Jacksonville Savings Bank for the explicit
purpose of meeting the minimum number of shares of common stock required to be
sold in order to complete the offering shall be made for investment purposes
only and not with a view toward redistribution. In addition, under
Financial Industry Regulatory Authority guidelines, members of the Financial
Industry Regulatory Authority and their associates are subject to certain
restrictions on transfer of securities purchased in accordance with subscription
rights and to certain reporting requirements upon purchase of these
securities. For a further discussion of limitations on purchases of
our shares of common stock at the time of conversion and thereafter, see
“—Certain Restrictions on Purchase or Transfer of Our Shares after Conversion”
and “Restrictions on Acquisition of Jacksonville Bancorp-Maryland.”
Plan
of Distribution; Selling Agent Compensation
Offering
materials have been initially distributed to certain persons by mail, with
additional copies made available through our Stock Information
Center.
We have
engaged Keefe, Bruyette & Woods, Inc., a broker-dealer registered with the
Financial Industry Regulatory Authority, as a selling agent in connection with
the offering of our common stock. In its role as selling agent,
Keefe, Bruyette & Woods, Inc., will:
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provide
advice on the financial and securities market implications of the plan of
conversion and reorganization and related corporate documents, including
our business plan;
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assist
in structuring our stock offering, including developing and assisting in
implementing a market strategy for the stock
offering;
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review
all offering documents, including this prospectus, stock order forms and
related offering materials (we are responsible for the preparation and
filing of such documents);
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assist
us in preparing for and scheduling meetings with potential investors and
broker-dealers, as necessary;
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assist
us in analyzing proposals from outside vendors retained in connection with
the stock offering, including printers, transfer agents and appraisal
firms;
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assist
us in the drafting and distribution of press releases as required or
appropriate in connection with the stock
offering;
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meet
with the board of directors and management to discuss any of these
services; and
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provide
such other financial advisory and investment banking services in
connection with the stock offering as may be agreed upon by Keefe,
Bruyette & Woods, Inc. and us.
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For these
services, Keefe, Bruyette & Woods, Inc. will receive a management fee of
$30,000, payable in four consecutive monthly installments commencing January
2010, which will be credited against the success fees in the subscription and
community offerings. A success fee of 1.5% of the aggregate dollar amount of the
common stock sold in the subscription offering and a success fee of 2.5% of the
aggregate dollar amount of the common stock sold in the community offering will
be paid to Keefe, Bruyette & Woods, Inc., each if the conversion is
consummated, excluding shares purchased by our directors, officers and employees
and members of their immediate families, our employee stock ownership plan and
our tax-qualified or stock-based compensation or similar plans (except
individual retirement accounts). In addition, Keefe, Bruyette & Woods, Inc.
will not receive any fees for the exchange shares issued to current stockholders
of Jacksonville Bancorp-Federal as part of the conversion.
The plan
of conversion and reorganization provides that, if necessary, all shares of
common stock not purchased in the subscription offering and community offering
may be offered for sale to the general public in a syndicated community offering
to be managed by Keefe, Bruyette & Woods, Inc. In such capacity,
Keefe, Bruyette & Woods, Inc. may form a syndicate of other
broker-dealers. Neither Keefe, Bruyette & Woods, Inc. nor any
registered broker-dealer will have any obligation to take or purchase any shares
of common stock in the syndicated community offering; however, Keefe, Bruyette
& Woods, Inc. has agreed to use its best efforts in the sale of shares in
any syndicated community offering. If there is a syndicated community
offering, Keefe, Bruyette & Woods, Inc. will receive a management fee not to
exceed 6.0% of the aggregate dollar amount of the common stock sold in the
syndicated community offering. Of this amount, Keefe, Bruyette &
Woods, Inc. will pass on to selected broker-dealers, who 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 not to exceed 3% of
the aggregate dollar amount of the common stock sold in the syndicated community
offering.
We also
will reimburse Keefe, Bruyette & Woods, Inc. for its reasonable
out-of-pocket expenses associated with its marketing effort up to a maximum of
$7,500, which may be increased up to $15,000 only in the case of a syndicated
community offering. In addition, we will reimburse Keefe, Bruyette
& Woods, Inc. for fees and expenses of its counsel not to exceed
$50,000. If the plan of conversion and reorganization is terminated
or if Keefe, Bruyette & Woods, Inc.’s engagement is terminated in accordance
with the provisions of the agreement, Keefe, Bruyette & Woods, Inc. will
only receive reimbursement of its reasonable out-of-pocket expenses and the
portion of the management fee payable and will return any amounts paid or
advanced by us in excess of these amounts. We will indemnify Keefe, Bruyette
& Woods, Inc. against liabilities and expenses (including legal fees)
related to or arising out of Keefe, Bruyette & Woods, Inc.’s engagement as
our selling agent and performance of services as our selling agent.
We have
also engaged Keefe, Bruyette & Woods, Inc. to act as our conversion agent in
connection with the stock offering. In its role as conversion agent, Keefe,
Bruyette & Woods, Inc. will, among other things:
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consolidate
accounts and develop a central
file;
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prepare
proxy forms and proxy materials;
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tabulate
proxies and ballots;
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act
as inspector of election at the special meeting of
members;
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assist
us in establishing and managing the Stock Information
Center;
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assist
our financial printer with labeling of stock offering
materials;
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process
stock order forms and certification forms and produce daily reports and
analysis;
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assist
our transfer agent with the generation and mailing of stock
certificates;
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advise
us on interest and refund calculations;
and
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create
tax forms for interest reporting.
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For these
services, Keefe, Bruyette & Woods, Inc. will receive a fee of $25,000, and
we have made an advance payment of $10,000 to Keefe, Bruyette & Woods, Inc.
with respect to this fee. We also will reimburse Keefe, Bruyette
& Woods, Inc. for its reasonable out-of-pocket expenses associated with its
acting as conversion agent not to exceed $2,500. If the plan of
conversion and reorganization is terminated or if Keefe, Bruyette & Woods,
Inc.’s engagement is terminated in accordance with the provisions of the
agreement, Keefe, Bruyette & Woods, Inc. will be entitled to the advance
payment and also receive reimbursement of its reasonable out-of-pocket expenses.
We will indemnify Keefe, Bruyette & Woods, Inc. against liabilities and
expenses (including legal fees) related to or arising out of Keefe, Bruyette
& Woods, Inc.’s engagement as our conversion agent and performance of
services as our conversion agent.
Some of
our directors and executive officers may participate in the solicitation of
offers to purchase common stock. These persons will be reimbursed for their
reasonable out-of-pocket expenses incurred in connection with the solicitation.
Other regular employees of Jacksonville Savings Bank may assist in the offering,
but only in ministerial capacities, and may provide clerical work in effecting a
sales transaction. No offers or sales may be made by tellers or at
the teller counters. Investment-related questions of prospective
purchasers will be directed to executive officers or registered representatives
of Keefe, Bruyette & Woods, Inc. Our other employees have been instructed
not to solicit offers to purchase shares of common stock or provide advice
regarding the purchase of common stock. We will rely on Rule 3a4-1
under the Securities Exchange Act of 1934, as amended, and sales of common stock
will be conducted within the requirements of Rule 3a4-1, so as to permit
officers, directors and employees to participate in the sale of common stock.
None of our officers, directors or employees will be compensated in connection
with their participation in the offering.
Prospectus
Delivery
To ensure
that each purchaser receives a prospectus at least 48 hours before the
expiration date of the offering in accordance with Rule 15c2-8 of the Securities
Exchange Act of 1934, we may not mail a prospectus any later than five days
prior to the expiration date or hand deliver any later than two days prior to
the expiration date. Execution of an order form will confirm receipt of delivery
in accordance with Rule 15c2-8. Order forms will only be distributed with or
preceded by a prospectus.
In the
syndicated community offering or any “stand-by” underwritten public offering, a
prospectus in electronic format may be made available on the Internet sites or
through other online services maintained by Keefe, Bruyette & Woods, Inc. or
one or more other members of the syndicate, or by their respective affiliates.
In those cases, prospective investors may view offering terms online and,
depending upon the syndicate member, prospective investors may be allowed to
place orders online. The members of the syndicate may agree with us to allocate
a specific number of shares for sale to online brokerage account holders. Any
such allocation for online distributions will be made on the same basis as other
allocations.
Other
than the prospectus in electronic format, the information on the Internet sites
referenced in the preceding paragraph and any information contained in any other
Internet site maintained by any member of the syndicate is not part of this
prospectus or the registration statement of which this prospectus forms a part,
has not been approved and/or endorsed by us or by Keefe, Bruyette & Woods,
Inc. or any other member of the syndicate in its capacity as selling agent or
syndicate member and should not be relied upon by investors.
Procedure
for Purchasing Shares
Expiration
Date.
The subscription and community offerings will expire at 12:00 noon, Central
Time, on [expiration date], unless we extend it for up to 45 days, with the
approval of the Office of Thrift Supervision, if required. This extension may be
approved by us, in our sole discretion, without further approval or notice to
purchasers in the offering. Any extension of the subscription and/or community
offering beyond [final expiration date] would require the Office of Thrift
Supervision’s approval. If the offering is so extended, or if the
offering range is decreased or is increased above the adjusted maximum of the
offering range, we will be required to resolicit purchasers before proceeding
with the offering.
We
reserve the right in our sole discretion to terminate the offering at any time
and for any reason, in which case we will cancel any deposit account withdrawal
orders and promptly return all funds submitted, with interest at Jacksonville
Savings Bank’s statement savings rate from the date of processing.
Use
of Order Forms in the Subscription and Community Offerings.
In order to purchase shares of common stock in the subscription and community
offerings, you must complete a stock order form and remit full
payment. We are not required to accept orders submitted on
photocopied or facsimiled order forms. All order forms must be received (not
postmarked) prior to 12:00 noon, Central Time, on [expiration date]. We are not
required to accept order forms that are not received by that time, are not
signed or are otherwise executed defectively or are received without full
payment or without appropriate withdrawal instructions. We are not required to
notify subscribers of incomplete or improperly executed order forms, and we have
the right to waive or permit the correction of incomplete or improperly executed
order forms. We do not represent, however, that we will do so and we
have no affirmative duty to notify any prospective subscriber of any such
defects. You may submit your order form and payment either by mail
using the stock order return envelope provided, by overnight delivery to the
indicated address on the order form or by delivering your order form in person
at any of Jacksonville Savings Bank’s branch offices. Once tendered,
an order form cannot be modified or revoked without our consent. We
reserve the right, in our sole discretion, to reject orders received in the
community offering, in whole or in part, at the time of receipt or at any time
prior to completion of the offering. If you are ordering shares in
the subscription offering, you must represent that you are purchasing shares for
your own account and that you have no agreement or understanding with any person
for the sale or transfer of the shares. We have the right to reject
any order submitted in the offering by a person who we believe is making false
representations or who we otherwise believe, either alone or acting in concert
with others, is violating, evading, circumventing, or intends to violate, evade
or circumvent the terms and conditions of the plan of conversion. Our
interpretation of the terms and conditions of the plan of conversion and
reorganization and of the acceptability of the order forms will be
final.
By
signing the order form, you will be acknowledging that the common stock is not a
deposit or savings account and is not federally insured or otherwise guaranteed
by Jacksonville Savings Bank or the federal government, and that you received a
copy of this prospectus. However, signing the order form will not result in you
waiving your rights under the Securities Act of 1933 or the Securities Exchange
Act of 1934.
Payment
for Shares.
Payment for all shares of common stock will be required to accompany all
completed order forms for the purchase to be valid. Payment for shares may be
made by:
(i)
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personal
check, bank check or money order, made payable to Jacksonville Bancorp,
Inc.; or
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(ii)
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authorizing
us to withdraw funds from Jacksonville Savings Bank savings and
certificate of deposit accounts (not checking accounts) designated on the
stock order form.
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Appropriate
means for designating withdrawals from deposit accounts at Jacksonville Savings
Bank are provided on the order form. The funds designated must be available in
the account(s) at the time the order form is received. A hold will be placed on
these funds, making them unavailable to the depositor. Funds authorized for
withdrawal will continue to earn interest within the account at the contract
rate until the offering is completed, at which time the designated withdrawal
will be made. Interest penalties for early withdrawal applicable to certificate
accounts will not apply to withdrawals authorized for the purchase of shares of
common stock; however, if a withdrawal results in a certificate account with a
balance less than the applicable minimum balance requirement, the certificate
will be canceled at the time of withdrawal without penalty and the remaining
balance will earn interest at the current savings rate subsequent to the
withdrawal. In the case of payments made by personal check, these
funds must be available in the account(s). Checks and money orders will be
immediately cashed and placed in a segregated account at Jacksonville Savings
Bank and will earn interest at Jacksonville Savings Bank’s statement savings
rate from the date payment is processed until the offering is completed or
terminated.
You may
not remit cash, Jacksonville Savings Bank line of credit checks, and third-party
checks (including those payable to you and endorsed over to Jacksonville
Bancorp, Inc.). Additionally, you may not designate a direct withdrawal from
Jacksonville Savings Bank accounts with check-writing
privileges. Please provide a check instead. If you request
that we do so, we reserve the right to interpret that as your authorization to
treat those funds as if we had received a check for the designated amount, and
we will immediately withdraw the amount from your checking account. If permitted
by the Office of Thrift Supervision, in the event we resolicit large purchasers,
as described above in “Limitation on
Common Stock Purchases,” such purchasers
who wish to increase their purchases will not be able to use personal checks to
pay for the additional shares.
Once we
receive your executed stock order form, it may not be modified, amended or
rescinded without our consent, unless the offering is not completed by
_______________, in which event purchasers may be given the opportunity to
increase, decrease or rescind their orders for a specified period of
time.
Regulations
prohibit Jacksonville Savings Bank from lending funds or extending credit to any
persons to purchase shares of common stock in the offering.
We shall
have the right, in our sole discretion, to permit institutional investors to
submit irrevocable orders together with the legally binding commitment for
payment and to thereafter pay for the shares of common stock for which they
subscribe in the community offering at any time prior to 48 hours before
the completion of the conversion. This payment may be made by wire
transfer.
If our
employee stock ownership plan purchases shares in the offering, it will not be
required to pay for such shares until consummation of the offering, provided
that there is a loan commitment from an unrelated financial institution or
Jacksonville Bancorp-Maryland to lend to the employee stock ownership plan the
necessary amount to fund the purchase.
Using
IRA Funds
If you
are interested in using your individual retirement account funds to purchase
shares of common stock, you must do so through a self-directed individual
retirement account, such as a brokerage firm individual retirement
account. By regulation, Jacksonville Savings Bank’s individual
retirement accounts are not self-directed, so they cannot be invested in our
shares of common stock. Therefore, if you wish to use funds that are
currently in a Jacksonville Savings Bank individual retirement account, you may
not designate on the order form that you wish funds to be withdrawn from the
account for the purchase of common stock. The funds you wish to use for the
purchase of common stock will instead have to be transferred to a brokerage
account. If you do not have such an account, you will need to
establish one before placing a stock order. An annual administrative
fee may be payable to the independent trustee or custodian. There
will be no early withdrawal or Internal Revenue Service interest penalties for
these transfers. Depositors interested in using funds in an individual
retirement account or any other retirement account, whether at Jacksonville
Savings Bank or elsewhere, to purchase shares of common stock should contact our
Stock Information Center for guidance as soon as possible, preferably at least
two weeks prior to the [expiration date] offering deadline, because processing
such transactions takes additional time, and whether such funds can be used may
depend on limitations imposed by the institutions where such funds are currently
held. We cannot guarantee that you will be able to use such funds.
Delivery
of Stock Certificates.
Certificates representing shares of common stock sold in the subscription and
community offerings will be mailed to the persons entitled thereto at the
certificate registration address noted by them on the order form, as soon as
practicable following consummation of the offering and receipt of all necessary
regulatory approvals. Any certificates returned as undeliverable will be held by
the transfer agent until claimed by persons legally entitled thereto or
otherwise disposed of in accordance with applicable law. Until
certificates for the shares of common stock are available and delivered to
purchasers, purchasers may not be able to sell the shares of common stock which
they ordered, even though the common stock will have begun
trading.
Other
Restrictions.
Notwithstanding any other provision of the plan of conversion and
reorganization, no person is entitled to purchase any shares of common stock to
the extent the purchase would be illegal under any federal or state law or
regulation, including state “blue sky” regulations, or would violate regulations
or policies of the Financial Industry Regulatory Authority, particularly those
regarding free riding and withholding. We may ask for an acceptable legal
opinion from any purchaser as to the legality of his or her purchase and we may
refuse to honor any purchase order if an opinion is not timely
furnished. In addition, we are not required to offer shares of common
stock to any person who resides in a foreign country, or in a State of the
United States with respect to which any of the following apply: (i) a small
number of persons otherwise eligible to subscribe for shares under the plan of
conversion reside in such state; (ii) the issuance of subscription rights or the
offer or sale of shares of common stock to such persons would require us, under
the securities laws of such state, to register as a broker, dealer, salesman or
agent or to register or otherwise qualify our securities for sale in such state;
or (iii) such registration or qualification would be impracticable for reasons
of cost or otherwise.
Restrictions
on Transfer of Subscription Rights and Shares
Office
of Thrift Supervision regulations prohibit any person with subscription rights,
including the Eligible Account Holders, Supplemental Eligible Account Holders
and Other Depositors, from transferring or entering into any agreement or
understanding to transfer the legal or beneficial ownership of the subscription
rights issued under the plan of conversion and reorganization or the shares of
common stock to be issued upon their exercise. These rights may be exercised
only by the person to whom they are granted and only for his or her
account. When registering your stock purchase on the order form, you
should not add the name(s) of persons who do not have subscription rights or who
qualify only in a lower purchase priority than you do. Doing so may
jeopardize your subscription rights. Each person exercising
subscription rights will be required to certify that he or she is purchasing
shares solely for his or her own account and that he or she has no agreement or
understanding regarding the sale or transfer of such shares. The regulations
also prohibit any person from offering or making an announcement of an offer or
intent to make an offer to purchase subscription rights or shares of common
stock to be issued upon their exercise prior to completion of the
offering.
We
will pursue any and all legal and equitable remedies in the event we become
aware of the transfer of subscription rights, and we will not honor orders that
we believe involve the transfer of subscription rights.
Stock
Information Center
Our
banking office personnel may not, by law, assist with investment-related
questions about the offering. If you have any questions regarding the
conversion or offering, please call our Stock Information Center, Monday through
Friday between 9:00 a.m. and 5:00 p.m., Central Time. The Stock
Information Center will be closed on weekends and bank holidays. The
toll-free phone number is (877) 860-2070. In addition, a representative of
Keefe, Bruyette and Woods, Inc. will be available to meet with you in person
between 9:00 a.m. and 5:00 p.m. on June ___, ___, ___ and ___, 2010, at
Jacksonville Savings Bank’s main office at 1211 W. Morton Avenue, Jacksonville,
Illinois.
Liquidation
Rights
Prior
to the Conversion. In
the unlikely event that Jacksonville Bancorp, MHC is liquidated prior to the
conversion, all claims of creditors of Jacksonville Bancorp, MHC would be paid
first. Thereafter, if there were any assets of Jacksonville Bancorp, MHC
remaining, these assets would first be distributed to certain depositors of
Jacksonville Savings Bank under such depositor’s liquidation
rights. The amount received by such depositors would be equal to
their pro rata interest in the remaining value of Jacksonville Bancorp, MHC
remaining after claims of creditors, based on the relative size of their deposit
accounts.
After the
Conversion. The plan of
conversion and reorganization provides for the establishment, upon completion of
the conversion, of a liquidation account by Jacksonville Bancorp-Maryland for
the benefit of Eligible Account Holders and Supplemental Eligible Account
Holders in an amount equal to (i) Jacksonville Bancorp, MHC’s ownership interest
in Jacksonville Bancorp-Federal’s total stockholders’ equity as of the date of
the latest statement of financial condition used in this prospectus plus (ii)
the value of the net assets of Jacksonville Bancorp, MHC as of the date of the
latest statement of financial condition of Jacksonville Bancorp, MHC prior to
the consummation of the conversion (excluding its ownership of Jacksonville
Bancorp-Federal). The plan of conversion and reorganization also provides for
the establishment of a parallel liquidation account in Jacksonville Savings Bank
to support the Jacksonville Bancorp-Maryland liquidation account in the event
Jacksonville Bancorp-Maryland does not have sufficient capital resources to fund
its obligations under the Jacksonville Bancorp-Maryland liquidation
account.
In the
unlikely event that Jacksonville Savings Bank were to liquidate after the
conversion, all claims of creditors, including those of depositors, would be
paid first. However, except with respect to the liquidation account
to be established in Jacksonville Bancorp-Maryland and the liquidation account
to be established in Jacksonville Savings Bank, a depositor’s claim would be
solely for the principal amount of his or her deposit accounts plus accrued
interest. Depositors would not have an interest in the value of the assets of
Jacksonville Savings Bank or Jacksonville Bancorp-Maryland above that
amount.
The
liquidation account established by Jacksonville Bancorp-Maryland is designed to
provide depositors a liquidation interest (received in exchange for the
liquidation interests in Jacksonville Bancorp, MHC) after the conversion in the
event of a liquidation of Jacksonville Bancorp-Maryland and Jacksonville Savings
Bank or a liquidation solely of Jacksonville Savings
Bank. Specifically, in the unlikely event that either (i)
Jacksonville Savings Bank or (ii) Jacksonville Bancorp-Maryland and Jacksonville
Savings Bank were to liquidate after the conversion, all claims of creditors,
including those of depositors, would be paid first, followed by a distribution
to depositors as of December 31, 2008 and March 31, 2010 of their interests in
the liquidation account maintained by Jacksonville
Bancorp-Maryland. Also, in a complete liquidation of both entities,
or of just Jacksonville Savings Bank, when Jacksonville Bancorp-Maryland has
insufficient assets (other than the stock of Jacksonville Savings Bank) to fund
the liquidation account obligations due to Eligible Account Holders and
Supplemental Eligible Account Holders and Jacksonville Savings Bank has positive
net worth, Jacksonville Savings Bank shall immediately make a distribution to
fund Jacksonville Bancorp-Maryland’s remaining obligations under the liquidation
account which will not be subject to the claims of Jacksonville
Bancorp-Maryland’s creditors. In no event will any Eligible Account Holder or
Supplemental Eligible Account Holder be entitled to a distribution that exceeds
such holder’s interest in the liquidation account maintained by Jacksonville
Bancorp-Maryland. If Jacksonville Bancorp-Maryland is completely liquidated or
sold apart from a sale or liquidation of Jacksonville Savings Bank, then the
Jacksonville Bancorp-Maryland liquidation account will cease to exist and
Eligible Account Holders and Supplemental Eligible Account Holders will receive
an equivalent interest in the Jacksonville Savings Bank liquidation account,
subject to the same rights and terms as the liquidation account at Jacksonville
Bancorp-Maryland.
Pursuant
to the plan of conversion and reorganization, after two years from the date of
completion of the conversion and upon the written request of the Office of
Thrift Supervision, Jacksonville Bancorp-Maryland will eliminate the liquidation account or transfer the liquidation
account and the depositors’ interests in such account to Jacksonville Savings
Bank, and the liquidation account shall thereupon become the liquidation account
of Jacksonville Savings Bank and will not be subject to the claims of
Jacksonville Bancorp-Maryland’s creditors.
Under the
rules and regulations of the Office of Thrift Supervision, a post-conversion
merger, consolidation, or similar combination or transaction with another
depository institution or depository institution holding company in which
Jacksonville Bancorp-Maryland or Jacksonville Savings Bank is not the surviving
institution would not be considered a liquidation. In such a
transaction, the liquidation account would be assumed by the surviving
institution or company.
Each
Eligible Account Holder and Supplemental Eligible Account Holder would have an
initial interest in the liquidation account for each deposit account, including
savings accounts, transaction accounts such as negotiable order of withdrawal
accounts, money market deposit accounts, and certificates of deposit, with a
balance of $50.00 or more held in Jacksonville Savings Bank on December 31, 2008
or March 31, 2010, equal to the proportion that the balance of each Eligible
Account Holder’s and Supplemental Eligible Account Holder’s deposit account on
December 31, 2008 or March 31, 2010, respectively, bears to the balance of all
Eligible Account Holders and Supplemental Eligible Account Holders in
Jacksonville Savings Bank on such dates.
If,
however, on any December 31 annual closing date commencing after the effective
date of the conversion, the amount in any such deposit account is less than the
amount in the deposit account on December 31, 2008 or March 31, 2010 or any
other annual closing date, then the interest in the liquidation account relating
to such deposit account would be reduced from time to time by the proportion of
any such reduction, and such interest will cease to exist if such deposit
account is closed. In addition, no interest in the liquidation account would
ever be increased despite any subsequent increase in the related deposit
account. Payment pursuant to liquidation rights of Eligible Account Holders and
Supplemental Eligible Account Holders would be separate and apart from the
payment of any insured deposit accounts to such depositors. Any assets remaining
after the above liquidation rights of Eligible Account Holders and Supplemental
Eligible Account Holders are satisfied would be available for distribution to
stockholders.
Material
Income Tax Consequences
Completion
of the conversion is subject to the prior receipt of an opinion of counsel or
tax advisor with respect to federal and state income tax consequences of the
conversion to Jacksonville Bancorp, MHC, Jacksonville Bancorp-Federal,
Jacksonville Bancorp-Maryland, Jacksonville Savings Bank, Eligible
Account Holders, Supplemental Eligible Account Holders and Other Depositors of
Jacksonville Savings Bank. Unlike private letter rulings, opinions of
counsel or tax advisors are not binding on the Internal Revenue Service or any
state taxing authority, and such authorities may disagree with such opinions. In
the event of such disagreement, there can be no assurance that Jacksonville
Bancorp-Maryland or Jacksonville Savings Bank would prevail in a judicial
proceeding.
Jacksonville
Bancorp, MHC, Jacksonville Bancorp-Federal, Jacksonville Savings Bank and
Jacksonville Bancorp-Maryland have received an opinion of counsel, Luse Gorman
Pomerenk & Schick, P.C., regarding all of the material federal income tax
consequences of the conversion, which includes the following:
1. |
The
merger of Jacksonville Bancorp, MHC with and into Jacksonville
Bancorp-Federal will qualify as a tax-free reorganization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue
Code.
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2. |
The
constructive exchange of Eligible Account Holders’ and Supplemental
Eligible Account Holders’ liquidation interests in Jacksonville Bancorp,
MHC for liquidation interests in Jacksonville Bancorp-Federal will satisfy
the continuity of interest requirement of Section 1.368-1(b) of the
Federal Income Tax Regulations.
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3. |
None
of Jacksonville Bancorp, MHC, Jacksonville Bancorp-Federal, Eligible
Account Holders nor Supplemental Eligible Account Holders, will recognize
any gain or loss on the transfer of the assets of Jacksonville Bancorp,
MHC to Jacksonville Bancorp-Federal in constructive exchange for a
liquidation interest established in Jacksonville Bancorp-Federal for the
benefit of such persons who remain depositors of Jacksonville Savings
Bank.
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4. |
The
basis of the assets of Jacksonville Bancorp, MHC and the holding period of
such assets to be received by Jacksonville Bancorp-Federal will be the
same as the basis and holding period of such assets
in Jacksonville Bancorp, MHC immediately before the exchange.
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5. |
The
merger of Jacksonville Bancorp-Federal with and into Jacksonville
Bancorp-Maryland will constitute a mere change in identity, form or place
of organization within the meaning of Section 368(a)(1)(F) of the Code and
therefore will qualify as a tax-free reorganization within the meaning of
Section 368(a)(1)(F) of the Code. Neither Jacksonville Bancorp-Federal nor
Jacksonville Bancorp-Maryland will recognize gain or loss as a result of
such merger.
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6. |
The
basis of the assets of Jacksonville Bancorp-Federal and the holding period
of such assets to be received by Jacksonville Bancorp-Maryland will be the
same as the basis and holding period of such assets
in Jacksonville Bancorp-Federal immediately before the
exchange. |
7. |
Current
stockholders of Jacksonville Bancorp-Federal will not recognize any gain
or loss upon their exchange of Jacksonville Bancorp-Federal common stock
for Jacksonville Bancorp-Maryland common stock.
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8.
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Eligible
Account Holders and Supplemental Eligible Account Holders will not
recognize any gain or loss upon the constructive exchange of their
liquidation interests in Jacksonville Bancorp-Federal for interests in the
liquidation account in Jacksonville Bancorp-Maryland.
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9. |
The
constructive exchange of the Eligible Account Holders and Supplemental
Eligible Account Holders liquidation interests in Jacksonville
Bancorp-Federal for interests in the liquidation account established
in Jacksonville Bancorp-Maryland will satisfy the continuity of interest
requirement of Section 1.368-1(b) of the Federal Income Tax
Regulations.
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10. |
Each
stockholder’s aggregate basis in shares of Jacksonville Bancorp-Maryland
common stock (including fractional share interests) received in the
exchange will be the same as the aggregate basis of Jacksonville
Bancorp-Federal common stock surrendered in the
exchange.
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11. |
Each
stockholder’s holding period in his or her Jacksonville Bancorp-Maryland
common stock received in the exchange will include the period during which
the Jacksonville Bancorp-Federal common stock surrendered was held,
provided that the Jacksonville Bancorp-Federal common stock surrendered is
a capital asset in the hands of the stockholder on the date of the
exchange.
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12. |
Cash
received by any current stockholder of Jacksonville Bancorp-Federal in
lieu of a fractional share interest in shares of Jacksonville
Bancorp-Maryland common stock will be treated as having been received as a
distribution in full payment in exchange for a fractional share interest
of Jacksonville Bancorp-Maryland common stock, which such stockholder
would otherwise be entitled to receive. Accordingly, a stockholder will
recognize gain or loss equal to the difference between the cash received
and the basis of the fractional share. If the common stock is held by the
stockholder as a capital asset, the gain or loss will be capital gain or
loss.
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13. |
It
is more likely than not that the fair market value of the nontransferable
subscription rights to purchase Jacksonville Bancorp-Maryland common stock
is zero. Accordingly, no gain or loss will be recognized by Eligible
Account Holders, Supplemental Eligible Account Holders or Other Depositors
upon distribution to them of nontransferable subscription rights to
purchase shares of Jacksonville Bancorp-Maryland common stock. Eligible
Account Holders, Supplemental Eligible Account Holders and Other
Depositors will not realize any taxable income as the result of the
exercise by them of the nontransferable subscriptions
rights.
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14. |
It
is more likely than not that the fair market value of the benefit provided
by the liquidation account of Jacksonville Savings Bank supporting the
payment of the Jacksonville Bancorp-Maryland liquidation account in the
event Jacksonville Bancorp-Maryland lacks sufficient net assets is
zero. Accordingly, it is more likely than not that no gain or
loss will be recognized by Eligible Account Holders and Supplemental
Eligible Account Holders upon the constructive distribution to them of
such rights in the Jacksonville Savings Bank liquidation account as of the
effective date of the merger of Jacksonville Bancorp-Federal with and into
Jacksonville Bancorp-Maryland.
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15. |
It
is more likely than not that the basis of the shares of Jacksonville
Bancorp-Maryland common stock purchased in the offering by the exercise of
nontransferable subscription rights will be the purchase price. The
holding period of the Jacksonville Bancorp-Maryland common stock purchased
pursuant to the exercise of nontransferable subscription rights will
commence on the date on which the right to acquire such stock was
exercised.
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16. |
No
gain or loss will be recognized by Jacksonville Bancorp-Maryland on the
receipt of money in exchange for Jacksonville Bancorp-Maryland common
stock sold in the
offering.
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We
believe that the tax opinions summarized above address all material federal
income tax consequences that are generally applicable to Jacksonville Bancorp,
MHC, Jacksonville Bancorp-Federal, Jacksonville Savings Bank, Jacksonville
Bancorp-Maryland and persons receiving subscription rights and stockholders of
Jacksonville Bancorp-Federal. With respect to items 8 and 13 above,
Luse Gorman Pomerenk & Schick, P.C. noted that the subscription rights will
be granted at no cost to the recipients, are legally non-transferable and of
short duration, and will provide the recipient with the right only to purchase
shares of common stock at the same price to be paid by members of the general
public in any community offering. The firm further noted that RP Financial, LC.
has issued a letter that the subscription rights have no ascertainable fair
market value. The firm also noted that the Internal Revenue Service
has not in the past concluded that subscription rights have value. Based on the
foregoing, Luse Gorman Pomerenk & Schick, P.C. believes that it is more
likely than not that the nontransferable subscription rights to purchase shares
of common stock have no value. However, the issue of whether or not the
nontransferable subscription rights have value is based on all the facts and
circumstances. If the subscription rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Depositors are deemed to have an
ascertainable value, receipt of these rights could result in taxable gain to
those Eligible Account Holders, Supplemental Eligible Account Holders and Other
Depositors who exercise the subscription rights in an amount equal to the
ascertainable value, and we could recognize gain on a distribution. Eligible
Account Holders, Supplemental Eligible Account Holders and Other Depositors are
encouraged to consult with their own tax advisors as to the tax consequences in
the event that subscription rights are deemed to have an ascertainable
value.
The
opinion as to item 14 above is based on the position that: (i) no
holder of an interest in a liquidation account has ever received a payment
attributable to a liquidation account; (ii) the interests in the liquidation
accounts are not transferable; (iii) the amounts due under the liquidation
account with respect to each Eligible Account Holder and Supplemental
Eligible Account Holder will be reduced as their deposits in Jacksonville
Savings Bank are reduced; and (iv) the Jacksonville Savings Bank liquidation
account payment obligation arises only if Jacksonville Bancorp-Maryland lacks
sufficient assets to fund the liquidation account.
In
addition, we have received a letter from RP Financial, LC. stating its belief
that the benefit provided by the Jacksonville Savings Bank liquidation account
supporting the payment of the liquidation account in the event Jacksonville
Bancorp-Maryland lacks sufficient net assets does not have any economic value at
the time of the conversion. Based on the foregoing, Luse Gorman
Pomerenk & Schick, P.C. believes it is more likely than not that such rights
in the Jacksonville Savings Bank liquidation account have no
value. If such rights are subsequently found to have an economic
value, income may be recognized by each Eligible Account Holder or Supplemental
Eligible Account Holder in the amount of such fair market value as of the date
of the conversion.
The opinion of Luse Gorman
Pomerenk & Schick, P.C., unlike a letter ruling issued by the Internal
Revenue Service, is not binding on the Internal Revenue Service and the
conclusions expressed therein may be challenged at a future date. The Internal
Revenue Service has issued favorable rulings for transactions substantially
similar to the proposed reorganization and stock offering, but any such ruling
may not be cited as precedent by any taxpayer other than the taxpayer to whom
the ruling is addressed. We do not plan to apply for a letter ruling
concerning the transactions described herein.
The
federal tax opinion has been filed with the Securities and Exchange Commission
as an exhibit to Jacksonville Bancorp-Maryland’s registration
statement. Advice regarding the Illinois state income tax
consequences consistent with the federal tax opinion has been issued by BKD,
LLP, tax advisors to Jacksonville Bancorp, MHC and Jacksonville
Bancorp-Federal.
Certain
Restrictions on Purchase or Transfer of Our Shares after Conversion
All
shares of common stock purchased in the offering by a director or an executive
officer of Jacksonville Savings Bank generally may not be sold for a period of
one year following the closing of the conversion, except in the event of the
death of the director or executive officer. Each certificate for restricted
shares will bear a legend giving notice of this restriction on transfer, and
instructions will be issued to the effect that any transfer within this time
period of any certificate or record ownership of the shares other than as
provided above is a violation of the restriction. Any shares of common stock
issued at a later date as a stock dividend, stock split, or otherwise, with
respect to the restricted stock will be similarly restricted. The directors and
executive officers of Jacksonville Bancorp-Maryland also will be restricted by
the insider trading rules under the Securities Exchange Act of
1934.
Purchases
of shares of our common stock by any of our directors, executive officers and
their associates, during the three-year period following the closing of the
conversion may be made only through a broker or dealer registered with the
Securities and Exchange Commission, except with the prior written approval of
the Office of Thrift Supervision. This restriction does not apply, however, to
negotiated transactions involving more than 1% of our outstanding common stock
or to purchases of our common stock by our stock option plan or any of our
tax-qualified employee stock benefit plans or non-tax-qualified employee stock
benefit plans.
Office of
Thrift Supervision regulations prohibit Jacksonville Bancorp-Maryland from
repurchasing its shares of common stock during the first year following
conversion unless compelling business reasons exist for such repurchases. After
one year, the Office of Thrift Supervision does not impose any repurchase
restrictions.
General.
As a result of the conversion, existing stockholders of Jacksonville
Bancorp-Federal will become stockholders of Jacksonville
Bancorp-Maryland. There are differences in the rights of stockholders
of Jacksonville Bancorp-Federal and stockholders of Jacksonville
Bancorp-Maryland caused by differences between federal and Maryland law and
regulations and differences in Jacksonville Bancorp-Federal’s federal stock
charter and bylaws and Jacksonville Bancorp-Maryland’s Maryland articles of
incorporation and bylaws.
This discussion is not
intended to be a complete statement of the differences affecting the rights of
stockholders, but rather summarizes the material differences and similarities
affecting the rights of stockholders. See “Where You Can Find Additional
Information” for procedures for obtaining a copy of Jacksonville
Bancorp-Maryland’s articles of incorporation and bylaws.
Authorized
Capital Stock. The authorized capital stock of Jacksonville
Bancorp-Federal consists of 20,000,000 shares of common stock, $0.01 par value
per share, and 10,000,000 shares of preferred stock, par value $0.01 per
share.
The
authorized capital stock of Jacksonville Bancorp-Maryland consists of 25,000,000
shares of common stock, $0.01 par value per share, and 10,000,000 shares of
preferred stock, par value $0.01 per share.
Under the Maryland General
Corporation Law and Jacksonville Bancorp-Maryland’s articles of incorporation,
the board of directors may increase or decrease the number of authorized shares
without stockholder approval. Stockholder approval is required to
increase or decrease the number of authorized shares of Jacksonville
Bancorp-Federal.
Jacksonville
Bancorp-Federal’s charter and Jacksonville Bancorp-Maryland’s articles of
incorporation both authorize the board of directors to establish one or more
series of preferred stock and, for any series of preferred stock, to determine
the terms and rights of the series, including voting rights, dividend rights,
conversion and redemption rates and liquidation preferences. As a result of the
ability to fix voting rights for a series of preferred stock, our board of
directors has the power, to the extent consistent with its fiduciary duty, to
issue a series of preferred stock to persons friendly to management in order to
attempt to block a hostile tender offer, merger or other transaction by which a
third party seeks control. We currently have no plans for the
issuance of additional shares for such purposes.
Issuance
of Capital Stock. Pursuant to applicable laws and regulations,
Jacksonville Bancorp, MHC is required to own not less than a majority of the
outstanding shares of Jacksonville Bancorp-Federal common stock. Jacksonville
Bancorp, MHC will no longer exist following consummation of the
conversion.
Jacksonville
Bancorp-Maryland’s articles of incorporation do not contain restrictions on the
issuance of shares of capital stock to directors, officers or controlling
persons, whereas Jacksonville Bancorp-Federal’s stock charter restricts such
issuances to general public offerings, or to directors for qualifying shares,
unless the share issuance or the plan under which they would generally be issued
has been approved by the stockholders. However, stock-based compensation plans,
such as stock option plans, would have to be submitted for approval by
Jacksonville Bancorp-Maryland stockholders due to requirements of the Nasdaq
Stock Market and in order to qualify stock options for favorable federal income
tax treatment.
Voting
Rights. Neither Jacksonville Bancorp-Federal’s stock charter or bylaws
nor Jacksonville Bancorp-Maryland’s articles of incorporation or bylaws provide
for cumulative voting for the election of directors. For additional information
regarding voting rights, see “—Limitations on Voting Rights of Greater-than-10%
Stockholders” below.
Payment
of Dividends. Jacksonville Bancorp-Federal’s ability to pay
dividends depends, to a large extent, upon Jacksonville Savings Bank’s ability
to pay dividends to Jacksonville Bancorp-Federal, and the ability of
Jacksonville Savings Bank to pay dividends to Jacksonville Bancorp-Federal is
restricted by Federal Deposit Insurance Corporation and Illinois Department of
Financial and Professional Regulation regulations and by income tax
considerations related to Illinois state savings banks.
The same restrictions will
apply to Jacksonville Savings Bank’s payment of dividends to Jacksonville
Bancorp-Maryland. In addition, Maryland law generally provides that
Jacksonville Bancorp-Maryland is limited to paying dividends in an amount equal
to its capital surplus over payments that would be owed upon dissolution to
stockholders whose preferential rights upon dissolution are superior to those
receiving the dividend, and to an amount that would not make it
insolvent.
Board
of Directors.
Jacksonville Bancorp-Federal’s bylaws and Jacksonville Bancorp-Maryland’s
articles of incorporation require the board of directors to be divided into
three classes and that the members of each class shall be elected for a term of
three years and until their successors are elected and qualified, with one class
being elected annually.
Under Jacksonville
Bancorp-Federal’s bylaws, any vacancies on the board of directors of
Jacksonville Bancorp-Federal may be filled by the affirmative vote of a majority
of the remaining directors although less than a quorum of the board of
directors. Persons elected by the board of directors of Jacksonville
Bancorp-Federal to fill vacancies may only serve until the next election of
directors by stockholders. Under Jacksonville Bancorp-Maryland’s bylaws, any
vacancy occurring on the board of directors, including any vacancy created by
reason of an increase in the number of directors, may be filled only by an
affirmative vote of two-thirds of the remaining directors, and any director so
chosen shall hold office for the remainder of the term to which the director has
been elected and until his or her successor is elected and
qualified.
Under Jacksonville
Bancorp-Federal’s bylaws, any director may be removed for cause by the holders
of a majority of the outstanding voting shares. Jacksonville
Bancorp-Maryland’s articles of incorporation also provide that any director may
be removed for cause by the holders of at least a majority of the outstanding
voting shares of Jacksonville Bancorp-Maryland.
Limitations
on Liability. The charter and bylaws of Jacksonville Bancorp-Federal do
not limit the personal liability of directors or officers.
Jacksonville
Bancorp-Maryland’s articles of incorporation provide that directors and officers
will not be personally liable for monetary damages to Jacksonville
Bancorp-Maryland for certain actions as directors or officers, except for (i)
receipt of an improper personal benefit from their positions as directors or
officers, (ii) actions or omissions that are determined to have involved active
and deliberate dishonesty, or (iii) to the extent allowed by Maryland law. These
provisions might, in certain instances, discourage or deter stockholders or
management from bringing a lawsuit against directors or officers for a breach of
their duties even though such an action, if successful, might benefit
Jacksonville Bancorp-Maryland.
Indemnification
of Directors, Officers, Employees and Agents. Under current
Office of Thrift Supervision regulations, Jacksonville Bancorp-Federal shall
indemnify its directors, officers and employees for any costs incurred in
connection with any litigation involving such person’s activities as a director,
officer or employee if such person obtains a final judgment on the merits in his
or her favor. In addition, indemnification is permitted in the case of a
settlement, a final judgment against such person, or final judgment other than
on the merits, if a majority of disinterested directors determines that such
person was acting in good faith within the scope of his or her employment as he
or she could reasonably have perceived it under the circumstances and for a
purpose he or she could reasonably have believed under the circumstances was in
the best interests of Jacksonville Bancorp-Federal or its stockholders.
Jacksonville Bancorp-Federal also is permitted to pay ongoing expenses incurred
by a director, officer or employee if a majority of disinterested directors
concludes that such person may ultimately be entitled to indemnification. Before
making any indemnification payment, Jacksonville Bancorp-Federal is required to
notify the Office of Thrift Supervision of its intention, and such payment
cannot be made if the Office of Thrift Supervision objects to such
payment.
The articles of
incorporation of Jacksonville Bancorp-Maryland provide that it shall indemnify
its current and former directors and officers to the fullest extent required or
permitted by Maryland law, including the advancement of expenses. Maryland law
allows Jacksonville Bancorp-Maryland to indemnify any person for expenses,
liabilities, settlements, judgments and fines in suits in which such person has
been made a party by reason of the fact that he or she is or was a director,
officer or employee of Jacksonville Bancorp-Maryland. No such
indemnification may be given if the acts or omissions of the person are adjudged
to be in bad faith and material to the matter giving rise to the proceeding, if
such person is liable to the corporation for an unlawful distribution, or if
such person personally received a benefit to which he or she was not
entitled. The right to indemnification includes the right to be paid
the expenses incurred in advance of final disposition of a
proceeding.
Special
Meetings of Stockholders. Jacksonville Bancorp-Federal’s bylaws provide
that special meetings of Jacksonville Bancorp-Federal’s stockholders may be
called by the Chairman, the president, a majority of the members of the board of
directors or the holders of not less than 10% of the outstanding capital stock
of Jacksonville Bancorp-Federal entitled to vote at the meeting. Jacksonville
Bancorp-Maryland’s bylaws provide that special meetings of the stockholders of
Jacksonville Bancorp-Maryland may be called by the president, by a majority vote
of the total authorized directors, or upon the written request of stockholders
entitled to cast at least a majority of all votes entitled to be cast at the
meeting.
Stockholder
Nominations and Proposals. Jacksonville Bancorp-Federal’s bylaws provide
that stockholders may submit nominations for election of directors at an annual
meeting of stockholders and may propose any new business to be taken up at such
a meeting by filing the proposal in writing with Jacksonville Bancorp-Federal at
least five days before the date of any such meeting.
Jacksonville
Bancorp-Maryland’s bylaws provide that any stockholder desiring to make a
nomination for the election of directors or a proposal for new business at a
meeting of stockholders must submit written notice to Jacksonville
Bancorp-Maryland at least 80 days prior and not earlier than 90 days prior to
such meeting. However, if less than 90 days’ notice or prior public
disclosure of the date of the meeting is given to stockholders, such written
notice must be submitted by a stockholder not later than the tenth day following
the day on which notice of the meeting was mailed to stockholders or such public
disclosure was made.
Management believes that
it is in the best interests of Jacksonville Bancorp-Maryland and its
stockholders to provide sufficient time to enable management to disclose to
stockholders information about a dissident slate of nominations for directors.
This advance notice requirement may also give management time to solicit its own
proxies in an attempt to defeat any dissident slate of nominations, should
management determine that doing so is in the best interests of stockholders
generally. Similarly, adequate advance notice of stockholder proposals will give
management time to study such proposals and to determine whether to recommend to
the stockholders that such proposals be adopted. In certain
instances, such provisions could make it more difficult to oppose management’s
nominees or proposals, even if stockholders believe such nominees or proposals
are in their best interests.
Stockholder
Action Without a Meeting. The bylaws of Jacksonville Bancorp-Federal
provide that any action to be taken or which may be taken at any annual or
special meeting of stockholders may be taken if a consent in writing, setting
forth the actions so taken, is given by the holders of all outstanding shares
entitled to vote with respect to the subject matter. The bylaws of Jacksonville
Bancorp-Maryland do not provide for action to be taken by stockholders without a
meeting. Under Maryland law, action may be taken by stockholders without a
meeting if all stockholders entitled to vote on the action consent to taking
such action without a meeting.
Stockholder’s
Right to Examine Books and Records. A federal regulation, which is
applicable to Jacksonville Bancorp-Federal, provides that stockholders may
inspect and copy specified books and records after proper written notice for a
proper purpose. Maryland law provides that a stockholder may inspect a company’s
bylaws, stockholder minutes, annual statement of affairs and any voting trust
agreements. However, only a stockholder or group of stockholders who together,
for at least six months, hold at least 5% of the company’s total shares, have
the right to inspect a company’s stock ledger, list of stockholders and books of
accounts.
Limitations on
Voting Rights of Greater-than-10% Stockholders. Jacksonville
Bancorp-Maryland’s articles of incorporation provide that no beneficial owner,
directly or indirectly, of more than 10% of the outstanding shares of common
stock will be permitted to vote any shares in excess of such 10% limit unless a
purchase of shares is approved by a majority of unaffiliated directors prior to
the acquisition of such shares. Jacksonville Bancorp-Federal’s
charter no longer provides such a limit on voting common stock.
In addition, Office of
Thrift Supervision regulations provide that for a period of three years
following the date of the completion of the offering, no person, acting alone or
together with associates in a group of persons acting in concert, may directly
or indirectly offer to acquire or acquire the beneficial ownership of more than
10% of a class of Jacksonville Bancorp-Maryland’s equity securities without the
prior written approval of the Office of Thrift Supervision. Where any person
acquires beneficial ownership of more than 10% of a class of Jacksonville
Bancorp-Maryland’s equity securities without the prior written approval of the
Office of Thrift Supervision, the securities beneficially owned by such person
in excess of 10% may not be voted by any person or counted as voting shares in
connection with any matter submitted to the stockholders for a vote, and will
not be counted as outstanding for purposes of determining the affirmative vote
necessary to approve any matter submitted to the stockholders for a
vote.
Mergers,
Consolidations and Sales of Assets. A federal regulation applicable to
Jacksonville Bancorp-Federal generally requires the approval of two-thirds of
the board of directors of Jacksonville Bancorp-Federal and the holders of
two-thirds of the outstanding stock of Jacksonville Bancorp-Federal entitled to
vote thereon for mergers, consolidations and sales of all or substantially all
of Jacksonville Bancorp-Federal’s assets. Such regulation permits Jacksonville
Bancorp-Federal to merge with another corporation without obtaining the approval
of its stockholders if:
(i)
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it
does not involve an interim savings
institution;
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(ii)
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Jacksonville
Bancorp-Federal’s federal stock charter is not
changed;
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(iii)
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each
share of Jacksonville Bancorp-Federal’s stock outstanding immediately
prior to the effective date of the transaction will be an identical
outstanding share or a treasury share of Jacksonville Bancorp-Federal
after such effective date; and
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(a)
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no
shares of voting stock of Jacksonville Bancorp-Federal and no securities
convertible into such stock are to be issued or delivered under the plan
of combination; or
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(b)
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the
authorized but unissued shares or the treasury shares of voting stock of
Jacksonville Bancorp-Federal to be issued or delivered under the plan of
combination, plus those initially issuable upon conversion of any
securities to be issued or delivered under such plan, do not exceed 15% of
the total shares of voting stock of Jacksonville Bancorp-Federal
outstanding immediately prior to the effective date of the
transaction.
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Under Maryland law,
“business combinations” between Jacksonville Bancorp-Maryland and an interested
stockholder or an affiliate of an interested stockholder are prohibited for five
years after the most recent date on which the interested stockholder becomes an
interested stockholder. These business combinations include a merger,
consolidation, statutory share exchange or, in circumstances specified in the
statute, certain transfers of assets, certain stock issuances and transfers,
liquidation plans and reclassifications involving interested stockholders and
their affiliates or issuance or reclassification of equity securities. Maryland
law defines an interested stockholder as: (i) any person who beneficially owns
10% or more of the voting power of Jacksonville Bancorp-Maryland’s voting stock
after the date on which Jacksonville Bancorp-Maryland had 100 or more beneficial
owners of its stock; or (ii) an affiliate or associate of Jacksonville
Bancorp-Maryland at any time after the date on which Jacksonville
Bancorp-Maryland had 100 or more beneficial owners of its stock who, within the
two-year period prior to the date in question, was the beneficial owner of 10%
or more of the voting power of the then-outstanding voting stock of Jacksonville
Bancorp-Maryland. A person is not an interested stockholder under the
statute if the board of directors approved in advance the transaction by which
the person otherwise would have become an interested stockholder. However, in
approving a transaction, the board of directors may provide that its approval is
subject to compliance, at or after the time of approval, with any terms and
conditions determined by the board.
After the five-year
prohibition, any business combination between Jacksonville Bancorp-Maryland and
an interested stockholder generally must be recommended by the board of
directors of Jacksonville Bancorp-Maryland and approved by the affirmative vote
of at least: (i) 80% of the votes entitled to be cast by holders of outstanding
shares of voting stock of Jacksonville Bancorp-Maryland, and (ii) two-thirds of
the votes entitled to be cast by holders of voting stock of Jacksonville
Bancorp-Maryland other than shares held by the interested stockholder with whom
or with whose affiliate the business combination is to be effected or held by an
affiliate or associate of the interested stockholder. These super-majority vote
requirements do not apply if Jacksonville Bancorp-Maryland’s common stockholders
receive a minimum price, as defined under Maryland law, for their shares in the
form of cash or other consideration in the same form as previously paid by the
interested stockholder for its shares.
Evaluation
of Offers. The articles of incorporation of Jacksonville
Bancorp-Maryland provide that its board of directors, when evaluating a
transaction that would or may involve a change in control of Jacksonville
Bancorp-Maryland (whether by purchases of its securities, tender offer, merger,
consolidation, share exchange, dissolution, liquidation, sale of all or
substantially all of its assets, proxy solicitation or otherwise), may, in
connection with the exercise of its business judgment in determining what is in
the best interests of Jacksonville Bancorp-Maryland and its stockholders and in
making any recommendation to the stockholders, give due consideration to all
relevant factors, including, but not limited to:
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the
economic effect, both immediate and long-term, upon Jacksonville
Bancorp-Maryland’s stockholders, including stockholders, if any, who do
not participate in the transaction;
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the
social and economic effect on the present and future employees, creditors
and customers of, and others dealing with, Jacksonville Bancorp-Maryland
and its subsidiaries and on the communities in which Jacksonville
Bancorp-Maryland and its subsidiaries operate or are
located;
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whether
the proposal is acceptable based on the historical, current or projected
future operating results or financial condition of Jacksonville
Bancorp-Maryland;
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whether
a more favorable price could be obtained for Jacksonville
Bancorp-Maryland’s stock or other securities in the
future;
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the
reputation and business practices of the other entity to be involved in
the transaction and its management and affiliates as they would affect the
employees of Jacksonville Bancorp-Maryland and its
subsidiaries;
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the
future value of the stock or any other securities of Jacksonville
Bancorp-Maryland or the other entity to be involved in the proposed
transaction;
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any
antitrust or other legal and regulatory issues that are raised by the
proposal;
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the
business and historical, current or expected future financial condition or
operating results of the other entity to be involved in the transaction,
including, but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection with the
proposed transaction, and other likely financial obligations of the other
entity to be involved in the proposed transaction;
and
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the
ability of Jacksonville Bancorp-Maryland to fulfill its objectives as a
financial institution holding company and on the ability of its subsidiary
financial institution(s) to fulfill the objectives of a federally insured
financial institution under applicable statutes and
regulations.
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If the
board of directors determines that any proposed transaction should be rejected,
it may take any lawful action to defeat such transaction.
Jacksonville
Bancorp-Federal’s charter and bylaws do not contain a similar
provision.
Dissenters’
Rights of Appraisal.
Office of Thrift Supervision regulations generally provide that a
stockholder of a federally chartered corporation that engages in a merger,
consolidation or sale of all or substantially all of its assets shall have the
right to demand from such institution payment of the fair or appraised value of
his or her stock in the corporation, subject to specified procedural
requirements. The regulations also provide, however, that a
stockholder of a federally chartered corporation whose shares are listed on a
national securities exchange are not entitled to dissenters’ rights in
connection with a merger if the stockholder is required to accept only
“qualified consideration” for his or her stock, which is defined to include
cash, shares of stock of any institution or corporation that at the effective
date of the merger will be listed on a national securities exchange, or any
combination of such shares of stock and cash.
Under Maryland law,
stockholders of Jacksonville Bancorp-Maryland will not have dissenters’
appraisal rights in connection with a plan of merger or consolidation to which
Jacksonville Bancorp-Maryland is a party as long as the common stock of
Jacksonville Bancorp-Maryland trades on a national securities
exchange.
Amendment
of Governing Instruments.
No amendment of Jacksonville Bancorp-Federal’s stock charter may be made unless
it is first proposed by the board of directors of Jacksonville Bancorp-Federal,
then approved by the holders of a majority of the total votes eligible to be
cast at a legal meeting unless a higher vote is otherwise required and either
preapproved or approved by the Office of Thrift Supervision.
Jacksonville
Bancorp-Maryland’s articles of incorporation may be amended, upon the submission
of an amendment by the board of directors to a vote of the stockholders, by the
affirmative vote of at least two-thirds of the outstanding shares of common
stock, or by the affirmative vote of a majority of the outstanding shares of
common stock if at least two-thirds of the members of the whole board of
directors approves such amendment; provided, however, that approval by at least
80% of the outstanding voting stock is generally required to amend the following
provisions:
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(i) |
The
limitation on voting rights of persons who directly or indirectly
beneficially own more than 10% of the outstanding shares of common
stock;
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(ii) |
The
division of the board of directors into three staggered
classes;
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(iii) |
The
ability of the board of directors to fill vacancies on the
board;
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(iv) |
The
requirement that directors may only be removed for cause and by the
affirmative vote of at least a majority of the votes eligible to be cast
by stockholders;
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(v)
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The
ability of the board of directors to amend and repeal the
bylaws;
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(vi) |
The
ability of the board of directors to evaluate a variety of factors in
evaluating offers to purchase or otherwise acquire Jacksonville
Bancorp-Maryland;
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(vii) |
The
authority of the board of directors to provide for the issuance of
preferred stock;
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(viii) |
The
validity and effectiveness of any action lawfully authorized by the
affirmative vote of the holders of a majority of the total number of
outstanding shares of common stock;
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(ix) |
The
number of stockholders constituting a quorum or required for stockholder
consent;
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(x) |
The
indemnification of current and former directors and officers, as well as
employees and other agents, by Jacksonville
Bancorp-Maryland;
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(xi) |
The
limitation of liability of officers and directors to Jacksonville
Bancorp-Maryland for money damages;
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(xii) |
The
inability of stockholders to cumulate their votes in the election of
directors;
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(xiii) |
The advance notice
requirements for stockholder proposals and nominations;
and |
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(xiv)
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The
provisions of the articles of incorporation relating to amendments and
requiring approval of at least 80% of the outstanding voting stock to
amend the provisions of the articles of incorporation provided in (i)
through (xiii) of this list.
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The
articles of incorporation also provide that the bylaws may be amended by the
affirmative vote of a majority of our directors or by the stockholders by the
affirmative vote of at least 80% of the total votes eligible to be voted at a
duly constituted meeting of stockholders. Any amendment of this
super-majority requirement for amendment of the bylaws would also require the
approval of 80% of the outstanding voting stock.
Although the board of
directors of Jacksonville Bancorp-Maryland is not aware of any effort that might
be made to obtain control of Jacksonville Bancorp-Maryland after the conversion,
the board of directors believes that it is appropriate to include certain
provisions as part of Jacksonville Bancorp-Maryland’s articles of incorporation
to protect the interests of Jacksonville Bancorp-Maryland and its stockholders
from takeovers which our board of directors might conclude are not in the best
interests of Jacksonville Savings Bank, Jacksonville Bancorp-Maryland or
Jacksonville Bancorp-Maryland’s stockholders.
The following discussion
is a general summary of the material provisions of Jacksonville
Bancorp-Maryland’s articles of incorporation and bylaws, Jacksonville Savings
Bank’s charter and certain other regulatory provisions that may be deemed to
have an “anti-takeover” effect. The following description of certain
of these provisions is necessarily general and is not intended to be a complete
description of the document or regulatory provision in
question. Jacksonville Bancorp-Maryland’s articles of incorporation
and bylaws are included as part of Jacksonville Bancorp, MHC’s application for
conversion filed with the Office of Thrift Supervision and Jacksonville
Bancorp-Maryland’s registration statement filed with the Securities and Exchange
Commission. See “Where You Can Find Additional
Information.”
Articles
of Incorporation and Bylaws of Jacksonville Bancorp-Maryland
Jacksonville
Bancorp-Maryland’s articles of incorporation and bylaws contain a number of
provisions relating to corporate governance and rights of stockholders that may
discourage future takeover attempts. As a result, stockholders who
might desire to participate in such transactions may not have an opportunity to
do so. In addition, these provisions will also render the removal of the board
of directors or management of Jacksonville Bancorp-Maryland more
difficult.
Directors.
The board of directors will be divided into three classes. The
members of each class will be elected for a term of three years and only one
class of directors will be elected annually. Thus, it would take at
least two annual elections to replace a majority of our board of
directors. Further, the bylaws impose notice and information
requirements in connection with the nomination by stockholders of candidates for
election to the board of directors or the proposal by stockholders of business
to be acted upon at an annual meeting of stockholders.
Restrictions
on Call of Special Meetings. The
bylaws provide that special meetings of stockholders can be called by the
President, by a majority of the whole board of directors or upon the written
request of stockholders entitled to cast at least a majority of all votes
entitled to vote at the meeting.
Prohibition
of Cumulative Voting. The
articles of incorporation prohibit cumulative voting for the election of
directors.
Limitation of
Voting Rights. The
articles of incorporation provide that in no event will any person who
beneficially owns more than 10% of the then-outstanding shares of common stock,
be entitled or permitted to vote any of the shares of common stock held in
excess of the 10% limit unless a purchase of shares is approved by a majority of
unaffiliated directors prior to the acquisition of such shares. This
provision has been included in the articles of incorporation in reliance on
Section 2-507(a) of the Maryland General Corporation Law, which entitles
stockholders to one vote for each share of stock unless the articles of
incorporation provide for a greater or lesser number of votes per share or limit
or deny voting rights.
Restrictions
on Removing Directors from Office. The
articles of incorporation provide that directors may be removed only for cause,
and only by the affirmative vote of the holders of at least a majority of the
voting power of all of our then-outstanding common stock entitled to vote (after
giving effect to the limitation on voting rights discussed above in “—Limitation
of Voting Rights.”).
Authorized
but Unissued Shares. After the conversion, Jacksonville
Bancorp-Maryland will have authorized but unissued shares of common and
preferred stock. See “Description of Capital Stock of Jacksonville
Bancorp-Maryland Following the Conversion.” The articles of
incorporation authorize 10,000,000 shares of serial preferred
stock. Jacksonville Bancorp-Maryland is authorized to issue preferred
stock from time to time in one or more series subject to applicable provisions
of law, and the board of directors is authorized to fix the designations, and
relative preferences, limitations, voting rights, if any, including without
limitation, offering rights of such shares (which could be multiple or as a
separate class). In the event of a proposed merger, tender offer or
other attempt to gain control of Jacksonville Bancorp-Maryland that the board of
directors does not approve, it may be possible for the board of directors to
authorize the issuance of a series of preferred stock with rights and
preferences that would impede the completion of the transaction. An
effect of the possible issuance of preferred stock therefore may be to deter a
future attempt to gain control of Jacksonville Bancorp-Maryland. The
board of directors has no present plan or understanding to issue any preferred
stock.
Amendments
to Articles of Incorporation and Bylaws.
Amendments to the articles of incorporation must be approved by our board of
directors and also by at least a majority of the outstanding shares of our
voting stock; provided, however, that approval by at least 80% of the
outstanding voting stock is generally required to amend certain
provisions. A list of these provisions is provided under “Comparison
of Stockholders’ Rights For Existing Stockholders of Jacksonville
Bancorp-Federal—Amendment of Governing Instruments” above.
The
articles of incorporation also provide that the bylaws may be amended by the
affirmative vote of a majority of Jacksonville Bancorp-Maryland’s directors or
by the stockholders by the affirmative vote of at least 80% of the total votes
eligible to be voted at a duly constituted meeting of
stockholders. Any amendment of this super-majority requirement for
amendment of the bylaws would also require the approval of 80% of the
outstanding voting shares.
The
provisions requiring the affirmative vote of 80% of outstanding shares for
certain stockholder actions have been included in the articles of incorporation
of Jacksonville Bancorp-Maryland in reliance on Section 2-104(b)(4) of the
Maryland General Corporation Law. Section 2-104(b)(4) permits the
articles of incorporation to require a greater proportion of votes than the
proportion that would otherwise be required for stockholder action under the
Maryland General Corporation Law.
Business
Combinations with Interested Stockholders.
Maryland law restricts mergers, consolidations, sales of assets and other
business combinations between Jacksonville Bancorp-Maryland and an “interested
stockholder.” See “Comparison of Stockholder Rights for Existing
Stockholders of Jacksonville Bancorp-Federal—Mergers, Consolidations and Sales
of Assets,” above.
Evaluation
of Offers. The articles of incorporation of Jacksonville
Bancorp-Maryland provide that its board of directors, when evaluating a
transaction that would or may involve a change in control of Jacksonville
Bancorp-Maryland (whether by purchases of its securities, tender offer, merger,
consolidation, share exchange, dissolution, liquidation, sale of all or
substantially all of its assets, proxy solicitation or otherwise), may, in
connection with the exercise of its business judgment in determining what is in
the best interests of Jacksonville Bancorp-Maryland and its stockholders and in
making any recommendation to the stockholders, give due consideration to all
relevant factors, including, but not limited to, certain enumerated
factors. For a list of enumerated factors, see “Comparison of
Stockholder Rights for Existing Stockholders of Jacksonville
Bancorp-Federal—Evaluation of Offers” above.
Purpose
and Anti-Takeover Effects of Jacksonville Bancorp-Maryland’s Articles of
Incorporation and Bylaws. Our
board of directors believes that the provisions described above are prudent and
will reduce our vulnerability to takeover attempts and certain other
transactions that have not been negotiated with and approved by our board of
directors. These provisions also will assist us in the orderly deployment of the
offering proceeds into productive assets during the initial period after the
conversion. Our board of directors believes these provisions are in the best
interests of Jacksonville Bancorp-Maryland and our stockholders. Our board of
directors believes that it will be in the best position to determine the true
value of Jacksonville Bancorp-Maryland and to negotiate more effectively for
what may be in the best interests of all our stockholders. Accordingly, our
board of directors believes that it is in the best interests of Jacksonville
Bancorp-Maryland and all of our stockholders to encourage potential acquirers to
negotiate directly with the board of directors and that these provisions will
encourage such negotiations and discourage hostile takeover attempts. It is also
the view of our board of directors that these provisions should not discourage
persons from proposing a merger or other transaction at a price reflective of
the true value of Jacksonville Bancorp-Maryland and that is in the best
interests of all our stockholders.
Takeover attempts that
have not been negotiated with and approved by our board of directors present the
risk of a takeover on terms that may be less favorable than might otherwise be
available. A transaction that is negotiated and approved by our board of
directors, on the other hand, can be carefully planned and undertaken at an
opportune time in order to obtain maximum value of Jacksonville Bancorp-Maryland
for our stockholders, with due consideration given to matters such as the
management and business of the acquiring corporation and maximum strategic
development of Jacksonville Bancorp-Maryland’s assets. Although a tender offer
or other takeover attempt may be made at a price substantially above the current
market price, such offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may
be presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
that is under different management and whose objectives may not be similar to
those of the remaining stockholders.
Despite our belief as to
the benefits to stockholders of these provisions of Jacksonville
Bancorp-Maryland’s articles of incorporation and bylaws, these provisions may
also have the effect of discouraging a future takeover attempt that would not be
approved by our board of directors, but pursuant to which stockholders may
receive a substantial premium for their shares over then current market prices.
As a result, stockholders who might desire to participate in such a transaction
may not have any opportunity to do so. Such provisions will also make it more
difficult to remove our board of directors and management. Our board of
directors, however, has concluded that the potential benefits outweigh the
possible disadvantages.
Charter
of Jacksonville Savings Bank
Jacksonville
Savings Bank’s charter will provide that for a period of five years from the
closing of the conversion and offering, no person other than Jacksonville
Bancorp-Maryland may offer directly or indirectly to acquire the beneficial
ownership of more than 10% of any class of equity security of Jacksonville
Savings Bank. This provision will not apply to any tax-qualified
employee benefit plan of Jacksonville Savings Bank or Jacksonville
Bancorp-Maryland or to an underwriter or member of an underwriting or selling
group involving the public sale or resale of securities of Jacksonville
Bancorp-Maryland or any of its subsidiaries, so long as after the sale or
resale, no underwriter or member of the selling group is a beneficial owner,
directly or indirectly, of more than 10% of any class of equity securities of
Jacksonville Savings Bank. In addition, during this five-year period,
all shares owned over the 10% limit may not be voted on any matter submitted to
stockholders for a vote.
Conversion
Regulations
Office of
Thrift Supervision and Illinois Department of Financial and Professional
Regulation regulations prohibit any person from making an offer, announcing an
intent to make an offer or participating in any other arrangement to purchase
stock or acquiring stock or subscription rights in a converting institution or
its holding company from another person prior to completion of its conversion.
Further, without the prior written approval of the Office of Thrift Supervision
and the Illinois Department of Financial and Professional Regulation, no person
may make an offer or announcement of an offer to purchase shares or actually
acquire shares of a converted institution or its holding company for a period of
three years from the date of the completion of the conversion if, upon the
completion of such offer, announcement or acquisition, the person would become
the beneficial owner of more than 10% of the outstanding stock of the
institution or its holding company. The Office of Thrift Supervision and the
Illinois Department of Financial and Professional Regulation have defined
“person” to include any individual, group acting in concert, corporation,
partnership, association, joint stock company, trust, unincorporated
organization or similar company, a syndicate or any other group formed for the
purpose of acquiring, holding or disposing of securities of an insured
institution. However, offers made exclusively to a bank or its
holding company, or an underwriter or member of a selling group acting on the
converting institution’s or its holding company’s behalf for resale to the
general public are excepted. A person who is found to have violated these
restrictions may face prosecution or other legal action.
Change
in Control Regulations
Under the
Change in Bank Control Act, no person may acquire control of a savings and loan
holding company unless the Office of Thrift Supervision has been given 60 days’
prior written notice and has not issued a notice disapproving the proposed
acquisition. In addition, Office of Thrift Supervision regulations provide that
no company may acquire control of a savings and loan holding company without the
prior approval of the Office of Thrift Supervision. Also, under the Illinois
Savings Bank Act and regulations issued by the Illinois Department of Financial
and Professional Regulation, no person or entity may acquire control of a
savings bank without the prior approval of the Illinois Department of Financial
and Professional Regulation.
Control,
as defined under federal law, means ownership, control of or holding irrevocable
proxies representing more than 25% of any class of voting stock, control in any
manner of the election of a majority of the institution’s directors, or a
determination by the Office of Thrift Supervision that the acquirer has the
power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution. Under state law,
control is defined to mean the ability of any person or entity, acting
individually or in concert, to own, hold, direct with power to vote, or hold
proxies representing 10% or more of the voting shares or rights of an
institution, the ability to achieve in any manner the election or appointment of
a majority of directors of an institution, or the power to direct or exercise
significant influence over the management or policies of an
institution.
Acquisition
of more than 10% of any class of a savings and loan holding company’s voting
stock, if the acquirer is also subject to any one of eight “control factors,”
constitutes a rebuttable determination of control under Office of Thrift
Supervision regulations. Such control factors include the acquirer being one of
the two largest stockholders. The determination of control may be rebutted by
submission to the Office of Thrift Supervision, prior to the acquisition of
stock or the occurrence of any other circumstances giving rise to such
determination, of a statement setting forth facts and circumstances which would
support a finding that no control relationship will exist and containing certain
undertakings. The regulations provide that persons or companies that acquire
beneficial ownership exceeding 10% or more of any class of a savings and loan
holding company’s stock who do not intend to participate in or seek to exercise
control over a savings and loan holding company’s management or policies may
qualify for a safe harbor by filing with the Office of Thrift Supervision a
certification form that states, among other things, that the holder is not in
control of such institution, is not subject to a rebuttable determination of
control and will take no action which would result in a determination or
rebuttable determination of control without prior notice to or approval of the
Office of Thrift Supervision, as applicable. There are also rebuttable
presumptions in the regulations concerning whether a group “acting in concert”
exists, including presumed action in concert among members of an “immediate
family.”
The
Office of Thrift Supervision may prohibit an acquisition of control if it finds,
among other things, that:
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the
acquisition would result in a monopoly or substantially lessen
competition;
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the
financial condition of the acquiring person might jeopardize the financial
stability of the institution;
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the
competence, experience or integrity of the acquiring person indicates that
it would not be in the interest of the depositors or the public to permit
the acquisition of control by such person;
or
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the
acquisition would have an adverse effect on the Deposit Insurance
Fund.
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General
Jacksonville
Bancorp-Maryland is authorized to issue 25,000,000 shares of common stock, par
value of $0.01 per share, and 10,000,000 shares of preferred stock, par value
$0.01 per share. Jacksonville Bancorp-Maryland currently expects to issue in the
offering and exchange up to 2,498,709 shares of common stock, subject to
adjustment up to 2,873,515 shares. Jacksonville Bancorp-Maryland will
not issue shares of preferred stock in the conversion. Each share of
Jacksonville Bancorp-Maryland common stock will have the same relative rights
as, and will be identical in all respects to, each other share of common stock.
Upon payment of the subscription price for the common stock, in accordance with
the plan of conversion and reorganization, all of the shares of common stock
will be duly authorized, fully paid and nonassessable.
The shares of common stock
of Jacksonville Bancorp-Maryland will represent nonwithdrawable capital, will
not be an account of an insurable type, and will not be insured by the Federal
Deposit Insurance Corporation or any other government
agency.
Common
Stock
Dividends. Jacksonville
Bancorp-Maryland may pay dividends to an amount equal to the excess of our
capital surplus over payments that would be owed upon dissolution to
stockholders whose preferential rights upon dissolution are superior to those
receiving the dividend, and to an amount that would not make us insolvent, as
and when declared by our board of directors. The payment of dividends by
Jacksonville Bancorp-Maryland is also subject to limitations that are imposed by
law and applicable regulation, including restrictions on payments of dividends
that would reduce Jacksonville Bancorp-Maryland’s capital below the then
adjusted balance of its liquidation account. The holders of common stock of
Jacksonville Bancorp-Maryland will be entitled to receive and share equally in
dividends as may be declared by our board of directors out of funds legally
available therefor. If Jacksonville Bancorp-Maryland issues shares of preferred
stock, the holders thereof may have a priority over the holders of the common
stock with respect to dividends.
Voting
Rights. Upon
consummation of the conversion, the holders of common stock of Jacksonville
Bancorp-Maryland will have exclusive voting rights in Jacksonville
Bancorp-Maryland. They will elect Jacksonville Bancorp-Maryland’s
board of directors and act on other matters as are required to be presented to
them under Maryland law or as are otherwise presented to them by the board of
directors. Generally, each holder of common stock will be entitled to one vote
per share and will not have any right to cumulate votes in the election of
directors. Any person who beneficially owns more than 10% of the
then-outstanding shares of Jacksonville Bancorp-Maryland’s common stock,
however, will not be entitled or permitted to vote any shares of common stock
held in excess of the 10% limit unless a purchase of shares is approved by a
majority of unaffiliated directors prior to the acquisition of such
shares. If Jacksonville Bancorp-Maryland issues shares of preferred
stock, holders of the preferred stock may also possess voting rights. Certain
matters require the approval of 80% of our outstanding common
stock. As an Illinois chartered stock savings bank, corporate powers
and control of Jacksonville Savings Bank are vested in its board of directors,
who elect the officers of Jacksonville Savings Bank and who fill any vacancies
on the board of directors. Voting rights of Jacksonville Savings Bank are vested
exclusively in the owners of the shares of capital stock of Jacksonville Savings
Bank, which will be Jacksonville Bancorp-Maryland, and voted at the direction of
Jacksonville Bancorp-Maryland’s board of directors. Consequently, the
holders of the common stock of Jacksonville Bancorp-Maryland will not have
direct control of Jacksonville Savings Bank.
Liquidation. In the event of any
liquidation, dissolution or winding up of Jacksonville Savings Bank,
Jacksonville Bancorp-Maryland, as the holder of 100% of Jacksonville Savings
Bank’s capital stock, would be entitled to receive all assets of Jacksonville
Savings Bank available for distribution, after payment or provision for payment
of all debts and liabilities of Jacksonville Savings Bank, including all deposit
accounts and accrued interest thereon, and after distribution of the balance in
the liquidation account to Eligible Account Holders and Supplemental Eligible
Account Holders. In the event of liquidation, dissolution or winding up of
Jacksonville Bancorp-Maryland, the holders of its common stock would be entitled
to receive, after payment or provision for payment of all its debts and
liabilities (including payments with respect to the liquidation account of
Jacksonville Bancorp-Maryland), all of the assets of Jacksonville
Bancorp-Maryland available for distribution. If preferred stock is issued, the
holders thereof may have a priority over the holders of the common stock in the
event of liquidation or dissolution.
Preemptive
Rights.
Holders of the common stock of Jacksonville Bancorp-Maryland will not be
entitled to preemptive rights with respect to any shares that may be issued. The
common stock is not subject to redemption.
Preferred
Stock
None of the shares of
Jacksonville Bancorp-Maryland’s authorized preferred stock will be issued as
part of the offering or the conversion. Preferred stock may be issued with
preferences and designations as our board of directors may from time to time
determine. Our board of directors may, without stockholder approval, issue
shares of preferred stock with voting, dividend, liquidation and conversion
rights that could dilute the voting strength of the holders of the common stock
and may assist management in impeding an unfriendly takeover or attempted change
in control.
The
transfer agent and registrar for Jacksonville Bancorp-Maryland’s common stock is
Hickory Point Bank & Trust, FSB.
The
consolidated financial statements of Jacksonville Bancorp-Federal as of December
31, 2009 and 2008 and for the years then ended appearing in this prospectus and
elsewhere in the registration statement have been audited by BKD, LLP,
independent registered public accountants, as stated in their reports with
respect thereto, and are included herein in reliance on their reports given upon
the authority of said firm as experts in accounting and auditing.
RP
Financial, LC. has consented to the publication herein of the summary of its
report to Jacksonville Bancorp-Maryland setting forth its opinion as to the
estimated pro forma market value of the shares of common stock upon completion
of the conversion and offering and its letters with respect to subscription
rights and the liquidation accounts.
Luse
Gorman Pomerenk & Schick, P.C., Washington, D.C., counsel to Jacksonville
Bancorp-Maryland, Jacksonville Bancorp-Federal, Jacksonville Bancorp, MHC and
Jacksonville Savings Bank, will issue to Jacksonville Bancorp-Maryland its
opinion regarding the legality of the common stock and the federal income tax
consequences of the conversion. A member of Luse Gorman Pomerenk
& Schick, P.C. may be deemed to have an interest by virtue of a family
member having subscription rights in the offering. Certain legal
matters will be passed upon for Keefe, Bruyette & Woods, Inc. by Patton
Boggs LLP.
Jacksonville
Bancorp-Maryland has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933 with respect to the
shares of common stock offered hereby. As permitted by the rules and regulations
of the Securities and Exchange Commission, this prospectus does not contain all
the information set forth in the registration statement. Such
information, including the appraisal report which is an exhibit to the
registration statement, can be examined without charge at the public reference
facilities of the Securities and Exchange Commission located at 100 F Street,
N.E., Washington, D.C. 20549, and copies of such material can be obtained from
the Securities and Exchange Commission at prescribed rates. The
Securities and Exchange Commission telephone number is
1-800-SEC-0330. In addition, the Securities and Exchange Commission
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission, including
Jacksonville Bancorp-Maryland. The statements contained in this
prospectus as to the contents of any contract or other document filed as an
exhibit to the registration statement are, of necessity, brief descriptions of
the material terms of, and should be read in conjunction with, such contract or
document.
Jacksonville
Bancorp, MHC has filed with the Office of Thrift Supervision an Application on
Form AC with respect to the conversion. This prospectus omits certain
information contained in the application. The application may be examined at the
principal office of the Office of Thrift Supervision, 1700 G Street, N.W.,
Washington, D.C. 20552, and at the Central Regional Office of the Office of
Thrift Supervision, 1 South Wacker Drive, Suite 2000, Chicago, Illinois
60606. Our Plan of Conversion and Reorganization is available, upon
request, at each of our branch offices.
In
connection with the offering, Jacksonville Bancorp-Maryland will register its
common stock under Section 12(b) of the Securities Exchange Act of 1934 and,
upon such registration, Jacksonville Bancorp-Maryland and the holders of its
common stock will become subject to the proxy solicitation rules, reporting
requirements and restrictions on common stock purchases and sales by directors,
officers and greater than 10% stockholders, the annual and periodic reporting
and certain other requirements of the Securities Exchange Act of
1934. Under the plan of conversion and reorganization, Jacksonville
Bancorp-Maryland has undertaken that it will not terminate such registration for
a period of at least three years following the offering.
Jacksonville
Bancorp, Inc.
December
31, 2009 and 2008
Contents
Report
of Independent Registered Public Accounting Firm
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F-2
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Consolidated
Financial Statements
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Balance
Sheets
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F-3
|
Statements
of Income
|
F-5
|
Statements
of Stockholders’ Equity
|
F-7
|
Statements
of Cash Flows
|
F-9
|
Notes
to Financial Statements
|
F-11
|
Separate
financial statements for Jacksonville Bancorp – Maryland have not been included
in this prospectus because Jacksonville Bancorp – Maryland has not engaged in
any significant activities, has no significant assets, and has no contingent
liabilities, revenue or expenses.
All
financial statement schedules have been omitted as the required information
either is not applicable or is included in the financial statements or related
notes.
Pursuant
to Securities and Exchange Commission regulations, Jacksonville Bancorp –
Maryland is a smaller reporting company as it will have a public float of less
than $75 million.
Report
of Independent Registered Public Accounting Firm
Audit
Committee, Board of Directors, and Stockholders
Jacksonville
Bancorp, Inc.
Jacksonville,
Illinois
We have
audited the accompanying consolidated balance sheets of Jacksonville Bancorp,
Inc. as of December 31, 2009 and 2008, and the related consolidated statements
of income, stockholders’ equity and cash flows for the years then
ended. The Company’s management is responsible for these financial
statements. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits include
consideration of internal control over financial reporting as a basis for
designing auditing procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no
such opinion. Our audits also include examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Jacksonville Bancorp, Inc.
as of December 31, 2009 and 2008, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
/sig/
BKD,
llp
Decatur,
Illinois
March 12,
2010
Jacksonville
Bancorp, Inc.
Consolidated
Balance Sheets
December
31, 2009 and 2008
Assets
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$ |
4,412,988 |
|
|
$ |
6,292,590 |
|
Federal
funds sold
|
|
|
9,925,855 |
|
|
|
460,194 |
|
Interest-bearing
demand deposits in banks
|
|
|
1,357,631 |
|
|
|
392,504 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
15,696,474 |
|
|
|
7,145,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
|
37,196,298 |
|
|
|
49,638,933 |
|
Mortgage-backed
securities
|
|
|
40,984,395 |
|
|
|
27,795,119 |
|
Other
investments
|
|
|
149,902 |
|
|
|
240,321 |
|
Loans
held for sale
|
|
|
814,074 |
|
|
|
1,388,284 |
|
Loans,
net of allowance for loan losses of $2,290,001 and $1,934,072 at December
31, 2009 and 2008
|
|
|
173,683,310 |
|
|
|
182,948,292 |
|
Premises
and equipment
|
|
|
5,766,858 |
|
|
|
6,106,746 |
|
Federal
Home Loan Bank stock
|
|
|
1,108,606 |
|
|
|
1,108,606 |
|
Foreclosed
assets held for sale, net
|
|
|
382,879 |
|
|
|
769,467 |
|
Cash
surrender value of life insurance
|
|
|
4,094,663 |
|
|
|
3,907,339 |
|
Interest
receivable
|
|
|
1,988,394 |
|
|
|
2,344,502 |
|
Deferred
income taxes
|
|
|
724,139 |
|
|
|
891,731 |
|
Mortgage
servicing rights, net of valuation allowance of $156,442 and $428,030 as
of December 31, 2009 and 2008
|
|
|
850,313 |
|
|
|
545,494 |
|
Goodwill
|
|
|
2,726,567 |
|
|
|
2,726,567 |
|
Other
assets
|
|
|
2,679,600 |
|
|
|
718,645 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
288,846,472 |
|
|
$ |
288,275,334 |
|
See Notes to
Consolidated Financial Statements
Jacksonville
Bancorp, Inc.
Consolidated
Balance Sheets
December
31, 2009 and 2008
Liabilities
and Stockholders’ Equity
|
|
2009
|
|
|
2008
|
|
Liabilities
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
Demand
|
|
$ |
20,668,169 |
|
|
$ |
19,526,137 |
|
Savings,
NOW and money market
|
|
|
88,412,078 |
|
|
|
78,129,554 |
|
Time
|
|
|
145,619,976 |
|
|
|
140,495,537 |
|
|
|
|
|
|
|
|
|
|
Total
deposits
|
|
|
254,700,223 |
|
|
|
238,151,228 |
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
3,789,453 |
|
|
|
7,633,079 |
|
Federal
Home Loan Bank advances
|
|
|
— |
|
|
|
13,500,000 |
|
Deferred
compensation
|
|
|
2,826,227 |
|
|
|
2,576,290 |
|
Advances
from borrowers for taxes and insurance
|
|
|
508,356 |
|
|
|
445,077 |
|
Interest
payable
|
|
|
734,903 |
|
|
|
925,661 |
|
Other
liabilities
|
|
|
1,023,890 |
|
|
|
784,559 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
263,583,052 |
|
|
|
264,015,894 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, authorized 10,000,000
shares; none
issued and outstanding
|
|
|
— |
|
|
|
— |
|
Common
stock, $.01 par value; authorized 20,000,000 shares; issued 1,987,904
shares
|
|
|
19,879 |
|
|
|
19,879 |
|
Additional
paid-in capital
|
|
|
6,634,591 |
|
|
|
6,634,108 |
|
Retained
earnings – substantially restricted
|
|
|
18,399,506 |
|
|
|
17,268,043 |
|
Accumulated
other comprehensive income
|
|
|
695,825 |
|
|
|
337,410 |
|
|
|
|
|
|
|
|
|
|
Treasury
stock, at cost
Common;
2009 – 67,087 shares
|
|
|
(486,381 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
25,263,420 |
|
|
|
24,259,440 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
288,846,472 |
|
|
$ |
288,275,334 |
|
See Notes to Consolidated
Financial Statements
Jacksonville
Bancorp, Inc.
Consolidated
Statements of Income
Years
Ended December 31, 2009 and 2008
|
|
2009
|
|
|
2008
|
|
Interest
and Fee Income
|
|
|
|
|
|
|
Loans,
including fees
|
|
$ |
11,591,716 |
|
|
$ |
12,026,500 |
|
Debt
securities
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
503,211 |
|
|
|
1,094,248 |
|
Tax-exempt
|
|
|
1,050,667 |
|
|
|
977,332 |
|
Mortgage-backed
securities
|
|
|
1,262,357 |
|
|
|
1,579,923 |
|
Other
|
|
|
11,966 |
|
|
|
230,333 |
|
|
|
|
|
|
|
|
|
|
Total
interest income
|
|
|
14,419,917 |
|
|
|
15,908,336 |
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
5,315,273 |
|
|
|
7,168,601 |
|
Short-term
borrowings
|
|
|
12,452 |
|
|
|
78,045 |
|
Federal
Home Loan Bank advances
|
|
|
103,803 |
|
|
|
469,771 |
|
|
|
|
|
|
|
|
|
|
Total
interest expense
|
|
|
5,431,528 |
|
|
|
7,716,417 |
|
|
|
|
|
|
|
|
|
|
Net
Interest Income
|
|
|
8,988,389 |
|
|
|
8,191,919 |
|
|
|
|
|
|
|
|
|
|
Provision
for Loan Losses
|
|
|
2,575,000 |
|
|
|
310,000 |
|
|
|
|
|
|
|
|
|
|
Net
Interest Income After Provision for Loan Losses
|
|
|
6,413,389 |
|
|
|
7,881,919 |
|
|
|
|
|
|
|
|
|
|
Noninterest
Income
|
|
|
|
|
|
|
|
|
Fiduciary
activities
|
|
|
166,138 |
|
|
|
220,542 |
|
Commission
income
|
|
|
869,368 |
|
|
|
1,021,228 |
|
Service
charges on deposit accounts
|
|
|
895,264 |
|
|
|
792,940 |
|
Mortgage
banking operations, net
|
|
|
736,681 |
|
|
|
195,743 |
|
Net
realized gains on sales of available-for-sale securities
|
|
|
588,959 |
|
|
|
33,324 |
|
Loan
servicing fees
|
|
|
359,813 |
|
|
|
352,477 |
|
Increase
in cash surrender value of life insurance
|
|
|
178,676 |
|
|
|
162,827 |
|
Other
|
|
|
414,195 |
|
|
|
381,842 |
|
|
|
|
|
|
|
|
|
|
Total
noninterest income
|
|
|
4,209,094 |
|
|
|
3,160,923 |
|
See Notes to Consolidated
Financial Statements
Jacksonville
Bancorp, Inc.
Consolidated
Statements of Income
Years
Ended December 31, 2009 and 2008
|
|
2009
|
|
|
2008
|
|
Noninterest
Expense
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
$ |
5,579,322 |
|
|
$ |
5,525,628 |
|
Occupancy
and equipment
|
|
|
1,075,728 |
|
|
|
1,101,671 |
|
Data
processing
|
|
|
356,666 |
|
|
|
427,838 |
|
Professional
|
|
|
230,699 |
|
|
|
179,517 |
|
Marketing
|
|
|
112,273 |
|
|
|
124,321 |
|
Postage
and office supplies
|
|
|
287,671 |
|
|
|
310,119 |
|
Deposit
insurance premium
|
|
|
555,223 |
|
|
|
46,943 |
|
Impairment
(recovery) on mortgage servicing rights asset
|
|
|
(122,790 |
) |
|
|
428,030 |
|
Other
|
|
|
1,050,935 |
|
|
|
1,076,670 |
|
|
|
|
|
|
|
|
|
|
Total
noninterest expense
|
|
|
9,125,727 |
|
|
|
9,220,737 |
|
|
|
|
|
|
|
|
|
|
Income
Before Income Taxes
|
|
|
1,496,756 |
|
|
|
1,822,105 |
|
|
|
|
|
|
|
|
|
|
Provision
for Income Taxes
|
|
|
100,589 |
|
|
|
304,183 |
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$ |
1,396,167 |
|
|
$ |
1,517,922 |
|
|
|
|
|
|
|
|
|
|
Basic
Earnings Per Share
|
|
$ |
0.72 |
|
|
$ |
0.76 |
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings Per Share
|
|
$ |
0.72 |
|
|
$ |
0.76 |
|
|
|
|
|
|
|
|
|
|
Cash
Dividends Per Share
|
|
$ |
0.30 |
|
|
$ |
0.30 |
|
See Notes to
Consolidated Financial Statements
Jacksonville
Bancorp, Inc.
Consolidated
Statements of Stockholders’ Equity
Years
Ended December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Issued
Common Stock
|
|
|
Paid-in
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2008
|
|
|
1,986,804 |
|
|
$ |
19,868 |
|
|
$ |
6,621,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Change
in unrealized appreciation on available-for-sale securities, net of
taxes
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
option compensation expense
|
|
|
— |
|
|
|
— |
|
|
|
1,760 |
|
Dividends
on common stock, $.30 per share
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock
options exercised
|
|
|
1,100 |
|
|
|
11 |
|
|
|
10,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2008
|
|
|
1,987,904 |
|
|
|
19,879 |
|
|
|
6,634,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Change
in unrealized appreciation on available-for-sale securities, net of
taxes
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of treasury stock (67,087 shares)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock
option compensation expense
|
|
|
— |
|
|
|
— |
|
|
|
483 |
|
Dividends
on common stock, $.30 per share
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2009
|
|
|
1,987,904 |
|
|
$ |
19,879 |
|
|
$ |
6,634,591 |
|
See Notes to Consolidated
Financial Statements
Jacksonville
Bancorp, Inc.
Consolidated
Statements of Stockholders’ Equity
Years
Ended December 31, 2009 and 2008
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
|
|
|
|
Earnings
|
|
|
Income
(Loss)
|
|
|
Stock
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2008
|
|
$ |
16,034,800 |
|
|
$ |
(58,136 |
) |
|
$ |
— |
|
|
$ |
22,617,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
1,517,922 |
|
|
|
— |
|
|
|
— |
|
|
|
1,517,922 |
|
Change
in unrealized appreciation on available-for-sale securities, net of
taxes
|
|
|
— |
|
|
|
395,546 |
|
|
|
— |
|
|
|
395,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,913,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
option compensation expense
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,760 |
|
Dividends
on common stock, $.30 per share
|
|
|
(284,679 |
) |
|
|
— |
|
|
|
— |
|
|
|
(284,679 |
) |
Stock
options exercised
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2008
|
|
|
17,268,043 |
|
|
|
337,410 |
|
|
|
— |
|
|
|
24,259,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
1,396,167 |
|
|
|
— |
|
|
|
— |
|
|
|
1,396,167 |
|
Change
in unrealized appreciation on available-for-sale securities, net of
taxes
|
|
|
— |
|
|
|
358,415 |
|
|
|
— |
|
|
|
358,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,754,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of treasury stock (67,087 shares)
|
|
|
— |
|
|
|
— |
|
|
|
(486,381 |
) |
|
|
(486,381 |
) |
Stock
option compensation expense
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
483 |
|
Dividends
on common stock, $.30 per share
|
|
|
(264,704 |
) |
|
|
— |
|
|
|
— |
|
|
|
(264,704 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2009
|
|
$ |
18,399,506 |
|
|
$ |
695,825 |
|
|
$ |
(486,381 |
) |
|
$ |
25,263,420 |
|
See Notes to Consolidated
Financial Statements
Jacksonville
Bancorp, Inc.
Consolidated
Statements of Cash Flows
Years
Ended December 31, 2009 and 2008
|
|
2009
|
|
|
2008
|
|
Operating
Activities
|
|
|
|
|
|
|
Net
income
|
|
$ |
1,396,167 |
|
|
$ |
1,517,922 |
|
Items
not requiring (providing) cash
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
406,469 |
|
|
|
431,697 |
|
Provision
for loan losses
|
|
|
2,575,000 |
|
|
|
310,000 |
|
Amortization
of premiums and discounts on securities
|
|
|
955,364 |
|
|
|
83,720 |
|
Amortization
of core deposit intangibles
|
|
|
— |
|
|
|
39,862 |
|
Deferred
income taxes
|
|
|
(17,047 |
) |
|
|
(290,430 |
) |
Net
realized gains on available-for-sale securities
|
|
|
(588,959 |
) |
|
|
(33,324 |
) |
Amortization
of mortgage servicing rights
|
|
|
507,313 |
|
|
|
196,403 |
|
Impairment
(recovery) of mortgage servicing rights asset
|
|
|
(122,790 |
) |
|
|
428,030 |
|
Increase
in cash surrender value of life insurance
|
|
|
(187,324 |
) |
|
|
(171,476 |
) |
Gains
on sales of foreclosed assets
|
|
|
(11,701 |
) |
|
|
(18,242 |
) |
Gain
on sale of premises and equipment
|
|
|
— |
|
|
|
(6,517 |
) |
Stock
option compensation expense
|
|
|
483 |
|
|
|
1,760 |
|
Tax
benefit relating to stock options exercised
|
|
|
— |
|
|
|
— |
|
Changes
in
|
|
|
|
|
|
|
|
|
Interest
receivable
|
|
|
356,108 |
|
|
|
(239,408 |
) |
Other
assets
|
|
|
(1,990,045 |
) |
|
|
(354,574 |
) |
Interest
payable
|
|
|
(190,758 |
) |
|
|
(322,685 |
) |
Other
liabilities
|
|
|
523,316 |
|
|
|
(212,431 |
) |
Origination
of loans held for sale
|
|
|
(66,814,834 |
) |
|
|
(29,807,986 |
) |
Proceeds
from sales of loans held for sale
|
|
|
66,699,701 |
|
|
|
30,076,869 |
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
3,496,463 |
|
|
|
1,629,190 |
|
|
|
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
|
|
|
Purchases
of available-for-sale securities
|
|
|
(101,825,114 |
) |
|
|
(69,456,634 |
) |
Proceeds
from maturities of available-for-sale securities
|
|
|
43,966,667 |
|
|
|
50,922,663 |
|
Proceeds
from the sales of available-for-sale investments and other
investments
|
|
|
57,378,873 |
|
|
|
22,009,669 |
|
Net
change in loans
|
|
|
6,600,703 |
|
|
|
(7,901,707 |
) |
Purchase
of premises and equipment
|
|
|
(66,581 |
) |
|
|
(295,828 |
) |
Proceeds
from sales of premises and equipment
|
|
|
— |
|
|
|
32,795 |
|
Proceeds
from the sale of foreclosed assets
|
|
|
487,568 |
|
|
|
201,880 |
|
Purchase
of bank-owned life insurance
|
|
|
— |
|
|
|
(549,635 |
) |
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) investing activities
|
|
|
6,542,116 |
|
|
|
(5,036,797 |
) |
See Notes to Consolidated
Financial Statements
Jacksonville
Bancorp, Inc.
Consolidated
Statements of Cash Flows
Years
Ended December 31, 2009 and 2008
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
Net
increase in demand deposits, money market, NOW and savings
accounts
|
|
$ |
11,424,556 |
|
|
$ |
2,267,974 |
|
Net
increase (decrease) in certificates of deposit
|
|
|
5,124,439 |
|
|
|
(9,837,497 |
) |
Net
increase (decrease) in short-term borrowings
|
|
|
(3,843,626 |
) |
|
|
2,697,045 |
|
Proceeds
from Federal Home Loan Bank advances
|
|
|
— |
|
|
|
8,500,000 |
|
Repayment
of Federal Home Loan Bank advances
|
|
|
(13,500,000 |
) |
|
|
(5,000,000 |
) |
Net
increase in advances from borrowers for taxes and
insurance
|
|
|
63,279 |
|
|
|
23,588 |
|
Proceeds
from stock options exercised
|
|
|
— |
|
|
|
11,000 |
|
Purchase
and retirement of common stock
|
|
|
— |
|
|
|
— |
|
Purchase
of treasury stock
|
|
|
(486,381 |
) |
|
|
— |
|
Dividends
paid
|
|
|
(269,660 |
) |
|
|
(284,679 |
) |
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
(1,487,393 |
) |
|
|
(1,622,569 |
) |
|
|
|
|
|
|
|
|
|
Increase
(Decrease) in Cash and Cash Equivalents
|
|
|
8,551,186 |
|
|
|
(5,030,176 |
) |
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents, Beginning of Year
|
|
|
7,145,288 |
|
|
|
12,175,464 |
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents, End of Year
|
|
$ |
15,696,474 |
|
|
$ |
7,145,288 |
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flows Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
5,622,286 |
|
|
$ |
8,039,102 |
|
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$ |
559,000 |
|
|
$ |
551,600 |
|
|
|
|
|
|
|
|
|
|
Sale
and financing of foreclosed assets
|
|
$ |
218,636 |
|
|
$ |
156,890 |
|
|
|
|
|
|
|
|
|
|
Real
estate acquired in settlement of loans
|
|
$ |
307,915 |
|
|
$ |
666,822 |
|
|
|
|
|
|
|
|
|
|
Dividends
declared not paid
|
|
$ |
66,157 |
|
|
$ |
71,113 |
|
|
|
|
|
|
|
|
|
|
Loans
held for sale transferred to loans
|
|
$ |
— |
|
|
$ |
— |
|
See Notes to Consolidated Financial
Statements
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Note
1:
|
Nature of Operations
and Summary of Significant Accounting Policies
|
Nature
of Operations
Jacksonville
Bancorp, Inc. (the “Company”) was incorporated under Federal law on May 3,
2002. The Company is a savings and loan holding company and its sole
business activity is the 100% ownership of Jacksonville Savings Bank (the
“Bank”). As part of our reorganization into the two-tier mutual
holding company form of ownership, the shareholder interests in the Bank were
converted into interests of the Company. The Bank was founded in 1916
as an Illinois-chartered savings and loan association and converted to an
Illinois-chartered savings bank in 1992. The Bank is headquartered in
Jacksonville, Illinois and operates six branches in addition to its main
office. The Bank’s deposits have been federally insured since 1945 by
the Federal Deposit Insurance Corporation (“FDIC”). The Bank has been
a member of the Federal Home Loan Bank (“FHLB”) System since 1932.
On April
20, 1995, the Bank reorganized into the mutual holding company form of
ownership, pursuant to which the Bank amended its charter from an
Illinois-chartered mutual savings bank into an Illinois-chartered mutual holding
company (“MHC”), Jacksonville Bancorp, MHC. On December 28, 2000,
Jacksonville Bancorp, MHC, converted from an Illinois-chartered mutual holding
company to a federally-chartered mutual holding company.
The Bank
is a community-oriented savings bank engaged primarily in the business of
attracting retail deposits from the general public in the Bank’s market area and
using such funds together with borrowings and funds from other sources to
originate consumer loans and mortgage loans secured by one- to four-family
residential real estate. The Bank also originates commercial real
estate loans, multi-family real estate loans, commercial business loans, and
agricultural loans. When possible, the Bank emphasizes the
origination of mortgage loans with adjustable interest rates (“ARM”), as well as
fixed-rate balloon loans with terms ranging from three to five years, consumer
loans, which are primarily home equity loans secured by second mortgages,
commercial business loans, and agricultural loans. The Bank also
offers trust and investment services. The investment center, Berthel
Fisher and Company Financial Services, Inc., is operated through the Bank’s
wholly-owned subsidiary, Financial Resources Group, Inc.
The
Company is subject to competition from other financial institutions and
nonfinancial institutions providing financial products. Additionally,
the Company is subject to the regulations of certain regulatory agencies and
undergoes periodic examinations by those regulatory agencies.
The
significant accounting and reporting policies of the Company and its subsidiary
follow:
|
Principles
of Consolidation and Financial Statement
Presentation
|
The
consolidated financial statements include the accounts of the Company, the Bank
and the Bank’s wholly owned subsidiary, Financial Resources Group,
Inc. Significant intercompany accounts and transactions have been
eliminated in consolidation. Based on the Company’s approach to
decision making, it has decided that its business is comprised of a single
segment.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
consolidated financial statements of the Company have been prepared in
conformity with accounting principles generally accepted in the United States of
America and conform to predominate practice within the banking
industry.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Material
estimates that are particularly susceptible to significant change relate to the
determination of the allowance for loan losses, fair value of securities,
Federal Home Loan Bank stock impairment, valuation of real estate acquired in
connection with foreclosures or in satisfaction of loans, valuation of loan
servicing rights, valuation of deferred tax assets and goodwill
impairment.
Cash
Equivalents
The
Company considers all liquid investments with original maturities of three
months or less to be cash equivalents. At December 31, 2009 and 2008,
cash equivalents consisted primarily of federal funds sold and interest-earning
demand deposits in banks.
The
financial institutions holding the Company’s cash accounts is participating in
the FDIC’s Transaction Account Guarantee Program. Under that program,
through June 30, 2010, all noninterest-bearing transaction accounts are fully
guaranteed by the FDIC for the entire amount in the account.
Effective
October 3, 2008, the FDIC’s insurance limits increased to
$250,000. The increase in federally insured limits is currently set
to expire December 31, 2013, at which time deposit insurance limits will be
reduced to $100,000. At December 31, 2009, the Company’s
interest-bearing cash accounts did not exceed federally insured
limits.
Securities
Available-for-sale
securities, which include any security for which the Company has no immediate
plan to sell but which may be sold in the future, are carried at fair
value. Unrealized gains and losses are recorded, net of related
income tax effects, in other comprehensive income.
Amortization
of premiums and accretion of discounts are recorded as interest income from
securities. Realized gains and losses are recorded as net security
gains (losses). Gains and losses on sales of securities are
determined on the specific-identification method.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Other
Investments
Other
investments at December 31, 2009 and 2008 include local municipal bonds and
equity investments in local community development organizations. The
municipal bonds mature ratably through the year 2020. These
securities have no readily ascertainable market value and are carried at
cost.
Loans
Held for Sale
Mortgage
loans originated and intended for sale in the secondary market are carried at
the lower of cost or fair value in the aggregate. Net unrealized
losses, if any, are recognized through a valuation allowance by charges to
noninterest income. Gains and losses on loan sales are recorded in
noninterest income, and direct loan origination costs and fees are deferred at
origination of the loan and are recognized in noninterest income upon sale of
the loan.
Loans
Loans
that management has the intent and ability to hold for the foreseeable future or
until maturity or payoffs are reported at their outstanding principal balances
adjusted for unearned income, charge-offs, the allowance for loan losses, any
unamortized deferred fees or costs on originated loans.
For loans
amortized at cost, interest income is accrued based on the unpaid principal
balance. Loan origination fees, net of certain direct origination
costs, as well as premiums and discounts, are deferred and amortized as a level
yield adjustment over the respective term of the loan.
The
accrual of interest on loans is generally discontinued at the time the loan is
90 days past due unless the credit is well-secured and in process of
collection. Past due status is passed on contractual terms of the
loan. In all cases, loans are placed on nonaccrual or charged off at
an earlier date if collection of principal or interest is considered
doubtful.
All
interest accrued but not collected for loans that are placed on nonaccrual or
charged off are reversed against interest income. The interest on
these loans is accounted for on the cash-basis or cost-recovery method, until
qualifying for return to accrual. Loans are returned to accrual
status when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured.
Allowance
for Loan Losses
The
allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to income. Loan
losses are charged against the allowance when management believes collectibility
of the principal is unlikely. Subsequent recoveries, if any, are
credited to the allowance.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
allowance for loan losses is evaluated on a regular basis by management and is
based upon management’s periodic review of the collectibility of the loans in
light of historical experience, the nature and volume of the loan portfolio,
adverse situations that may affect the borrower’s ability to repay, estimated
value of any underlying collateral and prevailing economic
conditions. This evaluation is inherently subjective as it requires
estimates that are susceptible to significant revision as more information
becomes available.
The
allowance consists of allocated and general components. The allocated
component relates to loans that are classified as impaired. For those
loans that are classified as impaired, an allowance is established when the
discounted cash flows (or collateral value or observable market price) of the
impaired loan is lower than the carrying value of that loan. The
general component covers nonclassified loans and is based on historical
charge-off experience and expected loss given default derived from the Company’s
internal risk rating process. Other adjustments may be made to the
allowance for pools of loans after an assessment of internal or external
influences on credit quality that are not fully reflected in the historical loss
or risk rating data.
A loan is
considered impaired when, based on current information and events, it is
probable that the Company will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment
include payment status, collateral value and the probability of collecting
scheduled principal and interest payments when due. Loans that
experience insignificant payment delays and payment shortfalls generally are not
classified as impaired. Management determines the significance of
payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower’s
prior payment record and the amount of the shortfall in relation to the
principal and interest owed. Impairment is measured on a loan-by-loan
basis for commercial and construction loans by either the present value of
expected future cash flows discounted at the loan’s effective interest rate, the
loan’s obtainable market price or the fair value of the collateral if the loan
is collateral dependent.
Groups of
loans with similar risk characteristics are collectively evaluated for
impairment based on the group’s historical loss experience adjusted for changes
in trends, conditions and other relevant factors that affect repayment of the
loans. Accordingly, the Company does not separately identify
individual consumer and residential loans for impairment measurements, unless
such loans are the subject of a restructuring agreement due to financial
difficulties of the borrower.
Premises
and Equipment
Depreciable
assets are stated at cost less accumulated depreciation. Depreciation
is charged to expense using the straight-line method over the estimated useful
lives of the assets.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
estimated useful lives for each major depreciable classification of premises and
equipment are as follows:
Buildings
and improvements
|
35-40
years
|
Equipment
|
3-5
years
|
Federal
Home Loan Bank Stock
Federal
Home Loan Bank stock is a required investment for institutions that are members
of the Federal Home Loan Bank system. The required investment in the
common stock is based on a predetermined formula.
The
Company owns $1,108,606 of Federal Home Loan Bank stock as of December 31, 2009
and 2008. The Federal Home Loan Bank of Chicago (FHLB) is operating
under a Cease and Desist Order from their regulator, the Federal Housing Finance
Board. The order prohibits capital stock repurchases and redemptions
until a time to be determined by the Federal Housing Finance
Board. The FHLB will continue to provide liquidity and funding
through advances. With regard to dividends, the FHLB will continue to
assess their dividend capacity each quarter and make appropriate request for
approval. The FHLB did not pay a dividend during 2009 or
2008. Management performed an analysis and deemed the cost method
investment in FHLB stock is ultimately recoverable and therefore not
impaired.
Foreclosed
Assets Held for Sale
Assets
acquired through, or in lieu of, loan foreclosure are held for sale and are
initially recorded at fair value at the date of foreclosure, establishing a new
cost basis. Subsequent to foreclosure, valuations are periodically
performed by management and the assets are carried at the lower of carrying
amount or fair value less cost to sell. Revenue and expenses from
operations and changes in the valuation allowance are included in income or
expense from foreclosed assets.
Bank-owned
Life Insurance
Bank-owned
life insurance policies are reflected on the consolidated balance sheets at the
estimated cash surrender value. Changes in the cash surrender value
are reflected in noninterest income in the consolidated statements of
income.
Goodwill
Goodwill
is tested annually for impairment. If the implied fair value of
goodwill is lower than its carrying amount, a goodwill impairment is indicated
and goodwill is written down to its implied fair value. Subsequent
increases in goodwill value are not recognized in the financial
statements. The goodwill was not deemed impaired as of December 31,
2009 or 2008.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Intangible
Assets
Intangible
assets are being amortized on the straight-line basis over periods up to eight
years. Such assets are periodically evaluated as to the
recoverability of their carrying value. The intangibles were fully
amortized during 2008.
Mortgage
Servicing Rights
Mortgage
servicing assets are recognized separately when rights are acquired through
purchase or through sale of financial assets. Under the servicing
assets and liabilities accounting guidance (ASC 860-50), servicing rights
resulting from the sale or securitization of loans originated by the Company are
initially measured at fair value at the date of transfer. Fair value
is based on market prices for comparable mortgage servicing contracts, when
available, or alternatively, is based on a valuation model that calculates the
present value of estimated future net servicing income. The valuation
model incorporates assumptions that market participants would use in estimating
future net servicing income, such as the cost to service, the discount rate, the
custodial earnings rate, an inflation rate, ancillary income, prepayment speeds
and default rates and losses. These variables change from quarter to
quarter as market conditions and projected interest rates change.
The
Company subsequently measures each class of servicing asset using either the
fair value or the amortization method. The Company has elected to
subsequently measure the mortgage servicing rights under the amortization
method. Under the amortization method, servicing rights are amortized
in proportion to and over the period of estimated net servicing
income. The amortized assets are assessed for impairment or increased
obligation based on fair value at each reporting date. Each class of
separately recognized servicing assets subsequently measured using the
amortization method are evaluated and measured for
impairment. Impairment is determined by stratifying rights into
tranches based on predominant characteristics, such as interest rate, loan type
and investor type. Impairment is recognized through a valuation
allowance for an individual tranche, to the extent that fair value is less than
the carrying amount of the servicing assets for that tranche. The
valuation allowance is adjusted to reflect changes in the measurement of
impairment after the initial measurement of impairment. Changes in
valuation allowances are reported as a separate line item in noninterest expense
on the income statement. Fair value in excess of the carrying amount
of servicing assets for that stratum is not recognized.
Servicing
fee income is recorded for fees earned for servicing loans. The fees
are based on a contractual percentage of the outstanding principal and are
recorded as income when earned in loan servicing fees in non-interest
income. The amortization of mortgage servicing rights is netted from
the gains on sale of loans, both cash gains as well as the capitalized gains,
and is included in mortgage banking operations, net in non-interest
income.
Treasury
Stock
Common
stock shares repurchased are recorded at cost. Cost of shares retired
or reissued is determined using the first-in, first-out method.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Stock
Options
At
December 31, 2009 and 2008, the Company has a stock-based employee compensation
plan, which is described more fully in Note 15.
Income
Taxes
The
Company accounts for income taxes in accordance with income tax accounting
guidance (ASC 740, Income
Taxes). The income tax accounting guidance results in two
components of income tax expense: current and
deferred. Current income tax expense reflects taxes to be paid or
refunded for the current period by applying the provisions of the enacted tax
law to the taxable income or excess of deductions over revenues. The
Company determines deferred income taxes using the liability (or balance sheet)
method. Under this method, the net deferred tax asset or liability is
based on the tax effects of the differences between the book and tax bases of
assets and liabilities, and enacted changes in tax rates and laws are recognized
in the period in which they occur.
Deferred
income tax expense results from changes in deferred tax assets and liabilities
between periods. Deferred tax assets are recognized if it is more
likely than not, based on the technical merits, that the tax position will be
realized or sustained upon examination. The term more likely than not
means a likelihood of more than 50 percent; the terms examined and upon
examination also include resolution of the related appeals or litigation
processes, if any. A tax position that meets the more-likely-than-not
recognition threshold is initially and subsequently measured as the largest
amount of tax benefit that has a greater than 50 percent likelihood of being
realized upon settlement with a taxing authority that has full knowledge of all
relevant information. The determination of whether or not a tax
position has met the more-likely-than-not recognition threshold considers the
facts, circumstances and information available at the reporting date and is
subject to the management’s judgment. Deferred tax assets are reduced
by a valuation allowance if, based on the weight of evidence available, it is
more likely than not that some portion or all of a deferred tax asset will not
be realized.
The
Company recognizes interest and penalties on income taxes as a component of
income tax expense.
The
Company files consolidated income tax returns with its subsidiary. The
Company and its subsidiary entered into a Tax Allocation Agreement on May 3,
2002, in order to allocate the consolidated tax liability between the
entities. For each taxable period, each entity shall compute its separate
tax liability as if it had filed a separate tax return and shall pay such
amounts to the Company. These payments shall include estimated tax
installments which shall be paid no later than the due date required by
law. To the extent that the separate tax liability of any entity shall
include any losses or tax credits, any refunds or reductions shall be retained
by such entity. No deferred tax liability may be transferred or exchanged
between entities. This agreement shall apply to all subsequent tax periods
until such time that each entity shall agree to terminate the
agreement.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Earnings
Per Share
Basic
earnings per share represents income available to common stockholders divided by
the weighted-average number of common shares outstanding during each
period. Diluted earnings per share reflects additional potential
common shares that would have been outstanding if dilutive potential common
shares had been issued. Potential common shares that may be issued by
the Company relate solely to outstanding stock options and are determined using
the treasury stock method.
Treasury
stock shares are not deemed outstanding for earnings per share
calculations.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Comprehensive
Income
Comprehensive
income consists of net income and other comprehensive income, net of applicable
income taxes. Other comprehensive income includes unrealized
appreciation (depreciation) on available-for-sale securities.
Trust
Assets
Assets
held in fiduciary or agency capacities are not included in the consolidated
balance sheets since such items are not assets of the Company. Fees
from trust activities are recorded as revenue over the period in which the
service is provided. Fees are a function of the market value of
assets managed and administered, the volume of transactions, and fees for other
services rendered, as set forth in the underlying client agreement with the
Trust Department. This revenue recognition involves the use of
estimates and assumptions, including components that are calculated based on
estimated asset valuations and transaction volumes. Generally, the
actual trust fee is charged to each account on a quarterly basis. Any
out of pocket expenses or services not typically covered by the fee schedule for
trust activities are charged directly to the trust account on a gross basis as
trust revenue is incurred. The Company managed or administered 100 and 106 trust
accounts with assets totaling approximately $50.1million and $48.9 million at
December 31, 2009 and 2008, respectively.
Reclassifications
Certain
reclassifications have been made to the 2008 financial statements to conform to
the 2009 financial statement presentation. These reclassifications
had no effect on net income or stockholders’ equity.
Recent
and Future Accounting Requirements
In June
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, “The
FASB Accounting Standards Codification TM and the Hierarchy of Generally
Accepted Accounting Principles—a replacement of FASB Statement No.
162.” Effective for financial statements issued for interim
and annual periods ending after September 15, 2009, the FASB Accounting
Standards Codification TM (“ASC”) is now the source of authoritative U.S. GAAP
recognized by the FASB to be applied by nongovernmental
entities. Rules and interpretive releases of the Securities and
Exchange Commission (“SEC”) under the authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. The ASC
superseded all then-existing non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature
not included in the ASC became non-authoritative. Following this
Statement, the FASB will no longer issue new standards in the form of
Statements, FASB Staff Positions (“FSP”) or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards
Updates. The FASB will not consider Accounting Standards Updates as
authoritative in their own right. Accounting Standards Updates will
serve only to update the ASC, provide background information about the guidance,
and provide the bases for conclusions on the change(s) in the
ASC. This SFAS was codified within ASC 105. The impact of
adoption was not material.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
In April
2009, the FASB issued FSP FAS 157-4, “Determining
Fair Value When the Volume and Level of Activity for the Asset
or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly,” which was codified into ASC
820. This FSP provides additional guidance for estimating fair value
in accordance with SFAS No. 157, “Fair
Value Measurements,” when the volume and level of activity for the asset
or liability have significantly decreased. This FSP also includes
guidance on identifying circumstances that indicate a transaction is not
orderly.
In April
2009, the FASB issued FSP FAS 115-2 and FSP FAS 124-2, “Recognition
and Presentation of Other-Than-Temporary Impairments,” which were
codified into ASC 320. This FSP amends the
other-than-temporary-impairment (“OTTI”) guidance in U.S. GAAP for debt
securities to make the guidance more operational and to improve the presentation
and disclosure of OTTI on debt and equity securities in the financial
statements. This FSP does not amend existing recognition and
measurement guidance related to OTTI of equity securities. FSP FAS
115-2 and 124-2 was effective for interim and annual periods ending after June
15, 2009, with early adoption permitted for periods ending after March 15, 2009
if FSP FAS 157-4 was adopted early as well. The Company adopted FSP
FAS 115-2 and 124-2 and FSP FAS 157-4 during 2009 and there was no material
impact to the financial statements.
In April
2009, the FASB issued FSP FAS 141(R)-1, “Accounting
for Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies” which was codified into ASC 805. This FSP
amends and clarifies SFAS No. 141(R), “Business
Combinations,” to address application issues raised by preparers,
auditors, and members of the legal profession on initial recognition and
measurement, subsequent measurement and accounting, and disclosure of assets and
liabilities arising from contingencies in a business
combination. This FSP was effective for assets or liabilities arising
from contingencies in business combinations for which the acquisition date is on
or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. There has been no impact during 2009 from
adoption of FSP FAS 141(R)-1 on January 1, 2009.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Newly
Issued But Not Yet Effective Accounting Standards
In June
2009, the FASB issued SFAS No. 166, “Accounting
for Transfers of Financial Assets—an amendment of FASB Statement No. 140”
which was codified into ASC Topic 860. Topic 860 seeks to improve the
relevance, representational faithfulness, and comparability of the information
that a reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor’s continuing involvement, if any,
in transferred financial assets. Topic 860 addresses (1) practices
that have developed since the issuance of SFAS No. 140, “Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities,” that are not consistent with the original intent and key
requirements of that Statement and (2) concerns of financial statement users
that many of the financial assets (and related obligations) that have been
derecognized should continue to be reported in the financial statements of
transferors. This standard must be applied as of the beginning of
each reporting entity’s first annual reporting period that begins after November
15, 2009, for interim periods within that first annual reporting period and for
interim and annual reporting periods thereafter. Earlier application
is prohibited. This standard must be applied to transfers occurring
on or after the effective date. The impact of adoption is not
expected to be material.
In June
2009, the FASB issued SFAS No. 167, “Amendments
to FASB Interpretation No. 46(R)”, which was codified into ASC Topic
810. Topic 810 seeks to improve financial reporting by enterprises
involved with variable interest entities by addressing (1) the effects on
certain provisions of FASB Interpretation No. 46 (revised December 2003), “Consolidation
of Variable Interest Entities,” as a result of the elimination of the
qualifying special-purpose entity concept in SFAS No. 166, and (2) constituent
concerns about the application of certain key provisions of Interpretation
46(R), including those in which the accounting and disclosures under the
Interpretation do not always provide timely and useful information about an
enterprise’s involvement in a variable interest entity. This Statement shall be
effective as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period, and for interim and annual reporting periods
thereafter. Earlier application is prohibited. The impact
of adoption is not expected to be material.
Note
2:
|
Restriction
on Cash and Due From Banks
|
The
Company is required to maintain reserve funds in cash and/or on deposit with the
Federal Reserve Bank. The reserve required at December 31, 2009 and
2008, was $1,160,000 and $1,054,000, respectively.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
amortized cost and approximate fair values, together with gross unrealized gains
and losses, of securities are as follows:
|
|
Amortized Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Fair
Value
|
|
Available-for-sale
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government and agencies
|
|
$ |
9,036,752 |
|
|
$ |
70,820 |
|
|
$ |
(27,556 |
) |
|
$ |
9,080,016 |
|
Mortgage-backed
securities (Government-sponsored enterprises -
residential)
|
|
|
40,428,279 |
|
|
|
610,634 |
|
|
|
(54,518 |
) |
|
|
40,984,395 |
|
Municipal
bonds
|
|
|
27,661,381 |
|
|
|
531,363 |
|
|
|
(76,462 |
) |
|
|
28,116,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
77,126,412 |
|
|
$ |
1,212,817 |
|
|
$ |
(158,536 |
) |
|
$ |
78,180,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government and agencies
|
|
$ |
19,472,065 |
|
|
$ |
361,545 |
|
|
$ |
— |
|
|
$ |
19,833,610 |
|
Mortgage-backed
securities (Government-sponsored enterprises -
residential)
|
|
|
27,384,188 |
|
|
|
410,931 |
|
|
|
— |
|
|
|
27,795,119 |
|
Municipal
bonds
|
|
|
30,066,572 |
|
|
|
283,150 |
|
|
|
(544,399 |
) |
|
|
29,805,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
76,922,825 |
|
|
$ |
1,055,626 |
|
|
$ |
(544,399 |
) |
|
$ |
77,434,052 |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
amortized cost and fair value of available-for-sale securities at
December 31, 2009, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities
because issuers may have the right to call or prepay obligations with or without
call or prepayment penalties.
|
|
Available-for-sale
|
|
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
Within
one year
|
|
$ |
270,508 |
|
|
$ |
271,451 |
|
One
to five years
|
|
|
3,627,155 |
|
|
|
3,758,162 |
|
Five
to ten years
|
|
|
18,617,963 |
|
|
|
18,862,007 |
|
After
ten years
|
|
|
14,182,507 |
|
|
|
14,304,678 |
|
|
|
|
36,698,133 |
|
|
|
37,196,298 |
|
Mortgage-backed
securities
|
|
|
40,428,279 |
|
|
|
40,984,395 |
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$ |
77,126,412 |
|
|
$ |
78,180,693 |
|
The
carrying value of securities pledged as collateral, to secure public deposits
and for other purposes, was $31,178,386 at December 31, 2009 and $43,048,336 at
December 31, 2008.
The book
value of securities sold under agreements to repurchase amounted to $3,789,453
and $7,633,079 at December 31, 2009 and 2008, respectively.
Gross
gains of $588,959 and $48,226 and gross losses of $0 and $14,902 resulting from
sales of available-for-sale securities were realized for 2009 and 2008,
respectively. The tax provision applicable to these net realized
gains amounted to $200,246 and $11,330, respectively.
Certain
investments in debt securities are reported in the financial statements at an
amount less than their historical cost. Total fair value of these
investments at December 31, 2009 and 2008, was $17,438,959 and $13,971,751,
which is approximately 22% and 18%, respectively, of the Company’s
available-for-sale investment portfolio. The declines primarily
resulted from recent changes in market interest rates.
Management
believes the declines in fair value for these securities are
temporary.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
following table shows the Company’s investments’ gross unrealized losses and
fair value of the Company’s investments with unrealized losses that are not
deemed to be other-than-temporarily impaired, aggregated by investment category
and length of time that individual securities have been in a continuous
unrealized loss position at December 31, 2009 and 2008:
|
|
December
31, 2009
|
|
|
|
|
|
|
Less
than 12 Months
|
|
|
12
Months or More
|
|
|
Total
|
|
Description
of
Securities
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government and agencies
|
|
$ |
2,477,539 |
|
|
$ |
(27,556 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,477,539 |
|
|
$ |
(27,556 |
) |
Mortgage-backed
securities (Government-sponsored enterprises -
residential)
|
|
|
7,435,781 |
|
|
|
(54,518 |
) |
|
|
— |
|
|
|
— |
|
|
|
7,435,781 |
|
|
|
(54,518 |
) |
Municipal
bonds
|
|
|
7,525,639 |
|
|
|
(76,462 |
) |
|
|
— |
|
|
|
— |
|
|
|
7,525,639 |
|
|
|
(76,462 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
temporarily impaired securities
|
|
$ |
17,438,959 |
|
|
$ |
(158,536 |
) |
|
$ |
—
|
|
|
$ |
—
|
|
|
$ |
17,438,959 |
|
|
$ |
(158,536 |
) |
|
|
December
31, 2008
|
|
|
|
|
|
|
Less
than 12 Months
|
|
|
12
Months or More
|
|
|
Total
|
|
Description
of
Securities
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government and agencies
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Mortgage-backed
securities (Government-sponsored enterprises -
residential)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Municipal
bonds
|
|
|
13,971,751 |
|
|
|
(544,399 |
) |
|
|
— |
|
|
|
— |
|
|
|
13,971,751 |
|
|
|
(544,399 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
temporarily impaired securities
|
|
$ |
13,971,751 |
|
|
$ |
(544,399 |
) |
|
$ |
—
|
|
|
$ |
—
|
|
|
$ |
13,971,751 |
|
|
$ |
(544,399 |
) |
As of
December 31, 2009 and 2008, there were no securities with an unrealized loss of
more than 12 consecutive months.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Note
4:
|
Loans
and Allowance for Loan Losses
|
Categories
of loans at December 31, include:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Mortgage
loans on real estate
|
|
|
|
|
|
|
Residential
1-4 family
|
|
$ |
38,580,967 |
|
|
$ |
46,806,391 |
|
Commercial
and agricultural
|
|
|
60,993,795 |
|
|
|
61,034,537 |
|
Second
mortgages
|
|
|
28,119,373 |
|
|
|
30,001,775 |
|
Total
mortgage loans on real estate
|
|
|
127,694,135 |
|
|
|
137,842,703 |
|
|
|
|
|
|
|
|
|
|
Commercial
loans, including agricultural
|
|
|
34,393,456 |
|
|
|
35,356,098 |
|
Consumer
|
|
|
6,117,802 |
|
|
|
5,841,659 |
|
Other
|
|
|
7,836,674 |
|
|
|
5,950,391 |
|
|
|
|
176,042,067 |
|
|
|
184,990,851 |
|
|
|
|
|
|
|
|
|
|
Less
|
|
|
|
|
|
|
|
|
Net
deferred loan fees
|
|
|
68,756 |
|
|
|
108,487 |
|
Allowance
for loan losses
|
|
|
2,290,001 |
|
|
|
1,934,072 |
|
|
|
|
|
|
|
|
|
|
Net
loans
|
|
$ |
173,683,310 |
|
|
$ |
182,948,292 |
|
Activity
in the allowance for loan losses was as follows:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Balance,
beginning of year
|
|
$ |
1,934,072 |
|
|
$ |
1,766,229 |
|
Provision
charged to expense
|
|
|
2,575,000 |
|
|
|
310,000 |
|
Losses
charged off, net of recoveries of $24,042 for 2009 and $64,025 for
2008
|
|
|
(2,219,071 |
) |
|
|
(142,157 |
) |
|
|
|
|
|
|
|
|
|
Balance,
end of year
|
|
$ |
2,290,001 |
|
|
$ |
1,934,072 |
|
The
increase in charge-off amounts in 2009 was mainly due to the deterioration of
two large commercial relationships. Losses totaling $1,886,820 were
recognized during the year on these two credits. As of December 31,
2009, the amount related to these relationships which remains in impaired loans
totaled $1,160,850, net of a specific allocation of $379,662.
The loan
portfolio includes a concentration of loans to agricultural and
agricultural-related industries amounting to $35,065,164 and $32,357,258 as of
December 31, 2009 and 2008, respectively. Generally, those loans are
collateralized by assets of the borrower. The loans are expected to
be repaid from cash flows or from proceeds of sale of selected assets of the
borrowers.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
At
December 31, 2009 and 2008, the Company held a concentration in commercial real
estate loans amounting to $34,773,390 and $35,356,098,
respectively. Included in the commercial loans and commercial real
estate amounts are loan participations purchased collateralized by properties
from an area out of the Company’s normal lending area totaling $11,080,199 and
$7,938,535 as of December 31, 2009 and 2008, respectively.
A loan is
considered impaired, in accordance with the impairment accounting guidance (ASC
310-10-35-16), when based on current information and events, it is probable the
Company will be unable to collect all amounts due from the borrower in
accordance with the contractual terms of the loan. Impaired loans
include nonperforming commercial loans but also include loans modified in
troubled debt restructurings where concessions have been granted to borrowers
experiencing financial difficulties. These concessions could include
a reduction in the interest rate on the loan, payment extensions, forgiveness of
principal, forbearance or other actions intended to maximize
collection.
Included
in the impaired loans at December 31, 2009 and 2008 are commercial real estate
loans in the amount of $1,073,629 and $0, respectively that
are troubled debt restructurings. The Company does not
have any additional troubled debt restructurings that were performing in
accordance with their modified terms as of December 31, 2009 and
2008. The weighted average interest rate of the troubled debt
restructured loans pre-restructuring was 7.17% and post-restructuring the rate
at December 31, 2009 was 5.34%.
The
following table presents the Company’s impaired and nonaccrual loans as well as
loans past due 90 days or more and accruing at December 31, 2009 and
2008.
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Impaired
loans without a valuation allowance
|
|
$ |
— |
|
|
$ |
206,446 |
|
Impaired
loans with a valuation allowance
|
|
|
3,713,484 |
|
|
|
1,147,702 |
|
Total
impaired loans
|
|
$ |
3,713,484 |
|
|
$ |
1,354,148 |
|
|
|
|
|
|
|
|
|
|
Valuation
allowance related to impaired loans
|
|
$ |
559,481 |
|
|
$ |
174,905 |
|
|
|
|
|
|
|
|
|
|
Total
nonaccrual loans
|
|
$ |
1,597,027 |
|
|
$ |
1,004,881 |
|
|
|
|
|
|
|
|
|
|
Total
loans past due 90 days or more and still accruing
|
|
$ |
356,534 |
|
|
$ |
185,502 |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Average
investment in impaired loans
|
|
$ |
5,205,308 |
|
|
$ |
489,211 |
|
|
|
|
|
|
|
|
|
|
Interest
income recognized on impaired loans
|
|
$ |
226,821 |
|
|
$ |
114,520 |
|
|
|
|
|
|
|
|
|
|
Interest
income recognized on a cash basis on impaired loans
|
|
$ |
219,969 |
|
|
$ |
96,459 |
|
Note
5:
|
Premises
and Equipment
|
Major
classifications of premises and equipment, stated at cost, are as
follows:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Land
|
|
$ |
983,276 |
|
|
$ |
983,276 |
|
Buildings
and improvements
|
|
|
7,542,073 |
|
|
|
7,522,011 |
|
Equipment
|
|
|
4,440,594 |
|
|
|
4,401,113 |
|
|
|
|
12,965,943 |
|
|
|
12,906,400 |
|
Less
accumulated depreciation
|
|
|
(7,199,085 |
) |
|
|
(6,799,654 |
) |
|
|
|
|
|
|
|
|
|
Net
premises and equipment
|
|
$ |
5,766,858 |
|
|
$ |
6,106,746 |
|
Mortgage
loans serviced for others are not included in the accompanying consolidated
balance sheets. The risks inherent in mortgage servicing assets
relate primarily to changes in prepayments that result from shifts in mortgage
interest rates. The unpaid principal balance of mortgage loans
serviced for others was $147,962,049 and $132,100,020 at December 31, 2009 and
2008, respectively.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
following summarized the activity pertaining to mortgage servicing rights
measured using the amortization method, along with the aggregate activity in
related valuation allowances:
|
|
2009
|
|
|
2008
|
|
Mortgage
servicing rights
|
|
|
|
|
|
|
Balance,
beginning of year
|
|
$ |
973,524 |
|
|
$ |
965,679 |
|
Additions
|
|
|
391,746 |
|
|
|
204,248 |
|
Amortization
|
|
|
(358,515 |
) |
|
|
(196,403 |
) |
Balance
at end of year
|
|
|
1,006,755 |
|
|
|
973,524 |
|
|
|
|
|
|
|
|
|
|
Valuation
allowances
|
|
|
|
|
|
|
|
|
Balance
at beginning of year
|
|
|
428,030 |
|
|
|
— |
|
Additions
|
|
|
— |
|
|
|
428,030 |
|
Reduction
due to increases in market value
|
|
|
(122,790 |
) |
|
|
— |
|
Reduction
due to payoff of loans
|
|
|
(148,798 |
) |
|
|
— |
|
Balances
at end of year
|
|
|
156,442 |
|
|
|
428,030 |
|
|
|
|
|
|
|
|
|
|
Mortgage
servicing assets, net
|
|
$ |
850,313 |
|
|
$ |
545,494 |
|
|
|
|
|
|
|
|
|
|
Fair
value disclosures
|
|
|
|
|
|
|
|
|
Fair
value as of the beginning of the period
|
|
$ |
545,494 |
|
|
$ |
1,040,899 |
|
Fair
value as of the end of the period
|
|
$ |
1,083,576 |
|
|
$ |
545,494 |
|
During
2008, a valuation allowance of $428,030 was necessary to adjust the aggregate
cost basis of the mortgage servicing right asset to fair market
value. The valuation allowance was reduced during 2009 due to both
payments received on the related loans as well as an increase in the estimated
market value on the mortgage servicing rights asset.
Comparable
market values and a valuation model that calculates the present value of future
cash flows were used to estimate fair value. For purposes of
measuring impairment, risk characteristics including product type, investor
type, and interest rates, were used to stratify the originated mortgage
servicing rights.
Interest-bearing
deposits in denominations of $100,000 or more totaled $89,917,806 at
December 31, 2009 and $87,908,417 at December 31, 2008.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
following table represents deposit interest expense by deposit
type:
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Savings,
NOW and Money Market
|
|
$ |
729,009 |
|
|
$ |
1,056,335 |
|
Certificates
of deposit
|
|
|
4,586,264 |
|
|
|
6,112,266 |
|
|
|
|
|
|
|
|
|
|
Total
deposit interest expense
|
|
$ |
5,315,273 |
|
|
$ |
7,168,601 |
|
At
December 31, 2009, the scheduled maturities of time deposits are as
follows:
2010
|
|
$ |
108,098,457 |
|
2011
|
|
|
25,659,323 |
|
2012
|
|
|
4,990,759 |
|
2013
|
|
|
2,171,590 |
|
2014
|
|
|
4,684,766 |
|
Thereafter
|
|
|
15,081 |
|
|
|
|
|
|
|
|
$ |
145,619,976 |
|
Note
8:
|
Short-term
Borrowings
|
Short-term
borrowings consist of securities sold under agreements to repurchase totaling
$3,789,453 and $7,633,079 at December 31, 2009 and 2008,
respectively.
Securities sold under
agreements to repurchase consist of obligations of the Company to other
parties. The obligations are secured by investments and such
collateral is held by the Company. The maximum amount of outstanding
agreements at any month end during 2009 and 2008 totaled $6,919,503 and
$7,633,079, respectively, and the monthly average of such agreements totaled
$5,160,416 and $6,031,389 for 2009 and 2008, respectively. The
agreements at December 31, 2009, are all overnight
agreements.
Note
9:
|
Federal
Home Loan Bank Advances
|
The
Federal Home Loan Bank advances totaled $0 and $13,500,000 as of December 31,
2009 and 2008, respectively. The advances at December 31, 2008 were
secured by mortgage loans totaling $44,039,000. The advances, at
interest rates of 0.52% to 5.09%, were subject to restrictions or penalties in
the event of prepayment. The advances outstanding at December 31,
2008 matured in 2009.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
Company and its subsidiary file income tax returns in the U.S. federal and state
of Illinois jurisdictions. With a few exceptions, the Company is no
longer subject to U.S. federal and Illinois income tax examinations
by tax authorities for years before 2006. During the years ended
December 31, 2009 and 2008, the Company did not recognize expense for interest
or penalties.
The
provision for income taxes includes these components:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Taxes
currently payable
|
|
|
|
|
|
|
Federal
|
|
$ |
117,636 |
|
|
$ |
594,613 |
|
State
|
|
|
— |
|
|
|
— |
|
Deferred
income taxes
|
|
|
(17,047 |
) |
|
|
(290,430 |
) |
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
$ |
100,589 |
|
|
$ |
304,183 |
|
A
reconciliation of income tax expense at the statutory rate to the Company’s
actual income tax expense is shown below:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Computed
at the statutory rate (34%)
|
|
$ |
508,897 |
|
|
$ |
619,515 |
|
Increase
(decrease) resulting from
|
|
|
|
|
|
|
|
|
Tax
exempt interest
|
|
|
(354,497 |
) |
|
|
(283,936 |
) |
Graduated
tax rates
|
|
|
(14,968 |
) |
|
|
(18,221 |
) |
State
income taxes, net
|
|
|
58,345 |
|
|
|
58,144 |
|
Increase
in cash surrender value
|
|
|
(60,750 |
) |
|
|
(55,361 |
) |
Other
|
|
|
(36,438 |
) |
|
|
(15,958 |
) |
|
|
|
|
|
|
|
|
|
Actual
tax expense
|
|
$ |
100,589 |
|
|
$ |
304,183 |
|
|
|
|
|
|
|
|
|
|
Tax
expense as a percentage of pre-tax income
|
|
|
6.72 |
% |
|
|
16.69 |
% |
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The tax
effects of temporary differences related to deferred taxes shown on the balance
sheets were:
|
|
2009
|
|
|
2008
|
|
Deferred
tax assets
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
$ |
763,554 |
|
|
$ |
625,389 |
|
Deferred
compensation
|
|
|
1,097,085 |
|
|
|
1,000,064 |
|
State
net operating loss carryforward
|
|
|
160,488 |
|
|
|
220,325 |
|
|
|
|
2,021,127 |
|
|
|
1,845,778 |
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
|
|
|
|
|
|
Unrealized
gains on available-for-sale securities
|
|
|
(358,456 |
) |
|
|
(173,817 |
) |
Depreciation
|
|
|
(360,916 |
) |
|
|
(337,862 |
) |
Federal
Home Loan Bank stock dividends
|
|
|
(146,736 |
) |
|
|
(146,736 |
) |
Prepaid
expenses
|
|
|
(68,875 |
) |
|
|
(46,695 |
) |
Mortgage
servicing rights
|
|
|
(330,075 |
) |
|
|
(211,750 |
) |
Other
|
|
|
(31,930 |
) |
|
|
(37,187 |
) |
|
|
|
(1,296,988 |
) |
|
|
(954,047 |
) |
|
|
|
|
|
|
|
|
|
Net
deferred tax asset
|
|
$ |
724,139 |
|
|
$ |
891,731 |
|
At
December 31, 2009 and 2008, the Company had Illinois net operating loss
carryforwards totaling approximately $3,331,005 and $4,572,947, respectively,
which will expire in varying amounts between 2015 and
2019. Management believes the Company will produce taxable earnings
in the future which will enable the net operating loss carryforwards to be
utilized prior to expiration. Based on management’s analysis, no valuation
allowance was required as of December 31, 2009 or 2008.
Retained
earnings at December 31, 2009 and 2008, include approximately $2,600,000, for
which no deferred federal income tax liability has been
recognized. These amounts represent an allocation of income to bad
debt deductions for tax purposes only. Reduction of amounts so
allocated for purposes other than tax bad debt losses or adjustments arising
from carryback of net operating losses would create income for tax purposes
only, which would be subject to the then-current corporate income tax
rate. The deferred income tax liabilities on the preceding amounts
that would have been recorded if they were expected to reverse into taxable
income in the foreseeable future were approximately $1,000,000 at December 31,
2009 and 2008.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Note
11:
|
Comprehensive
Income
|
Other
comprehensive income components and related taxes were as follows:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Net
unrealized gain (loss) on available-for-sale securities
|
|
$ |
1,132,013 |
|
|
$ |
632,636 |
|
Less
reclassification adjustment for realized gains included in
income
|
|
|
588,959 |
|
|
|
33,324 |
|
Other
comprehensive income, before tax effect
|
|
|
543,054 |
|
|
|
599,312 |
|
Less
tax expense
|
|
|
184,639 |
|
|
|
203,766 |
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
$ |
358,415 |
|
|
$ |
395,546 |
|
The
components of accumulated other comprehensive income (loss), included in
stockholders’ equity, are as follows:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Net
unrealized gain (loss) on securities available-for-sale
|
|
$ |
1,054,281 |
|
|
$ |
511,227 |
|
|
|
|
|
|
|
|
|
|
Tax
effect
|
|
|
(358,456 |
) |
|
|
(173,817 |
) |
|
|
|
|
|
|
|
|
|
Net-of-tax
amount
|
|
$ |
695,825 |
|
|
$ |
337,410 |
|
Note
12:
|
Regulatory
Matters
|
The Bank
is subject to various regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Bank’s financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank’s assets, liabilities and certain off-balance-sheet items
as calculated under regulatory accounting practices. The Bank’s
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Quantitative
measures established by regulation to ensure capital adequacy require the Bank
to maintain minimum amounts and ratios (set forth in the table below) of total
and Tier I capital (as defined in the regulations) to risk-weighted assets (as
defined) and of Tier I capital to average assets (as
defined). Management believes, as of December 31, 2009 and 2008, that
the Bank meets all capital adequacy requirements to which it is
subject.
As of
December 31, 2009, the most recent notification from the FDIC categorized the
Bank as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Bank must maintain
minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set
forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank’s
category.
The
Bank’s actual capital amounts (in thousands) and ratios are also presented in
the table.
|
|
Actual
|
|
|
Minimum
Capital Requirement
|
|
|
Minimum
to Be Well Capitalized Under Prompt Corrective
Action Provisions
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
As
of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
risk-based capital
(to
risk-weighted assets)
|
|
$ |
23,891 |
|
|
|
11.83 |
% |
|
$ |
16,146 |
|
|
|
8.0 |
% |
|
$ |
20,183 |
|
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
I capital
(to
risk-weighted assets)
|
|
|
21,601 |
|
|
|
10.70 |
|
|
|
8,073 |
|
|
|
4.0 |
|
|
|
12,110 |
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
I capital
(to
average assets)
|
|
|
21,601 |
|
|
|
7.44 |
|
|
|
11,611 |
|
|
|
4.0 |
|
|
|
14,514 |
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible
capital
(to
adjusted tangible assets)
|
|
|
21,601 |
|
|
|
7.44 |
|
|
|
4,354 |
|
|
|
1.5 |
|
|
|
— |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
risk-based capital
(to
risk-weighted assets)
|
|
$ |
22,816 |
|
|
|
10.94 |
% |
|
$ |
16,677 |
|
|
|
8.0 |
% |
|
$ |
20,846 |
|
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
I capital
(to
risk-weighted assets)
|
|
|
20,882 |
|
|
|
10.02 |
|
|
|
8,338 |
|
|
|
4.0 |
|
|
|
12,508 |
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
I capital
(to
average assets)
|
|
|
20,882 |
|
|
|
7.30 |
|
|
|
11,436 |
|
|
|
4.0 |
|
|
|
14,295 |
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible
capital
(to
adjusted tangible assets)
|
|
|
20,882 |
|
|
|
7.30 |
|
|
|
4,289 |
|
|
|
1.5 |
|
|
|
— |
|
|
|
N/A |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
following is a reconciliation of the Bank equity amount included in the
consolidated balance sheets to the amounts (in thousands) reflected above for
regulatory capital purposes as of December 31:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Bank
equity
|
|
$ |
25,024 |
|
|
$ |
24,001 |
|
Less
net unrealized gain
|
|
|
696 |
|
|
|
337 |
|
Less
disallowed goodwill
|
|
|
2,727 |
|
|
|
2,727 |
|
Less
disallowed servicing amounts
|
|
|
— |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
Tier
1 capital
|
|
|
21,601 |
|
|
|
20,882 |
|
|
|
|
|
|
|
|
|
|
Plus
allowance for loan losses
|
|
|
2,290 |
|
|
|
1,934 |
|
|
|
|
|
|
|
|
|
|
Total
risked-based capital
|
|
$ |
23,891 |
|
|
$ |
22,816 |
|
The Bank
is subject to certain restrictions on the amount of dividends that it may
declare without prior regulatory approval. As of December 31, 2009,
the Bank has $2,300,000 available for the payment of dividends without prior
regulatory approval.
Although
the Company’s regulators approved the mutual holding company’s waiver of
dividends, the amounts declared but not paid on the shares owned by the mutual
holding company are considered a restriction on the Company’s retained
earnings. The Company’s mutual holding company waived its share of
dividends declared by the Company as follows:
Year
ended December 31, 2000
|
|
$ |
77,905 |
|
Year
ended December 31, 2001
|
|
|
311,621 |
|
Year
ended December 31, 2002
|
|
|
311,622 |
|
Year
ended December 31, 2003
|
|
|
311,621 |
|
Year
ended December 31, 2004
|
|
|
311,622 |
|
Year
ended December 31, 2005
|
|
|
311,621 |
|
Year
ended December 31, 2006
|
|
|
311,622 |
|
Year
ended December 31, 2007
|
|
|
311,621 |
|
Year
ended December 31, 2008
|
|
|
311,622 |
|
Year
ended December 31, 2009
|
|
|
311,621 |
|
|
|
|
|
|
|
|
$ |
2,882,498 |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Note
13:
|
Related
Party Transactions
|
At
December 31, 2009 and 2008, the Company had loans outstanding to executive
officers, directors, significant shareholders and their affiliates (related
parties) in the amount of $4,175,892 and $979,776, respectively.
Annual
activity consisted of the following:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Balance
beginning of year
|
|
$ |
979,776 |
|
|
$ |
944,569 |
|
Additions
|
|
|
2,657,615 |
|
|
|
2,402,371 |
|
Repayments
|
|
|
(1,855,537 |
) |
|
|
(2,311,845 |
) |
Change
in related parties
|
|
|
2,394,038 |
|
|
|
(55,319 |
) |
|
|
|
|
|
|
|
|
|
Balance,
end of year
|
|
$ |
4,175,892 |
|
|
$ |
979,776 |
|
In
management’s opinion, such loans and other extensions of credit and deposits
were made in the ordinary course of business and were made on substantially the
same terms (including interest rates and collateral) as those prevailing at the
time for comparable transactions with other persons. Further, in
management’s opinion, these loans did not involve more than normal risk of
collectibility or present other unfavorable features.
Deposits
from related parties held by the Company at December 31, 2009 and 2008
totaled approximately $2,036,000 and $2,247,000, respectively.
Note
14:
|
Employee
Benefits
|
401(k)
Plan — The Company maintains a 401(k) savings plan for eligible
employees. The Company’s contributions to this plan were $143,770 and
$140,087 for the years ended December 31, 2009 and 2008,
respectively. The plan invests its assets in deposit accounts at the
Company which earned interest at a rate of 3.15% to 3.75% for the year ended
December 31, 2009 and 4.00% to 4.5% for the year ended December 31,
2008.
Deferred
Compensation Plan — The Company maintains a deferred compensation plan
for certain key officers and employees. Contributions are determined
annually by the Company’s Board of Directors. Effective in 2005, the
Company froze this plan and no contributions to this plan were made for the
years ended December 31, 2009 or 2008. The plan accrues interest at a
variable rate which fluctuates based on Moody’s Corporate Bond Average
Index. The amount recorded on the balance sheets as deferred
compensation was $2,166,147 and $2,091,900 as of December 31, 2009 and 2008,
respectively. Compensation expense related to the plan was $168,394
and $167,079 for the years ended December 31, 2009 and 2008,
respectively.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
Company has also entered into deferred compensation agreements with certain key
officers and employees. The agreements provide for monthly payments
at retirement or death. The charge to expense for this plan reflects
the accrual using the principal and interest method over the vesting period of
the present value of benefits due each participant on the full eligibility date
using a 6 to 8% discount rate. The amount recorded on the balance
sheets as deferred compensation was $660,080 and $484,390 as of December 31,
2009 and 2008, respectively. Compensation expense related to the
plans was $181,578 and $164,956 for the years ended December 31, 2009 and
2008, respectively.
Employee
Stock Ownership Plan — The ESOP is a noncontributory defined contribution
plan which covers substantially all employees. The Company may
contribute to the Plan, at its discretion, an amount determined by the Board of
Directors. The Company has made no contributions in 2009 or
2008.
At
December 31, 2009 and 2008, all 53,273 shares held by the ESOP had been
allocated. The fair value of shares held by the ESOP is $479,457 as
of December 31, 2009.
In the
event a terminated Plan participant desires to sell his or her shares of the
Company’s stock, the Company’s stock includes a put option, which is a right to
demand that the Company buy any shares of its stock distributed to participants
at fair market value.
Note
15:
|
Stock
Options Plan
|
The
Jacksonville Savings Bank and Jacksonville Bancorp, MHC 1996 Stock Option Plan
was adopted on April 23, 1996 and is administered by the Board of
Directors. A total of 83,625 shares of common stock were reserved and
awarded under the Plan. Awards expire ten years after the grant date
and are exercisable at a price of $8.83 per share. In 2004, 5,600
shares related to this plan were reissued at a price of $14.00 per
share. The Jacksonville Savings Bank 2001 Stock Option Plan was
adopted on April 30, 2001 and is administered by the Stock Benefits
Committee. A total of 87,100 shares of common stock were reserved and
awarded under the Plan during 2001 that expire ten years after the grant date
and are exercisable at a price of $10.00 per share. No shares were
granted during 2009 or 2008.
The fair
value of each option award is estimated on the date of grant using a binomial
option valuation model that uses the assumptions noted in the following
table. Expected volatility is based on historical volatility of the
Company’s stock and other factors. The Company uses historical data
to estimate option exercise and employee termination within the valuation model;
separate groups of employees that have similar historical exercise behavior are
considered separately for valuation purposes. The expected term of
options granted is derived from the output of the option valuation model and
represents the period of time that options granted are expected to be
outstanding; the range given below results from certain groups of employees
exhibiting different behavior. The risk-free rate for periods within
the contractual life of the option is based on the U.S. Treasury yield curve in
effect at the time of grant.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
A summary
of option activity under the Plan as of December 31, 2009 and 2008, and changes
during the years then ended, is presented below:
|
|
2009
|
|
|
|
Shares
|
|
|
Weighted- Average Exercise
Price
|
|
|
Weighted- Average Remaining Contractual Term
|
|
|
Aggregate Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
beginning of year
|
|
|
34,445 |
|
|
$ |
10.65 |
|
|
|
|
|
|
|
Granted
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Exercised
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Forfeited
or expired
|
|
|
(1,100 |
) |
|
|
14.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
end of year
|
|
|
33,345 |
|
|
$ |
10.54 |
|
|
|
2.40 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
end of year
|
|
|
33,345 |
|
|
$ |
10.54 |
|
|
|
2.40 |
|
|
$ |
0 |
|
The
aggregate intrinsic value of options outstanding and exercisable at the end of
the year 2009 excludes 28,845 and 4,500 shares that are exercisable at prices of
$10.00 and $14.00 per share and were antidilutive.
|
|
2008
|
|
|
|
Shares
|
|
|
Weighted- Average Exercise
Price
|
|
|
Weighted- Average Remaining Contractual Term
|
|
|
Aggregate Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
beginning of year
|
|
|
35,545 |
|
|
$ |
10.63 |
|
|
|
|
|
|
|
Granted
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Exercised
|
|
|
(1,100 |
) |
|
|
10.00 |
|
|
|
|
|
|
|
Forfeited
or expired
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
end of year
|
|
|
34,445 |
|
|
$ |
10.65 |
|
|
|
3.49 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
end of year
|
|
|
34,205 |
|
|
$ |
10.63 |
|
|
|
3.46 |
|
|
$ |
0 |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
aggregate intrinsic value of options outstanding at the end of the year 2008
excludes 28,845 and 5,600 shares that are exercisable at prices of $10.00 and
$14.00 per share and were antidilutive.
The
aggregate intrinsic value of options exercisable at the end of the year 2008
excludes 28,845 and 5,360 shares that are exercisable at prices of $10.00 and
$14.00 per share and were antidilutive.
The total
intrinsic value of options exercised during the years ended December 31, 2008
was $0. There were no shares exercised during 2009.
As of
December 31, 2009, there was $0 of total unrecognized compensation cost related
to nonvested share-based compensation arrangements granted under the
Plan. The total fair value of shares vested during the years ended
December 31, 2009 and 2008, was $972 and $1,863, respectively.
Note
16:
|
Earnings
Per Share
|
Earnings
per share (EPS) were computed as follows:
|
|
Year
Ended December 31, 2009
|
|
|
|
Income
|
|
|
Weighted- Average Shares
|
|
|
Per
Share Amount
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
1,396,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders
|
|
|
|
|
|
|
1,927,250 |
|
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders
|
|
$ |
1,396,167 |
|
|
|
1,927,250 |
|
|
$ |
0.72 |
|
Options
to purchases 28,845 and 4,500 shares of common stock at $10.00 and $14.00 per
share were outstanding at December 31, 2009, but were not included in the
computation of diluted EPS because the options’ exercise price was greater than
the average market price of the common shares.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
|
|
Year
Ended December 31, 2008
|
|
|
|
Income
|
|
|
Weighted- Average Shares
|
|
|
Per
Share Amount
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
1,517,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
|
|
|
|
|
1,987,712 |
|
|
|
|
Income
available to common stockholders
|
|
|
|
|
|
|
|
|
|
$ |
.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders
|
|
$ |
1,517,922 |
|
|
|
1,987,712 |
|
|
$ |
.76 |
|
Options
to purchases 28,845 and 5,600 shares of common stock at $10.00 and $14.00 per
share were outstanding at December 31, 2008, but were not included in the
computation of diluted EPS because the options’ exercise price was greater than
the average market price of the common shares.
Note
17:
|
Disclosures
about Fair Value of Assets and
Liabilities
|
ASC Topic
820, Fair
Value Measurements defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Topic 820 also
specifies a fair value hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value. The standard describes three levels of inputs that may be
used to measure fair value:
|
Level
1
|
Quoted
prices in active markets for identical assets or
liabilities
|
|
Level
2
|
Observable
inputs other than Level 1 prices, such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or
liabilities
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
|
Level
3
|
Unobservable
inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or
liabilities
|
Following
is a description of the valuation methodologies used for assets and liabilities
measured at fair value on a recurring basis and recognized in the accompanying
consolidated balance sheets, as well as the general classification of such
assets and liabilities pursuant to the valuation hierarchy.
Available-for-sale
Securities
Where
quoted market prices are available in an active market, securities are
classified within Level 1 of the valuation hierarchy. The
Company has no Level 1 securities. If quoted market prices are not
available, then fair values are estimated by using pricing models, quoted prices
of securities with similar characteristics or discounted cash
flows. Level 2 securities include U.S. Government and agencies,
mortgage-backed securities (Government-sponsored enterprises – residential) and
municipal bonds. In certain cases where Level 1 or Level 2
inputs are not available, securities are classified within Level 3 of the
hierarchy. The Company did not have securities considered Level 3 as
of December 31, 2009.
The
following table presents the fair value measurements of assets and liabilities
recognized in the accompanying balance sheets measured at fair value on a
recurring basis and the level within the fair value hierarchy in which the fair
value measurements fall at December 31, 2009 and 2008:
|
|
|
|
|
2009
|
|
|
|
|
|
|
Fair
Value Measurements Using
|
|
|
|
Fair
Value
|
|
|
Quoted
Prices in Active Markets for Identical Assets (Level
1)
|
|
|
Significant Other Observable Inputs (Level
2)
|
|
|
Significant Unobservable Inputs (Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government and agencies
|
|
$ |
9,080,016 |
|
|
$ |
— |
|
|
$ |
9,080,016 |
|
|
$ |
— |
|
Mortgage-backed
securities (Government-sponsored enterprises -
residential)
|
|
|
40,984,395 |
|
|
|
— |
|
|
|
40,984,395 |
|
|
|
— |
|
Municipal
bonds
|
|
|
28,116,282 |
|
|
|
— |
|
|
|
28,116,282 |
|
|
|
— |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
|
|
|
|
|
2008
|
|
|
|
|
|
|
Fair
Value Measurements Using
|
|
|
|
Fair
Value
|
|
|
Quoted
Prices in Active Markets for Identical Assets (Level
1)
|
|
|
Significant Other Observable Inputs (Level
2)
|
|
|
Significant Unobservable Inputs (Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government and agencies
|
|
$ |
19,833,610 |
|
|
$ |
— |
|
|
$ |
19,833,610 |
|
|
$ |
— |
|
Mortgage-backed
securities (Government-sponsored enterprises -residential)
|
|
|
27,795,119 |
|
|
|
— |
|
|
|
27,795,119 |
|
|
|
— |
|
Municipal
bonds
|
|
|
29,805,323 |
|
|
|
— |
|
|
|
29,805,323 |
|
|
|
— |
|
Following
is a description of the valuation methodologies used for assets and liabilities
measured at fair value on a nonrecurring basis and recognized in the
accompanying balance sheets, as well as the general classification of such
assets and liabilities pursuant to the valuation hierarchy.
Impaired
Loans (Collateral Dependent)
Loans for
which it is probable that the Company will not collect all principal and
interest due according to contractual terms are measured for
impairment. Allowable methods for determining the amount of
impairment include estimating fair value using the fair value of the collateral
for collateral dependent loans.
If the
impaired loan is identified as collateral dependent, then the fair value method
of measuring the amount of impairment is utilized. This method
requires obtaining a current independent appraisal of the collateral and
applying a discount factor to the value.
Impaired
loans that are collateral dependent are classified within Level 3 of the fair
value hierarchy when impairment is determined using the fair value
method.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Mortgage Servicing Rights
|
The
fair value used to determine the valuation allowance is estimated using
discounted cash flow models. Due to the nature of the valuation
inputs, mortgage servicing rights are classified within
Level
3 of the hierarchy. |
Foreclosed
Assets
|
Foreclosed assets consist primarily of other real estate
owned. Other real estate acquired through loan foreclosure is
initially recorded at fair value less costs to sell when acquired,
establishing a new cost basis. The adjustment at the time of
foreclosure is recorded through the allowance for loan
losses. Due to the subjective nature of establishing the fair
value when the asset is acquired, the actual fair value of the other real
estate owned or foreclosed asset could differ from the original estimate
and are classified within Level 3 of the fair value
hierarchy. If it is determined the fair value declines
subsequent to foreclosure, a valuation allowance is recorded through
non-interest expense. Operating costs associated with the
assets after acquisition are also recorded as non-interest
expense. Gains and losses on the disposition of other real
estate owned and foreclosed assets are netted and posted to other
non-interest expense. |
|
The following table
presents the fair value measurement of assets and liabilities measured at
fair value on a nonrecurring basis and the level within the fair value
hierarchy in which the fair value measurements fall at December 31, 2009
and 2008: |
|
|
|
|
|
2009
|
|
|
|
|
|
|
Fair
Value Measurements Using
|
|
|
|
Fair
Value
|
|
|
Quoted
Prices in Active Markets for Identical Assets (Level
1)
|
|
|
Significant Other Observable Inputs (Level
2)
|
|
|
Significant Unobservable Inputs (Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans (collateral dependent)
|
|
$ |
3,154,003 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,154,003 |
|
Mortgage
servicing rights
|
|
|
850,313 |
|
|
|
— |
|
|
|
— |
|
|
|
850,313 |
|
Foreclosed assets |
|
|
382,879
|
|
|
|
— |
|
|
|
— |
|
|
|
382,879
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
Fair
Value Measurements Using
|
|
|
|
Fair
Value
|
|
|
Quoted
Prices in Active Markets for Identical Assets (Level
1)
|
|
|
Significant Other Observable Inputs (Level
2)
|
|
|
Significant Unobservable Inputs (Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans (collateral dependent)
|
|
$ |
972,797 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
972,797 |
|
Mortgage
servicing rights
|
|
|
545,494 |
|
|
|
— |
|
|
|
— |
|
|
|
545,494 |
|
Foreclosed assets |
|
|
769,467 |
|
|
|
— |
|
|
|
— |
|
|
|
769,467 |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
The
following methods were used to estimate the fair value of all other financial
instruments recognized in the accompanying balance sheets at amounts other than
fair value.
Cash
and Cash Equivalents and Federal Home Loan Bank Stock
The
carrying amount approximates fair value.
Other
investments
The
carrying amount approximates fair value.
Loans
Held for Sale
For
homogeneous categories of loans, such as mortgage loans held for sale, fair
value is estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics.
Loans
The fair
value of loans is estimated by discounting the future cash flows using the
market rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities. Loans with
similar characteristics were aggregated for purposes of the
calculations. The carrying amount of accrued interest approximates
its fair value.
Deposits
Deposits
include demand deposits, savings accounts, NOW accounts and certain money market
deposits. The carrying amount approximates fair value. The
fair value of fixed-maturity time deposits is estimated using a discounted cash
flow calculation that applies the rates currently offered for deposits of
similar remaining maturities.
Short-term
Borrowings, Interest Payable and Advances From Borrowers for Taxes and
Insurance
The
carrying amount approximates fair value.
Federal
Home Loan Bank Advances
Rates
currently available to the Company for debt with similar terms and remaining
maturities are used to estimate the fair value of existing debt. Fair
value of long-term debt is based on quoted market prices or dealer quotes for
the identical liability when traded as an asset in an active
market. If a quoted market price is not available, an expected
present value technique is used to estimate fair value.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Commitments
to Originate Loans, Letters of Credit and Lines of Credit
The fair
value of commitments to originate loans is estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the present creditworthiness of the
counterparties. For fixed-rate loan commitments, fair value also
considers the difference between current levels of interest rates and the
committed rates. The fair values of letters of credit and lines of
credit are based on fees currently charged for similar agreements or on the
estimated cost to terminate or otherwise settle the obligations with the
counterparties at the reporting date.
The
following table presents estimated fair values of the Company’s financial
instruments at December 31, 2009 and 2008:
|
|
December
31, 2009
|
|
|
December
31, 2008
|
|
|
|
Carrying Amount
|
|
|
Fair
Value
|
|
|
Carrying Amount
|
|
|
Fair
Value
|
|
Financial
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
15,696,474 |
|
|
$ |
15,696,474 |
|
|
$ |
7,145,288 |
|
|
$ |
7,145,288 |
|
Available-for-sale
securities
|
|
|
78,180,693 |
|
|
|
78,180,693 |
|
|
|
77,434,052 |
|
|
|
77,434,052 |
|
Other
investments
|
|
|
149,902 |
|
|
|
149,902 |
|
|
|
240,321 |
|
|
|
240,321 |
|
Loans
held for sale
|
|
|
814,074 |
|
|
|
814,074 |
|
|
|
1,388,284 |
|
|
|
1,388,284 |
|
Loans,
net of allowance for loan losses
|
|
|
173,683,310 |
|
|
|
171,479,887 |
|
|
|
182,948,292 |
|
|
|
181,308,061 |
|
Federal
Home Loan Bank stock
|
|
|
1,108,606 |
|
|
|
1,108,606 |
|
|
|
1,108,606 |
|
|
|
1,108,606 |
|
Interest
receivable
|
|
|
1,988,394 |
|
|
|
1,988,394 |
|
|
|
2,344,502 |
|
|
|
2,344,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
254,700,223 |
|
|
|
257,948,804 |
|
|
|
238,151,228 |
|
|
|
240,721,801 |
|
Short-term
borrowings
|
|
|
3,789,453 |
|
|
|
3,789,453 |
|
|
|
7,633,079 |
|
|
|
7,633,079 |
|
Federal
Home Loan Bank advances
|
|
|
— |
|
|
|
— |
|
|
|
13,500,000 |
|
|
|
13,593,469 |
|
Advances
from borrowers for taxes and insurance
|
|
|
508,356 |
|
|
|
508,356 |
|
|
|
445,077 |
|
|
|
445,077 |
|
Interest
payable
|
|
|
734,903 |
|
|
|
734,903 |
|
|
|
925,661 |
|
|
|
925,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized
financial instruments (net of contract amount)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
to originate loans
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Letters
of credit
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Lines
of credit
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Note
18:
|
Significant
Estimates and Concentrations
|
Accounting
principles generally accepted in the United States of America require disclosure
of certain significant estimates and current vulnerabilities due to certain
concentrations. Estimates related to the allowance for loan losses
are reflected in the footnote regarding loans. Current
vulnerabilities due to certain concentrations of credit risk are discussed in
the footnote on commitments and credit risk. Other significant
estimates and concentrations not discussed in those footnotes
include:
Current
Economic Conditions
The
current protracted economic decline continues to present financial institutions
with circumstances and challenges, which in some cases have resulted in large
and unanticipated declines in the fair values of investments and other assets,
constraints on liquidity and capital and significant credit quality problems,
including severe volatility in the valuation of real estate and other collateral
supporting loans.
At
December 31, 2009 and 2008, the Company held $8,844,759 and $9,035,596 in
agricultural production loans and $26,220,405 and $23,321,662, respectively in
agricultural real estate loans in the Company’s geographic
area. During 2009, prices for corn, beans and livestock remained
lower than previous years and due to weather patterns in Illinois, crops were
late in being harvested. These issues could affect the repayment
ability for many agricultural loan customers.
At
December 31, 2009 and 2008, the Company held $34,773,390 and $35,356,098 in
commercial real estate, respectively, including $11,080,199 and $7,938,535 that
are outside of the Company’s normal lending area. Due to national,
state and local economic conditions, values for commercial and development real
estate have declined significantly, and the market for these properties is
depressed.
The
accompanying financial statements have been prepared using values and
information currently available to the Company.
Given the
volatility of current economic conditions, the values of assets and liabilities
recorded in the financial statements could change rapidly, resulting in material
future adjustments in asset values, the allowance for loan losses and capital
that could negatively impact the Company ‘s ability to meet regulatory capital
requirements and maintain sufficient liquidity.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Goodwill
As
discussed in Note
1, the Company annually tests its goodwill for impairment. At the
most recent testing date, the fair value of the banking reporting
unit exceeded its carrying value. Estimated fair value of the banking
reporting unit was based principally on forecasts of future
income. Due to the volatility of the current economic environment,
coupled with the Company’s recent loan loss experience, management’s forecasts
of future income are subject to significantly more uncertainty than during more
stable environments. Management believes it has applied reasonable
judgment in developing its estimates; however, unforeseen negative changes in
the national, state or local economic environment may negatively impact those
estimates in the near term.
Note
19:
|
Commitments
and Credit Risk
|
The
Company grants agribusiness, commercial and residential loans to customers in
Cass, Morgan, Macoupin, Montgomery and surrounding counties in
Illinois. The Company’s loans are generally secured by specific items
of collateral including real property, consumer assets and business
assets. Although the Company has a diversified loan portfolio, a
substantial portion of its debtors’ ability to honor their contracts is
dependent upon economic conditions and the agricultural economy in these
counties. The Company also purchases participation loans from out of
territory areas, as more fully described above in Note 4.
Commitments
to Originate Loans
Commitments
to originate loans are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since a portion of the commitments may
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Each customer’s creditworthiness
is evaluated on a case-by-case basis. The amount of collateral
obtained, if deemed necessary, is based on management’s credit evaluation of the
counterparty. Collateral held varies, but may include accounts
receivable, inventory, property, plant and equipment, commercial real estate and
residential real estate.
At
December 31, 2009 and 2008, the Company had outstanding commitments to originate
loans aggregating approximately $3,028,415 and $15,869,326,
respectively. The commitments extended over varying periods of time
with the majority being disbursed within a one-year period. Loan
commitments at fixed rates of interest amounted to $2,968,415 and $14,869,326 at
December 31, 2009 and 2008, respectively, with the remainder at floating market
rates. The range of fixed rates was 4.375% to 10.90% as of December
31, 2009.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Standby
Letters of Credit
Standby
letters of credit are irrevocable conditional commitments issued by the Company
to guarantee the performance of a customer to a third
party. Financial standby letters of credit are primarily issued to
support public and private borrowing arrangements, including commercial paper,
bond financing and similar transactions. Performance standby letters
of credit are issued to guarantee performance of certain customers under
non-financial contractual obligations. The credit risk involved in
issuing standby letters of credit is essentially the same as that involved in
extending loans to customers. Should the Company be obliged to
perform under the standby letters of credit, the Company may seek recourse from
the customer for reimbursement of amounts paid.
The
Company had total outstanding standby letters of credit amounting to $488,388
and $773,700 at December 31, 2009 and 2008, respectively, with terms of one year
or less. At December 31, 2009 and 2008, the Company’s deferred
revenue under standby letters of credit agreements was nominal.
Lines
of Credit
Lines of
credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Lines of credit generally
have fixed expiration dates. Since a portion of the line may expire
without being drawn upon, the total unused lines do not necessarily represent
future cash requirements. Each customer’s creditworthiness is
evaluated on a case-by-case basis. The amount of collateral obtained,
if deemed necessary, is based on management’s credit evaluation of the
counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, commercial real estate and
residential real estate. Management uses the same credit policies in
granting lines of credit as it does for on-balance-sheet
instruments.
At
December 31, 2009, the Company had granted unused lines of credit to borrowers
aggregating approximately $22,936,541 and $10,980,694 for commercial lines and
open-end consumer lines, respectively. At December 31, 2008, unused
lines of credit to borrowers aggregated approximately $23,531,125 for commercial
lines and $11,322,483 for open-end consumer lines.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Note
20:
|
Plan
of Conversion
|
On
January 19, 2010, the Company’s Board of Directors approved a plan of conversion
(the “Plan”). Jacksonville Bancorp, Inc., a newly formed Maryland
corporation (“Jacksonville Bancorp-Maryland”), is offering shares of common
stock for sale in connection with the “second step” conversion of Jacksonville
Bancorp, MHC from the mutual to the stock form of organization. Upon
completion of the conversion, Jacksonville Bancorp-Maryland will become the
holding company of Jacksonville Savings Bank and will succeed to all of the
business and operations of Jacksonville Bancorp, Inc. (“Jacksonville
Bancorp-Federal”), now owned by Jacksonville Bancorp, MHC, and each of
Jacksonville Bancorp-Federal and Jacksonville Bancorp, MHC will cease to
exist. The Plan is subject to approval by the Office of Thrift
Supervision (OTS) and includes the filing of a registration statement with the
Securities and Exchange Commission.
The Plan
calls for the common stock of the holding company to be offered to various
parties in a subscription offering at a price based on an independent appraisal
of the Company. It is anticipated that any shares not purchased in
the subscription offering will be offered in a community
offering. The Company may not declare or pay a cash dividend if the
effect thereof would cause its net worth to be reduced below either the amount
required for the liquidation account discussed below or the regulatory capital
requirements imposed by the OTS.
At the
time of conversion, the Company will establish a liquidation account in an
amount equal to the Company’s stockholders equity as reflected in the latest
statement of financial condition contained in the final conversion
prospectus. The liquidation account will be maintained for the
benefit of eligible account holders who continue to maintain their deposit
accounts in the Company after conversion. In the event of a complete
liquidation of the Bank and Holding Company (and only in such event), following
all liquidation payments to creditors, eligible depositors who continue to
maintain accounts shall be entitled to receive a distribution from the
liquidation account before any liquidation may be made with respect to the
Company’s capital stock.
Total
expenses related to the conversion were $14,184 at December 31, 2009 and have
been paid by Jacksonville Bancorp, MHC. These costs are being
capitalized and will be offset against proceeds from the offering, should the
conversion be successful. If the conversion is not successful, these
costs will immediately be recorded as an expense in the income
statement.
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Note
21:
|
Quarterly
Results of Operations (Unaudited)
|
|
|
Year
Ended December 31, 2009
|
|
|
|
Three
Months Ended
|
|
|
|
December
31
|
|
|
September
30
|
|
|
June
30
|
|
|
March
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
3,387,087 |
|
|
$ |
3,649,444 |
|
|
$ |
3,609,769 |
|
|
$ |
3,773,617 |
|
Interest
expense
|
|
|
1,204,502 |
|
|
|
1,314,222 |
|
|
|
1,421,744 |
|
|
|
1,491,060 |
|
Net
interest income
|
|
|
2,182,585 |
|
|
|
2,335,222 |
|
|
|
2,188,025 |
|
|
|
2,282,557 |
|
Provision
for loan losses
|
|
|
425,000 |
|
|
|
250,000 |
|
|
|
1,550,000 |
|
|
|
350,000 |
|
Net
interest income after provision for loan losses
|
|
|
1,757,585 |
|
|
|
2,085,222 |
|
|
|
638,025 |
|
|
|
1,932,557 |
|
Other
income
|
|
|
1,184,528 |
|
|
|
871,823 |
|
|
|
1,247,162 |
|
|
|
905,581 |
|
Other
expense
|
|
|
2,419,836 |
|
|
|
2,270,706 |
|
|
|
2,219,603 |
|
|
|
2,215,582 |
|
Income
before income taxes
|
|
|
522,277 |
|
|
|
686,339 |
|
|
|
(334,416 |
) |
|
|
622,556 |
|
Income
tax expense (benefit)
|
|
|
91,752 |
|
|
|
149,123 |
|
|
|
(261,592 |
) |
|
|
121,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
430,525 |
|
|
$ |
537,216 |
|
|
$ |
(72,824 |
) |
|
$ |
501,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share
|
|
$ |
0.22 |
|
|
$ |
0.28 |
|
|
$ |
(0.04 |
) |
|
$ |
0.26 |
|
Diluted
earnings (loss) per share
|
|
$ |
0.22 |
|
|
$ |
0.28 |
|
|
$ |
(0.04 |
) |
|
$ |
0.26 |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
|
|
Year
Ended December 31, 2008
|
|
|
|
Three
Months Ended
|
|
|
|
December
31
|
|
|
September
30
|
|
|
June
30
|
|
|
March
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
3,946,895 |
|
|
$ |
3,972,057 |
|
|
$ |
3,933,463 |
|
|
$ |
4,055,921 |
|
Interest
expense
|
|
|
1,615,858 |
|
|
|
1,856,923 |
|
|
|
2,023,898 |
|
|
|
2,219,738 |
|
Net
interest income
|
|
|
2,331,037 |
|
|
|
2,115,134 |
|
|
|
1,909,565 |
|
|
|
1,836,183 |
|
Provision
for loan losses
|
|
|
145,000 |
|
|
|
105,000 |
|
|
|
30,000 |
|
|
|
30,000 |
|
Net
interest income after provision for loan losses
|
|
|
2,186,037 |
|
|
|
2,010,134 |
|
|
|
1,879,565 |
|
|
|
1,806,183 |
|
Other
income
|
|
|
718,730 |
|
|
|
844,964 |
|
|
|
800,069 |
|
|
|
797,160 |
|
Other
expense
|
|
|
2,713,605 |
|
|
|
2,206,700 |
|
|
|
2,160,897 |
|
|
|
2,139,535 |
|
Income
before income taxes
|
|
|
191,162 |
|
|
|
648,398 |
|
|
|
518,737 |
|
|
|
463,808 |
|
Income
tax expense (benefit)
|
|
|
(40,813 |
) |
|
|
149,601 |
|
|
|
94,956 |
|
|
|
100,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
231,975 |
|
|
$ |
498,797 |
|
|
$ |
423,781 |
|
|
$ |
363,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.12 |
|
|
$ |
0.25 |
|
|
$ |
0.21 |
|
|
$ |
0.18 |
|
Diluted
earnings per share
|
|
$ |
0.12 |
|
|
$ |
0.25 |
|
|
$ |
0.21 |
|
|
$ |
0.18 |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Note
22:
|
Condensed
Financial Information (Parent Company
Only)
|
Presented
below is condensed financial information as to financial position, results of
operations and cash flows of the Company:
Condensed Balance
Sheets
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
Assets
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$ |
146,663 |
|
|
$ |
203,417 |
|
Investment
in common stock of subsidiary
|
|
|
25,023,244 |
|
|
|
24,000,219 |
|
Other
assets
|
|
|
190,588 |
|
|
|
149,388 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
25,360,495 |
|
|
$ |
24,353,024 |
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
$ |
97,075 |
|
|
$ |
93,584 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
97,075 |
|
|
|
93,584 |
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
25,263,420 |
|
|
|
24,259,440 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
25,360,495 |
|
|
$ |
24,353,024 |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Condensed
Statements of
Income
|
|
Year
Ending December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Income
|
|
|
|
|
|
|
Dividends
from subsidiary
|
|
$ |
864,624 |
|
|
$ |
384,749 |
|
Other
income
|
|
|
746 |
|
|
|
854 |
|
|
|
|
|
|
|
|
|
|
Total
income
|
|
|
865,370 |
|
|
|
385,603 |
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Other
expenses
|
|
|
218,720 |
|
|
|
151,222 |
|
|
|
|
|
|
|
|
|
|
Total
expenses
|
|
|
218,720 |
|
|
|
151,222 |
|
|
|
|
|
|
|
|
|
|
Income
Before Income Tax and Equity in Undistributed Income of
Subsidiary
|
|
|
646,650 |
|
|
|
234,381 |
|
|
|
|
|
|
|
|
|
|
Income
Tax Benefit
|
|
|
(84,908 |
) |
|
|
(58,702 |
) |
|
|
|
|
|
|
|
|
|
Income
Before Equity in Undistributed Income of Subsidiary
|
|
|
731,558 |
|
|
|
293,083 |
|
|
|
|
|
|
|
|
|
|
Equity
in Undistributed Income of Subsidiary
|
|
|
664,609 |
|
|
|
1,224,839 |
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$ |
1,396,167 |
|
|
$ |
1,517,922 |
|
Jacksonville
Bancorp, Inc.
Notes
to Consolidated Financial Statements
December
31, 2009 and 2008
Condensed Statements of Cash
Flows
|
|
Year
Ending December 31,
|
|
|
|
2009
|
|
|
2008
|
|
Operating
Activities
|
|
|
|
|
|
|
Net
income
|
|
$ |
1,396,167 |
|
|
$ |
1,517,922 |
|
Items
not providing cash, net
|
|
|
(664,126 |
) |
|
|
(1,223,081 |
) |
Change
in other assets and liabilities, net
|
|
|
(37,710 |
) |
|
|
(7,439 |
) |
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
694,331 |
|
|
|
287,402 |
|
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(264,704 |
) |
|
|
(284,679 |
) |
Purchase
and retirement of common stock
|
|
|
— |
|
|
|
— |
|
Purchase
of treasury stock
|
|
|
(486,381 |
) |
|
|
— |
|
Exercise
of stock options
|
|
|
— |
|
|
|
11,000 |
|
|
|
|
|
|
|
|
|
|
Net
cash used in financing activities
|
|
|
(751,085 |
) |
|
|
(273,679 |
) |
|
|
|
|
|
|
|
|
|
Net
Change in Cash and Cash Equivalents
|
|
|
(56,754 |
) |
|
|
13,723 |
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents at Beginning of Year
|
|
|
203,417 |
|
|
|
189,694 |
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents at End of Year
|
|
$ |
146,663 |
|
|
$ |
203,417 |
|
No person has been authorized to give any
information or to make any representation other than as contained in this
prospectus and, if given or made, such other information or representation must
not be relied upon as having been authorized by Jacksonville Bancorp, Inc. or
Jacksonville Savings Bank. This prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities offered
hereby to any person in any jurisdiction in which such offer or solicitation is
not authorized or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation in such jurisdiction. Neither the delivery of this
prospectus nor any sale hereunder shall under any circumstances create any
implication that there has been no change in the affairs of Jacksonville
Bancorp, Inc. or Jacksonville Savings Bank since any of the dates as of which
information is furnished herein or since the date hereof.
Up
to 1,351,250 Shares
(Subject
to increase to up to 1,553,938 shares)
(Proposed
Holding Company for
Jacksonville
Savings Bank)
COMMON
STOCK
par
value $0.01 per share
PROSPECTUS
Keefe,
Bruyette & Woods
[Date
of Prospectus]
These
securities are not deposits or accounts and are not federally insured or
guaranteed.
Until
__________, 2010 or 25 days after commencement of the syndicated community
offering, if any, whichever is later, all dealers that effect transactions in
these securities, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers’
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
PROSPECTUS
OF JACKSONVILLE BANCORP, INC., A MARYLAND CORPORATION
PROXY
STATEMENT OF JACKSONVILLE BANCORP, INC., A FEDERAL CORPORATION
Jacksonville
Savings Bank is converting from a mutual holding company structure to a
fully-public stock holding company structure. Currently, Jacksonville Savings
Bank is a wholly-owned subsidiary of Jacksonville Bancorp, Inc., a federal
corporation (“Jacksonville Bancorp-Federal”), and Jacksonville Bancorp, MHC owns
approximately 54.1% of Jacksonville Bancorp-Federal’s common stock. The
remaining 45.9% of Jacksonville Bancorp-Federal’s common stock is owned by
public stockholders. As a result of the conversion, a newly formed company,
Jacksonville Bancorp, Inc., a Maryland corporation (“Jacksonville
Bancorp-Maryland”), will become the stock holding company of Jacksonville
Savings Bank. Each share of Jacksonville Bancorp-Federal common stock
owned by the public will be exchanged for between 0.9615 and 1.3009 shares
(subject to adjustment to up to 1.4960 shares) of common stock of
Jacksonville Bancorp-Maryland, so that immediately after the conversion
Jacksonville Bancorp-Federal’s existing public stockholders will own the same
percentage of Jacksonville Bancorp-Maryland common stock as they owned of
Jacksonville Bancorp-Federal’s common stock immediately prior to the conversion,
excluding any new shares purchased by them in the offering and their receipt of
cash in lieu of fractional exchange shares, as further discussed
below. The actual number of shares that you will receive will depend
on the percentage of Jacksonville Bancorp-Federal common stock held by the
public at the completion of the conversion, the final independent appraisal of
Jacksonville Bancorp-Maryland and the number of shares of Jacksonville
Bancorp-Maryland common stock sold in the offering described in the following
paragraph. It will not depend on the market price of Jacksonville
Bancorp-Federal common stock. See “Proposal 1—Approval of the Plan of Conversion
and Reorganization—Share Exchange Ratio for Current Stockholders” for a
discussion of the exchange ratio. Based on the $_____ per share closing price of
Jacksonville Bancorp-Federal common stock as of the last trading day prior to
the date of this proxy statement/prospectus, unless at least __________ shares
of Jacksonville Bancorp-Maryland common stock are sold in the offering (which is
between the ______ and the _______ of the offering range), the initial value of
the Jacksonville Bancorp-Maryland common stock you receive in the share exchange
would be less than the market value of the Jacksonville Bancorp-Federal common
stock you currently own. See “Risk Factors—The market value of Jacksonville
Bancorp-Maryland common stock received in the share exchange may be less than
the market value of Jacksonville Bancorp-Federal common stock
exchanged.”
Concurrently with the exchange offer,
we are offering up to1,351,250 shares
of common stock (subject to increase to up to 1,553,938 shares) of Jacksonville
Bancorp-Maryland, representing the 54.1% ownership interest of Jacksonville
Bancorp, MHC in Jacksonville Bancorp-Federal, for sale to eligible depositors of
Jacksonville Savings Bank, to Jacksonville Savings Bank’s tax qualified benefit
plans and to the public, including Jacksonville Bancorp-Federal stockholders, at
a price of $10.00 per share. The conversion of Jacksonville Bancorp, MHC and the
offering and exchange of common stock by Jacksonville Bancorp-Maryland is
referred to herein as the “conversion and offering.” After the conversion and
offering are completed, Jacksonville Savings Bank will be a wholly-owned
subsidiary of Jacksonville Bancorp-Maryland, and 100% of the common stock of
Jacksonville Bancorp-Maryland will be owned by public stockholders. As a result
of the conversion and offering, Jacksonville Bancorp-Federal and Jacksonville
Bancorp, MHC will cease to exist.
Jacksonville Bancorp-Federal’s common
stock is currently traded on the Nasdaq Capital Market under the trading symbol
“JXSB.” We expect that Jacksonville Bancorp-Maryland’s shares of
common stock will trade on the Nasdaq Capital Market under the trading symbol
“JXSBD” for a period of 20 trading days after the completion of this stock
offering. Thereafter, Jacksonville Bancorp-Maryland’s trading symbol
will revert to “JXSB.”
The
conversion and offering cannot be completed unless the stockholders of
Jacksonville Bancorp-Federal approve the Plan of Conversion and Reorganization
of Jacksonville Bancorp, MHC, referred to herein as the “plan of
conversion.” Jacksonville Bancorp-Federal is holding a special
meeting of stockholders at Jacksonville Savings Bank, 1211 West Morton Avenue,
Jacksonville, Illinois, on June 29, 2010, at 2:00 p.m., Central time, to
consider and vote upon the plan of conversion. We must obtain the affirmative
vote of the holders of (i) two-thirds of the total number of votes entitled to
be cast at the special meeting by Jacksonville Bancorp-Federal’s stockholders,
including shares held by Jacksonville Bancorp, MHC, and (ii) a majority of the
total number of votes entitled to be cast at the special meeting by Jacksonville
Bancorp-Federal’s stockholders other than Jacksonville Bancorp, MHC. Jacksonville Bancorp-Federal’s Board
of Directors unanimously recommends that stockholders vote “FOR” the approval of
the plan of conversion.
This document serves as the proxy
statement for the special meeting of stockholders of Jacksonville
Bancorp-Federal and the prospectus for the shares of Jacksonville
Bancorp-Maryland common stock to be issued in exchange for shares of
Jacksonville Bancorp-Federal common stock. We urge you to read this entire
document carefully. You can also obtain information about us from documents that
we have filed with the Securities and Exchange Commission and the Office of
Thrift Supervision. This document does not serve as the prospectus
relating to the offering by Jacksonville Bancorp-Maryland of its shares of
common stock in the offering, which will be made pursuant to a separate
prospectus. Stockholders of Jacksonville Bancorp-Federal are not
required to participate in the stock offering.
This proxy statement/prospectus
contains information that you should consider in evaluating the plan of
conversion. In particular, you
should carefully read the section captioned “Risk Factors” beginning on
page 12 for a
discussion of certain risk factors relating to the conversion and
offering.
These securities are not deposits or
savings accounts and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
None of the Securities and Exchange
Commission, the Office of Thrift Supervision or any state securities regulator
has approved or disapproved of these securities or determined if this proxy
statement/prospectus is accurate or complete. Any representation to the contrary
is a criminal offense.
For
answers to your questions, please read this proxy statement/prospectus including
the Questions and Answers section, beginning on page 1. Questions about voting
on the plan of conversion may be directed to ________________,
_____________________, at 1-____-________, Monday through Friday from 9:00 a.m.
to 5:00 p.m., Central Time.
The date
of this proxy statement/prospectus is __________, 2010, and it is first being
mailed to stockholders of Jacksonville Bancorp-Federal on or about __________,
2010.
JACKSONVILLE
BANCORP-FEDERAL
1211
West Morton Avenue
Jacksonville,
Illinois 62650
(217)
245-4111
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
On June 29, 2010, Jacksonville
Bancorp-Federal will hold a special meeting of stockholders at Jacksonville
Savings Bank, 1211 West Morton Avenue, Jacksonville, Illinois. The
meeting will begin at 2:00 p.m., Central time. At the meeting,
stockholders will consider and act on the following:
|
1.
|
The
approval of a plan of conversion and reorganization (the “Plan”) whereby:
(a) Jacksonville Bancorp, MHC and Jacksonville Bancorp, Inc., a Federal
Corporation (“Jacksonville Bancorp-Federal”) will convert and reorganize
from the mutual holding company structure to the stock holding company
structure; (b) Jacksonville Bancorp, Inc., a Maryland corporation
(“Jacksonville Bancorp-Maryland”), will become the new stock holding
company of Jacksonville Savings Bank; (c) the outstanding shares of
Jacksonville Bancorp-Federal other than those held by Jacksonville
Bancorp, MHC, will be converted into shares of common stock of
Jacksonville Bancorp-Maryland; and (d) Jacksonville Bancorp-Maryland will
offer shares of its common stock for sale in a subscription offering,
community offering and, possibly, a syndicated community
offering;
|
|
|
|
|
|
2.
|
The
approval of the adjournment of the special meeting, if necessary, to
solicit additional proxies in the event that there are not sufficient
votes at the time of the special meeting to approve the plan of conversion
and reorganization;
|
|
|
|
|
|
3.
|
The
following informational proposals:
|
|
|
|
|
|
|
3a.
|
Approval
of a provision in Jacksonville Bancorp-Maryland’s articles of
incorporation requiring a super-majority vote to approve certain
amendments to Jacksonville Bancorp-Maryland’s articles of
incorporation;
|
|
|
|
|
|
|
3b.
|
Approval
of a provision in Jacksonville Bancorp-Maryland’s articles of
incorporation requiring a super-majority vote of stockholders to approve
stockholder-proposed amendments to Jacksonville Bancorp-Maryland’s
bylaws;
|
|
|
|
|
|
|
3c.
|
Approval
of a provision in Jacksonville Bancorp-Maryland’s articles of
incorporation to limit the voting rights of shares beneficially owned in
excess of 10% of Jacksonville Bancorp-Maryland’s outstanding voting stock;
and
|
|
|
|
|
|
4.
|
Such
other business that may properly come before the
meeting.
|
NOTE: The Board of Directors
is not aware of any other business to come before the meeting.
The provisions of Jacksonville
Bancorp-Maryland’s articles of incorporation which are summarized as
informational proposals 3a through 3c were approved as part of the process in
which our Board of Directors approved the plan of conversion and reorganization
(referred to herein as the “plan of conversion”). These proposals are
informational in nature only, because the Office of Thrift Supervision’s
regulations governing mutual-to-stock conversions do not provide for votes on
matters other than the plan of conversion. While we are asking you to
vote with respect to each of the informational proposals listed above, the
proposed provisions for which an informational vote is requested will become
effective if stockholders approve the plan of conversion, regardless of whether
stockholders vote to approve any or all of the informational
proposals.
The Board of Directors has fixed May
10, 2010, as the record date for the determination of stockholders entitled to
notice of and to vote at the special meeting and at an adjournment or
postponement thereof.
Upon written request addressed to the
Corporate Secretary of Jacksonville Bancorp-Federal at the address given above,
stockholders may obtain an additional copy of this proxy statement/prospectus
and/or a copy of the plan of conversion. In order to assure timely
receipt of the additional copy of the proxy statement/prospectus and/or the plan
of conversion, the written request should be received by Jacksonville
Bancorp-Federal, by _________, 2010.
Please complete and sign the enclosed
proxy, which is solicited by the Board of Directors, and mail it promptly in the
enclosed envelope. The proxy will not be used if you attend the
meeting and vote in person.
|
BY
ORDER OF THE BOARD OF DIRECTORS
|
|
|
|
|
|
|
|
|
|
|
John
D. Eilering
|
|
|
Corporate
Secretary
|
|
Jacksonville,
Illinois
__________,
2010
TABLE
OF CONTENTS
QUESTIONS
AND ANSWERS FOR STOCKHOLDERS OF JACKSONVILLE BANCORP-FEDERAL REGARDING THE
PLAN OF CONVERSION AND REORGANIZATION
|
1
|
SUMMARY
|
6
|
RISK
FACTORS
|
12
|
PROPOSAL
1 — APPROVAL OF THE PLAN OF CONVERSION AND REORGANIZATION
|
17
|
PROPOSAL
2 — ADJOURNMENT OF THE SPECIAL MEETING
|
20
|
PROPOSALS
3a THROUGH 3c — INFORMATIONAL PROPOSALS RELATED TO THE ARTICLES
OF INCORPORATION AND BYLAWS OF JACKSONVILLE
BANCORP-MARYLAND
|
21
|
SELECTED
CONSOLIDATED FINANCIAL AND OTHER DATA
|
25
|
FORWARD-LOOKING
STATEMENTS
|
26
|
HOW
WE INTEND TO USE THE PROCEEDS FROM THE OFFERING
|
27
|
OUR
DIVIDEND POLICY
|
27
|
MARKET
FOR THE COMMON STOCK
|
27
|
HISTORICAL
AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
|
28
|
CAPITALIZATION
|
29
|
PRO
FORMA DATA
|
30
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
31
|
BUSINESS
OF JACKSONVILLE BANCORP-MARYLAND
|
32
|
BUSINESS
OF JACKSONVILLE BANCORP-FEDERAL AND JACKSONVILLE SAVINGS
BANK
|
32
|
SUPERVISION
AND REGULATION
|
33
|
TAXATION
|
33
|
MANAGEMENT
|
34
|
BENEFICIAL
OWNERSHIP OF COMMON STOCK
|
35
|
SUBSCRIPTIONS
BY DIRECTORS AND EXECUTIVE OFFICERS
|
35
|
COMPARISON
OF STOCKHOLDERS’ RIGHTS FOR EXISTING STOCKHOLDERS OF
JACKSONVILLE BANCORP-FEDERAL
|
36
|
RESTRICTIONS
ON ACQUISITION OF JACKSONVILLE BANCORP-MARYLAND
|
37
|
DESCRIPTION
OF CAPITAL STOCK OF JACKSONVILLE BANCORP-MARYLAND FOLLOWING THE
CONVERSION
|
38
|
TRANSFER
AGENT
|
38
|
EXPERTS
|
38
|
LEGAL
MATTERS
|
38
|
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
|
38
|
OTHER
MATTERS
|
38
|
JACKSONVILLE
BANCORP-FEDERAL INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-1
|
QUESTIONS
AND ANSWERS
FOR
STOCKHOLDERS OF JACKSONVILLE BANCORP-FEDERAL
REGARDING
THE PLAN OF CONVERSION AND REORGANIZATION
You
should read this document for more information about the conversion and
reorganization. The plan of conversion and reorganization described
herein (referred to as the “plan of conversion”) have been conditionally
approved by Jacksonville Bancorp-Federal’s primary federal regulator, the Office
of Thrift Supervision. However, such approvals by the agency does not
constitute recommendations or endorsements of the plan of
conversion.
Q.
|
WHAT
ARE STOCKHOLDERS BEING ASKED TO APPROVE?
|
|
|
A.
|
Jacksonville
Bancorp-Federal stockholders as of May 10, 2010 are being asked to vote to
approve the plan of conversion pursuant to which Jacksonville Bancorp, MHC
will convert from the mutual to the stock form of organization. As part of
the conversion, a newly formed Maryland corporation, Jacksonville
Bancorp-Maryland is offering its common stock to eligible depositors of
Jacksonville Savings Bank, to Jacksonville Savings Bank’s tax qualified
benefit plans, to stockholders of Jacksonville Bancorp-Federal as of May
10, 2010 and to the public. The shares offered represent Jacksonville
Bancorp, MHC’s current 54.1% ownership interest in Jacksonville
Bancorp-Federal. Voting for approval of the plan of conversion will also
include approval of the exchange ratio and the articles of incorporation
and bylaws of Jacksonville Bancorp-Maryland (including the anti-takeover
provisions and provisions limiting stockholder rights). Your vote is important. Without
sufficient votes “FOR” its approval, we cannot implement the plan of
conversion.
|
|
|
|
In
addition, Jacksonville Bancorp-Federal stockholders are being asked to
approve the adjournment of the special meeting, if necessary, to solicit
additional proxies in the event that there are not sufficient votes at the
time of the special meeting to approve the plan of
conversion.
|
|
|
|
Stockholders
also are asked to vote on the following informational proposals with
respect to the articles of incorporation and bylaws of Jacksonville
Bancorp-Maryland:
|
|
|
|
|
●
|
Approval
of a provision in Jacksonville Bancorp-Maryland’s articles of
incorporation requiring a super-majority vote to approve certain
amendments to Jacksonville Bancorp-Maryland’s articles of
incorporation;
|
|
|
|
|
●
|
Approval
of a provision in Jacksonville Bancorp-Maryland’s articles of
incorporation requiring a super-majority vote of stockholders to approve
stockholder-proposed amendments to Jacksonville Bancorp-Maryland’s bylaws;
and
|
|
●
|
Approval
of a provision in Jacksonville Bancorp-Maryland’s articles of
incorporation to limit the voting rights of shares beneficially owned in
excess of 10% of Jacksonville Bancorp-Maryland’s outstanding voting
stock.
|
|
|
|
|
The
provisions of Jacksonville Bancorp-Maryland’s articles of incorporation
that are included as informational proposals were approved as part of the
process in which our Board of Directors approved the plan of conversion.
These proposals are informational in nature only, because the Office of
Thrift Supervision’s regulations governing mutual-to-stock conversions do
not provide for votes on matters other than the plan of
conversion. While we are asking you to vote with respect to
each of the informational proposals listed above, the proposed provisions
for which an informational vote is requested will become effective if
stockholders approve the plan of conversion, regardless of whether
stockholders vote to approve any or all of the informational
proposals. The provisions of Jacksonville Bancorp-Maryland’s
articles of incorporation which are summarized above as informational
proposals may have the effect of deterring, or rendering more difficult,
attempts by third parties to obtain control of Jacksonville
Bancorp-Maryland if such attempts are not approved by the Board of
Directors, or may make the removal of the Board of Directors or
management, or the appointment of new directors, more
difficult.
|
|
Your
vote is important. Without sufficient votes “FOR” approval of the plan of
conversion, we cannot implement the plan of conversion and the related
stock offering.
|
|
|
|
Q.
|
WHAT
ARE THE REASONS FOR THE CONVERSION AND RELATED
OFFERING?
|
|
|
A.
|
Our
primary reasons for converting and raising additional capital through the
offering are:
|
|
|
|
●
|
to
increase our capital to support internal growth through lending in the
communities we serve;
|
|
|
|
|
●
|
to
enhance existing products and services and support the development of new
products and services;
|
|
|
|
|
●
|
to
facilitate growth through branch and whole bank acquisitions, as
opportunities arise;
|
|
|
|
|
●
|
to
improve our overall competitive position; and
|
|
|
|
|
●
|
to
improve the liquidity of our shares of common stock and enhance
stockholder returns through more flexible capital management
strategies.
|
|
|
|
|
As
a fully converted stock holding company, we will have greater flexibility
in structuring mergers and acquisitions, including the form of
consideration that we can use to pay for an acquisition. Our
current mutual holding company structure limits our ability to offer
shares of our common stock as consideration in a merger or acquisition
since Jacksonville Bancorp, MHC is required to own a majority of
Jacksonville Bancorp-Federal’s outstanding shares of common
stock. Potential sellers often want stock for at least part of
the purchase price. Our new stock holding company structure
will enable us to offer stock or cash consideration, or a combination of
stock and cash, and therefore will enhance our ability to compete with
other bidders when acquisition opportunities arise. We
currently have no arrangements or understandings regarding any specific
acquisition.
|
|
|
|
Q.
|
WHAT
WILL STOCKHOLDERS RECEIVE FOR THEIR EXISTING JACKSONVILLE BANCORP-FEDERAL
SHARES?
|
|
|
A.
|
As
more fully described in “Proposal 1 — Approval of the Plan of
Conversion and Reorganization — Share Exchange Ratio,” depending on the
number of shares sold in the offering, each share of common stock that you
own at the time of the completion of the conversion will be exchanged for
between 848,122 shares at the minimum and 1,147,459 shares at the maximum
of the offering range (or 1,319,578 at the adjusted maximum of the
offering range) of Jacksonville Bancorp-Maryland common stock (cash will
be paid in lieu of any fractional shares). For example, if
you own 100 shares of Jacksonville Bancorp-Federal common stock, and the
exchange ratio is 1.1312 (at the midpoint of the offering range), after
the conversion you will receive 113 shares of Jacksonville Bancorp-Federal
common stock and $0.12 in cash, the value of the fractional share, based
on the $10.00 per share purchase price of stock in the
offering.
|
|
If
you own shares of Jacksonville Bancorp-Federal common stock in a brokerage
account in “street name,” your shares will be automatically exchanged, and
you do not need to take any action to exchange your shares of common
stock. If you own shares in the form of Jacksonville
Bancorp-Federal stock certificates after the completion of the conversion
and stock offering, our exchange agent will mail to you a transmittal form
with instructions to surrender your stock certificates. New certificates
of Jacksonville Bancorp-Maryland common stock will be mailed to you within
five business days after the exchange agent receives properly executed
transmittal forms and your Jacksonville Bancorp-Federal stock
certificates. You should not
submit a stock certificate until you receive a transmittal
form.
|
|
|
Q.
|
WHY
WILL THE SHARES THAT I RECEIVE BE BASED ON A PRICE OF $10.00 PER SHARE
RATHER THAN THE TRADING PRICE OF THE COMMON STOCK PRIOR TO COMPLETION OF
THE CONVERSION?
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A.
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The
$10.00 per share price was selected primarily because it is a commonly
selected per share price for mutual-to-stock conversion
offerings. The amount of common stock Jacksonville
Bancorp-Maryland will issue at $10.00 per share in the offering and the
exchange is based on an independent appraisal of the estimated market
value of Jacksonville Bancorp-Maryland, assuming the conversion and
offering are completed. RP Financial, LC., an appraisal firm
experienced in appraisal of financial institutions, has estimated that, as
of February 19, 2010, this market value ranged from $18.5 million to $25.0
million, with a midpoint of $21.7 million. Based on this
valuation, the number of shares of common stock of Jacksonville
Bancorp-Maryland that existing public stockholders of Jacksonville
Bancorp-Federal will receive in exchange for their shares of Jacksonville
Bancorp-Federal common stock will range from 848,122 to 1,147,459, with a
midpoint of 997,790 shares (with a value of approximately $8.5 million to
$11.5 million, with a midpoint of $10.0 million, at $10.00 per
share). If market conditions so warrant, the appraised value
can be increased to $28.7 million, the adjusted maximum of the appraisal,
and the number of shares issued in the exchange for existing shares of
Jacksonville Bancorp-Federal can be increased to 1,319,578 (a value of
$13.2 million, at $10.00 per share). The number of shares
received by the existing public stockholders of Jacksonville
Bancorp-Federal is intended to maintain their existing 45.9% ownership in
our organization (excluding any new shares purchased by them in the
offering and their receipt of cash in lieu of fractional exchange shares).
The independent appraisal is based in part on Jacksonville
Bancorp-Federal’s financial condition and results of operations, the pro
forma impact of the additional capital raised by the sale of shares of
common stock in the offering, and an analysis of a peer group of ten
publicly traded savings bank and thrift holding companies that RP
Financial, LC. considered comparable to Jacksonville
Bancorp-Federal.
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Q.
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DOES
THE EXCHANGE RATIO DEPEND ON THE TRADING PRICE OF JACKSONVILLE
BANCORP-FEDERAL COMMON STOCK?
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A.
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No,
the exchange ratio will not be based on the market price of Jacksonville
Bancorp-Federal common stock. Therefore, changes in the price of
Jacksonville Bancorp-Federal common stock between now and the completion
of the conversion and offering will not affect the calculation of the
exchange ratio.
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Q.
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WHY
DOESN’T JACKSONVILLE BANCORP-FEDERAL WAIT TO CONDUCT THE CONVERSION AND
OFFERING UNTIL THE STOCK MARKET IMPROVES SO THAT CURRENT STOCKHOLDERS CAN
RECEIVE A HIGHER EXCHANGE RATIO?
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A.
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The
Board of Directors believes that because the stock holding company form of
organization and the capital raised in the conversion offer important
advantages and that it is in the best interest of our stockholders to
complete the conversion and offering sooner rather than later. There is no
way to know when market conditions will change, when regulations governing
conversion to stock form will change, or how they might change, or how
changes in market conditions might affect stock prices for financial
institutions. The Board of Directors concluded that it would be better to
complete the conversion and offering now, under existing Office of Thrift
Supervision conversion regulations and under a valuation that offers a
fair exchange ratio to existing stockholders and an attractive price to
new investors, rather than wait an indefinite amount of time for
potentially better market conditions.
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Q.
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SHOULD
I SUBMIT MY STOCK CERTIFICATES NOW?
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A.
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No. If
you hold stock certificate(s), instructions for exchanging the
certificates will be sent to you by our exchange agent after completion of the
conversion. If your shares are held in “street name” (e.g., in a brokerage
account) rather than in certificate form, the share exchange will be
reflected automatically in your account upon completion of the
conversion.
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Q.
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HOW
DO I VOTE?
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A.
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Mark
your vote, sign each proxy card enclosed and return the card(s) to us, in
the enclosed proxy reply envelope. YOUR VOTE IS
IMPORTANT. PLEASE VOTE PROMPTLY.
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Q.
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IF
MY SHARES ARE HELD IN STREET NAME, WILL MY BROKER, BANK OR OTHER NOMINEE
AUTOMATICALLY VOTE ON THE PLAN ON MY BEHALF?
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A.
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No. Your
broker, bank or other nominee will not be able to vote your shares without
instructions from you. You should instruct your broker, bank or
other nominee to vote your shares, using the directions that they provide
to you.
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Q.
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WHAT
HAPPENS IF I DON’T VOTE?
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A.
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Your vote is very
important. Not voting all the proxy card(s) you receive will
have the same effect as voting “against” the plan of conversion.
Without sufficient favorable votes “for” the plan of
conversion, we will not proceed with the conversion and
offering.
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Q.
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WHAT
IF I DO NOT GIVE VOTING INSTRUCTIONS TO MY BROKER, BANK OR OTHER
NOMINEE?
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A.
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Your
vote is important. If you do not instruct your broker, bank or
other nominee to vote your shares, the unvoted proxy will have the same
effect as a vote “against” the plan of
conversion.
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Q.
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MAY
I PLACE AN ORDER TO PURCHASE SHARES IN THE OFFERING, IN ADDITION TO THE
SHARES THAT I WILL RECEIVE IN THE EXCHANGE?
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A.
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Yes.
If you would like to receive a prospectus and stock order form, you must
call our Stock Information Center at (877) 860-2070, Monday through Friday
between 9:00 a.m. and 5:00 p.m., Central Time. The Stock
Information Center is closed weekends and bank
holidays.
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Eligible
depositors of Jacksonville Savings Bank have priority subscription rights
allowing them to purchase common stock in a subscription
offering. Shares not purchased in the subscription offering may
be available for sale to the public in a community offering, as described
herein. In the event orders for Jacksonville Bancorp-Maryland
common stock in a community offering exceed the number of shares available
for sale, shares may be allocated (to the extent shares remain available)
first to cover orders of natural persons residing in the Illinois counties
of Cass, Greene, Macoupin, Montgomery, Morgan, Pike, Sangamon and Scott;
second to cover orders of Jacksonville Bancorp-Federal stockholders as of
[voting record date]; and thereafter to cover orders of the general
public. Stockholders of Jacksonville Bancorp-Federal are subject to an
ownership limitation.
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Shares
of common stock purchased in the offering by a stockholder and his or her
associates or individuals acting in concert with the stockholder, plus any shares a
stockholder and these individuals receive in the exchange for existing
shares of Jacksonville Bancorp-Federal common stock, may not exceed 5% of
the total shares of common stock of Jacksonville Bancorp-Maryland to be
issued and outstanding after the completion of the
conversion.
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Q.
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WILL
THE CONVERSION HAVE ANY EFFECT ON DEPOSIT AND LOAN ACCOUNTS AT
JACKSONVILLE SAVINGS BANK?
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A.
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No. The
account number, amount, interest rate and withdrawal rights of deposit
accounts will remain unchanged. Deposits will continue to be
federally insured by the Federal Deposit Insurance Corporation up to the
legal limit. Loans and rights of borrowers will not be
affected. Depositors will no longer have voting rights in the
mutual holding company, which will cease to exist, after the conversion
and offering. Only stockholders of Jacksonville
Bancorp-Maryland will have voting rights after the conversion and
offering.
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Please
note that properly completed and signed stock order forms, with full payment,
must be received (not postmarked) by the Stock Information Center no later than
12:00 noon, Central Time on __________, 2010.
OTHER
QUESTIONS?
For
answers to other questions, please read this proxy statement/prospectus.
Questions about voting on the plan of conversion may be directed to __________,
_____________________, at 1-___________, Monday through Friday from 9:00 a.m. to
5:00 p.m., Central Time. Questions about the stock offering may be
directed to our Stock Information Center at (877) 860-2070, Monday through
Friday between 9:00 a.m. and 5:00 p.m., Central Time. The Stock
Information Center is closed weekends and bank holidays.
SUMMARY
This summary highlights material
information from this proxy statement/prospectus and may not contain all the
information that is important to you. To understand the conversion
and other proposals fully, you should read this entire document carefully,
including the sections entitled “Risk Factors,” “Proposal 1 — Approval of The
Plan of Conversion and Reorganization,” “Proposal 2— Adjournment of the Special
Meeting,” “Proposals 3a through 3c — Informational Proposals Related to the
Articles of incorporation and Bylaws of Jacksonville Bancorp-Maryland” and the
consolidated financial statements and the notes to the consolidated financial
statements.
The
Jacksonville Bancorp-Federal Special Meeting
Date, Time and Place. Jacksonville
Bancorp-Federal will hold its special meeting of stockholders at Jacksonville
Savings Bank, 1211 West Morton Avenue, Jacksonville, Illinois, on June 29, 2010,
at 2:00 p.m., Central Time.
The Proposals. Stockholders
will be voting on the following proposals at the special meeting:
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1.
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The
approval of a plan of conversion and reorganization (the “Plan”) whereby:
(a) Jacksonville Bancorp, MHC and Jacksonville Bancorp, Inc., a Federal
Corporation (“Jacksonville Bancorp-Federal”) will convert and reorganize
from the mutual holding company structure to the stock holding company
structure; (b) Jacksonville Bancorp, Inc., a Maryland corporation
(“Jacksonville Bancorp-Maryland”), will become the new stock holding
company of Jacksonville Savings Bank; (c) the outstanding shares of
Jacksonville Bancorp-Federal other than those held by Jacksonville
Bancorp, MHC, will be converted into shares of common stock of
Jacksonville Bancorp-Maryland; and (d) Jacksonville Bancorp-Maryland will
offer shares of its common stock for sale in a subscription offering,
community offering and, possibly, a syndicated community
offering;
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2.
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The
approval of the adjournment of the special meeting, if necessary, to
solicit additional proxies in the event that there are not sufficient
votes at the time of the special meeting to approve the plan of conversion
and reorganization;
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3.
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The
following informational proposals:
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3a.
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Approval
of a provision in Jacksonville Bancorp-Maryland’s articles of
incorporation requiring a super-majority vote to approve certain
amendments to Jacksonville Bancorp-Maryland’s articles of
incorporation;
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3b
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Approval
of a provision in Jacksonville Bancorp-Maryland’s articles of
incorporation requiring a super-majority vote of stockholders to approve
stockholder-proposed amendments to Jacksonville Bancorp-Maryland’s
bylaws;
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3c.
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Approval
of a provision in Jacksonville Bancorp-Maryland’s articles of
incorporation to limit the voting rights of shares beneficially owned in
excess of 10% of Jacksonville Bancorp-Maryland’s outstanding voting stock;
and
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4.
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Such
other business that may properly come before the
meeting.
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The
provisions of Jacksonville Bancorp-Maryland’s articles of incorporation which
are summarized as informational proposals 3a through 3c were approved as part of
the process in which our Board of Directors approved the plan of conversion and
reorganization (referred to herein as the “plan of
conversion”). These proposals are informational in nature only,
because the Office of Thrift Supervision’s regulations governing mutual-to-stock
conversions do not provide for votes on matters other than the plan of
conversion. While we are asking you to vote with respect to each of
the informational proposals listed above, the proposed provisions for which an
informational vote is requested will become effective if stockholders approve
the plan of conversion, regardless of whether stockholders vote to approve any
or all of the informational proposals. The provisions of Jacksonville
Bancorp-Maryland’s articles of incorporation which are summarized as
informational proposals may have the effect of deterring or rendering more
difficult attempts by third parties to obtain control of Jacksonville
Bancorp-Maryland, if such attempts are not approved by the board of directors,
or may make the removal of the board of directors or management, or the
appointment of new directors, more difficult.
Vote
Required for Approval of Proposals by the Stockholders of Jacksonville
Bancorp-Federal
Proposal 1: Approval of the Plan of
Conversion and Reorganization. We must obtain the affirmative
vote of the holders of (i) two-thirds of the total number of votes entitled to
be cast at the special meeting by Jacksonville Bancorp-Federal stockholders,
including shares held by Jacksonville Bancorp, MHC, and (ii) a majority of the
total number of votes entitled to be cast at the special meeting by Jacksonville
Bancorp-Federal stockholders other than Jacksonville Bancorp, MHC.
Proposal 2 Approval of the
adjournment of the special meeting. We must obtain the
affirmative vote of at least a majority of the votes cast by Jacksonville
Bancorp-Federal stockholders at the special meeting to adjourn the special
meeting, if necessary, to solicit additional proxies in the event that there are
not sufficient votes at the time of the special meeting to approve the proposal
to approve the plan of conversion.
Informational Proposals 3a through
3c: Non-binding vote regarding certain provisions in Jacksonville
Bancorp-Maryland’s articles of incorporation. The provisions
of Jacksonville Bancorp-Maryland’s articles of incorporation which are
summarized as informational proposals were approved as part of the process in
which the Board of Directors of Jacksonville Bancorp-Federal approved the plan
of conversion. These proposals are informational in nature only, because the
Office of Thrift Supervision’s regulations governing mutual-to-stock conversions
do not provide for votes on matters other than the plan of
conversion. While we are asking you to vote with respect to each of
the informational proposals listed above, the proposed provisions for which an
informational vote is requested will become effective if stockholders approve
the plan of conversion, regardless of whether stockholders vote to approve any
or all of the informational proposals. The provisions of Jacksonville
Bancorp-Maryland’s articles of incorporation that are summarized as
informational proposals may have the effect of deterring or rendering more
difficult attempts by third parties to obtain control of Jacksonville
Bancorp-Maryland, if such attempts are not approved by the Board of Directors,
or may make the removal of the Board of Directors or management, or the
appointment of new directors, more difficult.
Other Matters. We must obtain
the affirmative vote of the majority of the votes cast by holders of outstanding
shares of common stock of Jacksonville Bancorp-Federal. At this time,
we know of no other matters that may be presented at the special
meeting.
Proposal 1 must also be approved by the
members of Jacksonville Bancorp, MHC at a special meeting of members called for
that purpose. Members will receive separate informational materials
for Jacksonville Bancorp, MHC regarding the conversion.
Revocability
of Proxies
You may revoke your proxy at any time
before the vote is taken at the special meeting. To revoke your
proxy, you must advise the corporate secretary of Jacksonville Bancorp-Federal
in writing before your common stock has been voted at the special meeting,
deliver a later-dated proxy or attend the special meeting and vote your shares
in person. Attendance at the special meeting will not in itself
constitute revocation of your proxy.
Vote
by Jacksonville Bancorp, MHC
Management
anticipates that Jacksonville Bancorp, MHC, our majority stockholder, will vote
all of its shares of common stock in favor of all the matters set forth
above. If Jacksonville Bancorp, MHC votes all of its shares in favor
of each proposal, the approval of the adjournment of the special meeting if
necessary, would be assured.
As of May 10, 2010, the directors and
executive officers of Jacksonville Bancorp-Federal beneficially owned ______
shares, or approximately ___% of the outstanding shares of Jacksonville
Bancorp-Federal common stock, and Jacksonville Bancorp, MHC owned __________
shares, or approximately 54.1% of the outstanding shares of Jacksonville
Bancorp-Federal common stock.
Your
Board of Directors unanimously recommends that you vote “FOR” the plan of
conversion, “FOR” the adjournment of the special meeting, if necessary, and
“FOR” the Informational Proposals 3a through 3c.
The
Companies
[Same as
prospectus]
Plan
of Conversion and Reorganization
The Boards of Directors of Jacksonville
Bancorp-Federal, Jacksonville Bancorp, MHC, Jacksonville Savings Bank and
Jacksonville Bancorp-Maryland have adopted a plan of conversion pursuant to
which Jacksonville Savings Bank will reorganize from a mutual holding company
structure to a stock holding company structure. Public stockholders of
Jacksonville Bancorp-Federal will receive shares in Jacksonville
Bancorp-Maryland in exchange for their shares of Jacksonville Bancorp-Federal
common stock based on an exchange ratio. This conversion to a stock
holding company structure also includes the offering by Jacksonville
Bancorp-Maryland of shares of its common stock to eligible depositors of
Jacksonville Savings Bank and to the public, including Jacksonville
Bancorp-Federal stockholders, in a subscription offering and, if necessary, in a
community offering and/or syndicated community offering. Following
the conversion and offering, Jacksonville Bancorp, MHC and Jacksonville
Bancorp-Federal will no longer exist, and Jacksonville Bancorp-Maryland will be
the parent company of Jacksonville Savings Bank.
The conversion and offering cannot be
completed unless the stockholders of Jacksonville Bancorp-Federal approve the
plan of conversion. Jacksonville Bancorp-Federal’s stockholders will
vote on the plan of conversion at Jacksonville Bancorp-Federal’s special
meeting. This document is the proxy statement used by Jacksonville
Bancorp-Federal’s board of directors to solicit proxies for the special
meeting. It is also the prospectus of Jacksonville Bancorp-Maryland
regarding the shares of Jacksonville Bancorp-Maryland common stock to be issued
to Jacksonville Bancorp-Federal’s stockholders in the share
exchange. This document does not serve as the prospectus relating to
the offering by Jacksonville Bancorp-Maryland of its shares of common stock in
the subscription offering and any community offering or syndicated community
offering , which will be made pursuant to a separate prospectus.
Our
Current Organizational Structure
[Same as
the prospectus]
Our
Organizational Structure Following the Conversion
[Same as
the prospectus]
Reasons
for the Conversion
[Same as
the prospectus]
Conditions
to Completion of the Conversion
[Same as
the prospectus]
The
Exchange of Existing Shares of Jacksonville Bancorp-Federal Common
Stock
[Same as
the prospectus]
How
We Determined the Offering Range and the $10.00 Per Share Stock Price
[Same as
the prospectus]
How
We Intend to Use the Proceeds From the Offering
[Same as
the prospectus]
Our
Dividend Policy
[Same as
the prospectus]
Purchases
and Ownership by Officers and Directors
[Same as
the prospectus]
Benefits
to Management and Potential Dilution to Stockholders Resulting from the
Conversion
[Same as
the prospectus]
Market
for Common Stock
[Same as
the prospectus]
Tax
Consequences
[Same as
the prospectus]
Changes
in Stockholders’ Rights for Existing Stockholders of Jacksonville
Bancorp-Federal
As a
result of the conversion, existing stockholders of Jacksonville Bancorp-Federal
will become stockholders of Jacksonville Bancorp-Maryland. Some
rights of stockholders of Jacksonville Bancorp-Maryland will be reduced compared
to the rights stockholders currently have in Jacksonville
Bancorp-Federal The reduction in stockholder rights results from
differences between the federal and Maryland charters and bylaws, and from
distinctions between federal and Maryland law. Many of the
differences in stockholder rights under the articles of incorporation and bylaws
of Jacksonville Bancorp-Maryland are not mandated by Maryland law but have been
chosen by management as being in the best interests of Jacksonville
Bancorp-Maryland and all of its stockholders. The articles of
incorporation and bylaws of Jacksonville Bancorp-Maryland which differ from the
charter and bylaws of Jacksonville Bancorp-Federal include the following
provisions: (i) allowing the Board of Directors to change the authorized number
of shares without stockholder approval; (ii) the restriction on the payment of
dividends under Maryland corporate law; (iii) filling vacancies on the Board of
Directors; (iv) limitations on liability for directors and officers; (v)
indemnification of directors, officers, employees and agents; (vi) the calling
of special meetings of stockholders; (vii) greater lead time required for
stockholders to submit proposals for new business or to nominate directors;
(viii) a stockholder’s right to examine the books and records of the company;
(vix) limitations on the voting rights of greater than 10% stockholders; (x)
restrictions on certain types of business combinations with interested
stockholders; (xi) consideration by the Board of Directors of certain factors
when considering a change in control of the company; and (xii) approval by at
least 80% of the outstanding shares of capital stock entitled to vote generally
is required to amend the bylaws and certain provisions of the articles of
incorporation. See “Comparison of Stockholders’ Rights For Existing Stockholders
of Jacksonville Bancorp-Federal” for a discussion of these
differences.
Dissenters’
Rights
Stockholders
of Jacksonville Bancorp-Federal do not have dissenters’ rights in connection
with the conversion and offering.
Important
Risks in Owning Jacksonville Bancorp-Maryland’s Common Stock
Before
you decide to purchase stock, you should read the “Risk Factors” section
beginning on page 12 of this proxy statement/prospectus.
RISK
FACTORS
You
should consider carefully the following risk factors in evaluating an investment
in the shares of common stock.
Risks
Related to Our Business
[Same as
the prospectus]
Risks
Related to the Offering and the Exchange
The
market value of Jacksonville Bancorp-Maryland common stock received in the share
exchange may be less than the market value of Jacksonville Bancorp-Federal
common stock exchanged.
The number of shares of Jacksonville
Bancorp-Maryland common stock you receive will be based on an exchange ratio
that will be determined as of the date of completion of the conversion and
offering. The exchange ratio will be based on the percentage of Jacksonville
Bancorp-Federal common stock held by the public prior to the completion of the
conversion and offering, the final independent appraisal of Jacksonville
Bancorp-Maryland common stock prepared by RP Financial, LC. and the number of
shares of common stock sold in the offering. The exchange ratio will ensure that
existing public stockholders of Jacksonville Bancorp-Federal common stock will
own the same percentage of Jacksonville Bancorp-Maryland common stock after the
conversion and offering as they owned of Jacksonville Bancorp-Federal common
stock immediately prior to completion of the conversion and offering (excluding
any new shares purchased by them in the offering and their receipt of cash in
lieu of fractional exchange shares). The exchange ratio will not
depend on the market price of Jacksonville Bancorp-Federal common
stock.
The exchange ratio ranges from 0.9615
shares at the minimum to 1.3009 shares at the maximum (or 1.4960 at the adjusted
maximum) of the offering range of Jacksonville Bancorp-Maryland common stock per
share of Jacksonville Bancorp-Federal common stock. Shares of Jacksonville
Bancorp-Maryland common stock issued in the share exchange will have an initial
value of $10.00 per share. Depending on the exchange ratio and the market value
of Jacksonville Bancorp-Federal common stock at the time of the exchange, the
initial market value of the Jacksonville Bancorp-Maryland common stock that you
receive in the share exchange could be less than the market value of the
Jacksonville Bancorp-Federal common stock that you currently own. Based on the
most recent closing price of Jacksonville Bancorp-Federal common stock prior to
the date of this proxy statement/prospectus, which was $___, unless at least
_____ shares of Jacksonville Bancorp-Maryland common stock are sold in the
offering (which is between the ____ and the _____ of the offering range), the
initial value of the Jacksonville Bancorp-Maryland common stock you receive in
the share exchange would be less than the market value of the Jacksonville
Bancorp-Federal common stock you currently own.
[Remaining
risks are the same as the prospectus]
INFORMATION
ABOUT THE SPECIAL MEETING
General
This proxy statement/prospectus is
being furnished to you in connection with the solicitation by the Board of
Directors of Jacksonville Bancorp-Federal of proxies to be voted at the special
meeting of stockholders to be held at Jacksonville Savings Bank, 1211 West
Morton Avenue, Jacksonville, Illinois, on June 29, 2010, at 2:00 p.m., Central
Time, and any adjournment or postponement thereof.
The purpose of the special meeting is
to consider and vote upon the Plan of Conversion and Reorganization of
Jacksonville Bancorp, MHC (referred to herein as the “plan of
conversion”).
In addition, stockholders will vote on
a proposal to approve the adjournment of the special meeting, if necessary, to
solicit additional proxies in the event that there are not sufficient votes at
the time of the special meeting to approve the
proposals. Stockholders also will vote on informational proposals
with respect to the articles of incorporation and bylaws of Jacksonville
Bancorp-Maryland.
Voting in favor of or against the
plan of conversion includes a vote for or against the conversion of Jacksonville
Bancorp, MHC to a stock holding company as contemplated by the plan of
conversion. Voting in favor of the plan of conversion will not
obligate you to purchase any shares of common stock in the offering and will not
affect the balance, interest rate or federal deposit insurance of any deposits
at Jacksonville Savings Bank.
Who
Can Vote at the Meeting
You are entitled to vote your
Jacksonville Bancorp-Federal common stock if our records show that you held your
shares as of the close of business on May 10, 2010. If your shares
are held in a stock brokerage account or by a bank or other nominee, you are
considered the beneficial owner of shares held in street name and these proxy
materials are being forwarded to you by your broker or nominee. As
the beneficial owner, you have the right to direct your broker or nominee how to
vote.
As of the close of business on May 10,
2010, there were __________shares of Jacksonville Bancorp-Federal common stock
outstanding. Each share of common stock has one vote.
Attending
the Meeting
If you are a stockholder as of the
close of business on May 10, 2010, you may attend the
meeting. However, if you hold your shares in street name, you will
need proof of ownership to be admitted to the meeting. A recent
brokerage statement or a letter from a bank or broker are examples of proof of
ownership. If you want to vote your shares of Jacksonville
Bancorp-Federal common stock held in street name in person at the meeting, you
will have to get a written proxy in your name from the broker, bank or other
nominee who holds your shares.
Quorum;
Vote Required
The special meeting will be held only
if there is a quorum. A quorum exists if a majority of the
outstanding shares of common stock entitled to vote, represented in person or by
proxy, is present at the meeting. If you return valid proxy
instructions or attend the meeting in person, your shares will be counted for
purposes of determining whether there is a quorum, even if you abstain from
voting. Broker non-votes also will be counted for purposes of
determining the existence of a quorum. A broker non-vote occurs when
a broker, bank or other nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power with respect to that item and has not received voting instructions
from the beneficial owner.
Proposal 1: Approval of the Plan of
Conversion and Reorganization. We must obtain the affirmative
vote of the holders of (i) two-thirds of the outstanding common stock of
Jacksonville Bancorp-Federal entitled to be cast at the special meeting,
including shares held by Jacksonville Bancorp, MHC, and (ii) a majority of the
outstanding shares of common stock of Jacksonville Bancorp-Federal entitled to
be cast at the special meeting, other than shares held by Jacksonville Bancorp,
MHC.
Proposal 2: Approval of
the adjournment of the special meeting. We must obtain the
affirmative vote of at least a majority of the votes cast by Jacksonville
Bancorp-Federal stockholders entitled to vote at the special meeting to adjourn
the special meeting, if necessary, to solicit additional proxies in the event
that there are not sufficient votes at the time of the special meeting to
approve the proposal to approve the plan of conversion.
Informational Proposals 3a through
3c: Non-binding vote regarding certain provisions in Jacksonville
Bancorp-Maryland’s articles of incorporation. The provisions
of Jacksonville Bancorp-Maryland’s articles of incorporation which are
summarized as informational proposals were approved as part of the process in
which the Board of Directors of Jacksonville Bancorp-Federal approved the plan
of conversion. These proposals are informational in nature only,
because the Office of Thrift Supervision’s regulations governing mutual-to-stock
conversions do not provide for votes on matters other than the plan of
conversion. While we are asking you to vote with respect to each of
the informational proposals, the proposed provisions for which an informational
vote is requested will become effective if stockholders approve the plan of
conversion, regardless of whether stockholders vote to approve any or all of the
informational proposals. The provisions of Jacksonville
Bancorp-Maryland’s articles of incorporation which are summarized as
informational proposals may have the effect of deterring or rendering more
difficult attempts by third parties to obtain control of Jacksonville
Bancorp-Maryland, if such attempts are not approved by the Board of Directors,
or may make the removal of the Board of Directors or management, or the
appointment of new directors, more difficult.
Other Matters. We
must obtain the affirmative vote of the majority of the votes cast by holders of
outstanding shares of common stock of Jacksonville
Bancorp-Federal. At this time, we know of no other matters that may
be presented at the special meeting.
Shares
Held by Jacksonville Bancorp, MHC and Our Officers and Directors
As of May 10, 2010, Jacksonville
Bancorp, MHC beneficially owned __________ shares of Jacksonville
Bancorp-Federal common stock. This equals approximately 54.1% of our
outstanding shares. Jacksonville Bancorp, MHC intends to vote all of
its shares in favor of Proposal 1—Approval of the Plan of Conversion and
Reorganization, Proposal 2—Approval of the Adjournment of the Special Meeting,
and Informational Proposals 3a through 3c.
As of May
10, 2010, our officers and directors beneficially owned _______ shares of
Jacksonville Bancorp-Federal common stock, not including shares that they may
acquire upon the exercise of outstanding stock options. This equals
___% of our outstanding shares and ___% of shares held by persons other than
Jacksonville Bancorp, MHC.
Voting
by Proxy
Our Board of Directors is sending you
this proxy statement/prospectus to request that you allow your shares of
Jacksonville Bancorp-Federal common stock to be represented at the special
meeting by the persons named in the enclosed proxy card. All shares
of Jacksonville Bancorp-Federal common stock represented at the meeting by
properly executed and dated proxies will be voted according to the instructions
indicated on the proxy card. If you sign, date and return a proxy
card without giving voting instructions, your shares will be voted as
recommended by our Board of Directors. Our Board of Directors
recommends that you vote “FOR” approval of the plan of
conversion, “FOR”
approval of the adjournment of the special meeting, and “FOR” each of the
Informational Proposals 3a through 3c.
If any matters not described in this
proxy statement/prospectus are properly presented at the special meeting, the
Board of Directors will use their judgment to determine how to vote your
shares. We do not know of any other matters to be presented at the
special meeting.
If your Jacksonville Bancorp-Federal
common stock is held in street name, you will receive instructions from your
broker, bank or other nominee that you must follow to have your shares
voted. Your broker, bank or other nominee may allow you to deliver
your voting instructions via the telephone or the Internet. Please
see the instruction form provided by your broker, bank or other nominee that
accompanies this proxy statement/prospectus.
Revocability
of Proxies
You may revoke your proxy at any time
before the vote is taken at the special meeting. To revoke your
proxy, you must advise the corporate secretary of Jacksonville Bancorp-Federal
in writing before your common stock has been voted at the special meeting,
deliver a later-dated proxy or attend the special meeting and vote your shares
in person. Attendance at the special meeting will not in itself
constitute revocation of your proxy.
Solicitation
of Proxies
This proxy statement/prospectus and the
accompanying proxy card are being furnished to you in connection with the
solicitation of proxies for the special meeting by the Board of
Directors. Jacksonville Bancorp-Federal will pay the costs of
soliciting proxies from its stockholders. To the extent necessary to
permit approval of the plan of conversion and the other proposals being
considered, directors, officers or employees of Jacksonville Bancorp-Federal and
Jacksonville Savings Bank may solicit proxies by mail, telephone and other forms
of communication. We will reimburse such persons for their reasonable
out-of-pocket expenses incurred in connection with such
solicitation.
We will also reimburse banks, brokers,
nominees and other fiduciaries for the expenses they incur in forwarding the
proxy materials to you.
Participants
in the Employee Stock Ownership Plan
If you participate in Jacksonville
Savings Bank Employee Stock Ownership Plan (the “ESOP”), you will receive a
voting instruction form for each plan that reflects all shares you may direct
the trustees to vote on your behalf under the plans. Under the terms of the
ESOP, the ESOP trustee votes all shares held by the ESOP, but each ESOP
participant may direct the trustee how to vote the shares of common stock
allocated to his or her account. The ESOP trustee, subject to the exercise of
its fiduciary duties, will vote all unallocated shares of Jacksonville
Bancorp-Federal common stock held by the ESOP and allocated shares for which no
voting instructions are received in the same proportion as shares for which it
has received timely voting instructions. The deadline for returning your voting
instructions to the plan’s trustee is _________, 2010.
Participants
in the 401(k) Plan
If you hold shares of common stock
through the Jacksonville Savings Bank 401(k) Plan (“401(k) Plan”), you will
receive a voting instruction form that reflects all shares that you may direct
the trustee to vote on your behalf under the 401(k) Plan. Under the
terms of the 401(k) Plan, a participant is entitled to direct the trustee as to
vote the shares in the 401(k) Plan credited to his or her account. The trustee
will vote all shares for which no directions are given or for which instructions
were not timely received in the same proportion as shares for which the trustee
received voting instructions. The deadline for returning your voting
instructions to the 401(k) plan’s trustee is _________, 2010.
Recommendation
of the Board of Directors
The Board of Directors recommends that
you promptly sign and mark the enclosed proxy in favor of the above described
proposals, including, the adoption of the plan of conversion and promptly return
it in the enclosed envelope. Voting the proxy card will not prevent
you from voting in person at the special meeting.
Your prompt vote is very important.
Failure to vote will have the same effect as voting against the plan of
conversion.
PROPOSAL 1 — APPROVAL OF THE PLAN OF
CONVERSION AND REORGANIZATION
The Board
of Directors of Jacksonville Bancorp-Federal and Jacksonville Bancorp, MHC, have
approved the plan of conversion and reorganization, referred to herein as the
“plan of conversion.” The plan of conversion must also be approved by
the members of Jacksonville Bancorp, MHC (depositors of Jacksonville Savings
Bank) and the stockholders of Jacksonville Bancorp-Federal. A special
meeting of members and a special meeting of stockholders have been called for
this purpose. The Office of Thrift Supervision has conditionally approved the
plan of conversion; however, such approval does not constitute a recommendation
or endorsement of the plan of conversion by that agency.
General
Pursuant
to the plan of conversion, our organization will convert from the mutual holding
company form of organization to the fully stock form. Currently,
Jacksonville Savings Bank is a wholly-owned subsidiary of Jacksonville
Bancorp-Federal and Jacksonville Bancorp, MHC owns approximately 54.1% of
Jacksonville Bancorp-Federal’s common stock. The remaining 45.9% of Jacksonville
Bancorp-Federal’s common stock is owned by public stockholders. As a result of
the conversion, our newly formed company, Jacksonville Bancorp-Maryland, will
become the holding company of Jacksonville Savings Bank. Each share
of Jacksonville Bancorp-Federal common stock owned by the public will be
exchanged for between 0.9615 shares at the minimum and 1.3009 shares at the
maximum of the offering range (or 1.4960 at the adjusted maximum of the offering
range) of Jacksonville Bancorp-Maryland common stock, so that Jacksonville
Bancorp-Federal’s existing public stockholders will own the same percentage of
Jacksonville Bancorp-Maryland common stock as they owned of Jacksonville
Bancorp-Federal’s common stock immediately prior to the conversion (excluding
any new shares purchased by them in the offering and their receipt of cash in
lieu of fractional exchange shares). The actual number of shares that
you will receive will depend on the percentage of Jacksonville Bancorp-Federal
common stock held by the public at the completion of the conversion, the final
independent appraisal of Jacksonville Bancorp-Maryland and the number of shares
of Jacksonville Bancorp-Maryland common stock sold in the offering described in
the following paragraph. It will not depend on the market price of Jacksonville
Bancorp-Federal common stock.
Concurrently with the exchange offer,
we are offering up to 1,351,250 shares of common stock of Jacksonville
Bancorp-Maryland, representing the 54.1% ownership interest of Jacksonville
Bancorp, MHC in Jacksonville Bancorp-Federal, for sale to eligible depositors
and to the public at a price of $10.00 per share. After the conversion and
offering are completed, Jacksonville Savings Bank will be a wholly-owned
subsidiary of Jacksonville Bancorp-Maryland, and 100% of the common stock of
Jacksonville Bancorp-Maryland will be owned by public stockholders. As a result
of the conversion and offering, Jacksonville Bancorp-Federal and Jacksonville
Bancorp, MHC will cease to exist.
Jacksonville
Bancorp-Maryland intends to contribute between $4.4 million and $6.1 million of
net proceeds, or $7.1 million if the offering range is increased by 15%, to
Jacksonville Savings Bank and to retain between $4.0 million and $5.6 million of
the net proceeds, or $6.5 million if the offering range is increased by 15%
(excluding the portion of the net proceeds loaned to our employee stock
ownership plan). The conversion will be consummated only upon the
issuance of at least the minimum number of shares of our common stock offered
pursuant to the plan of conversion and reorganization.
The plan
of conversion and reorganization provides that we will offer shares of common
stock in a “subscription offering” in the following descending order of
priority:
|
(i)
|
First,
to depositors with accounts at Jacksonville Savings Bank with aggregate
balances of at least $50.00 at the close of business on December 31,
2008.
|
|
|
|
|
(ii)
|
Second,
to our tax-qualified employee benefit plans, including our employee stock
ownership plan and 401(k) plan, which will receive nontransferable
subscription rights to purchase in the aggregate up to 10.0% of the shares
of common stock sold in the offering. Our employee stock ownership plan
currently intends to purchase up to 4% of the shares of common stock sold
in the offering, with the remaining shares in this purchase priority
allocated to our 401(k) plan.
|
|
|
|
|
(iii)
|
Third,
to depositors with accounts at Jacksonville Savings Bank with aggregate
balances of at least $50.00 at the close of business on March 31,
2010.
|
|
|
|
|
(iv)
|
Fourth,
to depositors of Jacksonville Savings Bank at the close of business on May
10, 2010.
|
Shares of
common stock not purchased in the subscription offering may be offered for sale
to the general public in a “community offering,” with a preference given first
to natural persons residing in the Illinois counties of Cass, Greene, Macoupin,
Montgomery, Morgan, Pike, Sangamon and Scott, and then to Jacksonville
Bancorp-Federal’s public stockholders as of May 10, 2010. The
community offering, if held, may begin concurrently with, during or promptly
after the subscription offering as we may determine at any time. We
also may offer for sale shares of common stock not purchased in the subscription
offering or community offering through a “syndicated community offering” managed
by Keefe, Bruyette & Woods, Inc. We have the right to accept or
reject, in our sole discretion, orders received in the community offering or
syndicated community offering. Any determination to accept or reject
stock orders in the community offering and the syndicated community offering
will be based on the facts and circumstances available to management at the time
of the determination.
The
community offering, if any, may begin at the same time as, during, or after the
subscription offering and must be completed within 45 days after the completion
of the subscription offering unless otherwise extended by the Office of Thrift
Supervision. See “—Community Offering.” The syndicated community
offering may begin at any time following the commencement of the subscription
offering and must be completed within 45 days after the completion of the
subscription offering unless otherwise extended by us, with approval of the
Office of Thrift Supervision. Alternatively, we may sell any remaining shares in
an underwritten public offering, which would be conducted on a firm commitment
basis. See “—Syndicated Community Offering.”
We
determined the number of shares of common stock to be offered in the offering
based upon an independent valuation of the estimated pro forma market value of
Jacksonville Bancorp-Maryland. All shares of common stock to be sold
in the offering will be sold at $10.00 per share. Investors will not be charged
a commission to purchase shares of common stock in the offering. The
independent valuation will be updated and the final number of the shares of
common stock to be issued in the offering will be determined at the completion
of the offering. See “—Stock Pricing and Number of Shares to be Issued” for more
information as to the determination of the estimated pro forma market value of
the common stock.
The
following is a brief summary of the conversion and is qualified in its entirety
by reference to the provisions of the plan of conversion and reorganization. A
copy of the plan of conversion and reorganization is available for inspection at
each banking office of Jacksonville Savings Bank and at the Central Regional and
the Washington, D.C. offices of the Office of Thrift Supervision. The plan of
conversion and reorganization is also filed as an exhibit to Jacksonville
Bancorp, MHC’s application to convert from mutual to stock form, of which this
prospectus is a part, copies of which may be obtained from the Office of Thrift
Supervision. The plan of conversion and reorganization is also an
exhibit to the registration statement we have filed with the Securities and
Exchange Commission, of which this prospectus is a part, copies of which may be
obtained from the Securities and Exchange Commission or online at the Securities
and Exchange Commission’s website. See “Where You Can Find Additional
Information.”
The
Board of Directors recommends that you vote “FOR” the Plan of Conversion and
Reorganization of Jacksonville Bancorp, MHC.
Reasons
for the Conversion and Offering
[Same as
the prospectus]
Share
Exchange Ratio for Current Stockholders
[Same as
the prospectus]
PROPOSAL
2 — ADJOURNMENT OF THE SPECIAL MEETING
If there are not sufficient votes to
constitute a quorum or to approve the plan of conversion at the time of the
special meeting, the proposals may not be approved unless the special meeting is
adjourned to a later date or dates in order to permit further solicitation of
proxies. In order to allow proxies that have been received by
Jacksonville Bancorp-Federal at the time of the special meeting to be voted for
an adjournment, if necessary, Jacksonville Bancorp-Federal has submitted the
question of adjournment to its stockholders as a separate matter for their
consideration. The Board of Directors of Jacksonville Bancorp-Federal
recommends that stockholders vote “FOR” the adjournment proposal. If
it is necessary to adjourn the special meeting, no notice of the adjourned
special meeting is required to be given to stockholders (unless the adjournment
is for more than 30 days or if a new record date is fixed), other than an
announcement at the special meeting of the hour, date and place to which the
special meeting is adjourned.
The Board of Directors recommends that
you vote “FOR” the adjournment of the special meeting, if necessary, to solicit
additional proxies in the event that there are not sufficient votes at the time
of the special meeting to approve the plan of conversion.
PROPOSALS
3a THROUGH 3c — INFORMATIONAL PROPOSALS RELATED TO THE
ARTICLES
OF INCORPORATION AND BYLAWS OF JACKSONVILLE BANCORP-MARYLAND
By their approval of the plan of
conversion as set forth in Proposal 1, the Board of Directors of Jacksonville
Bancorp-Federal has approved each of the informational proposals numbered 3a
through 3c, all of which relate to provisions included in the articles of
incorporation of Jacksonville Bancorp-Maryland. Each of these
informational proposals is discussed in more detail below.
As a result of the conversion, the
public stockholders of Jacksonville Bancorp-Federal, whose rights are presently
governed by the charter and bylaws of Jacksonville Bancorp-Federal, will become
stockholders of Jacksonville Bancorp-Maryland, whose rights will be governed by
the articles of incorporation and bylaws of Jacksonville
Bancorp-Maryland. The following informational proposals address the
material differences between the governing documents of the two
companies. This discussion is qualified in its entirety by reference
to the charter and bylaws of Jacksonville Bancorp-Federal and the articles of
incorporation and bylaws of Jacksonville Bancorp-Maryland. See “Where
You Can Find Additional Information” for procedures for obtaining a copy of
those documents.
The provisions of Jacksonville
Bancorp-Maryland’s articles of incorporation which are summarized as
informational proposals 3a through 3c were approved as part of the process in
which the Board of Directors of Jacksonville Bancorp-Federal approved the plan
of conversion. These proposals are informational in nature only,
because the Office of Thrift Supervision’s regulations governing mutual-to-stock
conversions do not provide for votes on matters other than the plan of
conversion. Jacksonville Bancorp-Federal’s stockholders are not being
asked to approve these informational proposals at the special
meeting. While we are asking you to vote with respect to each of the
informational proposals set forth below, the proposed provisions for which an
informational vote is requested will become effective if stockholders approve
the plan of conversion, regardless of whether stockholders vote to approve any
or all of the informational proposals. The provisions of Jacksonville
Bancorp-Maryland’s articles of incorporation and bylaws which are summarized as
informational proposals may have the effect of deterring or rendering more
difficult attempts by third parties to obtain control of Jacksonville
Bancorp-Maryland, if such attempts are not approved by the Board of Directors,
or may make the removal of the Board of Directors or management, or the
appointment of new directors, more difficult.
Informational Proposal 3a. – Approval
of a Provision in Jacksonville Bancorp-Maryland’s Articles of Incorporation
Requiring a Super-Majority Vote to Amend Certain Provisions of the Articles of
Incorporation of Jacksonville Bancorp-Maryland. No amendment
of the charter of Jacksonville Bancorp-Federal may be made unless it is first
proposed by the Board of Directors, then preliminarily approved by the Office of
Thrift Supervision, and thereafter approved by the holders of a majority of the
total votes eligible to be cast at a legal meeting. The articles of
incorporation of Jacksonville Bancorp-Maryland may generally be amended, upon
the submission of an amendment by the Board of Directors to a vote of the
stockholders, by the affirmative vote of at least two-thirds of the outstanding
shares of common stock, or by the affirmative vote of a majority of the
outstanding shares of common stock if at least two-thirds of the members of the
whole Board of Directors approves such amendment; provided, however, that any
amendment of Section C, D, E or F of Article Fifth (Preferred Stock,
Restrictions on Voting Rights of the Corporation’s Equity Securities, Majority
Vote, Quorum), Article 7 (Directors), Article 8 (Bylaws), Article 9 (Evaluation
of Certain Offers), Article 10 (Indemnification, etc. of Directors and
Officers), Article 11 (Limitation of Liability) and Article 12 (Amendment of the
Articles of Incorporation) must be approved by the affirmative vote of the
holders of at least 80% of the outstanding shares entitled to vote, except that
the Board of Directors may amend the articles of incorporation without any
action by the stockholders to increase or decrease the aggregate number of
shares of capital stock.
These limitations on amendments to
specified provisions of Jacksonville Bancorp-Maryland’s articles of
incorporation are intended to ensure that the referenced provisions are not
limited or changed upon a simple majority vote. While this limits the
ability of stockholders to amend those provisions, Jacksonville Bancorp, MHC, as
a 54.1% stockholder, currently can effectively block any stockholder proposed
change to the charter.
The requirement of a super-majority
stockholder vote to amend specified provisions of Jacksonville
Bancorp-Maryland’s articles of incorporation could have the effect of
discouraging a tender offer or other takeover attempt where the ability to make
fundamental changes through amendments to the articles of incorporation is an
important element of the takeover strategy of the potential
acquiror. The Board of Directors believes that the provisions
limiting certain amendments to the articles of incorporation will put the Board
of Directors in a stronger position to negotiate with third parties with respect
to transactions potentially affecting the corporate structure of Jacksonville
Bancorp-Maryland and the fundamental rights of its stockholders, and to preserve
the ability of all stockholders to have an effective voice in the outcome of
such matters.
The Board of Directors recommends that
you vote “FOR” the approval of a provision in Jacksonville Bancorp-Maryland’s
articles of incorporation requiring a super-majority vote to approve certain
amendments to Jacksonville Bancorp-Maryland’s articles of
incorporation.
Informational Proposal 3b. – Approval
of a Provision in Jacksonville Bancorp-Maryland’s Articles of Incorporation
Requiring a Super-Majority Vote of Stockholders to Approve Stockholder Proposed
Amendments to Jacksonville Bancorp-Maryland’s Bylaws. An
amendment to Jacksonville Bancorp-Federal’s bylaws proposed by stockholders must
be approved by the holders of a majority of the total votes eligible to be cast
at a legal meeting subject to applicable approval by the Office of Thrift
Supervision. The articles of incorporation of Jacksonville Bancorp-Maryland
provide that stockholders may only amend the bylaws if such proposal is approved
by the affirmative vote of the holders of at least 80% of the outstanding shares
entitled to vote.
The requirement of a super-majority
stockholder vote to amend the bylaws of Jacksonville Bancorp-Maryland is
intended to ensure that the bylaws are not limited or changed upon a simple
majority vote of stockholders. While this limits the ability of
stockholders to amend the bylaws, Jacksonville Bancorp, MHC, as a 54.1%
stockholder, currently can effectively block any stockholder proposed change to
the bylaws. Also, the Board of Directors of both Jacksonville Bancorp-Federal
and Jacksonville Bancorp-Maryland may by a majority vote amend either company’s
bylaws.
This provision in Jacksonville
Bancorp-Maryland’s articles of incorporation could have the effect of
discouraging a tender offer or other takeover attempt where the ability to make
fundamental changes through amendments to the bylaws is an important element of
the takeover strategy of the potential acquiror. The Board of Directors believes
that the provision limiting amendments to the bylaws will put the Board of
Directors in a stronger position to negotiate with third parties with respect to
transactions potentially affecting the corporate structure of Jacksonville
Bancorp-Maryland and the fundamental rights of its stockholders, and to preserve
the ability of all stockholders to have an effective voice in the outcome of
such matters.
The Board of Directors recommends that
you vote “FOR” the approval of the provision in Jacksonville Bancorp-Maryland’s
articles of incorporation requiring a super-majority vote of stockholders to
approve stockholder proposed amendments to Jacksonville Bancorp-Maryland’s
bylaws.
Informational Proposal 3c. – Approval
of a Provision in Jacksonville Bancorp-Maryland’s Articles of Incorporation to
Limit the Voting Rights of Shares Beneficially Owned in Excess of 10% of
Jacksonville Bancorp-Maryland’s Outstanding Voting Stock. The
articles of incorporation of Jacksonville Bancorp-Maryland provide that in no
event shall any person, who directly or indirectly beneficially owns in excess
of 10% of the then-outstanding shares of common stock as of the record date for
the determination of stockholders entitled or permitted to vote on any matter,
be entitled or permitted to any vote in respect of the shares held in excess of
the 10% limit unless a purchase of shares is approved by a majority of
unaffiliated directors prior to the acquisition of such shares. Beneficial
ownership is determined pursuant to the federal securities laws and includes,
but is not limited to, shares as to which any person and his or her affiliates
(i) have the right to acquire pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options and (ii) have or share investment or voting power (but shall
not be deemed the beneficial owner of any voting shares solely by reason of a
revocable proxy granted for a particular meeting of stockholders, and that are
not otherwise beneficially, or deemed by Jacksonville Bancorp-Maryland to be
beneficially, owned by such person and his or her affiliates).
The foregoing restriction does not
apply to any employee benefit plans of Jacksonville Bancorp-Maryland or any
subsidiary or a trustee of a plan.
The amended and restated articles of
incorporation of Jacksonville Savings Bank provide that, for a period of five
years from the effective date of the conversion, no person, other than
Jacksonville Bancorp-Maryland, shall directly or indirectly offer to acquire or
acquire more than 10% of the then-outstanding shares of common
stock. The foregoing restriction does not apply to:
|
●
|
the
purchase of shares by underwriters in connection with a public offering;
or
|
|
|
|
|
●
|
the
purchase of shares by any employee benefit plans of Jacksonville
Bancorp-Federal or any subsidiary.
|
The provision in Jacksonville
Bancorp-Maryland’s articles of incorporation limiting the voting rights of
beneficial owners of more than 10% of Jacksonville Bancorp-Maryland’s
outstanding voting stock is intended to limit the ability of any person to
acquire a significant number of shares of Jacksonville Bancorp-Maryland common
stock and thereby gain sufficient voting control so as to cause Jacksonville
Bancorp-Maryland to effect a transaction that may not be in the best interests
of Jacksonville Bancorp-Maryland and its stockholders generally. This
provision will not prevent a stockholder from seeking to acquire a controlling
interest in Jacksonville Bancorp-Maryland, but it will prevent a stockholder
from voting more than 10% of the outstanding shares of common stock unless that
stockholder has first persuaded the Board of Directors of the merits of the
course of action proposed by the stockholder. The Board of Directors
of Jacksonville Bancorp-Maryland believes that fundamental transactions
generally should be first considered and approved by the Board of Directors as
it generally believes that it is in the best position to make an initial
assessment of the merits of any such transactions and that its ability to make
the initial assessment could be impeded if a single stockholder could acquire a
sufficiently large voting interest so as to control a stockholder vote on any
given proposal. This provision in Jacksonville Bancorp-Maryland’s
articles of incorporation makes an acquisition, merger or other similar
corporate transaction less likely to occur, even if such transaction is
supported by most stockholders, because it can prevent a holder of shares in
excess of the 10% limit from voting the excess shares in favor of the
transaction. Thus, it may be deemed to have an anti-takeover
effect.
The Board of Directors recommends that
you vote “FOR” the approval of a provision in Jacksonville Bancorp-Maryland’s
articles of incorporation to limit the voting rights of shares beneficially
owned in excess of 10% of Jacksonville Bancorp-Maryland’s outstanding voting
stock.
SELECTED
CONSOLIDATED FINANCIAL AND OTHER DATA
[SAME
AS PROSPECTUS]
FORWARD-LOOKING
STATEMENTS
[SAME
AS PROSPECTUS]
HOW
WE INTEND TO USE THE PROCEEDS FROM THE OFFERING
[SAME
AS PROSPECTUS]
OUR
DIVIDEND POLICY
[SAME
AS PROSPECTUS]
MARKET
FOR THE COMMON STOCK
HISTORICAL
AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
CAPITALIZATION
PRO
FORMA DATA
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
BUSINESS
OF JACKSONVILLE BANCORP-MARYLAND
[SAME
AS PROSPECTUS]
BUSINESS
OF JACKSONVILLE BANCORP-FEDERAL AND JACKSONVILLE SAVINGS BANK
SUPERVISION
AND REGULATION
[SAME
AS PROSPECTUS]
TAXATION
MANAGEMENT
BENEFICIAL
OWNERSHIP OF COMMON STOCK
[SAME
AS PROSPECTUS]
SUBSCRIPTIONS
BY DIRECTORS AND EXECUTIVE OFFICERS
COMPARISON
OF STOCKHOLDERS’ RIGHTS FOR EXISTING
STOCKHOLDERS
OF JACKSONVILLE BANCORP-FEDERAL
RESTRICTIONS
ON ACQUISITION OF JACKSONVILLE BANCORP-MARYLAND
DESCRIPTION
OF CAPITAL STOCK OF JACKSONVILLE BANCORP-MARYLAND FOLLOWING THE
CONVERSION
[SAME
AS PROSPECTUS]
TRANSFER
AGENT
[SAME
AS PROSPECTUS]
EXPERTS
[SAME
AS PROSPECTUS]
LEGAL
MATTERS
[SAME
AS PROSPECTUS]
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
[SAME
AS PROSPECTUS]
OTHER
MATTERS
As of the
date of this document, the board of directors is not aware of any business to
come before the special meeting other than the matters described above in the
proxy statement/prospectus. However, if any matters should properly
come before the special meeting, it is intended that the holders of the proxies
will act in accordance with their best judgment.
[Financial
Statements that are the same as the offering prospectus to appear
here]
PART
II:
|
INFORMATION
NOT REQUIRED IN PROSPECTUS
|
|
|
Item
13.
|
Other
Expenses of Issuance and
Distribution
|
|
|
|
Amount
(1)
|
|
|
|
|
|
|
* |
Registrant’s
Legal Fees and Expenses
|
|
$ |
500,000 |
|
* |
Registrant’s
Accounting Fees and Expenses
|
|
|
50,000 |
|
* |
Conversion
Agent and Data Processing Fees
|
|
|
30,000 |
|
* |
Marketing
Agent Fees (1)
|
|
|
383,585 |
|
* |
Marketing
Agent Expenses (Including Legal Fees and Expenses)
|
|
|
57,500 |
|
* |
Appraisal
Fees and Expenses
|
|
|
40,000 |
|
* |
Printing,
Postage, Mailing and EDGAR Fees
|
|
|
204,000 |
|
* |
Filing
Fees (OTS, Nasdaq, FINRA, IDFPR and SEC)
|
|
|
25,923 |
|
* |
Transfer
Fees and Expenses
|
|
|
5,000 |
|
* |
Business
Plan Fees and Expenses
|
|
|
32,000 |
|
* |
Other
|
|
|
55,577 |
|
* |
Total
|
|
$ |
1,383,585 |
|
|
|
|
* |
Estimated |
(1)
|
Jacksonville
Bancorp, Inc. has retained Keefe Bruyette & Woods, Inc. to assist in
the sale of common stock on a best efforts basis in the
offerings. Fees are estimated at the adjusted maximum of the
offering range.
|
Item
14.
|
Indemnification
of Directors and Officers
|
Articles
10 and 11 of the Articles of Incorporation of Jacksonville Bancorp, Inc. (the
“Corporation”) set forth circumstances under which directors, officers,
employees and agents of the Corporation may be insured or indemnified against
liability which they incur in their capacities as such:
ARTICLE 10. Indemnification,
etc. of Directors and Officers.
A.
Indemnification. The
Corporation shall indemnify (1) its current and former directors and officers,
whether serving the Corporation or at its request any other entity, to the
fullest extent required or permitted by the MGCL now or hereafter in force,
including the advancement of expenses under the procedures and to the fullest
extent permitted by law, and (2) other employees and agents to such extent
as shall be authorized by the Board of Directors and permitted by law; provided,
however, that, except as provided in Section B of this Article 10 with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation.
B.
Procedure. If
a claim under Section A of this Article 10 is not paid in full by the
Corporation within sixty (60) days after a written claim has been received by
the Corporation, except in the case of a claim for an advancement of expenses,
in which case the applicable period shall be twenty (20) days, the indemnitee
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall also be
entitled to be reimbursed the expense of prosecuting or defending such
suit. It shall be a defense to any action for advancement of expenses
that the Corporation has not received both (i) an undertaking as required by law
to repay such advances in the event it shall ultimately be determined that the
standard of conduct has not been met and (ii) a written affirmation by the
indemnitee of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met. In (i) any suit
brought by the indemnitee to enforce a right to indemnification hereunder (but
not in a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) any suit by the Corporation
to recover an advancement of expenses pursuant to the terms of an undertaking
the Corporation shall be entitled to recover such expenses upon a final
adjudication that, the indemnitee has not met the applicable standard for
indemnification set forth in the MGCL. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the MGCL, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In
any suit brought by the indemnitee to enforce a right to indemnification or to
an advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article 10 or otherwise shall be on the
Corporation.
C.
Non-Exclusivity. The
rights to indemnification and to the advancement of expenses conferred in this
Article 10 shall not be exclusive of any other right that any Person may
have or hereafter acquire under any statute, these Articles, the Corporation’s
Bylaws, any agreement, any vote of stockholders or the Board of Directors, or
otherwise.
D.
Insurance. The
Corporation may maintain insurance, at its expense, to insure itself and any
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such Person against such expense, liability or loss under the
MGCL.
E.
Miscellaneous. The
Corporation shall not be liable for any payment under this Article 10 in
connection with a claim made by any indemnitee to the extent such indemnitee has
otherwise actually received payment under any insurance policy, agreement, or
otherwise, of the amounts otherwise indemnifiable hereunder. The
rights to indemnification and to the advancement of expenses conferred in
Sections A and B of this Article 10 shall be contract rights and such
rights shall continue as to an indemnitee who has ceased to be a director or
officer and shall inure to the benefit of the indemnitee’s heirs, executors and
administrators.
F.
Limitations Imposed by Federal
Law. Notwithstanding any other provision set forth in this
Article 10, in no event shall any payments made by the Corporation pursuant to
this Article 10 exceed the amount permissible under applicable federal law,
including, without limitation, Section 18(k) of the Federal Deposit Insurance
Act and the regulations promulgated thereunder.
Any
repeal or modification of this Article 10 shall not in any way diminish any
rights to indemnification or advancement of expenses of such director or officer
or the obligations of the Corporation arising hereunder with respect to events
occurring, or claims made, while this Article 10 is in force.
ARTICLE 11. Limitation
of Liability. An officer or director of the Corporation, as
such, shall not be liable to the Corporation or its stockholders for money
damages, except (A) to the extent that it is proved that the Person
actually received an improper benefit or profit in money, property or services,
for the amount of the benefit or profit in money, property or services actually
received; or (B) to the extent that a judgment or other final adjudication
adverse to the Person is entered in a proceeding based on a finding in the
proceeding that the Person’s action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding; or (C) to the extent otherwise provided by the
MGCL. If the MGCL is amended to further eliminate or limit the
personal liability of officers and directors, then the liability of officers and
directors of the Corporation shall be eliminated or limited to the fullest
extent permitted by the MGCL, as so amended.
Any
repeal or modification of the foregoing paragraph by the stockholders of the
Corporation shall not adversely affect any right or protection of a director or
officer of the Corporation existing at the time of such repeal or
modification.
Item
15. |
Recent Sales
of Unregistered Securities |
|
|
|
Not
Applicable. |
Item
16. |
Exhibits
and Financial Statement Schedules: |
|
|
|
The exhibits and
financial statement schedules filed as part of this registration statement
are as follows: |
|
|
|
(a) |
List
of Exhibits |
|
|
|
1.1
|
Engagement
Letters between Jacksonville Bancorp, Inc., Jacksonville Savings Bank and
Keefe, Bruyette & Woods, Inc.*
|
1.2
|
Form
of Agency Agreement between Jacksonville Bancorp, MHC, Jacksonville
Bancorp, Inc., a Maryland corporation, Jacksonville Savings Bank and
Jacksonville Bancorp, Inc., a federal corporation, and Keefe, Bruyette
& Woods, Inc. *
|
2
|
Plan
of Conversion and Reorganization, as amended*
|
3.1
|
Articles
of Incorporation of Jacksonville Bancorp, Inc., as amended and
restated
|
3.2
|
Bylaws
of Jacksonville Bancorp, Inc.*
|
4
|
Form
of Common Stock Certificate of Jacksonville Bancorp,
Inc.*
|
5
|
Opinion
of Luse Gorman Pomerenk & Schick, P.C. regarding legality of
securities being registered*
|
8
|
Federal
Tax Opinion of Luse Gorman Pomerenk & Schick, P.C.*
|
10.1
|
Employment
Agreement between Jacksonville Savings Bank and Andrew F. Applebee(1)
|
10.2
|
Employment
Agreement between Jacksonville Savings Bank and Richard A. Foss(2)
|
10.3
|
Employment
Agreement between Jacksonville Savings Bank and John Williams(2)
|
10.4
|
Jacksonville
Savings Bank and Jacksonville Bancorp, MHC 1996 Stock Option Plan(3)
|
10.5
|
Jacksonville
Savings Bank 2001 Stock Option Plan(3)
|
10.6
|
Amendments
to the Jacksonville Savings Bank and Jacksonville Bancorp, MHC Stock
Option Plans*
|
10.7
|
Change
in Control Agreement between Jacksonville Savings Bank and Diana Tone*
|
10.8
|
Jacksonville
Savings Bank Supplemental Life Insurance Plan*
|
10.9
|
Jacksonville
Savings Bank Salary Continuation Plan 1(2)
|
10.10
|
Jacksonville
Savings Bank Long-Term Deferred Compensation Plan, as
amended*
|
10.11
|
Deferred
Compensation Agreement between Chapin State Bank and John C.
Williams*
|
10.12
|
Director’s
Compensation Agreement between Chapin State Bank and John C.
Williams*
|
10.13
|
Deferred
Compensation Agreement between Chapin State Bank and Dean H.
Hess*
|
10.14
|
Director’s
Compensation Agreement between Chapin State Bank and Dean H.
Hess*
|
21
|
Subsidiaries
of Registrant*
|
23.1
|
Consent
of Luse Gorman Pomerenk & Schick, P.C. (contained in Opinions included
as Exhibits 5 and 8)*
|
23.2
|
Consent
of BKD LLP
|
23.3
|
Consent
of RP Financial, LC.*
|
24
|
Power
of Attorney (set forth on signature page)
|
99.1
|
Appraisal
Agreement between Jacksonville Savings Bank, and
Jacksonville Bancorp, Inc., and Jacksonville Bancorp, MHC and RP
Financial, LC.*
|
99.2
|
Business
Plan Agreement between Jacksonville Savings Bank and Keller & Company,
Inc.*
|
99.3
|
Appraisal
Report of RP Financial, LC.*,**
|
99.4
|
Letter
of RP Financial, LC. with respect to Subscription
Rights*
|
99.5
|
Letter
of RP Financial, LC. with respect to Liquidation
Rights*
|
99.6
|
Marketing
Materials*
|
99.7
|
Stock
Order and Certification Form*
|
99.8
|
Form
of Proxy Card*
|
_______________________ |
*
|
Previously
filed.
|
**
|
Supporting
financial schedules filed in paper format only pursuant to Rule 202 of
Regulation S-T. Available for inspection during business hours
at the principal offices of the SEC in Washington, D.C.
|
(1)
|
Incorporated
by reference to the Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 20, 2009 (File No.
000-49792).
|
(2)
|
Incorporated
by reference to the Current Report on Form 8-K filed with the Securities
and Exchange Commission on September 4, 2008 (File No.
000-49792).
|
(3)
|
Incorporated
by reference to the registration statement on Form S-8 filed with the
Securities and Exchange Commission on February 2, 2004 (File No.
333-112420).
|
|
(b)
|
Financial
Statement Schedules
|
No
financial statement schedules are filed because the required information is not
applicable or is included in the consolidated financial statements or related
notes.
The undersigned Registrant hereby
undertakes:
(1) To file, during
any period in which it offers or sales are being made, a post-effective
amendment to this registration statement:
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in
the effective registration
statement;
|
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement.
|
(2) That, for
the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the
offering.
(4) Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(5) That, for
the purpose of determining liability of the registrant under the Securities Act
of 1933 to any purchaser in the initial distribution of the
securities:
The undersigned registrant undertakes
that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to
sell the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to offer or
sell such securities to such purchaser:
|
(i)
|
Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424
(§230.424 of this chapter);
|
|
(ii)
|
Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
|
|
(iii)
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
|
|
(iv)
|
Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
|
(6) That, for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective.
(7) That, for the purpose
of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(8) The
undersigned registrant hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Jacksonville, State of
Illinois on May 10 , 2010.
|
JACKSONVILLE
BANCORP, INC. |
|
|
|
|
|
|
By:
|
/s/
Richard A. Foss
|
|
|
|
Richard
A. Foss
|
|
|
|
President
and Chief Executive Officer
|
|
|
|
(Duly
Authorized Representative)
|
|
POWER
OF ATTORNEY
We, the
undersigned directors and officers of Jacksonville Bancorp, Inc. (the “Company”)
hereby severally constitute and appoint Richard A. Foss as our true and lawful
attorney and agent, to do any and all things in our names in the capacities
indicated below which said Richard A. Foss may deem necessary or advisable to
enable the Company to comply with the Securities Act of 1933, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with the registration statement on Form S-1 relating to the offering
of the Company ’ s common
stock, including specifically, but not limited to, power and authority to sign
for us in our names in the capacities indicated below the registration statement
and any and all amendments (including post-effective amendments) thereto; and we
hereby approve, ratify and confirm all that said Richard A. Foss shall do or
cause to be done by virtue thereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Richard A. Foss
|
|
President,
Chief Executive
|
|
May 10 , 2010
|
Richard
A. Foss
|
|
Officer
and Director (Principal |
|
|
|
|
Executive
Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Diana S. Tone
|
|
Chief
Financial Officer
|
|
May 10, 2010
|
Diana
S. Tone |
|
(Principal
Financial and |
|
|
|
|
Accounting
Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Andrew F. Applebee
|
|
Chairman
of the Board
|
|
May 10, 2010
|
Andrew
F. Applebee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Dean H. Hess
|
|
Director
|
|
May 10, 2010
|
Dean
H. Hess
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
John L. Eyth
|
|
Director
|
|
May 10, 2010
|
John
L. Eyth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Emily J. Osburn
|
|
Director
|
|
May 10, 2010
|
Emily
J. Osburn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Harmon B. Deal, III
|
|
Director
|
|
May 10, 2010
|
Harmon
B. Deal, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
John C. William
|
|
Director
|
|
May 10, 2010
|
John
C. Williams
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
John M. Buchanan
|
|
Director
|
|
May 10, 2010
|
John
M. Buchanan
|
|
|
|
|
As
filed with the Securities and Exchange Commission on May
11, 2010
Registration
No. 333-165466
____________________________________
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_______________________________________
EXHIBITS
TO
PRE-EFFECTIVE AMENDMENT NO. 2 TO
THE
REGISTRATION
STATEMENT
ON
FORM
S-1
Jacksonville
Bancorp, Inc.
Jacksonville,
Illinois
EXHIBIT
INDEX
1.1
|
Engagement
Letters between Jacksonville Bancorp, Inc., Jacksonville Savings Bank and
Keefe, Bruyette & Woods, Inc.*
|
1.2
|
Form
of Agency Agreement between Jacksonville Bancorp, MHC, Jacksonville
Bancorp, Inc., a Maryland corporation, Jacksonville Savings Bank and
Jacksonville Bancorp, Inc., a federal corporation, and Keefe, Bruyette
& Woods, Inc. *
|
2
|
Plan
of Conversion and Reorganization, as amended*
|
3.1
|
Articles
of Incorporation of Jacksonville Bancorp, Inc., as amended and
restated
|
3.2
|
Bylaws
of Jacksonville Bancorp, Inc.*
|
4
|
Form
of Common Stock Certificate of Jacksonville Bancorp,
Inc.*
|
5
|
Opinion
of Luse Gorman Pomerenk & Schick, P.C. regarding legality of
securities being registered*
|
8
|
Federal
Tax Opinion of Luse Gorman Pomerenk & Schick, P.C.*
|
10.1
|
Employment
Agreement between Jacksonville Savings Bank and Andrew F. Applebee(1)
|
10.2
|
Employment
Agreement between Jacksonville Savings Bank and Richard A. Foss(2)
|
10.3
|
Employment
Agreement between Jacksonville Savings Bank and John Williams(2)
|
10.4
|
Jacksonville
Savings Bank and Jacksonville Bancorp, MHC 1996 Stock Option Plan(3)
|
10.5
|
Jacksonville
Savings Bank 2001 Stock Option Plan(3)
|
10.6
|
Amendments
to the Jacksonville Savings Bank and Jacksonville Bancorp, MHC Stock
Option Plans*
|
10.7
|
Change
in Control Agreement between Jacksonville Savings Bank and Diana Tone*
|
10.8
|
Jacksonville
Savings Bank Supplemental Life Insurance Plan*
|
10.9
|
Jacksonville
Savings Bank Salary Continuation Plan 1(2)
|
10.10
|
Jacksonville
Savings Bank Long-Term Deferred Compensation Plan, as
amended*
|
10.11
|
Deferred
Compensation Agreement between Chapin State Bank and John C.
Williams*
|
10.12
|
Director’s
Compensation Agreement between Chapin State Bank and John C.
Williams*
|
10.13
|
Deferred
Compensation Agreement between Chapin State Bank and Dean H.
Hess*
|
10.14
|
Director’s
Compensation Agreement between Chapin State Bank and Dean H.
Hess*
|
21
|
Subsidiaries
of Registrant*
|
23.1
|
Consent
of Luse Gorman Pomerenk & Schick, P.C. (contained in Opinions included
as Exhibits 5 and 8)*
|
23.2
|
Consent
of BKD LLP
|
23.3
|
Consent
of RP Financial, LC.*
|
24
|
Power
of Attorney (set forth on signature page)
|
99.1
|
Appraisal
Agreement between Jacksonville Savings Bank, and
Jacksonville Bancorp, Inc., and Jacksonville Bancorp, MHC and RP
Financial, LC.*
|
99.2
|
Business
Plan Agreement between Jacksonville Savings Bank and Keller & Company,
Inc.*
|
99.3
|
Appraisal
Report of RP Financial, LC.*,**
|
99.4
|
Letter
of RP Financial, LC. with respect to Subscription
Rights*
|
99.5
|
Letter
of RP Financial, LC. with respect to Liquidation
Rights*
|
99.6
|
Marketing
Materials*
|
99.7
|
Stock
Order and Certification Form*
|
99.8
|
Form
of Proxy Card*
|
_______________________ |
*
|
Previously
filed.
|
**
|
Supporting
financial schedules filed in paper format only pursuant to Rule 202 of
Regulation S-T. Available for inspection during business hours
at the principal offices of the SEC in Washington, D.C.
|
(1)
|
Incorporated
by reference to the Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 20, 2009 (File No.
000-49792).
|
(2) |
Incorporated
by reference to the Current Report on Form 8-K filed with the Securities
and Exchange Commission on September 4, 2008 (File No.
000-49792).
|
(3) |
Incorporated
by reference to the registration statement on Form S-8 filed with the
Securities and Exchange Commission on February 2, 2004 (File No.
333-112420).
|
EX-3.1
2
ex3-1.htm
EXHIBIT 3.1
ex3-1.htm
Exhibit
3.1
ARTICLES
OF INCORPORATION
JACKSONVILLE
BANCORP, INC.
The
undersigned, Alan Schick, whose address is 5335 Wisconsin Avenue, N.W., Suite
780, Washington, DC 20015, being at least eighteen years of age, acting as
incorporator, does hereby form a corporation under the general laws of the State
of Maryland, having the following Articles of Incorporation (the
“Articles”):
ARTICLE 1. Name. The
name of the corporation is Jacksonville Bancorp, Inc. (herein the
“Corporation”).
ARTICLE 2. Principal
Office. The address of the principal office of the Corporation
in the State of Maryland is c/o CSC-Lawyers Incorporating Service Company, 7 St.
Paul Street, Suite 1660, Baltimore, Maryland 21202.
ARTICLE 3. Purpose. The
purpose for which the Corporation is formed is to engage in any lawful act or
activity for which corporations may be organized under the general laws of the
State of Maryland as now or hereafter in force.
ARTICLE 4. Resident
Agent. The name and address of the registered agent of the
Corporation in the State of Maryland is CSC-Lawyers Incorporating Service
Company, 7 St. Paul Street, Suite 1660, Baltimore, Maryland 21202. Said resident
agent is a Maryland corporation.
ARTICLE 5. Capital
Stock
A.
Authorized
Stock. The total number of shares of capital stock of all
classes that the Corporation has authority to issue is thirty-five million
(35,000,000) shares, consisting of:
1. ten
million (10,000,000) shares of preferred stock, par value one cent ($0.01) per
share (the “Preferred Stock”); and
2. twenty-five
million (25,000,000) shares of common stock, par value one cent ($0.01) per
share (the “Common Stock”).
The
aggregate par value of all the authorized shares of capital stock is three
hundred and fifty thousand dollars ($350,000). Except to the extent
required by governing law, rule or regulation, the shares of capital stock may
be issued from time to time by the Board of Directors without further approval
of the stockholders of the Corporation. The Corporation shall have
the authority to purchase its capital stock out of funds lawfully available
therefor, which funds shall include, without limitation, the Corporation’s
unreserved and unrestricted capital surplus. The Board of Directors,
pursuant to a resolution approved by a majority of the Whole Board (rounded up
to the nearest whole number), and without action by the stockholders, may amend
these Articles to increase or decrease the aggregate number of shares of stock
or the number of shares of stock of any class or series that the Corporation has
authority to issue. For the purposes of these Articles, the term
“Whole Board” shall mean the total number of directors that the Corporation
would have if there were no vacancies on the Board of Directors at the time any
such resolution is presented to the Board of Directors for
adoption.
B.
Common
Stock. Except as provided under the terms of any series of
Preferred Stock and as limited by Section D of this Article 5, the
exclusive voting power shall be vested in the Common Stock. Except as otherwise
provided in these Articles, each holder of the Common Stock shall be entitled to
one vote for each share of Common Stock standing in the holder’s name on the
books of the Corporation. Subject to any rights and preferences of
any series of Preferred Stock, holders of Common Stock shall be entitled to such
dividends as may be declared by the Board of Directors out of funds lawfully
available therefor. Upon the dissolution, liquidation or winding up
of the Corporation, the holders of the Common Stock shall be entitled to receive
all the remaining assets of the Corporation available for distribution to its
stockholders ratably in proportion to the number of shares held by them,
respectively, after: (i) payment or provision for payment of the Corporation’s
debts and liabilities; (ii) distributions or provision for distributions in
settlement of the Liquidation Account established by the Corporation as
described in Section G of this Article 5; and (iii) distributions or provisions
for distributions to holders of any class or series of stock having a preference
over the Common Stock in the liquidation, dissolution or winding up of the
Corporation.
C.
Preferred
Stock. The Board of Directors is hereby expressly authorized,
subject to any limitations prescribed by law, to provide for the issuance of the
shares of Preferred Stock in series, to establish from time to time the number
of shares to be included in each such series, and to fix the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption of the shares
of each such series. The number of authorized shares of the Preferred
Stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the
Common Stock, without a vote of the holders of the Preferred Stock, or of any
series thereof, unless a vote of any such holders is required by law or pursuant
to the terms of such Preferred Stock.
D.
Restrictions on Voting Rights of the Corporation’s Equity
Securities
1. Notwithstanding
any other provision of these Articles, in no event shall the record owner (or if
more than one record owner, all such record owners taken as a group) of any
outstanding Common Stock that is beneficially owned, directly or indirectly, by
a Person who, as of any record date for the determination of stockholders
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. The
number of votes that may be cast by any particular 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 (a “Holder in Excess”) shall be a number
equal to the total number of votes that a single record owner of all Common
Stock owned by such Holder in Excess would be entitled to cast after giving
effect to the provisions hereof, multiplied by a fraction, the numerator of
which is the number of shares of such class or series that are both (i)
beneficially owned by such Holder in Excess and (ii) owned of record by such
particular record owner, and the denominator of which is the total number of
shares of Common Stock beneficially owned by such Holder in
Excess. The provisions of this Section D of this Article 5 shall not
be applicable if, before the Holder in Excess acquired beneficial ownership of
such shares in excess of the Limit, such acquisition was approved by a majority
of the “Unaffiliated Directors.” For this purpose, the term “Unaffiliated
Director” means any member of the Board of Directors who is unaffiliated with
the Holder in Excess and was a member of the Board of Directors prior to the
time that the Holder in Excess became such, and any director who is thereafter
chosen to fill any vacancy on the Board of Directors and who is elected and who,
in either event, is unaffiliated with the Holder in Excess and in connection
with his or her initial assumption of office is recommended for appointment or
election by a majority of the Unaffiliated Directors then serving on the Board
of Directors.
2. The
following definitions shall apply to this Section D of this
Article 5.
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(a)
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An
“affiliate” of a specified Person shall mean a Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Person
specified.
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(b)
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“Beneficial
ownership” shall be determined pursuant to Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934 (or any
successor rule or statutory provision), or, if said Rule 13d-3 shall be
rescinded and there shall be no successor rule or statutory provision
thereto, pursuant to said Rule 13d-3 as in effect on December 31, 2009;
provided, however, that a Person shall, in any event, also be deemed the
“beneficial owner” of any Common Stock:
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(1)
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that
such Person or any of its affiliates beneficially owns, directly or
indirectly; or
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(2)
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that
such Person or any of its affiliates has (i) the right to acquire (whether
such right is exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding (but shall not be
deemed to be the beneficial owner of any voting shares solely by reason of
an agreement, contract, or other arrangement with the Corporation to
effect any transaction of the type described in clause (i) or (ii) of the
first sentence of Article 9 hereof) or upon the exercise of
conversion rights, exchange rights, warrants, or options or otherwise, or
(ii) sole or shared voting or investment power with respect thereto
pursuant to any agreement, arrangement, understanding, relationship or
otherwise (but shall not be deemed to be the beneficial owner of any
voting shares solely by reason of a revocable proxy granted for a
particular meeting of stockholders, pursuant to a public solicitation of
proxies for such meeting, with respect to shares of which neither such
Person nor any such affiliate is otherwise deemed the beneficial owner);
or
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(3)
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that
are beneficially owned, directly or indirectly, by any other Person with
which such first mentioned Person or any of its affiliates acts as a
partnership, limited partnership, syndicate or other group pursuant to any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock of the
Corporation; and provided further, however, that (i) no director or
officer of the Corporation (or any affiliate of any such director or
officer) shall, solely by reason of any or all of such directors or
officers acting in their capacities as such, be deemed, for any purposes
hereof, to beneficially own any Common Stock beneficially owned by any
other such director or officer (or any affiliate thereof), and (ii)
neither any employee stock ownership or similar plan of the Corporation or
any subsidiary of the Corporation nor any trustee with respect thereto (or
any affiliate of such trustee) shall, solely by reason of such capacity of
such trustee, be deemed, for any purposes hereof, to beneficially own any
Common Stock held under any such plan. For purposes of
computing the percentage of beneficial ownership of Common Stock of a
Person, the outstanding Common Stock shall include shares deemed owned by
such Person through application of this subsection but shall not include
any other shares of Common Stock that may be issuable by the Corporation
pursuant to any agreement, or upon exercise of conversion rights, warrants
or options, or otherwise. For all other purposes, the
outstanding Common Stock shall include only Common Stock then outstanding
and shall not include any Common Stock that may be issuable by the
Corporation pursuant to any agreement, or upon the exercise of conversion
rights, warrants or options, or otherwise.
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(c)
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A
“Person” shall mean any individual, firm, corporation, or other
entity.
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(d)
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The
Board of Directors shall have the power to construe and apply the
provisions of this Section D and to make all determinations necessary
or desirable to implement such provisions including, but not limited to,
matters with respect to (i) the number of shares of Common Stock
beneficially owned by any Person, (ii) whether a Person is an affiliate of
another, (iii) whether a Person has an agreement, arrangement, or
understanding with another as to the matters referred to in the definition
of beneficial ownership, (iv) the application of any other definition
or operative provision of this Section D to the given facts, or (v)
any other matter relating to the applicability or effect of this Section
D.
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3. The
Board of Directors shall have the right to demand that any Person reasonably
believed by the Board of Directors to be a Holder in Excess (or holder of record
of Common Stock beneficially owned by any Holder in Excess) supply the
Corporation with complete information as to (i) the record owner(s) of all
shares beneficially owned by such Holder in Excess, and (ii) any other factual
matter relating to the applicability or effect of this section as may reasonably
be requested of such Holder in Excess. The Board of Directors shall
further have the right to receive from any Holder in Excess reimbursement for
all expenses incurred by the Board in connection with its investigation of any
matters relating to the applicability or effect of this section on such Holder
in Excess, to the extent such investigation is deemed appropriate by the Board
of Directors as a result of the Holder in Excess refusing to supply the
Corporation with the information described in the previous
sentence.
4. Any
constructions, applications, or determinations made by the Board of Directors
pursuant to this Section D 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
stockholders.
5. In
the event any provision (or portion thereof) of this Section D shall be
found to be invalid, prohibited or unenforceable for any reason, the remaining
provisions (or portions thereof) of this Section D 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 the Corporation and its stockholders that
each such remaining provision (or portion thereof) of this Section D
remain, to the fullest extent permitted by law, applicable and enforceable as to
all stockholders, including Holders in Excess, notwithstanding any such
finding.
E.
Majority
Vote. Pursuant to Section 2-104(b)(5) of the Maryland General
Corporation Law (“MGCL”), notwithstanding any provision of the MGCL requiring
stockholder authorization of an action by a greater proportion than a majority
of the total number of shares of all classes of capital stock or of the total
number of shares of any class of capital stock, such action shall be valid and
effective if authorized by the affirmative vote of the holders of a majority of
the total number of shares of all classes outstanding and entitled to vote
thereon, except as otherwise provided in these Articles.
F.
Quorum. Except as
otherwise provided by law or expressly provided in these Articles, 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 Article 5,
Section D) 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 stockholders, and every reference in these Articles to a majority or other
proportion of capital stock (or the holders thereof) for purposes of determining
any quorum requirement or any requirement for stockholder 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.
G.
Liquidation
Account. Under regulations of the Office of Thrift
Supervision, the Corporation must establish and maintain a liquidation account
(the “Liquidation Account”) for the benefit of certain Eligible Account Holders
and Supplemental Eligible Account Holders as defined in the Plan of Conversion
and Reorganization of Jacksonville Bancorp, MHC, as amended (the “Plan of
Conversion”). In the event of a complete liquidation involving (i)
the Corporation or (ii) Jacksonville Savings Bank, an Illinois chartered savings
bank that will be a wholly-owned subsidiary of the Corporation, the Corporation
must comply with the regulations of the Office of Thrift Supervision and the
provisions of the Plan of Conversion with respect to the amount and priorities
of each Eligible Account Holder’s and Supplemental Eligible Account Holder’s
interests in the Liquidation Account. The interest of an Eligible
Account Holder or Supplemental Eligible Account Holder in the Liquidation
Account does not entitle such account holders to voting rights.
ARTICLE 6. Preemptive
Rights and Appraisal Rights
A. Preemptive
Rights. Except for preemptive rights approved by the Board of
Directors pursuant to a resolution approved by a majority of the directors then
in office, no holder of the capital stock of the Corporation or series of stock
or of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued capital stock of any
class or series, or any unissued bonds, certificates of indebtedness, debentures
or other securities convertible into or exchangeable for capital stock of any
class or series or carrying any right to purchase stock of any class or
series.
B. Appraisal
Rights. Holders of shares of stock shall not be entitled to
exercise any rights of an objecting stockholder provided for under Title 3,
Subtitle 2 of the MGCL or any successor statute unless the Board of Directors,
pursuant to a resolution approved by a majority of the directors then in office,
shall determine that such rights apply with respect to all or any classes or
series of stock, to one or more transactions occurring after the date of such
determination in connection with which holders of such shares would otherwise be
entitled to exercise such rights.
ARTICLE 7. Directors. The
following provisions are made a part of these Articles for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. Management of the
Corporation. The business and affairs of the Corporation shall
be managed under the direction of the Board of Directors. All powers
of the Corporation may be exercised by or under the authority of the Board of
Directors, except as conferred on or as reserved to the stockholders by law or
by these Articles or the Bylaws of the Corporation; provided, however, that any
limitations on the Board of Director’s management or direction of the affairs of
the Corporation shall reserve the directors’ full power to discharge their
fiduciary duties.
B. Number, Class and Terms of Directors;
No Cumulative Voting. The number of directors constituting the
Board of Directors of the Corporation shall initially be eight (8), which number
may be increased or decreased in the manner provided in the Bylaws of the
Corporation; provided, however, that such number shall never be less than the
minimum number of directors required by the MGCL now or hereafter in
force. The directors, other than those who may be elected by the
holders of any series of Preferred Stock, shall be divided into three classes,
as nearly equal in number as reasonably possible, with the term of office of the
first class (“Class I”) to expire at the conclusion of the first annual meeting
of stockholders, the term of office of the second class (“Class II”) to expire
at the conclusion of the annual meeting of stockholders one year thereafter and
the term of office of the third class (“Class III”) to expire at the conclusion
of the annual meeting of stockholders two years thereafter, with each director
to hold office until his or her successor shall have been duly elected and
qualified. At each annual meeting of stockholders, directors elected
to succeed those directors whose terms expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders after
their election or for such shorter period of time as the Board of Directors may
determine, with each director to hold office until his or her successor shall
have been duly elected and qualified.
The names
of the individuals who will serve as directors of the Corporation until their
successors are elected and qualify are as follows:
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Class
I Directors:
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Term
to Expire in
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Dean
H. Hess
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2011
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John
C. Williams
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2011
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Harmon
B. Deal, III
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2011
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Class II
Directors:
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Term
to Expire in
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John
L. Eyth
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2012
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Richard
A. Foss
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2012
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John
M. Buchanan
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2012
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Class III
Directors:
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Term
to Expire in
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Andrew
F. Applebee
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2013
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Emily
J. Osburn
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2013
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Stockholders
shall not be permitted to cumulate their votes in the election of
directors.
C. Vacancies. Any
vacancies in the Board of Directors may be filled in the manner provided in the
Bylaws of the Corporation.
D. Removal. Subject to
the rights of the holders of any series of Preferred Stock then outstanding, any
director, or the entire Board of Directors, may be removed from office at any
time, but only for cause and only by the affirmative vote of the holders of a
majority of the voting power of all of the then-outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of directors
(after giving effect to the provisions of Article 5 hereof) voting together
as a single class.
E.
Stockholder Proposals and
Nominations of Directors. Advance notice of stockholder
nominations for the election of directors and of business to be brought by
stockholders before any meeting of the stockholders of the Corporation shall be
given in the manner provided in the Bylaws of the
Corporation. Stockholder proposals to be presented in connection with
a special meeting of stockholders shall be presented by the Corporation only to
the extent required by Section 2-502 of the MGCL and the Bylaws of the
Corporation.
ARTICLE 8. Bylaws. The
Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws
of the Corporation. Any adoption, amendment or repeal of the Bylaws
of the Corporation by the Board of Directors shall require the approval of a
majority of the Whole Board. The stockholders shall also have power
to adopt, amend or repeal the Bylaws of the Corporation. In addition
to any vote of the holders of any class or series of stock of the Corporation
required by law or by these Articles, the affirmative vote of 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 (after giving effect to the provisions of Article 5 hereof),
voting together as a single class, shall be required for the adoption, amendment
or repeal of any provisions of the Bylaws of the Corporation by the
stockholders.
ARTICLE 9. Evaluation
of Certain Offers. The Board of Directors, when evaluating
(i) any offer of another Person (as defined below) to (A) make a tender or
exchange offer for any equity security of the Corporation, (B) merge or
consolidate the Corporation with another corporation or entity, or (C) purchase
or otherwise acquire all or substantially all of the properties and assets of
the Corporation or (ii) any other actual or proposed transaction that would or
may involve a change in control of the Corporation (whether by purchases of
shares of stock or any other securities of the Corporation in the open market or
otherwise, tender offer, merger, consolidation, share exchange, dissolution,
liquidation, sale of all or substantially all of the assets of the Corporation,
proxy solicitation or otherwise), may, in connection with the exercise of its
business judgment in determining what is in the best interests of the
Corporation and its stockholders and in making any recommendation to the
Corporation’s stockholders, give due consideration to all relevant factors,
including, but not limited to: (A) the economic effect, both immediate and
long-term, upon the Corporation’s stockholders, including stockholders, if any,
who do not participate in the transaction; (B) the social and economic effect on
the present and future employees, creditors and customers of, and others dealing
with, the Corporation and its subsidiaries and on the communities in which the
Corporation and its subsidiaries operate or are located; (C) whether the
proposal is acceptable based on the historical, current or projected future
operating results or financial condition of the Corporation; (D) whether a more
favorable price could be obtained for the Corporation’s stock or other
securities in the future; (E) the reputation and business practices of the other
entity to be involved in the transaction and its management and affiliates as
they would affect the employees of the Corporation and its subsidiaries; (F) the
future value of the stock or any other securities of the Corporation or the
other entity to be involved in the proposed transaction; (G) any antitrust or
other legal and regulatory issues that are raised by the proposal; (H) the
business and historical, current or expected future financial condition or
operating results of the other entity to be involved in the transaction,
including, but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection with the
proposed transaction, and other likely financial obligations of the other entity
to be involved in the proposed transaction; and (I) the ability of the
Corporation to fulfill its objectives as a financial institution holding company
and on the ability of its subsidiary financial institution(s) to fulfill the
objectives of a federally insured financial institution under applicable
statutes and regulations. If the Board of Directors determines that
any proposed transaction of the type described in clause (i) or (ii) of the
immediately preceding sentence should be rejected, it may take any lawful action
to defeat such transaction, including, but not limited to, any or all of the
following: advising stockholders not to accept the proposal; instituting
litigation against the party making the proposal; filing complaints with
governmental and regulatory authorities; acquiring the stock or any of the
securities of the Corporation; selling or otherwise issuing authorized but
unissued stock or other securities or granting options or rights with respect
thereto; and obtaining a more favorable offer from another individual or
entity. This Article 9 does not create any implication
concerning factors that may be considered by the Board of Directors regarding
any proposed transaction of the type described in clause (i) or (ii) of the
first sentence of this Article 9.
For
purposes of this Article 9, a “Person” shall include an individual, a group
acting in concert, a corporation, a partnership, an association, a joint
venture, a pool, a joint stock company, a trust, an unincorporated organization
or similar company, a syndicate or any other group or entity formed for the
purpose of acquiring, holding or disposing of securities.
ARTICLE 10. Indemnification,
etc. of Directors and Officers
A. Indemnification. The
Corporation shall indemnify (1) its current and former directors and officers,
whether serving the Corporation or at its request any other entity, to the
fullest extent required or permitted by the MGCL now or hereafter in force,
including the advancement of expenses under the procedures and to the fullest
extent permitted by law, and (2) other employees and agents to such extent
as shall be authorized by the Board of Directors and permitted by law; provided,
however, that, except as provided in Section B of this Article 10 with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation.
B. Procedure. If a
claim under Section A of this Article 10 is not paid in full by the
Corporation within sixty (60) days after a written claim has been received by
the Corporation, except in the case of a claim for an advancement of expenses,
in which case the applicable period shall be twenty (20) days, the indemnitee
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall also be
entitled to be reimbursed the expense of prosecuting or defending such
suit. It shall be a defense to any action for advancement of expenses
that the Corporation has not received both (i) an undertaking as required by law
to repay such advances in the event it shall ultimately be determined that the
standard of conduct has not been met, and (ii) a written affirmation by the
indemnitee of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met. In (i) any suit
brought by the indemnitee to enforce a right to indemnification hereunder (but
not in a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) any suit by the Corporation
to recover an advancement of expenses pursuant to the terms of an undertaking
the Corporation shall be entitled to recover such expenses upon a final
adjudication that, the indemnitee has not met the applicable standard for
indemnification set forth in the MGCL. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the MGCL, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In
any suit brought by the indemnitee to enforce a right to indemnification or to
an advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article 10 or otherwise shall be on the
Corporation.
C. Non-Exclusivity. The
rights to indemnification and to the advancement of expenses conferred in this
Article 10 shall not be exclusive of any other right that any Person may
have or hereafter acquire under any statute, these Articles, the Corporation’s
Bylaws, any agreement, any vote of stockholders or the Board of Directors, or
otherwise.
D. Insurance. The
Corporation may maintain insurance, at its expense, to insure itself and any
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such Person against such expense, liability or loss under the
MGCL.
E. Miscellaneous. The
Corporation shall not be liable for any payment under this Article 10 in
connection with a claim made by any indemnitee to the extent such indemnitee has
otherwise actually received payment under any insurance policy, agreement, or
otherwise, of the amounts otherwise indemnifiable hereunder. The
rights to indemnification and to the advancement of expenses conferred in
Sections A and B of this Article 10 shall be contract rights and such
rights shall continue as to an indemnitee who has ceased to be a director or
officer and shall inure to the benefit of the indemnitee’s heirs, executors and
administrators.
F. Limitations Imposed by Federal
Law. Notwithstanding any other provision set forth in this
Article 10, in no event shall any payments made by the Corporation pursuant to
this Article 10 exceed the amount permissible under applicable federal
law.
Any
repeal or modification of this Article 10 shall not in any way diminish any
rights to indemnification or advancement of expenses of such director or officer
or the obligations of the Corporation arising hereunder with respect to events
occurring, or claims made, while this Article 10 is in force.
ARTICLE 11. Limitation
of Liability. An officer or director of the Corporation, as
such, shall not be liable to the Corporation or its stockholders for money
damages, except (A) to the extent that it is proved that the Person
actually received an improper benefit or profit in money, property or services,
for the amount of the benefit or profit in money, property or services actually
received; or (B) to the extent that a judgment or other final adjudication
adverse to the Person is entered in a proceeding based on a finding in the
proceeding that the Person’s action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding; or (C) to the extent otherwise provided by the
MGCL. If the MGCL is amended to further eliminate or limit the
personal liability of officers and directors, then the liability of officers and
directors of the Corporation shall be eliminated or limited to the fullest
extent permitted by the MGCL, as so amended.
Any
repeal or modification of the foregoing paragraph by the stockholders of the
Corporation shall not adversely affect any right or protection of a director or
officer of the Corporation existing at the time of such repeal or
modification.
ARTICLE 12. Amendment
of the Articles of Incorporation. The Corporation reserves the
right to amend or repeal any provision contained in these Articles in the manner
prescribed by the MGCL, including any amendment altering the terms or contract
rights, as expressly set forth in these Articles, of any of the Corporation’s
outstanding stock by classification, reclassification or otherwise, and no
stockholder approval shall be required if the approval of stockholders is not
required for the proposed amendment or repeal by the MGCL, and all rights
conferred upon stockholders are granted subject to this
reservation.
The Board
of Directors, pursuant to a resolution approved by a majority of the Whole Board
(rounded up to the nearest whole number), and without action by the
stockholders, may amend these Articles to increase or decrease the aggregate
number of shares of stock or the number of shares of stock of any class or
series that the Corporation has authority to issue.
No
proposed amendment or repeal of any provision of these Articles shall be
submitted to a stockholder vote unless the Board of Directors shall have (1)
approved the proposed amendment or repeal, (2) determined that it is advisable,
and (3) directed that it be submitted for consideration at either an annual or
special meeting of the stockholders pursuant to a resolution approved by the
Board of Directors. Any proposed amendment or repeal of any provision of these
Articles may be abandoned by the Board of Directors at any time before its
effective time upon the adoption of a resolution approved by a majority of the
Whole Board (rounded up to the nearest whole number).
The
amendment or repeal of any provision of these Articles shall be approved by at
least two-thirds of all votes entitled to be cast by the holders of shares of
capital stock of the Corporation entitled to vote on the matter (after giving
due effect to the provisions of Article 5 of these Articles), except that the
proposed amendment or repeal of any provision of these Articles need only be
approved by the vote of a majority of all the votes entitled to be cast by the
holders of shares of capital stock of the Corporation entitled to vote on the
matter (after giving due effect to the provisions of Article 5 of these
Articles) if the amendment or repeal of such provision is approved by the Board
of Directors pursuant to a resolution approved by at least two-thirds of the
Whole Board (rounded up to the nearest whole number).
Notwithstanding
any other provision of these Articles or any provision of law that might
otherwise permit a lesser vote or no vote, but in addition to any vote of the
holders of any class or series of the stock of the Corporation required by law
or by these Articles, the affirmative vote of 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 (after
giving effect to the provisions of Article 5), voting together as a single
class, shall be required to amend or repeal this Article 12,
Section C, D, E or F of Article 5, Article 7, Article 8,
Article 9, Article 10 or Article 11.
ARTICLE 13. Name and
Address of Incorporator. The name and mailing address of the sole
incorporator are as follows:
Alan
Schick
5335
Wisconsin Ave., N.W. Suite 780
Washington,
D.C. 20015
I, THE
UNDERSIGNED, being the incorporator, for the purpose of forming a corporation
under the laws of the State of Maryland, do make, file and record this Charter,
do certify that the facts herein stated are true, and, accordingly, have hereto
set my hand this 10th day of May,
2010.
|
/s/ Alan Schick |
|
|
Alan
Schick, Incorporator
|
|
12
EX-23.2
3
ex23-2.htm
EXHIBIT 23.2
ex23-2.htm
Consent
of Independent Registered Public Accounting Firm
Audit
Committee and Board of Directors
Jacksonville
Bancorp, Inc.
Jacksonville,
Illinois
We hereby
consent to the use in this Registration Statement on Form S-1 and the
Application for Conversion on Form AC of our report dated March 12, 2010,
relating to the financial statements of Jacksonville Bancorp, Inc. and to the
reference to our Firm under the caption “Experts” in the
Prospectus.
/s/ BKD, llp
Decatur,
Illinois
May 10, 2010
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