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Phelps County Bank

History:

Phelps County Bank (PCB) is a community bank owned by the employees through an Employee Stock Ownership Plan (ESOP). PCB competes with both independent banks and branches of large state and national banking companies. PCB was established by local citizens in 1963. The majority interest was purchased by Don Castleman in 1971 and he subsequently purchased all but three percent of the stock through a one bank holding company by 1978.

The ESOP was established in 1980 as a profit sharing plan which would let employees share in the growth of the bank. The first purchase was 5% of the bank stock from Don Castleman. The bank had assets of $20 million and 24 employees.In 1984 PCB purchased a bank in St. James, Missouri and assets increased from $32 million to $57 million. In order to bring the 15 employees from the merged bank into the ownership plan, Don Castleman sold another 8% of the stock to the ESOP.

By 1987 the bank's assets had grown to over $70 million and the ESOP and the stock had significantly increased in value. Management was able to use the ESOP as a recruitment incentive and turnover decreased significantly as employees were seeing their efforts rewarded in their stock account. A plan was put into place to use the ESOP as an orderly way to transfer ownership since Don Castleman was willing to sell his remaining stock to the ESOP. The ESOP purchased an additional 22% of the stock in 1988 bringing the employee ownership to 32%.

A tremendous effort was made to share information with employee-owners and to gain their commitment to make 100% ownership possible. In 1991 the ESOP purchased an additional 36% of the stock and completed the purchase of the remaining stock in 1993. The purchase of the stock by the ESOP was made possible partially because of favorable capital gain tax treatment for the seller, and interest rate incentives for the commercial lender who provided financing for the stock purchases. However, the primary reason Don Castleman was willing to sell his stock to the ESOP was because of his belief in the employees and their ability to keep the bank profitable and independent.

The goal of the employee-owners of Phelps County Bank is to remain a financially sound, independent bank providing high quality service to those who entrust us with their finances, and to provide a great place to work. This unique type of ownership has allowed PCB to grow each year and for the employee-owners to see the stock increase in value. It has also benefited the bank's customers since employee-owners not only own stock, they have taken ownership of their jobs and understand that the success of their business depends on their efforts and the satisfaction of their customers.

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