As filed with
the Securities and Exchange Commission on August 11,
2010
Registration
No. 333-167589
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Pre-Effective Amendment
No. 2
to the
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Century
Next Financial Corporation
and
Bank of Ruston 401(k) Plan
(Exact name of registrant as
specified in its articles of incorporation)
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Louisiana
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6035
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27-2851432
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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 No.)
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505 North Vienna
Street
Ruston, Louisiana
71270
(318) 255-3733
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Benjamin L. Denny
President and Chief Executive
Officer
Century Next Financial
Corporation
505 North Vienna
Street
Ruston, Louisiana
71270
(318) 255-3733
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies to:
Raymond A.
Tiernan, Esq.
Eric M.
Marion, Esq.
Elias, Matz, Tiernan &
Herrick L.L.P.
734 15th Street, N.W., 11th
Floor
Washington, D.C.
20005
202-347-0300
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this
Registration Statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box. þ
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
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company þ
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(Do not check if a smaller
reporting company)
CALCULATION OF REGISTRATION
FEE
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Proposed Maximum
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Proposed Maximum
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Title of Each Class of
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Amount to be
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Offering Price
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Aggregate
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Amount of
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Securities to be Registered
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Registered
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Per Unit
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Offering Price
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Registration Fee
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Common Stock, $.01 par value per share
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1,058,000 shares
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$10.00
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$10,580,000(1)
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$754.35(3)
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Participation interests
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71,839 interests(2)
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(1)
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Estimated solely for the purpose of
calculating the registration fee.
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(2)
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Represents shares which may be
purchased by participants in the Bank of Ruston 401(k) Plan.
Pursuant to Rule 457(h) of the Securities Act, as amended,
no separate fee is required for the participation interests, and
the number of participation interests registered has been
calculated on the basis of the maximum number of shares which
could be purchased utilizing the assets of such plan.
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(3)
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Previously paid.
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The Registrant hereby amends this Registration Statement on
such date as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that the Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said
Section 8(a) may determine.
PROSPECTUS
(Proposed Holding Company for
Bank of Ruston)
Up to 920,000 Shares of
Common Stock
(Anticipated Maximum)
This prospectus describes the initial public offering of shares
of Century Next Financial Corporation, a company being formed in
connection with the conversion of Bank of Ruston from the mutual
to the stock form of organization. Upon completion of the
conversion and offering, all of the common stock of Bank of
Ruston will be owned by Century Next Financial, and all of the
common stock of Century Next Financial will be owned by public
shareholders.
We are offering up to 920,000 shares of common stock for
sale, at a price of $10.00 per share, on a priority basis to
Bank of Rustons depositors in a subscription offering.
Shares of common stock not purchased in the subscription
offering may be offered to the general public in a community
offering which may begin during or immediately following the
subscription offering. We expect that the common stock of
Century Next Financial will be quoted on the OTC
Bulletin Board.
Certain depositors of Bank of Ruston have priority rights to
purchase shares of common stock in the subscription offering:
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Depositors with at least $50 on deposit at Bank of Ruston on
December 31, 2008;
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Depositors with at least $50 on deposit at Bank of Ruston on
June 30, 2010; and
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Depositors of Bank of Ruston as of [DATE4], 2010.
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If you fit none of the categories above, but are interested in
purchasing shares of our common stock:
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You may have an opportunity to purchase shares of common stock
after priority orders are filled.
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We must sell a minimum of 680,000 shares to complete the
offering. We may increase the maximum shares that we sell in the
offering up to 1,058,000 shares without notice to persons
who have subscribed for shares, due to regulatory
considerations, demand for the shares or changes in financial
market conditions. The offering is expected to terminate at
5:00 p.m., Central time, on [DATE1], 2010. We may extend
this expiration date without notice to you until [DATE2], 2010.
No single extension may exceed 90 days and the offering
must be completed by [DATE3], 2012.
The minimum number of shares you may purchase is 25 shares.
The maximum number of shares that can be ordered through a
single qualifying account in the offering is 20,000 shares.
Orders are irrevocable after submission unless the offering is
terminated or is extended beyond [DATE2], 2010 or the number of
shares of common stock to be sold increases to more than
1,058,000 shares or decreases to less than
680,000 shares. If the offering is extended beyond [DATE2],
2010, subscribers will be notified and will have the right to
confirm, modify or rescind their purchase orders, and funds will
be returned promptly to subscribers who do not respond to this
notice. Funds received prior to completion of the offering will
be held in a segregated account at Bank of Ruston and will earn
interest at our statement savings rate. If we terminate the
offering, or if we extend the offering beyond [DATE2], 2010 and
you reduce or rescind your order, we will promptly return your
funds without penalty, with interest at our statement savings
rate, and deposit withdrawal authorizations will be cancelled or
reduced.
Sandler ONeill & Partners, L.P. will assist us
in selling our shares of common stock on a best efforts basis,
but is not required to purchase any of the common stock that is
being offered. Our directors and executive officers, together
with their associates, intend to purchase 198,500 shares of
common stock in the offering, or 21.6% based on the maximum of
the offering. These purchases will count towards the minimum
purchases needed to complete the offering.
This investment involves a degree of risk, including the
possible loss of principal.
Please read Risk
Factors beginning on page 12.
OFFERING SUMMARY
Price per share:
$10.00
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Maximum,
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Minimum
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Maximum
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as Adjusted
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Number of shares
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680,000
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920,000
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1,058,000
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Gross offering proceeds
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$
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6,800,000
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$
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9,200,000
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$
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10,580,000
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Estimated offering expenses (excluding selling agent fees)
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$
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550,000
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$
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550,000
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$
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550,000
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Selling agent fees and expenses(1)
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$
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200,000
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$
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200,000
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$
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200,000
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Estimated net proceeds
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$
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6,050,000
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$
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8,450,000
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$
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9,830,000
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Estimated net proceeds per share
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$
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8.90
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$
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9.18
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$
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9.29
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(1)
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For a description of Sandler
ONeill & Partners, L.P.s compensation for
the stock offering, see The Conversion and
Offering Marketing Arrangements.
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These securities are not deposits or savings accounts and are
not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
Neither the Securities and Exchange Commission, the Office of
Thrift Supervision nor any state securities regulator has
approved or disapproved these securities or determined if this
prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.
For assistance, please contact the
conversion center at
( ) - .
The date of this prospectus
is ,
2010
Table of
Contents
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1
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12
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17
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18
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20
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23
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24
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24
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26
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27
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28
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34
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46
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47
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64
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73
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75
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84
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84
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101
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107
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108
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108
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108
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108
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Index to Financial Statements
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EX-23.2 |
SUMMARY
This summary highlights material information from this
document and may not contain all the information that is
important to you. You should read this entire document
carefully, including the sections entitled Risk
Factors and The Conversion and Offering,
before making a decision to invest in our common stock.
In this prospectus, unless we specify otherwise, Century
Next Financial, we, us, and
our refer to Century Next Financial Corporation, a
Louisiana corporation. Bank of Ruston refers to Bank
of Ruston, a federally chartered savings bank in its mutual form
or in its stock form as the context requires.
The
Companies
Century Next Financial
Corporation. Century Next Financial is a
Louisiana corporation recently formed for the purpose of
implementing the conversion and offering described in this
prospectus. Our principal activity after the conversion will be
the ownership of all of the outstanding common stock of Bank of
Ruston. This offering is being made by Century Next Financial.
Our corporate office is located at 505 North Vienna Street,
Ruston, Louisiana 71270.
Bank of Ruston. Bank of Ruston is a
federally chartered mutual savings bank. Bank of Ruston was
formed in 1905 as a Louisiana chartered mutual savings
association named Ruston Building and Loan
Association which converted to a federally chartered
savings bank effective February 22, 2005, and changed its
name to Bank of Ruston. Bank of Ruston is subject to
regulation, supervision and examination by the Office of Thrift
Supervision, as its chartering authority. Bank of Rustons
corporate office is located at 505 North Vienna Street, Ruston,
Louisiana 71270. Its telephone number at this address is
(318) 255-3733.
Bank of Rustons website is www.bankruston.com.
Our
Business
Bank of Ruston conducts its operations through its main office
in Ruston, Louisiana, located in Lincoln Parish, and one branch
office also located in Ruston, Louisiana. Bank of Rustons
principal business has been accepting deposits from the general
public and using those deposits to make residential and
commercial loans to individuals and businesses located primarily
in Lincoln Parish and, to a lesser extent, the neighboring
parishes of Claiborne, Bienville, Ouachita, Union and Jackson
Parishes. In accordance with our strategic plan, beginning in
2000 we began to diversify our products and services by
emphasizing commercial loans and lines of credit. As a part of
this strategy, we expanded our senior executive officer team and
added a Chief Credit Officer in 2000 and business development
officer in 2008 to assist with expanding our customer base,
including commercial customers, and cross-selling our products
and services.
At March 31, 2010, Bank of Ruston had total assets of
$87.0 million, deposits of $76.9 million and total
equity of $8.6 million, equal to 9.9% of total assets.
Total loans, net, at March 31, 2010 amounted to
$70.4 million, none of which were subprime or Alt-A loans.
We sell a substantial amount of our fixed-rate 15 to
30 year owner occupied one-to four-family residential loans
into the secondary market which generates significant fee
income. Bank of Rustons investment in securities consists
almost exclusively of mortgage backed securities totaling
$5.5 million at March 31, 2010.
Following the conversion and offering, Bank of Ruston will be
wholly-owned by Century Next Financial. Century Next Financial
intends to contribute 60% of the net proceeds as equity capital
to Bank of Ruston in exchange for the purchase of all of Bank of
Rustons capital stock and the remaining 40% of the net
proceeds will be retained by Century Next Financial. Initially,
Century Next Financial will use the net proceeds it retains to
loan funds to the employee stock ownership plan to purchase 8.0%
of the shares sold in the offering and will invest the remaining
amount in a deposit account at Bank of Ruston. Under applicable
regulations, Century Next Financial may, during the first year
following the conversion, assuming shareholder approval, use a
portion of the net proceeds it retains to fund the proposed
recognition and retention plan. See How We Intend to Use
the Proceeds from the Offering. In the future, the
proceeds from the offering are expected to provide us with
additional capital which we will use to expand our business
activities, enhance our existing
1
products and services and upgrade our technology infrastructure
and marketing. See Reasons for the Conversion
and Offering.
Our
Business Strategy
We have several business strategies that are designed to operate
and grow Bank of Ruston as a profitable community-oriented
financial institution serving primarily individual customers and
small to medium-sized businesses in our market area. To
implement these business strategies, we strive to:
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maintain high levels of asset quality, primarily through our
prudent and conservative lending practices;
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improve net interest margin through a combination of reduced
funding costs by growing our lower cost transaction deposit
accounts and improving yields through increased lending
diversification into higher yielding types of loans, including
commercial real estate and commercial business loans;
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attract commercial customers with commercial loan products and
cross-sell new retail deposit products and cash management
services to those commercial loan customers;
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expand the number of households served by Bank of Ruston through
offering competitive products and services that will meet the
full service banking needs of the communities we serve; and
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capitalize on our senior managements knowledge of the
local commercial real estate market and meet the needs of local
businesses through a community-oriented approach to banking,
which focuses on local decision-making and delivering a
consistent and high quality level of professional service.
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One of our primary business strategies is to place greater
emphasis on serving the lending and deposit needs of small-and
medium-sized commercial businesses in our market area. In order
to facilitate our prudent growth over time through the
implementation of our business strategy, we opened a second
branch banking office in February 2009 and hired a new
commercial lender in May 2010. We also expect to open a new
operations center in the near future where we will relocate our
current operational employees.
Reasons
for the Conversion and Offering
The conversion and offering are intended to provide an
additional source of capital not currently available to Bank of
Ruston. The net proceeds raised in the offering will allow us to
better serve the needs of our community by:
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expanding future lending and increasing operational growth;
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diversifying our lending activities, including increasing our
commercial real estate and commercial business loans;
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enhancing existing products and services, including expanding
home equity lines of credit and commercial deposit products, and
supporting the development of new products and services, and
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continuing to upgrade our technology infrastructure, marketing,
training programs and staff recruitment.
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After considering the advantages and risks of the conversion and
offering, the board of directors of Bank of Ruston approved the
conversion and offering as being in the best interests of Bank
of Ruston, its customers and members and the communities that it
serves.
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The
Conversion and Offering
The mutual-to-stock conversion that Bank of Ruston is
undertaking involves a series of transactions by which it will
convert from the mutual form of organization to the public stock
holding company form of organization. In connection with the
conversion, Bank of Ruston will amend and restate its federal
mutual savings bank charter as a stock savings bank charter.
After the conversion and offering are completed, all of Bank of
Rustons stock will be owned by Century Next Financial, and
all of Century Next Financials outstanding common stock
will be owned by the public. The management and business
operations of Bank of Ruston will continue after the conversion
and offering. The following diagram shows our new ownership
structure after completion of the conversion and offering.
Terms of
the Offering
We are offering between 680,000 and 920,000 shares of
common stock of Century Next Financial for sale at an offering
price of $10.00 per share. The subscription offering is made to
Bank of Rustons eligible account holders, our employee
stock ownership plan, supplemental eligible account holders and
Bank of Rustons voting members. Shares not purchased in
the subscription offering may be made available to the public in
a community offering, giving a preference to natural persons who
reside in Lincoln Parish, Louisiana. The maximum number of
shares that we sell in the offering may increase by up to 15%,
to 1,058,000 shares, due to regulatory considerations,
demand for the shares in the offering or changes in financial
market conditions in general and with respect to financial
institution stocks in particular. After submission, orders are
irrevocable unless the offering is terminated or is extended
beyond [DATE2], 2010 or the number of shares of common stock to
be sold increases to more than 1,058,000 shares or
decreases to less than 680,000 shares. If the offering is
extended beyond [DATE2], 2010 subscribers will have the right to
modify or rescind their purchase orders.
All investors will pay $10.00 per share in the offering. No
commission will be charged to purchase shares of common stock.
Sandler ONeill & Partners, L.P., our selling
agent in the offering, will use its best efforts to assist us in
selling shares of our common stock, but is not obligated to
purchase any shares of common stock in the offering.
Purchases
By Directors and Officers
We expect our directors and executive officers, together with
their associates, to subscribe for a total of
198,500 shares, which represents 29.2% and 21.6% of the
total shares to be outstanding at the minimum and maximum,
respectively, of the offering range. The purchase price paid by
them will be the same $10.00 per share price paid by all other
persons who purchase shares of common stock in the offering. See
Proposed Purchases of Common Stock by Management.
How We
Determined the Offering Range and the $10.00 Price Per
Share
The amount of common stock we are offering in connection with
the conversion is based on an independent appraisal of the
estimated market value of Century Next Financial, assuming that
the offering is
3
completed. An appraisal firm experienced in appraisals of banks
and financial institutions, RP Financial, LC., has estimated
that, as of May 28, 2010, this market value ranged from
$6.8 million to $9.2 million, with a midpoint of
$8.0 million. Based on this valuation and the $10.00 per
share price, the number of shares of common stock being offered
for sale by Century Next Financial will range from
680,000 shares to 920,000 shares.
The $10.00 per share price was selected primarily because it is
the price most commonly used in mutual-to-stock conversions of
financial institutions. RP Financial, LC.s appraisal is
based in part on our financial condition and results of
operations, the effect of the additional capital raised by the
sale of shares of common stock in the offering and an analysis
of a peer group of ten publicly traded savings bank and thrift
holding companies that RP Financial, LC. considered comparable
to us.
The following table presents a summary of selected pricing
ratios for Century Next Financial and our peer group companies
identified by RP Financial, LC. These ratios are based on
earnings for the twelve months ended March 31, 2010 and
book value as of March 31, 2010. Compared to the average
pricing of the peer group, our pro forma pricing ratios at the
maximum of the offering range indicated a premium of 21.2% on a
price-to-earnings basis, discount of 19.2% on a price-to-book
value basis and discount of 22.2% on a price-to-tangible book
value basis. Our board of directors, in reviewing and approving
the valuation, considered the range of price-to-core earnings
multiples and the range of price-to-book value ratios and
price-to-tangible book value ratios at the different amounts of
shares to be sold in the offering. The appraisal did not
consider one valuation approach to be more important than the
other. Instead, the appraisal concluded that these ranges
represented the appropriate balance of these two approaches to
valuing Century Next Financial, and the number of shares to be
sold, in comparison to the identified peer group institutions.
The estimated appraised value and the resulting premium or
discount took into consideration the potential financial impact
of the conversion and offering.
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Price as a
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Price as a
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Percentage of Pro
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Price as a Multiple
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Percentage of Pro
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Forma Tangible
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of Pro Forma
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Forma Stockholders
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Stockholders
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Earnings per Share
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Equity per Share
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Equity per Share
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Century Next Financial Corporation(1):
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Maximum, as adjusted, of offering range
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27.56
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x
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61.54
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%
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61.54
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%
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Maximum of offering range
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23.63
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x
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57.57
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%
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57.57
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%
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Midpoint of offering range
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20.32
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x
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53.62
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%
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53.62
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%
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Minimum of offering range
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17.04
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x
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49.04
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%
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49.04
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%
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Valuation of peer group companies as of May 28,
2010(2):
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Average
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19.50
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x
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71.27
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%
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73.97
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%
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Median
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16.44
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x
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67.77
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%
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71.12
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%
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(1) |
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Based on Bank of Rustons financial data as of and for the
twelve months ended March 31, 2010. |
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(2) |
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Reflects earnings for the most recent twelve-month periods for
which data was publicly available. |
The independent appraisal does not indicate per share market
value. Do not assume or expect that the valuation of Century
Next Financial as indicated above means that, after the
conversion and offering, the shares of common stock will trade
at or above the $10.00 per share purchase price. Furthermore,
the pricing ratios presented above were utilized by RP
Financial, LC. to estimate our market value and not to compare
the relative value of shares of our common stock with the value
of the capital stock of the peer group. The value of the capital
stock of a particular company may be affected by a number of
factors such as financial performance, asset size and market
location.
The independent appraisal will be updated prior to the
completion of the conversion and offering. If the appraised
value decreases below $6.8 million or increases above
$10.58 million, subscribers may be resolicited with the
approval of the Office of Thrift Supervision and be given the
opportunity to change or cancel their
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orders. If you do not respond, we will cancel your stock order
and return your subscription funds, with interest, and cancel
any authorization to withdraw funds from your deposit accounts
for the purchase of shares of common stock. For a more complete
discussion of the amount of stock we are offering for sale and
the independent appraisal, see The Conversion and
Offering How We Determined the Price Per Share and
the Offering Range.
After-Market
Performance Information
The following table provides information regarding the
after-market stock price performance for all standard
mutual-to-stock conversion transactions completed between
January 1, 2009 and May 28, 2010. As part of its
appraisal of our estimated pro forma market value, RP Financial,
LC. considered the after market performance of mutual-to-stock
conversions completed in the three months prior to May 28,
2010 which is the date of its appraisal report. RP Financial,
LC. considered information regarding the new issue market for
converting thrifts as part of its consideration of the market
for thrift stocks.
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Price Performance from Initial Trading Date
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Ticker
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Conversion
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Through
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Company Name
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Symbol
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Date
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1 Day
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1 Week
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1 Month
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5/28/2010
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Nasdaq listed companies:
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OBA Financial Services, Inc.
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OBAF
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01/22/10
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3.9
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%
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1.1
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%
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3.0
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%
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14.6
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%
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OmniAmerican Bancorp, Inc.
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OABC
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01/21/10
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18.5
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%
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13.2
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%
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9.9
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%
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15.7
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%
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Athens Bancshares, Inc.
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AFCB
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01/07/10
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16.0
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%
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13.9
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%
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10.6
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%
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6.0
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%
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Territorial Bancorp, Inc.
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TBNK
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07/13/09
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49.9
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%
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47.5
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%
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48.7
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%
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97.0
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%
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OTC Bulletin Board quoted companies:
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Harvard Illinois Bancorp, Inc.
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HARI
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04/09/10
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%
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%
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(1.0
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)%
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(21.5
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)%
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Versailles Financial Corp.
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VERF
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01/13/10
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%
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%
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%
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%
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St. Joseph Bancorp, Inc.
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SJBA
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02/02/09
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%
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%
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%
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%
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Hibernia Homestead Bancorp, Inc.
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HIBE
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01/28/09
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5.0
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%
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5.0
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%
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5.0
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%
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50.0
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%
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1/1/09 - 5/28/2010 Average for all companies
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11.7
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%
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10.1
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%
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9.5
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%
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20.2
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%
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1/1/09 - 5/28/2010 Median for all companies
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4.5
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%
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3.1
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%
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4.0
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%
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10.3
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%
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This table is not intended to be indicative of how our stock
may perform. Furthermore, this table presents only short-term
price performance with respect to several companies that only
recently completed their initial public offering and may not be
indicative of the longer-term stock price performance of these
companies. Before you make an investment decision, we urge
you to carefully read the entire prospectus, including, but not
limited to, the section entitled Risk Factors
beginning on page 12.
Stock price appreciation is affected by many factors, including,
but not limited to: general market and economic conditions; the
interest rate environment; the amount of proceeds a company
raises in its offering; and numerous factors relating to the
specific company, including the experience and ability of
management, historical and anticipated operating results, the
nature and quality of the companys assets and the
companys market area. The companies listed in the table
above may not be similar to Century Next Financial, the pricing
ratios for their offerings were in some cases different from the
pricing ratios for Century Next Financials common stock
and the market conditions in which these offerings were
completed, were, in some cases, different from current market
conditions. Any or all of these differences may cause our stock
to perform differently from these other offerings.
RP Financial, LC. advised the board of directors that the
appraisal was prepared in conformance with the regulatory
appraisal methodology. That methodology requires a valuation
based on an analysis of the trading prices of ten comparable
public companies whose stocks have traded for at least one year
prior to the valuation date, and as a result of this analysis,
RP Financial, LC. determined that pro forma price-to-earnings
ratios were generally higher than the peer group companies and
our pro forma price-to-book ratios were generally lower than the
peer group companies. See How We Determined the
Offering Range and the $10.00 Price Per Share. RP
Financial, LC. also advised the board of directors that the
aftermarket trading experience of
5
thrift conversion offerings completed during the three-month
period ended May 28, 2010 was considered in the appraisal
as a general indicator of current market conditions, but was not
relied upon as a primary valuation methodology. There was one
standard mutual-to-stock conversion offering completed during
the three-month period ended May 28, 2010.
Our board of directors carefully reviewed the information
provided to it by RP Financial, LC. through the appraisal
process, but did not make any determination regarding whether
prior standard mutual-to-stock conversions have been properly
valued, nor did the board draw any conclusions regarding how the
historical data reflected above may affect Century Next
Financials appraisal. Instead, we engaged RP Financial,
LC. to help us understand the regulatory process as it applies
to the appraisal and to advise the board of directors as to how
much capital Century Next Financial would be required to raise
under the regulatory appraisal guidelines.
There can be no assurance that our stock price will not trade
below $10.00 per share, as has been the case for some
mutual-to-stock conversions. Before you make an investment
decision, we urge you to carefully read this prospectus,
including, but not limited to, the section entitled Risk
Factors beginning on page 12.
Current
Market Conditions
The market for financial institution stocks declined in 2008 and
early 2009 due in part to credit related losses in the financial
institution industry and increased mortgage delinquencies and
foreclosures in the housing market. By March 2009, the equity
markets, including the market for financial stocks, began to
improve. The market for converting thrift institutions, like
Bank of Ruston, continues to be affected by the overall market
for thrift stocks.
Conditions
to Completing the Conversion
The conversion will be conducted in accordance with the terms of
our plan of conversion. We cannot complete the conversion and
offering unless:
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the plan of conversion is approved by the affirmative vote of at
least a majority of the votes eligible to be cast by Bank of
Rustons voting members;
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we receive all regulatory approvals necessary to complete the
mutual-to-stock conversion and the offering; and
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we sell at least the minimum number of shares of common stock
offered.
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Regulatory approval for the conversion is contingent upon us
obtaining the approval of Bank of Rustons voting members
for the plan of conversion and the successful completion of the
offering.
Benefits
to Management and Potential Dilution to Shareholders Resulting
from the Offering
We intend to adopt an employee stock ownership plan, which will
allocate shares of our common stock to eligible employees
primarily based on their compensation. Our employee stock
ownership plan will purchase a number of shares equal to 8.0% of
the shares sold in the offering. A loan from Century Next
Financial to the employee stock ownership plan trust for the
purchase of shares will have a term of 20 years. We will
incur additional compensation expense as a result of the
employee stock ownership plans release of shares over the
term of the loan.
In addition, we intend to consider the implementation of a stock
option plan and a recognition and retention plan no earlier than
six months after the conversion as required by applicable
regulations. If the stock option plan and the recognition and
retention plan are approved by shareholders and implemented
within one year of the completion of the conversion and
offering, the number of options granted or shares awarded may
not exceed 10.0% and 4.0%, respectively, of the shares
outstanding after the offering.
6
The following table summarizes the stock benefits that our
officers, directors and employees may receive following the
offering, assuming that we initially implement a stock option
plan, granting options to purchase 10.0% of the shares
outstanding after the offering, and a recognition and retention
plan, awarding shares of common stock equal to 4.0% of the
shares outstanding after the offering, as permitted under
applicable regulations. In the table below, it is assumed that,
at the minimum and maximum of the offering range, a total of
680,000 and 920,000 shares, respectively, will be sold and
outstanding after the offering.
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|
Number of Shares to be
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Individuals
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Granted or Purchased
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Dilution Resulting
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Estimated
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Eligible to Receive
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At Maximum of
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As Percent of
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from Issuance
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Value of
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Plan
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Awards
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Offering Range
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Shares Sold
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of Shares
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Grants(1)
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Employee Stock Ownership Plan
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Employees
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73,600
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8.0
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%
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%
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$
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736,000
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Recognition and Retention Plan
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Directors, officers
and employees
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36,800
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4.0
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%
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3.8
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%(2)
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368,000
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Stock Option Plan
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Directors, officers
and employees
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92,000
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10.0
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%
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9.1
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%
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401,120
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(1) |
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The actual value of the stock awards will be determined based on
their fair value as of the date the grants are made. For
purposes of this table, fair value is assumed to be the offering
price of $10.00 per share. The fair value of stock options has
been estimated at $4.36 per option using the Black-Scholes
option pricing model with the following assumptions: a grant
date share price and option exercise price of $10.00; dividend
yield of zero; expected option life of 10 years; risk free
interest rate of 3.84% (based on the
10-year U.S.
Treasury rate); and a volatility rate of 23.90% based on an
index of publicly-traded thrift institutions. The actual expense
of the stock options will be determined by the grant date fair
value of the options, which will depend on a number of factors,
including the valuation assumptions used in the option pricing
model ultimately adopted. |
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(2) |
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Assumes shares of common stock to be awarded under the
recognition and retention plan are issued from authorized but
unissued stock. It is our intention, however, to purchase shares
of our common stock on the open market to fund the recognition
and retention plan. |
The value of the restricted shares of common stock will be based
on the price of Century Next Financials common stock at
the time those shares are awarded, which, subject to shareholder
approval, cannot occur until at least six months after
completion of the conversion and offering. The following table
presents the total value of all restricted shares to be
available for grant under the recognition and retention plan,
assuming the shares for the plan are purchased or issued in a
range of market prices from $8.00 per share to $14.00 per share.
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42,320 Shares
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27,200 Shares
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32,000 Shares
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36,800 Shares
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Awarded at
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|
|
Awarded at
|
|
Awarded at
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|
Awarded at
|
|
Maximum of Range,
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Share Price
|
|
Minimum of Range
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|
Midpoint of Range
|
|
Maximum of Range
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as Adjusted
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(Dollars in thousands, except per share data)
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|
$ 8.00
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$
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218
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$
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256
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$
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294
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$
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339
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|
10.00
|
|
|
272
|
|
|
|
320
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|
|
|
368
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|
|
|
423
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|
12.00
|
|
|
326
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|
|
|
384
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|
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|
442
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|
|
|
508
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|
14.00
|
|
|
381
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|
448
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|
515
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|
592
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|
7
The grant date fair value of the options granted under the stock
option plan will be based in part on the price of Century Next
Financials common stock at the time the options are
granted, which, subject to shareholder approval, cannot occur
until at least six months after the completion of the conversion
and offering. The value will also depend on the various
assumptions utilized in the Black-Scholes option pricing model.
The following table presents the total estimated value of the
options to be available for grant under the stock option plan,
assuming the market price and exercise price for the stock
options are equal and the range of market prices for the shares
is $8.00 per share to $14.00 per share.
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105,800
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Grant Date
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68,000
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80,000
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|
92,000
|
|
Options at
|
|
|
Fair Value
|
|
Options at
|
|
Options at
|
|
Options at
|
|
Maximum of Range,
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Exercise Price
|
|
per Option
|
|
Minimum of Range
|
|
Midpoint of Range
|
|
Maximum of Range
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|
as Adjusted
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|
(Dollars in thousands, except per share data)
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|
$ 8.00
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|
$
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3.49
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$
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237
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$
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279
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$
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321
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$
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369
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|
10.00
|
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|
4.36
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|
296
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349
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401
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461
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12.00
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|
5.23
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356
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418
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481
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553
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14.00
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6.10
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415
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488
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561
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645
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Shareholders will experience a reduction or dilution in their
ownership interest of approximately 12.3% if we use authorized
but unissued shares to fund stock awards and stock option grants
made under the recognition and retention plan and the stock
option plan (or taken individually, 3.8% for the recognition and
retention plan and 9.1% for the stock option plan). Such
dilution will not occur if we determine to fund these stock
benefit plans through open market purchases, as opposed to the
issuance of authorized but unissued shares.
Persons
Who May Order Stock in the Offering
We are offering shares of our common stock in what is called a
subscription offering in the following order of
priority:
(1) Depositors with a minimum of $50 on deposit at Bank of
Ruston as of December 31, 2008;
(2) Our tax-qualified employee stock ownership plan;
(3) Depositors with a minimum of $50 on deposit at Bank of
Ruston as of June 30, 2010; and
(4) Bank of Rustons voting members as of [DATE4],
2010.
If all shares are not subscribed for in the subscription
offering, we may offer shares in a community offering. The
community offering, if any, may commence during the subscription
offering or just after the subscription offering concludes. If a
community offering is conducted, shares will be offered with a
preference given first to natural persons who reside in Lincoln
Parish, Louisiana and then to members of the general public. We
have the right to accept or reject orders received in the
community offering, at our sole discretion.
If we receive subscriptions for more shares than are to be sold
in this offering, we may be unable to fill or partially fill
your order. In such an event, shares will be allocated under a
formula outlined in the plan of conversion and as described in
the section entitled The Conversion and
Offering Subscription Offering and Subscription
Rights.
Limits on
Your Purchase of Shares of Common Stock
The minimum number of shares of common stock that you may
purchase is 25 ($250). No individual or persons exercising
subscription rights through a single qualifying deposit account
held jointly may purchase more than 20,000 shares of common
stock ($200,000). If any of the following persons purchase
shares of common stock, their purchases when combined with your
purchases cannot exceed 35,000 shares ($350,000):
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your spouse, or relatives of you or your spouse living in your
household;
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8
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companies, trusts or other entities in which you are a trustee,
have a substantial financial interest or hold a senior
management position; or
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other persons who may be acting in concert with you.
|
Unless we determine otherwise, persons having the same address
and persons exercising subscription rights through bank accounts
registered to the same address will be aggregated and subject to
this overall purchase limitation. We have the right to
determine, in our sole discretion, whether prospective
purchasers are associates or acting in concert.
Subject to the approval of the Office of Thrift Supervision, we
may increase or decrease the purchase and ownership limitations
at any time. For a detailed description of purchase limitations
see The Conversion and Offering Limitations on
Common Stock Purchases.
How You
May Purchase Shares of Common Stock
If you want to place an order for shares of common stock in the
subscription or community offering, you must complete and sign a
stock order form and submit it to us, together with full
payment. The stock order form also includes an acknowledgement
from you that, before purchasing shares of our common stock, you
have received a copy of this prospectus and that you are aware
of the risks involved in the investment, including those
described under Risk Factors beginning at
page 12. We must receive your stock order form before the
end of the subscription offering or the end of the community
offering. Once we receive your order, you cannot cancel or
change it. You may pay for shares in the subscription offering
or the community offering in the following ways:
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|
by personal check, bank check or money order made payable to
Century Next Financial Corporation. Funds submitted
by personal check must be available in your account when the
stock order is received; or
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|
|
by authorizing us to withdraw funds from your deposit account(s)
maintained at Bank of Ruston. On the stock order form, you may
not authorize direct withdrawal from individual retirement
accounts. You may, however, authorize withdrawal from all types
of savings accounts and certificate of deposit accounts.
|
Checks and money orders received by Century Next Financial will
be cashed immediately and placed in a segregated account at Bank
of Ruston. We will pay interest on your funds submitted by check
or money order at the rate we pay on our statement savings
accounts, from the date we receive your funds until the date the
offering is completed or terminated. All funds authorized for
withdrawal from deposit accounts must be available in the
account when the stock order form is received. Funds will remain
in the account and continue to earn interest at the applicable
contract rate, and subscription funds will be withdrawn upon
completion of the offering. A hold will be placed on those funds
when your stock order is received, making the designated funds
otherwise unavailable to you during the offering period. If,
upon a withdrawal from a certificate account, the balance falls
below the minimum balance requirement, the remaining funds will
earn interest at our statement savings rate. There will be no
early withdrawal penalty for withdrawals from certificate of
deposit accounts used to pay for stock.
Federal law prohibits us from knowingly loaning funds to anyone
for the purpose of purchasing shares in the offering, including
funds drawn on a Bank of Ruston line of credit. Cash, wire
transfers and third party checks may not be remitted.
For a further discussion regarding the stock ordering
procedures, see The Conversion and Offering
Procedure for Purchasing Shares in the Subscription and
Community Offerings.
Using
Individual Retirement Account Funds
If you intend to use your individual retirement account funds to
purchase shares in the offering, please contact the conversion
center promptly at
( ) - ,
preferably at least two weeks before [DATE1], 2010. On your
stock order form, you are not permitted to authorize direct
withdrawal of funds from an
9
individual retirement account. Please be aware that federal law
requires that such funds first be transferred to a self-directed
retirement account with an independent trustee such as a
brokerage account. The transfer of such funds to a new trustee
takes time. Because we do not control the policies and
procedures of other trustees, we cannot guarantee that you will
be able to use your individual retirement account funds to
purchase shares of common stock in the offering. Your ability to
use your individual retirement account funds will depend on
timing constraints and, possibly, limitations imposed by the
individual retirement account trustee.
You May
Not Sell or Transfer Your Subscription Rights
Under federal law, you are not permitted to sell or transfer
your subscription rights, and we will act to ensure that you do
not do so. We will not accept any stock orders that we believe
involve the transfer of subscription rights. For a further
discussion of subscription rights, see The Conversion and
Offering Subscription Offering and Subscription
Rights.
Deadline
for Placing Orders of Common Stock
If you wish to purchase shares of our common stock, a properly
completed and signed original stock order form, together with
payment for the shares, must be received (not postmarked) by
Century Next Financial Corporation no later than 5:00 p.m.,
Central time, on [DATE1], 2010. You may submit your order form
in one of three ways: by mail using the order reply return
envelope provided, by overnight courier to the address indicated
on the stock order form or by bringing the stock order form and
payment to our conversion center located at Bank of
Rustons branch office, 2109 Farmerville Highway, Ruston,
Louisiana. Once submitted, your order is irrevocable unless the
offering is terminated or extended or the number of shares to be
issued increases to more than 1,058,000 shares or decreases
to less than 680,000 shares. We may extend the [DATE1],
2010, expiration date, without notice to you, until [DATE2],
2010. If the offering is extended beyond [DATE2], 2010, or if
the offering range is increased or decreased, we will be
required to resolicit subscriptions before proceeding with the
offering. In either of these cases, subscribers will have the
right to confirm, modify or rescind their purchase orders. If we
do not receive a response from you to any resolicitation, your
order will be rescinded and all funds received will be returned
promptly with interest, or withdrawal authorizations will be
cancelled. All extensions, in the aggregate, may not last beyond
[DATE3], 2012.
Steps We
May Take If We Do Not Receive Orders for the Minimum Number of
Shares
If we do not receive orders for at least 680,000 shares of
common stock, we may take several steps in order to sell the
minimum number of shares. Specifically, we may:
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|
|
increase the purchase limitations; and/or
|
|
|
|
extend the community offering; and/or
|
|
|
|
seek regulatory approval to extend the offering beyond [DATE2],
2010, provided that any such extension will require us to
resolicit subscriptions as described above.
|
If we fail to sell the minimum number of shares, we will return
your funds to you with interest, or cancel your deposit account
withdrawal authorization.
Delivery
of Stock Certificates
Certificates representing shares of common stock sold in the
offering will be mailed to the certificate registration address
noted on the stock order form as soon as practicable following
completion of the conversion and offering and receipt of all
regulatory approvals. It is possible that, until certificates
for the common stock are delivered to purchasers, purchasers
might not be able to sell the shares of common stock which they
ordered, even though the common stock will have begun trading.
10
Market
for Common Stock
We expect that our common stock will be quoted on the OTC
Bulletin Board. Sandler ONeill & Partners,
L.P. currently intends to become a market maker in the common
stock, but is under no obligation to do so. After shares of the
common stock begin trading, you may contact a firm that offers
investment services in order to buy or sell shares. The OTC
Bulletin Board will assign a four letter trading symbol for
Century Next Financials common stock and you will be able
to view current stock quotations on electronic websites.
Our
Dividend Policy
We have not made a decision at this time whether to pay
dividends, or if we do decide to pay dividends, at what rate.
After the offering, we may consider a policy of paying cash
dividends on the common stock of Century Next Financial. The
payment of dividends is dependent on numerous factors, including
but not limited to, our future operating results and financial
performance, growth prospects, ongoing capital requirements,
regulatory limitations and overall economic conditions. In
addition, during the first three years after the conversion, no
dividend will be declared or paid if it would be classified as a
return of capital.
Tax
Aspects
As a general matter, the conversion and offering will not be a
taxable transaction for purposes of federal or state income
taxes to Century Next Financial, Bank of Ruston, or persons
eligible to subscribe in the subscription offering. Elias, Matz,
Tiernan & Herrick L.L.P., our special counsel, has
issued an opinion to us to the effect that consummation of
transactions contemplated by the conversion and offering
qualifies as a tax-free transaction for federal income tax
purposes and will not result in any adverse federal tax
consequences to Century Next Financial, Bank of Ruston, or
persons eligible to subscribe in the subscription offering.
Heard, McElroy & Vestal, LLP, our independent
registered public accounting firm, has issued an opinion to us
to the effect that consummation of transactions contemplated by
the conversion and offering should qualify as a tax-free
transaction for Louisiana state income tax purposes and should
not result in any adverse Louisiana state tax consequences to
Century Next Financial, Bank of Ruston, or persons eligible to
subscribe in the subscription offering. See The Conversion
and Offering Tax Aspects.
Conversion
Center
If you have any questions regarding the offering or the
conversion, please call the conversion center at
( ) - .
You may also visit our conversion center, which is located at
our branch office, 2109 Farmerville Highway, Ruston, Louisiana.
This location will accept stock order forms and proxy cards, and
will have supplies of offering materials. The conversion center
is open Monday through Friday, from 10:00 a.m. to
4:00 p.m., Central time. The conversion center is not open
on weekends or bank holidays.
To ensure that you receive a prospectus at least
48 hours before the offering deadline, we may not mail
prospectuses any later than five days prior to the offering
deadline or hand-deliver any prospectus later than two days
prior to the offering deadline. Stock order forms may only be
distributed with or preceded by a prospectus. We will make
reasonable attempts to provide a prospectus and offering
materials to holders of subscription rights. The subscription
offering and all subscription rights are expected to expire at
5:00 p.m., Central time, on [DATE1], 2010, regardless of
whether we have been able to locate each person entitled to
subscription rights.
By signing the stock order form, you are acknowledging your
receipt of a prospectus and your understanding that the shares
are not deposit accounts and are not insured or guaranteed by
Century Next Financial, Bank of Ruston, the Federal Deposit
Insurance Corporation, or any other federal or state
governmental agency.
11
RISK
FACTORS
You should consider carefully the following risk factors before
deciding whether to invest in Century Next Financials
common stock. Our business could be harmed by any of these
risks. In assessing these risks you should also refer to the
other information contained in this prospectus, including our
financial statements and the related notes thereto.
Risks
Related to Our Business
Increased emphasis on commercial lending, as well as our
consumer and commercial business lending, may expose us to
increased lending risks. We intend to
continue to emphasize commercial lending which includes loans
secured by owner-occupied commercial real estate, investment
real estate with guarantor support and commercial and industrial
loans. Such lending activities generally are considered to
involve a higher degree of risk than single-family residential
lending due to a variety of factors, including generally larger
loan balances, shorter terms to maturity and loan terms which
often do not require full amortization of the loan over its term
and, instead, provide for a balloon payment at stated maturity.
As a result, we may need to increase our provision for loan
losses in future periods to address possible loan losses in our
commercial loan portfolio. Our lending activities currently also
include consumer loans, including home equity loans and lines of
credit. Although commercial business loans and consumer loans
generally have shorter terms and higher interests rates than
mortgage loans, they generally involve more risk than mortgage
loans because of the nature of, or in certain cases the absence
of, the collateral which secures such loans.
If our allowance for losses on loans is not adequate to
cover losses, our earnings could decrease. We
have established an allowance for loan losses which we believe
is adequate to offset probable losses on our existing loans. We
anticipate originating more commercial real estate loans for
which we will require additional provisions for loan losses.
Material additions to our allowance would materially decrease
our net income. We make various assumptions and judgments about
the collectability of our loan portfolio, including the
creditworthiness of our borrowers and the value of the real
estate and other assets serving as collateral for the repayment
of many of our loans. We rely on our loan quality reviews, our
experience and our evaluation of economic conditions, among
other factors, in determining the amount of the allowance for
loan losses. While we are not aware of any specific factors
indicating a deficiency in the amount of our allowance for loan
losses, in light of the current economic slowdown, the increased
number of foreclosures and lower real estate values, one of the
most pressing current issues faced by financial institutions is
the adequacy of their allowance for loan losses. Federal bank
regulators have increased their scrutiny of the level of the
allowance for losses maintained by regulated institutions. Many
banks and other lenders are reporting significantly higher
provisions to their allowance for loan losses, which are
materially impacting their earnings. In the event that we have
to increase our allowance for loan losses, it would have an
adverse effect on our results in future periods. At
March 31, 2010, our allowance for loan losses amounted to
$179,000 while our total loan portfolio was $70.6 million
at such date, $19.9 million of which were commercial real
estate and multi-family loans.
The recent economic recession could result in increases in
our level of non-performing loans
and/or
reduce demand for our products and services, which could have an
adverse effect on our results of
operations. In recent periods, there has been
a decline in the housing and real estate markets and the
national economy has recently experienced a recession. Although
improving, housing market conditions had deteriorated nationally
as evidenced by reduced levels of sales, increasing inventories
of houses on the market, declining house prices and an increase
in the length of time houses remain on the market. No assurance
can be given that these conditions will continue to improve or
will not worsen in the near term. Concerns over inflation,
energy costs, geopolitical issues, the availability and cost of
credit, the mortgage market and a declining real estate market
have contributed to increased volatility and diminished
expectations for the economy and markets going forward. This
turbulence in the markets also has been largely attributable to
the fallout associated with a deteriorating market for subprime
mortgage loans and securities backed by such loans.
Dramatic declines in the housing market, with falling home
prices and increasing foreclosures and unemployment, resulted in
significant asset write-downs by financial institutions, which
have caused many
12
financial institutions to seek additional capital, to merge with
other institutions and, in some cases, to fail. These
developments also have contributed to a substantial decrease in
both lending activities by banks and other financial
institutions and activity in the secondary residential mortgage
loan market. If these conditions do not improve or worsen, they
could adversely affect our results of operations.
Our business is geographically concentrated in central
northern Louisiana, which makes us vulnerable to downturns in
the local and regional economy. Most of our
loans are to individuals and businesses located in central
northern Louisiana. Regional economic conditions affect the
demand for our products and services as well as the ability of
our customers to repay loans. While economic conditions in
northern Louisiana have been relatively good in recent periods,
the concentration of our business operations makes us
particularly vulnerable to downturns in the local economy.
According to the US Department of Labors Bureau of
Labor Statistics, unemployment in the Ruston metropolitan area
has increased from 6.2% in 2005 to 7.4% in 2009. The population
of Lincoln Parish is projected to decline 1.5% from 2010 to 2015
according to the Louisiana Parish Population Projection Series,
2010-2030 available at
www.louisiana.gov/Explore/Population_Projections/. Declines in
local real estate values, both residential and commercial, could
adversely affect the value of property used as collateral for
the loans we make. Historically, the oil and gas industry has
constituted a significant component of the local economy. The
oil and gas industry remains an important factor in the regional
economy in the markets that Bank of Ruston operates in and
downturns in the local oil and gas industry could adversely
affect Bank of Ruston.
Changes in interest rates could have a material adverse
effect on our operations. Our profitability
is dependent to a large extent on net interest income, which is
the difference between the interest income earned on
interest-earning assets such as loans and investment securities
and the interest expense paid on interest-bearing liabilities
such as deposits and borrowings. Changes in the general level of
interest rates can affect our net interest income by affecting
the difference between the weighted average yield earned on our
interest-earning assets and the weighted average rate paid on
our interest-bearing liabilities, or interest rate spread, and
the average life of our interest-earning assets and
interest-bearing liabilities. For the three months ended
March 31, 2010, our average interest rate spread was 4.14%
compared to a 4.05% for the three months ended March 31,
2009. We continue to monitor our interest rate sensitivity and
expect to diversify into higher yielding types of lending and
grow our lower cost transaction deposit accounts, but may not be
able to effectively do so.
We are dependent upon the services of key
executives. We rely heavily on our President
and Chief Executive Officer, Benjamin L. Denny, and our
Executive Vice President of Business Development, William D.
Hogan. The loss of Mr. Denny or Mr. Hogan could have a
material adverse impact on our operations because, as a small
company, we have fewer management-level personnel that have the
experience and expertise to readily replace these individuals.
Changes in key personnel and their responsibilities may be
disruptive to our business and could have a material adverse
effect on our business, financial condition, and results of
operations. We maintain life insurance covering
Messrs. Denny and Hogan under a bank-owned life insurance
program.
Increased
and/or
special Federal Deposit Insurance Corporation assessments will
hurt our earnings. The recent economic
recession has caused a high level of bank failures, which has
dramatically increased Federal Deposit Insurance Corporation
resolution costs and led to a significant reduction in the
balance of the Deposit Insurance Fund. As a result, the Federal
Deposit Insurance Corporation has significantly increased the
initial base assessment rates paid by financial institutions for
deposit insurance. Increases in the base assessment rate have
increased our deposit insurance costs and negatively impacted
our earnings. In addition, in May 2009, the Federal Deposit
Insurance Corporation imposed a special assessment on all
insured institutions. Our special assessment, which was
reflected in earnings for the quarter ended June 30, 2009,
was $36,000. In lieu of imposing an additional special
assessment, the Federal Deposit Insurance Corporation required
all institutions to prepay their assessments for the fourth
quarter of 2009 and all of 2010, 2011 and 2012. Additional
increases in the base assessment rate or special assessments
would negatively impact our earnings.
13
We operate in a highly regulated environment and we may be
adversely affected by changes in laws and
regulations. We are subject to extensive
regulation, supervision and examination by the Office of Thrift
Supervision, our primary federal regulator, and by the Federal
Deposit Insurance Corporation, as insurer of our deposits. Such
regulation and supervision governs the activities in which an
institution and its holding company may engage and are intended
primarily for the protection of the insurance fund and the
depositors and borrowers of Bank of Ruston rather than for
holders of our common stock. Regulatory authorities have
extensive discretion in their supervisory and enforcement
activities, including the imposition of restrictions on our
operations, the classification of our assets and determination
of the level of our allowance for loan losses. Any change in
such regulation and oversight, whether in the form of regulatory
policy, regulations, legislation or supervisory action, may have
a material impact on our operations.
Recently enacted regulatory reform may have a material
impact on our operations. On July 21,
2010, the President signed into law the Dodd-Frank Wall Street
Reform and Consumer Protection Act that, among other things,
imposes new restrictions and an expanded framework of regulatory
oversight for financial institutions and their holding
companies, including Bank of Ruston and Century Next Financial.
Under the new law, Bank of Rustons primary regulator, the
Office of Thrift Supervision, will be eliminated and existing
federal thrifts will be subject to regulation and supervision by
the Office of Comptroller of the Currency, which currently
supervises and regulates all national banks. Savings and loan
holding companies will be regulated by the Federal Reserve
Board, which will have the authority to promulgate new
regulations governing Century Next Financial that will impose
additional capital requirements and may result in additional
restrictions on investments and other holding company
activities. The law also creates a new consumer financial
protection bureau that will have the authority to promulgate
rules intended to protect consumers in the financial products
and services market. The creation of this independent bureau
could result in new regulatory requirements and raise the cost
of regulatory compliance. The federal preemption of state laws
currently accorded federally chartered financial institutions
will be reduced. In addition, regulation mandated by the new law
could require changes in regulatory capital requirements, loan
loss provisioning practices, and compensation practices which
may have a material impact on our operations. Because the
regulations under the new law have not been promulgated, we
cannot determine the full impact on our business and operations
at this time. See Regulation Recently Enacted
Regulatory Reform.
We face strong competition in our primary market area
which may adversely affect our
profitability. We are subject to vigorous
competition in all aspects and areas of our business from
commercial banks, mortgage banking companies, credit unions and
other providers of financial services, such as money market
mutual funds, brokerage firms, consumer finance companies and
insurance companies. Based on data from the Federal Deposit
Insurance Corporation, as of June 30, 2009, the most recent
date for which data is available, we had 9.13% of the total
deposits in Lincoln Parish. The financial resources of our
larger competitors may permit them to pay higher interest rates
on their deposits and to be more aggressive in new loan
originations. We also compete with non-financial institutions,
including retail stores that maintain their own credit programs
and governmental agencies that make available low cost or
guaranteed loans to certain borrowers. Competition from both
bank and non-bank organizations will continue.
Risks
Related to this Offering
The implementation of stock-based benefit plans will
increase our future compensation and may adversely affect our
net income. Following the offering, we will
recognize additional employee compensation and benefit expenses
stemming from options and shares granted to employees, directors
and executives under our proposed new stock benefit plans. These
additional expenses will adversely affect our net income. We
cannot determine the actual amount of these new stock-related
compensation and benefit expenses at this time because
applicable accounting practices generally require that they be
based on the fair market value of the options or shares of
common stock at the date of the grant; however, we expect them
to be significant. We will recognize expenses for our employee
stock ownership plan when shares are committed to be released to
participants accounts and will recognize expenses for
restricted stock awards and stock options generally over the
vesting period of awards made to recipients. These benefit
expenses in the first year following the offering have been
estimated to be approximately $146,000, in the aggregate, at the
maximum of the offering range as
14
set forth in the pro forma financial information under
Unaudited Pro Forma Data assuming the $10.00 per
share purchase price as fair market value. Actual expenses,
however, may be higher or lower, depending on the price of our
common stock at that time. For further discussion of these
plans, see Management New Stock Benefit
Plans.
A limited market for our common stock may depress our
market price and make it difficult to buy or sell our
stock. We expect our stock to be quoted on
the OTC Bulletin Board. However, it is unlikely that an
active and liquid trading market for our stock will develop, due
to the small size of the offering and the small number of
shareholders we expect to have. As a result, you may not be able
to buy or sell our common stock immediately following the close
of the offering or at or above the $10.00 per share offering
price. There may be a wide spread between the bid and asked
price for our common stock after the conversion. You should
consider the potentially long-term nature of an investment in
our common stock.
Our stock price may decline when trading
commences. We are offering shares of our
common stock at a uniform price of $10.00 per share. After the
offering is completed, the trading price of the common stock
will be determined by the marketplace, and will be influenced by
many factors outside of our control, including prevailing
interest rates, investor perceptions, securities analyst
research reports and general industry, geopolitical and economic
conditions. Publicly traded stock, including stocks of financial
institutions, often experience substantial market price
volatility. Market fluctuations in the price of our common stock
may not be related to the operating performance of Century Next
Financial.
We intend to remain independent, which may mean you will
not receive a premium for your common
stock. We intend to remain independent for
the foreseeable future. Because we do not plan on seeking
possible acquirors, it is unlikely that we will be acquired in
the foreseeable future. Accordingly, you should not purchase our
common stock with any expectation that a takeover premium will
be paid to you in the near term.
We have broad discretion in investing the net proceeds of
the offering. Century Next Financial intends
to contribute 60% of the net proceeds as equity capital to Bank
of Ruston for the purchase of all of Bank of Rustons
capital stock and the remaining 40% of the net proceeds will be
retained by Century Next Financial. Initially, Century Next
Financial intends to use the proceeds that it retains to loan
funds to the employee stock ownership plan to purchase 8.0% of
the shares sold in the offering and will invest the remaining
amount in a deposit account at Bank of Ruston. Under applicable
regulations, Century Next Financial may during the first year
following the conversion, assuming shareholder approval, use a
portion of the net proceeds it retains to fund the recognition
and retention plan. After one year following the conversion, we
may repurchase shares of common stock, subject to regulatory
restriction. Bank of Ruston initially intends to use the net
proceeds it receives as a contribution of capital from Century
Next Financial to fund loans and to invest in securities. We
have not allocated specific amounts of proceeds for any of these
purposes, and we will have significant flexibility in
determining how much of the net proceeds we apply to different
uses and the timing of such applications. There is a risk that
we may fail to effectively use the net proceeds which could have
a negative effect on our future profitability ratios.
Our stock-based benefit plans will be
dilutive. If the offering is completed and
shareholders subsequently approve a recognition and retention
plan and a stock option plan, we will allocate stock to our
officers, employees and directors through these plans. If the
shares for the recognition and retention plan are issued from
our authorized but unissued stock, the ownership percentage of
outstanding shares of Century Next Financial would be diluted by
approximately 3.8%. However, it is our intention to purchase
shares of our common stock in the open market to fund the
recognition and retention plan. Assuming the shares of our
common stock to be awarded under the recognition and retention
plan are purchased at a price equal to the offering price in the
offering, the reduction to stockholders equity from the
recognition and retention plan would be between $272,000 and
$423,000 at the minimum and the maximum, as adjusted, of the
offering range. The ownership percentage of Century Next
Financial shareholders would also decrease by approximately 9.1%
if all potential stock options under our proposed stock option
plan are exercised and are filled using shares issued from
authorized but unissued common stock, assuming the offering
closes at the maximum of the offering range. See Unaudited
Pro Forma Data for data on the dilutive effect of the
recognition and
15
retention plan and the stock option plan and
Management New Stock Benefit Plans for a
description of the plans.
Our stock value may suffer from anti-takeover provisions
in our articles of incorporation and bylaws that may impede
potential takeovers that management
opposes. Provisions in our corporate
documents, as well as certain federal regulations, may make it
difficult and expensive to pursue a tender offer, change in
control or takeover attempt that our board of directors opposes.
As a result, our shareholders may not have an opportunity to
participate in such a transaction, and the trading price of our
stock may not rise to the level of other institutions that are
more vulnerable to hostile takeovers. Anti-takeover provisions
contained in our corporate documents include:
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restrictions on acquiring more than 10% of our common stock by
any person and limitations on voting rights;
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the election of members of the board of directors to staggered
three-year terms;
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the absence of cumulative voting by shareholders in the election
of directors;
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provisions restricting the calling of special meetings of
shareholders; and
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our ability to issue preferred stock and additional shares of
common stock without shareholder approval.
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See Restrictions on Acquisition of Century Next Financial
and Bank of Ruston and Related Anti-Takeover Provisions
for a description of anti-takeover provisions in our corporate
documents and federal regulations.
The ownership interest of management and employees could
enable insiders to control the voting on proposals which require
a supermajority vote for approval. Our
directors and officers intend to purchase 198,500 shares in
the offering, or 29.2% of our outstanding shares of common stock
at the minimum of the offering range. Our employee stock
ownership plan is also expected to purchase 8% of the shares of
common stock sold in the stock offering and additional stock
options and shares of common stock would be granted to our
directors and employees if the proposed stock benefit plans are
adopted in the future. As a result, management and employees
would control a significant percentage of our shares of common
stock. If these individuals were to act together, they could
have significant influence over the outcome of any stockholder
vote, including a proposal with respect to a potential sale of
Century Next Financial and other proposals that require the
approval of 75% or more of the shares entitled to vote in an
election of directors.
We will be required to implement additional finance and
accounting systems, procedures and controls in order to satisfy
our new public company reporting requirements, which may
increase our operating expenses. After the
completion of this offering, we will become a public reporting
company. The federal securities laws and the regulations of the
Securities and Exchange Commission will require that we file
annual, quarterly and current reports and that we maintain
effective disclosure controls and procedures and internal
controls over financial reporting. We expect that the
obligations of being a public company, including substantial
public reporting obligations, will require significant
expenditures and place additional demands on our management
team. These obligations will increase our operating expense and
could divert our managements attention from our operations.
16
FORWARD-LOOKING
STATEMENTS
This document contains forward-looking statements, which can be
identified by the use of such words as estimate,
project, believe, intend,
anticipate, plan, seek,
expect and similar expressions. These
forward-looking statements include, but are not limited to:
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statements of goals, intentions and expectations;
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statements regarding prospects and business strategy;
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statements regarding asset quality and market risk; and
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estimates of future costs, benefits and results.
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These forward-looking statements are subject to significant
risks, assumptions and uncertainties, including, among other
things, the factors discussed under the heading Risk
Factors beginning at page 12 that could affect the
actual outcome of future events and the following factors:
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general economic conditions, either nationally or in our market
area, that are worse than expected;
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changes in the interest rate environment that reduce our
interest margins or reduce the fair value of financial
instruments;
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increased competitive pressures among financial services
companies;
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changes in consumer spending, borrowing and savings habits;
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legislative or regulatory changes that adversely affect our
business;
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adverse changes in the securities markets;
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our ability to grow and successfully manage such growth;
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our ability to return to profitability;
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changes in accounting policies and practices, as may be adopted
by the bank regulatory agencies, the Securities and Exchange
Commission or the Financial Accounting Standards Board; and
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our ability to successfully implement our business strategy,
enter into new markets
and/or
expand product offerings successfully and take advantage of
growth opportunities.
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Any of the forward-looking statements that we make in this
prospectus and in other public statements we make may turn out
to be wrong because of inaccurate assumptions we might make,
because of the factors illustrated above or because of other
factors that we cannot foresee.
Because of these and other uncertainties, our actual future
results may be materially different from the results indicated
by these forward-looking statements and you should not rely on
such statements.
17
SELECTED
FINANCIAL AND OTHER DATA
Set forth below is selected financial and other data of Bank of
Ruston. The information at March 31, 2010 and for the three
month periods ended March 31, 2010 and 2009 was not
audited, but in the opinion of management, reflects all
adjustments necessary for a fair presentation. All of these
adjustments are normal and recurring. The information at
December 31, 2009 and 2008 and for the years ended
December 31, 2009 and 2008 is derived in part from the
audited financial statements that appear in this prospectus. The
information at or for the year ended December 31, 2007, is
also derived from audited financial statements that do not
appear in this prospectus. The results of operations for the
three months ended March 31, 2010 are not necessarily
indicative of the results of operations that may be expected for
the entire year.
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At March 31,
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At December 31,
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2010
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2009
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2008
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2007
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(Dollars in thousands)
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Selected Financial Data:
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Total assets
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$
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87,019
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$
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85,875
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$
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77,771
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$
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70,544
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Cash and cash equivalents
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2,853
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4,674
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3,516
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2,684
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Investment securities, available for sale
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1,379
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1,384
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1,005
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998
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Mortgage-backed securities:
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Held to maturity
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158
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171
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274
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346
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Available for sale
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5,372
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5,703
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5,438
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4,774
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FHLB stock
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280
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280
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279
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271
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Loans receivable, net
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70,440
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66,998
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61,220
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57,232
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Deposits
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76,851
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75,943
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69,283
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62,544
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FHLB advances
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53
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61
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Total equity
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8,633
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8,476
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7,959
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7,472
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|
|
|
|
|
|
|
|
|
At or for the
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
Ended March 31,
|
|
|
At or for the Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in thousands)
|
|
|
Selected Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
1,120
|
|
|
$
|
1,082
|
|
|
$
|
4,406
|
|
|
$
|
4,448
|
|
|
$
|
4,110
|
|
Total interest expense
|
|
|
267
|
|
|
|
340
|
|
|
|
1,298
|
|
|
|
1,727
|
|
|
|
1,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
853
|
|
|
|
742
|
|
|
|
3,108
|
|
|
|
2,721
|
|
|
|
2,469
|
|
Provision for loan losses
|
|
|
|
|
|
|
2
|
|
|
|
16
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
853
|
|
|
|
740
|
|
|
|
3,092
|
|
|
|
2,689
|
|
|
|
2,469
|
|
Total non-interest income
|
|
|
176
|
|
|
|
161
|
|
|
|
773
|
|
|
|
605
|
|
|
|
432
|
|
Total non-interest expense
|
|
|
828
|
|
|
|
726
|
|
|
|
3,219
|
|
|
|
2,640
|
|
|
|
2,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
201
|
|
|
|
175
|
|
|
|
646
|
|
|
|
654
|
|
|
|
539
|
|
Income taxes
|
|
|
61
|
|
|
|
60
|
|
|
|
182
|
|
|
|
199
|
|
|
|
171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
140
|
|
|
$
|
115
|
|
|
$
|
464
|
|
|
$
|
455
|
|
|
$
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Operating Ratios(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average yield on interest-earning assets
|
|
|
5.66
|
%
|
|
|
6.46
|
%
|
|
|
5.88
|
%
|
|
|
6.31
|
%
|
|
|
6.51
|
%
|
Average rate on interest-bearing liabilities
|
|
|
1.52
|
|
|
|
1.96
|
|
|
|
1.97
|
|
|
|
2.82
|
|
|
|
2.72
|
|
Average interest rate spread(2)
|
|
|
4.14
|
|
|
|
4.05
|
|
|
|
3.91
|
|
|
|
3.49
|
|
|
|
3.79
|
|
Net interest margin(2)
|
|
|
4.31
|
|
|
|
4.57
|
|
|
|
4.15
|
|
|
|
3.86
|
|
|
|
3.91
|
|
Average interest-earning assets to average interest-bearing
liabilities
|
|
|
112.89
|
|
|
|
103.60
|
|
|
|
114.20
|
|
|
|
114.96
|
|
|
|
106.00
|
|
Net interest income after provision for loan losses to
non-interest expense
|
|
|
102.65
|
|
|
|
102.20
|
|
|
|
96.05
|
|
|
|
101.86
|
|
|
|
104.53
|
|
Total non-interest expense to average assets
|
|
|
3.83
|
|
|
|
3.66
|
|
|
|
3.92
|
|
|
|
3.44
|
|
|
|
3.50
|
|
Efficiency ratio(3)
|
|
|
80.76
|
|
|
|
80.40
|
|
|
|
82.94
|
|
|
|
79.37
|
|
|
|
81.41
|
|
Return on average assets
|
|
|
0.63
|
|
|
|
0.57
|
|
|
|
0.57
|
|
|
|
0.61
|
|
|
|
0.53
|
|
Return on average equity
|
|
|
6.35
|
|
|
|
5.64
|
|
|
|
5.63
|
|
|
|
5.87
|
|
|
|
5.08
|
|
Average equity to average assets
|
|
|
9.85
|
%
|
|
|
10.13
|
%
|
|
|
10.04
|
%
|
|
|
9.92
|
%
|
|
|
10.68
|
%
|
(Footnotes on following page)
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the
|
|
|
|
|
Three Months
|
|
At or for the Year Ended
|
|
|
Ended March 31,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2009
|
|
2008
|
|
2007
|
|
Asset Quality Ratios:(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans as a percent of total loans receivable(5)
|
|
|
0.35
|
%
|
|
|
0.37
|
%
|
|
|
0.37
|
%
|
|
|
0.49
|
%
|
|
|
0.22
|
%
|
Non-performing assets as a percent of total assets
|
|
|
0.28
|
|
|
|
0.31
|
|
|
|
0.29
|
|
|
|
0.39
|
|
|
|
0.18
|
|
Non-performing assets and troubled debt restructurings as a
percent of total assets(5)
|
|
|
0.28
|
|
|
|
0.31
|
|
|
|
0.29
|
|
|
|
0.41
|
|
|
|
0.18
|
|
Allowance for loan losses as a percent of non-performing loans
|
|
|
72.66
|
|
|
|
70.57
|
|
|
|
70.97
|
|
|
|
60.39
|
|
|
|
123.92
|
|
Net charge-offs (recoveries) to average loans receivable
|
|
|
(0.02
|
)%
|
|
|
0.02
|
%
|
|
|
0.04
|
%
|
|
|
0.01
|
%
|
|
|
0.03
|
%
|
Capital Ratios:(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital ratio
|
|
|
9.61
|
%
|
|
|
9.96
|
%
|
|
|
9.79
|
%
|
|
|
10.20
|
%
|
|
|
10.55
|
%
|
Tier 1 risk-based capital ratio
|
|
|
13.35
|
%
|
|
|
12.76
|
%
|
|
|
13.65
|
%
|
|
|
13.52
|
%
|
|
|
14.76
|
%
|
Total risk-based capital ratio
|
|
|
13.58
|
%
|
|
|
13.03
|
%
|
|
|
13.93
|
%
|
|
|
13.81
|
%
|
|
|
15.05
|
%
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking offices
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
(1) |
|
With the exception of end of period ratios, all ratios are based
on average monthly balances during the indicated periods. Ratios
for the three month periods are annualized. |
|
(2) |
|
Average interest rate spread represents the difference between
the average yield on interest-earning assets and the average
rate paid on interest-bearing liabilities, and net interest
margin represents net interest income as a percentage of average
interest-earning assets. |
|
(3) |
|
The efficiency ratio represents the ratio of non-interest
expense divided by the sum of net interest income and
non-interest income. |
|
(4) |
|
Non-performing loans consist of all loans 90 days or more
past due. Real estate owned consists of real estate acquired
through foreclosure or real estate acquired by acceptance of a
deed-in-lieu
of foreclosure. |
|
(5) |
|
Capital ratios are end of period ratios. |
19
RECENT
DEVELOPMENTS OF BANK OF RUSTON
Set forth below is selected financial and other data of Bank of
Ruston. The financial information at June 30, 2010 and for
the three and six month periods ended June 30, 2010 and
2009 was not audited, but in the opinion of management, reflects
all adjustments necessary for a fair presentation of the results
for such periods. All of these adjustments are normal and
recurring. The information at December 31, 2009 is derived
in part from the audited financial statements that appear in
this prospectus. The results of operations for the three and six
months ended June 30, 2010 are not necessarily indicative
of the results of operations that may be expected for the entire
year.
|
|
|
|
|
|
|
|
|
|
|
At June 30,
|
|
|
At December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Selected Financial Data:
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
90,716
|
|
|
$
|
85,875
|
|
Cash and cash equivalents
|
|
|
6,431
|
|
|
|
4,674
|
|
Investment securities, available for sale
|
|
|
1,376
|
|
|
|
1,384
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
Held to maturity
|
|
|
150
|
|
|
|
171
|
|
Available for sale
|
|
|
5,045
|
|
|
|
5,703
|
|
FHLB stock
|
|
|
280
|
|
|
|
280
|
|
Loans receivable, net
|
|
|
70,763
|
|
|
|
66,998
|
|
Deposits
|
|
|
80,312
|
|
|
|
75,943
|
|
Securities sold under repurchase agreements
|
|
|
905
|
|
|
|
|
|
Total equity
|
|
|
8,797
|
|
|
|
8,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the
|
|
|
At or for the
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Selected Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
1,140
|
|
|
$
|
1,071
|
|
|
$
|
2,260
|
|
|
$
|
2,153
|
|
Total interest expense
|
|
|
261
|
|
|
|
322
|
|
|
|
528
|
|
|
|
662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
879
|
|
|
|
749
|
|
|
|
1,732
|
|
|
|
1,491
|
|
Provision for loan losses
|
|
|
2
|
|
|
|
4
|
|
|
|
2
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
877
|
|
|
|
745
|
|
|
|
1,730
|
|
|
|
1,485
|
|
Total non-interest income
|
|
|
210
|
|
|
|
209
|
|
|
|
386
|
|
|
|
370
|
|
Total non-interest expense
|
|
|
848
|
|
|
|
801
|
|
|
|
1,678
|
|
|
|
1,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
239
|
|
|
|
153
|
|
|
|
438
|
|
|
|
328
|
|
Income taxes
|
|
|
86
|
|
|
|
59
|
|
|
|
147
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
153
|
|
|
$
|
94
|
|
|
$
|
291
|
|
|
$
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Operating Ratios(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average yield on interest-earning assets
|
|
|
5.48
|
%
|
|
|
5.91
|
%
|
|
|
5.57
|
%
|
|
|
5.99
|
%
|
Average rate on interest-bearing liabilities
|
|
|
1.41
|
|
|
|
2.02
|
|
|
|
1.46
|
|
|
|
2.08
|
|
Average interest rate spread(2)
|
|
|
4.07
|
|
|
|
3.89
|
|
|
|
4.11
|
|
|
|
3.91
|
|
Net interest margin(2)
|
|
|
4.23
|
|
|
|
4.13
|
|
|
|
4.27
|
|
|
|
4.15
|
|
Average interest-earning assets to average interest-bearing
liabilities
|
|
|
112.33
|
|
|
|
113.39
|
|
|
|
111.91
|
|
|
|
113.01
|
|
Net interest income after provision for loan losses to
non-interest expense
|
|
|
103.42
|
|
|
|
93.01
|
|
|
|
103.22
|
|
|
|
97.25
|
|
Total non-interest expense to average assets
|
|
|
3.73
|
|
|
|
4.02
|
|
|
|
3.77
|
|
|
|
3.90
|
|
Efficiency ratio(3)
|
|
|
77.87
|
|
|
|
83.61
|
|
|
|
79.13
|
|
|
|
82.05
|
|
Return on average assets
|
|
|
0.67
|
|
|
|
0.47
|
|
|
|
0.66
|
|
|
|
0.53
|
|
Return on average equity
|
|
|
6.94
|
|
|
|
4.57
|
|
|
|
6.71
|
|
|
|
5.11
|
|
Average equity to average assets
|
|
|
9.70
|
%
|
|
|
10.33
|
%
|
|
|
9.83
|
%
|
|
|
10.44
|
%
|
(Footnotes on following page)
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the
|
|
|
At or for the
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Asset Quality Ratios:(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans as a percent of total loans receivable(5)
|
|
|
0.45
|
%
|
|
|
0.36
|
%
|
|
|
0.45
|
%
|
|
|
0.36
|
%
|
Non-performing assets as a percent of total assets
|
|
|
0.35
|
%
|
|
|
0.30
|
%
|
|
|
0.35
|
%
|
|
|
0.30
|
%
|
Non-performing assets and troubled debt restructurings as a
percent of total assets(5)
|
|
|
0.35
|
%
|
|
|
0.30
|
%
|
|
|
0.35
|
%
|
|
|
0.30
|
%
|
Allowance for loan losses as a percent of non-performing loans
|
|
|
57.05
|
%
|
|
|
75.42
|
%
|
|
|
57.05
|
%
|
|
|
75.42
|
%
|
Net charge-offs (recoveries) to average loans receivable
|
|
|
0.01
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.02
|
%
|
Capital Ratios:(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital ratio
|
|
|
9.57
|
%
|
|
|
10.22
|
%
|
|
|
9.57
|
%
|
|
|
10.22
|
%
|
Tier 1 risk-based capital ratio
|
|
|
13.95
|
%
|
|
|
13.53
|
%
|
|
|
13.95
|
%
|
|
|
13.53
|
%
|
Total risk-based capital ratio
|
|
|
13.72
|
%
|
|
|
13.82
|
%
|
|
|
13.72
|
%
|
|
|
13.82
|
%
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking offices
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
(1) |
|
With the exception of end of period ratios, all ratios are based
on average monthly balances during the indicated periods. Ratios
for the three and six month periods are annualized. |
|
(2) |
|
Average interest rate spread represents the difference between
the average yield on interest-earning assets and the average
rate paid on interest-bearing liabilities, and net interest
margin represents net interest income as a percentage of average
interest-earning assets. |
|
(3) |
|
The efficiency ratio represents the ratio of non-interest
expense divided by the sum of net interest income and
non-interest income. |
|
(4) |
|
Non-performing loans consist of all loans 90 days or more
past due. Real estate owned consists of real estate acquired
through foreclosure or real estate acquired by acceptance of a
deed-in-lieu
of foreclosure. |
|
(5) |
|
Capital ratios are end of period ratios. |
Comparison
of Financial Condition at June 30, 2010 and
December 31, 2009
Bank of Rustons total assets increased by
$4.8 million, or 5.6%, to $90.7 million at
June 30, 2010, compared to $85.9 million at
December 31, 2009. During the first six months of 2010, the
largest increase in our assets was in loans receivable, net,
which increased $3.8 million, or 5.6%. Cash and cash
equivalents increased $1.8 million, or 37.6%, at
June 30, 2010 due in part to an increase in savings and
demand deposits. The largest decrease was in investment and
mortgage-backed securities, which decreased $687,000, or 9.5%,
at June 30, 2010 compared to December 31, 2009.
Premises and equipment, net, decreased $94,000 or 2.4%, for the
periods.
Loans receivable, net, increased by $3.8 million, or 5.6%,
to $70.8 million at June 30, 2010 compared to
$67.0 million at December 31, 2009. During the first
six months of 2010 our total loan originations amounted to
$35.4 million, loan principal payments were
$21.6 million and loan sales were $10.0 million. The
increase in loans receivable, net, was primarily due to
increases in one-to four-family residential loans of
$2.6 million, land loans of $1.4 million, commercial
real estate and lines of credit of $467,000 and $156,000 in home
equity lines of credit. Such increases were partially offset by
decreases of $417,000 in consumer loans, $329,000 in residential
construction loans and $126,000 in commercial business loans.
Investment and mortgage-backed securities amounted to
$6.6 million at June 30, 2010 compared to
$7.3 million at December 31, 2009, a decrease of
$687,000 or 9.5%. The decrease in investment securities at
June 30, 2010 was due to maturities and paydowns received
during the six-month period.
21
Total liabilities increased $4.5 million, or 5.8%, to
$81.9 million at June 30, 2010, compared to
$77.4 million at December 31, 2009. Deposits increased
by $4.4 million, or 5.8%, to $80.3 million at
June 30, 2010, compared to $75.9 million at
December 31, 2009, which reflected normal deposit inflows
during the period. We did not hold any Federal Home Loan Bank
advances at June 30, 2010 or December 31, 2009 as we
implemented our strategy to manage interest rate risk by paying
down higher cost borrowings.
Total equity amounted to $8.8 million at June 30, 2010
compared to $8.5 million at December 31, 2009, an
increase of $321,000 or 3.8%. The reason for the increase in our
total equity was net income of $291,000 for the first six months
of 2010 and an increase in accumulated other comprehensive
income of $28,000.
Comparison
of Operating Results for the Three and Six Months Ended
June 30, 2010 and 2009
Our net income was $153,000 for the three months ended
June 30, 2010, a $59,000, or 62.8%, increase over net
income of $94,000 for the quarter ended June 30, 2009. For
the six months ended June 30, 2010, our net income was
$291,000, an increase of $82,000 over net income of $209,000 for
the six months ended June 30, 2009. Our average interest
rate spread improved by 18 basis points to 4.07% for the
three months ended June 30, 2010 over the second quarter of
2009, while our net interest margin increased 10 basis
points to 4.23% in the second quarter of 2010 compared to the
second quarter of 2009. For the six months ended June 30,
2010, our average interest rate spread was 4.11% and our net
interest margin was 4.27%, compared to 3.91% and 4.15%,
respectively, for the first six months of 2009.
Our total interest income was $1.14 million for the three
months ended June 30, 2010, compared to $1.07 million
for the three months ended June 30, 2009, a $69,000, or
6.4%, increase. For the six months ended June 30, 2010, our
total interest income was $2.26 million, a $107,000, or
5.0%, increase over interest income for the first six months of
2009. The increases in interest income in the three- and
six-month periods ended June 30, 2010 over the comparable
periods in 2009 were due to increases in the average balances of
our interest-earnings assets, particularly loans and
available-for-sale
investment securities, which more than offset decreases in the
average yields earned.
Our total interest expense was $261,000 for the three months
ended June 30, 2010, a decrease of $61,000 compared to
$322,000 of interest expense during the second quarter of 2009.
For the six months ended June 30, 2010, our total interest
expense was $528,000, a $134,000 decrease over total interest
expense for the first six months of 2009. The average rate paid
on our interest-bearing liabilities decreased by 61 basis
points to 1.41% in the quarter ended June 30, 2010 compared
to 2.02% in the quarter ended June 30, 2009. For the six
months ended June 30, 2010, the average rate paid on
interest-bearing liabilities was 1.46% compared to 2.08% for the
first six months of 2009.
Our provision for loan losses amounted to $2,000 for the quarter
ended June 30, 2010, compared to $4,000 for the quarter
ended June 30, 2009. For the six months ended June 30,
2010, our provision for loan losses was $2,000, compared to
$6,000 for the first six months of 2009. Our loans receivable,
net increased by $323,000 during the quarter ended June 30,
2010, which included $2.6 million in loan originations,
offset by sales and repayments of loans. At June 30, 2010,
our allowance for loan losses amounted to $182,000, or 0.26% of
net loans receivable. Our total non-performing loans amounted to
$319,000 at June 30, 2010, compared to $245,000 at
March 31, 2010 and $248,000 December 31, 2009. At
June 30, 2010, our allowance for loan losses amounted to
57.05% of total non-performing loans. Net charge-offs
(recoveries) of loans amounted to $(2,000) during the first half
of 2010.
Our total non-interest income amounted to $210,000 for the
quarter ended June 30, 2010 compared to $209,000 for the
quarter ended June 30, 2009. For the six months ended
June 30, 2010, our non-interest income increased by $16,000
to $386,000 compared to $370,000 for the first half of 2009. The
primary reason for the increase was a $53,000 gain on sale of
fixed assets as a result of the sale of excess land at the site
of our new branch office in the first quarter of 2010, which was
partially offset by a decrease in fees and service charges of
$48,000.
Our total non-interest expense increased by $47,000 to $848,000
for the three months ended June 30, 2010, compared to
$801,000 for the three months ended June 30, 2009. The
number of our full-time equivalent
22
employees increased to 33 at June 30, 2010 compared to 30
at June 30, 2009. Our compensation expense increased by
$37,000 to $504,000 for the three months ended June 30,
2010 compared to the three months ended June 30, 2009. For
the six months ended June 30, 2010, total non-interest
expense increased by $150,000 to $1.7 million compared to
$1.5 million for the first six months of 2009. The primary
reasons for the increase in non-interest expense were increases
in compensation costs and occupancy expense. Our occupancy
expense increased by $25,000 in the first half of 2010 compared
to the first half of 2009, primarily reflecting the addition of
our branch office in February 2009 as well as increased
maintenance expense.
Income tax expense for the three months ended June 30, 2010
amounted to $86,000, an increase of $27,000 compared to the
quarter ended June 30, 2009. For the six months ended
June 30, 2010, income tax expense amounted to $147,000, an
increase of $28,000 compared to the first six months of 2009.
HOW WE
INTEND TO USE THE PROCEEDS FROM THE OFFERING
The following table shows how we intend to use the net proceeds
of the offering. The actual net proceeds will depend on the
number of shares of common stock sold in the offering and the
expenses incurred in connection with the offering. Payments for
shares made through withdrawals from deposit accounts at Bank of
Ruston will reduce Bank of Rustons deposits and will not
result in the receipt of new funds for investment. See
Unaudited Pro Forma Data for the assumptions used to
arrive at these amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15% Above
|
|
|
|
Minimum of
|
|
|
Midpoint of
|
|
|
Maximum of
|
|
|
Maximum of
|
|
|
|
Offering Range
|
|
|
Offering Range
|
|
|
Offering Range
|
|
|
Offering Range
|
|
|
|
680,000
|
|
|
|
|
|
800,000
|
|
|
|
|
|
920,000
|
|
|
|
|
|
1,058,000
|
|
|
|
|
|
|
Shares at
|
|
|
Percent
|
|
|
Shares at
|
|
|
Percent
|
|
|
Shares at
|
|
|
Percent
|
|
|
Shares at
|
|
|
Percent
|
|
|
|
$10.00
|
|
|
of Net
|
|
|
$10.00
|
|
|
of Net
|
|
|
$10.00
|
|
|
of Net
|
|
|
$10.00
|
|
|
of Net
|
|
|
|
per Share
|
|
|
Proceeds
|
|
|
per Share
|
|
|
Proceeds
|
|
|
per Share
|
|
|
Proceeds
|
|
|
per Share
|
|
|
Proceeds
|
|
|
|
(Dollars in thousands)
|
|
|
Offering proceeds
|
|
$
|
6,800
|
|
|
|
112.4
|
%
|
|
$
|
8,000
|
|
|
|
110.3
|
%
|
|
$
|
9,200
|
|
|
|
108.9
|
%
|
|
$
|
10,580
|
|
|
|
107.6
|
%
|
Less: offering expenses
|
|
|
(750
|
)
|
|
|
12.4
|
|
|
|
(750
|
)
|
|
|
10.3
|
|
|
|
(750
|
)
|
|
|
8.9
|
|
|
|
(750
|
)
|
|
|
7.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net offering proceeds
|
|
|
6,050
|
|
|
|
100.0
|
|
|
|
7,250
|
|
|
|
100.0
|
|
|
|
8,450
|
|
|
|
100.0
|
|
|
|
9,830
|
|
|
|
100.0
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds contributed to Bank of Ruston
|
|
$
|
3,630
|
|
|
|
60.0
|
%
|
|
$
|
4,350
|
|
|
|
60.0
|
%
|
|
$
|
5,070
|
|
|
|
60.0
|
%
|
|
$
|
5,898
|
|
|
|
60.0
|
%
|
Proceeds used for loan to employee stock ownership plan
|
|
|
544
|
|
|
|
9.0
|
|
|
|
640
|
|
|
|
8.8
|
|
|
|
736
|
|
|
|
8.7
|
|
|
|
846
|
|
|
|
8.6
|
|
Proceeds used to repurchase shares for recognition and retention
plan
|
|
|
272
|
|
|
|
4.5
|
|
|
|
320
|
|
|
|
4.4
|
|
|
|
368
|
|
|
|
4.4
|
|
|
|
423
|
|
|
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds remaining for Century Next Financial
|
|
$
|
1,604
|
|
|
|
26.5
|
%
|
|
$
|
1,940
|
|
|
|
26.8
|
%
|
|
$
|
2,276
|
|
|
|
26.9
|
%
|
|
$
|
2,663
|
|
|
|
27.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Century Next Financial intends to contribute 60% of the net
proceeds as equity capital to Bank of Ruston in exchange for the
purchase of all of Bank of Rustons capital stock with the
remaining 40% of the proceeds retained by Century Next
Financial. Century Next Financial will use the net proceeds it
retains to loan funds to the employee stock ownership plan to
purchase 8.0% of the shares sold in the offering and will invest
the remaining net proceeds it retains initially in a deposit
account at Bank of Ruston. Under applicable regulations, Century
Next Financial may during the first year following the
conversion, assuming shareholder approval, use a portion of the
net proceeds it retains to fund the recognition and retention
plan. Over time, Century Next Financial may also use the
proceeds it retains from the offering:
|
|
|
|
|
to invest in securities;
|
23
|
|
|
|
|
to repurchase shares of its common stock, subject to regulatory
restrictions; and
|
|
|
|
for general corporate purposes.
|
Under current applicable regulations, Century Next Financial may
not repurchase shares of its common stock during the first year
following the conversion, except to fund equity benefit plans
or, with prior regulatory approval, when extraordinary
circumstances exist.
Bank of Ruston intends to initially use the net proceeds it
receives as a contribution of capital from Century Next
Financial to fund loans and to invest in securities. In the
future, Bank of Ruston may use the offering proceeds:
|
|
|
|
|
to fund new loans;
|
|
|
|
to finance the possible expansion of its business
activities; and
|
|
|
|
for general corporate purposes.
|
We may need regulatory approvals to engage in some of the
activities listed above.
Except as described above, neither Century Next Financial nor
Bank of Ruston has any specific plans for the investment of the
net proceeds of this offering and has not allocated a specific
portion of the proceeds to any particular use. For a discussion
of our business reasons for undertaking the offering see
The Conversion and Offering Purposes of
Conversion.
OUR
POLICY REGARDING DIVIDENDS
After we complete the conversion and offering, our board of
directors will have the authority to declare dividends on the
common stock, subject to statutory and regulatory requirements.
We have not determined whether to pay dividends following our
conversion, or if so, at what rate. The rate of such dividends
and the initial or continued payment thereof will depend upon a
number of factors, including investment opportunities available
to us, capital requirements, our financial condition and results
of operations, tax considerations, statutory and regulatory
limitations, and general economic conditions. No assurances can
be given that any dividends will be paid or that, if paid, will
not be reduced or eliminated in future periods. In addition,
during the first three years after the conversion, no dividend
will be declared or paid if it would be classified as a return
of capital.
Dividends from Century Next Financial may eventually depend, in
part, upon receipt of dividends from Bank of Ruston because
Century Next Financial initially will have no source of income
other than dividends from Bank of Ruston, earnings from the
investment of the net proceeds from the sale of common stock
retained by us, and interest payments with respect to our loan
to our employee stock ownership plan.
Any payment of dividends by Bank of Ruston to Century Next
Financial which would be deemed to be drawn out of Bank of
Rustons bad debt reserves would require a payment of taxes
at the then-current tax rate by Bank of Ruston on the amount of
earnings deemed to be removed from the reserves for such
distribution. Bank of Ruston does not intend to make any
distribution that would create such a federal tax liability. See
Taxation.
Century Next Financial is not subject to the above regulatory
restrictions on the payment of dividends to our shareholders. We
are, however, subject to the requirements of Louisiana law,
which generally permit the payment of dividends out of surplus,
except when (i) the corporation is insolvent or would
thereby be made insolvent, or (ii) the declaration or
payment thereof would be contrary to any restrictions in the
corporations articles of incorporation.
MARKET
FOR OUR COMMON STOCK
Because this is our initial public offering, there is no market
for our common stock at this time. After we complete the
offering, we anticipate that our common stock will be quoted on
the OTC Bulletin Board.
24
Sandler ONeill & Partners, L.P. has advised us
of its intention to make a market in our common stock, however,
it is under no obligation to do so.
The development and maintenance of a liquid public market
depends upon the existence of willing buyers and sellers, the
presence of which is not within our control or the control of
any market maker. It is unlikely that an active and liquid
trading market for the common stock will develop due to the
small size of the offering and the small number of shareholders
expected following the conversion and offering. In addition,
there may be a wide spread between the bid and ask price for our
common stock after the conversion and offering. You should not
view the common stock as a short-term investment. Furthermore,
there can be no assurance that you will be able to sell your
shares at or above the purchase price.
25
REGULATORY
CAPITAL REQUIREMENTS
At March 31, 2010, Bank of Ruston exceeded all of its
regulatory capital requirements. The following table sets forth
Bank of Rustons historical capital under generally
accepted accounting principles and regulatory capital at
March 31, 2010, and the pro forma capital of Bank of Ruston
after giving effect to the conversion and offering, based upon
the sale of the number of shares shown in the table. The pro
forma risk-based capital amounts assume the investment of the
net proceeds received by Bank of Ruston in assets which have a
risk-weight of 50% under applicable regulations, as if such net
proceeds had been received and so applied at March 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma at March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15% Above
|
|
|
|
|
|
|
|
|
|
Minimum of
|
|
|
Midpoint of
|
|
|
Maximum of
|
|
|
Maximum of
|
|
|
|
|
|
|
|
|
|
Offering Range
|
|
|
Offering Range
|
|
|
Offering Range
|
|
|
Offering Range
|
|
|
|
Bank of Ruston
|
|
|
680,000
|
|
|
800,000
|
|
|
920,000
|
|
|
1,058,000
|
|
|
|
Historical at
|
|
|
Shares Sold at
|
|
|
Shares Sold at
|
|
|
Shares Sold at
|
|
|
Shares Sold at
|
|
|
|
March 31, 2010
|
|
|
$10.00 per Share
|
|
|
$10.00 per Share
|
|
|
$10.00 per Share
|
|
|
$10.00 per Share
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
Amount
|
|
|
Assets(1)
|
|
|
Amount
|
|
|
Assets(1)
|
|
|
Amount
|
|
|
Assets(1)
|
|
|
Amount
|
|
|
Assets(1)
|
|
|
Amount
|
|
|
Assets(1)
|
|
|
|
(Dollars in thousands)
|
|
|
Capital at Bank Level:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP capital
|
|
$
|
8,633
|
|
|
|
9.92
|
%
|
|
$
|
11,447
|
|
|
|
12.63
|
%
|
|
$
|
12,023
|
|
|
|
13.16
|
%
|
|
$
|
12,599
|
|
|
|
13.68
|
%
|
|
$
|
13,262
|
|
|
|
14.27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
$
|
8,547
|
|
|
|
9.61
|
%
|
|
$
|
11,361
|
|
|
|
12.28
|
%
|
|
$
|
11,937
|
|
|
|
12.80
|
%
|
|
$
|
12,513
|
|
|
|
13.32
|
%
|
|
$
|
13,176
|
|
|
|
13.90
|
%
|
Requirement
|
|
|
1,333
|
|
|
|
1.50
|
%
|
|
|
1,388
|
|
|
|
1.50
|
%
|
|
|
1,399
|
|
|
|
1.50
|
%
|
|
|
1,409
|
|
|
|
1.50
|
%
|
|
|
1,422
|
|
|
|
1.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess
|
|
$
|
7,214
|
|
|
|
8.11
|
%
|
|
$
|
9,973
|
|
|
|
10.78
|
%
|
|
$
|
10,538
|
|
|
|
11.30
|
%
|
|
$
|
11,104
|
|
|
|
11.82
|
%
|
|
$
|
11,754
|
|
|
|
12.40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
$
|
8,547
|
|
|
|
9.61
|
%
|
|
$
|
11,361
|
|
|
|
12.28
|
%
|
|
$
|
11,937
|
|
|
|
12.80
|
%
|
|
$
|
12,513
|
|
|
|
13.32
|
%
|
|
$
|
13,176
|
|
|
|
13.90
|
%
|
Requirement
|
|
|
3,556
|
|
|
|
4.00
|
%
|
|
|
3,701
|
|
|
|
4.00
|
%
|
|
|
3,730
|
|
|
|
4.00
|
%
|
|
|
3,759
|
|
|
|
4.00
|
%
|
|
|
3,792
|
|
|
|
4.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess
|
|
$
|
4,991
|
|
|
|
5.61
|
%
|
|
$
|
7,660
|
|
|
|
8.28
|
%
|
|
$
|
8,207
|
|
|
|
8.80
|
%
|
|
$
|
8,754
|
|
|
|
9.32
|
%
|
|
$
|
9,384
|
|
|
|
9.90
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
$
|
8,547
|
|
|
|
13.35
|
%
|
|
$
|
11,361
|
|
|
|
17.25
|
%
|
|
$
|
11,937
|
|
|
|
18.03
|
%
|
|
$
|
12,513
|
|
|
|
18.80
|
%
|
|
$
|
13,176
|
|
|
|
19.67
|
%
|
Requirement
|
|
|
2,562
|
|
|
|
4.00
|
%
|
|
|
2,634
|
|
|
|
4.00
|
%
|
|
|
2,649
|
|
|
|
4.00
|
%
|
|
|
2,663
|
|
|
|
4.00
|
%
|
|
|
2,680
|
|
|
|
4.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess
|
|
$
|
5,985
|
|
|
|
9.35
|
%
|
|
$
|
8,727
|
|
|
|
13.25
|
%
|
|
$
|
9,288
|
|
|
|
14.03
|
%
|
|
$
|
9,850
|
|
|
|
14.80
|
%
|
|
$
|
10,496
|
|
|
|
15.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
$
|
8,695
|
|
|
|
13.58
|
%
|
|
$
|
11,509
|
|
|
|
17.48
|
%
|
|
$
|
12,085
|
|
|
|
18.25
|
%
|
|
$
|
12,661
|
|
|
|
19.02
|
%
|
|
$
|
13,324
|
|
|
|
19.89
|
%
|
Requirement
|
|
|
5,123
|
|
|
|
8.00
|
%
|
|
|
5,268
|
|
|
|
8.00
|
%
|
|
|
5,297
|
|
|
|
8.00
|
%
|
|
|
5,326
|
|
|
|
8.00
|
%
|
|
|
5,359
|
|
|
|
8.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess
|
|
$
|
3,572
|
|
|
|
5.58
|
%
|
|
$
|
6,241
|
|
|
|
9.48
|
%
|
|
$
|
6,788
|
|
|
|
10.25
|
%
|
|
$
|
7,335
|
|
|
|
11.02
|
%
|
|
$
|
7,965
|
|
|
|
11.89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of capital of Bank of Ruston post offering:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds infused
|
|
|
|
|
|
|
|
|
|
$
|
3,630
|
|
|
|
|
|
|
$
|
4,350
|
|
|
|
|
|
|
$
|
5,070
|
|
|
|
|
|
|
$
|
5,898
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock acquired by employee stock ownership plan
|
|
|
|
|
|
|
|
|
|
|
(544
|
)
|
|
|
|
|
|
|
(640
|
)
|
|
|
|
|
|
|
(736
|
)
|
|
|
|
|
|
|
(846
|
)
|
|
|
|
|
Common stock acquired by recognition and retention Plan
|
|
|
|
|
|
|
|
|
|
|
(272
|
)
|
|
|
|
|
|
|
(320
|
)
|
|
|
|
|
|
|
(368
|
)
|
|
|
|
|
|
|
(423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma increase in GAAP and regulatory capital
|
|
|
|
|
|
|
|
|
|
$
|
2,814
|
|
|
|
|
|
|
$
|
3,390
|
|
|
|
|
|
|
$
|
3,966
|
|
|
|
|
|
|
$
|
4,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Adjusted total or adjusted risk-weighted assets, as appropriate. |
26
OUR
CAPITALIZATION
The following table presents the historical capitalization of
Bank of Ruston at March 31, 2010, and the pro forma
consolidated capitalization of Century Next Financial after
giving effect to the conversion and offering, based upon the
sale of the number of shares shown below and the other
assumptions set forth under Unaudited Pro Forma Data.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Century Next Financial Corporation Pro Forma
|
|
|
|
|
|
|
Based upon Sale at $10.00 per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,058,000
|
|
|
|
|
|
|
680,000
|
|
|
800,000
|
|
|
920,000
|
|
|
Shares(1)
|
|
|
|
|
|
|
Shares
|
|
|
Shares
|
|
|
Shares
|
|
|
(15% Above
|
|
|
|
Bank of
|
|
|
(Minimum
|
|
|
(Midpoint
|
|
|
(Maximum
|
|
|
Maximum
|
|
|
|
Ruston
|
|
|
of Offering
|
|
|
of Offering
|
|
|
of Offering
|
|
|
of Offering
|
|
|
|
Historical
|
|
|
Range)
|
|
|
Range)
|
|
|
Range)
|
|
|
Range)
|
|
|
|
(In thousands)
|
|
|
Deposits(2)
|
|
$
|
76,851
|
|
|
$
|
76,851
|
|
|
$
|
76,851
|
|
|
$
|
76,851
|
|
|
$
|
76,851
|
|
Borrowings
|
|
|
958
|
|
|
|
958
|
|
|
|
958
|
|
|
|
958
|
|
|
|
958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits and borrowings
|
|
$
|
77,809
|
|
|
$
|
77,809
|
|
|
$
|
77,809
|
|
|
$
|
77,809
|
|
|
$
|
77,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none to be issued
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Common stock, $.01 par value, (post-offering)
9,000,000 shares authorized; shares to be issued as
reflected(3)
|
|
|
|
|
|
|
7
|
|
|
|
8
|
|
|
|
9
|
|
|
|
11
|
|
Additional paid-in capital(3)
|
|
|
|
|
|
|
6,043
|
|
|
|
7,242
|
|
|
|
8,441
|
|
|
|
9,819
|
|
Retained earnings(4)
|
|
|
8,547
|
|
|
|
8,547
|
|
|
|
8,547
|
|
|
|
8,547
|
|
|
|
8,547
|
|
Accumulated other comprehensive gain
|
|
|
86
|
|
|
|
86
|
|
|
|
86
|
|
|
|
86
|
|
|
|
86
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock held by the employee stock ownership plan(5)
|
|
|
|
|
|
|
(544
|
)
|
|
|
(640
|
)
|
|
|
(736
|
)
|
|
|
(846
|
)
|
Common stock held by the recognition and retention plan(6)
|
|
|
|
|
|
|
(272
|
)
|
|
|
(320
|
)
|
|
|
(368
|
)
|
|
|
(432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
$
|
8,633
|
|
|
$
|
13,867
|
|
|
$
|
14,923
|
|
|
$
|
15,979
|
|
|
$
|
17,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity as percent of assets
|
|
|
9.92
|
%
|
|
|
15.03
|
%
|
|
|
15.99
|
%
|
|
|
16.93
|
%
|
|
|
17.99
|
%
|
|
|
|
(1) |
|
As adjusted to give effect to an increase in the number of
shares which could occur due to an increase in the offering
range of up to 15% to reflect regulatory considerations, demand
for the shares or changes in financial market conditions
following commencement of the offering. |
|
(2) |
|
Does not reflect withdrawals from deposit accounts for the
purchase of common stock in the offering. Such withdrawals would
reduce pro forma deposits by the amount of such withdrawals. |
|
(3) |
|
Our pro forma amounts of common stock and additional paid-in
capital have been increased to reflect the number of shares of
our common stock to be outstanding. No effect has been given to
the issuance of additional shares of common stock pursuant to
our proposed stock option plan. We intend to adopt a stock
option plan and to submit such plan to shareholders at a meeting
of shareholders to be held at least six months following
completion of the conversion. If the plan is approved by
shareholders, an amount equal to 10.0% of Century Next
Financials common stock to be sold in the offering will be
reserved for future issuance pursuant to the plan. Your
ownership percentage would decrease by approximately 9.1% if all
potential stock options are exercised from our authorized but
unissued common stock. See Unaudited Pro Forma Data
and Management New Stock Benefit
Plans Stock Option Plan. |
|
(4) |
|
The retained earnings of Century Next Financial will be
substantially restricted after the offering. |
(Footnotes continued on next page)
27
|
|
|
(5) |
|
Assumes that 8.0% of Century Next Financials common stock
to be sold in the offering will be purchased by the employee
stock ownership plan financed by a loan from Century Next
Financial. The loan will be repaid principally by Bank of
Rustons contributions to the employee stock ownership
plan. Since Century Next Financial will finance the employee
stock ownership plan debt, this debt will be eliminated through
consolidation and no liability will be reflected on Century Next
Financials consolidated financial statements. Accordingly,
the amount of shares of common stock acquired by the employee
stock ownership plan is shown in this table as a reduction of
stockholders equity. Assumes the funds used to acquire our
employee stock ownership plan shares will be borrowed from us.
See Note 1 to the tables set forth under Unaudited
Pro Forma Data and Management New Stock
Benefit Plans Employee Stock Ownership Plan. |
|
(6) |
|
Gives effect to the recognition and retention plan which we
expect to adopt after the offering and present to shareholders
for approval at a meeting of shareholders to be held at least
six months after we complete the conversion. No shares will be
purchased by the recognition and retention plan in the offering,
and such plan cannot purchase any shares until shareholder
approval has been obtained. If the recognition and retention
plan is approved by our shareholders, the plan intends to
acquire an amount of common stock equal to 4.0% of Century Next
Financials common stock to be sold in the offering. The
table assumes that shareholder approval has been obtained and
that such shares are purchased in the open market at $10.00 per
share. The common stock so acquired by the recognition and
retention plan is reflected as a reduction in stockholders
equity. If the shares are purchased at prices higher or lower
than the initial purchase price of $10.00 per share, such
purchases would have a greater or lesser impact, respectively,
on stockholders equity. If the recognition and retention
plan shares are issued from our authorized but unissued common
stock, such issuance would dilute the voting interests of
existing shareholders by approximately 3.8%. See Unaudited
Pro Forma Data and Management New Stock
Benefit Plans Recognition and Retention Plan. |
UNAUDITED
PRO FORMA DATA
The actual net proceeds from the sale of Century Next Financial
common stock in the offering cannot be determined until the
offering is completed. However, the net proceeds are currently
estimated to be between $6.1 million and $8.5 million,
or up to $9.8 million in the event the offering range is
increased by approximately 15%, based upon the following
assumptions:
|
|
|
|
|
We will sell all shares of common stock in the subscription
offering and community offering with no shares sold in a
syndicated community offering;
|
|
|
|
Our employee stock ownership plan will purchase an amount equal
to 8.0% of the shares sold in offering, at a price of $10.00 per
share with a loan from Century Next Financial that will be
repaid in equal installments over 20 years; and
|
|
|
|
Total expenses of the offering are estimated to be $750,000.
|
Actual expenses may vary from this estimate, depending upon,
among other factors, if the offering is extended beyond [DATE2],
2010.
We have prepared the following tables, which set forth our
historical consolidated net income and stockholders equity
prior to the conversion and offering at or for the year ended
December 31, 2009 and the three months ended March 31,
2010, and our pro forma consolidated net income and
stockholders equity following the conversion and offering
at or for such dates and periods. In preparing these tables and
in calculating pro forma data, the following assumptions have
been made:
|
|
|
|
|
Pro forma earnings have been calculated assuming the stock had
been sold at the beginning of the period and the net proceeds
had been invested at a yield of 2.55% for the three months ended
March 31, 2010 and 2.69% the year ended December 31,
2009. This represents the yield on a five-year
U.S. Treasury note as of March 31, 2010 and
December 31, 2009, which, in light of current market
interest rates, we consider to more accurately reflect the pro
forma reinvestment rate than the arithmetic average of the
weighted average yield earned on our interest earning assets and
the weighted average rate paid on our deposits, which is the
reinvestment rate generally required by Office of Thrift
Supervision regulations.
|
28
|
|
|
|
|
No withdrawals were made from Bank of Rustons deposit
accounts for the purchase of shares in the offering.
|
|
|
|
Historical and pro forma per share amounts have been calculated
by dividing historical and pro forma amounts by the indicated
number of shares of common stock, as adjusted in the pro forma
net income per share to give effect to the purchase of shares by
the employee stock ownership plan.
|
|
|
|
Pro forma stockholders equity (book value)
amounts have been calculated as if our shares of common stock
had been sold in the offering on the last day of the period
shown and accordingly, no effect has been given to the assumed
earnings effect of the net proceeds. Book value amounts do not
represent amounts available for distribution to shareholders in
the unlikely event of liquidation nor reflect the federal income
tax consequences of the restoration to income of Bank of
Rustons bad debt reserves for income tax purposes, which
would be required in the unlikely event of liquidation. See
Taxation.
|
The following pro forma information may not be representative of
the financial effects of the offering at the date on which the
offering actually occurs and should not be taken as indicative
of future results of operations. Pro forma stockholders
equity represents the difference between the stated amount of
our assets and liabilities computed in accordance with generally
accepted accounting principles. The pro forma stockholders
equity is not intended to represent the fair market value of the
common stock and may be different than amounts that would be
available for distribution to shareholders in the event of
liquidation.
The tables reflect the possible issuance of additional shares
pursuant to our proposed stock option plan, which we expect to
adopt following the offering and present, together with the
recognition and retention plan discussed below, to our
shareholders for approval at a meeting to be held at least six
months after the conversion is completed. See
Management New Stock Benefit Plans. For
purposes of the tables, we have assumed that shareholder
approval was obtained, the exercise price of the stock options
and the market price of the common stock at the date of grant
were $10.00 per share, the stock options had a term of
10 years and vest pro rata over a five year period, and
options were granted to acquire common stock equal to 10.0% of
Century Next Financials common stock sold the offering. We
applied the Black-Scholes option pricing model to estimate a
grant date fair value of $4.36 for each option. In addition to
the terms of the options described above, the Black-Scholes
option pricing model incorporated an estimated volatility rate
of 23.90% for the common stock, a dividend yield of zero, an
expected option life of 10 years and a risk free interest
rate of 3.84%. Finally, we assumed that 25.0% of the stock
options were non-qualified options granted to directors,
resulting in a tax benefit (at an assumed tax rate of 34.0%) for
a deduction equal to the grant date fair value of the options.
There can be no assurance that shareholder approval of the stock
option plan will be obtained, that the exercise price of the
options will be $10.00 per share or that the Black-Scholes
option pricing model assumptions used to prepare the table will
be the same at the time the options are granted.
The tables also give effect to the recognition and retention
plan, which we expect to adopt following the offering and
present, together with the stock option plan discussed above, to
our shareholders for approval at a meeting to be held at least
six months after the conversion is completed. If approved by
shareholders, the recognition and retention plan intends to
acquire an amount of common stock equal to 4.0% of Century Next
Financials common stock to be outstanding after the
offering, either through open market purchases, if permissible,
or from authorized but unissued shares of common stock. The
table assumes that shareholder approval has been obtained and
that the shares acquired by the recognition and retention plan
are purchased in the open market at $10.00 per share and vest
over a five-year period. There can be no assurance that
shareholder approval of the recognition and retention plan will
be obtained, that the shares will be purchased in the open
market or that the purchase price will be $10.00 per share.
The tables on the following pages summarize historical
consolidated data of Bank of Ruston and Century Next
Financials pro forma data at or for the dates and periods
indicated based on the assumptions set forth above and in the
tables and should not be used as a basis for projection of the
market value of our common stock following the conversion and
offering.
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the Three Months Ended March 31, 2010
|
|
|
|
680,000
|
|
|
800,000
|
|
|
920,000
|
|
|
1,058,000
|
|
|
|
Shares Sold
|
|
|
Shares Sold
|
|
|
Shares Sold
|
|
|
Shares Sold
|
|
|
|
at $10.00
|
|
|
at $10.00
|
|
|
at $10.00
|
|
|
at $10.00
|
|
|
|
per Share
|
|
|
per Share
|
|
|
per Share
|
|
|
per Share
|
|
|
|
(Minimum
|
|
|
(Midpoint
|
|
|
(Maximum
|
|
|
(15% Above
|
|
|
|
of Range)
|
|
|
of Range)
|
|
|
of Range)
|
|
|
Maximum)
|
|
|
|
(Dollars in thousands, except per share amounts)
|
|
|
Gross proceeds
|
|
$
|
6,800
|
|
|
$
|
8,000
|
|
|
$
|
9,200
|
|
|
$
|
10,580
|
|
Less: estimated offering expenses
|
|
|
(750
|
)
|
|
|
(750
|
)
|
|
|
(750
|
)
|
|
|
(750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net proceeds
|
|
|
6,050
|
|
|
|
7,250
|
|
|
|
8,450
|
|
|
|
9,830
|
|
Less: common stock acquired by employee stock ownership plan(1)
|
|
|
(544
|
)
|
|
|
(640
|
)
|
|
|
(736
|
)
|
|
|
(846
|
)
|
Less: common stock to be acquired by recognition and retention
plan(2)
|
|
|
(272
|
)
|
|
|
(320
|
)
|
|
|
(368
|
)
|
|
|
(423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investable proceeds
|
|
$
|
5,234
|
|
|
$
|
6,290
|
|
|
$
|
7,346
|
|
|
$
|
8,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
140
|
|
|
$
|
140
|
|
|
$
|
140
|
|
|
$
|
140
|
|
Pro forma income on net investable proceeds(3)
|
|
|
22
|
|
|
|
27
|
|
|
|
31
|
|
|
|
36
|
|
Less: pro forma state shares tax(4)
|
|
|
(17
|
)
|
|
|
(18
|
)
|
|
|
(19
|
)
|
|
|
(20
|
)
|
Less: pro forma employee stock ownership plan adjustment(1)
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(6
|
)
|
|
|
(7
|
)
|
Less: pro forma recognition and retention plan award expense(2)
|
|
|
(9
|
)
|
|
|
(11
|
)
|
|
|
(12
|
)
|
|
|
(14
|
)
|
Less: pro forma stock option expense(5)
|
|
|
(14
|
)
|
|
|
(16
|
)
|
|
|
(18
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income
|
|
$
|
118
|
|
|
$
|
117
|
|
|
$
|
116
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
0.22
|
|
|
$
|
0.18
|
|
|
$
|
0.16
|
|
|
$
|
0.14
|
|
Pro forma income on net investable proceeds:
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
0.04
|
|
Less: pro forma state shares tax(4)
|
|
|
(0.03
|
)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
Less: pro forma employee stock ownership plan adjustment(1)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
Less: pro forma recognition and retention plan award expense(2)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
Less: pro forma stock option expense(5)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income per share
|
|
$
|
0.19
|
|
|
$
|
0.16
|
|
|
$
|
0.14
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering price as a multiple of pro forma net income per share
|
|
|
13.27
|
|
|
|
15.78
|
|
|
|
18.34
|
|
|
|
21.37
|
|
Number of shares used to calculate pro forma net income per
share(6)
|
|
|
626,280
|
|
|
|
736,800
|
|
|
|
847,320
|
|
|
|
974,418
|
|
Stockholders equity(6):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
8,633
|
|
|
$
|
8,633
|
|
|
$
|
8,633
|
|
|
$
|
8,633
|
|
Estimated net proceeds
|
|
|
6,050
|
|
|
|
7,250
|
|
|
|
8,450
|
|
|
|
9,830
|
|
Less: common stock acquired by employee stock ownership plan(1)
|
|
|
(544
|
)
|
|
|
(640
|
)
|
|
|
(736
|
)
|
|
|
(846
|
)
|
Less: common stock to be acquired by recognition and retention
plan(2)
|
|
|
(272
|
)
|
|
|
(320
|
)
|
|
|
(368
|
)
|
|
|
(423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma stockholders equity
|
|
$
|
13,867
|
|
|
$
|
14,923
|
|
|
$
|
15,979
|
|
|
$
|
17,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
12.69
|
|
|
$
|
10.79
|
|
|
$
|
9.38
|
|
|
$
|
8.16
|
|
Estimated net proceeds
|
|
|
8.90
|
|
|
|
9.06
|
|
|
|
9.19
|
|
|
|
9.29
|
|
Less: common stock acquired by employee stock ownership plan(1)
|
|
|
(0.80
|
)
|
|
|
(0.80
|
)
|
|
|
(0.80
|
)
|
|
|
(0.80
|
)
|
Less: common stock to be acquired by recognition and retention
plan(2)
|
|
|
(0.40
|
)
|
|
|
(0.40
|
)
|
|
|
(0.40
|
)
|
|
|
(0.40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma stockholders equity per share
|
|
$
|
20.39
|
|
|
$
|
18.65
|
|
|
$
|
17.37
|
|
|
$
|
16.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering price as a percentage of pro forma stockholders
equity per share
|
|
|
49.04
|
%
|
|
|
53.62
|
%
|
|
|
57.57
|
%
|
|
|
61.54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares used to calculate pro forma stockholders
equity per share(6)
|
|
|
680,000
|
|
|
|
800,000
|
|
|
|
920,000
|
|
|
|
1,058,000
|
|
(Footnotes begin on the following page)
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for The Year Ended December 31, 2009
|
|
|
|
680,000
|
|
|
800,000
|
|
|
920,000
|
|
|
1,058,000
|
|
|
|
Shares Sold
|
|
|
Shares Sold
|
|
|
Shares Sold
|
|
|
Shares Sold
|
|
|
|
at $10.00
|
|
|
at $10.00
|
|
|
at $10.00
|
|
|
at $10.00
|
|
|
|
per Share
|
|
|
per Share
|
|
|
per Share
|
|
|
per Share
|
|
|
|
(Minimum
|
|
|
(Midpoint
|
|
|
(Maximum
|
|
|
(15% Above
|
|
|
|
of Range)
|
|
|
of Range)
|
|
|
of Range)
|
|
|
Maximum)
|
|
|
|
(Dollars in thousands, except per share amounts)
|
|
|
Gross proceeds
|
|
$
|
6,800
|
|
|
$
|
8,000
|
|
|
$
|
9,200
|
|
|
$
|
10,580
|
|
Less: estimated offering expenses
|
|
|
(750
|
)
|
|
|
(750
|
)
|
|
|
(750
|
)
|
|
|
(750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net proceeds
|
|
|
6,050
|
|
|
|
7,250
|
|
|
|
8,450
|
|
|
|
9,830
|
|
Less: common stock acquired by employee stock ownership plan(1)
|
|
|
(544
|
)
|
|
|
(640
|
)
|
|
|
(736
|
)
|
|
|
(846
|
)
|
Less: common stock to be acquired by recognition and retention
plan(2)
|
|
|
(272
|
)
|
|
|
(320
|
)
|
|
|
(368
|
)
|
|
|
(423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investable proceeds
|
|
$
|
5,234
|
|
|
$
|
6,290
|
|
|
$
|
7,346
|
|
|
$
|
8,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
464
|
|
|
$
|
464
|
|
|
$
|
464
|
|
|
$
|
464
|
|
Pro forma income on net investable proceeds(3)
|
|
|
93
|
|
|
|
112
|
|
|
|
130
|
|
|
|
152
|
|
Less: pro forma state shares tax(4)
|
|
|
(69
|
)
|
|
|
(73
|
)
|
|
|
(76
|
)
|
|
|
(80
|
)
|
Less: pro forma employee stock ownership plan adjustment(1)
|
|
|
(18
|
)
|
|
|
(21
|
)
|
|
|
(24
|
)
|
|
|
(28
|
)
|
Less: pro forma recognition and retention plan award expense(2)
|
|
|
(36
|
)
|
|
|
(42
|
)
|
|
|
(49
|
)
|
|
|
(56
|
)
|
Less: pro forma stock option expense(5)
|
|
|
(54
|
)
|
|
|
(64
|
)
|
|
|
(73
|
)
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income
|
|
$
|
380
|
|
|
$
|
376
|
|
|
$
|
372
|
|
|
$
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
0.74
|
|
|
$
|
0.63
|
|
|
$
|
0.55
|
|
|
$
|
0.47
|
|
Pro forma income on net investable proceeds:
|
|
|
0.15
|
|
|
|
0.15
|
|
|
|
0.15
|
|
|
|
0.16
|
|
Less: pro forma state shares tax(4)
|
|
|
(0.11
|
)
|
|
|
(0.10
|
)
|
|
|
(0.09
|
)
|
|
|
(0.08
|
)
|
Less: pro forma employee stock ownership plan adjustment(1)
|
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
Less: pro forma recognition and retention plan award expense(2)
|
|
|
(0.06
|
)
|
|
|
(0.06
|
)
|
|
|
(0.06
|
)
|
|
|
(0.06
|
)
|
Less: pro forma stock option expense(5)
|
|
|
(0.09
|
)
|
|
|
(0.09
|
)
|
|
|
(0.09
|
)
|
|
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income per share
|
|
$
|
0.60
|
|
|
$
|
0.50
|
|
|
$
|
0.43
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering price as a multiple of pro forma net income per share
|
|
|
16.53
|
|
|
|
20.00
|
|
|
|
23.26
|
|
|
|
27.03
|
|
Number of shares used to calculate pro forma net income per
share(6)
|
|
|
628,320
|
|
|
|
739,200
|
|
|
|
850,080
|
|
|
|
977,592
|
|
Stockholders equity(6):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
8,476
|
|
|
$
|
8,476
|
|
|
$
|
8,476
|
|
|
$
|
8,476
|
|
Estimated net proceeds
|
|
|
6,050
|
|
|
|
7,250
|
|
|
|
8,450
|
|
|
|
9,830
|
|
Less: common stock acquired by employee stock ownership plan(1)
|
|
|
(544
|
)
|
|
|
(640
|
)
|
|
|
(736
|
)
|
|
|
(846
|
)
|
Less: common stock to be acquired by recognition and retention
plan(2)
|
|
|
(272
|
)
|
|
|
(320
|
)
|
|
|
(368
|
)
|
|
|
(423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma stockholders equity
|
|
$
|
13,710
|
|
|
$
|
14,766
|
|
|
$
|
15,822
|
|
|
$
|
17,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
12.46
|
|
|
$
|
10.60
|
|
|
$
|
9.21
|
|
|
$
|
8.01
|
|
Estimated net proceeds
|
|
|
8.90
|
|
|
|
9.06
|
|
|
|
9.19
|
|
|
|
9.29
|
|
Less: common stock acquired by employee stock ownership plan(1)
|
|
|
(0.80
|
)
|
|
|
(0.80
|
)
|
|
|
(0.80
|
)
|
|
|
(0.80
|
)
|
Less: common stock to be acquired by recognition and retention
plan(2)
|
|
|
(0.40
|
)
|
|
|
(0.40
|
)
|
|
|
(0.40
|
)
|
|
|
(0.40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma stockholders equity per share
|
|
$
|
20.16
|
|
|
$
|
18.46
|
|
|
$
|
17.20
|
|
|
$
|
16.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering price as a percentage of pro forma stockholders
equity per share
|
|
|
49.60
|
%
|
|
|
54.17
|
%
|
|
|
58.14
|
%
|
|
|
62.11
|
%
|
Number of shares used to calculate pro forma stockholders
equity per share(6)
|
|
|
680,000
|
|
|
|
800,000
|
|
|
|
920,000
|
|
|
|
1,058,000
|
|
|
|
|
(1) |
|
Assumes that the employee stock ownership plan will acquire a
number of shares equal to 8.0% of Century Next Financials
common stock to be sold in the offering. The employee stock
ownership plan will borrow the funds used to acquire these
shares from the net proceeds from the offering retained by
Century |
(Footnotes continue on the following page)
31
|
|
|
|
|
Next Financial. The amount of this borrowing has been reflected
as a reduction from gross proceeds to determine estimated net
investable proceeds. This borrowing will have an interest rate
equal to the prime rate as published in the Wall Street
Journal, which is currently 3.25%, and a term of
20 years. Bank of Ruston intends to make contributions to
the employee stock ownership plan in amounts at least equal to
the principal and interest requirement of the debt. Interest
income that Century Next Financial will earn on the loan will
offset the interest paid on the loan by Bank of Ruston. As the
debt is paid down, shares will be released for allocation to
participants accounts and stockholders equity will
be increased. |
|
|
|
The adjustment to pro forma net income for the employee stock
ownership plan reflects the after-tax compensation expense
associated with the plan, based on an assumed effective tax rate
of 34.0%. Applicable accounting principles require that
compensation expense for the employee stock ownership plan be
based upon shares committed to be released and that unallocated
shares be excluded from earnings per share computations. An
equal number of shares (1/20 of the total, based on a
20-year
loan) will be released each year over the term of the loan. The
valuation of shares committed to be released would be based upon
the average market value of the shares during the year, which,
for purposes of this calculation, was assumed to be equal to the
$10.00 per share purchase price. If the average market value per
share is greater than $10.00 per share, total employee stock
ownership plan expense would be greater. |
|
(2) |
|
Assumes that Century Next Financial will purchase a number of
shares in the open market equal to 4.0% of Century Next
Financials common stock to be sold in the offering, that
will be reissued as restricted stock awards under the
recognition and retention plan proposed to be adopted following
the offering. Repurchases are assumed to be funded with cash on
hand at Century Next Financial. The cost of these shares has
been reflected as a reduction from gross proceeds to determine
estimated net investable proceeds. In calculating the pro forma
effect of the restricted stock awards, it is assumed that the
required shareholder approval has been received, that the shares
used to fund the awards were acquired at the beginning of the
respective period and that the shares were acquired at the
$10.00 per share purchase price. The issuance of authorized but
unissued shares of common stock instead of shares repurchased in
the open market would dilute the ownership interests of existing
shareholders, by approximately 3.8%. |
|
|
|
The adjustment to pro forma net income for the restricted stock
awards reflects the after-tax compensation expense associated
with the awards. It is assumed that the fair market value of a
share of Century Next Financial common stock was $10.00 at the
time the awards were made, that all shares were granted in the
first year after the offering, that shares of restricted stock
issued under the recognition and retention plan vest over a
five-year period, or 20.0% per year, that compensation expense
is recognized on a straight-line basis over each vesting period
so that 20.0% of the value of the shares awarded was an
amortized expense during each year, and that the combined
federal and state income tax rate was 34.0%. If the fair market
value per share is greater than $10.00 per share on the date
shares are awarded under the recognition and retention plan,
total recognition and retention plan expense would be greater. |
|
(3) |
|
Pro forma net income on net investable proceeds is equal to the
net proceeds less the cost of acquiring shares in the open
market at the $10.00 per share purchase price to fund the
employee stock ownership plan and the restricted stock awards
under the recognition and retention plan multiplied by the
after-tax reinvestment rate. The after-tax reinvestment rate for
the three months ended March 31, 2010 is equal to 1.68%,
based on the following assumptions: combined federal and state
income tax rate of 34.0% and a pre-tax reinvestment rate of
2.55%. The after-tax reinvestment rate for the year ended
December 31, 2009 is equal to 1.78%, based on the following
assumptions: combined federal and state income tax rate of 34.0%
and a pre-tax reinvestment rate of 2.69%. |
|
(4) |
|
Upon consummation of the conversion, Bank of Ruston will become
subject to the Louisiana Shares Tax. The Shares Tax is based
upon capitalized earnings and taxable stockholders equity
minus certain real and personal property credits. The amount
shown is an estimate. For additional information, see
Taxation-State Taxation. |
|
(5) |
|
The adjustment to pro forma net income for stock options
reflects the compensation expense associated with the stock
options that may be granted under the stock option plan to be
adopted following the conversion. If the stock option plan is
approved by shareholders, a number of shares equal to 10.0% of
Century Next Financials common stock to be sold in the
offering will be reserved for future issuance upon the |
32
|
|
|
|
|
exercise of stock options that may be granted under the plan.
Using the Black-Scholes option-pricing formula, each option is
assumed to have a value of $4.36 based on the following
assumptions: exercise price, $10.00; trading price on date of
grant, $10.00; dividend yield, zero; expected life,
10 years; expected volatility, 23.90%; and risk-free
interest rate, 3.84%. Finally, we assumed that 25.0% of the
stock options were non-qualified options granted to directors,
resulting in a tax benefit (at an assumed rate of 34.0%) for a
deduction equal to the grant date fair value of the options. It
is assumed that all stock options were granted in the first year
after the offering, that stock options granted under the stock
option plan vest over a five-year period, or 20.0% per year,
that compensation expense is recognized on a straight-line basis
over each vesting period so that 20.0% of the value of the
options awarded was an amortized expense during each year. If
the fair market value per share is different than $10.00 per
share on the date options are awarded under the stock option
plan, or if the assumptions used in the option-pricing formula
are different from those used in preparing this pro forma data,
the value of the stock options and the related expense would be
different. |
|
|
|
Applicable accounting standards do not prescribe a specific
valuation technique to be used to estimate the fair value of
employee stock options. Century Next Financial may use a
valuation technique other than the Black-Scholes option-pricing
formula and that technique may produce a different value. The
issuance of authorized but unissued shares of common stock to
satisfy option exercises instead of shares repurchased in the
open market would dilute the ownership interests of existing
shareholders by approximately 9.1%. |
|
(6) |
|
The number of shares used to calculate pro forma net income per
share is equal to the total number of shares to be outstanding
upon completion of the offering, less the number of shares
purchased by the employee stock ownership plan not committed to
be released within one year following the offering. The number
of shares used to calculate pro forma stockholders equity
per share is equal to the total number of shares to be
outstanding upon completion of the offering. |
33
MANAGEMENTS
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section is intended to help potential investors understand
the financial performance of Bank of Ruston through a discussion
of the factors affecting our financial condition and our
consolidated results of operations. This section should be read
in conjunction with the financial statements and notes to the
financial statements that appear elsewhere in this prospectus.
Century Next Financial has not yet commenced operations and has
engaged in only minimal organizational activities at
March 31, 2010, therefore the information included in this
section reflects the financial performance of Bank of Ruston.
Following the completion of the conversion and offering, we
anticipate that our non-interest expense will increase as a
result of the increased costs associated with managing a public
company, increased compensation expenses associated with the
purchases of shares of common stock by our employee stock
ownership plan, and the adoption of one or more stock-based
benefit plans, if such plans are approved by Century Next
Financials shareholders.
Overview
Our profitability depends primarily on net interest income,
which is the difference between interest income earned on
interest-earning assets, principally loans, and interest expense
paid on interest-bearing liabilities, principally deposits. Net
interest income is dependent upon the level of interest rates
and the extent to which such rates are changing. Our
profitability also depends, to a lesser extent, on
interest-earning deposits in other institutions, non-interest
income, borrowings from the Federal Home Loan Bank of Dallas,
provision for loan losses, non-interest expenses and federal
income taxes.
For our portfolio loans, we originate principally short-term
loans of three to five years which amortize over longer periods
up to 30 years and require the payment of principal at
stated maturity. Most of such loans are refinanced with Bank of
Ruston at the end of their term due to a renewal process with
reduced fees and costs. It has been our policy to renew such
loans at a rate no greater than 2% over the prior rate.
We sell a substantial amount of our long-term, fixed rate
single-family residential mortgage loans into the secondary
market, although we also retain some of such loans for
portfolio. In recent years, we have emphasized commercial real
estate lending and lines of credit which increased from
$10.2 million at December 31, 2008 to
$12.4 million at March 31, 2010. Typically,
single-family loans involve a lower degree of risk and carry a
lower yield than commercial real estate, construction,
commercial business and consumer loans. Our loans are primarily
funded by certificates of deposit, which typically have a higher
interest rate than savings accounts. At March 31, 2010,
certificates of deposit amounted to 56.4% of total deposits
compared to 58.3% and 54.2% of total deposits at
December 31, 2009 and 2008, respectively. We did not have
any borrowings from the Federal Home Loan Bank of Dallas as of
March 31, 2010 and December 31, 2009, compared to
$53,000 at December 31, 2008. Although we will attempt to
diversify into other deposit products following the conversion
in order to improve our net interest margin, we anticipate that
certificates of deposit will continue to be a primary source of
funding for our assets in the near term.
Our results of operations are also significantly affected by
general economic and competitive conditions, particularly with
respect to changes in interest rates, government policies and
actions of regulatory authorities. Future changes in applicable
law, regulations or government policies may materially affect
our financial condition and results of operations. See
Risk Factors beginning on page 12.
Business
Strategy
Our business strategy is focused on operating a growing and
profitable community-oriented financial institution. Below are
certain of the highlights of our business strategy:
|
|
|
|
|
Growing Our Loan Portfolio. Following the
conversion, we plan to expand our origination of commercial real
estate loans secured by owner-occupied commercial real estate
and investment real estate with strong guarantor support. We
plan to continue to emphasize originating short- term one-to
four family residential loans for portfolio and selling a
significant amount of our one-to four-family
|
34
|
|
|
|
|
residential loans having longer terms into the secondary market.
We plan to build on our banking relationships with small- and
medium-sized businesses in our local market area. As a local
community bank with a senior management team that has
significant commercial banking experience in Lincoln Parish and
the contiguous communities, Bank of Ruston is positioned to more
effectively meet the commercial banking needs of local
businesses that are currently underserved by larger financial
institutions that place more of an emphasis on developing large
commercial banking relationships. Bank of Rustons ability
to provide small- and medium-sized commercial banking customers
with local decision-making and superior service will be a core
marketing focus in competing for commercial real estate loans
and deposits. We will continue to pursue residential lending
which we expect will also be a potential source of core deposit
growth in our local market and originating loans throughout the
state of Louisiana.
|
|
|
|
|
|
Growing our Retail Core Deposits. We plan to
grow our retail deposits by emphasizing transactional deposit
accounts. According to the market share report of the Federal
Deposit Insurance Corporation, as of June 30, 2008, the
most recent date for which information is available, Bank of
Ruston had 9.1% of the market in Lincoln Parish which was the
fourth largest following one bank that operates nationally and
two regional banks. Growth of retail core deposits will be
pursued through offering products and services that meet the
full service banking needs of all age groups and developing more
of a sales culture in the branches. Advertising, promotions and
offering attractive rates on certain transaction accounts may
also be utilized as means to increase retail core deposits.
|
|
|
|
Maintaining High Asset Quality. We continue to
maintain high levels of asset quality. At March 31, 2010,
we had $245,000 of non-performing loans in our portfolio and no
real estate acquired in foreclosure. We attribute our high asset
quality to our prudent and conservative underwriting practices,
which include low loan-to-value ratios, personal guarantees,
cross-collateralization and tailoring loan terms for the
individual customer. We intend to maintain high asset quality
after the offering even as we grow Bank of Ruston.
|
|
|
|
Continuing to Provide Exceptional Customer
Service. As a community oriented savings bank, we
take pride in providing exceptional customer service as a means
to attract and retain customers. We deliver personalized service
to our customers that distinguishes us from the large regional
banks operating in our market area. Our management team has
strong ties to, and deep roots in, the community. We believe
that we know our customers banking needs and can respond
quickly to address them.
|
Critical
Accounting Policies
In reviewing and understanding financial information for Bank of
Ruston, you are encouraged to read and understand the
significant accounting policies used in preparing our financial
statements. These policies are described in Note 1 of the
notes to our financial statements. The accounting and financial
reporting policies of Bank of Ruston conform to accounting
principles generally accepted in the United States of America
and to general practices within the banking industry.
Accordingly, the financial statements require certain estimates,
judgments, and assumptions, which are believed to be reasonable,
based upon the information available. These estimates and
assumptions affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of income and expenses during the periods
presented. The following accounting policies comprise those that
management believes are the most critical to aid in fully
understanding and evaluating our reported financial results.
These policies require numerous estimates or economic
assumptions that may prove inaccurate or may be subject to
variations which may significantly affect our reported results
and financial condition for the period or in future periods.
Allowance for Loan Losses. The allowance for
loan losses is maintained at a level to provide for probable
credit losses related to specifically identified loans and for
losses inherent in the loan portfolio that have been incurred as
of the balance sheet date. The allowance for loan losses is
comprised of specific allowances and a general allowance.
Specific provisions are assessed for each loan that is reviewed
for impairment or for which a probable loss has been identified.
The allowance related to loans that are identified as impaired
is based on discounted expected future cash flows using the
loans initial effective interest rate,
35
the observable market value of the loan, or the estimated fair
value of the collateral for certain collateral dependent loans.
Factors contributing to the determination of specific provisions
include the financial condition of the borrower, changes in the
value of pledged collateral and general economic conditions.
General allowances are established based on historical
charge-offs considering factors that include risk rating,
concentrations and loan type. For the general allowance,
management also considers trends in delinquencies and
non-accrual loans, concentrations, volatility of risk ratings
and the evolving mix in terms of collateral, relative loan size
and the degree of seasoning within the various loan products.
Our allowance levels may be impacted by changes in underwriting
standards, credit administration and collection policies,
regulation and other factors which affect the credit quality and
collectability of the loan portfolio also impact the allowance
levels. The allowance for loan losses is based on
managements estimate of probable credit losses inherent in
the loan portfolio; actual credit losses may vary from the
current estimate. The allowance for loan losses is reviewed
periodically, taking into consideration the risk characteristics
of the loan portfolio, past charge-off experience, general
economic conditions and other factors that warrant current
recognition. As adjustments to the allowance for loan losses
become necessary, they are reflected as a provision for loan
losses in current-period earnings. Actual loan charge-offs are
deducted from and subsequent recoveries of previously
charged-off loans are added to the allowance.
Other-Than-Temporary Impairment. We review our
investment portfolio on a quarterly basis for indications of
impairment. This review includes analyzing the length of time
and the extent to which the fair value has been lower than the
cost, the financial condition and near-term prospects of the
issuer including any specific events that may influence the
operations of the issuer, and the intent and ability to hold the
investment for a period of time sufficient to allow for any
anticipated recovery in the market. Inherent in this analysis is
a certain amount of imprecision in the judgment used by
management.
We recognize credit-related other-than-temporary impairment on
debt securities in earnings while noncredit-related
other-than-temporary impairment on debt securities not expected
to be sold is recognized in accumulated other comprehensive
income. We assess whether the credit loss existed by considering
whether (a) we have the intent to sell the security,
(b) it is more likely than not that we will be required to
sell the security before recovery, or (c) we do not expect
to recover the entire amortized cost basis of the security. We
may bifurcate the other-than-temporary impairment on securities
not expected to be sold or where the entire amortized cost of
the security is not expected to be recovered into the components
representing credit loss and the component representing loss
related to other factors. The portion of the fair value decline
attributable to credit loss is recognized through earnings.
Corporate debt securities are evaluated for other-than-temporary
impairment by determining whether it is probable that an adverse
change in estimated cash flows has occurred. Determining whether
there has been an adverse change in estimated cash flows
involves the calculation of the present value of remaining cash
flows compared to previously projected cash flows. We consider
the discounted cash flow analysis to be our primary evidence
when determining whether credit-related other-than-temporary
impairment exists on corporate debt securities.
Income Taxes. Deferred income tax assets and
liabilities are determined using the liability (or balance
sheet) method. Under this method, the net deferred tax asset or
liability is determined based on the tax effects of the
temporary differences between the book and tax bases of the
various assets and liabilities and gives current recognition to
changes in tax rates and laws. Realizing our deferred tax assets
principally depends upon our achieving projected future taxable
income. We may change our judgments regarding future
profitability due to future market conditions and other factors.
We may adjust our deferred tax asset balances if our judgments
change.
Comparison
of Financial Condition at March 31, 2010 and
December 31, 2009
Bank of Rustons total assets increased by
$1.1 million, or 1.3%, to $87.0 million at
March 31, 2010, compared to $85.9 million at
December 31, 2009. During the first three months of 2010,
the largest increase in our assets was in loans receivable, net,
which increased $3.4 million. The largest decrease was in
cash and cash equivalents which decreased $1.8 million at
March 31, 2010 due in part to a reduction in certificates
of
36
deposits. Investment securities decreased $349,000, or 4.8%, at
March 31, 2010 compared to December 31, 2009, and
premises and equipment, net, decreased $107,000, or 2.8%, for
the periods.
Loans receivable, net, increased by $3.4 million, or 5.1%,
to $70.4 million at March 31, 2010 compared to
$67.0 million at December 31, 2009. During the first
three months of 2010 our total loan originations amounted to
$13.7 million, loan principal payments were
$7.9 million and loan sales were $2.4 million. The
increase in loans receivable, net, was primarily due to
increases in one-to four-family residential loans of
$3.1 million, land loans of $991,000, commercial business
loans of $260,000 and residential construction loans of
$244,000. Such increases were partially offset by decreases of
$705,000 in consumer loans, $235,000 in commercial real estate
and lines of credit, $170,000 in home equity lines of credit and
$36,000 in multi-family residential loans.
Investment securities amounted to $6.9 million at
March 31, 2010 compared to $7.3 million at
December 31, 2009, a decrease of $349,000, or 4.8%. The
decrease in investment securities at March 31, 2010 was due
to maturities and paydowns received during the three-month
period.
Total liabilities increased $987,000, or 1.3%, at March 31,
2010, to $78.4 million compared to $77.4 million at
December 31, 2009. Deposits increased by $908,000, or 1.2%,
to $76.9 million at March 31, 2010, compared to
$75.9 million at December 31, 2009, which reflected
normal deposit inflows during the period. We did not hold any
Federal Home Loan Bank advances at March 31, 2010 or
December 31, 2009 as we implemented our strategy to manage
interest rate risk by paying down higher cost borrowings.
Total equity amounted to $8.6 million at March 31,
2010 compared to $8.5 million at December 31, 2009, an
increase of $157,000, or 1.9%. The reason for the increase in
our total retained earnings was net income of $140,000 for the
first three months of 2010 and an increase in accumulated other
comprehensive income of $17,000.
Comparison
of Financial Condition at December 31, 2009 and
December 31, 2008
Bank of Rustons total assets increased $8.1 million,
or 10.4%, to $85.9 million at December 31, 2009
compared to $77.8 million at December 31, 2008. This
increase was primarily due to increases in loans receivable,
net, of $5.8 million, cash and cash equivalents of
$1.2 million and investment securities of $541,000.
Loans receivable, net, increased $5.8 million or 9.4% at
December 31, 2009 compared to December 31, 2008. The
increase in loans receivable, net was due primarily to an
increase in commercial real estate, commercial lines of credit,
multi-family and land loans of $4.4 million, one- to
four-family residential loans of $3.0 million, commercial
business loans of $727,000 and home equity lines of credit of
$665,000. Consumer loans decreased $2.6 million and
residential construction loans decreased $502,000.
Cash and cash equivalents increased $1.2 million or 32.9%
to $4.7 million at December 31, 2009 compared to
$3.5 million at December 31, 2008 primarily as a
result of normal deposit inflows. Investment securities
increased $541,000, or 8.1%, at December 31, 2009 from
$6.7 million at December 31, 2008. The increase in
investment securities was due to purchases of mortgage-backed
securities during fiscal 2009.
Total liabilities increased $7.6 million or 10.9% to
$77.4 million at December 31, 2009 compared to
$69.8 million at December 31, 2008, due primarily to
an increase in interest-bearing deposits of $6.7 million
partially offset by a decrease of $53,000 in FHLB advances. Bank
of Ruston had no FHLB advances at December 31, 2009.
Total equity increased $517,000 to $8.5 million at
December 31, 2009 compared to $8.0 million at
December 31, 2008, due to net income of $464,000 and an
increase in other comprehensive income of $53,000 for the year
ended December 31, 2009.
Management considered the increased deposit growth in
conjunction with our interest rate risk policy when determining
to repay borrowings of $53,000 from the Federal Home Loan Bank
of Dallas during fiscal 2009. The increase in loans receivable,
net, at December 31, 2009 compared to December 31,
2008 was primarily funded by the increase in deposits. At
December 31, 2009, Bank of Ruston had $907,000 of
37
securities sold under agreements to repurchase compared to none
at December 31, 2008 as a result of the implementation of a
commercial checking sweep account product added in 2009.
The increase in total deposits of $6.7 million or 9.6% from
December 31, 2008 to December 31, 2009 was due to
increases in certificates of deposit, statement savings
accounts, checking and money market accounts. Certificate of
deposit accounts and money market accounts increased
$6.7 million, or 18.0%, and $1.2 million, or 42.3%,
respectively, at December 31, 2009 compared to
December 31, 2008. Savings accounts and checking accounts
decreased by $980,000 and $280,000, respectively, at
December 31, 2009 compared to December 31, 2008.
Management attributes the increases in certificates of deposit
and money market accounts during fiscal 2009 to the preference
of customers for higher yielding deposit accounts.
Comparison
of Operating Results for the Three Months Ended March 31,
2010 and 2009
General. For the three months ended
March 31, 2010, Bank of Ruston had net income of $140,000
compared to net income of $115,000 for the first three months of
2009. Our results in the 2010 period reflect in part an increase
in the average balance of interest-earning assets which has
offset, in whole or in part, the decrease in our net interest
margin for the three months ended March 31, 2010. In
addition, our non-interest expenses increased $102,000 for the
three months ended March 31, 2010. Our net interest margin
decreased by 26 basis points to 4.31% for the three months
ended March 31, 2010 compared to 4.57% for the three months
ended March 31, 2009 while our average interest rate spread
increased to 4.14% for the three months ended March 31,
2010 compared to 4.05% for the three months ended March 31,
2009. During the first three months of 2010, the average rate
paid on certificates of deposit decreased 96 basis points
from 3.04% for the three months ended March 31, 2009 to
2.08% for the three months ended March 31, 2010. Lower
rates on certificates of deposit during the three months ended
March 31, 2010 reflect general interest rate declines
during the period.
Net Interest Income. Net interest income
amounted to $853,000 for the three months ended March 31,
2010 compared to $742,000 for the three months ended
March 31, 2009. The $111,000 or 15.0% increase was
primarily due to a $73,000 decrease in interest expense combined
with a $38,000 increase in interest income.
The average interest rate spread increased from 4.05% for the
three months ended March 31, 2009 to 4.14% for the three
months ended March 31, 2010 and average interest-earning
assets increased from $72.0 million to $79.2 million
during the same periods. Average interest-earning assets to
average interest-bearing liabilities increased from 103.6% for
the three months ended March 31, 2009 to 112.9% for the
three months ended March 31, 2010. The decrease in the
average interest rate spread reflects the decrease in average
yield earned on interest-earning assets from 6.46% for the three
months ended March 31, 2009 to 5.66% for the three months
ended March 31, 2010, primarily as a result of the decrease
in average yield on loans receivable and investment securities.
Net interest margin decreased 26 basis points from 4.57% to
4.31% for the three months ended March 31, 2009 and 2010,
respectively, primarily due to a decrease of 80 basis
points in the average yield on interest earning assets for the
periods.
Interest income increased by $38,000, or 3.5%, to
$1.1 million for the three months ended March 31, 2010
compared to the three months ended March 31, 2009. Such
increase was primarily due to an increase in the average balance
of loans receivable from $63.3 million for the three months
ended March 31, 2009 to $68.2 million for the three
months ended March 31, 2010 partially offset by a decrease
in the average yield on such loans receivable.
Interest expense decreased by $73,000, or 21.5%, to $267,000 for
the three months ended March 31, 2010 compared to the six
months ended March 31, 2009 primarily as a result of a
decrease in the average rate paid on certificates of deposit
which offset the increase in the average balance of certificates
of deposit. Such decrease in average rate was due to general
declining interest rates during the period.
We made no provision for loan losses in the three months ended
March 31, 2010 or 2009. We had no charge-offs during the
three month periods ended March 31, 2010 compared to
charge-offs of $10,000 for the three months ended March 31,
2009. At March 31, 2010, we had $245,000 of non-performing
assets and our allowance for loan losses amounted to $179,000.
To the best of managements knowledge, the allowance is
38
maintained at a level believed to cover all known and inherent
losses in the loan portfolio, both probable and reasonable to
estimate.
Non-Interest Income. Non-interest income,
which includes fees and service charges, realized gains and
losses on investments amounted to $176,000 for the three months
ended March 31, 2010, an increase of $15,000, or 9.3%,
compared to non-interest income of $161,000 for the three months
ended March 31, 2009. For the three months ended
March 31, 2010, non-interest income included a $53,000 gain
on sale of fixed assets as a result of the sale of excess land
at the site of our new branch office.
Non-Interest Expense. Non-interest expense
increased by $102,000, or 14.0%, to $828,000 for the three
months ended March 31, 2010, compared to $726,000 for the
three months ended March 31, 2009. The increase was
primarily the result of a $48,000 increase in salaries and
benefits expense, a $27,000 increase in occupancy expense, a
$17,000 increase in Federal Deposit Insurance Corporation
assessments and an $11,000 increase in other expense the first
three months of 2010 compared to 2009. During the first three
months of 2010, Bank of Ruston incurred additional salaries and
benefits expense as a result of the increase in customer service
contact personnel.
Income Tax Expense. The income tax expense
amounted to $61,000 and $60,000 for the three months ended
March 31, 2010 and 2009, respectively.
Comparison
of Operating Results for the Years Ended December 31, 2009
and 2008
General. Bank of Rustons net income
amounted to $464,000 for the year ended December 31, 2009,
an increase of $9,000 or 2.0% compared to net income of $455,000
for the year ended December 31, 2008. This increase was
primarily due to a decrease in interest expense of $429,000,
which offset a decrease in interest income of $42,000. Interest
expense decreased in fiscal 2009 primarily as a result of a
decrease in interest expense on certificates of deposit.
Net Interest Income. Net interest income
amounted to $3.1 million for the year ended
December 31, 2009 compared to $2.7 million for the
year ended December 31, 2008. The $387,000 or 14.2%
increase was primarily due to a $420,000 decrease in interest
expense on certificates of deposit.
The average interest rate spread increased from 3.49% for the
year ended December 31, 2008 to 3.91% for the year ended
December 31, 2009 while average interest-earning assets
increased from $70.5 million to $75.0 million during
the same periods. Average interest-earning assets to average
interest-bearing liabilities decreased from 114.96% for the year
ended December 31, 2008 to 114.20% for the year ended
December 31, 2009. The increase in the average interest
rate spread reflects the decrease in average rate paid on
interest-bearing liabilities from 2.82% in fiscal 2008 to 1.97%
in fiscal 2009 compared to a decrease in the average yield on
interest earning assets from 6.31% in 2008 to 5.88% in 2009. Net
interest margin increased 29 basis points from 3.86% to
4.15% at December 31, 2008 and 2009, respectively,
primarily due to a decrease of 85 basis points in the
average rate paid on interest-bearing liabilities compared to a
decrease of 43 basis points in the average yield on
interest-earning assets for the periods.
Interest income decreased by $42,000, or 1.0%, to
$4.4 million for the year ended December 31, 2009
compared to the year ended December 31, 2008. Such decrease
was primarily due to a decrease in the average yield on loans
receivable which was offset by the increase in the average
balance of such loans receivable from $59.5 million for the
year ended December 31, 2008 to $64.9 million for the
year ended December 31, 2009. The decrease in the average
yield on loans from 6.94% in fiscal 2008 to 6.27% in fiscal 2009
reflects changes in the market rates of interest during fiscal
2009.
Interest expense decreased by $429,000, or 24.8%, to
$1.3 million for the year ended December 31, 2009
compared to $1.7 million for the year ended
December 31, 2008 primarily as a result of a decrease in
the average rate paid on certificate of deposit accounts which
offset the increase in average balance of such accounts. Such
decrease in average rate is due to a decline in cost of
certificates of deposit as higher cost certificates of deposit
repriced at a lower rate during the fiscal year.
39
Non-Interest Income. Non-interest income,
which includes fees and service charges, realized gains and
losses on investments and other operating income, amounted to
$773,000 for the year ended December 31, 2009, an increase
of $168,000 or 27.8% compared to non-interest income of $605,000
for the year ended December 31, 2008. Other operating
income increased $96,000 for the year ended December 31,
2009, primarily as a result of a bank-owned life insurance death
benefit received by Bank of Ruston.
Non-Interest Expense. Non-interest expense
increased by $579,000, or 21.9% to $3.2 million for the
year ended December 31, 2009, compared to $2.6 million
for the year ended December 31, 2008. The increase was
primarily the result of a $165,000 increase in salaries and
employee benefits expense, $129,000 increase in deposit
insurance assessments, $106,000 increase in occupancy expense
and $174,000 increase in other expense. The $174,000 increase in
other operating expense was primarily due to expenses related to
the opening of our new branch office in February 2009, which
included advertising and other administrative expenses.
Income Tax Expense. The income tax expense
amounted to $182,000 and $199,000 for the fiscal years ended
December 31, 2009 and 2008, respectively.
40
Average Balances, Net Interest Income, and Yields Earned and
Rates Paid. The following tables show for the
periods indicated the total dollar amount of interest from
average interest-earning assets and the resulting yields, as
well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates, and the net
interest margin. Tax-exempt income and yields have not been
adjusted to a tax-equivalent basis. All average balances are
based on monthly balances. Management does not believe that the
monthly averages differ significantly from what the daily
averages would be. The table also reflects the yields on Bank of
Rustons interest-earning assets and costs of
interest-bearing liabilities at March 31, 2010.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
Yield/
|
|
|
2010
|
|
|
2009
|
|
|
|
Rate
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
at March 31,
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
|
2010
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate(1)
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(1)
|
|
|
6.06
|
%
|
|
$
|
68,160
|
|
|
$
|
1,068
|
|
|
|
6.27
|
%
|
|
$
|
63,270
|
|
|
$
|
1,016
|
|
|
|
6.94
|
%
|
Investment securities
|
|
|
2.95
|
|
|
|
7,123
|
|
|
|
51
|
|
|
|
2.88
|
|
|
|
6,611
|
|
|
|
66
|
|
|
|
3.99
|
|
Other interest-earning assets
|
|
|
0.10
|
|
|
|
3,872
|
|
|
|
1
|
|
|
|
0.07
|
|
|
|
2,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
5.50
|
%
|
|
|
79,222
|
|
|
|
1,120
|
|
|
|
5.66
|
%
|
|
|
71,981
|
|
|
|
1,082
|
|
|
|
6.01
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-earning assets
|
|
|
|
|
|
|
7,652
|
|
|
|
|
|
|
|
|
|
|
|
6,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
$
|
86,874
|
|
|
|
|
|
|
|
|
|
|
$
|
78,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market accounts
|
|
|
0.46
|
%
|
|
|
25,205
|
|
|
|
31
|
|
|
|
0.49
|
%
|
|
|
31,930
|
|
|
|
55
|
|
|
|
0.69
|
%
|
Certificates of deposit
|
|
|
2.16
|
%
|
|
|
44,971
|
|
|
|
234
|
|
|
|
2.08
|
|
|
|
37,496
|
|
|
|
285
|
|
|
|
3.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
1.51
|
%
|
|
|
70,176
|
|
|
|
265
|
|
|
|
1.52
|
|
|
|
69,426
|
|
|
|
340
|
|
|
|
1.96
|
|
Other borrowings
|
|
|
0.84
|
%
|
|
|
712
|
|
|
|
2
|
|
|
|
1.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
1.50
|
%
|
|
|
70,888
|
|
|
|
267
|
|
|
|
1.52
|
%
|
|
|
69,426
|
|
|
|
340
|
|
|
|
1.96
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing liabilities
|
|
|
|
|
|
|
7,986
|
|
|
|
|
|
|
|
|
|
|
|
2,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
78,874
|
|
|
|
|
|
|
|
|
|
|
|
72,364
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
|
|
|
|
7,199
|
|
|
|
|
|
|
|
|
|
|
|
6,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and retained earnings
|
|
|
|
|
|
$
|
86,073
|
|
|
|
|
|
|
|
|
|
|
$
|
79,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets
|
|
|
|
|
|
$
|
8,334
|
|
|
|
|
|
|
|
|
|
|
$
|
2,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income; average interest rate spread
|
|
|
|
|
|
|
|
|
|
$
|
853
|
|
|
|
4.14
|
%
|
|
|
|
|
|
$
|
742
|
|
|
|
4.05
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.31
|
%
|
|
|
|
|
|
|
|
|
|
|
4.12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets to average interest-bearing
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112.89
|
%
|
|
|
|
|
|
|
|
|
|
|
103.60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Calculated net of deferred fees and discounts, loans in process
and allowance for loan losses. |
|
(2) |
|
Equals net interest income divided by average interest-earning
assets. |
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate(1)
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate
|
|
|
|
(Dollars in thousands)
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable(1)
|
|
$
|
64,911
|
|
|
$
|
4,188
|
|
|
|
6.45
|
%
|
|
$
|
59,468
|
|
|
$
|
4,066
|
|
|
|
6.84
|
%
|
Investment securities
|
|
|
7,088
|
|
|
|
217
|
|
|
|
3.07
|
|
|
|
6,139
|
|
|
|
296
|
|
|
|
4.82
|
|
Other interest-earning assets
|
|
|
2,969
|
|
|
|
1
|
|
|
|
0.04
|
|
|
|
4,913
|
|
|
|
86
|
|
|
|
1.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
74,968
|
|
|
|
4,406
|
|
|
|
5.88
|
%
|
|
|
70,520
|
|
|
|
4,448
|
|
|
|
6.31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-earning assets
|
|
|
6,976
|
|
|
|
|
|
|
|
|
|
|
|
5,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
81,944
|
|
|
|
|
|
|
|
|
|
|
$
|
75,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market accounts
|
|
|
25,370
|
|
|
|
197
|
|
|
|
0.78
|
%
|
|
|
22,882
|
|
|
|
208
|
|
|
|
0.91
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
|
40,255
|
|
|
|
1,096
|
|
|
|
2.72
|
|
|
|
38,410
|
|
|
|
1,516
|
|
|
|
3.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
65,625
|
|
|
|
1,293
|
|
|
|
1.97
|
|
|
|
61,292
|
|
|
|
1,724
|
|
|
|
2.81
|
|
FHLB advances and other borrowings
|
|
|
1,070
|
|
|
|
5
|
|
|
|
|
|
|
|
53
|
|
|
|
3
|
|
|
|
5.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
66,695
|
|
|
|
1,298
|
|
|
|
1.97
|
%
|
|
|
61,345
|
|
|
|
1,727
|
|
|
|
2.82
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing liabilities
|
|
|
7,981
|
|
|
|
|
|
|
|
|
|
|
|
7,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
74,676
|
|
|
|
|
|
|
|
|
|
|
|
68,682
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
6,732
|
|
|
|
|
|
|
|
|
|
|
|
6,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and retained earnings
|
|
$
|
81,408
|
|
|
|
|
|
|
|
|
|
|
$
|
74,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets
|
|
$
|
8,273
|
|
|
|
|
|
|
|
|
|
|
$
|
9,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income; average interest rate spread
|
|
|
|
|
|
$
|
3,108
|
|
|
|
3.91
|
%
|
|
|
|
|
|
$
|
2,721
|
|
|
|
3.49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin(2)
|
|
|
|
|
|
|
|
|
|
|
4.15
|
%
|
|
|
|
|
|
|
|
|
|
|
3.86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets to average interest-bearing
liabilities
|
|
|
|
|
|
|
|
|
|
|
114.20
|
%
|
|
|
|
|
|
|
|
|
|
|
114.96
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Calculated net of deferred fees and discounts, loans in process
and allowance for loan losses. |
|
(2) |
|
Equals net interest income divided by average interest-earning
assets. |
42
Rate/Volume Analysis. The following table
shows the extent to which changes in interest rates and changes
in volume of interest-earning assets and interest-bearing
liabilities affected our interest income and expense during the
periods indicated. For each category of interest-earning assets
and interest-bearing liabilities, information is provided on
changes attributable to (1) changes in rate, which is the
change in rate multiplied by prior year volume, and
(2) changes in volume, which is the change in volume
multiplied by prior year rate. The combined effect of changes in
both rate and volume has been allocated proportionately to the
change due to rate and the change due to volume.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
Year Ended December 31,
|
|
|
|
2010 Compared to 2009
|
|
|
2009 Compared to 2008
|
|
|
|
Increase (Decrease) Due to
|
|
|
Increase (Decrease) Due to
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
Rate
|
|
|
Volume
|
|
|
(Decrease)
|
|
|
Rate
|
|
|
Volume
|
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable
|
|
$
|
(107
|
)
|
|
$
|
78
|
|
|
$
|
(29
|
)
|
|
$
|
(192
|
)
|
|
$
|
312
|
|
|
$
|
120
|
|
Investment securities
|
|
|
(20
|
)
|
|
|
5
|
|
|
|
(15
|
)
|
|
|
(103
|
)
|
|
|
25
|
|
|
|
(78
|
)
|
Other interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52
|
)
|
|
|
(33
|
)
|
|
|
(85
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
(127
|
)
|
|
|
83
|
|
|
|
(44
|
)
|
|
|
(347
|
)
|
|
|
304
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market accounts
|
|
|
(21
|
)
|
|
|
(1
|
)
|
|
|
(22
|
)
|
|
|
(31
|
)
|
|
|
23
|
|
|
|
(8
|
)
|
Certificates of deposit
|
|
|
(80
|
)
|
|
|
30
|
|
|
|
(50
|
)
|
|
|
(491
|
)
|
|
|
74
|
|
|
|
(421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
(101
|
)
|
|
|
29
|
|
|
|
(72
|
)
|
|
|
(522
|
)
|
|
|
97
|
|
|
|
(429
|
)
|
FHLB advances and other borrowings
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
(101
|
)
|
|
|
28
|
|
|
|
(73
|
)
|
|
|
(522
|
)
|
|
|
93
|
|
|
|
(429
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in net Interest income
|
|
$
|
(26
|
)
|
|
$
|
55
|
|
|
$
|
29
|
|
|
$
|
175
|
|
|
$
|
211
|
|
|
$
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses. The allowance for
loan losses is established through a provision for loan losses
charged to earnings as losses are estimated to have occurred in
our loan portfolio. The allowance for loan losses is maintained
at a level to provide for probable credit losses related to
specifically identified loans and for losses inherent in the
loan portfolio that have been incurred as of the balance sheet
date. The allowance for loan losses is comprised of specific
allowances and a general allowance.
Specific provisions are assessed for each loan that is reviewed
for impairment or for which a probable loss has been identified.
The allowance related to loans that are identified as impaired
is based on discounted expected future cash flows using the
loans initial effective interest rate, the observable
market value of the loan, or the estimated fair value of the
collateral for certain collateral dependent loans. Factors
contributing to the determination of specific provisions include
the financial condition of the borrower, changes in the value of
pledged collateral and general economic conditions. General
allowances are established based on historical charge-offs
considering factors that include risk rating, concentrations and
loan type. For the general allowance, management also considers
trends in delinquencies and non-accrual loans, concentrations,
volatility of risk ratings and the evolving mix in terms of
collateral, relative loan size and the degree of seasoning
within the various loan products.
Changes in underwriting standards, credit administration and
collection policies, regulation and other factors which affect
the credit quality and collectability of the loan portfolio also
impact the allowance levels. The allowance for loan losses is
based on managements estimate of probable credit losses
inherent in the loan portfolio; actual credit losses may vary
from the current estimate. The allowance for loan losses is
reviewed periodically, taking into consideration the risk
characteristics of the loan portfolio, past charge-off
experience, general economic conditions and other factors that
warrant current recognition. As adjustments to the allowance for
loan losses become necessary, they are reflected as a provision
for loan losses in current-period
43
earnings. Actual loan charge-offs are deducted from and
subsequent recoveries of previously charged-off loans are added
to the allowance.
No provision was made to the allowance during the three months
ended March 31, 2010. During fiscal 2009 we made a
provision of $16,000, compared to a provision of $32,000 in
fiscal 2008. To the best of managements knowledge, the
allowance is maintained at a level believed to cover all known
and inherent losses in the loan portfolio, both probable and
reasonable to estimate.
Exposure
to Changes in Interest Rates
Bank of Rustons ability to maintain net interest income
depends upon its ability to earn a higher yield on assets than
the rates it pays on deposits and borrowings. Bank of
Rustons interest-earning assets consist primarily of
residential mortgage loans which have short-term fixed rates of
interest for three to five years which amortize up to
30 years and commercial loans which have fixed or, in some
limited circumstances, adjustable rates of interest and terms up
to five years. Bank of Rustons interest-bearing
liabilities primarily consist of higher rate certificates of
deposit rather than other types of deposit products.
Consequently, Bank of Rustons ability to maintain a
positive spread between the interest earned on assets and the
interest paid on deposits and borrowings can be adversely
affected when market rates of interest rise. At March 31,
2010, certificates of deposit amounted to $43.3 million or
49.8% of total assets at such date.
Net Portfolio Value Analysis. Our interest
rate sensitivity is monitored by management through the use of
models which generate estimates of the change in net portfolio
value (NPV) over a range of interest rate scenarios.
NPV represents the market value of portfolio equity, which is
different from book value, and is equal to the market value of
assets minus the market value of liabilities with adjustments
made for off-balance sheet items. The NPV ratio, under any
interest rate scenario, is defined as the NPV in that scenario
divided by the market value of assets in the same scenario. The
following table sets forth our NPV as of March 31, 2010 and
reflects the changes to NPV as a result of immediate and
sustained changes in interest rates as indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Interest Rates in
|
|
Net Portfolio Value
|
|
NPV as % of Portfolio Value of Assets
|
Basis Points (Rate Shock)
|
|
Amount
|
|
$ Change
|
|
% Change
|
|
NPV Ratio
|
|
Change
|
|
|
(Dollars in thousands)
|
|
300bp
|
|
$
|
13,306
|
|
|
$
|
(733
|
)
|
|
|
(5
|
)%
|
|
|
14.31
|
%
|
|
|
(50
|
)bp
|
200
|
|
|
13,700
|
|
|
|
(338
|
)
|
|
|
(2
|
)
|
|
|
14.62
|
|
|
|
(20
|
)bp
|
100
|
|
|
13,960
|
|
|
|
(78
|
)
|
|
|
(1
|
)
|
|
|
14.80
|
|
|
|
(1
|
)bp
|
Static
|
|
|
14,038
|
|
|
|
|
|
|
|
|
|
|
|
14.81
|
|
|
|
|
bp
|
(50)
|
|
|
14,061
|
|
|
|
23
|
|
|
|
|
|
|
|
14.81
|
|
|
|
|
bp
|
(100)
|
|
|
14,082
|
|
|
|
44
|
|
|
|
|
|
|
|
14.81
|
|
|
|
|
bp
|
Certain shortcomings are inherent in the methodology used in the
above interest rate risk measurement. Modeling changes in NPV
requires the making of certain assumptions which may or may not
reflect the manner in which actual yields and costs respond to
changes in market interest rates. In this regard, the models
presented assume that the composition of our interest sensitive
assets and liabilities existing at the beginning of a period
remains constant over the period being measured and also assumes
that a particular change in interest rates is reflected
uniformly across the yield curve regardless of the duration to
maturity or repricing of specific assets and liabilities.
Accordingly, although the NPV simulation model above provides an
indication of interest rate risk exposure at a particular point
in time, such model is not intended to and do not provide a
precise forecast of the effect of changes in market interest
rates on net interest income and will differ from actual results.
Liquidity
and Capital Resources
Bank of Ruston maintains levels of liquid assets deemed adequate
by management. Bank of Ruston adjusts its liquidity levels to
fund deposit outflows, repay its borrowings and to fund loan
commitments. Bank of Ruston also adjusts liquidity as
appropriate to meet asset and liability management objectives.
44
Bank of Rustons primary sources of funds are deposits,
amortization and prepayment of loans and to a lesser extent,
funds provided from operations. While scheduled principal
repayments on loans are a relatively predictable source of
funds, deposit flows and loan prepayments are greatly influenced
by general interest rates, economic conditions and competition.
Bank of Ruston sets the interest rates on its deposits to
maintain a desired level of total deposits. In addition, Bank of
Ruston invests excess funds in short-term interest-earning
accounts and other assets, which provide liquidity to meet
lending requirements. Bank of Rustons cash and cash
equivalents amounted to $2.9 million at March 31, 2010.
A significant portion of Bank of Rustons liquidity
consists of non-interest earning deposits. Bank of Rustons
primary sources of cash are principal repayments on loans and
increases in deposit accounts. If Bank of Ruston requires funds
beyond its ability to generate them internally, borrowing
agreements exist with the Federal Home Loan Bank of Dallas,
which provide an additional source of funds. At March 31,
2010, Bank of Ruston did not have any advances from the Federal
Home Loan Bank of Dallas and had $32.9 million in borrowing
capacity. Additionally, at March 31, 2010, Bank of Ruston
was a party to a Master Purchase Agreement with First National
Bankers Bank whereby Bank of Ruston may purchase Federal Funds
from First National Bankers Bank in an amount not to exceed
$2.5 million. There were no amounts purchased under this
agreement as of March 31, 2010.
At March 31, 2010, Bank of Ruston had outstanding loan
commitments of $1.3 million to originate loans. At
March 31, 2010, certificates of deposit scheduled to mature
in less than one year totaled $35.5 million. Based on prior
experience, management believes that a significant portion of
such deposits will remain with us, although there can be no
assurance that this will be the case. In addition, in a rising
interest rate environment, the cost of such deposits could be
significantly higher upon renewal. Bank of Ruston intends to
utilize its liquidity to fund its lending activities.
Bank of Ruston is required to maintain regulatory capital
sufficient to meet tier 1 leverage, tier 1 risk-based
and total risk-based capital ratios of at least 4.0%, 4.0% and
8.0%, respectively. At March 31, 2010, Bank of Ruston
exceeded each of its capital requirements with ratios of 9.6%,
13.4% and 13.6%, respectively.
Off-Balance
Sheet Arrangements
In the normal course of operations, we engage in a variety of
financial transactions that, in accordance with generally
accepted accounting principles are not recorded in our financial
statements. These transactions involve, to varying degrees,
elements of credit, interest rate, and liquidity risk. Such
transactions are used primarily to manage customers
requests for funding and take the form of loan commitments and
lines of credit. Our exposure to credit loss from
non-performance by the other party to the above-mentioned
financial instruments is represented by the contractual amount
of those instruments. We use the same credit policies in making
commitments and conditional obligations as we do for on-balance
sheet instruments. In general, we require collateral or other
security to support financial instruments with off
balance sheet credit risk.
Commitments. The following tables summarize
our outstanding commitments to originate loans and to advance
additional amounts pursuant to outstanding letters of credit,
lines of credit and undisbursed construction loans in process at
March 31, 2010 and December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
Amount of Commitment Expiration
|
|
|
|
Committed at
|
|
|
Per Period
|
|
|
|
March 31,
|
|
|
To
|
|
|
1-3
|
|
|
4-5
|
|
|
After
|
|
|
|
2010
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
|
(In thousands)
|
|
|
Letters of credit
|
|
$
|
800
|
|
|
$
|
800
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Lines of credit
|
|
|
36
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused lines of credit
|
|
|
1,815
|
|
|
|
1,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undisbursed portion of loans in process
|
|
|
145
|
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to originate loans
|
|
|
1,319
|
|
|
|
1,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commitments
|
|
$
|
4,115
|
|
|
$
|
4,115
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
Amount of Commitment Expiration
|
|
|
|
Committed at
|
|
|
Per Period
|
|
|
|
December 31,
|
|
|
To
|
|
|
1-3
|
|
|
4-5
|
|
|
After
|
|
|
|
2009
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
|
(In thousands)
|
|
|
Letters of credit
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Lines of credit
|
|
|
36
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused lines of credit
|
|
|
1,101
|
|
|
|
1,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undisbursed portion of loans in process
|
|
|
712
|
|
|
|
712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to originate loans
|
|
|
180
|
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commitments
|
|
$
|
3,029
|
|
|
$
|
3,029
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Cash Obligations. The following
tables summarize our contractual cash obligations, consisting of
certificates of deposit, at March 31, 2010 and
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at
|
|
|
Payments Due by Period
|
|
|
|
March 31,
|
|
|
To
|
|
|
1-3
|
|
|
4-5
|
|
|
After
|
|
|
|
2010
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
|
(In thousands)
|
|
|
Certificates of deposit
|
|
$
|
38,950
|
|
|
$
|
35,466
|
|
|
$
|
3,484
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
38,950
|
|
|
$
|
35,466
|
|
|
$
|
3,484
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at
|
|
|
Payments Due by Period
|
|
|
|
December 31,
|
|
|
To
|
|
|
1-3
|
|
|
4-5
|
|
|
After
|
|
|
|
2009
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
|
(In thousands)
|
|
|
Certificates of deposit
|
|
$
|
40,035
|
|
|
$
|
35,990
|
|
|
$
|
4,045
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
40,035
|
|
|
$
|
35,990
|
|
|
$
|
4,045
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
Inflation and Changing Prices
The financial statements and related financial data presented
herein regarding Bank of Ruston have been prepared in accordance
with accounting principles generally accepted in the United
States of America which generally require the measurement of
financial position and operating results in terms of historical
dollars, without considering changes in relative purchasing
power over time due to inflation. Unlike most industrial
companies, virtually all of Bank of Rustons assets and
liabilities are monetary in nature. As a result, interest rates
generally have a more significant impact on Bank of
Rustons performance than does the effect of inflation.
Interest rates do not necessarily move in the same direction or
in the same magnitude as the prices of goods and services, since
such prices are affected by inflation to a larger extent than
interest rates.
BUSINESS
OF CENTURY NEXT FINANCIAL
Century Next Financial is a newly-formed Louisiana corporation
that will own 100% of Bank of Rustons common stock
following completion of the conversion. Century Next Financial
has not engaged in any business to date. Century Next Financial
intends to contribute 60% of the net proceeds as equity capital
to Bank of Ruston in exchange for the purchase of all of Bank of
Rustons capital stock with the remaining 40% of the
proceeds retained by Century Next Financial. We will use our
initial capital in the manner discussed in How We Intend
to Use the Proceeds From the Offering. Our cash flow will
depend upon earnings from the investment of the portion of net
proceeds we retain and any dividends we receive from Bank of
Ruston.
Immediately after the conversion and offering, it is expected
that our only business activities will be to hold all of the
outstanding common stock of Bank of Ruston. We will be
authorized to pursue other business activities permitted by
applicable laws and regulations for savings and loan holding
companies, which may
46
include the issuance of additional shares of common stock to
raise capital and borrowing funds for reinvestment in Bank of
Ruston. There are no plans for any additional capital issuance,
merger or acquisition or other diversification of the activities
of Century Next Financial at the present time.
Initially, Century Next Financial will neither own nor lease any
property, but will instead use the premises, equipment and
furniture of Bank of Ruston. At the present time, we intend to
utilize only persons who are officers of Bank of Ruston to serve
as officers of Century Next Financial. We also may use the
support staff of Bank of Ruston from time to time. These persons
will not be separately compensated by Century Next Financial. We
will hire additional employees, as appropriate, to the extent we
expand our business in the future.
Pursuant to the regulations under Sections 23A and 23B of
the Federal Reserve Act, Bank of Ruston and Century Next
Financial expect to enter into an expense sharing agreement
following the conversion. Under this agreement, Century Next
Financial will reimburse Bank of Ruston for the time that
employees of Bank of Ruston devote to activities of Century Next
Financial, the portion of the expense of the annual independent
audit attributable to Century Next Financial and all expenses
attributable to Century Next Financials public filing
obligations under the Securities Exchange Act of 1934. If
Century Next Financial commences any significant activities
other than holding all of the outstanding common stock of Bank
of Ruston, Century Next Financial and Bank of Ruston will amend
the expense sharing agreement to provide for the equitable
sharing of all expenses of such other activities that may be
attributable to Century Next Financial.
BUSINESS
OF BANK OF RUSTON
Bank of Ruston is a federally-chartered savings bank located in
Ruston, Louisiana, which is in Lincoln Parish. Bank of
Rustons business consists primarily of attracting deposits
from the general public and using those funds to originate
residential and commercial loans in Lincoln Parish and, to a
lesser extent, its contiguous parishes of Claiborne, Bienville,
Ouachita, Union and Jackson Parishes. We generate fee income
from the sale of most of our long-term fixed rate owner-occupied
one- to four-family residential loans we originate, while
retaining short-term fixed rate loans for portfolio. In recent
periods we have begun to emphasize commercial lending and
cross-selling products to our customers.
Market
Area and Competition
Bank of Rustons two banking offices are located in Lincoln
Parish in central northern Louisiana and our market area
includes the contiguous parishes of Claiborne, Bienville,
Ouachita, Union and Jackson Parishes. The local economy benefits
from two colleges, Louisiana Tech and Grambling State. The
expanding timber, poultry and cattle industries and regional oil
and gas industry also support the local economy. The
unemployment rate for Lincoln Parish as of March 2010 was 6.4%
compared to 6.9% for the state of Louisiana. The population of
Lincoln Parish was approximately 42,745 in 2009 and is predicted
to remain relatively flat over the next five years.
We face significant competition in originating loans and
attracting deposits. This competition stems primarily from
commercial banks and mortgage-banking companies. Within our
market area, eleven other banks, and credit unions are
operating. Many of the financial service providers operating in
our market area are significantly larger, and have greater
financial resources, than us. We face additional competition for
deposits from short-term money market funds and other corporate
and government securities funds, mutual funds and from other
non-depository financial institutions such as brokerage firms
and insurance companies.
Bank of
Rustons Lending Activities
General. At March 31, 2010, the net loan
portfolio of Bank of Ruston amounted to $70.4 million,
representing approximately 80.9% of its total assets at that
date. The principal lending activity of Bank of Ruston is the
origination of one- to four-family residential loans and, to a
lesser extent, commercial real estate and multi-family loans. At
March 31, 2010, one- to four-family residential loans
amounted to $39.2 million, or 55.5% of its total loan
portfolio. At March 31, 2010, commercial real estate and
multi-family residential loans
47
totaled $19.9 million, or 28.2% of the total loan
portfolio. Commercial business loans at March 31, 2010,
totaled $4.7 million, or 6.7% of the total loan portfolio.
Consumer non-real estate loans totaled $3.7 million, or
5.2% of the total loan portfolio at March 31, 2010.
Residential construction and home equity lines of credit totaled
$1.6 million and $1.5 million, or 2.3% and 2.2%,
respectively, of the total loan portfolio at March 31, 2010.
The types of loans that Bank of Ruston may originate are subject
to federal and state laws and regulations. Interest rates
charged on loans are affected principally by the demand for such
loans, the supply of money available for lending purposes and
the rates offered by our competitors. These factors are, in
turn, affected by general and economic conditions, the monetary
policy of the federal government, including the Federal Reserve
Board, legislative and tax policies, and governmental budgetary
matters.
As a federally-chartered savings bank, Bank of Ruston is subject
to a regulatory loan to one borrower limit. As of March 31,
2010, Bank of Rustons loans to one borrower limit was
$1.3 million. At March 31, 2010, Bank of Rustons
five largest loans or groups of loans-to-one borrower, including
related entities, aggregated $1.1 million,
$1.0 million, $988,000, $980,000 and $958,000. Each of Bank
of Rustons five largest loans or groups of loans was
performing in accordance with its terms at March 31, 2010.
Loan Portfolio Composition. The following
table shows the composition of our loan portfolio by type of
loan at the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
March 31, 2010
|
|
|
2009
|
|
|
2008
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
|
(Dollars in thousands)
|
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential
|
|
$
|
39,195
|
|
|
|
55.50
|
%
|
|
$
|
36,099
|
|
|
|
53.74
|
%
|
|
$
|
33,067
|
|
|
|
53.85
|
%
|
Commercial real estate and lines of credit
|
|
|
12,435
|
|
|
|
17.61
|
|
|
|
12,670
|
|
|
|
18.86
|
|
|
|
10,196
|
|
|
|
16.61
|
|
Multi-family
|
|
|
2,211
|
|
|
|
3.13
|
|
|
|
2,247
|
|
|
|
3.35
|
|
|
|
456
|
|
|
|
0.74
|
|
Land
|
|
|
5,283
|
|
|
|
7.48
|
|
|
|
4,292
|
|
|
|
6.39
|
|
|
|
4,159
|
|
|
|
6.77
|
|
Residential construction
|
|
|
1,609
|
|
|
|
2.28
|
|
|
|
1,365
|
|
|
|
2.03
|
|
|
|
1,867
|
|
|
|
3.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans
|
|
|
60,733
|
|
|
|
86.00
|
|
|
|
56,673
|
|
|
|
84.37
|
|
|
|
49,745
|
|
|
|
81.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity line of credit
|
|
|
1,527
|
|
|
|
2.16
|
|
|
|
1,697
|
|
|
|
2.53
|
|
|
|
1,029
|
|
|
|
1.68
|
|
Consumer non-real estate loans
|
|
|
3,663
|
|
|
|
5.19
|
|
|
|
4,368
|
|
|
|
6.50
|
|
|
|
6,920
|
|
|
|
11.27
|
|
Commercial business loans
|
|
|
4,696
|
|
|
|
6.65
|
|
|
|
4,436
|
|
|
|
6.60
|
|
|
|
3,709
|
|
|
|
6.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other loans
|
|
|
9,886
|
|
|
|
14.00
|
|
|
|
10,501
|
|
|
|
15.63
|
|
|
|
11,658
|
|
|
|
18.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
70,619
|
|
|
|
100.00
|
%
|
|
$
|
67,174
|
|
|
|
100.00
|
%
|
|
$
|
61,403
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
179
|
|
|
|
|
|
|
|
176
|
|
|
|
|
|
|
|
183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
$
|
70,440
|
|
|
|
|
|
|
$
|
66,998
|
|
|
|
|
|
|
$
|
61,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination of Loans. The lending activities
of Bank of Ruston are subject to the written underwriting
standards and loan origination procedures established by the
board of directors and management. Loan originations are
obtained through a variety of sources, primarily existing
customers as well as new customers obtained from referrals and
local advertising and promotional efforts. In addition, our
business development officer actively solicits new loans
throughout our local market area. Written loan applications are
taken by one of Bank of Rustons loan officers or through
submission to the Bank of Ruston website and reviewed by a loan
officer. The loan officer also supervises the procurement of
credit reports, appraisals and other documentation involved with
a loan. In accordance with its lending policy and loan
underwriting standards, Bank of Ruston obtains independent
outside appraisals on its loans or broker valuations for small
loans, under
48
$250,000, or loans with low loan-to-value ratios. Borrowers must
also obtain flood insurance policies when the property is in a
flood hazard area. We have entered into correspondent loan sales
agreements with several mortgage companies to purchase most of
our long-term fixed rate owner-occupied residential mortgage
loan originations.
Bank of Rustons loan approval process is intended to
assess the borrowers ability to repay the loan, the
viability of the loan and the value of the property that will
secure the loan. Loans up to our lending limit, which as of
March 31, 2010 was $1.3 million, are approved by a
management loan committee currently consisting of
Messrs. Benjamin Denny and James Hall. All loans in excess
of $5,000 are reviewed weekly by a loan committee of the Board
of Directors, currently consisting of Messrs. Denny, Ewing,
Reneau and Rogers. The senior loan officer is an ex officio
non-voting member of the board loan committee and serves as
chairman. Exceptions for loan limits will be approved by
management. Appraisals are obtained by a board approved
appraiser.
The following table shows our total loans originated, purchased,
sold and repaid during the periods indicated. The loans sold,
reflected in the table, all consist of one- to four-family
residential loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Loan originations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential
|
|
$
|
7,598
|
|
|
$
|
11,962
|
|
|
$
|
44,126
|
|
|
$
|
34,562
|
|
Commercial real estate and lines of credit
|
|
|
1,185
|
|
|
|
2,060
|
|
|
|
4,213
|
|
|
|
4,738
|
|
Multi-family
|
|
|
25
|
|
|
|
|
|
|
|
5,040
|
|
|
|
1,170
|
|
Land
|
|
|
554
|
|
|
|
620
|
|
|
|
4,491
|
|
|
|
7,153
|
|
Residential construction
|
|
|
861
|
|
|
|
2,057
|
|
|
|
6,307
|
|
|
|
11,962
|
|
Home equity lines of credit
|
|
|
140
|
|
|
|
586
|
|
|
|
824
|
|
|
|
485
|
|
Consumer non-real estate loans
|
|
|
1,957
|
|
|
|
1,761
|
|
|
|
7,780
|
|
|
|
8,166
|
|
Commercial business loans
|
|
|
1,360
|
|
|
|
573
|
|
|
|
2,984
|
|
|
|
3,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan originations
|
|
|
13,680
|
|
|
|
19,619
|
|
|
|
75,765
|
|
|
|
71,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans sold
|
|
|
2,416
|
|
|
|
6,687
|
|
|
|
31,631
|
|
|
|
17,984
|
|
Loan principal repayments
|
|
|
7,880
|
|
|
|
10,159
|
|
|
|
38,392
|
|
|
|
49,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans sold and principal repayments
|
|
|
10,296
|
|
|
|
16,846
|
|
|
|
70,023
|
|
|
|
67,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) due to other items, net(1)
|
|
|
61
|
|
|
|
61
|
|
|
|
29
|
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in total loans
|
|
$
|
3,445
|
|
|
$
|
2,834
|
|
|
$
|
5,771
|
|
|
$
|
4,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Other items consist of loans in process, deferred fees and the
allowance for loan losses. |
Although federal laws and regulations permit savings banks to
originate and purchase loans secured by real estate located
throughout the United States, Bank of Ruston concentrates its
portfolio lending activity to its primary market area in Lincoln
Parish, Louisiana and the surrounding area.
49
Contractual Terms to Final Maturities. The
following tables show the scheduled contractual maturities of
our loans as of March 31, 2010 and December 31, 2009,
before giving effect to the allowance for loan losses. Demand
loans, loans having no stated schedule of repayments and no
stated maturity, and overdrafts are reported as due in one year
or less. The amounts shown below do not take into account loan
prepayments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
Home
|
|
|
Consumer
|
|
|
Commercial
|
|
|
|
|
|
|
Four-Family
|
|
|
and Lines of
|
|
|
Multi-
|
|
|
|
|
|
Residential
|
|
|
Equity Lines
|
|
|
Non-Real
|
|
|
Business
|
|
|
|
|
|
|
Residential
|
|
|
Credit
|
|
|
Family
|
|
|
Land
|
|
|
Construction
|
|
|
of Credit
|
|
|
Estate Loans
|
|
|
Loans
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Amounts due after March 31, 2010 in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One year or less
|
|
$
|
7,447
|
|
|
$
|
4,245
|
|
|
$
|
25
|
|
|
$
|
3,123
|
|
|
$
|
1,609
|
|
|
$
|
74
|
|
|
$
|
1,164
|
|
|
$
|
3,137
|
|
|
$
|
20,824
|
|
After one year through two years
|
|
|
5,363
|
|
|
|
3,229
|
|
|
|
56
|
|
|
|
442
|
|
|
|
|
|
|
|
1,032
|
|
|
|
532
|
|
|
|
335
|
|
|
|
10,989
|
|
After two years through three years
|
|
|
9,499
|
|
|
|
1,578
|
|
|
|
823
|
|
|
|
493
|
|
|
|
|
|
|
|
421
|
|
|
|
562
|
|
|
|
490
|
|
|
|
13,866
|
|
After three years through five years
|
|
|
4,380
|
|
|
|
2,777
|
|
|
|
1,307
|
|
|
|
1,016
|
|
|
|
|
|
|
|
|
|
|
|
1,218
|
|
|
|
734
|
|
|
|
11,432
|
|
After five years through ten years
|
|
|
2,285
|
|
|
|
606
|
|
|
|
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
187
|
|
|
|
|
|
|
|
3,201
|
|
After ten years through 15 years
|
|
|
1,399
|
|
|
|
|
|
|
|
|
|
|
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,485
|
|
After 15 years
|
|
|
8,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
39,195
|
|
|
$
|
12,435
|
|
|
$
|
2,211
|
|
|
$
|
5,283
|
|
|
$
|
1,609
|
|
|
$
|
1,527
|
|
|
$
|
3,663
|
|
|
$
|
4,696
|
|
|
$
|
70,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
Home
|
|
|
Consumer
|
|
|
Commercial
|
|
|
|
|
|
|
Four-Family
|
|
|
and Lines of
|
|
|
Multi-
|
|
|
|
|
|
Residential
|
|
|
Equity Lines
|
|
|
Non-Real
|
|
|
Business
|
|
|
|
|
|
|
Residential
|
|
|
Credit
|
|
|
Family
|
|
|
Land
|
|
|
Construction
|
|
|
of Credit
|
|
|
Estate Loans
|
|
|
Loans
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Amounts due after December 31, 2009 in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One year or less
|
|
$
|
6,203
|
|
|
$
|
5,310
|
|
|
$
|
|
|
|
$
|
2,211
|
|
|
$
|
1,365
|
|
|
$
|
|
|
|
$
|
1,222
|
|
|
$
|
2,795
|
|
|
$
|
19,106
|
|
After one year through two years
|
|
|
5,166
|
|
|
|
1,988
|
|
|
|
58
|
|
|
|
267
|
|
|
|
|
|
|
|
640
|
|
|
|
599
|
|
|
|
370
|
|
|
|
9,088
|
|
After two years through three years
|
|
|
9,080
|
|
|
|
2,667
|
|
|
|
839
|
|
|
|
533
|
|
|
|
|
|
|
|
1,057
|
|
|
|
760
|
|
|
|
544
|
|
|
|
15,480
|
|
After three years through five years
|
|
|
5,072
|
|
|
|
1,844
|
|
|
|
1,350
|
|
|
|
1,078
|
|
|
|
|
|
|
|
|
|
|
|
1,489
|
|
|
|
694
|
|
|
|
11,527
|
|
After five years through ten years
|
|
|
2,412
|
|
|
|
861
|
|
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
298
|
|
|
|
33
|
|
|
|
3,728
|
|
After ten years through 15 years
|
|
|
935
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,014
|
|
After 15 years
|
|
|
7,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
36,099
|
|
|
$
|
12,670
|
|
|
$
|
2,247
|
|
|
$
|
4,292
|
|
|
$
|
1,365
|
|
|
$
|
1,697
|
|
|
$
|
4,368
|
|
|
$
|
4,436
|
|
|
$
|
67,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
The following tables show the dollar amount of our loans at
March 31, 2010 and December 31, 2009, due after
March 31, 2011 and December 31, 2010, respectively, as
shown in the preceding tables, which have fixed interest rates
or which have floating or adjustable interest rates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at
|
|
|
|
|
|
|
Floating or
|
|
|
March 31,
|
|
|
|
Fixed-Rate
|
|
|
Adjustable-Rate
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
One- to four-family residential
|
|
$
|
39,195
|
|
|
$
|
|
|
|
$
|
39,195
|
|
Commercial real estate and lines of credit
|
|
|
11,870
|
|
|
|
565
|
|
|
|
12,435
|
|
Multi-family
|
|
|
2,211
|
|
|
|
|
|
|
|
2,211
|
|
Land
|
|
|
5,283
|
|
|
|
|
|
|
|
5,283
|
|
Residential construction
|
|
|
1,609
|
|
|
|
|
|
|
|
1,609
|
|
Home equity lines of credit
|
|
|
1,527
|
|
|
|
|
|
|
|
1,527
|
|
Consumer non-real estate loans
|
|
|
3,663
|
|
|
|
|
|
|
|
3,663
|
|
Commercial business loans
|
|
|
4,696
|
|
|
|
|
|
|
|
4,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
70,054
|
|
|
$
|
565
|
|
|
$
|
70,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at
|
|
|
|
|
|
|
Floating or
|
|
|
December 31,
|
|
|
|
Fixed-Rate
|
|
|
Adjustable-Rate
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
One- to four-family residential
|
|
$
|
36,099
|
|
|
$
|
|
|
|
$
|
36,099
|
|
Commercial real estate and lines of credit
|
|
|
11,657
|
|
|
|
1,013
|
|
|
|
12,670
|
|
Multi-family
|
|
|
2,247
|
|
|
|
|
|
|
|
2,247
|
|
Land
|
|
|
4,292
|
|
|
|
|
|
|
|
4,292
|
|
Residential construction
|
|
|
1,365
|
|
|
|
|
|
|
|
1,365
|
|
Home equity lines of credit
|
|
|
1,697
|
|
|
|
|
|
|
|
1,697
|
|
Consumer non-real estate loans
|
|
|
4,368
|
|
|
|
|
|
|
|
4,368
|
|
Commercial business loans
|
|
|
4,436
|
|
|
|
|
|
|
|
4,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
66,161
|
|
|
$
|
1,013
|
|
|
$
|
67,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scheduled contractual maturities of loans do not necessarily
reflect the actual expected term of the loan portfolio. The
average life of mortgage loans is substantially less than their
average contractual terms because of prepayments. The average
life of mortgage loans tends to increase when current mortgage
loan rates are higher than rates on existing mortgage loans and,
conversely, decrease when rates on current mortgage loans are
lower than existing mortgage loan rates (due to refinancing of
fixed-rate loans at lower rates). Under the latter circumstance,
the weighted average yield on loans decreases as higher yielding
loans are repaid or refinanced at lower rates.
One- to Four-Family Residential Real Estate
Loans. Our principal lending activity is the
origination of loans secured by single-family residences. At
March 31, 2010, $39.2 million, or 55.5%, of our total
loan portfolio, before net items, consisted of one- to
four-family residential loans including both owner occupied and
non-owner occupied properties.
It is the policy of Bank of Ruston to originate loans as a first
lien position on owner occupied residences up to the Banks
legal lending limit, which at March 31, 2010, was
$1.3 million. We originate fixed rate loans with terms of
15 or 30 years, the majority of which we sell into the
secondary market. The loans we originate for portfolio primarily
consist of short-term fixed rate loans with terms of three to
five years and principal due at stated maturity. Such loans are
amortizing over
10-20 years
and we generally expect that many such borrowers will refinance
with Bank of Ruston at the end of the term as we provide a
streamlined refinancing process for the loan. Our residential
loan portfolio includes both owner occupied and non-owner
occupied properties. All of our non-owner occupied properties
are financed with short-term 3 to 5 year loans and have
51
loan-to-value ratios of 75%. Mortgages without private mortgage
insurance are generally limited to 80%, or less, of the
appraised value, or purchase price, of the secured real estate
property. Exceptions to this policy may be approved by the
management loan committee.
Bank of Rustons guidelines for credit quality generally
parallel the Federal National Mortgage Corporation, commonly
called Fannie Mae, and the Federal Home Loan Mortgage
Corporation, commonly called Freddie Mac, secondary market
guidelines including income ratios and credit scores.
Commercial Real Estate and Lines of Credit. As
of March 31, 2010, loans secured by commercial real estate
and commercial lines of credit, also secured by real estate,
were $12.4 million, or 17.6% of total loans. Although
commercial real estate and lines of credit are generally
considered to have greater credit risk than certain other types
of loans, management attempts to mitigate such risk by
originating such loans in its local market area to known
borrowers. Our commercial real estate loans primarily consist of
owner occupied business and retail properties.
It is the current policy of Bank of Ruston to lend in a first
lien position on real property occupied as a commercial business
property or mixed use properties. Bank of Rustons
commercial loans are, as of March 31, 2010, limited to our
legal lending limit of $1.3 million to individual borrowers
and related parties. Commercial real estate loans are limited to
a maximum of 75% of the lesser of appraised value or purchase
price and primarily have fixed-rates and terms up to five years.
We originate few adjustable rate commercial real estate loans.
If the collateral consists of special purpose fixed assets, the
maximum loan-to-value ratio is adjusted down based on the
estimated cost to convert the property to general use. Extended
amortization schedules up to 20 years may be offered if
justified by the borrowers financial strength
and/or low
loan-to-value ratio. Rate commitments are limited to
5 years with adjustments thereafter based on a negotiated
rate or spread relative to a market index. Commercial real
estate loans are presented to the applicable loan committee for
review and approval, including analysis of the creditworthiness
of the borrower.
Land Loans. As of March 31, 2010, land
loans were $5.3 million, or 7.5% of the total loan
portfolio. Land loans include land which has been acquired for
the purpose of development, unimproved land and land acquired
for agriculture or timber. Our loan policy provides for
loan-to-value ratios of 75% on improved land or land acquired
for development and 65% for unimproved land loans. Land loans
are originated with fixed rates and terms up to five years.
Although land loans generally are considered to have greater
credit risk than certain other types of loans, we expect to
mitigate such risk by identifying secondary source of repayment
for the land loan other than the sale of the collateral. It is
our practice to only originate a limited amount of loans for
speculative development to borrowers with whom we have a prior
relationship. Our policy requires land loans in excess of
$250,000 to be reviewed on an annual basis with updated
documentation.
Multi-family Residential Loans. We originate
multi-family residential loans in our local market area
primarily consisting of apartment rental properties. At
March 31, 2010, our multi-family residential loans totaled
$2.2 million, or 3.1% of total loans. Multi-family
residential loans have loan-to-value ratios of 75% and terms up
to five years. We require rental and cash flow data sufficient
to cover the loan repayment as well as identify a secondary
source of repayment, other than the sale of the collateral. Our
policy requires multi-family residential loans in excess of
$250,000 to be reviewed on an annual basis with updated
documentation.
Commercial Business Loans. Bank of Ruston
originates commercial business loans secured by inventory and
accounts receivable with terms up to five years. Our commercial
business loans are to various types of business, including
manufacturing, retail and service industries. Loan-to-value
ratios for inventory range from 50% to 75% depending on the type
and expected life. Accounts receivable have loan-to-value ratios
between 50% to 75% depending on the type of credit. At
March 31, 2010, $4.7 million, or 6.7% of our total
loan portfolio consisted of commercial business loans.
Residential Construction Loans. Bank of Ruston
originates residential construction loans with loan-to-value
ratios of 75% to 90%, or up to 95% with exceptions, with a firm
commitment or takeout letter from a mortgage lender which is
sufficient to pay off the loan. A significant amount of our
residential construction loans are to the primary owners of the
property, although to a lesser extent, we also lend to builders
in our local market area. Loans for the substantial renovation
of an existing home are underwritten and administered
52
as construction loans. At March 31, 2010,
$1.6 million, or 2.3% of our total loan portfolio consisted
of residential construction loans.
Home Equity Loans and Lines of Credit. Bank of
Ruston originates second mortgage residential loans and home
equity lines of credit to finance minor renovations and repairs
as well as for other consumer or investment purposes. Second
mortgage loans and home equity lines of credit are primarily
extended when Bank of Ruston holds the first mortgage on the
collateral and are generally limited to loan-to-value ratios of
80% or less. At March 31, 2010, $1.5 million, or 2.2%
of our total loans consisted of home equity loans and lines of
credit.
Consumer Non-real estate Loans. Bank of Ruston
originates consumer non-real estate loans that have terms up to
five years and generally higher interest rates than residential
mortgage loans. The consumer loans offered by Bank of Ruston
consist of loans secured by deposit accounts with Bank of
Ruston, automobile loans and other chattels such as boats, motor
homes, trailers and consumer rubber tire tractors. Bank of
Ruston will make unsecured consumer loans to customers with an
established history of performance and capacity for repayment.
At March 31, 2010, our consumer loans totaled
$3.7 million, or 5.2% of our total loan portfolio.
Loan Origination and Other Fees. In addition
to interest earned on loans, Bank of Ruston may also receive
loan origination fees or points for originating
loans. Loan points are a percentage of the principal amount of
the mortgage loan and are charged to the borrower in connection
with the origination of the loan.
Asset
Quality
General. Bank of Rustons collection
procedures provide that when a loan is 30 and 60 days past
due, a notice is sent to the borrower. Borrowers who are
61-89 days
delinquent will be sent a letter advising that payments must be
received by the last day of the month. For those who are
90 days delinquent, a demand letter is sent by Bank of
Ruston giving them 10 days within which the loan must be
brought current. Customers who have not responded to the
90-day
demand letter will receive an attorneys letter advising
them to bring the loan current. Late charges will be assessed
based on the number of days specified in the note beyond the due
date. The board of directors is notified of all delinquencies
ninety days past due. In most cases, deficiencies are cured
promptly. While Bank of Ruston generally prefers to work with
borrowers to resolve such problems, Bank of Ruston will
institute foreclosure or other collection proceedings when
necessary to minimize any potential loss.
Loans are placed on non-accrual status when management believes
the probability of collection of interest is doubtful. When a
loan is placed on non-accrual status, previously accrued but
unpaid interest is deducted from interest income. Bank of Ruston
discontinues the accrual of interest income when the loan
becomes 90 days past due as to principal or interest.
Real estate and other assets acquired by Bank of Ruston as a
result of foreclosure or by
deed-in-lieu
of foreclosure are classified as real estate owned until sold.
Bank of Ruston did not have any real estate owned at
March 31, 2010, December 31, 2009 or 2008.
53
Delinquent Loans. The following table shows
the delinquencies in our loan portfolio as of the dates
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010
|
|
|
|
30-89
|
|
|
90 or More
|
|
|
|
Days Overdue
|
|
|
Days Overdue
|
|
|
|
Number
|
|
|
Principal
|
|
|
Number
|
|
|
Principal
|
|
|
|
of Loans
|
|
|
Balance
|
|
|
of Loans
|
|
|
Balance
|
|
|
|
(Dollars in thousands)
|
|
|
One- to four-family residential
|
|
|
8
|
|
|
$
|
394
|
|
|
|
2
|
|
|
$
|
204
|
|
Commercial real estate and lines of credit, multi-family and land
|
|
|
1
|
|
|
|
95
|
|
|
|
1
|
|
|
|
4
|
|
Residential construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer non-real estate loans
|
|
|
13
|
|
|
|
62
|
|
|
|
1
|
|
|
|
9
|
|
Commercial business loans
|
|
|
1
|
|
|
|
32
|
|
|
|
1
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total delinquent loans
|
|
|
23
|
|
|
$
|
583
|
|
|
|
5
|
|
|
$
|
245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent loans to total net loans
|
|
|
|
|
|
|
0.82
|
%
|
|
|
|
|
|
|
0.35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent loans to total loans
|
|
|
|
|
|
|
0.82
|
%
|
|
|
|
|
|
|
0.34
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
|
30-89
|
|
|
90 or More
|
|
|
30-89
|
|
|
90 or More
|
|
|
|
Days Overdue
|
|
|
Days Overdue
|
|
|
Days Overdue
|
|
|
Days Overdue
|
|
|
|
Number
|
|
|
Principal
|
|
|
Number
|
|
|
Principal
|
|
|
Number
|
|
|
Principal
|
|
|
Number
|
|
|
Principal
|
|
|
|
of Loans
|
|
|
Balance
|
|
|
of Loans
|
|
|
Balance
|
|
|
of Loans
|
|
|
Balance
|
|
|
of Loans
|
|
|
Balance
|
|
|
|
(Dollars in thousands)
|
|
|
One- to four-family residential
|
|
|
6
|
|
|
$
|
304
|
|
|
|
2
|
|
|
$
|
205
|
|
|
|
8
|
|
|
$
|
358
|
|
|
|
2
|
|
|
$
|
299
|
|
Commercial real estate and lines of credit, multi-family and land
|
|
|
1
|
|
|
|
95
|
|
|
|
1
|
|
|
|
4
|
|
|
|
1
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
Residential construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer non-real estate loans
|
|
|
14
|
|
|
|
99
|
|
|
|
2
|
|
|
|
11
|
|
|
|
9
|
|
|
|
86
|
|
|
|
2
|
|
|
|
4
|
|
Commercial business loans
|
|
|
1
|
|
|
|
5
|
|
|
|
1
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total delinquent loans
|
|
|
22
|
|
|
$
|
503
|
|
|
|
6
|
|
|
$
|
248
|
|
|
|
18
|
|
|
$
|
459
|
|
|
|
4
|
|
|
$
|
303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent loans to total net loans
|
|
|
|
|
|
|
0.75
|
%
|
|
|
|
|
|
|
0.37
|
%
|
|
|
|
|
|
|
0.75
|
%
|
|
|
|
|
|
|
0.49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquent loans to total loans
|
|
|
|
|
|
|
0.75
|
%
|
|
|
|
|
|
|
0.37
|
%
|
|
|
|
|
|
|
0.75
|
%
|
|
|
|
|
|
|
0.49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
Non-performing Assets. The following table
shows the amounts of our non-performing assets, which include
non-accruing loans and other repossessed assets at the dates
indicated. We did not have accruing loans 90 days or more
past due, real estate owned or troubled debt restructurings at
any of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
March 31, 2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Non-accruing loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential
|
|
$
|
204
|
|
|
$
|
204
|
|
|
$
|
299
|
|
Commercial real estate and lines of credit, multi-family and land
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
Residential construction
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer non-real estate loans
|
|
|
9
|
|
|
|
12
|
|
|
|
4
|
|
Commercial business loans
|
|
|
28
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-accruing loans
|
|
$
|
245
|
|
|
$
|
248
|
|
|
$
|
303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing loans 90 days or more past due
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total non-performing loans
|
|
|
245
|
|
|
|
248
|
|
|
|
303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other repossessed assets(1)
|
|
|
|
|
|
|
2
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-performing assets
|
|
$
|
245
|
|
|
$
|
250
|
|
|
$
|
317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-performing loans as a percentage of loans, net
|
|
|
0.35
|
%
|
|
|
0.37
|
%
|
|
|
0.49
|
%
|
Total non-performing loans as a percentage of total assets
|
|
|
0.28
|
%
|
|
|
0.29
|
%
|
|
|
0.39
|
%
|
Total non-performing assets as a percentage of total assets
|
|
|
0.28
|
%
|
|
|
0.29
|
%
|
|
|
0.41
|
%
|
|
|
|
(1) |
|
Other repossessed assets consist solely of small motor vehicles. |
During the three months ended March 31, 2010, gross
interest income of $4,000 would have been recorded on
non-accruing loans under their original terms, if the loans had
been current throughout the period. No interest income was
recorded on non-accruing loans during the three months ended
March 31, 2010.
Classified Assets. Federal regulations require
that each insured savings institution classify its assets on a
regular basis. In addition, in connection with examinations of
insured institutions, federal examiners have authority to
identify problem assets and, if appropriate, classify them.
There are three classifications for problem assets:
substandard, doubtful and
loss. Substandard assets have one or more defined
weaknesses and are characterized by the distinct possibility
that the insured institution will sustain some loss if the
deficiencies are not corrected. Doubtful assets have the
weaknesses of substandard assets with the additional
characteristic that the weaknesses make collection or
liquidation in full on the basis of currently existing facts,
conditions and values questionable, and there is a higher
possibility of loss. An asset classified loss is considered
uncollectible and of such little value that continuance as an
asset of the institution is not warranted. Another category
designated special mention also must be established
and maintained for assets which do not currently expose an
insured institution to a sufficient degree of risk to warrant
classification as substandard, doubtful or loss. Assets
classified as substandard or doubtful require the institution to
establish general allowances for loan losses. If an asset or
portion thereof is classified as loss, the insured institution
must either establish specific allowances for loan losses in the
amount of 100% of the portion of the asset classified loss, or
charge-off such amount. General loss allowances established to
cover possible losses related to assets classified substandard
or doubtful may be included in determining an institutions
regulatory capital, while specific valuation allowances for loan
losses do not qualify as regulatory capital. Federal examiners
may disagree with an insured institutions classifications
and amounts reserved.
At March 31, 2010, Bank of Ruston had $342,000 of assets
classified substandard and $30,000 of assets classified loss.
Non-performing
loans at March 31, 2010, included $155,000 of classified
assets, the related allowance for loan loss for which was
$5,000. Bank of Ruston had an additional $359,000 of assets
designated as special mention at March 31, 2010.
55
Allowance for Loan Losses. At March 31,
2010, Bank of Rustons allowance for loan losses amounted
to $179,000. The allowance for loan losses is maintained at a
level believed, to the best of managements knowledge, to
cover all known and inherent losses in the portfolio both
probable and reasonable to estimate at each reporting date. The
level of allowance for loan losses is based on managements
periodic review of the collectability of the loans in light of
historical experience, the nature and volume of the loan
portfolio, adverse situations that may affect the
borrowers ability to repay, estimated value of any
underlying collateral and prevailing conditions. Bank of Ruston
is primarily engaged in originating single-family residential
loans secured by owner occupied and non-owner occupied
properties and commercial loans to known borrowers in Bank of
Rustons market area. The management of Bank of Ruston
considers the deficiencies of all classified loans in
determining the amount of allowance for loan losses required at
each reporting date. Management analyzes the probability of the
correction of the classified loans weaknesses and the
extent of any known or inherent losses that Bank of Ruston might
sustain on them.
While management believes that it determines the size of the
allowance based on the best information available at the time,
the allowance will need to be adjusted as circumstances change
and assumptions are updated. Future adjustments to the allowance
could significantly affect net income.
The following table shows changes in our allowance for loan
losses during the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the Three Months
|
|
|
At or for the Year Ended
|
|
|
|
Ended March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Total loans outstanding at end of period
|
|
$
|
70,619
|
|
|
$
|
64,237
|
|
|
$
|
67,173
|
|
|
$
|
61,403
|
|
Average loans outstanding
|
|
|
67,764
|
|
|
|
63,183
|
|
|
|
64,231
|
|
|
|
59,569
|
|
Allowance for loan losses, beginning of period
|
|
|
176
|
|
|
|
183
|
|
|
|
183
|
|
|
|
157
|
|
Provision for loan losses
|
|
|
|
|
|
|
2
|
|
|
|
16
|
|
|
|
32
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential
|
|
|
|
|
|
|
(10
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate and lines of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer non-real estate loans
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge-offs
|
|
|
|
|
|
|
(10
|
)
|
|
|
(24
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries on loans previously charged off
|
|
|
3
|
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses, end of period
|
|
$
|
179
|
|
|
$
|
175
|
|
|
$
|
176
|
|
|
$
|
183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses as a percent of
non-performing
loans
|
|
|
72.66
|
%
|
|
|
70.57
|
%
|
|
|
70.97
|
%
|
|
|
60.39
|
%
|
Ratio of net charge-offs during the period to average loans
outstanding during the period
|
|
|
|
%
|
|
|
0.02
|
%
|
|
|
0.04
|
%
|
|
|
0.01
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
The following table shows how our allowance for loan losses is
allocated by type of loan at each of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
March 31, 2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Loan
|
|
|
|
|
|
Loan
|
|
|
|
|
|
Loan
|
|
|
|
|
|
|
Category
|
|
|
|
|
|
Category
|
|
|
|
|
|
Category
|
|
|
|
Amount of
|
|
|
as a % of
|
|
|
Amount of
|
|
|
as a % of
|
|
|
Amount of
|
|
|
as a % of
|
|
|
|
Allowance
|
|
|
Total Loans
|
|
|
Allowance
|
|
|
Total Loans
|
|
|
Allowance
|
|
|
Total Loans
|
|
|
|
(Dollars in thousands)
|
|
|
One- to four-family residential
|
|
$
|
54
|
|
|
|
57.66
|
%
|
|
$
|
|
|
|
|
56.27
|
%
|
|
$
|
|
|
|
|
55.53
|
%
|
Commercial real estate and lines of credit
|
|
|
34
|
|
|
|
28.22
|
|
|
|
|
|
|
|
28.60
|
|
|
|
|
|
|
|
24.12
|
|
Multi-family
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential construction
|
|
|
6
|
|
|
|
2.28
|
|
|
|
|
|
|
|
2.03
|
|
|
|
|
|
|
|
3.04
|
|
Home equity line of credit
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer non-real estate
|
|
|
24
|
|
|
|
5.19
|
|
|
|
23
|
|
|
|
6.50
|
|
|
|
32
|
|
|
|
11.27
|
|
Commercial business loans
|
|
|
23
|
|
|
|
6.65
|
|
|
|
|
|
|
|
6.60
|
|
|
|
|
|
|
|
6.04
|
|
Unallocated
|
|
|
9
|
|
|
|
|
|
|
|
153
|
|
|
|
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
179
|
|
|
|
100.00
|
%
|
|
$
|
176
|
|
|
|
100.00
|
%
|
|
$
|
183
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective for the quarter ended March 31, 2010, Bank of
Ruston changed its methodology for allocating its allowance for
loan losses to more closely follow the guidance of Accounting
Standards Codification (ASC) Topic 450, Contingencies and
ASC Topic 310, Receivables. The result of our change in
methodology is reflected in the above table at March 31,
2010. Prior to this period, substantially all of our allowance
was unallocated. We do not expect that the change in methodology
for allocating the allowance will impact the amount of our
provisions for loan losses in future periods.
We regularly review the loan portfolio and make provisions for
loan losses in order to maintain the allowance for loan losses
in an amount management believes to be appropriate to absorb
probable losses on existing loans. The allowance for loan losses
consists primarily of two components: (1) specific
allowances established for impaired loans and (2) general
allowances established for loan losses on a portfolio basis for
loans that do not meet the definition of impaired loans. A loan
is deemed impaired when, based on current information, it is
probable that we will be unable to collect all amounts due under
the loan contract. If impairment is determined, Bank of Ruston
will measure that impairment and create a specific valuation
allowance for each such loan. General allowances are established
for the remainder of the loan portfolio which is separated by
category and, with respect to non homogenous loans, further
broken down into one of three risk classifications we have
assigned to the loan. Appropriate provisions for each category
are calculated taking total loans by type
and/or risk
class and applying the historical four-year charge off
percentage for that category plus a current economic adjustment
percentage. The economic adjustment used at each quarterly
review period is analyzed to ensure that it is appropriate and
reasonable based on current trends and economic conditions.
Following the quarterly allowance for loan loss analysis, we
will make additional loan loss provisions, if warranted, or
assign unallocated provisions to the allowance account.
Following the quarter ended March 31, 2010, we further
revised our methodology for allocating the allowance for loan
losses such that there generally will no longer be an
unallocated component to the allowance.
Investment
Activities
General. Our investment policy is designed
primarily to manage the interest rate sensitivity of our assets
and liabilities, to generate a favorable return without
incurring undue interest rate and credit risk, to complement our
lending activities and to provide and maintain liquidity.
At March 31, 2010, our investment securities portfolio
amounted to $6.9 million, or 7.9% of total assets at such
date. The largest component of our securities portfolio in
recent periods has been mortgage-backed
57
securities, which amounted to $5.5 million or 80.1% of the
securities portfolio at March 31, 2010. In addition, we
invest in U.S. government and agency obligations, municipal
securities, and FHLB stock. Our agency debt securities often
have call provisions which provide the agency with the ability
to call the securities at specified dates. At March 31,
2010, Bank of Ruston did not hold any Fannie Mae or Freddie Mac
common or preferred stock.
At March 31, 2010, we had an aggregate of $131,000 in gross
unrealized gains on our investment securities portfolio. Such
unrealized gains reflect an increase in market value of
securities as a result of changes in market rates of interest.
Management classifies securities as available for sale, held to
maturity, or trading, at the time of acquisition. Securities
classified as held to maturity must be purchased with the intent
and ability to hold that security until its final maturity, and
can be sold prior to maturity only under rare circumstances.
Held to maturity securities are accounted for based upon the
historical cost of the security. Available for sale securities
can be sold at any time based upon needs or market conditions.
Available for sale securities are accounted for at fair value,
with unrealized gains and losses on these securities, net of
income tax provisions, reflected in retained earnings as
accumulated other comprehensive income. At March 31, 2010,
we had $6.7 million of securities classified as available
for sale, $158,000 of securities classified as held to maturity
and none classified as trading account.
We do not purchase mortgage-backed derivative instruments that
would be characterized high-risk under Federal
banking regulations at the time of purchase, nor do we purchase
corporate obligations which are not rated investment grade or
better.
Our mortgage-backed securities consist primarily of mortgage
pass-through certificates issued by the Government National
Mortgage Association (GNMA or Ginnie
Mae), Fannie Mae or Freddie Mac. At March 31, 2010,
all of our mortgage-backed securities were issued by the GNMA,
Fannie Mae or Freddie Mac and we held no mortgage-backed
securities from private issuers.
Investments in mortgage-backed securities involve a risk that
actual prepayments will be greater than estimated prepayments
over the life of the security, which may require adjustments to
the amortization of any premium or accretion of any discount
relating to such instruments thereby changing the net yield on
such securities. There is also reinvestment risk associated with
the cash flows from such securities or in the event such
securities are redeemed by the issuer. In addition, the market
value of such securities may be adversely affected by changes in
interest rates.
Ginnie Mae is a government agency within the Department of
Housing and Urban Development which is intended to help finance
government-assisted housing programs. Ginnie Mae securities are
backed by loans insured by the Federal Housing Administration,
or guaranteed by the Veterans Administration. The timely payment
of principal and interest on Ginnie Mae securities is guaranteed
by Ginnie Mae and backed by the full faith and credit of the
U.S. Government. Freddie Mac is a private corporation
chartered by the U.S. Government. Freddie Mac issues
participation certificates backed principally by conventional
mortgage loans. Freddie Mac guarantees the timely payment of
interest and the ultimate return of principal on participation
certificates. Fannie Mae is a private corporation chartered by
the U.S. Congress with a mandate to establish a secondary
market for mortgage loans. Fannie Mae guarantees the timely
payment of principal and interest on Fannie Mae securities.
Freddie Mac and Fannie Mae securities are not backed by the full
faith and credit of the U.S. Government, but because
Freddie Mac and Fannie Mae are U.S. Government-sponsored
enterprises, these securities are considered to be among the
highest quality investments with minimal credit risks. In
September 2008, the Federal Housing Finance Agency was appointed
as conservator of Fannie Mae and Freddie Mac. The
U.S. Department of the Treasury agreed to provide capital
as needed to ensure that Fannie Mae and Freddie Mac continue to
provide liquidity to the housing and mortgage markets.
58
Investment and Mortgage-backed Securities
Portfolios. The following table sets forth
certain information relating to our investment and
mortgage-backed securities portfolios and our investment in FHLB
stock at the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
March 31, 2010
|
|
|
2009
|
|
|
2008
|
|
|
|
Amortized
|
|
|
Market
|
|
|
Amortized
|
|
|
Market
|
|
|
Amortized
|
|
|
Market
|
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
|
(In thousands)
|
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
5,248
|
|
|
$
|
5,370
|
|
|
$
|
5,607
|
|
|
$
|
5,703
|
|
|
$
|
5,418
|
|
|
$
|
5,438
|
|
U.S. Government and agency obligations
|
|
|
1,023
|
|
|
|
1,029
|
|
|
|
1,029
|
|
|
|
1,035
|
|
|
|
998
|
|
|
|
1,003
|
|
Municipal obligations
|
|
|
345
|
|
|
|
348
|
|
|
|
345
|
|
|
|
348
|
|
|
|
|
|
|
|
|
|
Equity Securities
|
|
|
2
|
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
Total securities available-for-Sale
|
|
|
6,618
|
|
|
|
6,749
|
|
|
|
6,982
|
|
|
|
7,087
|
|
|
|
6,418
|
|
|
|
6,443
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
160
|
|
|
|
158
|
|
|
|
171
|
|
|
|
171
|
|
|
|
274
|
|
|
|
269
|
|
Total securities held to maturity
|
|
|
160
|
|
|
|
158
|
|
|
|
171
|
|
|
|
171
|
|
|
|
274
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB stock
|
|
|
280
|
|
|
|
280
|
|
|
|
280
|
|
|
|
280
|
|
|
|
279
|
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment and mortgage-backed securities and FHLB stock
|
|
$
|
7,058
|
|
|
$
|
7,187
|
|
|
$
|
7,433
|
|
|
$
|
7,538
|
|
|
$
|
6,971
|
|
|
$
|
6,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables set forth the amount of investment
securities which mature during each of the periods indicated and
the weighted average yields for each range of maturities at
March 31, 2010 and December 31, 2009, respectively. As
Bank or Ruston held no tax-exempt securities during the periods
presented, no yield adjustments were made.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts at March 31, 2010, which Mature In
|
|
|
|
|
|
|
After One
|
|
|
|
|
|
|
|
|
|
|
|
|
One Year
|
|
|
to Five
|
|
|
After Five
|
|
|
Over
|
|
|
|
|
|
|
or Less
|
|
|
Years
|
|
|
to 10 Years
|
|
|
10 Years
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
264
|
|
|
$
|
4,983
|
|
|
$
|
5,247
|
|
U.S. government and agency obligations
|
|
|
1,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,023
|
|
Municipal obligations
|
|
|
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,023
|
|
|
|
|
|
|
|
609
|
|
|
|
4,983
|
|
|
|
6,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average yield
|
|
|
1.34
|
%
|
|
|
|
%
|
|
|
2.91
|
%
|
|
|
0.35
|
%
|
|
|
2.61
|
%
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
13
|
|
|
$
|
|
|
|
$
|
146
|
|
|
$
|
|
|
|
$
|
159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
13
|
|
|
|
|
|
|
|
146
|
|
|
|
|
|
|
|
159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average yield
|
|
|
7.39
|
%
|
|
|
|
%
|
|
|
(0.02
|
)%
|
|
|
|
%
|
|
|
1.46
|
%
|
Total mortgage-backed and investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
13
|
|
|
$
|
|
|
|
$
|
410
|
|
|
$
|
4,983
|
|
|
$
|
5,406
|
|
U.S. government and agency obligations
|
|
|
1,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,023
|
|
Municipal obligations
|
|
|
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,036
|
|
|
|
|
|
|
|
755
|
|
|
|
4,983
|
|
|
|
6,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average yield
|
|
|
1.41
|
%
|
|
|
|
%
|
|
|
2.34
|
%
|
|
|
0.35
|
%
|
|
|
2.58
|
%
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts at December 31, 2009, which Mature In
|
|
|
|
|
|
|
After One
|
|
|
|
|
|
|
|
|
|
|
|
|
One Year
|
|
|
to Five
|
|
|
After Five
|
|
|
Over
|
|
|
|
|
|
|
or Less
|
|
|
Years
|
|
|
to 10 Years
|
|
|
10 Years
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
318
|
|
|
$
|
5,289
|
|
|
$
|
5,607
|
|
U.S. government and agency obligations
|
|
|
|
|
|
|
1,029
|
|
|
|
|
|
|
|
|
|
|
|
1,029
|
|
Municipal obligations
|
|
|
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
1,029
|
|
|
|
663
|
|
|
|
5,289
|
|
|
|
6,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average yield
|
|
|
|
%
|
|
|
1.34
|
%
|
|
|
1.29
|
%
|
|
|
1.80
|
%
|
|
|
1.71
|
%
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
|
|
|
$
|
19
|
|
|
$
|
151
|
|
|
$
|
|
|
|
$
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
19
|
|
|
|
151
|
|
|
|
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average yield
|
|
|
|
%
|
|
|
0.04
|
%
|
|
|
n/m*
|
|
|
|
|
%
|
|
|
0.01
|
%
|
Total mortgage-backed and investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
|
|
|
$
|
19
|
|
|
$
|
469
|
|
|
$
|
5,289
|
|
|
$
|
5,777
|
|
U.S. government and agency obligations
|
|
|
|
|
|
|
1,029
|
|
|
|
|
|
|
|
|
|
|
|
1,029
|
|
Municipal obligations
|
|
|
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
1,048
|
|
|
|
814
|
|
|
|
5,289
|
|
|
|
7,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average yield
|
|
|
|
%
|
|
|
1.31
|
%
|
|
|
1.05
|
%
|
|
|
1.80
|
%
|
|
|
1.67
|
%
|
The following table sets forth the composition of our
mortgage-backed securities portfolio at each of the dates
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
March 31, 2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Fixed-rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
$
|
1,810
|
|
|
$
|
2,007
|
|
|
$
|
2,956
|
|
Held to maturity
|
|
|
13
|
|
|
|
19
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed-rate
|
|
|
1,823
|
|
|
|
2,026
|
|
|
|
2,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable-rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
3,559
|
|
|
|
3,696
|
|
|
|
2,514
|
|
Held to maturity
|
|
|
146
|
|
|
|
151
|
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustable-rate
|
|
|
3,705
|
|
|
|
3,847
|
|
|
|
2,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities
|
|
$
|
5,528
|
|
|
$
|
5,873
|
|
|
$
|
5,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources
of Funds
General. Deposits are the primary source of
Bank of Rustons funds for lending and other investment
purposes. In addition to deposits, principal and interest
payments on loans are a source of funds. Loan repayments are a
relatively stable source of funds, while deposit inflows and
outflows are significantly influenced by general interest rates
and money market conditions. Borrowings may also be used on a
short-term basis to compensate for reductions in the
availability of funds from other sources and on a longer-term
basis for general business purposes.
60
Deposits. Deposits are attracted by Bank of
Ruston principally from the Lincoln Parish, Louisiana. Deposit
account terms vary, with the principal differences being the
minimum balance required, the time periods the funds must remain
on deposit and the interest rate.
Bank of Ruston has not solicited deposits from outside Louisiana
or paid fees to brokers to solicit funds for deposit.
Interest rates paid, maturity terms, service fees and withdrawal
penalties are established on a periodic basis. Management
determines the rates and terms based on rates paid by
competitors, the need for funds or liquidity, growth goals and
federal regulations. Bank of Ruston attempts to control the flow
of deposits by pricing its accounts to remain generally
competitive with other financial institutions in its market area.
The following table shows the distribution of, and certain other
information relating to, our deposits by type of deposit, as of
the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
March 31, 2010
|
|
|
2009
|
|
|
2008
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
|
(Dollars in thousands)
|
|
|
Certificate accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00% - 0.99%
|
|
$
|
796
|
|
|
|
1.04
|
%
|
|
$
|
|
|
|
|
|
%
|
|
$
|
|
|
|
|
|
%
|
1.00% - 1.99%
|
|
|
16,946
|
|
|
|
22.06
|
|
|
|
14,958
|
|
|
|
19.70
|
|
|
|
338
|
|
|
|
0.49
|
|
2.00% - 2.99%
|
|
|
14,690
|
|
|
|
19.12
|
|
|
|
17,294
|
|
|
|
22.77
|
|
|
|
10,633
|
|
|
|
15.35
|
|
3.00% - 3.99%
|
|
|
10,722
|
|
|
|
13.96
|
|
|
|
11,557
|
|
|
|
15.22
|
|
|
|
21,054
|
|
|
|
30.39
|
|
4.00% - 4.99%
|
|
|
170
|
|
|
|
0.22
|
|
|
|
475
|
|
|
|
0.63
|
|
|
|
4,489
|
|
|
|
6.48
|
|
5.00% - or more
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,028
|
|
|
|
1.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total certificate accounts
|
|
$
|
43,324
|
|
|
|
56.40
|
%
|
|
|
44,284
|
|
|
|
58.31
|
%
|
|
|
37,542
|
|
|
|
54.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
|
6,809
|
|
|
|
8.86
|
%
|
|
|
6,716
|
|
|
|
8.84
|
%
|
|
|
7,696
|
|
|
|
11.11
|
%
|
Checking:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing
|
|
|
15,275
|
|
|
|
19.88
|
|
|
|
13,919
|
|
|
|
18.33
|
|
|
|
14,924
|
|
|
|
21.54
|
|
Non-interest bearing
|
|
|
6,599
|
|
|
|
8.59
|
|
|
|
7,065
|
|
|
|
9.30
|
|
|
|
6,339
|
|
|
|
9.15
|
|
Money market
|
|
|
4,844
|
|
|
|
6.30
|
|
|
|
3,959
|
|
|
|
5.21
|
|
|
|
2,782
|
|
|
|
4.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total transaction accounts
|
|
|
33,527
|
|
|
|
43.63
|
|
|
|
31,659
|
|
|
|
41.69
|
|
|
|
31,741
|
|
|
|
45.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
76,851
|
|
|
|
100.00
|
%
|
|
$
|
75,943
|
|
|
|
100.00
|
%
|
|
$
|
69,283
|
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the average balance of each type of
deposit and the average rate paid on each type of deposit for
the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended December 31,
|
|
|
|
March 31, 2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
Interest
|
|
|
Rate
|
|
|
Average
|
|
|
Interest
|
|
|
Rate
|
|
|
Average
|
|
|
Interest
|
|
|
Rate
|
|
|
|
Balance
|
|
|
Expense
|
|
|
Paid
|
|
|
Balance
|
|
|
Expense
|
|
|
Paid
|
|
|
Balance
|
|
|
Expense
|
|
|
Paid
|
|
|
|
(Dollars in thousands)
|
|
|
Savings accounts
|
|
$
|
6,694
|
|
|
$
|
7
|
|
|
|
0.42
|
%
|
|
$
|
7,213
|
|
|
$
|
52
|
|
|
|
0.72
|
%
|
|
$
|
6,992
|
|
|
$
|
70
|
|
|
|
1.00
|
%
|
Checking Interest Bearing
|
|
|
14,011
|
|
|
|
14
|
|
|
|
0.40
|
|
|
|
14,629
|
|
|
|
97
|
|
|
|
0.66
|
|
|
|
13,519
|
|
|
|
103
|
|
|
|
0.76
|
|
Money market
|
|
|
4,500
|
|
|
|
11
|
|
|
|
0.98
|
|
|
|
3,528
|
|
|
|
48
|
|
|
|
1.36
|
|
|
|
2,371
|
|
|
|
35
|
|
|
|
1.48
|
|
Certificates of Deposit
|
|
|
44,971
|
|
|
|
234
|
|
|
|
2.08
|
|
|
|
40,255
|
|
|
|
1,010
|
|
|
|
2.52
|
|
|
|
38,410
|
|
|
|
1,516
|
|
|
|
4.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
$
|
70,176
|
|
|
$
|
266
|
|
|
|
1.52
|
|
|
$
|
65,625
|
|
|
$
|
1,293
|
|
|
|
1.97
|
|
|
$
|
61,292
|
|
|
$
|
1,724
|
|
|
|
2.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
76,615
|
|
|
$
|
266
|
|
|
|
1.39
|
%
|
|
$
|
72,345
|
|
|
$
|
1,293
|
|
|
|
1.79
|
%
|
|
$
|
68,148
|
|
|
$
|
1,724
|
|
|
|
2.53
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
The following table shows our deposit flows during the periods
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Total deposits
|
|
$
|
72,319
|
|
|
$
|
64,473
|
|
|
$
|
280,943
|
|
|
$
|
388,239
|
|
Total withdrawals
|
|
|
(71,678
|
)
|
|
|
(63,513
|
)
|
|
|
(275,574
|
)
|
|
|
(383,224
|
)
|
Interest credited
|
|
|
267
|
|
|
|
340
|
|
|
|
1,292
|
|
|
|
1,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total increase in deposits
|
|
$
|
908
|
|
|
$
|
1,300
|
|
|
$
|
6,661
|
|
|
$
|
6,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables present, by various interest rate
categories and maturities, the amount of certificates of
deposit, excluding time deposits in individual retirement
accounts, at March 31, 2010 and December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010
|
|
|
|
Maturing in the 12 Months Ending March 31,
|
|
Certificates of Deposit
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Thereafter
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Less than 2.00%
|
|
$
|
17,014
|
|
|
$
|
728
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17,742
|
|
2.00% - 2.99%
|
|
|
12,100
|
|
|
|
2,590
|
|
|
|
|
|
|
|
|
|
|
|
14,690
|
|
3.00% - 3.99%
|
|
|
6,183
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
6,349
|
|
4.00% - 4.99%
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170
|
|
5.00% - or more
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total certificate accounts
|
|
$
|
35,467
|
|
|
$
|
3,484
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
38,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
|
Maturing in the 12 Months Ending December 31,
|
|
Certificates of Deposit
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Thereafter
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Less than 2.00%
|
|
$
|
14,720
|
|
|
$
|
237
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
14,957
|
|
2.00% - 2.99%
|
|
|
14,512
|
|
|
|
2,782
|
|
|
|
|
|
|
|
|
|
|
|
17,294
|
|
3.00% - 3.99%
|
|
|
6,282
|
|
|
|
1,026
|
|
|
|
|
|
|
|
|
|
|
|
7,308
|
|
4.00% - 4.99%
|
|
|
476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
476
|
|
5.00% - or more
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total certificate accounts
|
|
$
|
35,990
|
|
|
$
|
4,045
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
40,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables show the maturities of our certificates of
deposit of $100,000 or more at March 31, 2010 and
December 31, 2009, respectively, by time remaining to
maturity.
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2010
|
|
|
|
|
|
|
Weighted
|
|
Quarter Ending:
|
|
Amount
|
|
|
Average Rate
|
|
|
|
(Dollars in thousands)
|
|
|
June 30, 2010
|
|
$
|
4,729
|
|
|
|
2.06
|
%
|
September 30, 2010
|
|
|
5,799
|
|
|
|
2.08
|
|
December 31, 2010
|
|
|
4,220
|
|
|
|
2.43
|
|
March 31, 2011
|
|
|
1,820
|
|
|
|
2.02
|
|
After March 31, 2011
|
|
|
1,091
|
|
|
|
2.29
|
|
|
|
|
|
|
|
|
|
|
Total certificates of deposit with balances of $100,000 or more
|
|
$
|
17,659
|
|
|
|
2.16
|
%
|
|
|
|
|
|
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009
|
|
|
|
|
|
|
Weighted
|
|
Quarter Ending:
|
|
Amount
|
|
|
Average Rate
|
|
|
|
(Dollars in thousands)
|
|
|
March 31, 2010
|
|
$
|
6,867
|
|
|
|
2.13
|
%
|
June 30, 2010
|
|
|
3,028
|
|
|
|
2.06
|
|
September 30, 2010
|
|
|
3,920
|
|
|
|
2.43
|
|
December 31, 2010
|
|
|
4,095
|
|
|
|
2.45
|
|
After December 31, 2010
|
|
|
1,075
|
|
|
|
2.06
|
|
|
|
|
|
|
|
|
|
|
Total certificates of deposit with balances of $100,000 or more
|
|
$
|
18,985
|
|
|
|
2.27
|
%
|
|
|
|
|
|
|
|
|
|
Borrowings. Bank of Ruston may obtain advances
from the Federal Home Loan Bank of Dallas upon the security of
the common stock it owns in that bank and certain of its
residential mortgage loans and mortgage-backed and other
investment securities, provided certain standards related to
creditworthiness have been met. These advances are made pursuant
to several credit programs, each of which has its own interest
rate and range of maturities. Federal Home Loan Bank advances
are generally available to meet seasonal and other withdrawals
of deposit accounts and to permit increased lending.
As of March 31, 2010, Bank of Ruston was permitted to
borrow up to an aggregate total of $32.9 million from the
Federal Home Loan Bank of Dallas. Bank of Ruston did not have
any Federal Home Loan Bank advances outstanding at
March 31, 2010. Additionally, at March 31, 2010, Bank
of Ruston was a party to a Master Purchase Agreement with First
National Bankers Bank whereby Bank of Ruston may purchase
Federal Funds from First National Bankers Bank in an amount not
to exceed $2.5 million. There were no amounts purchased
under this agreement as of March 31, 2010.
In addition to FHLB advances, our borrowings include securities
sold under agreements to repurchase. Repurchase agreements are
contracts for the sale of securities owned or borrowed by Bank
of Ruston, with an agreement to repurchase those securities at
an agreed upon price and date. We use repurchase agreements as
an investment vehicle for our commercial sweep checking product.
We enter into securities repurchase agreements with our
commercial checking account customers under a sweep account
arrangement. Account balances are swept on a daily basis into
mortgage-backed securities purchases from us, which we agree to
repurchase as the checking account is drawn upon by the
customer. At March 31, 2010, our securities repurchase
agreements amounted to $958,000 and all of such borrowings were
short-term, having maturities of one year or less. The average
balance of our securities sold under repurchase agreements for
the three months ended March 31, 2010 was $712,000.
The following table shows certain information regarding our
borrowings at or for the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or For the
|
|
At or For the
|
|
|
Three Months
|
|
Year Ended
|
|
|
Ended March 31,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2009
|
|
2008
|
|
|
(Dollars in thousands)
|
|
FHLB advances and other borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average balance outstanding
|
|
$
|
712
|
|
|
$
|
53
|
|
|
$
|
1,070
|
|
|
$
|
58
|
|
Maximum amount outstanding at any month-end during the period
|
|
|
1,137
|
|
|
|
53
|
|
|
|
960
|
|
|
|
61
|
|
Balance outstanding at end of period
|
|
|
958
|
|
|
|
|
|
|
|
907
|
|
|
|
53
|
|
Average interest rate during the period
|
|
|
1.00
|
%
|
|
|
4.24
|
%
|
|
|
2.62
|
%
|
|
|
4.24
|
%
|
Weighted average interest rate at end of period
|
|
|
1.00
|
%
|
|
|
4.24
|
%
|
|
|
1.03
|
%
|
|
|
4.24
|
%
|
We had no FHLB advances outstanding at March 31, 2010 or
December 31, 2009.
63
Subsidiaries
At March 31, 2010, Bank of Ruston did not have any
subsidiary companies.
Total
Employees
Bank of Ruston had 30 full-time and two part-time employees
at March 31, 2010. None of these employees are represented
by a collective bargaining agreement, and Bank of Ruston
believes that it enjoys good relations with its personnel.
Legal
Proceedings
We are not presently involved in any legal proceedings of a
material nature. From time to time, we are a party to legal
proceedings incidental to our business to enforce our security
interest in collateral pledged to secure loans made by Bank of
Ruston.
Properties
We currently conduct business from our main office and one
full-service banking office. The following table sets forth the
net book value of the land, building and leasehold improvements
and certain other information with respect to the our offices at
March 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of Lease
|
|
|
Net Book Value
|
|
|
Amount of
|
|
Description/Address
|
|
Leased/Owned
|
|
|
Expiration
|
|
|
of Property
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Main Office:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
505 North Vienna
Ruston, Louisiana 71270
|
|
|
Owned
|
|
|
|
N/A
|
|
|
$
|
2,005
|
|
|
$
|
75,229
|
|
Branch Office:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2109 Farmerville Highway
Ruston, Louisiana 71270
|
|
|
Owned
|
|
|
|
N/A
|
|
|
|
1,730
|
|
|
|
1,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
3,735
|
|
|
$
|
76,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REGULATION
Set forth below is a brief description of certain laws relating
to the regulation of Century Next Financial and Bank of Ruston
after the proposed conversion. This description does not purport
to be complete and is qualified in its entirety by reference to
applicable laws and regulations.
General
Bank of Ruston, as a federally chartered savings bank, is
subject to federal regulation and oversight by the Office of
Thrift Supervision extending to all aspects of its operations.
Bank of Ruston also is subject to regulation and examination by
the Federal Deposit Insurance Corporation, which insures the
deposits of Bank of Ruston to the maximum extent permitted by
law, and requirements established by the Federal Reserve Board.
Federally chartered savings institutions are required to file
periodic reports with the Office of Thrift Supervision and are
subject to periodic examinations by the Office of Thrift
Supervision and the Federal Deposit Insurance Corporation. The
investment and lending authority of savings institutions are
prescribed by federal laws and regulations, and such
institutions are prohibited from engaging in any activities not
permitted by such laws and regulations. Such regulation and
supervision primarily is intended for the protection of
depositors and not for the purpose of protecting shareholders.
Federal law provides the federal banking regulators, including
the Office of Thrift Supervision and Federal Deposit Insurance
Corporation, with substantial enforcement powers. The Office of
Thrift Supervisions enforcement authority over all savings
institutions and their holding companies includes, among other
things, the ability to assess civil money penalties, to issue
cease and desist or removal orders and to initiate
64
injunctive actions. In general, these enforcement actions may be
initiated for violations of laws and regulations and unsafe or
unsound practices. Other actions or inactions may provide the
basis for enforcement action, including misleading or untimely
reports filed with the Office of Thrift Supervision. Any change
in such regulations, whether by the Federal Deposit Insurance
Corporation, Office of Thrift Supervision or Congress, could
have a material adverse impact on Century Next Financial and
Bank of Ruston and their operations.
Under the recently enacted Dodd-Frank Wall Street Reform and
Consumer Protection Act, the powers of the Office of Thrift
Supervision regarding Bank of Ruston and Century Next Financial
will transfer to other federal financial institution regulatory
agencies on July 21, 2011, unless extended up to an
additional six months. See Recently Enacted
Regulatory Reform. As of the transfer date, all of the
regulatory functions related to Bank of Ruston that are
currently under the jurisdiction of the Office of Thrift
Supervision will transfer to the Office of the Comptroller of
the Currency. In addition, as of that same date, all of the
regulatory functions related to Century Next Financial, as a
savings and loan holding company that are currently under the
jurisdiction of the Office of Thrift Supervision, will transfer
to the Federal Reserve.
Recently
Enacted Regulatory Reform
On July 21, 2010, the President signed into law the
Dodd-Frank Wall Street Reform and Consumer Protection Act. The
financial reform and consumer protection act imposes new
restrictions and an expanded framework of regulatory oversight
for financial institutions, including depository institutions.
In addition, the new law changes the jurisdictions of existing
bank regulatory agencies and in particular transfers the
regulation of federal savings associations from the Office of
Thrift Supervision to the Office of Comptroller of the Currency,
effective one year from the effective date of the legislation,
with a potential extension up to six months. Savings and loan
holding companies will be regulated by the Board of Governors of
the Federal Reserve System. The new law also establishes an
independent federal consumer protection bureau within the
Federal Reserve. The following discussion summarizes significant
aspects of the new law that may affect Bank of Ruston and
Century Next Financial. Regulations implementing these changes
have not been promulgated, so we cannot determine the full
impact on our business and operations at this time.
The following aspects of the financial reform and consumer
protection act are related to the operations of Bank of Ruston:
|
|
|
|
|
The Office of Thrift Supervision will be merged into the Office
of the Comptroller of the Currency and the authority of the
other two bank regulatory agencies restructured. The federal
thrift charter will be preserved with the Federal Reserve given
authority over savings and loan holding companies.
|
|
|
|
A new independent consumer financial protection bureau will be
established within the Federal Reserve, empowered to exercise
broad regulatory, supervisory and enforcement authority with
respect to both new and existing consumer financial protection
laws. Smaller financial institutions, like Bank of Ruston, will
be subject to the supervision and enforcement of their primary
federal banking regulator with respect to the federal consumer
financial protection laws.
|
|
|
|
The Federal Deposit Insurance Act was amended to direct federal
regulators to require depository institution holding companies
to serve as a source of strength for their depository
institution subsidiaries.
|
|
|
|
Tier 1 capital treatment for hybrid capital
items like trust preferred securities is eliminated subject to
various grandfathering and transition rules.
|
|
|
|
The current prohibition on payment of interest on demand
deposits was repealed, effective July 21, 2011.
|
|
|
|
State law is preempted only if it would have a discriminatory
effect on a federal savings association or is preempted by any
other federal law. The Office of the Comptroller of the Currency
must make a preemption determination on a
case-by-case
basis with respect to a particular state law or other state law
with substantively equivalent terms.
|
65
|
|
|
|
|
Deposit insurance is permanently increased to $250,000 and
unlimited deposit insurance for noninterest-bearing transaction
accounts extended through January 1, 2013.
|
|
|
|
Deposit insurance assessment base calculation will equal the
depository institutions total assets minus the sum of its
average tangible equity during the assessment period.
|
|
|
|
The minimum reserve ratio of the Deposit Insurance Fund
increased to 1.35 percent of estimated annual insured
deposits or assessment base; however, the Federal Deposit
Insurance Corporation is directed to offset the
effect of the increased reserve ratio for insured
depository institutions with total consolidated assets of less
than $10 billion.
|
The following aspects of the financial reform and consumer
protection act are related to the operations of Century Next
Financial:
|
|
|
|
|
Leverage capital requirements and risk based capital
requirements applicable to depository institutions will be
extended to thrift holding companies.
|
|
|
|
The Securities and Exchange Commission is authorized to adopt
rules requiring public companies to make their proxy materials
available to shareholders for nomination of their own candidates
for election to the board of directors.
|
|
|
|
Public companies will be required to provide their shareholders
with a non-binding vote: (i) at least once every three
years on the compensation paid to executive officers, and
(ii) at least once every six years on whether they should
have a say on pay vote every one, two or three years.
|
|
|
|
A separate, non-binding shareholder vote will be required
regarding golden parachutes for named executive officers when a
shareholder vote takes place on mergers, acquisitions,
dispositions or other transactions that would trigger the
parachute payments.
|
|
|
|
Securities exchanges will be required to prohibit brokers from
using their own discretion to vote shares not beneficially owned
by them for certain significant matters, which
include votes on the election of directors, executive
compensation matters, and any other matter determined to be
significant.
|
|
|
|
Stock exchanges, which does not include the OTC
Bulletin Board, will be prohibited from listing the
securities of any issuer that does not have a policy providing
for (i) disclosure of its policy on incentive compensation
payable on the basis of financial information reportable under
the securities laws, and (ii) the recovery from current or
former executive officers, following an accounting restatement
triggered by material noncompliance with securities law
reporting requirements, of any incentive compensation paid
erroneously during the three-year period preceding the date on
which the restatement was required that exceeds the amount that
would have been paid on the basis of the restated financial
information.
|
|
|
|
Disclosure in annual proxy materials will be required concerning
the relationship between the executive compensation paid and the
financial performance of the issuer.
|
|
|
|
Item 402 of
Regulation S-K
will be amended to require companies to disclose the ratio of
the Chief Executive Officers annual total compensation to
the median annual total compensation of all other employees.
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Smaller reporting companies are exempt from complying with the
internal control auditor attestation requirements of
Section 404(b) of the Sarbanes-Oxley Act.
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Regulation
of Century Next Financial Corporation
Holding Company Acquisitions. Upon completion
of the conversion, Century Next Financial will become a savings
and loan holding company under the Home Owners Loan Act,
as amended, and will be required to register with the Office of
Thrift Supervision. Federal law generally prohibits a savings
and loan holding company, without prior Office of Thrift
Supervision approval, from acquiring the ownership or control of
any other savings institution or savings and loan holding
company, or all, or substantially all, of the assets
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or more than 5% of the voting shares of the savings institution
or savings and loan holding company. These provisions also
prohibit, among other things, any director or officer of a
savings and loan holding company, or any individual who owns or
controls more than 25% of the voting shares of such holding
company, from acquiring control of any savings institution not a
subsidiary of such savings and loan holding company, unless the
acquisition is approved by the Office of Thrift Supervision.
The Office of Thrift Supervision may not approve any acquisition
that would result in a multiple savings and loan holding company
controlling savings institutions in more than one state, subject
to two exceptions: (1) the approval of interstate
supervisory acquisitions by savings and loan holding companies;
and (2) the acquisition of a savings institution in another
state if the laws of the state of the target savings institution
specifically permit such acquisitions. The states vary in the
extent to which they permit interstate savings and loan holding
company acquisitions.
Holding Company Activities. Century Next
Financial will operate as a unitary savings and loan holding
company and will be permitted to engage only in the activities
permitted for financial holding companies under Federal Reserve
Board regulations or for multiple savings and loan holding
companies. Multiple savings and loan holding companies are
permitted to engage in the following activities:
(i) activities permitted for a bank holding company under
section 4(c) of the Bank Holding Company Act (unless the
Director of the Office of Thrift Supervision prohibits or limits
such 4(c) activities); (ii) furnishing or performing
management services for a subsidiary savings association;
(iii) conducting any insurance agency or escrow business;
(iv) holding, managing, or liquidating assets owned by or
acquired from a subsidiary savings association; (v) holding
or managing properties used or occupied by a subsidiary savings
association; (vi) acting as trustee under deeds of trust;
or (vii) activities authorized by regulation as of
March 5, 1987, to be engaged in by multiple savings and
loan holding companies. Although savings and loan holding
companies are not subject to specific capital requirements or
specific restrictions on the payment of dividends or other
capital distributions, federal regulations do prescribe such
restrictions on subsidiary savings institutions, as described
below. Bank of Ruston will be required to notify the Office of
Thrift Supervision 30 days before declaring any dividend.
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 agency has authority to
order cessation of activities or divestiture of subsidiaries
deemed to pose a threat to the safety and soundness of the
institution.
Federal Securities Laws. We have filed a
registration statement with the Securities and Exchange
Commission under the Securities Act of 1933 for the registration
of our common stock to be issued pursuant to the conversion. In
connection with the conversion, we intend to register our common
stock with the Securities and Exchange Commission under
Section 12(g) of the Securities Exchange Act of 1934. We
will then be subject to the proxy and tender offer rules,
insider trading reporting requirements and restrictions, and
certain other requirements under the Securities Exchange Act of
1934. Pursuant to Office of Thrift Supervision regulations and
the plan of conversion, we have agreed to maintain such
registration for a minimum of three years following Bank of
Rustons mutual-to-stock conversion.
The Sarbanes-Oxley Act of 2002. As a public
company, Century Next Financial will be subject to the
Sarbanes-Oxley Act of 2002, which implements a broad range of
corporate governance and accounting measures for public
companies designed to promote honesty and transparency in
corporate America and better protect investors from corporate
wrongdoing. The Sarbanes-Oxley Acts principal legislation
and the derivative regulation and rule-making promulgated by the
SEC include:
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the creation of an independent accounting oversight board;
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auditor independence provisions that restrict non-audit services
that accountants may provide to their audit clients;
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additional corporate governance and responsibility measures,
including the requirement that the chief executive officer and
chief financial officer certify financial statements;
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a requirement that companies establish and maintain a system of
internal control over financial reporting and that a
companys management provide an annual report regarding its
assessment of the effectiveness of such internal control over
financial reporting to the companys independent
accountants
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and that such accountants provide an attestation report with
respect to managements assessment of the effectiveness of
the companys internal control over financial reporting;
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the forfeiture of bonuses or other incentive-based compensation
and profits from the sale of an issuers securities by
directors and senior officers in the twelve month period
following initial publication of any financial statements that
later require restatement;
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an increase in the oversight of, and enhancement of certain
requirements relating to audit committees of public companies
and how they interact with the companys independent
auditors;
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the requirement that audit committee members must be independent
and are absolutely barred from accepting consulting, advisory or
other compensatory fees from the issuer;
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the requirement that companies disclose whether at least one
member of the audit committee is a financial expert
(as such term is defined by the SEC) and if not, why not;
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expanded disclosure requirements for corporate insiders,
including accelerated reporting of stock transactions by
insiders and a prohibition on insider trading during pension
blackout periods;
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a prohibition on personal loans to directors and officers,
except certain loans made by insured financial institutions;
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disclosure of a code of ethics and the requirement of filing of
a
Form 8-K
for a change or waiver of such code;
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mandatory disclosure by analysts of potential conflicts of
interest; and
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a range of enhanced penalties for fraud and other violations.
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Regulation
of Bank of Ruston
General. As part of the conversion, Bank of
Ruston will convert from a federally-chartered mutual savings
bank to a federally chartered stock savings bank. The Office of
Thrift Supervision will continue to be its primary federal
regulator and has extensive authority over the operations of
federally-chartered savings institutions. As part of this
authority, Bank of Ruston is required to file periodic reports
with the Office of Thrift Supervision and is subject to periodic
examinations by the Office of Thrift Supervision and the Federal
Deposit Insurance Corporation. The investment and lending
authorities of savings institutions are prescribed by federal
laws and regulations, and such institutions are prohibited from
engaging in any activities not permitted by such laws and
regulations. Such regulation and supervision is primarily
intended for the protection of depositors and the Deposit
Insurance Fund administered by the Federal Deposit Insurance
Corporation.
The Office of Thrift Supervisions enforcement authority
over all savings institutions and their holding companies
includes, among other things, the ability to assess civil money
penalties, to issue cease and desist or removal orders and to
initiate injunctive actions. In general, these enforcement
actions may be initiated for violations of laws and regulations
and unsafe or unsound practices. Other actions or inactions may
provide the basis for enforcement action, including misleading
or untimely reports filed with the Office of Thrift Supervision.
Insurance of Accounts. The deposits of the
Bank are insured to the maximum extent permitted by the DIF and
are backed by the full faith and credit of the
U.S. Government. As insurer, the Federal Deposit Insurance
Corporation is authorized to conduct examinations of, and to
require reporting by, insured institutions. It also may prohibit
any insured institution from engaging in any activity determined
by regulation or order to pose a serious threat to the Federal
Deposit Insurance Corporation. The Federal Deposit Insurance
Corporation also has the authority to initiate enforcement
actions against savings institutions, after giving the Office of
Thrift Supervision an opportunity to take such action.
The Federal Deposit Insurance Corporation increased deposit
insurance on most accounts from $100,000 to $250,000. In
addition, pursuant to Section 13(c)(4)(G) of the Federal
Deposit Insurance Act, the Federal Deposit Insurance Corporation
has implemented two temporary programs to provide deposit
insurance for the
68
full amount of most noninterest bearing transaction deposit
accounts through the end of 2013 and to guarantee certain
unsecured debt of financial institutions and their holding
companies through December 2012. For noninterest bearing
transaction deposit accounts, including accounts swept from a
noninterest bearing transaction account into a noninterest
bearing savings deposit account, a 10 basis point annual
rate surcharge is applied to deposit amounts in excess of
$250,000. Bank of Ruston did not participate in the temporary
liquidity guarantee program.
The Federal Deposit Insurance Corporation adopted a new
risk-based premium system that provides for quarterly
assessments based on an insured institutions ranking in
one of four risk categories based upon supervisory and capital
evaluations. Well-capitalized institutions (generally those with
CAMELS composite ratings of 1 or 2) are grouped in Risk
Category I and assessed for deposit insurance at an annual rate
of between five and seven basis points. The assessment rate for
an individual institution is determined according to a formula
based on a weighted average of the institutions individual
CAMELS component ratings plus either five financial ratios or,
in the case of an institution with assets of $10.0 billion
or more, the average ratings of its long-term debt. Institutions
in Risk Categories II, III and IV are assessed at
annual rates of 22, 32 and 45 basis points, respectively.
In addition, all institutions with deposits insured by the
Federal Deposit Insurance Corporation are required to pay
assessments to fund interest payments on bonds issued by the
Financing Corporation, a mixed-ownership government corporation
established to recapitalize the predecessor to the Deposit
Insurance Fund. These assessments will continue until the
Financing Corporation bonds mature in 2019.
The Federal Deposit Insurance Corporation may terminate the
deposit insurance of any insured depository institution,
including Bank of Ruston, if it determines after a hearing that
the institution has engaged or is engaging in unsafe or unsound
practices, is in an unsafe or unsound condition to continue
operations, or has violated any applicable law, regulation,
order or any condition imposed by an agreement with the Federal
Deposit Insurance Corporation. It also may suspend deposit
insurance temporarily during the hearing process for the
permanent termination of insurance, if the institution has no
tangible capital. If insurance of accounts is terminated, the
accounts at the institution at the time of the termination, less
subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the Federal
Deposit Insurance Corporation. Management is aware of no
existing circumstances which would result in termination of Bank
of Rustons deposit insurance.
On May 22, 2009, the Federal Deposit Insurance Corporation
announced a five basis point special assessment on each insured
depository institutions assets minus its Tier 1
capital as of June 30, 2009. The Federal Deposit Insurance
Corporation collected the special assessment on
September 30, 2009. Based on our assets and Tier 1
capital at June 30, 2009, the impact of the special
assessment was $36,000, which was expensed in the second quarter
of fiscal 2009.
On November 12, 2009, the Federal Deposit Insurance
Corporation approved a requirement for insured deposit
institutions to prepay 13 quarters of estimated insurance
assessments. Prepayment of the assessment was included with the
December 30, 2009 invoice and totaled approximately
$375,000. Unlike a special assessment, this prepayment will not
immediately affect bank earnings. Banks will book the prepaid
assessment as a non-earning asset and record the actual
risk-based premium payments at the end of each quarter.
Regulatory Capital Requirements. Federally
insured savings institutions are required to maintain minimum
levels of regulatory capital. The Office of Thrift Supervision
has established capital standards consisting of a tangible
capital requirement, a leverage capital
requirement and a risk-based capital
requirement. The Office of Thrift Supervision also is
authorized to impose capital requirements in excess of these
standards on individual institutions on a
case-by-case
basis.
Current Office of Thrift Supervision capital standards require
savings institutions to satisfy the following capital
requirements:
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tangible capital requirement tangible
capital equal to at least 1.5% of adjusted total assets;
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leverage capital requirement core
capital equal to at least 4.0% of adjusted total assets; and
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risk-based capital requirement total
capital (a combination of core and supplementary
capital) equal to at least 8.0% of risk-weighted
assets.
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Core capital generally consists of common stockholders
equity (including retained earnings). Tangible capital generally
equals core capital minus intangible assets, with only a limited
exception for purchased mortgage servicing rights. The Bank had
no intangible assets at March 31, 2010. Both core and
tangible capital are further reduced by an amount equal to a
savings institutions debt and equity investments in
subsidiaries engaged in activities not permissible to national
banks (other than subsidiaries engaged in activities undertaken
as agent for customers or in mortgage banking activities and
subsidiary depository institutions or their holding companies).
These adjustments do not affect Bank of Rustons regulatory
capital.
In determining compliance with the risk-based capital
requirement, a savings institution is allowed to include both
core capital and supplementary capital in its total capital,
provided that the amount of supplementary capital included does
not exceed the savings institutions core capital.
Supplementary capital generally consists of general allowances
for loan losses up to a maximum of 1.25% of risk-weighted
assets, together with certain other items. In determining the
required amount of risk-based capital, total assets, including
certain off-balance sheet items, are multiplied by a risk weight
based on the risks inherent in the type of assets. The risk
weights range from 0% for cash and securities issued by the
U.S. Government or unconditionally backed by the full faith
and credit of the U.S. Government to 100% for loans (other
than qualifying residential loans weighted at 80%) and
repossessed assets.
Savings institutions must value securities available for sale at
amortized cost for regulatory capital purposes. This means that
in computing regulatory capital, savings institutions should add
back any unrealized losses and deduct any unrealized gains, net
of income taxes, on debt securities reported as a separate
component of capital, as defined by generally accepted
accounting principles.
At March 31, 2010, Bank of Ruston exceeded all of its
regulatory capital requirements, with tangible, core and
risk-based capital ratios of 9.6%, 9.6% and 13.6%, respectively.
Any savings institution that fails any of the capital
requirements is subject to possible enforcement actions by the
Office of Thrift Supervision or the Federal Deposit Insurance
Corporation. Such actions could include a capital directive, a
cease and desist order, civil money penalties, the establishment
of restrictions on the institutions operations,
termination of federal deposit insurance and the appointment of
a conservator or receiver. The Office of Thrift
Supervisions capital regulation provides that such
actions, through enforcement proceedings or otherwise, could
require one or more of a variety of corrective actions.
Prompt Corrective Action. The following table
shows the amount of capital associated with the different
capital categories set forth in the prompt corrective action
regulations.
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Total Risk-Based
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Tier 1 Risk-Based
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Tier 1 Leverage
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Capital Category
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Capital
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Capital
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Capital
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Well capitalized
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10% or more
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6% or more
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5% or more
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Adequately capitalized
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8% or more
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4% or more
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4% or more
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Undercapitalized
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Less than 8%
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Less than 4%
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Less than 4%
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Significantly undercapitalized
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Less than 6%
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Less than 3%
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Less than 3%
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In addition, an institution is critically
undercapitalized if it has a ratio of tangible equity to
total assets that is equal to or less than 2.0%. Under specified
circumstances, a federal banking agency may reclassify a well
capitalized institution as adequately capitalized and may
require an adequately capitalized institution or an
undercapitalized institution to comply with supervisory actions
as if it were in the next lower category (except that the
Federal Deposit Insurance Corporation may not reclassify a
significantly undercapitalized institution as critically
undercapitalized).
An institution generally must file a written capital restoration
plan which meets specified requirements within 45 days of
the date that the institution receives notice or is deemed to
have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized. A federal
banking agency must
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provide the institution with written notice of approval or
disapproval within 60 days after receiving a capital
restoration plan, subject to extensions by the agency. An
institution which is required to submit a capital restoration
plan must concurrently submit a performance guaranty by each
company that controls the institution. In addition,
undercapitalized institutions are subject to various regulatory
restrictions, and the appropriate federal banking agency also
may take any number of discretionary supervisory actions.
At March 31, 2010, Bank of Ruston was deemed a well
capitalized institution for purposes of the prompt corrective
regulations and as such is not subject to the above mentioned
restrictions.
The table below sets forth Bank of Rustons capital
position relative to its regulatory capital requirements at
March 31, 2010.
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To be Well Capitalized
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Required for Capital
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Under Prompt Corrective
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Excess Over
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Actual
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Adequacy Purposes
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Action Provisions
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Well-Capitalized Provisions
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Amount
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Ratio
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Amount
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Ratio
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Amount
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Ratio
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Amount
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Ratio
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(Dollars in thousands)
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Tier 1 risk-based capital
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$
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8,547
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13.35
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%
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$
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2,562
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4.0
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%
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$
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3,842
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6.0
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%
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4,705
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7.35
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%
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Total risk-based capital
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8,695
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13.58
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5,123
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8.0
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6,404
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10.0
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2,291
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3.58
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Tier 1 leverage capital
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8,547
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9.61
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3,556
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4.0
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4,445
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5.0
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4,102
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4.61
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Tangible capital
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8,547
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9.61
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1,333
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1.5
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N/A
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N/A
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N/A
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N/A
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Capital Distributions. Office of Thrift
Supervision regulations govern capital distributions by savings
institutions, which include cash dividends, stock repurchases
and other transactions charged to the capital account of a
savings institution to make capital distributions. A savings
institution must file an application for Office of Thrift
Supervision approval of the capital distribution if either
(1) the total capital distributions for the applicable
calendar year exceed the sum of the institutions net
income for that year to date plus the institutions
retained net income for the preceding two years, (2) the
institution would not be at least adequately capitalized
following the distribution, (3) the distribution would
violate any applicable statute, regulation, agreement or Office
of Thrift Supervision-imposed condition, or (4) the
institution is not eligible for expedited treatment of its
filings. If an application is not required to be filed, savings
institutions which are a subsidiary of a savings and loan
holding company (as well as certain other institutions) must
still file a notice with the Office of Thrift Supervision at
least 30 days before the board of directors declares a
dividend or approves a capital distribution.
Qualified Thrift Lender Test. All savings
institutions are required to meet a qualified thrift lender, or
QTL, test to avoid certain restrictions on their operations. A
savings institution can comply with the QTL test by either
qualifying as a domestic building and loan association as
defined in the Internal Revenue Code or meeting the Office of
Thrift Supervision QTL test.
Currently, the Office of Thrift Supervision QTL test requires
that 65% of an institutions portfolio assets
(as defined) consist of certain housing and consumer-related
assets on a monthly average basis in nine out of every
12 months. To be a qualified thrift lender under the IRS
test, the savings institution must meet a business
operations test and a 60 percent assets
test, each defined in the Internal Revenue Code.
If the savings institution fails to maintain its QTL status, the
holding companys activities are restricted. In addition,
it must discontinue any non-permissible business, although the
Office of Thrift Supervision may grant a grace period up to two
years for good cause. Under the Dodd-Frank Wall Street Reform
and Consumer Protection Act, the savings institution is also
prohibited from paying dividends and is subject to an
enforcement action for violation of the Home Owners Loan
Act, as amended. Nonetheless, any company that controls a
savings institution that is not a qualified thrift lender must
register as a bank holding company within one year of the
savings institutions failure to meet the QTL test.
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Statutory penalty provisions require an institution that fails
to remain a QTL to either become a national bank or be
prohibited from the following:
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Making any new investments or engaging in any new activity not
allowed for both a national bank and a savings association;
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Establishing any new branch office unless allowable for a
national bank; and
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Paying dividends unless allowable for a national bank.
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Three years from the date a savings association should have
become or ceases to be a QTL, by failing to meet either QTL
test, the institution must dispose of any investment or not
engage in any activity unless the investment or activity is
allowed for both a national bank and a savings association.
At March 31, 2010, Bank of Ruston met the requirements to
be deemed a QTL.
Community Reinvestment Act. All federal
savings associations have a responsibility under the Community
Reinvestment Act and related regulations to help meet the credit
needs of their communities, including low- and moderate-income
neighborhoods. An institutions failure to comply with the
provisions of the Community Reinvestment Act could result in
restrictions on its activities. Bank of Ruston received a
satisfactory Community Reinvestment Act rating in
its most recently completed examination.
Limitations on Transactions with
Affiliates. Transactions between savings
associations and any affiliate are governed by Sections 23A
and 23B of the Federal Reserve Act as made applicable to savings
associations by Section 11 of the Home Owners Loan
Act. An affiliate of a savings association is any company or
entity which controls, is controlled by or is under common
control with the savings association. In a holding company
context, the holding company of a savings association (such as
Century Next Financial) and any companies which are controlled
by such holding company are affiliates of the savings
association. Generally, Section 23A limits the extent to
which the savings association or its subsidiaries may engage in
covered transactions with any one affiliate to an
amount equal to 10% of such associations capital stock and
surplus, and contain an aggregate limit on all such transactions
with all affiliates to an amount equal to 20% of such capital
stock and surplus. Section 23B applies to covered
transactions as well as certain other transactions and
requires that all transactions be on terms substantially the
same, or at least as favorable, to the savings association as
those provided to a non-affiliate. The term covered
transaction includes the making of loans to, purchase of
assets from and issuance of a guarantee to an affiliate and
similar transactions. Section 23B transactions also include
the provision of services and the sale of assets by a savings
association to an affiliate. In addition to the restrictions
imposed by Sections 23A and 23B, a savings association is
prohibited from (i) making a loan or other extension of
credit to an affiliate, except for any affiliate which engages
only in certain activities which are permissible for bank
holding companies, or (ii) purchasing or investing in any
stocks, bonds, debentures, notes or similar obligations of any
affiliate, except for affiliates which are subsidiaries of the
savings association.
In addition, Sections 22(g) and (h) of the Federal
Reserve Act as made applicable to savings associations by
Section 11 of the Home Owners Loan Act place
restrictions on loans to executive officers, directors and
principal shareholders of the savings association and its
affiliates. Under Section 22(h), loans to a director, an
executive officer and to a greater than 10% shareholder of a
savings association, and certain affiliated interests of either,
may not exceed, together with all other outstanding loans to
such person and affiliated interests, the savings
associations loans to one borrower limit (generally equal
to 15% of the associations unimpaired capital and
surplus). Section 22(h) also requires that loans to
directors, executive officers and principal shareholders be made
on terms substantially the same as offered in comparable
transactions to other persons unless the loans are made pursuant
to a benefit or compensation program that (i) is widely
available to employees of the association and (ii) does not
give preference to any director, executive officer or principal
shareholder, or certain affiliated interests of either, over
other employees of the savings association. Section 22(h)
also requires prior board approval for certain loans. In
addition, the aggregate amount of extensions of credit by a
savings association to all insiders cannot exceed the
associations unimpaired capital and surplus. Furthermore,
Section 22(g) places additional restrictions on loans to
executive officers. Bank of
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Ruston currently is subject to Section 22(g) and
(h) of the Federal Reserve Act and at March 31, 2010,
was in compliance with the above restrictions.
Anti-Money Laundering. All financial
institutions, including savings and loan associations, are
subject to federal laws that are designed to prevent the use of
the U.S. financial system to fund terrorist activities.
Financial institutions operating in the United States must
develop anti-money laundering compliance programs, due diligence
policies and controls to ensure the detection and reporting of
money laundering. Such compliance programs are intended to
supplement compliance requirements, also applicable to financial
institutions, under the Bank Secrecy Act and the Office of
Foreign Assets Control Regulations. Bank of Ruston has
established policies and procedures to ensure compliance with
these provisions.
Federal Home Loan Bank System. Bank of Ruston
is a member of the Federal Home Loan Bank of Dallas, which is
one of 12 regional Federal Home Loan Banks that administers the
home financing credit function of savings institutions. Each
Federal Home Loan Bank serves as a reserve or central bank for
its members within its assigned region. It is funded primarily
from proceeds derived from the sale of consolidated obligations
of the Federal Home Loan Bank System. It makes loans to members
(i.e., advances) in accordance with policies and
procedures established by the board of directors of the Federal
Home Loan Bank. At March 31, 2010, Bank of Ruston did not
have any Federal Home Loan Bank advances and $32.9 million
available on its credit line with the Federal Home Loan Bank.
As a member, Bank of Ruston is required to purchase and maintain
stock in the Federal Home Loan Bank of Dallas in an amount equal
to at least 1.0% of its aggregate unpaid residential mortgage
loans or similar obligations at the beginning of each year. At
March 31, 2010, Bank of Ruston had $280,000 in Federal Home
Loan Bank stock, which was in compliance with this requirement.
The Federal Home Loan Banks are required to provide funds for
the resolution of troubled savings institutions and to
contribute to affordable housing programs through direct loans
or interest subsidies on advances targeted for community
investment and low- and moderate-income housing projects. These
contributions have adversely affected the level of Federal Home
Loan Bank dividends paid in the past and could do so in the
future. These contributions also could have an adverse effect on
the value of Federal Home Loan Bank stock in the future.
Federal Reserve System. The Federal Reserve
Board requires all depository institutions to maintain reserves
against their transaction accounts (primarily NOW and Super NOW
checking accounts) and non-personal time deposits. The required
reserves must be maintained in the form of vault cash or an
account at a Federal Reserve Bank. At March 31, 2010, Bank
of Ruston had met its reserve requirement.
TAXATION
Federal
Taxation
General. Century Next Financial and Bank of
Ruston will be subject to federal income taxation in the same
general manner as other corporations with some exceptions listed
below. The following discussion of federal, state and local
income taxation is only intended to summarize certain pertinent
income tax matters and is not a comprehensive description of the
applicable tax rules. Bank of Rustons federal and state
income tax returns for taxable years through December 31,
2005 have been closed for purposes of examination by the
Internal Revenue Service.
Upon completion of the conversion, Century Next Financial will
file a consolidated federal income tax return with Bank of
Ruston. Accordingly, it is anticipated that any cash
distributions made by Century Next Financial to its shareholders
would be treated as cash dividends and not as a non-taxable
return of capital to shareholders for federal and state tax
purposes.
Method of Accounting. For federal income tax
purposes, Bank of Ruston reports income and expenses on the
accrual method of accounting and uses a December 31 tax year for
filing its federal income tax return.
73
Bad Debt Reserves. The Small Business Job
Protection Act of 1996 eliminated the use of the reserve method
of accounting for bad debt reserves by savings institutions,
effective for taxable years beginning after 1995. Prior to that
time, Bank of Ruston was permitted to establish a reserve for
bad debts and to make additions to the reserve. These additions
could, within specified formula limits, be deducted in arriving
at taxable income. As a result of the Small Business Job
Protection Act of 1996, savings associations must use the
specific charge-off method in computing their bad debt deduction
beginning with their 1996 federal tax return. In addition,
federal legislation required the recapture over a six year
period of the excess of tax bad debt reserves at
December 31, 1995 over those established as of
December 31, 1987.
Taxable Distributions and Recapture. Prior to
the Small Business Job Protection Act of 1996, bad debt reserves
created prior to January 1, 1988 were subject to recapture
into taxable income if Bank of Ruston failed to meet certain
thrift asset and definitional tests. New federal legislation
eliminated these savings association related recapture rules.
However, under current law, pre-1988 reserves remain subject to
recapture should Bank of Ruston make certain non-dividend
distributions or cease to maintain a bank charter.
At March 31, 2010, the total federal pre-1988 reserve was
approximately $1.2 million. The reserve reflects the
cumulative effects of federal tax deductions by Bank of Ruston
for which no federal income tax provisions have been made.
Alternative Minimum Tax. The Internal Revenue
Code imposes an alternative minimum tax at a rate of 20% on a
base of regular taxable income plus certain tax preferences. The
alternative minimum tax is payable to the extent such
alternative minimum tax income is in excess of the regular
income tax. Net operating losses, of which Bank of Ruston has
none, can offset no more than 90% of alternative minimum taxable
income. Certain payments of alternative minimum tax may be used
as credits against regular tax liabilities in future years. Bank
of Ruston has not been subject to the alternative minimum tax or
any such amounts available as credits for carryover.
Net Operating Loss Carryovers. For net
operating losses in years beginning after August 5, 1997,
net operating losses can be carried back to the two years
preceding the loss year and forward to the 20 years
following the loss year. At March 31, 2010, Bank of Ruston
had no net operating loss carry forwards for federal income tax
purposes.
Corporate Dividends-Received
Deduction. Century Next Financial may exclude
from its income 100% of dividends received from Bank of Ruston
as a member of the same affiliated group of corporations. The
corporate dividends received deduction is 80% in the case of
dividends received from corporations which a corporate recipient
owns less than 80%, but at least 20% of the distribution
corporation. Corporations which own less than 20% of the stock
of a corporation distributing a dividend may deduct only 70% of
dividends received.
State and
Local Taxation
Century Next Financial will be subject to the Louisiana
Corporation Income Tax based on our Louisiana taxable income.
The Corporation Income Tax applies at graduated rates from 4%
upon the first $25,000 of Louisiana taxable income to 8% on all
Louisiana taxable income in excess of $200,000. For these
purposes, Louisiana taxable income means net income
which is earned by us within or derived from sources within the
State of Louisiana, after adjustments permitted under Louisiana
law, including a federal income tax deduction. In addition, Bank
of Ruston will be subject to the Louisiana Shares Tax which is
imposed on the assessed value of Bank of Rustons capital.
The formula for deriving the assessed value is to apply the
applicable rate to the sum of:
(a) 20% of our capitalized earnings, plus
(b) 80% of our taxable stockholders equity, minus
(c) 50% of our real and personal property assessment.
Various items may also be subtracted in calculating a
companys capitalized earnings. We believe that the
Louisiana Shares Tax will result in a significant additional tax
liability following the conversion on an annual basis. See
Pro Forma Data.
74
MANAGEMENT
Management
of Century Next Financial and Bank of Ruston
Century Next Financials board of directors is divided into
three classes, each of which contains approximately one-third of
the board. Our directors will be elected by shareholders for
staggered three-year terms, or until their successors are
elected and qualified. One class of directors, consisting of
Messrs. Denny and Thurmon, will have a term of office
expiring at the first annual meeting of shareholders after the
conversion, a second class, consisting of Messrs. Rogers,
Reneau and Thompson, will have a term of office expiring at the
second annual meeting of shareholders and a third class,
consisting of Messrs. Hogan, Walpole and Ewing will have a
term of office expiring at the third annual meeting of
shareholders. None of our directors are related to any of
Century Next Financials other directors or executive
officers by first cousin or closer. We have determined that
directors Ewing, Reneau, Thompson, Thurmon and Walpole are
independent directors as defined in the rules of the Nasdaq
Stock Market. The following table sets forth certain information
regarding our directors, all of whom also serve as directors of
Bank of Ruston. Ages are reflected as of March 31, 2010.
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Director of
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Age and Position with Bank of Ruston and
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Bank of Ruston
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Name
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Principal Occupation During the Past Five Years
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Since
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Benjamin L. Denny
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Director. President and Chief Executive Officer since March
1992. Age 61.
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1992
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As President and Chief Executive Officer, Mr. Denny brings to
the Board significant knowledge of Bank of Rustons
operations. Mr. Denny also has gained valuable banking and
institutional knowledge from his 41 years of service in the
financial institutions industry and his long-standing ties to
the local business and legal community in the Ruston area.
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J. Brandon Ewing
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Director. Owner of Ewing Timber L.L.C. located in Jonesboro,
Louisiana. Age 41.
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2006
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Mr. Ewing brings significant business, management and financial
expertise to the Board as the owner of a family operated
business.
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William D. Hogan
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Director. Executive Vice President, Business Development of Bank
of Ruston since 2008. Previously, Owner and Senior Vice
President of Sales at Hogan Hardwoods, Ruston, Louisiana from
2001 to 2008. Age 47.
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1996
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Mr. Hogan brings financial and business expertise to the Board
as our Executive Vice President, Business Development. Mr.
Hogan has gained financial expertise though his service on our
Board since 1996 and his prior term as an officer of a hardwoods
and architectural building products supplier. Mr. Hogan owned
and managed Builders Supply of Ruston from 1991 to 2001.
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Dr. Daniel D. Reneau
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Director. President of Louisiana Tech University, located in
Ruston, Louisiana, since July 1987. Age 69.
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1982
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Mr. Reneau brings significant leadership and management
expertise to the Board as the President of a Louisiana research
university.
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Thomas W. Rogers, Esq.
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Chairman of the Board since February 2005. Partner with Napper,
Madden & Rogers, located in Ruston, Louisiana since January
1979. Age 57.
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1996
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As a partner in a local law firm, Mr. Rogers brings significant
knowledge of the local legal community and operations of Bank of
Ruston having served as legal counsel.
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75
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Director of
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Age and Position with Bank of Ruston and
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Bank of Ruston
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Name
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Principal Occupation During the Past Five Years
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Since
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Scott R. Thompson
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Director. Owner of STC, LLC. Located in Ruston, Louisiana. Age
52.
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2005
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Mr. Thompson brings to the Board significant business and
management expertise as well as knowledge of the local real
estate market as the owner of a local construction company.
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Dewey C. Thurmon
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Director. Retired Owner of Thurmon Oil Company, located in
Ruston, Louisiana. Age 92.
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1977
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Mr. Thurmon brings valuable insight and knowledge to the Board
through his tenure as the longest serving member of the Board
since 1977. Mr. Thurmon also has long-standing ties to the
local business community in the Ruston area.
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Neal Walpole
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Director. President of Walpole Tire Service, located in Ruston,
Louisiana for over 30 years. Age 57.
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2003
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Mr. Walpole brings significant business and management expertise
and knowledge of the local business community from his years of
service as President of a local service company.
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Executive
Officers Who are Not Also Directors
G. Randall Allison, age 60 years,
has served as Vice President, Chief Financial Officer, Secretary
and Treasurer of Bank of Ruston since May 2008. Mr. Allison
previously served as an Accounting Manager at Davison Transport,
Inc., Ruston, Louisiana from 2003 to May 2008. Mr. Allison
previously served in various operational and accounting
positions with Ruston State Bank from 1971 to 2003.
Barbara L. Ford, age 44 years, has served as
Senior Vice President and Information Technology Officer of Bank
of Ruston since July 2005.
James H. Hall, age 67 years, has served as
Senior Vice President and Chief Credit Officer of Bank of Ruston
since March 2000. For the 29 year period prior thereto,
Mr. Hall served as a commercial lender in the local banking
industry.
Lorie R. Hamlin, age 29 years, has served as
Vice President and Operations Manager of Bank of Ruston since
January 2010 and January 2009, respectively. Previously,
Ms. Hamlin served as Assistant Operations Manager from 2006
to January 2009 and prior thereto, in other positions with Bank
of Ruston since 2000.
Warren L. Post, age 58 years, has served as
Vice President and Mortgage Lender of Bank of Ruston since
August 1994. Previously, Mr. Post served as a mortgage
lender with Ruston State Bank from 1983 to 1994.
Our executive officers are elected annually and hold office
until their successors have been elected and qualified or until
death, resignation or removal by the board of directors.
Committees
of the Board of Directors of Century Next Financial and Bank of
Ruston.
Regular meetings of the board of directors of Century Next
Financial are held monthly and special meetings may be held from
time-to-time as needed. The board of directors of Bank of Ruston
has established a Compensation Committee and Nominating
Committee. The current members of the Compensation Committee are
Messrs. Thompson, Walpole and Rogers, who is chairman.
Members of the Nominating Committee are Messrs. Thompson,
Walpole and Hogan, who is chairman. We expect the Compensation
Committee and Nominating Committee of Century Next Financial to
be similar to those of Bank of Ruston.
In connection with the conversion, Century Next Financial will
establish an audit committee which will operate in accordance
with a written charter. We expect that all of the members of the
audit committee would be considered independent directors as
defined by the regulations of the Securities and Exchange
Commission. Members of the compensation and nominating
committees would not be required to be independent as a result
of our listing on the OTC Bulletin Board. To the extent we
establish such committees we expect that they will operate in
accordance with written charters.
76
Director
Compensation
Initially, our directors will not be compensated by Century Next
Financial but will serve on the Board of, and be compensated by,
Bank of Ruston. Following the conversion, board and committee
fees will be paid by Century Next Financial. Each director of
Bank of Ruston currently receives $400 per month for board
meetings, regardless of attendance and $125 per week for
committee meetings, regardless of the number of committees on
which he serves. Mr. Rogers also receives compensation from
Bank of Ruston for legal services provided as counsel to the
bank, which did not exceed $120,000 for fiscal 2009. We expect
our fee structure will change following the conversion such that
directors will receive an annual retainer of $7,500, paid
monthly, and board and committee fees of $100 and $50,
respectively, paid if attended.
Board
Leadership Structure
Mr. Benjamin Denny serves as our President and Chief
Executive Officer and Mr. Thomas Rogers serves as our
Chairman of the Board. The Board of Directors has determined
that the separation of the offices of Chairman of the Board and
President enhances Board independence and oversight. Further,
the separation of the Chairman of the Board permits the
President and Chief Executive Officer to better focus on his
responsibilities of managing the daily operations of Bank of
Ruston, enhancing shareholder value and expanding and
strengthening our franchise while allowing the Chairman to lead
the Board of Directors in its fundamental role of providing
independent oversight and advice to management.
Boards
Role in Risk Oversight
Risk is inherent with every business, particularly financial
institutions. We face a number of risks, including credit risk,
interest rate risk, liquidity risk, operational risk, strategic
risk and reputational risk. Management is responsible for the
day-to-day management of the risks Bank of Ruston faces, while
the Board, as a whole and through its committees, has
responsibility for the oversight of risk management. In its risk
oversight role, the Board of Directors ensures that the risk
management processes designed and implemented by management are
adequate and functioning as designed. In this regard, the
Chairman of the Board meets regularly with management to discuss
strategy and risks facing Bank of Ruston.
Bank of Ruston has established a compliance committee that
reviews and assesses our systems of internal control and meets
and reviews the report of our compliance officer on a monthly
basis. The members of the compliance committee are the senior
officers of each of our business departments. Bank of Ruston
also has established an information technology committee which
meets on an as needed basis and also consists of members of
senior management. Reports of the compliance and information
technology committees are reviewed by the full Board.
Director Compensation Table. The following
table sets forth total compensation paid to each director of
Bank of Ruston during fiscal 2009, other than Messrs. Denny
and Hogan whose compensation is set forth below under
Executive Compensation. There was no
above-market or preferential earnings on deferred compensation
of directors under our deferred compensation plan.
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Board/Committee
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Fees Earned or Paid
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All Other
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Name
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in Cash
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Compensation(1)
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Total
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Benjamin L. Denny
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$
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11,300
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$
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$
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11,300
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J. Brandon Ewing
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11,300
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(2)
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11,300
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William D. Hogan
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11,300
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(2)
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11,300
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Dr. Daniel D. Reneau
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11,300
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11,300
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Thomas W. Rogers, Esq.
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11,300
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(2)
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11,300
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Scott R. Thompson
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11,300
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(2)
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11,300
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Dewey C. Thurmon
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11,300
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557
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11,857
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Neal Walpole
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11,300
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(2)
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11,300
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(1) |
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Includes for Mr. Thurmon, annual retirement benefits paid
pursuant to the Indexed Deferred Compensation Benefit Plan. |
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(2) |
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Includes amounts deferred at the election of the director
pursuant to the Directors Deferral Income Plan. |
77
Directors
Indexed Deferred Compensation Plan
In August 1996, Bank of Ruston established the Ruston
Building & Loan Association Indexed Deferred
Compensation Benefit Agreement for William Hogan, Daniel Reneau
and Thomas Rogers. Similar agreements were entered into with
Johnson Walpole in October 2003 and Scott Thompson in November
2005. The agreements were each amended and restated effective as
of January 1, 2007 as the Bank of Ruston Directors
Indexed Deferred Compensation Plan in order to conform to
changes in the tax laws under Section 409A of the Internal
Revenue Code and the regulations thereunder and to make certain
changes to the benefit formula under the plan. Jefferson Ewing
became a new participant in the plan effective as of
January 1, 2007.
The prior agreements provided eligible participants with an
indexed retirement benefit based on the growth of a hypothetical
universal life insurance contract. Pre-retirement death benefits
were also provided under the prior agreements for designated
beneficiaries of participants who do not survive until
retirement. At the time the agreements were restructured, the
benefit formula was changed to make it easier to calculate the
amount of the retirement benefit. The new retirement benefit
formula is measured on the cash value increase on a certain
group of life insurance contracts designated by Bank of Ruston.
Participants who had accumulated benefits under the prior
agreements will continue to be eligible to receive such
accumulated benefit upon retirement, in addition to any amounts
accrued for their benefit under the restructured agreements.
Retirement benefits are payable annually on the first day of
each year following the participants retirement date for a
total of twenty years. If a participant terminates service for
any reason other than death or for cause prior to reaching his
retirement age, he shall receive the vested portion of his
accrued benefit determined as of the last day of the prior plan
year payable in twenty annual installments commencing on the
first day of the year coincident with or following his
retirement date. All benefits are forfeited if the participant
is terminated for cause. Pre-retirement death benefits are
provided to the participants designated beneficiaries in
an amount equal to the lump sum value of the participants
accrued benefit under the plan. In addition, the
participants designated beneficiary shall receive a
specified pre-retirement death benefit payable annually for ten
years commencing on the first day of the month following the
participants date of death. If the participant dies after
commencement of retirement benefits under the plan, or after
becoming entitled to receive the retirement benefits under the
plan but prior to their commencement, the payments or the
remainder thereof shall be paid to the participants
beneficiary at the same time and in the same manner as such
payments would have been made to the participant.
Directors
Deferral Income Plan
In October 2003, Bank of Ruston established the Directors
Deferral Income Plan for William Hogan, Thomas Rogers and
Johnson Walpole. A similar agreement was entered into with Scott
Thompson in December 2005. The 2003 and 2005 agreements were
amended and restated effective as of January 1, 2008 in
order to conform to changes in the tax laws under
Section 409A of the Internal Revenue Code and the
regulations thereunder. Jefferson Ewing became a new participant
in the plan effective as of January 1, 2009. Under the
plan, participants may elect to defer up to 100% of their
directors fees
and/or bonus
earned during a calendar year. Participants accounts also
will be credited with interest annually based on the
hypothetical performance of a group of selected asset funds
until the date distributions begin, and thereafter a rate equal
to 5% per annum. All amounts deferred by a director are fully
vested at all times.
Upon termination of a directors service with Bank of
Ruston, we will pay the amounts credited to the directors
deferred fee account. The amounts will be paid in substantially
equal annual installments for a term of one hundred twenty
months, or in a lump sum in the event a participant is
terminated for cause. In the event of a participants death
while in the service of Bank of Ruston, his designated
beneficiary will receive the balance of the participants
deferred fee account commencing on the first day of the month
following the participants date of death payable for a
term of one hundred twenty months. The plan also provides for
limited hardship withdrawals in the event a participant incurs
an unforeseeable emergency. In the event of a change in control
followed by the participants termination of employment
other than due to death or disability, the participant will
receive the value of his deferred fee account in a single lump
sum payment.
78
Executive
Compensation
The following table shows the compensation paid by Bank of
Ruston to its President and Chief Executive Officer and
Executive Vice President, Business Development for the year
ended December 31, 2009. No other executive officer of Bank
of Ruston received total compensation in excess of $100,000
during fiscal 2009.
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All Other
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Name and Principal Position
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Year
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Salary
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Bonus
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Compensation(1)
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Total
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Benjamin L. Denny
President and Chief Executive Officer
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2009
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$
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132,200
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$
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1,322
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$
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18,419
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$
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151,941
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William D. Hogan
Executive Vice President, Business Development
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2009
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119,465
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1,195
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17,384
|
|
|
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138,044
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(1) |
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All other compensation does not include amounts attributable to
other miscellaneous benefits. The costs to Bank of Ruston of
providing such benefits during fiscal 2009 did not exceed
$10,000. Includes for Messrs. Denny and Hogan, directors
and committee fees of $11,300, matching contributions under Bank
of Rustons 401(k) retirement plan and excess life
insurance premiums. |
The board of directors approved Mr. Dennys base
salary of $132,200 for fiscal 2009, which was an increase of
5.0% from fiscal 2008. The dollar amount of total salary was
based on the boards perception of the local market for
chief executive officer compensation and was intended to ensure
that Bank of Ruston remained competitive in attracting and
retaining a qualified chief executive officer.
Death
Benefit Only Income Continuation Plan
In November 2005, Bank of Ruston established the Death Benefit
Only Income Continuation Plan in order to provide a minimum
level of income continuation benefits to the beneficiaries of
certain of our key employees in the event of such
individuals death while in the service of Bank of Ruston.
The only current participant in the plan is James Hall, our
chief credit officer. In the event of Mr. Halls death
prior to reaching the later of age 70 or his actual date of
retirement, we will pay Mr. Halls beneficiary three
thousand dollars ($3,000) monthly for a total of two hundred
forty months commencing upon the first day of the month
following his date of death. Upon termination of employment or
retirement from Bank of Ruston, all benefits are forfeited under
the plan.
Officers
Deferred Compensation Plan
In October 1993, Bank of Ruston established the Ruston
Building & Loan Association Salary Continuation
Agreement for Benjamin Denny. A similar agreement was entered
into with Warren Post in November 1999. The 1993 and 1999
agreements were amended and restated effective as of
January 1, 2008 as the Officers Deferred Compensation
Plan in order to conform to changes in the tax laws under
Section 409A of the Internal Revenue Code and the
regulations thereunder. James Hall became a new participant in
the plan as of January 1, 2008.
The plan provides eligible employees with a specified amount of
retirement benefits in addition to those provided by our
tax-qualified retirement plans, which are limited due to certain
restrictions and limitations of the Internal Revenue Code.
Pre-retirement death benefits are also provided for designated
beneficiaries of participants (other than Mr. Hall) who do
not survive until retirement. Retirement benefits commence on
the later of the first day of the year coincident with or
following the participants actual retirement or the date
specified in the officers individual participation
agreement, and are payable in equal monthly installments for the
greater of one hundred twenty months or the participants
lifetime. A participant who terminates employment for reasons
other than death or cause prior to his retirement date shall
receive the amount of his accrued benefit payable in one hundred
twenty monthly installments commencing on the first day of the
year coincident with or next following the participants
retirement date. All benefits are forfeited if the participant
is terminated for cause.
If the participant dies while in the service of Bank of Ruston
and prior to commencement of payments under the plan, the
retirement benefit under the plan shall be forfeited and the
participants designated beneficiaries (other than
Mr. Halls) shall instead be entitled to receive the
pre-retirement death benefit commencing on the first day of the
month coincident with or following the participants date
of death payable for two hundred forty months. If the
79
participant dies after commencement of retirement benefits under
the plan, or after becoming entitled to receive the retirement
benefits under the plan but prior to their commencement, the
monthly payments or the remainder thereof shall be paid to the
participants beneficiary at the same time and in the same
manner as such payments would have been made to the participant.
Benefits under the plan are reduced dollar for dollar if a
participant becomes disabled and is receiving payments under one
of our disability policies.
Defined
Benefit Pension Plan
Bank of Ruston participates in a multiple-employer,
noncontributory defined benefit retirement plan sponsored by the
Pentegra Defined Benefit Plan for Financial Institutions.
Effective March 1, 2007, Bank of Ruston elected to freeze
benefit accruals provided under the plan to existing
participants, to cease future benefit accruals, and to cease new
eligibility for plan entry for employees hired on and after
March 1, 2007. Those participants who had met the
eligibility requirements as of March 1, 2007 will receive a
benefit equal to the benefit accrued under the plan as of that
date.
Bank of Ruston is contingently liable for contributing ongoing
administrative fees, including payment of Pension Benefit
Guaranty Corporation premiums assessed on an annual plan year
valuation basis. Bank of Ruston is also contingently liable for
contributions to the Plan to the extent a prescribed funding
shortfall is determined through the annual valuation reporting
for the July 1 through June 30 plan year.
Prior to March 2007, the plan covered substantially all Bank of
Rustons employees, provided employees completed 12
consecutive months of service during which one thousand (1,000)
hours of service were completed. Benefits were based upon each
participants benefit service and average annual
compensation, with each participant becoming fully vested upon
completion of 5 years of qualifying service. A participant
who terminates employment prior to age 65 and is vested in
a benefit is entitled to an annual early retirement benefit.
Payment of an early retirement benefit may commence as early as
age 45, in which case the accrued benefit will be reduced
by applying actuarial equivalence factors for each year that
precedes age 65. Normal and early retirement benefits are
generally payable over the lifetime of the participant and
designated beneficiary and include a death benefit feature upon
the participants death. Optional forms of distribution
under the plan include various forms of annuity payment,
including a higher lifetime benefit with no contingent death
benefit or a 50% or 100% joint and survivor annuity.
401(k)
Plan
Bank of Ruston sponsors the Bank of Ruston 401(k) Plan which is
a qualified, tax-exempt defined contribution plan with a salary
deferral feature under Section 401(k) of the Internal
Revenue Code. An employee of Bank of Ruston is eligible to
become a participant in the plan after completing one month of
employment in which the employee completed at least
83.33 hours of service. Eligible employees are entitled to
enter the 401(k) plan on a monthly basis.
Under the 401(k) plan, participants are permitted to make salary
reduction contributions (in whole percentages) equal to the
lesser of (i) from 1% to 50% of compensation, or
(ii) $16,500 (for 2010, as indexed annually). Participants
who are age 50 or older are permitted to make catch
up contributions to the plan up to $5,500 (for 2010, as
indexed annually). Bank of Ruston currently contributes a
matching contribution amount equal to 75% of the first 6% of the
employees contribution.
The 401(k) plan permits employees to direct the investment of
his or her own accounts into various investment options
including an employer stock fund. Participants are entitled to
direct the trustee as to how to vote his or her allocable shares
of common stock in the employer stock fund.
Plan benefits generally will be paid to each participant in the
form of a single cash payment at normal retirement age unless an
earlier payment is selected, or in installments over a period
not in excess of his remaining life expectancy. If a participant
dies prior to receipt of the entire value of his or her 401(k)
plan account, payment will generally be made to the beneficiary
in a single cash payment as soon as possible following the
participants death. If the beneficiary is not the
participants spouse, payment will be made within one year
of the date of death.
80
If the spouse is the designated beneficiary, payment will be
made no later than the date the participant would have attained
age 701/2.
Normal retirement age under the 401(k) plan is age 65.
New Stock
Benefit Plans
Employee Stock Ownership Plan. Century Next
Financial has established an employee stock ownership plan for
our employees to become effective upon completion of the
conversion. Employees who have been credited with at least
1,000 hours of service during a
12-month
period and who have attained age 21 are eligible to
participate in Century Next Financials employee stock
ownership plan.
As part of the conversion, in order to fund the purchase of up
to 8.0% of the common stock issued in the conversion, or
54,400 shares and 73,600 shares based on the minimum
and maximum of the offering range, respectively, we anticipate
that the employee stock ownership plan will borrow funds from
Century Next Financial. We anticipate that such loan will equal
100% of the aggregate purchase price of the common stock
acquired by our employee stock ownership plan. We have agreed to
loan the employee stock ownership plan the funds necessary to
purchase shares. If the employee stock ownership plans
order is not completely filled in the offering we expect that
the employee stock ownership plan will purchase shares in the
open market after the conversion is completed at a price which
may be more or less than $10.00 per share. The loan to the
employee stock ownership plan, which will have a term of
20 years, will be repaid principally from Bank of
Rustons contributions to the employee stock ownership plan
and the collateral for the loan will be the common stock
purchased by the employee stock ownership plan. The interest
rate for the employee stock ownership plan loan will be fixed
and is expected to be at the prime rate on the date the employee
stock ownership plan enters into the loan. We may, in any plan
year, make additional discretionary contributions for the
benefit of plan participants in either cash or shares of common
stock, which may be acquired through the purchase of outstanding
shares in the market or from individual shareholders, upon the
original issuance of additional shares by Century Next Financial
or upon the sale of treasury shares by Century Next Financial.
Such purchases, if made, would be funded through additional
borrowings by the employee stock ownership plan or additional
contributions from Century Next Financial or from Bank of
Ruston. The timing, amount and manner of future contributions to
the employee stock ownership plan will be affected by various
factors, including prevailing regulatory policies, the
requirements of applicable laws and regulations and market
conditions.
Shares purchased by our employee stock ownership plan with the
loan proceeds will be held in a suspense account and released
for allocation to participants on a pro rata basis as debt
service payments are made. Shares released from the employee
stock ownership plan will be allocated to each eligible
participants employee stock ownership plan account based
on the ratio of each such participants compensation,
consisting of salary and bonus, to the total of such
compensation of all eligible employee stock ownership plan
participants. Forfeitures may be used for several purposes such
as the payment of expenses or be reallocated among remaining
participating employees. Account balances of participants in the
employee stock ownership plan will be 100% vested after three
years of service. Credit is given for years of service with Bank
of Ruston prior to adoption of the employee stock ownership
plan. In the case of a change in control, as defined
in the employee stock ownership plan, however, participants will
become immediately fully vested in their account balances.
Participants will also become fully vested in their account
balances upon death, disability or retirement. Benefits may be
payable upon retirement or separation from service.
Generally accepted accounting principles require that any third
party borrowing by our employee stock ownership plan be
reflected as a liability on our statement of financial
condition. Since the employee stock ownership plan is borrowing
from us, the loan will not be treated as a liability but instead
will be excluded from shareholders equity. If the employee
stock ownership plan purchases newly issued shares from Century
Next Financial, total shareholders equity would neither
increase nor decrease, but per share shareholders equity
and per share net earnings would decrease as the newly issued
shares are allocated to the employee stock ownership plan
participants.
Our employee stock ownership plan will be subject to the
requirements of the Employee Retirement Income Security Act of
1974, as amended, and the applicable regulations of the IRS and
the Department of Labor.
81
Stock Option Plan. Following completion of the
conversion, we intend to adopt a stock option plan, which will
be designed to attract and retain qualified personnel, provide
directors, officers and employees with a proprietary interest in
Century Next Financial as an incentive to contribute to our
success and reward employees for outstanding performance. The
stock option plan will provide for the grant of incentive stock
options intended to comply with the requirements of
Section 422 of the Internal Revenue Code and non-incentive
or compensatory stock options. Options may be granted to our
directors, officers and employees. The stock option plan will be
administered and interpreted by a committee of the board of
directors composed of independent directors. Unless terminated
earlier, the stock option plan shall continue in effect for a
period of 10 years from the date the stock option plan is
adopted by the board of directors.
Under the stock option plan, a committee will determine which
directors, officers and employees will be granted options,
whether options will be incentive or compensatory options, the
number of shares subject to each option, the exercise price of
each option, whether options may be exercised by delivering
other shares of common stock and when such options become
exercisable. The per share exercise price of an incentive stock
option will be at least equal the fair market value of a share
of common stock on the date the option is granted, or 110% of
fair market value in the case of incentive stock options granted
to employees who are 10% shareholders.
At a meeting of our shareholders at least six months after the
conversion, we intend to present the stock option plan to
shareholders for their approval and to reserve an amount equal
to 10.0% of the shares of common stock issued in the conversion,
which would be 68,000 shares or 92,000 shares based on
the minimum and maximum of the offering range, respectively, for
issuance under the stock option plan. Century Next Financial
will be subject to applicable regulations of the Office of
Thrift Supervision which provide that if the stock option plan
is adopted within twelve months after the conversion, it must be
approved by a majority of the total votes eligible to be cast by
shareholders. If the stock option plan is implemented more than
one year after the conversion, the plan must be approved by a
majority of the shares of Century Next Financial present and
voting at the meeting of shareholders. In addition, Office of
Thrift Supervision regulations provide that, in the event such
plan is implemented within one year after the conversion, no
individual officer or employee may receive more than 25% of the
options granted under the stock option plan and non-employee
directors may not receive more than 5% individually, or 30% in
the aggregate of the options granted under the stock option
plan. Office of Thrift Supervision regulations also provide that
the exercise price of any options granted under any such plan
must be at least equal to the fair market value of the common
stock as of the date of grant. Further, options under such plan
generally are required to vest no more rapidly than over a five
year period at 20% per year. Century Next Financial intends that
the stock option plan will comply with all applicable
regulations of the Office of Thrift Supervision. Each stock
option or portion thereof will be exercisable at any time on or
after it vests and will be exercisable until 10 years after
its date of grant or for periods of up to five years following
the death, disability or other termination of the
optionees employment or service as a director. However,
failure to exercise incentive stock options within ninety days
after the date on which the optionees employment
terminates may result in the loss of incentive stock option
treatment for federal income tax purposes.
At the time an option is granted pursuant to the stock option
plan, the recipient will not be required to make any payment in
consideration for such grant. With respect to incentive or
compensatory stock options, the optionee will be required to pay
the applicable exercise price at the time of exercise in order
to receive the underlying shares of common stock. The shares
reserved for issuance under the stock option plan may be
authorized but previously unissued shares, treasury shares, or
shares purchased by Century Next Financial on the open market or
from private sources. In the event of a stock split, reverse
stock split or stock dividend, the number of shares of common
stock under the stock option plan, the number of shares to which
any option relates and the exercise price per share under any
option shall be adjusted to reflect such increase or decrease in
the total number of shares of common stock outstanding.
Under current provisions of the Internal Revenue Code, the
federal income tax treatment of incentive stock options and
compensatory stock options is different. A holder of incentive
stock options who meets certain holding period requirements will
not recognize income at the time the option is granted or at the
time the option is exercised, and a federal income tax deduction
generally will not be available to us at any time as a result of
such grant or exercise. With respect to compensatory stock
options, the difference between the fair market value on the
82
date of exercise and the option exercise price generally will be
treated as compensation income upon exercise, and we will be
entitled to a deduction in the amount of income so recognized by
the optionee.
Recognition and Retention Plan. After
completion of the conversion, we also intend to adopt a
recognition and retention plan for our directors, officers and
employees. The objective of the recognition and retention plan
will be to enable us to provide directors, officers and
employees with a proprietary interest in Century Next Financial
as an incentive to contribute to our success. We intend to
present the recognition and retention plan to our shareholders
for their approval at a meeting of shareholders. Office of
Thrift Supervision regulations provide that, in the event such
plan is implemented within one year after the conversion, shares
granted under the plan generally are required to vest no more
rapidly than over a five year period at 20% per year. In
addition, regulations of the Office of Thrift Supervision
require that if the recognition and retention is adopted within
twelve months after the conversion, it must be approved by a
majority of the total votes eligible to be cast by shareholders.
If the recognition and retention plan is implemented more than
one year after the conversion, the plan must be approved by a
majority of the shares of Century Next Financial present and
voting at the meeting of shareholders. Century Next Financial
intends that the recognition and retention plan will comply with
all then applicable regulation of the Office of Thrift
Supervision.
The recognition and retention plan will be administered by a
committee of Century Next Financials board of directors,
which will have the responsibility to invest all funds
contributed to the trust created for the recognition and
retention plan. We will contribute sufficient funds to the trust
so that it can purchase, following the receipt of shareholder
approval, a number of shares equal to an aggregate of 4.0% of
the common stock issued in the conversion, which would be
27,200 shares or 36,800 shares based on the minimum
and maximum of the offering range, respectively. Shares of
common stock granted pursuant to the recognition and retention
plan generally will be in the form of restricted stock vesting
as described above. For accounting purposes, compensation
expense in the amount of the fair market value of the common
stock at the date of the grant to the recipient will be
recognized pro rata over the period during which the shares are
earned. A recipient will be entitled to all voting and other
shareholder rights, except that the shares, while restricted,
may not be sold, pledged or otherwise disposed of and are
required to be held in the trust. Under the terms of the
recognition and retention plan, recipients of awards will be
entitled to instruct the trustees of the recognition and
retention plan as to how the underlying shares should be voted,
and the trustees will be entitled to vote all unallocated shares
in their discretion. If a recipients employment is
terminated as a result of death or disability, or in connection
with a change in control, all restrictions will expire and all
allocated shares will become unrestricted. We will be able to
terminate the recognition and retention plan at any time, and if
we do so, any shares not allocated will revert to Century Next
Financial. Recipients of grants under the recognition and
retention plan will not be required to make any payment at the
time of grant or when the underlying shares of common stock
become vested, other than for certain recipients, payment of
withholding taxes.
Transactions
With Related Persons
Bank of Ruston offers extensions of credit to its directors,
officers and employees as well as members of their immediate
families for the financing of their primary residences and other
proposes. These loans are made in the ordinary course of
business, on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable loans with persons not related to Bank of Ruston and
none of such loans involve more than the normal risk of
collectability or present other unfavorable features.
Section 22(h) of the Federal Reserve Act generally provides
that any credit extended by a savings institution, such as Bank
of Ruston, to its executive officers, directors and, to the
extent otherwise permitted, principal shareholder(s), or any
related interest of the foregoing, must be on substantially the
same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions by the
savings institution with non-affiliated parties; unless the
loans are made pursuant to a benefit or compensation program
that (i) is widely available to employees of the
institution and (ii) does not give preference to any
director, executive officer or principal shareholder, or certain
affiliated interests of either, over other employees of the
savings institution, and must not involve more than the normal
risk of repayment or present other unfavorable features.
83
PROPOSED
PURCHASES OF COMMON STOCK BY MANAGEMENT
The following table sets forth, for each of our directors, who
are currently directors of Bank of Ruston, and executive
officers (and their associates) and for all of our directors and
executive officers as a group, the proposed purchases of common
stock, assuming sufficient shares are available to satisfy their
subscriptions. The amounts include shares that may be purchased
through Individual Retirement Accounts and the Bank of Ruston
401(k) Plan. Any purchases made by our directors or executive
officers in the offering are being made for investment purposes
only and not with a view toward resale. The percentages are
based on the minimum and maximum of the offering range.
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Number of
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Percent
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Percent
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Name
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Shares
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Amount ($)
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at Minimum
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at Maximum
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Directors:
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Benjamin L. Denny
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22,000
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$
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220,000
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3.2
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%
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2.4
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%
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J. Brandon Ewing
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20,000
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200,000
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2.9
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2.2
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William D. Hogan
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20,000
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200,000
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2.9
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2.2
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Dr. Daniel D. Reneau
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10,000
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100,000
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1.5
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1.1
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Thomas W. Rogers, Esq.
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35,000
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350,000
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5.1
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3.8
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Scott R. Thompson
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20,000
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200,000
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2.9
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2.2
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Dewey C. Thurmon
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25,000
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250,000
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3.7
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2.7
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Neal Walpole
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15,000
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150,000
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2.2
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1.6
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Executive Officers:
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G. Randall Allison
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10,000
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100,000
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1.5
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1.1
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Barbara L. Ford
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6,000
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60,000
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*
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*
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James H. Hall
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12,500
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125,000
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1.8
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1.4
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Lorie R. Hamlin
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*
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*
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Warren L. Post
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3,000
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30,000
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*
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*
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All Directors and Executive Officers as a Group (13 persons)
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198,500
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$
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1,985,000
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29.2
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%
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21.6
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%
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* |
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Represents less than 1% of outstanding common stock. |
THE
CONVERSION AND OFFERING
Bank of Rustons board of directors has approved the
plan of conversion, as has the Office of Thrift Supervision,
subject to approval by the members of Bank of Ruston entitled to
vote on the matter and the satisfaction of certain other
conditions. Office of Thrift Supervision approval, however, does
not constitute a recommendation or endorsement of the plan of
conversion by the Office of Thrift Supervision.
General
On May 18, 2010, the board of directors of Bank of Ruston
unanimously approved the plan of conversion pursuant to which we
will be converted from a federally chartered mutual savings bank
to a federally chartered stock savings bank also to be known as
Bank of Ruston. We will offer and sell the common
stock of Century Next Financial which will hold all of the
common stock of Bank of Ruston following the conversion. The
plan of conversion has been conditionally approved by the Office
of Thrift Supervision, subject to, among other things, approval
of the plan by the members of Bank of Ruston. A special meeting
has been called for this purpose to be held
on ,
2010.
In adopting the plan of conversion, our board of directors
determined that the conversion was advisable and in the best
interests of Bank of Ruston and its members. The board further
determined that the interests of
84
certain depositors in the net worth of Bank of Ruston would be
equitably provided for and that the conversion would not have
any adverse impact on the reserves and net worth of Bank of
Ruston.
We have received approval from the Office of Thrift Supervision
for Century Next Financial to become a savings and loan holding
company and to acquire all of the common stock of Bank of
Ruston. Century Next Financial will contribute 60% of the net
proceeds from the sale of the common stock of Century Next
Financial in the offering to Bank of Ruston with the remaining
40% of the net proceeds being retained by Century Next Financial
for our general corporate purposes. Based on the minimum and
maximum of the offering range, we intend to use approximately
$544,000, and approximately $736,000, at the minimum and maximum
of the offering range, respectively, of the net proceeds
retained by us to loan funds to our employee stock ownership
plan to enable it to purchase up to 8% of the common stock of
Century Next Financial. The conversion will not be completed
unless we sell shares of common stock equal to our appraised
value.
The plan of conversion provides generally that we will offer
shares of common stock for sale in the subscription offering to
eligible account holders, our employee stock ownership plan,
supplemental eligible account holders and other members of Bank
of Ruston. In addition, subject to the prior rights of holders
of subscription rights, we may elect to offer the shares of
common stock not subscribed for in the subscription offering, if
any, for sale in a community offering commencing during or upon
completion of the subscription offering. See
Subscription Offering and Subscription
Rights and Community Offering
below. We have the right to accept or reject, in whole or in
part, any orders to purchase shares of common stock received in
the community offering.
The aggregate price of the shares of common stock to be issued
in the conversion will be within the offering range, which was
determined based upon an independent appraisal of the estimated
pro forma market value of the common stock. The offering range
is currently $6.8 million to $9.2 million. All shares
of Century Next Financials common stock to be issued and
sold in the conversion will be sold at the same price. The
independent appraisal will be affirmed or, if necessary, updated
before we complete the conversion. The appraisal has been
performed by RP Financial, a consulting firm experienced in the
valuation and appraisal of savings institutions. See
How We Determined the Price Per Share and the
Offering Range below for more information as to how RP
Financial estimated the pro forma market value of the common
stock.
The following discussion of the conversion summarizes the
material aspects of the plan of conversion. The summary is
qualified in its entirety by reference to the provisions of the
plan of conversion. A copy of the plan of conversion is
available for inspection at the offices of Bank of Ruston and at
the offices of the Office of Thrift Supervision. The plan of
conversion is also filed as an exhibit to the registration
statement of which this prospectus is a part, copies of which
may be obtained from the Securities and Exchange Commission. See
Where You Can Find Additional Information.
Purposes
of Conversion
As a mutual savings bank, we do not have shareholders nor do we
have authority to issue capital stock. By converting to the
capital stock form of organization, we will be structured in the
form used by commercial banks, most business entities and most
savings institutions. The conversion will result in an increase
in our capital base, which will support our operations and allow
us to better serve the needs of our community by:
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expanding future lending and increasing operational growth;
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diversifying our lending activities, including increasing our
commercial real estate and commercial business loans;
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enhancing existing products and services, including expanding
home equity lines of credit and commercial deposit products, and
supporting the development of new products and services, and
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continuing to upgrade our technology infrastructure, marketing,
training programs and staff recruitment.
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The conversion will permit our customers and possibly other
members of the local community and of the general public to
become equity owners and to share in our future. The conversion
also will provide additional funds for lending and investment
activities and facilitate future access to the capital markets.
The holding
85
company form of organization will provide additional flexibility
to diversify our business activities through subsidiaries, or
through acquisition of or mergers with other financial
institutions, as well as other companies. Although there are no
current arrangements, understandings or agreements regarding any
such opportunities, we will be in a position after the
conversion, subject to regulatory limitations and our financial
position, to take advantage of any such opportunities that may
arise.
Effects
of Conversion
General. Before the conversion, each of our
depositors has both a deposit account and a pro rata ownership
interest in the net worth of Bank of Ruston, which interest may
only be realized in the event of a liquidation of Bank of
Ruston. However, this ownership interest is tied to the
depositors account and has no tangible market value
separate from such deposit account. A depositor who reduces or
closes his account receives nothing for his ownership interest
in the net worth of Bank of Ruston, which is lost to the extent
that the balance in the account is reduced.
Consequently, our depositors normally cannot realize the value
of their ownership interest, which has realizable value only in
the unlikely event that we were liquidated. In such event, the
depositors of record at that time, as owners, would share pro
rata in any residual surplus and reserves of Bank of Ruston
after other claims, including claims of depositors to the amount
of their deposits, are paid.
When we convert to stock form, permanent nonwithdrawable capital
stock will be created to represent the ownership of the net
worth of Bank of Ruston, and Bank of Ruston will become a wholly
owned subsidiary of Century Next Financial. Century Next
Financials common stock will be separate and apart from
deposit accounts of Bank of Ruston and such stock cannot be and
will not be insured by the Federal Deposit Insurance Corporation
or any other governmental agency. Certificates will be issued to
evidence ownership of Century Next Financial common stock. These
stock certificates will be transferable, and therefore the stock
may be sold or traded if a purchaser is available with no effect
on any account the seller may hold in Bank of Ruston.
Continuity. While the conversion is being
accomplished, our normal banking business of accepting deposits
and making loans will continue without interruption. We will
continue to be subject to regulation by the Office of Thrift
Supervision and the Federal Deposit Insurance Corporation. After
the conversion, we will continue to provide services for
depositors and borrowers under current policies by our present
management and staff.
Our current directors and officers will continue to serve as
directors and officers of Bank of Ruston after the conversion.
The directors and officers of Century Next Financial consist of
individuals currently serving as directors and officers of Bank
of Ruston, and they will retain their positions in Bank of
Ruston after the conversion.
Effect on Deposit Accounts. Under the plan of
conversion, each depositor in Bank of Ruston at the time of the
conversion will automatically continue as a depositor after the
conversion, and each such deposit account will remain the same
with respect to deposit balance, interest rate and other terms,
except to the extent that funds in the account are withdrawn to
purchase the common stock with respect to those depositors who
authorize such a withdrawal and except with respect to voting
and liquidation rights. Each such account will be insured by the
Federal Deposit Insurance Corporation to the same extent as
before the conversion. Depositors will continue to hold their
existing certificates, passbooks and other evidences of their
accounts.
Effect on Loans. No loan outstanding from Bank
of Ruston will be affected by the conversion, and the amount,
interest rate, maturity and security for each loan will remain
as they were contractually fixed prior to the conversion.
Effect on Voting Rights of Members. At
present, all depositors of Bank of Ruston are members of, and
have voting rights in, Bank of Ruston as to all matters
requiring membership action. When we complete the conversion,
depositors will cease to be members and will no longer be
entitled to vote at meetings of Bank of Ruston. After the
conversion, Century Next Financial will be the sole shareholder
of Bank of Ruston and will have all of the voting rights in Bank
of Ruston. Exclusive voting rights with respect to Century Next
Financial will be vested in the holders of our common stock. Our
depositors will not have voting rights in
86
Bank of Ruston after the conversion, except, to the extent that
they become Century Next Financial shareholders by buying our
common stock, they will have voting rights in Century Next
Financial.
Tax Effects. To complete the conversion, we
must receive rulings or opinions with regard to federal and
Louisiana income taxation which indicate that the conversion
will not be taxable for federal or Louisiana income tax purposes
to us or the Eligible Account Holders or Supplemental Eligible
Account Holders, except as discussed below. We have received
favorable opinions regarding the federal and Louisiana income
tax consequences of the conversion. See
Material Federal and Louisiana Income Tax
Consequences of the Conversion.
Effect on Liquidation Rights. Before the
conversion, if Bank of Ruston were to liquidate, all claims of
our creditors (including those of depositors, to the extent of
their deposit balances) would be paid first. Thereafter, if
there were any assets remaining, members of Bank of Ruston would
receive such remaining assets, pro rata, based upon the deposit
balances in their deposit accounts at Bank of Ruston immediately
prior to liquidation. In the unlikely event that we were to
liquidate after the conversion, all claims of creditors
(including those of depositors, to the extent of their deposit
balances) would also be paid first, followed by distribution of
the liquidation account to certain depositors (see
Liquidation Rights of Certain
Depositors), with any assets remaining thereafter
distributed to Century Next Financial as the sole shareholder of
Bank of Ruston. Pursuant to the rules and regulations of the
Office of Thrift Supervision, a post-conversion merger,
consolidation, sale of bulk assets or similar combination or
transaction with another insured savings institution would not
be considered a liquidation and, in such a transaction, the
liquidation account would be required to be assumed by the
surviving institution.
How We
Determined the Price Per Share and the Offering Range
The plan of conversion requires that the purchase price of the
common stock must be based on the appraised pro forma market
value of the common stock, as determined on the basis of an
independent valuation. We have retained RP Financial to make
such valuation. For its services in making such appraisal, RP
Financials fees and out-of-pocket expenses are estimated
to be $33,500. We have agreed to indemnify RP Financial and any
employees of RP Financial who act for or on behalf of RP
Financial in connection with the appraisal and the business plan
against any and all loss, damage, claim, liability or expense of
any kind (including claims under federal securities laws)
arising out of any misstatement or untrue statement of a
material fact or an omission to state a material fact in the
information supplied by us to RP Financial, unless a court
determines RP Financial was negligent or otherwise at fault.
RP Financial prepared the appraisal taking into account the pro
forma impact of the offering. For its analysis, RP Financial
undertook substantial investigations to learn about our business
and operations. We supplied financial information, including
annual financial statements, information on the composition of
assets and liabilities, and other financial schedules.
Furthermore, RP Financial visited our facilities and had
discussions with our management. RP Financial did not perform a
detailed individual analysis of the separate components of our
assets and liabilities. We did not impose any limitations on RP
Financial in connection with its appraisal.
In connection with its appraisal, RP Financial reviewed the
following factors, among others:
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our present and projected operating results and financial
condition;
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the economic and demographic conditions of our primary market
area;
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pertinent historical financial and other information relating to
Bank of Ruston;
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a comparative evaluation of our operating and financial
statistics with those of other savings institutions;
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the proposed price per share;
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the aggregate size of the offering of common stock;
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our proposed dividend policy;
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the impact of the offering on our capital position and earnings
potential; and
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the trading market for securities of comparable institutions and
general conditions in the market for such securities.
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RP Financial relied primarily on a comparative market value
methodology in determining the pro forma market value of our
common stock. In applying this methodology, RP Financial
analyzed financial and operational comparisons of Bank of Ruston
with a selected peer group of publicly traded savings
institutions. The pro forma market value of our common stock was
determined by RP Financial based on the market pricing ratios of
the peer group, subject to certain valuation adjustments based
on fundamental differences between Bank of Ruston and the
institutions comprising the peer group. Specifically, RP
Financial took into account that, on a pro forma basis compared
solely to the peer group, we had a relatively higher capital
level, lower concentration of investment in securities, and a
higher concentration of loans and that, based on the
twelve-month period preceding their appraisal, we had similar
profitability compared to the peer group. Additionally, RP
Financial took into account the economic conditions and outlook
for the market area in which Bank of Ruston operates and the
after market pricing characteristics of recently converted
savings institutions. RP Financial utilized the results of this
overall analysis to establish pricing ratios that resulted in
the determination of our pro forma market value.
Consistent with Office of Thrift Supervision appraisal
guidelines, RP Financials analysis utilized three selected
valuation procedures, the price/book method, the price/earnings
method, and the price/assets method, all of which are described
in its report. RP Financials appraisal report is filed as
an exhibit to the registration statement that we have filed with
the Securities and Exchange Commission. See Where You Can
Find Additional Information. RP Financial placed the
greatest emphasis on the price/earnings and price/book methods
in estimating pro forma market value. RP Financial compared the
pro forma price/book and price/earnings ratios for Century Next
Financial to the same ratios for a peer group of comparable
companies. The peer group consists of 10 thrift holding
companies with assets between $199.0 million and
$494.0 million. The following are various averages for peer
group companies which averages were not used as selection
criteria for the peer group companies:
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average assets of $373.0 million;
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average non-performing assets of 2.11% of total assets;
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average loans of 70.8% of total assets;
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average equity of 11.9% of total assets; and
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average net income of 0.41% of average assets.
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On the basis of the analysis in its report, RP Financial has
advised us that, in its opinion, as of May 28, 2010, the
pro forma market value of the common stock of Century Next
Financial to be sold in the offering was within the valuation
range of $6.8 million and $9.2 million with a midpoint
of $8.0 million.
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The following table presents a summary of selected pricing
ratios for Century Next Financial, for the peer group and for
all fully converted publicly traded savings banks. The figures
for Century Next Financial are from RP Financials
appraisal report and they thus do not correspond exactly to the
ratios presented in the Pro Forma Data section of this
prospectus. Compared to the average pricing ratios of the peer
group, Century Next Financials pro forma pricing ratios at
the maximum of the offering range indicate a premium of 21.2% on
a price-to-earnings basis, discount of 19.2% on a price-to-book
value basis and discount of 22.2% on a price-to-tangible book
basis.
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Price to
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Price to
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Earnings
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Book Value
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Price to Tangible
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Multiple(1)
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Ratio(2)
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Book Value Ratio(2)
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Century Next Financial (pro forma):
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Midpoint
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20.32
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53.62
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%
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53.22
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Maximum
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23.63
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57.57
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57.57
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Maximum, as adjusted
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27.56
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61.54
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61.54
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Peer Group:
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Average
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19.50
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71.27
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%
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73.97
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Median
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16.44
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67.77
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71.12
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All fully-converted, publicly-traded savings banks:
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Average
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18.56
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76.73
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%
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85.20
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Median
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16.40
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76.18
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80.30
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(1) |
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Ratios are based on earnings for twelve months ended
March 31, 2010, and share prices as of May 28, 2010. |
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(2) |
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Ratios are based on book value as of March 31, 2010, and
share prices as of May 28, 2010. |
Our board of directors reviewed RP Financials appraisal
report, including the methodology and the assumptions used by RP
Financial, and determined that the valuation range was
reasonable and adequate. Assuming that the shares are sold at
$10.00 per share in the offering, the estimated number of shares
would be between 680,000 at the minimum of the valuation range
and 920,000 at the maximum of the valuation range, with a
midpoint of 800,000. The purchase price of $10.00 per share was
determined by us, taking into account, among other factors, the
requirement under Office of Thrift Supervision regulations that
the common stock be offered in a manner that will achieve the
widest distribution of the stock and desired liquidity in the
common stock after the offering.
Since the outcome of the offering relates in large measure to
market conditions at the time of sale, it is not possible for us
to determine the exact number of shares that we will issue at
this time. The offering range may be amended, with the approval
of the Office of Thrift Supervision, if necessitated by
developments following the date of the appraisal in, among other
things, market conditions, our financial condition or operating
results, regulatory guidelines or national or local economic
conditions.
If, upon completion of the subscription offering, at least the
minimum number of shares are subscribed for, RP Financial, after
taking into account factors similar to those involved in its
prior appraisal, will determine its estimate of our pro forma
market value as of the close of the subscription offering. If,
as a result of regulatory considerations, demand for the shares
or changes in market conditions, RP Financial determines that
our pro forma market value has increased, we may sell up to
1,058,000 shares without any further notice to you.
No shares will be sold unless RP Financial confirms that, to the
best of its knowledge and judgment, nothing of a material nature
has occurred that would cause it to conclude that the actual
total purchase price of the shares on an aggregate basis was
materially incompatible with its appraisal. If, however, the
facts do not justify that statement, we may either: terminate
the stock offering and promptly return all funds; promptly
return all funds, set a new offering range, notify all
subscribers and give them the opportunity to place a new order
for shares of Century Next Financial common stock; or take such
other actions as may be permitted by
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the Office of Thrift Supervision. If the offering is terminated,
all subscriptions will be cancelled and subscription funds will
be returned promptly with interest, and holds on funds
authorized for withdrawal from deposit accounts will be released
or reduced. If RP Financial establishes a new valuation range,
it must be approved by the Office of Thrift Supervision.
In formulating its appraisal, RP Financial relied upon the
truthfulness, accuracy and completeness of all documents we
furnished to it. RP Financial also considered financial and
other information from regulatory agencies, other financial
institutions, and other public sources, as appropriate. While RP
Financial believes this information to be reliable, RP Financial
does not guarantee the accuracy or completeness of the
information and did not independently verify the financial
statements and other data provided by us nor independently value
our assets or liabilities. The appraisal is not intended to
be, and must not be interpreted as, a recommendation of any kind
as to the advisability of purchasing shares of common stock.
Moreover, because the appraisal must be based on many factors
that change periodically, there is no assurance that purchasers
of shares in the offering will be able to sell shares after the
offering at prices at or above the purchase price.
The appraisal report of RP Financial has been filed as an
exhibit to our registration statement and our application for
conversion, both of which this prospectus is a part, and is
available for inspection in the manner set forth under
Where You Can Find Additional Information.
Subscription
Offering and Subscription Rights
In accordance with the plan of conversion, rights to subscribe
for the purchase of Company common stock have been granted under
the plan of conversion to the following persons in the following
order of descending priority:
(1) Eligible Account Holders, that is,
depositors at Bank of Ruston with account balances of $50.00 or
more as of December 31, 2008;
(2) Our employee stock ownership plan;
(3) Supplemental Eligible Account Holders, that
is, persons who are not Eligible Account Holders but who are
depositors at Bank of Ruston with account balances of $50.00 or
more as of June 30, 2010; and
(4) Other Members, that is, persons who are not
Eligible Account Holders or Supplemental Eligible Account
Holders but who are depositors at Bank of Ruston as of [DATE4],
2010.
Classification as an Eligible Account Holder, Supplemental
Eligible Account Holder or Other Member will be based upon the
name(s) and legal status of the person(s)
and/or
entities who are the depositors, as reflected on Bank of
Rustons records, for the underlying account as of the
Eligibility Record Date, Supplemental Eligibility Record Date or
Voting Record Date. For example, if John Doe and Jane Doe have a
joint account as of the eligibility record date, they are
considered one eligible account holder with a joint subscription
right to purchase $200,000 of common stock. This joint account
would not provide John or Jane with an individual, independent
subscription right. If, however, John Doe also had a separate,
individual deposit account as of the eligibility record date, he
would have an additional, independent subscription right for
another $200,000 of common stock. However, the amount of common
stock that may be purchased in the offering by any person
together with their associates, such as a spouse or other
relative living in their house, and persons acting in concert,
is limited to the maximum overall limit of $350,000. See
-Limitations on Common Stock Purchases below. All
subscriptions received will be subject to the availability of
common stock after satisfaction of all subscriptions of all
persons having prior rights in the subscription offering.
Priority 1: Eligible Account
Holders. Each Eligible Account Holder will
receive, without payment, first priority, nontransferable
subscription rights to subscribe for in the subscription
offering up to the greater of:
(1) $200,000 (20,000 shares) of common stock
offered, or
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(2) 15 times the product, rounded down to the next whole
number, obtained by multiplying the total number of shares of
common stock to be issued by a fraction, of which the numerator
is the amount of the Eligible Account Holders qualifying
deposit and the denominator of which is the total amount of
qualifying deposits of all Eligible Account Holders,
in each case as of the close of business on December 31,
2008 (the Eligibility Record Date), subject to the
overall purchase limitations. See Limitations
on Common Stock Purchases below.
If there are not sufficient shares available to satisfy all
subscriptions by Eligible Account Holders, shares first will be
allocated among subscribing Eligible Account Holders so as to
permit each such Eligible Account Holder, to the extent
possible, to purchase a number of shares sufficient to make his
total allocation equal to the lesser of the number of shares
subscribed for or 100 shares. Thereafter, any shares
remaining after each subscribing Eligible Account Holder has
been allocated the lesser of the number of shares subscribed for
or 100 shares will be allocated among the subscribing
Eligible Account Holders whose subscriptions remain unfilled in
the proportion that the amounts of their respective eligible
deposits bear to the total amount of eligible deposits of all
subscribing Eligible Account Holders whose subscriptions remain
unfilled, provided that no fractional shares shall be issued.
Subscription Rights of Eligible Account Holders will be
subordinated to the priority rights of our employee stock
ownership plan to purchase shares in excess of the maximum of
the offering range.
To ensure proper allocation of stock, each Eligible Account
Holder must list on his subscription order form all accounts in
which he has an ownership interest. Failure to list an account
could result in fewer shares being allocated than if all
accounts had been disclosed. The subscription rights of Eligible
Account Holders who are also our directors or officers or their
associates will be subordinated to the subscription rights of
other Eligible Account Holders to the extent attributable to
increased deposits in the year preceding December 31, 2008.
Priority 2: Employee Stock Ownership
Plan. Our employee stock ownership plan will
receive, without payment, second priority, nontransferable
subscription rights to purchase, in the aggregate, up to 8% of
the common stock to be issued in the conversion, including any
increase in the number of shares of common stock after the date
hereof as a result of an increase of up to 15% in the maximum of
the offering range. Our employee stock ownership plan intends to
purchase 8% of the shares of common stock, or 54,400 shares
and 73,600 shares based on the minimum and maximum of the
offering range, respectively. Subscriptions by our employee
stock ownership plan will not be aggregated with shares of
common stock purchased directly by or which are otherwise
attributable to any other participants in the subscription and
community offerings, including subscriptions of any of our
directors, officers, employees or associates thereof. In the
event that the total number of shares offered in the conversion
is increased to an amount greater than the number of shares
representing the maximum of the offering range,
920,000 shares, our employee stock ownership plan will have
a priority right to purchase any such shares exceeding the
maximum shares up to an aggregate of 8% of the common stock. See
Limitations on Common Stock Purchases
below Our employee stock ownership plan may purchase some or all
of our shares that it intends to acquire in the open market
after the offering is completed, subject to approval of the
Office of Thrift Supervision.
Priority 3: Supplemental Eligible Account
Holders. To the extent that there are sufficient
shares remaining after satisfaction of subscriptions by Eligible
Account Holders and our employee stock ownership plan, each
Supplemental Eligible Account Holder will receive, without
payment, third priority, nontransferable subscription rights to
subscribe for in the subscription offering up to the greater of:
(1) $200,000 (20,000 shares) of common stock
offered, or
(2) 15 times the product, rounded down to the next whole
number, obtained by multiplying the total number of shares of
common stock to be issued by a fraction, of which the numerator
is the amount of the Supplemental Eligible Account Holders
qualifying deposit and the denominator of which is the total
amount of qualifying deposits of all Supplemental Eligible
Account Holders,
in each case as of the close of business on June 30, 2010
(the Supplemental Eligibility Record Date), subject
to the overall purchase limitations. See
Limitations on Common Stock Purchases
below.
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In the event the Supplemental Eligible Account Holders subscribe
for a number of shares which, when added to the shares
subscribed for by Eligible Account Holders and our employee
stock ownership plan, is in excess of the total number of shares
of common stock offered in the conversion, shares first will be
allocated so as to permit each subscribing Supplemental Eligible
Account Holder, to the extent possible, to purchase a number of
shares sufficient to make his total allocation equal to the
lesser of the number of shares subscribed for or
100 shares. Thereafter, any shares remaining available will
be allocated among the Supplemental Eligible Account Holders
whose subscriptions remain unfilled in the proportion that the
amounts of their respective eligible deposits bear to the total
amount of eligible deposits of all subscribing Supplemental
Eligible Account Holders whose subscriptions remain unfilled,
provided that no fractional shares shall be issued.
Priority 4: Other Members. To the
extent that there are sufficient shares remaining after
satisfaction of subscriptions by Eligible Account Holders, our
employee stock ownership plan and Supplemental Eligible Account
Holders, each Other Member will receive, without payment
therefor, fourth priority, nontransferable subscription rights
to purchase up to $200,000 (20,000 shares) of common stock
offered, subject to the overall purchase limitations. See
Limitations on Common Stock Purchases
below.
In the event the Other Members subscribe for a number of shares
which, when added to the shares subscribed for by Eligible
Account Holders, our employee stock ownership plan and
Supplemental Eligible Account Holders, is in excess of the total
number of shares of common stock offered in the conversion,
shares first will be allocated so as to permit each subscribing
Other Member, to the extent possible, to purchase a number of
shares sufficient to make his total allocation equal to the
lesser of the number of shares subscribed for or
100 shares. Thereafter, any remaining shares will be
allocated among such subscribing Other Members on an equal
number of shares basis per order until all orders have been
filled or the remaining shares have been allocated, provided
that no fractional shares shall be issued.
Expiration Date for the Subscription
Offering. The subscription offering will expire
at 5:00 p.m., Central time, on [DATE1], 2010 (the
expiration date), unless extended for up to
45 days or for such additional periods by us as may be
approved by the Office of Thrift Supervision. The subscription
offering may not be extended beyond [DATE3], 2012. Subscription
rights which have not been exercised prior to the expiration
date (unless extended) will become void.
We will not execute orders until at least the minimum number of
shares of common stock (680,000 shares) have been
subscribed for or otherwise sold. If all shares have not been
subscribed for or sold within 45 days after the expiration
date, unless such period is extended with the consent of the
Office of Thrift Supervision, all funds delivered to Bank of
Ruston pursuant to the subscription offering will be returned
promptly to the subscribers with interest and all withdrawal
authorizations will be canceled. If an extension beyond the
45-day
period following the expiration date is granted (which is,
[DATE2], 2010), we will notify subscribers of the extension of
time and subscribers will have the right to modify or rescind
their subscriptions. If we do not receive an affirmative
response from a subscriber to any resolicitation, the
subscribers order will be rescinded and all funds received
will be returned promptly with interest, or withdrawal
authorizations will be cancelled.
Community Offering. To the extent that shares
remain available for purchase after satisfaction of all
subscriptions of Eligible Account Holders, the employee stock
ownership plan, Supplemental Eligible Account Holders and Other
Members, we may elect to offer shares pursuant to the plan of
conversion to certain members of the general public, with
preference given to natural persons residing in Lincoln Parish,
Louisiana, (such natural persons referred to as Preferred
Subscribers). If we conduct a community offering it may
commence concurrently with or subsequent to the subscription
offering and will expire not later than 45 days subsequent
to the subscription offering. In the event we conduct a
community offering, subscribers may purchase up to $200,000 of
common stock (20,000 shares) subject to the maximum
purchase limitations. See Limitations on
Common Stock Purchases below. This amount may be increased
at our sole discretion. The opportunity to subscribe for shares
of common stock in the community offering category will be
subject to our right in our sole discretion, to accept or reject
any such orders in whole or in part either at the time of
receipt of an order or as soon as practicable following the
expiration date.
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If there are not sufficient shares available to fill the orders
of Preferred Subscribers after completion of the subscription
offerings, such stock will be allocated first to each Preferred
Subscriber whose order is accepted by us, in an amount equal to
the lesser of 100 shares or the number of shares subscribed
for by each such Preferred Subscriber, if possible. Thereafter,
any remaining shares will be allocated among the Preferred
Subscribers whose orders remain unsatisfied on an equal number
of shares basis per order until all the remaining shares have
been allocated, provided that no fractional shares shall be
issued and subject to the overall purchase limitations. If there
are any shares remaining, shares will be allocated to other
members of the general public who subscribe in the community
offering applying the same allocation described above for
Preferred Subscribers.
Syndicated Community or Underwritten Public
Offering. We are not conducting a syndicated
community or underwritten public offering and have not engaged
Sandler ONeill & Partners, L.P., to act as our
agent in any syndicated community or underwritten public
offering.
If we are unable to find purchasers from the general public for
all unsubscribed shares, we will make other purchase
arrangements, if feasible. Other purchase arrangements must be
approved by the Office of Thrift Supervision and may include
purchases by directors, officers and their associates in excess
of the proposed management purchases discussed earlier, although
no such increased purchases are currently anticipated. If other
purchase arrangements cannot be made, we may terminate the
offering and promptly return all funds; set a new offering
range, notify all subscribers and give them the opportunity to
confirm, cancel or change their orders; or take such other
actions as may be permitted by the Office of Thrift Supervision.
Persons
Who Cannot Exercise Subscription Rights
We will make reasonable efforts to comply with the securities
laws of all states in the United States in which persons
entitled to subscribe for stock pursuant to the plan of
conversion reside. However, we are not required to offer stock
in the subscription offering to any person who resides in a
foreign country or resides in a state of the United States with
respect to which:
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the number of persons otherwise eligible to subscribe for shares
under the plan of conversion who reside in such jurisdiction is
small;
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the granting of subscription rights or the offer or sale of
shares of common stock to such persons would require us, or our
officers, directors or employees, under the laws of such
jurisdiction, to register as a broker, dealer, salesman or
selling agent or to register or otherwise qualify its securities
for sale in such jurisdiction or to qualify as a foreign
corporation or file a consent to service of process in such
jurisdiction; or
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such registration, qualification or filing in our judgment would
be impracticable or unduly burdensome for reasons of costs or
otherwise.
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Where the number of persons eligible to subscribe for shares in
one state is small, we will base our decision as to whether or
not to offer the common stock in such state on a number of
factors, including but not limited to the size of accounts held
by account holders in the state, the cost of registering or
qualifying the shares or the need to register us, or our
officers, directors or employees as brokers, dealers or salesmen.
Limitations
on Common Stock Purchases
The plan of conversion includes the following limitations on the
number of shares of common stock which may be purchased in the
conversion:
(1) No fewer than 25 shares of common stock may be
purchased, to the extent such shares are available;
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(2) Each Eligible Account Holder may subscribe for and
purchase in the subscription offering up to the greater of
(a) $200,000 (20,000 shares) of common stock or
(b) 15 times the product, rounded down to the next whole
number, obtained by multiplying the total number of shares of
common stock offered by a fraction, of which the numerator is
the amount of the qualifying deposit of the Eligible Account
Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders, in each case as of the
close of business on the Eligibility Record Date, with
clause (a) above subject to the overall limitation in
clause (6) below;
(3) Our employee stock ownership plan may purchase up to 8%
of the aggregate number of shares of common stock to be issued
in the offering and any additional shares issued in the event of
an increase in the offering range;
(4) Each Supplemental Eligible Account Holder may subscribe
for and purchase in the Subscription Offering up to the greater
of (a) $200,000 (20,000 shares) of common stock and
(b) 15 times the product, rounded down to the next whole
number, obtained by multiplying the total number of shares of
common stock offered by a fraction, of which the numerator is
the amount of the qualifying deposit of the Supplemental
Eligible Account Holder and the denominator is the total amount
of qualifying deposits of all Supplemental Eligible Account
Holders, in each case as of the close of business on the
Supplemental Eligibility Record Date, with clause (a) above
subject to the overall limitation in clause (6) below;
(5) Each Other Member or any person purchasing shares of
common stock in the community offering may subscribe for and
purchase up to $200,000 (20,000 shares) of common stock
offered in the subscription offering or community offering,
subject to the overall limitation in clause (6) below;
(6) Except for our employee stock ownership plan and
certain Eligible Account Holders and Supplemental Eligible
Account Holders whose subscription rights are based upon the
amount of their deposits, the maximum number of shares of common
stock subscribed for or purchased in all categories of the
conversion by any person, together with associates of and groups
of persons acting in concert with such persons, shall not exceed
$350,000 of the common stock offered in the offering
(35,000 shares); and
(7) No more than 34% of the total number of shares offered
for sale in the conversion may be purchased by our directors and
officers and their associates in the aggregate, excluding
purchases by our employee stock ownership plan.
Subject to any required regulatory approval and the requirements
of applicable laws and regulations, but without further approval
of the members of Bank of Ruston, the individual amount
permitted to be subscribed for and the overall purchase
limitations may be increased or decreased. If either of such
amounts is increased, subscribers for the maximum amount will be
given the opportunity to increase their subscriptions up to the
then applicable limit. If either of such amounts is decreased,
subscribers for the maximum amount will be decreased by the
minimum amount necessary so that the subscriber will be in
compliance with the new maximum limitation.
In the event of an increase in the total number of shares of
common stock offered in the conversion due to an increase in the
offering range of up to 15%, the additional shares will be
allocated in the following order of priority in accordance with
the plan of conversion:
(1) to fill our employee stock ownership plans
subscription of 8% of the adjusted maximum number of shares;
(2) in the event that there is an oversubscription by
Eligible Account Holders, to fill unfulfilled subscriptions of
Eligible Account Holders, inclusive of the adjusted maximum;
(3) in the event that there is an oversubscription by
Supplemental Eligible Account Holders, to fill unfulfilled
subscriptions of Supplemental Eligible Account Holders,
inclusive of the adjusted maximum;
(4) in the event that there is an oversubscription by Other
Members, to fill unfulfilled subscriptions of Other Members,
inclusive of the adjusted maximum; and
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(5) to fill unfulfilled subscriptions in the community
offering to the extent possible, inclusive of the adjusted
maximum.
The term associate of a person is defined to include
the following:
(1) any corporation or other organization (other than
Century Next Financial, Bank of Ruston or a majority-owned
subsidiary of Bank of Ruston) of which such person is a
director, officer or partner or is directly or indirectly the
beneficial owner of 10% or more of any class of equity
securities;
(2) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity, provided,
however, that such term shall not include any tax-qualified
employee stock benefit plan in which such person has a
substantial beneficial interest or serves as a trustee or in a
similar fiduciary capacity; and
(3) any relative or spouse of such person, or any relative
of such spouse, who either has the same home as such person or
who is a director or officer of us or any of our subsidiaries.
The term acting in concert is defined to mean
(1) knowing participation in a joint activity or
interdependent conscious parallel action towards a common goal
whether or not pursuant to an express agreement, or (2) a
combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any
contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise. We may presume that
certain persons are acting in concert based upon, among other
things, joint account relationships, common addresses on our
records or the fact that such persons have filed joint Schedules
13D or 13G with the Securities and Exchange Commission with
respect to other companies.
Plan of
Distribution and Marketing Arrangements
Offering materials have been initially distributed to certain
persons by mail, with additional copies made available through
the conversion center and Sandler ONeill &
Partners, L.P. All prospective purchasers are to send payment
directly to Bank of Ruston, where such funds will be held in a
separate account earning interest and not released until the
offering is completed or terminated.
We have engaged Sandler ONeill & Partners, L.P.,
a broker-dealer registered with FINRA, as a financial and
marketing advisor in connection with the offering of our common
stock. In its role as financial and marketing advisor, Sandler
ONeill & Partners, L.P. will assist us in the
offering as follows:
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consulting as to the securities marketing implications of any
aspect of the plan of conversion;
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reviewing with our board of directors the financial impact of
the offering on us based upon the independent appraisers
appraisal of the common stock;
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reviewing all offering documents, including the prospectus,
stock order forms and related offering materials (we are
responsible for the preparation and filing of such documents);
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assisting in the design and implementation of a marketing
strategy for the offering;
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as necessary, assisting us in scheduling and preparing for
meetings with potential investors and broker-dealers; and
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providing such other general advice and assistance we may
request to promote the successful completion of the offering.
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For these services, Sandler ONeill & Partners,
L.P. will receive a fee of $150,000. We have made an advance
payment of $25,000 to Sandler ONeill & Partners,
L.P. We will also reimburse Sandler ONeill &
Partners, L.P. for its reasonable out-of-pocket expenses, up to
a maximum of $25,000, and for its legal fees and expenses
associated with this marketing effort, up to a maximum of
$50,000. If the plan of conversion is terminated or if Sandler
ONeill & Partners, L.P. terminates its agreement
with us in accordance with the provisions of the agreement,
Sandler ONeill & Partners, L.P. will only
receive reimbursement of its reasonable out-of-pocket expenses.
We will indemnify Sandler ONeill & Partners,
L.P. against liabilities and expenses
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(including legal fees) incurred in connection with certain
claims or liabilities arising out of or based upon untrue
statements or omissions contained in the offering materials for
the common stock, including liabilities under the Securities Act
of 1933.
We have also engaged Sandler ONeill & Partners,
L.P. to act as records management agent in connection with the
offering. In its role as records management agent, Sandler
ONeill & Partners, L.P. will assist us in the
offering as follows: (i) consolidation of accounts and vote
calculation; (ii) preparation of order forms;
(iii) organization and supervision of the conversion
center; (iv) proxy solicitation and special meeting
services; and (v) subscription services. For these
services, Sandler ONeill & Partners, L.P. will
receive a fee of $10,000 and reimbursement for its reasonable
out-of-pocket expenses, up to a maximum of $5,000. We have made
an advance payment of $5,000 to Sandler ONeill &
Partners, L.P. for its role as records management agent.
Sandler ONeill has not prepared any report or opinion
constituting a recommendation or advice to us or to persons who
subscribe for common stock, nor has it prepared an opinion as to
the fairness to us of the purchase price or the terms of the
common stock to be sold. Sandler ONeill expresses no
opinion as to the prices at which common stock to be issued may
trade.
Our directors and executive officers may participate in the
solicitation of offers to purchase common stock. Trained
employees may participate in the offering in ministerial
capacities, providing clerical work in effecting a sales
transaction or answering questions of a ministerial nature.
Questions of prospective purchasers regarding the offering
process will be directed to registered representatives of
Sandler ONeill & Partners, L.P. We will rely on
Rule 3a4-1
of the Securities Exchange Act of 1934, as amended, so as to
permit officers, directors, and employees to participate in the
sale of the common stock. No officer, director, or employee will
be compensated for his participation by the payment of
commissions or other remuneration based either directly or
indirectly on the transactions in the common stock.
Procedure
for Purchasing Shares in the Subscription and Community
Offerings
To ensure that each purchaser in the subscription and community
offering receives a prospectus at least 48 hours before the
applicable expiration date, unless extended, in accordance with
Rule 15c2-8
of the Securities Exchange Act of 1934, no prospectus will be
mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution
of the stock order form will confirm receipt or delivery in
accordance with
Rule 15c2-8.
Order forms will only be distributed with a prospectus.
To purchase shares in the Subscription Offering, an executed
stock order form with the required payment for each share
subscribed for, or with appropriate authorization for withdrawal
from a deposit account at Bank of Ruston (which may be given by
completing the appropriate blanks in the order form), must be
received by Bank of Ruston by 5:00 p.m., Central time, on
[DATE1], 2010, unless extended. We will not accept stock order
forms which are not received by such time or are executed
defectively or are received without full payment, or appropriate
withdrawal instructions. Copies of order forms, payments from
other private third parties and wire transfers also will not be
accepted. We will not accept incomplete or improperly executed
forms. Once received, an executed order form may not be
modified, amended or rescinded without our consent, unless the
conversion has not been completed within 45 days after the
end of the subscription offering, [DATE2], 2010, unless such
period has been extended.
In order to ensure that Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members are properly
identified as to their stock purchase priority, depositors as of
the close of business on the Eligibility Record Date
(December 31, 2008), the Supplemental Eligibility Record
Date (June 30, 2010) and depositors as of the close of
business on [DATE4], 2010, must list all accounts on the stock
order form giving all names in each account and the account
numbers. Failure to list all of your accounts may result in
fewer shares being allocated to you than if all of your accounts
had been disclosed. To preserve your subscription rights, you
must register shares only in the name or names of Eligible
Account Holders, Supplemental Eligible Account Holders or Other
Members, as appropriate, as of the Eligibility Record Date,
Supplemental Eligibility Record Date or Other Member voting
record date. You may not add names of others who did not have
subscription rights to purchase shares of our common stock.
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Payment for subscriptions may be made (1) by check or money
order payable to, Century Next Financial Corporation, or
(2) by authorization of withdrawal from deposit accounts
maintained with Bank of Ruston. Interest will be paid on
payments made by check or money order at Bank of Rustons
statement savings account rate of interest from the date payment
is received until the offering is completed or terminated. Funds
received before completion of the offering will be maintained in
a segregated deposit account at Bank of Ruston. We will pay
interest on all funds received at a rate equal to Bank of
Rustons statement savings account rate, which is currently
0.4% per annum. The offering will be conducted in compliance
with all applicable provisions of
Rule 15c2-4
of the Securities Exchange Act of 1934. If payment is made by
authorization of withdrawal from deposit accounts, the funds
authorized to be withdrawn from a deposit account will continue
to accrue interest at the contractual rates until completion or
termination of the conversion, but a hold will be placed on such
funds, thereby making them unavailable to the depositor until
completion or termination of the offering.
If a subscriber authorizes Bank of Ruston to withdraw the amount
of the purchase price from his deposit account, Bank of Ruston
will do so as of the effective date of the offering. Bank of
Ruston will waive any applicable penalties for early withdrawal
from certificate accounts. If the remaining balance in a
certificate account is reduced below the applicable minimum
balance requirement at the time that the funds actually are
transferred under the authorization, the certificate will be
canceled at the time of the withdrawal, without penalty, and the
remaining balance will earn interest at the statement savings
account rate.
Our employee stock ownership plan will not be required to pay
for the shares subscribed for at the time it subscribes.
Instead, our employee stock ownership plan may pay for such
shares upon completion of the offering provided that there is a
valid loan commitment in force from the time of its subscription
until completion. The loan commitment may be from Century Next
Financial or an unrelated financial institution.
Owners of self-directed IRAs may use the assets of such IRAs to
purchase shares of common stock in the subscription and
community offerings, provided that such IRAs are not maintained
at Bank of Ruston. Persons with IRAs maintained at Bank of
Ruston must have their accounts transferred to an unaffiliated
institution or broker to purchase shares of common stock in the
subscription and community offerings. In addition, applicable
regulations require that officers, directors and 10%
shareholders who use self-directed IRA funds to purchase shares
of common stock in the subscription and community offerings make
such purchases for the exclusive benefit of the IRAs. Any
interested parties wishing to use IRA funds for stock purchases
are advised to contact the conversion center for additional
information and allow sufficient time for the account to be
transferred as required.
We may, in our sole discretion, permit institutional investors
to submit irrevocable orders together with the legally binding
commitment for payment and to thereafter pay for such shares of
common stock for which they subscribe in the community offering
at any time before the 48 hours prior to the completion of
the offering. This payment may be made by wire transfer. Our
interpretation of the terms and conditions of the plan of
conversion and of the acceptability of the order forms will be
final.
Restrictions
on Transfer of Subscription Rights and Shares
You may not transfer or enter into any agreement or
understanding to transfer the legal or beneficial ownership of
your subscription rights issued under the plan of conversion or
the shares of common stock to be issued upon their exercise. You
may exercise your subscription rights only for your own account.
If you exercise your subscription rights, you will be required
to certify that you are purchasing shares solely for your own
account and that you have no agreement or understanding
regarding the sale or transfer of such shares. Federal
regulations also prohibit any person from offering or making an
announcement of an offer or intent to make an offer to purchase
such subscription rights or shares of common stock prior to the
completion of the conversion. With the exception of purchases
through individual retirement accounts, Keogh accounts and
401(k) plan accounts, shares purchased in the subscription
offering must be registered in the names of all depositors on
the qualifying account(s). Deleting names of depositors or
adding non-depositors or otherwise altering the form of
beneficial ownership of a qualifying account will result in the
loss of your subscription rights.
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We will pursue any and all legal and equitable remedies in
the event we become aware of the transfer of subscription rights
and will not honor orders known by us to involve the transfer of
such rights.
Liquidation
Rights of Certain Depositors
In the unlikely event of a complete liquidation of Bank of
Ruston in its present mutual form, each of our depositors would
receive his pro rata share of any of our assets remaining after
payment of claims of all creditors (including the claims of all
depositors to the withdrawal value of their accounts). Each
depositors pro rata share of such remaining assets would
be in the same proportion as the value of his deposit account
was to the total value of all deposit accounts at the time of
liquidation. After the conversion, each depositor, in the event
of a complete liquidation of Bank of Ruston, would have a claim
as a creditor of the same general priority as the claims of all
other general creditors of Bank of Ruston. However, except as
described below, his claim would be solely in the amount of the
balance in his deposit account plus accrued interest. The
depositor would not have an interest in the value or assets of
Bank of Ruston above that amount.
The plan of conversion provides for the establishment, upon the
completion of the conversion, of a special liquidation
account for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders in an amount equal to our
net worth as of the date of its latest statement of financial
condition contained in the final prospectus utilized in the
conversion. As of March 31, 2010, the initial balance of
the liquidation account would be approximately
$8.6 million. Each Eligible Account Holder and Supplemental
Eligible Account Holder, if he were to continue to maintain his
deposit account at Bank of Ruston, would be entitled, upon a
complete liquidation of Bank of Ruston after the conversion, to
an interest in the liquidation account prior to any payment to
Century Next Financial as the sole shareholder of Bank of
Ruston. Each Eligible Account Holder and Supplemental Eligible
Account Holder would have an initial interest in such
liquidation account for each deposit account, including
statement savings accounts, interest-bearing checking accounts,
money market deposit accounts, and certificates of deposit, held
in Bank of Ruston at the close of business on December 31,
2008 or June 30, 2010, as the case may be. Each Eligible
Account Holder and Supplemental Eligible Account Holder will
have a pro rata interest in the total liquidation account for
each of his deposit accounts based on the proportion that the
balance of each such deposit account on the December 31,
2008, eligibility record date (or the June 30, 2010
supplemental eligibility record date, as the case may be) bore
to the balance of all deposit accounts in Bank of Ruston on such
dates. For deposit accounts in existence at both the eligibility
record date and the supplemental eligibility record date,
separate initial sub account balances will be determined for
such accounts on each of the respective dates. The liquidation
account will be an off balance sheet memorandum account. The
balance of the liquidation account will not be reflected in our
published financial statements.
If, however, on any December 31 annual closing date, commencing
December 31, 2010, the amount in any deposit account is
less than the amount in such deposit account on
December 31, 2008 or June 30, 2010, as the case may
be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be
reduced by the proportion of any such reduction, and such
interest will cease to exist if such deposit account is closed.
In addition, no interest in the liquidation account would ever
be increased despite any subsequent increase in the related
deposit account. Any assets remaining after the claims of
general creditors (including the claims of all depositors to the
withdrawal value of their accounts) and the above liquidation
rights of Eligible Account Holders and Supplemental Eligible
Account Holders are satisfied would be distributed to Century
Next Financial as the sole shareholder of Bank of Ruston.
Material
Federal and Louisiana Income Tax Consequences of the
Conversion
Completion of the conversion is expressly conditioned upon prior
receipt of either a ruling or an opinion of counsel with respect
to federal tax laws, and either a ruling or an opinion with
respect to Louisiana tax laws, to the effect that consummation
of the transactions contemplated hereby will not result in a
taxable reorganization under the provisions of the applicable
codes or otherwise result in any adverse tax consequences to us
or to account holders receiving subscription rights, except to
the extent, if any, that subscription rights are deemed to have
fair market value on the date such rights are issued.
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Elias, Matz, Tiernan & Herrick L.L.P.,
Washington, D.C., has issued an opinion to us that, for
federal income tax purposes:
(1) Our change in form from mutual to stock ownership will
constitute a reorganization under Section 368(a)(1)(F) of
the Internal Revenue Code and we will not recognize any gain or
loss as a result of the conversion;
(2) no gain or loss will be recognized by us upon the
purchase of Bank of Rustons capital stock by Century Next
Financial;
(3) no gain or loss will be recognized by Eligible Account
Holders and Supplemental Eligible Account Holders upon the
issuance to them of deposit accounts in Bank of Ruston in its
stock form plus their interests in the liquidation account in
exchange for their deposit accounts in the mutual bank;
(4) the tax basis of the depositors deposit accounts
in Bank of Ruston immediately after the conversion will be the
same as the basis of their deposit accounts immediately prior to
the conversion;
(5) the tax basis of each Eligible Account Holders
and Supplemental Eligible Account Holders interest in the
liquidation account will be zero;
(6) the tax basis to the shareholders of the common stock
purchased in the conversion will be the amount paid therefor;
(7) the holding period for shares of common stock will
begin on the date of the exercise of the subscription right and
on the day after the date of purchase if purchased in the
community offering; and
(8) it is more likely than not that the Eligible Account
Holders and Supplemental Eligible Account Holders will not
recognize gain upon the issuance to them of withdrawable savings
accounts in Bank of Ruston following the conversion, interests
in the liquidation account and nontransferable subscription
rights to purchase Century Next Financial common stock in
exchange for their savings accounts and proprietary interests in
Bank of Ruston.
In reaching their conclusions in opinions (4), (5) and
(8) above, Elias, Matz, Tiernan & Herrick L.L.P.
has noted that the subscription rights will be granted at no
cost to the recipients, will be legally nontransferable and of
short duration, and will provide the recipients with the right
only to purchase shares of common stock at the same price to be
paid by members of the general public in any community offering.
Elias, Matz, Tiernan & Herrick L.L.P. has also noted
that RP Financial has issued a letter
dated ,
2010, as described below, stating that the subscription rights
will have no ascertainable market value. In addition, no cash or
property will be given to recipients of the subscription rights
in lieu of such rights or to those recipients who fail to
exercise such rights. In addition, the IRS was requested in 1993
in a private letter ruling to address the federal tax treatment
of the receipt and exercise of nontransferable subscription
rights in another conversion and declined to express any
opinion. Elias, Matz, Tiernan & Herrick L.L.P.
believes because of the factors noted above in this paragraph
that it is more likely than not that the nontransferable
subscription rights to purchase common stock will have no
ascertainable value at the time the rights are granted.
Heard McElroy & Vestal, LLP, has also advised us that
the tax effects of the conversion under Louisiana law are
substantially the same as they are under federal law.
In the opinion of RP Financial, the subscription rights will
have no ascertainable value at the time of distribution or
exercise, based on the fact that such rights will be acquired by
the recipients without cost, will be nontransferable and of
short duration, and will afford the recipients the right only to
purchase the common stock at the same price as will be paid by
members of the general public in any community offering.
The issue of whether or not the subscription rights have value
is dependent upon all of the facts and circumstances that occur.
If the nontransferable subscription rights to purchase common
stock are subsequently found to have an ascertainable market
value greater than zero, income may be recognized by various
recipients of the nontransferable subscription rights (in
certain cases, whether or not the rights are exercised) and we
may be taxed on the distribution of the nontransferable
subscription rights under Section 311 of the Internal
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Revenue Code. In this event, the nontransferable subscription
rights may be taxed partially or entirely at ordinary income tax
rates.
Unlike private rulings, an opinion is not binding on the IRS,
and the IRS could disagree with conclusions reached therein. In
the event of such disagreement, there can be no assurance that
the IRS would not prevail in a judicial or administrative
proceeding. Eligible subscribers are encouraged to consult with
their own tax advisor as to their own tax consequences in the
event that such subscription rights are deemed to have an
ascertainable value.
Delivery
of Certificates
Certificates representing Century Next Financial common stock
issued in the conversion will be mailed by our transfer agent to
the persons entitled thereto at the addresses of such persons
appearing on the stock order form as soon as practicable
following completion of the conversion. Any certificates
returned as undeliverable will be held by us until claimed by
persons legally entitled thereto or otherwise disposed of in
accordance with applicable law. Until certificates for common
stock are available and delivered to subscribers, such
subscribers may not be able to sell the shares of common stock
for which they have subscribed, even though trading of the
common stock may have commenced.
Required
Approvals
Various approvals of the Office of Thrift Supervision are
required to complete the conversion. The Office of Thrift
Supervision approved the plan of conversion, subject to approval
by Bank of Rustons members and other standard conditions.
The Office of Thrift Supervision has also approved our holding
company application, subject to the following standard
conditions:
(1) The acquisition of Bank of Ruston by Century Next
Financial must be completed within 120 days of approval of
the application;
(2) We must file legal and accounting and other standard
certifications with the Office of Thrift Supervision; and
(3) We must not take any action that would prevent Century
Next Financial common stock from being listed on an exchange or
the Nasdaq system.
We are required to make filings with certain state securities
regulatory authorities in connection with the issuance of common
stock in the conversion.
Certain
Restrictions on Purchase or Transfer of Shares After the
Conversion
All shares of common stock purchased in connection with the
conversion by any of our directors or officers will be subject
to a restriction that the shares not be sold for a period of one
year following the conversion, except in the event of the death
of such director or officer or pursuant to a merger or similar
transaction approved by the Office of Thrift Supervision. Each
certificate for restricted shares will bear a legend giving
notice of this restriction on transfer, and appropriate
stop-transfer instructions will be issued to our transfer agent.
Any shares of common stock issued at a later date within this
one year period as a stock dividend, stock split or otherwise
with respect to such restricted stock will be subject to the
same restrictions. Our directors and executive officers will
also be subject to the insider trading rules promulgated
pursuant to the Securities Exchange Act of 1934 as long as the
common stock is registered pursuant to Section 12(b) of the
Securities Exchange Act of 1934.
Purchases of our common stock by our directors, officers and
their associates during the three-year period following
completion of the conversion may be made only through a broker
or dealer registered with the Securities and Exchange
Commission, except with the prior written approval of the Office
of Thrift Supervision. This restriction does not apply, however,
to negotiated transactions involving more than 1% of our
outstanding common stock or to certain purchases of stock
pursuant to an employee stock benefit plan,
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such as our employee stock ownership plan, or by any
non-tax-qualified employee stock benefit plan, such as the
recognition plan.
Any repurchases of common stock by us in the future will be
subject to the receipt of any necessary approvals from the
Office of Thrift Supervision during the first year after the
conversion.
RESTRICTIONS
ON ACQUISITION OF CENTURY NEXT FINANCIAL AND BANK OF RUSTON
AND RELATED ANTI-TAKEOVER PROVISIONS
Restrictions
in Our Articles of Incorporation and Bylaws and Louisiana
Law
Certain provisions of our articles of incorporation and bylaws
and Louisiana law which deal with matters of corporate
governance and rights of shareholders might be deemed to have a
potential anti-takeover effect. Provisions in our articles of
incorporation and bylaws provide, among other things,
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that our board of directors is divided into classes with only
one-third of our directors standing for reelection each year;
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that no person shall directly or indirectly acquire or offer to
acquire beneficial ownership of more than 10% of the issued and
outstanding shares of any class of voting securities of Century
Next Financial;
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that special meetings of shareholders may be called by
shareholders who beneficially own at least 50% of the
outstanding voting shares of Century Next Financial;
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that shareholders generally must provide us advance notice of
shareholder proposals and director nominations and provide
certain specified related information; and
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the authority to issue shares of authorized but unissued common
stock and preferred stock and to establish the terms of any one
or more series of preferred stock, including voting rights,
without additional shareholder approval.
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Provisions of the Louisiana Business Corporation Law applicable
to us as well as our articles of incorporation contain certain
provisions which may be deemed to have an anti-takeover effect,
including:
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rights of shareholders to receive the fair value for their
shares following a control transaction from a controlling person
or group; and
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a supermajority voting requirement for a business combination
with an interested shareholder (defined generally as
the beneficial owner of 10% or more of the corporations
outstanding shares) unless certain minimum price and procedural
safeguards are satisfied.
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The provisions noted above as well as others discussed below may
have the effect of discouraging a future takeover attempt which
is not approved by our board of directors but which individual
shareholders may consider to be in their best interests or in
which shareholders may receive a substantial premium for their
shares over the then current market price. As a result,
shareholders who might wish to participate in such a transaction
may not have an opportunity to do so. The provisions may also
render the removal of our board of directors or management more
difficult. Furthermore, such provisions could render us being
deemed less attractive to a potential acquiror
and/or could
result in our shareholders receiving a lesser amount of
consideration for their shares of our common stock than
otherwise could have been available either in the market
generally
and/or in a
takeover.
A more detailed discussion of these and other provisions of our
articles of incorporation and bylaws and the Louisiana Business
Corporation Law is set forth below.
Board of Directors. Our articles of
incorporation and bylaws provide that our board of directors be
divided into three classes of directors each and that the
members of each class be elected for a term of three years and
until their successors are elected and qualified, with one class
being elected annually. Holders of our common stock will not
have cumulative voting in the election of directors.
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Under our articles of incorporation, subject to the rights of
the holders of any class or series of stock having preference
over our common stock, any vacancy occurring in our board of
directors, including any vacancy created by reason of an
increase in the number of directors, may be filled by a majority
vote of the remaining directors, whether or not a quorum is
present. Any director so chosen to fill a vacancy will hold
office for the remainder of the term to which the director has
been elected and until his or her successor is elected and
qualified.
Our articles of incorporation also provide that, subject to the
rights of the holder of any class or series of stock having
preference over our common stock, any director may be removed by
shareholders without cause by the affirmative vote of at least
75% of all outstanding shares entitled to vote in the election
of directors, and may be removed with cause only upon the vote
of at least a majority of the total votes eligible to be cast by
shareholders. Cause for removal will be deemed to exist only if
the director in question is:
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convicted of a felony or an offense punishable by imprisonment
for a term of more than one year by a court of competent
jurisdiction; or
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deemed liable by a court of competent jurisdiction for gross
negligence or misconduct in the performance of duties to Century
Next Financial.
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Limitation on Voting Rights. Article 10.A
of our articles of incorporation provides that no person shall
directly or indirectly offer to acquire or acquire the
beneficial ownership of (i) more than 10% of the issued and
outstanding shares of any class of an equity security of Century
Next Financial, or (ii) any securities convertible into, or
exercisable for, any equity securities of Century Next Financial
if, assuming conversion or exercise by such person of all
securities of which such person is the beneficial owner which
are convertible into, or exercisable for, such equity securities
(but of no securities convertible into, or exercisable for, such
equity securities of which such person is not the beneficial
owner), such person would be the beneficial owner of more than
10% of any class of an equity security of Century Next
Financial. The term person is broadly defined to
prevent circumvention of this restriction.
The foregoing restrictions do not apply to (i) any offer
with a view toward public resale made exclusively to Century
Next Financial by underwriters or a selling group acting on its
behalf, (ii) any tax-qualified employee benefit plan or
arrangement established by us and any trustee of such a plan or
arrangement, and (iii) any other offer or acquisition
approved in advance by the affirmative vote of two-thirds of our
entire board of directors. In the event that shares are acquired
in violation of Article 10.A, all shares beneficially owned
by any person in excess of 10% shall be considered Excess
Shares and shall not be counted as shares entitled to vote
and shall not be voted by any person or counted as voting shares
in connection with any matters submitted to shareholders for a
vote, and the board of directors may cause such Excess Shares to
be transferred to an independent trustee for sale on the open
market or otherwise, with the expenses of such trustee to be
paid out of the proceeds of sale.
Indemnification and Limitation of
Liability. Article 8.A of our articles of
incorporation provides that a director or officer of Century
Next Financial will not be personally liable for monetary
damages for any action taken, or any failure to take any action,
as a director or officer except to the extent that by law a
directors or officers liability for monetary damages
may not be limited. This provision does not eliminate or limit
the liability of our directors and officers for (a) any
breach of the directors or officers duty of loyalty
to Century Next Financial or our shareholders, (b) any acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) any unlawful
dividend, stock repurchase or other distribution, payment or
return of assets to shareholders, or (d) any transaction
from which the director or officer derived an improper personal
benefit. This provision may preclude shareholder derivative
actions and may be construed to preclude other third-party
claims against the directors and officers.
Our articles of incorporation also provide that Century Next
Financial shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, including actions by or in
the right of Century Next Financial, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person is or was our director, officer, employee or agent, or is
or was serving at our request as a director, officer, employee
or agent of another corporation, partnership,
102
joint venture, trust or other enterprise. Such indemnification
is furnished to the full extent provided by law against expenses
(including attorneys fees), judgments, fines, and amounts
paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding. The
indemnification provisions also permit us to pay reasonable
expenses in advance of the final disposition of any action, suit
or proceeding as authorized by our Board of Directors, provided
that the indemnified person undertakes to repay us if it is
ultimately determined that such person was not entitled to
indemnification.
The rights of indemnification provided in our articles of
incorporation are not exclusive of any other rights which may be
available under our bylaws, any insurance or other agreement, by
vote of shareholders or directors (regardless of whether
directors authorizing such indemnification are beneficiaries
thereof) or otherwise. In addition, the articles of
incorporation authorize us to maintain insurance on behalf of
any person who is or was our director, officer, employee or
agent, whether or not we would have the power to provide
indemnification to such person. By action of the board of
directors, we may create and fund a trust fund or other fund or
form of self-insurance arrangement of any nature, and may enter
into agreements with our officers, directors, employees and
agents for the purpose of securing or insuring in any manner its
obligation to indemnify or advance expenses provided for in the
provisions in the articles of incorporation and bylaws regarding
indemnification. These provisions are designed to reduce, in
appropriate cases, the risks incident to serving as a director,
officer, employee or agent and to enable us to attract and
retain the best personnel available.
Authorized Shares. Article 4 of our
articles of incorporation authorizes the issuance of
10,000,000 shares of stock, of which 1,000,000 shares
shall be shares of serial preferred stock, and 9,000,000 shall
be common stock. The shares of common stock and preferred stock
were authorized in an amount greater than that to be issued in
the conversion to provide our board of directors with as much
flexibility as possible to effect, among other transactions,
financings, acquisitions, stock dividends, stock splits and
employee stock options. However, these additional authorized
shares may also be used by the board of directors consistent
with its fiduciary duty to deter future attempts to gain control
of Century Next Financial. The board of directors also has sole
authority to determine the terms of any one or more series of
preferred stock, including voting rights, conversion rates, and
liquidation preferences. As a result of the ability to fix
voting rights for a series of preferred stock, the board has the
power, to the extent consistent with its fiduciary duty, to
issue a series of preferred stock to persons friendly to
management in order to attempt to block a post-tender offer
merger or other transaction by which a third party seeks
control, and thereby assist management to retain its position.
We currently have no plans for the issuance of additional
shares, other than the issuance of additional shares pursuant to
stock benefit plans.
Special Meetings of Shareholders and Shareholder Nominations
and Proposals. Article 9.B of the articles
of incorporation provides that special meetings of shareholders
may only be called by (i) the President, (ii) a
majority of the board of directors, and (iii) by persons
who beneficially own an aggregate of at least 50% of the
outstanding voting shares, except as may otherwise be provided
by law. The articles of incorporation also provide that any
action permitted to be taken at a meeting of shareholders may be
taken without a meeting if a consent in writing, setting forth
the action so taken, is given by the holders of all outstanding
shares entitled to vote and filed with the secretary of Century
Next Financial.
Article 9.D of our articles of incorporation provides that
only such business as shall have been properly brought before an
annual meeting of shareholders shall be conducted at the annual
meeting.
To be properly brought before an annual meeting, business must
be specified in the notice of the meeting, or any supplement
thereto, given by or at the direction of the board of directors,
or otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before an
annual meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to Century Next
Financials secretary. To be timely, a shareholders
notice must be delivered to or mailed and received at Century
Next Financials principal executive offices not later than
120 days prior to the anniversary date of the mailing of
proxy materials by Century Next Financial in connection with the
immediately preceding annual meeting of shareholders, or, in the
case of the first annual meeting of shareholders following the
conversion, by December 15, 2010. Century Next
Financials articles of incorporation also require that the
notice must contain
103
certain information in order to be considered. The board of
directors may reject any shareholder proposal not made in
accordance with the articles of incorporation. The presiding
officer of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not
properly brought before the meeting in accordance with our
articles of incorporation, and if he should so determine, he
shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
Article 6.F. of our articles of incorporation provide that,
subject to the rights of the holders of any class or series of
stock having a preference over the common stock as to dividends
or upon liquidation, all nominations for election to the board
of directors, other than those made by the board or a committee
thereof, shall be made by a shareholder who has complied with
the notice provisions in such Article 6.F. Written notice
of a shareholder nomination must include certain specified
information and must be communicated to the attention of the
secretary and either delivered to, or mailed and received at,
Century Next Financials principal executive offices not
later than (a) with respect to an annual meeting of
shareholders, 120 days prior to the anniversary date of the
mailing of proxy materials by Century Next Financial in
connection with the immediately preceding annual meeting of
shareholders, or in the case of the first annual meeting
following the conversion by December 15, 2010.
The procedures regarding shareholder proposals and nominations
are intended to provide Century Next Financials board of
directors with the information deemed necessary to evaluate a
shareholder proposal or nomination and other relevant
information, such as existing shareholder support, as well as
the time necessary to consider and evaluate such information in
advance of the applicable meeting. The proposed procedures,
however, will give incumbent directors advance notice of a
business proposal or nomination. This may make it easier for the
incumbent directors to defeat a shareholder proposal or
nomination, even when certain shareholders view such proposal or
nomination as in the best interests of Century Next Financial or
its shareholders.
Amendment of Articles of Incorporation and
Bylaws. Article 11 of our articles of
incorporation generally provides that any amendment of the
articles of incorporation must be first approved by a majority
of the board of directors and then by the holders of a majority
of the shares of Century Next Financial entitled to vote in an
election of directors, except that the approval of 75% of the
shares entitled to vote in an election of directors is required
for any amendment to Articles 6 (directors), 7 (preemptive
rights), 8 (indemnification), 9 (meetings of shareholders and
shareholder proposals), 10 (restrictions on acquisitions) and 11
(amendments).
Our bylaws may be amended by a majority of the board of
directors or by the affirmative vote of a majority of the total
shares entitled to vote in an election of directors, except that
the affirmative vote of at least 75% of the total shares
entitled to vote in an election of directors shall be required
to amend, adopt, alter, change or repeal any provision
inconsistent with certain specified provisions of the bylaws.
Louisiana
Corporate Law
In addition to the provisions contained in our articles of
incorporation, the Louisiana Business Corporation Law includes
certain provisions applicable to Louisiana corporations, such as
Century Next Financial, which may be deemed to have an
anti-takeover effect. Such provisions include (i) rights of
shareholders to receive the fair value of their shares of stock
following a control transaction from a controlling person or
group and (ii) requirements relating to certain business
combinations.
The Louisiana Business Corporation Law provides that any person
who acquires control shares will be able to vote
such shares only if the right to vote is approved by the
affirmative vote of at least a majority of both (1) all the
votes entitled to be cast by shareholders and (2) all the
votes entitled to be cast by shareholders excluding
interested shares. Control shares is
defined to include shares that would entitle the holder thereof,
assuming the shares had full voting rights, to exercise voting
power within any of the following ranges: (a) 20% or more
but less than one-third of all voting power; (b) one-third
or more but less than a majority of all voting power; or
(c) a majority or more of all voting power. Any acquisition
that would result in the ownership of control shares in a higher
range would require an additional vote of shareholders.
Interested shares includes control shares and any
shares held by an officer or employee director of the
corporation. If the control shares are provided full voting
rights, all shareholders have dissenters rights
104
entitling them to receive the fair cash value of
their shares, which shall not be less than the highest price
paid per share to acquire the control shares.
The Louisiana Business Corporation Law defines a Business
Combination generally to include (a) any merger,
consolidation or share exchange of the corporation with an
Interested Shareholder or affiliate thereof,
(b) any sale, lease, transfer or other disposition, other
than in the ordinary course of business, of assets equal to 10%
or more of the market value of the corporations
outstanding stock or of the corporations net worth to any
Interested Shareholder or affiliate thereof in any
12-month
period, (c) the issuance or transfer by the corporation of
equity securities of the corporation with an aggregate market
value of 5% or more of the total market value of the
corporations outstanding stock to any Interested
Shareholder or affiliate thereof, except in certain
circumstances, (d) the adoption of any plan or proposal for
the liquidation or dissolution of the corporation in which
anything other than cash will be received by an Interested
Shareholder or affiliate thereof, or (e) any
reclassification of the corporations stock or merger which
increases by 5% or more the ownership interest of the Interested
Shareholder or any affiliate thereof. Interested
Shareholder includes any person who beneficially owns,
directly or indirectly, 10% or more of the corporations
outstanding voting stock, or any affiliate thereof who had such
beneficial ownership during the preceding two years, excluding
in each case the corporation, its subsidiaries and their benefit
plans.
Under the Louisiana Business Corporation Law, a business
combination must be approved by any vote otherwise required by
law or the articles of incorporation, and by the affirmative
vote of at least each of the following: (1) 80% of the
total outstanding voting stock of the corporation; and
(2) two-thirds of the outstanding voting stock held by
persons other than the Interested Shareholder. However, the
supermajority vote requirement shall not be applicable if the
business combination meets certain minimum price requirements
and other procedural safeguards, or if the transaction is
approved by the Board of Directors prior to the time that the
Interested Shareholder first became an Interested Shareholder.
The Louisiana Business Corporation Law authorizes the board of
directors of Louisiana business corporations to create and issue
(whether or not in connection with the issuance of any of its
shares or other securities) rights and options granting to the
holders thereof (1) the right to convert shares or
obligations into shares of any class, or (2) the right or
option to purchase shares of any class, in each case upon such
terms and conditions as Century Next Financial may deem
expedient.
Anti-Takeover
Effects of the Articles of Incorporation and Bylaws and the
Louisiana Business Corporation Law
The foregoing provisions of the articles of incorporation and
bylaws of Century Next Financial and Louisiana law could have
the effect of discouraging an acquisition of Century Next
Financial or stock purchases in furtherance of an acquisition,
and could accordingly, under certain circumstances, discourage
transactions which might otherwise have a favorable effect on
the price of our common stock.
The board of directors believes that the provisions described
above are prudent and will reduce vulnerability to takeover
attempts and certain other transactions that are not negotiated
with and approved by our board of directors. The board of
directors believes that these provisions are in our best
interests and those of our shareholders. In the board of
directors judgment, the board of directors is in the best
position to determine our true value and to negotiate more
effectively for what may be in the best interests of
shareholders. Accordingly, the board of directors believes that
it is in our best interests and those of our shareholders to
encourage potential acquirors to negotiate directly with the
board of directors and that these provisions will encourage such
negotiations and discourage hostile takeover attempts. It is
also the board of directors view that these provisions
should not discourage persons from proposing a merger or other
transaction at prices reflective of the true value of our stock
and where the transaction is in the best interests of all
shareholders.
Despite the board of directors belief as to the benefits
to our shareholders of the foregoing provisions, these
provisions also may have the effect of discouraging a future
takeover attempt in which shareholders might receive a
substantial premium for their shares over then current market
prices and may tend to perpetuate existing management. As a
result, shareholders who might desire to participate in such a
transaction
105
may not have an opportunity to do so. The board of directors,
however, has concluded that the potential benefits of these
provisions outweigh their possible disadvantages.
Regulatory
Restrictions
The Change in Bank Control Act provides that no person, acting
directly or indirectly or through or in concert with one or more
other persons, may acquire control of a savings institution
unless the Office of Thrift Supervision has been given
60 days prior written notice. The Home Owners
Loan Act provides that no company may acquire
control of a savings institution without the prior
approval of the Office of Thrift Supervision. Any company that
acquires such control becomes a thrift holding company subject
to registration, examination and regulation by the Office of
Thrift Supervision. Pursuant to federal regulations, control of
a savings institution is conclusively deemed to have been
acquired by, among other things, the acquisition of more than
25% of any class of voting stock of the institution or the
ability to control the election of a majority of the directors
of an institution. Moreover, control is presumed to have been
acquired, subject to rebuttal, upon the acquisition of more than
10% of any class of voting stock, or of more than 25% of any
class of stock, of a savings institution where certain
enumerated control factors are also present in the
acquisition. The Office of Thrift Supervision may prohibit an
acquisition if (a) it would result in a monopoly or
substantially lessen competition, (b) the financial
condition of the acquiring person might jeopardize the financial
stability of the institution, or (c) the competence,
experience or integrity of the acquiring person indicates that
it would not be in the interest of the depositors or of the
public to permit the acquisition of control by such person. The
foregoing restrictions do not apply to the acquisition of a
savings institutions capital stock by one or more
tax-qualified employee stock benefit plans, provided that the
plan or plans do not have beneficial ownership in the aggregate
of more than 25% of any class of equity security of the savings
institution.
During the conversion and for three years following the
conversion, Office of Thrift Supervision regulations prohibit
any person from acquiring, either directly or indirectly, or
making an offer to acquire more than 10% of the stock of any
converted savings institution, such as Bank of Ruston, without
the prior written approval of the Office of Thrift Supervision,
except for:
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any offer with a view toward public resale made exclusively to
the institution or to underwriters or a selling group acting on
its behalf;
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offers that if consummated would not result in the acquisition
by such person during the preceding
12-month
period of more than 1% of such stock;
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offers in the aggregate for up to 24.9% by the employee stock
ownership plan or other tax-qualified plans of us or Bank of
Ruston; and
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an offer to acquire or acquisition of beneficial ownership of
more than 10% of the common stock of the savings institution by
a corporation whose ownership is or will be substantially the
same as the ownership of the savings institution, provided that
the offer or acquisition is made more than one year following
the date of completion of the conversion.
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Such prohibition also is applicable to the acquisition of our
common stock. In the event that any person, directly or
indirectly, violates this regulation, the securities
beneficially owned by such person in excess of 10% shall not be
counted as shares entitled to vote and shall not be voted by any
person or counted as voting shares in connection with any
matters submitted to a vote of shareholders. The definition of
beneficial ownership for this regulation extends to persons
holding revocable or irrevocable proxies for an
institutions stock under circumstances that give rise to a
conclusive or rebuttable determination of control under Office
of Thrift Supervision regulations.
In addition to the foregoing, the plan of conversion prohibits
any person, prior to the completion of the conversion, from
offering, or making an announcement of an intent to make an
offer, to purchase subscription rights or common stock. See
The Conversion Restrictions on Transfer of
Subscription Rights and Shares.
106
DESCRIPTION
OF CAPITAL STOCK
General
We are authorized to issue 10,000,000 shares of capital
stock, of which 9,000,000 are shares of common stock, par value
$.01 per share and 1,000,000 are shares of preferred stock, par
value $.01 per share. We currently expect to issue up to
920,000 shares of common stock and no shares of preferred
stock in the conversion. Each share of our common stock issued
in the conversion will have the same relative rights as, and
will be identical in all respects with, each other share of
common stock issued in the conversion. Upon payment of the
purchase price of $10.00 per share for the common stock in
accordance with the plan of conversion, all such stock will be
duly authorized, fully paid and nonassessable based on the laws
and regulations in effect as of the date of consummation of the
conversion.
Our common stock will represent nonwithdrawable capital, will
not be an account of an insurable type, and will not be insured
by the Federal Deposit Insurance Corporation.
Common
Stock
Dividends. We can pay dividends if, as and
when declared by our board of directors, subject to compliance
with limitations which are imposed by law. See Our Policy
Regarding Dividends. The holders of our common stock will
be entitled to receive and share equally in such dividends as
may be declared by our board of directors out of funds legally
available therefor. If we issue preferred stock, the holders
thereof may have a priority over the holders of the common stock
with respect to dividends.
Voting Rights. Upon completion of the
conversion, the holders of our common stock will possess
exclusive voting rights in Century Next Financial. They will
elect our board of directors and act on such other matters as
are required to be presented to them under Louisiana law or our
articles of incorporation or as are otherwise presented to them
by the board of directors. Except as discussed in
Restrictions on Acquisition of Century Next Financial and
Bank of Ruston and Related Anti-Takeover Provisions, each
holder of common stock will be entitled to one vote per share
and will not have any right to cumulate votes in the election of
directors. If we issue preferred stock, holders of the preferred
stock may also possess voting rights.
Liquidation. In the event of any liquidation,
dissolution or winding up of Bank of Ruston, Century Next
Financial, as the sole holder of Bank of Rustons capital
stock, would be entitled to receive, after payment or provision
for payment of all debts and liabilities of Bank of Ruston
(including all deposit accounts and accrued interest thereon)
and after distribution of the balance in the special liquidation
account to Eligible Account Holders and Supplemental Eligible
Account Holders (see The Conversion and
Offering Liquidation Rights of Certain
Depositors), all assets of Bank of Ruston available for
distribution. In the event of any liquidation, dissolution or
winding up of Century Next Financial, the holders of our common
stock would be entitled to receive, after payment or provision
for payment of all our debts and liabilities, all of the assets
of the company available for distribution. If preferred stock is
issued, the holders thereof may have a priority over the holders
of our common stock in the event of liquidation or dissolution.
Preemptive Rights. Holders of our common stock
will not be entitled to preemptive rights with respect to any
shares which may be issued in the future. Our common stock is
not subject to any required redemption.
Preferred
Stock
None of the shares of our authorized preferred stock will be
issued in the conversion. Such stock may be issued with such
preferences and designations as the board of directors may from
time to time determine. Our board of directors can, without
shareholder approval, issue preferred stock with voting,
dividend, liquidation and conversion rights which could dilute
the voting strength of the holders of the common stock and may
assist management in impeding an unfriendly takeover or
attempted change in control.
107
TRANSFER
AGENT AND REGISTRAR
The transfer agent and registrar for the common stock of Century
Next Financial will be Registrar and Transfer Company.
EXPERTS
Heard McElroy & Vestal, LLP, independent registered
public accounting firm, has audited our financial statements at
December 31, 2009 and 2008, and for each of the two years
in the period ended December 31, 2009, as set forth in
their report. Weve included our financial statements in
the prospectus and elsewhere in the registration statement in
reliance on Heard McElroy & Vestal, LLPs report,
given on their authority as experts in accounting and auditing.
RP Financial has consented to the publication herein of the
summary of its report to Bank of Ruston and Century Next
Financial setting forth its opinion as to the estimated pro
forma market value of the common stock to be outstanding upon
completion of the conversion and its opinion with respect to
subscription rights.
LEGAL AND
TAX MATTERS
The legality of the Common Stock and the federal income tax
consequences of the conversion will be passed upon for Bank of
Ruston and Century Next Financial by Elias, Matz,
Tiernan & Herrick L.L.P., Washington, D.C.,
special counsel. The Louisiana income tax consequences of the
conversion will be passed upon for Bank of Ruston and Century
Next Financial Corporation by Heard McElroy & Vestal,
LLP, Shreveport, Louisiana. Certain legal matters will be passed
upon for Sandler ONeill & Partners, L.P. by Luse
Gorman Pomerenk & Schick, P.C.,
Washington, D.C.
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
Century Next Financial has filed with the Securities and
Exchange Commission a Registration Statement on
Form S-1
under the Securities Act of 1933 with respect to the shares of
its common stock offered in this document. As permitted by the
rules and regulations of the Securities and Exchange Commission,
this prospectus does not contain all the information set forth
in the Registration Statement. Such information can be examined
without charge at the public reference facilities of the
Securities and Exchange Commission located at
100 F Street, N.E., Washington, D.C. 20549, and
copies of such material can be obtained from the Securities and
Exchange Commission at prescribed rates. The public may obtain
more information on the operations of the public reference room
by calling
1-800-SEC-0330.
The registration statement also is available through the
Securities and Exchange Commissions world wide web site on
the internet at
http://www.sec.gov.
The statements contained in this prospectus as to the contents
of any contract or other document filed as an exhibit to the
Registration Statement are, of necessity, brief descriptions
thereof and are not necessarily complete.
Bank of Ruston has filed an application with respect to the
conversion with the Office of Thrift Supervision. This
prospectus omits certain information contained in that
application. The application may be examined at the principal
office of the Office of Thrift Supervision,
1700 G Street, N.W., Washington, D.C. 20552, and
at the Western Regional Office of the Office of Thrift
Supervision located at 225 East John Carpenter Freeway,
Suite 500, Irving, Texas 75062. Century Next Financial also
has filed a holding company application with the Office of
Thrift Supervision. This prospectus omits certain information
contained in that application.
In connection with the conversion, Century Next Financial will
register its common stock with the Securities and Exchange
Commission under Section 12(b) of the Securities Exchange
Act of 1934, and, upon such registration, Century Next Financial
and the holders of its stock will become subject to the proxy
solicitation rules, reporting requirements and restrictions on
stock purchases and sales by directors, officers and greater
than 10% shareholders, the annual and periodic reporting
requirements and certain other requirements of the Securities
Exchange Act of 1934. Century Next Financial has undertaken that
it will not terminate such registration for a period of at least
three years following the conversion.
108
BANK OF
RUSTON
INDEX TO
FINANCIAL STATEMENTS
The registrant, Century Next Financial Corporation, a Louisiana
corporation, has not yet commenced operations and has engaged in
only minimal activities to date. Accordingly, the financial
statements of Century Next Financial Corporation have been
omitted as they are not required.
All financial statement schedules are not included because they
are not applicable or the required information has been
disclosed in the financial statements or in the notes thereto.
109
333 Texas Street,
Suite 1525
Shreveport, Louisiana
71101
318-429-1525
Phone
318-429-2070
Fax
The Board of Directors
Bank of Ruston
Ruston, Louisiana
Report
of Independent Registered Public Accounting Firm
We have audited the accompanying balance sheets of the Bank of
Ruston as of December 31, 2009 and 2008, and the related
statements of income, changes in equity, and cash flows for the
years then ended. These financial statements are the
responsibility of the Banks management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. 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 financial statements referred to above
present fairly, in all material respects, the financial position
of the Bank of Ruston as of December 31, 2009 and 2008, and
the results of its operations and its cash flows for the years
then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/ Heard McElroy & Vestal LLP
March 12, 2010
Shreveport, Louisiana
F-1
BANK
OF RUSTON
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March 31,
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December 31,
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2010
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2009
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2008
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(Unaudited)
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(In thousands)
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ASSETS
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Cash and cash equivalents
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$
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2,853
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$
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4,674
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$
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3,516
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Investment securities-Note 2
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6,909
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7,258
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6,717
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Federal Home Loan Bank stock-Note 2
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280
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280
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279
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Loans (includes loans held for sale of $2,916, $761 and $585),
less allowance for loan losses of $179, $176 and
$183-Notes 3 and 6
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70,440
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66,998
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61,220
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Accrued interest receivable:
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|
|
|
|
|
|
|
|
|
Loans
|
|
|
346
|
|
|
|
308
|
|
|
|
279
|
|
Securities
|
|
|
33
|
|
|
|
28
|
|
|
|
3
|
|
Premises and equipment-Note 4
|
|
|
3,778
|
|
|
|
3,885
|
|
|
|
3,671
|
|
Foreclosed real estate-Note 10
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets-Note 9
|
|
|
2,380
|
|
|
|
2,444
|
|
|
|
2,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
87,019
|
|
|
$
|
85,875
|
|
|
$
|
77,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND RETAINED EARNINGS
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits-Note 8:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and demand
|
|
$
|
33,527
|
|
|
$
|
31,659
|
|
|
$
|
31,741
|
|
Time
|
|
|
43,324
|
|
|
|
44,284
|
|
|
|
37,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
76,851
|
|
|
|
75,943
|
|
|
|
69,283
|
|
Advances from borrowers for insurance and taxes
|
|
|
32
|
|
|
|
21
|
|
|
|
20
|
|
FHLB advances-Note 13
|
|
|
|
|
|
|
|
|
|
|
53
|
|
Securities sold under agreements to repurchase-Note 13
|
|
|
958
|
|
|
|
907
|
|
|
|
|
|
Accrued interest payable
|
|
|
20
|
|
|
|
21
|
|
|
|
39
|
|
Other liabilities-Notes 9 and 12
|
|
|
525
|
|
|
|
506
|
|
|
|
417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
78,386
|
|
|
|
77,399
|
|
|
|
69,812
|
|
Commitments and contingencies-Note 7
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
8,547
|
|
|
|
8,407
|
|
|
|
7,942
|
|
Accumulated other comprehensive income,
net of taxes of $44, $35 and $8
|
|
|
86
|
|
|
|
69
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
8,633
|
|
|
|
8,476
|
|
|
|
7,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and retained earnings
|
|
$
|
87,019
|
|
|
$
|
85,875
|
|
|
$
|
77,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-2
BANK OF
RUSTON
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
Years Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgage loans
|
|
$
|
174
|
|
|
$
|
197
|
|
|
$
|
748
|
|
|
$
|
861
|
|
Consumer and other loans
|
|
|
894
|
|
|
|
819
|
|
|
|
3,440
|
|
|
|
3,205
|
|
Investment securities
|
|
|
51
|
|
|
|
66
|
|
|
|
217
|
|
|
|
296
|
|
Other
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
1,120
|
|
|
|
1,082
|
|
|
|
4,406
|
|
|
|
4,448
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and interest-bearing demand deposits
|
|
|
31
|
|
|
|
55
|
|
|
|
197
|
|
|
|
208
|
|
Time deposits
|
|
|
234
|
|
|
|
285
|
|
|
|
1,096
|
|
|
|
1,516
|
|
Other borrowings
|
|
|
2
|
|
|
|
|
|
|
|
5
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
267
|
|
|
|
340
|
|
|
|
1,298
|
|
|
|
1,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
853
|
|
|
|
742
|
|
|
|
3,108
|
|
|
|
2,721
|
|
Provision for loan losses-Note 3
|
|
|
|
|
|
|
2
|
|
|
|
16
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
853
|
|
|
|
740
|
|
|
|
3,092
|
|
|
|
2,689
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges
|
|
|
39
|
|
|
|
47
|
|
|
|
201
|
|
|
|
201
|
|
Loan fees
|
|
|
64
|
|
|
|
97
|
|
|
|
408
|
|
|
|
328
|
|
Gain on sale of foreclosed real estate
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Gain on cash value of life insurance-Note 12
|
|
|
8
|
|
|
|
5
|
|
|
|
28
|
|
|
|
31
|
|
Gain on sale of fixed assets
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income
|
|
|
9
|
|
|
|
12
|
|
|
|
136
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
176
|
|
|
|
161
|
|
|
|
773
|
|
|
|
605
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits-Note 12
|
|
|
507
|
|
|
|
459
|
|
|
|
1,929
|
|
|
|
1,764
|
|
Occupancy expense
|
|
|
101
|
|
|
|
74
|
|
|
|
355
|
|
|
|
249
|
|
Expense of foreclosed real estate-Note 10
|
|
|
1
|
|
|
|
2
|
|
|
|
8
|
|
|
|
3
|
|
FDIC deposit insurance
|
|
|
26
|
|
|
|
9
|
|
|
|
140
|
|
|
|
11
|
|
Other operating expense
|
|
|
193
|
|
|
|
182
|
|
|
|
787
|
|
|
|
613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
828
|
|
|
|
726
|
|
|
|
3,219
|
|
|
|
2,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
201
|
|
|
|
175
|
|
|
|
646
|
|
|
|
654
|
|
Income taxes-Note 9
|
|
|
61
|
|
|
|
60
|
|
|
|
182
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
140
|
|
|
$
|
115
|
|
|
$
|
464
|
|
|
$
|
455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-3
BANK
OF RUSTON
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Total
|
|
|
|
Earnings
|
|
|
Income
|
|
|
Equity
|
|
|
|
(In thousands)
|
|
|
Balance at December 31, 2007
|
|
$
|
7,487
|
|
|
$
|
(15
|
)
|
|
$
|
7,472
|
|
Net income
|
|
|
455
|
|
|
|
|
|
|
|
455
|
|
Unrealized gain on securities available for sale, net of taxes
of $16
|
|
|
|
|
|
|
31
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
7,942
|
|
|
$
|
16
|
|
|
$
|
7,959
|
|
Net income
|
|
|
464
|
|
|
|
|
|
|
|
464
|
|
Unrealized gain on securities available for sale, net of taxes
of $27
|
|
|
|
|
|
|
53
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
8,407
|
|
|
$
|
69
|
|
|
$
|
8,476
|
|
Net income (unaudited)
|
|
|
140
|
|
|
|
|
|
|
|
140
|
|
Unrealized gain on securities available for sale, net of taxes
of $9 (unaudited)
|
|
|
|
|
|
|
17
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (unaudited)
|
|
|
|
|
|
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010 (unaudited)
|
|
$
|
8,547
|
|
|
$
|
86
|
|
|
$
|
8,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-4
BANK OF
RUSTON
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
Years Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
140
|
|
|
$
|
115
|
|
|
$
|
464
|
|
|
$
|
455
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
|
|
|
|
2
|
|
|
|
16
|
|
|
|
32
|
|
Depreciation
|
|
|
48
|
|
|
|
33
|
|
|
|
184
|
|
|
|
117
|
|
(Gain) loss on sale of foreclosed real estate
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
Net (increase) decrease in loans held for sale
|
|
|
(1,624
|
)
|
|
|
(555
|
)
|
|
|
(175
|
)
|
|
|
1,029
|
|
(Gain) loss on cash value of life insurance
|
|
|
(8
|
)
|
|
|
(5
|
)
|
|
|
(28
|
)
|
|
|
(31
|
)
|
(Gain) loss on sale of fixed assets
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in accrued interest receivable
|
|
|
(44
|
)
|
|
|
(77
|
)
|
|
|
(26
|
)
|
|
|
46
|
|
Increase (decrease) in accrued interest payable
|
|
|
(1
|
)
|
|
|
(12
|
)
|
|
|
(18
|
)
|
|
|
20
|
|
(Increase) decrease in other assets
|
|
|
69
|
|
|
|
49
|
|
|
|
(386
|
)
|
|
|
(4
|
)
|
Increase (decrease) in other liabilities
|
|
|
19
|
|
|
|
(2
|
)
|
|
|
89
|
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
(1,597
|
)
|
|
|
(567
|
)
|
|
|
(344
|
)
|
|
|
1,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
(1,457
|
)
|
|
|
(452
|
)
|
|
|
120
|
|
|
|
1,626
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales and maturities of investment securities
|
|
|
368
|
|
|
|
304
|
|
|
|
2,506
|
|
|
|
2,125
|
|
Purchase of investment securities
|
|
|
|
|
|
|
|
|
|
|
(2,967
|
)
|
|
|
(2,675
|
)
|
Net redemption (purchase) of Federal Home Loan Bank stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Proceeds from sale of foreclosed real estate
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
Purchases of life insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(223
|
)
|
Proceeds from fixed assets
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of premises and equipment, net
|
|
|
(38
|
)
|
|
|
(334
|
)
|
|
|
(398
|
)
|
|
|
(1,686
|
)
|
Net (increase) decrease in loans
|
|
|
(1,818
|
)
|
|
|
(2,302
|
)
|
|
|
(5,619
|
)
|
|
|
(5,091
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by investing activities
|
|
|
(1,334
|
)
|
|
|
(2,332
|
)
|
|
|
(6,478
|
)
|
|
|
(7,511
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in savings and demand
|
|
|
1,868
|
|
|
|
1,089
|
|
|
|
(81
|
)
|
|
|
4,722
|
|
Net increase (decrease) in time deposits
|
|
|
(960
|
)
|
|
|
211
|
|
|
|
6,742
|
|
|
|
2,017
|
|
Increase (decrease) in advances from borrowers for insurance and
taxes
|
|
|
11
|
|
|
|
15
|
|
|
|
1
|
|
|
|
(14
|
)
|
Repayments of FHLB advances
|
|
|
|
|
|
|
(2
|
)
|
|
|
(53
|
)
|
|
|
(8
|
)
|
Net increase in securities sold under agreements to repurchase
|
|
|
51
|
|
|
|
|
|
|
|
907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities
|
|
|
970
|
|
|
|
1,313
|
|
|
|
7,516
|
|
|
|
6,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(1,821
|
)
|
|
|
(1,471
|
)
|
|
|
1,158
|
|
|
|
832
|
|
Cash and cash equivalents at beginning of year
|
|
|
4,674
|
|
|
|
3,515
|
|
|
|
3,516
|
|
|
|
2,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
2,853
|
|
|
$
|
2,044
|
|
|
$
|
4,674
|
|
|
$
|
3,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
268
|
|
|
$
|
353
|
|
|
$
|
1,316
|
|
|
$
|
1,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes
|
|
$
|
|
|
|
$
|
20
|
|
|
$
|
210
|
|
|
$
|
225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
F-5
BANK
OF RUSTON
MARCH
31, 2010 (UNAUDITED) AND DECEMBER 31, 2009 AND
2008
|
|
1.
|
Summary
of Significant Accounting Policies
|
During 2005, Bank of Ruston (formerly, Ruston
Building & Loan Association) converted from a state
chartered, mutual building and loan association to a federally
chartered, mutual savings bank. The change in the entitys
name resulted from this conversion.
a. Inclusion
of Unaudited Information
The financial information included herein as of March 31,
2010 and for the interim periods ended March 31, 2010 and
2009 is unaudited. However, in managements opinion, the
information reflects all normal, recurring adjustments that are
necessary for a fair presentation. The results shown for the
three months ended March 31, 2010 and 2009 are not
necessarily indicative of the results to be obtained for a full
year.
b. Investments
in securities
The Banks investments in securities are classified in two
categories and accounted for as follows:
|
|
|
|
|
Securities Held to Maturity. Bonds, notes and
debentures for which the Bank has the positive intent and
ability to hold to maturity are reported at cost, adjusted for
amortization of premiums and accretion of discounts, which are
recognized in interest income using the straight-line method
over the period to maturity.
|
|
|
|
Securities Available for Sale. Securities
available for sale consist of bonds, notes, debentures, and
certain equity securities not classified as trading securities
nor as securities held to maturity.
|
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other
than temporary result in write-downs of the individual
securities to their fair value. The related write-downs are
included in earnings as realized losses. No such write-downs
were made in the first quarter of fiscal 2010, or fiscal 2009
and 2008.
Unrealized gains and losses, net of income taxes, on securities
available for sale are accounted for in accumulated other
comprehensive income as part of retained earnings. Changes in
unrealized gains and losses on these securities are separately
reported as components of other comprehensive income.
Gains and losses on the sale of securities available for sale
are determined using the specific-identification method.
c. Use
of estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reported period. Actual results could
differ from those estimates.
Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance
for losses on loans and the valuation of real estate acquired in
connection with foreclosures or in satisfaction of loans. In
connection with the determination of the allowances for losses
on loans and foreclosed real estate, management obtains
independent appraisals for significant properties.
Most of the Banks business activity is with customers
located within the Ruston, Louisiana area. The loan categories
are detailed in Note 3. The economy of the area is
diversified but depends on timber, agriculture, and oil and gas.
Although these areas of the economy and the economy in general
in the area are doing well, they could decline in the future.
F-6
|
|
1.
|
Summary
of Significant Accounting
Policies
(Continued)
|
While management uses available information to recognize losses
on loans, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition,
regulatory agencies, as an integral part of their examination
process, periodically review the Banks allowances for
losses on loans and foreclosed real estate. Such agencies may
require the Bank to recognize additions to the allowances based
on their judgments about information available to them at the
time of their examination. Because of these factors, it is
reasonably possible that the allowance for losses on loans may
change materially in the near future.
d. Loans
and allowance for loan losses
Loans are stated at the amount of unpaid principal, reduced by
deferred loan fees and an allowance for loan losses. Deferred
loan fees are generally recognized as income under the effective
yield method. Interest on loans is calculated by using the
simple interest method on daily or monthly balances of the
principal amount outstanding. Loans held for sale are reported
at the lower of cost or market, with market value determined on
the aggregate method.
The allowance for loan losses is established through a provision
for loan losses charged to expense. Loans are charged against
the allowance for loan losses when management believes that the
collectibility of the principal is unlikely. The allowance is an
amount that management believes will be appropriate to absorb
probable losses on existing loans that may become uncollectible,
based on evaluations of the collectibility of loans and prior
loan loss experience. The evaluations take into consideration
such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem
loans, and current economic conditions that may affect the
borrowers ability to pay.
Accrual of interest is discontinued on a loan after it is
90 days or more past due and when management believes,
after considering economic and business conditions and
collection efforts, that the borrowers financial condition
is such that collection of interest is unlikely. Past due status
is based on contractual terms of the loan. However, loans may be
placed on nonaccrual or charged off at an earlier date if
collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans that are placed
on nonaccrual or charged off 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.
Loans held for sale are disposed of within sixty days of
origination; consequently, cost approximates fair value.
e. Premises
and equipment
Premises and equipment are carried at cost less accumulated
depreciation. Depreciation of premises and equipment is provided
over the estimated useful lives of the respective assets using
straight-line and accelerated methods. Expenditures for major
renewals and betterments of premises and equipment are
capitalized and those for maintenance and repairs are charged to
expense as incurred.
|
|
f.
|
Bank
Owned Life Insurance
|
The Bank has purchased insurance policies on the lives of
certain directors and executive officers of the Bank. The Bank
purchased the policies to insure the lives of certain key
executives and provide additional benefits for their
beneficiaries. The cash surrender value of the insurance
policies, up to the total amount of premiums paid, is recorded
as an asset in the balance sheets and included in other assets.
At March 31, 2010 and December 31, 2009 and 2008, the
cash surrender value amounted to $1.9 million,
$1.9 million and $1.8 million, respectively. The Bank
may not invest more than 25 percent of its total capital in
bank-owned life insurance without first notifying and obtaining
authorization from the Banks OTS Regional Office. The
bank-owned life insurance provides an attractive tax-exempt
return to the Bank.
F-7
|
|
1.
|
Summary
of Significant Accounting
Policies
(Continued)
|
g. Income
taxes
Deferred income taxes are recognized for the tax consequences of
differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. Such
differences arise primarily from differences in computing the
provision for possible loan losses, and differences in
recognizing interest expense.
h. Cash
and cash equivalents
For purposes of the statement of cash flows, the Bank considers
all cash on hand and demand deposits with other banks to be cash
equivalents. The Bank is required to maintain balances on hand
or with the Federal Reserve Bank. At December 31, 2009 and
2008, these reserve (in thousands) requirements amounted to $553
and $643, respectively, and $461 at March 31, 2010.
i. Advertising
costs
Advertising costs are expensed as incurred. Such costs (in
thousands) amounted to approximately $25 and $24 at
March 31, 2010 and 2009, and $119 and $108 for
December 31, 2009 and 2008, and are included in other
operating expense.
j. Comprehensive
income (loss)
Generally accepted accounting principles (GAAP)
generally require that recognized revenues, 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 balance sheets, such
items, along with net earnings, are components of comprehensive
income. The Bank presents comprehensive income in its statements
of retained earnings.
k. Reclassifications
Certain reclassifications have been made to prior period
balances to conform to the current period presentation.
l. Recent
accounting pronouncements
In June 2009, the FASB issued Accounting Standards Update
(ASU) No.
2009-01,
Topic 105 Generally Accepted Accounting
Principles amendments based on Statement of Financial Accounting
Standards No. 168 The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles. ASU
2009-01
amends the ASC for the issuance of FASB Statement
(SFAS) No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles. ASU
2009-1
includes SFAS 168 in its entirety, including the accounting
standards update instructions contained in Appendix B of
the Statement. The ASC became the source of authoritative
U.S. generally accepted accounting principles
(GAAP) recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the
Securities Exchange Committee (SEC) under authority
of federal securities laws are also sources of authoritative
GAAP for SEC registrants. As of the effective date of this
Statement, September 15, 2009, the ASC supersedes all
then-existing non-SEC accounting and reporting standards. All
other non-grandfathered non-SEC accounting literature not
included in the ASC is no longer authoritative. This Statement
became effective for the Banks financial statements
beginning in the interim period ended September 30, 2009.
In April 2009, the FASB issued guidance under ASC Topic 825. The
guidance requires disclosures about fair value of financial
instruments for interim reporting periods of publicly traded
companies as well as in annual financial statements. This
guidance was adopted for interim reporting periods ending after
June 15, 2009.
The FASB will no longer issue new standards in the form of
Statements, FASB Staff Positions, or Emerging Issues Task Force
(EITF) Abstracts. Instead, it now issues Accounting
Standards Updates. The FASB does not consider Accounting
Standards Updates as authoritative in their own right.
Accounting Standards Updates serve only to update the ASC,
provide background information about the guidance, and provide
the bases for conclusions
F-8
|
|
1.
|
Summary
of Significant Accounting
Policies
(Continued)
|
on the change(s) in the ASC. FASB Statement No. 162, The
Hierarchy of Generally Accepted Accounting Principles, which
became effective on November 13, 2008, identified the
sources of accounting principles and the framework for selecting
the principles used in preparing the financial statements of
nongovernmental entities that are presented in conformity with
GAAP. SFAS 162 arranged these sources of GAAP in a
hierarchy for users to apply accordingly. Upon becoming
effective, all of the content of the ASC carries the same level
of authority, effectively superseding SFAS 162. In other
words, the GAAP hierarchy has been modified to include only two
levels of GAAP: authoritative and non-authoritative. As a
result, this Statement replaces SFAS 162 to indicate this
change to the GAAP hierarchy. The adoption of the ASC and ASU
2009-01 did
not have any effect on the Banks results of operations or
financial position. All references to accounting literature
included in the notes to the financial statements have been
changed to reference the appropriate sections of the ASC.
In January 2010, the FASB issued Accounting Standards Update
No. 2010-06,
Fair Value Measurements and Disclosures (Topic
820) Improving Disclosures about Fair Value
Measurements. ASU
2010-06
amends Subtopic
820-10 with
new disclosure requirements and clarification of existing
disclosure requirements. New disclosures required include the
amount of significant transfers in and out of levels 1 and
2 fair value measurements and the reasons for the transfers. In
addition, the reconciliation for level 3 activity will be
required on a gross rather than net basis. The ASU provides
additional guidance related to the level of disaggregation in
determining classes of assets and liabilities and disclosures
about inputs and valuation techniques. The amendments are
effective for annual or interim reporting periods beginning
after December 15, 2009, except for the requirement to
provide the reconciliation for level 3 activity on a gross
basis which will be effective for fiscal years beginning after
December 15, 2010.
The carrying amounts (in thousands) of investment securities and
their approximate fair values at March 31, 2010 and
December 31, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010
|
|
|
|
|
Gross
|
|
Gross
|
|
Estimated
|
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB certificates
|
|
|
2,764
|
|
|
|
80
|
|
|
|
|
|
|
|
2,844
|
|
GNMA certificates
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
FNMA certificates
|
|
|
1,998
|
|
|
|
39
|
|
|
|
|
|
|
|
2,037
|
|
FNR certificates
|
|
|
463
|
|
|
|
3
|
|
|
|
|
|
|
|
466
|
|
SBA pools
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
U.S. Government obligations
|
|
|
1,023
|
|
|
|
6
|
|
|
|
|
|
|
|
1,029
|
|
Municipal securities
|
|
|
345
|
|
|
|
3
|
|
|
|
|
|
|
|
348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
6,616
|
|
|
|
131
|
|
|
|
|
|
|
|
6,747
|
|
Equity securities
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,618
|
|
|
|
131
|
|
|
|
|
|
|
|
6,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB certificates
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
SBA pools
|
|
|
147
|
|
|
|
|
|
|
|
2
|
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160
|
|
|
|
|
|
|
|
2
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-9
|
|
2.
|
Investment
Securities
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
Gross
|
|
Gross
|
|
Estimated
|
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB certificates
|
|
|
3,034
|
|
|
|
80
|
|
|
|
|
|
|
|
3,114
|
|
GNMA certificates
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
FNMA certificates
|
|
|
2,293
|
|
|
|
13
|
|
|
|
3
|
|
|
|
2,303
|
|
FNR certificates
|
|
|
257
|
|
|
|
6
|
|
|
|
|
|
|
|
263
|
|
SBA pools
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
U.S. Government obligations
|
|
|
1,029
|
|
|
|
6
|
|
|
|
|
|
|
|
1,035
|
|
Municipal securities
|
|
|
345
|
|
|
|
3
|
|
|
|
|
|
|
|
348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
6,981
|
|
|
|
108
|
|
|
|
3
|
|
|
|
7,086
|
|
Equity securities
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,982
|
|
|
|
108
|
|
|
|
3
|
|
|
|
7,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA pools
|
|
|
171
|
|
|
|
1
|
|
|
|
1
|
|
|
|
171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
Gross
|
|
Gross
|
|
Estimated
|
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GNMA certificates
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
FHLB certificates
|
|
|
1,563
|
|
|
|
55
|
|
|
|
2
|
|
|
|
1,615
|
|
FNMA certificates
|
|
|
1,347
|
|
|
|
5
|
|
|
|
1
|
|
|
|
1,351
|
|
FNR certificates
|
|
|
950
|
|
|
|
4
|
|
|
|
11
|
|
|
|
943
|
|
FHR certificates
|
|
|
1,530
|
|
|
|
|
|
|
|
28
|
|
|
|
1,502
|
|
SBA pools
|
|
|
13
|
|
|
|
|
|
|
|
1
|
|
|
|
12
|
|
U.S. Government obligations
|
|
|
998
|
|
|
|
4
|
|
|
|
|
|
|
|
1,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
6,416
|
|
|
|
68
|
|
|
|
43
|
|
|
|
6,441
|
|
Equity securities
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,418
|
|
|
|
68
|
|
|
|
43
|
|
|
|
6,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed
|
|
|
40
|
|
|
|
2
|
|
|
|
|
|
|
|
42
|
|
SBA pools
|
|
|
234
|
|
|
|
|
|
|
|
7
|
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
274
|
|
|
|
2
|
|
|
|
7
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-10
|
|
2.
|
Investment
Securities
(Continued)
|
The following table shows the gross unrealized losses (in
thousands) and fair value of the Banks investments with
unrealized losses, aggregated by investment category and length
of time that individual securities have been in a continuous
unrealized loss position, at March 31, 2010 and
December 31, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010
|
|
|
Less than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|
|
Estimated
|
|
Gross
|
|
Estimated
|
|
Gross
|
|
Estimated
|
|
Gross
|
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA pools
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
1
|
|
|
|
91
|
|
|
|
1
|
|
FNR certificates
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109
|
|
|
|
1
|
|
|
|
109
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
Less than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|
|
Estimated
|
|
Gross
|
|
Estimated
|
|
Gross
|
|
Estimated
|
|
Gross
|
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA certificates
|
|
|
629
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
629
|
|
|
|
2
|
|
FNR certificates
|
|
|
|
|
|
|
|
|
|
|
463
|
|
|
|
1
|
|
|
|
463
|
|
|
|
1
|
|
FHR certificates
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
SBA pools
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
2
|
|
|
|
93
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
629
|
|
|
|
2
|
|
|
|
598
|
|
|
|
3
|
|
|
|
1,227
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
Less than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|
|
Estimated
|
|
Gross
|
|
Estimated
|
|
Gross
|
|
Estimated
|
|
Gross
|
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Mortgage backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLMC certificates
|
|
|
146
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
146
|
|
|
|
(2
|
)
|
FNMA certificates
|
|
|
139
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
139
|
|
|
|
(1
|
)
|
FNR certificates
|
|
|
458
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
458
|
|
|
|
(11
|
)
|
FHR certificates
|
|
|
1,501
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
1,501
|
|
|
|
(28
|
)
|
GNMA certificates
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
SBA pools
|
|
|
|
|
|
|
|
|
|
|
240
|
|
|
|
(8
|
)
|
|
|
240
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,260
|
|
|
|
(42
|
)
|
|
|
240
|
|
|
|
(8
|
)
|
|
|
2,500
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management evaluates securities for other-than-temporary
impairment on at least 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 Bank to
retain its investment in the issuer for a period of time
sufficient to allow for any anticipated recovery in fair value.
Market changes in interest rates and market changes in credit
spreads will cause normal fluctuations in the market value of
securities and the possibility of temporary unrealized losses.
The Bank has determined that there was no other-than-temporary
impairment associated with these securities at March 31,
2010 or December 31, 2009 and 2008.
F-11
|
|
2.
|
Investment
Securities
(Continued)
|
The scheduled maturities of debt securities at March 31,
2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity
|
|
Securities Available for Sale
|
|
|
|
|
Estimated
|
|
|
|
Estimated
|
|
|
Amortized
|
|
Fair
|
|
Amortized
|
|
Fair
|
|
|
Cost
|
|
Value
|
|
Cost
|
|
Value
|
|
Due in one year or less
|
|
|
13
|
|
|
|
13
|
|
|
|
1,023
|
|
|
|
1,029
|
|
Due from one year to five years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due from five to ten years
|
|
|
147
|
|
|
|
145
|
|
|
|
609
|
|
|
|
617
|
|
Due after ten years
|
|
|
|
|
|
|
|
|
|
|
4,983
|
|
|
|
4,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160
|
|
|
|
158
|
|
|
|
6,615
|
|
|
|
5,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The FHLB stock is a restricted investment security, and is
carried at cost. Total (in thousands) at March 31, 2010 and
December 31, 2009 was $280; at December 31, 2008, it
was $279. The Banks required stock investment is $47 at
March 31, 2010.
The following table summarizes investment activities (in
thousands) for the periods ending March 31, 2010 and
December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
Held to
|
|
Available
|
|
Held to
|
|
Available
|
|
Held to
|
|
Available
|
|
|
Maturity
|
|
for Sale
|
|
Maturity
|
|
for Sale
|
|
Maturity
|
|
for Sale
|
|
Purchases of securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,967
|
|
|
|
|
|
|
|
2,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities of securities
|
|
|
|
|
|
|
368
|
|
|
|
104
|
|
|
|
2,403
|
|
|
|
71
|
|
|
|
2,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (in thousands) at March 31, 2010 and
December 31, 2009 and 2008, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Held for sale (one-four family)
|
|
|
2,916
|
|
|
|
761
|
|
|
|
585
|
|
Residential real estate (one-four family)
|
|
|
36,279
|
|
|
|
35,338
|
|
|
|
32,482
|
|
Commercial real estate and lines of credit
|
|
|
12,435
|
|
|
|
12,670
|
|
|
|
10,196
|
|
Multifamily real estate
|
|
|
2,211
|
|
|
|
2,247
|
|
|
|
456
|
|
Land
|
|
|
5,283
|
|
|
|
4,292
|
|
|
|
4,159
|
|
Residential construction
|
|
|
1,609
|
|
|
|
1,365
|
|
|
|
1,867
|
|
Commercial business
|
|
|
4,696
|
|
|
|
4,436
|
|
|
|
3,709
|
|
Home equity lines of credit
|
|
|
1,527
|
|
|
|
1,697
|
|
|
|
1,029
|
|
Consumer non-real estate
|
|
|
3,633
|
|
|
|
4,337
|
|
|
|
6,800
|
|
Overdrafts
|
|
|
30
|
|
|
|
31
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,619
|
|
|
|
67,174
|
|
|
|
61,403
|
|
Allowance for loan losses
|
|
|
(179
|
)
|
|
|
(176
|
)
|
|
|
(183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,440
|
|
|
|
66,998
|
|
|
|
61,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-12
Changes in the allowance for loan losses (in thousands) are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
March 31,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2009
|
|
2008
|
|
Beginning balance
|
|
|
176
|
|
|
|
183
|
|
|
|
183
|
|
|
|
157
|
|
Provision for loan losses
|
|
|
|
|
|
|
2
|
|
|
|
16
|
|
|
|
32
|
|
Loans charged off
|
|
|
|
|
|
|
(10
|
)
|
|
|
(24
|
)
|
|
|
(8
|
)
|
Recoveries
|
|
|
3
|
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
179
|
|
|
|
175
|
|
|
|
176
|
|
|
|
183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans on which the accrual of interest has been discontinued
amounted to approximately $245, $248 and $303 at
December 31, 2009 and 2008, respectively. Had nonaccrual
loans been current during the year per their original terms,
interest income would have increased by approximately $4 for
2010, $10 for 2009 and $16 for 2008. Impaired loans are not
significant.
The Bank is obligated to repurchase those mortgage loans sold
which do not have complete documentation or which experience an
early payment default. At March 31, 2010 and
December 31, 2009 and 2008, loans sold (in thousands) for
which the Bank is contingently liable to repurchase amounted to
approximately $9,102, $7,919 and $12,915. The Bank also is
committed to sell loans (in thousands) approximating $2,944,
$771 and $796 at March 31, 2010 and December 31, 2009
and 2008.
The Bank grants consumer, commercial and residential loans to
customers in Ruston, Louisiana and the surrounding area.
Although the Bank has a diversified loan portfolio, a
substantial portion of loan repayment is dependent upon the
general economic sector.
|
|
4.
|
Premises
and Equipment
|
Premises and equipment (in thousands) at March 31, 2010 and
December 31, 2009 and 2008, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
March 31,
|
|
December 31,
|
|
|
Useful Lives
|
|
2010
|
|
2009
|
|
2008
|
|
Land
|
|
|
|
|
|
|
1,080
|
|
|
|
1,150
|
|
|
|
640
|
|
Buildings and improvements
|
|
|
15-40 years
|
|
|
|
2,898
|
|
|
|
2,898
|
|
|
|
1,697
|
|
Furniture, fixtures and equipment
|
|
|
3-10 years
|
|
|
|
1,131
|
|
|
|
1,121
|
|
|
|
857
|
|
Vehicles
|
|
|
4 years
|
|
|
|
29
|
|
|
|
29
|
|
|
|
29
|
|
Branch construction in progress
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,138
|
|
|
|
5,198
|
|
|
|
4,800
|
|
Less-accumulated depreciation
|
|
|
|
|
|
|
(1,360
|
)
|
|
|
(1,313
|
)
|
|
|
(1,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment
|
|
|
|
|
|
|
3,778
|
|
|
|
3,885
|
|
|
|
3,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation (in thousands) charged to operations amounted to
$184 in 2009 and $116 in 2008 for the years ending in December
and $47 and $32 for the periods ending March 31, 2010 and
2009, respectively.
The Bank is subject to various regulatory capital requirements
administered by federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the
Banks financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Banks assets,
liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Banks capital
amounts and
F-13
|
|
5.
|
Regulatory
Capital
(Continued)
|
classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the Bank to maintain minimum amounts
and ratios (set forth in the table below) of total and
Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I and
Tangible capital (as defined) to average assets (as defined).
Management believes, as of March 31, 2010, that the Bank
meets all capital adequacy requirements to which it is subject.
As of March 31, 2010, the most recent notification from the
Office of Thrift Supervision categorized the Bank as well
capitalized under the regulatory framework for prompt corrective
action. To be categorized as adequately capitalized the Bank
must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. The
Banks actual capital amounts (in thousands) and ratios are
also presented in the table. There are no conditions or events
since that notification that management believes have changed
the institutions category.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To be Well
|
|
|
|
|
|
|
Capitalized Under
|
|
|
|
|
For Capital
|
|
Prompt Corrective
|
|
|
Actual
|
|
Adequacy Purposes:
|
|
Action Provisions:
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
As of March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to Risk Weighted Assets)
|
|
|
8,695
|
|
|
|
13.58
|
%
|
|
|
³5,123
|
|
|
|
³8.0
|
%
|
|
|
³6,404
|
|
|
|
³10.0
|
%
|
Core (Tier I) Capital (to Risk Weighted Assets)
|
|
|
8,547
|
|
|
|
13.35
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
³3,842
|
|
|
|
³6.0
|
%
|
Core (Tier I) Capital (to Total Assets)
|
|
|
8,547
|
|
|
|
9.61
|
%
|
|
|
³3,556
|
|
|
|
³4.0
|
%
|
|
|
³4,445
|
|
|
|
³5.0
|
%
|
Tangible Capital (to Total Assets)
|
|
|
8,547
|
|
|
|
9.61
|
%
|
|
|
³1,333
|
|
|
|
³1.5
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to Risk Weighted Assets)
|
|
|
8,580
|
|
|
|
13.93
|
%
|
|
|
³4,927
|
|
|
|
³8.0
|
%
|
|
|
³6,159
|
|
|
|
³10.0
|
%
|
Core (Tier I) Capital (to Risk Weighted Assets)
|
|
|
8,407
|
|
|
|
13.65
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
³3,695
|
|
|
|
³6.0
|
%
|
Core (Tier I) Capital (to Total Assets)
|
|
|
8,407
|
|
|
|
9.79
|
%
|
|
|
³3,434
|
|
|
|
³4.0
|
%
|
|
|
³4,293
|
|
|
|
³5.0
|
%
|
Tangible Capital (to Total Assets)
|
|
|
8,407
|
|
|
|
9.79
|
%
|
|
|
³1,288
|
|
|
|
³1.5
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
As of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to Risk Weighted Assets)
|
|
|
8,113
|
|
|
|
13.81
|
%
|
|
|
³4,700
|
|
|
|
³8.0
|
%
|
|
|
³5,875
|
|
|
|
³10.0
|
%
|
Core (Tier I) Capital (to Risk Weighted Assets)
|
|
|
7,942
|
|
|
|
13.52
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
³3,525
|
|
|
|
³6.0
|
%
|
Core (Tier I) Capital (to Total Assets)
|
|
|
7,942
|
|
|
|
10.20
|
%
|
|
|
³3,117
|
|
|
|
³4.0
|
%
|
|
|
³3,894
|
|
|
|
³5.0
|
%
|
Tangible Capital (to Total Assets)
|
|
|
7,942
|
|
|
|
10.20
|
%
|
|
|
³1,168
|
|
|
|
³1.5
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
The following is a reconciliation of the Banks equity
under GAAP to regulatory capital at the dates indicated (dollars
in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
GAAP equity
|
|
|
8,547
|
|
|
|
8,407
|
|
|
|
7,942
|
|
Allowance for loan losses
|
|
|
148
|
|
|
|
173
|
|
|
|
171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital
|
|
|
8,695
|
|
|
|
8,580
|
|
|
|
8,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Related
Party Transactions
|
At March 31, 2010 and December 31, 2009 and 2008,
certain officers, directors, or companies in which they have 10%
or more beneficial ownership were indebted to the Bank in the
approximate aggregate amounts (in
F-14
|
|
6.
|
Related
Party
Transactions
(Continued)
|
thousands) of $2,219, $2,249 and $2,338, respectively. Such
parties held deposits (in thousands) in the Bank in the
approximate amounts of $5,119, $4,680 and $2,457 at
March 31, 2010 and December 31, 2009 and 2008,
respectively. Total principal additions (in thousands) were $0,
$1,716 and $1,722 for the periods ended March 31, 2010,
December 31, 2009 and 2008, respectively; total principal
payments (in thousands) were $30, $1,805 and $2,947 for the same
periods. These loans are made in the ordinary course of
business, on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable loans with persons not related to the Bank and none
of such loans involve more than the normal risk of
collectability or present other unfavorable features.
|
|
7.
|
Commitments
and Contingencies
|
In the ordinary course of business, the Bank has outstanding
commitments on which management does not anticipate losses. They
include, among other things, commitments to extend credit and
letters of credit undertaken in the normal course of business.
As of March 31, 2010 and December 31, 2009 and 2008,
the Bank had $3,279, $1,993 and $4,486, respectively, of loan
commitments outstanding (in thousands), including loans in
process. Letters and lines of credit (in thousands) outstanding
at March 31, 2010 and December 31, 2009 and 2008
amounted to $836, $1,036 and $0, respectively. As of
March 31, 2010 and December 31, 2009 and 2008, the
Bank had outstanding commitments to fund fixed-rate loans (in
thousands) of $1,319, $180 and $1,625, respectively. The range
of interest rates on such commitments was 4.25% to 5.00% at
March 31, 2010, 4.75% (one loan) at December 31, 2009
and 4.50% to 5.375% at December 31, 2008.
When entered into, these commitments represent off-balance sheet
risk to the Bank, with the contractual notional amount
representing the Banks exposure to credit loss in the
event of nonperformance by the other party to the 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. They generally have fixed
expiration dates and require payment of a fee. Since many
commitments are expected to expire without being drawn upon, the
total commitments do not necessarily represent future cash
requirements. The Bank evaluates each customers
creditworthiness on a
case-by-case
basis, and obtains an amount of collateral it deems sufficient.
The Bank is party to agreements for the provision of data
processing and imaging services. These agreements generally run
until October 2011 at approximately $11,000 (including a $3,000
fixed fee) per month. Certain agreements automatically renew for
a successive five year term at market rates at the end of the
current term, if no advance notice of termination is given.
Future estimated minimum payments (in thousands) at
March 31, 2010 under these agreements are as follows:
|
|
|
|
|
2010
|
|
|
134
|
|
2011 (end of term)
|
|
|
103
|
|
|
|
|
|
|
|
|
|
237
|
|
|
|
|
|
|
F-15
Deposits (in thousands) at March 31, 2010 and
December 31, 2009 and 2008 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
Average
|
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Savings and Demand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing accounts
|
|
|
6,599
|
|
|
|
|
|
|
|
7,065
|
|
|
|
|
|
|
|
6,339
|
|
|
|
|
|
Interest bearing checking
|
|
|
15,275
|
|
|
|
.40
|
%
|
|
|
13,919
|
|
|
|
0.40
|
%
|
|
|
14,924
|
|
|
|
0.75
|
%
|
Savings accounts
|
|
|
6,809
|
|
|
|
.40
|
%
|
|
|
6,716
|
|
|
|
0.40
|
%
|
|
|
7,696
|
|
|
|
1.00
|
%
|
Money market
|
|
|
4,844
|
|
|
|
1.00
|
%
|
|
|
3,959
|
|
|
|
1.00
|
%
|
|
|
2,782
|
|
|
|
1.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,527
|
|
|
|
|
|
|
|
31,659
|
|
|
|
|
|
|
|
31,741
|
|
|
|
|
|
Time
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00% to 0.99%
|
|
|
796
|
|
|
|
.80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.00% to 1.99%
|
|
|
16,946
|
|
|
|
1.56
|
%
|
|
|
14,958
|
|
|
|
1.62
|
%
|
|
|
338
|
|
|
|
1.67
|
%
|
2.00% to 2.99%
|
|
|
14,690
|
|
|
|
2.25
|
%
|
|
|
17,294
|
|
|
|
2.19
|
%
|
|
|
10,633
|
|
|
|
2.46
|
%
|
3.00% to 3.99%
|
|
|
10,722
|
|
|
|
3.28
|
%
|
|
|
11,557
|
|
|
|
3.26
|
%
|
|
|
21,054
|
|
|
|
3.37
|
%
|
4.00% to 4.99%
|
|
|
170
|
|
|
|
4.00
|
%
|
|
|
475
|
|
|
|
4.16
|
%
|
|
|
4,489
|
|
|
|
4.43
|
%
|
5.00% to 5.99%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,028
|
|
|
|
5.18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,324
|
|
|
|
|
|
|
|
44,284
|
|
|
|
|
|
|
|
37,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
76,851
|
|
|
|
|
|
|
|
75,943
|
|
|
|
|
|
|
|
69,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scheduled maturities of time deposits, excluding IRA accounts,
at March 31, 2010 are as follows:
|
|
|
|
|
2011
|
|
|
35,467
|
|
2012
|
|
|
3,484
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
38,951
|
|
|
|
|
|
|
Time deposits (in thousands) of $100,000 or more amounted to
approximately $17,659, $18,985 and $19,257 at March 31,
2010 and December 31, 2009 and 2008, respectively. The
Federal Deposit Insurance Corporation has increased deposit
insurance on most accounts from $100,000 to $250,000.
Income tax expense (in thousands) as of March 31, 2010 and
2009, and December 31, 2009 and 2008 is summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2009
|
|
2008
|
|
Federal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
68
|
|
|
|
60
|
|
|
|
142
|
|
|
|
242
|
|
Community Renewal credits
|
|
|
(7
|
)
|
|
|
(5
|
)
|
|
|
(22
|
)
|
|
|
(22
|
)
|
Deferred
|
|
|
|
|
|
|
5
|
|
|
|
62
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income taxes
|
|
|
61
|
|
|
|
60
|
|
|
|
182
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
|
|
9.
|
Income
Taxes
(Continued)
|
A reconciliation of the federal statutory rate to the effective
income tax rate for the quarters ended March 31, 2009 and
2008 and years ended December 31, 2009 and 2008 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
Federal statutory income tax rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
Depreciation
|
|
|
(1.4
|
)
|
|
|
(1.2
|
)
|
|
|
(0.8
|
)
|
|
|
(1.4
|
)
|
Wage credits
|
|
|
(0.7
|
)
|
|
|
(0.7
|
)
|
|
|
(2.2
|
)
|
|
|
(2.8
|
)
|
Allowance for bad debts
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
Non-taxable life insurance
|
|
|
|
|
|
|
|
|
|
|
(4.1
|
)
|
|
|
|
|
Other
|
|
|
(1.1
|
)
|
|
|
2.2
|
|
|
|
0.9
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate expense
|
|
|
30.3
|
%
|
|
|
34.3
|
%
|
|
|
28.2
|
%
|
|
|
30.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of deferred income taxes (in thousands) included
in other assets in the balance sheets are approximately as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Allowance for loan losses
|
|
|
131
|
|
|
|
130
|
|
|
|
132
|
|
Deferred compensation
|
|
|
31
|
|
|
|
30
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal deferred tax assets
|
|
|
162
|
|
|
|
160
|
|
|
|
164
|
|
Depreciation
|
|
|
(89
|
)
|
|
|
(88
|
)
|
|
|
(31
|
)
|
Unrealized gains on securities available for sale
|
|
|
(44
|
)
|
|
|
(35
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal deferred tax liability
|
|
|
(133
|
)
|
|
|
(123
|
)
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax asset, net
|
|
|
29
|
|
|
|
37
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These deferred tax assets and liabilities arise from temporary
differences related to the allowance for loan losses,
accumulated depreciation, accrued interest payable, and
unrealized gains or losses on investment securities available
for sale. The major difference in reported income tax expense
and expected income taxes based upon pretax income results from
Community Renewal credits and changes in the cash surrender
value of life insurance. Other liabilities at March 31,
2010 and December 31, 2009 and 2008 include income taxes
payable (in thousands) of $20, $21 and $50.
The Bank, as required by accounting standards, reviewed its
various tax positions taken or expected to be taken in its tax
returns and has determined it does not have unrecognized tax
benefits, nor does it expect that position to change
significantly over the next twelve months. The Bank recognizes
interest and penalties accrued on any unrecognized tax benefits
as a component of income tax expense. As of March 31, 2010,
it has not accrued interest or penalties related to uncertain
tax positions.
The Bank files an annual U.S. Federal income tax return.
Federal income tax returns for the tax years 2007 and beyond
remain subject to examination by the Internal Revenue Service.
|
|
10.
|
Foreclosed
Real Estate
|
Foreclosed real estate represents property acquired through
foreclosure or deeded in lieu of foreclosure on loans on which
the borrowers have defaulted as to payment of principal and
interest. The Bank also transfers to this category those loans
meeting the applicable criteria for loans considered
repossessions insubstance. Amounts are carried at the lower of
cost of acquisition or the assets fair value less
estimated costs to sell. Reductions in the balance at the date
of acquisition are charged to the allowance for loan losses. Any
subsequent writedowns to reflect current fair value are charged
to noninterest expense and credited to foreclosed real estate.
Direct costs incurred in foreclosures are also charged to
noninterest expense. At March 31, 2010 and
December 31, 2009 and 2008, the Bank held no foreclosed
real estate.
F-17
Until March 1, 2007, the Bank participated in a
multi-employer, noncontributory defined benefit retirement plan
sponsored by the Financial Institutions Retirement Fund. This
plan covered substantially all the Banks employees, and
provided benefits to employees who worked at least one thousand
hours per year. Benefits were based upon each employees
benefit service and average annual compensation, with each
employee becoming fully vested upon completion of five years of
qualifying service. The Financial Institutions Retirement Fund
applied a full funding test on an individual employer basis. The
Bank incurred pension contribution expense (in thousands) of $60
in December 31, 2009 and 2008; and $15 in March 2010 and
2009.
Effective March 1, 2007, the Bank elected to freeze the
benefits provided under the plan to existing participants, to
cease future benefit accruals, and to cease eligibility for
employees in the Plan. Those participants in the Plan as of
March 1, 2007 will receive a benefit equal to the benefit
accrued under the Plan as of that date. The Bank is contingently
liable for a final contribution to the Plan of up to an
approximate amount of $91,000 as of July 1, 2009, the most
recent valuation date.
The Bank also participates in an employee 401(k) retirement
plan. Employees contribute up to 6% of their compensation to the
plan, with the Bank matching 75% of such contributions. The
Banks contribution expense (in thousands) to this plan
amounted to $44 and $36 for December 2009 and 2008; and $20 and
$17 for March 2010 and 2009.
|
|
12.
|
Deferred
Compensation Plan
|
The Bank implemented a deferred compensation plan in late 1993
for certain key employees, and in 1996 for certain directors.
The plans generally provide for retirement, death or disability
payments, payable over 25 years (20 years for
directors). The Bank obtained insurance on these individuals to
provide for funding of the plan; however, the policies
themselves are not pledged against the benefits. The plan limits
the ultimate benefits to the cash surrender value (CSV) in the
policies, after a certain return is realized by the Bank from
those policies. Thus, based upon this limitation, deferred
compensation is recognized to the extent of the CSV increase
each year, once the Bank realizes its return.
Following is a summary of changes in deferred compensation
payable (in thousands) and the related cash values of the life
insurance contracts for December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
Change in cash value of life insurance contracts
|
|
|
71
|
|
|
|
264
|
|
Earnings (loss) of life insurance
contracts-directors
|
|
|
86
|
|
|
|
(32
|
)
|
Earnings (loss) of life insurance contracts-officers
|
|
|
6
|
|
|
|
30
|
|
Change in deferred compensation
payable-directors
|
|
|
111
|
|
|
|
(24
|
)
|
Change in deferred compensation payable-officers
|
|
|
28
|
|
|
|
29
|
|
No change occurred as of March 31, 2010 from 2009.
Borrowings include advances from the Federal Home Loan Bank.
Such advances are secured by deposit accounts in the Federal
Home Loan Bank, Bank-owned capital stock in the Federal Home
Loan Bank, and investment securities held in the custody of the
Federal Home Loan Bank.
These advances (in thousands) as of March 31, 2010, and
December 31, 2009 and 2008 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Long-term advance dated 8-24-04, monthly payment of $1 for ten
years, interest at 4.243%
|
|
|
|
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-18
|
|
13.
|
Borrowings
(Continued)
|
The Bank has borrowing (in thousands) available to it as of
March 31, 2010 in the approximate amount of $32,885 under
current terms with the Federal Home Loan Bank.
Additional borrowing also is available through another bank for
federal funds purchases. As of March 31, 2010, this credit
line is for a maximum borrowing limit (in thousands) of $2,500
at the existing federal funds rate of the lender, and expires
June 2010. No amounts were outstanding on this credit line at
March 31, 2010 or December 31, 2009.
The Bank has overnight repurchase agreements with certain
checking account customers, which are shown as securities sold
under agreements (repos) to repurchase. At
March 31, 2010 and December 31, 2009, the amount (in
thousands) outstanding was $958 and $907, respectively. Interest
expense (in thousands) on the repos was $2 for the three months
ended March 31, 2010 and $4 for the year ended
December 31, 2009. The market value of the collateral was
approximately equal to the amounts outstanding. The average
balance outstanding (in thousands) for the three months ended
March 31, 2010 was $712 and for the year ended
December 31, 2009 was $1,051. The maximum balance
outstanding (in thousands) for 2010 and 2009 was $1,137 and
$1,468, respectively.
|
|
14.
|
Fair
Value Measurements
|
Accounting standards in the United States of America establish a
framework for using fair value to measure assets and
liabilities, and define fair value as the price that would be
received to sell an asset or paid to transfer a liability (an
exit price) as opposed to the price that would be paid to
acquire the asset or received to assume the liability (an entry
price).
Under these standards, a fair value measure should reflect the
assumptions that market participants would use in pricing the
asset or liability, including the assumptions about the risk
inherent in a particular valuation technique, the effect of a
restriction on the sale or use of an asset, and the risk of
nonperformance. Required disclosures stratify balance sheet
accounts measured at fair value based on inputs the Bank uses to
derive fair value measurements. These strata include:
|
|
|
|
|
Level 1 valuations, where the valuation is based on quoted
market prices for identical assets or liabilities traded in
active markets (which include exchanges and over-the-counter
markets with sufficient volume).
|
|
|
|
Level 2 valuations, where the valuation is based on quoted
market prices for similar instruments traded in active markets,
quoted prices for identical or similar instruments in markets
that are not active, and model-based valuation techniques for
which all significant assumptions are observable in the market.
|
|
|
|
Level 3 valuations, where the valuation is generated from
model-based techniques that use significant assumptions not
observable in the market, but observable based on Bank-specific
data. These unobservable assumptions reflect the Banks own
estimates for assumptions that market participants would use in
pricing the asset or liability. Valuation techniques typically
include option pricing models, discounted cash flow models, and
similar techniques, but may also include the use of market
prices of assets or liabilities that are not directly comparable
to the subject asset or liability.
|
Items Measured
at Fair Value on a Recurring Basis
For the Bank, the only items recorded at fair value on a
recurring basis are securities available for sale. These
securities consist primarily of mortgage-backed (including
Agency) securities. When available, the Bank uses quoted market
prices of identical assets on active exchanges (Level 1
measurements). Where such quoted market prices are not
available, the Bank typically employs quoted market prices of
similar instruments (including matrix pricing)
and/or
discounted cash flows to estimate a value of these securities
(Level 2 measurements). Level 3 measurements include
discounted cash flow analyses based on assumptions that are not
readily observable in the market place, including projections of
future cash flows, loss assumptions, and discount rates.
F-19
|
|
14.
|
Fair
Value
Measurements
(Continued)
|
The following table presents financial assets and liabilities
(in thousands) measured at fair value on a recurring basis at
March 31, 2010 and December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB certificates
|
|
|
|
|
|
|
2,844
|
|
|
|
|
|
|
|
2,844
|
|
GNMA certificates
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
15
|
|
FHLMC certificates
|
|
|
|
|
|
|
1,029
|
|
|
|
|
|
|
|
1,029
|
|
FNMA certificates
|
|
|
|
|
|
|
2,037
|
|
|
|
|
|
|
|
2,037
|
|
FNR certificates
|
|
|
|
|
|
|
466
|
|
|
|
|
|
|
|
466
|
|
SBA pools
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
8
|
|
Munis
|
|
|
|
|
|
|
348
|
|
|
|
|
|
|
|
348
|
|
Equity securities
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,749
|
|
|
|
|
|
|
|
6,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB certificates
|
|
|
|
|
|
|
3,114
|
|
|
|
|
|
|
|
3,114
|
|
GNMA certificates
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
15
|
|
FHLMC certificates
|
|
|
|
|
|
|
1,035
|
|
|
|
|
|
|
|
1,035
|
|
FNMA certificates
|
|
|
|
|
|
|
2,303
|
|
|
|
|
|
|
|
2,303
|
|
FNR certificates
|
|
|
|
|
|
|
263
|
|
|
|
|
|
|
|
263
|
|
SBA pools
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
8
|
|
Municipal securities
|
|
|
|
|
|
|
348
|
|
|
|
|
|
|
|
348
|
|
Equity securities
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,087
|
|
|
|
|
|
|
|
7,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
|
|
|
|
6,443
|
|
|
|
|
|
|
|
6,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items Measured
at Fair Value on a Non-Recurring Basis
From time to time, certain assets may be recorded at fair value
on a non-recurring basis, typically as a result of the
application of lower of cost or fair value accounting or a
write-down occurring during the period. The only item recorded
at fair value on a non-recurring basis is foreclosed real
estate, which is recorded at the lower of cost or fair value
less estimated costs to sell. Fair value is determined by
reference to appraisals (performed either by the Bank or by
independent appraisers) on the subject property, using market
prices of similar real estate assets (Level 2
measurements). The Bank held no foreclosed real estate at
March 31, 2010 or December 31, 2009 and 2008.
The Bank is required to evaluate events or transactions that may
occur after the balance sheet date for potential recognition or
disclosure in the financial statements. The Bank performed such
an evaluation through March 12, 2010, the date which the
financial statements were available to be issued, and noted no
such subsequent events.
|
|
16.
|
Plan
of Conversion (Unaudited)
|
On May 18, 2010, the Board of Directors of the Bank adopted
a Plan of Conversion (the Plan) whereby the Bank will convert
from a federally chartered mutual savings bank to a federally
chartered stock savings bank and
F-20
|
|
16.
|
Plan
of Conversion
(Unaudited)
(Continued)
|
operate as a wholly owned subsidiary of a stock holding company
(the Holding Company), and offer the Holding Company stock on a
priority basis to qualifying depositors, tax-qualified employee
benefit plans sponsored by the Bank, and others in a
subscription offering, with any remaining shares to be offered
to the public in a direct community offering and possibly in a
syndicated community offering (the Conversion). The Conversion
is subject to approval by the Office of Thrift Supervision and
by the Banks members.
As part of the Conversion, the Bank will establish a liquidation
account in an amount equal to the net worth of the Bank as of
the date of the latest balance sheet appearing in the final
prospectus distributed in connection with the Conversion. The
liquidation account will be maintained for the benefit of
eligible account holders and supplemental eligible account
holders who maintain their accounts at the Bank after the
Conversion. The liquidation account will be reduced annually to
the extent that such account holders have reduced their
qualifying deposits as of each anniversary date. Subsequent
increases will not restore an account holders interest in
the liquidation account. In the event of a complete liquidation,
each eligible account holder will be entitled to receive
balances for accounts then held.
Conversion cost will be deferred and reduce the proceeds from
the shares sold in the Conversion. If the Conversion is not
completed, all costs will be expensed. As of March 31,
2010, the Bank had incurred $12,500 of Conversion costs.
F-21
You should rely only on the information contained in this
document or that to which we have referred you. We have not
authorized anyone to provide you with information that is
different. This document does not constitute an offer to sell,
or the solicitation of an offer to buy, any of the securities
offered hereby to any person in any jurisdiction in which such
offer or solicitation would be unlawful. The affairs of Bank of
Ruston following the conversion and offering, and Century Next
Financial may change after the date of this prospectus. Delivery
of this document and the sales of shares made hereunder does not
mean otherwise.
(Proposed Holding Company for
Bank of Ruston)
Up to 920,000 Shares of
Common Stock
(Anticipated Maximum, Subject
to Increase)
Common Stock
PROSPECTUS
,
2010
Dealer Prospectus Delivery Obligation
Until ,
2010 all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the
dealers obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
PROSPECTUS
SUPPLEMENT
Bank of Ruston 401(k) Plan
Offering Participation Interests in up to 71,839 shares
of
Common Stock
This prospectus supplement is being provided to employees of
Bank of Ruston who are participants in the newly adopted Bank of
Ruston 401(k) Plan (the Plan). The Plan was adopted
for the benefit of Bank of Rustons active employees to
replace the former Pentegra Defined Contribution Plan for
Financial Institutions (the former Pentegra Plan).
The account balances of active employees of Bank of Ruston have
been transferred from the former Pentegra Plan, a
multiple-employer plan in which Bank of Ruston formerly
participated, to the Plan, effective as of July 1, 2010,
provided that such employees consented to such transfer. This
prospectus supplement relates to the election by Plan
participants to invest all or a part of their Plan accounts in
stock units representing an ownership interest in the common
stock of Century Next Financial Corporation at a purchase price
of $10.00 per share.
Bank of Ruston is converting from a mutual savings bank to a
stock savings bank and establishing a stock holding company,
Century Next Financial, to hold all of the outstanding shares of
Bank of Ruston. All of the shares of Century Next Financial will
be held by public shareholders. In connection with the
conversion, Century Next Financials common stock will be
offered for sale to certain depositors in a subscription
offering and then to the general public in a community offering.
As a participant in the Plan, you may use your account balance
in the Plan to purchase shares of Century Next Financial common
stock in two possible ways:
|
|
|
|
|
First, if you already have subscription rights as an eligible
depositor of Bank of Ruston, you may exercise such rights and
use the monies held in your individual Plan account to purchase
shares during the subscription offering of Century Next
Financials shares, subject to the limitations and other
conditions of such offering. If you do not have subscription
rights, you may be able to use the monies held in your
individual Plan account to purchase shares during a community
offering, as a member of the general public. Subscription
offering orders, however, will have preference over orders
placed in a community offering, in the event the offering is
oversubscribed. Because the Plan actually purchases the shares,
you will acquire a participation interest in the
shares and not own the shares directly. Shares may be purchased
in this manner by allocating all or a portion of the funds in
your Plan account into a new investment option, the employer
stock fund, which provides the opportunity to invest Century
Next Financials common stock. The purchase price is $10.00
per share.
|
|
|
|
Second, after Century Next Financials initial public
offering is completed, on an ongoing basis, whether or not you
purchase shares during the offering, you will be able to
allocate all or a portion of your Plan account between all of
the Plans investment funds including the option to invest
in Century Next Financials common stock. The purchase
price of shares will be market price, which may be more or less
than the $10.00 purchase price in the offering.
|
The prospectus dated
, 2010 of Century Next Financial, which is attached to this
prospectus supplement, includes detailed information with
respect to Century Next Financial, Bank of Ruston and the
offering of Century Next Financial common stock. This prospectus
supplement should be read only in conjunction with the attached
prospectus.
For a discussion of certain factors you should consider
before investing, see Restrictions on Resale at
page S-9
in this prospectus supplement and Risk Factors
beginning on page 12 in the prospectus.
Neither the Securities and Exchange Commission nor any state
securities regulator has approved or disapproved these
securities or passed upon the adequacy or accuracy of this
prospectus supplement. Any representation to the contrary is a
criminal offense.
The participation interests are not savings accounts or
deposits and are not insured or guaranteed by any government
insurance fund, Bank of Ruston or Century Next Financial
Corporation. This type of investment involves risk and you may
lose some or all of your investment.
The date of this prospectus supplement
is ,
2010
|
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Page
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S-1
|
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S-1
|
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S-1
|
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|
S-1
|
|
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S-2
|
|
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S-2
|
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S-2
|
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S-2
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S-2
|
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S-3
|
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A-1
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B-1
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THE
OFFERING
Summary
of the Conversion
Bank of Ruston is converting from the mutual to the stock form
and organizing a new stock holding company under the name
Century Next Financial Corporation, a Louisiana corporation.
Bank of Ruston will convert from a federally chartered mutual
savings bank to a federally chartered stock savings bank and
become a wholly owned subsidiary of Century Next Financial. You
may use your Plan account to subscribe for shares of common
stock of Century Next Financial as described in this prospectus
supplement.
Securities
Offered
The securities offered by this prospectus supplement are
participation interests in the Plan. Bank of Ruston is offering
stock units in the Plan. The stock units represent indirect
ownership of Century Next Financial common stock through the
Century Next Financial Corporation Stock Fund being established
under the Plan in connection with the stock offering. At
March 31, 2010, the Plan had $718,391 in assets which could
be used to purchase up to 71,839 shares (at the purchase
price of $10.00 per share) of Century Next Financials
common stock subject to the limitations and conditions of
Century Next Financials offering. The Plan will hold the
common stock and the Plan will only acquire shares at the
instruction of Plan participants for their own accounts. Century
Next Financial is the issuer of the common stock. The common
stock to be issued hereby is conditioned on the completion of
the conversion. Your investment in the common stock of Century
Next Financial in the conversion is subject to the priority
purchase rights applicable to you, as set forth in the Plan of
Conversion, and as described below. Information with regard to
the Plan is contained in this prospectus supplement, and
information with regard to the conversion and the financial
condition, results of operation and business of Bank of Ruston
is contained in the attached prospectus. This prospectus
supplement should be read with the attached prospectus. The
address of the principal executive office of Century Next
Financial and Bank of Ruston is 505 North Vienna Street, Ruston,
Louisiana 71270. The telephone number of Bank of Ruston is
(318) 255-3733.
Election
to Purchase Common Stock in the Offering; Priorities
You may direct the transfer of all or part of the funds which
represent your beneficial interest in the assets of the Plan to
be invested in the employer stock fund. The Plan trustee will
subscribe for common stock offered for sale in connection with
the conversion according to your directions. In the event the
offering is oversubscribed and the Plan trustee is unable to use
the full amount allocated by you to purchase common stock in the
offering, the amount that is not invested in common stock of
Century Next Financial will be returned to the other investments
of the Plan pursuant to your existing investment directions. If
you choose not to direct the investment of your Plan account
balance to purchase shares of Century Next Financials
common stock in the offering, your Plan account balance will
remain in the other investment options of the Plan as previously
directed.
You are permitted to use funds allocated to your Plan account to
purchase shares of Century Next Financials common stock in
the subscription offering to the extent that you fall into one
of the following orders of priority:
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first, you held deposit account(s) at Bank of Ruston with an
aggregate balance of $50 or more at the close of business on
December 31, 2008;
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second, you held deposit account(s) at Bank of Ruston with an
aggregate balance of $50 or more at the close of business on
June 30, 2010; and
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third, you held deposit account(s) at Bank of Ruston at the
close of business on [DATE4], 2010.
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If you do not qualify in the subscription offering, your order
will be treated as a community offering order. Common stock so
purchased will be allocated to your Plan account.
S-1
The limitations on the amount of common stock that you may
purchase in the offering, as described in the attached
prospectus, see The Conversion and Offering
Limitations on Common Stock Purchases, will be calculated
based on the aggregate amount directly purchased by you in the
offering with funds held outside the Plan, together with the
amount purchased with funds allocated to your Plan account.
How to
Use Plan Funds and Funds Held Outside the Plan to Invest in the
Offering
Accompanying this prospectus supplement is an investment
election form attached as Annex A. The
investment election form will enable you to direct that all or a
portion of your beneficial interest in the Plan be used to
invest in the common stock of Century Next Financial. If you
wish to invest all or part of your beneficial interest in the
assets of the Plan in Century Next Financials common stock
during the offering, you should complete the investment election
form and return it to G. Randall Allison no later than
5:00 p.m., Central time on [DATE1], 2010. In order to
purchase shares outside the Plan (in your name or through an
IRA), you must complete and return a stock order form, along
with payment by check or by authorizing a withdrawal from your
Bank of Ruston deposit account(s) to be received by the
conversion center no later than 5:00 p.m., Central time, on
[DATE1], 2010. If you do not have a stock order form, or have
other questions about purchasing stock outside the Plan, contact
the Conversion Center by calling
( ) .
Deadline
for Delivery of Election Forms
The investment election form must be returned to Bank of Ruston,
505 North Vienna Street, Ruston, Louisiana 71270, Attn: G.
Randall Allison, to be received no later than 5:00 p.m.,
Central time on [DATE1], 2010.
Irrevocability
of Election to Participate in the Offering
After you return the investment election form, your directions
to transfer amounts credited to your Plan account to purchase
shares of common stock during the offering are
irrevocable.
Direction
to Purchase Common Stock After the Offering
After the offering, whether or not you elected to purchase
shares during the offering, you will continue to be able to
direct the investment of your plan contributions in the
investment options available under the Plan, including Century
Next Financials common stock, through the employer stock
fund (the percentage invested in any option must be a whole
percent). You may change the allocation of your interest in the
various investment options offered under the Plan at any time.
Special restrictions may apply to transfers directed to or from
Century Next Financials common stock if you are an
executive officer, director or principal shareholder of Century
Next Financial and are subject to the provisions of
Section 16(b) of the Securities and Exchange Act of 1934,
as amended. In addition, participants who are our officers or
directors will not be able to transfer their initial investment
out of Century Next Financials common stock purchased in
the offering for a period of one (1) year following
completion of the conversion.
Purchase
Price of Common Stock
The funds you allocate for the purchase of common stock in the
offering will be used by the Plan trustee to purchase shares of
common stock, except in the event of an oversubscription, as
discussed above. The price paid for such shares of common stock
in the offering will be $10.00 per share, the same price as paid
by all other persons who purchase shares of common stock in the
offering.
After the offering, common stock purchased by the Plan trustee
will be acquired in open market transactions or from Century
Next Financials treasury stock account. The prices paid by
the trustee for shares acquired in the open market may be higher
or lower than the $10.00 per share offering price and will be
for adequate consideration which means the fair
market value of the common stock as quoted on the OTC
Bulletin Board.
S-2
Nature of
a Participants Interest in Common Stock
The common stock will be held in the name of the Plan, as
trustee, and will be allocated to your individual account under
the Plan. Therefore, earnings with respect to your Plan account
should not be affected by the investment designations (including
investments in Century Next Financial common stock) of other
participants.
DESCRIPTION
OF THE PLAN
Introduction
The former Pentegra Plan was originally adopted effective as of
February 1, 2000 and participated in the Pentegra Defined
Contribution Plan for Financial Institutions, a multiple
employer plan. The former Pentegra Plan was amended and restated
effective as of December 31, 2007, was further amended
effective as of October 1, 2009 and was amended again on
December 17, 2009. In connection with the mutual to stock
conversion of Bank of Ruston and the initial public offering of
common stock of Century Next Financial, Bank of Ruston desired
to permit employees who participated in the former Pentegra Plan
and who have the ability to direct the investment of their
account balances to purchase common stock Century Next Financial
in their accounts in the Plan. In order to facilitate the
purchase of shares, however, Bank of Ruston was required to
transfer the account balances of Bank of Ruston employees who
participated in former Pentegra Plan to a new single employer
plan that Bank of Ruston established. The single employer Plan
was adopted effective July 1, 2010. The former Pentegra
Plan does not permit the account balances of former employees to
be transferred to the new single employer plan. Accordingly, no
account of a former employee has been transferred to the Plan.
The Plan is a profit sharing plan with a cash or deferred
compensation feature established in accordance with the
requirements under Section 401(a) and Section 401(k)
of the Internal Revenue Code of 1986, as amended. Bank of Ruston
received a determination letter from the IRS dated March 8,
2010 for the former Pentegra Plan, which provides that the
former Pentegra Plan is qualified under Section 401(a) of
the Internal Revenue Code, and its related trust is tax exempt
under Section 501(a) of the Internal Revenue Code. Bank of
Ruston will apply for a determination letter with respect to the
Plan pursuant to a filing schedule established by the Internal
Revenue Service.
Employee
Retirement Income Security Act
The Plan is an individual account plan other than a
money purchase pension plan within the meaning of
the Employee Retirement Income Security Act of 1974, as amended.
As such, the Plan is subject to all of the provisions of
Title I (Protection of Employee Benefits Rights) and
Title II (Amendments to the Internal Revenue Code Relating
to Retirement Plans) of ERISA, except the funding requirements
contained in Part 3 of Title I of ERISA, which by
their terms do not apply to an individual account plan (other
than a money purchase pension plan). The Plan is not subject to
Title IV (Plan Termination Insurance) of ERISA. The funding
requirements contained under Title IV of ERISA are not
applicable to participants or beneficiaries under the Plan.
Applicable federal law requires the Plan to impose substantial
restrictions on your right to withdraw amounts held for your
benefit under the Plan prior to the termination of your
employment with Bank of Ruston. A substantial federal tax
penalty also may be imposed on distributions made prior to you
attaining the
age 591/2.
Reference
to Full Text of Plan
The following is a summary of the Plan and does not contain all
of the detailed information in the Plan. Copies of the Plan are
available to all employees by request from Bank of Ruston, 505
North Vienna Street, Ruston, Louisiana 71270, Attn: G. Randall
Allison. You are urged to read carefully the full text of the
Plan.
S-3
To the extent that any conflict may exist between the terms and
conditions of the Plan and the description in this prospectus
supplement, the terms and conditions in the Plan shall control.
Eligibility
and Participation
An employee of Bank of Ruston is eligible to become a
participant in the Plan after completing one (1) month of
employment in which the employee completed at least
83.33 hours of service. An eligible participant will enter
the Plan on the first day of the calendar month coinciding with
or next following the date an employee satisfies these
requirements. After an employee enters the Plan, he or she is
eligible to receive employer matching contributions; however,
Bank of Ruston retains the discretion to increase, decrease or
eliminate the amount of contributions made to the Plan. The plan
year is the calendar year, January 1 to December 31.
As of March 31, 2010, there were approximately
27 employees actively participating in the Plan.
Contributions
Under the Plan
401(k) Contributions. As a Plan participant,
you are permitted to elect to reduce your compensation in whole
percentages up to 50% of your Plan salary and may change your
contributions later. Contribution changes are permitted daily.
The amount you elect is subject to certain restrictions and
limitations, as discussed below, not to exceed $16,500 for 2010
or such higher amount as may be periodically set by the IRS,
with such amount to be contributed to the Plan on your behalf.
If you are 50 years or older, you can also make catch
up contributions of up to $5,500 in 2010. Your pre-tax
employee contributions are transferred by Bank of Ruston to the
trustee and credited to your Plan account. The Plan defines
compensation as your basic taxable cash
compensation, including commissions, overtime and bonuses but
excluding any non-cash remuneration such as when shares of
restricted stock vest, plus certain pre-tax contributions.
Generally, you may elect to modify the amount contributed to
your Plan account; however, special restrictions apply to the
employer stock fund if you are subject to Section 16 of the
Securities Exchange Act of 1934.
Employer Matching and Profit Sharing
Contributions. Bank of Ruston currently
contributes a matching contribution amount equal to 75% of the
first 6% of your contribution. Bank of Ruston retains the
discretion to increase, decrease or eliminate the amount of
matching contributions made to the Plan.
Limitations
on Contributions
Limitation on Annual Additions and
Benefits. Pursuant to the requirements of the
Internal Revenue Code, the Plan provides that the amount of
contributions and forfeitures allocated to your Plan account
during any calendar year generally may not exceed the lesser of
100% of compensation for the calendar year or $49,000 (for 2010)
(adjusted for increases in the cost of living as permitted by
the Internal Revenue Code).
Limitation on 401(k) Plan Contributions. By
law, your total deferrals under the Plan may not exceed $16,500
for 2010 ($22,000 if you are 50 years or older), adjusted
for increases in the cost of living as permitted by the Internal
Revenue Code. Contributions in excess of this limitation will be
included in gross income for federal income tax purposes in the
year they are made. In addition, any such excess deferral will
again be subject to federal income tax when distributed by the
Plan, unless the excess deferral (together with any income
allocable thereto) is distributed by April 15th of the
following year in which the excess deferral is made. Any income
on the excess deferral that is distributed by
April 15th of the immediately succeeding year will be
treated, for federal income tax purposes, as earned and received
by you in the taxable year in which the excess deferral is made.
Limitation on Plan Contributions for Highly Compensated
Employees. Section 401(k) of the Internal
Revenue Code limits the amount of salary deferrals that may be
made to the Plan in any calendar year on behalf of highly
compensated employees (as defined below) in relation to the
amount of salary deferrals made by or on behalf of all other
employees eligible to participate in the Plan. If these
limitations are exceeded, the level of deferrals by highly
compensated employees must be adjusted.
S-4
In general, a highly compensated employee includes any employee
who, during the calendar year or the preceding year,
(1) was at any time a 5% owner (i.e., owns directly or
indirectly more than 5% of the stock of Century Next Financial),
or (2) for the preceding year had compensation from the
employer in excess of $110,000 (for 2010), and if the employer
so elects was in the top-group of employees for such preceding
year. An employee is in the top-paid group of employees for any
year if such employee is in the group consisting of the top 20%
of employees when ranked on the basis of compensation paid
during such year. Such dollar amounts are adjusted annually to
reflect increases in the cost of living.
In order to prevent the disqualification of the Plan, any amount
contributed by highly compensated employees that exceeds the
average deferral limitation in any calendar year must be
distributed to such highly compensated employees before the
close of the following calendar year. However, the employer will
be subject to a 10% excise tax on any excess contributions
unless such excess contributions either are recharacterized or
are distributed before the close of the first 12 months
following the calendar year to which such excess contributions
relate.
Top-Heavy Plan Requirements. If for any
calendar year the Plan is a top-heavy plan, Bank of Ruston may
be required to make certain minimum contributions to the Plan on
behalf of non-key employees. In general, the Plan will be
regarded as a top-heavy plan for any calendar year
if, as of the last day of the preceding calendar year, the
aggregate balance of the accounts of participants who are key
employees exceeds 60% of the aggregate balance of the accounts
of all participants. Key employees generally include any
employee who, at any time during the calendar year, was
(1) an officer of Bank of Ruston having annual compensation
in excess of $160,000 (for 2010), (2) a 5% owner of Century
Next Financial (i.e., owns directly or indirectly more than 5%
of the stock of Century Next Financial, or stock possessing more
than 5% of the total combined voting power of all stock of
Century Next Financial or (3) a 1% or greater owner of
Century Next Financial having annual compensation in excess of
$150,000.
Loans
You are generally permitted to borrow money from your account
once per year. The loan amount must be at least $1,000 and is
limited to a maximum of 50% of your vested account balance, up
to a maximum of $50,000. The interest rate will be determined at
the time of the loan request. This rate will remain fixed for
the life of the loan. You can borrow for any reason up to a
maximum term of 60 months. If you are borrowing to purchase
a residence, your loan may have a term of up to 180 months.
Refinancing is not permitted. The Plan Administrator can provide
you with information about the fees associated with a loan.
Unlike a withdrawal, there are no tax penalties associated with
the plans loan feature, unless you default on the loan
repayment, in which case the loan is treated as a withdrawal.
Hardship
Withdrawal
You can withdraw contributions made on your behalf if your
employer determines that you have an immediate financial need
created by severe hardship and you lack other reasonably
available resources. The IRS defines financial hardship as:
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Purchase of a primary residence and payment of certain expenses
related to the repair of damage to a primary residence.
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To prevent eviction from or foreclosure of a primary residence.
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Tuition, including room and board, for the next 12 months
of post-secondary education for yourself, your spouse or
children.
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Payment of unreimbursed medical expenses and certain funeral
expenses.
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Payment for expenses for repairing damages to a principal
residence that would qualify for a casualty deduction under the
Internal Revenue Code.
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In the event of a hardship withdrawal, you may continue to make
contributions to the 401(k) Plan.
S-5
In-Service
Withdrawal
In general, you may make a full or partial withdrawal if you
have an immediate financial need created by severe hardship, as
described in the preceding paragraph under the header
Hardship Withdrawal. If you make a withdrawal, you
may continue to make contributions to the Plan. The Plan also
provides for in-service withdrawals of rollover account balances
and, to the extent that you are vested in your Plan account
balance and have completed five (5) years of participation
in the Plan, employer matching contributions. You are also
entitled to apply for in-service distribution of your entire
account balance if you have attained
age 591/2.
Under current tax law, any amounts withdrawn from the
plan both contributions and earnings - will be taxed
as ordinary income. Distributions before
age 591/2,
unless such distributions are a result of severance from
employment at or after age 55, or death, are also subject
to a 10% early withdrawal penalty, as well as regular income tax.
Investment
of Contributions
All amounts credited to your accounts under the Plan are held in
a trust. A trustee appointed by Bank of Rustons Board of
Directors administers the trust. Accompanying this prospectus
supplement is Annex B, which provides a
description of the investment choices under the Plan.
Employer
Stock
Each participants beneficial interest in his or her common
stock of Century Next Financial will be valued using the unit
accounting method and the common stock acquired by the trustee
will be denominated in stock units and held in trust for the
participants in the Plan. Initially one stock unit will equal
one share of Century Next Financial common stock, and a stock
unit initially will be valued at $10.00. Following the stock
offering, the stock unit value will be determined by dividing
the total market value of the Century Next Financial Corporation
Stock Fund at the end of each day by the total number of units
held in the Century Next Financial Corporation Stock Fund by all
participants as of the close of the previous day. The change in
stock unit value will reflect the days change in stock
price, any cash dividends accrued and the interest earned on the
cash component of the Century Next Financial Corporation Stock
Fund, less any investment management fees. All purchases will be
made at prevailing market prices. Under certain circumstances,
the Plan trustee may be required to limit the daily volume of
shares purchased.
Any brokerage commissions, transfer fees and other expenses
incurred in the sale and purchase of our common stock will be
paid out of a cash account managed by the Plan trustee.
Therefore, although your account will not be directly adjusted
for such fees, the market value of the shares held in your
account will be reduced.
As of the date of this prospectus supplement, none of the shares
of Century Next Financial common stock have been issued or are
outstanding and there is no established market for Century Next
Financials common stock. Accordingly, there is no record
of the historical performance of Century Next Financials
common stock. Generally, performance will be dependent upon a
number of factors, including the financial condition and
profitability of Century Next Financial and market conditions
for Century Next Financials common stock.
Vesting
You are always 100% vested in your pre-tax employee
contributions and the earnings thereon under the Plan. In
addition, you are always 100% vested in any employer
contributions made on your behalf other than matching
contributions or profit sharing contributions (and the earnings
thereon) under the Plan. Employer matching contributions made on
your behalf become 100% vested after you complete three years of
service (and are zero percent vested if you have less than three
years of service).
Distribution
Upon Retirement or Disability
Upon retirement or disability, you may elect to have your vested
account balance distributed in a single lump-sum payment or in
installments over a period not in excess of his remaining life
expectancy. Payment of
S-6
your benefits must generally begin no later than the April 1
following the later of the calendar year in which you attain
age 701/2
or the calendar year in which you retire.
Distribution
Upon Death
If you die before your entire vested interest has been
distributed, benefits will be paid to your surviving spouse in a
single lump-sum payment. If you are an unmarried participant, or
you are a married participant with special consent to the
designation of a beneficiary other than your spouse, payment of
benefits to your chosen beneficiary will be in a single lump-sum
payment.
Distribution
Upon Termination of Employment
After termination of employment with Bank of Ruston, you are
entitled to distribution of your vested Plan account upon the
earlier of death, disability, or attainment of the Plans
normal retirement age. However, you may elect to receive a
distribution of your vested Plan account after termination prior
to death, disability, or the attainment of the Plans
normal retirement age.
Non-alienation
of Benefits
Except with respect to federal income tax withholdings and
qualified domestic relations orders, benefits payable under the
Plan shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge or
otherwise dispose of any rights to benefits payable under the
Plan shall be void.
Reports
to Plan Participants
The Plan administrator will furnish to you a quarterly statement
showing the balance in your Plan account as of the end of that
period, the amount of contributions allocated to your Plan
account for that period, and the adjustments to your account to
reflect earnings or losses, distributions, loans disbursed, loan
repayments
and/or
transfers between investment funds.
Plan
Administration
The Board of Directors of Bank of Ruston is the named fiduciary
of the Plan for purposes of ERISA. The trustee for all the
investment funds under the Plan, except the employer stock fund,
is Pentegra Trust Company. Reliance Trust Company is
the custodian of the Century Next Financial Corporation Stock
Fund. The trustee receives, holds and invests the contributions
to the Plan in trust and distributes them to participants and
beneficiaries in accordance with the terms of the Plan and the
directions of the Plan administrator.
The Plan is administered by a Plan administrator who is one or
more persons appointed by and who serve at the pleasure of Bank
of Ruston. Currently, the Plan administrator is Bank of Ruston.
The address and telephone number of the administrator is 505
North Vienna Street, Ruston, Louisiana 71270,
(318) 255-3733.
The administrator is responsible for the administration of the
Plan, interpretation of the provisions of the Plan, prescribing
procedures for filing applications for benefits, preparation and
distribution of information explaining the Plan, maintenance of
Plan records, books of account and all other data necessary for
the proper administration of the Plan, and preparation and
filing of all returns and reports relating to the Plan which are
required to be filed with the U.S. Department of Labor and
the IRS, and for all disclosures required to be made to
participants, beneficiaries and others under ERISA.
Amendment
and Termination
Bank of Ruston intends to continue the Plan indefinitely.
Nevertheless, Bank of Ruston may terminate the Plan at any time.
If the Plan is terminated in whole or in part, then regardless
of other provisions in the Plan, if you are affected by the
termination you will have a fully vested interest in your Plan
account. Bank of Ruston reserves the right to make, from time to
time, any amendment or amendments to the Plan which do
S-7
not cause any part of the trust to be used for, or diverted to,
any purpose other than the exclusive benefit of participants or
their beneficiaries; provided, however, that Bank of Ruston may
make any amendment it determines necessary or desirable, with or
without retroactive effect, to comply with ERISA
and/or the
Internal Revenue Code.
Merger,
Consolidation or Transfer
In the event of the merger or consolidation of the Plan with
another plan, or the transfer of the Plan trust assets to
another plan, the Plan requires that each participant will (if
either the Plan or the other plan were then terminated) receive
a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he or she
would have been entitled to receive immediately before the
merger, consolidation or transfer (if the Plan had then
terminated).
Federal
Income Tax Consequences
General. The following is a brief summary of
certain federal income tax aspects of the Plan. Statutory
provisions are subject to change, as are their interpretations,
and their application may vary in individual circumstances. The
consequences under applicable state and local income tax laws
may not be the same as under the federal income tax laws.
As a qualified retirement plan, the Internal Revenue
Code affords special tax treatment which includes the following:
(1) the sponsoring employer is allowed an immediate tax
deduction for the amount contributed to the Plan each year;
(2) participants pay no current income tax on amounts
contributed by the employer on their behalf; and
(3) earnings of the plan are tax-deferred, thereby
permitting the tax-free accumulation of income and gains on
investments. The Plan will be administered to comply in
operation with the requirements of the Internal Revenue Code as
of the applicable effective date of any change in the law. Bank
of Ruston expects that it will adopt any amendments to the Plan
that may be necessary to maintain the qualified status of the
Plan under the Internal Revenue Code.
You are
urged to consult your tax advisors with respect to any
distribution from
the Plan and transactions involving the Plan.
Lump-Sum Distribution. A distribution from the
Plan to a participant or the beneficiary of a participant will
qualify as a lump-sum distribution if it is made:
(1) within one taxable year to the participant or
beneficiary; (2) on account of the participants
death, disability or separation from service, or after the
participant attains
age 591/2;
and (3) consists of the balance to the credit of the
participant under this Plan and all other profit sharing plans,
if any, maintained by Bank of Ruston. The portion of any
lump-sum distribution that is required to be included in the
participants or beneficiarys taxable income for
federal income tax purposes consists of the entire amount of
such lump-sum distribution less the amount of after-tax
contributions, if any, made by the participant to any other
profit sharing plans maintained by Bank of Ruston which is
included in such distribution.
Averaging Rules. The portion of the total
taxable amount of a lump-sum distribution that is attributable
to participation in the Plan or in any other profit-sharing plan
maintained by Bank of Ruston and referred to as the ordinary
income portion, will be taxable generally as ordinary income for
federal income tax purposes.
Under a special rule, if you turned age 50 by 1985, you may
elect to have your lump-sum distribution taxed under a ten-year
income averaging rule which would allow you to pay a separate
tax on the lump-sum distribution that would approximate the tax
(under the rates in effect in 1986) that would have been
due if the distribution had been received in ten equal annual
installments
Common Stock Included in Lump-Sum
Distribution. If a lump-sum distribution includes
our common stock, the distribution generally will be taxed in
the manner described above, except that the total taxable amount
will be reduced by the amount of any net unrealized appreciation
with respect to such common stock, i.e., the excess of the value
of such common stock at the time of the distribution over its
cost to the Plan. The tax basis of such common stock to the
participant or beneficiary for purposes of computing gain or
loss on its
S-8
subsequent sale will be the value of the common stock at the
time of distribution less the amount of net unrealized
appreciation. Any gain on a subsequent sale or other taxable
disposition of such common stock, to the extent of the amount of
net unrealized appreciation at the time of distribution, will be
considered long-term capital gain regardless of the holding
period of such common stock. Any gain on a subsequent sale or
other taxable disposition of the common stock in excess of the
amount of net unrealized appreciation at the time of
distribution will be considered either short-term capital gain
or long-term capital gain depending upon the length of the
holding period of the common stock. The recipient of a
distribution may elect to include the amount of any net
unrealized appreciation in the total taxable amount of such
distribution to the extent allowed by IRS regulations.
Distribution: Rollovers and Direct Transfers to Another
Qualified Plan or to an IRA. Virtually all
distributions from the Plan may be rolled over to another
qualified retirement plan or to an IRA without regard to whether
the distribution is a lump-sum distribution or a partial
distribution. You have the right to elect to have the trustee
transfer all or any portion of an eligible rollover
distribution directly to another qualified plan or to an
IRA. Distributions that are made directly to another retirement
plan or a traditional IRA are generally not taxable to you until
you take a distribution from such plan or IRA. Distributions may
also be made to a Roth IRA, provided that the taxable amount of
the distribution will be included in your taxable income. If you
do not elect to have an eligible rollover
distribution transferred directly to another qualified
plan or to a traditional IRA, the distribution will be subject
to a mandatory federal withholding tax equal to 20% of the
taxable distribution. The principal types of distributions which
do not constitute eligible rollover distributions are
(1) an annuity type distribution made over the life
expectancy of the participant (or the participant and another
individual), or for a period of 10 years or more,
(2) a minimum distribution required by
Section 401(a)(9) of the Internal Revenue Code, or
(3) the portion of any distribution not includable in gross
income, except that unrealized appreciation in employee
securities can be included in an eligible rollover distribution.
ERISA and
Other Qualification
As noted above, the Plan is subject to certain provisions of
ERISA, and was submitted to the IRS for a determination that it
is qualified under the Internal Revenue Code.
We have provided a brief description of the material federal
income tax aspects of the Plan which are of general application
under the Internal Revenue Code. This is not intended to be a
complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from
the Plan. Accordingly, you are urged to consult a tax advisor
concerning the federal, state and local tax consequences of
participating in and receiving distributions from Plan.
Restrictions
on Resale
All shares of common stock purchased in connection with the
conversion by any of our directors or officers, including shares
acquired in the Plan, will be subject to a restriction that the
shares not be sold for a period of one year following the
conversion, except in the event of the death of such director or
officer or pursuant to a merger or similar transaction approved
by the Office of Thrift Supervision. Each certificate for
restricted shares will bear a legend giving notice of this
restriction on transfer, and appropriate stop-transfer
instructions will be issued to our transfer agent. Any shares of
common stock issued at a later date within this one year period
as a stock dividend, stock split or otherwise with respect to
such restricted stock will be subject to the same restrictions.
Our directors and executive officers will also be subject to the
insider trading rules promulgated pursuant to the Securities
Exchange Act of 1934, as long as the common stock is registered
pursuant to Section 12(b) of the Securities Exchange Act of
1934, and Rule 144 under the Securities Act of 1933, as
amended.
SEC
Reporting and Short-Swing Profit Liability
Section 16 of the Securities Exchange Act of 1934 imposes
reporting and liability requirements on officers, directors and
persons beneficially owning more than ten percent of public
companies such as Century
S-9
Next Financial. Section 16(a) of the Securities Exchange
Act of 1934 requires the filing of reports of beneficial
ownership. Within ten days of becoming a person subject to the
reporting requirements of Section 16(a), a Form 3
reporting initial beneficial ownership must be filed with the
Securities and Exchange Commission. Certain changes in
beneficial ownership, such as purchases, sales, gifts and
participation in savings and retirement plans, must be reported
periodically, either on a Form 4 within two business days
after a change occurs, or annually in certain limited situations
on a Form 5 within 45 days after the close of Century
Next Financials fiscal year. Investment in our common
stock in the Plan by officers, directors and persons
beneficially owning more than ten percent of the common stock
must be reported to the SEC on the Forms 4 or Forms 5
filed by such individuals.
In addition to the reporting requirements described above,
Section 16(b) of the Securities Exchange Act of 1934
provides for the recovery by Century Next Financial of profits
realized by any officer, director or any person beneficially
owning more than ten percent of the common stock resulting from
the purchase and sale or sale and purchase of the common stock
within any six-month period.
The SEC has adopted rules that provide exemption from the profit
recovery provisions of Section 16(b) for
participant-directed employer security transactions within an
employee benefit plan, such as the Plan, provided certain
requirements are met.
Financial
Information Regarding Plan Assets
Financial information representing the net assets available for
Plan benefits and the change in net assets available for Plan
benefits at December 31, 2009, is available upon written
request to the Plan administrator at the address shown above.
LEGAL
OPINION
The validity of the issuance of the common stock will be passed
upon by Elias, Matz, Tiernan & Herrick L.L.P.,
Washington, D. C., which firm acted as special counsel for
Century Next Financial and Bank of Ruston in connection with the
conversion and offering.
S-10
ANNEX A
BANK OF
RUSTON 401(k) PLAN
Investment Election Form
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Name of Plan Participant:
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Social Security Number:
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1. INSTRUCTIONS. This form provides your
directions to sell certain investments in your Bank of Ruston
401(k) Plan account for the purpose of purchasing the common
stock of Century Next Financial Corporation during the stock
offering.
To direct the investment of all or part of the funds credited to
your account into the common stock of Century Next Financial,
you should complete and submit this form to G. Randall Allison,
Vice President and Chief Financial Officer, to be received no
later than 5:00 p.m., Central time on [DATE1], 2010. A
representative for Bank of Ruston will retain a copy of this
form and return a copy to you. If you need any assistance in
completing this form, please contact G. Randall Allison at
(318) 255-3733.
If you do not complete and return this form to Bank of Ruston by
12:00 noon on [DATE1], 2010, the funds credited to your account
under the Plan will continue to be invested in accordance with
your prior investment directions.
2. INVESTMENT DIRECTIONS. As directed
below, I hereby authorize the sale of the funds currently
credited to my account and the purchase of common stock of
Century Next Financial with such proceeds. The total dollar
amount transferred from existing investment funds must be in
increments of $10. For example, you may transfer $1,000 or
$1,010, but you may not transfer $1,001 or $1,011. If the
value of any fund you select is insufficient to cover the dollar
amount selected below, then your order will be reduced
accordingly. Be aware that the fund values change daily, and
funds will not be transferred for several days after [DATE1],
2010.
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Plan Investment Funds
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Dollar Amount
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Target Retirement Income Fund
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Sell $
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Target Retirement 2010 Fund
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Sell $
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Target Retirement 2015 Fund
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Sell $
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Target Retirement 2020 Fund
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Sell $
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Target Retirement 2025 Fund
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Sell $
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Target Retirement 2030 Fund
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Sell $
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Target Retirement 2035 Fund
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Sell $
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Target Retirement 2040 Fund
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Sell $
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Target Retirement 2045 Fund
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Sell $
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Target Retirement 2050 Fund
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Sell $
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Pentegra Stable Value Fund
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Sell $
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Short Term Investment Fund
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Sell $
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Government Short Term Investment Fund
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Sell $
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Treasury Inflation Protected Securities Fund
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Sell $
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Aggregate Bond Index Fund
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Sell $
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S&P 500 Index Fund
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Sell $
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Vanguard Value Index Fund
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Sell $
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Vanguard Growth Index Fund
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Sell $
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S&P MidCap Index Fund
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Sell $
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Russell 2000 Index Fund
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Sell $
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Nasdaq 100 Index Fund
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Sell $
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US REIT Fund
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Sell $
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International Fund
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Sell $
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Number of Shares of Century Next Financial
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Price Per Share
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Total Amount To Purchase
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X $10.00 =
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$
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A-1
3. PURCHASER INFORMATION. To the
extent that your order cannot be filled with common stock of
Century Next Financial, the amount (including earnings, if any)
not used to purchase common stock will be returned to your other
investments in the Plan pursuant to your existing investment
elections. Please indicate your purchase priority in the
offering.
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a. o
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Eligible Account Holder Check here if you
were a depositor with $50.00 or more on deposit with Bank of
Ruston as of December 31, 2008. Please list your accounts
below.
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b. o
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Supplemental Eligible Account Holder Check
here if you were a depositor with $50.00 or more on deposit with
Bank of Ruston as of June 30, 2010, but are not an Eligible
Account Holder. Please list your account(s) below.
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c. o
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Other Member Check here if you were a
depositor with Bank of Ruston as of [DATE4, 2010] but are not an
Eligible Account Holder or Supplemental Eligible Account Holder.
Please list your account(s) below.
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d. o
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Community Member Check if none of the above
subscription offering categories applies, but you wish to place
an order for common stock through the Plan in the community
offering.
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Please Note:
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Failure to list all of your Bank of Ruston deposit accounts
that qualify you in a, b or c above, may result in the loss of
part or all of your subscription rights.
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Account Title (Name(s) on Account)
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Deposit Account Number
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4. PURCHASE LIMITATIONS. The following
restrictions apply to the aggregate number of shares you may
request to purchase during the stock offering, including your
purchase through the Plan plus any purchases you make
outside the Plan, using a Stock Order Form:
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Minimum number of shares: 25 shares ($250)
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Maximum number of shares: up to 20,000 shares ($200,000)
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Maximum number of shares for you, together with associates:
35,000 shares ($350,000)
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See The Offering Limitations on Common Stock
Purchases in the accompanying prospectus for more
information.
5. ACKNOWLEDGMENT OF PARTICIPANT. I
understand that this Investment Election Form is
irrevocable and shall be subject to all of the terms and
conditions of Bank of Ruston 401(k) Plan and the Plan of
Conversion. I acknowledge that I have received a copy of the
prospectus and the prospectus supplement. To the extent your
order cannot be filled with common stock of Century Next
Financial, the amount (including earnings, if any) not used to
purchase common stock will be returned to your other investments
in the Plan pursuant to your existing investment elections.
Please contact the conversion center at
( ) -
for more information.
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Signature of participant
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Date:
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Keep a
Copy for Your Records
A-2
ANNEX B
BANK OF
RUSTON
401(k) PLAN
Investment Choices
Commencing July 1, 2010, your account balance was
transferred from the Pentegra Defined Contribution Plan for
Financial Institutions to a single employer plan, and you were
given the opportunity to direct the investment of your account
into one or more of the following funds:
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Target Retirement Income Fund
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Government Short Term Investment Fund
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Target Retirement 2010 Fund
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Treasury Inflation Protected Securities Fund
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Target Retirement 2015 Fund
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Aggregate Bond Index Fund
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Target Retirement 2020 Fund
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S&P 500 Index Fund
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Target Retirement 2025 Fund
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Vanguard Value Index Fund
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Target Retirement 2030 Fund
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Vanguard Growth Index Fund
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Target Retirement 2035 Fund
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S&P MidCap Index Fund
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Target Retirement 2040 Fund
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Russell 2000 Index Fund
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Target Retirement 2045 Fund
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Nasdaq 100 Index Fund
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Target Retirement 2050 Fund
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US REIT Fund
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Pentegra Stable Value Fund
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International Fund
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Short Term Investment Fund
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In connection with the offering of common stock of Century Next
Financial, the Plan now provides that in addition to the funds
specified above, you may direct the trustee, or its
representative, to invest all or a portion of your account in
the Century Next Financial Corporation Stock Fund. You may elect
to have both past contributions and earnings, as well as future
contributions to your account invested among the funds listed
above. Transfers of past contributions and the earnings thereon
do not affect the investment mix of future contributions. You
may change your investment directions at any time. This may be
done either by filing a form or by telephone or other electronic
medium. You may also redirect the investment of your investment
accounts such that a percentage of any one or more investment
accounts may be transferred to any one or more other investment
accounts either by filing a form or by telephone or other
electronic medium.
The net gain (or loss) of the funds from investments (including
interest payments, dividends, realized and unrealized gains and
losses on securities, and expenses paid from the trust) will be
determined at least daily during the calendar year. For purposes
of such allocations, all assets of the trust are valued at their
fair market value.
B-1
Core Investment Funds. The annual percentage
return on these funds for the prior three years was:
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Funds
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2009
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2008
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2007
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Target Retirement Income Fund
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*
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*
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*
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Target Retirement 2010 Fund
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*
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*
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*
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Target Retirement 2015 Fund
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17.11
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%
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(22.8
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)%
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6.2
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%
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Target Retirement 2020 Fund
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*
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*
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*
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Target Retirement 2025 Fund
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20.75
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%
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(28.7
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)%
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6.6
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%
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Target Retirement 2030 Fund
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*
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*
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*
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Target Retirement 2035 Fund
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25.83
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%
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(34.2
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)%
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6.8
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%
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Target Retirement 2040 Fund
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*
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*
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*
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Target Retirement 2045 Fund
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26.35
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%
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(34.1
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)%
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7.5
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%
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Target Retirement 2050 Fund
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*
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*
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*
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Pentegra Stable Value Fund
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2.19
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%
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2.9
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%
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3.8
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%
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Short Term Investment Fund
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0.19
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%
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2.3
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%
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4.9
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%
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Government Short Term Investment Fund
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(0.09
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)%
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1.9
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%
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4.8
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%
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Treasury Inflation Protected Securities Fund
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10.60
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%
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*
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*
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Aggregate Bond Index Fund
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5.49
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%
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4.9
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%
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6.3
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%
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S&P 500 Index Fund
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26.01
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%
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(37.3
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)%
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4.9
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%
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Vanguard Value Index Fund
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*
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*
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*
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Vanguard Growth Index Fund
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*
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*
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*
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S&P MidCap Index Fund
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36.58
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%
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(36.5
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)%
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7.4
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%
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Russell 2000 Index Fund
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26.85
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%
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(33.8
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)%
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(2.1
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)%
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Nasdaq 100 Index Fund
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53.98
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%
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(42.0
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)%
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18.2
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%
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US REIT Fund
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26.77
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%
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(39.3
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)%
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(18.1
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)%
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International Fund
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31.33
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%
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(43.6
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)%
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10.6
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%
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The annual percentage return on these funds is not
available due to date of inception and/or date of offering to
the Plan |
Investment
Fund Descriptions
The following is a brief description of the above referenced
investment funds available for participant election.
SSgA Target Retirement Funds (including SSgA Target
Retirement Income Fund, SSgA Target Retirement 2010 Fund, SSgA
Target Retirement 2015 Fund, SSgA Target Retirement 2020 Fund,
SSgA Target Retirement 2025 Fund, SSgA Target Retirement 2030
Fund, SSgA Target Retirement 2035 Fund, SSgA Target Retirement
2040 Fund, SSgA Target Retirement 2045 Fund and SSgA Target
Retirement 2050 Fund). These funds offer complete, low cost
investment strategies with asset allocations which become more
conservative as you near retirement and are designed for people
who want a professional to decide what types of investments are
best for their selected retirement date. You simply select the
fund with a date closest to when you expect to retire and invest
accordingly. The funds seek to match, as closely as possible,
the performance of the corresponding SSgA Custom Index, over the
long term. Each fund seeks to achieve its objective by investing
in a set of underlying SSgA collective trust funds representing
various asset classes. Each fund (other than the SSgA Target
Retirement Income Fund) is managed to a specific retirement year
(target date) included in its name.
Over time, the allocation to asset classes and funds change
according to a predetermined glide path. (The glide
path represents the shifting of asset classes over time and does
not apply to the Income Fund). Each funds asset allocation
will become more conservative as it approaches its target
retirement date. This reflects the need for reduced investment
risks as retirement approaches and the need for lower volatility
of a portfolio, which may be a primary source of income after
retirement. The allocations reflected in the glide
B-2
path do not reflect tactical decisions made by SSgA to
overweight or underweight a particular asset class based on its
market outlook but rather management of each funds
strategic allocation according to its glide path and applicable
benchmark. Each fund attempts to closely match the
characteristics and returns or its custom benchmark as opposed
to any attempts to outperform this benchmark.
Once a fund reaches its target retirement date, it will begin a
five-year transition period to the SSgA Target Retirement Income
Fund resulting at the end of that five-year period in an
allocation to stocks that will remain fixed at approximately 35%
of assets. The remainder of the fund will be invested in
fixed-income securities.
Pentegra Stable Value Fund. The fund seeks to
preserve the principal amount of your contributions while
maintaining a rate of return comparable to other fixed income
instruments. The fund invests in investment contracts issued by
insurance companies, banks, and other financial institutions, as
well as enhanced short-term investment products. Each issuer
must meet the credit quality criteria in order to be approved by
the investment manager. The fund is managed to a weighted
average maturity of approximately 1.5-4.0 years and
maintains an average AA credit quality.
Short Term Investment Fund. The fund seeks to
maximize current income while preserving capital and liquidity
through investing in a diversified portfolio of short-term
securities. The funds yield reflects short-term interest
rates. The fund seeks to maintain a diversified portfolio of
short-term securities by investing in high-quality money market
securities and other short-term debt investments. Most of the
investments in the fund may have a range of maturity from
overnight to 90 days; however, 20% of the value of the fund
may be invested in assets with a maturity date in excess of
90 days, but not to exceed 13 months. All securities
are required to meet strict guidelines for credit quality and
must be rated at least A1 by Standard & Poors
and P1 by Moodys Investors Service.
Government Short Term Investment Fund. This
fund seeks to provide the safety of principal and current income
offered by short-term U.S. government securities. The fund
seeks to preserve principal and offer liquidity by investing
only in short-term issues of the U.S. Treasury and its
agencies. The funds investments have a short time to
maturity, with no more than 20% of the fund invested beyond
90 days. No security may have a maturity of more than
13 months.
TIPS Index Fund. The fund seeks to match the
total rate of return of the Barclays Capital U.S. Inflation
Notes Index during a calendar year. The fund seeks to match the
return of the index by investing in a portfolio of
U.S. Treasury inflation protected securities. The duration
of the fund is managed to that of the benchmark at all times, as
are the sector and security weights. Overall sector and security
weightings are also matched to the index. The fund is one of
full replication, investing in a portfolio that owns the
market-value weight of each security in the index.
Aggregate Bond Index Fund. The fund seeks to
match the returns of the Barclays Capital U.S. Aggregate
Bond Index. The fund invests primarily in government, corporate,
mortgage-backed and asset-backed securities. The fund invests in
a well-diversified portfolio that is representative of the broad
domestic bond market.
S&P 500 Index Fund. The fund seeks to
replicate the returns and characteristics of the S&P 500
Index. The fund seeks to maintain the returns of the index by
investing in a portfolio that replicates the index by owning
securities in the same capitalization weights as they appear in
the index. Replication seeks low turnover, accurate tracking,
and low costs. The funds approach is to buy and hold
securities, trading only when there is a change to the
composition of the index or when cash flow activity occurs in
the fund. The fund uses a hierarchy of trading alternatives when
appropriate internal crossing, external crossing,
futures, and open market trades to attempt to
capitalize on every opportunity to reduce the funds
transaction costs. To provide 100% equity exposure, the base
fund maintains a small (generally less than 5%) position in
unleveraged S&P 500 stock index futures contracts. Futures
help enable better tracking of index returns and allow for
greater liquidity.
Vanguard Value Index. The fund seeks to track
the investment performance of the MSCI US Prime Market Value
Index, an unmanaged benchmark representing
U.S. large-capitalization value stocks. Using full
replication, the portfolio holds all stocks in the same
capitalization weighing as the index. The experience and
stability of Vanguards Quantitative Equity Group have
permitted continuous refinement of techniques for reducing
tracking error. The group uses proprietary software to implement
trading decisions that accommodate
B-3
cash flow and maintain close correlation with index
characteristics. Vanguards refined indexing process,
combined with low management fees and efficient trading, has
provided tight tracking net of expenses.
Vanguard Growth Index. The fund seeks to track
the investment performance of the MSCI US Prime Market Growth
Index, an unmanaged benchmark representing large
U.S. firms. Using full replication, the portfolio holds all
stocks in the same capitalization weighing as the index. The
experience and stability of Vanguards Quantitative Equity
Group have permitted continuous refinement of techniques for
reducing tracking error. The group uses proprietary software to
implement trading decisions that accommodate cash flow and
maintain close correlation with index characteristics.
Vanguards refined indexing process, combined with low
management fees and efficient trading, has provided tight
tracking net of expenses.
S&P MidCap Fund. The fund seeks to
replicate the returns and characteristics of the S&P MidCap
400 Index. The fund seeks to match the return of the index
by investing in a portfolio that owns units of one or more
portfolios that hold securities of the index, in the same
capitalization weights as they appear in the index. Replication
seeks low turnover, accurate tracking and low costs. The
funds approach is to buy and hold securities, trading only
when there is a change to the composition of the index or when
cash flow activity occurs. We use a hierarchy of trading
alternatives when appropriate internal crossing,
external crossing, futures, and open market trades
to attempt to capitalize on every opportunity to reduce
transaction costs. To provide 100% equity exposure, the base
fund maintains a small (generally less than 5%) position in
S&P MidCap 400 stock index futures contract. Futures help
enable better tracking of index returns and allow for greater
liquidity.
Russell 2000 Index Fund. The fund seeks to
replicate the returns and characteristics of the Russell
2000 Index. The fund seeks to match the return of the index
by investing in a portfolio that holds the securities of the
index. Replication seeks low turnover, accurate tracking and low
costs. The funds approach is to buy and hold securities,
trading only when there is a change to the composition of the
index or when cash flow activity occurs. We use a hierarchy of
trading alternatives when appropriate internal
crossing, external crossing, futures, and open market
trades to attempt to capitalize on every opportunity
to reduce transaction costs. To provide 100% exposure to the
equity market and help increase tracking accuracy, the base fund
may hold Russell 2000 Index futures contracts (no more than 5%
of the holdings are futures). Futures help enable better
tracking of index returns and allow for greater liquidity.
Nasdaq 100 Index Fund. The fund seeks to match
the performance of the NASDAQ 100 Index. The fund invests in all
of the stocks in the NASDAQ 100 Index in proportion to their
weighting in the Index. The Fund may also hold 2-5% of its value
in futures contracts (an agreement to buy or sell a specific
security by a specific date at an agreed upon price). The
strategy of investing in the same stocks as the Index minimizes
the need for trading and therefore results in lower expenses.
REIT Index Fund. The fund invests primarily in
equity shares of real estate investment trusts (REITs). The fund
typically invests in all securities in the Dow Jones/Wilshire
REIT Index in proportion to their weighting in the Index. The
fund seeks to match the performance of the Dow Jones/Wilshire
REIT Index while providing daily liquidity. As such we seek to
maintain sector and security weightings that closely match the
Index. The Dow Jones/Wilshire REIT Index is comprised of 90
publicly traded REITs. To be included in the Index, a company
must be an equity owner and operator of commercial (or
residential) real estate and must generate at least 75% of its
revenue from such assets. The REITs invest in loans secured by
real estate and invest directly in real estate properties such
as apartments, office buildings, and shopping malls. REITS
generate income from rentals or lease payments and offer the
potential for growth from property appreciation and the
potential for capital gains from the sale of properties.
International Fund. The fund seeks to match
the performance of the Morgan Stanley Capital International,
Europe, Australia, Far East (MSCI EAFE) Index while providing
daily liquidity. The fund typically invests in all the stocks in
the MSCI EAFE Index in proportion to their weighting in the
Index. The strategy of investing in the same stocks as the Index
minimizes the need for trading and therefore results in lower
expenses.
B-4
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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Item 13
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Other
Expenses of Issuance and Distribution.
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SEC filing fees*
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$
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750
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Office of Thrift Supervision filing fees
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|
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12,000
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FINRA filing fees*
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1,500
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Printing, postage, mailing and EDGAR expenses
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|
|
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70,000
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Legal fees and expenses
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250,000
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Blue Sky filing fees and expenses
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35,000
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Accounting fees and expenses
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|
|
|
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45,000
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|
Appraisers fees and expenses
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|
|
|
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33,500
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Business Plan
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|
|
|
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25,000
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Marketing agent fees and expenses
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200,000
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Certificate printing
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|
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7,500
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Conversion agent fees
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10,000
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Miscellaneous
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59,750
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Total
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$
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750,000
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Item 14.
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Indemnification
of Directors and Officers.
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In accordance with the Louisiana Business Corporation Law,
Article 8 of the Registrants Articles of
Incorporation provides as follows:
A. Personal Liability of Directors and
Officers. A director or officer of the
Corporation shall not be personally liable for monetary damages
for any action taken, or any failure to take any action, as a
director or officer except to the extent that by law a
directors or officers liability for monetary damages
may not be limited.
B. Indemnification. The Corporation shall
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action,
suit or proceeding, including actions by or in the right of the
Corporation, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was
a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding to the
full extent permissible under Louisiana law.
C. Advancement of Expenses. Reasonable
expenses incurred by an officer, director, employee or agent of
the Corporation in defending an action, suit or proceeding
described in Section B of this Article 8 may be paid
by the Corporation in advance of the final disposition of such
action, suit or proceeding if authorized by the board of
directors (without regard to whether participating members
thereof are parties to such action, suit or proceeding), upon
receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that the
person is not entitled to be indemnified by the Corporation.
D. Other Rights. The indemnification and
advancement of expenses provided by or pursuant to this
Article 8 shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, insurance or other
agreement, vote of shareholders or directors (regardless of
whether directors authorizing such indemnification are
beneficiaries thereof) or otherwise, both as to actions in their
official capacity and as to actions in another capacity while
holding an
II-1
office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such
person.
E. Insurance. The Corporation shall have
the power to purchase and maintain insurance or other similar
arrangement on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture or other enterprise, against any liability
asserted against or incurred by him in any such capacity, or
arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such
liability under the provisions of this Article 8.
F. Security Fund; Indemnity
Agreements. By action of the Board of Directors
(notwithstanding their interest in the transaction), the
Corporation may create and fund a trust fund or other fund or
form of self-insurance arrangement of any nature, and may enter
into agreements with its officers, directors, employees and
agents for the purpose of securing or insuring in any manner its
obligation to indemnify or advance expenses provided for in this
Article 8.
G. Modification. The duties of the
Corporation to indemnify and to advance expenses to any person
as provided in this Article 8 shall be in the nature of a
contract between the Corporation and each such person, and no
amendment or repeal of any provision of this Article 8, and
no amendment or termination of any trust or other fund or form
of self-insurance arrangement created pursuant to Section F
of this Article 8, shall alter to the detriment of such person
the right of such person to the advance of expenses or
indemnification related to a claim based on an act or failure to
act which took place prior to such amendment, repeal or
termination.
H. Proceedings Initiated by Indemnified
Persons. Notwithstanding any other provision of
this Article 8, the Corporation shall not indemnify a
director, officer, employee or agent for any liability incurred
in an action, suit or proceeding initiated (which shall not be
deemed to include counter-claims or affirmative defenses) or
participated in as an intervenor or amicus curiae by the person
seeking indemnification unless such initiation of or
participation in the action, suit or proceeding is authorized,
either before or after its commencement, by the affirmative vote
of a majority of the directors in office.
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Item 15.
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Recent
Sales of Unregistered Securities
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Not applicable.
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Item 16.
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Exhibits
and Financial Statement Schedules
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The exhibits and financial statement schedules filed as a part
of this Registration Statement are as follows:
(a) List of Exhibits (filed herewith unless
otherwise noted)
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No.
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Description
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1
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.1
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Form of Agency Agreement with Sandler ONeill &
Partners, L.P.(1)
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1
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.2
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Engagement Letter with Sandler ONeill &
Partners, L.P. as marketing agent(1)
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2
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.1
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Plan of Conversion, as amended(1)
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3
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.1
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Articles of Incorporation of Century Next Financial
Corporation(1)
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3
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.2
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Bylaws of Century Next Financial Corporation(1)
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4
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.0
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Form of Stock Certificate of Century Next Financial
Corporation(1)
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5
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.0
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Opinion of Elias, Matz, Tiernan & Herrick L.L.P. re:
legality(1)
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8
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.1
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Opinion of Elias, Matz, Tiernan & Herrick L.L.P. re:
Federal tax matters(1)
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8
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.2
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Opinion of Heard McElroy & Vestal LLP re: Louisiana
tax matters(1)
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8
|
.3
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Letter of RP Financial, LC. re: Subscription Rights(1)
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10
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.1
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Bank of Ruston Officers Deferred Compensation Plan(1)
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10
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.2
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Bank of Ruston Death Benefit Only Income Continuation Plan(1)
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10
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.3
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Bank of Ruston Directors Indexed Deferred Compensation
Plan(1)
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|
10
|
.4
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Bank of Ruston Directors Deferral Income Plan(1)
|
II-2
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No.
|
|
Description
|
|
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23
|
.1
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Consent of Elias, Matz, Tiernan & Herrick L.L.P.
(included in Exhibit 5.0 and Exhibit 8.1,
respectively)(1)
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23
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.2
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Consent of Heard McElroy & Vestal LLP
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23
|
.3
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Consent of RP Financial, LC(1)
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24
|
.0
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Power of Attorney (included in Signature Page of this
Registration Statement)(1)
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99
|
.1
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Subscription Order Form and Instructions(1)
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99
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.2
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|
Additional Solicitation Material(1)
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|
99
|
.3
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|
Appraisal Report of RP Financial, LC(1)
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|
99
|
.4
|
|
Form of proxy statement and proxy for members of Bank of
Ruston(1)
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(b) Financial Statement Schedules
All schedules have been omitted as not applicable or not
required under the rules of
Regulation S-X.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any Prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of the
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
Prospectus filed with the Commission pursuant to
Rule 424 (b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change
in the maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the
effective Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the Offering.
(4) That, for purposes of determining any liability under
the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(5) That, for the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment
that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-3
(6) That, for the purpose of determining liability of the
Registrant under the Securities Act of 1933 to any purchaser in
the initial distribution of the securities:
The undersigned Registrant undertakes that in a primary offering
of securities of the undersigned Registrant pursuant to this
registration statement, regardless of the underwriting method
used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the
following communications, the undersigned Registrant will be a
seller to the purchaser and will be considered to offer or sell
such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned Registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned Registrant or used
or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned Registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned Registrant to the purchaser.
The undersigned Registrant hereby undertakes to furnish stock
certificates to or in accordance with the instructions of the
respective purchasers of the Common Stock, so as to make
delivery to each purchaser promptly following completion of the
offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 2 to the
Form S-1
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Ruston,
state of Louisiana on August 11, 2010.
CENTURY NEXT FINANCIAL CORPORATION
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|
|
|
By:
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/s/ Benjamin
L. Denny
|
Benjamin L. Denny
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
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|
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Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Thomas
W. Rogers*
Thomas
W. Rogers, Esq.
|
|
Chairman of the Board
|
|
August 11, 2010
|
|
|
|
|
|
/s/ Benjamin
L. Denny
Benjamin
L. Denny
|
|
President and Chief Executive Officer and Director
|
|
August 11, 2010
|
|
|
|
|
|
/s/ G.
Randall Allison
G.
Randall Allison
|
|
Vice President and Chief Financial Officer (principal financial
and accounting officer)
|
|
August 11, 2010
|
|
|
|
|
|
/s/ J.
Brandon Ewing*
J.
Brandon Ewing
|
|
Director
|
|
August 11, 2010
|
|
|
|
|
|
/s/ William
D. Hogan*
William
D. Hogan
|
|
Executive Vice President, Business Development and Director
|
|
August 11, 2010
|
|
|
|
|
|
/s/ Daniel
D. Reneau*
Dr. Daniel
D. Reneau
|
|
Director
|
|
August 11, 2010
|
|
|
|
|
|
/s/ Scott
R. Thompson*
Scott
R. Thompson
|
|
Director
|
|
August 11, 2010
|
|
|
|
|
|
/s/ Dewey
C. Thurmon*
Dewey
C. Thurmon
|
|
Director
|
|
August 11, 2010
|
|
|
|
|
|
/s/ Neal
Walpole*
Neal
Walpole
|
|
Director
|
|
August 11, 2010
|
|
|
|
* |
|
By Benjamin L. Denny pursuant to power of attorney. |
II-5