U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[ X ] Quarterly Report Pursuant To Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Quarter Ended September 30, 2005
Or
[ ] Transition Report Pursuant To Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Commission file number 001-14986
Pelican Financial, Inc.
(Exact name of registrant as specified in its charter)
Delaware
58-2298215
(State or Other Jurisdiction of (IRS Employer Incorporation or Organization)
Identification No.)
3767 Ranchero Drive
Ann Arbor, Michigan 48108
(Address of Principal Executive Offices)
734-662-9733
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
===
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Exchange Act Rule 12b-2).
Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock Outstanding as of October 31, 2005
Common stock, $0.01 Par value ............................... 4,494,365 Shares
Index
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004 3
Consolidated Statements of Income and Comprehensive Income for the Three and
Nine Months Ended September 30, 2005 and September 30, 2004 4
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2005 and September 30, 2004 5
Notes to Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-19
Item 3. Quantitative and Qualitative Disclosures about Market Risk 19
Item 4. Controls and Procedures 19
Part II. Other Information
Item 1. Legal Proceedings 20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20-21
Item 6. Exhibits 21
PELICAN FINANCIAL, INC.
Consolidated Balance Sheets
September 30, December 31,
2005 2004
(Unaudited)
------------------ -------------------
ASSETS
Cash and cash equivalents
Cash and due from banks $ 1,054,805 $ 2,831,621
Interest-bearing deposits 2,289,936 275,800
Federal funds sold 15,224,956 7,384,068
------------------ -------------------
Total cash and cash equivalents 18,569,697 10,491,489
Securities available for sale 61,036,927 69,385,545
Federal Reserve & Federal Home Loan Bank Stock 1,904,900 2,669,700
Loans held for sale 20,581,560 -
Loans receivable, net 86,770,114 110,830,985
Other real estate owned 62,153 -
Premises and equipment, net 3,413,636 3,713,200
Other assets 2,149,304 1,724,659
------------------ -------------------
$ 194,488,291 $ 198,815,578
================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 18,576,228 $ 15,200,340
Interest-bearing 135,479,524 125,508,431
------------------ -------------------
Total deposits 154,055,752 140,708,771
Federal Home Loan Bank borrowings 25,500,000 41,500,000
Other liabilities 108,039 319,057
------------------ -------------------
Total liabilities 179,663,791 182,527,828
Shareholders' equity
Preferred stock, 200,000 shares authorized; none outstanding - -
Common stock, $.01 par value 10,000,000 shares authorized; 4,494,365
outstanding at September 30, 2005 and December 31, 2004 44,943 44,943
Additional paid in capital 15,574,767 15,574,767
Retained earnings (deficit) (173,385) 932,726
Accumulated other comprehensive (loss), net of tax (621,825) (264,686)
------------------ -------------------
Total shareholders' equity 14,824,500 16,287,750
------------------ -------------------
$ 194,488,291 $ 198,815,578
================== ===================
PELICAN FINANCIAL, INC.
Consolidated Statements of Income and Comprehensive Income (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
---- ---- ---- ----
Interest income
Loans, including fees $ 1,914,769 $ 1,810,314 $ 5,740,790 $ 5,712,140
Investment securities, taxable 627,623 853,184 1,855,481 2,124,366
Federal funds sold and overnight accounts 133,942 82,480 269,876 254,308
--------------- -------------- ----------------- ----------------
Total interest income 2,676,334 2,745,978 7,866,147 8,090,814
Interest expense
Deposits 1,046,463 1,016,584 2,729,292 2,883,814
Other borrowings 338,213 164,603 1,072,850 490,459
--------------- -------------- ----------------- ----------------
Total interest expense 1,384,676 1,181,187 3,802,142 3,374,273
--------------- -------------- ----------------- ----------------
Net interest income 1,291,658 1,564,791 4,064,005 4,716,541
Provision for loan losses 440,000 (300,000) 440,000 (225,000)
--------------- -------------- ----------------- ----------------
Net interest income after provision for loan losses 851,658 1,864,791 3,624,005 4,941,541
Noninterest income
Gain on sales of securities, net - 310,456 5,625 313,315
Service charges on deposit accounts 61,953 52,303 179,741 118,793
Gain on sale of loans, net 7,456 4,587 13,177 24,345
Net gain on foreclosed assets and other income 50,573 36,262 102,540 105,657
--------------- -------------- ----------------- ----------------
Total noninterest income 119,982 403,608 301,083 562,110
Noninterest expense
Compensation and employee benefits 920,010 1,032,321 2,698,159 2,899,231
Occupancy and equipment 367,083 352,557 1,120,561 939,756
Legal 55,876 67,886 163,447 175,336
Accounting and auditing 52,788 52,620 158,214 143,770
Data processing 65,097 69,669 212,575 161,301
Marketing and advertising 44,884 22,652 127,836 80,257
Loan and other real estate owned 54,648 70,590 221,633 272,229
Other noninterest expense 262,998 363,442 898,010 944,801
--------------- -------------- ----------------- ----------------
Total noninterest expense 1,823,384 2,031,737 5,600,435 5,616,681
--------------- -------------- ----------------- ----------------
Income (loss) before income taxes (851,744) 236,662 (1,675,347) (113,030)
Income tax expense (benefit) (289,671) 80,848 (569,235) (37,203)
--------------- -------------- ----------------- ----------------
Net Income (loss) $ (562,073) $ 155,814 $ (1,106,112) $ (75,827)
=============== ============== ================= ================
Basic earnings (loss) per share $ (0.13) $ 0.03 $ (0.25) $ (0.02)
=============== ============== ================= ================
Diluted earnings (loss) per share $ (0.13) $ 0.03 $ (0.25) $ (0.02)
=============== ============== ================= ================
Comprehensive income (loss) $ (876,872) $ 685,552 $ (1,463,251) $ (259,362)
=============== ============== ================= ================
PELICAN FINANCIAL, INC.
Consolidated Statements of Cash Flows (Unaudited)
For the Nine months ended September 30,
Nine months ended September 30,
---------------------------------------------
2005 2004
-------------------- ------------------------
Cash flows from operating activities
Net cash provided (used) in operating activities $ (1,223,205) $ 260,248
-------------------- ------------------------
Cash flows from investing activities
Loan originations, net 3,577,465 5,259,947
Sale of real estate owned - 321,396
Property and equipment expenditures, net (50,401) (1,217,456)
Purchase of securities available for sale (31,778,327) (86,897,656)
Proceeds from sales of securities available for sale 2,005,625 70,867,375
Proceeds from maturities and principal repayments
of securities available for sale 37,435,270 7,204,085
Redemption (purchase) of Federal Home Loan Bank
stock 764,800 (243,200)
-------------------- ------------------------
Net cash (used) in investing activities 11,954,432 (4,705,509)
Cash flows from financing activities
Increase in deposits 13,346,981 38,005,197
Cash dividends - -
Decrease in note payable due on demand - (291,665)
Proceeds from exercise of stock options - 6,234
Repayments on Federal Home Loan Bank borrowings (16,000,000) -
-------------------- ------------------------
Net cash provided by financing activities (2,653,019) 37,719,766
-------------------- ------------------------
Net change in cash and cash equivalents 8,078,208 33,274,505
Cash and cash equivalents at beginning of period 10,491,489 55,419,717
-------------------- ------------------------
Cash and cash equivalents at end of period $ 18,569,697 $ 88,694,222
==================== ========================
Transfers from:
Loans to held for sale $ 20,421,253 $ -
Loans to other real estate owned $ 62,153 $ -
PELICAN FINANCIAL, INC.
Notes to the Consolidated Financial Statements (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The unaudited consolidated financial statements as of and for the three and nine
month periods ended September 30, 2005 and September 30, 2004, include the
accounts of Pelican Financial Inc. ("Pelican Financial") and its wholly owned
subsidiary Pelican National Bank ("Pelican National"). All references herein to
Pelican Financial include the consolidated results of its subsidiary. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Stock Compensation:
Compensation expense under stock options is reported using the intrinsic value
method. No stock-based compensation cost is reflected in net income, as all
options granted had an exercise price equal to or greater than the market price
of the underlying common stock at date of grant. The following table illustrates
the effect on net income and earnings per share if expense was measured using
the fair value recognition provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation.
Three Months Ended September 30,
2005 2004
------------------- ------------------
Net income (loss) as reported $ (562,073) $ 155,814
Stock-based compensation expense, net of
forfeitures, using fair value method 4,547 6,764
------------------- ------------------
Pro forma net income (loss) $ (566,620) $ 149,050
Basic earnings (loss) per share as reported $ (0.13) $ 0.03
Pro forma basic earnings (loss) per share (0.13) 0.03
Diluted earnings (loss) per share as reported $ (0.13) $ 0.03
Pro forma diluted earnings (loss) per share (0.13) 0.03
Nine Months Ended September 30,
2005 2004
------------------- ------------------
Net income (loss) as reported $ (1,106,112) $ (75,827)
Stock-based compensation expense, net of
forfeitures, using fair value method 13,641 14,032
------------------- ------------------
Pro forma net income (loss) $ (1,119,753) $ (89,859)
Basic earnings (loss) per share as reported $ (0.25) $ (0.02)
Pro forma basic earnings (loss) per share (0.25) (0.02)
Diluted earnings (loss) per share as reported $ (0.25) $ (0.02)
Pro forma diluted earnings (loss) per share (0.25) (0.02)
Due to the spin-off (see Note 3), options outstanding at December 31, 2003
included 10,735 options that were held by employees of Washtenaw Mortgage
Company ("Washtenaw"), which prior to the spin-off was a wholly owned subsidiary
of Pelican Financial. These options were cancelled during the first quarter of
2004 and replaced with options on stock of The Washtenaw Group. While employees
and directors of Pelican Financial and Pelican National held the remaining
options, the intrinsic value (market value per share, less option exercise
price) of these options was significantly reduced by the effect of the spin-off.
As a result of the spin-off, the number and exercise price of these options was
modified in January 2004 to restore the options to substantially the same
intrinsic value as existed at the date of the spin-off. Accordingly, the options
outstanding at December 31, 2003 were replaced with 288,385 options at an
exercise price of $3.45. Since the options were modified to offset the effect of
the spin-off on the stock price per share, no compensation expense has been
recognized for the modification.
PELICAN FINANCIAL, INC.
Notes to the Consolidated Financial Statements (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
FAS 123, Revised, requires companies to record compensation cost for stock
options provided to employees in return for employment service. The cost is
measured at the fair value of the options when granted, and this cost is
expensed over the employment service period, which is normally the vesting
period of the options. This will apply to awards granted or modified in fiscal
year beginning in 2006. Compensation cost will also be recorded for prior option
grants that vest after the date of adoption. The effect on results of operations
will depend on the level of future option grants and the calculation of the fair
value of the options granted at such future date, as well as the vesting periods
provided, and so cannot currently be predicted. Existing options that will vest
after adoption date are expected to result in additional compensation expense of
approximately $23,000 in 2006 and $13,000 in 2007.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include
information or footnotes necessary for a complete presentation of consolidated
financial condition, results of operations, and cash flows in conformity with
U.S. generally accepted accounting principles. However, all adjustments,
consisting of normal recurring accruals, which, in the opinion of management,
are necessary for fair presentation of the consolidated financial statements,
have been included. The results of operations for the quarterly period ended
September 30, 2005, are not necessarily indicative of the results which may be
expected for the entire fiscal year or for any other period. For further
information, refer to the consolidated financial statements and footnotes
thereto for the year ended December 31, 2004 included in Pelican Financial's
Form 10-K.
Certain prior year amounts have been reclassified to conform to the 2005
presentation.
NOTE 3 - SPIN-OFF
On December 31, 2003, Pelican Financial, the former parent company of Washtenaw,
distributed all of the outstanding shares of Washtenaw's new parent company, The
Washtenaw Group, to the holders of Pelican Financial common stock on a share for
share basis (based on Pelican Financial shareholders of record on December 22,
2003). Upon completion of the distribution on December 31, 2003, Washtenaw was
no longer a subsidiary of Pelican Financial. During the periods presented in the
financial statements, Pelican Financial did not incur any expenses on behalf of
Washtenaw.
Following the distribution certain individuals continue to serve as officers of
both Washtenaw and Pelican Financial. Washtenaw pays their salaries and all
other compensation, and Pelican Financial reimburses Washtenaw, as part of the
transitional services agreement, for time spent on Pelican Financial matters.
Prior to 2004, Pelican did not reimburse Washtenaw for these services. Beginning
in 2004, officers and other employees providing services to both companies
maintain records of their time spent on the affairs of each company as a basis
for determining the reimbursements.
PELICAN FINANCIAL, INC.
Notes to the Consolidated Financial Statements (Unaudited)
NOTE 4 - LOANS RECEIVABLE
Loans receivable consist of the following:
September 30, December 31,
2005 2004
----------------- ----------------
Commercial, financial and agricultural $ 5,210,051 $ 1,967,687
Commercial real estate 29,423,024 38,751,936
Residential real estate 47,088,370 46,689,250
Marine - 17,823,612
Consumer 6,019,230 6,552,454
----------------- ----------------
87,740,675 111,784,939
Less: allowance for loan losses (970,561) (953,954)
----------------- ----------------
Loans receivable, net $ 86,770,114 $ 110,830,985
================= ================
All marine loans were reclassified to loans held for sale effective September
30, 2005 due to the requirements of the regulatory agreement disclosed in Note
7. A market value loss adjustment of $440,000 was recorded at the
reclassification date to adjust these loans to the lower of cost or market
value. The loss was recorded as a charge-off against the allowance for loan
losses.
Activity in the allowance for loan losses for the quarter ended September 30,
are as follows:
2005 2004
------------------- ----------------
$
Balance at beginning of period $ 980,802 1,228,053
Provision for loan losses 440,000 (300,000)
Loans charged-off (497,864) (3,534)
Recoveries 47,623 13,366
------------------- ----------------
Balance at end of period $ 970,561 $ 937,885
=================== ================
Activity in the allowance for loan losses for the nine months ended September
30, are as follows:
2005 2004
------------------- ----------------
$
Balance at beginning of period $ 953,954 1,330,112
Provision for loan losses 440,000 (225,000)
Loans charged-off (536,628) (245,677)
Recoveries 113,235 78,450
------------------- ----------------
Balance at end of period $ 970,561 $ 937,885
=================== ================
PELICAN FINANCIAL, INC.
Notes to the Consolidated Financial Statements (Unaudited)
NOTE 5 - EARNINGS PER SHARE
The following summarizes the computation of basic and diluted earnings per
share.
Three Months Ended Three Months Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Basic earnings (loss) per share
Net income (loss) applicable to common stock $ (562,073) $ 155,814
Weighted average shares outstanding 4,494,365 4,488,994
-------------------------------- ---------------------------------
Basic earnings (loss) per share $ (0.13) $ 0.03
================================ =================================
Diluted earnings (loss) per share
Net income (loss) applicable to common stock $ (562,073) $ 155,814
Weighted average shares outstanding 4,494,365 4,488,994
Dilutive effect of assumed exercise of stock
options - 9,809
-------------------------------- ---------------------------------
Diluted average shares outstanding 4,494,365 4,498,803
-------------------------------- ---------------------------------
Diluted earnings (loss) per share $ (0.13) $ 0.03
================================ =================================
Nine Months Ended Nine Months Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Basic earnings (loss) per share
Net income (loss) applicable to common stock $ (1,106,112) $ (75,827)
Weighted average shares outstanding 4,494,365 4,488,567
-------------------------------- ---------------------------------
Basic earnings (loss) per share $ (0.25) $ (0.02)
================================ =================================
Diluted earnings (loss) per share
Net income (loss) applicable to common stock $ (1,106,112) $ (75,827)
Weighted average shares outstanding 4,494,365 4,488,567
Dilutive effect of assumed exercise of stock
options - -
-------------------------------- ---------------------------------
Diluted average shares outstanding 4,494,365 4,488,567
-------------------------------- ---------------------------------
Diluted earnings (loss) per share $ (0.25) $ (0.02)
================================ =================================
PELICAN FINANCIAL, INC.
Notes to the Consolidated Financial Statements (Unaudited)
NOTE 6 - MERGER AGREEMENT
On November 4, 2005, Pelican Financial announced that it had reached an
agreement in principle to merge with a newly formed subsidiary of Stark Bank
Group, Ltd, of Fort Dodge, Iowa ("The Stark Bank Group").
According to the terms of the proposed agreement, shareholders of Pelican
Financial will receive $6.00 for each common share held, subject to adjustment
as to the extent that certain costs incurred by Pelican Financial exceed $3.0
million and subject to an escrow account (expected to be approximately $0.20 per
share) to be established to cover these costs, to the extent they may exceed
$3.0 million, and to cover possible liabilities from the expected sale of
certain marine loans. This escrow will reduce the immediate cash payment to less
than $6.00 per share. Pelican Financial has approximately 4.5 million common
shares outstanding. The proposed all-cash deal is subject to approval by Pelican
Financial shareholders and regulators, to a final due diligence by the Stark
Bank Group by November 14, 2005, at which time Pelican Financial expects to
enter into a definitive agreement, and to other customary closing conditions.
The merger is expected to be completed in the first quarter of 2006.
The proposed agreement also requires Stark Bank Group to purchase $4 million of
a newly created series of convertible preferred stock of Pelican Financial.
NOTE 7 - REGULATORY AGREEMENT
On September 1, 2005, Pelican National, entered into a Formal Agreement with the
Office of the Comptroller of the Currency ("OCC"). The Formal Agreement requires
Pelican National to implement the following: (a) form a compliance committee
comprised of at least three outside directors; (b) adopt and implement a written
action plan to improve Pelican National; (c) adopt and implement a written
three-year strategic plan; (d) adopt and implement a written profit plan to
improve and sustain earnings of Pelican National; (e) increase and thereafter
maintain Tier 1 capital at least equal to 13% of risk-weighted assets and Tier 1
capital at least equal to 8% of adjusted total assets; (f) appoint a new Senior
Lending Officer; (g) develop and implement a written program to improve Pelican
National's portfolio management; (f) develop and implement a written program to
reduce the high level of credit risk; (g) take immediate and continuing action
to protect its interest in assets criticized in the most recent Report of
Examination and (h) take all necessary step to ensure that Pelican National
corrects each violation of law, rule or regulation cited in the Report of
Examination
At September 30, 2005 Pelican National met the Tier 1 to risk-weighted assets
ratio requirement, with a ratio of 14.07%, but did not meet the Tier 1 to
adjusted total assets ratio requirement, with a ratio of 7.47%. To achieve the
increase in capital ratios in the short-term, the Board of Directors approved
the sale of the marine loan portfolio. The portfolio was reclassified to loans
held for sale and a mark to market adjustment was recorded. This resulted in a
charge-off to the allowance for loan losses of $440,000.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations Forward Looking Statements
Discussions of certain matters in this quarterly report on Form 10-Q may
constitute forward-looking statements within the meaning of the Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and as such, may involve
risks and uncertainties. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies, and expectations, are
generally identifiable by the use of words or phrases such as "believe",
"expect", "intend", "anticipate", "estimate", "project", "forecast", "may
increase", "may fluctuate", "may improve" and similar expressions or future or
conditional verbs such as "may", "will", "should", "would", and "could". Persons
are cautioned that such forward-looking statements are not guarantees of future
performance and are subject to various factors that could cause actual results
to differ materially from those estimated. These factors include, but are not
limited to, changes in general economic and market conditions, legislative and
regulatory changes, monetary and fiscal policies of the federal government,
demand for loan and deposit products and the development of an interest rate
environment that adversely affects the interest rate spread or other income from
Pelican Financial's investments and operations. These factors should be
considered in evaluating the forward-looking statements, and undue reliance
should not be placed on such statements. Pelican Financial does not undertake,
and specifically disclaims any obligation, to update any forward-looking
statements to reflect occurrences, or events or circumstances after the date of
such statements.
OVERVIEW
Pelican Financial currently serves as the holding company of Pelican National.
Pelican Financial's operations focus on retail banking. Retail banking involves
attracting deposits from the general public and using these funds to originate
consumer, commercial, commercial real estate, residential construction, and
single-family residential mortgage loans, from its six offices in Naples, Fort
Myers, Bonita Springs and Cape Coral, Florida.
Pelican Financial's earnings are primarily dependent upon three sources: net
interest income, which is the difference between interest earned on
interest-earning assets and interest paid on interest-bearing liabilities; fee
income from customers; and gains realized on sales of loans. These revenues are
in turn significantly affected by factors such as changes in prevailing interest
rates and in the yield curve (that is, the difference between prevailing
short-term and long-term interest rates).
The earnings performance of Pelican Financial is a concern to management.
Management is attempting to improve this by a variety of factors including
liquidity management, cross selling of products and managing operating expenses.
As part of the effort to manage operating expenses, the Board of Directors made
the decision to close one of the Fort Myers bank branches. The branch will be
closed by December 31, 2005. This decision was made due to the lack of deposit
growth and limited lending opportunities at the branch. No loss is anticipated
as a result of the sale of the real estate.
On September 1, 2005, Pelican National, entered into a Formal Agreement with the
Office of the Comptroller of the Currency ("OCC") "), under which Pelican
National is obligated to take measures necessary to correct unsafe and unsound
banking practices and certain violations of law. The Formal Agreement requires
Pelican National to implement the following: (a) form a compliance committee
comprised of at least three outside directors; (b) adopt and implement a written
action plan to improve Pelican National; (c) adopt and implement a written
three-year strategic plan; (d) adopt and implement a written profit plan to
improve and sustain earnings of Pelican National; (e) increase and thereafter
maintain Tier 1 capital at least equal to 13% of risk-weighted assets and Tier 1
capital at least equal to 8% of adjusted total assets; (f) appoint a new Senior
Lending Officer; (g) develop and implement a written program to improve Pelican
National's portfolio management; (f) develop and implement a written program to
reduce the high level of credit risk; (g) take immediate and continuing action
to protect its interest in assets criticized in the most recent Report of
Examination and (h) take all necessary step to ensure that Pelican National
corrects each violation of law, rule or regulation cited in the Report of
Examination
To achieve the increase in capital ratios in the short-term, the Board of
Directors approved the sale of the marine loan portfolio. The portfolio was
reclassified to loans held for sale and a mark to market adjustment was
recorded. This resulted in charge-off to the allowance for loan losses of
$440,000.
MERGER AGREEMENT
On November 4, 2005, Pelican Financial announced that it had reached an
agreement in principle to merge with a newly formed subsidiary of Stark Bank
Group. According to the terms of the proposed agreement, shareholders of Pelican
Financial will receive $6.00 for each common share held, subject to adjustment
as to the extent that certain costs incurred by Pelican Financial exceed $3.0
million and subject to an escrow account (expected to be approximately $0.20 per
share) to be established to cover these costs, to the extent they may exceed
$3.0 million, and to cover possible liabilities from the expected sale of
certain marine loans. This escrow will reduce the immediate cash payment to less
than $6.00 per share. Pelican Financial has approximately 4.5 million common
shares outstanding. The proposed all-cash deal is subject to approval by Pelican
Financial shareholders and regulators, to a final due diligence by the Stark
Bank Group by November 14, 2005, at which time Pelican Financial expects to
enter into a definitive agreement, and to other customary closing conditions.
The merger is expected to be completed in the first quarter of 2006. The
proposed agreement also requires Stark Bank Group to purchase $4 million of a
newly created series of convertible preferred stock of Pelican Financial.
EARNINGS PERFORMANCE
Pelican Financial reported a net loss of $562,000 for the quarter ended
September 30, 2005, compared to a net income of $156,000 for the quarter ended
September 30, 2004. Basic and diluted earnings per share from continuing
operations was a loss of $0.13 and earnings of $0.03 per share for the three
months ended September 30, 2005 and 2004, respectively.
For the nine months ended September 30, 2005, Pelican Financial reported a net
loss of $1,106,000 compared to a net loss of $76,000 for the same period in
2004. Basic and diluted earnings per share was a loss of $0.25 and $0.02 per
share for the nine months ended September 30, 2005 and September 30, 2004,
respectively.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income was $1.3 million and $1.6 million for the three months ended
September 30, 2005 and September 30, 2004, respectively. For the nine months
ended September 30, 2005 and September 30, 2004, net interest income was $4.1
million and $4.7 million respectively. Net interest income decreased primarily
as a result of the decrease in the average balance of interest-earning assets
and the change in the overall deposit structure. Both of these were a direct
result of the large withdrawal of deposits that occurred during the fourth
quarter of 2004. The non-interest bearing deposits were replaced primarily with
the Federal Home Loan Bank ("FHLB") advances with various maturities as well
time deposits. Also as a result of the withdrawal of the deposits, the average
balance in both federal funds sold and securities available for sale decreased.
Average Balance Sheet
The following tables summarize the average yields earned on interest-earning
assets and the average rates paid on interest-bearing liabilities for Pelican
Financial.
Three Months Ended September 30,
2005 2004
-----------------------------------------------------------------------------
Average Interest Yield/Cost Average Interest Yield/Cost
Volume ---------------------- volume ----------------------
ASSETS
Interest-earning assets:
Federal funds sold........................... $ 17,252 $ 134 3.11% $ 21,932 $ 83 1.51%
Securities................................... 65,419 627 3.83 109,609 853 3.11
Loans receivable............................. 109,746 1,915 6.98 105,596 1,810 6.85
------- ----- ---- ------- ----- ----
Total interest-earning assets.............. 192,417 2,676 5.56 237,137 2,746 4.63
Non-earning assets........................... 7,063 12,472
----- ------
Total assets............................ $ 199,480 $249,609
========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts................................. $ 2,685 6 0.89 $ 1,865 3 0.64
Money market accounts........................ 43,054 234 2.17 114,445 572 2.00
Savings deposits............................. 11,550 50 1.73 9,462 32 1.35
Time deposits................................ 78,098 756 3.87 36,040 409 4.54
Other borrowings............................. 30,463 338 4.44 12,000 165 5.50
------ --- ---- ------ --- ----
Total interest-bearing liabilities......... 165,850 1,384 3.34 173,812 1,181 2.72
----- ---- ----- ----
Noninterest-bearing liabilities.............. 18,903 59,757
Shareholders' equity.......................... 14,727 16,040
------ -- ------
Total liabilities and shareholders' equity... $ 199,480 $249,609
========= =======
Interest rate spread........................... 2.22% 1.91%
==== ====
Net interest income and net interest
margin....................................... $1,292 2.69% $1,565 2.64%
====== ==== ===== ====
Nine Months Ended September 30,
2005 2004
-----------------------------------------------------------------------------
Average Interest Yield/Cost Average Interest Yield/Cost
Volume ---------------------- Volume ----------------------
ASSETS
Interest-earning assets:
Federal funds sold........................... $ 13,020 $ 270 2.76% $ 30,318 $ 254 1.12%
Securities................................... 70,029 1,855 3.53 92,774 2,125 3.05
Loans receivable............................. 110,976 5,741 6.90 108,349 5,710 7.03
------- ----- ---- ------- ----- ----
Total interest-earning assets.............. 194,025 7,866 5.40 231,500 8,091 4.66
Non-earning assets........................... 7,981 12,065
----- ------
Total assets............................ $202,006 $ 243,565
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts................................. $ 2,803 17 0.80 $ 1,636 10 0.80
Money market accounts........................ 52,865 820 2.07 99,468 1,556 2.09
Savings deposits............................. 12,267 140 1.52 9,341 96 1.37
Time deposits................................ 63,200 1,752 3.70 37,110 1,222 4.39
Other borrowings............................. 36,539 1,073 3.92 12,000 490 5.44
------ ----- ---- ------ --- ----
Total interest-bearing liabilities......... 167,674 3,802 3.02 159,555 3,374 2.82
----- ---- ----- ----
Noninterest-bearing liabilities.............. 19,435 67,680
Shareholders' equity.......................... 14,897 16,330
------ -- ------
Total liabilities and shareholders' equity... $202,006 $ 243,565
======== =======
Interest rate spread........................... 2.38% 1.84%
===== =====
Net interest income and net interest
Margin....................................... $4,064 2.79% $4,717 2.72%
= ====== ===== ===== =====
Net interest income represents the excess of income on interest-earning assets
over interest expense on interest bearing liabilities. The principal
interest-earning assets are federal funds sold, investment securities and loans
receivable. Interest-bearing liabilities primarily consist of FHLB borrowings,
time deposits, interest-bearing checking accounts (NOW accounts), savings,
deposits and money market accounts. Funds attracted by these interest-bearing
liabilities are invested in interest-earning assets. Accordingly, net interest
income depends upon the volume of average interest-earning assets and average
interest bearing liabilities and the interest rates earned or paid on them.
Noninterest Income
Noninterest income for the three months ended September 30, 2005 was $120,000
compared to $404,000 for the same period in 2004, a decrease of $284,000. This
decrease was primarily due to the decrease in gain on sale of securities of
$310,000. The decrease gain on sale of securities was due to the gains
recognized during 2004 on the sales of securities for liquidity purposes. There
were no sales of securities during the three months ended September 30, 2005.
For the nine months ended September 30, 2005, noninterest income was $301,000,
compared to $562,000 for the same period in 2004. The decrease of $261,000 was
primarily the result of fluctuations in operations as described above.
Noninterest Expense
Total noninterest expense for the three months ended September 30, 2005 and
September 30, 2004 was $1.8 million and $2.0 million, respectively. For the nine
months ended September 30, 2005 and September 30, 2004, noninterest expense was
$5.6 million. The significant fluctuations are detailed below.
Compensation and Employee Benefits Expense
Compensation and benefits decreased $112,000 and $201,000 for the three and nine
month periods, ended September 30, 2005, respectively. The reduction is
primarily due to the departure of several high cost employees. Their
responsibilities were subsequently shared among the remaining management team.
Occupancy and Equipment Expense
Occupancy and equipment expense increased $15,000 and $181,000 for the three and
nine month periods, ended September 30, 2005, respectively. The increase was due
to Pelican National opening two bank branches during the second half of the year
in 2004.
Marketing and Advertising
Marketing and Advertising expense increased $22,000 and $48,000 for the three
and nine month periods, ended September 30, 2005, respectively. The increase in
expenditures was due to increased advertising and promotional activity.
Other Noninterest Expense
Other noninterest expenses decreased to $263,000, compared to $363,000 for the
quarters ended September 30, 2005 and 2004, respectively. The decrease is due to
management's focused effort on reducing costs to improve profitability. For the
nine month period ended September 30, 2005, other noninterest expense decreased
$47,000.
BALANCE SHEET ANALYSIS
The following is a discussion of the consolidated balance sheet of Pelican
Financial.
ASSETS
At September 30, 2005, total assets of Pelican Financial equaled $194.5 million
compared to $198.8 million at December 31, 2004, a decrease of $4.3 million or
2%.
Investment Securities
Pelican National primarily utilizes investments in securities for liquidity
management and as a method of deploying excess funding not utilized for
investment in loans. Pelican National has invested primarily in U. S. government
and agency securities and U. S. government sponsored agency issued
mortgage-backed securities. As required by SFAS
No. 115, Pelican National classifies securities as held-to-maturity,
available-for-sale, or trading. At September 30, 2005, and at December 31, 2004,
all of the investment securities held in Pelican National's investment portfolio
were classified as available for sale. ..
The following table contains information on the carrying value of Pelican
National's investment portfolio at the dates indicated. At September 30, 2005,
the market value of Pelican National's investment portfolio totaled $61.0
million. During the periods indicated and except as otherwise noted, Pelican
National had no securities of a single issuer that exceeded 10% of shareholders'
equity.
(dollars in thousands)
At September 30, 2005 At December 31, 2004
--------------------- --------------------
U. S. Government agency $ 24,140 $ 49,934
Mortgage-backed securities 36,897 19,452
Federal Reserve Bank and Federal Home Loan Bank
Stock 1,905 2,670
-------------------------------- ---------------------------------
Total investment securities $ 62,942 $ 72,056
================================ =================================
The decrease in securities available for sale is the result of management's
attempt to maximize the yield earned on the deposits at Pelican National.
Management is using the investment portfolio as an alternative to investing in
loans receivable due to new loan originations trailing deposit growth.
Cash and Cash Equivalents
Cash and cash equivalents were $18.6 million at September 30, 2005, compared to
$10.5 million at December 31, 2004. The increase of $8.1 million or 77% was
primarily the result of a $13.3 million increase in deposits. These deposits
have not been fully invested in higher yielding loans or securities and were
primarily being invested in federal funds sold. Management is anticipating
higher loan production and is maintaining higher liquidity levels to fund the
growth.
Loans Receivable
Total loans receivable were $86.8 million at September 30, 2005, compared to
$110.8 million at December 31, 2004. The decrease in balance is the result of
new loan production being offset by loan payoffs and principal reductions. Also,
$20.6 million in boat loans were transferred to loans held for sale to allow
Pelican National to reduce the assets of the bank and achieve compliance with
the Formal Agreement with the OCC. New loan production for the three and nine
months ended September 30, 2005 was $13.3 million and $47.7 million,
respectively.
The following table contains selected data relating to the composition of
Pelican Financial's loan portfolio by type of loan at the dates indicated. This
table includes loans held for sale and loans held for investment. Pelican
Financial had no concentration of loans exceeding 10% of total loans that are
not otherwise disclosed below.
September 30, 2005 December 31, 2004
--------------------- ------------------
Amount Percent Amount Percent
(in thousands)
Real estate loans:
Residential, one to four units.......... $45,449 42.08% $46,331 41.55%
Commercial and industrial
real estate......................... 29,423 27.24 37,457 33.59
Construction............................ 1,408 1.30 1,381 1.24
----- ---- ----- ----
Total real estate loans.............. 76,280 70.62 85,169 76.38
Other loans:
Business, commercial.................... 5,140 4.76 1,968 1.77
Automobile.............................. 398 0.37 348 0.31
Marine.................................. 20,581 19.05 17,823 15.98
Other consumer.......................... 5,621 5.20 6,205 5.56
----- ---- ----- ----
Total other loans.................... 31,740 29.38 26,344 23.62
------ ----- ------ -----
Total gross loans................. 108,020 100.00% 111,513 100.00%
====== ======
Unearned fees, premiums and
discounts, net.......................... 302 272
Allowance for loan losses.................. (970) (954)
------ ------
Total Loans net......................... $107,352 $110,831
-------- --------
Asset Quality
Pelican Financial is exposed to certain credit risks related to the value of the
collateral that secures loans held in its portfolio and the ability of borrowers
to repay their loans during the term thereof. Pelican Financial's senior
officers closely monitor the loan and real estate owned portfolios for potential
problems on a continuing basis and report to the Board of Directors of Pelican
Financial at regularly scheduled meetings. These officers regularly review the
classification of loans and the allowance for losses. Pelican Financial also has
a quality control department, the function of which is to provide the Board of
Directors with an independent ongoing review and evaluation of the quality of
the process by which lending assets are generated.
The following table sets forth certain information on nonperforming loans and
other real estate owned, the ratio of such loans and other real estate owned to
total loans and total assets as of the dates indicated.
At September 30, At December 31,
2005 2004 2004
---- ---- ----
(Dollars in thousands)
Nonaccrual loans............................... $ 682 $ 232 $ 450
Loans past due 90 days or more but not on
nonaccrual................................... - 59 109
--------- -- ---
Total nonperforming loans.................. 682 291 559
Other real estate owned........................ 62 - -
-- ------- - -------
Total nonperforming assets................. $ 744 $ 291 $ 559
===== ====== =====
Total nonperforming assets to total assets..... 0.38% 0.11% 0.28%
Allowance for loan losses to nonperforming loans 142.27% 322.34% 170.83%
Nonperforming loans to total assets............ 0.35% 0.11% 0.28%
Provision and Allowance for Loan Losses
The allowance for loan losses as of September 30, 2005 was $971,000, or 1.12% of
total portfolio loans, compared to $954,000, or 0.86% of total loans at December
31, 2004. The allowance for loan losses is maintained at a level management
considers appropriate based upon our regular, quarterly assessments of the
probable estimated losses inherent in the loan portfolio. The methodology for
measuring the appropriate level of allowance relies on several key elements,
which include specific allowances for identified problem loans, general
allocations for graded loans, and general allocations based on historical trends
for pools of similar un-graded loans.
Specific allowances are established in cases where senior credit management has
identified significant conditions or circumstances related to an individual
credit that we believe indicates the loan is impaired. The specific allowance is
determined by methods prescribed by SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan".
A general allocation on commercial and commercial real estate loans not
considered impaired is calculated by applying loss factors to outstanding loans
based on the internal risk grade of such loans. Loans are assigned a loss
allocation factor for each loan classification category. The lower the grading
assigned to a loan category, the greater the allocation percentage that is
applied. Changes in risk grade of both performing and nonperforming loans affect
the amount of the allocation. Loss factors are based on our loss experience and
may be adjusted for significant factors that, in management's judgment, affect
the collectibility of the portfolio as of the analysis date.
Groups of homogeneous loans, such as residential real estate and consumer loans,
receive an allowance allocation based on loss trends. We use historical loss
trends based on our experience in determining an adequate allowance for these
pools of loans. General economic and business conditions, credit quality trends,
seasoning of the portfolios and recent loss experience are conditions considered
in connection with allocation factors for these similar pools of loans.
During the three and nine months ended September 30, 2005 the allowance for loan
losses was not materially changed. The small fluctuation in the allowance was
deemed appropriate due to no significant change in the allocations on the loans
on the banks "criticized asset report". The aforementioned reclassification of
marine loans to held for sale resulted in a charge-off of $440,000 to adjust the
loans to the lower of cost or market value. The allowance was replenished for
this charge-off by a provision of $440,000 in the quarter ended September 30,
2005. While the allowance as a percent of loans increased from .86% at December
31, 2004 to 1.12% at September 30, 2005, management believes this is appropriate
due to uncertainty of the impact of the recent hurricane. Management is
concerned this may impact the collateral value of specific loans and the general
economic market in the effected areas.
Criticized assets decreased from $4.5 million at December 31, 2004 to $1.9
million at September 30, 2005. These loans represent loans with one or more
underwriting deficiencies as identified by bank management or the bank's
regulatory agency. Management is in the process of corrective actions on the
criticized loans in an effort to improve the rating on the criticized assets.
Criticized assets may or may not be delinquent.
LIABILITIES
At September 30, 2005, the total liabilities of Pelican Financial were $179.7
million as compared to $182.5 million at December 31, 2004, a decrease of $2.8
million or 2%. This decrease was primarily due to repayments of FHLB borrowings
which was offset by the an increase in deposits.
Deposits
Total deposits were $154.1 million at September 30, 2005, compared to $140.7
million at December 31, 2004, representing an increase of $13.4 million or 10%.
The increase was the result of a focus on developing new deposit relationships
with customers. In addition the two branches opened during 2004 increased
Pelican National's total deposits to $21.0 million at September 30, 2005.
Federal Home Loan Bank Borrowings
During the nine months ended September 30, 2005, FHLB borrowings decreased from
$41.5 million to $25.5 million. The decrease of $16.0 million was due to the
increase in deposits. Pelican National borrowed additional funds from the FHLB
on a short-term basis until it is able to replace the large withdrawal of
deposits that occurred during the fourth quarter of 2004 with core deposits.
Pelican National intends to replace the FHLB borrowings with customer deposits.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity Management
The objective of liquidity management is to ensure the availability of
sufficient resources to meet all financial commitments and to capitalize on
opportunities for business expansion. Liquidity management addresses the ability
to meet deposit withdrawals either on demand or by contractual maturity, to
repay other borrowings as they mature and to make new loans and investments as
opportunities arise.
Pelican Financial's source of funds is dividends paid by Pelican National.
Pelican National's sources of funds include net increases in deposits, principal
and interest payments on loans, proceeds from sales of loans held for sale,
proceeds from maturities and sales of securities, calls of available for sale
securities and FHLB borrowings.
The liquidity reserve may consist of cash on hand, cash on demand deposits with
other correspondent banks, and other investments and short-term marketable
securities as determined by the rules of the OCC, such as federal funds sold and
United States securities and securities guaranteed by the United States. At
September 30, 2005, Pelican National had a liquidity ratio of 39%. This is
calculated by adding all of Pelican National's cash, unpledged securities and
federal funds sold and dividing by its' total liabilities. Pelican National has
available to it several contingent sources of funding. These include the ability
to raise funds through brokered deposits, lines of credit and the sale of loans
or participations.
Capital Resources
The Board of Governors of the Federal Reserve System's ("FRB") capital adequacy
guidelines mandate that minimum ratios be maintained by bank holding companies
such as Pelican Financial. Pelican National is governed by capital adequacy
guidelines mandated by the OCC. Based upon their respective regulatory capital
ratios at September 30, 2005, Pelican Financial and Pelican National are both
"well capitalized", as defined in the regulations issued by the FRB and the OCC
setting forth the general capital requirements mandated by the Federal Deposit
Insurance Corporation Improvement Act of 1991.
The table below indicates the regulatory capital ratios of Pelican Financial and
Pelican National and the regulatory categories for a well capitalized and
adequately capitalized bank under the regulatory framework for prompt corrective
action (all three capital ratios) at September 30, 2005 and December 31, 2004,
respectively:
September 30, 2005 December 31, 2004 Required to be
Pelican Pelican Pelican Pelican Adequately Well
National Financial National Financial Capitalized Capitalized
Total Equity Capital to risk-weighted
assets 14.99% 15.77% 15.53% 16.31% 8.00% 10.00%
Tier 1 Capital to risk-weighted assets 14.07% 14.52% 14.64 15.42 4.00% 6.00%
Tier 1 Capital to adjusted total
assets 7.47% 7.72% 7.18 7.57 4.00% 5.00%
On September 1, 2005, Pelican National, entered into a Formal Agreement with the
OCC. The Formal Agreement requires Pelican National to increase and thereafter
maintain Tier 1 capital to at least 13% of risk-weighted assets and Tier 1
capital to at least 8% of adjusted total assets
Item 3: Quantitative and Qualitative Disclosure About Market Risk
For a discussion of Pelican Financial's asset/liability management policies as
well as the potential impact of interest rate changes upon the market value of
Pelican Financial's portfolio, see Pelican Financial's Annual Report to
Shareholders and Form 10-K for the fiscal year ended December 31, 2004.
Management believes that there has been no material change in Pelican
Financial's asset/liability position or the market value of Pelican Financial's
portfolio since December 31, 2004.
Item 4: Controls and Procedures
Pelican Financial, under the supervision and with the participation of its
management, including its principal executive officer and principal financial
officer, evaluated the effectiveness of the design and operation of its
disclosure controls and procedures as of the end of the period covered by this
report. Based on this evaluation, the principal executive officer and principal
financial officer concluded that Pelican Financial's disclosure controls and
procedures are effective in reaching a reasonable level of assurance that
information required to be disclosed by Pelican Financial in the reports that it
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time period specified in the
Securities and Exchange Commission's rules and forms.
The principal executive officer and principal financial officer also conducted
an evaluation of internal control over financial reporting ("Internal Control")
to determine whether any changes in Internal Control occurred during the fiscal
quarter that have materially affected or which are reasonably likely to
materially affect Internal Control. Based on that evaluation, there has been no
such change during the quarter covered by this report.
A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within Pelican Financial have
been detected. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.
Pelican Financial conducts periodic evaluations to enhance, where necessary its
procedures and controls.
Part II. Other Information
Item 1. Legal Proceedings
During the quarter ended March 31, 2005, Pelican Financial settled two legal
proceedings for approximately $135,000. There has been no other material change
to the pending legal proceedings to which Pelican Financial is a party since the
filing of the registrant's Form 10-K for the fiscal year ended December 31,
2004.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Shareholders
None
Item 5. Other Information
On November 4, 2005, Pelican Financial announced that it had reached an
agreement in principle to merge with a newly formed subsidiary of Stark Bank
Group.
According to the terms of the proposed agreement, shareholders of Pelican
Financial will receive $6.00 for each common share held, subject to adjustment
as to the extent that certain costs incurred by Pelican Financial exceed $3.0
million and subject to an escrow account (expected to be approximately $0.20 per
share) to be established to cover these costs, to the extent they may exceed
$3.0 million, and to cover possible liabilities from the expected sale of
certain marine loans. This escrow will reduce the immediate cash payment to less
than $6.00 per share. Pelican Financial has approximately 4.5 million common
shares outstanding. The proposed all-cash deal is subject to approval by Pelican
Financial shareholders and regulators, to a final due diligence by the Stark
Bank Group by November 14, 2005, at which time Pelican Financial expects to
enter into a definitive agreement, and to other customary closing conditions.
The merger is expected to be completed in the first quarter of 2006.
The proposed agreement also requires Stark Bank Group to purchase $4 million of
a newly created series of convertible preferred stock of Pelican Financial.
Additional Information about the Merger and Where to Find It
It is anticipated that the merger will be submitted to Pelican Financial
shareholders for approval. Pelican Financial will prepare proxy materials
describing the merger that will be mailed to Pelican Financial's shareholders.
These proxy materials and other relevant materials, including the definitive
merger agreement, may be obtained free of charge at the Securities and Exchange
Commission's website at http://www.sec.gov. In addition, shareholders may obtain
free copies of the documents that Pelican Financial files with the SEC on
Pelican Financial's website at www.PelicanFinancialInc.com or by written request
directed to:
Howard Nathan
Pelican Financial, Inc.
3767 Ranchero Drive
Ann Arbor, Michigan 48108.
SHAREHOLDERS OF PELICAN FINANCIAL ARE URGED TO READ THESE MATERIALS AND TO
READ THE DEFINITIVE PROXY MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY
CONTAIN
AND WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND RELATED
ITEMS. Shareholders are urged to read the proxy statement and other relevant
materials before making any voting or investment decisions with respect to the
proposed merger.
The executive officers and directors of Pelican Financial have interests in the
proposed merger, some of which differ from, and are in addition to, those of
Pelican Financial's shareholders generally. In addition, Pelican Financial and
its executive officers and directors may be participating or may be deemed to be
participating in the solicitation of proxies from the security holders of the
Pelican Financial in connection with the proposed merger. Information about the
executive officers and directors of Pelican Financial, their relationship with
Pelican Financial and their beneficial ownership of Pelican Financial securities
will be set forth in the proxy materials filed with the Securities and Exchange
Commission. Shareholders may obtain additional information regarding the direct
and indirect interests of Pelican Financial and its executive officers and
directors in the proposed merger by reading the proxy materials relating to the
merger when they become available.
Item 6. Exhibits
Exhibit Number Description
3.1 Certificate of Incorporation of Pelican Financial, Inc. (1)
3.2 Bylaws of Pelican Financial, Inc. (1)
4 Form of Common Stock Certificate of Pelican Financial, Inc. (1)
10.1 Employment Agreement with Michael D. Surgen (1)
10.2 Pelican Financial, Inc. Stock Option and Incentive Plan and Forms of
Agreements (1)
10.3 Master Agreement between Federal National Mortgage Association and
Washtenaw Mortgage Corporation dated December 21, 1998 (1)
31.1 Certification of Principal Executive Officer
31.2 Certification of Principal Financial Officer
32 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 14, 2005 /s/ Charles C. Huffman
----------------------
Charles C. Huffman
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 2005 /s/ Howard M. Nathan
--------------------
Howard M. Nathan
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit Index
Exhibit Number Description
3.1 Certificate of Incorporation of Pelican Financial, Inc. (1)
3.2 Bylaws of Pelican Financial, Inc. (1)
4 Form of Common Stock Certificate of Pelican Financial, Inc. (1)
10.1 Employment Agreement with Michael D. Surgen (1)
10.2 Pelican Financial, Inc. Stock Option and Incentive Plan and Forms of
Agreements (1)
10.3 Master Agreement between Federal National Mortgage Association and
Washtenaw Mortgage Corporation dated December 21, 1998 (1)
31.1 Certification of Principal Executive Officer
31.2 Certification of Principal Financial Officer
32 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002