BKGM BankGuam Holding Company (CE)

PROPOSAL 2:

APPROVAL OF AN AMENDMENT TO OUR ARTICLES OF INCORPORATION

TO EFFECT A 1-FOR-500 REVERSE STOCK SPLIT

Our Board of Directors has unanimously approved and recommended that shareholders approve a 1-for-500 reverse stock split of our common stock, which will be accomplished by amending our Articles of Incorporation. The purpose of the reverse stock split is to provide liquidity to shareholders and to allow the Company to deregister its shares and cease being a public reporting company. If the reverse stock split is effected, it will reduce the number of shareholders of our common stock to fewer than 1,200, which will allow us to terminate our public reporting obligations under the Exchange Act. If approved at the Annual Meeting, shareholders of the Company who own fewer than 500 shares of the Company’s common stock will receive a cash payment in lieu of a fraction of a share, and will no longer be shareholders of the Company. Shareholders holding 500 or more shares of our common stock will remain shareholders after the reverse stock split. See “Information About the Reverse Stock Split” below for more information about the reverse stock split. The form of the proposed amendment to the Articles of Incorporation to effect the reverse stock split is attached to this proxy statement as Annex A.

Vote Required for Approval of Proposal 2

Proposal 2 will be approved if the votes cast “for” such proposal exceed the votes cast “against” the proposal. Abstentions and broker non-votes will have no effect on the outcome of Proposal 2.

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT THE REVERSE STOCK SPLIT.

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INFORMATION ABOUT THE REVERSE STOCK SPLIT

The Board of Directors, after consideration of numerous factors, has authorized an amendment to the Company’s Articles of Incorporation that would effect a 1-for-500 reverse stock split of our common stock.

In lieu of issuing fractional shares, each shareholder will receive cash in the amount of $14.75 per pre-split share (subject to any applicable U.S. federal, state and local withholding tax) that would result in the issuance of a fractional share. As a result of the reverse stock split, each shareholder of record of fewer than 500 shares immediately before the effective date will no longer be a shareholder of the Company.

We anticipate that the reverse stock split will be effected as soon as possible after the date of the Annual Meeting, subject to shareholder approval of this Proposal 2 and the receipt of all required regulatory approvals, on the date the Company files Articles of Amendment to our Articles of Incorporation with the Guam Department of Revenue and Taxation, or on any later date that the Company may specify in such Articles of Amendment; provided, that the Board of Directors may at any time, before or after receiving shareholder approval of this Proposal 2, determine to abandon the reverse stock split. Following the effective date of the reverse stock split, transmittal materials will be sent to those shareholders entitled to a cash payment that will describe how to turn in their stock certificates and receive the cash payments. Those shareholders entitled to a cash payment should not turn in their stock certificates at this time. See “Special Factors – Effective Date” on page [•].

Purposes of and Reasons for the Reverse Stock Split

The Board of Directors has decided that the costs of being an SEC reporting company outweigh the benefits and, thus, it is no longer in our best interests or the best interests of our shareholders, including our unaffiliated shareholders, for us to remain an SEC reporting company. The reverse stock split will enable us to terminate the registration of our common stock under the Exchange Act if, after the reverse stock split, there are fewer than 1,200 record holders of our common stock and we make the necessary filings with the SEC. Our reasons for proposing the reverse stock split include the following:

See “Special Factors – Purposes of and Reasons for the Reverse Stock Split” beginning on page [•].

Effects of the Reverse Stock Split

As a result of the reverse stock split, the number of issued and outstanding shares of our common stock will be reduced proportionately based on the reverse stock split ratio of 1-for-500. The number of authorized shares of common stock will not be reduced. Consequently, the number of authorized but unissued shares of common stock will increase as a result of the reverse stock split.

The number of our shareholders of record will, we expect, be reduced below 1,200, which will allow us to terminate the registration of our common stock under the Exchange Act. Following the termination of the registration of our common stock under the Exchange Act, we will no longer be subject to any reporting requirements under the Exchange Act or the rules of the SEC applicable to SEC reporting companies and will be able, if the Board of Directors so determines, to eliminate most of the expenses related to the disclosure, reporting and compliance requirements of the Sarbanes-Oxley Act.

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Each share of common stock held by a shareholder of record owning fewer than 500 shares immediately prior to the effective date of the reverse stock split will be converted into the right to receive $14.75 in cash (subject to any applicable U.S. federal, state and local withholding tax), without interest, per pre-split share.

Each share of common stock held by a shareholder of record owning 500 shares or more immediately prior to the effective date of the reverse stock split will be reduced proportionately based on the reverse stock split ratio of 1-for-500 and, in lieu of any fractional share, such shareholder will receive $14.75 in cash for each pre-split share that would result in the issuance of a fractional share.

Our officers, directors and 10% shareholders will no longer be subject to the reporting requirements of Section 16 of the Exchange Act or be subject to recovery of “short-swing” profits from the sale of shares of our common stock. Persons acquiring more than 5% of our common stock will no longer be required to report their beneficial ownership under the Exchange Act.

Since our obligation to file periodic and other filings with the SEC will be suspended, our continuing shareholders may have access to less information about us and our business, operations and financial performance.

The per share exercise price of all outstanding option awards will be increased proportionately and the number of shares of our common stock issuable upon the exercise of all outstanding option awards will be reduced proportionately. These adjustments will result in approximately the same aggregate exercise price being required to be paid for all outstanding option awards upon exercise.

The number of shares reserved for issuance and any maximum number of shares with respect to which equity awards may be granted to any participant under the Company’s equity-based compensation plan will be reduced proportionately based on the reverse stock split ratio of 1-for-500.

We estimate that as a result of the reverse stock split, approximately 579,000 of our pre-split shares, representing approximately 5.95% of the total shares of our common stock outstanding as of March 28, 2022, will be repurchased for $14.75 per pre-split share in lieu of issuing fractional shares. As a result, we estimate that the ownership percentage of our shares of common stock held by our current directors, executive officers and 10% shareholders will increase from approximately 53.9% to 57.2%.

The increase in the ownership percentage of our shares of common stock held by our current directors, executive officers and 10% shareholders and the reduction in the number of shares outstanding following the completion of the reverse stock split is based upon information we received as of March 28, 2022 as to our record holders.

See “Special Factors – Effects of the Reverse Stock Split” beginning on page [•], “Special Factors – Alternatives Considered” beginning on page [•], “Special Factors – Fairness of the Reverse Stock Split” beginning on page [•] and “Special Factors – Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons” beginning on page [•].

Fairness of the Reverse Stock Split

The special committee consisting of non-interested members of the Board of Directors (the “Special Committee”) fully considered and reviewed the terms, purposes and effects of the reverse stock split. Based on its review, the Special Committee recommended the reverse stock split to the Board of Directors. The Board of Directors then unanimously determined that the reverse stock split is procedurally and substantively fair to our shareholders, including the unaffiliated shareholders who will receive cash consideration in the reverse stock split and unaffiliated shareholders who will continue as our shareholders.

The Board of Directors considered a number of factors in reaching its determinations, including the following factors:

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See “Special Factors – Fairness of the Reverse Stock Split” beginning on page [•] and “Special Factors – Opinion of Kidron” beginning on page [•].

Advantages of the Reverse Stock Split

There are several advantages associated with the reverse stock split, including the following:

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See “Special Factors – Purposes of and Reasons for the Reverse Stock Split” beginning on page [•] and “Special Factors – Fairness of the Reverse Stock Split” beginning on page [•].

Disadvantages of the Reverse Stock Split

If the reverse stock split occurs, there will be certain disadvantages to shareholders, including the following:

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See “Special Factors – Fairness of the Reverse Stock Split” beginning on page [•].

Voting Information

The votes cast “for” the proposed amendments to the Articles of Incorporation must exceed the votes cast “against” the proposed amendments to the Articles of Incorporation to effect the reverse stock split. Our directors and executive officers have indicated that they intend to vote their shares of our common stock (including the shares of certain of their affiliates, 5,242,323 shares, or approximately 53.9% of our issued and outstanding shares eligible to vote at the Annual Meeting) “FOR” the reverse stock split.

See “Special Factors – Shareholder Approval” beginning on page [•] and “Annual Meeting and Voting Information – Quorum and Certain Voting Matters” on page [•].

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

The receipt of cash by a shareholder in lieu of fractional shares generally will be taxable for U.S. federal income tax purposes. A continuing shareholder who does not receive cash in the reverse stock split generally should not recognize any gain or loss with respect to the reverse stock split for U.S. federal income tax purposes.

See “Special Factors – Material U.S. Federal Income Tax Consequences of the Reverse Stock Split” beginning on page [•].

Termination of the Reverse Stock Split

The Board of Directors has reserved the right to abandon the reverse stock split if it believes the reverse stock split is no longer in our best interests, and the Board of Directors has retained authority, in its discretion, to withdraw the reverse stock split from the agenda of the Annual Meeting prior to any vote. In addition, even if the reverse stock split is approved by shareholders at the Annual Meeting, the Board of Directors may determine not to implement the reverse stock split if it subsequently determines that the reverse stock split is not in our best interests.

See “Special Factors – Termination of the Reverse Stock Split” on page [•].

QUESTIONS AND ANSWERS ABOUT THE REVERSE STOCK SPLIT

The following questions and answers are intended to briefly address potential questions regarding the reverse stock split. These questions and answers may not address all questions that may be important to you as a shareholder. Please refer to the more detailed information contained elsewhere in this proxy statement, the Annexes to this proxy statement and any information and documents referred to or incorporated by reference in this proxy statement.

What is the reverse stock split?

The reverse stock split is a reduction of the number of our authorized and issued and outstanding common stock in a ratio of 500 shares prior to the reverse stock split to one share following the reverse split. Shareholders that own less than 500 shares prior to the reverse stock split will cease to own any shares of our common stock and instead will receive cash for their shares. The number of authorized shares of common stock will not be reduced as a result of the reverse stock split, and therefore the number of authorized but unissued shares of common stock will increase as a result of the reverse stock split.

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How does the Board recommend that I vote on the proposal?

The Board unanimously recommends that you vote “FOR” the proposal to amend the Articles of Incorporation to effect the reverse stock split.

What is the purpose of the reverse stock split?

The Board of Directors has decided that the costs of being an SEC reporting company outweigh the benefits and, thus, it is no longer in our best interests or the best interests of our shareholders, including our unaffiliated shareholders, for us to remain an SEC reporting company. The reverse stock split will enable us to terminate the registration of our common stock under the Exchange Act if, as we anticipate, after the reverse stock split there are fewer than 1,200 record holders of our common stock, and we make the necessary filings with the SEC.

Our reasons for proposing the reverse stock split include:

What does the deregistration of our common stock mean?

Following the reverse stock split, we expect that we will have fewer than 1,200 shareholders of record, which will enable us to take action to terminate the registration of our common stock under the Exchange Act. Effective on and following the termination of the registration of our common stock under the Exchange Act, we will no longer be required to file annual, quarterly and other reports with the SEC and our executive officers, directors and 10% shareholders will no longer be required to file reports relating to their transactions in our common stock. Any trading in our common stock will continue in privately negotiated sales or on OTC Markets. However, trading opportunities on OTC Markets will be dependent upon whether any broker-dealers commit to make a market for our common stock, and we cannot guarantee that our common stock will continue to be quoted on OTC markets.

What are the OTC Markets?

The OTC Markets collects and publishes quotes of market makers for over-the-counter securities through its website at www.otcmarkets.com. OTC Markets has a number of tiers on which securities may be listed, depending, in part, on the information available with respect to the issuer of the securities. Our common stock is currently traded on the OTC Pink tier, and we anticipate that our common stock will continue to trade on the OTC Pink tier if the reverse stock split is effected.

How will the reverse stock split affect the day-to-day operations of the Company?

Though the reverse stock split will have very little effect on the Company’s business and operations, it will reduce management time spent on compliance and disclosure matters attributable to our Exchange Act filings and may therefore enable management to increase its focus on managing our business and growing shareholder value.

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What will I receive in the reverse stock split?

If you own fewer than 500 shares of our common stock immediately prior to the effective date of the reverse stock split, you will receive $14.75 in cash (subject to any applicable U.S. federal, state and local withholding tax), without interest, from us for each pre-reverse stock split share that you own. If you own more than 500 shares of our common stock immediately prior to the effective date of the reverse stock split, you will receive one share of post-split stock for every 500 shares of pre-split shares you own as of the effective date of the reverse stock split, and you will receive a $14.75 cash payment in lieu of any fraction of a share you would otherwise be entitled to receive as a result of the reverse stock split.

What potential conflicts of interest are posed by the reverse stock split?

Our directors, executive officers and 10% shareholders may have interests in the reverse stock split that are different from your interests as a shareholder and have relationships that may present conflicts of interest. While our Board of Directors recommends a vote “FOR” the reverse stock split, to the Company’s knowledge, none of the Company’s affiliates has made a recommendation, in their individual capacities, either in support of or opposed to the reverse stock split. Our directors and executive officers have indicated that they intend to vote their shares of our common stock, including shares of certain of their affiliates (5,242,323 shares, or approximately 53.9% of our issued and outstanding shares eligible to vote at the Annual Meeting), “FOR” the reverse stock split.

Upon the effectiveness of the reverse stock split, the aggregate number of shares of our common stock owned by our current directors, executive officers and 10% shareholders will be reduced proportionately by the reverse stock split ratio of 1-for-500 and the ownership percentage of the shares of our common stock held by our current directors, executive officers and 10% shareholders will increase by approximately 4.3% from 53.9% to 57.2% as a result of the reduction of the number of shares of our common stock outstanding. Each of our directors and executive officers will continue to serve as a director or executive officer after the reverse stock split. Directors, executive officers and any shareholders who own more than 10% of our outstanding common stock will experience certain advantages after the reverse stock split in that they will be relieved of certain SEC reporting requirements and will no longer be subject to the “short-swing profit” trading recovery provisions under Section 16 of the Exchange Act. Information regarding our officers’ and directors’ compensation and stock ownership will no longer be publicly available, and persons acquiring more than 5% of our common stock will no longer be required to report their beneficial ownership under the Exchange Act. In addition, by deregistering our common stock under the Exchange Act subsequent to the consummation of the reverse stock split, we will no longer be prohibited, pursuant to Section 402 of the Sarbanes-Oxley Act, from making personal loans to our directors or executive officers, although no such loans currently are contemplated.

What if I hold fewer than 500 shares of common stock and hold all of my shares in street name?

If you hold fewer than 500 shares of our common stock in street name, your broker, bank or other nominee is considered the shareholder of record with respect to those shares and not you. It is possible that the bank, broker or other nominee also holds shares for other beneficial owners of our common stock and that it may hold 500 or more total shares. Therefore, depending upon their procedures, they may not be obligated to treat the reverse stock split as affecting beneficial owners’ shares. It is our desire to treat shareholders holding fewer than 500 shares of our common stock in street name through a nominee (such as a bank or broker) in the same manner as shareholders whose shares are registered in their name. However, we may not have the necessary information to compare your record holdings with any shares that you may hold in street name in a brokerage account and these banks, brokers and other nominees may have different procedures for processing the reverse stock split. Accordingly, if you hold your shares of our common stock in street name, we encourage you to contact your bank, broker or other nominee.

What happens if I own a total of 500 or more shares of common stock beneficially through multiple brokerage firms in street name, or through a combination of record ownership in my name and one or more brokerage firms in street name?

We may not have the information to compare your record holdings and your ownership through a brokerage firm or to compare your holdings in two or more different brokerage firms. As a result, if you hold more than the minimum number of shares, you may nevertheless have your shares cashed out if you hold them in a combination of record and street name or through accounts in several brokerage firms. If you are in this situation and desire to remain a shareholder of the Company after the reverse stock split, we recommend that you combine your holdings in one brokerage account or transfer any shares held through a brokerage firm into record name prior to the effective date of the reverse stock split. You should be able to determine whether your shares will be cashed out by examining your brokerage account statements to see if you hold more than the minimum number of shares in any one account. To determine the reverse stock split’s effect on any shares you hold in street name (and possible payment of the cash consideration), you should contact your broker, bank or other nominee.

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If I own fewer than 500 shares of common stock, is there any way I can continue to be a shareholder of the Company after the reverse stock split?

If you own fewer than 500 shares of our common stock before the reverse stock split, the only way you can continue to be a shareholder of the Company after the reverse stock split is to acquire, prior to the effective date, sufficient additional shares to cause you to own a minimum of 500 shares on the effective date. However, given the historically limited liquidity of our common stock, we cannot assure you that any shares will be available for purchase and thus there can be no assurance that you will be able to acquire sufficient shares to meet or exceed the required 500 shares. In such an instance, you would no longer remain a shareholder of the Company after the effective date.

Is there anything I can do if I own 500 or more shares of common stock, but would like to take advantage of the opportunity to receive cash for my shares as a result of the reverse stock split?

If you own 500 or more shares of our common stock before the reverse stock split, you can only receive cash for all of your shares if, prior to the effective date, you reduce your stock ownership to fewer than 500 shares by selling or otherwise transferring shares. However, there can be no assurance that any purchaser for your shares will be available.

What will happen if the reverse stock split is approved by our shareholders?

Assuming that we have fewer than 1,200 record holders of our common stock after the reverse stock split, we will file applicable forms with the SEC to deregister our shares of common stock under the Exchange Act. Upon the effectiveness of those filings, we would no longer be subject to the reporting and related requirements under the Exchange Act that are applicable to public companies. We will also no longer be subject to the provisions of the Sarbanes-Oxley Act, although the Board of Directors may decide, in its sole discretion, to maintain compliance with the Sarbanes-Oxley Act. Also, any trading in our common stock will continue to occur, if at all, in privately negotiated sales or on OTC Markets.

What will happen if the reverse stock split is not approved?

If the reverse stock split is not approved by our shareholders, we will continue to operate our business, and we will continue to incur the costs involved with being a public company. We also may decide to evaluate and explore available alternatives, although the Board of Directors has not yet made a determination that any of those alternatives are feasible or advisable.

If the reverse stock split is approved by the shareholders, can the Board of Directors determine not to proceed with the reverse stock split?

Even if the reverse stock split is approved by the shareholders, the Board of Directors may determine not to proceed with the reverse stock split if it believes that proceeding with the reverse stock split is not in our best interests or in the best interests of our shareholders, including all unaffiliated shareholders.

What are the material U.S. federal income tax consequences of the reverse stock split?

The receipt of cash by a holder of less than 500 shares in the reverse stock split generally will be taxable for U.S. federal income tax purposes. In general, neither the Company nor any continuing shareholder who does not receive cash in the reverse stock split should be subject to U.S. federal income taxation with respect to the reverse stock split. To review the material U.S. federal income tax consequences of the reverse stock split in greater detail, see “Special Factors – Material U.S. Federal Income Tax Consequences of the Reverse Stock Split” beginning on page [•]. We urge you to consult with your personal tax advisor regarding the tax consequences to you of the reverse stock split.

Should I send in my stock certificates now?

No. After the reverse stock split is completed, we will send instructions on how to receive any cash payments to which you may be entitled.

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What is the total cost of the reverse stock split to the Company?

Since we do not know how many record and beneficial holders of our common stock will receive cash for their shares in the reverse stock split, we do not know the exact cost of the reverse stock split. However, based on information that we have received as of March 28, 2022 with regard to the size of holdings of those of you who may hold shares in street name, as well as our estimates of other reverse stock split expenses, we believe that the total cash requirement of the reverse stock split to us will be approximately $[8.8 million]. This amount includes approximately $8.7 million needed to cash out fractional shares, approximately $[60 thousand] of legal, accounting and financial advisory fees, approximately $[AMOUNT] for transfer agent costs and approximately $[AMOUNT] of other costs, including costs of printing and mailing, to effect the reverse stock split. This total amount could be larger or smaller depending on, among other things, the number of fractional shares that will be outstanding after the reverse stock split as a result of purchases, sales and other transfers of our shares of common stock by our shareholders.

Am I entitled to appraisal rights in connection with the reverse stock split?

[No. Under Guam law, our Articles of Incorporation and our By-Laws, no appraisal or dissenters’ rights are available to our shareholders who dissent from the reverse stock split.]

ADDITIONAL INFORMATION ABOUT THE REVERSE STOCK SPLIT

Purposes of and Reasons for the Reverse Stock Split

Our Board of Directors has decided that the costs of being an SEC reporting company outweigh the benefits and, thus, it is no longer in our best interests or the best interests of our shareholders, including our unaffiliated shareholders, for us to remain an SEC reporting company. Therefore, our Board of Directors has unanimously authorized, subject to shareholder approval, a 1-for-500 reverse stock split of our common stock. At the Annual Meeting, shareholders are being asked to consider and vote upon a proposal to amend our Articles of Incorporation to effect the reverse stock split. A copy of the proposed amendment to our Articles of Incorporation for the reverse stock split is attached as Annex A.

The reverse stock split will enable us to terminate the registration of our common stock under the Exchange Act if, after the reverse stock split, there are fewer than 1,200 record holders of our common stock, and we make the necessary filings with the SEC. Management believes that we will be able to realize significant cost savings by the elimination of most of the expenses related to the disclosure, reporting and compliance requirements of the Exchange Act, the Sarbanes-Oxley Act (if the Board of Directors decides not to maintain compliance with the Sarbanes-Oxley Act), and other federal securities laws and regulations. The costs associated with these obligations constitute a significant overhead expense. These costs include increased professional fees for our auditors and corporate counsel, costs related to our Director and Officer insurance policy, printing and mailing costs, internal compliance costs and transfer agent costs. These SEC registration-related costs have been increasing over the years, and we believe that they will continue to increase, particularly as a result of the additional procedural, reporting, auditing and disclosure obligations imposed on public companies by the Sarbanes-Oxley Act in general and Section 404 of the Sarbanes-Oxley Act in particular.

As a result of the reverse stock split, (i) each share of common stock held by a shareholder of record owning fewer than 500 shares immediately prior to the effective date of the reverse stock split will be converted into the right to receive $14.75 in cash (subject to any applicable Guam, U.S. federal, state and local withholding tax), without interest, per pre-split share, and (ii) each share of common stock held by a shareholder of record owning 500 shares or more immediately prior to the effective date of the reverse stock split will remain a shareholder of the Company and will also receive cash in lieu of any fractional shares resulting from the reverse stock split. The shares of common stock acquired by the Company as a result of the reverse stock split will be restored to the status of authorized but unissued shares, which will reduce the number of outstanding shares.

In determining whether the number of our shareholders of record falls below 1,200 as a result of the reverse stock split, we must count shareholders of record in accordance with Rule 12g5-1 under the Exchange Act. Rule 12g5-1 provides, with certain exceptions, that in determining whether issuers, including the Company, are subject to the registration provisions of the Exchange Act, securities are considered to be “held of record” by each person who is identified as the owner of such securities on the respective records of security holders maintained by or on behalf of the issuers. However, institutional custodians such as the Depository Trust & Clearing Company (“DTC”) and other commercial depositories are not considered a single holder of record for purposes of these provisions. Rather, each depository’s accounts are treated as the record holder of shares.

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As a result of the reverse stock split and the repurchase of shares in lieu of issuing fraction shares, we expect to have approximately 1,100 record holders of our shares, which would enable us to terminate the registration of our shares under the Exchange Act. If the reverse stock split is consummated, we intend to file with the SEC a Form 15 to deregister our shares. Upon the filing of the Form 15, our obligation to file periodic and current reports under the Exchange Act will be immediately suspended. Deregistration of our shares will be effective 90 days after filing of the Form 15. Upon deregistration of our shares, our obligation to comply with the requirements of the proxy rules and to file proxy statements under Section 14 of the Exchange Act will also be terminated. We will not be required to file periodic and current reports with the SEC in the future unless we subsequently file another registration statement under the Securities Act of 1933, as amended, or again have record holders of our common stock in excess of 2,000.

It is anticipated that our shares of common stock will continue to be quoted on OTC Markets following the reverse stock split. OTC Markets is a centralized quotation service that collects and publishes market maker quotes for securities. OTC Markets categorizes all securities trading over-the-counter into easily identifiable tiers. Our common stock is currently traded on the OTC Pink tier. Following consummation of the reverse stock split, when we will no longer be filing reports under the Exchange Act, we anticipate that our common stock will continue to trade on the OTC Pink.

Although we anticipate that our shares will be quoted on OTC Markets, there can be no assurance that any broker-dealer will be willing to continue to act as a market maker in our shares after the reverse stock split.

Our reasons for proposing the reverse stock split include the following:

Significant Cost Savings. We expect to realize annual cost savings as a result of the termination of the registration of our shares of common stock under the Exchange Act, including ongoing expenses for compliance with the Sarbanes-Oxley Act if the Board of Directors decides, in its sole discretion, to no longer maintain compliance pursuant to the Sarbanes-Oxley Act, and other accounting, legal, printing and miscellaneous costs associated with being a publicly traded company, between $670,000 and $695,000 per calendar year, as follows:

The external costs associated with our public reports and other filing obligations, as well as other external costs relating to public company status, comprise a significant part of operating expense.

In addition, as a non-SEC reporting company, our management and employees will no longer be required to spend time preparing the periodic and other reports required of SEC reporting companies under the Exchange Act, and complying with the Sarbanes-Oxley Act (although the Board of Directors may decide, in its sole discretion, to continue to maintain compliance pursuant to the Sarbanes-Oxley Act). We believe that this time could more effectively be devoted to other purposes, such as operating our business and undertaking new initiatives that may result in greater long-term growth.

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Absence of Benefit to the Company and Its Shareholders of Public Reporting. We enjoy little benefit from being a public reporting company. The benefits of public reporting, and the reasons we believe they are currently not significant to our Company and shareholders, include:

Liquidity for Small Stockholdings. The reverse stock split will permit our small shareholders (those holding fewer than 500 shares) to liquidate their shares, at a price that we believe is both fair and attractive, without incurring brokerage commissions. Given the current lack of market activity in our common stock, this is an opportunity that might not otherwise be available to our shareholders.

Substantial Number of Small Holders. The Company has a large number of shareholders who own less than 500 shares, which is less, and in many cases substantially less, than $7,375 in value at current market prices. The Company believes that it is uneconomical for the Company to continue to maintain share positions of such a small size. These small positions will be cashed out as a result of the reverse stock split.

Background of the Reverse Stock Split

We are a Guam corporation organized in 2011 to be a bank holding company for Bank of Guam, our wholly-owned subsidiary (the “Bank”).

The Board of Directors of the Company has from time to time considered the advisability of deregistering the Company’s common stock under the Exchange Act, to avoid the costs, relative to the benefits, of compliance with the requirements of the Exchange Act. As part of its deliberations on this issue, the Board of Directors considered the benefits to the Company and its shareholders of the continued registration of the common stock that might justify the continuing public company costs being incurred by the Company.

February 28, 2022, the Board of Directors created a special committee of the Board of Directors (the “Special Committee”) to evaluate a reverse stock split transaction to reduce the number of shareholders of the Company to a level that would allow deregistration with the SEC.

On March 10, 2022, the Special Committee engaged Mercer Capital to advise with respect to this process.

On April 5, 2022 the Special Committee met to consider the advisability and terms of the proposed reverse stock split. The Special Committee received the results of a valuation analysis performed by Mercer Capital as well as a presentation from management and counsel. Representatives of Mercer Capital reviewed the valuation analysis presented to the Special Committee and answered any questions pertaining to the analysis. Based on these considerations, and its own knowledge of the Company’s business and its prospects, the Special Committee tentatively determined that a price of $15.00 per share would constitute fair and equitable consideration for shareholders whose shares will be eliminated as a consequence of the reverse stock split. The Special Committee then reviewed considerations for and against the reverse stock split and the consideration proposed to be paid in the reverse stock split. The Special Committee also considered potential alternatives to the reverse stock split. The Special Committee’s recommendation was made subject to further consideration, receipt of a fairness opinion from the Board of Directors’ financial advisor and a final decision whether or not to proceed with the reverse stock split. The Special Committee also recommended that the Board establish a reverse stock split ratio of 1-for-400 shares.

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On April 5, 2022, the Board of Directors met to receive the recommendations of the Special Committee. The Board of Directors received a report from the Special Committee, and presentations from management and counsel that reviewed the considerations addressed at the Special Committee’s meeting. The Board of Directors accepted the recommendations of the Special Committee, subject to receiving the final report and fairness opinion from Mercer Capital.

Following the April 5, 2022 meetings of the Special Committee and the Board of Directors, the Company provided updated information through March 31, 2022 to Mercer Capital, which resulted in Mercer Capital adjusting the range of its valuation to $14.60 to $15.17 per share. The Company also determined that a 1-for-400 reverse stock split ratio would not be sufficient to reduce the number of shareholders of record below the 1,200 threshold necessary to deregister the Company’s shares.

On April 12, 2022 the Special Committee met again to consider the updated valuation and shareholder estimates. Based on these considerations, and its own knowledge of the Company’s business and its prospects, the Special Committee determined that a price of $14.75 per share would constitute fair and equitable consideration for shareholders whose shares will be eliminated as a consequence of the reverse stock split. The Special Committee also recommended that the Board establish a reverse stock split ratio of 1-for-500 shares.

On April 12, 2022 the Board of Directors met to receive the recommendations of the Special Committee and make a determination to proceed with the reverse stock split and the consideration that would be payable in the reverse stock split to shareholders. The Board of Directors received a report from the Special Committee, and presentations from management and counsel . Based on the various considerations reviewed by the Board of Directors, including the Mercer Capital analysis and the recommendations of the Special Committee, the Board of Directors determined that $14.75 per share was a fair and equitable price for the Company’s shares. Following deliberations, the Board of Directors then determined unanimously to proceed with a 1-for-500 reverse stock split, in which consideration of $14.75 per share would be paid in in lieu of fractional shares. In reaching its decision to proceed with the deregistration through the reverse stock split, the Board of Directors also considered the various other factors discussed in this prospectus.

The full text of Mercer Capital’s written opinion, dated April 5, 2022, which sets forth, among other things, assumptions made, procedures followed, matters considered, qualifications and exceptions, and limitations of the reviews undertaken in rendering the opinion, is attached as Annex B to this proxy statement. Shareholders are urged to read the updated opinion carefully and in its entirety.

For a further discussion of fairness of the reverse stock split, see “Special Factors – Fairness of the Reverse Stock Split” beginning on page [•] and “Special Factors – Opinion of [•]” beginning on page [•].

Fairness of the Reverse Stock Split

The Board of Directors believes that the reverse stock split is fair to the unaffiliated shareholders of the Company, including both unaffiliated shareholders who will be cashed out after the reverse stock split and those who continue to be shareholders of the Company after the reverse stock split. After consideration of all aspects of the reverse stock split, as described below, the Board of Directors, following the recommendation of the Special Committee, unanimously approved the reverse stock split. Except for such approval, we are not aware that any of our affiliates has made a recommendation, in their individual capacities, either in support of or opposed to the reverse stock split.

Substantive Fairness

In making its recommendation, the Special Committee and the Board of Directors considered, among other things, the factors listed below, in reaching its conclusion as to the substantive fairness of the reverse stock split to our unaffiliated shareholders, including both unaffiliated holders who are cashed-out after the reverse stock split and those who continue as shareholders after the reverse stock split. The Special Committee did not assign specific weight to any factors it considered, nor did it apply them in a formulaic fashion, although the Special Committee particularly noted the opportunity in the reverse stock split for shareholders to sell their holdings at a fair and attractive price, as well as the significant cost and time savings for us resulting from the reverse stock split which will benefit our continuing shareholders. The Special Committee relied upon, and adopted the analyses and conclusions of Mercer Capital in determining whether the consideration offered to unaffiliated shareholders constitutes fair value in relation to the going concern value. The discussion below is not meant to be exhaustive, but we believe includes all material factors considered by the Special Committee, and, in turn, the Board of Directors, in reaching their determinations.

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Disadvantages of the Reverse Stock Split

The Board of Directors also considered the disadvantages of the reverse stock split, including that:

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Procedural Fairness

We did not retain an unaffiliated representative to act solely on behalf of our unaffiliated shareholders for the purpose of negotiating the terms of the reverse stock split or preparing a report covering the fairness of the reverse stock split. The Board of Directors did, however, form the Special Committee to approve the reverse stock split.

The Board of Directors also noted that this proxy statement, along with our other filings with the SEC, provide a great deal of information for unaffiliated shareholders to make an informed decision as to the reverse stock split. The Board of Directors therefore made no special provision for the review of our files by our unaffiliated shareholders, although subject to certain conditions, Guam law provides shareholders with the right to review our books and records.

The Board of Directors understands that our directors and executive officers indicated that they and certain of their affiliates intend to vote the shares of common stock over which they have voting power in favor of the reverse stock split and that, if they do so, the reverse stock split will be approved regardless of how any other shareholders vote their shares. However, the Board of Directors determined not to condition the approval of the reverse stock split on approval by a majority of unaffiliated shareholders. The Board of Directors noted that affiliated and unaffiliated shareholders will be treated equally in the reverse stock split. If separate approval of unaffiliated shareholders were required, our affiliated shareholders would receive lesser voting rights than unaffiliated shareholders solely on the basis of their affiliate status even though they will receive no additional benefits or different treatment in the reverse stock split and any such requirement would prevent a majority of the outstanding shares of our common stock from participating in the consideration of the proposed reverse stock split. Furthermore, a vote of the majority of unaffiliated shareholders is not required under Guam law.

Recommendation of the Board of Directors

At a meeting held on April 12, 2022, based on the foregoing analyses and the recommendation of the Special Committee, including a consideration of the disadvantages of the reverse stock split, the Board of Directors unanimously determined that the reverse stock split is procedurally and substantively fair to and in the best interests of the Company and its unaffiliated shareholders, and unanimously approved the reverse stock split and recommends that you vote “FOR” approval of the reverse stock split.

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Alternatives Considered

Our Board of Directors considered other methods of effecting a transaction to deregister our common stock, but ultimately rejected each of these alternatives and determined that the reverse stock split was preferable to the other alternatives.

When considering the various alternatives to the reverse stock split, the primary focus was the level of assurance that the selected alternative would result in us having fewer than 1,200 record owners of our common stock, thus allowing us to achieve our objective of terminating registration of our common stock under the Exchange Act, the time frame within which such alternative could reasonably be expected to be achieved, again relative to the other alternatives under consideration, as well as the potential costs of the alternative transactions.

For the reasons discussed above, our Board of Directors unanimously agreed that the reverse stock split was the most expeditious and economical way of undertaking a deregistration transaction.

Effects of the Reverse Stock Split

Generally

The Board of Directors is soliciting shareholder approval for the reverse stock split. If approved by the shareholders and implemented by the Board of Directors, we anticipate that the reverse stock split will be effected as soon as possible after the date of the Annual Meeting, subject to the receipt of all required regulatory approvals, on the date the Company files the Articles of Amendment to our Articles of Incorporation with the Guam Department of Revenue and Taxation, or on any later date that the Company may specify in such Articles of Amendment.

At the Annual Meeting, shareholders are being asked to consider and vote upon a proposal to amend our Articles of Incorporation to effect the reverse stock split. A copy of the proposed Articles of Amendment to our Articles of Incorporation for the reverse stock split is attached as Annex A.

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If the reverse stock split is completed, the following will occur:

There will be no differences between the respective rights, such as dividend, voting, liquidation or other rights, preferences or limitations of our common stock prior to the reverse stock split and our common stock after the reverse stock split.

Effects on the Company

Upon completion of the reverse stock split, it is anticipated that we will have fewer than 1,200 shareholders of record and will therefore be eligible to terminate the registration of our common stock with the SEC and become a non-reporting company. In determining whether the number of our shareholders of record falls below 1,200 as a result of the reverse stock split, we will count shareholders of record in accordance with Rule 12g5-1 under the Exchange Act. Rule 12g5-1 provides, with certain exceptions, that in determining whether issuers, including us, are subject to the registration provisions of the Exchange Act, securities are considered to be “held of record” by each person who is identified as the owner of such securities on the respective records of security holders maintained by or on behalf of the issuers. However, institutional custodians such as the Depository Trust & Clearing Company and other commercial depositories are not considered a single holder of record for purposes of these provisions. Rather, the Depository Trust & Clearing Company’s and other depositories’ accounts are treated as the record holders of our shares. Based on information available to us as of the record date, we expect that as a result of the reverse stock split the number of our shareholders of record would be reduced to approximately 1,100.

The registration of our common stock may be terminated upon application by us to the SEC if there are fewer than 1,200 shareholders of record of our common stock. If the reverse split is consummated and, as expected, we will have fewer than 1,200 shareholders of record, we intend to promptly file with the SEC a Form 15 making a certification to that effect. Our obligation to file periodic and current reports as a result of our common stock’s registration under the applicable provisions of the Exchange Act will be suspended immediately upon the filing of the Form 15. After the 90-day waiting period following the filing of the Form 15:

However, following the filing of the Form 15 with the SEC, if on the first day of any fiscal year we have more than 2,000 shareholders of record we once again will become subject to the reporting requirements of the Exchange Act. Also, we will continue to be subject to the general anti-fraud provisions of applicable federal and state securities laws.

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We anticipate that following the reverse stock split we will continue to operate as we have done prior to the reverse stock split.

The reverse stock split is estimated to result in the retirement of approximately 579,400 shares of common stock at a cost of $14.75 per share. Including expenses for the reverse stock split, the Company estimates that the total cost of the reverse stock split to us, including fees and expenses for the various legal and financial advisers, will be approximately $[8.5 million]. Our cash balances will be reduced accordingly. The consideration to be paid to shareholders in lieu of fractional shares and the other costs of the reverse stock split will be paid from cash on hand.

See “Special Factors – Source of Funds and Expenses” on page [•].

Our common stock is currently quoted on the OTC Pink tier of OTC Markets. We expect that our common stock will continue to be quoted on the OTC Pink tier of OTC Markets following consummation of the reverse stock split. The resulting lack of public information concerning the Company may further reduce the liquidity of our common stock.

OTC Markets is a quotation service that collects and publishes market maker quotes for over-the-counter securities. OTC Markets is not a stock exchange or a regulated entity. Price quotations are provided by over-the-counter market makers and company information is provided by the over-the-counter companies. There is no assurance that there will be any quotations of our common stock on OTC Markets after the reverse stock split or that they will continue for any length of time.

Effects on the Cashed-Out Shareholders

Shareholders holding fewer than 500 shares of common stock immediately prior to the effective date of the reverse stock split will cease to be shareholders of the Company. They will lose all rights associated with being our shareholder, such as the right to attend and vote at shareholder meetings and receive dividends and distributions. These shareholders will receive the right to be paid $14.75 in cash (subject to any applicable U.S. federal, state and local withholding tax), without interest, for each share of common stock owned immediately prior to the reverse stock split. These shareholders will be liable for any applicable taxes but will not be required to pay brokerage fees or service charges. Promptly after the effective date of the reverse stock split, we will send a transmittal letter explaining to such shareholders how they can surrender their stock certificates in exchange for cash payment. The length of time between the effective date of the reverse stock split and the date on which a shareholder of less than 500 shares of common stock will receive such shareholder’s cash will depend, in part, on the amount of time taken by such shareholder to return his or her stock certificates with a properly completed letter of transmittal. No cash payment will be made to any such shareholder until he or she has surrendered his or her outstanding stock certificate(s), together with the letter of transmittal, in accordance with the terms of the letter of transmittal. Following the surrender of stock certificates in accordance with the terms of the letter of transmittal, shareholders should receive cash payments promptly. No interest will be paid on the cash payment at any time.

If a shareholder owns fewer than 500 shares of our common stock before the reverse stock split, the only way the shareholder can continue to be our shareholder after the reverse stock split is to acquire, prior to the effective date of the reverse stock split, sufficient additional shares to cause such shareholder to own a minimum of 500 shares on the effective date of the reverse stock split. However, given the historically limited liquidity of our common stock, we cannot assure you that any shares will be available for purchase and thus there can be no assurance that a shareholder will be able to acquire sufficient shares to meet or exceed the required 500 shares. In such an instance, the shareholder would no longer remain a shareholder of the Company after the effective date of the reverse stock split.

The number of shares of common stock held by a shareholder of record in two or more separate but identical brokerage accounts will be combined to determine the number of shares of our common stock owned by such shareholder and, accordingly, whether the shareholder will be a cashed-out shareholder or a continuing shareholder. Shares held by shareholders in joint accounts, such as by a husband and wife, and shares held in similar capacities will be treated separately and will not be combined with individual accounts in determining whether a shareholder will be a cashed-out shareholder or a continuing shareholder. We intend to treat shareholders holding our common stock in street name in the same manner as record holders. Prior to the effective date of the reverse stock split, we will conduct an inquiry of all brokers, banks and other nominees that hold shares of our common stock in “street name,” ask them to provide us with information on how many fractional shares will be cashed out, and request that they effect the reverse stock split for their beneficial holders. However, these banks, brokers and other nominees may have different procedures than registered shareholders for processing the reverse stock split. Also, a shareholder owning 500 or more shares of common stock may nevertheless have those shares cashed out if the shareholder holds shares in a combination of street name accounts and record holder accounts or holds shares in separate accounts in several brokerage firms. If you are in this situation and desire to remain one of our shareholders after the reverse stock split, you may consolidate your holdings into one brokerage account or record holder account prior to the effective date of the reverse stock split. Conversely, if you hold an account with less than 500 shares in street name and want to ensure that your shares are cashed out, you may want to change the manner in which your shares are held from street name into a record holder account in your own name so that you will be a record owner of the shares.

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Effects on the Unaffiliated Remaining Shareholders

Shareholders holding 500 or more shares of common stock immediately prior to the effective date of the reverse stock split will continue to be shareholders of the Company, will receive a cash payment in lieu of any fractions of a share that would result from the reverse stock split equal to $14.75 per share which would have resulted in the issuance of a fractional share and, following the reverse stock split, the number of shares held by such shareholders will be reduced proportionately by the reverse stock split ratio of 1-for-500.

Shareholders who continue as shareholders of the Company after the reverse stock split may experience reduced liquidity of their shares of common stock. We anticipate that our common stock will continue to be quoted on the OTC Pink tier of OTC Markets where the common stock is currently quoted. As such, we anticipate that information relating to the quotation of our common stock will be published by OTC Markets, but there can be no assurance of any quotation of, or market for, our common stock.

Shareholders who continue as our shareholders after the reverse stock split will not receive or have access to the same financial and other business information about us that they would if we continued to make public disclosures pursuant to the Exchange Act. We anticipate, however, that the Company will continue to make available annual financial information on our website. Also, shareholders will continue to have the right, upon written request, to receive certain information in appropriate circumstances, to the extent provided by Guam Business Corporation Act (the “Guam Act”), including, for example, the right to view and copy our stock ledger, a list of our shareholders and other books and records, provided that the requesting party is a shareholder, makes the request in the form required by statute, and does so for a proper purpose.

Our Board of Directors also believes that, following the transaction, the remaining shareholders will benefit from the savings in direct and indirect operating costs to the Company resulting from us no longer being required to maintain our public reporting company status, as described above. Our continuing shareholders, including our unaffiliated shareholders, will be the beneficiaries of these savings.

See “Special Factors—Purposes of and Reasons for the Reverse Stock Split” beginning on page [•]. Remaining shareholders will have the opportunity to participate in our future growth and earnings as we go forward as a more streamlined entity without the costs of compliance with SEC reporting requirements.

Effects on the Affiliated Remaining Shareholders

Our affiliates, consisting of directors, executive officers and 10% shareholders, will participate in the reverse stock split to the same extent as non-affiliates. However, because the number of shares held by a shareholder is a factor in determining whether a shareholder has affiliate status, as a practical matter affiliated shareholders will not be cashed out in the reverse stock split.

Upon the effectiveness of the reverse stock split, the aggregate number of shares of our common stock owned by our current directors, executive officers and 10% shareholders will be reduced proportionately by the reverse stock split ratio of 1-for-500 and the ownership percentage of the shares of our common stock held by our directors, executive officers and 10% shareholders will increase by approximately 3.3% from 53.9% to 57.2% as a result of the reduction of the number of shares of our common stock outstanding. The increase in the ownership percentage of our shares of common stock held by our current directors, executive officers and 10% shareholders and the reduction in the number of shares outstanding following the completion of the reverse stock split is based on record holder information that we received as of March 28, 2022 as to our record holders, and information we have received regarding the holdings of beneficial owners of our common stock held in street name. The number of shares to be cashed out in the reverse stock split may vary from the estimate above, and the ownership percentage of our shares of common stock held by our current directors, executive officers and 10% shareholders and the ownership percentage of the continuing shareholders after the reverse stock split will proportionally increase or decrease as a result of purchases, sales and other transfers of our shares of common stock by our shareholders prior to the effective date of the reverse stock split, and depending on the number of shares held in street name that are actually cashed out in the reverse stock split. Like all other remaining shareholders, these affiliates also are likely to experience reduced liquidity of their shares of common stock.

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As we noted above, we ultimately expect to realize recurring annual cost savings between $670 thousand and $695 thousand annually as a result of the reverse stock split. Our continuing shareholders, including our affiliated shareholders, will be the beneficiaries of these savings.

See “Special Factors – Purposes of and Reasons for the Reverse Stock Split” beginning on page [•].

Remaining shareholders will have the opportunity to participate in our future growth and earnings as we go forward as a more streamlined entity without the costs of compliance with SEC reporting requirements.

Our current directors, executive officers and 10% shareholders may have interests in the reverse stock split that are different from your interests as a shareholder, and have relationships that may present conflicts of interest, including holding options to purchase shares of our common stock that will remain outstanding following the reverse stock split. See “Special Factors – Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons” beginning on page [•].

Opinion of Mercer Capital

The Board of Directors retained Mercer Capital to assist with its determination of a fair price at which to compensate shareholders whose stock would be cashed out in the reverse stock split. Mercer Capital is a national valuation and financial advisory firm focused on the valuation of illiquid securities issued by financial institutions and corporations since 1982 when the company was founded. Mercer Capital is regularly retained to evaluate mergers & acquisitions and to issue fairness opinions in conjunction with such engagements in addition to providing fairness and valuation opinions for corporate reorganizations, security issuances and redemptions, employee benefit plans, corporate planning, litigation and tax matters.

The type and amount of consideration payable to holders of common stock that will be cashed out as a result of the reverse stock split was determined by the Board of Directors. However, the Board of Directors relied upon, and adopted the analyses and conclusions of, Mercer Capital in determining the fairness of the consideration offered.

The Company has agreed to pay Mercer Capital for its services in connection with the reverse split a fee of $35 thousand, none of which is contingent upon the consummation of the reverse stock split. The Company has also agreed to reimburse Mercer Capital for its expenses incurred in connection with Mercer Capital’s engagement and to indemnify Mercer Capital and its directors, officers, employees, agents and affiliates against specified liabilities, including liabilities under the federal securities laws.

Previously, Mercer Capital has provided valuation services to the Company in connection with the Company’s acquisition of ownership interests in ASC Trust LLC.

During the past two years, the Company paid Mercer Capital a total of $35,125 in connection with such services.

On April 5, 2022, Mercer Capital rendered a written opinion to our Board of Directors that, subject to the limitations, exceptions, assumptions and qualifications set forth therein, as of such date, the consideration to be received by shareholders pursuant to the reverse stock split was fair, from a financial point of view, to such holders.

The full text of Mercer Capital’s written opinion, dated April 5, 2022, which sets forth, among other things, assumptions made, procedures followed, matters considered, qualifications and exceptions, and limitations of the reviews undertaken in rendering the opinion, is attached as Annex B to this proxy statement. Shareholders are urged to read the updated opinion carefully and in its entirety.

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The opinion of Mercer Capital is directed to our Board of Directors and addresses only the fairness, from a financial point of view, of the consideration to be received by shareholders pursuant to the reverse stock split and does not address any other aspect of the proposed transaction and does not constitute a recommendation to any shareholder with respect to the reverse stock split or any other matter being considered by the shareholders. The opinion of Mercer Capital is not a recommendation as to how our Board of Directors, any shareholder or any other person or entity should vote or act with respect to any matters relating to the reverse stock split. Further, the Mercer Capital opinion does not in any manner address our underlying business decision to pursue the reverse stock split or the relative merits of the reverse stock split as compared to any alternative business transaction or strategy. The decision as to whether to approve the reverse stock split may depend on an assessment of factors unrelated to the financial analysis on which the opinion of Mercer Capital is based.

The following is a summary of the material analyses performed by Mercer Capital in connection with rendering its opinion. Mercer Capital noted that the basis and methodology for the opinion have been designed specifically for this purpose and may not translate to any other purposes. While this summary describes the analyses and factors that Mercer Capital deemed material in its presentation and opinion to our Board of Directors, it does not purport to be a comprehensive description of all analyses and factors considered by Mercer Capital. The opinion is based on the comprehensive consideration of the various analyses performed. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Mercer Capital’s financial analyses. This summary is qualified in its entirety by reference to the full text of the opinion of Mercer Capital.

Mercer Capital was retained by the Board of Directors of the Company on March 15, 2022, to (a) establish a range of value for the Company’s common shares consistent with fair value as interpreted to be consistent with shareholder appraisal rights as stipulated in the Guam Business Corporation Act (§281301) and applicable case law; and (b) provide, on behalf of the Company’s Board of Directors, its opinion of the fairness from a financial point of view to all Company shareholders of the cash consideration to be paid to shareholders who will be “cashed out” in the transaction (“Fairness Opinion”).

Mercer Capital utilized three general approaches to the valuation and within each approach considered one or more methods: the asset-based approach (Net Asset Value Method), the market approach (Transactions Method and Guideline Public Company Method), and the income approach (Earnings Capitalization Method and Discounted Cash Flow Method). Indications of value derived from each valuation method were weighted by Mercer Capital to derive a range of value. No discounts or premiums were applied, which is consistent with “fair value” as defined in §281301 of the Guam Business Corporation Act. Also, M&A transaction data was analyzed but was not used to derive an indication of value because expense synergies are widely incorporated into bank M&A pricing and therefore render indications of value that are inconsistent with statutory fair value.

Net Asset Value Method is an asset-based approach that develops a valuation indication in the context of a going concern by adjusting the reported book values of a subject company’s assets to their market values and subtracting its liabilities (adjusted to market value, if appropriate). The indicated value should not be interpreted as an estimate of liquidation value.

Typical adjustments for banks include elimination of intangible assets disallowed as capital by banking regulators, recognition in part or full of contingent assets/liabilities, and mark-to-market adjustments for assets carried at cost or for which the market value of the asset is substantially different than carrying value.

Mercer Capital derived an indicated net asset value of $93.8 million based on preliminary tangible common equity on March 31, 2022 that was then reduced for the unrealized loss in bonds classified as “held-to-maturity” net of the tax benefit. Mercer Capital did not ascribe any weight to this indication of value.

Transactions Method is a market approach that develops an indication of value based upon consideration of actual transactions in the stock of a subject company. The Company trades on the OTCPK market under ticker symbol “BKGM”. Mercer Capital reviewed the daily price and volume data for the Company over the past five years and calculated the volume weighted average price (“VWAP”) for the past four quarters.

Mercer Capital derived an indication of value of $113.9 million which was based on the first quarter 2022 VWAP of $11.72 per share. The transactions method was weighted in the correlated indicated of value.

Guideline Public Company Method is a market-based valuation in which comparable public companies are identified in order to apply representative multiples to a subject company. Mercer Capital identified three groups of publicly traded banks based on region, size/profitability, and exchange (OTC) from which various valuation metrics were calculated. Mercer Capital averaged the median multiple for the three groups to derive a base multiple then applied a fundamental discount of 10% to reflect a) high parent company leverage; b) elevated NPAs and c) limited growth potential given the majority of the company’s franchise is located on U.S. territory islands in the Pacific Ocean with small economies.

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Mercer Capital derived indications of value of a) $179.4 million based upon 2021 core net income ($16.6 million, 10.8x); b) $166.3 million based upon 2022 forecasted net income ($16.6 million, 10.0x); c) $183.2 million based upon forecasted 2023 net income ($21.5 million; 8.5x) d) $146.5 million based upon capitalized year-end 2021 tangible common equity ($142.2 million, 1.03x); and d) capitalized preliminary tangible common equity as of March 31, 2022 ($120.0 million, 1.03x).

Capitalized forecasted 2022 earnings and capitalized tangible book value (as of December 31, 2021) were the only indications that received weight in the correlated indication of value because in Mercer Capital’s opinion market participants typically are focused on forecasted earnings (and 2021 net income for both the company and guideline publics included transitory PPP-related revenues) and secondarily capitalized tangible common equity in the case of bank stocks.

Earnings Capitalization Method is an income approach that requires estimates of ongoing earnings and a capitalization rate (or multiple). Ongoing earning power is an estimate of sustainable earnings and represents a base from which long-term growth can be expected. A three-year weighted average (2020, 2021, and 2022E) of adjusted net income excluding PPP income was used to derive ongoing earning power of $14.4 million.

An indication of value is derived from the product of ongoing earnings and an appropriate multiple (or capitalization factor) that reflects the Company’s equity discount rate less estimated long-term growth rate applicable to ongoing earnings. Mercer Capital derived an equity discount rate of 15.20% which reflects the sum of the a) long-term US Treasury rate; b) beta-adjusted large cap equity premium; c) small cap equity premium; and d) specific company risk premium. The estimated long-term growth rate in earning power of 6% was subtracted to derive a capitalization rate of 9.20%, the inverse of which is the capitalization factor (or multiple) of 10.9x.

The $156.6 million indication of value was weighted in the correlated indication of value.

Discounted Cash Flow (DCF) Method is an income approach which relies upon the projection of a future stream of cash flows that accrue to capital providers, the present value of which represents the value of the Company.

Mercer Capital relied upon projections prepared by company management for fiscal years 2022-2026 that assume the Bank’s ROA trends to ~1.0% by 2026 from 0.62% in 2021 primarily via a) improvement in the NIM that in turn is attributable to a mix shift into higher yielding loans from liquid investments; and b) positive operating leverage that improves the efficiency ratio to 69% from 81%. ASC’s earnings are projected to grow ~50% to $6.0 million in 2026 from $4.0 million projected for 2022.

The discount rate used by Mercer Capital to discount projected cash flows is 16.2%, which reflects an additional 100bps premia over the discount rate developed for the capitalization of earning power because in the opinion of Mercer Capital a market participant would require a higher rate of return to account for the risk that the substantial improvement in profitability projected by management is not achieved.

Interim cash flows discounted reflect common dividends projected by management to remain unchanged over the projection period at $3.9 million annually, or $0.40 per share.

Mercer Capital derived a terminal value for the Company as of year-end 2026 that also was discounted to a present value based upon the product of projected 2027 net income of $32.3 million (2026 projected net income of $30.7 million was increased 5%) and a capitalization factor of 8.9x that reflects the inverse of the 16.2% discount rate less a perpetuity growth rate of 5%. The perpetuity growth rate was lowered to 5% from 6% in the Earnings Capitalization Method given significant earnings growth projected for 2022-2026.

The sum of discounted interim cash flows and the terminal value of $154.4 million was weighted in the correlated indication of value.

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Correlated Indication of Value. Mercer Capital considered each indication of value then assigned weights based upon its opinion of the relative importance of each in deriving the fair value range (“low” and “high”) of the Company’s common shares in the context of a going concern. In the “low” scenario, Mercer Capital assigned a) one third weight to the Transaction Method b) one third weight on the Guideline Public Company Method and c) one third weight on the Income Approach. In the “high” scenario, Mercer Capital assigned a) one fifth weight to the Transaction Method b) two fifths weight on the Guideline Public Company Method and c) two fifths weight on the Income Approach.

For the Guideline Public Company Method, in both scenarios, weights were split evenly between the capitalization of forecasted 2022 earnings and the capitalization of tangible book value (12/31/21). For the Income Approach, in both scenarios, weights were split evenly between the Earnings Capitalization Method and the DCF Method.

Discounts. No discounts for minority interest or marketability of the company’s common stock were applied consistent with statutory fair value as prescribed in the Guam Business Corporation Act.

Concluded Range of Fair Value. Mercer Capital derived the concluded range of fair value of $141.9 million to $147.5 million, or $14.60 to $15.17 per common share. The range of common equity value represents 7.1x to 7.4x reported net income for 2021 of $20.0 million; 9.8x to 10.2x core net income for 2021 of $14.5 million; 8.5x to 8.9x projected 2022 net income of $16.1 million; and 100% to 104% of tangible book value as of year-end 2021.

Other Considerations. The proposed cash price for fractional shares of $14.75 per share represents a 26% premium to the Company’s $11.72 per share volume weighted average price for the first quarter of 2022. By way of comparison, Mercer Capital reviewed acquisitions of publicly traded companies listed on the NYSE/NASDAQ and OTC listed companies (OTCQX/OTCQV/OTCPK) in which the transaction value a) ranged between $100 million and $250 million; b) the target agreed to be acquired since January 1, 2021; and c) the target was domiciled in the U.S. The median one-day premium for companies that agreed to be acquired and were listed on a national exchange was 28%, while the one-day premium for the OTC-listed companies was 32%.

Mercer Capital also noted:

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The Company’s net book value at December 31, 2021 and 2020 was $180,748,930 and $177,055,634, respectively, or approximately $18.60 and $18.28 per share, respectively.

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At its discretion, the Board of Directors of the Company declares dividends to its shareholders on a quarterly basis. The amount of future dividends will depend upon our earnings, financial condition, capital requirements and other factors, and will be determined by the Company’s Board of Directors on a quarterly basis. It is the policy of the Federal Reserve Board that bank holding companies generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. It is also the policy of the Federal Reserve Board that bank holding companies not maintain dividend levels that undermine the holding company’s ability to be a source of strength to its banking subsidiaries. Under the federal Prompt Corrective Action regulations, the Federal Reserve Board may prohibit a bank holding company from paying any dividends if the holding company is undercapitalized, and the FDIC may prohibit a non-member bank from paying any dividends if the bank is undercapitalized.

As a holding company, our ability to pay cash dividends is affected by the ability of our bank subsidiary, Bank of Guam, to pay cash dividends. The ability of Bank of Guam (and our ability) to pay cash dividends in the future and the amount of any such cash dividends is and could in the future be further influenced by bank regulatory requirements and approvals and capital guidelines. Funds for payment of any cash dividends by the Company would be obtained from its investments as well as dividends from Bank of Guam. The decision whether to pay dividends will be made by the Board of Directors in light of conditions then existing, including factors such as our results of operations, financial condition, business conditions, regulatory capital requirements and covenants under any applicable contractual arrangements, including agreements with regulatory authorities.

Conduct of Our Business after the Reverse Stock Split

Except as described in this proxy statement, neither we nor our management have any current plans or proposals to affect any extraordinary corporate transaction, such as a merger, reorganization or liquidation, a sale or transfer of any material amount of our assets, a change in management, a material change in our indebtedness or capitalization, or any other material change in our corporate structure or business. We expect to conduct our business and operations after the effective date of the reverse stock split in substantially the same manner as currently conducted.

Except as described in this proxy statement with respect to the use of funds to finance the reverse stock split and related costs and our plans to deregister our common stock under the Exchange Act, the reverse stock split is not anticipated to have a material effect upon the conduct of our business. We intend, however, to continue to evaluate and review our businesses, properties, management and other personnel, corporate structure, capitalization and other aspects of our operations in the same manner as we historically have from time to time, and to make such changes as we consider appropriate.

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By way of example, we may determine to propose additional reverse stock splits transactions in the future, depending on whether our Board of Directors determines that the transaction would be cost-effective to us. Factors that the Board of Directors would consider at the time include the number of our shareholders, the trading price of our common stock, the cost of cashing out fractional shares and of the reverse stock split generally, cost savings to the Company anticipated from the reverse stock split and strategic alternatives at the time available to the Company. We have no present intention of proposing any additional reverse stock splits. We also intend to continue to explore from time-to-time acquisitions and other business opportunities to expand or strengthen our businesses. In that regard, we may review proposals or may propose the acquisition or disposition of assets or other changes in our business, corporate structure, capitalization, management or other changes that we then consider to be in our best interests and in the best interests of continuing shareholders after the reverse stock split. We may also explore opportunities for business combinations in which the Company may be acquired, or our shareholders would not constitute a majority of the shareholders of the surviving corporation. There are currently no plans to enter into any such transactions or any other transactions that would require shareholder approval. In addition, our executive officers and directors are expected to retain their respective positions with us following the transaction.

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

The following is a summary of the material U.S. federal income tax consequences of the reverse stock split to the Company and its shareholders. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), existing Treasury Regulations promulgated thereunder, published rulings, administrative pronouncements and judicial decisions, any changes to which could affect the tax consequences described herein, possibly on a retroactive basis. This summary only addresses shareholders who hold their common stock as a capital asset. This section does not apply to a shareholder that is a member of a special class of holders subject to special rules, including, without limitation, financial institutions, regulated investment companies, real estate investment trusts, holders who are dealers in securities or foreign currency, traders in securities that elect to use a mark-to-market method of accounting for securities holdings, tax-exempt organizations, insurance companies, holders that received their common stock pursuant to the exercise of employee stock options or otherwise as compensation, persons liable for alternative minimum tax, holders who hold their common stock as part of a hedge, straddle, conversion, constructive sale or other integrated transaction, or holders whose functional currency is not the U.S. dollar. This summary does not address tax considerations arising under any U.S. federal estate or gift tax laws or under any state, local or foreign laws. This summary is not binding on the Internal Revenue Service (the “IRS”).

Tax Consequences to the Company. We will not recognize taxable income, gain or loss in connection with the reverse stock split.

Tax Consequences to Stockholders. A stockholder generally will not recognize gain or loss on the reverse stock split, except in respect of cash, if any, received in lieu of a fractional share interest. In general, the aggregate tax basis of the post-split shares received will be equal to the aggregate tax basis of the pre-split shares exchanged therefor (excluding any portion of the holder’s basis allocated to fractional shares), and the holding period of the post-split shares received will include the holding period of the pre-split shares exchanged.

A holder of pre-split shares who receives cash generally will be treated as a sale that is subject to Section 302 of the Code, and not as a distribution under Section 301 of the Code, if the receipt of cash (a) is “substantially disproportionate” with respect to the holder, (b) results in a “complete termination” of the holder’s interest, or (c) is “not essentially equivalent to a dividend” with respect to the holder, in each case taking into account shares both actually and constructively owned by such holder (under certain constructive ownership rules). A distribution is not essentially equivalent to a dividend if the holder undergoes a “meaningful reduction” in the holder’s proportionate interest. If the redemption is treated as a sale, the holder will recognize capital gain or loss equal to the difference between the portion of the tax basis of the post-split shares allocated to the fractional share interest and the cash received. If the redemption does not meet one of the Section 302 tests, the cash distribution will be treated as a distribution under Section 301 of the Code. In such case, the cash distribution will be treated as a dividend to the extent of our current and accumulated earnings and profits allocable to the distribution, and then as a recovery of basis to the extent of the holder’s tax basis in his or her shares (which, for these purposes, may include the holder’s tax basis in all of his or her shares rather than only the holder’s tax basis in his or her fractional share interest, although the law is not entirely clear), and finally as gain from the sale of stock.

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Whether a holder who receives cash in lieu of fractional shares will have a meaningful reduction in ownership will depend on all of the facts and circumstances existing at and around the time of the reverse stock split, including the size of the holder’s percentage interest in our common stock before and after the reverse stock split. In this regard, the IRS has indicated in published rulings that any reduction in the percentage interest of a public company stockholder whose relative stock interest is minimal (an interest of less than 1% of the outstanding Company common stock should satisfy this requirement) and who exercises no control over corporate affairs should constitute a meaningful reduction in such stockholder’s interest. However, some stockholders receiving cash in lieu of a fractional share will have an increase in their percentage ownership interest in the Company and therefore could be subject to dividend treatment on the receipt of cash in lieu of such fractional share ownership interest.

We recommend that stockholders consult their own tax advisors to determine the extent to which their fractional share redemption is treated as a sale of the fractional share or as a distribution under Section 301 of the Code and the tax consequences thereof.

Information Reporting and Backup Withholding. Payment of cash in lieu of fractional shares within the United States or conducted through certain U.S. related financial intermediaries is subject to both backup withholding and information reporting unless the beneficial owner certifies under penalties of perjury that he or she is not a U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a U.S. holder) or the stockholder otherwise establishes an exemption. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against such stockholder’s U.S. federal income tax liability provided the required information is furnished to the IRS.

Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons

Our current directors, executive officers and 10% shareholders may have interests in the reverse stock split that are different from your interests as a shareholder and have relationships that may present conflicts of interest. While our Board of Directors recommends a vote “FOR” the reverse stock split, to the Company’s knowledge, none of the Company’s affiliates has made a recommendation, in their individual capacities, either in support of or opposed to the reverse stock split. Our current directors and executive officers have indicated that they intend to vote shares of our common stock over which they have voting control (including shares held by certain of their affiliates, 5,242,323 shares, or approximately 53.9% of our issued and outstanding shares eligible to vote at the Annual Meeting) “FOR” the reverse stock split. Because our directors and officers and certain of their affiliates beneficially own a majority of our outstanding shares of common stock and have indicated their intention to vote in favor of the reverse stock split, we expect that the reverse stock split will be approved regardless of how any other shares of our common stock are voted.

Upon the effectiveness of the reverse stock split, the aggregate number of shares of our common stock owned by our current directors, executive officers and 10% shareholders will be reduced proportionately by the reverse stock split ratio of 1-for-500, and the ownership percentage of the shares of our common stock held by our current directors, executive officers and 10% shareholders will increase by approximately 3.3% from 53.9% to 57.2% as a result of the reduction of the number of shares of our common stock outstanding. The increase in the ownership percentage of our shares of common stock held by our current directors, executive officers and 10% shareholders and the reduction in the number of shares outstanding following the completion of the reverse stock split is based on record holder information that we received as of March 28, 2022 as to our record holders, and information we have received regarding the holdings of beneficial owners of our common stock held in street name. The number of shares to be cashed out in the reverse stock split may vary from the estimate above, and the ownership percentage of our shares of common stock held by our directors, executive officers and 10% shareholders and the ownership percentage of the continuing shareholders after the reverse stock split will proportionally increase or decrease as a result of purchases, sales and other transfers of our shares of common stock by our shareholders prior to the effective date of the reverse stock split, and depending on the number of street name shares that are actually cashed out in the reverse stock split.

See “Special Factors – Effects of the Reverse Stock Split – Effects on the Affiliated Remaining Shareholders” beginning on page [•].

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Directors, executive officers and any shareholders who own more than 10% of our outstanding common stock will experience certain advantages after the reverse stock split in that they will be relieved of certain SEC reporting requirements and “short-swing profit” recapture provisions under Section 16 of the Exchange Act, and information regarding their compensation and stock ownership will no longer be publicly available. In addition, by deregistering the common stock under the Exchange Act subsequent to the consummation of the reverse stock split, we will no longer be prohibited, pursuant to Section 402 of the Sarbanes-Oxley Act, from making personal loans to our directors or executive officers. However, we do not have a present intention of making personal loans to our directors or executive officers, and the ability to make such loans was not a reason considered by the Board of Directors in evaluating the benefits of the reverse stock split.

Except as described above in this section, none of our affiliates has any interest, direct or indirect, in the reverse stock split other than interests arising from the ownership of securities where those affiliates receive no extra or special benefit not shared on a pro rata basis by all other holders of our common stock. In particular, there are no agreements with affiliates to purchase common stock upon consummation of or subsequent to the reverse stock split or otherwise with respect to the reverse stock split.

Sources of Funds and Expenses

Because we do not know how many record and beneficial holders of our common stock will receive cash for their shares in the reverse stock split, we do not know the exact cost of the reverse stock split. However, based on information that we have received as of April 12, 2022 with regard to the size of holdings of our shareholders of record, as well as our estimates of other reverse stock split expenses, we believe that the total cash requirement of the reverse stock split to us will be approximately $[8.8 million]. This amount includes approximately $[8.7 million] needed to cash out fractional shares, approximately $[AMOUNT] of legal, accounting and financial advisory fees, approximately $[AMOUNT] for transfer agent costs and approximately $[AMOUNT] of other costs, including costs of printing and mailing, to effect the reverse stock split. This total amount could be larger or smaller depending on, among other things, the number of fractional shares that will be outstanding after the reverse stock split as a result of purchases, sales and other transfers of our shares of common stock by our shareholders.

The consideration to be paid to shareholders in lieu of fractional shares in the reverse stock split and the other costs of the reverse stock split will be paid from cash on hand. There are no conditions to the availability of the funds for the reverse stock split, and we do not have any alternative financing arrangements or alternative financing plans with respect to the reverse stock split. No part of the funds required for the reverse stock split is expected to be borrowed.

Shareholder Approval

A majority of the outstanding shares of our common stock will constitute a quorum for the purpose of approving the amendment to our Articles of Incorporation to effect the reverse stock split. Assuming the presence of a quorum, the reverse stock split will be approved if the votes cast “for” the reverse stock split exceed the votes cast “against” the reverse stock split. Our current directors and executive officers have indicated that they intend to vote the shares of our common stock over which they have voting control (including shares held by certain of their affiliates, 5,242,323 shares, or approximately 53.9% of our issued and outstanding shares eligible to vote at the Annual Meeting) “FOR” the reverse stock split.

Effective Date

The reverse stock split will become effective as of the date that we amend our Articles of Incorporation through the filing of the Articles of Amendment to the Articles of Incorporation with the Guam Department of Revenue and Taxation to effect the reverse stock split. We intend to effect the reverse stock split as soon as possible after the reverse stock split is approved by our shareholders, subject to final authorization by our Board of Directors and the receipt of all necessary regulatory approvals. Within five business days after the effective date of the reverse stock split, the Company expects that its transfer agent, Computershare, acting in the capacity of paying agent, will send to each shareholder of record of fewer than 500 shares of our common stock, and to brokers, banks and other nominees, based on information we receive from them in response to our inquiries, for each owner of fewer than 500 shares of our common stock held in street name, instructions, including letters of transmittal asking them to surrender their shares. Upon proper completion, execution and return of the letter of transmittal, and the return of the letter of transmittal and accompanying stock certificate(s) to the transfer agent, the transfer agent will send the payments to these shareholders within five business days of receipt. Therefore, the timing of receipt of payment for these shareholders is dependent upon their proper surrender of their stock certificates and the delivery of properly prepared and executed letters of transmittal. For shares held in street name through DTC, payment of the consideration due to holders in lieu of fractional shares of our common stock will be made in accordance with the practices and procedures of DTC.

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Our common stock acquired in connection with the reverse stock split will be restored to the status of authorized but unissued shares.

The suspension of our obligation to file periodic reports and other documents under the Exchange Act will become effective after the filing with the SEC of a certification and notice of termination of registration on Form 15. The deregistration of our common stock under Section 12(g) of the Exchange Act will take effect 90 days after the filing of the Form 15.

See “Special Factors – Effects of the Reverse Stock Split” beginning on page [•].

Termination of the Reverse Stock Split

Under applicable Guam law, the Board of Directors has a duty to act in the best interests of our shareholders. Accordingly, the Board of Directors reserves the right to abandon the reverse stock split, if for any reason the Board of Directors determines that, in the best interests of our shareholders, it is not advisable to proceed with the reverse stock split, even assuming the shareholders approve the reverse stock split by vote. Although the Board of Directors presently believes that the reverse stock split is in our best interests and has recommended a vote “FOR” the reverse stock split, the Board of Directors nonetheless believes that it is prudent to recognize that circumstances could possibly change such that it might not be appropriate or desirable to affect the reverse stock split at that time. Such reasons include, but are not limited to:

If the Board of Directors decides to withdraw the reverse stock split, whether before or after the time the Annual Meeting is held, the Board of Directors will promptly notify our shareholders of the decision by public announcement.

Process for Payment for Fractional Shares

Shareholders owning fewer than 500 shares on the effective date of the reverse stock split will receive $14.75 (subject to any applicable U.S. federal, state and local withholding tax) for each pre-split share of common stock, without interest. Shareholders who own 500 or more shares at the effective date of the reverse stock split will receive $14.75 (subject to any applicable U.S. federal, state and local withholding tax) for each pre-split share of common stock which would have resulted in the issuance of a fractional share in lieu of such fractional share that would have otherwise resulted from the reverse stock split.

For purposes of determining ownership of shares of our common stock on the effective date of the reverse stock split, such shares will be considered held by the person in whose name such shares are registered on our transfer agent’s records. We intend to treat shareholders holding shares of our common stock in street name in the same manner as registered shareholders whose shares are registered in their names. Prior to the effective date of the reverse stock split, we will conduct an inquiry of all brokers, banks and other nominees that hold shares of our common stock in street name. We will ask them to affect the reverse stock split for their beneficial holders holding shares of our common stock in street name. We will rely on these brokers, banks and other nominees to provide us with information on how many fractional shares will be cashed out. However, these brokers, banks and other nominees may have different procedures than registered shareholders for processing the reverse stock split. If you hold your shares in street name with a bank, broker or other nominee, and if you have any questions in this regard, we encourage you to contact your bank, broker or nominee.

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Within five business days after the effective date of the reverse stock split, we expect that our transfer agent will send to each holder of record of 500 or fewer shares of our common stock immediately prior to the reverse stock split, and to brokers, banks and other nominees, based on information we receive from them in response to our inquiries, for each owner of fewer than 500 shares of our common stock immediately prior to the reverse stock split held in street name, instructions for surrendering any stock certificates held thereby representing shares of our common stock which will be converted to a right to receive cash as a result of the reverse stock split. The instructions will include a letter of transmittal to be completed and returned to the transfer agent by the holder of such certificates, together with such certificates. The shares we acquire in the reverse stock split will be restored to the status of authorized but unissued shares.

Within five business days after the transfer agent receives from a holder of fewer than 500 shares a surrendered certificate, together with a duly completed and executed letter of transmittal with respect thereto and such other documents as we may require, the transfer agent will deliver to the person payment in an amount equal to $14.75 (subject to any applicable U.S. federal, state and local withholding tax), without interest, for each pre-split share of common stock that is represented by the fractional share.

For shares held in street name through DTC, payment of the consideration in lieu of fractional shares of our common stock will be made in accordance with the practices and procedures of DTC.

Our transfer agent Computershare will act as our agent for purposes of paying for fractional shares in connection with the reverse stock split.

No service charge, brokerage commission, or transfer tax will be payable by a shareholder of fewer than 500 shares in connection with the cash out of shares in the reverse stock split.

If any certificate evidencing shares of our common stock has been lost or destroyed, we may in our sole discretion accept in lieu thereof a duly executed affidavit and indemnity agreement in a form satisfactory to us. The holder of any shares of our common stock evidenced by any certificate that has been lost or destroyed must submit:

Additional instructions with respect to lost or destroyed certificates will be included with the letter of transmittal that we will send to shareholders after the effective date of the reverse stock split. In the event that the Company is unable to locate certain shareholders or if a shareholder fails to properly complete, execute, and return the letter of transmittal and accompanying stock certificate(s) to the transfer agent, any funds payable to such holders pursuant to the reverse stock split will be held in escrow until a proper claim is made, subject to applicable unclaimed property and escheat laws.

DO NOT SEND STOCK CERTIFICATES TO US OR THE TRANSFER AGENT UNTIL AFTER YOU HAVE RECEIVED A LETTER OF TRANSMITTAL AND ANY ACCOMPANYING INSTRUCTIONS.

No Appraisal or Dissenters’ Rights

Under Guam law, our Articles of Incorporation and our By-Laws, no appraisal or dissenters’ rights are available to shareholders of the Company who dissent from the reverse stock split.

Potential Anti-Takeover Effects of Amendment

Release No. 34-15230 of the staff of the SEC requires disclosure and discussion of the effects of any action, including the proposed amendment to our Articles of Incorporation to effectuate the reverse stock split, that may be used as an anti-takeover mechanism. Because the proposed amendment to our Articles of Incorporation will result in a relative increase in the number of authorized but unissued shares of our common stock vis-à-vis the number of outstanding shares of our common stock after the reverse stock split, the reverse stock split could, under certain circumstances, have an anti-takeover effect, although this is not the purpose or intent of our Board of Directors. A relative increase in the number of our authorized shares could enable the Board of Directors to render more difficult or discourage an attempt by a party attempting to obtain control of the Company by tender offer or other means.

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As stated above, in the event of a reverse stock split, we have no present intent to use the relative increase in the number of authorized but unissued shares of our common stock for anti-takeover purposes, and the proposed amendments are not part of a plan by the Board of Directors to adopt a series of anti-takeover provisions. We are not aware of any pending or threatened efforts to obtain control of the Company, and the Board of Directors has no present intent to authorize the issuance of additional shares of common stock to discourage these efforts if they were to arise.

Escheat Laws

The unclaimed property and escheat laws of each state provide that under circumstances defined in that state’s statutes, holders of unclaimed or abandoned property must surrender that property to the state. Persons whose shares are cashed out and whose addresses are unknown to us, or who do not return their stock certificates and request payment for their cashed-out shares, generally will have a certain period of time from the effective date of the reverse stock split in which to claim the cash payment payable to them. For example, with respect to shareholders whose last known addresses are in New York, as shown by our records, the period is three years. Following the expiration of that three-year period, the Unified Disposition of Unclaimed Property Act of New York would likely cause the cash payments to escheat to the State of New York. For shareholders who reside in other states or whose last known addresses, as shown by our records, are in states other than New York, such states may have abandoned property laws which call for such state to obtain either (i) custodial possession of property that has been unclaimed until the owner reclaims it or (ii) escheat of such property to the state. Under the laws of such other jurisdictions, the “holding period” or the time period which must elapse before the property is deemed to be abandoned may be shorter or longer than three years. If we do not have an address for the holder of record of the shares, then unclaimed cash-out payments will be turned over to [NAME], in accordance with the escheat laws of Guam.

Regulatory Approvals

Completion of the reverse stock split will be subject to the Company obtaining all required federal bank regulatory agency approvals, if any such approvals might be necessary. If any such approvals are required, we cannot be certain when such approvals will be received.

Litigation

There is no ongoing litigation related to the reverse stock split.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains certain forward-looking statements concerning, among other things, our anticipated results, and future plans and objectives that are or may be considered to be “forward-looking statements.” The words “believe”, “expect”, “anticipate”, “should”, “could” and other expressions that indicate future events and trends identify forward-looking statements. These expectations are based upon many assumptions that we believe to be reasonable, but such assumptions ultimately may prove to be materially inaccurate or incomplete, in whole or in part and, therefore, undue reliance should not be placed on them. Several factors which could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to: the reactions of our customers, suppliers and other persons with whom we do business prior to the reverse stock split; the effects of the reverse stock split on the market for our common stock; general global and economic conditions; and other factors recited from time to time in our filings with the SEC. In light of the uncertainty inherent in our forward-looking statements, you should not consider their inclusion to be a representation that the forward-looking statements will be achieved. In evaluating forward-looking statements, you should consider all these risks and uncertainties, together with any other risks described in our other reports and documents furnished or filed with the SEC, and you should not place undue reliance on those statements. We assume no obligation for updating any forward-looking statements, whether as a result of new information, future events, or otherwise. However, to the extent that there are any material changes in the information contained in this proxy statement, the Company will promptly disclose the changes as and to the extent required by applicable law and the rules and regulations of the SEC.

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WHERE YOU CAN FIND MORE INFORMATION

The reverse stock split is a “going private” transaction subject to Rule 13e-3 of the Exchange Act. The Company has filed a Rule 13e-3 Transaction Statement on Schedule 13E-3 under the Exchange Act with respect to the reverse stock split. The Schedule 13E-3 contains additional information about the Company. Copies of the Schedule 13E-3 are available for inspection and copying at the principal executive offices of the Company during regular business hours by any interested shareholder of the Company, or a representative who has been so designated in writing, and may be inspected and copied, or obtained by mail, by written request directed to Danilo Rapadas, General Counsel, at 111 West Chalan Santo Papa Hagåtña, Guam 96910, (671) 472-5300.

The Company is currently subject to the information requirements of the Exchange Act and files periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters.

You may read and copy any document we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public electronically on the SEC’s Website at http://www.sec.gov.

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