SUPERIOR BANCORP
As filed with the Securities and Exchange Commission on
May 25, 2007
Registration
No. 333-142533
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Amendment No. 1
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
SUPERIOR BANCORP
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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6711
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63-1201350
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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17 North 20th Street
Birmingham, Alabama 35203
(205) 327-1400
(Address, including Zip Code,
and Telephone Number, including Area Code, of
Registrants Principal
Executive Offices)
C. Stanley Bailey
Chairman and Chief Executive Officer
Superior Bancorp
17 North 20th Street
Birmingham, Alabama 35203
(205) 327-1400
(Name, Address, including Zip
Code, and Telephone Number, including Area Code,
of Agent for Service)
Copies to:
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ROBERT E. LEE GARNER
KIMBERLY L. HAGER
Haskell Slaughter Young & Rediker, LLC
1400 Park Place Tower
2001 Park Place North
Birmingham, Alabama 35203
(205) 251-1000
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WILLIAM H. CAUGHRAN
General Counsel
Superior Bancorp
17 North
20th Street
Birmingham, Alabama 35203
(205) 327-1400
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after the
effective date of this Registration Statement.
If the securities being registered on this Form are to be
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following box. o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
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
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further Amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the SEC, acting
pursuant to said Section 8(a), may determine.
Proxy
Statement of
Peoples Community
Bancshares, Inc.
Prospectus
of
Superior Bancorp
PROPOSED
MERGER YOUR VOTE IS VERY IMPORTANT
The board of directors of Peoples Community Bancshares,
Inc. has unanimously approved a transaction that will result in
the merger of Peoples Community Bancshares with and into
Superior Bancorp. The stockholders of Peoples Community
Bancshares are being asked to approve the merger at special
meeting of the stockholders of Peoples Community
Bancshares.
If we complete the merger, Peoples Community Bancshares
stockholders will be entitled to receive 2.9036 shares of
Superior Bancorp common stock for each share of Peoples
Community Bancshares common stock they own, subject to reduction
if Peoples Community Bancshares does not have a net worth,
as defined in the merger agreement, of at least $25,959,000 at
the effective time of the merger.
We expect that the merger will qualify as a reorganization under
the Internal Revenue Code, in which case Peoples Community
Bancshares stockholders will not recognize gain or loss for
federal income tax purposes upon the exchange of their shares of
Peoples Community Bancshares common stock for shares of
Superior Bancorp common stock. You should carefully read the
description of material federal tax consequences beginning on
page 54 of this prospectus/proxy statement and consult your
own tax advisor.
We cannot complete the merger unless the stockholders of
Peoples Community Bancshares approve the merger agreement.
The board of directors of Peoples Community Bancshares
unanimously recommends that you vote FOR the
merger agreement and the merger.
Peoples Community Bancshares will hold a special meeting
of its stockholders to approve the merger. The place, date and
time of the special meeting are as follows:
Peoples Community Bancshares, Inc.
25 South Links Avenue
Sarasota, Florida 34236
July 3, 2007
6:00 p.m.
Superior Bancorp common stock is quoted on the NASDAQ Global
Market under the ticker symbol SUPR.
YOUR VOTE IS IMPORTANT. Please take the time to vote on the
proposals by completing and mailing the enclosed proxy card,
even if you plan to attend the stockholders meeting.
This prospectus/proxy statement provides you with detailed
information about the proposed merger. In addition, you may
obtain information about Superior Bancorp from documents that
Superior Bancorp has filed with the Securities and Exchange
Commission. We encourage you to read this entire document
carefully. You should also consider carefully the risk factors
we describe beginning on page 23 of this prospectus/proxy
statement.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus/proxy statement is
truthful or complete. Any representation to the contrary is a
criminal offense. Shares of Superior Bancorp common stock are
not bank accounts or deposits, are not federally insured by the
FDIC and are not insured by any other state or federal
agency.
This prospectus/proxy statement is dated May 25, 2007, and
is first being mailed to the stockholders of Peoples
Community Bancshares on or about May 29, 2007.
PROSPECTUS/PROXY STATEMENT
This prospectus/proxy statement incorporates by reference
important business and financial information about Superior
Bancorp from documents that are not included in or delivered
with this document. This information is available to you without
charge upon your written or oral request. You can obtain
documents incorporated by reference in this document, other than
certain exhibits to those documents, by requesting them in
writing or by telephone from the appropriate company at the
following address:
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Superior Bancorp
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Peoples Community
Bancshares, Inc.
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17 North 20th Street
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25 South Links Avenue
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Birmingham, Alabama 35203
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Sarasota, Florida 34236
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(205)
327-1400
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(941) 365-5934
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Attention: Carol Murcks
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Attention: Denise Hagman
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Superior Bancorp files quarterly and annual reports with the
Securities and Exchange Commission. You can obtain free copies
of this information through the SEC website at www.sec.gov or
through Superior Bancorps website at www.superiorbank.com.
Stockholders requesting documents should do so by June 19,
2007, in order to receive them before the special
meeting. For additional information about
Superior Bancorp and Peoples Community Bancshares, see
Where You Can Find More Information beginning on
page 74.
You should rely only on information provided in this
prospectus/proxy statement. Neither Superior Bancorp nor
Peoples Community Bancshares has authorized anyone else to
provide you with different information. The information in this
prospectus/proxy statement about Superior Bancorp and its
subsidiaries has been supplied by Superior Bancorp, and the
information in this prospectus/proxy statement about
Peoples Community Bancshares and Peoples Community
Bank of the West Coast has been supplied by Peoples
Community Bancshares. Although neither Superior Bancorp nor
Peoples Community Bancshares has actual knowledge that
would indicate that any statement or information (including
financial statements) relating to the other party contained
herein are inaccurate or incomplete, neither Superior Bancorp
nor Peoples Community Bancshares warrants the accuracy or
completeness of such statements or information as they relate to
any other party. Superior Bancorp is not making an offer of
these securities in any state or jurisdiction where the offer is
not permitted. Neither Superior Bancorp nor Peoples
Community Bancshares is soliciting proxies in any state where
the solicitation of proxies is not permitted.
PEOPLES
COMMUNITY BANCSHARES INC.
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
to be held July 3,
2007
6:00 p.m.
25 South Links
Avenue
Sarasota, Florida
34236
NOTICE IS HEREBY GIVEN THAT Peoples Community Bancshares,
Inc. will hold a special meeting of stockholders on Tuesday,
July 3, 2007, at 6:00 p.m. at its principal executive
offices located at 25 South Links Avenue, Sarasota, Florida
34236 for the following purposes:
1. Merger. To consider and vote on
the approval of the Agreement and Plan of Merger, dated as of
January 18, 2007, under which Peoples Community
Bancshares will merge with and into Superior Bancorp, a
Delaware-chartered thrift holding company headquartered in
Birmingham, Alabama. The merger agreement, which describes the
merger in more detail, is included in the accompanying
prospectus/proxy statement as Annex A.
2. Adjournment. To consider and
vote on the adjournment of the special meeting to solicit
additional proxies if there are insufficient votes to approve
proposal 1.
Only stockholders of record at the close of business on
May 25, 2007 will be entitled to notice of and to vote at
the Peoples Community Bancshares special meeting or any
adjournments or postponements thereof. The approval of the
merger agreement and the merger requires the approval of the
holders of a majority of the shares of the Peoples
Community Bancshares common stock outstanding and entitled to
vote at the meeting.
Stockholders of Peoples Community Bancshares have a right
to dissent from the proposed merger and obtain payment in cash
of the appraised or fair value of their shares of Peoples
Community Bancshares common stock by complying with the
applicable provisions of Florida law. The full text of
Sections 607.1301 through 607.1320 of the Florida Statutes,
which describes the procedures to be followed by stockholders
who choose to dissent under Florida law, is included as
Annex B to the prospectus/proxy statement and should be
read carefully.
The board of directors of Peoples Community Bancshares
unanimously recommends that holders of Peoples Community
Bancshares common stock vote FOR the
proposals listed above.
It is important that your shares be represented at the
special meeting regardless of the number of shares you own. Even
if you plan to attend the special meeting, we urge you to
complete, sign and date the enclosed proxy card and return it in
the envelope provided as promptly as possible. If you attend the
special meeting, you may vote either in person or by proxy. You
may revoke any proxy you give at any time before its exercise in
the manner described in the prospectus/proxy statement.
BY ORDER OF THE BOARD OF DIRECTORS,
Neil D. McCurry, Jr.
Chairman, Chief Executive Officer and President
May 25, 2007
Sarasota, Florida
DO NOT SEND STOCK CERTIFICATES WITH YOUR PROXY CARD.
TABLE OF
CONTENTS
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QUESTIONS
AND ANSWERS ABOUT THE MERGER
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Q: |
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What is Peoples Community Bancshares proposing at the
special meeting? |
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At the special meeting, the stockholders of Peoples
Community Bancshares will be asked to approve the merger of
Peoples Community Bancshares into Superior Bancorp
pursuant to the Agreement and Plan of Merger dated
January 18, 2007, between Superior Bancorp and
Peoples Community Bancshares. If sufficient votes to
approve the merger and the merger agreement are not received at
the special meeting, the adjournment of the special meeting to
solicit additional proxies will also be considered. |
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What should I do now? |
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After carefully reviewing this document, please indicate on your
proxy card how you want to vote and sign and date your proxy
card. Mail your signed proxy card in the enclosed return
envelope as soon as possible to ensure that your shares are
represented at the special meeting. |
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If you sign, date and send in your proxy and do not indicate how
you want to vote, your proxy will be voted in favor of the
merger agreement and the merger and adjournment. If you do not
sign and send in your proxy and if you do not attend and cast
your vote in person at the special meeting, it will have the
same effect as a vote against the merger agreement and the
merger and adjournment. |
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What vote is required to approve the merger? |
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Approval of the merger agreement and the merger requires the
affirmative vote of a majority of the outstanding shares of the
Peoples Community Bancshares common stock. |
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What does the Peoples Community Bancshares board of
directors recommend? |
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The board of directors of Peoples Community Bancshares has
unanimously approved and adopted the merger agreement and the
merger. Accordingly, the board of directors of Peoples
Community Bancshares unanimously recommends that its
stockholders vote FOR approval of the
merger agreement and the merger and the adjournment of the
special meeting, if necessary. |
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What will Peoples Community Bancshares stockholders
receive in the merger? |
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Peoples Community Bancshares stockholders will receive
2.9036 shares of Superior Bancorp common stock for each
share of Peoples Community Bancshares common stock they
own, subject to adjustment as provided in the merger agreement. |
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What happens to options previously granted by Peoples
Community Bancshares with respect to the merger? |
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All outstanding Peoples Community Bancshares options will
be cancelled and option holders will receive cash in exchange
for each option equal to (1) the
ten-day
average closing price of Superior Bancorp common stock
immediately preceding the effective date multiplied by the
exchange ratio, less (2) the exercise price of such option.
It is a condition to the closing of the merger that each holder
of a Peoples Community Bancshares option shall have
executed an agreement to cancel such option as of the effective
date of the merger and receive cash in exchange therefor. See
The Merger The Merger Agreement
Treatment of Peoples Community Bancshares Stock
Options on page 41. |
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Will Peoples Community Bancshares stockholders be able
to trade Superior Bancorp common stock they receive pursuant to
the merger? |
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Yes. Superior Bancorp common stock issued pursuant to the merger
will be registered under the Securities Act of 1933 and will be
listed on the NASDAQ Global Market under the ticker symbol
SUPR. All shares of Superior Bancorp common stock
that you receive pursuant to the merger will generally be freely
transferable unless you are deemed an affiliate of Peoples
Community Bancshares at the time of the merger. Affiliates of
Peoples Community Bancshares may, however, be able to
freely sell the shares they receive pursuant to the merger,
subject to the terms of any
lock-up
agreement and any applicable securities regulations. See
The Merger Resale of Superior Bancorp Common
Stock by Affiliates on page 56. |
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Can I change my vote after I have mailed my signed proxy
card? |
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Yes. You can change your vote at any time before your proxy is
voted at the special meeting. You can do this in one of three
ways. First, you can send a written notice stating that you
would like to revoke your proxy. Second, you can complete and
submit a new proxy card. If you choose either of these two
methods, you must submit your notice of revocation or your new
proxy card to Peoples Community Bancshares at the address
below, before the special meeting. Third, you can attend the
special meeting and vote in person. Simply attending the
meeting, however, will not revoke your proxy. |
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Should I send in my stock certificates now? |
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No. After the merger is completed, Superior Bancorp will
send you written instructions on exchanging your Peoples
Community Bancshares stock certificates for Superior Bancorp
stock certificates. |
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When do you expect the merger to be completed? |
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We expect to complete the merger in the third quarter of 2007.
However, we cannot assure you when or if the merger will occur.
We must first obtain the approvals of the stockholders of
Peoples Community Bancshares and the necessary regulatory
approvals, and various conditions specified in the merger
agreement must be satisfied or waived. |
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Who can help answer my questions? |
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If you have more questions about the merger or the special
meeting or if you need additional copies of this
prospectus/proxy statement, you should contact: |
Peoples Community Bancshares, Inc.
25 South Links Avenue
Sarasota, Florida 34236
Attention: Denise Hagman
Telephone:
(941) 365-5934
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SUMMARY
OF PROSPECTUS/PROXY STATEMENT
This summary highlights selected information from this
prospectus/proxy statement and may not contain all of the
information that is important to you. For a more complete
understanding of this merger and for a more complete description
of the legal terms of the merger agreement, you should carefully
read this entire prospectus/proxy statement and the documents to
which we have referred you. This will help you to understand the
merger and related matters fully and their legal terms.
The
Companies
(See pages 61 and 63)
Superior Bancorp
17 North 20th Street
Birmingham, Alabama 35203
(205) 327-1400
Superior Bancorp is a Delaware-chartered thrift holding company
headquartered in Birmingham, Alabama. Superior Bancorp offers a
broad range of banking and related services through Superior
Bank, its principal subsidiary. Superior Bank is a federal
savings bank with a total of 60 branches in Alabama and Florida.
Superior Bank also has loan production offices in Montgomery,
Alabama and Tallahassee, Florida and operates 19 consumer
finance offices in Northeast Alabama. At March 31, 2007,
Superior Bancorp had assets of approximately
$2.452 billion, loans of approximately $1.675 billion,
deposits of approximately $1.861 billion and
stockholders equity of approximately $279 million.
Superior Bancorp common stock is traded on the NASDAQ Global
Market under the symbol SUPR. Superior Bancorp was
known as The Banc Corporation until May 18, 2006, when its
stockholders approved the change of its corporate name to
Superior Bancorp. As used in this prospectus/proxy statement,
the term Superior Bancorp refers to Superior Bancorp
and its subsidiaries and affiliates, including Superior Bank,
unless the context requires otherwise.
Peoples Community Bancshares, Inc.
25 South Links Avenue
Sarasota, Florida 34236
(941) 365-5934
Peoples Community Bancshares is a Florida bank holding
company, headquartered in Sarasota, Florida. Peoples
Community Bank of the West Coast, a wholly-owned subsidiary of
Peoples Community Bancshares, is a Florida-chartered bank.
Peoples Community Bank has three branches in Sarasota,
Venice and Bradenton, Florida. At March 31, 2007,
Peoples Community Bancshares had assets of approximately
$332 million, loans of approximately $263 million,
deposits of approximately $256 million and
stockholders equity of approximately $27.1 million.
As used in this prospectus/proxy statement, the term
Peoples Community Bancshares refers to
Peoples Community Bancshares and its subsidiaries,
including Peoples Community Bank of the West Coast, unless
the context requires otherwise.
The
Special Meeting
(See page 29)
Peoples Community Bancshares will hold a special meeting
of stockholders on July 3, 2007, at 6:00 p.m., local
time, at its principal executive offices located at
25 South Links Avenue, Sarasota, Florida 34236.
At the special meeting, stockholders will be asked to vote on a
proposal to approve and adopt the merger agreement providing for
the merger of Peoples Community Bancshares with and into
Superior Bancorp, the merger and the adjournment of the special
meeting to solicit additional proxies, if necessary.
1
The
Merger
(See page 31)
If the conditions for completing the merger are satisfied,
Peoples Community Bancshares will merge with and into
Superior Bancorp. Superior Bancorp will be the surviving
corporation and Peoples Community Bancshares will cease to
exist. In connection with the merger, we anticipate that on or
after the effective date of the merger, Superior Bank will
purchase substantially all of the assets of and assume
substantially all of the liabilities of Peoples Community
Bank.
We have attached the merger agreement to this prospectus/proxy
statement as Annex A. The merger agreement is the legal
document that establishes the terms and conditions of the
merger, and you should read the entire merger agreement
carefully.
Board of
Directors of the Surviving Corporation
(See page 50)
After the effective time of the merger, the boards of directors
of Superior Bancorp and its subsidiaries, including Superior
Bank, will consist of those persons serving before the effective
time. At the first board meeting following the effective date of
the merger, Superior Bancorp will elect to its board one
individual who is currently an independent director of
Peoples Community Bancshares or Peoples Community
Bank.
Reasons
for the Merger
(See page 33)
In reaching its decision to approve and adopt the merger
agreement, the board of directors of Superior Bancorp considered
a number of factors as generally supporting its decision,
including the following:
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the high-growth market available in central Florida;
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the growth potential in Florida for a billion-dollar thrift;
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the numerous customer relationships of Peoples Community
Bank in Sarasota and Manatee Counties;
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the expected impact on future earnings of the combined companies;
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the expected impact on stockholder value of the combined
companies;
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the financial terms of recent business combinations in the
financial services industry and a comparison of the multiples of
selected combinations with the terms of the proposed transaction
with Peoples Community Bancshares; and
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the opinion of Sandler ONeill & Partners, L.P.
that the consideration for which shares of Peoples
Community Bancshares common stock will be exchanged in the
merger agreement is fair from a financial point of view to
Superior Bancorp.
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In reaching its decision to approve and adopt the merger
agreement, the board of directors of Peoples Community
Bancshares considered a number of factors as generally
supporting its decision, including the following:
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the value of the consideration to be received by Peoples
Community Bancshares stockholders relative to the value of its
common stock;
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certain information concerning the financial condition, results
of operations and business prospects of Superior Bancorp;
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the financial terms of recent business combinations in the
financial services industry and a comparison of the multiples of
selected combinations with the terms of the proposed transaction
with Superior Bancorp;
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the alternatives to the merger, including remaining an
independent institution;
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the competitive and regulatory environment for financial
institutions generally;
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the fact that the merger will enable Peoples Community
Bancshares stockholders to exchange their shares of common stock
for shares of common stock of a financial institution, the stock
of which is publicly traded on the NASDAQ Global Market, and
that the consideration will be received tax-free; and
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the opinion of Hovde Financial that the consideration for which
shares of Peoples Community Bancshares common stock will
be exchanged in the merger is fair from a financial point of
view.
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Board of
Directors of Peoples Community Bancshares Recommends
Stockholder Approval
The board of directors of Peoples Community Bancshares
believes that the merger is in the best interests of its company
and its stockholders and recommends that stockholders vote
FOR the approval of the merger
agreement and the merger.
Opinion
of Peoples Community Bancshares Financial
Advisor
(See page 34)
Hovde Financial delivered a written opinion to the board of
directors of Peoples Community Bancshares to the effect
that, as of January 18, 2007, and subject to various
conditions and limitations in its opinion, the consideration for
which shares of Peoples Community Bancshares common stock
will be exchanged in the merger is fair from a financial point
of view to Peoples Community Bancshares stockholders.
The opinion is attached to this prospectus/proxy statement as
Annex C. You should read the entire opinion carefully in
connection with your consideration of the merger.
Vote
Required
To approve the merger, a majority of the outstanding shares of
Peoples Community Bancshares common stock entitled to vote
at the special meeting must vote FOR
the merger agreement and the merger. To approve the adjournment
of the special meeting to solicit additional proxies, more of
the shares of Peoples Community Bancshares common stock
voting at the special meeting must vote
FOR the adjournment than vote against
the adjournment.
Peoples
Community Bancshares Stockholders Will Receive Shares of
Superior Bancorp Common Stock
(See page 41)
When the merger is completed, Peoples Community Bancshares
stockholders will have the right to receive 2.9036 shares
of Superior Bancorp common stock in exchange for each share of
Peoples Community Bancshares common stock they own,
subject to the following provisions. In the event that the
actual net worth, as defined in the merger agreement, of
Peoples Community Bancshares is less than $25,959,000 on
the effective date of the merger, then the exchange ratio will
be reduced by a factor equal to the percentage obtained by
dividing (a) the amount by which the net worth of
Peoples Community Bancshares is less than $25,959,000 by
(b) $25,959,000.
Peoples
Community Bancshares Optionholders Will Receive Cash in
Consideration for the Value of Their Options
(See page 41)
At the effective time of the merger, all outstanding options to
purchase Peoples Community Bancshares common stock will be
cancelled and each holder of an option will be entitled to
receive in exchange for each option cash per share equal to the
amount resulting when the number of options held by such a
holder is multiplied by the per option value. The per option
value equals (1) the
ten-day
average closing price of Superior Bancorp common stock
immediately preceding the effective date multiplied by the
exchange ratio, less (2) the exercise price per share of
Peoples Community Bancshares common stock subject to such
option.
It is a condition to the closing of the merger that each holder
of a Peoples Community Bancshares option has entered into
an agreement to surrender his or her option as of the effective
date of the merger in exchange for the consideration described
above.
3
Listing
of Superior Bancorp Common Stock
(See page 54)
Superior Bancorp common stock issued pursuant to the merger will
be registered under the Securities Act of 1933 and will be
listed on the NASDAQ Global Market under the ticker symbol
SUPR. Shares of Superior Bancorp common stock issued
to Peoples Community Bancshares stockholders will be
freely transferable unless the stockholder is an affiliate of
Peoples Community Bancshares at the time of the merger.
Affiliates of Peoples Community Bancshares may, however,
be able to freely sell the shares they receive in the merger
subject to the terms of any
lock-up
agreement and any applicable securities regulations.
Other
Interests of Officers and Directors of Peoples Community
Bancshares in the Merger
(See page 50)
You should be aware that the officers and directors of
Peoples Community Bancshares, who are also stockholders of
Peoples Community Bancshares, have interests in the merger
that are different from or in addition to your interests. These
differing interests include the following:
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|
Superior Bancorp will continue to indemnify Peoples
Community Bancshares and its subsidiaries current
directors and executive officers under the merger agreement, and
Peoples Community Bancshares has agreed to provide these
individuals with extended directors and officers
insurance for a period of four years following the effective
date of the merger;
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Superior Bancorp will elect one independent director of the
current Peoples Community Bancshares board or the current
Peoples Community Bank board to its board of directors at
the first board meeting following the effective date of the
merger;
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Neil D. McCurry, Jr., Rick Halloran, Dorothy S. Barth and
Christopher Pennewill of Peoples Community Bancshares have
entered into employment agreements with Superior Bancorp that
will become effective immediately prior to completion of the
merger;
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Pursuant to their amended Salary Continuation Agreements with
Peoples Community Bancshares, Neil D. McCurry, Jr.,
Rick Halloran, Dorothy S. Barth and Christopher Pennewill will
be paid $1,500,000, $121,500, $201,000 and $72,000,
respectively, on January 8, 2008, if the merger is
completed; and
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Each executive officer and each director of Peoples
Community Bancshares has executed a support agreement to vote
his shares for the merger, not to transfer his shares prior to
the merger, not to exercise any stock options and not to compete
with Superior Bank for a period of two years following the
merger.
|
Share
Ownership of Directors and Executive Officers
(See page 51)
As of March 31, 2007, the directors and executive officers
of Peoples Community Bancshares and Peoples
Community Bank beneficially owned and were entitled to vote
approximately 950,234 shares, or approximately 41.5% of the
outstanding shares, of Peoples Community Bancshares common
stock. These executive officers and directors have agreed in
writing to vote all shares of Peoples Community Bancshares
common stock for which they have voting power in favor of the
merger agreement and the merger.
Conditions
to the Completion of the Merger
(See page 44)
In order to complete the merger, Superior Bancorp and
Peoples Community Bancshares must satisfy a number of
mutual conditions, including the following:
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|
|
the merger agreement and the merger will have been approved by
the Peoples Community Bancshares stockholders;
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4
|
|
|
|
|
all necessary regulatory approvals and consents will have been
received from the Office of Thrift Supervision, the SEC and
other regulatory agencies and for any contract and permit
required for the consummation of the merger;
|
|
|
|
no court or governmental agency will have enacted, issued or
enforced any law or order or taken any other action to prohibit
or restrict the merger;
|
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|
|
all other consents will have been obtained that are required for
consummation of the merger for the prevention of a default under
any contract or permit which, if not obtained, is reasonably
likely to have a material adverse effect on the party subject to
the contract or permit;
|
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|
the registration statement of which this prospectus/proxy
statement is a part will have been declared effective by the SEC
and will not be subject to a stop order, and no other
proceedings will be threatened or pending by any state or
federal agency; and
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Superior Bancorp and Peoples Community Bancshares will
each have received an opinion of Haskell Slaughter
Young & Rediker, LLC, regarding the tax consequences
of the merger.
|
The obligation of Superior Bancorp to complete the merger is
subject to the satisfaction or waiver of the following
conditions, among others:
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|
|
all representations and warranties of Peoples Community
Bancshares will be true and correct in all material respects;
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|
|
Peoples Community Bancshares will have performed in all
material respects all agreements and covenants required by the
merger agreement to be performed by Peoples Community
Bancshares;
|
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|
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Peoples Community Bancshares will have a net worth, as
defined in the merger agreement, of not less than $25,959,000;
|
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Peoples Community Bancshares will have provided certain
closing certificates with respect to the merger and the
financial and regulatory condition of Peoples Community
Bancshares and its subsidiaries;
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Peoples Community Bancshares legal counsel,
Igler & Dougherty, P.A., will have provided an opinion
to Superior Bancorp as required by the merger agreement;
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Peoples Community Bancshares will have used its best
efforts to obtain an agreement from each director, executive
officer and affiliate of Peoples Community Bancshares,
regarding the sale and disposition of each such persons
stock;
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|
|
the number of shares as to which Peoples Community
Bancshares stockholders have exercised dissenters rights
of appraisal will not exceed 10% of the outstanding shares of
Peoples Community Bancshares;
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Superior Bancorp will have received a letter from Sandler
ONeill & Partners, L.P. confirming its opinion
prior to the date of the merger agreement that the exchange
ratio is fair to the stockholders of Superior Bancorp from a
financial point of view;
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the board of directors of Superior Bancorp will not have made a
determination that the merger has become impractical because of
any state of war, declaration of a banking moratorium or a
general suspension of trading of Superior Bancorp common stock
on the NASDAQ Global Market;
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|
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each of the officers and directors of Peoples Community
Bancshares will have delivered a letter to Superior Bancorp to
the effect that he or she is not aware of any claims he or she
may have against Peoples Community Bancshares;
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Peoples Community Bancshares will have paid off in full
and terminated, without penalty or cost to Superior Bancorp or
Peoples Community Bancshares, the Peoples Community
Bancshares line of credit, and all liens and collateral
for such line of credit will have been released in full;
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Superior Bancorp will not be required to make any payment to any
person in connection with the merger which in the reasonable
opinion of Superior Bancorp will be subject to the excise tax
imposed on excess
|
5
terminate the merger agreement even after the stockholders of
Peoples Community Bancshares approve the merger if any of
the following occurs:
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the other party is in material breach of its representations or
warranties under the merger agreement, the breach has not been
or cannot be cured within 30 days after notice of the
breach, and the breach would provide the non-breaching party the
ability to refuse to consummate the merger;
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the other party is in material breach of any of its covenants or
other agreements under the merger agreement, and as a result of
such breach, one of the conditions to the merger cannot be
satisfied or cured within 30 days after notice of the
breach; or
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the merger is not completed by December 31, 2007.
|
Peoples Community Bancshares may terminate the merger
agreement in any of the following events:
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|
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|
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if before the approval of the merger agreement by the
stockholders of Peoples Community Bancshares, the board of
directors of Peoples Community Bancshares has
(1) withdrawn or modified or changed its recommendation or
approval of the merger agreement and the merger consideration in
a manner adverse to Superior Bancorp to approve and permit
Peoples Community Bancshares to accept a superior
proposal, and (2) determined after consideration of written
advice of Peoples Community Bancshares legal counsel
that the termination of the merger agreement is necessary to
comply with the boards fiduciary duties under applicable
laws; provided, however, that at least two business days before
any such termination Peoples Community Bancshares will
negotiate with Superior Bancorp to amend the merger agreement to
enable Peoples Community Bancshares to proceed with the
merger (the Fiduciary Duty Termination
Rights); or
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if its board of directors determines by majority vote that at
any time during the five-business-day period commencing on the
date that all regulatory approvals and consents are received
(the determination date) that, on the determination date,
(1) the
ten-day
average closing price of Superior Bancorp common stock is less
than $9.56 and (2) the number obtained by dividing the
ten-day
average closing price of Superior Bancorp on the determination
date by $11.25 is less than the Bank Index Ratio minus 0.15. The
Bank Index Ratio is equal to the quotient obtained by dividing
the ten-day
average of the NASDAQ Bank Index as reported on NASDAQ
immediately preceding the determination date by 3,386.64.
Peoples Community Bancshares must give Superior Bancorp
notice of its election to terminate and Superior Bancorp will
have the option to pay additional consideration in stock, cash
or a combination of both so that the aggregate consideration
will be valued at the lesser of (1) the product obtained by
multiplying (A) the product of 0.85 and $11.25 by
(B) the exchange ratio and (2) the product obtained by
multiplying (A) the product of the Bank Index Ratio and
$11.25 by (B) the exchange ratio. If Superior Bancorp
elects to pay such additional consideration within the
five-day
period, the merger agreement will not terminate.
|
Superior Bancorp may terminate the merger agreement in any of
the following events (the Superior Bancorp Termination
Rights):
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the board of directors of Peoples Community Bancshares
fails to reaffirm its approval of the merger upon Superior
Bancorps request or resolves not to reaffirm its approval
of the merger;
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the board of directors of Peoples Community Bancshares
does not include in its proxy statement its recommendation,
without modification or qualification, that Peoples
Community Bancshares stockholders approve the merger or
withdraws, qualifies or modifies, or proposes publicly to
withdraw, qualify or modify, in any manner adverse to Superior
Bancorp, its recommendation to Peoples Community
Bancshares stockholders to approve the merger;
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the board of directors of Peoples Community Bancshares
affirms, recommends or authorizes entering into any business
combination other than the merger or the board of Peoples
Community Bancshares does not recommend against any tender or
exchange offer or takes no position with respect to any tender
or exchange offer within ten business days of commencement of a
tender or exchange offer; or
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the board of directors of Peoples Community Bancshares
negotiates or authorizes any negotiations with a third party
regarding a proposal other than the merger.
|
7
MARKET
PRICE AND DIVIDEND INFORMATION
Superior Bancorp common stock currently trades on the NASDAQ
Global Market under the ticker symbol SUPR. Superior
Bancorp common stock traded on the NASDAQ Global Market under
the ticker symbol TBNC through May 18, 2006. As
of April 30, 2007, there were approximately 3,108 record
holders of Superior Bancorp common stock. The following table
sets forth, for the calendar periods indicated, the range of
high and low reported sales prices:
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High
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Low
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2005
|
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First Quarter
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$
|
11.25
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$
|
8.00
|
|
Second Quarter
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10.85
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|
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|
9.25
|
|
Third Quarter
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10.91
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|
|
|
10.34
|
|
Fourth Quarter
|
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12.00
|
|
|
|
10.49
|
|
2006
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
11.94
|
|
|
$
|
10.70
|
|
Second Quarter
|
|
|
11.87
|
|
|
|
10.71
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|
Third Quarter
|
|
|
11.93
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|
|
|
10.54
|
|
Fourth Quarter
|
|
|
11.89
|
|
|
|
10.39
|
|
2007
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
11.87
|
|
|
$
|
10.57
|
|
Second Quarter (through
May 24, 2007)
|
|
|
10.99
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|
|
|
9.80
|
|
On January 18, 2007, the closing price for Superior Bancorp
common stock before the public announcement of the merger was
$11.02 per share. On May 24, 2007, the closing price
for Superior Bancorp common stock was $10.05 per share.
Peoples Community Bancshares common stock is not listed
for quotation on any stock exchange. As of March 31, 2007,
there were approximately 420 record holders of
Peoples Community Bancshares common stock. There is no
active market for Peoples Community Bancshares common
stock, although management generally is aware of transactions in
its common stock. The range of prices per share of Peoples
Community Bancshares common stock involved in such transactions
during 2005 and 2006 was between $13.50 and $24.00. The last
private trade of Peoples Community Bancshares common stock
that management is aware of was at $24.00 per share in
March 2007.
Dividends
Holders of Superior Bancorp common stock are entitled to receive
dividends when, as and if declared by its board of directors.
Superior Bancorp derives cash available to pay dividends
primarily, if not entirely, from dividends paid to Superior
Bancorp by its subsidiaries. There are certain restrictions that
limit Superior Banks ability to pay dividends to Superior
Bancorp and, in turn, Superior Bancorps ability to pay
dividends to its stockholders. Superior Bancorps ability
to pay dividends will depend on its earnings and financial
condition, liquidity and capital requirements, the general
economic and regulatory climate, its ability to service any
equity or debt obligations senior to Superior Bancorp common
stock and other factors deemed relevant by its board of
directors. Superior Bancorp does not currently pay dividends on
its common stock, but expects to evaluate its common stock
dividend policy from time to time as circumstances indicate,
subject to applicable regulatory restrictions.
Although thrift holding companies are not currently subject to
specific capital requirements or specific restrictions on the
payment of dividends or other capital distributions, federal
regulations prescribe such restrictions on subsidiary savings
institutions, as described below. Superior Bank must notify the
Office of Thrift Supervision 30 days before declaring
any dividend to Superior Bancorp. In addition, the financial
impact of a holding company on its subsidiary institution is a
matter that is evaluated by the Office of Thrift Supervision,
and the Office
9
of Thrift Supervision has authority to order cessation of
activities or divestiture of subsidiaries deemed to pose a
threat to the safety and soundness of the institution.
Superior Bancorp paid dividends on its preferred stock
aggregating $4.92 per preferred share in 2005. All preferred
stock of Superior Bancorp was converted into Superior Bancorp
common stock effective July 1, 2005.
Holders of Peoples Community Bancshares common stock are
entitled to receive dividends when, as and if declared by the
board of directors. Peoples Community Bancshares funds
that are available to pay dividends come from dividends it
receives from Peoples Community Bank. There are certain
restrictions that limit Peoples Community Banks
ability to pay dividends to Peoples Community Bancshares
under Florida law and, in turn, Peoples Community
Bancshares ability to pay dividends to its stockholders.
Peoples Community Bancshares ability to pay
dividends depends on its earnings and financial condition,
liquidity and capital requirements, and other factors deemed
relevant by its board of directors. The most recent dividends
paid by Peoples Community Bancshares were $0.10 per
share in each of June 2006 and May 2007.
10
COMPARATIVE
PER SHARE INFORMATION
The following summary presents selected information about
Superior Bancorps and Peoples Community
Bancshares income per share, book value per share and
dividends per share of common stock, respectively, in comparison
with pro forma information giving effect to the merger. The
selected financial information should be read in conjunction
with the historical consolidated financial statements of
Superior Bancorp, the historical consolidated financial
statements of Peoples Community Bancshares and the related
notes thereto.
The following information is not necessarily indicative of the
combined results of operations or combined financial position
that would have resulted had the merger been consummated at the
beginning of the periods indicated, nor is it necessarily
indicative of the future combined results of operations or
financial position.
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As of and for the
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Three Months
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Ended
|
|
|
Year Ended
|
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|
|
March 31, 2007
|
|
|
December 31, 2006
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Net Income per Common
Share Basic
|
|
|
|
|
|
|
|
|
Superior Bancorp
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
.07
|
|
|
$
|
.21
|
|
Pro Forma Consolidated (unaudited)
|
|
|
.07
|
|
|
|
.24
|
|
Peoples Community Bancshares
|
|
|
|
|
|
|
|
|
Historical (unaudited)
|
|
|
.39
|
|
|
|
1.52
|
|
Pro Forma Equivalent (unaudited)
|
|
|
.20
|
|
|
|
.70
|
|
Net Income per Common
Share Diluted
|
|
|
|
|
|
|
|
|
Superior Bancorp
|
|
|
|
|
|
|
|
|
Historical
|
|
|
.07
|
|
|
$
|
.21
|
|
Pro Forma Consolidated (unaudited)
|
|
|
.07
|
|
|
|
.24
|
|
Peoples Community Bancshares
|
|
|
|
|
|
|
|
|
Historical (unaudited)
|
|
|
.38
|
|
|
|
1.49
|
|
Pro Forma Equivalent (unaudited)
|
|
|
.20
|
|
|
|
.70
|
|
Book Value per Common
Share
|
|
|
|
|
|
|
|
|
Superior Bancorp
|
|
|
|
|
|
|
|
|
Historical (unaudited)
|
|
|
8.04
|
|
|
$
|
7.97
|
|
Pro Forma Consolidated (unaudited)
|
|
|
8.54
|
|
|
|
N/A
|
|
Peoples Community Bancshares
|
|
|
|
|
|
|
|
|
Historical (unaudited)
|
|
|
11.84
|
|
|
|
11.43
|
|
Pro Forma Equivalent (unaudited)
|
|
|
24.80
|
|
|
|
N/A
|
|
Dividends Declared per Common
Share
|
|
|
|
|
|
|
|
|
Peoples Community Bancshares
(unaudited)
|
|
|
|
|
|
|
.10
|
|
Peoples Community Bancshares
Pro Forma Equivalent (unaudited)
|
|
|
|
|
|
|
.03
|
|
11
The following unaudited pro forma condensed consolidated
financial information is based on the historical financial
statements of Superior Bancorp and Peoples Community
Bancshares and has been prepared to illustrate the effects of
the merger of Peoples Community Bancshares with and into
Superior Bancorp. The unaudited pro forma condensed consolidated
statement of financial condition as of March 31, 2007 and
the unaudited pro forma condensed consolidated statements of
income for the three months ended March 31, 2007 and for
the year ended December 31, 2006 give effect to this
merger, accounted for under the purchase method of accounting.
The unaudited pro forma condensed consolidated statement of
income for the three months ended March 31, 2007 has been
derived from the unaudited interim financial statements of
Superior Bancorp and Peoples Community Bancshares included
or incorporated by reference in this prospectus/proxy statement.
The unaudited pro forma condensed consolidated statement of
income for the year ended December 31, 2006 is based on the
audited financial statements of Superior Bancorp and
Peoples Community Bancshares included or incorporated by
reference in this prospectus/proxy statement. These unaudited
pro forma condensed consolidated statements of income give
effect to the transaction as if it had been consummated as of
January 1, 2006. The unaudited pro forma condensed
consolidated financial statements do not give effect to any
anticipated cost savings or revenue enhancements in connection
with the transaction.
The unaudited pro forma condensed consolidated financial
statements should be considered together with the historical
financial statements of Superior Bancorp and Peoples
Community Bancshares, including the respective notes to those
statements, included or incorporated by reference in this
prospectus/proxy statement. The pro forma information is based
on certain assumptions described in the accompanying Note 1
to Unaudited Pro Forma Condensed Consolidated Financial
Information and does not necessarily indicate the consolidated
financial position or the results of operations in the future or
the consolidated financial position or the results of operations
that would have been realized had the merger transaction been
consummated during the period or as of the date for which the
pro forma information is presented.
12
Superior
Bancorp and Subsidiaries
Unaudited
Pro Forma Condensed Consolidated Statement of Financial
Condition
As of
March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Peoples
|
|
|
Pro Forma
|
|
|
|
|
|
|
Superior
|
|
|
Community
|
|
|
Acquisition
|
|
|
Pro Forma
|
|
|
|
Bancorp
|
|
|
Bancshares
|
|
|
Adjustments
|
|
|
Consolidated
|
|
|
|
(In thousands, except per share data)
|
|
|
ASSETS
|
Cash and due from banks
|
|
$
|
47,339
|
|
|
$
|
8,105
|
|
|
$
|
(3,575
|
)(b)
|
|
$
|
51,769
|
|
|
|
|
|
|
|
|
|
|
|
|
(100
|
)(c)
|
|
|
|
|
Interest bearing deposits in other
banks
|
|
|
12,447
|
|
|
|
104
|
|
|
|
|
|
|
|
12,551
|
|
Federal funds sold
|
|
|
14,889
|
|
|
|
1,112
|
|
|
|
|
|
|
|
16,001
|
|
Investment securities
|
|
|
342,837
|
|
|
|
47,125
|
|
|
|
(207
|
)(b)
|
|
|
389,755
|
|
Tax lien certificates
|
|
|
12,188
|
|
|
|
|
|
|
|
|
|
|
|
12,188
|
|
Mortgage loans held for sale
|
|
|
28,059
|
|
|
|
|
|
|
|
|
|
|
|
28,059
|
|
Loans, net of unearned income
|
|
|
1,675,317
|
|
|
|
266,450
|
|
|
|
(2,938
|
)(b)
|
|
|
1,938,829
|
|
Less: Allowance for loan losses
|
|
|
(18,977
|
)
|
|
|
(3,387
|
)
|
|
|
|
|
|
|
(22,364
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
|
1,656,340
|
|
|
|
263,063
|
|
|
|
(2,938
|
)
|
|
|
1,916,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
|
95,689
|
|
|
|
2,358
|
|
|
|
(100
|
)(b)
|
|
|
97,947
|
|
Accrued interest receivable
|
|
|
13,440
|
|
|
|
1,906
|
|
|
|
|
|
|
|
15,346
|
|
Stock in FHLB
|
|
|
13,383
|
|
|
|
2,147
|
|
|
|
|
|
|
|
15,530
|
|
Cash surrender value of life
insurance
|
|
|
40,895
|
|
|
|
3,488
|
|
|
|
|
|
|
|
44,383
|
|
Goodwill and intangible assets
|
|
|
128,743
|
|
|
|
|
|
|
|
7,720
|
(b)
|
|
|
186,059
|
|
|
|
|
|
|
|
|
|
|
|
|
49,596
|
(b)
|
|
|
|
|
Other assets
|
|
|
45,561
|
|
|
|
2,396
|
|
|
|
(1,519
|
)(b)
|
|
|
46,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,451,810
|
|
|
$
|
331,804
|
|
|
$
|
48,877
|
|
|
$
|
2,832,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Deposits
|
|
$
|
1,860,693
|
|
|
$
|
255,654
|
|
|
$
|
(1,755
|
)(b)
|
|
$
|
2,114,592
|
|
Advances from FHLB
|
|
|
200,840
|
|
|
|
35,000
|
|
|
|
(820
|
)(b)
|
|
|
235,020
|
|
Federal funds borrowed and security
repurchase agreements
|
|
|
23,022
|
|
|
|
4,297
|
|
|
|
|
|
|
|
27,319
|
|
Notes payable
|
|
|
5,993
|
|
|
|
4,270
|
|
|
|
|
|
|
|
10,263
|
|
Junior subordinated debentures owed
to unconsolidated subsidiary trusts
|
|
|
43,859
|
|
|
|
4,124
|
|
|
|
(209
|
)(b)
|
|
|
47,774
|
|
Capital lease obligation
|
|
|
3,785
|
|
|
|
|
|
|
|
|
|
|
|
3,785
|
|
Accrued expenses and other
liabilities
|
|
|
35,087
|
|
|
|
1,334
|
|
|
|
4,716
|
(b)
|
|
|
41,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,173,279
|
|
|
|
304,679
|
|
|
|
1,932
|
|
|
|
2,479,890
|
|
Stockholders
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
35
|
|
|
|
23
|
|
|
|
(23
|
)(a)
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
(b)
|
|
|
|
|
Surplus
|
|
|
253,994
|
|
|
|
25,820
|
|
|
|
1,305
|
(a)
|
|
|
328,057
|
|
|
|
|
|
|
|
|
|
|
|
|
47,038
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100
|
)(c)
|
|
|
|
|
Retained earnings
|
|
|
28,234
|
|
|
|
1,462
|
|
|
|
(1,462
|
)(a)
|
|
|
28,234
|
|
Accumulated other comprehensive loss
|
|
|
(1,024
|
)
|
|
|
(180
|
)
|
|
|
180
|
(a)
|
|
|
(1,024
|
)
|
Treasury stock, at cost
|
|
|
(716
|
)
|
|
|
|
|
|
|
|
|
|
|
(716
|
)
|
Unearned ESOP stock
|
|
|
(1,992
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,992
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders
equity
|
|
|
278,531
|
|
|
|
27,125
|
|
|
|
46,945
|
|
|
|
352,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
2,451,810
|
|
|
$
|
331,804
|
|
|
$
|
48,877
|
|
|
$
|
2,832,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of common shares
outstanding
|
|
|
34,658
|
|
|
|
2,291
|
|
|
|
6,652
|
(b)
|
|
|
41,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total book value per common
share
|
|
$
|
8.04
|
|
|
$
|
11.84
|
|
|
|
|
|
|
$
|
8.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value per common
share
|
|
$
|
4.32
|
|
|
$
|
11.84
|
|
|
|
|
|
|
$
|
4.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent pro forma book value
per common share for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Superior common shares exchanged
for Peoples Community
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bancshares common
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
(a) |
|
To eliminate equity of Peoples Community Bancshares. |
|
|
|
(b) |
|
To record issuance of common stock and cash payments to
purchase 100% of Peoples Community Bancshares; to record
assets acquired and liabilities assumed at their estimated fair
market values and related merger and transaction costs. See
Note 1 to Unaudited Proforma Condensed Consolidated
Financial Information for detail.
|
|
|
|
(c) |
|
To record estimated direct costs of issuing common stock
|
|
|
|
|
|
Professional fees
|
|
$
|
50
|
|
Printing costs
|
|
|
50
|
|
|
|
|
|
|
|
|
$
|
100
|
|
|
|
|
|
|
14
Superior
Bancorp and Subsidiaries
Unaudited
Pro Forma Condensed Consolidated Statement of Income
For the
Three Months Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Peoples
|
|
|
Pro Forma
|
|
|
|
|
|
|
Superior
|
|
|
Community
|
|
|
Acquisition
|
|
|
Pro Forma
|
|
|
|
Bancorp
|
|
|
Bancshares
|
|
|
Adjustments
|
|
|
Consolidated
|
|
|
|
(In thousands, except per share data)
|
|
|
Interest income
|
|
$
|
39,744
|
|
|
$
|
5,695
|
|
|
$
|
373
|
(a)
|
|
$
|
45,767
|
|
|
|
|
|
|
|
|
|
|
|
|
(45
|
)(e)
|
|
|
|
|
Interest expense
|
|
|
21,710
|
|
|
|
3,068
|
|
|
|
422
|
(b)
|
|
|
25,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
18,034
|
|
|
|
2,627
|
|
|
|
(94
|
)
|
|
|
20,567
|
|
Provision for loan losses
|
|
|
705
|
|
|
|
103
|
|
|
|
|
|
|
|
808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
17,329
|
|
|
|
2,524
|
|
|
|
(94
|
)
|
|
|
19,759
|
|
Noninterest income
|
|
|
4,086
|
|
|
|
285
|
|
|
|
|
|
|
|
4,371
|
|
Noninterest expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
10,098
|
|
|
|
961
|
|
|
|
|
|
|
|
11,059
|
|
Occupancy, furniture and equipment
expense
|
|
|
3,127
|
|
|
|
256
|
|
|
|
(5
|
)(g)
|
|
|
3,378
|
|
Other operating expenses
|
|
|
4,801
|
|
|
|
182
|
|
|
|
351 (c
|
)
|
|
|
5,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest
expenses
|
|
|
18,026
|
|
|
|
1,399
|
|
|
|
346
|
|
|
|
19,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
3,389
|
|
|
|
1,410
|
|
|
|
(440
|
)
|
|
|
4,359
|
|
Income tax expense
|
|
|
1,091
|
|
|
|
519
|
|
|
|
(163
|
)(d)
|
|
|
1,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,298
|
|
|
$
|
891
|
|
|
$
|
(277
|
)
|
|
$
|
2,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common
share
|
|
$
|
0.07
|
|
|
$
|
0.39
|
|
|
|
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common
share
|
|
$
|
0.07
|
|
|
$
|
0.38
|
|
|
|
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
|
34,438
|
|
|
|
2,291
|
|
|
|
6,652
|
(f)
|
|
|
41,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, assuming dilution
|
|
|
35,038
|
|
|
|
2,337
|
|
|
|
6,652
|
(f)
|
|
|
41,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma equivalent net income
per common share for Superior common shares exchanged for
Peoples Community Bancshares common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
To record amortization of
fair value adjustment of loans and investments over a 3 to
4 year period using straight-line and accelerated methods
which approximate the interest method.
|
|
|
|
(b)
|
|
To record amortization of
fair value adjustment of deposits and borrowings over a 1 to
29 year period using straight-line and accelerated methods
which approximate the interest method.
|
|
|
|
(c)
|
|
To record amortization of
core deposit intangible over a 10 year period using an
accelerated method.
|
|
|
|
|
|
Amortization
|
|
|
|
|
Year 1
|
|
$
|
1,404
|
|
Year 2
|
|
|
1,263
|
|
Year 3
|
|
|
1,123
|
|
Year 4
|
|
|
983
|
|
Year 5
|
|
|
842
|
|
Year 6
|
|
|
702
|
|
Year 7
|
|
|
561
|
|
Year 8
|
|
|
421
|
|
Year 9
|
|
|
281
|
|
Year 10
|
|
|
140
|
|
|
|
|
(d)
|
|
To record the tax
effect of the interest amortization adjustments at a 37%
marginal tax rate.
|
|
|
|
(e)
|
|
Adjust interest income for
loss of earnings due to cash payments at the federal funds rate
of 5%.
|
|
|
|
(f)
|
|
Common stock issued to
acquire Peoples Community Bancshares.
|
|
|
|
(g)
|
|
To record reduction in
depreciation expense related to decrease in carrying value of
equipment and software:
|
15
Superior
Bancorp and Subsidiaries
Unaudited
Pro Forma Condensed Consolidated Statement of Income
For the
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
|
|
|
|
|
|
|
|
|
|
Peoples
|
|
|
Pro Forma
|
|
|
|
|
|
|
Superior
|
|
|
Community
|
|
|
Acquisition
|
|
|
Pro Forma
|
|
|
|
Bancorp
|
|
|
Bancshares
|
|
|
Adjustments
|
|
|
Consolidated
|
|
|
|
(In thousands, except per share data)
|
|
|
Interest income
|
|
$
|
108,777
|
|
|
$
|
20,289
|
|
|
$
|
1,490
|
(a)
|
|
$
|
130,372
|
|
|
|
|
|
|
|
|
|
|
|
|
(184
|
)(e)
|
|
|
|
|
Interest expense
|
|
|
61,383
|
|
|
|
9,749
|
|
|
|
1,683
|
(b)
|
|
|
72,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
47,394
|
|
|
|
10,540
|
|
|
|
(377
|
)
|
|
|
57,557
|
|
Provision for loan losses
|
|
|
2,500
|
|
|
|
667
|
|
|
|
|
|
|
|
3,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
44,894
|
|
|
|
9,873
|
|
|
|
(377
|
)
|
|
|
54,390
|
|
Noninterest income
|
|
|
11,811
|
|
|
|
1,196
|
|
|
|
|
|
|
|
13,007
|
|
Noninterest
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
26,805
|
|
|
|
4,329
|
|
|
|
|
|
|
|
31,134
|
|
Occupancy, furniture and equipment
expense
|
|
|
7,754
|
|
|
|
955
|
|
|
|
(20
|
)(g)
|
|
|
8,689
|
|
Management separation costs
|
|
|
265
|
|
|
|
|
|
|
|
|
|
|
|
265
|
|
Other operating expenses
|
|
|
14,961
|
|
|
|
629
|
|
|
|
1,404
|
(c)
|
|
|
16,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest
expenses
|
|
|
49,785
|
|
|
|
5,913
|
|
|
|
1,384
|
|
|
|
57,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
6,920
|
|
|
|
5,156
|
|
|
|
(1,761
|
)
|
|
|
10,315
|
|
Income tax expense
|
|
|
1,923
|
|
|
|
1,712
|
|
|
|
(652
|
)(d)
|
|
|
2,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,997
|
|
|
$
|
3,444
|
|
|
$
|
(1,109
|
)
|
|
$
|
7,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common
share
|
|
$
|
0.21
|
|
|
$
|
1.52
|
(h)
|
|
|
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common
share
|
|
$
|
0.21
|
|
|
$
|
1.49
|
(h)
|
|
|
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
|
23,409
|
|
|
|
2,273
|
(h)
|
|
|
6,652
|
(f)
|
|
|
30,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, assuming dilution
|
|
|
24,034
|
|
|
|
2,305
|
(h)
|
|
|
6,652
|
(f)
|
|
|
30,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common
share
|
|
$
|
|
|
|
$
|
0.10
|
(h)
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma equivalent net income
and dividends per common share for Superior common shares
exchanged for Peoples Community Bancshares common
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
To record amortization
of fair value adjustment of loans and investments over a 3 to
4 year period using straight-line and accelerated methods
which approximate the interest method.
|
|
|
|
(b)
|
|
To record amortization
of fair value adjustment of deposits and borrowings over a 1 to
29 year period using straight-line and accelerated methods
which approximate the interest method.
|
|
|
|
(c)
|
|
To record amortization
of core deposit intangible over a 10 year period using an
accelerated method.
|
|
|
|
(d)
|
|
To record the tax
effect of the interest amortization adjustments at a 37%
marginal tax rate.
|
|
|
|
(e)
|
|
Adjust interest income
for loss of earnings due to cash payments at the federal funds
rate of 5%.
|
|
|
|
(f)
|
|
Common stock issued to
acquire Peoples Community Bancshares.
|
|
|
|
(g)
|
|
To record reduction in
depreciation expense related to decrease in carrying value of
equipment and software.
|
16
Note 1
Unaudited Pro Forma Consolidated Financial Information
|
|
|
|
|
|
|
Peoples Community
|
|
|
|
Bancshares
|
|
|
|
(In thousands, except
|
|
|
|
per share amounts)
|
|
|
Pro forma outstanding shares of
acquired corporation
|
|
|
2,291
|
|
Exchange ratio per merger agreement
|
|
|
2.9036
|
|
|
|
|
|
|
Total Superior Bancorp shares to
be issued
|
|
|
6,652
|
|
Fair value of Superior Bancorp
stock
|
|
$
|
11.15
|
(a)
|
|
|
|
|
|
Fair value of stock to be issued
|
|
$
|
74,170
|
|
Net cash paid to cancel
outstanding stock options
|
|
|
2,120
|
(b)
|
Pro forma transaction costs
|
|
|
535
|
(c)
|
|
|
|
|
|
Total pro forma purchase
price
|
|
|
76,825
|
|
|
|
|
|
|
Net assets of acquired corporation
per historical financial statements
|
|
|
27,125
|
|
Decrease in net assets to be
acquired to reflect certain pro forma premerger
transactions
|
|
|
|
|
Merger costs
|
|
|
(920
|
)(d)
|
|
|
|
|
|
Pro forma net assets to be acquired
|
|
|
26,205
|
|
|
|
|
|
|
Purchase accounting adjustments
to carrying value of asset or liability:(h)
|
|
|
|
|
Investments
|
|
|
(207
|
)
|
Loans
|
|
|
(2,938
|
)
|
Equipment and software
|
|
|
(100
|
)
|
Core deposit intangible
|
|
|
7,720
|
(e)
|
Other assets Florida
bank charter to be sold
|
|
|
1,000
|
|
Deposits
|
|
|
1,755
|
|
FHLB borrowings
|
|
|
820
|
|
Junior subordinated debentures
|
|
|
209
|
|
Contractual obligations
|
|
|
(5,500
|
)(f)
|
Tax benefit on cash payments to
option holders
|
|
|
784
|
(b)
|
Other assets deferred
income taxes
|
|
|
(2,519
|
)(g)
|
|
|
|
|
|
Net pro forma purchase
accounting adjustments
|
|
|
1,024
|
|
|
|
|
|
|
Goodwill
|
|
$
|
49,596
|
|
|
|
|
|
|
|
|
|
(a) |
|
Based on the closing stock price several days
prior to and after the agreements were reached and announced.
|
|
|
|
(b) |
|
Pro forma amount of cash payment for
cancellation of outstanding stock options.
|
17
|
|
|
|
|
Per Option Value as defined in
agreement
|
|
|
|
|
Proforma estimated
ten-day
average trading price
|
|
$
|
11.15
|
|
Exchange ratio
|
|
|
2.9036
|
|
|
|
|
|
|
Dollar per option
|
|
$
|
32.38
|
|
Less: Weighted average exercise
price per option
|
|
|
12.19
|
|
|
|
|
|
|
Per Option Value
|
|
$
|
20.190
|
|
Total stock options
outstanding
|
|
|
105
|
|
|
|
|
|
|
Total cash payment to option
holders
|
|
$
|
2,120
|
|
Less: Tax benefit (37%)
|
|
|
(784
|
)
|
|
|
|
|
|
Net cash payment
|
|
$
|
1,336
|
|
|
|
|
|
|
|
|
|
(c) |
|
The following pro forma merger costs are
expected to be incurred by Superior Bancorp:
|
|
|
|
|
|
Professional fees
|
|
$
|
100
|
|
Investment banking
|
|
|
400
|
|
Consulting
|
|
|
35
|
|
|
|
|
|
|
|
|
$
|
535
|
|
|
|
|
|
|
|
|
|
(d) |
|
The following pro forma merger costs are
expected to be incurred by Peoples Community Bancshares:
|
|
|
|
|
|
Professional fees
|
|
$
|
150
|
|
Investment banking
|
|
|
770
|
|
|
|
|
|
|
|
|
$
|
920
|
|
|
|
|
|
|
|
|
|
(e) |
|
Estimated to be approximately 5.0% non-time
deposits.
|
|
|
|
(f) |
|
Pro forma costs related to exit or terminate
certain contracts or activities.
|
|
|
|
|
|
Employment related
|
|
$
|
5,000
|
|
Data processing
|
|
|
500
|
|
|
|
|
|
|
Pro forma contractual obligations
|
|
$
|
5,500
|
|
|
|
|
|
|
|
|
|
(g) |
|
Assumes 37% marginal tax rate.
|
|
|
|
(h) |
|
These purchase accounting adjustments are
preliminary estimates and are subject to change primarily as a
result of changes in market interest rates and obtaining final
valuations of certain long-lived assets.
|
18
SELECTED
FINANCIAL DATA SUPERIOR BANCORP
The following table sets forth selected financial data from
Superior Bancorps consolidated financial statements for
the periods and dates indicated and should be read in
conjunction with Superior Bancorps consolidated financial
statements including the related notes and
Managements Discussion and Analysis of Financial
Condition and Results of Operations incorporated by
reference herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
As of and for the Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
Selected Statement of Financial
Condition Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,451,810
|
|
|
$
|
1,413,967
|
|
|
$
|
2,440,990
|
|
|
$
|
1,415,469
|
|
|
$
|
1,423,128
|
|
|
$
|
1,171,626
|
|
|
$
|
1,406,800
|
|
Loans, net of unearned income
|
|
|
1,675,317
|
|
|
|
989,576
|
|
|
|
1,639,528
|
|
|
|
963,253
|
|
|
|
934,868
|
|
|
|
856,941
|
|
|
|
1,138,537
|
|
Allowance for loan losses
|
|
|
18,977
|
|
|
|
11,999
|
|
|
|
18,892
|
|
|
|
12,011
|
|
|
|
12,543
|
|
|
|
25,174
|
|
|
|
27,766
|
|
Investment securities
|
|
|
342,837
|
|
|
|
238,281
|
|
|
|
354,716
|
|
|
|
242,595
|
|
|
|
288,308
|
|
|
|
141,601
|
|
|
|
73,125
|
|
Deposits
|
|
|
1,860,693
|
|
|
|
1,077,853
|
|
|
|
1,870,841
|
|
|
|
1,043,695
|
|
|
|
1,067,206
|
|
|
|
889,935
|
|
|
|
1,107,798
|
|
Advances from FHLB and other
borrowings
|
|
|
223,862
|
|
|
|
197,096
|
|
|
|
211,255
|
|
|
|
214,496
|
|
|
|
205,546
|
|
|
|
131,919
|
|
|
|
174,922
|
|
Notes payable
|
|
|
5,993
|
|
|
|
3,703
|
|
|
|
5,545
|
|
|
|
3,755
|
|
|
|
3,965
|
|
|
|
1,925
|
|
|
|
|
|
Junior subordinated debentures owed
to unconsolidated trusts
|
|
|
43,859
|
|
|
|
31,959
|
|
|
|
44,006
|
|
|
|
31,959
|
|
|
|
31,959
|
|
|
|
31,959
|
|
|
|
31,959
|
|
Stockholders equity
|
|
|
278,531
|
|
|
|
105,803
|
|
|
|
276,087
|
|
|
|
105,065
|
|
|
|
100,539
|
|
|
|
100,122
|
|
|
|
76,541
|
|
Selected Statement of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
39,744
|
|
|
$
|
21,649
|
|
|
$
|
108,777
|
|
|
$
|
77,280
|
|
|
$
|
66,160
|
|
|
$
|
76,213
|
|
|
$
|
88,548
|
|
Interest expense
|
|
|
21,710
|
|
|
|
11,645
|
|
|
|
61,383
|
|
|
|
38,255
|
|
|
|
28,123
|
|
|
|
33,487
|
|
|
|
40,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
18,034
|
|
|
|
10,004
|
|
|
|
47,394
|
|
|
|
39,025
|
|
|
|
38,037
|
|
|
|
42,726
|
|
|
|
48,038
|
|
Provision for loan losses
|
|
|
705
|
|
|
|
600
|
|
|
|
2,500
|
|
|
|
3,500
|
|
|
|
975
|
|
|
|
20,975
|
|
|
|
51,852
|
|
Noninterest income
|
|
|
4,086
|
|
|
|
2,502
|
|
|
|
11,811
|
|
|
|
9,583
|
|
|
|
10,527
|
|
|
|
14,592
|
|
|
|
15,123
|
|
Gain on sale of branches
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
739
|
|
|
|
48,264
|
|
|
|
|
|
Insurance Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment penalty FHLB
advances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,532
|
|
|
|
|
|
Loss on sale of loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,293
|
|
|
|
|
|
|
|
|
|
Management separation costs
|
|
|
|
|
|
|
|
|
|
|
265
|
|
|
|
15,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense
|
|
|
18,026
|
|
|
|
10,806
|
|
|
|
49,520
|
|
|
|
45,153
|
|
|
|
45,644
|
|
|
|
55,398
|
|
|
|
42,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
(benefit)
|
|
|
3,389
|
|
|
|
1,100
|
|
|
|
6,920
|
|
|
|
(10,398
|
)
|
|
|
391
|
|
|
|
26,677
|
|
|
|
(31,360
|
)
|
Income tax expense (benefit)
|
|
|
1,091
|
|
|
|
250
|
|
|
|
1,923
|
|
|
|
(4,612
|
)
|
|
|
(796
|
)
|
|
|
9,178
|
|
|
|
(12,959
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
2,298
|
|
|
|
850
|
|
|
|
4,997
|
|
|
|
(5,786
|
)
|
|
|
1,187
|
|
|
|
17,499
|
|
|
|
(18,401
|
)
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
305
|
|
|
|
446
|
|
|
|
219
|
|
|
|
|
|
Effect of early conversion of
preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to
common stockholders
|
|
$
|
2,298
|
|
|
$
|
850
|
|
|
$
|
4,997
|
|
|
$
|
(8,097
|
)
|
|
$
|
741
|
|
|
$
|
17,280
|
|
|
$
|
(18,401
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) basic
|
|
$
|
0.07
|
|
|
$
|
0.04
|
|
|
$
|
0.21
|
|
|
$
|
(0.42
|
)
|
|
$
|
0.04
|
|
|
$
|
0.99
|
|
|
$
|
(1.09
|
)
|
diluted(1)
|
|
$
|
0.07
|
|
|
$
|
0.04
|
|
|
$
|
0.21
|
|
|
$
|
(0.42
|
)
|
|
$
|
0.04
|
|
|
$
|
0.95
|
|
|
$
|
(1.09
|
)
|
Weighted average shares
outstanding basic
|
|
|
34,438
|
|
|
|
20,015
|
|
|
|
23,409
|
|
|
|
19,154
|
|
|
|
17,583
|
|
|
|
17,492
|
|
|
|
16,829
|
|
Weighted average shares
outstanding diluted(1)
|
|
|
35,038
|
|
|
|
20,673
|
|
|
|
24,034
|
|
|
|
19,154
|
|
|
|
17,815
|
|
|
|
18,137
|
|
|
|
16,829
|
|
Book value at period end
|
|
$
|
8.04
|
|
|
$
|
5.27
|
|
|
$
|
7.97
|
|
|
$
|
5.21
|
|
|
$
|
5.31
|
|
|
$
|
5.31
|
|
|
$
|
4.35
|
|
Tangible book value per share
|
|
$
|
4.32
|
|
|
$
|
4.67
|
|
|
$
|
4.23
|
|
|
$
|
4.61
|
|
|
$
|
4.62
|
|
|
$
|
4.59
|
|
|
$
|
3.59
|
|
Preferred shares outstanding at
period end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
|
|
|
|
62
|
|
|
|
|
|
Common shares outstanding at period
end
|
|
|
34,658
|
|
|
|
20,085
|
|
|
|
34,652
|
|
|
|
20,172
|
|
|
|
17,750
|
|
|
|
17,695
|
|
|
|
17,605
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
As of and for the Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
Performance Ratios and Other
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.38
|
%
|
|
|
0.24
|
%
|
|
|
0.30
|
%
|
|
|
(0.41
|
)%
|
|
|
0.09
|
%
|
|
|
1.29
|
%
|
|
|
(1.36
|
)%
|
Return on average
stockholders equity
|
|
|
3.37
|
|
|
|
3.27
|
|
|
|
3.55
|
|
|
|
(5.68
|
)
|
|
|
1.18
|
|
|
|
19.08
|
|
|
|
(19.89
|
)
|
Net interest margin(2)(3)
|
|
|
3.53
|
|
|
|
3.21
|
|
|
|
3.17
|
|
|
|
3.14
|
|
|
|
3.31
|
|
|
|
3.50
|
|
|
|
3.93
|
|
Net interest spread(3)(4)
|
|
|
3.21
|
|
|
|
3.01
|
|
|
|
2.93
|
|
|
|
3.00
|
|
|
|
3.20
|
|
|
|
3.35
|
|
|
|
3.70
|
|
Noninterest income to average
assets(5)
|
|
|
0.66
|
|
|
|
0.69
|
|
|
|
0.66
|
|
|
|
0.77
|
|
|
|
0.82
|
|
|
|
1.03
|
|
|
|
0.99
|
|
Noninterest expense to average
assets(6)
|
|
|
2.91
|
|
|
|
3.06
|
|
|
|
2.87
|
|
|
|
3.14
|
|
|
|
3.52
|
|
|
|
4.07
|
|
|
|
3.15
|
|
Efficiency ratio(7)
|
|
|
78.79
|
|
|
|
85.87
|
|
|
|
82.13
|
|
|
|
87.99
|
|
|
|
91.72
|
|
|
|
100.09
|
|
|
|
67.85
|
|
Average loan to average deposit
ratio
|
|
|
91.22
|
|
|
|
94.37
|
|
|
|
93.12
|
|
|
|
88.82
|
|
|
|
92.16
|
|
|
|
100.69
|
|
|
|
105.35
|
|
Average interest-earning assets to
average interest bearing liabilities
|
|
|
107.56
|
|
|
|
105.07
|
|
|
|
106.01
|
|
|
|
104.58
|
|
|
|
104.88
|
|
|
|
105.82
|
|
|
|
107.04
|
|
Assets Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to
nonperforming loans
|
|
|
221.18
|
%
|
|
|
290.53
|
%
|
|
|
219.88
|
%
|
|
|
252.76
|
%
|
|
|
169.36
|
%
|
|
|
78.59
|
%
|
|
|
105.00
|
%
|
Allowance for loan losses to loans,
net of unearned income
|
|
|
1.13
|
|
|
|
1.21
|
|
|
|
1.15
|
|
|
|
1.25
|
|
|
|
1.34
|
|
|
|
2.94
|
|
|
|
2.44
|
|
Nonperforming assets
(NPAs) to loans plus NPAs, net of unearned income
|
|
|
0.61
|
|
|
|
0.56
|
|
|
|
0.63
|
|
|
|
0.68
|
|
|
|
1.32
|
|
|
|
4.41
|
|
|
|
2.53
|
|
Nonaccrual loans to loans, net of
unearned income
|
|
|
0.46
|
|
|
|
0.42
|
|
|
|
0.47
|
|
|
|
0.47
|
|
|
|
0.68
|
|
|
|
3.46
|
|
|
|
2.17
|
|
Net loan charge-offs to average
loans
|
|
|
0.15
|
|
|
|
0.25
|
|
|
|
0.20
|
|
|
|
0.43
|
|
|
|
1.52
|
|
|
|
2.21
|
|
|
|
3.35
|
|
Net loan charge-offs to average
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
87.94
|
|
|
|
102.00
|
|
|
|
92.64
|
|
|
|
115.20
|
|
|
|
1,395.49
|
|
|
|
111.87
|
|
|
|
72.69
|
|
Allowance for loan losses
|
|
|
13.25
|
|
|
|
20.69
|
|
|
|
12.26
|
|
|
|
33.57
|
|
|
|
108.47
|
|
|
|
93.21
|
|
|
|
135.74
|
|
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 risk-based capital ratio
|
|
|
9.58
|
%
|
|
|
10.25
|
%
|
|
|
9.39
|
%
|
|
|
10.15
|
%
|
|
|
10.05
|
%
|
|
|
12.60
|
%
|
|
|
6.51
|
%
|
Total risk-based capital ratio
|
|
|
10.58
|
|
|
|
11.17
|
|
|
|
10.40
|
|
|
|
11.08
|
|
|
|
11.51
|
|
|
|
14.07
|
|
|
|
8.83
|
|
Leverage ratio
|
|
|
7.61
|
|
|
|
8.38
|
|
|
|
7.43
|
|
|
|
8.30
|
|
|
|
7.98
|
|
|
|
9.72
|
|
|
|
3.70
|
|
|
|
|
(1) |
|
Common stock equivalents of 775,000 and 1,002,000 shares
were not included in computing diluted earnings per share for
the years ended December 31, 2004 and 2005, respectively,
because their effects were antidilutive. |
|
(2) |
|
Net interest income divided by average earning assets. |
|
(3) |
|
Calculated on a taxable equivalent basis. |
|
(4) |
|
Yield on average interest-earning assets less rate on average
interest-bearing liabilities. |
|
(5) |
|
Noninterest income has been adjusted for certain nonrecurring
items such as gain on sale of branches, insurance proceeds,
change in fair value of derivatives and investment security
gains (losses). |
|
|
|
(6) |
|
Noninterest expense has been adjusted for core deposit
amortization and certain nonrecurring items such as merger
related costs, loss on sale of assets and management separation
costs. |
|
|
|
(7) |
|
Efficiency ratio is calculated by dividing noninterest expense,
adjusted for core deposit amortization, management separation
costs, losses on other real estate and the loss on sale of
assets, by noninterest income, adjusted for gain on sale of
branches, insurance proceeds, changes in fair values of
derivatives and investment security gains (losses), plus net
interest income on a fully taxable equivalent basis. |
20
SELECTED
FINANCIAL DATA PEOPLES COMMUNITY BANCSHARES,
INC.
The following table sets forth selected financial data for
Peoples Community Bancshares, Inc. and should be read in
conjunction with the related consolidated financial statements
and notes thereto. See Peoples Community Bancshares,
Inc. and Subsidiaries Consolidated Financial Statements,
beginning on page F-1.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2007(1)
|
|
|
2006(1)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(Dollars In Thousands, except per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
5,695
|
|
|
|
4,487
|
|
|
$
|
20,289
|
|
|
$
|
14,501
|
|
|
$
|
8,591
|
|
|
$
|
5,320
|
|
|
$
|
4,456
|
|
Total interest expense
|
|
|
3,068
|
|
|
|
1,843
|
|
|
|
9,749
|
|
|
|
5,321
|
|
|
|
2,805
|
|
|
|
1,785
|
|
|
|
1,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income before
provision for loan losses
|
|
|
2,627
|
|
|
|
2,644
|
|
|
|
10,540
|
|
|
|
9,180
|
|
|
|
5,786
|
|
|
|
3,535
|
|
|
|
2,556
|
|
Provision for loan losses
|
|
|
103
|
|
|
|
120
|
|
|
|
667
|
|
|
|
645
|
|
|
|
926
|
|
|
|
363
|
|
|
|
297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision
for loan losses
|
|
|
2,524
|
|
|
|
2,524
|
|
|
|
9,873
|
|
|
|
8,535
|
|
|
|
4,860
|
|
|
|
3,172
|
|
|
|
2,259
|
|
Noninterest income
|
|
|
285
|
|
|
|
355
|
|
|
|
1,196
|
|
|
|
989
|
|
|
|
583
|
|
|
|
480
|
|
|
|
276
|
|
Noninterest expense
|
|
|
1,399
|
|
|
|
1,344
|
|
|
|
5,913
|
|
|
|
5,497
|
|
|
|
4,146
|
|
|
|
3,088
|
|
|
|
2,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
1,410
|
|
|
|
1,535
|
|
|
|
5,156
|
|
|
|
4,027
|
|
|
|
1,297
|
|
|
|
564
|
|
|
|
98
|
|
Income taxes
|
|
|
519
|
|
|
|
600
|
|
|
|
1,712
|
|
|
|
1,517
|
|
|
|
503
|
|
|
|
221
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
891
|
|
|
$
|
935
|
|
|
$
|
3,444
|
|
|
$
|
2,510
|
|
|
$
|
794
|
|
|
$
|
343
|
|
|
$
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
331,804
|
|
|
$
|
297,579
|
|
|
$
|
323,060
|
|
|
$
|
256,089
|
|
|
$
|
195,360
|
|
|
$
|
117,940
|
|
|
$
|
82,835
|
|
Total cash and cash equivalents
|
|
|
9,321
|
|
|
|
20,333
|
|
|
|
21,914
|
|
|
|
7,905
|
|
|
|
8,916
|
|
|
|
16,592
|
|
|
|
8,073
|
|
Investment securities
|
|
|
47,125
|
|
|
|
23,027
|
|
|
|
42,719
|
|
|
|
27,602
|
|
|
|
16,478
|
|
|
|
10,582
|
|
|
|
8,493
|
|
Loans (gross)
|
|
|
266,450
|
|
|
|
243,408
|
|
|
|
250,055
|
|
|
|
216,175
|
|
|
|
166,645
|
|
|
|
89,619
|
|
|
|
63,966
|
|
Allowance for loan losses
|
|
|
3,387
|
|
|
|
2,739
|
|
|
|
3,284
|
|
|
|
2,620
|
|
|
|
1,940
|
|
|
|
1,035
|
|
|
|
692
|
|
Deposits
|
|
|
255,654
|
|
|
|
227,325
|
|
|
|
244,185
|
|
|
|
195,703
|
|
|
|
158,928
|
|
|
|
103,844
|
|
|
|
73,555
|
|
Borrowings
|
|
|
47,691
|
|
|
|
45,572
|
|
|
|
50,436
|
|
|
|
36,466
|
|
|
|
17,105
|
|
|
|
75
|
|
|
|
|
|
Shareholders equity
|
|
|
27,125
|
|
|
|
23,375
|
|
|
|
26,193
|
|
|
|
20,766
|
|
|
|
18,542
|
|
|
|
13,225
|
|
|
|
8,653
|
|
Cash dividend per share
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
.10
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic(1)
|
|
$
|
.39
|
|
|
$
|
.41
|
|
|
$
|
1.52
|
|
|
$
|
1.20
|
|
|
$
|
.42
|
|
|
$
|
.28
|
|
|
$
|
.05
|
|
diluted(1)(2)
|
|
|
.38
|
|
|
|
.41
|
|
|
|
1.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Unaudited. |
|
(2) |
|
There is insufficient information to calculate diluted earnings
per share for the years 2002-2005. |
21
FORWARD-LOOKING
STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements made by Superior
Bancorp or on its behalf. Some of the disclosures in this
prospectus/proxy statement, including any statements preceded
by, followed by or which include the words may,
could, should, will,
would, hope, might,
believe, expect, anticipate,
estimate, intend, plan,
assume or similar expressions constitute
forward-looking statements.
These forward-looking statements include, implicitly and
explicitly, the assumptions underlying the statements and other
information with respect to Superior Bancorps beliefs,
plans, objectives, goals, expectations, anticipations,
estimates, intentions, financial condition, results of
operations, future performance and business, including the
accretive effect of the merger and Superior Bancorps
expectations and estimates with respect to Superior
Bancorps revenues, expenses, earnings, return on equity,
return on assets, efficiency ratio, asset quality, the adequacy
of Superior Bancorps allowance for loan losses and other
financial data and capital and performance ratios.
Although Superior Bancorp believes that the expectations
reflected in its forward-looking statements are reasonable,
these statements involve risks and uncertainties, including
those described under Risk Factors below and in
Superior Bancorps Annual Report on
Form 10-K,
which are subject to change based on various important factors
(some of which are beyond Superior Bancorps control). The
following factors, among others, could cause Superior
Bancorps financial performance to differ materially from
its goals, plans, objectives, intentions, expectations and other
forward-looking statements: (1) the strength of the United
States economy in general and the strength of the regional and
local economies in which Superior Bancorp conducts operations;
(2) the effects of, and changes in, trade, monetary and
fiscal policies and laws, including interest rate policies of
the Board of Governors of the Federal Reserve System;
(3) inflation, interest rate, market and monetary
fluctuations; (4) Superior Bancorps ability to
successfully integrate the assets, liabilities, customers,
systems and management that it acquires or merges into its
operations; (5) Superior Bancorps timely development
of new products and services in a changing environment,
including the features, pricing and quality compared to the
products and services of its competitors; (6) the
willingness of users to substitute competitors products
and services for its products and services; (7) the impact
of changes in financial services policies, laws and regulations,
including laws, regulations and policies concerning taxes,
banking, securities and insurance, and the application thereof
by regulatory bodies; (8) Superior Bancorps ability
to resolve any legal proceeding on acceptable terms and the
proceedings effect on Superior Bancorps financial
condition or results of operations; (9) technological
changes; (10) changes in consumer spending and savings
habits; (11) the effect of natural disasters, such as
hurricanes, in Superior Bancorps geographic markets; and
(12) regulatory, legal or judicial proceedings.
If one or more of the factors affecting Superior Bancorps
forward-looking information and statements proves incorrect,
then its actual results, performance or achievements could
differ materially from those expressed in, or implied by,
forward-looking information and statements contained in this
prospectus/proxy statement. Therefore, Superior Bancorp cautions
you not to place undue reliance on its forward-looking
information and statements.
Superior Bancorp does not intend to update its forward-looking
information and statements, whether written or oral, to reflect
change. All forward-looking statements attributable to Superior
Bancorp are expressly qualified by these cautionary statements.
22
RISK
FACTORS
If the merger is consummated, Peoples Community Bancshares
stockholders will receive shares of Superior Bancorp common
stock in exchange for their shares of Peoples Community
Bancshares common stock. You should be aware of the risks and
uncertainties associated with an investment in Superior Bancorp
common stock and should carefully consider these risks.
Some of the risks and uncertainties involved in an investment in
Superior Bancorp common stock relate to economic conditions
generally and would affect other financial institutions in
similar ways. Some of these factors are identified under the
heading Forward-Looking Statements on page 22.
Risks
Relating to the Merger
If the
merger is not completed, Superior Bancorp and Peoples
Community Bancshares will have incurred substantial expenses
without realizing the expected benefits.
Superior Bancorp and Peoples Community Bancshares have
incurred substantial expenses in connection with the merger. The
completion of the merger depends on the satisfaction of
specified conditions and the receipt of regulatory approvals. We
cannot guarantee that these conditions will be met. If the
merger is not completed, these expenses could have a material
adverse impact on the financial condition of Superior Bancorp
and/or
Peoples Community Bancshares because neither company would
have realized the expected benefits of the merger.
The
merger must be approved by multiple governmental
agencies.
Before the merger and related transactions may be completed,
various orders, consents and approvals or waivers must be
obtained from the Office of Thrift Supervision, the Board of
Governors of the Federal Reserve System, the Florida Office of
Financial Regulation, the Securities and Exchange Commission and
other governmental authorities. These governmental entities may
impose conditions on the completion of the merger or require
changes to the terms of the merger. Although Superior Bancorp
and Peoples Community Bancshares do not currently expect
that any such conditions or changes would be imposed, there can
be no assurance that they will not be, and such conditions or
changes could have the effect of delaying completion of the
merger or imposing additional costs on or limiting the revenues
of Superior Bancorp following the merger, any of which might
have a material adverse effect on Superior Bancorp following the
merger. Neither Superior Bancorp nor Peoples Community
Bancshares is obligated to complete the merger if the regulatory
approvals received in connection with the completion of the
merger include any conditions or restrictions which, in the
reasonable good faith judgment of the board of directors of
Superior Bancorp, would so materially adversely impact the
economic benefits of the transaction so as to render inadvisable
the consummation of the merger.
Superior
Bancorp may fail to realize all of the anticipated benefits of
the merger.
The success of the merger will depend, in part, on Superior
Bancorps ability to realize the anticipated benefits and
cost savings from combining the businesses of Superior Bancorp
and Peoples Community Bancshares. However, to realize
these anticipated benefits and cost savings, Superior Bancorp
must successfully combine the businesses of Superior Bancorp and
Peoples Community Bancshares. If Superior Bancorp is not
able to achieve these objectives, the anticipated benefits and
cost savings of the merger may not be realized fully or at all
or may take longer to realize than expected.
Superior Bancorp and Peoples Community Bancshares have
operated, and until the completion of the merger will continue
to operate, independently. It is possible that the integration
process could result in the loss of key employees, the
disruption of each companys ongoing businesses or
inconsistencies in standards, controls, procedures and policies
that adversely affect Superior Bancorps ability to
maintain its relationships with the companies respective
clients, customers, depositors and employees or to achieve the
anticipated benefits of the merger. In addition,
managements time and resources may be focused on the
integration of recently completed acquisitions during the same
general time period. These acquisitions and any future
acquisitions, in turn, could divert time and resources from
other matters, which could have an adverse effect on Superior
Bancorp during the transition period. This could be further
exacerbated by efforts to integrate any other merged companies.
23
Peoples
Community Bancshares directors and executive officers have
financial interests in the merger that are different from, or in
addition to, the interests of Peoples Community Bancshares
stockholders.
Peoples Community Bancshares executive officers and
directors, who collectively hold approximately 41.5% of the
outstanding Peoples Community Bancshares stock, have
agreed to vote in favor of the merger agreement and the merger.
In considering these facts and the other information contained
in this document, you should be aware that Peoples
Community Bancshares directors and executive officers have
financial interests in the merger that are different from, or in
addition to, the interests of Peoples Community Bancshares
stockholders. In addition, these agreements to vote in favor of
the merger may have the effect of discouraging persons from
making a proposal to acquire Peoples Community Bancshares.
Further, certain executive officers of Peoples Community
Bancshares have entered into employment agreements with Superior
Bancorp. These and certain other additional interests of
Peoples Community Bancshares directors and executive
officers are described in detail in The Merger
Other Interests of Directors and Officers of Peoples
Community Bancshares in the Merger, beginning on page 50
of this prospectus/proxy statement. These circumstances may
cause some of Peoples Community Bancshares directors
and executive officers to view the proposed transaction
differently than you may view it.
Because
the market price of Superior Bancorp common stock will
fluctuate, Peoples Community Bancshares stockholders
cannot be sure of the exact market value of Superior Bancorp
common stock that they will receive in the merger.
Under the terms of the merger agreement, each share of
Peoples Community Bancshares common stock you own will be
converted into the right to receive 2.9036 shares of
Superior Bancorp common stock. The market price of Superior
Bancorp common stock may vary from the price on the date that
this prospectus/proxy statement is mailed to Peoples
Community Bancshares stockholders or on the date of the special
meeting of Peoples Community Bancshares stockholders. See
Market Price and Dividend Information, beginning on
page 9.
The market price of Superior Bancorp common stock may change as
a result of a variety of factors, including general market and
economic conditions, changes in Superior Bancorps
business, operations and prospects, and regulatory
considerations. Many of these factors are beyond the control of
Superior Bancorp and are not necessarily related to a change in
the financial performance or condition of Superior Bancorp. As a
result of the fixed exchange ratio, the market value of shares
of Superior Bancorp common stock that a Peoples Community
Bancshares stockholder receives in the merger will decline or
increase correspondingly with declines or increases in the
market price of Superior Bancorp common stock prior to and as of
the date shares are exchanged.
There can be no assurance that the value of Superior Bancorp
common stock that Peoples Community Bancshares
stockholders receive in the merger will be substantially
equivalent to the market price of Superior Bancorp common stock
at the time Peoples Community Bancshares stockholders vote
to approve the merger agreement and the merger. We urge you to
obtain current market quotations for Superior Bancorp common
stock. Superior Bancorp common stock is currently listed on the
NASDAQ Global Market under the ticker symbol SUPR.
At the time of the special meeting, you will not know the exact
value of the consideration you will receive when the merger is
completed.
The
exchange ratio will be reduced if Peoples Community
Bancshares net worth is less than $25,959,000 at the
effective time of the merger.
It is a condition to the merger that Peoples Community
Bancshares have a net worth, as defined in the merger agreement,
of at least $25,959,000 at the effective time of the merger. In
the event that there is a shortfall between $25,959,000 and the
actual net worth of Peoples Community Bancshares at the
effective time of the merger, then the exchange ratio will be
reduced downward by a reduction factor equal to the percentage
obtained by dividing the shortfall amount by $25,959,000.
24
The
value of the stock consideration Peoples Community
Bancshares stockholders will receive could be less than
$9.56 per share if the Peoples Community Bancshares
board of directors does not exercise its right to terminate the
merger agreement upon the occurrence of certain
events.
If, on the date that all necessary consents and regulatory
approvals have been received (the determination date),
(1) the
ten-day
average closing price of Superior Bancorp common stock
immediately preceding the determination date is less than
$9.56 per share, and (2) the number obtained by
dividing the Superior Bancorp stock price on the determination
date by $11.25 is less than the Bank Index Ratio minus 0.15,
then a majority of the entire board of directors of
Peoples Community Bancshares may vote to terminate the
merger agreement at any time during the five-business-day period
after all consents and approvals have been received. The Bank
Index Ratio is equal to the quotient obtained by dividing
(A) the average of the NASDAQ Bank Index for ten
consecutive trading days immediately preceding the determination
date by (B) 3,386.64. If Peoples Community Bancshares
exercises its option to terminate the merger agreement,
Peoples Community Bancshares must give notice to Superior
Bancorp. Superior Bancorp will have the option of paying
additional consideration in the form of Superior Bancorp common
stock, cash or a combination of both so that the aggregate
consideration is valued at the lesser of (1) the product of
0.85 and $11.25, multiplied by the exchange ratio, and
(2) the product of the Bank Index Ratio and $11.25,
multiplied by the exchange ratio.
No assurance can be given as to whether Peoples Community
Bancshares board of directors would exercise the right to
terminate the merger agreement if these conditions are met or
whether Superior Bancorp would agree to pay additional
consideration.
The merger agreement does not provide for a resolicitation of
Peoples Community Bancshares stockholders in the
event that the conditions are met and the Peoples
Community Bancshares board of directors nevertheless chooses to
complete the transaction. The Peoples Community Bancshares
board of directors has made no decision as to whether it would
exercise its right to terminate the merger agreement. In
considering whether to exercise its right to terminate the
merger agreement, Superior Bancorp expects that the
Peoples Community Bancshares board of directors would take
into account all the relevant facts and circumstances that exist
at the time and would consult with its financial advisor and
legal counsel.
The
merger agreement limits Peoples Community Bancshares
ability to pursue alternative transactions to the merger and
requires Peoples Community Bancshares to pay a termination
fee if it does.
The merger agreement prohibits Peoples Community
Bancshares and its directors, officers, representatives and
agents from soliciting, authorizing the solicitation of or,
subject to very narrow exceptions, entering into discussions
with any third party regarding alternative business
combinations. The prohibition limits Peoples Community
Bancshares ability to pursue offers that may be superior
from a financial point of view from other possible acquirers. If
either Peoples Community Bancshares or Superior Bancorp
terminates the merger agreement as a result of certain events
and Peoples Community Bancshares consummates a transaction
with another party, Peoples Community Bancshares would be
required to pay a $3,250,000 termination fee to Superior Bancorp
upon consummation of such transaction. This fee makes it less
likely that a third party will make an alternative acquisition
proposal.
Superior
Bancorp and Peoples Community Bancshares may choose not to
proceed with the merger if it is not completed by
December 31, 2007, or if all conditions to closing are not
met or waived.
Either Superior Bancorp or Peoples Community Bancshares
may terminate the merger agreement if the merger has not been
completed by December 31, 2007. See The
Merger The Merger Agreement Termination
Events, beginning on page 47. There can be no assurance
that all conditions to the merger will have been satisfied by
December 31, 2007. See The Merger The
Merger Agreement Conditions to Completion of the
Merger, beginning on page 44.
After
the merger is completed, Peoples Community Bancshares
stockholders who receive Superior Bancorp common stock for some
or all of their shares of Peoples Community Bancshares
common stock will
25
become stockholders of Superior Bancorp and will have
different rights, as stockholders, which that may be less
advantageous than their current rights.
Upon completion of the merger, Peoples Community
Bancshares stockholders who receive Superior Bancorp common
stock for their shares of Peoples Community Bancshares
common stock will become stockholders of Superior Bancorp.
Differences in Peoples Community Bancshares articles
of incorporation and bylaws and Superior Bancorps restated
certificate of incorporation and bylaws, as well as differences
between Florida law and Delaware law, will result in changes to
the rights of Peoples Community Bancshares stockholders
who become Superior Bancorp stockholders. For a description of
these changes, see Comparison of the Rights of
Peoples Community Bancshares Stockholders and Superior
Bancorp Stockholders, beginning on page 69 of this
prospectus/proxy statement. A stockholder of Peoples
Community Bancshares may conclude that his or her current rights
under Peoples Community Bancshares articles of
incorporation and bylaws are more advantageous than the rights
such stockholder would have as a stockholder of Superior Bancorp
under Superior Bancorps restated certificate of
incorporation and bylaws.
Superior
Bank and Superior Bancorp are subject to different regulation
than Peoples Community Bank and Peoples Community
Bancshares.
Superior Bank is a federal savings bank, and Superior Bancorp is
a thrift holding company. Each is subject to supervision by the
Office of Thrift Supervision, an agency of the United States
Department of the Treasury. Peoples Community Bank is a
Florida state-chartered bank, which is subject to the regulation
by the Florida Office of Financial Regulation and the Federal
Deposit Insurance Corporation. Peoples Community
Bancshares is a bank holding company, which is regulated by the
Board of Governors of the Federal Reserve System.
There are a number of material differences between federal
savings banks and thrift holding companies, on the one hand, and
Florida state-chartered banks and bank holding companies, on the
other hand. Neither Superior Bancorp nor Peoples Community
Bancshares can give any assurance as to the effect that any of
these differences will have on the operations of the combined
organizations. Some of these differences include restrictions on
federal savings banks non-real estate-related lending not
imposed on Florida state-chartered banks; differences in
permitted non-banking-related activities; differences in
interstate branching rights; differences in the cost of
supervisory assessments imposed from time to time by the Office
of Thrift Supervision as compared to the Florida Office of
Financial Regulation and the Federal Reserve; and differences in
the nature and extent of other supervisory and regulatory
requirements by the Office of Thrift Supervision as compared to
the Florida Office of Financial Regulation and the Federal
Reserve and the interpretation thereof by such agencies.
Risks
Relating To Superior Bancorps Business
If the
interest payments Superior Bank makes on deposits increase
relative to interest income, Superior Bancorp may be less
profitable.
Superior Bancorps profitability depends to a large extent
on Superior Banks net interest income, which is the
difference between income from interest-earning assets, such as
loans made and investment securities held, and interest paid on
deposits and its borrowings. Superior Bancorps net
interest income is affected not only by actions it takes, but by
changes in general interest rate levels and by other economic
factors beyond Superior Bancorps control. Superior
Bancorps net interest income may be reduced if
(i) more interest-earning assets than interest-bearing
liabilities reprice or mature at a time when interest rates are
declining, or (ii) more interest-bearing liabilities than
interest-earning assets reprice or mature at a time when
interest rates are rising.
In addition, Superior Bancorp may be affected by changes in the
difference between short- and long-term interest rates. For
example, short-term deposits may be used to support longer-term
loans. If the difference between short- and long-term interest
rates becomes smaller, the spread between the rates Superior
Bancorp pays on deposits and borrowings and the rates Superior
Bancorp receives on loans could narrow significantly, decreasing
net interest income.
26
Further, if market interest rates rise rapidly, interest rate
adjustment caps may limit Superior Bancorps ability to
increase interest rates on adjustable-rate mortgage loans, but
Superior Bancorp may have to pay higher interest rates on
deposits and borrowings. This could cause Superior
Bancorps net interest income to decrease.
An
increase in loan prepayments may adversely affect Superior
Bancorps profitability.
The rate at which borrowers prepay loans is dependent on a
number of factors outside Superior Bancorps control,
including changes in market interest rates, conditions in the
housing and financial markets and general economic conditions.
Superior Bancorp cannot always accurately predict prepayment
rates. If the prepayment rates with respect to loans are greater
than Superior Bancorp anticipates, there may be a negative
impact on profitability because Superior Bancorp may not be able
to reinvest prepayment proceeds at rates comparable to those
received on the prepaid loans, particularly in a time of falling
interest rates.
If
Superior Bancorps allowance for loan losses is inadequate,
then Superior Bancorps profitability will be
reduced.
Superior Bancorp is exposed to the risk that its customers will
be unable to repay their loans in accordance with their terms
and that any collateral securing such loans will be insufficient
to ensure full repayment. Such credit risk is inherent in the
lending business, and failure to adequately assess such credit
risk could have a material adverse effect on Superior
Bancorps financial condition and results of operations.
Superior Bancorp evaluates the collectibility of its loan
portfolio and reviews its evaluation on a regular basis, and
Superior Bancorp provides an allowance for loan losses that
Superior Bancorp believes is adequate based on various factors
that Superior Bancorp believes may affect the credit quality of
loans. However, there can be no assurance that actual loan
losses will not exceed the allowance that has been established,
as such allowance is adjusted from time to time.
If the allowance for loan losses is inadequate for the actual
losses, then there could be a material adverse effect on
Superior Bancorps results of operations. In addition, if
as a result of its perception of adverse trends, Superior
Bancorp materially increases the allowance for loan losses in
the future, its earnings would be reduced.
Events
in Superior Bancorp geographic markets could adversely affect
Superior Bancorp.
Superior Bancorps business is concentrated in a limited
number of markets in Alabama and Florida. Changes in general
economic conditions and in the values of real estate in such
geographic markets could have an adverse impact on Superior
Bancorps ability to achieve loan and deposit growth
targets and on its customers ability to repay existing
loans. In addition, natural disasters, such as hurricanes and
tornadoes, in these geographic markets could adversely affect
Superior Bancorps business.
Superior
Bancorp faces substantial competition.
There are numerous competitors in Superior Bancorps
geographic markets, including national, regional and local banks
and thrifts and other financial services businesses, some of
which have substantially greater resources, higher brand
visibility and a wider geographic presence than Superior Bancorp
has. Some of these competitors may offer a greater range of
services, more favorable pricing and greater customer
convenience than Superior Bancorp is able to provide. In
addition, in some markets, there are a significant number of new
banks and other financial institutions that have opened in the
recent past or are expected to open in the near future, and such
new competitors may also seek to exploit Superior Bancorps
markets and customer base. Further, there have been recent
consolidations or announcements of proposed consolidations of
larger banking institutions in Superior Banks market areas
which have led to some uncertainties and such consolidations may
have an impact on Superior Banks market areas. If Superior
Bancorp is unable to maintain and grow its market share in the
face of such competition, its results of operations will be
adversely affected.
Superior
Bancorp is subject to extensive regulation.
Superior Bancorps operations are subject to regulation by
the Office of Thrift Supervision. Regulation by these entities
is intended primarily for the protection of depositors and the
deposit insurance fund and not for the
27
benefit of stockholders. Superior Bancorp may incur substantial
costs in complying with such regulations, and failure to comply
with them may expose Superior Bancorp to substantial penalties.
In addition, Superior Bancorp is subject to numerous consumer
protection laws and other laws relating to the operation of
financial institutions. Failure to comply with such laws could
expose Superior Bancorp to liability, which could have a
material adverse effect on its results of operations.
Superior
Bancorp may require additional capital to fund its growth
plans.
Superior Bancorps business strategy includes the expansion
of its business through the development of new locations and
through the acquisition of other financial institutions and, to
the extent permitted by applicable law, complementary businesses
as appropriate opportunities arise. In order to finance such
growth and to maintain required regulatory capital levels,
Superior Bancorp may require additional capital in the future.
There can be no assurance that such capital will be available
upon favorable terms, or at all.
Superior
Bancorp is dependent upon the services of its management
team.
Superior Bancorps operations and strategy are directed by
its senior management team, most of whom have joined Superior
Bancorp since January 2005. Any loss of the services of members
of this management team could have a material adverse effect on
Superior Bancorps results of operations and the ability to
implement Superior Bancorps business strategy.
Risks
Related To an Investment in Superior Bancorp Common
Stock
Superior
Bancorps stock price may be volatile due to limited
trading volume.
Superior Bancorp common stock is traded on the NASDAQ Global
Market. However, the average daily trading volume in Superior
Bancorp common stock is relatively small, typically under
60,000 shares per day and sometimes less than that. With
the increased number of outstanding shares, Superior Bancorp
expects trading activity to increase. For the fourth quarter of
2006, the average daily trading volume increased to
106,000 shares. Notwithstanding this increase, trades
involving a relatively small number of shares may have a
significant effect on the market price of Superior Bancorp
common stock, and it may be difficult for investors to acquire
or dispose of large blocks of stock without significantly
affecting the market price.
Superior
Bancorps ability to pay dividends is
limited.
Superior Bancorps ability to pay dividends is limited by
regulatory requirements and the need to maintain sufficient
consolidated capital to meet the capital needs of its business,
including capital needs related to future growth. Superior
Bancorps primary source of income is the payment of
dividends from Superior Bank to Superior Bancorp. Superior Bank,
in turn, is likewise subject to regulatory requirements
potentially limiting its ability to pay such dividends to
Superior Bancorp and by the need to maintain sufficient capital
for its operations and obligations. Further, Superior Bancorp is
obligated, subject to regulatory limitations, to make periodic
distributions on its trust preferred securities, which reduces
the income that might otherwise be available to pay dividends on
Superior Bancorp common stock. Thus, there can be no assurance
that Superior Bancorp will pay dividends to its common
stockholders, no assurance as to the amount or timing of any
such dividends, and no assurance that such dividends, if and
when paid, will be maintained, at the same level or at all, in
future periods. Superior Bancorp has no present plans for paying
a dividend on its common stock.
The
market price of Superior Bancorp common stock has risen
significantly in a relatively short period of time and such
increase may not continue.
The market price of Superior Bancorp common stock, as reported
on the NASDAQ Global Market, increased by approximately 38%
between December 31, 2004 and December 31, 2006.
Superior Bancorp believes that this increase resulted in part
from investors perception as to the ability of its new
senior management team to execute its business strategy and
enhance stockholder value. There can be no assurance that the
market price of Superior
28
Bancorp common stock will remain at or near its current level,
which is substantially above historic trading prices prior to
2005, or will increase at a similar pace in the future.
Use of
Superior Bancorp common stock for future acquisitions or to
raise capital may be dilutive to existing
stockholders.
When Superior Bancorp determines that appropriate strategic
opportunities exist, Superior Bancorp may acquire other
financial institutions and related businesses, subject to
applicable regulatory requirements. Superior Bancorp may use its
common stock for such acquisitions. From time to time, Superior
Bancorp may also seek to raise capital through selling
additional common stock. It is possible that the issuance of
additional common stock in such acquisition or capital
transactions may be dilutive to the interests of existing
stockholders.
THE
PEOPLES COMMUNITY BANCSHARES SPECIAL MEETING
This prospectus/proxy statement is being furnished to
Peoples Community Bancshares stockholders in connection
with the solicitation of proxies by the Peoples Community
Bancshares board of directors for use at the Peoples
Community Bancshares special meeting to consider and vote upon
the approval of the merger agreement and the merger and the
adjournment of the special meeting, if necessary. Each copy of
this prospectus/proxy statement mailed or delivered to
Peoples Community Bancshares stockholders is accompanied
by a proxy card for use at the special meeting.
This prospectus/proxy statement is also furnished to
Peoples Community Bancshares stockholders as a prospectus
in connection with the issuance of shares of Superior Bancorp
common stock upon consummation of the merger.
Date, Place and Time. The Peoples
Community Bancshares special meeting is to be held at its
principal executive offices located at 25 South Links
Avenue, Sarasota, Florida 34236, on Tuesday, July 3,
2007, at 6:00 p.m.
Record Date, Quorum and Voting. The board of
directors of Peoples Community Bancshares has fixed the
close of business on May 25, 2007, as the record date for
the determination of the Peoples Community Bancshares
stockholders entitled to receive notice of and to vote at the
Peoples Community Bancshares special meeting. The
presence, in person or by proxy, of the holders of a majority of
the shares of Peoples Community Bancshares common stock
entitled to vote at the Peoples Community Bancshares
special meeting will constitute a quorum. Each stockholder of
record as of the record date is entitled to one vote for each
share then held.
Vote Required. As of May 25, 2007, the
Peoples Community Bancshares record date, there were
2,291,261 shares of Peoples Community Bancshares
common stock outstanding. Approval and adoption of the merger
agreement requires the affirmative vote of a majority of all
outstanding shares of Peoples Community Bancshares common
stock entitled to vote thereon; as a result, failures to vote,
broker non-votes and abstentions will be the equivalents of
votes against the merger agreement and the merger. Accordingly,
approval of the merger agreement at the Peoples Community
Bancshares special meeting will require the affirmative vote of
the holders of at least 1,145,631 shares of Peoples
Community Bancshares common stock.
As of the Peoples Community Bancshares record date,
directors and executive officers of Peoples Community
Bancshares and Peoples Community Bank beneficially owned
an aggregate of 950,234 shares, or approximately 41.5% of
the Peoples Community Bancshares common stock, outstanding
on such date. The directors and executive officers of
Peoples Community Bancshares and Peoples Community
Bank have agreed to vote the shares of Peoples Community
Bancshares common stock beneficially owned by them in favor of
the merger agreement and the merger. See The
Merger The Merger Agreement Support
Agreements, beginning on page 53.
To adjourn the special meeting to solicit additional proxies,
more of the shares of Peoples Community Bancshares common
stock voting at the special meeting must vote FOR
the adjournment than vote against the adjournment.
Voting and Revocation of Proxies. Shares of
Peoples Community Bancshares common stock represented by a
proxy properly signed and received at or prior to the
Peoples Community Bancshares special meeting, unless
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subsequently revoked, will be voted in accordance with the
instructions thereon. The proposal to adopt the merger agreement
is a non-discretionary item, meaning that brokerage firms may
not vote shares in their discretion on behalf of a client if the
client has not furnished voting instructions. Because the merger
must be approved by the holders of a majority of the outstanding
shares of the common stock of both Superior Bancorp and
Peoples Community Bancshares, abstentions and broker
non-votes will have the same effect as a vote against the
merger. You are urged to complete, sign and date the
accompanying proxy and return it promptly in the enclosed
postage-prepaid envelope. Only votes cast
FOR approval and adoption of the
merger agreement and the merger or other matters constitute
affirmative votes.
If a proxy is properly executed and returned without
indicating any voting instructions, shares of Peoples
Community Bancshares common stock represented by the proxy will
be voted FOR approval and adoption of the merger
agreement and the merger and for adjournment of the special
meeting.
Any proxy given pursuant to the solicitation may be revoked by
the person giving the proxy at any time before the proxy is
voted by filing an instrument revoking it or by delivering a
duly executed proxy bearing a later date to Peoples
Community Bancshares before or at the special meeting, or by
voting in person at the special meeting. Attendance at the
Peoples Community Bancshares special meeting will not in
and of itself constitute a revocation of a proxy.
Solicitation of Proxies. In addition to
solicitation by mail, directors, officers and employees of
Peoples Community Bancshares, who will not be specifically
compensated for such services, may solicit proxies from the
stockholders of Peoples Community Bancshares personally or
by telephone or other forms of communication. Except as
otherwise provided in the merger agreement, Peoples
Community Bancshares will bear its own expenses in connection
with the solicitation of proxies for the Peoples Community
Bancshares special meeting. See The Merger
Expenses and Fees, on page 49.
Recommendation of Peoples Community Bancshares
Board of Directors. Peoples Community
Bancshares board of directors has unanimously adopted the
merger agreement and believes that the proposed transaction is
fair and in the best interests of Peoples Community
Bancshares and its stockholders. Peoples Community
Bancshares board of directors recommends that its
stockholders vote FOR approval and
adoption of the merger agreement and the merger and
FOR the adjournment of the special
meeting.
Peoples Community Bancshares stockholders should not
send stock certificates with their proxy cards. The procedure
for the exchange of shares after the merger is consummated is
described at page 59 in this prospectus/proxy statement.
See The Merger Exchange of Certificates,
beginning on page 59.
30
THE
MERGER
We describe and summarize below the principal provisions of
the proposed merger between Superior Bancorp and Peoples
Community Bancshares, Inc. This description is not complete and
is subject to, and qualified in its entirety by reference to,
the Agreement and Plan of Merger, the full text of which is
attached to this joint proxy statement prospectus as
Annex A. We urge you to read the Agreement and Plan of
Merger carefully and in its entirety.
Background
of the Merger
From time to time over the past several years, during regularly
scheduled meetings, the directors of Peoples Community
Bancshares discussed its business and prospects, conditions in
the business and community banking market in Florida, and the
merger activity among financial institutions in Florida. During
this time, several parties approached Peoples Community
Bancshares expressing moderate to serious interest in acquiring
it. Peoples Community Bancshares did not enter into an
agreement with any of those parties, as its board of directors
did not believe that the transactions that were proposed would
afford Peoples Community Bancshares stockholders the
opportunity to receive any meaningful return on their investment.
In late March 2006, Stan Bailey, the Chairman and Chief
Executive Officer of Superior Bancorp, held an introductory
meeting with Neil McCurry, Jr., the President of
Peoples Community Bancshares, to discuss Superior Bancorp
and its plans for expansion in Florida as well as Peoples
Community Bancshares and its strategic plans for the future.
In August 2006, the board of directors of Peoples
Community Bancshares met for a general discussion of its
strategic alternatives, and the board decided to interview two
investment banking firms, including Hovde Financial
(Hovde), to determine whether either could assist
the board in a strategic analysis of Peoples Community
Bancshares prospects. The Peoples Community
Bancshares board of directors met with representatives of Hovde
later that month, to discuss Peoples Community
Bancshares strategic options. On August 22, 2006,
Hovde and Peoples Community Bancshares signed an
engagement letter pursuant to which Hovde was to assist and
advise Peoples Community Bancshares with respect to merger
discussions with potential partners and, if the parties
proceeded with a transaction, provide an opinion that the merger
consideration was fair from a financial point of view to the
stockholders of Peoples Community Bancshares.
As a part of its engagement, Hovde discussed with the board
information regarding the banking industry and market conditions
in general. Hovde also discussed bank holding companies and
investor groups that, in its opinion, could have an interest in
acquiring Peoples Community Bancshares and had the
necessary financial resources to carry out a transaction with
Peoples Community Bancshares and the ability to obtain
regulatory approvals. While not making a final decision whether
to pursue any business combination transaction, Peoples
Community Bancshares board did authorize Hovde to solicit
indications of interest that might warrant serious consideration
and potentially result in an agreement for Peoples
Community Bancshares to merge with or otherwise be acquired by
another entity. During September and October of 2006, Hovde,
with the assistance of Peoples Community Bancshares
management, performed a due diligence review of Peoples
Community Bancshares and completed a detailed offering
memorandum.
After a thorough review of the potential buyers deemed most
suitable, Hovde made the initial contacts with those select
parties during late October 2006. Then, on November 14,
2006, Mr. Bailey and George Hall, the Chief Banking Officer
of Superior Bank, met with Mr. McCurry to discuss Superior
Bancorps recent acquisition of Kensington Bankshares, Inc.
and First Kensington Bank in the Tampa, Florida market and
Superior Bancorps future plans for expansion in Florida
and to initiate preliminary discussions about the possibility of
combining the two companies.
On December 5, 2006, Mr. Bailey met with
Mr. McCurry and representatives of Hovde to discuss in
conceptual terms a merger with Peoples Community
Bancshares, and the process and schedule if the parties were to
agree to pursue a transaction.
On December 15, 2006, Superior Bancorp delivered to
Mr. McCurry and Hovde a draft letter of intent addressing
the proposed terms and conditions of the potential merger
between Superior Bancorp and Peoples
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Community Bancshares as well as Superior Bancorps plans
for retention of certain members of Peoples Community
Banks senior management in the event of a merger.
On December 20, 2006, Mr. Bailey met with
Mr. McCurry to discuss the proposed terms and conditions
and retention plans, provided to Mr. McCurry Superior
Bancorps due diligence request list and submitted a
revised letter of intent to Mr. McCurry for consideration
by the board of directors of Peoples Community Bancshares.
On December 26, 2006, representatives of Superior Bancorp
met with the board of directors of Peoples Community
Bancshares to discuss the proposed merger. In addition,
Mr. Bailey met with Rick Halloran, Executive Vice President
of Peoples Community Bancshares, Christopher Pennewill,
Senior Vice President of Peoples Community Bank, and
Dorothy Barth, Chief Financial Officer of Peoples
Community Bancshares, to discuss the proposed merger and plans
for management retention.
During the remainder of December 2006 and in early January 2007,
representatives of Superior Bancorp and Peoples Community
Bancshares, respectively, continued to discuss the respective
backgrounds, philosophies and corporate cultures of Superior
Bancorp and Peoples Community Bancshares, their strategic
directions, future plans, and other issues. The representatives
also discussed the parameters of a possible transaction between
the two parties, including integration issues, non-compete
agreements, employment agreements, and regulatory, tax and
compliance issues. Concurrently, Hovde, counsel for
Peoples Community Bancshares, and representatives of
Peoples Community Bancshares and Superior Bancorp
negotiated the terms of a merger agreement.
On January 10, 2007, Superior Bancorp engaged Sandler
ONeill & Partners, LP (Sandler
ONeill) to assist and advise Superior Bancorp with
respect to merger discussions with Peoples Community
Bancshares and, if the parties proceeded with a transaction, to
provide an opinion that the merger consideration was fair from a
financial point of view to the stockholders of Superior Bancorp.
On January 10 and 11, 2007, representatives of
Peoples Community Bancshares and Hovde conducted
on-site due
diligence of Superior Bancorp.
On January 11, 2007, Superior Bancorps board of
directors met to discuss the proposed merger with Peoples
Community Bancshares, the reasons for the merger and the due
diligence process. Representatives of Superior Bancorp conducted
on-site due
diligence of Peoples Community Bancshares on January
12-14, 2007.
Superior Bancorps board of directors reconvened on
January 17, 2007 to review the results of the due diligence
investigation, to review Sandler ONeills fairness
opinion and to consider approval of the merger agreement.
Superior Bancorps board of directors approved the merger
and the merger agreement and the transactions contemplated
thereby at the meeting.
On January 15, 2007, the board of directors of
Peoples Community Bancshares held its regularly scheduled
meeting, at which representatives of Hovde and legal counsel for
Peoples Community Bancshares participated. Peoples
Community Bancshares legal counsel reviewed generally for
the board of directors the fiduciary obligations of directors in
the sale of financial institutions. Hovde and legal counsel for
Peoples Community Bancshares briefed the board of
directors on the results of final negotiations concerning the
merger agreement and related matters. The board of directors
discussed, among other matters, the proposed terms of the
merger, including financial terms. Specifically, the board of
directors discussed the structure of the transaction, merger
consideration terms, the representations, warranties and
covenants of the parties and certain non-financial issues. The
board of directors reviewed the most recent drafts of the merger
agreement and ancillary documents. During the boards
meeting, Hovde advised that it was of the opinion, which opinion
was subsequently confirmed in writing, that as of that date and
based on and subject to the procedures followed, assumptions
made, matters considered and limitations on review described in
its opinion, the consideration to be received by Peoples
Community Bancshares stockholders under the merger
agreement was fair from a financial point of view. See
Opinion of Peoples Community
Bancshares Financial Advisor on page 34.
Following these discussions, Peoples Community
Bancshares board of directors unanimously approved the
merger agreement, the merger and the transactions contemplated
thereby. The board of directors authorized Peoples
Community Bancshares officers to execute the merger
agreement upon receiving confirmation that Superior Bancorp had
approved the merger agreement and the transactions contemplated
by the merger agreement.
32
On January 18, 2007, Superior Bancorp and Peoples
Community Bancshares executed the merger agreement and
Messrs. McCurry, Halloran and Pennewill and Ms. Barth
executed agreements with Superior Bank. In addition, Superior
Bancorp and Peoples Community Bancshares issued a joint
press release announcing the execution of the merger agreement
and the merger. Superior Bancorp, joined by Mr. McCurry,
held an analyst conference call on January 19, 2007 to
review the announced transaction.
Superior
Bancorps Reasons for the Merger
On January 17, 2007, the board of directors of Superior
Bancorp unanimously approved and adopted the merger agreement.
The board of directors of Superior Bancorp believes that the
merger and the terms and provisions of the merger agreement are
in the best interests of Superior Bancorps stockholders.
In approving the merger, the board of directors of Superior
Bancorp considered a number of factors as generally supporting
its decision to enter into the merger agreement. The following
factors considered by the board of directors of Superior Bancorp
in evaluating the merger agreement are not intended to be
exhaustive, but include the material factors considered by the
board. Without assigning any relative or specific weights to the
factors, the board of directors of Superior Bancorp considered
the following material factors:
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the high-growth market available in central Florida;
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the growth potential in Florida for a billion-dollar thrift;
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the numerous customer relationships of Peoples Community
Bancshares in Sarasota and Manatee Counties;
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the expected impact on future earnings of the combined companies;
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the expected impact on stockholder value of the combined
companies;
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the financial terms of recent business combinations in the
financial services industry and a comparison of the multiples of
selected combinations with the terms of the proposed transaction
with Peoples Community Bancshares; and
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the opinion of Sandler ONeill that the consideration for
which shares of Peoples Community Bancshares common stock
will be exchanged in the merger is fair from a financial point
of view to the stockholders of Superior Bancorp.
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The foregoing discussion of the information and factors
considered by the Superior Bancorp board of directors is not
intended to be exhaustive, but includes the material factors
considered. In view of the variety of factors considered in
connection with its evaluation of the merger and the offer
price, the board of directors did not find it practicable to,
and did not, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determinations
and recommendations, and individual directors may have given
differing weights to different factors.
The terms of the merger were the result of arms-length
negotiations between representatives of Superior Bancorp and
representatives of Peoples Community Bancshares. Based
upon the consideration of the foregoing factors, the board of
directors of Superior Bancorp unanimously approved the merger as
being in the best interest of Superior Bancorp, its stockholders
and its other constituencies.
Peoples
Community Bancshares Reasons for the Merger
On January 15, 2007, the board of directors of
Peoples Community Bancshares unanimously approved and
adopted the merger agreement. The board of directors of
Peoples Community Bancshares believes that the merger and
the terms and provisions of the merger agreement are in the best
interests of Peoples Community Bancshares
stockholders.
In approving the merger, the board of directors of Peoples
Community Bancshares considered a number of factors as generally
supporting its decision to enter into the merger agreement. The
following factors considered by the board of directors of
Peoples Community Bancshares in evaluating the merger
agreement are not intended to be exhaustive, but include the
material factors considered by the board. Without assigning any
relative or specific
33
weights to the factors, the board of directors of Peoples
Community Bancshares considered the following material factors:
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the value of the consideration to be received by Peoples
Community Bancshares stockholders relative to the value of its
common stock;
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certain information concerning the financial condition, results
of operations and business prospects of Superior Bancorp;
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the financial terms of recent business combinations in the
financial services industry and a comparison of the multiples of
selected combinations with the terms of the proposed transaction
with Superior Bancorp;
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the alternatives to the merger, including remaining an
independent institution;
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the competitive and regulatory environment for financial
institutions generally;
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the fact that the merger will enable Peoples Community
Bancshares stockholders to exchange their shares of common stock
for shares of common stock of a financial institution the stock
of which is widely held and publicly traded, and that the
consideration will be received tax-free; and
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the opinion of Hovde Financial that the consideration for which
shares of Peoples Bancshares common stock will be
exchanged in the merger is fair from a financial point of view
to the stockholders of Peoples Community Bancshares.
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The foregoing discussion of the information and factors
considered by the Peoples Community Bancshares board of
directors is not intended to be exhaustive, but includes the
material factors considered. In view of the variety of factors
considered in connection with its evaluation of the merger and
the offer price, the board of directors did not find it
practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching
its determinations and recommendations, and individual directors
may have given differing weights to different factors.
Each member of the Peoples Community Bancshares board of
directors has indicated that he intends to vote his shares of
common stock in favor of the merger.
The terms of the merger were the result of arms-length
negotiations between representatives of Peoples Community
Bancshares and representatives of Superior Bancorp. Based upon
the consideration of the foregoing factors, the board of
directors of Peoples Community Bancshares unanimously
approved the merger as being in the best interest of
Peoples Community Bancshares, its stockholders and its
other constituencies.
Recommendation
of Peoples Community Bancshares Board of
Directors
Peoples Community Bancshares board of directors has
unanimously approved the merger agreement and the merger and
believes that the proposed merger is in the best interest of
Peoples Community Bancshares and its stockholders.
Accordingly, Peoples Community Bancshares
board of directors unanimously recommends that its stockholders
vote FOR approval of the merger agreement and
the merger and FOR the adjournment of the
special meeting.
Opinion
of Peoples Community Bancshares Financial
Advisor
Hovde has delivered to the board of directors of Peoples
Community Bancshares its opinion that, based upon and subject to
the various considerations set forth in its written opinion
dated January 18, 2007, the total transaction consideration
to be paid to the stockholders of Peoples Community
Bancshares is fair from a financial point of view as of such
date. In requesting Hovdes advice and opinion, no
limitations were imposed by Peoples Community Bancshares
upon Hovde with respect to the investigations made or procedures
followed by it in rendering its opinion. The full text of the
opinion of Hovde, dated January 18, 2007, which describes
the procedures followed, assumptions made, matters considered
and limitations on the review undertaken, is attached hereto as
Annex C. The stockholders of Peoples Community
Bancshares should read this opinion in its entirety.
34
Hovde is a nationally recognized investment banking firm and, as
part of its investment banking business, is continually engaged
in the valuation of financial institutions in connection with
mergers and acquisitions, private placements and valuations for
other purposes. As a specialist in securities of financial
institutions, Hovde has experience in, and knowledge of, banks,
thrifts and bank and thrift holding companies. The board of
directors of Peoples Community Bancshares selected Hovde
to act as its financial advisor in connection with the merger on
the basis of the firms reputation and expertise in
transactions such as the merger.
Hovde will receive a fee from Peoples Community Bancshares
for performing a financial analysis of the merger and rendering
a written opinion to the board of directors of Peoples
Community Bancshares as to the fairness, from a financial point
of view, of the consideration to be paid to the stockholders of
Peoples Community Bancshares. Hovde will receive all of
such fee subsequent to Hovdes presentation of its fairness
opinion and analysis to the board of directors of Peoples
Community Bancshares. Peoples Community Bancshares has
also agreed to indemnify Hovde against any claims, losses and
expenses arising out of the merger or Hovdes engagement
that did not arise from Hovdes gross negligence or willful
misconduct.
Hovdes opinion is directed only to the fairness, from a
financial point of view, of the total transaction consideration,
and, as such, does not constitute a recommendation to any
stockholder of Peoples Community Bancshares as to how the
stockholder should vote at the Peoples Community
Bancshares stockholder meeting. The summary of the opinion of
Hovde set forth in this prospectus/proxy statement is qualified
in its entirety by reference to the full text of the opinion
attached hereto as Annex C.
The following is a summary of the analyses performed by Hovde in
connection with its fairness opinion. Certain of these analyses
were confirmed in a presentation to the board of directors of
Peoples Community Bancshares by Hovde. The summary set
forth below does not purport to be a complete description of
either the analyses performed by Hovde in rendering its opinion
or the presentation delivered by Hovde to the board of directors
of Peoples Community Bancshares, but it does summarize all
of the material analyses performed and presented by Hovde.
The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods
of financial analyses and the application of those methods to
the particular circumstances. In arriving at its opinion, Hovde
did not attribute any particular weight to any analysis and
factor considered by it, but rather made qualitative judgments
as to the significance and relevance of each analysis and
factor. Accordingly, Hovde believes that its analyses and the
following summary must be considered as a whole and that
selecting portions of its analyses, without considering all
factors and analyses, could create an incomplete view of the
process underlying the analyses set forth in its report to the
board of directors of Peoples Community Bancshares and its
fairness opinion.
In performing its analyses, Hovde made numerous assumptions with
respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the
control of Peoples Community Bancshares and Superior
Bancorp. The analyses performed by Hovde are not necessarily
indicative of actual value or actual future results, which may
be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as part of
Hovdes analysis of the fairness of the transaction
consideration, from a financial point of view, to the
stockholders of Peoples Community Bancshares. The analyses
do not purport to be an appraisal or to reflect the prices at
which a company might actually be sold or the prices at which
any securities may trade at the present time or at any time in
the future. Hovdes opinion does not address the relative
merits of the merger as compared to any other business
combination in which Peoples Community Bancshares might
engage. In addition, as described above, Hovdes opinion to
the board of directors of Peoples Community Bancshares was
one of many factors taken into consideration by the board of
directors of Peoples Community Bancshares in making its
determination to approve the merger agreement.
35
During the course of its engagement, and as a basis for arriving
at its opinion, Hovde reviewed and analyzed material bearing
upon the financial and operating conditions of Peoples
Community Bancshares and Superior Bancorp and material prepared
in connection with the merger, including, among other things,
the following:
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the merger agreement and all attachments thereto;
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certain historical publicly available information concerning
Peoples Community Bancshares and Superior Bancorp;
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certain internal financial statements and other financial and
operating data concerning Peoples Community Bancshares and
Superior Bancorp;
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certain financial projections prepared by the managements of
Peoples Community Bancshares and Superior Bancorp;
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certain other information provided to Hovde by members of the
senior management of Peoples Community Bancshares and
Superior Bancorp for the purpose of reviewing the future
prospects of Peoples Community Bancshares and Superior
Bancorp, including financial forecasts related to the respective
businesses, earnings, assets, liabilities and the amount and
timing of cost savings expected to be achieved as a result of
the merger;
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historical market prices and trading volumes for Superior
Bancorp common stock;
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the nature and terms of recent merger and acquisition
transactions to the extent publicly available, involving banks,
thrifts and bank and thrift holding companies that Hovde
considered relevant;
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the pro forma ownership of Superior Bancorps common stock
by the stockholders of Peoples Community Bancshares
relative to the pro forma contribution of Peoples
Community Bancshares assets, liabilities, equity and
earnings to the combined company;
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the pro forma impact of the merger on the combined
companys earnings per share, consolidated capitalization
and financial ratios;
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such other information and factors as Hovde deemed
appropriate; and
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its assessment of general economic, market and financial
conditions and its experience in other transactions, as well as
its knowledge of the commercial banking industry and its general
experience in securities valuations.
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In rendering its opinion, Hovde assumed, without independent
verification, the accuracy and completeness of the financial and
other information and relied upon the accuracy of the
representations of the parties contained in the merger
agreement. Hovde also assumed that the financial forecasts
furnished to or discussed with Hovde by Peoples Community
Bancshares and Superior Bancorp were reasonably prepared and
reflected the best currently available estimates and judgments
of senior management of Peoples Community Bancshares and
Superior Bancorp as to the future financial performance of
Peoples Community Bancshares, Superior Bancorp, or the
combined company, as the case may be. Hovde has not made any
independent evaluation or appraisal of any properties, assets or
liabilities of Peoples Community Bancshares or Superior
Bancorp. Hovde assumed and relied upon the accuracy and
completeness of the publicly available and other non-public
financial information provided to it by Peoples Community
Bancshares and Superior Bancorp, relied upon the representations
and warranties of Peoples Community Bancshares and
Superior Bancorp made pursuant to the merger agreement, and did
not independently attempt to verify any of such information.
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Analysis of Selected Mergers. As part of its
analysis, Hovde reviewed three groups of comparable merger
transactions. The first peer group included transactions, which
have occurred since January 1, 2006, that involved target
banks in the entire United States that had total assets between
$200 million and $400 million and a return on average
assets greater than 1.00% (the Nationwide Merger
Group). This Nationwide Merger Group consisted of the
following 13 transactions:
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Buyer
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Seller
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Enterprise Financial Services (MO)
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Clayco Banc Corporation (KS)
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Dearborn Bancorp Inc. (MI)
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Fidelity Financial Corporation of
MI (MI)
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United Community Banks Inc. (GA)
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Southern Bancorp Inc. (GA)
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Sterling Bancshares Inc. (TX)
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BOTH Inc. (TX)
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Industrial Bank of Taiwan
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Evertrust bank (CA)
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Castle Creek Capital LLC (CA)
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Bankshares Inc. (FL)
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Inland Bancorp Holding Company (IL)
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Cambank Inc. (IL)
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UMB Financial Corporation (MO)
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|
Mountain States Bancorp Inc. (CO)
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Security Bank Corp. (GA)
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|
Homestead Bank (GA)
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Vineyard National Bancorp (CA)
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|
Rancho Bank (CA)
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Riverside Banking Company (FL)
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|
First Community Bank Holding Corp.
(FL)
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Superior Bancorp (AL)
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Kensington Bankshares, Inc. (FL)
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Western Alliance Bancorp (NV)
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Bank of Nevada (NV)
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Hovde then reviewed comparable mergers involving banks
headquartered in Sarasota, Florida that have announced since
January 1, 1994 (the Florida Merger Group).
This Florida Merger Group consisted of the following seven
transactions:
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Buyer
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Seller
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TIB Financial Corp. (FL)
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Bank of Venice (FL)
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NBC Capital Corp. (MS)
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SunCoast Bancorp Inc. (FL)
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Colonial BancGroup Inc. (AL)
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Sarasota Bancorp. (FL)
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United Financial Holdings Inc. (FL)
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First Security Bank (FL)
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F.N.B. Corp. (PA)
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West Coast Bank (FL)
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Provident Financial Group Inc. (OH)
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Florida Gulfcoast Bancorp, Inc.
(FL)
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First of America Bank Corp. (MI)
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Presidential Holding Company (FL)
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37
Hovde also reviewed comparable mergers announced since
January 1, 2005, involving target banks in the entire
United States that had total assets under $1 billion and
efficiency ratios less than 0.50% (the Efficiency Ratio
Merger Group). This Efficiency Ratio Merger Group
consisted of 33 transactions:
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Buyer
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Seller
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Enterprise Financial Services (MO)
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Clayco Banc Corporation (KS)
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Stifel Financial Corp. (MO)
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First Service Financial Co. (MO)
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Sun American Bancorp (FL)
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Independent Community Bank (FL)
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Greene Investment Company (IA)
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Dunlap Corp. (IA)
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American West Bancorp. (WA)
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Far West Bancorporation (UT)
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Integra Bank Corp. (IN)
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Prairie Financial Corporation (IL)
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Reserve Financial Associates LLC
(OH)
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Business Bank of Florida Corp. (FL)
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Industry Bancshares Inc. (TX)
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Community Bancorp, Inc. (TX)
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Blackridge Financial Inc. (ND)
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Carlos Bancshares Inc. (MN)
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Sterling Bancshares Inc. (TX)
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BOTH Inc. (TX)
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Community Bancorp (NV)
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Valley Bancorp (NV)
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Castle Creek Capital LLC (CA)
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Bankshares Inc. (FL)
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First Charter Corp. (NC)
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GBC Bancorp Inc. (GA)
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Glacier Bancorp Inc. (MT)
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First National Bank of Morgan (UT)
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Alabama National BanCorp. (AL)
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PB Financial Services Corp. (GA)
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Security Bank Corp. (GA)
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Homestead Bank (GA)
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Crescent Financial Corp. (NC)
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Port City Capital Bank (NC)
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Western Alliance Bancorp (NC)
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|
Bank of Nevada (NV)
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Cornerstone Holding Co Inc. (ND)
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Citizens Incorporated (ND)
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East West Bancorp Inc. (CA)
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Standard FSB (CA)
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IBT Bancorp Inc. (MI)
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Farwell State Savings Bank (MI)
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Wintrust Financial Corp. (IL)
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|
Hinsbrook Bancshares inc. (IL)
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United Bancorp of WY (WY)
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|
First National Bank Holding Co.
Inc. (WY)
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Synovus Financial Corp. (GA)
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|
Banking Corporation of Florida (FL)
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First Sleepy Eye Bancorp Inc. (SD)
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|
Stearns Bank Evansville NA (MN)
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Synovus Financial Corp. (GA)
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|
Riverside Bancshares Inc. (GA)
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Liberty Bancshares Inc. (AR)
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|
Russelville Bancshares Inc. (AR)
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Pacific Continental Corp. (OR)
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|
NWB Financial Corp. (WA)
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Frandsen Financial Corporation (MN)
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|
QCF Bancorp Inc. (MN)
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First Community Bancorp (CA)
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|
Pacific Liberty Bank (CA)
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Home Bancshares Inc. (AR)
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|
Mountain View Bancshares Inc. (AR)
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Investor Group
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|
Rock Springs American Bancorp Inc.
(WY)
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Mercantile Bankshares Corp. (MD)
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Community Bank of N. Virginia (VA)
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Hovde calculated the medians and averages of the following
relevant transaction ratios in the Nationwide Merger Group, the
Florida Merger Group and the Efficiency Ratio Merger Group: the
percentage of the offer value to the acquired companys
total assets, the multiple of the offer value to the acquired
companys tangible book value; the multiple of the offer
value to the acquired companys earnings for the
12 months preceding the announcement date of the
transaction; and the tangible book value premium to core
deposits. Hovde compared these multiples with the corresponding
multiples for the merger, valuing the total consideration that
would be received pursuant to the merger agreement at
$32.77 per Peoples Community Bancshares diluted
share. In calculating the multiples for the merger, Hovde used
Peoples Community Bancshares earnings for the
12 months ended
38
September 30, 2006, and Peoples Community
Bancshares tangible book value per share, total assets,
and total deposits as of September 30, 2006. The results of
this analysis were as follows:
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Ratio of
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Tangible
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Offer Value to
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Book Value
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12 Months
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Premium
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Total
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Tangible
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Preceding
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to Core
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Assets
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Book Value
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Earnings
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Deposits
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(%)
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(x)
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(x)
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(%)
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Peoples Community Bancshares
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25.3
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3.2
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22.6
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26.5
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Nationwide Merger Group average
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23.5
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3.0
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21.7
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24.2
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Florida Merger Group average
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22.7
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2.5
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21.5
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19.8
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Efficiency Ratio Merger Group
average
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25.3
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2.73
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18.5
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24.6
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Rate of Return Analysis. Hovde estimated the
rates of returns for four different scenarios; Peoples
Community Bancshares stand-alone, Peoples Community
Bancshares affiliates in five years, Peoples Community
Bancshares affiliates with Superior Bancorp, and Peoples
Community Bancshares affiliates with Superior Bancorp and
Superior Bancorp is acquired. For the standalone scenario
(Status Quo), it is assumed that Superior Bancorp
common stock sells in the market on December 31, 2011 at
17x earnings per share (EPS) and the current
Superior Bancorp price to earnings ratio (P/E) is
based on the 2007 estimate. The Status Quo scenario yielded an
annual return of investment of 47.10%. For the second scenario
(Affiliation in 5 Years), it is assumed that
Superior Bancorp affiliates with a merger partner on
December 31, 2011 at 21x EPS, which yielded an annual
return of investment of 55.08%. The third scenario
(Affiliation Today) assumes Superior Bancorp
affiliates with Peoples Community Bancshares in 2007 and
the pro forma stock sells in the market on December 31,
2011 at 17x EPS with the current Peoples Community
Bancshares P/E based on the 2007 estimate. The Affiliation Today
scenario yielded an annual return of investment of 71.41%. The
fourth scenario (Double Dip) assumed Superior
Bancorp affiliates with Peoples Community Bancshares in
2007 and the pro forma company is acquired on December 31,
2011 at 25x EPS. The Double Dip scenario yielded an annual
return of investment of 88.76%.
Contribution Analysis. Hovde prepared a
contribution analysis showing percentages of total assets, total
net loans, total deposits, total equity, and total tangible
equity at September 30, 2006 for Peoples Community
Bancshares and for Superior Bancorp, as well the estimated
fiscal year 2007 earnings, that would be contributed to the
combined company on a pro-forma basis by Peoples Community
Bancshares and Superior Bancorp. This analysis indicated that
holders of Peoples Community Bancshares common stock would
own approximately 16.1% of the pro forma common shares
outstanding of Superior Bancorp, assuming an exchange ratio of
1.00, while contributing an average of 14.4% of the financial
components listed above.
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Peoples Community Bancshares
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Contribution
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Superior Bancorp
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Total assets
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11.7
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%
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Total net loans
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13.1
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%
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Total deposits
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11.9
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%
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Total equity
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|
|
8.6
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%
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Total tangible equity
|
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|
14.8
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%
|
Net income estimated
fiscal year 2007 GAAP Basis
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26.1
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%
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Average Peoples Community
Bancshares Contribution Percentage
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14.4
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%
|
Actual Peoples Community
Bancshares Pro Forma Ownership
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|
16.1
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%
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Discounted Cash Flow Analysis. Hovde estimated
the present value of all shares of Peoples Community
Bancshares common stock by estimating the value of Peoples
Community Bancshares estimated future earnings stream
beginning in 2006. Reflecting Peoples Community
Bancshares internal projections, Hovde assumed net income
in 2006, 2007, 2008, 2009, 2010 and 2011 of $4.0 million,
$5.1 million, $6.1 million, $7.0 million,
$7.9 million and $8.9 million, respectively. The
present value of these earnings was calculated based on a range
of discount rates of 10.0%, 11.0%, 12.0%, 13.0%, and 14.0%,
respectively. In order to derive the terminal value of
39
Peoples Community Bancshares earnings stream beyond
2011, Hovde assumed a terminal value based on a multiple of
between 2.07x and 2.47x applied to book value in 2011. The
present value of this terminal amount was then calculated based
on the range of discount rates mentioned above. These rates and
values were chosen to reflect different assumptions regarding
the required rates of return of holders or prospective buyers of
Peoples Community Bancshares common stock. This analysis
and its underlying assumptions yielded a range of values for
present value of Peoples Community Bancshares stock of
approximately $28.17 per share (at a 14.0% discount rate
and a 2.07 price to book value multiple) to $39.95 per
share (at a 10.0% discount rate and a 2.47x price to book value
multiple), with a midpoint of $33.64 per share (using a
12.0% discount rate and a 2.27x price to book value multiple),
compared to total merger consideration of $32.77 per share.
Deposit Premium Analysis. Hovde prepared a
core deposit premium sensitivity analysis based on aggregate
value. In calculating the value, Hovde used Peoples
Community Bancshares tangible equity and core deposits as
of September 30, 2006. For this analysis, core deposit
premiums ranged from 21.75% to 24.25%. The value per share
ranged from $30.73 (21.75% Core Deposit Premium) to $32.98
(24.25% Core Deposit Premium). The median Peoples
Community Bancshares value per share based on the range was
$31.86 (23.00% Core Deposit Premium). The transaction deal value
per share was $32.77. The average core deposit premium for the
Nationwide Merger Group, Florida Merger Group, Efficiency Ratio
Merger Group, and all banks in 2006 were 19.8%, 24.2%, 19.8%,
and 24.6%, respectively. Superior Bancorps offer implies a
core deposit premium of 26.5%.
Based upon the foregoing analyses and other investigations
and assumptions set forth in its opinion, without giving
specific weightings to any one factor or comparison, Hovde
determined that the transaction consideration was fair from a
financial point of view to the stockholders of Peoples
Community Bancshares.
The
Merger Agreement
The merger agreement has been included as Annex A to
this prospectus/proxy statement in order to provide you with
information regarding its terms. It is not intended to provide
any other factual information about the parties. The merger
agreement contains representations and warranties the parties
made to each other. The assertions contained in those
representations and warranties are qualified by information
contained in confidential disclosure schedules that the parties
have exchanged. These disclosure schedules contain information
that modifies, qualifies and creates exceptions to the
representations and warranties set forth in the merger
agreement. Accordingly, you should not rely on the
representations and warranties contained in the merger agreement
as characterizations of the actual state of facts, since they
are modified in important part by the underlying disclosure
schedules. In addition, information concerning the subject
matter of the representations and warranties may have changed
since the date of the merger agreement. You should rely only on
this prospectus/proxy statement, other filings made by Superior
Bancorp with the SEC and other public announcements or
statements by the parties for factual information about the
parties.
Effect
of the Merger
Subject to the terms of the merger agreement, and in accordance
with Delaware law and Florida law, Peoples Community
Bancshares will merge with and into Superior Bancorp and the
separate legal existence of Peoples Community Bancshares
will cease. Superior Bancorp will be the surviving corporation.
All property, rights, powers, duties, obligations, debts and
liabilities of Peoples Community Bancshares will
automatically be deemed transferred to Superior Bancorp, as the
surviving corporation in the merger. The restated certificate of
incorporation and the bylaws of Superior Bancorp in effect at
the effective time of the merger will govern Superior Bancorp,
as the surviving corporation in the merger, until amended or
repealed in accordance with applicable law. Superior Bancorp
will continue as the surviving corporation under the same name
after the merger is completed.
Peoples
Community Bank
Superior Bancorp and Peoples Community Bancshares
anticipate that, on or after the effective date of the merger,
Superior Bank will acquire substantially all of the assets of,
and assume substantially all of the liabilities of,
Peoples Community Bank. Peoples Community Bancshares
has agreed to cooperate with Superior Bancorp, including calling
any special meetings of the board of directors of Peoples
Community Bank and the filing of any
40
regulatory applications, in the execution of appropriate
documentation relating to such transaction. In the event that
following the effective date of the merger Peoples
Community Bank remains a separate legal entity owned by Superior
Bancorp, Superior Bancorp and Peoples Community Bancshares
have agreed that prior to the effective date of the merger they
will determine which existing members of the board of directors
of Peoples Community Bank, if any, will remain as
directors. Superior Bancorp has agreed that it will accept the
resignations of any such existing members who desire to resign
as of effective date of the merger.
What
Peoples Community Bancshares Stockholders Will
Receive
On the effective date of the merger, each share of Peoples
Community Bancshares common stock will be converted into the
right to receive 2.9036 shares of Superior Bancorp common
stock, subject to Peoples Community Bancshares price
termination right described in the next section below.
In the event that there is a shortfall between the required net
worth of Peoples Community Bancshares of $25,959,000 and
the actual amount of the net worth of Peoples Community
Bancshares at the effective time of the merger, then the
exchange ratio shall be adjusted downward by a reduction factor
equal to the percentage obtained by dividing the net worth
shortfall amount by $25,959,000. The net worth of Peoples
Community Bancshares will be calculated pursuant to the merger
agreement as Peoples Community Bancshares
stockholders equity less adjustments for specified loans
and credits. Net worth will not be reduced as a result of any
expense incurred or losses realized as a result of the merger
agreement, changes in laws or generally accepted accounting
principles (GAAP), the transactions contemplated by
the merger agreement or any actions taken at the request or with
the consent of Superior Bancorp.
In addition, Superior Bancorp will not issue fractional shares
of Superior Bancorp common stock to Peoples Community
Bancshares stockholders. If, as a Peoples Community
Bancshares stockholder, you are otherwise entitled to receive a
fractional share of Superior Bancorp common stock under the
exchange procedure described below, you will instead have the
right to receive cash, without interest, in an amount equal to
the product of the fractional part of a share that would
otherwise be due to you and the final closing price per share of
Superior Bancorp common stock on the last business day
immediately preceding the effective date of the merger.
Peoples
Community Bancshares Price Termination Right
Peoples Community Bancshares may, but is not required to,
terminate the merger agreement during the five-business-day
period after the date all consents and regulatory approvals have
been received (the determination date) if (1) the
ten-day
average closing price per share of Superior Bancorp common stock
as reported on the NASDAQ Global Market immediately preceding
the determination date is less than $9.56, and (2) the
number obtained by dividing the Superior Bancorp stock price on
the determination date by $11.25, is less than the Bank Index
Ratio minus 0.15. The Bank Index Ratio is equal to the quotient
obtained by dividing the average of the NASDAQ Bank Index for
ten consecutive trading days immediately preceding the
determination date by 3,386.64, the value of the NASDAQ Bank
Index on the date of the merger agreement. If Peoples
Community Bancshares exercises its option to terminate,
Peoples Community Bancshares must give notice to Superior
Bancorp. The merger agreement will not be terminated if Superior
Bancorp agrees within five business days of receipt of such
notice to increase the consideration for the merger by paying
additional consideration in stock, cash or a combination of both
so that consideration will be valued at the lesser of
(1) the product of 0.85 and $11.25, multiplied by the
exchange ratio and (2) the product of the Bank Index Ratio
and $11.25, multiplied by the exchange ratio. No assurance can
be given as to whether Peoples Community Bancshares
board of directors would exercise such right to terminate the
merger agreement if these conditions occur or whether Superior
Bancorp would agree to pay additional consideration.
Superior
Bancorp Common Stock
Each share of Superior Bancorp common stock outstanding
immediately prior to completion of the merger will remain
outstanding and unchanged by the merger.
Treatment
of Peoples Community Bancshares Stock
Options
The merger agreement provides that, at the effective time of the
merger, each outstanding option to purchase Peoples
Community Bancshares common stock will be cancelled and each
holder of such options will be entitled to
41
receive cash equal to the amount resulting when the number of
options held by such a holder is multiplied by the Per Option
Value. The Per Option Value equals (1) the
ten-day
average trading price of Superior Bancorp common stock
immediately preceding the effective date multiplied by the
exchange ratio, less (2) the exercise price for each share
of Peoples Community Bancshares common stock subject to
such option.
It is a condition to the closing of the merger that each holder
of a Peoples Community Bancshares option has entered into
an agreement to surrender his or her option as of the effective
date of the merger in exchange for the consideration described
above.
Closing
and Effective Date of the Merger
The merger will be consummated only when all conditions,
including obtaining all stockholder and regulatory approvals and
consents, have been fulfilled or waived, or as soon as
practicable thereafter as Superior Bancorp and Peoples
Community Bancshares may mutually agree. Regulatory approvals
cannot be waived. The effective date of the merger will be the
date specified in the Certificate of Merger to be issued by the
Secretary of State of the State of Delaware. We currently expect
to close the merger during the third quarter of 2007, although
we cannot guarantee when or if the merger will be completed. See
The Merger The Merger Agreement
Conditions to the Completion of the Merger and The
Merger The Merger Agreement Regulatory
Approvals, beginning at pages 44 and 49, respectively.
Representations
and Warranties
In the merger agreement, Superior Bancorp and Peoples
Community Bancshares have each made a number of customary
representations and warranties relating to the organization and
capital structures of the respective companies and their
subsidiaries, their operations, financial condition and other
matters, including their authority to enter into the merger
agreement and to consummate the merger.
Covenants
with Respect to the Merger
The merger agreement provides that, during the period from the
date of the merger agreement to the effective time, except as
specifically provided for in the merger agreement, each of
Superior Bancorp and Peoples Community Bancshares will:
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use its best efforts promptly to take all actions and do all
things necessary, proper or advisable under applicable law to
consummate and make effective, as soon as practicable, the
transactions contemplated by the merger agreement;
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use its best efforts to cooperate with the other party and take
certain actions under the merger agreement in order to
consummate the merger;
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not make any public announcement, issue any press release or
other publicity or confirm any statements concerning the
transaction without the approval of the other party;
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furnish to the other party public and non-public filings not
precluded from disclosure by law, including call reports, SEC
filings, regulatory filings, tax returns and similar documents;
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provide the other party with access to its assets, books and
records during normal business hours to effect the parties
respective covenants under the merger agreement and hold such
information in confidence; and
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give written notice promptly to the other party upon becoming
aware of the occurrence or impending occurrence of any event or
circumstances relating to it or its subsidiaries which
(1) is likely to have, individually or in the aggregate, a
material adverse effect on it or (2) would cause or
constitute a material breach of any of its representations,
warranties or covenants, and to use its reasonable efforts to
prevent or promptly remedy the same.
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In addition, until the effective date of the merger,
Peoples Community Bancshares has agreed to:
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conduct its business in the ordinary course of business and use
commercially reasonable efforts subject to the terms of the
merger agreement to maintain its relationship with its
depositors, customers and employees;
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42
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not make any material change in its accounting or tax policies
or methods of operations, except as disclosed in writing in its
disclosure schedules to Superior Bancorp;
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take no action which would prevent or impede the merger from
qualifying as a tax-free reorganization for federal income tax
purposes;
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cooperate with Superior Bancorp in the preparation of the
registration statement that includes this prospectus/proxy
statement and any regulatory filings and file all regulatory
applications and the registration statement and cause a
stockholders meeting to be held to approve the merger as
soon as possible after the effective date of the registration
statement;
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take no action which would materially adversely affect the
ability of any party to obtain any consents required for the
transactions contemplated by the merger agreement without the
imposition of conditions or restrictions;
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take no action which would materially adversely affect the
ability of any party to perform its covenants and agreements
under the merger agreement;
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use its reasonable efforts to cause the merger to be closed at
the earliest practicable date and take no action or omit to take
any action which would cause the merger not to qualify as a
reorganization for federal income tax purposes;
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recommend that Peoples Community Bancshares stockholders
vote in favor of the merger agreement and the merger at the
Peoples Community Bancshares stockholders meeting,
and not withdraw, qualify or modify its recommendation or
approve or recommend another acquisition proposal or enter into
another acquisition proposal unless its board of directors
determines in good faith after it has received a superior
proposal that the failure to do so would result in a breach of
fiduciary duties to the Peoples Community Bancshares
stockholders;
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not solicit, initiate, encourage or induce the making,
submission or announcement of any competing request or proposal
or participate in negotiations or furnish any person any
nonpublic information that may lead to an acquisition proposal
or approve, recommend or enter into an acquisition proposal;
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maintain an allowance for possible loan, securities or credit
losses, including for loans made or securities purchased after
January 18, 2007, that is adequate within the meaning of
GAAP and applicable regulatory requirements or guidelines and
its current credit policies and loan loss methodologies;
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use its reasonable efforts to cause each executive officer and
director of Peoples Community Bancshares to execute a
support agreement;
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furnish to Superior Bancorp copies of all quarterly financial
statements, all audit reports submitted to Peoples
Community Bancshares by independent auditors and copies of
financial statements and reports sent to its stockholders or
filed with the SEC or other regulatory agency and any additional
financial data as reasonably requested;
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provide Superior Bancorp with all information provided to its
board of directors for each new, renewed or modified loan with
an outstanding principal amount in excess of $250,000;
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consult with Superior Bancorp prior to making any loan which
will result in an exception to its loan policy;
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consult with Superior Bancorp in advance on any agreement to
make or to permit any amendment or termination of any contract
requiring capital expenditures of more than $50,000;
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consult with Superior Bancorp to coordinate various business
issues on a basis mutually satisfactory to Peoples
Community Bancshares and Superior Bancorp;
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purchase for and on behalf of its current and former officers
and directors extended coverage under the current
directors and officers liability insurance policy
maintained by Community Bancshares to provide continued coverage
for four years following the effective date of the
merger; and
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43
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if so determined by its board of directors, may establish and
declare its normal dividend of $.10 per share of
Peoples Community Bancshares common stock at the earlier
of ten business days prior to the effective date or during May
2007.
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In addition, until the effective date of the merger, Superior
Bancorp has agreed to:
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conduct its business in the ordinary course of business and use
commercially reasonable efforts subject to the terms of the
merger agreement to maintain its relationship with its
depositors, customers and employees;
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not make any material change in its accounting or tax policies
or methods of operations, except as required by GAAP or by law;
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take no action which would materially adversely affect the
ability of any party to obtain any consents required for the
transactions contemplated by the merger agreement without the
imposition of conditions or restrictions;
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take no action which would materially adversely affect the
ability of any party to perform its covenants and agreements
under the merger agreement;
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use its reasonable efforts to cause the merger to be effected at
the earliest practicable date and take no action or omit to take
any action which would cause the merger not to qualify as a
reorganization for federal income tax purposes;
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cooperate with Peoples Community Bancshares in the
preparation of any regulatory filings and the registration
statement that includes this joint prospectus/proxy statement,
file all regulatory applications for approvals and the
registration statement as soon as possible;
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furnish to Peoples Community Bancshares copies of all
financial statements and loan reports that it provides to its
board of directors and executive management and reports filed
with the SEC or other regulatory agency and any additional
financial data as reasonably requested;
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cause the listing of the shares of Superior Bancorp common stock
to be issued in the merger on the NASDAQ Global Market or other
quotations system on which such shares are primarily traded;
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provide to officers and employees of Peoples Community
Bancshares at the effective time employee benefits under
employee benefit and welfare plans of Superior Bancorp and honor
all employment, severance, consulting and other agreements
disclosed by Peoples Community Bancshares;
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acknowledge that the authority to establish and implement
business policies of Peoples Community Bancshares shall
continue to reside with Peoples Community Bancshares
officers and board until the effective date of the merger;
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after the effective date, provide to the officers and employees
of Peoples Community Bancshares employee benefits under
employee benefit and welfare plans similar to those provided by
Superior Bancorp to similarly situated employees; and
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provide certain indemnification rights to each current and
former director
and/or
officer of Peoples Community Bancshares or any of its
subsidiaries arising out of or pertaining to matters existing or
occurring at or prior to the effective date of the merger for a
period of four years from the effective date of the merger.
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Conditions
to the Completion of the Merger
The completion of the merger is subject to a number of
conditions, some of which are mutual and others of which are
applicable to either Superior Bancorp or Peoples Community
Bancshares. Although most of the conditions will not be
satisfied until immediately before the effective time of the
merger, the companies believe that they each are currently in
material compliance with the conditions.
The obligation of Superior Bancorp to complete the merger is
subject to the following conditions:
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The representations and warranties of Peoples Community
Bancshares contained in the merger agreement will be true and
correct in all material respects on the effective date of the
merger.
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Peoples Community Bancshares will have performed in all
material respects all agreements and covenants required by the
merger agreement to be performed by Peoples Community
Bancshares.
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Peoples Community Bancshares will have a net worth, as
defined in the merger agreement, of not less than $25,959,000.
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Superior Bancorp will have received certain closing certificates
with respect to the merger and the financial and regulatory
condition of Peoples Community Bancshares and its
subsidiaries.
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Superior Bancorp will have received an opinion of Peoples
Community Bancshares legal counsel, Igler &
Dougherty, P.A., as to certain legal matters.
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Peoples Community Bancshares will have used its best
efforts to obtain an agreement from each director, executive
officer and affiliate of Peoples Community Bancshares
regarding the sale and disposition of each such persons
stock.
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The number of shares as to which Peoples Community
Bancshares stockholders have exercised dissenters rights
of appraisal will not exceed 10% of the outstanding shares of
Peoples Community Bancshares.
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Superior Bancorp will have received a letter from Sandler
ONeill & Partners, L.P. confirming its opinion
prior to the date of the merger agreement that the exchange
ratio is fair to the stockholders of Superior Bancorp from a
financial point of view.
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The board of directors of Superior Bancorp will not have made a
determination that the merger has become impractical because of
any state of war, declaration of a banking moratorium or a
general suspension of trading of Superior Bancorp common stock
on the NASDAQ Global Market.
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Each of the officers and directors of Peoples Community
Bancshares will have delivered a letter to Superior Bancorp
confirming that he or she is not aware of any claims he or she
may have against Peoples Community Bancshares.
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Peoples Community Bancshares will have paid off in full
and terminated, without penalty or cost to Superior Bancorp or
Peoples Community Bancshares, the Peoples Community
Bancshares line of credit and all liens and collateral for
such line of credit will have been released in full.
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Superior Bancorp will not be required to make any payment to any
person in connection with the merger which in the reasonable
opinion of Superior Bancorp will be subject to the excise tax
imposed on excess parachute payments by Section 4999 of the
Internal Revenue Code
and/or for
which Superior Bancorp will receive no deduction by virtue of
Section 280G.
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All holders of Peoples Community Bancshares options
will have entered into agreements to surrender their respective
Peoples Community Bancshares options in exchange for the
payment of cash contemplated by the merger agreement.
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The obligation of Peoples Community Bancshares to
consummate the merger is subject to, among others, the following
conditions:
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The representations and warranties of Superior Bancorp contained
in the merger agreement will be true and correct in all material
respects on the effective date of the merger.
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Superior Bancorp will have performed in all material respects
all agreements and covenants required by the merger agreement to
be performed by Superior Bancorp.
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Peoples Community Bancshares will have received certain
closing certificates with respect to the merger and the
financial and regulatory condition of Superior Bancorp and its
subsidiaries.
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Peoples Community Bancshares will have received the
opinion of Superior Bancorps General Counsel as required
by the merger agreement.
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Peoples Community Bancshares will have received a letter
from Hovde Financial confirming its opinion as of the date of
the merger agreement that the exchange ratio is fair to the
stockholders of Peoples Community Bancshares from a
financial point of view.
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The shares of Superior Bancorp common stock to be issued in
connection with the merger will have been approved for listing
on the NASDAQ Global Market.
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The board of directors of Peoples Community Bancshares
will not have made a determination that the merger has become
impractical because of any state of war, declaration of a
banking moratorium or a general suspension of trading of
Superior Bancorp common stock on the NASDAQ Global Market.
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Peoples Community Bancshares will use its reasonable best
efforts to obtain an agreement from each officer, director or
affiliate of Peoples Community Bancshares regarding the
sale and disposition of such persons stock.
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The obligation of each of Superior Bancorp and Peoples
Community Bancshares to consummate the merger is subject to
certain additional conditions, including the following:
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The merger agreement will have been approved by holders of a
majority of the outstanding Peoples Community Bancshares
common stock entitled to vote thereon.
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All required orders, consents and approvals will have been
obtained from the Office of Thrift Supervision and other
appropriate bank regulatory authorities, the Securities and
Exchange Commission and other governmental authorities. No such
order, consent or approval obtained which is necessary to
consummate the merger will be conditioned or restricted in a
manner which in the reasonable good faith judgment of the board
of directors of Superior Bancorp would so materially adversely
impact the economic benefits of the transaction so as to render
inadvisable the consummation of the merger.
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All other consents will have been obtained that are required for
consummation of the merger for the prevention of any default
under any contract or permit, which if not obtained, is
reasonably likely to have individually or in the aggregate a
material adverse effect. No such consent obtained which is
necessary to consummate the merger will be conditioned or
restricted in a manner which in the reasonable judgment of the
board of directors of Superior Bancorp would so materially
adversely impact the economic or business benefits of the
transaction so as to render it inadvisable.
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There will be no pending or threatened legal proceeding in any
court or any pending or threatened proceeding by any
governmental commission, board or agency, with a view to seeking
any restraint or prohibition on, or in which it is sought to
restrain or prohibit consummation of the transactions
contemplated by the merger agreement or in which it is sought to
obtain divestiture, rescission or damages in connection with the
transactions contemplated by the merger agreement, and no
investigation by any such entity will be pending or threatened.
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The registration statement of which this prospectus/proxy
statement is a part will have been declared effective by the SEC
and will not be subject to a stop order, and all applicable
federal securities and state blue sky laws will have been
complied with.
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Superior Bancorp and Peoples Community Bancshares will
have each received an opinion of Haskell Slaughter
Young & Rediker, LLC, in form and substance reasonably
satisfactory to each of Superior Bancorp and Peoples
Community Bancshares, with respect to certain tax consequences
of the merger.
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No assurance can be given as to when or if all of the foregoing
conditions to the merger can or will be satisfied or waived by
the respective parties. As of the date of this prospectus/proxy
statement, neither Superior Bancorp nor Peoples Community
Bancshares has any reason to believe that any of these
conditions will not be satisfied.
Amendment
and Waiver
Subject to applicable law, Superior Bancorp and Peoples
Community Bancshares may amend the merger agreement by written
agreement authorized by their respective boards of directors.
Before or at the effective time of the merger, either Superior
Bancorp or Peoples Community Bancshares may waive in
writing any inaccuracies in
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the representations and warranties of the other party, or,
subject to applicable law, may waive compliance by the other
party with any of the other agreements or conditions contained
in the merger agreement.
Termination
Events
The merger agreement may be terminated at any time prior to or
on the effective date of the merger in the following
circumstances:
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by the mutual consent of the respective boards of directors of
Superior Bancorp and Peoples Community Bancshares;
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by the board of directors of either Superior Bancorp and
Peoples Community Bancshares (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
in the merger agreement) in the event of a material breach by
the other party of any representation, warranty, covenant or
other agreement contained in the merger agreement (determined
without regard to any qualifications regarding materiality which
may be contained in any applicable representation or warranty)
which cannot be or has not been cured within 30 days after
the giving of written notice to the breaching party and which
breach would provide the non-breaching party the ability to
refuse to consummate the merger;
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by the board of directors of either Superior Bancorp or
Peoples Community Bancshares (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant, or other agreement contained
in merger agreement) in the event of a material breach by the
other party of any covenant or agreement contained in the merger
agreement which cannot be or has not been cured within
30 days after the giving of written notice to the breaching
party or if any of the conditions to the obligations of such
party will have not been satisfied in full;
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by the board of directors of either Superior Bancorp or
Peoples Community Bancshares if all transactions
contemplated by the merger agreement will not have been
consummated on or prior to December 31, 2007, unless the
failure to complete the merger by that date is due to the
terminating partys actions;
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by Peoples Community Bancshares, if its board of directors
so determines by a vote of a majority of its entire board, at
any time during the five-business-day period commencing on the
first date on which all orders, consents and approvals (and
waivers, if applicable) necessary for consummation of the merger
and the transactions contemplated by the merger agreement have
been received (the determination date), if on the determination
date, (1) the
ten-day
average closing price of Superior Bancorp common stock
immediately preceding the determination date as reported on
NASDAQ Global Market and (2) the number obtained by
dividing the
ten-day
average closing price of Superior Bancorp on the determination
date by $11.25 is less than the Bank Index Ratio minus 0.15 (the
Bank Index Ratio is equal to the quotient obtained by dividing
the ten-day
average of the NASDAQ Bank Index as reported on NASDAQ
immediately preceding the determination date by 3,386.64);
subject, however, to the next three sentences. If Peoples
Community Bancshares elects to exercise its termination right,
it will give prompt written notice thereof to Superior Bancorp.
During the five-business-day period commencing with its receipt
of such notice, Superior Bancorp will have the option of paying
additional consideration for the merger in the form of Superior
Bancorp common stock, cash or a combination of Superior Bancorp
common stock and cash, so that the aggregate consideration paid
by Superior Bancorp per share of Peoples Community
Bancshares common stock for the merger will be valued at the
lesser of (1) the product obtained by multiplying
(A) the product of 0.85 and $11.25 by (B) the exchange
ratio and (2) the product obtained by multiplying
(A) the product of the Bank Index Ratio and $11.25 by
(B) the exchange ratio. If within such five-business-day
period, Superior Bancorp delivers written notice to
Peoples Community Bancshares that it intends to proceed
with the merger by paying such additional consideration, as
contemplated by the previous sentence, then no termination will
have occurred and the merger agreement will remain in full force
and effect in accordance with its terms (except that the
consideration for the merger will have been so modified);
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by Peoples Community Bancshares, if before the approval of
the merger agreement by the stockholders of Peoples
Community Bancshares, the board of directors of Peoples
Community Bancshares has (1) withdrawn or modified or
changed its recommendation or approval of the merger agreement
and the merger
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consideration in a manner adverse to Superior Bancorp to approve
and permit Peoples Community Bancshares to accept a
superior proposal, and (2) determined after consideration
of written advice of Peoples Community Bancshares
legal counsel that the termination of the merger agreement is
necessary to comply with its fiduciary duties under applicable
laws; provided, however, that at least two business days before
any such termination Peoples Community Bancshares will
negotiate with Superior Bancorp to amend the merger agreement to
enable Peoples Community Bancshares to proceed with the
merger (the Fiduciary Duty Termination Rights);
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by Superior Bancorp, if the board of directors of Peoples
Community Bancshares fails to reaffirm its approval of the
merger upon Superior Bancorps request or resolves not to
reaffirm its approval of the merger;
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by Superior Bancorp, if the board of directors of Peoples
Community Bancshares does not include in its proxy statement its
recommendation, without modification or qualification, that
Peoples Community Bancshares stockholders approve the
merger or withdraws, qualifies or modifies, or proposes publicly
to withdraw, qualify or modify, in any manner adverse to
Superior Bancorp, its recommendation to Peoples Community
Bancshares stockholders to approve the merger;
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by Superior Bancorp, if the board of directors of Peoples
Community Bancshares affirms, recommends or authorizes entering
into any acquisition transaction other than the merger or the
board of Peoples Community Bancshares does not recommend
against any tender or exchange offer or takes no position with
respect to any tender or exchange offer within ten business days
of commencement of a tender or exchange offer;
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by Superior Bancorp, if the board of directors of Peoples
Community Bancshares negotiates or authorizes any negotiations
with a third party regarding a proposal other than the
merger; or
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by Superior Bancorp, if the number of shares as to which
Peoples Community Bancshares stockholders have exercised
dissenters rights of appraisal exceeds 10% of the
outstanding shares of Peoples Community Bancshares.
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Effect
of Termination; Termination Fee
If the merger agreement is terminated, it will become void, and
there will be no liability on the part of either Superior
Bancorp or Peoples Community Bancshares, except as
described in the next paragraph and except that each party will
be liable for damages caused by its willful breach of any
warranty, representation, covenant or other agreement contained
in the merger agreement.
If (1) Peoples Community Bancshares terminates the
merger agreement pursuant to its Fiduciary Duty Termination
Rights or (2) if Superior Bancorp terminates the merger
agreement pursuant to the Superior Bancorp Termination Rights,
and Peoples Community Bancshares enters into a definitive
agreement with respect to an acquisition proposal or
transaction, then Peoples Community Bancshares is
obligated under the merger agreement to pay Superior Bancorp,
upon consummation of such transaction, a termination fee of
$3,250,000 to compensate Superior Bancorp for its direct and
indirect expenses associated with the transaction.
Agreement
Not to Solicit Other Offers
Under the merger agreement, Peoples Community Bancshares
is restricted in its ability to participate in discussions and
negotiate with any person concerning any proposal to acquire
Peoples Community Bancshares upon a merger, purchase of
assets, purchase of or tender offer for Peoples Community
Bancshares common stock or similar acquisition transaction.
Peoples Community Bancshares has also agreed, except to
the extent legally required for the board of directors of
Peoples Community Bancshares to discharge its fiduciary
duties, not to make any information regarding Peoples
Community Bancshares available to any person for the purpose of
affecting or causing a merger, consolidation or disposition of
Peoples Community Bancshares, or its assets or common
stock.
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Expenses
and Fees
In general, each of Superior Bancorp and Peoples Community
Bancshares will be responsible for all expenses it incurs in
connection with the negotiation and completion of the
transactions contemplated by the merger agreement. However,
Superior Bancorp has agreed to pay the filing fees payable in
connection with the filing of this prospectus/proxy statement
with the SEC and printing costs incurred in connection with the
printing of this document.
Regulatory
Approvals
Completion of the merger and related transactions is subject to
several federal and state regulatory filings and approvals. The
merger and related transactions cannot be completed unless the
companies receive prior approvals, waivers or exemptions from
the Office of Thrift Supervision, the Florida Office of
Financial Regulation and the Board of Governors of the Federal
Reserve System. Superior Bancorp filed its application with the
Office of Thrift Supervision on April 20, 2007. Superior
Bancorp filed its application with the Florida Office of
Financial Regulation on April 20, 2007.
This transaction is subject to the approval of the Office of
Thrift Supervision under the Bank Merger Act. This approval
requires consideration by the Office of Thrift Supervision of
various factors, including assessments of the competitive effect
of the contemplated transactions, the managerial and financial
resources and future prospects of the resulting institutions and
the effect of the contemplated transactions on the convenience
and needs of the communities to be served.
The Community Reinvestment Act of 1977 also requires that the
Office of Thrift Supervision, in deciding whether to approve the
merger, assess the records of performance of Superior Bank in
meeting the credit needs of the communities it serves, including
low and moderate income neighborhoods. As part of the review
process under the Community Reinvestment Act, it is not unusual
for the Office of Thrift Supervision to receive protests and
other adverse comments from community groups and others.
Superior Bank currently maintains a Community Reinvestment Act
rating of Satisfactory from its primary regulator,
and Peoples Community Bank also currently maintains a
Community Reinvestment Act rating of Satisfactory
from its primary regulator.
In addition, the USA PATRIOT Act places responsibility on the
Office of Thrift Supervision to monitor institutions under its
supervision with regard to compliance with anti-money laundering
laws and regulations. As part of this monitoring, the Office of
Thrift Supervision must take into consideration the
effectiveness of the insured depository institutions involved in
the proposed merger transaction in combating money laundering
activities.
The regulations of the Office of Thrift Supervision require
publication of notice of, and an opportunity for public comment
with respect to, the application filed in connection with the
merger and authorize the Office of Thrift Supervision to conduct
a meeting if it finds that written submissions are insufficient
to address facts or issues raised in an application, or
otherwise determines that a meeting will benefit the Office of
Thrift Supervisions decision-making process in connection
with the application. Any such meeting or comments provided by
third parties could prolong the period during which the merger
is subject to review by the Office of Thrift Supervision.
Consummation of the merger is also subject to, and conditioned
upon, receipt of approvals or waivers from the Florida Division
of Financial Institutions and the Board of Governors of the
Federal Reserve System. Superior Bancorp believes that, pursuant
to the regulations and advisory letters of the Board of
Governors of the Federal Reserve System, the Federal Reserve
will waive any approval requirements in connection with the
transactions contemplated by the merger.
Superior Bancorp has filed its application and related notices
seeking the requisite approvals from the above agencies.
Superior Bancorp and Peoples Community Bancshares cannot
be certain that such approvals will be granted and, if granted,
of the date of those approvals or as to what conditions, if any,
may be imposed on such approvals.
Superior Bancorp and Peoples Community Bancshares are not
aware of any other significant governmental approvals that are
required for consummation of the merger. If any other approval
or action is required, it is
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presently contemplated that Superior Bancorp and Peoples
Community Bancshares would seek to obtain such approval. There
can be no assurance that any other approvals, if required, will
be obtained.
The approval of any application merely implies the satisfaction
of regulatory criteria for approval, which do not include review
of the merger from the standpoint of the adequacy of the
consideration to be received by Peoples Community
Bancshares stockholders. Further, regulatory approvals do not
constitute an endorsement or recommendation of the merger.
Management
and Operations After the Merger
After the effective date of the merger, the boards of directors
and the officers of Superior Bancorp and its subsidiaries,
including Superior Bank, will consist of those persons serving
in such capacities of Superior Bancorp before such date.
Superior Bancorp has agreed that after the effective date of the
merger, it will elect one independent member of the current
Peoples Community Bancshares or Peoples Community
Bank board of directors to the Superior Bancorp board at the
first board meeting after the effective date of the merger. See
The Merger Other Interests of Directors and
Officers of Peoples Community Bancshares in the
Merger, and The Merger The Merger
Agreement Peoples Community Bank,
beginning on pages 50 and 40, respectively.
Employment;
Severance; Employee Benefit Plans
On the effective date of the merger, Superior Bancorp will
provide to officers and employees of Peoples Community
Bancshares and its subsidiaries employee benefits under employee
benefit and welfare plans which are substantially similar to
those provided by Superior Bancorp to its similarly situated
officers and employees.
With respect to employee benefits maintained by Superior Bancorp
or by Superior Bank in which employees of Peoples
Community Bancshares and its subsidiaries participate after the
effective date of the merger, Superior Bancorp has agreed to
treat service by employees of Peoples Community Bancshares
and its subsidiaries prior to the effective date of the merger
as service with Superior Bancorp, for purposes of determining
eligibility to participate, entitlement to benefits and vesting
including for vacation entitlement, severance benefits. Service
with Peoples Community Bancshares will also apply for
purposes of satisfying any waiting periods, evidence of
insurability requirements or the application of pre-existing
condition limitations with respect to any Superior Bancorp
employee benefit plan that is a group health plan. Each Superior
Bancorp employee benefit plan that is a group health plan will
waive, or cause the insurance carrier to waive, pre-existing
condition limitations to the same extent waived under the
applicable Peoples Community Bancshares employee benefit
plan. Each such employee of Peoples Community Bancshares
and its subsidiaries will be given credit for amounts paid under
a corresponding group health plan during the same period for
purposes of applying deductibles, co-payments and out of pocket
maximums as though such amounts had been paid under the Superior
Bancorp group health plan.
Other
Interests of Directors and Officers of Peoples Community
Bancshares in the Merger
In considering the recommendation of the board of directors of
Peoples Community Bancshares that you vote
FOR the merger agreement and the
merger, you should be aware that some of Peoples Community
Bancshares executive officers and directors have interests
in the merger that are different from, or in addition to, your
interests as a stockholder. The respective boards of directors
of Superior Bancorp and Peoples Community Bancshares were
aware of these interests and took them into account in their
respective decisions to approve the merger.
These differing interests include, among other things, the
following:
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Superior Bancorp will continue to indemnify Peoples
Community Bancshares and its subsidiaries current
directors and executive officers under the merger agreement and
Peoples Community Bancshares has agreed to provide these
individuals with extended directors and officers
insurance for a period of four years following the effective
date of the merger;
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Superior Bancorp will elect one independent director of the
current Peoples Community Bancshares or Peoples
Community Bank board to its board of directors at the first
board meeting following the effective date of the merger;
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Neil D. McCurry, Jr., Rick Halloran, Dorothy S. Barth and
Christopher Pennewill of Peoples Community Bancshares have
entered into employment agreements with Superior Bancorp that
will become effective immediately prior to completion of the
merger;
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Pursuant to their amended Salary Continuation Agreements with
Peoples Community Bancshares, Neil D. McCurry, Jr.,
Rick Halloran, Dorothy S. Barth and Christopher Pennewill will
be paid $1,500,000, $121,500, $201,000 and $72,000,
respectively, on January 8, 2008, if the merger is
completed; and
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Each executive officer and each director of Peoples
Community Bancshares has executed a support agreement to vote
his shares for the merger, not to transfer his shares prior to
the merger, not to exercise any stock options and not to compete
with Superior Bank for a period of two years following the
merger.
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Indemnification
and Directors and Officers Insurance
Superior Bancorps restated certificate of incorporation
and bylaws provide for the elimination of directors
liability for monetary damages arising from a breach of certain
fiduciary obligations and for the indemnification of directors,
officers and agents to the full extent permitted by Delaware
law. These provisions generally provide for indemnification in
the absence of gross negligence or willful misconduct and cannot
be amended without the affirmative vote of a majority of the
outstanding shares of Superior Bancorp common stock entitled to
vote thereon.
By operation of law under Delaware law and Florida law, all
rights to indemnification for acts or omissions occurring prior
to the effective time now existing in favor of the current or
former directors or officers of Peoples Community
Bancshares as provided in its articles of incorporation or
bylaws will survive the merger and will continue in effect in
accordance with their terms.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling Superior Bancorp or Peoples Community
Bancshares pursuant to the foregoing provisions, the companies
have been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
Superior Bancorp has agreed in the merger agreement that, for
four years following the effective time of the merger, it will
indemnify and hold harmless each of Peoples Community
Bancshares present and former directors, officers and
employees and those of its subsidiaries against any costs or
expenses including reasonable attorneys fees, judgments,
fines, losses, claims, damages or liabilities incurred in
connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at
or prior to the effective time of the merger including the
transactions contemplated by the merger agreement, whether
asserted or claimed prior to, at or after the effective time of
the merger, to the fullest extent that the person would have
been indemnified pursuant to (i) Peoples Community
Bancshares articles of incorporation and bylaws and
(ii) any agreement, arrangement or understanding disclosed
by Peoples Community Bancshares to Superior Bancorp in
each case as in effect on the date of the merger agreement.
Peoples Community Bancshares has also agreed in the merger
agreement that it will purchase for, and on behalf of, its
current and former officers and directors, extended coverage
under the current directors and officers liability
insurance policy maintained by Peoples Community
Bancshares to provide for continued coverage of such insurance
for a period of four years following the effective date of the
merger with respect to matters occurring prior to such date.
Share
Ownership of Directors and Executive Officers
As of May 25, 2007, the record date for the special meeting of
Peoples Community Bancshares stockholders, the directors
and executive officers of Peoples Community Bancshares may
be deemed to be the beneficial owners of 950,234 shares,
representing 41.5% of the outstanding shares of Peoples
Community Bancshares common stock.
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Agreements
with Messrs. McCurry and Halloran
On January 18, 2007, Neil D. McCurry, Jr., President
and Chief Executive Officer of Peoples Community
Bancshares, and Rick Halloran, Executive Vice President of
Peoples Community Bancshares, entered into agreements with
Superior Bank. Each of these agreements will become effective
immediately prior to the merger and will replace and supersede
each officers current Employment Agreement and
Supplemental Life Insurance Agreements with Peoples
Community Bancshares, but will not supersede such officers
Salary Continuation Agreement. Pursuant to the agreements,
Messrs. McCurry and Halloran will serve as at-will
employees of Superior Bancorp. Mr. McCurry will be employed
as Chairman and Chief Executive Officer of Peoples
Community Bank, a division of Superior Bank, during the
post-closing period. Mr. Halloran will be employed as
Executive Vice President Lending of Peoples
Community Bank, a division of Superior Bank. Mr. McCurry
will receive an annual base salary of $225,000, and
Mr. Halloran will continue to receive his current base
salary of $140,600. After the merger, Mr. McCurry will also
receive options to purchase the number of shares of Superior
Bancorp common stock valued at $100,000 as of the grant date. In
addition, Messrs. McCurry and Halloran will be entitled to
participate in the employee benefit plans and programs of
Superior Bank generally made available to similarly situated
employees of Superior Bank from time to time, including, in the
case of Mr. McCurry, the annual bonus plan pursuant to
which Mr. McCurry will be eligible to receive a bonus of up
to 30% of his base salary. Mr. Halloran will be eligible to
receive a retention bonus in the amount of $75,000 following the
second anniversary of the effective date of the merger. Pursuant
to the agreements, Messrs. McCurry and Halloran have agreed
to terminate and waive all rights, benefits and payments
specified in any employment agreement or supplemental life
insurance agreement with Peoples Community Bank or
Peoples Community Bancshares. In consideration for this
termination, Superior Bank will pay $1,100,000 to
Mr. McCurry and $202,500 to Mr. Halloran, each payable
in the first payroll following the effective date of the merger.
In addition, the agreements restrict the ability of each of
Messrs. McCurry and Halloran to engage in various
activities that are competitive with Superior Banks
business beginning at the effective time of the merger and
ending on the fifth anniversary and second anniversary,
respectively, of the termination of his employment. In
consideration for each officers agreement to the
restrictive covenants relating to noncompetition
and/or
nonsolicitation, Superior Bank will pay the following amounts:
$1,500,000 to Mr. McCurry, payable in five equal annual
installments beginning on the first payroll following the
effective date of the merger, and $190,000 to Mr. Halloran,
payable in the first payroll following the effective date of the
merger.
Superior Bank and each of Messrs. McCurry and Halloran may
terminate his respective employment agreement at any time for
any reason; provided, however, that if Superior Bank terminates
the officers employment other than for cause (as defined
in the agreement) or on account of death or total disability (as
defined in the agreement), in the case of Mr. McCurry,
prior to the third anniversary of the effective date of the
merger, and in the case of Mr. Halloran, prior to the
second anniversary of the effective date of the merger, Superior
Bank will pay to the officer a lump sum payment equal to the
officers base salary for the period from the date of
termination of employment to the third or second anniversary
date, respectively, of the effective date of the merger.
In the event of a change in control (as defined in the
agreement) of Superior Bancorp, all unpaid payments to
Mr. McCurry will be paid at the effective time of the
change in control, and Mr. McCurry will, in such event, not
be subject to any restrictions on competition longer than one
year following such change in control.
Agreements
with Ms. Barth and Mr. Pennewill
On January 18, 2007, Dorothy S. Barth, Chief Financial
Officer of Peoples Community Bancshares and Peoples
Community Bank, and Christopher Pennewill, Senior Vice President
of Peoples Community Bank, entered into agreements with
Superior Bank which will become effective immediately prior to
the merger. Pursuant to the agreements, Ms. Barth will, at
the effective time of the merger, be employed as Chief Financial
Officer of Peoples Community Bank, a division of Superior
Bank, at her current annual salary, and Mr. Pennewill will
be employed at the effective time of the merger as the Manatee
County Executive of Peoples Community Bank, a division of
Superior Bank, at his current annual salary. Ms. Barth and
Mr. Pennewill will be entitled to participate in employee
benefit plans and programs of Superior Bank generally made
available to other similarly situated
52
employees of Superior Bank from time to time. Pursuant to the
agreements, Ms. Barth and Mr. Pennewill will terminate
their existing Split Dollar Agreements with Peoples
Community Bancshares or Peoples Community Bank immediately
prior to the consummation of the merger and, in consideration of
the termination of such agreements, Ms. Barth and
Mr. Pennewill will each receive $25,000 in the first
payroll following the effective date of the merger. Each
agreement provides that if the officer has not terminated his or
her employment or has not been terminated by Superior Bank for
cause prior to the second anniversary of the effective date of
the merger, Superior Bank will pay each such officer a $50,000
bonus. In addition, the agreements restrict the ability of
Ms. Barth and Mr. Pennewill to engage in various
activities that are competitive with business conducted by
Superior Bank beginning at the effective date of the merger and
ending on the first and second anniversary, respectively, of the
effective date of the merger.
Superior Bank and each of Ms. Barth and Mr. Pennewill
may terminate his or her employment at any time for any reason;
provided, however, that Ms. Barth and Mr. Pennewill
will remain subject to the other obligations under their
respective agreements, including the nondisclosure and
nonsolicitation covenants. If Superior Bank terminates
Ms. Barths or Mr. Pennewills employment
other than for cause (as defined in the agreement) in the case
of Ms. Barth, prior to the first anniversary of the
effective time of the merger, and in the case of
Mr. Pennewill, prior to the second anniversary of the
effective time of the merger, Superior Bank will pay to the
officer a lump sum payment equal to the officers base
salary for the period from the date of termination of employment
to the first anniversary of the effective time of the merger for
Ms. Barth and to the second anniversary of the effective
time of the merger for Mr. Pennewill.
Amendments
to Salary Continuation Agreements
On January 18, 2007, Peoples Community Bank amended
the Salary Continuation Agreements with Messrs. McCurry,
Halloran and Pennewill and Ms. Barth to provide the
officers with a new election as to the timing and form of
recurring benefits. The Amendments to Salary Continuation
Agreements provide that in the event Peoples Community
Bancshares merges with Superior Bancorp, the officers will
receive the following lump sum payments on January 31,
2008: Mr. McCurry, $1,500,000; Mr. Halloran, $121,500;
Ms. Barth, $201,000; and Mr. Pennewill, $72,000.
Support
Agreements
Each executive officer of Peoples Community Bancshares and
each director of Peoples Community Bancshares and
Peoples Community Bank, has executed a Support Agreement,
in which each such person agrees to vote all their shares of
Peoples Community Bancshares common stock in favor of the
merger and the merger agreement.
The form of the Support Agreement is set forth in Exhibit A
to the merger agreement, which is attached to this
prospectus/proxy statement as Annex A. This agreement may
have the effect of discouraging third parties from making a
proposal for an acquisition transaction involving Peoples
Community Bancshares. The following is a brief summary of the
material provisions of this agreement:
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Each such person agrees to vote, or cause to be voted, in person
or by proxy, all of the Peoples Community Bancshares
common stock as to which the he or she has voting power,
individually or jointly with other persons.
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Each such person agrees, except for certain specific transfers
set forth in the agreement, not to directly or indirectly
transfer any of his or her Peoples Community Bancshares
common stock until the vote upon the merger agreement and the
merger by Peoples Community Bancshares stockholders has
been taken or until the merger agreement has been terminated.
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Each such person agrees not to exercise any outstanding
Peoples Community Bancshares stock options.
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Each such person agrees that, for a period of two years
following the effective date of the merger, he or she will not
serve as an officer or director, or acquire 5% or more of the
outstanding equity securities, of any bank or savings and loan
association or bank holding company, or federal or state
chartered bank, savings bank, thrift, homestead association,
savings association, savings and loan association or cooperative
bank that has
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its principal business location within the Florida counties in
which Peoples Community Bank has a branch or its main
office.
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Public
Trading Markets
Superior Bancorp common stock is listed on the NASDAQ Global
Market stock exchange under the ticker symbol SUPR.
Superior Bancorp was listed under the ticker symbol
TBNC through May 18, 2006, when The Banc
Corporation changed its name to Superior Bancorp. Peoples
Community Bancshares common stock is not traded on any stock
exchange and any trading of its common stock occurs in privately
negotiated transactions. Upon completion of the merger, all
shares of Peoples Community Bancshares common stock, for
which dissenters rights of appraisal are not perfected,
will be exchanged for shares of common stock of Superior
Bancorp. Superior Bancorp common stock issued pursuant to the
merger agreement will be listed on the NASDAQ Global Market.
The shares of Superior Bancorp common stock to be issued in
connection with the merger will be freely transferable under the
Securities Act, except for shares issued to any stockholders
that may be deemed either to be an affiliate of
(i) Peoples Community Bancshares at or after the
effective time of the merger or (ii) Superior Bancorp as
discussed in Resale of Superior Bancorp Common
Stock by Affiliates, beginning on page 56.
Accounting
Treatment
The merger is expected to be treated for accounting and
financial reporting purposes as a purchase, meaning
that the assets and liabilities of Peoples Community
Bancshares will be recorded at their respective estimated fair
values and combined with the historical basis of Superior
Bancorp, Therefore, the financial statements of Superior Bancorp
issued after the merger will reflect these values from
Peoples Community Bancshares and will not be restated
retroactively to reflect the historical financial position or
results of operations of Peoples Community Bancshares.
Goodwill
and/or other
intangible assets may be created by the excess of the purchase
price over the net fair value of Peoples Community
Bancshares assets and liabilities.
The unaudited pro forma financial information contained in this
prospectus/proxy statement has been prepared using the purchase
accounting method to account for the merger. See Unaudited
Pro Forma Condensed Consolidated Financial Information,
beginning on page 12.
Certain
Federal Income Tax Consequences
The following discussion is a general summary of the anticipated
material United States federal income tax consequences of the
exchange of Peoples Community Bancshares common stock for
Superior Bancorp common stock pursuant to the merger. This
summary does not address any tax consequences arising under the
laws of any state, local or foreign jurisdiction. This
discussion is based upon the Internal Revenue Code of 1986, as
amended (the Code), regulations promulgated by the
United States Treasury Department, court cases and
administrative rulings in each case as in effect as of the date
hereof and all of which are subject to change at any time,
possibly with retroactive effect. This discussion assumes that
you hold your Peoples Community Bancshares common stock as
a capital asset within the meaning of Section 1221 of the
Code. The federal income tax laws are complex and the tax
consequences of the merger may vary depending upon each
stockholders individual circumstances or tax status.
Accordingly, this description is not a complete description of
all of the consequences of the merger and, in particular, may
not address United States federal income tax considerations that
may affect the treatment of stockholders subject to special
treatment under United States federal income tax law (including,
for example, foreign persons, financial institutions, dealers in
securities, traders in securities who elect to apply a
mark-to-market
method of accounting, insurance companies, tax-exempt entities,
pass-through entities or investors in such entities, holders who
acquired their shares of Peoples Community Bancshares
common stock pursuant to the exercise of an employee stock
option or right, pursuant to a tax qualified retirement plan or
otherwise as compensation and holders who hold Peoples
Community Bancshares common stock as part of a
hedge, straddle or conversion
transaction). This discussion is based on laws,
regulations, rulings and judicial decisions as in effect on the
date of this document, without consideration of the particular
facts or circumstances of any holder of Peoples Community
Bancshares common stock. These authorities are all subject to
change and any such change may be
54
made with retroactive effect. No assurance can be given that,
after any such change, this discussion would not be different.
The obligations of the parties to complete the merger are
conditioned upon the receipt by each party of a tax opinion from
Haskell Slaughter Young & Rediker, LLC, that the
merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code.
Haskell Slaughter Young & Rediker, LLC, has rendered
its tax opinion to each of Superior Bancorp and Peoples
Community Bancshares, subject to the limitations discussed
above, on the basis of facts, representations and assumptions
set forth or referred to in such opinion which are consistent
with the state of facts existing at the effective time of the
merger. In rendering its tax opinion, counsel relied upon
representations and covenants, including those contained in
certificates of officers of Superior Bancorp and Peoples
Community Bancshares, reasonably satisfactory in form and
substance to such counsel. The opinion represents counsels
best legal judgment, but has no binding effect or official
status of any kind, and no assurance can be given that contrary
positions will not be taken by the Internal Revenue Service or a
court considering the issues. Neither Superior Bancorp nor
Peoples Community Bancshares has requested, nor do either
of them intend to request, a ruling from the Internal Revenue
Service as to the tax consequences of the merger and as a result
there can be no assurances that the Internal Revenue Service
will not disagree with or challenge any of the conclusions
herein.
Subject to the limitations and qualifications referred to in
this prospectus/proxy statement and assuming that the merger
will be completed as described in the merger agreement and this
prospectus/proxy statement and that the merger is treated as a
reorganization within the meaning of Section 368(a) of the
Code, the following are the material United States federal
income tax consequences to the Peoples Community
Bancshares stockholders:
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the merger will constitute a reorganization within
the meaning of Section 368 of the Code;
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no gain or loss will be recognized by Superior Bancorp or
Peoples Community Bancshares;
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no gain or loss will be recognized by the stockholders of
Peoples Community Bancshares who receive shares of
Superior Bancorps common stock except to the extent of any
taxable boot received by stockholders from Superior
Bancorp, and except to the extent of any dividends received from
Peoples Community Bancshares prior to the effective date
of the merger;
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the basis of Superior Bancorps common stock received in
the merger will be equal to the sum of the basis of the shares
of Peoples Community Bancshares common stock exchanged in
the merger and the amount of gain, if any, which was recognized
by the exchanging Peoples Community Bancshares
stockholder, including any portion treated as a dividend, less
the value of taxable boot, if any, received by the stockholder
in the merger;
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the holding period of Superior Bancorps common stock will
include the holding period of the shares of Peoples
Community Bancshares common stock exchanged therefor if the
shares of Peoples Community Bancshares common stock were
capital assets in the hands of the exchanging Peoples
Community Bancshares stockholder; and
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cash received by a Peoples Community Bancshares
stockholder in lieu of a fractional share interest of Superior
Bancorp common stock will be treated as having been received as
a distribution in full payment in exchange for the fractional
share interest of Superior Bancorp common stock which he or she
would otherwise be entitled to receive and will qualify as
capital gain or loss, assuming the Peoples Community
Bancshares stock was a capital asset in his or her hands as of
the effective date of the merger.
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A stockholder who receives cash in lieu of a fractional share of
Superior Bancorp common stock in the merger will be treated for
United States federal income tax purposes as if the fractional
share of Superior Bancorp common stock had been received and
then redeemed for cash by Superior Bancorp. A stockholder will
recognize a capital gain or loss in an amount equal to the
difference between the cash received and the tax basis allocable
to the fractional share of Superior Bancorp common stock, unless
such payment, under each such stockholders particular
facts and circumstances, is deemed to have the effect of a
dividend distribution and not a redemption treated as an
exchange under the principles of Section 302 of the Code,
described above.
55
A stockholder who receives cash for his or her Peoples
Community Bancshares common stock because he or she exercised
his or her dissenters rights will be treated for United
States federal income tax purposes as if Superior Bancorp common
stock had been received and then redeemed for cash by Superior
Bancorp. A stockholder will recognize a capital gain or loss in
an amount equal to the difference between the cash received and
the tax basis in Superior Bancorp common stock, unless such
payment, under each such stockholders particular facts and
circumstances, is deemed to have the effect of a dividend
distribution and not a redemption treated as an exchange under
the principles of Section 302 of the Code, described above.
Unless an exemption applies under the backup withholding rules
of Section 3406 of the Internal Revenue Code, the Exchange
Agent will be required to withhold, and will withhold, 28% of
any cash payments to which a Peoples Community Bancshares
stockholders is entitled pursuant to the merger, unless the
stockholder provides the appropriate form. A stockholder should
complete and sign the substitute Internal Revenue Service
Form W-9
enclosed with the letter of transmittal sent by the exchange
agent. Unless an applicable exemption exists and is proved in a
manner satisfactory to the exchange agent, this completed form
provides the information, including the holders taxpayer
identification number, and certification necessary to avoid
backup withholding.
A stockholder of Peoples Community Bancshares who receives
Superior Bancorp common stock and cash as a result of the merger
will generally be required to retain records pertaining to the
merger and will be required to file with such stockholders
United States federal income tax return for the year in which
the merger takes place a statement setting forth certain facts
relating to the merger as provided in Treasury Regulations
Section 1.368-3(b).
A holder of Peoples Community Bancshares stock options
will realize gross income, which will be characterized as
ordinary compensation income, from the cancellation of such
options pursuant to the merger agreement in an amount equal to
the fair market value of Superior Bancorp common stock received
in exchange for the cancellation of such options.
The foregoing is a summary discussion of material federal income
tax consequences of the merger and is not a complete analysis or
listing of potential tax effects relevant to a decision whether
to vote in favor of approval of the merger agreement. You
are urged to consult your personal tax and financial advisors as
to the particular tax consequences to you of the merger,
including the application of state, local and foreign tax laws
and possible future changes in federal income tax laws and the
interpretation thereof, which can have retroactive
effects.
IRS
Circular 230 Notice
To ensure compliance with the requirements of the Internal
Revenue Service, we inform you that any federal tax information
provided herein may not be used to avoid any federal tax
penalty. Any such information provided herein is provided on the
basis and with the intent that the information may not be used
to avoid any federal tax penalty.
Resale of
Superior Bancorp Common Stock by Affiliates
Superior Bancorp common stock to be issued to Peoples
Community Bancshares stockholders in connection with the merger
will be registered under the Securities Act. Superior Bancorp
common stock received by the Peoples Community Bancshares
stockholders upon consummation of the merger will be freely
transferable under the Securities Act, except for shares issued
to any person who may be deemed an affiliate of
Peoples Community Bancshares or Superior Bancorp within
the meaning of Rule 145 under the Securities Act.
Affiliates are generally defined as persons who
control, are controlled by, or are under common control with
Peoples Community Bancshares or Superior Bancorp, as the
case may be. Affiliates generally include directors, certain
executive officers and major stockholders of Superior Bancorp
and Peoples Community Bancshares. In addition, affiliates
of Peoples Community Bancshares or Superior Bancorp must
sell their shares of Superior Bancorp common stock acquired in
connection with the merger in compliance with Rule 145 or
another applicable exemption from the registration requirements
of the Securities Act.
In general, under Rule 145, for one year following the
effective time of the merger, an affiliate (together with
certain related persons) would be entitled to sell shares of
Superior Bancorp common stock acquired in the merger only
through unsolicited broker transactions or in
transactions directly with a market maker, as such
terms are
56
defined in Rule 144 under the Securities Act. Additionally,
during the one-year period, the number of shares to be sold by
an affiliate (together with certain related persons and certain
persons acting in concert) within any three-month period for
purposes of Rule 145 may not exceed the greater of 1% of
the outstanding shares of Superior Bancorp common stock or the
average weekly trading volume of the stock during the four
calendar weeks preceding such sale. Rule 145 will remain
available to affiliates only if Superior Bancorp remains current
with its information filings with the SEC under the Securities
Exchange Act of 1934. One year after the effective time, an
affiliate of Peoples Community Bancshares would be able to
sell its shares of Superior Bancorp common stock without the
manner of sale or volume limitations, provided that Superior
Bancorp was current with its Securities Exchange Act information
filings and such affiliate was no longer an affiliate of
Superior Bancorp. Two years after the effective time, an
affiliate of Peoples Community Bancshares would be able to
sell its shares of Superior Bancorp common stock without any
restrictions so long as the affiliate was not, and had not been
for at least three months before selling, an affiliate of
Superior Bancorp.
Peoples Community Bancshares has agreed in the merger
agreement to use its reasonable best efforts to identify each
person who may be deemed to be an affiliate for purposes of
Rule 145 and to cause such persons to deliver to
Peoples Community Bancshares, prior to the date of the
Peoples Community Bancshares special meeting, a written
agreement intended to ensure compliance with the Securities Act
in connection with the sale or other transfer of Superior
Bancorp common stock received in the merger.
Appraisal
Rights of Peoples Community Bancshares
Stockholders
Stockholders of Peoples Community Bancshares will
have dissenters rights of appraisal under the merger
agreement. A dissenting stockholder of Peoples Community
Bancshares must take each step in the indicated order and in
strict compliance with the provisions of the law in order to
perfect his or her appraisal rights. The failure of a
Peoples Community Bancshares stockholder to comply
precisely with the procedural steps on a timely basis will
result in a loss of that stockholders appraisal rights.
The following discussion is not a complete statement of the law
relating to dissenters rights of appraisal and is
qualified in its entirety by reference to Sections 607.1301
through 607.1333 of the Florida Business Corporation Act, the
full text of which is set forth in Annex B hereto.
Pursuant to the Florida Business Corporation Act, any
stockholder of record of Peoples Community Bancshares
common stock who objects to the merger, and who fully complies
with all the provisions of Sections 607.1301 through
603.1333 of the Florida Business Corporation Act, will be
entitled to demand and receive payment in cash of an amount
equal to the fair value of his or her shares of Peoples
Community Bancshares common stock if the merger is consummated.
Any Peoples Community Bancshares stockholder desiring to
receive payment of the fair value of his or her Peoples
Community Bancshares common stock in accordance with the
requirements of Sections 607.1301 through 607.1333 of the
Florida Business Corporation Act:
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must deliver to Peoples Community Bancshares prior to the
special meeting at which the vote will be taken on the merger,
or at the special meeting, but before the vote is taken, written
notice of intent to demand payment for his or her Peoples
Community Bancshares shares if the merger is
consummated; and
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must not vote in favor of the merger.
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A vote against the merger or abstention from voting will not by
itself satisfy the notice requirements.
A stockholder must demand appraisal with respect to all of the
shares registered in his or her name, except that a record
stockholder may assert appraisal rights as to fewer than all of
the shares registered in the record stockholders name but
that are owned by one or more beneficial owners, if the record
stockholder objects with respect to all shares owned by each
dissenting beneficial stockholder. A record stockholder must
notify Peoples Community Bancshares in writing of the name
and address of each beneficial stockholder on whose behalf
appraisal rights are being asserted. A beneficial stockholder
may assert appraisal rights as to any shares held on behalf of
the stockholder only if the stockholder submits to Peoples
Community Bancshares the record stockholders written
consent to the assertion of such rights before the date
specified in the appraisal notice as the due
57
date to execute and return the form, and does so with respect to
all shares that are beneficially owned by the beneficial
stockholder.
Within 10 days after the effective date of the merger,
Superior Bancorp, as successor to Peoples Community
Bancshares in the merger, will provide to each former
stockholder of Peoples Community Bancshares who has voted
against the merger and properly provided a notice of intent to
demand payment of fair value a written appraisal notice and
form, which will (1) indicate Superior Bancorps
estimate of the fair value of Peoples Community Bancshares
common stock, (2) contain an offer by Superior Bancorp to
pay the stockholder this estimate of fair value, and (3) be
accompanied by a copy of Superior Bancorps most recent
published financial statements and a copy of
Sections 607.1301 through 607.1333 of the Florida Business
Corporation Act. The appraisal notice will provide that a
stockholder may obtain information on the number of stockholders
who return the appraisal form and the number of shares owned by
those stockholders. It will also indicate the date by which
Superior Bancorp must be notified if a stockholder wishes to
withdraw from the appraisal process.
A stockholder asserting appraisal rights must execute and return
the appraisal form to Superior Bancorp, as successor to
Peoples Community Bancshares, and deposit the
stockholders certificates in accordance with the terms of
the notice, before the date specified in the appraisal notice,
which will not be fewer than 40 nor more than 60 days after
the appraisal notice and form were sent to the stockholder. A
stockholder who timely returns the form and deposits shares in
accordance with the appraisal notice has no further rights as a
stockholder, but only has the right to receive fair
value for the shares in accordance with the appraisal
procedures, unless the appraisal demand is withdrawn.
A stockholder who does not (1) execute and return the form
and (2) deposit his or her certificates by the date set
forth in the appraisal notice will no longer be entitled to
appraisal rights, will be bound by the terms of the merger
agreement and will receive the merger consideration consisting
of Superior Bancorp common stock. A stockholder who complies
with the terms of the notice but wishes to withdraw from the
appraisal process may do so by notifying Superior Bancorp in
writing no more than 20 days after the date set forth in
the appraisal notice as the due date to execute and return the
form. A stockholder who fails to withdraw from the appraisal
process in a timely manner may not thereafter withdraw without
Superior Bancorps written consent.
If a stockholder timely accepts the offer to pay the fair value
of the shares as set forth in the appraisal notice, payment will
be made within 90 days after Superior Bancorp receives the
form from the stockholder. A stockholder who is dissatisfied
with the offer must include in his or her returned form a demand
for payment of that stockholders estimate of the fair
value of the shares plus interest; otherwise the stockholder
will be entitled to payment of only the amount offered. Interest
is to be calculated at the interest rate on judgments in Florida
in effect at the mergers effective time. Once Superior
Bancorp has made payment of an agreed value as described above,
the stockholder will cease to have any further appraisal rights.
If Superior Bancorp and the stockholder asserting appraisal
rights are unable to agree on the fair value of the shares,
under Section 607.1330 of the Florida Business Corporation
Act, Superior Bancorp will be required to file, within
60 days after receipt of the stockholders demand, an
appraisal action in the appropriate court in Sarasota County.
The court would be required to determine the fair value for the
shares of Superior Bancorp common stock. If Superior Bancorp
fails to file such proceeding within 60 days, any
stockholder asserting appraisal rights may do so in the name of
Superior Bancorp. All stockholders asserting appraisal rights,
except for those that have agreed upon a value with Superior
Bancorp, are deemed to be parties to the proceeding. In such a
proceeding, the court may, if it so elects, appoint one or more
persons as appraisers to receive evidence and recommend a
decision on the question of fair value. Superior Bancorp would
be required to pay each stockholder asserting appraisal rights
the amount found to be due within 10 days after final
determination of the proceedings. At the courts
discretion, the judgment may include interest at a rate
determined by the court. Upon payment of this judgment, the
stockholder would cease to have any further appraisal rights
with respect to his or her Peoples Community Bancshares
shares.
The court in any appraisal proceeding will determine the costs
and expenses (including attorneys and experts fees)
of any appraisal proceeding and such costs and expenses will be
assessed against Superior Bancorp. However, all or any part of
such costs and expenses (including attorneys and
experts fees) may be apportioned and assessed against all
or some of the stockholders that request an appraisal, in such
amount as the court deems equitable, if the court determines
that the stockholders acted arbitrarily or not in good faith
with respect to the stockholders
58
appraisal rights. If the court finds that counsel for one
stockholder substantially benefited other stockholders, and
attorneys fees should not be assessed against Superior
Bancorp, the court may award counsel fees to be paid out of the
amounts awarded to benefited stockholders.
If you should decide to exercise your dissenters rights of
appraisal, you must do all of the things described in this
section and as set forth in Sections 607.1301 through
607.1333 of the Florida Business Corporation Act in order to
preserve your appraisal rights and to receive the fair value of
your shares of Peoples Community Bancshares common stock
in cash (as determined in accordance with those provisions). If
you do not follow each of the steps as described above, you will
have no right to receive cash for your shares as provided for
appraisal rights by the Florida Business Corporation Act. In
view of the complexity of these provisions of Florida law,
stockholders of Peoples Community Bancshares who are
considering exercising their appraisal rights should consult
their legal advisors.
If a Peoples Community Bancshares stockholder fails
to comply with any requirements of the provisions relating to
dissenters rights of appraisal, that failure will result
in a forfeiture of such rights.
References in the foregoing discussion to applicable statutes
are summaries of portions of those statutes, do not purport to
be complete and are qualified in their entirety by reference to
applicable law. Sections 607.1301 through 607.1333 of the
Florida Business Corporations Act are attached to this
prospectus/proxy statement as Annex B. You are urged
to read Annex B carefully if you intend to exercise your
dissenters rights of appraisal.
Exchange
of Certificates
As promptly as practicable, but in no case later than 15
business days after the effective date of the merger, an agent
of Superior Bancorp (the Exchange Agent) will mail
to each Peoples Community Bancshares stockholder of record
(1) the election form, (2) a letter of transmittal and
(3) instructions for use in effecting the surrender of the
certificates representing shares of Peoples Community
Bancshares common stock in exchange for certificates
representing shares of Superior Bancorp common stock. The letter
of transmittal will specify that delivery will be effected, and
risk of loss and title to the certificates will pass, only upon
delivery of the certificates to Superior Bancorp. When a
Peoples Community Bancshares stockholder surrenders his or
her certificate to the Exchange Agent, together with a properly
completed letter of transmittal, and any other documents as may
be necessary, that stockholder will receive in exchange a
certificate representing that number of whole shares of Superior
Bancorp common stock which that stockholder is entitled, if any,
and a check for the amount to be paid instead of any fractional
share of Superior Bancorp common stock. The Exchange Agent will
deliver the merger consideration to Peoples Community
Bancshares stockholders within ten business days of receipt of
their certificates of Peoples Community Bancshares common
stock, duly executed and in property form for transfer.
If a prior transfer of ownership of Peoples Community
Bancshares common stock is not registered in the transfer
records of Peoples Community Bancshares, a certificate
representing the proper number of shares of Superior Bancorp
common stock may be issued to a person other than the person in
whose name the certificate so surrendered is registered, if the
certificate will be properly endorsed or otherwise be in proper
form for transfer and the person requesting the issuance will
pay any transfer or other taxes required by reason of the
issuance of shares of Superior Bancorp common stock to a person
other than the registered holder of the certificate or establish
to the satisfaction of Superior Bancorp that such tax has been
paid or is not applicable.
Until surrendered as contemplated by the merger agreement, each
certificate will be deemed at any time after the effective time
to represent only the right to receive such stockholders
pro rata share of the merger consideration under the terms of
the merger agreement. No interest will be paid or will accrue on
any cash payable in lieu of any fractional shares of Superior
Bancorp common stock. After the merger is completed, to the
extent permitted by law, holders of record of Peoples
Community Bancshares common stock at the time we complete the
merger will be entitled to vote at any meeting of Superior
Bancorp stockholders the number of shares of Superior Bancorp
common stock into which their respective shares of Peoples
Community Bancshares common stock are converted after the
effective time, regardless of whether such holders have received
their certificates representing Superior Bancorp common stock in
accordance with the merger agreement.
No dividend or other distribution payable after the completion
of the merger with respect to Superior Bancorp common stock
will, however, be paid to the holder of any unsurrendered
Peoples Community Bancshares
59
certificate until the holder properly surrenders such
certificate along with the properly completed transmittal
materials. Upon surrender, all undelivered dividends and other
distributions and, if applicable, a check for the amount to be
paid instead of any fractional share interest will be delivered
to such stockholder, in each case without interest. No
certificates or scrip representing fractional shares of Superior
Bancorp common stock will be issued upon conversion of
Peoples Community Bancshares common stock, and the
fractional share interests will not entitle the owner thereof to
vote or to any rights of a stockholder of Superior Bancorp.
Notwithstanding any other provision of the merger agreement,
each holder of Peoples Community Bancshares common stock
exchanged pursuant to the merger who would otherwise have been
entitled to receive a fraction of a share of Superior Bancorp
common stock will receive cash instead of fractional shares of
Superior Bancorp common stock.
At the effective time of the merger, Peoples Community
Bancshares stockholders will cease to be, and will have no
rights as, Peoples Community Bancshares stockholders other
than:
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the right to receive the number of shares of Superior Bancorp
common stock into which the shares of Peoples Community
Bancshares common stock have been converted or, if elected, cash,
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the right to receive any fractional share payment,
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the right to receive any dividends or other distributions to
which they may be entitled under the merger agreement, or
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the right to perfect dissenters rights of appraisal, if
such have been properly exercised.
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None of Superior Bancorp, Peoples Community Bancshares or
the Exchange Agent will be liable to any holder of Peoples
Community Bancshares common stock for any shares of Superior
Bancorp common stock or any related dividends or other
distributions or cash in lieu of fractional shares delivered to
a public official pursuant to any applicable abandoned property,
escheat or similar law.
Payment
for Peoples Community Bancshares Options
The merger agreement provides that, at the effective time of the
merger, each outstanding option to purchase Peoples
Community Bancshares common stock shall be cancelled, and each
holder of such options will be entitled to receive cash equal to
the amount resulting when the number of options is multiplied by
the Per Option Value. The term Per Option Value
means (1) the
ten-day
average trading price of Superior Bancorp common stock
immediately preceding the effective date multiplied by the
exchange ratio, less (2) the exercise price for each share
of Peoples Community Bancshares common stock subject to
such option. As promptly as practicable after the effective date
of the merger, Superior Bancorp will issue a check for the
amount to be paid to each holder of a Peoples Community
Bancshares option who has executed a termination agreement. It
is a condition of Superior Bancorps obligation to
consummate the merger that each holder of a Peoples
Community Bancshares option shall have executed an agreement to
cancel such option as of the effective date of the merger.
Until cancelled as contemplated by the merger agreement, each
option will be deemed at any time after the effective time to
represent only the right to receive such option merger
consideration under the terms of the merger agreement.
60
INFORMATION
ABOUT SUPERIOR BANCORP
General
Superior Bancorp is a Delaware-chartered thrift holding company
headquartered in Birmingham, Alabama. Superior Bancorp offers a
broad range of banking and related services in 60 locations in
Alabama and Florida through Superior Bank, its principal
subsidiary. Superior Banks consumer finance subsidiaries
operate an additional 19 consumer finance offices in North
Alabama. Superior Bancorp had assets of approximately
$2.452 billion, loans of approximately $1.675 billion,
deposits of approximately $1.861 billion and
stockholders equity of approximately $279 million at
March 31, 2007. Superior Bancorps principal executive
offices are located at 17 North 20th Street, Birmingham,
Alabama 35203, and its telephone number is
(205) 327-1400.
Superior Bancorp was founded in 1997 and completed its initial
public offering in December 1998. Beginning in the fall of 1998,
Superior Bancorp grew through the acquisition of various
financial institutions in Alabama and Florida.
In January 2005, Superior Bancorp began the transition from its
founding management team to a new senior management team
composed of veteran bankers with a strong operational track
record and a history of enhancing stockholder value. During the
remainder of 2005, Superior Bancorp completed that management
transition. In addition, in November 2005 Superior Bancorp
converted its principal subsidiary, now known as Superior Bank,
from an Alabama state-chartered bank to a federally chartered
thrift regulated by the Office of Thrift Supervision. Superior
Bancorp believes that this conversion will allow it greater
flexibility in its operations, as well as allowing Superior Bank
to operate under a single regulatory system rather than the dual
federal/state regulatory system that had been applicable to it.
Superior Bancorp expanded its franchise during 2006 with two
strategic acquisitions. On August 31, 2006, Superior
Bancorp entered the Tampa, Florida market when Superior Bancorp
acquired Kensington Bankshares, Inc. and its subsidiary, First
Kensington Bank. On November 7, 2006, Superior Bancorp
increased its market presence in North Alabama by acquiring
Community Bancshares, Inc. and its subsidiary, Community Bank.
Strategy
Operations. Superior Bancorp focuses its
services on small- to medium-sized businesses, as well as
professionals and individuals, emphasizing its local
decision-making, effective response time and personalized
service. As a result, Superior Bancorp conducts its business on
a decentralized basis with respect to deposit gathering and most
credit decisions, emphasizing local knowledge and authority to
make these decisions. Superior Bancorp supplements this
decentralized management approach with centralized loan
administration, policy oversight, credit review, audit, legal,
asset/liability management, data processing, human resources and
risk management systems. Superior Bancorp implements these
standardized administrative and operational policies at each of
its locations while retaining local management and advisory
directors to capitalize on their knowledge of the local
community.
Products and Services. Superior Bank provides
a wide range of retail and small business services, including
noninterest-bearing and interest-bearing checking, savings and
money market accounts, negotiable order of withdrawal
(NOW) accounts, certificates of deposit and
individual retirement accounts. In addition, Superior Bank
offers an extensive array of consumer, small business and
commercial real estate loan products. Other financial services
include annuities, automated teller machines, debit cards,
credit-related life and disability insurance, safety deposit
boxes, internet banking, bill payment and telephone banking.
Superior Bank attracts primary banking relationships through the
customer-oriented service environment created by Superior
Banks personnel combined with competitive financial
products.
Superior Bank also owns two consumer finance companies: Superior
Financial Services, LLC and
1st
Community Credit Corporation. The finance companies generally
provide smaller loans to a market segment traditionally not
pursued by Superior Bank. These loans typically involve greater
risk and generate higher yields than standard bank loans.
Superior Bancorp believes that, by conducting this business,
Superior Bancorp reaches a customer base not served by its
banking operations.
Market Areas. Superior Bancorp is
headquartered in Birmingham, Alabama. Its primary markets are
located in northern and central Alabama, the panhandle of
Florida and the Tampa, Florida area.
61
Superior Bank has branches in:
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Alabama
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Florida
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Albertville
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Andalusia
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Altha
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Athens
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Birmingham
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Apalachicola
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Blountsville
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Boaz
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Blountstown
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Childersburg
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Cleveland
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Bristol
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Decatur
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Elkmont
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Carrabelle
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Falkville
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Frisco City
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Clearwater
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Gadsden
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Gardendale
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Mexico Beach
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Guntersville
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Gurley
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New Port Richey
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Haleyville
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Hamilton
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Palm Harbor
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Hartselle
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Huntsville
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Panama City
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Kinston
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Madison
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Port Richey
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Meridianville
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Monroeville
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Port St. Joe
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Mountain Brook
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New Hope
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Spring Hill
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Oneonta
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Opp
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Sun City Center
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Rainbow City
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Rogersville
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Tallahassee
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Samson
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Snead
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Tampa
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Sylacauga
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Uniontown
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Wesley Chapel
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Warrior
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In addition to these branches, Superior Bancorp operates loan
production offices in Montgomery, Alabama and Tallahassee,
Florida. Superior Bancorps finance company subsidiaries
have offices in Albertville, Arab, Atalla, Athens, Boaz,
Cullman, Decatur, Fort Payne, Gadsden, Hartselle,
Huntsville, Jasper, Oneonta, Oxford, Pell City and Talladega,
Alabama.
Growth. Superior Bancorps future growth
depends primarily on the expansion of the business of its
primary wholly owned subsidiary, Superior Bank. That expansion
will depend on internal growth and the opening of new branch
offices in new and existing markets. Superior Bank may also
continue to engage in the strategic acquisition of other
financial institutions and branches that have relatively high
earnings and low-cost deposits or that Superior Bancorp believes
to have exceptional growth potential, such as the acquisitions
completed in 2006 and the proposed merger with Peoples
Community Bancshares. Superior Bancorps ability to
increase profitability and grow internally depends primarily on
its ability to attract and retain low-cost and core deposits
while continuing to generate high-yielding, quality loans.
Superior Bancorps ability to grow profitably through the
opening or acquisition of new branches will depend primarily on,
among other things, its ability to identify profitable, growing
markets and branch locations within such markets that will
enable it to attract the necessary deposits to operate such
branches profitably and identify lending and investment
opportunities within such markets.
Superior Bancorp periodically evaluates business combination
opportunities and conducts discussions, due diligence activities
and negotiations in connection with those opportunities. As a
result, Superior Bancorp may pursue business combination
transactions involving cash, debt or equity securities from time
to time. Any future business combination or series of business
combinations that Superior Bancorp might undertake may be
material to its business, financial condition or results of
operations in terms of assets acquired or liabilities assumed.
Any future acquisition is subject to approval by the appropriate
regulatory agencies.
Available
Information
Superior Bancorp maintains an Internet website at
www.superiorbank.com. Superior Bancorp makes available free of
charge through its website various reports that Superior Bancorp
files with the SEC, including its annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to these reports which are incorporated herein by
reference. These reports are made available as soon as
reasonably practicable after these reports are filed with, or
furnished to, the SEC. From its home page at
62
www.superiorbank.com, go to and click on Investor
Relations and click on SEC Filings to access
these reports. See Where You Can Find More
Information and Incorporation of Certain Documents
by Reference beginning on page 74.
INFORMATION
ABOUT PEOPLES COMMUNITY BANCSHARES
Business
Peoples Community Bancshares is a Florida bank holding
company, headquartered in Sarasota, Florida. Peoples
Community Bank of the West Coast, a wholly-owned subsidiary of
Peoples Community Bancshares, is a Florida-chartered bank.
Peoples Community Bank has three branches in Sarasota,
Venice and Bradenton, Florida. At March 31, 2007,
Peoples Community Bancshares had assets of approximately
$332 million, loans of approximately $263 million,
deposits of approximately $256 million and
stockholders equity of approximately $27.1 million.
Peoples Community Bancshares was incorporated under the
laws of the State of Florida on September 4, 1998 and is a
registered bank holding company under the Bank Holding Company
Act of 1956, as amended. Peoples Community Bancshares
acquired all of the voting shares of Peoples Community
Bank on July 6, 2002. Peoples Community Bank was
incorporated under the laws of the State of Florida on
August 25, 1999 and commenced operations as a Florida state
bank on October 4, 1999.
Peoples Community Bank provides a range of consumer and
commercial banking services to individuals, businesses and
industries. The basic services offered by Peoples
Community Bank include demand interest-bearing and
noninterest-bearing accounts, money market deposit accounts, NOW
accounts, time deposits, safe deposit services, homeowner
association services, direct deposits, notary services, money
orders, night depository, travelers checks, cashiers
checks, domestic collections, savings bonds, bank drafts,
automated teller services, drive-in tellers, and banking by
mail. In addition, Peoples Community Bank primarily makes
secured and unsecured commercial and real estate loans and
issues stand-by letters of credit. Peoples Community Bank
does not have trust powers and, accordingly, provides no trust
services.
The revenues of Peoples Community Bank are primarily
derived from interest on, and fees received in connection with,
real estate and other loans, and from interest and dividends
from investment securities and short-term investments. The
principal sources of funds for Peoples Community Bank
lending activities are its deposits, repayment of loans, and the
maturity of investment securities. The principal expenses of
Peoples Community Bank are the interest paid on deposits,
and operating and general administrative expenses.
As is the case with banking institutions generally,
Peoples Community Banks operations are materially
and significantly influenced by general economic conditions and
by related monetary and fiscal policies of financial institution
regulatory agencies, including the Board of Governors of the
Federal Reserve System. Deposit flows and costs of funds are
influenced by interest rates on competing investments and
general market rates of interest. Lending activities are
affected by the demand for financing of real estate and other
types of loans, which in turn is affected by the interest rates
at which such financing may be offered and other factors
affecting local demand and availability of funds. Peoples
Community Bank faces strong competition in the attraction of
deposits (its primary source of lendable funds) and in the
origination of loans.
Managements
Discussion and Analysis of Financial Condition
General
Information
Scope of Operations. Peoples Community
Bancshares serves as a one-bank holding company for
Peoples Community Bank. Peoples Community
Banks deposits are insured by the FDIC. Peoples
Community Bank provides community-banking services through three
full-service branches in Sarasota, Bradenton and Venice,
Florida. Peoples Community Statutory Trust I, a
special purpose entity formed solely to issue trust preferred
securities, is a wholly owned subsidiary of Peoples
Community Bancshares.
Critical Accounting Policies. Peoples
Community Bancshares consolidated financial statements are
prepared in conformity with GAAP. The financial information
contained within these statements is, to a significant
63
extent, based on approximate measures of the financial effects
of transactions and events that have already occurred. Critical
accounting policies are those that involve the most complex and
subjective decisions and assessments, and have the greatest
potential impact on Peoples Community Bancshares
stated results of operations. The notes to the consolidated
financial statements include a summary of the significant
accounting policies and methods used in the preparation of
Peoples Community Bancshares consolidated financial
statements. Management believes that, of these significant
accounting policies, the following involve a higher degree of
judgment and complexity. Management has discussed these critical
accounting assumptions and estimates with the Board of
Directors Audit Committee.
Allowance for Loan Losses. Peoples
Community Bancshares allowance for loan losses is
established as losses are estimated to have occurred through a
provision for loan losses charged to operations. Loan losses are
charged against the allowance when management believes the
collectibility of a loan balance is unlikely. Subsequent
recoveries, if any, are credited to the allowance.
The allowance for loan losses comprises (1) a component for
individual loan impairment measured according to
SFAS No. 114, Accounting by Creditors for
Impairment of a Loan, and (2) a measure of collective
loan impairment according to SFAS No. 5,
Accounting for Contingencies. The allowance for loan
losses is established and maintained at levels deemed adequate
to cover losses inherent in the portfolio as of the balance
sheet date. This estimate is based upon managements
evaluation of the risks in the loan portfolio and changes in the
nature and volume of loan activity. Estimates for loan losses
are derived by analyzing historical loss experience, current
trends in delinquencies and charge-offs, historical peer bank
experience, changes in the size and composition of the loan
portfolio, adverse situations that may affect the
borrowers 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.
Income Taxes. Provisions for income taxes are
based on taxes payable or refundable for the current year and
deferred taxes on temporary differences between the tax basis of
assets and liabilities and their reported amounts in the
consolidated financial statements. Deferred tax assets and
liabilities are included in the consolidated financial
statements at currently enacted income tax rates applicable to
the period in which the deferred tax assets and liabilities are
expected to be realized or settled. In the event of changes in
the tax laws, deferred tax assets and liabilities are adjusted
in the period of the enactment of those changes, with the
cumulative effects included in the current years income
tax provision.
Market
Risk Disclosure
Market risk is the risk of loss due to adverse changes in market
prices and rates. Peoples Community Bancshares
market risk arises primarily from interest-rate risk inherent in
its lending and deposit gathering activities. The measure of
market risk associated with financial instruments is meaningful
only when all related and offsetting on and off balance sheet
transactions are aggregated, and the resulting net positions are
identified.
Peoples Community Bancshares does not engage in trading or
hedging activities and has not invested in interest-rate
derivatives or entered into interest rate swaps. Peoples
Community Bancshares primary objective in managing
interest-rate risk is to minimize the adverse impact of changes
in interest rates on its net interest income and capital, while
adjusting its asset-liability structure to obtain the maximum
yield-cost spread on that structure.
Asset/Liability Management. It is the
objective of Peoples Community Bancshares to manage assets
and liabilities to provide a satisfactory, consistent level of
profitability within the framework of established cash, loan,
investment, borrowing and capital policies. Designated bank
officers are responsible for monitoring policies and procedures
that are designed to ensure acceptable composition of the
asset/liability mix, stability and leverage of all sources of
funds while adhering to prudent banking practices. It is the
overall philosophy of management to support asset growth
primarily through growth of core deposits, which include
deposits of all categories made by individuals, partnerships and
corporations. Management seeks to invest the largest portion of
its assets in commercial, commercial real estate, consumer and
real estate loans.
The asset/liability mix is monitored on an ongoing basis, and a
quarterly report reflecting interest-sensitive assets and
interest-sensitive liabilities is prepared and presented to the
board of directors. The objective of this
64
policy is to control interest-sensitive assets and liabilities
to minimize the impact of substantial movements in interest
rates on Peoples Community Bancshares earnings.
Interest Sensitivity. The objective of
interest sensitivity management is to minimize the risk
associated with the effect of interest rate changes on net
interest margins while maintaining net interest income at
acceptable levels. Managing this risk involves monthly
monitoring of the interest sensitive assets relative to interest
sensitive liabilities over specific time intervals. All assets
and liabilities are evaluated as maturing at the earlier of the
repricing date or the contractual maturity date. While
liabilities without specific terms such as money market, NOW and
savings accounts are generally considered core deposits for
liquidity purposes, 100% are deemed to reprice for purposes of
interest rate sensitivity analysis within the first twelve
months; however, all lag in both a rising and falling rate
environment. Management subjectively sets rates on all accounts
not specifically tied to an index.
The principal measure of Peoples Community
Bancshares exposure to interest rate risk is the
difference between interest-sensitive assets and liabilities for
the periods being measured, commonly referred to as the
gap for such period. A positive gap position
represents a greater amount of interest-sensitive assets
repricing (or maturing). Thus, an increase in rates would
positively impact net interest income, as the yield on
interest-earning assets would increase prior to the increase in
the cost of interest bearing liabilities. Conversely, a negative
gap position is indicative of a greater amount of
interest-sensitive liabilities repricing (or maturing) than
interest-sensitive assets in a given time interval. In this
instance, the impact on net interest income would be positive in
a declining rate environment and negative if rates were rising.
The impact on net interest income described above is general, as
other factors would additionally maximize or minimize the
effect. For example, a change in the prime interest rate could
effect an immediate change to rates on prime-related assets,
whereas a liability that reprices according to changes in
Treasury rates might (i) lag in the timing of the change
and (ii) change rates in an amount less than the change in
the prime interest rate. It is common to focus on the one-year
gap, which is the difference between the dollar amount of assets
and the dollar amount of liabilities maturing or repricing
within the next twelve months.
The following is a consolidated maturity and repricing analysis
of rate-sensitive assets and liabilities as of December 31,
2006.
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0-90
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91-180
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181-365
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Over
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Days
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Days
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Days
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1 Year
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Total
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(In thousands)
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Interest-earning assets:
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Federal funds sold
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$
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13,790
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$
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$
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$
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$
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13,790
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Interest-bearing deposits
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Investment securities
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726
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1,668
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1,240
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39,085
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42,719
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Restricted securities
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Loans
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91,206
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14,769
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22,316
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121,428
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249,719
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|
|
|
|
|
Total interest-earning assets
|
|
|
105,722
|
|
|
|
16,437
|
|
|
|
23,556
|
|
|
|
160,513
|
|
|
|
306,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand deposits
|
|
|
|
|
|
|
12,003
|
|
|
|
11,004
|
|
|
|
|
|
|
|
23.007
|
|
Savings
|
|
|
79,617
|
|
|
|
|
|
|
|
14,317
|
|
|
|
|
|
|
|
93,934
|
|
Certificates of Deposit
|
|
|
20,318
|
|
|
|
31,454
|
|
|
|
32,655
|
|
|
|
12,552
|
|
|
|
96,979
|
|
Other borrowings
|
|
|
29,312
|
|
|
|
|
|
|
|
|
|
|
|
21,124
|
|
|
|
50,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
129,247
|
|
|
|
43,457
|
|
|
|
57,976
|
|
|
|
33,676
|
|
|
|
264,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Sensitivity Gap
(rate-sensitive assets less rate-sensitive liabilities):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest sensitivity gap
|
|
$
|
(23,525
|
)
|
|
$
|
(27,020
|
)
|
|
$
|
(34,420
|
)
|
|
$
|
126,837
|
|
|
$
|
41,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative interest sensitivity gap
|
|
|
(23,525
|
)
|
|
|
(50,545
|
)
|
|
|
(84,965
|
)
|
|
|
41,872
|
|
|
|
|
|
Interest sensitivity gap ratio as
a percent of total assets
|
|
|
(7.3
|
)%
|
|
|
(8.4
|
)%
|
|
|
(10.6
|
)%
|
|
|
39.3
|
%
|
|
|
|
|
Cumulative interest sensitivity
gap ratio as a percent of total assets
|
|
|
(7.3
|
)%
|
|
|
(15.6
|
)%
|
|
|
(26.3
|
)%
|
|
|
13.0
|
%
|
|
|
|
|
65
At December 31, 2006, Peoples Community Bancshares
had $145.7 million in interest-sensitive assets compared to
$230.7 million in interest-sensitive liabilities that will
mature or reprice within a year, resulting in a negative gap of
$85.0 million (or 26%) expressed as a percentage of total
assets).
Management believes that the current balance sheet structure of
interest-sensitive assets and liabilities does not represent a
material risk to earnings or liquidity in the event of a change
in market rates.
Comparison
of the Three-Month Periods Ended March 31, 2007 and
2006.
General. At March 31, 2007, Peoples
Community Bancshares had total assets of $332 million, net
loans of $263 million, total deposits of $256 million,
and stockholders equity of $27.1 million.
Earnings. Net earnings for the period ended
March 31, 2007 were $891,000 compared to net earnings of
$935,000 for the period ended March 31, 2006. This decrease
in Peoples Community Bancshares net earnings was
primarily due to an increase in interest expense and a decrease
in secondary market fee income.
Interest Income. Interest income increased to
$5.7 million for the period ended March 31, 2007 from
$4.5 million for the period ended March 31, 2006.
Interest income on loans increased to $4.9 million for the
period ended March 31, 2007 from $4.2 million for the
period ended March 31, 2006 due primarily to an increase in
the average loan portfolio balance. Interest on securities
increased to $554,000 for the period ended March 31, 2007
from $316,000 for the same period in 2006. The increase was
primarily due to the increase in average balances outstanding.
Interest Expense. Interest expense on deposit
accounts increased to $3.1 million for the period ended
March 31, 2007, from $1.8 million for the period ended
March 31, 2006. Interest expense increased primarily
because of an increase in the average balance of deposits during
the first quarter 2007 compared to the same period in 2006.
Interest expense on borrowings increased to $598,000 from
$456,000 for the period ending March 31, 2007 and 2006,
respectively, primarily due to an increase in the average
balance outstanding on Peoples Community Bancshares
line of credit.
Provision for Loan Losses. The provision for
the period ended March 31, 2007, was $3.3 million
compared to $2.7 million for the same period in 2006 due to
the increase in loans outstanding.
Noninterest Income. Total noninterest income
decreased to $285,000 for the period ended March 31, 2007
from $355,000 for the period ended March 31, 2006 primarily
due to a decrease in mortgage loan referral fees.
Noninterest Expenses. Total noninterest
expenses increased by $55,000 for the period ended
March 31, 2007 from $1.3 million for the same period
in 2006. This is attributable to increases in operating expenses
associated with the growth of Peoples Community Bancshares.
Comparison
of the Twelve-Month Periods Ended December 31, 2006 and
2005
General. At December 31, 2006,
Peoples Community Bancshares had total assets of
$323 million, net loans of $246 million, total
deposits of $244 million, and stockholders equity of
$26.2 million.
Earnings. Net earnings for the year ended
December 31, 2006 were $3.4 million compared to net
earnings of $2.5 million for the year ended
December 31, 2005. This increase in Peoples Community
Bancshares net earnings was primarily due to an increase
in net interest income and secondary market fee income.
Interest Income. Interest income increased to
$20.3 million for the year ended December 31, 2006
from $14.5 million for the year ended December 31,
2005. Interest income on loans increased to $18.3 million
due primarily to an increase in the average loan portfolio
balance for the year ended December 31, 2006, and an
increase in the average yield earned from 6.77% for the year
ended December 31, 2005 to 7.58% for the year ended
December 31, 2006. Interest on securities increased to
$1.3 million due to an increase in the average balance and
average yield during the year ended December 31, 2006.
Interest Expense. Interest expense on deposit
accounts increased to $7.5 million for the year ended
December 31, 2006, from $4.2 million for the year
ended December 31, 2005. Interest expense increased
primarily because of an increase in the average balance of
deposits during 2006. Interest expense on borrowings increased
to
66
$2.2 million for the year ended December 31, 2006 from
$1.1 million for the year ended December 31, 2005 due
to an increase in the average balance of Federal Home
Loan Bank advances, borrowings under Peoples
Community Bancshares line of credit and other borrowings.
Provision and Allowance for Loan Losses. The
provision for loan losses is charged to earnings to bring the
total allowance to a level deemed appropriate by management and
the board and is based upon historical experience, the volume
and type of lending conducted by Peoples Community Bank,
industry standards, the amount of nonperforming loans, general
economic conditions, particularly as they relate to
Peoples Community Banks market areas, and other
factors related to the estimated collectibility of its loan
portfolio. The allowance for loan losses at December 31,
2006, was $3.3 million compared to $2.6 million at the
same date in 2005.
Noninterest Income. Total noninterest income
increased to $1.2 million for the year ended
December 31, 2006 from $989,000 for the year ended
December 31, 2005, primarily due to an increase in mortgage
loan referral fees of $136,000.
Noninterest Expenses. Total noninterest
expenses increased to $5.9 million for the year ended
December 31, 2006 from $5.5 million for the year ended
December 31, 2005, primarily due to normal increases in
operating expenses associated with a growing company.
Income Taxes. Income taxes for the year ended
December 31, 2006, were $1.7 million (an effective
rate of 33%) compared to income taxes of $1.5 million (an
effective rate of 38%) for the year ended December 31, 2005.
Comparison
of the Twelve-Month Periods Ended December 31, 2005 and
2004
General. At December 31, 2005,
Peoples Community Bancshares had total assets of
$256 million, net loans of $213 million, total
deposits of $196 million, and stockholders equity of
$20.8 million.
Earnings. Net earnings for the year ended
December 31, 2005 were $2.5 million compared to net
earnings of $794,000 for the year ended December 31, 2004.
This increase in Peoples Community Bancshares net
earnings was primarily due to an increase in net interest income
and secondary market fee income.
Interest Income. Interest income increased to
$14.5 million for the year ended December 31, 2005
from $8.6 million for the year ended December 31,
2004. Interest income on loans increased to $13.3 million,
due primarily to an increase in the average loan portfolio
balance for the year ended December 31, 2005. Interest on
securities increased to $867,000 due to an increase in the
average balance and average yield during the year ended
December 31, 2005.
Interest Expense. Interest expense on deposit
accounts increased to $4.2 million for the year ended
December 31, 2005, from $2.6 million for the year
ended December 31, 2004. Interest expense increased
primarily because of an increase in the average balance of
deposits during 2005. Interest expense on borrowings increased
to $1.1 million for the year ended December 31, 2005
from $185,000 for the year ended December 31, 2004 due to
an increase in the average balance of Federal Home
Loan Bank advances, borrowings under Peoples
Community Bancshares line of credit, Peoples
Community Banks junior subordinated debenture and other
borrowings.
Provision and Allowance for Loan Losses. At
December 31, 2005, the allowance for loan losses was
$2.6 million, compared to $1.9 million at
December 31, 2004.
Noninterest Income. Total noninterest income
increased to $989,000 for the year ended December 31, 2005
from $583,000 for the year ended December 31, 2004,
primarily as a result of gain on sale of real estate.
Noninterest Expenses. Total noninterest
expenses increased to $5.5 million for the year ended
December 31, 2005 from $4.1 million for the year ended
December 31, 2004, primarily due to normal increases in
operating expenses associated with a growing company.
Income Taxes. Income taxes for the year ended
December 31, 2005, were $1.5 million (an effective
rate of 38%) compared to income taxes of $503,000 (an effective
rate of 39%) for the year ended December 31, 2004.
67
SUMMARY
OF REGULATORY DIFFERENCES
There are a number of material differences between the
regulation of federal savings banks and thrift holding
companies, on the one hand, and Florida state-chartered banks
and bank holding companies, on the other hand. Superior Bancorp
is a thrift holding company and Superior Bank is a federal
savings bank, also known as a thrift. Both entities are
regulated by the Office of Thrift Supervision (OTS).
Peoples Community Bancshares is a bank holding company and
Peoples Community Bank is a Florida state-chartered bank.
Peoples Community Bancshares is regulated by the Board of
Governors of the Federal Reserve System and Peoples
Community Bank is regulated by the Florida Office of Financial
Regulation. In addition, both Superior Bank and Peoples
Community Bank are regulated by the Federal Deposit Insurance
Corporation.
After the merger of Peoples Community Bancshares into
Superior Bancorp, the combined holding companies will be a
thrift holding company and the combined banks will be a federal
savings bank. The primary regulator of the combined
organizations will be the OTS. In addition, the FDIC will
continue to regulate the combined banks. The combined
organizations will not be regulated by the Board of Governors of
the Federal Reserve System or by the Florida Office of Financial
Regulation. Neither Superior Bancorp nor Peoples Community
Bancshares can give any assurance as to the effect that any
regulatory differences will have on the operations of the
combined organizations. The following is a summary of these
differences.
Single Regulator. Federal savings banks and
their holding companies have a single regulator, the OTS. Having
a single regulator can provide certain advantages to banks
operating on an interstate basis, by providing a single set of
regulatory rules and by providing certain preemption of state
and local laws that might otherwise be applicable. By contrast,
a state-chartered bank is subject to regulation by its home
state banking regulator, by its host state banking
regulators (regulators in states outside its home state in which
it operates), and by one or more federal regulators. For
example, a federal savings bank generally has greater power to
engage in interstate banking than does a state-chartered bank,
because of the single set of interstate branching rules enacted
by the OTS. By contrast, a state-chartered bank is subject to
the interstate banking rules of both its home state and all host
states, which might not be consistent or as advantageous as the
OTS rules.
In addition, a holding company of a state-chartered bank, such
as Peoples Community Bancshares, is subject to regulation
by the Board of Governors of the Federal Reserve System. This
regulation is in addition to its subsidiary banks
regulation by its state banking authority. Such additional
regulation of a holding company may provide a benefit to
depositors and shareholders that is not present with a single
regulator.
Limitations on Certain Loans. A federal
savings bank is restricted from holding non-real estate-related
commercial and industrial loans, including agricultural loans,
in excess of 20% of the banks assets. Any such loans above
10% of assets must qualify as small business loans as defined by
the OTS. In addition, commercial real estate loans may not
exceed 400% of a federal savings banks capital.
Legislation has been introduced in Congress to relax these
restrictions but there can be no assurance whether such
legislation will ever pass. By contrast, Florida state-chartered
banks are not subject to such restrictions based on the real
estate nature of loans.
Federal savings banks are also subject to the so-called
Qualified Thrift Lender test. Under this test, at
least 65% of a federal savings banks assets must consist
of Qualified Assets, which generally consist of
cash, U.S. government or agency securities, or real estate
related loans, and consumer, credit card and small business
loans. Florida state-chartered banks are not subject to such
test.
Neither Superior Bancorp nor Peoples Community Bancshares
can give any assurance that the above limitations on types of
loans will not in the future have an adverse effect on Superior
Bank or Superior Bancorp.
Lending Limits to One Borrower. Under OTS
regulations, federal savings banks may not have credit
outstanding to a single borrower in excess of 15% of their
capital and surplus, with certain exceptions for secured
transactions and for the development of domestic residential
housing units. Florida state-chartered banks also may not have
credit outstanding to a single borrower in excess of 15% of
their capital and surplus, with certain exceptions for secured
transactions. Neither Superior Bancorp nor Peoples
Community Bancshares can give any assurance that any differences
in legal lending limits to a single borrower resulting from the
application of the OTS rules to the combined organizations will
not in the future have an adverse effect on Superior Bank or
Superior Bancorp.
68
COMPARISON
OF RIGHTS OF PEOPLES COMMUNITY BANCSHARES STOCKHOLDERS AND
SUPERIOR BANCORP STOCKHOLDERS
Peoples Community Bancshares is incorporated in Florida,
and Superior Bancorp is incorporated in Delaware. After the
merger, the former Peoples Community Bancshares
stockholders will have their rights and obligations as
stockholders of Superior Bancorp governed by Delaware law. A
summary comparison of the material rights of Superior Bancorp
stockholders under Superior Bancorps restated certificate
of incorporation and bylaws and the rights of a Peoples
Community Bancshares stockholder under the Peoples
Community Bancshares articles of incorporation and bylaws
is described below. The information set forth below is qualified
in its entirety by reference to Superior Bancorps restated
certificate of incorporation and its bylaws and to the articles
of incorporation and the bylaws of Peoples Community
Bancshares.
Classes
and Series of Capital Stock
Peoples Community
Bancshares. Peoples Community Bancshares is
authorized by its articles of incorporation to issue up to
10,000,000 shares of capital stock, which includes
9,000,000 designated as common stock, par value $0.01 per
share, and 1,000,000 of undesignated preferred stock. As of
March 31, 2007, there were 2,291,261 shares of
Peoples Community Bancshares common stock outstanding. In
addition, 32,265 shares of Peoples Community
Bancshares common stock have been reserved for future option
grants under Peoples Community Bancshares stock
option plans. The board of directors of Peoples Community
Bancshares has the authority under the Peoples Community
Bancshares articles of incorporation to designate classes of and
to issue preferred stock.
Superior Bancorp. Superior Bancorp is
authorized by its restated certificate of incorporation to issue
up to 65,000,000 shares of capital stock, of which
60,000,000 shares are designated common stock, par value
$.001 per share, and 5,000,000 shares are designated
preferred stock, par value $.001 per share. As of
March 31, 2007, there were 34,658,368 shares of
Superior Bancorp common stock outstanding. In addition,
2,500,000 shares of Superior Bancorp common stock have been
reserved for future option grants under Superior Bancorps
stock option plans. The board of directors of Superior Bancorp
has the authority to issue preferred stock in one or more series
and fix the rights, preferences, privileges and restrictions for
each such series, without any further vote or action by the
stockholders. As of March 31, 2007, there were no shares of
preferred stock of Superior Bancorp issued and outstanding.
Size and
Election of the Board of Directors
Peoples Community
Bancshares. Peoples Community
Bancshares articles of incorporation provide that the
board of directors of Peoples Community Bancshares will
consist of not more than 15 directors, nor less than five
directors. The board of directors of Peoples Community
Bancshares fixes its size by resolution. There are currently
five directors. Directors of Peoples Community Bancshares
are elected by a plurality of votes cast at the annual meeting
of stockholders to one-year terms.
Superior Bancorp. Superior Bancorps
bylaws provide that the board of directors of Superior Bancorp
will consist of not more than 30 directors, nor less than
three directors. The board of directors of Superior Bancorp
fixes the size of the board by resolution. There are currently
12 directors. Directors of Superior Bancorp are elected to
one-year terms by a plurality of votes cast at the annual
meeting of stockholders.
Removal
of Directors
Peoples Community
Bancshares. Peoples Community
Bancshares articles of incorporation provide that a
director may be removed for any reason by the vote of the
holders of 66% of the shares of Peoples Community
Bancshares common stock entitled to vote at an election of
directors, except as might be limited by the rights of the
holders of any class of preferred stock.
Superior Bancorp. Superior Bancorps
bylaws provide that a director may be removed with or without
cause by the vote of the holders of a majority of the shares of
Superior Bancorp common stock entitled to vote at an election of
directors, except as otherwise provided by applicable law.
69
Dividends
Peoples Community Bancshares. The bylaws
of Peoples Community Bancshares authorize the board of
directors to declare a dividend to the stockholders, in cash or
property, without a vote of the stockholders. Such dividends
would be paid pursuant to applicable provisions of Florida law.
Superior Bancorp. The restated certificate of
incorporation of Superior Bancorp authorizes the board of
directors of Superior Bancorp to declare a dividend to
distribute to the stockholders, without a vote of the
stockholders, any portion of the assets of Superior Bancorp
which are available under Delaware law for distribution.
Conversion
and Dissolution
Peoples Community
Bancshares. Peoples Community Bancshares
common stock cannot be converted into any other type of stock of
Peoples Community Bancshares. The articles of
incorporation of Peoples Community Bancshares authorizes
the issuance of 1,000,000 shares of preferred stock and
provides that shares of preferred stock may have the voting
powers, preferences and other rights as designated by the board
of directors.
Superior Bancorp. Superior Bancorp common
stock cannot be converted into any other type of stock of
Superior Bancorp. The restated certificate of incorporation of
Superior Bancorp authorizes the issuance of
5,000,000 shares of preferred stock, par value
$.001 per share, and provides that shares of preferred
stock may have the voting powers, preferences and other special
rights (including, without limitation, the right to convert the
shares of preferred stock into shares of Superior Bancorp common
stock) as described in Superior Bancorps restated
certificate of incorporation or resolutions providing for the
issuance of preferred stock. If the board of directors of
Superior Bancorp designated a series of preferred stock, such
preferred stock could be entitled to preferential payments in
the event of dissolution of Superior Bancorp.
Amendment
or Repeal of the Incorporation Documents and Bylaws
Peoples Community Bancshares. Under
Florida law, Peoples Community Bancshares articles
of incorporation may be amended upon a vote of the holders of a
majority of the outstanding shares of Peoples Community
Bancshares common stock.
Superior Bancorp. Under Delaware law, unless
its certificate of incorporation or bylaws require a greater
vote, amendment of a corporations certificate of
incorporation generally requires the approval of the holders of
a majority of the outstanding stock entitled to vote thereon. If
the amendment would increase or decrease the number of
authorized shares of any class or series or the par value of
such shares or would adversely affect the shares of such class
or series, the approval of the holders of a majority of the
outstanding stock of such class or series is required to amend
the certificate of incorporation. The restated certificate of
incorporation and the bylaws of Superior Bancorp impose no
greater voting requirement.
The restated certificate of incorporation and bylaws of Superior
Bancorp provide that the bylaws may be altered, amended or
repealed by a vote of a majority of the entire board of
directors of Superior Bancorp, or by a majority of the
outstanding stock entitled to vote thereon.
Special
Meetings of Stockholders
Peoples Community
Bancshares. Peoples Community
Bancshares bylaws provide that a special meeting of
stockholders may be called by resolution of a majority of the
total number of authorized directors, the chairman of the board,
the president or the holders of at least 20% of the outstanding
shares of Peoples Community Bancshares.
Superior Bancorp. Superior Bancorps
bylaws provide that a special meeting of Superior Bancorp
stockholders may, unless otherwise prescribed by law, be called
at any time by the chairman of the board or the President or by
order of the board of directors of Superior Bancorp. Special
meetings of stockholders prescribed by law for the election of
directors will be called by the board of directors of Superior
Bancorp, the chairman of the board, the president or the
secretary whenever they are required to do so by applicable law.
70
Liability
of Directors
Peoples Community
Bancshares. Peoples Community
Bancshares articles of incorporation provide that its
directors, officers, employees and agents are to be indemnified
by Peoples Community Bancshares to the fullest extent of
the law. Florida law generally provides that a director is not
personally liable for monetary damages to the corporation or any
other person for any statement, vote, decision, or failure to
act, regarding corporate management or policy, by a director,
unless:
The director breached or failed to perform his or
her duties as a director; and
The directors breach of, or failure to
perform, those duties constitutes:
1. A violation of the criminal law, unless the director had
reasonable cause to believe his or her conduct was lawful or had
no reasonable cause to believe his or her conduct was unlawful.
A judgment or other final adjudication against a director in any
criminal proceeding for a violation of the criminal law estops
that director from contesting the fact that his or her breach,
or failure to perform, constitutes a violation of the criminal
law; but does not estop the director from establishing that he
or she had reasonable cause to believe that his or her conduct
was lawful or had no reasonable cause to believe that his or her
conduct was unlawful;
2. A transaction from which the director derived an
improper personal benefit, either directly or indirectly;
3. A circumstance under which the liability provisions
under Florida law for unlawful distributions to stockholders are
applicable;
4. In a proceeding by or in the right of the corporation to
procure a judgment in its favor or by or in the right of a
stockholder, conscious disregard for the best interest of the
corporation, or willful misconduct; or
5. In a proceeding by or in the right of someone other than
the corporation or a stockholder, recklessness or an act or
omission which was committed in bad faith or with malicious
purpose or in a manner exhibiting wanton and willful disregard
of human rights, safety, or property.
Superior Bancorp. Delaware law permits a
corporation to include a provision in its certificate of
incorporation eliminating or limiting the personal liability of
a director to a corporation or its stockholders for damages for
breach of the directors fiduciary duty, subject to certain
limitations. The restated certificate of incorporation of
Superior Bancorp includes such a provision which, as described
below, limits the liability to the fullest extent permitted
under applicable law.
The restated certificate of incorporation of Superior Bancorp
provides that a director will not be personally liable to the
corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability:
|
|
|
|
|
for any breach of the directors duty of loyalty to
Superior Bancorp or its stockholders;
|
|
|
|
for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
|
|
|
|
under Section 174 of the Delaware General Corporation Law,
which concerns unlawful payments of dividends or expenditures of
funds for unlawful stock purchases or redemptions; or
|
|
|
|
for any transaction from which the director derived an improper
personal benefit.
|
While these provisions provide directors with protection from
awards of monetary damages for breaches of their duty of care,
they do not eliminate such duty. Accordingly, these provisions
will have no effect on the availability of equitable remedies
such as an injunction or rescission based on a directors
breach of his or her duty of care. The provisions described
above apply to an officer of Superior Bancorp only if he or she
is a director of Superior Bancorp and is acting in his or her
capacity as director, and do not apply to officers of Superior
Bancorp who are not directors.
71
DESCRIPTION
OF CAPITAL STOCK OF SUPERIOR BANCORP
Authorized
Capital Stock
Superior Bancorps restated certificate of incorporation
provides that Superior Bancorp may issue 5,000,000 shares
of preferred stock, par value $.001 per share, and
60,000,000 shares of common stock, par value $.001 per
share.
Superior
Bancorp Common Stock
Holders of Superior Bancorp common stock are entitled to one
vote for each share held of record on all matters to be
submitted to a vote of the stockholders and do not have
pre-emptive rights. Cumulative voting is not permitted. This
means that the holders of shares entitled to exercise more than
50% of the voting rights in the election of directors, for
example, will be able to elect all Superior Bancorps
directors.
The holders of Superior Bancorp common stock are entitled to
dividends and other distributions as and if declared by the
board of directors of Superior Bancorp out of funds legally
available therefor. See Market Price and Dividend
Information. All outstanding shares of Superior Bancorp
common stock are, and the shares to be issued in the merger will
be, when issued pursuant to the merger agreement, fully paid and
nonassessable. Upon the liquidation, dissolution or winding up
of Superior Bancorp, the holders of Superior Bancorp common
stock would be entitled to share pro rata in the distribution of
all assets, if any, of Superior Bancorp remaining after payment
or provision for payment of all Superior Bancorps debts
and obligations and preferred liquidation payments, if any, to
holders of any outstanding shares of preferred stock. Shares of
Superior Bancorp common stock are not subject to any redemption
provisions and are not convertible into any other security or
other property of Superior Bancorp. No share of Superior Bancorp
common stock is subject to any call or assessment.
Superior
Bancorp Preferred Stock
The board of directors of Superior Bancorp is authorized to
issue shares of preferred stock in one or more series. The board
of directors of Superior Bancorp will determine and fix the
rights, preferences and privileges of each series, including
dividend rights and preferences over dividends on Superior
Bancorp common stock and one or more series of preferred stock,
conversion rights, voting rights (in addition to those provided
by law), redemption rights and the terms of any sinking fund
therefor, and rights upon liquidation, dissolution or winding
up, including preferences over Superior Bancorp common stock and
one or more series of preferred stock. Although Superior Bancorp
has no present plans to issue any shares of preferred stock, the
issuance of shares of preferred stock, or the issuance of rights
to purchase such shares, may have the effect of delaying,
deferring or preventing a change in control of Superior Bancorp
or an unsolicited acquisition proposal.
Certain
Provisions of Superior Bancorps Restated Certificate of
Incorporation and Delaware Law
No Classified Board of Directors. Superior
Bancorps restated certificate of incorporation and bylaws
provide for the directors of Superior Bancorp to be elected
annually for a term of one year.
Delaware Takeover Statute. Superior Bancorp is
subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any of a broad range of business
combinations with any interested stockholder for a
period of three years following the date that such stockholder
became an interested stockholder, unless:
|
|
|
|
|
before that date, the board of directors of the corporation
approved either the business combination or the transaction
which resulted in the stockholder becoming an interested
stockholder;
|
|
|
|
upon consummation of the transaction which resulted in the
stockholders becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of
shares outstanding those shares owned:
|
|
|
|
by persons who are directors and also officers; and
|
72
|
|
|
|
|
by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange
offer; or
|
|
|
|
on or after such date, the business combination is approved by
the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the
affirmative vote of at least
662/3%
of the outstanding voting stock which is not owned by the
interested stockholder.
|
An interested stockholder is defined as any person
that is (a) the owner of 15% or more of the outstanding
voting stock of the corporation or (b) an affiliate or
associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time
within the three-year period immediately prior to the date on
which it is sought to be determined whether such person is an
interested stockholder.
Limitations
on Liability of Officers and Directors
Superior Bancorps restated certificate of incorporation
contains a provision eliminating or limiting a directors
liability to Superior Bancorp and its stockholders for monetary
damages arising from acts or omissions in the directors
capacity as a director, as described above under
Comparison of Rights of Peoples Community Bancshares
Stockholders and Superior Bancorp Stockholders
Liability of Directors.
This provision offers persons who serve on the board of
directors of Superior Bancorp protection against awards of
monetary damages resulting from breaches of their duty of care
except as indicated above. As a result of this provision, the
ability of Superior Bancorp or a stockholder of Superior Bancorp
to successfully prosecute an action against a director for a
breach of his duty of care is limited. However, the provision
does not affect the availability of equitable remedies such as
an injunction or rescission based upon a directors breach
of his duty of care. The SEC has taken the position that the
provision will have no effect on claims arising under the
federal securities laws.
In addition, Superior Bancorps restated certificate of
incorporation and bylaws provide for mandatory indemnification
rights, subject to limited exceptions, to any director, officer,
employee or agent of Superior Bancorp who by reason of the fact
that he or she is a director, officer, employee or agent of
Superior Bancorp, is involved in a legal proceeding of any
nature. Such indemnification rights include reimbursement for
expenses incurred by such director, officer, employee or agent
in advance of the final disposition of such proceeding in
accordance with the applicable provisions of Delaware law.
Transfer
Agent and Registrar
The transfer agent and registrar for Superior Bancorp common
stock is Computershare, 250 Royall Street, Canton, Massachusetts
02021, Telephone
(781) 575-2000.
73
EXPERTS
The consolidated financial statements and managements
report on the effectiveness of internal control over financial
reporting of Superior Bancorp (formerly The Banc Corporation)
incorporated by reference in this prospectus/proxy statement
have been audited by Carr, Riggs & Ingram, LLC, an
independent registered public accounting firm, as stated in its
reports thereon, and are included in reliance upon such reports
and upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Peoples Community
Bancshares appearing in this prospectus/proxy statement have
been audited by Hacker, Johnson & Smith, P.A., an
independent registered public accounting firm, to the extent and
for the periods indicated in their report appearing elsewhere
herein. Such consolidated financial statements have been
included in reliance upon such report given on the authority of
such firm as an expert in accounting and auditing.
LEGAL
MATTERS
The validity of the shares of Superior Bancorp common stock to
be issued to the stockholders of Peoples Community
Bancshares pursuant to the merger will be passed upon by Haskell
Slaughter Young & Rediker, LLC, Birmingham, Alabama.
OTHER
MATTERS
Superior Bancorp and Peoples Community Bancshares know of
no other matters which may be brought before the special meeting.
WHERE YOU
CAN FIND MORE INFORMATION
Superior Bancorp is subject to the informational requirements of
the Securities Exchange Act of 1934, which means that Superior
Bancorp is required to file reports, proxy statements and other
information, all of which are available at the Public Reference
Room of the Securities and Exchange Commission (the
SEC) at 100 F Street, N.E., Washington, D.C.
20549. You may also obtain copies of the reports, proxy
statements and other information from the Public Reference
Section of the SEC, at prescribed rates, by calling
1-800-SEC-0330.
The SEC maintains a World Wide Web site on the Internet at
http://www.sec.gov where you can access reports, proxy,
information and registration statements and other information
regarding registrants that file electronically with the SEC
through the EDGAR system. Superior Bancorp has filed a
registration statement on
Form S-4
to register Superior Bancorp common stock to be issued to the
Peoples Community Bancshares stockholders in the merger.
This prospectus/proxy statement is a part of that registration
statement and constitutes a prospectus of Superior Bancorp in
addition to being a proxy statement of Peoples Community
Bancshares for the special meeting of its stockholders to be
held on July 3, 2007, as described in this prospectus/proxy
statement. As allowed by SEC rules, this prospectus/proxy
statement does not contain all of the information you can find
in the registration statement or the exhibits to the
registration statement. This prospectus/proxy statement
summarizes some of the documents that are exhibits to the
registration statement, and you should refer to the exhibits for
a more complete description of the matters covered by these
documents.
74
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows Superior Bancorp to incorporate by reference
certain information into this document, which means that
Superior Bancorp can disclose important information to you by
referring you to another document filed separately with the SEC.
The information incorporated by reference is considered part of
this document, except for any information superseded by
information contained directly in this document or in later
filed documents incorporated by reference in this document.
This document incorporates by reference the documents set forth
below that Superior Bancorp has previously filed with the SEC.
These documents contain important information about Superior
Bancorp and their respective businesses:
Superior Bancorp Filings (File
No. 0-25033)
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|
|
|
|
Superior Bancorps Annual Report on
Form 10-K
for the year ended December 31, 2006, filed March 16,
2007;
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|
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|
|
Superior Bancorps Proxy Statement for its 2007 Annual
Meeting of Stockholders filed April 16, 2007;
|
|
|
|
|
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Superior Bancorps Quarterly Report on Form 10-Q for
the three months ended March 31, 2007, filed May 10,
2007; and
|
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|
|
|
|
Superior Bancorps Current Reports on
Form 8-K
filed January 19, January 26, January 29,
March 1, April 27, April 30, May 10, and
May 17, 2007.
|
Superior Bancorp also incorporates by reference additional
documents that may be filed with the SEC under
sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act between the date of this prospectus/proxy statement
and prior to the special meetings.
Notwithstanding any other provision of this prospectus/proxy
statement, no portion of any document which is furnished to, but
not filed with, the SEC shall be deemed to be incorporated by
reference herein unless such furnished portion is expressly so
incorporated. Any statements in a document incorporated by
reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained
herein (or in any subsequently filed document which is also
incorporated by reference herein) modifies or supersedes any
such statement. Any statement so modified or superseded shall
not be deemed to be a part of this prospectus/proxy statement
except as so modified or superseded.
All information concerning Superior Bancorp and its subsidiaries
has been furnished by Superior Bancorp, and all information
concerning Peoples Community Bancshares has been furnished
by Peoples Community Bancshares. You should rely only on
the information contained or incorporated by reference in this
prospectus/proxy statement in making your decision to vote on
the merger agreement and the merger. No one has been authorized
to provide you with information that is different from that
contained in this prospectus/proxy statement.
This prospectus/proxy statement is dated May 25, 2007. You
should not assume that the information contained in this
prospectus/proxy statement is accurate as of any date other than
such date, and neither the mailing of this prospectus/proxy
statement to stockholders nor the issuance of Superior Bancorp
common stock in the merger will create any implication to the
contrary.
This prospectus/proxy statement does not constitute an offer to
sell, or a solicitation of any offer to buy, any securities, or
the solicitation of a proxy, in any jurisdiction to or from any
person to whom it is not lawful to make any such offer or
solicitation in such jurisdiction. Neither the delivery of this
prospectus/proxy statement nor any distribution of securities
made hereunder will, under any circumstances, create an
implication that there has been no change in information set
forth or incorporated in this document by reference or in the
affairs of Superior Bancorp or Peoples Community
Bancshares since the date of this prospectus/proxy statement.
75
PEOPLES
COMMUNITY BANCSHARES, INC.
AND SUBSIDIARY
Index to
Financial Statements of
Peoples Community Bancshares, Inc.
|
|
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|
|
Independent Auditors Report
|
|
|
F-2
|
|
Consolidated Balance Sheets for
the years ended December 31, 2006 and 2005
|
|
|
F-3
|
|
Consolidated Statements of
Earnings for the years ended December 31, 2006, 2005 and
2004
|
|
|
F-4
|
|
Consolidated Statements of Changes
in Stockholders Equity
|
|
|
F-5
|
|
Consolidated Statements of Cash
Flows
|
|
|
F-6
|
|
Notes to Consolidated Financial
Statements
|
|
|
F-7
|
|
Consolidated Balance Sheets for
the three months ended March 31, 2007 (unaudited)
|
|
|
F-24
|
|
Consolidated Statement of Earnings
for the three months ended March 31, 2007 and 2006
(unaudited)
|
|
|
F-25
|
|
Consolidated Statement of Cash
Flows for the three months ended March 31, 2007 and 2006
(unaudited)
|
|
|
F-26
|
|
Notes to Interim Consolidated
Financial Statements
|
|
|
F-27
|
|
F-1
Independent
Auditors Report
Peoples Community BancShares, Inc.
Sarasota, Florida:
We have audited the accompanying consolidated balance sheets of
Peoples Community BancShares, Inc. and Subsidiary (the
Company) at December 31, 2006 and 2005, and the
related consolidated statements of earnings, changes in
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2006. These
consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of the Company at December 31, 2006 and 2005, and
the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2006, in
conformity with accounting principles generally accepted in the
United States of America.
HACKER, JOHNSON & SMITH PA
Tampa, Florida
April 5, 2007
F-2
Peoples
Community Bancshares, Inc. and Subsidiary
($ in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
ASSETS
|
Cash and due from banks
|
|
$
|
7,458
|
|
|
|
7,483
|
|
Interest-bearing deposits with banks
|
|
|
486
|
|
|
|
344
|
|
Federal funds sold
|
|
|
13,970
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
21,914
|
|
|
|
7,905
|
|
Securities available for sale
|
|
|
24,945
|
|
|
|
20,091
|
|
Securities held to maturity
|
|
|
17,774
|
|
|
|
7,511
|
|
Loans, net of allowance for loan
losses of $3,284 in 2006 and $2,620 in 2005
|
|
|
246,435
|
|
|
|
213,189
|
|
Federal Home Loan Bank stock,
at cost
|
|
|
2,221
|
|
|
|
1,780
|
|
Premises and equipment, net
|
|
|
2,316
|
|
|
|
872
|
|
Accrued interest receivable
|
|
|
1,597
|
|
|
|
1,068
|
|
Cash surrender value of bank owned
life insurance
|
|
|
3,455
|
|
|
|
2,121
|
|
Deferred income taxes
|
|
|
1,306
|
|
|
|
971
|
|
Other assets
|
|
|
1,097
|
|
|
|
581
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
323,060
|
|
|
|
256,089
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits
|
|
|
30,265
|
|
|
|
38,746
|
|
Savings, NOW and money-market
deposits
|
|
|
116,941
|
|
|
|
89,311
|
|
Time deposits
|
|
|
96,979
|
|
|
|
67,646
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
244,185
|
|
|
|
195,703
|
|
Junior subordinated debenture
|
|
|
4,124
|
|
|
|
4,124
|
|
Other borrowings
|
|
|
4,037
|
|
|
|
1,322
|
|
Line of credit
|
|
|
4,275
|
|
|
|
|
|
Federal Home Loan Bank advances
|
|
|
38,000
|
|
|
|
31,000
|
|
Official checks
|
|
|
1,256
|
|
|
|
1,981
|
|
Accrued interest payable and other
liabilities
|
|
|
990
|
|
|
|
1,193
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
296,867
|
|
|
|
235,323
|
|
|
|
|
|
|
|
|
|
|
Commitments (Notes 4, 10 and
19)
|
|
|
|
|
|
|
|
|
Stockholders
equity:
|
|
|
|
|
|
|
|
|
Preferred stock, no par value;
1,000,000 shares authorized, none issued or outstanding
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value;
9,000,000 shares authorized, 2,290,696 and
2,085,992 shares issued and outstanding in 2006 and 2005
|
|
|
23
|
|
|
|
21
|
|
Additional paid-in capital
|
|
|
25,811
|
|
|
|
23,710
|
|
Retained earnings (accumulated
deficit)
|
|
|
571
|
|
|
|
(2,644
|
)
|
Accumulated other comprehensive loss
|
|
|
(212
|
)
|
|
|
(321
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders
equity
|
|
|
26,193
|
|
|
|
20,766
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
323,060
|
|
|
|
256,089
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
F-3
Peoples
Community Bancshares, Inc. and Subsidiary
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
18,319
|
|
|
|
13,293
|
|
|
|
7,982
|
|
Securities
|
|
|
1,327
|
|
|
|
867
|
|
|
|
514
|
|
Other interest-earning assets
|
|
|
643
|
|
|
|
341
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
20,289
|
|
|
|
14,501
|
|
|
|
8,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
7,530
|
|
|
|
4,244
|
|
|
|
2,620
|
|
Borrowings
|
|
|
2,219
|
|
|
|
1,077
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
9,749
|
|
|
|
5,321
|
|
|
|
2,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
10,540
|
|
|
|
9,180
|
|
|
|
5,786
|
|
Provision for loan losses
|
|
|
667
|
|
|
|
645
|
|
|
|
926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
9,873
|
|
|
|
8,535
|
|
|
|
4,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts
|
|
|
204
|
|
|
|
180
|
|
|
|
150
|
|
Other service charges and fees
|
|
|
99
|
|
|
|
82
|
|
|
|
46
|
|
Mortgage loan referral fees
|
|
|
705
|
|
|
|
569
|
|
|
|
264
|
|
Gain on sale of securities
available for sale
|
|
|
|
|
|
|
4
|
|
|
|
31
|
|
Gain on sale of equipment
|
|
|
|
|
|
|
30
|
|
|
|
|
|
Income from bank owned life
insurance
|
|
|
143
|
|
|
|
84
|
|
|
|
37
|
|
Other
|
|
|
45
|
|
|
|
40
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
1,196
|
|
|
|
989
|
|
|
|
583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
4,329
|
|
|
|
3,347
|
|
|
|
2,411
|
|
Occupancy and equipment
|
|
|
955
|
|
|
|
1,152
|
|
|
|
965
|
|
Printing and supplies
|
|
|
104
|
|
|
|
186
|
|
|
|
120
|
|
Professional fees
|
|
|
91
|
|
|
|
149
|
|
|
|
132
|
|
Advertising
|
|
|
43
|
|
|
|
154
|
|
|
|
120
|
|
Other
|
|
|
391
|
|
|
|
509
|
|
|
|
398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expenses
|
|
|
5,913
|
|
|
|
5,497
|
|
|
|
4,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
|
|
5,156
|
|
|
|
4,027
|
|
|
|
1,297
|
|
Income taxes
|
|
|
1,712
|
|
|
|
1,517
|
|
|
|
503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
3,444
|
|
|
|
2,510
|
|
|
|
794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
F-4
Peoples
Community Bancshares, Inc. and Subsidiary
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Compre-
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Earnings
|
|
|
hensive
|
|
|
Total
|
|
|
|
Common
|
|
|
Paid-In
|
|
|
(Accumulated
|
|
|
Income
|
|
|
Stockholders
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Deficit)
|
|
|
(Loss)
|
|
|
Equity
|
|
|
Balance at December 31,
2003
|
|
$
|
14
|
|
|
|
14,463
|
|
|
|
(1,310
|
)
|
|
|
58
|
|
|
|
13,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
794
|
|
|
|
|
|
|
|
794
|
|
Net change in unrealized gain on
securities available for sale, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(93
|
)
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividend
(149,615 shares)
|
|
|
1
|
|
|
|
1,794
|
|
|
|
(1,795
|
)
|
|
|
|
|
|
|
|
|
Sale of common stock, net of
issuance costs of $10 (385,566 shares)
|
|
|
4
|
|
|
|
4,612
|
|
|
|
|
|
|
|
|
|
|
|
4,616
|
|
Repurchase of common stock
(370 shares)
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
Sale of common stock in connection
with employee stock purchase plan (370 shares)
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2004
|
|
|
19
|
|
|
|
20,869
|
|
|
|
(2,311
|
)
|
|
|
(35
|
)
|
|
|
18,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
2,510
|
|
|
|
|
|
|
|
2,510
|
|
Net change in unrealized loss on
securities available for sale, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(286
|
)
|
|
|
(286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividend
(189,528 shares)
|
|
|
2
|
|
|
|
2,841
|
|
|
|
(2,843
|
)
|
|
|
|
|
|
|
|
|
Repurchase of common stock
(1,558 shares)
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
Sale of common stock in connection
with employee stock purchase plan (1,558 shares)
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2005
|
|
$
|
21
|
|
|
|
23,710
|
|
|
|
(2,644
|
)
|
|
|
(321
|
)
|
|
|
20,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2005
|
|
$
|
21
|
|
|
|
23,710
|
|
|
|
(2,644
|
)
|
|
|
(321
|
)
|
|
|
20,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
3,444
|
|
|
|
|
|
|
|
3,444
|
|
Net change in unrealized loss on
securities available for sale, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(229
|
)
|
|
|
|
|
|
|
(229
|
)
|
Repurchase of common stock
(1,504 shares)
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
Sale of common stock in connection
with Employee Stock Purchase Plan (1,504 shares)
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Exercise of common stock options
(204,704 shares), including tax benefit of $343
|
|
|
2
|
|
|
|
2,101
|
|
|
|
|
|
|
|
|
|
|
|
2,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2006
|
|
$
|
23
|
|
|
|
25,811
|
|
|
|
571
|
|
|
|
(212
|
)
|
|
|
26,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
F-5
Peoples
Community Bancshares, Inc. and Subsidiary
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
3,444
|
|
|
|
2,510
|
|
|
|
794
|
|
Adjustments to reconcile net
earnings to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
198
|
|
|
|
383
|
|
|
|
356
|
|
Provision for loan losses
|
|
|
667
|
|
|
|
645
|
|
|
|
926
|
|
Credit for deferred income taxes
|
|
|
(405
|
)
|
|
|
(320
|
)
|
|
|
(294
|
)
|
Gain on sale of securities
available for sale
|
|
|
|
|
|
|
(4
|
)
|
|
|
(31
|
)
|
Gain on sale of equipment
|
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
Amortization of loan fees, costs,
premiums and discounts
|
|
|
(26
|
)
|
|
|
240
|
|
|
|
328
|
|
Increase in accrued interest
receivable
|
|
|
(529
|
)
|
|
|
(409
|
)
|
|
|
(257
|
)
|
Income from bank owned life
insurance
|
|
|
(143
|
)
|
|
|
(84
|
)
|
|
|
(37
|
)
|
Increase in other assets
|
|
|
(516
|
)
|
|
|
(385
|
)
|
|
|
(37
|
)
|
(Decrease) increase in official
checks, accrued interest payable and other liabilities
|
|
|
(928
|
)
|
|
|
2,389
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
1,762
|
|
|
|
4,935
|
|
|
|
1,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity of interest-bearing
deposits in banks
|
|
|
|
|
|
|
|
|
|
|
95
|
|
Purchase of securities available
for sale
|
|
|
(7,153
|
)
|
|
|
(12,966
|
)
|
|
|
(9,854
|
)
|
Purchase of securities held to
maturity
|
|
|
(10,276
|
)
|
|
|
(6,557
|
)
|
|
|
(961
|
)
|
Maturity of securities available
for sale
|
|
|
|
|
|
|
4,500
|
|
|
|
2,500
|
|
Repayments of securities available
for sale
|
|
|
2,434
|
|
|
|
2,389
|
|
|
|
1,557
|
|
Proceeds from sale of securities
available for sale
|
|
|
|
|
|
|
1,001
|
|
|
|
668
|
|
Net increase in loans
|
|
|
(33,830
|
)
|
|
|
(49,495
|
)
|
|
|
(77,191
|
)
|
Purchase of premises and equipment
|
|
|
(1,642
|
)
|
|
|
(186
|
)
|
|
|
(177
|
)
|
Proceeds from sale of equipment
|
|
|
|
|
|
|
31
|
|
|
|
|
|
Purchase of Federal Home
Loan Bank stock
|
|
|
(441
|
)
|
|
|
(779
|
)
|
|
|
(780
|
)
|
Purchase of bank owned life
insurance
|
|
|
(1,191
|
)
|
|
|
|
|
|
|
(2,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(52,099
|
)
|
|
|
(62,062
|
)
|
|
|
(86,143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
|
|
48,482
|
|
|
|
36,775
|
|
|
|
55,084
|
|
Net increase in Federal Home
Loan Bank advances
|
|
|
7,000
|
|
|
|
14,000
|
|
|
|
17,000
|
|
Net increase in other borrowings
|
|
|
2,715
|
|
|
|
1,217
|
|
|
|
30
|
|
Proceeds from junior subordinated
debenture
|
|
|
|
|
|
|
4,124
|
|
|
|
|
|
Repurchase of common stock
|
|
|
(23
|
)
|
|
|
(23
|
)
|
|
|
(5
|
)
|
Net proceeds from sale of common
stock
|
|
|
23
|
|
|
|
23
|
|
|
|
4,621
|
|
Proceeds from exercise of common
stock options
|
|
|
1,760
|
|
|
|
|
|
|
|
|
|
Tax benefit from exercise of common
stock options
|
|
|
343
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(229
|
)
|
|
|
|
|
|
|
|
|
Net proceeds from line of credit
|
|
|
4,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
|
64,346
|
|
|
|
56,116
|
|
|
|
76,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
|
14,009
|
|
|
|
(1,011
|
)
|
|
|
(7,676
|
)
|
Cash and cash equivalents at
beginning of year
|
|
|
7,905
|
|
|
|
8,916
|
|
|
|
16,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of
year
|
|
$
|
21,914
|
|
|
|
7,905
|
|
|
|
8,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash
flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
10,928
|
|
|
|
5,158
|
|
|
|
2,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
2,578
|
|
|
|
1,830
|
|
|
|
685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive
income, change in unrealized gain (loss) on securities available
for sale, net of taxes
|
|
$
|
109
|
|
|
|
(286
|
)
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividend
|
|
$
|
|
|
|
|
2,843
|
|
|
|
1,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
F-6
Peoples
Community Bancshares, Inc. and Subsidiary
At December 31, 2006 and 2005 and For Each of the
Three
Years in the Period Ended December 31, 2006
|
|
(1)
|
Summary
of Significant Accounting Policies
|
General. Peoples Community BancShares,
Inc. (the Holding Company) owns 100% of the
outstanding common stock of Peoples Community Bank of the
West Coast (the Bank) (collectively the
Company). The Holding Companys primary
business activity is the operation of the Bank. The Bank is a
state (Florida) chartered commercial bank. The deposit accounts
of the Bank are insured by the Federal Deposit Insurance
Corporation. The Bank offers a variety of community banking
services to individual and corporate customers through its three
banking offices located in Sarasota and Manatee Counties,
Florida.
The following is a description of the significant accounting
policies and practices followed by the Company, which conform to
accounting principles generally accepted in the United States of
America and prevailing practices within the banking industry.
Basis of Presentation. The accompanying
consolidated financial statements include the accounts of the
Holding Company and the Bank. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates. In preparing consolidated
financial statements in conformity with accounting principles
generally accepted in the United States of America, management
is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the
consolidated balance sheet and reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates. Material estimates that are
particularly susceptible to significant change in the near term
relate to the determination of the allowance for loan losses and
deferred tax assets.
Cash and Cash Equivalents. For purposes of the
consolidated statements of cash flows, cash and cash equivalents
include cash and balances due from banks, interest-bearing
deposits with banks and federal funds sold, all of which mature
within ninety days.
The Bank is required by law or regulation to maintain cash
reserves with the Federal Reserve, in other bank accounts or in
the vault. The reserve balances at December 31, 2006 and
2005 were approximately $1,073,000 and $608,000, respectively.
Securities. Securities may be classified as
either trading, held to maturity or available for sale. Trading
securities are held principally for resale and recorded at their
fair values. Unrealized gains and losses on trading securities
are included immediately in earnings.
Held-to-maturity
securities are those which the Company has the positive intent
and ability to hold to maturity and are reported at amortized
cost.
Available-for-sale
securities consist of securities not classified as trading
securities nor as
held-to-maturity
securities. Unrealized holding gains and losses, net of tax, on
available-for-sale
securities are excluded from earnings and reported in
accumulated other comprehensive loss. Gains and losses on the
sale of
available-for-sale
securities are recorded on the trade date and are determined
using the specific-identification method. Premiums and discounts
on securities are recognized in interest income using the
interest method over the period to maturity.
Loans. Loans that management has the intent
and ability to hold for the foreseeable future or until maturity
or pay-off are reported at their outstanding principal adjusted
for any charge-offs, the allowance for loan losses, and any
deferred fees or costs.
Loan origination fees are deferred and certain direct
origination costs are capitalized and recognized as an
adjustment of the yield of the related loan.
The accrual of interest on loans is discontinued at the time the
loan is ninety days delinquent unless the credit is
well-collateralized and in process of collection. In all cases,
loans are placed on nonaccrual or charged-off at an earlier date
if collection of principal or interest is considered doubtful.
F-7
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
All interest accrued but not collected for loans that are placed
on nonaccrual or charged-off is 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
earnings. Loan losses are charged against the allowance when
management believes the uncollectibility 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 managements 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 borrowers 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 specific and general components. The
specific component relates to loans that are classified as
either loss, doubtful, substandard or special mention. For such
loans that are also 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 industry loss
experience adjusted for qualitative factors.
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 borrowers 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 commercial real estate
loans by either the present value of expected future cash flows
discounted at the loans effective interest rate, the
loans obtainable market price, or the fair value of the
collateral if the loan is collateral dependent.
Large groups of smaller balance homogeneous loans are
collectively evaluated for impairment. Accordingly, the Company
does not separately identify individual installment, including
lines of credit and residential loans for impairment disclosures.
Premises and Equipment. Land is stated at
cost. Premises and equipment are stated at cost, less
accumulated depreciation and amortization. Depreciation expense
is computed using the straight-line method over the estimated
useful life of each type of asset. Leasehold improvements are
amortized on a straight-line basis over the estimated useful
life of the asset or the expected lease term which includes
certain renewal options, if shorter.
Transfer of Financial Assets. Transfers of
financial assets are accounted for as sales, when control over
the assets has been surrendered. Control over transferred assets
is deemed to be surrendered when (1) the assets have been
isolated from the Company, (2) the transferee obtains the
right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred
assets, and (3) the Company does not maintain effective
control over the transferred assets through an agreement to
repurchase them before their maturity.
Income Taxes. Deferred income tax assets and
liabilities are recorded to reflect the tax consequences on
future years of temporary differences between revenues and
expenses reported for financial statement and those reported for
income tax purposes. Deferred tax assets and liabilities are
measured using the enacted tax rates
F-8
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
expected to apply to taxable income in the years in which those
temporary differences are expected to be realized or settled.
Valuation allowances are provided against assets which are not
likely to be realized.
The Holding Company and the Bank file consolidated income tax
returns. Income taxes are allocated between the Holding Company
and the Bank as through separate income tax returns were filed.
Stock-Based Compensation. Prior to
January 1, 2006, the Companys stock option plans were
accounted for under the recognition and measurement provisions
of Accounting Principles Board (APB) Opinion No. 25
(Opinion 25), Accounting for Stock Issued to
Employees, and related Interpretations, as permitted by
Financial Accounting Standards Board (FASB) Statement
No. 123, Accounting for Stock-Based Compensation (as
amended by Statement of Financial Accounting
Standards (SFAS) No. 148, Accounting for
Stock-Based Compensation Transition and Disclosure)
(collectively SFAS 123). No stock-based employee
compensation cost was recognized in the Companys
consolidated statements of earnings through December 31,
2005, as all options granted under the plans had an exercise
price equal to the market value of the underlying common stock
on the date of grant. Effective January 1, 2006, the
Company adopted the fair value recognition provisions of FASB
Statement No. 123R, Share-Based Payment
(SFAS 123(R)), and is required to expense the fair
value of any stock options granted after January 1, 2006.
There were no stock options granted in 2006.
In addition, prior to the adoption of SFAS 123(R), the tax
benefits of stock options exercised were classified as operating
cash flows. Since the adoption of SFAS 123(R), tax benefits
resulting from tax deductions in excess of the compensation cost
recognized for options are classified as financing cash flows.
No stock options were exercised prior to 2006.
Off-Balance-Sheet Financial Instruments. In
the ordinary course of business the Company has entered into
off-balance-sheet financial instruments consisting of unfunded
loan commitments and unused lines of credit. Such financial
instruments are recorded in the financial statements when they
are funded.
Fair Values of Financial Instruments. The fair
value of a financial instrument is the current amount that would
be exchanged between willing parties, other than in a forced
liquidation. Fair value is best determined based upon quoted
market prices. However, in many instances, there are no quoted
market prices for the Companys various financial
instruments. In cases where quoted market prices are not
available, fair values are based on estimates using present
value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. Accordingly,
the fair value estimates may not be realized in an immediate
settlement of the instrument. Fair value disclosure excludes
certain financial instruments and all nonfinancial instruments.
Accordingly, the aggregate fair value amounts presented may not
necessarily represent the underlying fair value of the Company.
The following methods and assumptions were used by the Company
in estimating fair values of financial instruments:
Cash and Cash Equivalents. The carrying
amounts of cash and cash equivalents approximates their fair
value.
Securities. Fair values for securities are
based on quoted market prices, where available. If quoted market
prices are not available, fair values are based on quoted market
prices of comparable instruments.
Loans. For variable-rate loans that reprice
frequently and have no significant change in credit risk, fair
values are based on carrying values. Fair values for fixed-rate
loans are estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.
Federal Home Loan Bank Stock. Fair value
of the Companys investment in Federal Home Loan Bank
stock is based on its redemption value.
Accrued Interest. The carrying amount
approximates fair value.
F-9
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
Deposit Liabilities. The fair values disclosed
for demand, savings, NOW and money market deposits are, by
definition, equal to the amount payable on demand at the
reporting date (that is, their carrying amounts). Fair values
for fixed-rate time deposits are estimated using a discounted
cash flow calculation that applies interest rates currently
being offered on certificates to a schedule of aggregate
expected monthly maturities of time deposits.
Other Borrowings and Line of Credit. The
carrying amounts of other borrowings and the line of credit
approximate their fair value.
Federal Home Loan Bank Advances and Junior Subordinated
Debenture. Fair values of these borrowings are
estimated using discounted cash flow analysis based on the
Companys current incremental borrowing rates for similar
types of borrowings.
Off-Balance-Sheet Financial Instruments. Fair
values for off-balance-sheet lending commitments are based on
fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the
counterparties credit standing.
Advertising. The Company expenses all media
advertising as incurred.
Comprehensive Income. Generally accepted
accounting principles require that recognized revenue, expenses,
gains and losses be included in net earnings. Although certain
changes in assets and liabilities, such as unrealized gains and
losses on
available-for-sale
securities, are reported as a separate component of the equity
section of the consolidated balance sheet, such items, along
with net earnings, are components of comprehensive income. The
components of other comprehensive income and related tax effects
for the years ended December 31, 2006, 2005 and 2004 are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
|
|
|
Tax
|
|
|
After
|
|
|
|
Tax
|
|
|
Effect
|
|
|
Tax
|
|
|
Year Ended December 31,
2006-
|
|
|
|
|
|
|
|
|
|
|
|
|
Holding gains
|
|
$
|
179
|
|
|
|
(70
|
)
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
Holding losses
|
|
|
(458
|
)
|
|
|
175
|
|
|
|
(283
|
)
|
Gains included in net earnings
|
|
|
(4
|
)
|
|
|
1
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized holding losses
|
|
$
|
(462
|
)
|
|
|
176
|
|
|
|
(286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
Holding losses
|
|
|
(119
|
)
|
|
|
45
|
|
|
|
(74
|
)
|
Gains included in net earnings
|
|
|
(31
|
)
|
|
|
12
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized holding losses
|
|
$
|
(150
|
)
|
|
|
57
|
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recent Accounting Pronouncements. In February
2006, the FASB issued SFAS No. 155, Accounting for
Certain Hybrid Instruments (SFAS 155), which permits,
but does not require, fair value accounting for any hybrid
financial instrument that contains an embedded derivative that
would otherwise require bifurcation in accordance with
SFAS 133. The statement also subjects beneficial interests
issued by securitization vehicles to the requirements of
SFAS 133. The statement was effective as of January 1,
2007. The adoption of SFAS 155 had no effect on the Company.
In March 2006, the FASB issued SFAS No. 156,
Accounting for Servicing of Financial Assets, an amendment of
FASB Statement No. 133 and 140 (SFAS 156), which
permits, but does not require, an entity to account for one or
more classes of servicing rights (i.e., mortgage servicing
rights) at fair value, with the changes in fair value recorded
F-10
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
in the consolidated statement of earnings. This Statement was
effective as of January 1, 2007. The adoption of
SFAS 156 had no effect on the Company.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair
value under generally accepted accounting principles and
enhances disclosures about fair value measurements.
SFAS 157 retains the exchange price notion and clarifies
that the exchange price is the price that would be received for
an asset or paid to transfer a liability (an exit price) in an
orderly transaction between market participants on the
measurement date. SFAS 157 is effective for the
Companys financial statements for the year beginning on
January 1, 2008, with earlier adoption permitted. The
adoption of SFAS 157 is not expected to have a material
effect on the Company.
In July 2006, the FASB released FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an interpretation
of FASB Statement No. 109 (FIN 48). FIN 48
clarifies the accounting and reporting for income taxes where
interpretation of the tax law may be uncertain. FIN 48
prescribes a comprehensive model for the financial statement
recognition, measurement, presentation and disclosure of income
tax uncertainties with respect to positions taken or expected to
be taken in income tax returns. The Company adopted FIN 48
on January 1, 2007. The adoption of FIN 48 had no
impact on the Company.
Reclassifications. Certain balances in the
2004 and 2005 consolidated financial statements have been
reclassified to conform to the 2006 presentation.
(2) Securities
Securities have been classified according to managements
intent. The carrying amount of securities and their fair values
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Available for
sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency
securities
|
|
$
|
14,154
|
|
|
|
44
|
|
|
|
(104
|
)
|
|
|
14,094
|
|
Mortgage-backed securities
|
|
|
11,131
|
|
|
|
|
|
|
|
(280
|
)
|
|
|
10,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,285
|
|
|
|
44
|
|
|
|
(384
|
)
|
|
|
24,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency
securities
|
|
|
7,020
|
|
|
|
|
|
|
|
(118
|
)
|
|
|
6,902
|
|
Mortgage-backed securities
|
|
|
13,590
|
|
|
|
|
|
|
|
(401
|
)
|
|
|
13,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,610
|
|
|
|
|
|
|
|
(519
|
)
|
|
|
20,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held for
maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
|
$
|
17,774
|
|
|
|
13
|
|
|
|
(173
|
)
|
|
|
17,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
|
$
|
7,511
|
|
|
|
|
|
|
|
(233
|
)
|
|
|
7,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of available for sale securities were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Gross proceeds
|
|
$
|
|
|
|
|
1,001
|
|
|
|
688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross gains
|
|
$
|
|
|
|
|
4
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-11
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
The scheduled maturities of securities at December 31, 2006
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale
|
|
|
Held to Maturity
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
Due in one year
|
|
$
|
995
|
|
|
|
965
|
|
|
|
|
|
|
|
|
|
Due from one to five years
|
|
|
3,950
|
|
|
|
3,934
|
|
|
|
285
|
|
|
|
276
|
|
Due from five to ten years
|
|
|
8,210
|
|
|
|
8,199
|
|
|
|
2,817
|
|
|
|
2,808
|
|
Due after ten years
|
|
|
999
|
|
|
|
996
|
|
|
|
14,672
|
|
|
|
14,532
|
|
Mortgage-backed securities
|
|
|
11,131
|
|
|
|
10,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,285
|
|
|
|
24,945
|
|
|
|
17,774
|
|
|
|
17,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities with gross unrealized losses at December 31,
2006, aggregated by investment category and length of time that
individual securities have been in a continuous loss position,
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
Twelve Months
|
|
|
Over Twelve Months
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Securities Available for
Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency
securities
|
|
$
|
15
|
|
|
|
2,184
|
|
|
|
89
|
|
|
|
6,908
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
280
|
|
|
|
10,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
15
|
|
|
|
2,184
|
|
|
|
369
|
|
|
|
17,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held for
Maturity-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities
|
|
$
|
117
|
|
|
|
8,337
|
|
|
|
56
|
|
|
|
5,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management evaluates securities for
other-than-temporary
impairment at least on a quarterly basis, and more frequently
when economic or market concerns warrant such evaluation.
Consideration is given to (1) the length of time and the
extent to which the fair value has been less than cost,
(2) the financial condition and near-term prospects of the
issuer, and (3) the intent and ability of the Company to
retain its investment in the issuer for a period of time
sufficient to allow for any anticipated recovery in fair value.
The unrealized losses on fifty-one of the Companys
investment securities were caused by interest rate changes. It
is expected that the securities would not be settled at a price
less than the par value of the investments. Because the decline
in fair value is attributable to changes in interest rates and
not credit quality, and because the Company has the ability and
intent to hold these investments until a market price recovery
or maturity, these investments are not considered
other-than-temporarily
impaired.
F-12
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
(3) Loans
The components of loans are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Commercial real estate
|
|
$
|
213,177
|
|
|
|
166,027
|
|
Residential real estate
|
|
|
12,181
|
|
|
|
19,871
|
|
Commercial
|
|
|
7,650
|
|
|
|
6,221
|
|
Installment, including lines of
credit
|
|
|
17,047
|
|
|
|
24,056
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
250,055
|
|
|
|
216,175
|
|
Less:
|
|
|
|
|
|
|
|
|
Deferred loan fees, net
|
|
|
(336
|
)
|
|
|
(366
|
)
|
Allowance for loan losses
|
|
|
(3,284
|
)
|
|
|
(2,620
|
)
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
$
|
246,435
|
|
|
|
213,189
|
|
|
|
|
|
|
|
|
|
|
An analysis of the change in the allowance for loan losses
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Beginning balance
|
|
$
|
2,620
|
|
|
|
1,940
|
|
|
|
1,035
|
|
Provision for loan losses
|
|
|
667
|
|
|
|
645
|
|
|
|
926
|
|
Charge-offs
|
|
|
(3
|
)
|
|
|
|
|
|
|
(21
|
)
|
Recoveries
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
3,284
|
|
|
|
2,620
|
|
|
|
1,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had no impaired loans in 2006, 2005 or 2004.
Nonaccrual and past due loans at December 31, 2006 and 2005
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Nonaccrual loans
|
|
$
|
540
|
|
|
|
|
|
Accruing loans past due ninety
days or more
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company grants the majority of its loans to borrowers
throughout the Sarasota and Manatee Counties, Florida area.
Although the Company has a diversified loan portfolio, a
significant portion of its borrowers ability to honor
their contracts is dependent upon the economy and real estate
market in Sarasota and Manatee Counties, Florida.
The Companys loan portfolio consists of $6,569,000 and
$33,764,000 of construction loans within the commercial real
estate and residential real estate categories, respectively. Of
this amount, repayment of $33,271,000 of the construction loans
is primarily dependent upon the sale of the collateral.
F-13
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
(4) Premises
and Equipment
A summary of premises and equipment follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Land
|
|
$
|
1,404
|
|
|
|
|
|
Furniture and fixtures
|
|
|
1,121
|
|
|
|
1,031
|
|
Computer equipment and software
|
|
|
576
|
|
|
|
454
|
|
Leasehold improvements
|
|
|
889
|
|
|
|
831
|
|
|
|
|
|
|
|
|
|
|
Total, at cost
|
|
|
3,990
|
|
|
|
2,316
|
|
Less accumulated depreciation and
amortization
|
|
|
(1,674
|
)
|
|
|
(1,444
|
)
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
$
|
2,316
|
|
|
|
872
|
|
|
|
|
|
|
|
|
|
|
The Company leases its main office facility under an operating
lease. The lease contains escalation clauses providing for
increased rent expense based primarily on increases in real
estate taxes. The lease has a ten year term and contains three
five year renewal options. The Company also has an operating
lease for additional office space. This lease has a three-year
term. In January 2004, the Company opened a branch in Manatee
County, Florida. The Company leases this branch under an
operating lease. The lease is for a thirty month period and
contains two, one year renewal options. In addition, the Company
has an operating lease for a branch facility in Venice, Florida.
The lease is for a term of three years with three renewal
options of three years each. Total rental expense for the years
ended December 31, 2006, 2005 and 2004 was $293,132,
$281,914 and $247,728, respectively. The Company subleased a
portion of their main office facility to a related party during
2005 and 2004 for $21,130 and $31,694, respectively.
At December 31, 2006, future minimum rental commitments
under operating leases, including certain renewal options, are
as follows (in thousands):
|
|
|
|
|
|
|
Operating
|
|
|
|
Lease
|
|
Year Ending December 31,
|
|
Expense
|
|
|
2007
|
|
$
|
276
|
|
2008
|
|
|
240
|
|
2009
|
|
|
230
|
|
2010
|
|
|
210
|
|
2011
|
|
|
217
|
|
Thereafter
|
|
|
3,343
|
|
|
|
|
|
|
|
|
$
|
4,516
|
|
|
|
|
|
|
(5) Deposits
The aggregate amount of time deposits with a minimum
denomination of $100,000, was approximately $25.5 million
and $12.0 million at December 31, 2006 and 2005,
respectively.
F-14
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
A schedule of maturities of time deposits at December 31,
2006 follows (in thousands):
|
|
|
|
|
Year Ending
|
|
|
|
December 31,
|
|
Amount
|
|
|
2007
|
|
$
|
84,425
|
|
2008
|
|
|
4,177
|
|
2009
|
|
|
3,734
|
|
2010
|
|
|
1,995
|
|
2011
|
|
|
2,648
|
|
|
|
|
|
|
|
|
$
|
96,979
|
|
|
|
|
|
|
(6) Other
Borrowings
The Company enters into repurchase agreements with customers.
These agreements require the Company to pledge securities as
collateral for borrowings under these agreements. At
December 31, 2006 and 2005, the outstanding balance of such
borrowings totaled approximately $4,037,000 and $1,322,000,
respectively, and the Company pledged securities with a carrying
value of approximately $4,117,000 and $1,407,000, respectively
as collateral for these agreements.
(7) Federal
Home Loan Bank Advances
At December 31, 2006, the maturities and interest rates on
the advances from the Federal Home Loan Bank of Atlanta
(FHLB) are as follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2006
|
|
|
At December 31, 2005
|
|
Maturing
|
|
|
|
|
|
|
|
|
|
|
Maturing
|
|
|
|
|
|
|
|
|
|
in the
|
|
Next
|
|
|
|
|
|
|
|
|
in the
|
|
Next
|
|
|
|
|
|
|
|
Year Ending
|
|
Call
|
|
|
Interest
|
|
|
|
|
|
Year Ending
|
|
Call
|
|
|
Interest
|
|
|
|
|
December 31,
|
|
Date
|
|
|
Rate
|
|
|
Amount
|
|
|
December 31,
|
|
Date
|
|
|
Rate
|
|
|
Amount
|
|
|
2007
|
|
|
|
|
|
|
2.72
|
%
|
|
$
|
3,000
|
|
|
2006
|
|
|
|
|
|
|
3.33
|
%
|
|
$
|
3,000
|
|
2008
|
|
|
|
|
|
|
3.81
|
%
|
|
|
2,000
|
|
|
2007
|
|
|
|
|
|
|
2.72
|
%
|
|
|
3,000
|
|
2009
|
|
|
|
|
|
|
4.71
|
%
|
|
|
3,000
|
|
|
2008
|
|
|
|
|
|
|
3.81
|
%
|
|
|
2,000
|
|
2011
|
|
|
3/08
|
(1)
|
|
|
4.79
|
%
|
|
|
5,000
|
|
|
2009
|
|
|
|
|
|
|
4.71
|
%
|
|
|
3,000
|
|
2012
|
|
|
4/07
|
|
|
|
2.52
|
%(2)
|
|
|
5,000
|
|
|
2010
|
|
|
9/06
|
|
|
|
3.29
|
%
|
|
|
8,000
|
|
2013
|
|
|
9/08
|
|
|
|
4.81
|
%(3)
|
|
|
8,000
|
|
|
2012
|
|
|
4/07
|
|
|
|
2.52
|
%(2)
|
|
|
5,000
|
|
2015
|
|
|
9/10
|
|
|
|
3.91
|
%(4)
|
|
|
7,000
|
|
|
2015
|
|
|
9/10
|
|
|
|
3.91
|
%(4)
|
|
|
7,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
3/09
|
|
|
|
4.86
|
%(5)
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
38,000
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
31,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Callable quarterly beginning March 10, 2008. |
|
(2) |
|
Adjusts monthly to one-month LIBOR less 50 basis points. |
|
(3) |
|
Adjusts quarterly to the rate for three-month U.S. dollar
deposits less .56% as published in Reuters. |
|
(4) |
|
Fixed until September 2010, then adjustable three-month LIBOR. |
|
(5) |
|
Adjustable quarterly to three month LIBOR, fixed at 4.75% after
September 2008. |
At December 31, 2006, the collateral agreement with the
FHLB includes a lien requiring the Company to maintain
qualifying first mortgage, commercial real estate and
one-to-four
family residential loans in the amount of $76.1 million.
F-15
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
(8) Junior
Subordinated Debenture
Peoples Community Statutory Trust I (the
Trust) was formed in 2005 for the sole purpose of
issuing $4,000,000 of Trust Preferred Securities.
On December 15, 2005, the Trust sold adjustable-rate
Trust Preferred Securities due December 15, 2035 in
the aggregate principal amount of $4,000,000 (the Capital
Securities) in a pooled trust preferred securities
offering. The interest rate on the Capital Securities is fixed
at 6.41% until December 2010 then adjusts quarterly, to a rate
equal to the then current three-month London Interchange Bank
Offering Rate (LIBOR), plus 145 basis points.
In addition, the Holding Company contributed capital of $124,000
to the Trust for the purchase of the common securities of the
Trust. The proceeds from these sales were paid to the Holding
Company in exchange for $4,124,000 of its adjustable-rate Junior
Subordinated Debenture (the Debenture) due
December 15, 2035. The Debenture has the same terms as the
Capital Securities. The sole asset of the Trust, the obligor on
the Capital Securities, is the Debenture.
The Holding Company has guaranteed the Trusts payment of
distributions on, payments on any redemptions of, and any
liquidation distribution with respect to, the Capital
Securities. Cash distributions on both the Capital Securities
and the Debenture are payable quarterly in arrears on
March 15, June 15, September 15 and
December 15 of each year.
The Capital Securities are subject to mandatory redemption
(i) in whole, but not in part, upon repayment of the
Debenture at stated maturity or, at the option of the Holding
Company, their earlier redemption in whole upon the occurrence
of certain changes in the tax treatment or capital treatment of
the Capital Securities, or a change in the law such that the
Trust would be considered an Investment Company and (ii) in
whole or in part at any time on or after December 15, 2010
contemporaneously with the optional redemption by the Holding
Company of the Debenture in whole or in part. The Debenture is
redeemable prior to maturity at the option of the Holding
Company (i) on or after December 15, 2010, in whole at
any time or in part from time to time, or (ii) in whole,
but not in part, at any time within 90 days following the
occurrence and continuation of certain changes in the tax
treatment or capital treatment of the Capital Securities, or a
change in law such that the Trust would be considered an
Investment Company, required to be registered under the
Investment Company Act of 1940.
In 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities
(FIN 46), as revised in December, 2003. In accordance
with this Interpretation, the Trust is not consolidated in the
financial statements of the Company, but rather accounted for
under the equity method of accounting.
(9) Line
of Credit
The Company has a line of credit with a third party lender. The
total available credit is $7.5 million. The line of credit
has a variable interest rate of prime less 75 basis points
and is collateralized with the common stock of the Bank. The
line of credit expires June 30, 2007. The outstanding
balance at December 31, 2006 was $4,275,000. The Company
had no outstanding balance on the line of credit at
December 31, 2005.
(10) Off-Balance-Sheet
Financial Instruments
The Company is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet
the financing needs of its customers. These financial
instruments are unfunded loan commitments and unused lines of
credit and may involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the consolidated
balance sheets. The contract amounts of these instruments
reflect the extent of involvement the Company has in these
financial instruments.
The Companys exposure to credit loss in the event of
nonperformance by the other party to the financial instrument
for unfunded loans commitments and unused lines of credit is
represented by the contractual amount of
F-16
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
those instruments. The Company uses the same credit policies in
making commitments as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a fee. Since some of the commitments are expected to
expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Company
evaluates each customers credit worthiness on a
case-by-case
basis. The amount of collateral obtained if deemed necessary by
the Company upon extension of credit is based on
managements credit evaluation of the counterparty.
Unfunded loan commitments and unused lines of credit typically
result in loans with a market interest rate when funded. A
summary of the amounts of the Companys financial
instruments with off balance sheet risk at December 31,
2006 follows (in thousands):
|
|
|
|
|
Amount
|
|
|
|
|
Unfunded loan commitments
|
|
$
|
2,024
|
|
|
|
|
|
|
Unused lines of credit
|
|
$
|
38,220
|
|
|
|
|
|
|
(11) Financial
Instruments
The estimated fair values of the Companys financial
instruments at December 31, 2006 and 2005 were as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
December 31, 2005
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
21,914
|
|
|
|
21,914
|
|
|
|
7,905
|
|
|
|
7,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
$
|
24,945
|
|
|
|
24,945
|
|
|
|
20,091
|
|
|
|
20,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity
|
|
$
|
17,774
|
|
|
|
17,616
|
|
|
|
7,511
|
|
|
|
7,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
$
|
246,435
|
|
|
|
243,497
|
|
|
|
213,189
|
|
|
|
212,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
$
|
1,597
|
|
|
|
1,597
|
|
|
|
1,068
|
|
|
|
1,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank stock
|
|
$
|
2,221
|
|
|
|
2,221
|
|
|
|
1,780
|
|
|
|
1,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
244,185
|
|
|
|
242,430
|
|
|
|
195,703
|
|
|
|
197,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other borrowings
|
|
$
|
4,037
|
|
|
|
4,037
|
|
|
|
1,322
|
|
|
|
1,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit
|
|
$
|
4,275
|
|
|
|
4,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank
advances
|
|
$
|
38,000
|
|
|
|
37,180
|
|
|
|
31,000
|
|
|
|
30,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior subordinated debenture
|
|
$
|
4,124
|
|
|
|
3,915
|
|
|
|
4,124
|
|
|
|
4,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance-sheet financial
instruments
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-17
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
(12) Income
Taxes
The income tax provision consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,791
|
|
|
|
1,561
|
|
|
|
681
|
|
State
|
|
|
326
|
|
|
|
276
|
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
2,117
|
|
|
|
1,837
|
|
|
|
797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(348
|
)
|
|
|
(273
|
)
|
|
|
(252
|
)
|
State
|
|
|
(57
|
)
|
|
|
(47
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(405
|
)
|
|
|
(320
|
)
|
|
|
(294
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income taxes
|
|
$
|
1,712
|
|
|
|
1,517
|
|
|
|
503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reasons for the differences between the statutory Federal
income tax rate and the effective tax rate are summarized as
follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Pretax
|
|
|
|
|
|
Pretax
|
|
|
|
|
|
Pretax
|
|
|
|
Amount
|
|
|
Earnings
|
|
|
Amount
|
|
|
Earnings
|
|
|
Amount
|
|
|
Earnings
|
|
|
Income taxes at statutory rate
|
|
$
|
1,753
|
|
|
|
34.0
|
%
|
|
$
|
1,370
|
|
|
|
34.0
|
%
|
|
$
|
441
|
|
|
|
34.0
|
%
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes, net of Federal tax
benefit
|
|
|
177
|
|
|
|
3.4
|
|
|
|
151
|
|
|
|
3.7
|
|
|
|
49
|
|
|
|
3.8
|
|
Tax exempt income
|
|
|
(69
|
)
|
|
|
(1.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(149
|
)
|
|
|
(2.9
|
)
|
|
|
(4
|
)
|
|
|
(.1
|
)
|
|
|
13
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
1,712
|
|
|
|
33.2
|
%
|
|
$
|
1,517
|
|
|
|
37.6
|
%
|
|
$
|
503
|
|
|
|
38.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-18
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are presented below (in thousands).
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
1,118
|
|
|
|
867
|
|
Unrealized loss on securities
available for sale
|
|
|
128
|
|
|
|
198
|
|
Accumulated depreciation
|
|
|
2
|
|
|
|
|
|
Accrued salary continuation
|
|
|
73
|
|
|
|
34
|
|
Other
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
1,323
|
|
|
|
1,101
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accrual to cash conversion
|
|
|
17
|
|
|
|
33
|
|
Accumulated depreciation
|
|
|
|
|
|
|
25
|
|
Other
|
|
|
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
17
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
1,306
|
|
|
|
971
|
|
|
|
|
|
|
|
|
|
|
(13) Stock
Option Plans
The Company has an incentive stock option plan and a
compensatory stock option plan for officers and employees (the
Officers and Employees Plan) and a directors
nonqualified stock option plan (the Directors Plan).
The Company has reserved a total of 15% of the outstanding
shares of common stock at any given time for all plans. The
exercise price of the stock options for both plans is the fair
market value of the common stock on the date of grant. The
options must be exercised within 10 years from the date of
grant. At December 31, 2006, a total of 5,820 shares
remain available for grant under both plans.
A summary of stock option transactions follows (all per share
information has been adjusted for the 10% stock dividend issued
in 2005 and 2004) (dollars in thousands, except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
|
Options
|
|
|
Price
|
|
|
Term
|
|
|
Outstanding at December 31,
2004
|
|
|
257,394
|
|
|
$
|
8.96
|
|
|
|
|
|
Options granted
|
|
|
49,703
|
|
|
|
14.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2005
|
|
|
307,097
|
|
|
|
9.91
|
|
|
|
|
|
Options exercised
|
|
|
(204,704
|
)
|
|
|
8.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at
December 31, 2006
|
|
|
102,393
|
|
|
$
|
12.19
|
|
|
|
6.9 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of options exercised during the year
ended December 31, 2006 was $1,285,000 and the tax benefit
relating to the stock options exercised was $343,000. No stock
options were exercised in 2005 or 2004.
In 2005, the Company accelerated the vesting of all stock
options granted prior to 2005 and immediately vested all stock
options granted in 2005. There were no unvested stock options at
December 31, 2006 or 2005.
F-19
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
(14) Related
Party Transactions
At December 31, 2006 and 2005, executive officers and
directors of the Company and entities in which they hold a
financial interest had approximately $3,358,000 and $5,619,000,
respectively of funds on deposit in the Company. At
December 31, 2006 and 2005, there were loans with a balance
outstanding of approximately $7,830,000 and $4,142,000,
respectively, to these related parties.
(15) Regulatory
Matters
Banking regulations place contain restrictions on dividends paid
and loans or advances made by the Bank to the Holding Company.
The Bank is subject to various regulatory capital requirements
administered by the 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
Companys and the Banks financial statements. Under
capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company and the Bank must meet
specific capital guidelines that involve quantitative measures
of their assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The
capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the Bank to maintain minimum amounts
and percentages (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
(as defined) to average assets (as defined). Management
believes, as of December 31, 2006, that the Bank met all
capital adequacy requirements to which they were subject.
As of December 31, 2006, the most recent notification from
the regulatory authorities 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 percentages as set forth in the table.
There are no conditions or events since that notification that
management believes have changed the Banks category. The
Banks actual capital amounts and percentages are also
presented in the table (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Well
|
|
|
|
|
|
|
For Capital
|
|
|
Capitalized
|
|
|
|
Actual
|
|
|
Adequacy Purposes
|
|
|
Purposes
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
As of December 31,
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to Risk-Weighted
Assets)
|
|
$
|
33,072
|
|
|
|
12.02
|
%
|
|
$
|
22,003
|
|
|
|
8.00
|
%
|
|
$
|
27,504
|
|
|
|
10.00
|
%
|
Tier I Capital (to
Risk-Weighted Assets)
|
|
|
30,093
|
|
|
|
10.94
|
|
|
|
11,002
|
|
|
|
4.00
|
|
|
|
16,502
|
|
|
|
6.00
|
|
Tier I Capital (to Average
Assets)
|
|
|
30,093
|
|
|
|
9.45
|
|
|
|
12,742
|
|
|
|
4.00
|
|
|
|
15,926
|
|
|
|
5.00
|
|
As of December 31,
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital (to Risk-Weighted
Assets)
|
|
|
27,343
|
|
|
|
12.13
|
|
|
|
18,031
|
|
|
|
8.00
|
|
|
|
22,539
|
|
|
|
10.00
|
|
Tier I Capital (to
Risk-Weighted Assets)
|
|
|
24,747
|
|
|
|
10.98
|
|
|
|
9,015
|
|
|
|
4.00
|
|
|
|
13,523
|
|
|
|
6.00
|
|
Tier I Capital (to Average
Assets)
|
|
|
24,747
|
|
|
|
9.64
|
|
|
|
10,270
|
|
|
|
4.00
|
|
|
|
12,837
|
|
|
|
5.00
|
|
(16) Stockholders
Equity
In 2003, the Company offered 500,000 shares of common stock
at $12 per share in a special offering to its Florida
shareholders only. In 2004, the Company sold 135,566 shares
for net proceeds of $1,626,000.
F-20
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
In 2004, the Company sold 250,000 shares of common stock at
$12 per share in a special offering to its Florida
shareholders only for net proceeds of $2,990,000.
In 2005 and 2004, the Company paid a 10% common stock dividend.
No fractional shares were issued or paid in cash.
In 2006, the Company paid a $.10 cash dividend.
(17) Compensation
Programs
The Company has a profit sharing plan established in accordance
with the provisions of Section 401(k) of the Internal
Revenue Code. The profit sharing plan is available to all
employees electing to participate after meeting certain
length-of-service
requirements. The Company contributed $93,000, $73,000 and
$28,000 to the plan during the years ended December 31,
2006, 2005 and 2004, respectively.
In 2004, the Company entered into Salary Continuation Agreements
(the Agreements) with certain officers of the
Company which require the Company to provide salary continuation
benefits to them upon retirement. The Agreements require the
Company to pay monthly benefits, as calculated in the
Agreements, for the greater of twenty-two years or the
participants lifetime following their normal retirement
age. The Agreements also provide for salary continuation in the
event of a change in control of the Company and for early
voluntary termination by the officers, based on a vesting
schedule from the date of the Agreements until the officers
normal retirement age. The Company is accruing the present value
of the future benefits over the terms of the Agreements. The
Company has purchased life insurance policies on the officers
which although not formally linked, have future cash value that
exceeds the estimated future benefit. The Company recognized
expense of approximately $106,000, $67,000 and $39,000 in 2006,
2005 and 2004, respectively.
(18) Employee
Stock Purchase Plan
In August 2004, the Company established a Employee Stock
Purchase Plan (the Plan) under which employees can
elect to purchase the Companys common stock through
payroll deductions. Employees defer salary each pay period and
the Company issues shares at the end of the fiscal year.
1,504 shares and 1,558 shares of common stock were
purchased under this Plan in 2006 and 2005, respectively, at
market value.
(19) Pending
Merger
On January 18, 2007, the Company entered into a merger
agreement with Superior Bancorp. In the merger, the
Companys shares shall be converted into 2.9036 shares
of Superior Bancorp common stock. The agreement is subject to
shareholder and regulatory approval.
F-21
Peoples
Community Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial
Statements (Continued)
(20) Holding
Company Financial Information
The Holding Companys financial information as of
December 31, 2006 and 2005 and for each of the years in the
three year period ending December 31, 2006 follows (in
thousands):
Condensed
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
ASSETS
|
Cash and interest-bearing deposits
with banks
|
|
$
|
65
|
|
|
|
345
|
|
Loans, net of allowance for loan
losses of $305 in 2006
|
|
|
2,428
|
|
|
|
|
|
Land
|
|
|
1,404
|
|
|
|
|
|
Other assets
|
|
|
871
|
|
|
|
153
|
|
Investment in subsidiary
|
|
|
29,882
|
|
|
|
24,425
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
34,650
|
|
|
|
24,923
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Junior subordinated debenture
|
|
|
4,124
|
|
|
|
4,124
|
|
Line of credit
|
|
|
4,275
|
|
|
|
|
|
Accrued expenses
|
|
|
58
|
|
|
|
33
|
|
Stockholders equity
|
|
|
26,193
|
|
|
|
20,766
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
34,650
|
|
|
|
24,923
|
|
|
|
|
|
|
|
|
|
|
Condensed
Statements of Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenue
|
|
$
|
158
|
|
|
|
92
|
|
|
|
134
|
|
Expenses
|
|
|
(1,061
|
)
|
|
|
(86
|
)
|
|
|
(150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings before earnings of
subsidiary
|
|
|
(903
|
)
|
|
|
6
|
|
|
|
(16
|
)
|
Earnings of subsidiary
|
|
|
4,347
|
|
|
|
2,504
|
|
|
|
810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
3,444
|
|
|
|
2,510
|
|
|
|
794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-22
Condensed
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
3,444
|
|
|
|
2,510
|
|
|
|
794
|
|
Adjustments to reconcile net
earnings to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
305
|
|
|
|
|
|
|
|
20
|
|
Equity in undistributed earnings
of subsidiary
|
|
|
(4,347
|
)
|
|
|
(2,504
|
)
|
|
|
(810
|
)
|
Increase in other assets
|
|
|
(718
|
)
|
|
|
(133
|
)
|
|
|
(12
|
)
|
Increase (decrease) in accrued
expenses
|
|
|
25
|
|
|
|
33
|
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating
activities
|
|
|
(1,291
|
)
|
|
|
(94
|
)
|
|
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (increase) decrease in loans
|
|
|
(2,733
|
)
|
|
|
2,286
|
|
|
|
(2,082
|
)
|
Investment in subsidiary
|
|
|
(1,001
|
)
|
|
|
(6,170
|
)
|
|
|
(3,200
|
)
|
Purchase of land
|
|
|
(1,404
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(5,138
|
)
|
|
|
(3,884
|
)
|
|
|
(5,282
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of common
stock, net
|
|
|
23
|
|
|
|
23
|
|
|
|
4,621
|
|
Repurchase of common stock
|
|
|
(23
|
)
|
|
|
(23
|
)
|
|
|
(5
|
)
|
Proceeds from line of credit
|
|
|
4,275
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of common
stock options
|
|
|
1,760
|
|
|
|
|
|
|
|
|
|
Tax benefit from exercise of
common stock options
|
|
|
343
|
|
|
|
|
|
|
|
|
|
Proceeds from junior subordinated
debenture
|
|
|
|
|
|
|
4,124
|
|
|
|
|
|
Dividend paid
|
|
|
(229
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
|
6,149
|
|
|
|
4,124
|
|
|
|
4,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
|
|
|
(280
|
)
|
|
|
146
|
|
|
|
(767
|
)
|
Cash at beginning of year
|
|
|
345
|
|
|
|
199
|
|
|
|
966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
65
|
|
|
|
345
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in investment in subsidiary
due to change in accumulated other comprehensive income, change
in unrealized gain (loss) on securities available for sale, net
of income taxes
|
|
$
|
109
|
|
|
|
(286
|
)
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock dividend
|
|
$
|
|
|
|
|
2,843
|
|
|
|
1,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
Peoples
Community Bancshares, Inc. and Subsidiary
Consolidated
Balance Sheet
(Unaudited) As of March 31, 2007
($ in thousands, except per share amounts)
|
|
|
|
|
|
|
At March 31, 2007
|
|
|
|
(Unaudited)
|
|
|
ASSETS
|
Cash and due from banks
|
|
$
|
8,105
|
|
Interest-bearing deposits with
banks
|
|
|
104
|
|
Federal funds sold
|
|
|
1,112
|
|
Total cash and cash equivalents
|
|
|
9,321
|
|
Securities available for sale
|
|
|
29,356
|
|
Securities held to maturity
|
|
|
17,769
|
|
Loans, net of allowance for loan
losses of $3,387
|
|
|
263,063
|
|
Federal Home Loan Bank stock,
at cost
|
|
|
2,147
|
|
Premises and equipment, net
|
|
|
2,358
|
|
Accrued interest receivable
|
|
|
1,906
|
|
Cash surrender value of bank owned
life insurance
|
|
|
3,488
|
|
Deferred income taxes
|
|
|
1,269
|
|
Other assets
|
|
|
1,127
|
|
|
|
|
|
|
Total assets
|
|
$
|
331,804
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
Noninterest-bearing demand deposits
|
|
|
36,172
|
|
Savings, NOW and money-market
deposits
|
|
|
118,229
|
|
Time deposits
|
|
|
101,253
|
|
|
|
|
|
|
Total deposits
|
|
|
255,654
|
|
Junior subordinated debenture
|
|
|
4,124
|
|
Other borrowings
|
|
|
4,297
|
|
Line of credit
|
|
|
4,270
|
|
Federal Home Loan Bank
advances
|
|
|
35,000
|
|
Official checks
|
|
|
68
|
|
Accrued interest payable and other
liabilities
|
|
|
1,266
|
|
|
|
|
|
|
Total liabilities
|
|
|
304,679
|
|
Stockholders
equity:
|
|
|
|
|
Preferred stock, no par value;
1,000,000 shares authorized, none issued or outstanding
|
|
|
|
|
Common stock, $.01 par value;
9,000,000 shares authorized, 2,291,261 shares issued
and outstanding
|
|
|
23
|
|
Additional paid-in capital
|
|
|
25,820
|
|
Retained earnings
|
|
|
1,462
|
|
Accumulated other comprehensive
loss
|
|
|
(180
|
)
|
|
|
|
|
|
Total stockholders
equity
|
|
|
27,125
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
331,804
|
|
|
|
|
|
|
See Accompanying Note to Consolidated Financial Statements.
F-24
Peoples
Community Bancshares, Inc. and Subsidiary
Consolidated
Statements of Earnings
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
For The Three Month
|
|
|
|
Period Ended
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
4,926
|
|
|
|
4,151
|
|
Securities
|
|
|
554
|
|
|
|
316
|
|
Other interest-earning assets
|
|
|
215
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
5,695
|
|
|
|
4,487
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
2,470
|
|
|
|
1,387
|
|
Borrowings
|
|
|
598
|
|
|
|
456
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
3,068
|
|
|
|
1,843
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
2,627
|
|
|
|
2,644
|
|
Provision for loan losses
|
|
|
103
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses
|
|
|
2,524
|
|
|
|
2,524
|
|
|
|
|
|
|
|
|
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts
|
|
|
54
|
|
|
|
54
|
|
Other service charges and fees
|
|
|
82
|
|
|
|
51
|
|
Mortgage loan referral fees
|
|
|
111
|
|
|
|
222
|
|
Income from bank owned life
insurance
|
|
|
36
|
|
|
|
28
|
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
285
|
|
|
|
355
|
|
|
|
|
|
|
|
|
|
|
Noninterest expenses:
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
961
|
|
|
|
910
|
|
Occupancy and equipment
|
|
|
256
|
|
|
|
239
|
|
Printing and supplies
|
|
|
41
|
|
|
|
64
|
|
Professional fees
|
|
|
15
|
|
|
|
34
|
|
Advertising
|
|
|
26
|
|
|
|
32
|
|
Other
|
|
|
100
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expenses
|
|
|
1,399
|
|
|
|
1,344
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
|
|
1,410
|
|
|
|
1,535
|
|
Income taxes
|
|
|
519
|
|
|
|
600
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
891
|
|
|
|
935
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Note to Consolidated Financial Statements.
F-25
Peoples
Community Bancshares, Inc. and Subsidiary
Consolidated
Statements of Cash Flows
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
For the Three Month
|
|
|
|
Period Ended
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Net cash provided by operating
activities
|
|
|
(572
|
)
|
|
|
1,941
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
Purchase of securities available
for sale
|
|
|
(4,997
|
)
|
|
|
|
|
Purchase of securities held to
maturity
|
|
|
|
|
|
|
(1,075
|
)
|
Repayments of securities available
for sale
|
|
|
853
|
|
|
|
555
|
|
Net increase in loans
|
|
|
(16,628
|
)
|
|
|
(27,480
|
)
|
Purchase of premises and equipment
|
|
|
(47
|
)
|
|
|
(15
|
)
|
Purchase of Federal Home
Loan Bank stock
|
|
|
74
|
|
|
|
(193
|
)
|
Purchase of bank owned life
insurance
|
|
|
|
|
|
|
(1,225
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(20,745
|
)
|
|
|
(29,433
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
|
|
11,469
|
|
|
|
29,946
|
|
Net (decrease) increase in Federal
Home Loan Bank advances
|
|
|
(3,000
|
)
|
|
|
5,000
|
|
Net increase in other borrowings
|
|
|
260
|
|
|
|
850
|
|
Proceeds from junior subordinated
debenture
|
|
|
|
|
|
|
4,124
|
|
Repurchase of common stock
|
|
|
(23
|
)
|
|
|
(23
|
)
|
Net proceeds from sale of common
stock
|
|
|
23
|
|
|
|
23
|
|
Proceeds from exercise of common
stock options
|
|
|
|
|
|
|
|
|
Tax benefit from exercise of
common stock options
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
Net proceeds from line of credit
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
|
8,724
|
|
|
|
39,920
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
and cash equivalents
|
|
|
(12,593
|
)
|
|
|
12,428
|
|
Cash and cash equivalents at
beginning of year
|
|
|
21,914
|
|
|
|
7,905
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of year
|
|
$
|
9,321
|
|
|
|
20,333
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash
flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
3,068
|
|
|
|
1,843
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
519
|
|
|
|
600
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Note to Consolidated Financial Statements.
F-26
Note to
Consolidated Financial Statements
The consolidated financial statements of Peoples Community
Bancshares and Subsidiaries in this report have not been audited
except for information derived from the 2006 audited
consolidated financial statements and notes thereto. The
consolidated financial statements in this report should be read
in conjunction with the 2006 audited consolidated financial
statements and notes thereto for the year ended
December 31, 2006.
F-27
ANNEX A
AGREEMENT
AND PLAN OF MERGER
by and between
PEOPLES COMMUNITY BANCSHARES, INC.
and
SUPERIOR BANCORP
dated as of
January 18, 2007
A-1
TABLE OF
CONTENTS
|
|
|
|
|
Caption
|
|
Page
|
|
ARTICLE 1
|
|
|
A-6
|
|
NAME
|
|
|
A-6
|
|
1.1 Name
|
|
|
A-6
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 2
|
|
|
A-6
|
|
MERGER TERMS AND
CONDITIONS
|
|
|
A-6
|
|
2.1 Applicable Law
|
|
|
A-6
|
|
2.2 Corporate Existence
|
|
|
A-6
|
|
2.3 Certificate of Incorporation
and Bylaws
|
|
|
A-6
|
|
2.4 Resulting Corporations
Officers and Board
|
|
|
A-7
|
|
2.5 Stockholder Approvals
|
|
|
A-7
|
|
2.6 Further Acts
|
|
|
A-7
|
|
2.7 Effective Date and Closing
|
|
|
A-7
|
|
2.8 Subsidiary Bank
|
|
|
A-7
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 3
|
|
|
A-7
|
|
CONVERSION OF ACQUIRED CORPORATION
STOCK
|
|
|
A-7
|
|
3.1 Conversion of Acquired
Corporation Stock
|
|
|
A-7
|
|
3.2 Surrender of Acquired
Corporation Stock
|
|
|
A-8
|
|
3.3 Fractional Shares
|
|
|
A-8
|
|
3.4 Adjustments
|
|
|
A-8
|
|
3.5 Buyer Stock
|
|
|
A-9
|
|
3.6 Dissenting Stockholder Rights
|
|
|
A-9
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 4
|
|
|
A-9
|
|
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF BUYER
|
|
|
A-9
|
|
4.1 Organization
|
|
|
A-9
|
|
4.2 Capital Stock
|
|
|
A-9
|
|
4.3 Taxes
|
|
|
A-9
|
|
4.4 No Conflict with Other
Instrument
|
|
|
A-10
|
|
4.5 Absence of Material Adverse
Change
|
|
|
A-10
|
|
4.6 Approval of Agreement
|
|
|
A-10
|
|
4.7 Tax Treatment
|
|
|
A-10
|
|
4.8 Title and Related Matters
|
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A-10
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4.9 Subsidiaries
|
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A-10
|
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4.10 Contracts
|
|
|
A-10
|
|
4.11 Litigation
|
|
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A-11
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|
4.12 Compliance
|
|
|
A-11
|
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4.13 Registration Statement
|
|
|
A-11
|
|
4.14 SEC Filings and Financial
Statements; NASDAQ
|
|
|
A-11
|
|
4.15
Form S-4
|
|
|
A-12
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4.16 Brokers
|
|
|
A-12
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|
4.17 Government Authorization
|
|
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A-12
|
|
4.18 Absence of Regulatory
Communications
|
|
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A-12
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4.19 Disclosure
|
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|
A-12
|
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4.20 Absence of Certain Changes or
Events
|
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A-12
|
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4.21 Commitments
|
|
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A-13
|
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4.22 Charter and Bylaws
|
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A-13
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A-2
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Caption
|
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Page
|
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4.23 Material Contract Defaults
|
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A-13
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4.24 Insurance
|
|
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A-13
|
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4.25 Pension and Employee Benefit
Plans
|
|
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A-14
|
|
4.27 Regulatory Approvals
|
|
|
A-16
|
|
4.28 Loans; Adequacy of Allowance
for Loan Losses
|
|
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A-16
|
|
4.29 Environmental Matters
|
|
|
A-16
|
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4.30 Collective Bargaining; Labor
Disputes
|
|
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A-16
|
|
4.31 Derivative Contracts
|
|
|
A-16
|
|
4.32 Accounting, Tax and
Regulatory Matters
|
|
|
A-17
|
|
4.33 Opinion of Counsel
|
|
|
A-17
|
|
4.34 Transactions with Management
|
|
|
A-17
|
|
4.35 Accounting Controls
|
|
|
A-17
|
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4.36 Deposit Insurance
|
|
|
A-17
|
|
4.37 Intellectual Property
|
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A-17
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ARTICLE 5
|
|
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A-17
|
|
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF ACQUIRED CORPORATION
|
|
|
A-17
|
|
5.1 Organization
|
|
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A-17
|
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5.2 Capital Stock
|
|
|
A-17
|
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5.3 Subsidiaries
|
|
|
A-18
|
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5.4 Financial Statements
|
|
|
A-18
|
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5.5 Absence of Certain Changes or
Events
|
|
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A-18
|
|
5.6 Title and Related Matters
|
|
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A-19
|
|
5.7 Commitments
|
|
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A-20
|
|
5.8 Charter and Bylaws
|
|
|
A-20
|
|
5.9 Litigation; Compliance with
Laws
|
|
|
A-20
|
|
5.10 Material Contract Defaults
|
|
|
A-21
|
|
5.11 No Conflict with Other
Instrument
|
|
|
A-21
|
|
5.12 Governmental Authorization
|
|
|
A-21
|
|
5.13 Absence of Regulatory
Communications
|
|
|
A-21
|
|
5.14 Absence of Material Adverse
Change
|
|
|
A-21
|
|
5.15 Insurance
|
|
|
A-21
|
|
5.16 Pension and Employee Benefit
Plans; Employees
|
|
|
A-22
|
|
5.17 Buy-Sell Agreement
|
|
|
A-24
|
|
5.18 Brokers
|
|
|
A-24
|
|
5.19 Approval of Agreements
|
|
|
A-25
|
|
5.20 Disclosure
|
|
|
A-25
|
|
5.21 Registration Statement
|
|
|
A-25
|
|
5.22 Loans; Allowance for Possible
Loan Losses
|
|
|
A-25
|
|
5.23 Environmental Matters
|
|
|
A-25
|
|
5.24 Taxes
|
|
|
A-26
|
|
5.25 Collective Bargaining
|
|
|
A-26
|
|
5.26 Labor Disputes
|
|
|
A-26
|
|
5.27 Derivative Contracts
|
|
|
A-26
|
|
5.28 Accounting, Tax and
Regulatory Matters
|
|
|
A-27
|
|
5.29 Offices
|
|
|
A-27
|
|
5.30 Data Processing Systems
|
|
|
A-27
|
|
5.31 Intellectual Property
|
|
|
A-27
|
|
A-3
|
|
|
|
|
Caption
|
|
Page
|
|
5.32. No Trust Powers
|
|
|
A-27
|
|
5.33 Regulatory Approvals
|
|
|
A-27
|
|
5.34 Opinion of Counsel
|
|
|
A-27
|
|
5.35 Anti-takeover Provisions
|
|
|
A-27
|
|
5.36 Transactions with Management
|
|
|
A-28
|
|
5.37 Deposits
|
|
|
A-28
|
|
5.38 Accounting Controls
|
|
|
A-28
|
|
5.39 Deposit Insurance
|
|
|
A-28
|
|
5.40 Registration Obligations
|
|
|
A-28
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 6
|
|
|
A-28
|
|
ADDITIONAL COVENANTS
|
|
|
A-28
|
|
6.1 Additional Covenants of Buyer
|
|
|
A-28
|
|
6.2 Additional Covenants of
Acquired Corporation
|
|
|
A-30
|
|
6.3 Additional Covenants Relating
to Trust Preferred Securities
|
|
|
A-33
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 7
|
|
|
A-33
|
|
MUTUAL COVENANTS AND AGREEMENTS
|
|
|
A-33
|
|
7.1 Best Efforts, Cooperation
|
|
|
A-33
|
|
7.2 Press Release
|
|
|
A-34
|
|
7.3 Mutual Disclosure
|
|
|
A-34
|
|
7.4 Access to Properties and
Records; Investigation
|
|
|
A-34
|
|
7.5 Notice of Adverse Changes
|
|
|
A-34
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 8
|
|
|
A-34
|
|
CONDITIONS TO OBLIGATIONS OF ALL
PARTIES
|
|
|
A-34
|
|
8.1 Approval by Stockholders
|
|
|
A-35
|
|
8.2 Regulatory Authority Approval;
Other Consents
|
|
|
A-35
|
|
8.3 Legal Proceedings
|
|
|
A-35
|
|
8.4 Registration Statement
|
|
|
A-35
|
|
8.5 Tax Opinion
|
|
|
A-35
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 9
|
|
|
A-36
|
|
CONDITIONS TO OBLIGATIONS OF
ACQUIRED CORPORATION
|
|
|
A-36
|
|
9.1 Representations, Warranties
and Covenants
|
|
|
A-36
|
|
9.3 Closing Certificate
|
|
|
A-36
|
|
9.4 Opinion of Counsel
|
|
|
A-36
|
|
9.5 Fairness Opinion
|
|
|
A-37
|
|
9.6 NASDAQ Listing
|
|
|
A-37
|
|
9.7 Support for Legal Opinion
|
|
|
A-37
|
|
9.8 Material Events
|
|
|
A-37
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 10
|
|
|
A-37
|
|
CONDITIONS TO OBLIGATIONS OF BUYER
|
|
|
A-37
|
|
10.1 Representations, Warranties
and Covenants
|
|
|
A-37
|
|
10.2 Acquired Corporation Net Worth
|
|
|
A-37
|
|
10.3 Closing Certificate
|
|
|
A-37
|
|
10.4 Opinion of Counsel
|
|
|
A-38
|
|
10.5 Controlling Stockholders
|
|
|
A-38
|
|
10.6 Support for Legal Opinions
|
|
|
A-38
|
|
A-4
|
|
|
|
|
Caption
|
|
Page
|
|
10.7 Dissenters
|
|
|
A-38
|
|
10.8 Material Events
|
|
|
A-38
|
|
10.9 Fairness Opinion
|
|
|
A-38
|
|
10.10 Other Matters
|
|
|
A-38
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 11
|
|
|
A-39
|
|
TERMINATION OF REPRESENTATIONS AND
WARRANTIES
|
|
|
A-39
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 12
|
|
|
A-39
|
|
NOTICES
|
|
|
A-39
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 13
|
|
|
A-39
|
|
AMENDMENT OR TERMINATION
|
|
|
A-39
|
|
13.1 Amendment
|
|
|
A-39
|
|
13.2 Termination
|
|
|
A-40
|
|
13.3 Damages
|
|
|
A-42
|
|
13.4 Termination Fee
|
|
|
A-42
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 14
|
|
|
A-42
|
|
DEFINITIONS
|
|
|
A-42
|
|
|
|
|
|
|
|
|
|
|
|
ARTICLE 15
|
|
|
A-48
|
|
MISCELLANEOUS
|
|
|
A-48
|
|
15.1 Expenses
|
|
|
A-48
|
|
15.2 Benefit and Assignment
|
|
|
A-48
|
|
15.3 Governing Law
|
|
|
A-48
|
|
15.4 Counterparts
|
|
|
A-48
|
|
15.5 Headings
|
|
|
A-48
|
|
15.6 Severability
|
|
|
A-48
|
|
15.7 Construction
|
|
|
A-49
|
|
15.8 Confidentiality; Return of
Information
|
|
|
A-49
|
|
15.9 Equitable Remedies
|
|
|
A-49
|
|
15.10 Attorneys Fees
|
|
|
A-49
|
|
15.11 No Waiver
|
|
|
A-49
|
|
15.12 Remedies Cumulative
|
|
|
A-49
|
|
15.13 Entire Contract
|
|
|
A-49
|
|
A-5
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered
into as of this the 18th day of January, 2007, by and
between PEOPLES COMMUNITY BANCSHARES, INC.
(Acquired Corporation), a Florida corporation, and
SUPERIOR BANCORP (Buyer), a Delaware
corporation.
WITNESSETH
WHEREAS, Acquired Corporation operates as a bank holding company
for its wholly owned Subsidiary, Peoples Community Bank of
the West Coast, a Florida state bank (the Bank),
with its principal office in Sarasota, Florida;
WHEREAS, Buyer is a thrift holding company with a Subsidiary
federal savings bank in Alabama and Florida;
WHEREAS, Acquired Corporation wishes to merge with Buyer; and
WHEREAS, it is the intention of Buyer and Acquired Corporation
that such Merger shall qualify for federal income tax purposes
as a reorganization within the meaning of
Section 368(a) of the Code, as defined herein;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the Parties hereto agree as follows:
ARTICLE 1
NAME
1.1 Name. The name of the corporation
resulting from the Merger shall be Superior Bancorp,
or such other name as Buyer shall have adopted as of the
Effective Date.
ARTICLE 2
MERGER
TERMS AND CONDITIONS
2.1 Applicable Law. On the Effective
Date, Acquired Corporation shall be merged (the
Merger) with and into Buyer (herein referred to as
the Resulting Corporation whenever reference is made
to it as of the Effective Date or thereafter). The Merger shall
be undertaken pursuant to the provisions of and with the effect
provided in the DGCL and, to the extent applicable, the FBCA.
The offices and facilities of Acquired Corporation and of Buyer
shall become the offices and facilities of the Resulting
Corporation.
2.2 Corporate Existence. On the Effective
Date, the corporate existence of Acquired Corporation and of
Buyer shall, as provided in the DGCL and FBCA, be merged into
and continued in the Resulting Corporation, and the Resulting
Corporation shall be deemed to be the same corporation as
Acquired Corporation and Buyer. All property, rights,
privileges, powers, franchises and interests of Acquired
Corporation and Buyer, respectively, in and to every type of
property (real, personal and mixed) and chooses in action shall
be transferred to and vested in the Resulting Corporation, and
all debts and other obligations shall be assumed by the
Resulting Corporation, by virtue of the Merger without any deed
or other transfer. The Resulting Corporation on the Effective
Date, and without any order or other action on the part of any
court or otherwise, shall hold and enjoy all rights of property,
franchises and interests, including appointments, designations
and nominations and all other rights and interests as trustee,
executor, administrator, transfer agent and registrar of stocks
and bonds, guardian of estates, assignee, and receiver and in
every other fiduciary capacity and in every agency, and
capacity, in the same manner and to the same extent as such
rights, franchises and interests were held or enjoyed by
Acquired Corporation and Buyer, respectively, on the Effective
Date, and shall be subject to all the restrictions, disabilities
and duties of Acquired Corporation and Buyer, respectively, on
the Effective Date.
2.3 Certificate of Incorporation and
Bylaws. On the Effective Date, the certificate of
incorporation and bylaws of the Resulting Corporation shall be
the restated certificate of incorporation and bylaws of Buyer as
they exist immediately before the Effective Date.
A-6
2.4 Resulting Corporations Officers and
Board. The board of directors and the officers of
the Resulting Corporation on the Effective Date shall consist of
those persons serving in such capacities of Buyer as of the
Effective Date. Buyer agrees that at its first regularly
scheduled meeting of Resulting Corporations board of
directors following the Effective Date Resulting Corporation
will elect to its board of directors one individual who as of
the business day prior to the Effective Date is an independent
member of Acquired Corporations board of directors (as
determined by SEC and NASDAQ rules and regulations and other
applicable Laws).
2.5 Stockholder Approvals. This Agreement
shall be submitted to the stockholders of Acquired Corporation
at the Stockholders Meeting to be held as promptly as
practicable consistent with the terms and conditions set forth
in this Agreement. Upon approval by the requisite vote of the
stockholders of Acquired Corporation as required by applicable
Law, the Merger shall become effective as soon as practicable
thereafter in the manner provided in Section 2.7 hereof,
subject to the provisions of Articles 8, 9 and 10 below.
2.6 Further Acts. If, at any time after
the Effective Date, the Resulting Corporation shall consider or
be advised that any further assignments or assurances in law or
any other acts are necessary or desirable to vest, perfect,
confirm or record, in the Resulting Corporation, title to and
possession of any property or right of Acquired Corporation or
Buyer, acquired as a result of the Merger, Buyer and its
officers and directors shall execute and deliver all such proper
deeds, assignments and assurances in law and do all acts
necessary or proper to vest, perfect or confirm title to, and
possession of, such property or rights in the Resulting
Corporation.
2.7 Effective Date and Closing. Subject
to the terms of all requirements of Law and the conditions
specified in this Agreement the Merger shall become effective on
the date specified in the Certificate of Merger to be issued by
the Secretary of State of Delaware (such time being herein
called the Effective Date). Assuming all other
conditions stated in this Agreement have been or will be
satisfied as of the Closing, the Closing shall take place at the
offices of Buyer, in Birmingham, Alabama, at 5:00 p.m. on a
date specified by Buyer that shall be as soon as reasonably
practicable, but not later than 30 calendar days, after the
later to occur of the Stockholders Meetings or the receipt of
all required regulatory approvals under Section 8.2, or at
such other place and time that the Parties may mutually agree.
2.8 Subsidiary Bank. Buyer and Acquired
Corporation anticipate that, on or after the Effective Date,
Buyers federal savings bank Subsidiary, Superior Bank,
will acquire the Bank by merger, acquisition of assets or
otherwise. The exact timing and structure of such acquisition
have not been finalized at this time, and Buyer in its
discretion will finalize such timing and structure at a later
date. Acquired Corporation will cooperate with Buyer, including
the call of any special meetings of the board of directors of
the Bank and the filing of any regulatory applications, in the
execution of appropriate documentation relating to such merger
or other transaction. In the event that following the Effective
Date the Bank remains a separate legal entity owned by Buyer,
Buyer and Acquired Corporation will mutually agree prior to the
Effective Date upon which existing members of the board of
directors of the Bank, if any, shall remain as directors thereof
following the Effective Date.
ARTICLE 3
CONVERSION
OF ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock.
(a) Subject to the potential adjustment provided for in
Section 3.1(c) and 3.4 below, on the Effective Date, each
share of common stock of Acquired Corporation outstanding and
held of record by Acquired Corporations stockholders, but
excluding shares held by Acquired Corporation or any of its
Subsidiaries, other than in a fiduciary capacity or as a result
of debts previously contracted, and excluding shares held by
stockholders who perfect their dissenters rights of
appraisal as provided in Section 3.6 of this Agreement (the
Acquired Corporation Stock), shall be converted by
operation of law and without any action by any holder thereof
into and exchanged for the right to receive 2.9036 shares
of Buyers Common Stock (the Exchange Ratio).
(b) On the Effective Date, all outstanding Acquired
Corporation Options shall be cancelled and each holder of such
options shall be entitled to receive in exchange therefor the
right to receive cash equal to the amount resulting when the
number of Acquired Corporation Options held by a holder thereof
is multiplied by the Per Unit Value. As
A-7
used herein, the term Per Unit Value shall mean
(i) the average of the closing prices of Buyers
Common Stock for the 10 business days preceding the Effective
Date multiplied by the Exchange Ratio less (ii) the
exercise price for each share of Acquired Corporation Stock
subject to such option. Schedule 3.1 to the Acquired
Corporations Disclosure Supplement sets forth the names of
all persons holding Acquired Corporation Options, the number of
shares of Acquired Corporation common stock subject to such
options, the exercise price and the expiration date of such
options.
(c) Notwithstanding anything to the contrary in this
Section 3.1 or otherwise in this Agreement, in the event
that there is a shortfall (the Net Worth Shortfall
Amount) between the Acquired Corporation Net Worth
specified in Section 10.2 hereof (the Required Net
Worth Amount), and the actual amount of such Net Worth,
then the Exchange Ratio shall be adjusted downward by the
Reduction Factor. As used herein, the Reduction
Factor shall mean the percentage obtained by dividing
(i) the Net Worth Shortfall Amount by (ii) the
Required Net Worth Amount.
3.2 Surrender of Acquired Corporation
Stock. As promptly as practicable, but in no case
later than fifteen (15) business days after the Effective
Date, an independent exchange agent (the Exchange
Agent) appointed by Buyer shall send to each holder of
record of shares of Acquired Company Stock outstanding on the
Effective Date transmittal materials for use in exchanging the
certificates for such shares for certificates for shares of
Buyers Common Stock into which such shares of Acquired
Company Stock have been converted pursuant hereto. Each holder
of an outstanding certificate or certificates which prior
thereto represented shares of Acquired Corporation Stock who is
entitled to receive Buyers Common Stock shall be entitled,
upon surrender to the Exchange Agent of their certificate or
certificates representing shares of Acquired Corporation Stock
(or an affidavit or affirmation by such holder of the loss,
theft, or destruction of such certificate or certificates in
such form as the Exchange Agent may reasonably require and, if
Buyer reasonably requires, a bond of indemnity in form and
amount, and issued by such sureties, as Buyer may reasonably
require), to receive in exchange therefor a certificate or
certificates representing the number of whole shares of
Buyers Common Stock into and for which the shares of
Acquired Corporation Stock so surrendered shall have been
converted, such certificates to be of such denominations and
registered in such names as such holder may reasonably request.
Until so surrendered and exchanged, each such outstanding
certificate which, prior to the Effective Date, represented
shares of Acquired Corporation Stock and which is to be
converted into Buyers Common Stock shall for all purposes
evidence ownership of the Buyers Common Stock into and for
which such shares shall have been so converted and holders
thereof shall have all rights as holders of Buyers Common
Stock, except that dividends or other distributions with respect
to such Buyers Common Stock, if any, shall be held by
Buyer until the certificates previously representing shares of
Acquired Corporation Stock shall have been properly tendered.
After the Effective Date, there shall be no transfers on the
stock transfer books of Acquired Corporation of shares of
Acquired Corporation Stock which were issued and outstanding on
the Effective Date and converted pursuant to the provisions
hereof. If after the Effective Date certificates are presented
for transfer to Acquired Corporation, they shall be canceled and
exchanged for the shares of Buyers Common Stock
deliverable in respect thereof as determined in accordance with
the provisions of this paragraph.
3.3 Fractional Shares. No fractional
shares of Buyers Common Stock shall be issued, and each
holder of shares of Acquired Corporation Stock having a
fractional interest arising upon the conversion of such shares
into shares of Buyers Common Stock shall, at the time of
surrender of the certificates previously representing Acquired
Corporation Stock, be paid by Buyer an amount in cash, without
interest, in an amount equal to such fractional part of a share
of Buyers Common Stock multiplied by the closing price per
share of Buyers Common Stock on NASDAQ on the Effective
Date.
3.4 Adjustments. In the event that prior
to the Effective Date Buyers Common Stock shall be changed
into a different number of shares or a different class of shares
by reason of any recapitalization or reclassification, stock
dividend, combination, stock split, or reverse stock split of
the Buyers Common Stock, an appropriate and proportionate
adjustment shall be made in the number of shares of Buyers
Common Stock into which the Acquired Corporation Stock shall be
converted. In the event that Buyer is acquired by another entity
prior to the Effective Date, the compensation paid to
stockholders of Acquired Corporation shall be adjusted as
necessary to reflect the consideration paid to the stockholders
of Buyer.
A-8
3.5 Buyer Stock. The shares of Common
Stock of Buyer issued and outstanding immediately before the
Effective Date shall continue to be issued and outstanding
shares of the Resulting Corporation.
3.6 Dissenting Stockholder Rights. Any
stockholder of Acquired Corporation who perfects such
stockholders dissenters rights in accordance with
the FBCA shall be entitled to receive from the Resulting
Corporation the value of such shares in cash as determined
pursuant to the provisions of the FBCA; provided, that no such
payment shall be made to any dissenting stockholder unless and
until such dissenting stockholder has complied with the
applicable provisions of the FBCA and surrendered to the
Resulting Corporation the certificate or certificates
representing the shares for which payment is being made. If
after the Effective Date a dissenting stockholder of Acquired
Corporation fails to perfect, or effectively withdraws or loses,
his or her right to appraisal and payment for shares of Acquired
Corporation Stock, Buyer shall issue and deliver the
consideration to which such holder of shares of Acquired
Corporation Stock is entitled under Section 3.1(a) (without
interest) upon surrender by such holder of the certificate or
certificates representing shares of Acquired Corporation Stock
held by him or her.
ARTICLE 4
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF BUYER
Buyer represents, warrants and covenants to and with Acquired
Corporation as follows:
4.1 Organization. Buyer is a corporation
duly organized, validly existing and in good standing under the
Laws of the State of Delaware. Buyer has all requisite power and
authority to carry on its business as it is now being conducted
and is qualified to do business in every jurisdiction in which
the character and location of the Assets owned by it or the
nature of the business transacted by it requires qualification
or in which the failure to qualify could, individually, or in
the aggregate, have a Material Adverse Effect.
4.2 Capital Stock.
(a) The authorized capital stock of Buyer consists of
(A) 50,000,000 shares of Common Stock, $0.001 par
value per share, of which as of December 31, 2006,
34,641,666 shares were validly issued and
34,722,342 shares were outstanding, fully paid and
nonassessable under the DGCL and are not subject to preemptive
rights (not counting additional shares reserved for issuance
pursuant to stock option and other plans and outstanding options
issued under such plans or otherwise), and
(B) 5,000,000 shares of Convertible Preferred Stock,
$0.001 par value per share, none of which is issued and
outstanding. The shares of Buyers Common Stock to be
issued in the Merger are duly authorized and, when so issued,
will be validly issued and outstanding, fully paid and
nonassessable under the DGCL, will have been registered under
the 1933 Act and will have been registered or qualified
under the securities laws of all jurisdictions in which such
registration or qualification is required, based upon
information provided by Acquired Corporation and will be listed
and eligible for trading on NASDAQ.
(b) The authorized capital stock of each Subsidiary of
Buyer is validly issued and outstanding, fully paid and
nonassessable under the Laws of the jurisdiction in which such
Subsidiary is organized, and each Subsidiary is wholly owned,
directly or indirectly, by Buyer.
4.3 Taxes. All Tax returns required to be
filed by or on behalf of Buyer have been timely filed (or
requests for extensions therefor have been timely filed and
granted and have not expired), and all returns filed are
complete and accurate in all material respects. All Taxes due
and all additional assessments received have been paid, if due
and payable. The amounts recorded for Taxes on the balance
sheets contained in the reports described in Section 4.14
are, to the Knowledge of Buyer, sufficient in all material
respects for the payment of all unpaid federal, state, county,
local, foreign or other Taxes (including any interest or
penalties) of Buyer accrued for or applicable to the period
ended on the dates thereof, and all years and periods prior
thereto and for which Buyer may at such dates have been liable
in its own right or as transferee of the Assets of, or as
successor to, any other corporation or other party. Except as
disclosed on Schedule 4.3 to Buyers Disclosure
Supplement, no audit, examination or investigation is presently
being conducted or, to the Knowledge of Buyer, threatened by any
taxing authority which is likely to result in a material Tax
Liability, no material unpaid Tax deficiencies or additional
liabilities of any sort have been proposed by any governmental
representative and no agreements for extension of time for the
assessment of any material amount of Tax have been entered into
by or on behalf of Buyer. To the Knowledge of Buyer, Buyer has
withheld
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from its employees (and timely paid to the appropriate
governmental entity) proper and accurate amounts for all periods
in material compliance with all Tax withholding provisions of
applicable federal, state, foreign and local Laws (including
without limitation, income, Social Security and employment Tax
withholding for all types of compensation).
4.4 No Conflict with Other
Instrument. The consummation of the transactions
contemplated by this Agreement will not result in the breach of
any term or provision of or constitute a Default (without regard
to the giving of notice or the passage of time) under any
material Contract, indenture, mortgage, deed of trust or other
material agreement or instrument to which Buyer or any of its
Subsidiaries is a party or by which they or their Assets may be
bound; will not conflict with any provision of the certificate
of incorporation or bylaws of Buyer or the certificate or
articles of incorporation or bylaws of any of its Subsidiaries;
and will not violate any provision of any Law, regulation,
judgment or decree binding on them or any of their Assets.
4.5 Absence of Material Adverse
Change. Since September 30, 2006, there have
been no events, changes or occurrences which have had or are
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Buyer, except as disclosed in
Schedule 4.5 to Buyers Disclosure Supplement.
4.6 Approval of Agreement. The board of
directors of Buyer has approved this Agreement and the
transactions contemplated by it, and has authorized the
execution and delivery by Buyer of this Agreement. This
Agreement constitutes the legal, valid and binding obligation of
Buyer, enforceable against it in accordance with its terms.
Subject to the matters referred to in Section 8.2, Buyer
has full power, authority and legal right to enter into this
Agreement and to consummate the transactions contemplated by
this Agreement. Buyer has no Knowledge of any fact or
circumstance under which the appropriate regulatory approvals
required by Section 8.2 will not be granted without the
imposition of material conditions or material delays.
4.7 Tax Treatment. Buyer has no present
plan to sell or otherwise dispose of any material portion of the
Assets of Acquired Corporation, subsequent to the Merger, and
Buyer intends to continue the historic business of Acquired
Corporation.
4.8 Title and Related Matters. Buyer has
good and marketable title to all the properties, interests in
properties and Assets, real and personal, that are material to
the business of Buyer, reflected in the balance sheet dated as
of September 30, 2006 in the Buyer SEC Reports, or acquired
after the date of such balance sheet (except properties,
interests and Assets sold or otherwise disposed of since such
date, in the ordinary course of business, or, if other than in
the ordinary course of business, of a nature and amount not
material to the business of Buyer), free and clear of all
mortgages, Liens, pledges, charges or encumbrances except
(a) mortgages and other encumbrances referred to in the
notes of such balance sheet, (b) liens for current Taxes
not yet due and payable and (c) such imperfections of title
and easements as do not materially detract from or interfere
with the present use of the properties subject thereto or
affected thereby, or otherwise materially impair present
business operations at such properties. To the Knowledge of
Buyer, the material structures and equipment of Buyer comply in
all material respects with the requirements of all applicable
Laws.
4.9 Subsidiaries. Each Subsidiary of
Buyer has been duly incorporated and is validly existing as a
corporation in good standing under the Laws of the jurisdiction
of its incorporation and each Subsidiary has been duly qualified
as a foreign corporation to transact business and is in good
standing under the Laws of each other jurisdiction in which it
owns or leases properties, or conducts any business so as to
require such qualification and in which the failure to be duly
qualified could have a Material Adverse Effect upon Buyer and
its Subsidiaries considered as one enterprise; the federal
savings bank Subsidiary of Buyer has its deposits fully insured
by the Federal Deposit Insurance Corporation to the extent
provided by the Federal Deposit Insurance Act; and the
businesses of the non-bank Subsidiaries of Buyer are permitted
to subsidiaries of registered thrift holding companies.
4.10 Contracts. Neither Buyer nor any of
its Subsidiaries is in violation of its respective certificate
or articles of incorporation or bylaws or in Default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any Contract, indenture,
mortgage, loan agreement, note, lease or other instrument to
which it is a party or by which it or its property may be bound,
except for such Defaults, if any, as would not, individually or
in the aggregate, have a Material Adverse Effect upon Buyer.
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4.11 Litigation. Except as disclosed in
Schedule 4.11 to Buyers Disclosure Supplement, there
is no Litigation before or by any court or Agency, domestic or
foreign, now pending, or, to the Knowledge of Buyer, threatened
against or affecting Buyer or any of its Subsidiaries (nor does
Buyer have knowledge of any facts which could give rise to any
such Litigation) which is reasonably likely to have any Material
Adverse Effect or prospective Material Adverse Effect, or which
is reasonably likely to materially affect or delay the
consummation of the transactions contemplated by this Agreement;
and all pending legal or governmental proceedings to which Buyer
or any Subsidiary is a party or of which any of their properties
is the subject, including ordinary routine litigation incidental
to the business, are, considered in the aggregate not material.
4.12 Compliance. Except as disclosed in
Schedule 4.12 to Buyers Disclosure Supplement, to the
Knowledge of Buyer, Buyer and its Subsidiaries have complied in
all material respects with all material applicable Laws and
Regulations including without limitation those imposing Taxes
and those related to consumer finance, commercial banking, and
the sale of non-deposit investment and insurance products, of
any applicable jurisdiction and of all states, municipalities,
other political subdivisions and Agencies, in respect of the
ownership of its Assets and the conduct of its business, except
where such noncompliance would not have a Material Adverse
Effect on the Buyer and its Subsidiaries as a whole.
4.13 Registration Statement. None of the
information supplied or to be supplied by Buyer for inclusion in
the Registration Statement to be filed by Buyer with the SEC
will, when the Registration Statement becomes effective, be
false or misleading with respect to any material fact, or omit
to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to
be supplied by Buyer to Acquired Corporations stockholders
in the proxy statement/prospectus used in connection with the
Stockholders Meeting, and any other documents to be filed by
Buyer with the SEC, or any other Agency in connection with the
transactions contemplated hereby will, at the respective time
such documents are filed and with respect to the Acquired
Corporation Proxy Statement, when first mailed to the
stockholders of Acquired Corporation, be false or misleading
with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, not misleading,
or in the case of the Acquired Corporation Proxy Statement or
any amendment thereof or supplement thereto, at the time of the
Acquired Corporation Stockholders Meeting, be false or
misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of
proxies for the Stockholders Meeting.
4.14 SEC Filings and Financial Statements;
NASDAQ. (a) Since December 31, 2003,
Buyer has filed all forms, reports and documents with the SEC
required to be filed by it pursuant to the federal securities
Laws and SEC rules and regulations thereunder (the Buyer
SEC Reports), each of which complied as to form, at the
time such form, report or document was filed (and subject to any
subsequent amendments thereto), in all material respects with
the applicable requirements of the 1933 Act, the
1934 Act and the applicable rules and regulations
thereunder. To the Knowledge of Buyer, each member of
Buyers board of directors has filed all forms, reports and
documents with the SEC required to be filed by him pursuant to
the federal securities Laws and SEC rules and regulations
thereunder. As of their respective dates, none of the Buyer SEC
Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
Each of the balance sheets in the Buyer SEC Reports (including
the related notes and schedules, and subject to any subsequent
amendments to such Buyer SEC Reports) fairly presents the
financial condition of the entity or entities to which it
relates for the periods set forth therein (subject, in the case
of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each
case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may
be noted therein. Buyer has no material obligations or
liabilities (contingent or otherwise) except as disclosed in the
Buyer SEC Reports. For purposes of this paragraph,
material shall have the meaning of such term as
defined under the 1933 Act, the 1934 Act and the rules
promulgated thereunder.
(b) Since December 31, 2003, Buyer has filed all
forms, reports and documents with NASDAQ required to be filed by
it pursuant to the requirements of NASDAQ (the NASDAQ
Reports), each of which complied as to form, at the time
such form, report or document was filed (and subject to any
subsequent amendments thereto), in all material respects with
the applicable requirements of NASDAQ. As of their respective
dates, none of the NASDAQ Reports contained any untrue statement
of a material fact or omitted to state a material fact required
to be stated
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therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not
misleading. Buyer is in material compliance with all rules and
requirements of NASDAQ applicable to it.
4.15 Form S-4. The
conditions for use of a registration statement on SEC
Form S-4
set forth in the General Instructions on
Form S-4
will be satisfied with respect to Buyer and the Registration
Statement.
4.16 Brokers. Except for services
provided by Sandler ONeill & Partners, L.P.,
which have been retained by Buyer and the arrangements with
which, including fees, have been disclosed to Acquired
Corporation prior to the date hereof, all negotiations relative
to this Agreement and the transactions contemplated by this
Agreement have been carried on by Buyer directly with Acquired
Corporation and without the intervention of any other person,
either as a result of any act of Buyer or otherwise in such
manner as to give rights to any valid claim against Buyer for
finders fees, brokerage commissions or other like payments.
4.17 Government Authorization. Buyer and
its Subsidiaries have all Permits that are or will be legally
required to enable Buyer or any of its Subsidiaries to conduct
their businesses in all material respects as now conducted by
each of them.
4.18 Absence of Regulatory
Communications. Except as disclosed in
Schedule 4.18 to Buyers Disclosure Supplement,
neither Buyer nor any of its Subsidiaries is subject to, or has
received during the past three years, any written communication
directed specifically to it from any Agency to which it is or
has been subject or pursuant to which such Agency has imposed or
has indicated it is reasonably likely to impose any material
restrictions on the operations of it or the business conducted
by it or taken any other action with respect to Buyer or any of
its Subsidiaries which has had or is reasonably likely to have a
Material Adverse Effect upon Buyer and its Subsidiaries taken as
a whole.
4.19 Disclosure. No representation or
warranty, or any statement or certificate furnished or to be
furnished to Acquired Corporation by Buyer, contains or will
contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the
statements contained in this Agreement or in any such statement
or certificate not misleading.
4.20 Absence of Certain Changes or
Events. Except as disclosed in Schedule 4.20
to Buyers Disclosure Supplement, since September 30,
2006, neither Buyer nor any of its Subsidiaries has
(a) issued, delivered or agreed to issue or deliver any
stock, bonds or other corporate securities (whether authorized
and unissued or held in the treasury) except shares of common
stock issued upon the exercise of existing options to purchase
shares of Buyers common stock under its Third Amended and
Restated 1998 Stock Option Plan;
(b) borrowed or agreed to borrow any funds or incurred, or
become subject to, any Liability (absolute or contingent) except
borrowings, obligations (including purchase of federal funds)
and Liabilities incurred in the ordinary course of business and
consistent with past practice;
(c) paid any material obligation or Liability (absolute or
contingent) other than current Liabilities shown on the
September 30, 2006 balance sheet in the Buyer SEC Reports
and current Liabilities incurred since that date in the ordinary
course of business and consistent with past practice;
(d) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any Assets of any kind
whatsoever to stockholders, or purchased or redeemed, or agreed
to purchase or redeem, directly or indirectly, or otherwise
acquire, any of its outstanding securities;
(e) except in the ordinary course of business, sold or
transferred, or agreed to sell or transfer, any of its Assets,
or canceled, or agreed to cancel, any debts or claims;
(f) except in the ordinary course of business, entered or
agreed to enter into any agreement or arrangement granting any
preferential rights to purchase any of its Assets, or requiring
the consent of any party to the transfer and assignment of any
of its Assets;
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(g) suffered any Losses or waived any rights of value which
in either event in the aggregate are material considering
Buyers business as a whole, except as are disclosed in
Schedule 4.20 of Buyers Disclosure Supplement;
(h) except in the ordinary course of business or as
disclosed in Schedule 4.20(h) to Buyers Disclosure
Supplement, made or permitted any amendment or termination of
any Contract, agreement or license to which it is a party if
such amendment or termination is material considering
Buyers business as a whole;
(i) except in accordance with Buyers normal and usual
practice, or as required by Law or by Contract, or as noted in
Schedule 4.20(i) to Buyers Disclosure Supplement,
made any accrual or arrangement for or payment of bonuses or
special compensation of any kind or any severance or termination
pay to any present or former officer or employee;
(j) except in accordance with normal and usual practice,
increased the rate of compensation payable to or to become
payable to any of its officers or employees or made any material
increase in any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement or other employee
benefit plan, payment or arrangement made to, for or with any of
its officers or employees;
(k) received notice that any of its substantial customers
has terminated or intends to terminate its relationship, which
termination would have a Material Adverse Effect;
(l) failed to operate its business in the ordinary course
(other than this Agreement and the transactions contemplated
hereby) so as to preserve its business intact and to preserve
the goodwill of its customers and others with whom it has
business relations;
(m) entered into any other transaction other than in the
ordinary course of business; or
(n) agreed, in writing or otherwise, to take any action
described in clauses (a) through (m) above.
Between the date hereof and the Effective Date, Buyer will not
do any of the things listed in clauses (a) through
(n) of this Section 4.20 if such action would have a
Material Adverse Effect on Buyer and its Subsidiaries taken as a
whole.
4.21 Commitments. Buyer has disclosed in
the Exhibits to its annual report on
Form 10-K
for the year ended December 31, 2005, or in the Exhibits to
any subsequently filed quarterly report on
Form 10-Q
or current report on
Form 8-K,
all material contracts required to be disclosed
pursuant to Item 601(b)(10) of
Regulation S-K
under the 1933 Act.
4.22 Charter and
Bylaws. Schedule 4.22 to Buyers
Disclosure Supplement contains true and correct copies of the
certificate of incorporation or articles of incorporation and
bylaws of Buyer and Superior Bank including all amendments
thereto, as currently in effect. There will be no changes in
such certificates or articles of incorporation or bylaws prior
to the Effective Date without the prior written consent of
Acquired Corporation.
4.23 Material Contract Defaults. Except
as disclosed on Schedule 4.23 to Buyers Disclosure
Supplement, neither Buyer nor any of its Subsidiaries is in
Default in any material respect under the terms of any material
Contract which has or is reasonably likely to have a Material
Adverse Effect on Buyer and its Subsidiaries taken as a whole,
and, to the Knowledge of Buyer, there is no event which, with
notice or lapse of time, or both, may be or become an event of
Default under any such material Contract that is reasonably
likely to have such a Material Adverse Effect in respect of
which adequate steps have not been taken to prevent such a
Default from occurring.
4.24 Insurance. Each of the Buyer and its
Subsidiaries has in effect insurance coverage and bonds with
reputable insurers which, in respect to amounts, types and risks
insured, management of Buyer reasonably believes to be adequate
for the type of business conducted by such company, and all of
which are identified on Schedule 4.24 to Buyers
Disclosure Supplement. Neither Buyer nor any of its Subsidiaries
is liable for any material retroactive premium adjustment. All
insurance policies and bonds are valid, enforceable and in full
force and effect, and neither Buyer nor any of its Subsidiaries
has received any notice of any material premium increase or
cancellation with respect to any of its insurance policies or
bonds. Within the last three years, neither Buyer nor any of its
Subsidiaries has been refused any insurance coverage which it
has sought or applied for, and it has no reason to believe that
existing insurance coverage cannot be renewed as and when the
same shall expire, upon terms and conditions as
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favorable as those presently in effect, other than possible
increases in premiums that do not result from any extraordinary
loss experience. All policies of insurance presently held or
policies containing substantially equivalent coverage, to the
extent available generally in the market without material
increase in cost or change in coverage, will be outstanding and
in full force with respect to each of Buyer and its Subsidiaries
at all times from the date hereof to the Effective Date.
4.25 Pension and Employee Benefit Plans.
(a) The following representations pertain to employee
benefit plans as defined by Section 3(3) of ERISA
(whether or not such plans are subject to ERISA), and all bonus,
incentive compensation, deferred compensation, profit sharing,
stock option, restricted stock, stock appreciation right, stock
bonus, stock purchase, supplemental retirement, life insurance,
or any other employee benefit plans, programs or arrangements
(whether written or oral, qualified or nonqualified), and all
employment, consulting, retention, termination, severance or
other contracts or arrangements, whether legally enforceable or
not, and any trust, escrow or other agreement related thereto,
to which Buyer or any ERISA Affiliate thereof is a party which
(i) is now or was for the last six (6) years
maintained or contributed to by Buyer or an ERISA Affiliate
thereof (as hereinafter defined), or (ii) with respect to
which Buyer or any ERISA Affiliate thereof has any obligations
to any current or former officer, employee, consultant or
independent contractor, leased employee or the dependents of any
thereof, regardless of whether funded, or (iii) which could
result in the imposition of any liability or obligation of any
kind or nature, and whether or not now due or to become due to
Buyer or any ERISA Affiliate thereof (all of the above shall be
collectively referred to as the Buyer Employee
Plans).
(b) [Reserved]
(c) Except as set forth in Schedule 4.25(c) to
Buyers Disclosure Supplement, neither Buyer nor any ERISA
Affiliate has been liable at any time for contributions to
(i) a plan or program that is, or has been at any time,
subject to Section 412 of the Code, Section 302 of
ERISA and/or
Title IV of ERISA or (ii) a multiemployer
plan (as defined in Section 3(39) of ERISA).
Schedule 4.25(c) to Buyers Disclosure Supplement also
indicates whether (i) any Buyer Employee Plan has an
accumulated funding deficiency (whether or not
waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA, (ii) Buyer or any ERISA
Affiliate has an outstanding funding waiver, (iii) Buyer or
any ERISA Affiliate is required to provide security for any
Employee Plan pursuant to Section 401(a)(29) of the Code or
(iv) if, and to the extent, any unfunded liabilities (past,
present or future) exist with respect to any Buyer Employee Plan.
(d) Except as set forth in Schedule 4.25(d) to
Buyers Disclosure Supplement, the form and operation of
all Buyer Employee Plans are in all material respects in
compliance with the applicable provisions of ERISA, the Code,
and any other applicable laws, including the Americans with
Disabilities Act of 1990, the Family Medical Leave Act of 1993
and the Health Insurance Portability and Accountability Act of
1996, and such Buyer Employee Plans have been operated in all
material respects in compliance with such laws and the written
Buyer Employee Plan documents. To the Knowledge of Buyer,
neither Buyer nor any fiduciary of a Buyer Employee Plan has
violated the requirements of Section 404 of ERISA with
respect to any Buyer Employee Plan. All required reports
(including IRS Form 5500 annual reports and summary annual
reports) have been (when required) timely filed with the IRS and
the United States Department of Labor (the DOL). To
the Knowledge of Buyer, all summary plan descriptions and
summaries of material modifications and other notices required
by ERISA or the Code with respect to the Buyer Employee Plans
have been timely distributed as required to all participants,
alternate payees and beneficiaries, and all such summary plan
descriptions, summaries of material modifications and other
notices have complied and currently comply with applicable Law
and are consistent with the terms and provisions of the
corresponding written Buyer Employee Plan documents. To the
Knowledge of Buyer, there have been no prohibited transactions
with respect to the Buyer Employee Plans that will or could
reasonably likely result in a Material Adverse Effect on Buyer
and its Subsidiaries taken as a whole. Any contributions,
including salary deferrals, required to be made under the terms
of any of the Buyer Employee Plans by Buyer as of the Effective
Date of the Merger have been timely made.
(e) Each Buyer Employee Plan that is intended to be
qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS, and Buyer is not
aware of any circumstances that will or could reasonably result
in revocation of any such favorable determination letter. Each
trust created under any Buyer
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Employee Plan has been determined to be exempt from taxation
under Section 501(a) of the Code, and to the Knowledge of
Buyer there are no circumstances that will or could reasonably
result in a revocation of such exemption. Each Buyer Employee
Plan that is an employee welfare benefit plan (as defined in
Section 3(1) of ERISA) that utilizes a funding vehicle
described in Section 501(c)(9) of the Code or is subject to
the provisions of Section 505 of the Code has been the
subject of a notification by the IRS that such funding vehicle
qualifies for tax-exempt status under Section 501(c)(9) of
the Code or that the Buyer Employee Plan complies with
Section 505 of the Code, unless the IRS does not, as a
matter of policy, issue such notification with respect to the
particular type of funding vehicle. With respect to each Buyer
Employee Plan, to the Knowledge of Buyer no event has occurred
or condition exists that will or could give rise to a loss of
any intended tax consequence or to any tax under
Section 511 of the Code.
(f) Except as disclosed on Schedule 4.25(f) of
Buyers Disclosure Supplement, there are no pending claims,
lawsuits or actions relating to any Buyer Employee Plan (other
than ordinary course claims for benefits) and, to the best
knowledge of Buyer, none are threatened.
(g) No written or oral representations have been made, and
no Buyer Employee Plans provide, for the continuation of
medical, dental, life or disability insurance coverage for any
period of time beyond the earlier of (i) the end of the
current plan year, or (ii) the termination of employment
(except to the extent of coverage required under COBRA), except
as provided in any Contracts disclosed in Buyers
Disclosure Supplement.
(h) Except as disclosed on Schedule 4.25(h) of
Buyers Disclosure Supplement and except for the
possibility of full vesting of plan account balances which may
be necessitated by Section 411(d)(3) of the Code in order
for tax-qualified status to be retained, the consummation of the
transactions contemplated by this Agreement will not accelerate
the time of vesting, of payment, or increase the amount, of
compensation to any employee, officer, former employee or former
officer of Buyer or any ERISA Affiliate.
(i) Buyer and any ERISA Affiliate thereof have at all times
complied and currently comply in all material respects with the
applicable continuation requirements for their group health
plans, including (1) Section 4980B of the Code and
Sections 601 through 608, inclusive, of ERISA, which
provisions are referred to collectively as COBRA and
(2) any applicable state statutes mandating health
insurance continuation coverage for employees.
(j) Except as disclosed in Schedule 4.25(j) to
Buyers Disclosure Supplement, neither Buyer nor any ERISA
Affiliate has incurred any liability to the DOL, the Pension
Benefit Guaranty Corporation (the PBGC) or the IRS
in connection with any of the Buyer Employee Plans, and, to the
Knowledge of Buyer, except as disclosed in Schedule 4.25(j)
to Buyers Disclosure Supplement, no condition exists that
presents a risk to Acquired Buyer or any ERISA Affiliate of
incurring any liability to the DOL, the PBGC or the IRS.
(k) For the purpose of this Section 4.25, the term
ERISA Affiliate shall mean (i) any related
company or trade or business that is required to be aggregated
with Buyer under Code Sections 414(b), (c), (m) or
(o); (ii) any other company, entity or trade or business
that has adopted or has ever participated in any Buyer Employee
Plan; and (iii) any predecessor or successor company or
trade or business of Buyer or any entity described in this
Section 4.25(k).
(l) Buyer and any ERISA Affiliate have properly classified
individuals providing services to such entities as independent
contractors or employees, as the case may be for purposes of
eligibility to participate in the Buyer Employee Plans and such
classifications have not been challenged by the IRS.
(m) Except as disclosed in Schedule 4.25(m) to the
Buyers Disclosure Supplement, no lien, security interests
or other encumbrances exist with respect to any of the assets of
Buyer or any ERISA Affiliate that were imposed pursuant to the
terms of the Code or ERISA and, to the Knowledge of Buyer, no
condition exists or could occur that would result in the
imposition of such liens, security interests or encumbrances
arising from or relating to the Buyer Employee Plans.
(n) [Reserved]
(o) To the Knowledge of Buyer, Buyer is not delinquent in
payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any
services performed for it or any other amounts required to be
reimbursed to such employees (including accrued paid time off,
accrued vacation, accrued sick leave
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and other benefits) or in the payment to the appropriate
governmental authority of all required taxes, insurance, social
security and withholding thereon; and as of the Effective Date
of the Merger, Buyer will not have an obligation or liability to
any of its employees or to any governmental authority for any
such matters.
4.26 [Reserved]
4.27 Regulatory Approvals. Buyer has no
Knowledge of any reason why all requisite regulatory approvals
regarding the Merger should not or cannot be obtained.
4.28 Loans; Adequacy of Allowance for Loan
Losses. All reserves for loan losses shown on the
September 30, 2006 financial statements of Buyer in the
Buyer SEC Reports are adequate (within the meaning of GAAP and
applicable regulatory guidelines) in all material respects.
Buyer has no Knowledge of any fact which is likely to require a
future material increase in the provision for loan losses or a
material decrease in the loan loss reserve reflected in the most
recent financial statements contained in Buyers SEC
Reports. Each loan reflected as an Asset on the financial
statements of Buyer is the legal, valid and binding obligation
of the obligor of each loan, enforceable in accordance with its
terms subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, or other similar laws relating to
creditors rights generally and to general equitable
principles and complies with all Laws to which it is subject.
Buyer does not have in its portfolio any loan exceeding its
legal lending limit, and except as disclosed to Acquired
Corporation, to the Knowledge of Acquired Corporation, it has no
material loans that are delinquent in payment for more than
30 days, substandard, doubtful, loss, or nonperforming.
4.29 Environmental Matters. Buyer and
each of its Subsidiaries are in material compliance with all
Environmental Laws, and Buyer has no Knowledge that Buyer or any
of its Subsidiaries has not complied with all regulations and
requirements promulgated by the Occupational Safety and Health
Administration that are applicable to Buyer or any of its
Subsidiaries, except, in each case, where such noncompliance has
not had or is not reasonably likely to have a Material Adverse
Effect on Buyer and its Subsidiaries taken as a whole. To the
Knowledge of Buyer, there is no Litigation pending or threatened
with respect to any violation or alleged violation of the
Environmental Laws. To the Knowledge of Buyer, with respect to
Assets of Buyer or any of its Subsidiaries, including any Loan
Property of any material loan, (a) there has been no
spillage, leakage, contamination or release of any substances
for which the appropriate remedial action has not been
completed; (b) no owned or leased property is contaminated
with or contains any hazardous substance or waste; and
(c) there are no underground storage tanks on any premises
owned or leased by Buyer or any of its Subsidiaries, where in
the case of each of clause (a) and (b) any such
condition or occurrence has had or is reasonably likely to have
a Material Adverse Effect on Buyer and its Subsidiaries taken as
a whole.
4.30 Collective Bargaining; Labor
Disputes. To the Knowledge of Buyer, Buyer and
each of its Subsidiaries is in material compliance with all
federal and state laws respecting employment and employment
practices, terms and conditions of employment, wages and hours.
Neither Buyer nor any of its Subsidiaries is or has been engaged
in any unfair labor practice, and, to the Knowledge of Buyer, no
unfair labor practice complaint against Buyer or any of its
Subsidiaries is pending before the National Labor Relations
Board. Relations between management of Buyer and its
Subsidiaries and the employees are amicable and there have not
been, nor to the Knowledge of Buyer, are there presently, any
attempts to organize employees, nor to the Knowledge of Buyer,
are there plans for any such attempts. There are no labor
contracts, collective bargaining agreements, letters of
undertakings or other arrangements, formal or informal, between
Buyer and any union or labor organization covering any employees
of Buyer and its Subsidiaries and none of said employees are
represented by any union or labor organization.
4.31 Derivative Contracts. Except as
disclosed in Section 4.31 to Buyers Disclosure
Supplement or as entered into in the ordinary course of business
subsequent to the date hereof, neither Buyer nor any of its
Subsidiaries is a party to or has agreed to enter into a swap,
forward, future, option, cap, floor or collar financial
contract, or any other interest rate or foreign currency
protection contract or derivative security (Derivative
Contract) not included in Buyers September 30,
2006 financial statements in the Buyer SEC Reports (including
various combinations thereof). With respect to all agreements
currently outstanding pursuant to which Buyer or any of its
Subsidiaries has purchased securities subject to an agreement to
resell, Buyer or such Subsidiary has a security interest in the
securities or other collateral securing such agreement, and the
value of such collateral at the date such agreement was entered
into equals or exceeds the amount of the debt secured thereby.
Neither Buyer nor any of its
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Subsidiaries has pledged collateral in excess of the amount
required under any interest rate swap, repurchase agreement,
Derivative Contract or other similar agreement currently
outstanding.
4.32 Accounting, Tax and Regulatory
Matters. Neither Buyer nor any of its
Subsidiaries has taken any action or has any Knowledge of any
fact or circumstance that is reasonably likely to
(i) prevent the transactions provided for herein, including
the Merger, from qualifying as a reorganization within the
meaning of Section 368(a) of the Code, or
(ii) materially impede or delay receipt of any Consents of
Agencies referred to in subsection 8.2 of this Agreement.
4.33 Opinion of Counsel. Buyer has no
Knowledge of any facts that would preclude issuance of the
opinion of counsel referred to in Section 9.4.
4.34 Transactions with Management. Buyer
has disclosed in Buyers proxy statement dated
April 17, 2006 with respect to its regular 2006 annual
meeting of stockholders all matters required to be disclosed
pursuant to Item 404 of
Regulation S-K
under the 1933 Act, Certain Relationships and Related
Transactions.
4.35 Accounting Controls. Buyer and its
Subsidiaries have devised and maintained systems of internal
accounting control sufficient to provide reasonable assurances
that: (i) all material transactions are executed in
accordance with general or specific authorization of the Board
of Directors of Buyer and the duly authorized executive officers
of Buyer or the applicable Subsidiary of Buyer; (ii) all
material transactions are recorded as necessary to permit the
preparation of financial statements in conformity with GAAP with
respect to Buyer or the applicable Subsidiary of Buyer or any
other criteria applicable to such financial statements, and to
maintain proper accountability for items therein;
(iii) access to the material Assets of Buyer and its
Subsidiaries is permitted only in accordance with general or
specific authorization of the Board of Directors of Buyer and
the duly authorized executive officers; and (iv) the
recorded accountability for items is compared with the actual
levels at reasonable intervals and appropriate actions taken
with respect to any differences.
4.36 Deposit Insurance. The deposit
accounts of Superior Bank are insured by the FDIC in accordance
with the provisions of the FDIC Act. Superior Bank has paid all
regular premiums and special assessments and filed all reports
required under the FDIC Act.
4.37 Intellectual Property. Each of Buyer
and its Subsidiaries owns or possesses licenses or other rights
to use all material patents, copyrights, trade secrets, trade
names, service marks, trademarks, computer software and other
intellectual property used in its business; and none of Buyer or
its Subsidiaries has received any notice of any Litigation that
is pending or threatened, which challenge the right of Buyer and
its Subsidiaries to the ownership or use of such. Each of Buyer
and its Subsidiaries has taken reasonable precautions to
safeguard its trade secrets from disclosure to third-parties.
ARTICLE 5
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF ACQUIRED CORPORATION
Acquired Corporation represents, warrants and covenants to and
with Buyer, as follows:
5.1 Organization. Acquired Corporation is
a Florida corporation, and the Bank is a Florida state-chartered
bank. Each is duly organized, validly existing and in good
standing under the respective Laws of its jurisdiction of
incorporation and has all requisite power and authority to carry
on its business as it is now being conducted and is qualified to
do business in every jurisdiction in which the character and
location of the Assets owned by it or the nature of the business
transacted by it requires qualification or in which the failure
to qualify could, individually, or in the aggregate, have a
Material Adverse Effect.
5.2 Capital Stock. As of
December 31, 2006, the authorized capital stock of Acquired
Corporation consisted of (A) 9,000,000 shares of
common stock, $0.01 par value per share,
2,290,696 shares of which were issued and outstanding at
such date, and (B) 1,000,000 shares of Preferred
Stock, no par value per share, none of which was issued and
outstanding at such date. All of such shares which are
outstanding are validly issued, fully paid and nonassessable
under the FBCA and not subject to preemptive rights. As of
December 31, 2006, Acquired Corporation had
107,201 shares of its common stock subject to exercise at
any time pursuant to outstanding
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stock options under its stock option plans or pursuant to
outstanding warrants. Except for the foregoing, Acquired
Corporation does not have any other arrangements or commitments
obligating it to issue shares of its capital stock or any
securities convertible into or having the right to purchase
shares of its capital stock, including the grant or issuance of
Acquired Corporation Options.
5.3 Subsidiaries. Acquired Corporation has no direct
Subsidiaries other than the Bank and the Subsidiaries shown on
Schedule 5.3 to Acquired Corporations Disclosure
Supplement. Acquired Corporation owns all of the issued and
outstanding capital stock of the Bank and its other
Subsidiaries, including without limitation the Trust, free and
clear of any liens, claims or encumbrances of any kind. All of
the issued and outstanding shares of capital stock of the
Subsidiaries have been validly issued and are fully paid and
non-assessable. As of December 31, 2006, there were
3,000,000 shares of the common stock, par value
$5.00 per share, authorized of the Bank, 762,156 of which
were issued and outstanding and wholly owned by Acquired
Corporation, and no shares of preferred stock. The Bank has no
arrangements or commitments obligating it to issue shares of its
capital stock or any securities convertible into or having the
right to purchase shares of its capital stock. There are no
arrangements or commitments relating to the rights of any
Acquired Corporation Company to vote or dispose of any shares of
the capital stock of any Acquired Corporation Company.
5.4 Financial Statements. Acquired
Corporation has delivered to Buyer copies of the following
financial statements of Acquired Corporation:
(i) Consolidated statements of financial condition as of
December 31, 2004 and 2005 and September 30, 2006;
(ii) Consolidated statements of income for each of the two
years ended December 31, 2004 and 2005 and the quarter
ended September 30, 2006;
(iii) Consolidated statements of stockholders equity
for each of the two years ended December 31, 2004 and 2005
and the quarter ended September 30, 2006; and
(iv) Consolidated statements of cash flows for the two
years ended December 31, 2004 and 2005 and the quarter
ended September 30, 2006.
All of the foregoing financial statements are in all material
respects in accordance with the books and records of Acquired
Corporation and have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods indicated,
except for changes required by GAAP, all as more particularly
set forth in the notes to such statements. Each of such
financial statements presents fairly as of its date the
financial condition and results of operations of Acquired
Corporation for the year then ended. Except as and to the extent
reflected or reserved against in such financial statements
(including the notes thereto), Acquired Corporation did not
have, as of the date of such financial statements, any material
Liabilities or obligations (absolute or contingent) of a nature
customarily reflected in financial statements or the notes
thereto. For purposes of this paragraph, material
shall have the meaning of such term as defined under the
1933 Act, the 1934 Act and the rules promulgated
thereunder.
5.5 Absence of Certain Changes or
Events. Except as set forth on Schedule 5.5
to Acquired Corporations Disclosure Supplement, since
September 30, 2006, no Acquired Corporation Company has
(a) issued, delivered or agreed to issue or deliver any
stock, bonds or other corporate securities (whether authorized
and unissued or held in the treasury) except shares of common
stock issued upon the exercise of existing Acquired Corporation
Options;
(b) borrowed or agreed to borrow any funds or incurred, or
become subject to, any Liability (absolute or contingent) except
borrowings, obligations (including purchase of federal funds)
and Liabilities incurred in the ordinary course of business and
consistent with past practice;
(c) paid any material obligation or Liability (absolute or
contingent) other than current Liabilities reflected in or shown
on the most recent balance sheet referred to in Section 5.4
and current Liabilities incurred since that date in the ordinary
course of business and consistent with past practice;
(d) except as necessary in order to enable Acquired
Corporation to pay the dividend contemplated by
Section 6.2(k) hereof or for any Acquired Corporation
Company to pay dividends to enable Acquired Corporation
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to meet its obligations as they come due, declared or made, or
agreed to declare or make, any payment of dividends or
distributions of any Assets of any kind whatsoever to
stockholders, or purchased or redeemed, or agreed to purchase or
redeem, directly or indirectly, or otherwise acquire, any of its
outstanding securities;
(e) except in the ordinary course of business, sold or
transferred, or agreed to sell or transfer, any of its Assets,
or canceled, or agreed to cancel, any debts or claims;
(f) except in the ordinary course of business, entered or
agreed to enter into any agreement or arrangement granting any
preferential rights to purchase any of its Assets, or requiring
the consent of any party to the transfer and assignment of any
of its Assets;
(g) suffered any Losses or waived any rights of value which
in either event in the aggregate are material considering its
business as a whole;
(h) except in the ordinary course of business, made or
permitted any amendment or termination of any Contract,
agreement or license to which it is a party if such amendment or
termination is material considering its business as a whole;
(i) except in accordance with normal and usual practice or
as required by Law or Contract, made any accrual or arrangement
for or payment of bonuses or special compensation of any kind or
any severance or termination pay to any present or former
officer or employee;
(j) except in accordance with normal and usual practice,
increased the rate of compensation payable to or to become
payable to any of its officers or employees or made any material
increase in any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement or other employee
benefit plan, payment or arrangement made to, for or with any of
its officers or employees;
(k) as of December 31, 2006, received notice that any
of its substantial customers has terminated or intends to
terminate its relationship, which termination would have a
Material Adverse Effect;
(l) failed to operate its business in the ordinary course
(other than this Agreement and the transactions contemplated
hereby) so as to preserve its business intact and to preserve
the goodwill of its customers and others with whom it has
business relations;
(m) entered into any other transaction other than in the
ordinary course of business; or
(n) agreed, in writing or otherwise, to take any action
described in clauses (a) through (m) above.
Between the date hereof and the Effective Date, no Acquired
Corporation Company, without the express written approval of
Buyer, will do any of the things listed in clauses (a)
through (n) of this Section 5.5 except as permitted
therein or as contemplated in this Agreement, or disclosed in
the Acquired Corporation Disclosure Supplement and no Acquired
Corporation Company will enter into or amend any material
Contract wherein either the Acquired Corporation Company has an
obligation to pay or the other party thereto has an obligation
to provide goods or services, in either case in excess of
$50,000 during the term thereof, other than Loans or renewals
thereof entered into in the ordinary course of business, without
the express written consent of Buyer.
5.6 Title and Related Matters.
(a) Title. Each Acquired
Corporation Company has good and marketable title to all Assets
that are material to the business of the Acquired Corporation
Companies taken as a whole, reflected in the most recent
financial statements referred to in Section 5.4, or
acquired after the date of such financial statement (except
Assets sold or otherwise disposed of since such date, in the
ordinary course of business or as disclosed in the Acquired
Corporation Disclosure Supplement), free and clear of all
mortgages, Liens, pledges, charges or encumbrances except
(i) mortgages and other encumbrances referred to in the
notes to such balance sheet, (ii) Liens for current Taxes
not yet due and payable and (iii) such imperfections of
title and easements as do not materially interfere with the
present use of the properties subject thereto or affected
thereby, or otherwise materially impair present business
operations at such properties. To the Knowledge of Acquired
Corporation, the material structures and equipment of each
Acquired Corporation Company comply in all material respects
with the requirements of all applicable Laws.
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(b) Leases. Schedule 5.6(b)
to Acquired Corporations Disclosure Supplement sets forth
a list and description of all real and personal property owned
or leased by any Acquired Corporation Company, either as lessor
or lessee, all of which are in full force and effect and under
which no breach or Default on the part of such Acquired
Corporation Company or, to the Knowledge of Acquired
Corporation, any other party has occurred or is continuing.
(c) Depreciation
Schedule. Schedule 5.6(c) to Acquired
Corporations Disclosure Supplement sets forth a
depreciation schedule for financial reporting purposes of each
Acquired Corporation Companys fixed Assets as of
September 30, 2006.
(d) Computer Hardware and
Software. Schedule 5.6(d) to Acquired
Corporations Disclosure Supplement contains a description
of all material agreements relating to data processing computer
software and hardware now being used in the business operations
of any Acquired Corporation Company. Acquired Corporation has no
Knowledge of any defects, irregularities or problems with any of
its computer hardware or software which renders such hardware or
software unable to reasonably perform the tasks and functions to
be performed by them in the business of any Acquired Corporation
Company. Except as set forth in Schedule 5.6(d) to Acquired
Corporations Disclosure Supplement, each applicable
Acquired Corporation Company owns or has the uncontested right,
and after the Effective Date will continue to own or have the
uncontested right, to use all such computer software and
hardware.
(e) Bank Owned Life
Insurance. Schedule 5.6(e) sets forth the
insurance policies owned by Acquired Corporation or an Acquired
Corporation Company insuring the lives of certain of its
officers. The premiums for each such policy have been paid in
full and Acquired Corporation or an Acquired Corporation Company
is both the legal owner and beneficiary of each such policy.
Neither Acquired Corporation nor any Acquired Corporation
Company has Knowledge of any misrepresentation in the
application for such policies or any other reason why such
policies would not be valid and binding on the insurers who
issued the policies.
5.7 Commitments. Except as set forth in
Schedule 5.7 to Acquired Corporations Disclosure
Supplement or in the most recent financial statements referred
to in Section 5.4, no Acquired Corporation Company is a
party to any oral or written (i) Contracts for the
employment of any officer or employee which is not terminable on
30 days (or less) notice, (ii) profit sharing,
bonus, deferred compensation, savings, stock option, severance
pay, pension or retirement plan, agreement or arrangement,
(iii) loan agreement, indenture or similar agreement
relating to the borrowing of money by such party, except for
such agreements for borrowing made in the ordinary course of
business , (iv) guaranty of any obligation for the
borrowing of money or otherwise, excluding guaranties made in
the ordinary course of business, (v) consulting Contracts,
(vi) collective bargaining agreement, (vii) agreement
with any present or former officer, director or shareholder of
such party, or (viii) any Contract (A) which limits
the freedom of the Acquired Corporation Companies to compete in
any line of business or with any Person or (B) which limits
the freedom of any other Person to compete in any line of
business with any Acquired Corporation Company, or
(ix) other Contract, agreement or commitment which involves
the payment by any Acquired Corporation Company of amounts
aggregating $50,000 or more in any twelve-month period or is
otherwise material to the business, operations, prospects or
Assets or to the condition, financial or otherwise, of any
Acquired Corporation Company. Complete and accurate copies of
all Contracts, plans and other items so listed will be made
available to Buyer for inspection and copying.
5.8 Charter and Bylaws. Schedule 5.8
to Acquired Corporations Disclosure Supplement contains
true and correct copies of the certificate of incorporation or
articles of incorporation and bylaws of each Acquired
Corporation Company, including all amendments thereto, as
currently in effect. There will be no changes in such articles
of incorporation or bylaws prior to the Effective Date without
the prior written consent of Buyer which will not be
unreasonably withheld.
5.9 Litigation; Compliance with
Laws. Except as described in Schedule 5.9 of
the Acquired Corporations Disclosure Supplement, there is
no Litigation (whether or not purportedly on behalf of Acquired
Corporation) pending or, to the Knowledge of Acquired
Corporation, threatened against or affecting any Acquired
Corporation Company (nor does Acquired Corporation have
Knowledge of any facts which are reasonably likely to give rise
to any such Litigation) at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator
of any kind, which is reasonably likely to result in any
judgment or Liability not fully covered by insurance in excess
of a reasonable deductible amount or
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which may have a Material Adverse Effect on the Acquired
Corporation Companies as a whole, and no Acquired Corporation
Company is in Default with respect to any judgment, order, writ,
injunction, decree, award, rule or regulation of any court,
arbitrator or governmental department, commission, board,
bureau, agency or instrumentality, which Default would have a
Material Adverse Effect on the Acquired Corporation Companies as
a whole. Except as disclosed in Schedule 5.9 to Acquired
Corporations Disclosure Supplement, to the Knowledge of
Acquired Corporation, each Acquired Corporation Company has
complied in all material respects with all material applicable
Laws and Regulations including without limitation those imposing
Taxes and those related to consumer finance, commercial banking,
and the sale of non-deposit investment and insurance products,
of any applicable jurisdiction and of all states,
municipalities, other political subdivisions and Agencies, in
respect of the ownership of its Assets and the conduct of its
business, except where such noncompliance would not have a
Material Adverse Effect on the Acquired Corporation Companies as
a whole.
5.10 Material Contract Defaults. Except
as disclosed on Schedule 5.10 to Acquired
Corporations Disclosure Supplement, no Acquired
Corporation Company is in Default in any material respect under
the terms of any material Contract which default has or is
reasonably likely to have a Material Adverse Effect on the
Acquired Corporation Companies as a whole and, to the Knowledge
of Acquired Corporation, there is no event which, with notice or
lapse of time, or both, which is reasonably likely to or will
become an event of Default under any such material Contract that
is reasonably likely to have such a Material Adverse Effect in
respect of which adequate steps have not been taken to prevent
such a Default from occurring.
5.11 No Conflict with Other
Instrument. Upon the receipt of all required
Consents, the consummation of the transactions contemplated by
this Agreement will not result in the breach of any term or
provision of or constitute a Default under any material Contract
indenture, mortgage, deed of trust, lease identified on
Schedule 5.6(b) to Acquired Corporations Disclosure
Supplement or other material agreement or instrument to which
any Acquired Corporation Company is a party and will not
conflict with any provision of the charter or bylaws of any
Acquired Corporation Company.
5.12 Governmental Authorization. Each
Acquired Corporation Company has all Permits that are required
to enable any Acquired Corporation Company to conduct its
business in all material respects as now conducted by each
Acquired Corporation Company.
5.13 Absence of Regulatory
Communications. Except as provided in
Schedule 5.13 to Acquired Corporations Disclosure
Supplement, no Acquired Corporation Company is subject to, nor
has any Acquired Corporation Company received during the past
three years, any written communication directed specifically to
it from any Agency to which it is or has been subject or
pursuant to which such Agency has imposed or has indicated it is
reasonably likely to impose any material restrictions on the
operations of it or the business conducted by it or taken any
other action with respect to any Acquired Corporation Company
which has had or is reasonably likely to have a Material Adverse
Effect upon the Acquired Corporation Companies taken as a whole.
5.14 Absence of Material Adverse
Change. Except as disclosed in Schedule 5.14
to Acquired Corporations Disclosure Supplement, since
September 30, 2006, there have been no events, changes or
occurrences which have had, or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
the Acquired Corporation Companies taken as a whole. For
purposes of this Section 5.14, Material Adverse Effect
shall exclude any changes in results of operations, cash flows,
stockholders equity or financial condition resulting from
items excluded from the definition of Net Worth.
5.15 Insurance. Each Acquired Corporation
Company has in effect insurance coverage and bonds with
reputable insurers, which, in respect to amounts, types and
risks insured, management of Acquired Corporation reasonably
believes to be adequate for the type of business conducted by
such company, and all of which are identified on
Schedule 5.15 to Acquired Corporations Disclosure
Supplement. No Acquired Corporation Company is liable for any
material retroactive premium adjustment. All insurance policies
and bonds are valid, enforceable and in full force and effect,
and no Acquired Corporation Company has received any notice of
any material premium increase or cancellation with respect to
any of its insurance policies or bonds. Within the last three
years, no Acquired Corporation Company has been refused any
insurance coverage which it has sought or applied for. All
policies of insurance presently held or policies containing
substantially equivalent coverage, to the extent available
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generally in the market without material increase in cost or
change in coverage, will be outstanding and in full force with
respect to each Acquired Corporation Company at all times from
the date hereof to the Effective Date.
5.16 Pension and Employee Benefit Plans; Employees.
(a) Schedule 5.16(a) to Acquired Corporations
Disclosure Supplement sets forth a true, complete and correct
list of all employee benefit plans as defined by
Section 3(3) of ERISA (whether or not such plans are
subject to ERISA), and all bonus, incentive compensation,
deferred compensation, profit sharing, stock option, restricted
stock, stock appreciation right, stock bonus, stock purchase,
supplemental retirement, life insurance, or any other employee
benefit plans, programs or arrangements (whether written or
oral, qualified or nonqualified), and all employment,
consulting, retention, termination, severance or other contracts
or arrangements, whether legally enforceable or not, and any
trust, escrow or other agreement related thereto, to which any
Acquired Corporation Company or any ERISA Affiliate thereof is a
party which (i) is now or was for the last six
(6) years maintained or contributed to by any Acquired
Corporation Company or an ERISA Affiliate thereof (as
hereinafter defined), or (ii) with respect to which any
Acquired Corporation Company or any ERISA Affiliate thereof has
any obligations to any current or former officer, employee,
consultant or independent contractor, leased employee or the
dependents of any thereof, regardless of whether funded, or
(iii) which could result in the imposition of any liability
or obligation of any kind or nature, and whether or not now due
or to become due to any Acquired Corporation Company or any
ERISA Affiliate thereof (all of the above shall be collectively
referred to as the Employee Plans).
(b) For each Employee Plan, Acquired Corporation has
heretofore provided or made available to Buyer true and correct
copies of each of the following documents, as applicable:
(i) the Employee Plan document and where such Employee Plan
is unwritten, a written description of the material terms
thereof, (ii) the actuarial report or financial statements,
if any, for such Employee Plan for each of the last three
(3) years, (iii) the most recent determination letter
from the Internal Revenue Service (the IRS) for such
Employee Plan, (iv) the IRS Form 5500 annual reports
for such Employee Plan for the 2004 and 2005 plan years and
Acquired Corporation will provide Buyer with any 2006 plan year
IRS Form 5500 annual reports filed with respect to such
Employee Plan as soon as administratively practicable following
the filing of such annual report with the appropriate Agency,
(v) all personnel, payroll and employment manuals,
handbooks and policies, and (iv) the most recent summary
plan description and related summaries of material modifications.
(c) Except as set forth in Schedule 5.16(c) to the
Acquired Corporations Disclosure Supplement, neither the
Acquired Corporation, any Acquired Corporation Company nor any
ERISA Affiliate has been liable at any time for contributions to
(i) a plan or program that is, or has been at any time,
subject to Section 412 of the Code, Section 302 of
ERISA and/or
Title IV of ERISA or (ii) a multiemployer
plan (as defined in Section 3(39) of ERISA).
Schedule 5.16(c) to Acquired Corporations Disclosure
Supplement also indicates whether (i) any Employee Plan has
an accumulated funding deficiency (whether or not
waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA, (ii) Acquired Corporation, any
Acquired Corporation Company or any ERISA Affiliate has an
outstanding funding waiver, (iii) Acquired Corporation, any
Acquired Corporation Company or any ERISA Affiliate is required
to provide security for any Employee Plan pursuant to
Section 401(a)(29) of the Code or (iv) if, and to the
extent, any unfunded liabilities (past, present or future) exist
with respect to any Employee Plan.
(d) Except as set forth in Schedule 5.16(d) to the
Acquired Corporations Disclosure Supplement, the form and
operation of all Employee Plans are in all material respects in
compliance with the applicable provisions of ERISA, the Code,
and any other applicable laws, including the Americans with
Disabilities Act of 1990, the Family Medical Leave Act of 1993
and the Health Insurance Portability and Accountability Act of
1996, and such Employee Plans have been operated in all material
respects in compliance with such laws and the written Employee
Plan documents. To the Knowledge of Acquired Corporation, no
Acquired Corporation Company or any fiduciary of an Employee
Plan has violated the requirements of Section 404 of ERISA
with respect to any Employee Plan. All required reports
(including IRS Form 5500 annual reports and summary annual
reports) have been (when required) timely filed with the IRS and
the United States Department of Labor (the DOL). To
the Knowledge of Acquired Corporation, all summary plan
descriptions and summaries of material modifications and other
notices required by ERISA or the Code with respect to the
Employee Plans have been timely distributed as required to all
participants, alternate payees and beneficiaries, and all such
summary plan descriptions, summaries of material modifications
and other notices have complied and currently comply with
applicable Law and are consistent with the terms and
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provisions of the corresponding written Employee Plan documents.
To the Knowledge of Acquired Corporation, there have been no
prohibited transactions with respect to the Employee Plans that
will or could reasonably likely result in a Material Adverse
Effect on any Acquired Corporation Company. Any contributions,
including salary deferrals, required to be made under the terms
of any of the Employee Plans by Acquired Corporation as of the
Effective Date of the Merger have been timely made.
(e) Each Employee Plan that is intended to be qualified
under Section 401(a) of the Code has received a favorable
determination letter from the IRS, and Acquired Corporation is
not aware of any circumstances that will or could reasonably
result in revocation of any such favorable determination letter.
Each trust created under any Employee Plan has been determined
to be exempt from taxation under Section 501(a) of the
Code, and to the Knowledge of Acquired Corporation there are no
circumstances that will or could reasonably result in a
revocation of such exemption. Each Employee Plan that is an
employee welfare benefit plan (as defined in Section 3(1)
of ERISA) that utilizes a funding vehicle described in
Section 501(c)(9) of the Code or is subject to the
provisions of Section 505 of the Code has been the subject
of a notification by the IRS that such funding vehicle qualifies
for tax-exempt status under Section 501(c)(9) of the Code
or that the Employee Plan complies with Section 505 of the
Code, unless the IRS does not, as a matter of policy, issue such
notification with respect to the particular type of funding
vehicle. With respect to each Employee Plan, to the Knowledge of
Acquired Corporation no event has occurred or condition exists
that will or could give rise to a loss of any intended tax
consequence or to any tax under Section 511 of the Code.
(f) Except as disclosed on Schedule 5.16(f) of
Acquired Corporations Disclosure Supplement, there are no
pending claims, lawsuits or actions relating to any Employee
Plan (other than ordinary course claims for benefits) and, to
the best knowledge of Acquired Corporation, none are threatened.
(g) No written or oral representations have been made, and
no Employee Plans provide, for the continuation of medical,
dental, life or disability insurance coverage for any period of
time beyond the earlier of (i) the end of the current plan
year, or (ii) the termination of employment (except to the
extent of coverage required under COBRA), except as provided in
any Contracts disclosed in the Acquired Corporation Disclosure
Supplement.
(h) Except as disclosed on Schedule 5.16(h) of
Acquired Corporations Disclosure Supplement and except for
the possibility of full vesting of plan account balances which
may be necessitated by Section 411(d)(3) of the Code in
order for tax- qualified status to be retained, the consummation
of the transactions contemplated by this Agreement will not
accelerate the time of vesting, of payment, or increase the
amount, of compensation to any employee, officer, former
employee or former officer of any Acquired Corporation Company
or any ERISA Affiliate. Except as disclosed in
Schedule 5.16(h) to Acquired Corporations Disclosure
Supplement, no wages, salaries, compensation, bonus, pension or
other payments to any employee, affiliate, officer, director or
broker of any Acquired Corporation Company or any ERISA
Affiliate will be triggered by or result from the consummation
of the transactions contemplated by this Agreement. Except as
disclosed in the Acquired Corporation Disclosure Supplement, no
Employee Plan or other Contracts, including those contemplated
in this Agreement, provide for payments or other benefits that
would be triggered by the consummation of the transactions
contemplated by this Agreement that would subject any person to
excise tax under Section 4999 of the Code (i.e.,
golden parachute taxes), and no action otherwise has
been taken to accelerate payments or vesting and no agreement
entered into by Acquired Corporation, any Acquired Corporation
Company or ERISA Affiliate within the prior 12 months that
would be treated as a parachute payment as defined in
Section 280G of the Code. All compensation amounts that
have been paid or are payable are or will become deductible by
Acquired Corporation or Buyer pursuant to Section 162(m) of
the Code.
(i) Acquired Corporation, any Acquired Corporation Company
and any ERISA Affiliate thereof have at all times complied and
currently comply in all material respects with the applicable
continuation requirements for their group health plans,
including (1) Section 4980B of the Code and
Sections 601 through 608, inclusive, of ERISA, which
provisions are referred to collectively as COBRA and
(2) any applicable state statutes mandating health
insurance continuation coverage for employees.
Schedule 5.16(i) to Acquired Corporations Disclosure
Supplement lists all of the former employees of Acquired
Corporation, any Acquired Corporation Company or any ERISA
Affiliate thereof and their beneficiaries who have elected or
are eligible to elect COBRA continuation of health insurance
coverage under any Employee Plan offering group health insurance
benefits.
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(j) Except as disclosed in Schedule 5.16(j) to
Acquired Corporations Disclosure Supplement, neither
Acquired Corporation, any Acquired Corporation Company nor any
ERISA Affiliate has incurred any liability to the DOL, the
Pension Benefit Guaranty Corporation (the PBGC) or
the IRS in connection with any of the Employee Plans, and, to
the Knowledge of Acquired Corporation, except as disclosed in
Schedule 5.16(j) to Acquired Corporations Disclosure
Supplement, no condition exists that presents a risk to Acquired
Corporation, any Acquired Corporation Company or any ERISA
Affiliate of incurring any liability to the DOL, the PBGC or the
IRS.
(k) For the purpose of this Section 5.16, the term
ERISA Affiliate shall mean (i) any related
company or trade or business that is required to be aggregated
with Acquired Corporation or any Acquired Corporation Company
under Code Sections 414(b), (c), (m) or (o);
(ii) any other company, entity or trade or business that
has adopted or has ever participated in any Employee Plan; and
(iii) any predecessor or successor company or trade or
business of Acquired Corporation or any entity described in this
Section 5.16(k).
(l) Acquired Corporation, each Acquired Corporation Company
and any ERISA Affiliate have properly classified individuals
providing services to such entities as independent contractors
or employees, as the case may be for purposes of eligibility to
participate in the Employee Plans and such classifications have
not been challenged by the IRS.
(m) Except as disclosed in Schedule 5.16(m) to the
Acquired Corporation Disclosure Supplement, no lien, security
interests or other encumbrances exist with respect to any of the
assets of Acquired Corporation, any Acquired Corporation Company
or any ERISA Affiliate that were imposed pursuant to the terms
of the Code or ERISA and, to the Knowledge of Acquired
Corporation, no condition exists or could occur that would
result in the imposition of such liens, security interests or
encumbrances arising from or relating to the Employee Plans.
(n) Schedule 5.16(n) to Acquired Corporations
Disclosure Supplement contains a list of all of the employees of
Acquired Corporation, any Acquired Corporation Company and any
ERISA Affiliate, their current salary or wage rates, bonus and
other compensation, including stock options and stock grants,
benefit arrangements, accrued sick days, vacation days and
holidays, period of service, department and a job title or other
summary of the responsibilities of such employees.
Schedule 5.16(n) also indicates whether such employees are
part-time, full-time or on a leave of absence and the type of
leave. All employees are employees at-will, unless otherwise
specified in Schedule 5.16(n). Except as disclosed on
Schedule 5.16(n) to the Acquired Corporation Disclosure
Supplement, Acquired Corporation, any Acquired Corporation
Company and any ERISA Affiliate, is not a party to any oral
(express or implied) or written (i) employment agreement,
(ii) consulting agreement, or (iii) independent
contractor agreement with any individual or entity.
(o) To the Knowledge of Acquired Corporation, no Acquired
Corporation Company is delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed for it or any
other amounts required to be reimbursed to such employees
(including accrued paid time off, accrued vacation, accrued sick
leave and other benefits) or in the payment to the appropriate
governmental authority of all required taxes, insurance, social
security and withholding thereon; and as of the Effective Date
of the Merger, no Acquired Corporation Company will have an
obligation or liability to any of its employees or to any
governmental authority for any such matters.
5.17 Buy-Sell Agreement. To the Knowledge
of Acquired Corporation, there are no agreements among any of
its stockholders granting to any person or persons a right of
first refusal in respect of the sale, transfer, or other
disposition of shares of outstanding securities by any
stockholder of Acquired Corporation, any similar agreement or
any voting agreement or voting trust in respect of any such
shares.
5.18 Brokers. Except for services
provided by Hovde Financial, which has been retained by Acquired
Corporation and the arrangements with which, including fees,
have been disclosed to Buyer prior to the date hereof, all
negotiations relative to this Agreement and the transactions
contemplated by this Agreement have been carried on by Acquired
Corporation directly with Buyer and without the intervention of
any other person, either as a result of any act of Acquired
Corporation, or otherwise, in such manner as to give rise to any
valid claim against Acquired Corporation for a finders
fee, brokerage commission or other like payment.
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5.19 Approval of Agreements. The board of
directors of Acquired Corporation has approved this Agreement
and the transactions contemplated by this Agreement, and has
authorized the execution and delivery by Acquired Corporation of
this Agreement. As of the date of this Agreement, Acquired
Corporations Board of Directors has by the majority vote
of the members of Acquired Corporations Board of Directors
determined (a) that this Agreement and the transactions
contemplated hereby, including the Merger, are advisable to and
in the best interests of Acquired Corporation and its
stockholders, (b) to submit this Agreement for approval and
adoption by the stockholders of Acquired Corporation and to
declare the advisability of this Agreement, and (c) to
recommend that the stockholders of Acquired Corporation adopt
and approve this Agreement and the transactions contemplated
hereby, including the Merger (collectively, the Acquired
Corporations Board of Directors Recommendation).
5.20 Disclosure. No representation or
warranty, nor any written statement or certificate furnished or
to be furnished to Buyer by Acquired Corporation, contains or
will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the
statements contained in this Agreement or in any such statement
or certificate not misleading.
5.21 Registration
Statement. (a) Acquired Corporation shall
furnish all information to Buyer with respect to any Acquired
Corporation Company including financial statements of Acquired
Corporation as Buyer may reasonably request for inclusion in the
Registration Statement, and the Buyers application for
listing on NASDAQ of Buyers Common Stock to be registered
by the Registration Statement, and such information and
financial statements shall satisfy the requirements of SEC
Form S-4
and SEC
Regulation S-X
under the 1933 Act, as applicable.
(b) None of the information supplied or to be supplied by
Acquired Corporation for inclusion in the Registration Statement
to be filed by Buyer with the SEC will, when the Registration
Statement becomes effective, be false or misleading with respect
to any material fact, or omit to state any material fact
necessary to make the statements therein not misleading. None of
the information supplied by Acquired Corporation or to be
supplied to Buyers or Acquired Corporations
stockholders in the proxy statement/prospectus used in
connection with the Stockholders Meeting, and any other
documents to be filed by Acquired Corporation with the SEC, or
any other Agency in connection with the transactions
contemplated hereby will, at the respective time such documents
are filed and with respect to the Acquired Corporation Proxy
Statement, when first mailed to the stockholders of Acquired
Corporation be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the
statements therein, not misleading, or in the case of the
Acquired Corporation Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Acquired Corporation
Stockholders Meetings, be false or misleading with respect to
any material fact, or omit to state any material fact necessary
to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Stockholders
Meeting.
5.22 Loans; Allowance for Possible Loan
Losses. Except as disclosed in Schedule 5.22
to Acquired Corporations Disclosure Supplement, the
allowance for possible loan, securities or credit losses (the
Allowance) shown on the consolidated balance sheets
of Acquired Corporation in financial statements referred to in
Section 5.4 was as of the dates thereof, adequate (within
the meaning of GAAP and applicable regulatory requirements or
guidelines) in all material respects. Acquired Corporation has
no Knowledge of any fact which is likely to require a future
material increase in the provision for loan losses or a material
decrease in the loan loss reserve reflected in the most recent
financial statements referred to in Section 5.4.
Each loan reflected as an Asset on the financial statements of
Acquired Corporation is the legal, valid and binding obligation
of the obligor of each loan, enforceable in accordance with its
terms subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, or other similar laws relating to
creditors rights generally and to general equitable
principles and the absence of indemnity and contribution and
complies with all Laws to which it is subject. Acquired
Corporation does not have in its portfolio any loan exceeding
its legal lending limit, and except as disclosed on
Schedule 5.22 to Acquired Corporations Disclosure
Supplement, to the Knowledge of Acquired Corporation, it has no
material loans that are delinquent in payment for more than
30 days, substandard, doubtful, loss, or nonperforming.
5.23 Environmental Matters. Except as
provided in Schedule 5.23 to Acquired Corporations
Disclosure Supplement, to the Knowledge of Acquired Corporation,
each Acquired Corporation Company is in material
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compliance with all Laws and other governmental requirements
relating to the generation, management, handling,
transportation, treatment, disposal, storage, delivery,
discharge, release or emission of any waste, pollution, or toxic
or hazardous substance (the Environmental Laws), and
Acquired Corporation has no Knowledge that any Acquired
Corporation Company has not complied in all material respects
with all regulations and requirements promulgated by the
Occupational Safety and Health Administration that are
applicable to any Acquired Corporation Company, except, in each
case, where such noncompliance has not had or is not reasonably
likely to have a Material Adverse Effect on the Acquired
Corporation Companies taken as a whole. To the Knowledge of
Acquired Corporation, there is no Litigation pending or
threatened with respect to any violation or alleged violation of
the Environmental Laws. To the Knowledge of Acquired
Corporation, with respect to Assets of any Acquired Corporation
Company, including any Loan Property of any material loan,
(a) there has been no spillage, leakage, contamination or
release of any substances for which the appropriate remedial
action has not been completed; (b) no owned or leased
property is contaminated with or contains any hazardous
substance or waste; and (c) there are no underground
storage tanks on any premises owned or leased by any Acquired
Corporation Company, where, in the case of each of
clause (a) and (b) any such condition or occurrence
has had or is reasonably likely to have a Material Adverse
Effect on the Acquired Corporation Companies taken as a whole.
5.24 Taxes. All Tax returns required to
be filed by or on behalf of Acquired Corporation have been
timely filed (or requests for extensions therefor have been
timely filed and granted and have not expired), and all returns
filed are complete and accurate in all material respects, or
appropriate reserves established, except as may be disclosed in
the Acquired Corporation Disclosure Supplement. All Taxes shown
on these returns to be due and all additional assessments
received have been paid or will be paid before the date on which
they would be delinquent. Except as disclosed in the Acquired
Corporation Disclosure Supplement, the amounts recorded for
Taxes on the Acquired Corporations most recent financial
statements referred to in Section 5.4 are, to the Knowledge
of Acquired Corporation, sufficient in all material respects for
the payment of all unpaid federal, state, county, local, foreign
and other Taxes (including any interest or penalties) of
Acquired Corporation accrued for or applicable to the period
ended on the dates thereof, and all years and periods prior
thereto and for which Acquired Corporation may at such dates
have been liable in its own right or as a transferee of the
Assets of, or as successor to, any other corporation or other
party. No audit, examination or investigation is presently being
conducted or, to the Knowledge of Acquired Corporation,
threatened by any taxing authority which is likely to result in
a material Tax Liability, no material unpaid Tax deficiencies or
additional liability of any sort has been proposed by any
governmental representative and no agreements for extension of
time for the assessment of any material amount of Tax have been
entered into by or on behalf of Acquired Corporation. Acquired
Corporation has not executed an extension or waiver of any
statute of limitations on the assessment or collection of any
Tax due that is currently in effect. To the Knowledge of
Acquired Corporation, each Acquired Corporation Company has
withheld from its employees (and timely paid to the appropriate
governmental entity) proper and accurate amounts for all periods
in material compliance with all Tax withholding provisions of
applicable federal, state, foreign and local Laws (including
without limitation, income, Social Security and employment Tax
withholdings).
5.25 Collective Bargaining. There are no
labor contracts, collective bargaining agreements, letters of
undertakings or other arrangements, formal or informal, between
any Acquired Corporation Company and any union or labor
organization covering any Acquired Corporation Companys
employees and none of said employees are represented by any
union or labor organization.
5.26 Labor Disputes. To the Knowledge of
Acquired Corporation, each Acquired Corporation Company is in
material compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of
employment, wages and hours. No Acquired Corporation Company is
or has been engaged in any unfair labor practice, and, to the
Knowledge of Acquired Corporation, no unfair labor practice
complaint against any Acquired Corporation Company is pending
before the National Labor Relations Board. Relations between
management of each Acquired Corporation Company and the
employees are amicable and there have not been, nor to the
Knowledge of Acquired Corporation, are there presently, any
attempts to organize employees, nor to the Knowledge of Acquired
Corporation, are there plans for any such attempts.
5.27 Derivative Contracts. Except as
disclosed in Section 5.27 of the Acquired Corporation
Disclosure Supplement or as entered into in the ordinary course
of business after the date hereof, no Acquired Corporation
Company is a party to or has agreed to enter into a swap,
forward, future, option, cap, floor or collar financial
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contract, or any other interest rate or foreign currency
protection contract or derivative security (Derivative
Contract) not included in Acquired Corporations most
recent financial statements referred to in Section 5.4
(including various combinations thereof). With respect to all
agreements currently outstanding pursuant to which any Acquired
Corporation Company has purchased securities subject to an
agreement to resell, such Acquired Corporation Company has a
security interest in the securities or other collateral securing
such agreement, and the value of such collateral at the date
such agreement was entered into equals or exceeds the amount of
the debt secured thereby. No Acquired Corporation Company has
pledged collateral in excess of the amount required under any
interest rate swap, repurchase agreement, Derivative Contract or
other similar agreement currently outstanding.
5.28 Accounting, Tax and Regulatory
Matters. No Acquired Corporation Company has
taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the
transactions provided for herein, including the Merger, from
qualifying as a reorganization within the meaning of
Section 368(a) of the Code, or (ii) materially impede
or delay receipt of any Consents of Agencies referred to in
subsection 8.2 of this Agreement. Acquired Corporation has
no knowledge of any plan or intention on the part of Acquired
Corporation shareholders to sell or otherwise dispose of any of
the Buyers common stock to be received by them in the
Merger that would reduce such shareholders ownership to a
number of shares having, in the aggregate, a fair market value
of less than fifty (50%) percent of the total fair market value
of Acquired Corporation common stock outstanding immediately
before the Merger.
5.29 Offices. The headquarters of
Acquired Corporation and each other office, branch or facility
maintained and operated by each Acquired Corporation Company
(including without limitation representative and loan production
offices and operations centers) and the locations thereof are
listed on Schedule 5.29 to Acquired Corporations
Disclosure Supplement. None of the Acquired Corporation
Companies maintains any other office or branch or conducts
business at any other location, or has applied for or received
permission to open any additional office or branch or to operate
at any other location.
5.30 Data Processing Systems. Except to
the extent indicated on Schedule 5.30 of Acquired
Corporations Disclosure Supplement, no action will be
necessary as a result of the transactions contemplated by this
Agreement to enable use by Buyer and its Subsidiaries of the
electronic data processing, information, record keeping,
communications, telecommunications, hardware, third party
software, networks, peripherals, and computer systems, including
any outsourced systems and processes, that are used by the
Acquired Corporation Companies to the same extent and in the
same manner that it has been used by the Acquired Corporation
Companies.
5.31 Intellectual Property. Each of the
Acquired Corporation Companies owns or possesses licenses or
other rights to use all material patents, copyrights, trade
secrets, trade names, service marks, trademarks, computer
software and other intellectual property used in its business;
and none of the Acquired Corporation Companies has received any
notice of any Litigation that is pending or threatened, which
challenge the right of any Acquired Corporation Company to the
ownership or use of such. Schedule 5.31 to Acquired
Corporations Disclosure Supplement lists all of the
trademarks, trade names, licenses and other intellectual
property used to conduct the businesses of the Acquired
Corporation Companies. Each of the Acquired Corporation
Companies has taken reasonable precautions to safeguard its
trade secrets from disclosure to third-parties.
5.32. No Trust Powers. The Bank does
not possess and does not exercise trust powers.
5.33 Regulatory Approvals. Acquired
Corporation has no Knowledge of any reason with respect to the
Acquired Corporation Companies why all requisite regulatory
approvals regarding the Merger should not or cannot be obtained.
5.34 Opinion of Counsel. Acquired
Corporation has no Knowledge of any facts that would preclude
issuance of the opinion of counsel referred to in
Section 10.4.
5.35 Anti-takeover Provisions. Except for
state and/or
federal bank Laws, no provisions of an anti-takeover nature
contained in their respective organizational documents or the
provisions of any federal or state anti-takeover,
fair price, control share acquisition or
similar Laws apply to Acquired Corporation, this Agreement or
the Merger. The provisions of Section 607.0901 and
Section 607.0902 of the FBCA do not apply to Acquired
Corporation.
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5.36 Transactions with Management. Except
for (a) deposits, all of which are on terms and conditions
comparable in all material respects to those made available to
other nonaffiliated similarly situated customers of the Bank at
the time such deposits were entered into, (b) the loans
listed on Schedule 5.36 to Acquired Corporations
Disclosure Supplement, (c) the agreements designated on
Schedule 5.36 to Acquired Corporations Disclosure
Supplement, (d) obligations under employee benefit plans of
the Acquired Corporation Companies set forth in
Schedule 5.16 to Acquired Corporations Disclosure
Supplement, and (e) any other items described on
Schedule 5.36 to Acquired Corporations Disclosure
Supplement, there are no contracts with or commitments to
present or former stockholders who own or owned more than 5% of
the Acquired Corporation Stock, directors, officers or employees
(or their Related Interests) involving the expenditure of more
than $1,000 as to any one individual (including any business
directly or indirectly controlled by any such person), or more
than $5,000 for all such contracts or commitments in the
aggregate for all such individuals.
5.37 Deposits. Except as set forth on
Schedule 5.37 to Acquired Corporations Disclosure
Supplement, none of the deposits of the Bank are subject to any
encumbrance, legal restraint or other legal process (other than
garnishments, pledges, set off rights, limitations applicable to
public deposits, escrow limitation, arrangements for
sweeps of business deposit accounts and similar
actions taken in the ordinary course of business), and other
than deposits of Acquired Corporation, no portion of deposits of
the Bank represents a deposit of any other Acquired Corporation
Company.
5.38 Accounting Controls. Each of the
Acquired Corporation Companies has devised and maintained
systems of internal accounting control sufficient to provide
reasonable assurances that: (i) all material transactions
are executed in accordance with general or specific
authorization of the Board of Directors and the duly authorized
executive officers of the applicable Acquired Corporation
Company; (ii) all material transactions are recorded as
necessary to permit the preparation of financial statements in
conformity with GAAP with respect to the applicable Acquired
Corporation Company or any other criteria applicable to such
financial statements, and to maintain proper accountability for
items therein; (iii) access to the material Assets of each
of the Acquired Corporation Companies is permitted only in
accordance with general or specific authorization of the Board
of Directors and the duly authorized executive officers; and
(iv) the recorded accountability for items is compared with
the actual levels at reasonable intervals and appropriate
actions taken with respect to any differences.
5.39 Deposit Insurance. The deposit
accounts of the Bank are insured by the FDIC in accordance with
the provisions of the FDIC Act. The Bank has paid all regular
premiums and special assessments and filed all reports required
under the FDIC Act.
5.40 Registration Obligations. Neither of
Acquired Corporation or the Bank is under any obligation,
contingent or otherwise, which will survive the Merger to
register its securities under the 1933 Act or any state
securities laws.
ARTICLE 6
ADDITIONAL
COVENANTS
6.1 Additional Covenants of Buyer. Buyer
covenants to and with Acquired Corporation as follows:
(a) Operations. Buyer will conduct
its business and the business of each of its Subsidiaries in the
ordinary course of business and will use commercially reasonable
efforts subject to the terms of this Agreement to maintain its
relationships with its depositors, customers and employees.
Buyer will not make any material change in its accounting or tax
policies or methods of operation, except as required by GAAP or
by Law. Buyer will take no action which would
(i) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction, or
(ii) materially adversely affect the ability of any Party
to perform its covenants and agreements under this Agreement;
provided, that the foregoing shall not prevent Buyer from
acquiring any Assets or other businesses or from discontinuing
or disposing of any of its Assets or business if such action is,
in the reasonable judgment of Buyer, desirable in the conduct of
the business of Buyer and its Subsidiaries, provided further
that such actions shall not materially delay the receipt of any
regulatory or governmental or third party approvals or Consents
or the Effective Date or materially hinder or delay consummation
of the Merger. Buyer will use its
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reasonable efforts to cause the Merger to be effected at the
earliest practicable date, and to take no action or omit to take
any action which would cause the Merger not, to qualify as a
reorganization within the meaning of
Section 368(a) of the Code for federal income tax purposes.
(b) Regulatory Approvals and Stockholders
Meeting. Acquired Corporation will cooperate
with Buyer in the preparation of any regulatory filings and the
Registration Statement. Buyer will file all regulatory
applications seeking all necessary regulatory approvals of the
transactions contemplated hereby as soon as possible and shall
file the Registration Statement as soon as possible and shall
actively seek the necessary regulatory approvals and
effectiveness of the Registration Statement and will keep
informed and copy the Acquired Corporation and its counsel on
all filings and correspondence with respect to the regulatory
applications and the Registration Statement.
(c) Reports. Buyer shall furnish
to Acquired Corporation:
(i) As soon as practicable, copies of all such financial
statements and loan reports as it shall provide the members of
its board of directors or to its executive management and of
such regular and periodic reports as Buyer may file with the SEC
or any other Agency; and
(ii) With reasonable promptness, such additional financial
or operating data as Acquired Corporation may reasonably request.
(d) No Control of Acquired Corporation by
Buyer. Notwithstanding any other provision
hereof, until the Effective Date, the authority to establish and
implement the business policies of Acquired Corporation shall
continue to reside solely in Acquired Corporations
officers and board of directors.
(e) Listing. Prior to the
Effective Date, Buyer shall cause the listing of the shares of
Buyers Common Stock to be issued in the Merger on the
NASDAQ or other quotations system on which such shares are
primarily traded.
(f) Employee Benefit
Matters. (i) Upon and following the
Effective Date, Buyer shall provide generally to officers and
employees of the Acquired Corporation Companies employee
benefits under employee benefit and welfare plans (other than
stock option or other plans involving the potential issuance of
Buyer Common Stock), on terms and conditions which when taken as
a whole are substantially similar to those currently provided by
Buyer and its Subsidiaries to their similarly situated officers
and employees.
(ii) With respect to each Buyer employee benefit plan that
is an employee benefit plan, as defined in
Section 3(3) of ERISA, for purposes of determining
eligibility to participate and vesting, including for severance
benefits and vacation entitlement, service with Acquired
Corporation or any Acquired Corporation Company shall be treated
as service with Buyer; provided, however, that such service
shall not be recognized to the extent that such recognition
would result in a duplication or increase of any benefits.
Service with Acquired Corporation or any Acquired Corporation
Company also shall apply for purposes of satisfying any waiting
periods, evidence of insurability requirements, or the
application of any preexisting condition limitations with
respect to any Buyer employee benefit plan that is a group
health plan. Each Buyer employee benefit plan that is a group
health plan shall waive, or cause its insurance carrier to
waive, pre-existing condition limitations to the same extent
waived under the applicable Acquired Corporation employee
benefit plan. Acquired Corporation Employees shall be given
credit for amounts paid under a corresponding group health plan
during the same period for purposes of applying deductibles,
co-payments and
out-of-pocket
maximums as though such amounts had been paid in accordance with
the terms and conditions of the Buyer group health plan.
(iii) If requested by Buyer, prior to the Effective Date,
Acquired Corporation shall freeze, amend or take other action
with respect to any Employee Plan (including terminating such
plans immediately prior to the Effective Date) that Buyer, in
its sole discretion, deems advisable and not inconsistent with
this Agreement, and provide all required notices to participants
and appropriate governmental agencies.
(g) Indemnification. (i) Subject
to the conditions set forth in subsection (ii) hereof,
for a period of four years from and after the Effective Time,
Buyer shall indemnify and hold harmless each present and former
director
and/or
officer of any Acquired Corporation Company (the
Indemnified Parties) against any costs or
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expenses (including reasonable attorneys fees), judgments,
fines losses, claims, damages, settlements or liabilities
incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal administrative or
investigative (each, a Claim), arising out of or
pertaining to matters existing or occurring at or prior to the
Effective Date, whether asserted or claimed prior to, at or
after the Effective Date, to the fullest extent that any
Acquired Corporation Company would have been permitted to
indemnify such person under applicable law, the articles of
incorporation, certificate of incorporation or bylaws of any
such Acquired Corporation Company in effect on the date hereof.
(ii) Any Indemnified Party wishing to claim indemnification
under this Section 6.1(g) shall notify Buyer within
45 days after the Indemnified Partys receipt of a
notice of any Claim, but the failure to so notify shall not
relieve Buyer of any Liability it may have to such Indemnified
Party, unless such failure materially prejudices Buyer in the
defense of the Claim or otherwise. In the event of any claim
(whether arising before or after the Effective Date),
(A) Buyer shall have the right to assume the defense
thereof, and Buyer shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if Buyer elects
not to assume such defense, or counsel for the Indemnified
Parties advises that there are issues which raise conflicts of
interest between Buyer and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and
Buyer shall pay the reasonable fees and expenses of such counsel
for the Indemnified Parties promptly after statements therefor
are received; provided, however, that Buyer shall be obligated
pursuant to this Section 6.1(g)(ii)(A) to pay for only one
firm of counsel for all Indemnified Parties in any jurisdiction,
unless the interests of any Indemnified Party conflict with the
interests of another Indemnified Party, then, in such event,
Buyer shall pay for the counsel for each Indemnified Party
having a conflicting interest, (B) the Indemnified Parties
will cooperate in the defense of any such matter and
(C) Buyer shall not be liable for any settlement effected
without its prior written consent which shall not be
unreasonably withheld; and provided further that Buyer shall not
have any obligation hereunder to any Indemnified Party when and
if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification
of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
6.2 Additional Covenants of Acquired
Corporation. Acquired Corporation covenants to
and with Buyer as follows:
(a) Operations. Acquired
Corporation will conduct its business and the business of each
Acquired Corporation Company in the ordinary course of business
and will use commercially reasonable efforts subject to the
terms of this Agreement to maintain its relationships with its
depositors, customers and employees. Acquired Corporation will
not make any material change in its accounting or tax policies
or methods of operation, except as disclosed in the Acquired
Corporation Disclosure Supplement. Acquired Corporation will
take no action that would prevent or impede the Merger from
qualifying as a tax-free reorganization within the meaning of
Section 368 of the Code.
(b) Stockholders Meeting;
Consents. Acquired Corporation will cooperate
with Buyer in the preparation of the Registration Statement and
any regulatory filings and will cause the Stockholders Meeting
to be held for the purpose of approving the Merger as soon as
practicable after the effective date of the Registration
Statement. Acquired Corporation will take no action which would
(i) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction, or
(ii) materially adversely affect the ability of any Party
to perform its covenants and agreements under this Agreement,
provided, that the foregoing shall not prevent Acquired
Corporation from acquiring any Assets or other businesses or
from discontinuing or disposing of any of its Assets or business
if such action is, in the reasonable judgment of Acquired
Corporation, desirable in the conduct of the business of the
Acquired Corporation Companies, provided further that such
actions shall not materially delay the receipt of any regulatory
or governmental or third party approvals or Consents or the
Effective Date or materially hinder or delay consummation of the
Merger. Acquired Corporation will use its reasonable efforts to
cause the Merger to be effected at the earliest practicable
date, and to take no action or omit to take any action which
would cause the Merger not, to qualify as a
reorganization within the meaning of
Section 368(a) of the Code for federal income tax purposes
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(c) Withdrawal of Board Recommendation; Other
Offers.
(i) Except as provided below, (A) Acquired
Corporations Board of Directors shall recommend that
Acquired Corporations stockholders vote in favor of and
adopt and approve this Agreement and the Merger at Acquired
Corporations Stockholders Meeting; (B) the Acquired
Corporation Proxy Statement shall include a statement of the
Acquired Corporations Board of Directors Recommendation
(as defined in Section 5.19 hereof); and (C) neither
the Board of Directors of Acquired Corporation nor any committee
thereof shall (x) except as expressly permitted by this
Section 6.2(c)(i), withdraw, qualify or modify, or propose
publicly to withdraw, qualify or modify, in a manner adverse to
Buyer, the approval or recommendation of such Board of Directors
or such committee of the Merger or this Agreement,
(y) approve or recommend, or propose publicly to approve or
recommend, any Acquisition Proposal, or (z) cause Acquired
Corporation to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement
related to any Acquisition Proposal. Notwithstanding the
foregoing, in the event that, prior to the adoption of this
Agreement by the holders of Acquired Corporation Stock, the
Board of Directors of Acquired Corporation determines in good
faith, after it has received a Superior Proposal and after
receipt of advice from outside counsel, that the failure to do
so would result in a reasonable possibility that the Board of
Directors of Acquired Corporation would breach its fiduciary
duties to Acquired Corporation stockholders under applicable
Law, the Board of Directors of Acquired Corporation may (subject
to this and the following sentences) inform Acquired Corporation
stockholders that it no longer believes that the Merger is
advisable and no longer recommends approval and may (subject to
this Section 6.2(c)(i)) approve or recommend a Superior
Proposal (and in connection therewith withdraw or modify its
approval or recommendation of this Agreement and the Merger (a
Subsequent Determination), but only at a time that
is after the fifth business day following Buyers receipt
of written notice advising Buyer that the Board of Directors of
Acquired Corporation has received a Superior Proposal specifying
the material terms and conditions of such Superior Proposal (and
including a copy thereof with all accompanying documentation, if
in writing), identifying the person making such Superior
Proposal and stating that it intends to make a Subsequent
Determination. After providing such notice, Acquired Corporation
shall provide a reasonable opportunity to Buyer to make such
adjustments in the terms and conditions of this Agreement as
would enable Acquired Corporation to proceed with its
recommendation to its stockholders without a Subsequent
Determination; provided, however, that any such
adjustment shall be at the discretion of the Parties at the
time. Notwithstanding any other provision of this Agreement,
Acquired Corporation shall submit this Agreement to its
stockholders at its Stockholders Meeting even if the
Board of Directors of Acquired Corporation determines at any
time after the date hereof that it is no longer advisable or
recommends that Acquired Corporation stockholders reject it,
provided, however, that Acquired Corporation shall not be
required to submit this Agreement to its stockholders at its
Stockholders Meeting if this Agreement has been terminated and
Buyer has been paid the fee specified in Section 13.4
hereof.
(ii) Other Offers. No Acquired
Corporation Company shall, nor shall it authorize or permit any
of its Representatives to, directly or indirectly
(A) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Proposal,
(B) participate in any discussions or negotiations
regarding, or furnish to any Person or Group (as
such term is defined in Section 13(d) under the
1934 Act) any nonpublic information with respect to, or
take any other action to facilitate any inquiries or the making
of any proposal that constitutes or may reasonably be expected
to lead to, any Acquisition Proposal, (C) subject to
Section 6.2(c)(i), approve, endorse or recommend any
Acquisition Proposal, or (D) enter into any Contract
contemplating or otherwise relating to any Acquisition
Transaction; provided however, that this
Section 6.2(c)(ii) shall not prohibit an Acquired
Corporation Company from furnishing nonpublic information
regarding any Acquired Corporation Company to, or entering into
a confidentiality agreement or discussions or negotiations with,
any Person or Group in response to a bona fide unsolicited
written Acquisition Proposal submitted by such Person or Group
(and not withdrawn) if (I) no Acquired Corporation Company
or Representative thereof shall have violated any of the
restrictions set forth in this Section 6.2(c)(ii),
(II) the Board of Directors of Acquired Corporation
determines in its good faith judgment (based on, among other
things, the advice of Acquired Corporations financial
advisors that such Acquisition Proposal constitutes a Superior
Proposal, (III) the Board of Directors of Acquired
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Corporation concludes in good faith, after consultation with its
outside legal counsel, that the failure to take such action
would be inconsistent with its fiduciary duties, as such duties
would exist in the absence of this Section 6.2(c)(ii), to
the stockholders of Acquired Corporation under applicable Law,
(IV) (x) at least five business days prior to
furnishing any such nonpublic information to, or entering into
discussions or negotiations with, such Person or Group, Acquired
Corporation gives Buyer written notice of the identity of such
Person or Group and of Acquired Corporations intention to
furnish nonpublic information to, or enter into discussions or
negotiations with, such Person or Group, and (y) Acquired
Corporation receives from such Person or Group an executed
confidentiality agreement containing terms no less favorable to
the disclosing Party than the terms of the confidentiality
agreement between Acquired Corporation and Buyer and
(V) contemporaneously with furnishing any such nonpublic
information to such Person or Group, Acquired Corporation
furnishes such nonpublic information to Buyer (to the extent
such nonpublic information has not been previously furnished by
Acquired Corporation to Buyer). In addition to the foregoing,
Acquired Corporation shall provide Buyer with at least five
business days prior written notice of a meeting of the
Board of Directors of Acquired Corporation at which meeting the
Board of Directors of Acquired Corporation is reasonably
expected to resolve to recommend a Superior Proposal to its
stockholders and together with such notice a copy of the most
recently proposed documentation relating to such Superior
Proposal; provided further that Acquired Corporation hereby
agrees promptly to provide to Buyer any revised documentation
and any Contract entered into in connection with such Superior
Proposal.
(iii) Requests for Nonpublic Information on Acquired
Corporation. In addition to the obligations
of Acquired Corporation set forth in Section 6.2(c)(ii), as
promptly as practicable, after any of the executive officers of
Acquired Corporation become aware thereof, Acquired Corporation
shall advise Buyer of any request received by Acquired
Corporation for nonpublic information which Acquired Corporation
reasonably believes could lead to an Acquisition Proposal or of
any Acquisition Proposal, the material terms and conditions of
such request or Acquisition Proposal, and the identity of the
Person or Group making any such request or Acquisition Proposal.
Acquired Corporation shall keep Buyer informed promptly of
material amendments or modifications to any such request or
Acquisition Proposal.
(iv) Cessation of Activities Regarding Prior
Acquisition Proposals. Each Acquired
Corporation Company shall immediately cease any and all existing
activities, discussions or negotiations with any Persons
conducted heretofore with respect to any Acquisition
Proposal and will use their respective reasonable best
efforts to enforce any confidentiality or similar or related
agreement relating to any Acquisition Proposal.
(v) Compliance with 1934 Act
Rules. Nothing contained in this Agreement
shall prevent a Party or its board of directors from complying
with
Rule 14d-9
and
Rule 14e-2
under the 1934 Act with respect to an Acquisition Proposal,
provided that such Rules will in no way eliminate or modify the
effect that any action pursuant to such Rules would otherwise
have under this Agreement.
(d) Loan Loss Reserve. Acquired
Corporation shall maintain an allowance for possible loan,
securities or credit losses, including for loans made or
securities purchased after the date hereof, that is adequate
within the meaning of GAAP and applicable regulatory
requirements or guidelines, and its current credit policies and
loan loss methodologies.
(e) Stockholder Voting. Acquired
Corporation shall as soon as practicable after the date hereof
use its reasonable efforts to cause each director and executive
officer of Acquired Corporation to execute a Support Agreement
in substantially the form of Exhibit A hereto.
(f) Reports. Acquired Corporation
shall furnish to Buyer:
(i) As soon as practicable, and in any event within
30 days after the end of each quarterly period,
consolidated statements of operations of Acquired Corporation
for such period and for the period beginning at the commencement
of the fiscal year and ending at the end of such quarterly
period, and a consolidated statement of financial condition of
Acquired Corporation as of the end of such quarterly
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period, setting forth in each case in comparative form figures
for the corresponding periods ending in the preceding fiscal
year, subject to changes resulting from year-end adjustments;
(ii) Promptly upon receipt thereof, copies of all audit
reports submitted to Acquired Corporation by independent
auditors in connection with each annual or special audit of the
books of Acquired Corporation made by such accountants,
including any management letters;
(iii) As soon as practicable, copies of all such financial
statements and reports as it shall send to its stockholders and
of such regular and periodic reports as Acquired Corporation may
file with the SEC or any other Agency; and
(iv) With reasonable promptness, such additional financial
data and information as Buyer may reasonably request.
(h) Certain Practices. Acquired
Corporation shall (i) provide Buyer with all information
provided to its board of directors for each new, renewed or
modified loan with an outstanding principal amount in excess of
$250,000, (ii) consult with Buyer prior to making any loan
which will result in an exception to its loan policy,
(iii) consult with Buyer in advance on any agreement to
make or to permit any amendment or termination of any Contract
by or with any Acquired Corporation Company requiring capital
expenditures of more than $50,000; and (iv) consult with
Buyer to coordinate various business issues on a basis mutually
satisfactory to Acquired Corporation and Buyer. Acquired
Corporation and the Bank shall not be required to undertake any
of such activities, however, except as such activities may be in
compliance with existing Law and Regulations.
(i) Bank Owned Life
Insurance. Acquired Corporation shall, and
shall cause each Acquired Corporation Company to, maintain the
insurance policies currently in effect insuring the lives of
certain of its officers, and will not cause or allow the owner
or beneficiary of such policies to be changed.
(j) Insurance. Prior to the
Effective Date, Acquired Corporation shall purchase for, and on
behalf of, its current and former officers and directors,
extended coverage under the current directors and
officers liability insurance policy maintained by Acquired
Corporation to provide for continued coverage of such insurance
for a period of four years following the Effective Date with
respect to matters occurring prior to the Effective Date.
(k) Dividend. Notwithstanding
anything in this Agreement to the contrary, Acquired Corporation
may establish and declare its normal dividend of $0.10 per
share of Acquired Corporation Stock at the earlier of ten
business days prior to the anticipated Closing Date, or during
May 2007.
6.3 Additional Obligations of Buyer and Acquired
Corporation Relating to Trust Preferred
Securities. Buyer acknowledges that the Trust
holds $4,000,000 principal amount of Fixed/Floating Rate Junior
Subordinated Deferrable Interest Debentures (the
Debentures) issued by Acquired Corporation pursuant
to an Indenture (the Indenture) between Wilmington
Trust Company, as trustee (the Trustee), dated as of
December 15, 2005 and has issued $4,000,000 in
Fixed/Floating Rate Capital Securities (the
Trust Preferred Securities). Subject to the
provisions of this Agreement, and without limiting the effects
of the Merger, Buyer shall, at the Effective Date, expressly
assume all of Acquired Corporations obligations under the
Indenture (including, without limitation, being substituted for
Acquired Corporation) and execute any and all documents,
instruments and agreements, including any supplemental
indentures, required by the Indenture, the Debentures or the
Trust Preferred Securities and thereafter shall perform all
of Acquired Corporations obligations with respect to the
Debentures and the Trust Preferred Securities. Acquired
Corporation shall use commercially reasonable best efforts to
obtain the consent of the Trustee to any supplemental indenture
or other document, instrument or agreement required to evidence
such assumption by Buyer, and Buyer shall cooperate in good
faith with such efforts.
ARTICLE 7
MUTUAL
COVENANTS AND AGREEMENTS
7.1 Best Efforts, Cooperation. Subject to
the terms and conditions herein provided, Buyer and Acquired
Corporation each agrees to use its best efforts promptly to
take, or cause to be taken, all actions and do, or cause to be
done, all things necessary, proper or advisable under applicable
Laws or otherwise, including, without limitation,
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promptly making required deliveries of stockholder lists and
stock transfer reports and attempting to obtain all necessary
Consents and waivers and regulatory approvals, including the
holding of any regular or special board meetings, to consummate
and make effective, as soon as practicable, the transactions
contemplated by this Agreement. The officers of each Party to
this Agreement shall fully cooperate with officers and
employees, accountants, counsel and other representatives of the
other Parties not only in fulfilling the duties hereunder of the
Party of which they are officers but also in assisting, directly
or through direction of employees and other persons under their
supervision or control, such as stock transfer agents for the
Party, the other Parties requiring information which is
reasonably available from such Party. Buyer and Acquired
Corporation will agree on stay bonuses for various
key employees of the Acquired Corporation Companies in such
amounts and payable on such date or dates as they may agree.
7.2 Press Release. Each Party hereto
agrees that, unless approved by the other Parties in advance,
such Party will not make any public announcement, issue any
press release or other publicity or confirm any statements by
any person not a party to this Agreement concerning the
transactions contemplated hereby. Notwithstanding the foregoing,
each Party hereto reserves the right to make any disclosure if
such Party, in its reasonable discretion, deems such disclosure
required by Law. In that event, such Party shall provide to the
other Party the text of such disclosure sufficiently in advance
to enable the other Party to have a reasonable opportunity to
comment thereon.
7.3 Mutual Disclosure. Each Party hereto
agrees to promptly furnish to each other Party hereto its public
disclosures and filings not precluded from disclosure by Law
including but not limited to call reports,
Form 8-K,
Form 10-Q
and
Form 10-K
filings, Y-3 applications, reports on
Form Y-6,
quarterly or special reports to stockholders, Tax returns,
Form S-8
registration statements and similar documents.
7.4 Access to Properties and Records;
Investigation. Each Party hereto shall afford the
officers and authorized representatives of the other Party full
access to the Assets, books and records of such Party during
normal business hours in order to effect the Parties
respective covenants hereunder. All such information that may be
obtained by any such Party will be held in confidence by such
party, will not be disclosed by such Party or any of its
representatives except in accordance with this Agreement, and
will not be used by such Party for any purpose other than the
accomplishment of the Merger as provided herein. Each Party
shall keep the other Party advised of all material developments
relevant to its business and to consummation of the Merger and
shall permit the other Party to make or cause to be made such
investigation of its business and properties (including that of
its Subsidiaries) and of their respective financial and legal
conditions as the other Party reasonably requests, provided,
that such investigation shall be reasonably related to the
transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a
Party shall affect the ability of such Party to rely on the
representations and warranties of the other Party. Between the
date hereof and the Effective Date, Acquired Corporation shall
permit Buyers senior officers and independent auditors to
meet with the senior officers of Acquired Corporation, including
officers responsible for Acquired Corporations financial
statements, the internal controls of Acquired Corporation and
the disclosure controls and procedures of Acquired Corporation,
to discuss such matters as Buyer may deem reasonably necessary
or appropriate for Buyer to satisfy its obligations under
Sections 302 and 906 of the Sarbanes-Oxley Act.
7.5 Notice of Adverse Changes. Each Party
agrees to give written notice promptly to the other Party upon
becoming aware of the occurrence or impending occurrence of any
event or circumstance relating to it or any of its Subsidiaries
which (i) is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on it or
(ii) would cause or constitute a material breach of any of
its representations, warranties, or covenants contained herein,
and to use its reasonable efforts to prevent or promptly to
remedy the same.
ARTICLE 8
CONDITIONS
TO OBLIGATIONS OF ALL PARTIES
The obligations of Buyer and Acquired Corporation to cause the
transactions contemplated by this Agreement to be consummated
shall be subject to the satisfaction, in the sole discretion of
the Party relying upon such
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conditions, on or before the Effective Date of all the following
conditions, except as such Parties may waive such conditions in
writing:
8.1 Approval by Stockholders. At the
Stockholders Meeting, this Agreement and the matters
contemplated by this Agreement shall have been duly approved by
the vote of the holders of not less than the requisite number of
the issued and outstanding voting securities of Acquired
Corporation as is required by applicable Law and Acquired
Corporations articles of incorporation and bylaws.
8.2 Regulatory Authority Approval; Other
Consents. (a) Orders, Consents and
approvals, in form and substance reasonably satisfactory to
Buyer and Acquired Corporation, required for consummation of the
Merger and the Subsidiary transactions contemplated by this
Agreement shall have been entered by the Office of Thrift
Supervision and other appropriate bank regulatory Agencies
granting the authority necessary for the consummation of the
transactions contemplated by this Agreement and satisfying all
other requirements prescribed by Law and shall be in full force
and effect, and all waiting periods required by law shall have
expired. No Order, Consent or approval so obtained which is
necessary to consummate the transactions contemplated hereby
shall be conditioned or restricted in a manner which in the
reasonable judgment of the Board of Directors of Buyer would so
materially adversely impact the economic or business benefits of
the transactions contemplated by this Agreement so as to render
inadvisable consummation of the Merger.
(b) Each Party shall have obtained any and all other
Consents required for consummation of the Merger (other than
those referred to in Section 8.2(a) of this Agreement) for
the preventing of any Default under any Contract or Permit of
such Party which, if not obtained or made, is reasonably likely
to have, individually or in the aggregate, a Material Adverse
Effect on such Party. No Consent obtained which is necessary to
consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable
judgment of the Board of Directors of Buyer would so materially
adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render
inadvisable consummation of the Merger.
8.3 Legal Proceedings. No federal, state,
local, foreign or other court, board, body, commission, agency,
authority or instrumentality, including the Agencies, of
competent jurisdiction, shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which
prohibits, restricts or makes illegal consummation of the
transactions contemplated by this Agreement, provided that the
Buyer and the Acquired Corporation shall, and shall cause their
respective Subsidiaries to use commercially reasonable efforts
to seek the lifting or change of any Order or action, and to
obtain an interpretation of any Law, so as to permit the
completion of the transactions contemplated herein or the terms
hereof.
8.4 Registration Statement. The
Registration Statement shall be effective under the
1933 Act and no stop order suspending the effectiveness of
the Registration Statement shall be in effect; no proceedings
for such purpose, or under the proxy rules of the SEC or any
bank regulatory authority pursuant to the 1934 Act, with
respect to the transactions contemplated hereby, shall be
pending before or threatened by the SEC or any bank regulatory
authority; and all approvals or authorizations for the offer of
Buyers Common Stock shall have been received or obtained
pursuant to any applicable state securities Laws, and no stop
order or proceeding with respect to the transactions
contemplated hereby shall be pending or threatened under any
such state law.
8.5 Tax Opinion. Buyer and Acquired
Corporation shall have received an opinion of Haskell Slaughter
Young & Rediker, LLC, addressed to each of them, in
form and substance reasonably satisfactory to Acquired
Corporation and Buyer to the effect that (i) the Merger
will constitute a reorganization within the meaning
of Section 368 of the Code; (ii) no gain or loss will
be recognized by Buyer or Acquired Corporation; (iii) no
gain or loss will be recognized by the stockholders of Acquired
Corporation who receive shares of Buyers Common Stock
except to the extent of any taxable boot received by
such persons from Buyer, and except to the extent of any
dividends received from Acquired Corporation prior to the
Effective Date; (iv) the basis of the Buyers Common
Stock received in the Merger will be equal to the sum of the
basis of the shares of Acquired Corporation common stock
exchanged in the Merger and the amount of gain, if any, which
was recognized by the exchanging Acquired Corporation
stockholder, including any portion treated as a dividend, less
the value of taxable boot, if any, received by such stockholder
in the Merger; (v) the holding period of the Buyers
Common Stock will include the holding period of the shares of
Acquired Corporation common stock exchanged therefor if such
shares of Acquired
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Corporation common stock were capital assets in the hands of the
exchanging Acquired Corporation stockholder; and (vi) cash
received by an Acquired Corporation stockholder in lieu of a
fractional share interest of Buyers Common Stock will be
treated as having been received as a distribution in full
payment in exchange for the fractional share interest of
Buyers Common Stock which he or she would otherwise be
entitled to receive and will qualify as capital gain or loss
(assuming the Acquired Corporation Stock was a capital asset in
his or her hands as of the Effective Date).
ARTICLE 9
CONDITIONS
TO OBLIGATIONS OF ACQUIRED CORPORATION
The obligations of Acquired Corporation to cause the
transactions contemplated by this Agreement to be consummated
shall be subject to the satisfaction on or before the Effective
Date of all the following conditions except as Acquired
Corporation may waive such conditions in writing:
9.1 Representations, Warranties and
Covenants. Notwithstanding any investigation made
by or on behalf of Acquired Corporation, all representations and
warranties of Buyer contained in this Agreement shall be true in
all material respects on and as of the Effective Date as if such
representations and warranties were made on and as of such
Effective Date (and without regard to any qualifications in such
representations and warranties relating to materiality),
provided that any representations and warranties that are as of
a specified date shall speak and be effective only as to such
date, and Buyer shall have performed in all material respects
all agreements and covenants required by this Agreement to be
performed by it on or prior to the Effective Date.
9.2 [Reserved]
9.3 Closing Certificate. In addition to
any other deliveries required to be delivered hereunder,
Acquired Corporation shall have received a certificate from the
President or a Vice President and from the Secretary or
Assistant Secretary of Buyer dated as of the Closing certifying
that:
(a) the Board of Directors of Buyer has duly adopted
resolutions approving the substantive terms of this Agreement
and authorizing the consummation of the transactions
contemplated by this Agreement and such resolutions have not
been amended or modified and remain in full force and effect;
(b) each person executing this Agreement on behalf of Buyer
is an officer of Buyer holding the office or offices specified
therein and the signature of each person set forth on such
certificate is his or her genuine signature;
(c) the certificate of incorporation and bylaws of Buyer
referenced in Section 4.4 hereof remain in full force and
effect;
(d) such persons have no knowledge of a basis for any
material claim, in any court or before any Agency or arbitration
or otherwise against, by or affecting Buyer or the business,
prospects, condition (financial or otherwise), or Assets of
Buyer which would prevent the performance of this Agreement or
the transactions contemplated by this Agreement or declare the
same unlawful or cause the rescission thereof; and
(e) the conditions set forth in Article 8 and this
Article 9 have been satisfied insofar as they relate to
Buyer.
9.4 Opinion of Counsel. Acquired
Corporation shall have received an opinion of Buyers
General Counsel, dated as of the Closing, to the effect that, on
the basis of the facts, representations and assumptions set
forth in the opinion, (i) Buyer is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and
authority to carry on the business in which it is engaged,
(ii) the execution and compliance with the terms of this
Agreement do not and will not violate or conflict with any
provision of the Certificate of Incorporation or Bylaws, or
other binding contracts, agreements, orders, instruments, etc.
of the Buyer, (iii) the Agreement has been duly adopted and
approved by the board of directors and stockholders of Buyer in
accordance with its Certificate of Incorporation and Bylaws,
(iv) the Agreement has been duly and validly executed by
Buyer and is enforceable in accordance with its terms against
Buyer, and (v) the amount of authorized stock of Buyer
along with the number of shares of stock issued and outstanding
as of December 31, 2006, that the
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capital stock of Buyer issued and outstanding were duly issued
and fully paid and nonassessable, and that shares of capital
stock issued as contemplated by this Agreement will be, upon
issuance and delivery under the Agreement, duly authorized,
validly issued, registered under the Securities Act of 1933, and
fully paid and nonassessable and listed for quotation on NASDAQ.
Such counsel may rely on representations and certificates of
officers and directors of Buyer and certificates of public
officials. The opinion of counsel for Buyer shall also be
subject to reasonable and customary qualifications.
9.5 Fairness Opinion. Acquired
Corporation shall have received prior to the date of this
Agreement from Hovde Financial a letter (acceptable in form to
Acquired Corporation) confirming its opinion that the terms of
this Agreement and the Merger are fair to the stockholders of
Acquired Corporation from a financial point of view.
9.6 NASDAQ Listing. The shares of
Buyers Common Stock to be issued under this Agreement
shall have been approved for listing on the NASDAQ.
9.7 Support for Legal Opinion. There
shall have been furnished to counsel for Acquired Corporation
delivering the opinion under Section 10.4 certified copies
of such corporate records of Buyer and copies of such other
documents as such counsel may reasonably have requested for such
purpose and any officers certificates relied upon by such
counsel in rendering its opinion.
9.8 Material Events. There shall have
been no determination by the board of directors of Acquired
Corporation that the transactions contemplated by this Agreement
have become impractical because of any state of war, declaration
of a banking moratorium in the United States or a general
suspension of trading on the NASDAQ or any other exchange on
which Buyers Common Stock may be traded.
ARTICLE 10
CONDITIONS
TO OBLIGATIONS OF BUYER
The obligations of Buyer to cause the transactions contemplated
by this Agreement to be consummated shall be subject to the
satisfaction on or before the Effective Date of all of the
following conditions except as Buyer may waive such conditions
in writing:
10.1 Representations, Warranties and
Covenants. Notwithstanding any investigation made
by or on behalf of Buyer, all representations and warranties of
Acquired Corporation contained in this Agreement shall be true
in all material respects on and as of the Effective Date as if
such representations and warranties were made on and as of the
Effective Date (and without regard to any qualifications in such
representations and warranties relating to materiality),
provided that any representations and warranties that are as of
a specified date shall speak and be effective only as to such
date, and Acquired Corporation shall have performed in all
material respects all agreements and covenants required by this
Agreement to be performed by it on or prior to the Effective
Date.
10.2 Acquired Corporation Net
Worth. Acquired Corporation shall have a Net
Worth of not less than $25,959,000.
10.3 Closing Certificate. In addition to
any other deliveries required to be delivered hereunder, Buyer
shall have received a certificate from Acquired Corporation
executed by the President or Vice President and from the
Secretary or Assistant Secretary of Acquired Corporation dated
as of the Closing certifying that:
(a) the Board of Directors of Acquired Corporation has duly
adopted resolutions approving the substantive terms of this
Agreement and authorizing the consummation of the transactions
contemplated by this Agreement and such resolutions have not
been amended or modified and remain in full force and effect;
(b) the stockholders of Acquired Corporation have duly
adopted resolutions approving the substantive terms of the
Merger and the transactions contemplated thereby and such
resolutions have not been amended or modified and remain in full
force and effect;
(c) each person executing this Agreement on behalf of
Acquired Corporation is an officer of Acquired Corporation
holding the office or offices specified therein and the
signature of each person set forth on such certificate is his or
her genuine signature;
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(d) the articles of incorporation and bylaws of Acquired
Corporation and the Bank referenced in Section 5.8 hereof
remain in full force and effect and have not been amended or
modified since the date hereof; and
(e) the conditions set forth in Article 8 and this
Article 10 have been satisfied insofar as they relate to
Acquired Corporation.
10.4 Opinion of Counsel. Buyer shall have
received an opinion of Igler & Dougherty, P.A.,
counsel to Acquired Corporation, dated as of the Closing, to the
effect that, on the basis of the facts, representations and
assumptions set forth in the opinion, (i) Acquired
Corporation is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware,
with full corporate power and authority to carry on the business
in which it is engaged and that each of the Acquired Corporation
Companies is a corporation duly organized, validly existing and
in good standing under the laws of its state of organization,
with full corporate power and authority to carry on the business
in which it is engaged (ii) the execution and compliance
with the terms of this Agreement do not violate or conflict with
any provision of the Certificate of Incorporation or Bylaws of
Acquired Corporation, (iii) the Agreement has been duly
adopted and approved by the board of directors and stockholders
of Acquired Corporation in accordance with its Certificate of
Incorporation and Bylaws, (iv) the Agreement has been duly
and validly executed by the Acquired Corporation and is
enforceable in accordance with its terms against Buyer, and
(v) the amount of authorized stock of Acquired Corporation
along with the number of shares of stock issued and outstanding
as of December 31, 2006 that the capital stock of Acquired
Corporation issued and outstanding were duly issued and fully
paid and nonassessable, and that, except for the Acquired
Corporation Options described in the Agreement, there are no
options, subscriptions, warrants calls, or other commitments
obligating the Acquired Corporation to issue or acquire any of
its equity securities. Such counsel may rely on representations
and certificates of officers and directors of Acquired
Corporation and certificates of public officials. The opinion of
counsel to Acquired Corporation shall also be subject to
reasonable and customary qualifications.
10.5 Controlling Stockholders. Acquired
Corporation shall use its reasonable best efforts to cause each
director, executive officer and other person who is an
affiliate of Acquired Corporation (for purposes of
Rule 145 under the 1933 Act) to deliver to Buyer as
soon as practicable after the date hereof, but in no event after
the date of the Acquired Corporations Stockholders
Meeting, a written agreement, providing that such person will
not sell, pledge, transfer or otherwise dispose of the shares of
the shares of Buyers Common Stock to be received by such
affiliate upon the Effective Date, except in
compliance with the applicable provisions of the 1933 Act, SEC
Rule 145(d) and other rules and regulations of the SEC as
may be applicable. Acquired Corporation acknowledges that the
certificates of Buyers Common Stock issued to all
affiliates of Acquired Corporation will bear an
appropriate legend reflecting the restrictions on resale
described above, regardless of whether such affiliate has
delivered such written agreement.
10.6 Support for Legal Opinions. There
shall have been furnished to counsel for Buyer delivering the
opinions under Section 8.5 and Section 9.4 certified
copies of such corporate records of Acquired Corporation and
copies of such other documents as such counsel may reasonably
have requested for such purpose.
10.7 Dissenters. The number of shares as
to which shareholders of Acquired Corporation have exercised
dissenters rights of appraisal under Section 3.6 does not
exceed 10% of the outstanding shares of common stock of Acquired
Corporation.
10.8 Material Events. There shall have
been no determination by the board of directors of Buyer that
the transactions contemplated by this Agreement have become
impractical because of any state of war, declaration of a
banking moratorium in the United States or general suspension of
trading on the NASDAQ or any exchange on which Buyers
Common Stock may be traded.
10.9 Fairness Opinion. Buyer shall have
received prior to the date of this Agreement from Sandler
ONeill & Partners, L.P. a letter (acceptable in
form to Buyer) confirming its opinion that the terms of this
Agreement and the Merger are fair to the stockholders of Buyer
from a financial point of view.
10.10 Other Matters. (a) On the
Effective Date, Acquired Corporation shall have used its
reasonable efforts to cause each of the executive officers and
directors of the Acquired Corporation and the Bank to deliver a
letter to Buyer to the effect that such person is not aware of
any claims he or she might have against Buyer other than routine
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compensation, benefits and the like as an employee, or ordinary
rights as a customer, or pursuant to Contracts with any Acquired
Corporation Company.
(b) Buyer shall not be required to make any payment to any
Person in connection with the Merger which in the reasonable
opinion of Buyer will be subject to the excise tax imposed on
excess parachute payments by Code section 4999
and/or for
which Buyer will receive no deduction by virtue of Code
section 280G.
(c) On the Effective Date Acquired Corporation shall have
paid off in full and terminated, without penalty or other cost
or expense to Buyer, Acquired Corporation or any Acquired
Corporation Company the Line of Credit, and all Liens and other
collateral for such Line of Credit, including without limitation
all shares of capital stock of the Bank, shall have been
released in full.
(d) All holders of Acquired Corporation Options shall have
entered into binding agreements to surrender their respective
Acquired Corporation Options in return for the payment for which
provision is made in Section 3.1(b) above.
ARTICLE 11
TERMINATION
OF REPRESENTATIONS AND WARRANTIES
All representations and warranties provided in Articles 4
and 5 of this Agreement or in any closing certificate pursuant
to Articles 9 and 10 shall terminate and be extinguished at
and shall not survive the Effective Date. All covenants,
agreements and undertakings required by this Agreement to be
performed by any Party hereto following the Effective Date shall
survive such Effective Date and be binding upon such Party. If
the Merger is not consummated, all representations, warranties,
obligations, covenants, or agreements hereunder or in any
certificate delivered hereunder relating to the transaction
which is not consummated shall be deemed to be terminated or
extinguished, except that the last sentence of Section 7.4,
and Sections 13.3, 13.4, Article 11, Article 12,
Article 15 and any applicable definitions of
Article 14, shall survive. Items disclosed in the Schedules
to a Disclosure Supplement attached hereto (including any
exhibits to such Schedules) are incorporated into this Agreement
and form a part of the representations, warranties, covenants or
agreements to which they relate.
ARTICLE 12
NOTICES
All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if
delivered by hand, by facsimile transmission, by registered or
certified mail, postage pre-paid, or by courier or overnight
carrier, to the persons at the addresses set forth below (or at
such other address as may be provided hereunder), and shall be
deemed to have been delivered as of the date so received:
(a) If to Acquired Corporation to: Neil D. McCurry, Chief
Executive Officer, Peoples Community Bancshares, Inc., 25
South Links Avenue, Sarasota, Florida 34236, facsimile
(941-365-8413,
with copies to A. George Igler at Igler &
Dougherty, P.A., 2457 Care Drive, Second Floor, Tallahassee,
Florida 32308, facsimile,
(850) 878-1230,
or as may otherwise be specified by Acquired Corporation in
writing to Buyer.
(b) If to Buyer, to Marvin Scott, President, 17 North
20th Street,
Birmingham, AL 35203, facsimile
205-327-3611,
with copies to William H. Caughran, General Counsel, 17 North
20th Street,
Birmingham, AL 35203, facsimile
205-327-3611,
or as may otherwise be specified in writing by Buyer to Acquired
Corporation.
ARTICLE 13
AMENDMENT OR
TERMINATION
13.1 Amendment. This Agreement may be
amended by the mutual consent of Buyer and Acquired Corporation
before or after approval of the transactions contemplated herein
by the stockholders of Acquired Corporation in any manner
permitted by applicable law.
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13.2 Termination. This Agreement may be
terminated at any time prior to or on the Effective Date whether
before or after action thereon by the stockholders of Acquired
Corporation, as follows:
(a) by the mutual consent of the respective boards of
directors of Acquired Corporation and Buyer;
(b) by the board of directors of either Party (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained
in this Agreement) in the event of a material breach by the
other Party of any representation or warranty contained in this
Agreement (determined without regard to any qualifications
regarding materiality which may be contained in such
representation or warranty) which cannot be or has not been
cured within thirty (30) days after the giving of written
notice to the breaching Party of such breach and which breach
would provide the non-breaching Party the ability, to refuse to
consummate the Merger under the standard set forth in
Section 10.1 of this Agreement in the case of Buyer and
Section 9.1 of this Agreement in the case of Acquired
Corporation;
(c) by the board of directors of either Party (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained
in this Agreement) in the event of a material breach by the
other Party of any covenant or agreement contained in this
Agreement which cannot be or has not been cured within thirty
(30) days after the giving of written notice to the
breaching Party of such breach;
(d) by the board of directors of either Party if all
transactions contemplated by this Agreement shall not have been
consummated on or prior to December 31, 2007, if the
failure to consummate the transactions provided for in this
Agreement on or before such date is not caused by any breach of
this Agreement by the Party electing to terminate pursuant to
this Section 13.2(d);
(e) by Acquired Corporation, if its board of directors so
determines by a majority vote of the members of its entire
board, at any time during the five business day period
commencing on the Determination Date, such termination to be
effective on the 30th day following such Determination
Date, if both of the following conditions are satisfied:
(i) the Buyer Stock Price on the Determination Date is less
than $9.56; and
(ii) the number obtained by dividing the Buyer Stock Price
on the Determination Date by the Initial Buyer Stock Price shall
be less than the quotient obtained by dividing the Final NASDAQ
Bank Index Value by the Initial NASDAQ Bank Index Value minus
0.15;
subject, however, to the next three sentences. If Acquired
Corporation elects to exercise its termination right pursuant to
this Section 13.2(e), it shall give prompt written notice
thereof to Buyer. During the five business day period commencing
with its receipt of such notice, Buyer shall have the option of
paying additional consideration for the Merger in the form of
Buyers Common Stock, cash or a combination of Buyers
Common Stock and cash, so that the aggregate consideration paid
by Buyer per share of Acquired Corporation Stock for the Merger
shall be valued at the lesser of (i) the product of 0.85
and the Initial Buyer Stock Price multiplied by the Exchange
Ratio or (ii) the product obtained by multiplying the Index
Ratio by the Initial Buyer Stock Price multiplied by the
Exchange Ratio. If within such five business day period, Buyer
delivers written notice to Acquired Corporation that it intends
to proceed with the Merger by paying such additional
consideration, as contemplated by the previous sentence, then no
termination shall have occurred pursuant to this
Section 13.2(e) and this Agreement shall remain in full
force and effect in accordance with its terms (except that the
consideration for the Merger shall have been so modified).
For purposes of Section 13.2(e), the following terms shall
have the meanings assigned below:
Buyer Stock Price shall mean the average of
the daily closing sales prices of a share of Buyers Common
Stock as reported on the NASDAQ for the ten consecutive trading
days immediately preceding the Determination Date.
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Determination Date shall mean the first date
on which all Orders, Consents and approvals (and waivers, if
applicable) necessary for consummation of the Merger and the
transactions contemplated by this Agreement have been received
as provided in Section 8.2(a) hereof.
Final NASDAQ Bank Index Value shall mean the
average of the NASDAQ Bank Index (Symbol: IXBK, or US:BANK)
values as reported on the NASDAQ for the ten consecutive trading
days immediately preceding the Determination Date.
Initial Buyer Stock Price shall mean $11.25,
adjusted as provided in the last sentence of this
Section 13.2(e).
Initial NASDAQ Bank Index Value shall mean
3386.64, adjusted as provided in the last sentence of this
Section 13.2(e).
Index Ratio shall mean the Final NASDAQ Bank
Index Value divided by the Initial NASDAQ Bank Index Value.
If Buyer or any company the stock of which is used in the NASDAQ
Bank Index declares or effects a stock dividend,
reclassification, recapitalization,
split-up,
combination, exchange of shares or similar transaction between
the date of this Agreement and the Determination Date, the
prices for the stock of such company shall be appropriately
adjusted for purposes of applying this Section 13.2(e).
This Section 13.2(e) shall not apply to the consideration
received by holders of Acquired Corporation Options provided in
Section 3.1(b) hereof.
(f) By Buyer in the event that (i) the Board of
Directors of Acquired Corporation, shall have failed to reaffirm
its approval upon Buyers request for such reaffirmation of
the Merger and the transactions contemplated by this Agreement
(to the exclusion of any other Acquisition Proposal), or shall
have resolved not to reaffirm the Merger, or (ii) the Board
of Directors of Acquired Corporation shall have failed to
include in the Acquired Corporation Proxy Statement its
recommendation, without modification or qualification, that
Acquired Corporation stockholders approve the Merger or shall
have withdrawn, qualified or modified, or proposed publicly to
withdraw, qualify or modify, in a manner adverse to Buyer, the
recommendation of such Board of Directors to Acquired
Corporation stockholders that they approve the Merger, or
(iii) the Board of Directors of Acquired Corporation shall
have affirmed, recommended or authorized entering into any
Acquisition Transaction other than the Merger or, within 10
business days after commencement of any tender or exchange offer
for any shares of Acquired Corporation Stock, the Board of
Directors of Acquired Corporation shall have failed to recommend
against acceptance of such tender or exchange offer by its
stockholders or takes no position with respect to the acceptance
of such tender or exchange offer by its stockholders, or
(iv) the Board of Directors of Acquired Corporation
negotiates or authorizes the conduct of negotiations (and five
business days have elapsed without such negotiations being
discontinued) with a third party (it being understood and agreed
that negotiate shall not be deemed to include the
provision of information to, or the request and receipt of
information from, any Person that submits an Acquisition
Proposal or discussions regarding such information for the sole
purpose of ascertaining the terms of such Acquisition Proposal
and determining whether the board of directors will in fact
engage in, or authorize, negotiations) regarding an Acquisition
Proposal other than the Merger;
(g) By Acquired Corporation (provided that Acquired
Corporation is not then in material breach of any
representation, warranty, covenant, or other agreement contained
in this Agreement), if prior to the adoption of this Agreement
by the affirmative vote of the holders of the requisite number
of the outstanding shares of Acquired Corporation Stock entitled
to vote thereon at the Acquired Corporation Stockholders
Meeting, the Board of Directors of Acquired Corporation has
(i) withdrawn or modified or changed its recommendation or
approval of this Agreement and the shares of Buyer Common Stock
issueable hereunder in a manner adverse to Buyer in order to
approve and permit Acquired Corporation to accept a Superior
Proposal and (ii) determined, after consideration of the
written advice of outside legal counsel to Acquired Corporation,
that the failure to take such action as set forth in the
preceding clause (i) would be reasonably likely to result
in a breach of the Board of Directors fiduciary duties
under applicable Law, provided, however, that (ii) at least
2 business days prior to any such termination, Acquired
Corporation shall, and shall cause its advisors to, negotiate
with Buyer
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to make such adjustments in the terms and conditions of this
Agreement as would enable Acquired Corporation to proceed with
the transactions contemplated herein on such adjusted
terms; or
(h) by Buyer, if the number of shares as to which
stockholders of Acquired Corporation have exercised dissenters
rights of appraisal under Section 3.6 hereof exceeds 10% of
the outstanding shares of Acquired Corporation.
13.3 Damages. In the event of termination
pursuant to Section 13.2, this Agreement shall become void
and have no effect, except as provided in Article 11, and
except that Acquired Corporation and Buyer shall be liable for
damages for any willful breach of warranty, representation,
covenant or other agreement contained in this Agreement.
13.4 Termination Fee. If Buyer terminates
this Agreement pursuant to Section 13.2(f) hereof or if
Acquired Corporation terminates this Agreement pursuant to
Section 13.2(g) of this Agreement, and the transactions
contemplated by a definitive Contract with respect to an
Acquisition Proposal or Acquisition Transaction other than the
Merger have been consummated with respect to Acquired
Corporation, then Acquired Corporation shall pay to Buyer an
amount equal to $3,250,000 (the Termination Fee)
upon the consummation of the transactions contemplated by such
Contract. Acquired Corporation hereby waives any right to
set-off or counterclaim against such amount. The Termination Fee
shall be paid in
same-day
funds at or prior to the date of closing of the transactions
contemplated by of such Contract.
ARTICLE 14
DEFINITIONS
(a) The following terms, which are capitalized in this
Agreement, shall have the meanings set forth below for the
purpose of this Agreement:
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Acquired Corporation |
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Peoples Community Bancshares, Inc., a Florida corporation. |
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Acquired Corporation Company |
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Acquired Corporation, the Bank, any Subsidiary of Acquired
Corporation or the Bank, or any person or entity acquired as a
Subsidiary of Acquired Corporation or the Bank in the future and
owned by Acquired Corporation or the Bank at the Effective Date. |
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Acquired Corporation Options |
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Options respecting the issuance of a maximum of
107,201 shares of Acquired Corporation Stock pursuant to
Acquired Corporations stock option plans or agreements. |
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Acquired Corporation Stock |
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Shares of common stock, par value $.01 per share, of
Acquired Corporation. |
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Acquired Corporation Proxy Statement |
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The proxy statement used by Acquired Corporation to solicit the
approval of its stockholders of the transactions contemplated by
this Agreement, which shall include the prospectus of Buyer
relating to the issuance of the Buyers Common Stock to the
stockholders of Acquired Corporation. |
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Acquisition Proposal |
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Any tender offer or exchange offer or any proposal for a merger,
acquisition of all or substantially all of the stock or assets
of, or other business combination involving Acquired Corporation
or any other Acquired Corporation Company or the acquisition of
a substantial equity interest in, or a substantial portion of
the assets of, Acquired Corporation or any other Acquired
Corporation Company. |
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Acquisition Transaction |
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Any transaction or series of related transactions (other than
the transactions contemplated by this Agreement) involving: |
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(i) any acquisition or purchase from Acquired Corporation
by any Person or Group (other than Buyer or any of its
Affiliates) of 25% or more in interest of the total outstanding
voting securities of Acquired Corporation or any of its
Subsidiaries, or any tender offer or exchange offer that if
consummated would result in any Person or Group (other than
Buyer or any of its affiliates) beneficially owning 25% or more
in interest of the total outstanding voting securities of
Acquired Corporation or any of its Subsidiaries, or any merger,
consolidation, business combination or similar transaction
involving Acquired Corporation pursuant to which the
stockholders of Acquired Corporation immediately preceding such
transaction hold less than 90% of the equity interests in the
surviving or resulting entity (which includes the parent
corporation of any constituent corporation to any such
transaction) of such transaction; (ii) any sale or lease
(other than in the ordinary course of business), or exchange,
transfer, license (other than in the ordinary course of
business), acquisition or disposition of 5% or more of the
assets of Acquired Corporation; or (iii) any liquidation or
dissolution of Acquired Corporation. |
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Agencies |
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Shall mean, collectively, the Federal Trade Commission, the
United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, all state
regulatory agencies having jurisdiction over the Parties and
their respective Subsidiaries, HUD, the VA, the FHA, the GNMA,
the FNMA, the FHLMC, the NASDAQ, and the SEC. |
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Agreement |
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This Agreement and Plan of Merger (including the exhibits
hereto, which are hereby incorporated by reference herein and
made a part hereof, and may be referred to in this Agreement an
any other related instrument or document without being attached
hereto) and the Schedules (including the exhibits thereto) to a
Disclosure Supplement delivered pursuant hereto and incorporated
herein by reference. |
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Assets |
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With respect to any Person shall mean all of the assets,
properties, businesses and rights of such Person of every kind,
nature, character and description, whether real, personal or
mixed, tangible or intangible, accrued or contingent, or
otherwise relating to or utilized in such Persons
business, directly or indirectly, in whole or in part, whether
or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate
of such Person and wherever located. |
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Bank |
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Peoples Community Bank, a Florida state bank. |
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Buyer |
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Superior Bancorp, a Delaware corporation with its principal
offices in Birmingham, Alabama. |
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Buyers Common Stock |
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Buyers Common Stock authorized and defined in the
certificate of incorporation of Buyer, as amended. |
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Buyer SEC Reports |
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The forms, reports and documents filed by Buyer as described in
Section 4.14. |
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Closing |
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The submission of the certificates of officers, legal opinions
and other actions required to be taken in order to consummate
the Merger in accordance with this Agreement. |
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Code |
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The Internal Revenue Code of 1986, as amended, and the
regulations thereunder. |
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Consent |
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Any consent, approval, authorization, clearance, exemption,
waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit. |
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Contract |
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Any written or oral agreement, arrangement, authorization,
commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any
kind or character, or other document to which any Person is a
party or that is binding on any Person or its capital stock,
Assets or business. |
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Default |
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(i) Any breach or violation of or default under any
Contract, Order or Permit, (ii) any occurrence of any event
that with the passage of time or the giving of notice or both
would constitute a breach or violation of or default under any
Contract, Order or Permit, or (iii) any occurrence of any
event that with or without the passage of time or the giving of
notice would give rise to a right to terminate or revoke, change
the current terms of, or renegotiate, or to accelerate,
increase, or impose any Liability under, any Contract Order or
Permit. |
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DGCL |
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The Delaware General Corporation Law, as amended. |
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Disclosure Supplement |
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The disclosure supplement delivered by Acquired Corporation to
Buyer or by Buyer to Acquired Corporation, as the case may be,
concurrently with the execution and delivery of this Agreement.
Each such Disclosure Supplement is hereby incorporated by
reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document
without being attached hereto. |
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Effective Date |
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The date and time at which the Merger becomes effective as
defined in Section 2.7 hereof. |
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Environmental Laws |
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The laws, regulations and governmental requirements referred to
in Section 5.23 hereof. |
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ERISA |
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The Employee Retirement Income Security Act of 1974, as amended. |
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Exchange Ratio |
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2.9036, as provided in Section 3.1(a), and subject to
adjustment as provided in Section 3.1(c). |
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FBCA |
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The Florida Business Corporation Act, as amended. |
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FDIC Act |
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The Federal Deposit Insurance Act, as amended. |
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GAAP |
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Generally accepted accounting principles applicable to banks and
bank holding companies consistently applied during the periods
involved. |
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Knowledge |
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The actual knowledge of the Chief Executive Officer, Chief
Financial Officer, Chief Accounting Officer, Chief Credit
Officer or any Senior or Executive Vice President of Buyer, in
the case of Knowledge of Buyer, or of such executive officers
with comparable responsibility of Acquired Corporation and the
Bank, in the case of knowledge of Acquired Corporation. |
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Law |
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Any code, law, ordinance, regulation, reporting or licensing
requirement, rule, or statute applicable to a Person or its
Assets, Liabilities or |
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business, including, without limitation, those promulgated,
interpreted or enforced by any Agency. |
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Liability |
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Any direct or indirect, primary or secondary, liability,
indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and
defense), deficiency, guaranty or endorsement of or by any
Person (other than endorsements of notes, bills, checks, and
drafts presented for collection or deposit in the ordinary
course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or
otherwise. |
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Lien |
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Any conditional sale agreement, defect of title, easement,
encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest,
title retention or other security arrangement, or any adverse
right or interest, charge, or claim of any nature whatsoever of,
on, or with respect to any property or property interest, other
than (i) Liens for current property Taxes not yet due and
payable, (ii) for depository institution Subsidiaries of a
Party, pledges to secure deposits and other Liens incurred in
the ordinary course of the banking business, (iii) Liens in
the form of easements and restrictive covenants on real property
which do not materially adversely affect the use of such
property by the current owner thereof, and (iv) Liens which
are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party. |
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Line of Credit |
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The line of credit created by the Loan and Stock Pledge
Agreement dated as of November 10, 2006 between Acquired
Corporation and The Bankers Bank in the amount of $7,500,000. |
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Litigation |
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Any action, arbitration, complaint, criminal prosecution,
governmental or other examination or investigation, hearing,
inquiry, administrative or other proceeding relating to or
affecting a Party, its business, its Assets (including Contracts
related to it), or the transactions contemplated by this
Agreement relating to or affecting a Party, its business, its
Assets (including Contracts related to it), or the transactions
contemplated by this Agreement; provided that such term shall
not include regular, periodic examinations of depository
institutions and their affiliates by any Agency). |
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Loan Property |
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Any property owned by the Party in question or by any of its
Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes
the owner or operator of such property, but only with respect to
such property. |
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Loss |
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Any and all direct or indirect payments, obligations,
recoveries, deficiencies, fines, penalties, interest,
assessments, losses, diminution in the value of Assets, damages,
punitive, exemplary or consequential damages (including, but not
limited to, lost income and profits and interruptions of
business), liabilities, costs, expenses (including without
limitation, reasonable attorneys fees and expenses, and
consultants fees and other costs of defense or
investigation), and interest on any amount payable to a third
party as a result of the foregoing. |
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material |
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For purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided
that any specific |
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monetary amount stated in this Agreement shall determine
materiality in that instance. |
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Material Adverse Effect |
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On a Party shall mean an event, change or occurrence which has
a material adverse impact on (i) the financial position,
Assets, business, or results of operations of such Party and its
Subsidiaries, taken as a whole, or (ii) the ability of such
Party to perform its obligations under this Agreement or to
consummate the Merger or the other transactions contemplated by
this Agreement, provided that material adverse
effect shall not be deemed to include the impact of
(w) changes in banking and similar laws of general
applicability or interpretations thereof by courts or
governmental authorities, (x) changes in generally accepted
accounting principles or regulatory accounting principles
generally applicable to banks and their holding companies,
(y) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior written consent of the other
Party in contemplation of the transactions contemplated hereby,
and (z) the Merger and compliance with the provisions of
this Agreement on the operating performance of the Parties. |
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Merger |
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The merger of Acquired Corporation with Buyer as contemplated
in this Agreement. |
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NASDAQ |
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The National Market of the National Association of Securities
Dealers Automated Quotation System. |
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Net Worth |
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For purposes of this Agreement, including Sections 3.1(c),
and 10.2 hereof, the term Net Worth which shall be
calculated and used for determining whether a Material
Adverse Effect has occurred with respect to the results of
operations, cash flows, financial condition or
stockholders equity of the Acquired Corporation, based
upon the Acquired Corporations stockholders equity.
Net Worth shall not be reduced as a result of any expense
incurred or losses realized as a result of this Agreement,
changes in Laws or GAAP, the transactions contemplated hereby or
any actions taken at the request or with the consent of Buyer.
Notwithstanding the generality of the foregoing, Net Worth shall
not be reduced by any of the items in the following
non-exclusive list: (i) the $0.10 per share cash
dividend contemplated by Section 6.2(k) of this Agreement;
(ii) fees paid or costs reimbursed to Hovde Financial or
the Acquired Corporations attorneys or accountants in
connection with the transactions contemplated by this Agreement;
(iii) costs of printing the Acquired Corporations
Proxy Statement; (iv) costs of soliciting proxies for the
Stockholders Meeting ; (v) the marking to
market of any securities; or (vi) costs associated
with terminating employee benefit plans. |
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Order |
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Any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court,
arbitrator, mediator, tribunal, administrative agency or Agency. |
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Party |
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Acquired Corporation or Buyer, and Parties shall
mean both Acquired Corporation and Buyer. |
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Permit |
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Any federal, state, local, and foreign governmental approval,
authorization, certificate, easement filing, franchise, license,
notice, permit, |
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or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its
securities, Assets or business. |
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Person |
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A natural person or any legal, commercial or governmental
entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited
liability company, trust, business association, group acting in
concert, or any person acting in a representative capacity. |
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Registration Statement |
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The registration statement on
Form S-4,
or such other appropriate form, to be filed with the SEC by the
Buyer, and which has been agreed to by Acquired Corporation, to
register the shares of Buyers Common Stock offered to
stockholders of the Acquired Corporation pursuant to this
Agreement, including the Acquired Corporation Proxy Statement. |
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Related Interests |
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As applied to any Person: (i) the Persons spouse,
parent, grandparent, child, grandchild, sibling, aunt, uncle,
niece or nephew (including in-laws and adoptive relationships)
(Family Member), (ii) a partnership of which
the Person or a Family Member is a general or limited partner;
(iii) a corporation of which the Person or a Family Member
owns one (1%) percent or more of the outstanding stock or
otherwise has the power to control the corporation, or
(iv) a trust of which the Person or a Family Member is a
settlor, trustee or beneficiary. |
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Resulting Corporation |
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Buyer, as the surviving corporation resulting from the Merger. |
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SEC |
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United States Securities and Exchange Commission. |
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Stockholders Meeting |
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The special meeting of stockholders of Acquired Corporation
called to approve the transactions contemplated by this
Agreement. |
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Subsidiaries |
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All those corporations, banks, associations, or other entities
of which the entity in question owns or controls 5% or more of
the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 5% or more of the
outstanding equity securities is owned directly or indirectly by
its parent; provided, however, there shall not be included any
such entity acquired through foreclosure or any such entity the
equity securities of which are owned or controlled in a
fiduciary capacity. |
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Superior Proposal |
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Any Acquisition Proposal (on its most recently amended or
modified terms, if amended or modified) (i) involving the
acquisition of the entire equity interest in, or all or
substantially all of the assets and liabilities of, the Acquired
Corporation Companies and (ii) with respect to which the
Board of Directors of Acquired Corporation (A) determines
in good faith that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated on a timely basis, taking
into account all legal, financial, regulatory and other aspects
of the Acquisition Proposal and the Person or Group making the
Acquisition Proposal, and (B) determines in its good faith
judgment (based on, among other things, the advice of its
financial advisors to be more favorable to Acquired
Corporations stockholders than the Merger taking into
account all relevant factors (including whether, in the good
faith judgment of the Board of Directors of Acquired
Corporation, after obtaining the advice of Acquired
Corporations financial |
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advisors the Person or Group making such Acquisition Proposal is
reasonably able to finance the transaction and close it timely,
and any proposed changes to this Agreement that may be proposed
by Buyer in response to such Acquisition Proposal.) |
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Tax or Taxes |
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Any federal, state, county, local, foreign, and other taxes,
assessments, charges, fares, and impositions, including interest
and penalties thereon or with respect thereto. |
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Trust |
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Peoples Community Statutory Trust I |
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1933 Act |
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The Securities Act of 1933, as amended, and the regulations
thereunder. |
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1934 Act |
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The Securities Exchange Act of 1934, as amended, and the
regulations thereunder. |
ARTICLE 15
MISCELLANEOUS
15.1 Expenses. (a) Except as
otherwise provided in this Section 15.1, each of the
Parties shall bear and pay all direct costs and expenses
incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including filing,
registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment
bankers, accountants, and counsel, except that Buyer shall bear
and pay the filing fees payable in connection with the
Registration Statement and the Buyer Proxy Statement and
printing costs incurred in connection with the printing of the
Registration Statement and the Buyer Proxy Statement.
(b) Nothing contained in this Section 15.1 shall
constitute or shall be deemed to constitute liquidated damages
for the willful breach by a Party of the terms of this Agreement
or otherwise limit the rights of the nonbreaching Party.
15.2 Benefit and Assignment. Except as
expressly contemplated hereby, neither this Agreement nor any of
the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Party.
Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by,
the Parties and their respective successors and assigns.
15.3 Governing Law; Venue. Except to the
extent the Laws of the State of Delaware apply to the Merger,
this Agreement shall be governed by, and construed in accordance
with the Laws of the State of Florida without regard to any
conflict of Laws. The parties agree that the exclusive venue for
disputes arising out of this Agreement shall be the courts of
the State of Florida located in Hillsborough County, Florida and
the United States District Court for the Middle District of
Florida.
15.4 Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed to
constitute an original. Each such counterpart shall become
effective when one counterpart has been signed by each Party
thereto.
15.5 Headings. The headings of the
various articles and sections of this Agreement are for
convenience of reference only and shall not be deemed a part of
this Agreement or considered in construing the provisions
thereof.
15.6 Severability. Any term or provision
of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining terms and provisions thereof or
affecting the validity or enforceability of such provision in
any other jurisdiction, and if any term or provision of this
Agreement is held by any court of competent jurisdiction to be
void, voidable, invalid or unenforceable in any given
circumstance or situation, then all other terms and provisions,
being severable, shall remain in full force and effect in such
circumstance or situation and the term or provision shall remain
valid and in effect in any other circumstances or situation.
A-48
15.7 Construction. Use of the masculine
pronoun herein shall be deemed to refer to the feminine and
neuter genders and the use of singular references shall be
deemed to include the plural and vice versa, as appropriate. The
terms include, including and derivatives
thereof shall mean including without limitation by
reason of enumeration or otherwise. No inference in favor of or
against any Party shall be drawn from the fact that such Party
or such Partys counsel has drafted any portion of this
Agreement.
15.8 Confidentiality; Return of
Information. Between the date of this Agreement
and the Effective Date, Buyer and Acquired Company will maintain
in confidence, and will cause the directors, officers,
employees, agents and advisors of Buyer and Acquired Corporation
Companies to maintain in confidence any written, oral or other
information obtained in confidence from another Person or from
an Acquired Company in connection with this Agreement or the
Merger, including any such information obtained prior to the
date of this Agreement, unless (a) such information is
already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available
through no fault of such Party, (b) the use of such
information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the Merger to be
consummated, or (c) the furnishing or use of such
information is required by legal proceedings.
In the event of termination of this Agreement prior to the
Effective Date, each Party shall return to the other, without
retaining copies thereof, all confidential or non-public
documents, work papers and other materials obtained from the
other Party in connection with the transactions contemplated in
this Agreement and shall keep such information confidential, not
disclose such information to any other person or entity, and not
use such information in connection with its business.
15.9 Equitable Remedies. The parties
hereto agree that, in the event of a breach of this Agreement by
either Party, the other Party may be without an adequate remedy
at law owing to the unique nature of the contemplated
transactions. In recognition thereof, in addition to (and not in
lieu of) any remedies at law that may be available to the
nonbreaching Party, the non-breaching Party shall be entitled to
obtain equitable relief, including the remedies of specific
performance and injunction, in the event of a breach of this
Agreement by the other Party, and no attempt on the part of the
non-breaching Party to obtain such equitable relief shall be
deemed to constitute an election of remedies by the
non-breaching Party that would preclude the non-breaching Party
from obtaining any remedies at law to which it would otherwise
be entitled.
15.10 Attorneys Fees. If any Party
hereto shall bring an action at law or in equity to enforce its
rights under this Agreement (including an action based upon a
misrepresentation or the breach of any warranty, covenant,
agreement or obligation contained herein), the prevailing Party
in such action shall be entitled to recover from the other Party
its costs and expenses incurred in connection with such action
(including fees, disbursements and expenses of attorneys and
costs of investigation).
15.11 No Waiver. No failure, delay or
omission of or by any Party in exercising any right, power or
remedy upon any breach or Default of any other Party shall
impair any such rights, powers or remedies of the Party not in
breach or Default, nor shall it be construed to be a wavier of
any such right, power or remedy, or an acquiescence in any
similar breach or Default; nor shall any waiver of any single
breach or Default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any
Party of any provisions of this Agreement must be in writing and
be executed by the Parties to this Agreement and shall be
effective only to the extent specifically set forth in such
writing.
15.12 Remedies Cumulative. All remedies
provided in this Agreement, by law or otherwise, shall be
cumulative and not alternative.
15.13 Entire Contract. This Agreement and
the documents and instruments referred to herein constitute the
entire contract between the parties to this Agreement and
supersede all other understandings with respect to the subject
matter of this Agreement.
A-49
IN WITNESS WHEREOF, Acquired Corporation and Buyer have caused
this Agreement to be signed by their respective duly authorized
officers as of the date first above written.
PEOPLES COMMUNITY BANCSHARES, INC.
ITS: President and Chief Executive Officer
SUPERIOR BANCORP
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By:
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/s/ C.
Stanley Bailey
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ITS: Chairman and Chief Executive Officer
A-50
Exhibit A
Form of Support Agreement
THIS SUPPORT AGREEMENT is made and entered into as of
this the 18th day of January, 2007, by and between
SUPERIOR BANCORP (Buyer), a Delaware
corporation, and the undersigned officer or director (the
Peoples Community Official) of Peoples
Community Bancshares, Inc., a Florida corporation
(Acquired Corporation), or of Peoples
Community Bank of the West Coast, a Florida bank (the
Bank).
WITNESSETH
WHEREAS, Buyer and Acquired Corporation have entered into an
Agreement and Plan of Merger (the Plan of Merger),
pursuant to which the parties thereto agree that Acquired
Corporation will merge (the Merger) with and into
Buyer, and Buyer shall be the surviving entity of the Merger;
NOW, THEREFORE, in consideration of the expenses that Buyer will
incur in connection with the transactions contemplated by the
Plan of Merger, and in order to preserve the value of the
franchise to be purchased by Buyer and induce Buyer to proceed
to incur such expenses, the Peoples Community Official
makes the following agreements in favor of Buyer:
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1.
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Undertakings
of Peoples Community Official
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1.1 The Peoples Community Official agrees and
undertakes, subject to the exercise of his fiduciary duties, to
vote or cause to be voted in favor of the approval of the Plan
of Merger all shares of Acquired Corporation Stock (as defined
in the Plan of Merger), as to which he has voting power (other
than shares held in a fiduciary capacity), which amount of
shares is shown on the schedule attached hereto and made a part
hereof, at any meeting or meetings (including any and all
adjournments thereof) held on or before December 31, 2007.
The parties hereto acknowledge and agree that nothing in this
Section or this Agreement is intended to dictate or require that
the Peoples Community Official vote as a director in any
manner.
1.2 The Peoples Community Official further agrees
that he will not transfer any of the shares of Acquired
Corporation Stock over which he has dispositive power, which
number of shares is shown on the schedule attached hereto and
made a part hereof, until the vote upon the Plan of Merger by
Acquired Corporations stockholders has been taken or until
the Plan of Merger has been terminated pursuant to the
provisions thereof, except (i) for transfers by operation
of law, and (ii) for transfers in connection with which
Buyer has consented to the transfer and the transferee shall
agree in writing with Buyer to be bound by this Agreement as
fully as the undersigned.
1.3 The Peoples Community Official further agrees not
to exercise any Acquired Corporation Options owned by such
individual.
1.4 This Section 1 shall terminate at such time as the
Plan of Merger terminates or on the Effective Date.
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2.
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Agreement
Not to Compete.
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The Peoples Community Official agrees that for a period of
two years following the Effective Date (as defined in the Plan
of Merger), the Peoples Community Official will not serve
as an officer or director, or acquire (other than by gift or
inheritance) 5% or more of the outstanding voting securities, of
any bank or savings and loan association or bank holding
company, or federal or state chartered bank, savings bank,
thrift, homestead association, savings association, savings and
loan association or cooperative bank, that has a business
location within any county in Florida in which the Bank has a
branch or its main office as of the date hereof.
In the event of a Change in Control of Buyer the Peoples
Community Official shall in no event be subject to the
restrictions contained in this Section 2 longer than one
year following the Change in Control. For purposes of this
Agreement, a Change in Control is hereby defined to
be:
(a) a merger, consolidation or other corporate
reorganization of the Buyer in which the Buyer does not survive
or, if it survives, the shareholders of the Buyer before such
transaction do not own more than 50% of,
A-51
respectively: (i) the Common Stock of the surviving entity,
and (ii) the combined voting power of any other outstanding
securities entitled to vote on the election of directors of the
surviving entity;
(b) the acquisition, other than from the Buyer, by any
individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended from time to time (the Exchange
Act) or any successor provision) of beneficial ownership
of 25% or more of either: (i) the then outstanding shares
of Common Stock of the Buyer, or (ii) the combined voting
power of the then outstanding voting securities of the Buyer
entitled to vote generally in the election of directors;
provided, however, that neither of the following shall
constitute a Change in Control:
(A) any acquisition by the Buyer, any of its subsidiaries,
or any employee benefit plan (or related trust) of the Buyer or
its subsidiaries, or
(B) any acquisition by any corporation, entity, or group,
if, following such acquisition, more than 50% of the then
outstanding voting rights of such corporation, entity or group
are owned, directly or indirectly, by all or substantially all
of the persons who were the owners of the Common Stock of the
Buyer immediately prior to such acquisition:
(c) individuals who, as of the effective date of this
Agreement, constitute the Board of Directors of the Buyer (the
Incumbent Buyer Board) cease for any reason to
constitute at least a majority of such Board of Directors (the
Buyer Board), provided that any individual becoming
a director subsequent to such date, whose election, or
nomination for election by the Buyers shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Buyer Board, shall be considered as
though such individual were a member of the Incumbent Buyer
Board, but excluding, for this purpose, any individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the
directors of the Buyer (as such terms are used in
Rule 14a-11
of Regulation 14A promulgated under the Exchange Act or any
successor provision); or
(d) approval by the shareholders of the Buyer of:
(i) a complete liquidation or dissolution of the
Buyer, or
(ii) the sale or other disposition of all or substantially
all the assets of the Buyer, other than to a corporation, with
respect to which immediately following such sale or other
disposition more than 50%, respectively, of the then outstanding
shares of common stock of such corporation, and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors, is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the outstanding
Common Stock of the Buyer, and the outstanding voting securities
of the Buyer immediately prior to such sale or other
disposition, in substantially the same proportions as their
ownership, immediately prior to such sale or disposition, of the
outstanding Common Stock of the Buyer and outstanding securities
of the Buyer, as the case may be.
3.1 The provisions of this Agreement shall be enforceable
through an action for damages at law or a suit for specific
performance or other appropriate extraordinary relief, the
Community Official acknowledging that remedies at law for breach
or default might be or become inadequate.
3.2 The Peoples Community Official acknowledges and
agrees that this Agreement is executed in connection with the
sale of all of the business of Acquired Corporation.
3.3 To the extent permitted under applicable law, any
provision of this Agreement may be amended or modified at any
time, either before or after its approval by an agreement in
writing among the parties hereto.
3.4 This Agreement may be executed in counterparts, each of
which shall be deemed to constitute an original. Each such
counterpart shall become effective when one counterpart has been
signed by each party hereto.
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3.5 This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Florida applicable to
agreements made and entirely to be performed within such State,
except as federal law may be applicable.
3.6 The Peoples Community Official may not assign any
of his rights or obligations under this Agreement to any other
person.
3.7 This Agreement supersedes any and all oral or written
agreements and understandings heretofore made between the
parties hereto relating to the subject matter hereof and
contains the entire agreement of the parties relating to the
subject matter hereof; provided, however, that notwithstanding
the foregoing, this Agreement does not modify or amend any stock
option agreement, employment agreement, option or similar
employee benefit agreement between any Acquired Corporation
Company and the Peoples Community Official. The terms and
conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective
successors, heirs and legatees.
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IN WITNESS WHEREOF, the parties have signed this
Agreement effective as of the date first set forth above.
SUPERIOR BANCORP
By: _
_
Title: _
_
PEOPLES COMMUNITY OFFICIAL
SCHEDULE TO
SUPPORT AGREEMENT
Number of shares of common stock,
$ par value, of Peoples
Community Bancshares, Inc. owned by the Peoples Community
Official: shares.
A-54
ANNEX B
Appraisal
Rights under the Florida Business Corporation Act
607.1301 Appraisal
rights; definitions.
The following definitions apply to
ss. 607.1302-607.1333:
(1) Affiliate means a person that
directly or indirectly through one or more intermediaries
controls, is controlled by, or is under common control with
another person or is a senior executive thereof. For purposes of
s. 607.1302(2)(d), a person is deemed to be an affiliate of its
senior executives.
(2) Beneficial shareholder means a
person who is the beneficial owner of shares held in a voting
trust or by a nominee on the beneficial owners behalf.
(3) Corporation means the issuer of the
shares held by a shareholder demanding appraisal and, for
matters covered in § 607.1322-607.1333, includes the
surviving entity in a merger.
(4) Fair value means the value of the
corporations shares determined:
(a) Immediately before the effectuation of the corporate
action to which the shareholder objects.
(b) Using customary and current valuation concepts and
techniques generally employed for similar businesses in the
context of the transaction requiring appraisal, excluding any
appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable to the corporation
and its remaining shareholders.
(c) For a corporation with 10 or fewer shareholders,
without discounting for lack of marketability or minority status.
(5) Interest means interest from the
effective date of the corporate action until the date of
payment, at the rate of interest on judgments in this state on
the effective date of the corporate action.
(6) Preferred shares means a class or
series of shares the holders of which have preference over any
other class or series with respect to distributions.
(7) Record shareholder means the person
in whose name shares are registered in the records of the
corporation or the beneficial owner of shares to the extent of
the rights granted by a nominee certificate on file with the
corporation.
(8) Senior executive means the chief
executive officer, chief operating officer, chief financial
officer, or anyone in charge of a principal business unit or
function.
(9) Shareholder means both a record
shareholder and a beneficial shareholder.
607.1302 Right
of shareholders to appraisal.
(1) A shareholder of a domestic corporation is entitled to
appraisal rights, and to obtain payment of the fair value of
that shareholders shares, in the event of any of the
following corporate actions:
(a) Consummation of a conversion of such corporation
pursuant to s. 607.1112 if shareholder approval is required for
the conversion and the shareholder is entitled to vote on the
conversion under § 607.1103 and 607.1112(6), or the
consummation of a merger to which such corporation is a party if
shareholder approval is required for the merger under s.
607.1103 and the shareholder is entitled to vote on the merger
or if such corporation is a subsidiary and the merger is
governed by s. 607.1104;
(b) Consummation of a share exchange to which the
corporation is a party as the corporation whose shares will be
acquired if the shareholder is entitled to vote on the exchange,
except that appraisal rights shall not be available to any
shareholder of the corporation with respect to any class or
series of shares of the corporation that is not exchanged;
B-1
(c) Consummation of a disposition of assets pursuant to s.
607.1202 if the shareholder is entitled to vote on the
disposition, including a sale in dissolution but not including a
sale pursuant to court order or a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds of
the sale will be distributed to the shareholders within
1 year after the date of sale;
(d) An amendment of the articles of incorporation with
respect to the class or series of shares which reduces the
number of shares of a class or series owned by the shareholder
to a fraction of a share if the corporation has the obligation
or right to repurchase the fractional share so created;
(e) Any other amendment to the articles of incorporation,
merger, share exchange, or disposition of assets to the extent
provided by the articles of incorporation, bylaws, or a
resolution of the board of directors, except that no bylaw or
board resolution providing for appraisal rights may be amended
or otherwise altered except by shareholder approval; or
(f) With regard to a class of shares prescribed in the
articles of incorporation prior to October 1, 2003,
including any shares within that class subsequently authorized
by amendment, any amendment of the articles of incorporation if
the shareholder is entitled to vote on the amendment and if such
amendment would adversely affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to
any of his or her shares;
2. Altering or abolishing the voting rights pertaining to
any of his or her shares, except as such rights may be affected
by the voting rights of new shares then being authorized of any
existing or new class or series of shares;
3. Effecting an exchange, cancellation, or reclassification
of any of his or her shares, when such exchange, cancellation,
or reclassification would alter or abolish the
shareholders voting rights or alter his or her percentage
of equity in the corporation, or effecting a reduction or
cancellation of accrued dividends or other arrearages in respect
to such shares;
4. Reducing the stated redemption price of any of the
shareholders redeemable shares, altering or abolishing any
provision relating to any sinking fund for the redemption or
purchase of any of his or her shares, or making any of his or
her shares subject to redemption when they are not otherwise
redeemable;
5. Making noncumulative, in whole or in part, dividends of
any of the shareholders preferred shares which had
theretofore been cumulative;
6. Reducing the stated dividend preference of any of the
shareholders preferred shares; or
7. Reducing any stated preferential amount payable on any
of the shareholders preferred shares upon voluntary or
involuntary liquidation.
(2) Notwithstanding subsection (1), the availability
of appraisal rights under paragraphs (1)(a), (b), (c), and
(d) shall be limited in accordance with the following
provisions:
(a) Appraisal rights shall not be available for the holders
of shares of any class or series of shares which is:
1. Listed on the New York Stock Exchange or the American
Stock Exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc.; or
2. Not so listed or designated, but has at least
2,000 shareholders and the outstanding shares of such class
or series have a market value of at least $10 million,
exclusive of the value of such shares held by its subsidiaries,
senior executives, directors, and beneficial shareholders owning
more than 10 percent of such shares.
(b) The applicability of paragraph (a) shall be
determined as of:
1. The record date fixed to determine the shareholders
entitled to receive notice of, and to vote at, the meeting of
shareholders to act upon the corporate action requiring
appraisal rights; or
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2. If there will be no meeting of shareholders, the close
of business on the day on which the board of directors adopts
the resolution recommending such corporate action.
(c) Paragraph (a) shall not be applicable and
appraisal rights shall be available pursuant to
subsection (1) for the holders of any class or series
of shares who are required by the terms of the corporate action
requiring appraisal rights to accept for such shares anything
other than cash or shares of any class or any series of shares
of any corporation, or any other proprietary interest of any
other entity, that satisfies the standards set forth in
paragraph (a) at the time the corporate action becomes
effective.
(d) Paragraph (a) shall not be applicable and
appraisal rights shall be available pursuant to
subsection (1) for the holders of any class or series
of shares if:
1. Any of the shares or assets of the corporation are being
acquired or converted, whether by merger, share exchange, or
otherwise, pursuant to the corporate action by a person, or by
an affiliate of a person, who:
a. Is, or at any time in the
1-year
period immediately preceding approval by the board of directors
of the corporate action requiring appraisal rights was, the
beneficial owner of 20 percent or more of the voting power
of the corporation, excluding any shares acquired pursuant to an
offer for all shares having voting power if such offer was made
within 1 year prior to the corporate action requiring
appraisal rights for consideration of the same kind and of a
value equal to or less than that paid in connection with the
corporate action; or
b. Directly or indirectly has, or at any time in the
1-year
period immediately preceding approval by the board of directors
of the corporation of the corporate action requiring appraisal
rights had, the power, contractually or otherwise, to cause the
appointment or election of 25 percent or more of the
directors to the board of directors of the corporation; or
2. Any of the shares or assets of the corporation are being
acquired or converted, whether by merger, share exchange, or
otherwise, pursuant to such corporate action by a person, or by
an affiliate of a person, who is, or at any time in the
1-year
period immediately preceding approval by the board of directors
of the corporate action requiring appraisal rights was, a senior
executive or director of the corporation or a senior executive
of any affiliate thereof, and that senior executive or director
will receive, as a result of the corporate action, a financial
benefit not generally available to other shareholders as such,
other than:
a. Employment, consulting, retirement, or similar benefits
established separately and not as part of or in contemplation of
the corporate action;
b. Employment, consulting, retirement, or similar benefits
established in contemplation of, or as part of, the corporate
action that are not more favorable than those existing before
the corporate action or, if more favorable, that have been
approved on behalf of the corporation in the same manner as is
provided in s. 607.0832; or
c. In the case of a director of the corporation who will,
in the corporate action, become a director of the acquiring
entity in the corporate action or one of its affiliates, rights
and benefits as a director that are provided on the same basis
as those afforded by the acquiring entity generally to other
directors of such entity or such affiliate.
(e) For the purposes of paragraph (d) only, the
term beneficial owner means any person who, directly
or indirectly, through any contract, arrangement, or
understanding, other than a revocable proxy, has or shares the
power to vote, or to direct the voting of, shares, provided that
a member of a national securities exchange shall not be deemed
to be a beneficial owner of securities held directly or
indirectly by it on behalf of another person solely because such
member is the recordholder of such securities if the member is
precluded by the rules of such exchange from voting without
instruction on contested matters or matters that may affect
substantially the rights or privileges of the holders of the
securities to be voted. When two or more persons agree to act
together for the purpose of voting their shares of the
corporation, each member of the group formed thereby shall be
deemed to have acquired beneficial ownership, as of the date of
such agreement, of all voting shares of the corporation
beneficially owned by any member of the group.
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(3) Notwithstanding any other provision of this section,
the articles of incorporation as originally filed or any
amendment thereto may limit or eliminate appraisal rights for
any class or series of preferred shares, but any such limitation
or elimination contained in an amendment to the articles of
incorporation that limits or eliminates appraisal rights for any
of such shares that are outstanding immediately prior to the
effective date of such amendment or that the corporation is or
may be required to issue or sell thereafter pursuant to any
conversion, exchange, or other right existing immediately before
the effective date of such amendment shall not apply to any
corporate action that becomes effective within 1 year of
that date if such action would otherwise afford appraisal rights.
(4) A shareholder entitled to appraisal rights under this
chapter may not challenge a completed corporate action for which
appraisal rights are available unless such corporate action:
(a) Was not effectuated in accordance with the applicable
provisions of this section or the corporations articles of
incorporation, bylaws, or board of directors resolution
authorizing the corporate action; or
(b) Was procured as a result of fraud or material
misrepresentation.
607.1303 Assertion
of rights by nominees and beneficial owners.
(1) A record shareholder may assert appraisal rights as to
fewer than all the shares registered in the record
shareholders name but owned by a beneficial shareholder
only if the record shareholder objects with respect to all
shares of the class or series owned by the beneficial
shareholder and notifies the corporation in writing of the name
and address of each beneficial shareholder on whose behalf
appraisal rights are being asserted. The rights of a record
shareholder who asserts appraisal rights for only part of the
shares held of record in the record shareholders name
under this subsection shall be determined as if the shares as to
which the record shareholder objects and the record
shareholders other shares were registered in the names of
different record shareholders.
(2) A beneficial shareholder may assert appraisal rights as
to shares of any class or series held on behalf of the
shareholder only if such shareholder:
(a) Submits to the corporation the record
shareholders written consent to the assertion of such
rights no later than the date referred to in s. 607.1322(2)(b)2.
(b) Does so with respect to all shares of the class or
series that are beneficially owned by the beneficial shareholder.
607.1320 Notice
of appraisal rights.
(1) If proposed corporate action described in s.
607.1302(1) is to be submitted to a vote at a shareholders
meeting, the meeting notice must state that the corporation has
concluded that shareholders are, are not, or may be entitled to
assert appraisal rights under this chapter. If the corporation
concludes that appraisal rights are or may be available, a copy
of ss. 607.1301-607.1333 must accompany the meeting notice sent
to those record shareholders entitled to exercise appraisal
rights.
(2) In a merger pursuant to s. 607.1104, the parent
corporation must notify in writing all record shareholders of
the subsidiary who are entitled to assert appraisal rights that
the corporate action became effective. Such notice must be sent
within 10 days after the corporate action became effective
and include the materials described in s. 607.1322.
(3) If the proposed corporate action described in s.
607.1302(1) is to be approved other than by a shareholders
meeting, the notice referred to in subsection (1) must
be sent to all shareholders at the time that consents are first
solicited pursuant to s. 607.0704, whether or not consents are
solicited from all shareholders, and include the materials
described in s. 607.1322.
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607.1321 Notice
of intent to demand payment.
(1) If proposed corporate action requiring appraisal rights
under s. 607.1302 is submitted to a vote at a shareholders
meeting, or is submitted to a shareholder pursuant to a consent
vote under s. 607.0704, a shareholder who wishes to assert
appraisal rights with respect to any class or series of shares:
(a) Must deliver to the corporation before the vote is
taken, or within 20 days after receiving the notice
pursuant to s. 607.1320(3) if action is to be taken without a
shareholder meeting, written notice of the shareholders
intent to demand payment if the proposed action is effectuated.
(b) Must not vote, or cause or permit to be voted, any
shares of such class or series in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of
subsection (1) is not entitled to payment under this
chapter.
607.1322 Appraisal
notice and form.
(1) If proposed corporate action requiring appraisal rights
under s. 607.1302(1) becomes effective, the corporation must
deliver a written appraisal notice and form required by
paragraph (2)(a) to all shareholders who satisfied the
requirements of s. 607.1321. In the case of a merger under s.
607.1104, the parent must deliver a written appraisal notice and
form to all record shareholders who may be entitled to assert
appraisal rights.
(2) The appraisal notice must be sent no earlier than the
date the corporate action became effective and no later than
10 days after such date and must:
(a) Supply a form that specifies the date that the
corporate action became effective and that provides for the
shareholder to state:
1. The shareholders name and address.
2. The number, classes, and series of shares as to which
the shareholder asserts appraisal rights.
3. That the shareholder did not vote for the transaction.
4. Whether the shareholder accepts the corporations
offer as stated in subparagraph (b)4.
5. If the offer is not accepted, the shareholders
estimated fair value of the shares and a demand for payment of
the shareholders estimated value plus interest.
(b) State:
1. Where the form must be sent and where certificates for
certificated shares must be deposited and the date by which
those certificates must be deposited, which date may not be
earlier than the date for receiving the required form under
subparagraph 2.
2. A date by which the corporation must receive the form,
which date may not be fewer than 40 nor more than 60 days
after the date the subsection (1) appraisal notice and
form are sent, and state that the shareholder shall have waived
the right to demand appraisal with respect to the shares unless
the form is received by the corporation by such specified date.
3. The corporations estimate of the fair value of the
shares.
4. An offer to each shareholder who is entitled to
appraisal rights to pay the corporations estimate of fair
value set forth in subparagraph 3.
5. That, if requested in writing, the corporation will
provide to the shareholder so requesting, within 10 days
after the date specified in subparagraph 2., the number of
shareholders who return the forms by the specified date and the
total number of shares owned by them.
6. The date by which the notice to withdraw under s.
607.1323 must be received, which date must be within
20 days after the date specified in subparagraph 2.
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(c) Be accompanied by:
1. Financial statements of the corporation that issued the
shares to be appraised, consisting of a balance sheet as of the
end of the fiscal year ending not more than 15 months prior
to the date of the corporations appraisal notice, an
income statement for that year, a cash flow statement for that
year, and the latest available interim financial statements, if
any.
2. A copy of § 607.1301-607.1333.
607.1323 Perfection
of rights; right to withdraw.
(1) A shareholder who wishes to exercise appraisal rights
must execute and return the form received pursuant to s.
607.1322(1) and, in the case of certificated shares, deposit the
shareholders certificates in accordance with the terms of
the notice by the date referred to in the notice pursuant to s.
607.1322(2)(b)2. Once a shareholder deposits that
shareholders certificates or, in the case of
uncertificated shares, returns the executed forms, that
shareholder loses all rights as a shareholder, unless the
shareholder withdraws pursuant to subsection (2).
(2) A shareholder who has complied with
subsection (1) may nevertheless decline to exercise
appraisal rights and withdraw from the appraisal process by so
notifying the corporation in writing by the date set forth in
the appraisal notice pursuant to s. 607.1322(2)(b)6. A
shareholder who fails to so withdraw from the appraisal process
may not thereafter withdraw without the corporations
written consent.
(3) A shareholder who does not execute and return the form
and, in the case of certificated shares, deposit that
shareholders share certificates if required, each by the
date set forth in the notice described in subsection (2),
shall not be entitled to payment under this chapter.
607.1324 Shareholders
acceptance of corporations offer.
(1) If the shareholder states on the form provided in s.
607.1322(1) that the shareholder accepts the offer of the
corporation to pay the corporations estimated fair value
for the shares, the corporation shall make such payment to the
shareholder within 90 days after the corporations
receipt of the form from the shareholder.
(2) Upon payment of the agreed value, the shareholder shall
cease to have any interest in the shares.
607.1326 Procedure
if shareholder is dissatisfied with offer.
(1) A shareholder who is dissatisfied with the
corporations offer as set forth pursuant to s.
607.1322(2)(b)4. must notify the corporation on the form
provided pursuant to s. 607.1322(1) of that shareholders
estimate of the fair value of the shares and demand payment of
that estimate plus interest.
(2) A shareholder who fails to notify the corporation in
writing of that shareholders demand to be paid the
shareholders stated estimate of the fair value plus
interest under subsection (1) within the timeframe set
forth in s. 607.1322(2)(b)2. waives the right to demand payment
under this section and shall be entitled only to the payment
offered by the corporation pursuant to s. 607.1322(2)(b)4.
607.1330 Court
action.
(1) If a shareholder makes demand for payment under s.
607.1326 which remains unsettled, the corporation shall commence
a proceeding within 60 days after receiving the payment
demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not
commence the proceeding within the
60-day
period, any shareholder who has made a demand pursuant to s.
607.1326 may commence the proceeding in the name of the
corporation.
(2) The proceeding shall be commenced in the appropriate
court of the county in which the corporations principal
office, or, if none, its registered office, in this state is
located. If the corporation is a foreign corporation without a
registered office in this state, the proceeding shall be
commenced in the county in this state in which the principal
office or registered office of the domestic corporation merged
with the foreign corporation was located at the time of the
transaction.
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(3) All shareholders, whether or not residents of this
state, whose demands remain unsettled shall be made parties to
the proceeding as in an action against their shares. The
corporation shall serve a copy of the initial pleading in such
proceeding upon each shareholder party who is a resident of this
state in the manner provided by law for the service of a summons
and complaint and upon each nonresident shareholder party by
registered or certified mail or by publication as provided by
law.
(4) The jurisdiction of the court in which the proceeding
is commenced under subsection (2) is plenary and
exclusive. If it so elects, the court may appoint one or more
persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers shall
have the powers described in the order appointing them or in any
amendment to the order. The shareholders demanding appraisal
rights are entitled to the same discovery rights as parties in
other civil proceedings. There shall be no right to a jury trial.
(5) Each shareholder made a party to the proceeding is
entitled to judgment for the amount of the fair value of such
shareholders shares, plus interest, as found by the court.
(6) The corporation shall pay each such shareholder the
amount found to be due within 10 days after final
determination of the proceedings. Upon payment of the judgment,
the shareholder shall cease to have any interest in the shares.
607.1331 Court
costs and counsel fees.
(1) The court in an appraisal proceeding shall determine
all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court.
The court shall assess the costs against the corporation, except
that the court may assess costs against all or some of the
shareholders demanding appraisal, in amounts the court finds
equitable, to the extent the court finds such shareholders acted
arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this chapter.
(2) The court in an appraisal proceeding may also assess
the fees and expenses of counsel and experts for the respective
parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all
shareholders demanding appraisal if the court finds the
corporation did not substantially comply with
§ 607.1320 and 607.1322; or
(b) Against either the corporation or a shareholder
demanding appraisal, in favor of any other party, if the court
finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this chapter.
(3) If the court in an appraisal proceeding finds that the
services of counsel for any shareholder were of substantial
benefit to other shareholders similarly situated, and that the
fees for those services should not be assessed against the
corporation, the court may award to such counsel reasonable fees
to be paid out of the amounts awarded the shareholders who were
benefited.
(4) To the extent the corporation fails to make a required
payment pursuant to s. 607.1324, the shareholder may sue
directly for the amount owed and, to the extent successful,
shall be entitled to recover from the corporation all costs and
expenses of the suit, including counsel fees.
607.1332 Disposition
of acquired shares.
Shares acquired by a corporation pursuant to payment of the
agreed value thereof or pursuant to payment of the judgment
entered therefor, as provided in this chapter, may be held and
disposed of by such corporation as authorized but unissued
shares of the corporation, except that, in the case of a merger
or share exchange, they may be held and disposed of as the plan
of merger or share exchange otherwise provides. The shares of
the surviving corporation into which the shares of such
shareholders demanding appraisal rights would have been
converted had they assented to the merger shall have the status
of authorized but unissued shares of the surviving corporation.
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607.1333 Limitation
on corporate payment.
(1) No payment shall be made to a shareholder seeking
appraisal rights if, at the time of payment, the corporation is
unable to meet the distribution standards of s. 607.06401. In
such event, the shareholder shall, at the shareholders
option:
(a) Withdraw his or her notice of intent to assert
appraisal rights, which shall in such event be deemed withdrawn
with the consent of the corporation; or
(b) Retain his or her status as a claimant against the
corporation and, if it is liquidated, be subordinated to the
rights of creditors of the corporation, but have rights superior
to the shareholders not asserting appraisal rights, and if it is
not liquidated, retain his or her right to be paid for the
shares, which right the corporation shall be obliged to satisfy
when the restrictions of this section do not apply.
(2) The shareholder shall exercise the option under
paragraph (1)(a) or paragraph (b) by written
notice filed with the corporation within 30 days after the
corporation has given written notice that the payment for shares
cannot be made because of the restrictions of this section. If
the shareholder fails to exercise the option, the shareholder
shall be deemed to have withdrawn his or her notice of intent to
assert appraisal rights.
B-8
ANNEX C
Opinion
of Hovde Financial, Inc.
January 18,
2007
Board of Directors
Peoples Community Bancshares, Inc.
25 South Links Avenue
Sarasota, FL 34236
Dear Members of the Board:
We understand that Peoples Community Bancshares, Inc.
(the Company), a Florida corporation, and Peoples
Community Bank of the West Coast (the Bank), a
Florida banking association, and Superior Bancorp
(SUPR), a Delaware corporation and a thrift holding
company with a subsidiary federal savings bank in Alabama and
Florida, are about to enter into an Agreement and Plan of
Merger, to-be-dated on or about January 18, 2006 (the
Agreement), pursuant to which the Company
will merge with and into SUPR (the Merger).
This Agreement also provides for the acquisition of the Bank by
Superior Bank, SUPRs federal savings bank subsidiary (the
Bank Merger). Capitalized terms not otherwise
defined herein shall have the same meaning attributed to them in
the Agreement. Subject to the potential adjustment provided for
in Section 3.1(c) and 3.4 of the Agreement, on the
Effective Date, each share of common stock of the Company
outstanding and held of record by the Companys
stockholders, but excluding shares held by the Company or any of
its Subsidiaries, other than in a fiduciary capacity or as a
result of debts previously contracted, and excluding shares held
by stockholders who perfect their dissenters rights of
appraisal as provided in Section 3.6 of this Agreement (the
Company Stock), shall be converted by operation of
law and without any action by any holder thereof into and
exchanged for the right to receive 2.9036 shares of
SUPRs Common Stock (the Exchange Ratio). Also,
on the Effective Date, all outstanding Company Options shall be
cancelled and each holder of such options shall be entitled to
receive in exchange therefor the right to receive cash equal to
the amount resulting when the number of Company Options, as the
case may be, held by a holder thereof is multiplied by the Per
Unit Value. As used herein, the term Per Unit Value
shall mean (i) $32.67 less (ii) the exercise price for
each share of Company Stock subject to such option.
Hovde Financial (Hovde), as part of its investment
banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bidding,
secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and
other purposes. We are familiar with the Company, having acted
as its financial advisor in connection with, and having
participated in the negotiations leading to, the Agreement.
We were retained by the Company to act as its financial advisor
in connection with the Merger. We will receive compensation from
the Company in connection with our services, a significant
portion of which is contingent upon consummation of the Merger.
The Company has agreed to indemnify us for certain liabilities
arising out of our engagement.
During the course of our engagement and for the purposes of the
opinion set forth herein, we have:
(i) reviewed the Agreement and all attachments thereto;
(ii) reviewed certain historical publicly available
business and financial information concerning the Bank and SUPR;
(iii) reviewed certain internal financial statements and
other financial and operating data concerning the Company;
(iv) analyzed certain financial projections prepared by the
management of the Company and SUPR;
(v) held discussions with members of the senior management
of the Company and SUPR for the purpose of reviewing the future
prospects of the Company and SUPR, including financial forecasts;
(vi) reviewed historical market prices and trading volumes
for SUPR Common Stock;
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(vii) reviewed the terms of recent merger and acquisition
transactions, to the extent publicly available, involving banks,
thrifts and bank and thrift holding companies that we considered
relevant;
(viii) evaluated the pro forma ownership of SUPR Common
Stock by the Companys shareholders relative to the pro
forma contribution of the Companys assets, liabilities,
equity and earnings to the combined company;
(ix) performed such other analyses and considered such
other factors as we have deemed appropriate.
We also took into account our assessment of general economic,
market and financial conditions and our experience in other
transactions as well as our knowledge of the banking industry
and our general experience in securities valuations.
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and
other information and representations contained in the materials
provided to us by the Company and SUPR and in the discussions
with the managements of the Company and SUPR. In that regard, we
have assumed that the financial forecasts, including, without
limitation, the projections regarding under-performing and
nonperforming assets and net charge-offs have been reasonably
prepared on a basis reflecting the best currently available
information and judgments and estimates of the Company and SUPR
and that such forecasts will be realized in the amounts and at
the times contemplated thereby. We are not experts in the
evaluation of loan and lease portfolios for purposes of
assessing the adequacy of the allowances for losses with respect
thereto and have assumed that such allowances for the Company
and SUPR are in the aggregate adequate to cover such losses. We
were not retained to and did not conduct a physical inspection
of any of the properties or facilities of the Company, SUPR or
their respective subsidiaries. In addition, we have not reviewed
individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities of the
Company, SUPR or any of their respective subsidiaries and we
were not furnished with any such evaluations or appraisals.
We have assumed that the Merger will be consummated
substantially in accordance with the terms set forth in the
Agreement. We have further assumed that the Merger will be
accounted for as a purchase under generally accepted accounting
principles. We have assumed that the Merger is, and will be, in
compliance with all laws and regulations that are applicable to
the Company, SUPR and its subsidiaries. In rendering this
opinion, SUPR and we have assumed that there are no factors that
would impede any necessary regulatory or governmental approval
of the Merger and we have further assumed that, in the course of
obtaining the necessary regulatory and governmental approvals,
no restriction will be imposed on SUPR or the surviving
corporations that would have a material adverse effect on the
surviving corporation or the contemplated benefits of the
Merger. We have also assumed that no change in applicable law or
regulation would occur that would cause a material adverse
change in the prospects or operations of SUPR or any of the
surviving corporations after the Merger.
Our opinion is based solely upon the information available to us
and the economic, market and other circumstances, as they exist
as of the date hereof. Events occurring and information that
becomes available after the date hereof could materially affect
the assumptions and analyses used in preparing this opinion. We
have not undertaken to reaffirm or revise this opinion or
otherwise comment upon any events occurring or information that
becomes available after the date hereof, except as otherwise
agreed in our engagement letter.
We are not expressing any opinion herein as to the prices at
which shares of SUPR Common Stock issued in the Merger may trade
if and when they are issued or at any future time, nor does our
opinion constitute a recommendation to any holder of a the
Company common stock as to how such holder should vote with
respect to the Agreement at any meeting of holders of the
Company common stock.
This letter is solely for the information of the Board of
Directors of the Company and is not to be used, circulated,
quoted or otherwise referred to for any other purpose, nor is it
to be filed with, included in or referred to in whole or in part
in any registration statement, proxy statement or any other
document, except in each case in accordance with our prior
written consent which shall not be unreasonably withheld;
provided, however, that we hereby consent to the inclusion and
reference to this letter in any registration statement, proxy
statement, information statement or tender offer document to be
delivered to the holders of the Companys common stock in
connection with the Merger if and only if this letter is quoted
in full or attached as an exhibit to such document and this
letter has not been withdrawn prior to the date of such document.
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Subject to the foregoing and based on our experience as
investment bankers, our activities and assumptions as described
above, and other factors we have deemed relevant, we are of the
opinion as of the date hereof that the consideration to be
received by the holders of the Companys common stock
pursuant to the Agreement is fair, from a financial point of
view, to the shareholders of the Company.
Sincerely,
/s/ Hovde Financial
HOVDE FINANCIAL
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PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification
of directors and officers.
Superior
Bancorp
Section 102(b)(7) of Delaware General Corporation Law
grants corporations the right to limit or eliminate the personal
liability of their directors in certain circumstances in
accordance with provisions therein set forth. Superior
Bancorps restated certificate of incorporation contains a
provision eliminating or limiting director liability to Superior
Bancorp and its stockholders for monetary damages arising from
acts or omissions in the directors capacity as a director.
The provision does not, however, eliminate or limit the personal
liability of a director
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for any breach of such directors duty of loyalty to
Superior Bancorp or its stockholders.
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for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law.
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under the Delaware statutory provision making directors
personally liable, under a negligence standard, for unlawful
dividends or unlawful stock purchases or redemptions.
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for any transaction from which the director derived an improper
personal benefit. This provision offers persons who serve on the
board of directors of Superior Bancorp protection against awards
of monetary damages resulting from breaches of their duty of
care (except as indicated above). As a result of this provision,
the ability of Superior Bancorp or a stockholder thereof to
successfully prosecute an action against a director for a breach
of his duty of care is limited. However, the provision does not
affect the availability of equitable remedies such as an
injunction or rescission based upon a directors breach of
his duty of care. The SEC has taken the position that the
provision will have no effect on claims arising under the
federal securities laws.
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Section 145 of the Delaware General Corporation Law grants
corporations the right to indemnify their directors, officers,
employees and agents in accordance with the provisions therein
set forth. Superior Bancorps bylaws provide for mandatory
indemnification rights, subject to limited exceptions, to any
director, officer, employee, or agent of Superior Bancorp who,
by reason of the fact that he or she is a director, officer,
employee, or agent of Superior Bancorp, is involved in a legal
proceeding of any nature. Such indemnification rights include
reimbursement for expenses incurred by such director, officer,
employee, or agent in advance of the final disposition of such
proceeding in accordance with the applicable provisions of
Delaware law.
Superior Bancorp has entered into agreements with all of its
directors and its executive officers pursuant to which Superior
Bancorp has agreed to indemnify such directors and executive
officers against liability incurred by them by reason of their
services of a director to the fullest extent allowable under
applicable law.
See Item 22 of this Registration Statement on
Form S-4.
Exhibits:
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(2)-1
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Agreement and Plan of Merger
between Peoples Community Bancshares, Inc. and Superior
Bancorp, dated January 18, 2007, filed as Exhibit 10
to Superior Bancorps Current Report on
Form 8-K
dated January 18, 2007, is hereby incorporated herein by
reference.
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(3)-1
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Composite Certificate of
Incorporation filed as Exhibit 3 to Superior Bancorps
Current Report on
Form 8-K
dated May 16, 2007, is hereby incorporated herein by
reference.
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(3)-2
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Bylaws of Superior Bancorp filed
as Exhibit 3 to Superior Bancorps Current Report on Form
8-K dated October 1, 2006 is hereby incorporated herein by
reference.
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(5)
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Opinion of Haskell Slaughter
Young & Rediker, LLC.
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(8)
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Form of Tax Opinion of Haskell
Slaughter Young & Rediker, LLC.
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(10)-1
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Agreement dated January 18,
2007 between Superior Bank and Neil McCurry, Jr.
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II-1
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(10)-2
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Agreement dated January 18,
2007 between Superior Bank and Rick Halloran.
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(10)-3
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Agreement dated January 18,
2007 between Superior Bank and Dorothy S. Barth.
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(10)-4
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Agreement dated January 18,
2007 between Superior Bank and Christopher Pennewill.
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(23)-1
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Consent of Carr, Riggs &
Ingram, LLC.
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(23)-2
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Consent of Hacker,
Johnson & Smith, P.A.
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99-(1)
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Consent of Hovde Financial, Inc.
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99-(2)
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Form of Proxy of Peoples
Community Bancshares, Inc.
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(a) The undersigned registrant hereby undertakes to file,
during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(1) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(2) 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 Securities and Exchange 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; and
(3) 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.
(b) The undersigned registrant hereby undertakes 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.
(c) The undersigned registrant hereby undertakes 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.
(d) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrants annual report
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plans annual report pursuant to
Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement 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.
(e) The undersigned registrant undertakes as follows:
(1) that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) that every prospectus (i) that is filed pursuant
to paragraph (1) immediately preceding, or
(ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment
is effective, and that, for purposes of determining any
II-2
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.
(f) 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 Securities Act of 1933 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 Securities Act of 1933
and will be governed by the final adjudication of such issue.
(g) The undersigned registrant hereby undertakes to respond
to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of
this form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the
registration statement through the date of responding to the
request.
(h) The undersigned registrant hereby undertakes to supply
by means of a post-effective amendment all information
concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized in the City of Birmingham, Alabama, on May 25,
2007.
SUPERIOR BANCORP
C. Stanley Bailey
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ C.
Stanley Bailey
C.
Stanley Bailey
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Chief Executive Officer
(Principal Executive Officer) and
Chairman of the Board
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May 25, 2007
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/s/ Mark
A. Tarnakow
Mark
A. Tarnakow
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Chief Financial Officer
(Principal Financial and
Accounting Officer)
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May 25, 2007
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*
Roger
Barker
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Director
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May 25, 2007
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*
K.
Earl Durden
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Director
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May 25, 2007
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*
Rick
D. Gardner
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Chief Operating Officer and
Director
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May 25, 2007
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*
Thomas
E. Jernigan, Jr.
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Director
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May 25, 2007
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*
James
Mailon Kent, Jr.
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Director
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May 25, 2007
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*
James
M. Link
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Director
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May 25, 2007
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*
D.
Dewey Mitchell
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Director
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May 25, 2007
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*
Barry
Morton
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Director
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May 25, 2007
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II-4
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Signature
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Title
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Date
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*
Robert
R. Parrish, Jr.
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Director
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May 25, 2007
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*
C.
Marvin Scott
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President and Director
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May 25, 2007
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*
James
C. White, Sr.
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Director
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May 25, 2007
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* By:
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/s/ C.
Stanley Bailey
Attorney-in-fact
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II-5