As filed with the Securities and Exchange Commission on September 12, 2003
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party Other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] Confidential, for Use of the Commission Only (as Permitted by Rule
14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12.
EAGLE BANCORP
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule, or registration statement no.:
(3) Filing party:
(4) Date filed:
EAGLE BANCORP
1400 Prospect Avenue
Helena, Montana 59601
(406) 442-3080
September 12, 2003
Dear Stockholder:
You are invited to attend the 2003 Annual Meeting of Stockholders (the
"Annual Meeting") of Eagle Bancorp, the stock holding company for American
Federal Savings Bank (the "Bank"). The Annual Meeting is scheduled to be held on
Thursday, October 16, 2003, at 10:00 a.m., Montana time at the main office of
the Bank, located at 1400 Prospect Avenue, Helena, Montana.
The attached Notice of Annual Meeting and Proxy Statement describes the
proposals to be voted on at the Annual Meeting. The Board of Directors of Eagle
Bancorp has determined the approval of the proposals is in the best interests of
Eagle Bancorp and its stockholders. Therefore, the Board unanimously recommends
that you vote in favor of all proposals and in favor of the Board's nominees for
director. Members of the Board and officers of Eagle Bancorp and Eagle Bancorp's
independent auditors will be present at the Annual Meeting to respond to any
questions that you may have regarding the agenda for the Annual Meeting.
Please sign and return the enclosed proxy card promptly. Your
cooperation is appreciated since a majority of the common stock outstanding must
be represented either in person or by proxy to constitute a quorum for the
conduct of business at the annual meeting.
On behalf of the Board of Directors and all of the employees of Eagle
Bancorp, I wish to thank you for all your support and interest. We look forward
to seeing you at the Annual Meeting.
Sincerely yours,
/s/ LARRY A. DREYER
--------------------------------
Larry A. Dreyer
President and CEO
EAGLE BANCORP
1400 Prospect Avenue
Helena, MT 59601
(406) 442-3080
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 16, 2003
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Eagle
Bancorp ("Eagle" or the "Company") will be held at the home office of American
Federal Savings Bank located at 1400 Prospect Avenue, Helena, Montana on
Thursday, October 16, 2003, at 10:00 a.m. Montana time, for the following
purposes, as more completely set forth in the accompanying Proxy Statement:
I. To elect two (2) directors of the Company for three year
terms.
II. To ratify the appointment by the Company's Board of Directors
of the firm of Anderson ZurMuehlen & Co, P.C. as independent public accountants
for the Company for the fiscal year ending June 30, 2004.
III. To transact such other business as may properly come before
the meeting. Except with respect to procedural matters incident to the conduct
of the meeting, management of Eagle is not aware of any matters other than those
set forth above which may properly come before the meeting.
The Board of Directors of Eagle has fixed the close of business on
Tuesday, September 2, 2003, as the voting record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting. Only those
stockholders of record as of the close of business on that date will be entitled
to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/ LARRY A. DREYER
-------------------------------
Larry A. Dreyer
President & CEO
September 12, 2003
Helena, Montana
YOUR VOTE IS IMPORTANT. YOU ARE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND
THE ANNUAL MEETING YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY
GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE
EXERCISE THEREOF. PROXIES MUST BE RECEIVED PRIOR TO THE COMMENCEMENT OF THE
MEETING.
EAGLE BANCORP
-----------------
PROXY STATEMENT
-----------------
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 16, 2003
This Proxy Statement is being furnished to the holders of the common
stock, par value $0.01 per share ("Common Stock"), of Eagle Bancorp ("Eagle" or
the "Company"), in connection with the solicitation of proxies by the Board of
Directors for use at the 2003 Annual Meeting of Stockholders ("Annual Meeting")
to be held on Thursday, October 16, 2003, at the home office of American Federal
Savings Bank located at 1400 Prospect Avenue, Helena, Montana at 10:00 a.m.
Montana time, for the purposes set forth in the attached Notice of Annual
Meeting of Stockholders. This Proxy Statement is first being mailed to
stockholders on or about September 12, 2003.
MATTERS TO BE CONSIDERED AND ACTED UPON AT THE ANNUAL MEETING
Each proxy solicited hereby, if properly signed and returned to Eagle
and not revoked prior to its use, will be voted in accordance with the
instructions indicated on the proxies. If no contrary instructions are given,
each signed proxy received will be voted in favor of the election of Mr.
McCarvel and Mr. Maierle, in favor of the ratification of Anderson ZurMuehlen &
Co., P.C. and in the discretion of the proxy holder, as to any other matter
which may properly come before the Annual Meeting. Only proxies that are
returned can be counted and voted at the Annual Meeting.
SOLICITATION OF PROXIES
All costs of the solicitation of proxies will be borne by Eagle. In
addition, directors, officers and other employees of Eagle or American Federal
Savings Bank (the "Bank" or "American Federal") may solicit proxies personally
or by telephone or other means without additional compensation. Eagle will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Common Stock.
REVOCATION OF PROXIES
A stockholder who has given a proxy may revoke it at any time prior to
its exercise at the Annual Meeting by (i) giving written notice of revocation to
the Secretary of Eagle, (ii) properly submitting to Eagle a duly-executed proxy
bearing a later date, or (iii) attending the Annual Meeting and voting in
person. All written notices of revocation and other communications with respect
to revocation of proxies should be addressed as follows: Eagle Bancorp, 1400
Prospect Avenue, Helena, Montana 59601, Attention: Terey Artz. Proxies solicited
hereby may be exercised only at the Annual Meeting and will not be used for any
other meeting.
VOTING SECURITIES
The securities that may be voted at the Annual Meeting consists of
shares of Common Stock, with each share entitling its owner to one vote on all
matters to be voted on at the Annual Meeting. Only holders of record of Common
Stock at the close of business on September 2, 2003 (the "Record Date"), will be
entitled to notice of and to vote at the Annual Meeting. On the Record Date
there were 1,209,772 shares of Common Stock issued and outstanding and 648,493
shares of Common Stock, or 53.6% of the issued and outstanding Common Stock, are
held
1
by Eagle Financial MHC, Eagle's mutual holding company. Eagle had no other class
of securities outstanding at this time.
The presence in person or by proxy of the holders of at least a
majority of the total number of shares of Common Stock entitled to vote is
necessary to constitute a quorum at the Annual Meeting. With respect to any
matter, any shares for which a broker indicates on the proxy that it does not
have discretionary authority as to such shares to vote on such matter ("Broker
Non-Votes") will be considered present for the purposes of determining whether a
quorum is present. In the event there are not sufficient votes for a quorum or
to approve or ratify any proposal at the time of the Annual Meeting, the Annual
Meeting shall be adjourned in order to permit further solicitation of proxies.
VOTING PROCEDURES
Once a quorum has been established, the affirmative vote of a majority
of the outstanding shares of Common Stock present or represented by proxy at the
Annual Meeting is required to approve the proposals described in this proxy
statement, except as described below. Additionally, directors can be elected by
a plurality of stockholders. Stockholders are not permitted to cumulate their
votes for the election of directors or any other purpose. Votes may be cast for
or withheld from each nominee for election as directors. Votes that are withheld
and Broker Non-Votes will have no effect on the outcome of the election for
directors because directors will be elected by a plurality of votes cast.
With respect to the other proposals to be voted upon at the Annual
Meeting, stockholders may vote for or against a proposal and may abstain from
voting. Ratification of Anderson ZurMuehlen & Co., P.C. as independent auditors
for the fiscal year ending June 30, 2004, will require the affirmative vote of a
majority of the outstanding shares of Common Stock present in person or by proxy
at the Annual Meeting and entitled to vote. Abstentions and Broker Non-Votes
will have the same effect as a vote against this proposal.
The Company's Annual Report to Stockholders, which includes its annual
report on Form 10-KSB for its fiscal year ended June 30, 2003, is mailed
herewith to stockholders. The Company has filed this report with the Securities
and Exchange Commission (the "SEC"). Stockholders may obtain, free of charge, an
additional copy of the annual report on Form 10-KSB by requesting it by
telephone or in writing from Terey Artz, Eagle Bancorp, 1400 Prospect Avenue,
Helena, Montana 59601, (406) 442-3080.
Executed, unmarked proxies will be voted for all proposals. Except for
procedural matters incidental to conduct of the Annual Meeting, the Company
knows of no other matters expected to come before the meeting.
Proxies solicited hereby are to be returned to the Company's transfer
agent, Registrar & Transfer Company. The Board of Directors has designated Terey
Artz, corporate secretary, to act as Inspector of Election and tabulate votes at
the Annual Meeting. After the final adjournment of the Annual Meeting, the
proxies will be returned to the Company.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of June 30, 2003, except
as specifically noted, with respect to ownership of the Company's Common Stock
by: (i) Eagle Financial MHC, the company's mutual holding company; (ii) the
American Federal Savings Bank Employee Stock Ownership Plan (the "ESOP"); (iii)
the executive officers and directors of the Company; and (iv) all the directors
and executive officers of the Company as a group. Except for those listed below,
Eagle has no knowledge of any other person (including any "group" as that term
is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
who owns beneficially more than 5% of the Common Stock.
2
Common Stock
Beneficially Owned(1)
---------------------------
Name Title or Address Number(2) Percent
---- ---------------- ------ -------
Eagle Financial MHC 1400 Prospect Avenue 648,493 53.60%
Helena, MT 59601
Jeffrey S. Halis 500 Park Avenue, Fifth Floor 66,400 5.49%
New York, NY 10022
Kenneth R. Lehman and Joan 1408 N. Abingdon Street 81,228 6.71%
Abercrombie Lehman Arlington, VA 22207
American Federal Savings Bank 1400 Prospect Avenue 36,806 3.04%
Employee Stock Ownership Plan Helena, MT 59601
Robert L. Pennington Chairman of the Board 14,900(3)(4)(7) 1.23%
Charles G. Jacoby Vice Chairman of the Board 14,900(7) 1.23%
Don O. Campbell Director 7,400(7) *
Larry A. Dreyer Director, President and Chief 23,818(4)(7)(8)(9) 1.97%
Executive Officer
Teresa L. Hartzog Director 12,170(7) 1.01%
James A. Maierle Director 14,900(5)(7) 1.23%
Thomas J. McCarvel Director 9,400(7) *
Peter J. Johnson Senior Vice President/Treasurer 14,955(4)(6)(7)(8) 1.24%
Michael C. Mundt Senior Vice President/Lending 8,596(4)(7)(8) *
Joanne Y. Sanderson Senior Vice President/Operations 20,991(4)(7)(8) 1.74%
Directors and Executive Officers as
a group (10 persons) N/A 142,030 11.74%
--------------------
(1) Except as otherwise noted, all beneficial ownership by directors and
executive officers is direct and each director or executive officer
exercises sole voting and investment power over the shares.
(2) Reflects information provided by these persons, filings made by these
persons with the Securities and Exchange Commission, and other
information known to Eagle.
(3) Includes 5,000 shares held jointly by Mr. Pennington and his spouse.
Mr. Pennington has shared voting and investment power over these 5,000
shares.
(4) Includes Common Stock held by each Executive Officer and Mr. Pennington
in the Bank's Non-Contributory Profit Sharing Plan.
(5) Includes 5,000 shares held by Rosmar, Inc. for which Mr. Maierle, as
President of Rosmar, Inc., has shared voting and investment power.
(6) Includes 50 shares held by children.
(footnotes continued on next page)
3
(footnotes continued from previous page)
(7) Includes total shares awarded under the Company's Stock Incentive Plan
approved by shareholders on October 19, 2000. Shares were awarded
January 2001 and vest evenly over a five year period.
(8) Includes Common Stock held in the Bank's ESOP.
(9) Includes 375 shares held by wife for which Mr. Dreyer disclaims
beneficial ownership.
* Represents less than 1% of outstanding shares.
---------------
PROPOSAL I - ELECTION OF DIRECTORS
The Company's Bylaws provide that the Board of Directors be composed of
seven (7) members, whose terms are divided into three approximately equal
classes. The members of each class are elected for a term of three years. One
class is elected annually.
Two directors will be elected at the Annual Meeting. The Board of
Directors has nominated current directors Thomas J. McCarvel and James A.
Maierle for re-election. If elected, Mr. McCarvel and Mr. Maierle will each
serve as director for a three year term expiring at the Annual Meeting to be
held in 2006.
The Board of Directors acts as Eagle's Nominating Committee and
determines management nominees for election as directors. The Bylaws also allow
stockholders to submit nominations in writing directly to the Corporate
Secretary of the Company not fewer than five (5) days prior to the date of the
Annual Meeting. No stockholder nominations have been received by the Company.
There are no arrangements known to management between the persons named and any
other person pursuant to which such nominees were selected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES FOR DIRECTOR UNDER THIS PROPOSAL I.
The persons named in the enclosed proxy intend to vote for the election
of the named nominees, unless the proxy is marked by the stockholder to the
contrary. Eagle Financial MHC, which owns a majority of the Company's common
stock, also intends to vote its shares in favor of the named nominee. If any
nominee is unable to serve, all valid proxies will be voted for the election of
such substitute as the Board of Directors may recommend. The Board of Directors
knows of no reason why any nominee might be unable to serve.
The following table sets forth certain information as of June 30, 2003,
with respect to each nominee, and each director continuing in office.
Director New or Current
Name Age Since(1) Term to Expire(2)
---- --- ----- --------------
BOARD NOMINEES
--------------
Thomas J. McCarvel 54 1998 2006
Mr. McCarvel has served as a Vice President of
Carroll College in Helena since December 1991. He
was the Chief Operating Officer of Anderson
ZurMuehlen & Co., P.C., a public accounting firm in
Helena, Montana, and Eagle and American Federal's
independent auditors from 1988 to 1991.
4
Director New or Current
Name Age Since(1) Term to Expire(2)
---- --- ----- --------------
James A. Maierle 55 1997 2006
Mr. Maierle currently serves as President of
Morrison-Maierle, Inc., a civil engineering
corporation, headquartered in Helena.
DIRECTORS CONTINUING IN OFFICE
------------------------------
Larry A. Dreyer 57 1990 2005
Mr. Dreyer is currently President (since 1993) and
Chief Executive Officer (since 1995) of American
Federal. He is also President and CEO of Eagle. He
joined American Federal Savings Bank in 1973,
serving as its Controller. He is a member and past
president of the Downtown Helena Kiwanis Club and
past chairman of both the St. Peter's Hospital
Foundation and Diocese of Helena Finance Council.
He is also a member of the Independent Community
Bankers of America, National Bank Services
Committee.
Don O. Campbell 69 1994 2004
Mr. Campbell is a retired certified public
accountant and previously served as Vice President
and Controller of Capri, Inc., an investment
management company located in Helena.
Charles G. Jacoby 71 1979 2004
Mr. Jacoby is retired. He formerly owned a retail
clothing establishment in Helena. He serves as Vice
Chairman of the Board.
Teresa L. Hartzog 72 1993 2005
Ms. Hartzog is retired. She was formerly employed
by the Leaphart law firm where she served as office
manager and a legal secretary.
Robert L. Pennington 71 1973 2004
Mr. Pennington is the Chairman of Eagle. He was
previously the President and Chief Executive
Officer of American Federal Savings Bank from 1974
through 1995, when he retired. He has served as
Chairman of American Federal since 1993.
--------------------
(1) Includes prior service on the Board of Directors of American Federal
Savings Bank.
(2) All terms expire on the date of the Annual Meeting.
---------------
5
Board Meetings and Committees
The business of the Company's and the Bank's Board of Directors is
conducted through meetings once a month and may have additional meetings. During
the fiscal year ended June 30, 2003, the Board met twelve times. All Directors
who served as directors during the fiscal year ended June 30, 2003, attended at
least 75% of Board meetings. All committee members attended at least 75% of the
meetings of their respective committees. Certain of the standing committees are
discussed:
Report of the Audit Committee
The Audit Committee consists of three (3) non-employee directors and
met ten (10) times during the fiscal year ended June 30, 2003. The Audit
Committee chairmanship is rotated between Mr. Jacoby and Mr. Campbell in
alternating years. The Audit Committee is appointed by the Board of Directors to
assist the Board in fulfilling its responsibility for oversight of the quality
and integrity of the Company's financial reporting process.
The Audit Committee has adopted a charter which was attached to the
proxy statement for the 2001 Annual Meeting of Stockholders. The charter
describes the Committee's principal duties and responsibilities including:
o Oversight and review of the annual financial reporting process
(including regulatory financial reporting);
o Oversight and review of the system of internal controls and
safeguards;
o Oversight of the adequacy and integrity of the Company's
financial information; and
o Maintenance of an open avenue of communication between the
Board of Directors, senior management, internal auditors, and
the Company's independent public accountants and permit
auditors and internal auditors to meet with the Audit
Committee without the presence of management.
The Audit Committee is independent in accordance with the amended
issuer rules of the NASD. The Audit Committee Charter is reviewed annually. In
addition, the Audit Committee has taken the following actions:
o Reviewed and discussed the Company's audited financial
statements for the 2003 fiscal year with the management of the
Company.
o Discussed with the Company's independent auditors the matters
required to be discussed under SAS 61, as amended
(Codification of Statements on Auditing Standards).
o Received written disclosures and the letter from its
independent auditors required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1,
"Independence Discussions With Audit Committees).
Based upon the foregoing, the Audit Committee recommended to the Board
of Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2003, to be
filed with the SEC.
Auditor Fees, Other Fees and Auditor Independence
For the year ended June 30, 2003, the Company paid its independent
auditors Anderson ZurMuehlen & Co., P.C., and related affiliates, approximately
$44,000 for audit services, including unaudited review of financial statements
in the quarterly reports to shareholders on Form 10-QSB filed with the
Securities and Exchange
6
Commission and corporate tax return preparation and $10,530 for other non-audit
services. These non-audit services consisted primarily of employee benefit
services and computer software. The Audit Committee has concluded that the
providing of these non-audit services did not adversely impact the independence
of Anderson ZurMuehlen & Co., P.C.
Don O. Campbell, Chairman
Charles G. Jacoby
Robert L. Pennington
Compensation Committee. The Compensation Committee met four (4) times
in fiscal 2003. It reviews and discusses employee performance and prepares
recommendations for annual salary adjustments and bonuses. This committee
currently consists of Messrs. Pennington and Campbell and Ms. Hartzog.
The Investment Committee. The Investment Committee consists of
Directors Dreyer, Jacoby and Maierle, as well as executive officers Johnson and
Mundt. The Investment Committee meets at least quarterly in order to review
investment performance and strategy. The Investment Committee met four (4) times
during the year ended June 30, 2003.
The Asset Liability Management Committee. The Asset Liability
Management Committee consists of Directors Pennington and Dreyer as well as
executive officers Johnson and Mundt. The Asset Liability Management Committee
meets at least quarterly to review American Federal's policies concerning
interest rate risk and loan and deposit rates. It met four (4) times during the
year ended June 30, 2003.
Directors' Compensation
During fiscal 2003, each director, except for the Chairman of the
Board, was paid an annual fee of $12,000. The Chairman of the Board receives an
annual fee of $20,700. Also, each non-employee director, other than the Chairman
of the Board, was paid $175 for each committee meeting attended. The total fees
paid to the directors of Eagle for the year ended June 30, 2003, were $99,995.
Eagle has no other director compensation plans or director deferred compensation
plans other than the Stock Incentive Plan approved at the annual meeting in
2000. Each director of the Company also serves as a director of American Federal
and Eagle Financial MHC. Directors do not receive additional compensation for
their service on the boards of American Federal or Eagle Financial MHC.
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by Larry A. Dreyer in each of the
last three fiscal years. No other executive officer of Eagle or American Federal
served as President or earned a total salary and bonus in excess of $100,000
during the last three fiscal years.
Long-Term
Annual Compensation Compensation
--------------------------------------------------- ------------
Year Ended Other Annual Restricted All Other
Name and Position June 30 Salary Bonus Compensation(1) Stock Awards(2) Compensation(3)
----------------- ------- ------ ----- ------------ ------------ ------------
Larry A. Dreyer 2003 $122,000 $18,300 $12,000 $ 0 $42,632
President and Chief 2002 $115,700 $ 9,835 $12,000 $ 0 $40,001
Executive Officer 2001 $112,000 $ 7,840 $12,000 $55,545 $35,357
-----------------------
(1) Represents compensation for serving on the board of directors of Eagle
Bancorp.
(footnotes continued on next page)
7
(footnotes continued from previous page)
(2) On October 19, 2000, shareholders of the company approved the 2000
Eagle Bancorp Stock Incentive Plan (the "Plan"). Under the Plan,
certain employees of the Bank and directors are eligible to receive
stock related benefits, including stock options and restricted stock.
Under the Plan, the Board made restricted stock awards available to all
nonemployee members of the Board and to certain officers, including
Messrs. Dreyer, Johnson, Mundt and Ms. Sanderson. The restricted stock
vests over a five year period at a rate of 20% per year. The value of
shares when awarded was determined by multiplying the closing price
($11.50) of the Common Stock on January 18, 2001, the date the of the
award, by the number of shares awarded. No shares have vested to date.
(3) For fiscal 2003 consists of employer contribution to profit sharing
plan of $10,720, $2,722 for employer 401(k) payments, $23,209 for
employer deferred compensation payments, $2,516 for ESOP stock, and
$3,465 for various medical and life insurance payments.
--------------------
Option Grants in Last Fiscal Year. There were no options granted in
fiscal 2003 to Mr. Dreyer or any other employees or directors.
Employment Agreement. American Federal entered into an Employment
Agreement with its President, Larry A. Dreyer, effective January 1, 2000. The
Employment Agreement has an initial term of three years. The Employment
Agreement is terminable by the Bank for cause as defined in the Employment
Agreement. If Mr. Dreyer is terminated without cause, he will be entitled to a
continuation of his salary plus bonuses and deferred compensation from the date
of termination through the remaining term of the Employment Agreement. The
aggregate payment made to Mr. Dreyer would be an expense to the Bank and would
result in reductions to net income and capital. After the first three years, the
Employment Agreement may be renewed annually by the board of directors after a
determination of the satisfactory performance of Mr. Dreyer in the Board's sole
discretion. If Mr. Dreyer becomes disabled during the term of the Employment
Agreement, he would continue to receive payment of 75% of the base salary until
he returns to full-time employment at American Federal, reaches age 65, accepts
another full-time position with another employer, or upon his death. Such
payments shall be reduced by any other benefit payments made under a disability
plan in effect for Mr. Dreyer and the Bank's other employees.
Non-Contributory Profit Sharing Plan. Neither Eagle nor American
Federal has a pension plan for employees. Instead, the Bank has established a
non-contributory profit sharing plan for eligible employees who have completed
one year of service with American Federal. The non-contributory plan enables
American Federal to contribute up to 15% of qualified salaries each year.
Typically 8% is contributed. The percentage amount of the contribution is
determined by the board of directors each year and is based primarily on
profitability for the past year. For the year ended June 30, 2003, the Board
authorized profit sharing contributions to Mr. Dreyer of $10,720 and total
contributions are $146,807 as of June 30, 2003.
The Non-Contributory Profit Sharing Plan also allows employees to make
contributions to a tax-qualified defined contribution savings plan or an
employee owned 401(k) plan. Employees can contribute a portion of their
salaries, (up to a maximum of $12,000 for calendar 2003), to a 401(k) plan.
Eagle's board of directors has the authority to match up to a maximum of 50% of
an employee's contribution provided that the matching amount does not exceed
2.0% of such employee compensation. For the year ended June 30, 2003, the Bank
contributed $2,722 to Mr. Dreyer's 401(k) program and $36,286 in total to the
401(k) program.
Salary Continuation Agreement. Another benefit offered by American
Federal is a program to increase overall retirement benefits for employees to
levels which more closely approximate those in comparable businesses. American
Federal consulted with independent compensation consultants and developed a plan
to supplement retirement benefits. The plan American Federal adopted covers
eight of its senior officers, including Mr. Dreyer and all senior vice
presidents and vice presidents. It is a non-qualified retirement plan which is
designated the American Federal Savings Bank Salary Continuation Agreement (the
"Salary Continuation Agreement"). Under the Salary Continuation Agreement, each
officer receives a fixed retirement benefit based on his or her years of service
with
8
American Federal. This plan is funded by insurance policies owned by American
Federal. It also provides for partial payments in the event of early retirement,
death or disability. In Mr. Dreyer's case, if he retires at age 65, the Salary
Continuation Agreement provides for a lump sum payment of $414,000, or an annual
payment for life of $45,000. American Federal has purchased life insurance
contracts for each covered executive to fund the payments. American Federal
Savings Bank recognizes expenses to maintain the plan. For the year ended June
30, 2003, the total expenses were $82,504.
Bonus Plan. American Federal also provides a discretionary bonus
program ("Bonus Program") for all eligible employees. The Bonus Program is based
on the after-tax net profitability of American Federal and is linked
specifically to the Bank's return on assets. In the case of non-officer
employees, bonus amounts are based on salary levels. Under the Bonus Program,
the Bank's return on assets for the period from January through October is used
to determine the bonus levels of Bank officers. Officers' bonuses are directly
linked to the return on assets. For example, if American Federal Savings Bank
produces a return on assets of .90%, then each officer would receive a bonus of
9% of annual base salary. For the year ended June 30, 2003, American Federal
Savings Bank paid total bonuses of $194,004. Mr. Dreyer's bonus during this
period was $18,300.
Employee Stock Ownership Plan. In connection with its reorganization to
the mutual holding company form of organization, the Bank established the ESOP
for employees age 21 or older who have at least one year of credited service
with the Bank.
As of June 30, 2003, the ESOP held 32,206 shares of Common Stock. These
shares represent shares purchased by the ESOP in the offering. Shares of Common
Stock purchased by the ESOP were funded by funds borrowed from Eagle. Shares
purchased in the reorganization by the ESOP will be allocated to participants'
accounts over ten (10) years.
The ESOP is administered by an unaffiliated corporate trustee in
conjunction with the ESOP Committee of the Bank. The ESOP trustee must vote all
allocated shares held by the ESOP in accordance with the instructions of
participating employees. Shares for which employees do not give instructions
will be voted by the ESOP trustee.
GAAP requires that any third party borrowing by the ESOP be reflected
as a liability on Eagle's statement of financial condition. Since the ESOP is
borrowing from Eagle, such obligation is eliminated in consolidation. However,
the cost of unallocated shares are treated as a reduction of shareholders'
equity.
Contributions to the ESOP and shares released from the suspense account
are allocated among ESOP participants on the basis of participants' compensation
as it relates to total participant compensation. Employees are fully vested upon
completion of seven (7) years of service. Benefits may be payable upon
retirement, early retirement, disability, death or separation from service.
The ESOP is subject to the requirements of ERISA and regulations of the
IRS and the United States Department of Labor.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee determines compensation policy and consists
of Directors Pennington, Campbell and Hartzog. Mr. Pennington was formerly
Chairman and Chief Executive Officer of the Bank. None of the above are members
of a compensation committee of the Board of Directors of any Company.
CERTAIN TRANSACTIONS
No directors, executive officers or immediate family members of such
individuals were engaged in transactions with Eagle, American Federal or any
subsidiary involving more than $60,000 (other than through a loan) during the
fiscal years ended June 30, 2002 and June 30, 2003. Furthermore, Eagle has no
"interlocking" relationships in which any executive officer is a member of the
board of directors of another entity, one of whose executive officers are a
member of American Federal's board of directors.
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American Federal has followed the policy of offering residential
mortgage loans for the financing of personal residences, and consumer loans to
its officers, directors and employees. Loans are made in the ordinary course of
business. They are also made on substantially the same terms and conditions,
including interest rate and collateral, as those of comparable transactions
prevailing at the time with other persons. These loans do not include more than
the normal risk of collectibility or present other unfavorable features. As of
June 30, 2003, the aggregate principal balance of loans outstanding to all
directors, executive officers and immediate family members of such individuals
was approximately $172,021.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCES
To the knowledge of the Board and based upon a review of Forms 3 and 4 and
amendments thereto furnished to the Company pursuant to Rule 16a-3(e) during the
fiscal year ended June 30, 2003, no person who is a director, officer or
beneficial owner of 10% of the Common Stock failed to file on a timely basis,
the reports required by Section 16(a) of the Securities Exchange Act.
PROPOSAL II - RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The firm of Anderson ZurMuehlen & Co., P.C., Certified Public
Accountants, acted as independent auditors for the Company for fiscal years
ended June 30, 2002 and 2003. The Board has determined to reappoint Anderson
ZurMuehlen & Co., P.C. to act as independent auditors for the fiscal year ending
June 30, 2004. A representative of Anderson ZurMuehlen & Co., P.C. will be
present at the Annual Meeting, will be given an opportunity to make a statement
if he or she desires to do so and will be available to respond to appropriate
questions. Eagle Financial MHC intends to vote its shares of Common Stock in
favor of the ratification of the appointment of Anderson ZurMuehlen & Co., P.C.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF Anderson ZurMuehlen & Co., P.C. AS THE COMPANY'S INDEPENDENT
AUDITORS FOR FISCAL 2004 UNDER THIS PROPOSAL II.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no matters to be brought before the Annual Meeting other than
procedural matters incident to the conduct of the Annual Meeting. If further
business is properly presented, the proxy holders will vote proxies, as
determined by a majority of the Board of Directors.
STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
Pursuant to the proxy solicitation regulations of the Securities and
Exchange Commission (the "SEC"), any shareholder proposal intended for inclusion
in the Company's proxy statement and form of proxy related to the Company's 2004
Annual Meeting of stockholders must be received by the Company by May 15, 2004,
pursuant to the proxy solicitation regulations of the Securities and Exchange
Commission. Nothing in this paragraph shall be deemed to require the Company to
include in its proxy statement and form of proxy any stockholder proposal which
does not meet the requirements of the Securities and Exchange Commission in
effect at that time.
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Whether or not you intend to be present at the Annual Meeting, you are
urged to return your proxy card promptly. If you are then present at the Annual
Meeting and wish to vote your shares in person, your original proxy may be
revoked by voting at the Annual Meeting. However, if you are a stockholder whose
shares are not registered in your own name, you will need appropriate
documentation from your recordholder to vote personally at the Annual Meeting.
By Order of the Board of Directors
/s/ LARRY A. DREYER
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Larry A. Dreyer
President and CEO
Helena, Montana
September 12, 2003
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