As filed with the Securities and Exchange Commission on July 12, 2011
Registration No. 333-________


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
 
West End Indiana Bancshares, Inc. and
West End Bank, S.B. 401(k) Plan
(Exact Name of Registrant as Specified in Its Charter)
 
Maryland 6712 Being applied for
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
 
34 South 7th Street
Richmond, Indiana  47374
(765) 962-9587
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant’s Principal Executive Offices)
 
Mr. John P. McBride
President and Chief Executive Officer
34 South 7th Street
Richmond, Indiana  47374
(765) 962-9587
 (Address, Including Zip Code, and Telephone Number, Including Area Code, of
Agent for Service)
 
Copies to:
Kip Weissman, Esq.
Steven T. Lanter, Esq.
Luse Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W.
Suite 780
Washington, D.C. 20015
(202) 274-2000
Beth A. Freedman
Silver, Freedman & Taff, L.L.P.
3299 K Street, N.W.
Suite 100
Washington, DC  20007
(202) 295-4500
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  x
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
     
  Large accelerated filer o Accelerated filer o
  Non-accelerated filer o Smaller reporting company x
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
Title of each class of
securities to be registered
Amount to be registered
Proposed maximum offering price per share
Proposed maximum aggregate offering price
Amount of registration fee
Common Stock, $0.01 par value per share
1,889,500
$10.00
$18,895,000 (1)
$2,195
Participation interests
94,400 interests
   
(2)
 
(1)
Estimated solely for the purpose of calculating the registration fee.
(2)
The securities of West End Indiana Bancshares, Inc. to be purchased by the West End Bank, S.B. 401(k) Plan are included in the amount shown for the common stock. Accordingly, no separate fee is required for the participation interests. In accordance with Rule 457(h) of the Securities Act of 1933, as amended, the registration fee has been calculated on the basis of the number of shares of common stock that may be purchased with the current assets of such Plan.
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 
 

 
 
PROSPECTUS
West End Indiana Bancshares, Inc.
(Proposed Holding Company for West End Bank, S.B.)
Up to 1,610,000 Shares of Common Stock
 
West End Indiana Bancshares, Inc., a Maryland corporation, is offering shares of common stock for sale in connection with the conversion of West End Bank, MHC from the mutual to the stock form of organization.  All shares of common stock are being offered for sale at a price of $10.00 per share.  We expect that our common stock will be quoted on the OTC Bulletin Board upon conclusion of the stock offering.  There is currently no public market for the shares of our common stock.
 
We are offering up to 1,610,000 shares of common stock for sale on a best efforts basis.  We may sell up to 1,851,500 shares of common stock because of demand for the shares or changes in market conditions without resoliciting subscribers.  We must sell a minimum of 1,190,000 shares in order to complete the offering.
 
We are offering the shares of common stock in a “subscription offering.”  Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering.” We also may offer for sale shares of common stock not purchased in the subscription offering or community offering through a “syndicated community offering” to be managed by Keefe, Bruyette & Woods, Inc. In addition to the shares that we will sell in the offering, we will also contribute 38,000 shares ($380,000) of our common stock and $125,000 in cash to a charitable foundation that we are establishing.
 
The minimum number of shares of common stock you may order is 25 shares.  The maximum number of shares of common stock that an individual can order by himself or with an associate or group of persons acting in concert is 15,000 shares.  The offering is expected to expire at 4:30 p.m., Eastern Time, on [expire date].  We may extend this expiration date without notice to you until [extend date 1], or such later date as the Office of Thrift Supervision or the Federal Reserve Board as its successor may approve, to the extent such approval is required, which may not be beyond [extend date 2].  Once submitted, orders are irrevocable.  However, if the offering is extended beyond [extend date 1], or the number of shares of common stock to be sold is increased to more than 1,851,500 shares or decreased to fewer than 1,190,000 shares, we will resolicit subscribers, giving them an opportunity to change or cancel their orders.  Funds received during the offering will be held in a segregated account at West End Bank, S.B., and will earn interest at 0.50% per annum, which is our current statement savings rate.
 
Keefe, Bruyette & Woods, Inc. will assist us in selling our shares of common stock on a best efforts basis.  Keefe, Bruyette & Woods, Inc. is not required to purchase any shares of the common stock that are being offered for sale.  Purchasers will not pay a commission to purchase shares of common stock in the offering. Keefe, Bruyette & Woods, Inc. has advised us that it intends to make a market in the common stock, but is under no obligation to do so.
 
Upon completion of the conversion, West End Indiana Bancshares, Inc. will be a savings and loan holding company, and will be registered with the Federal Reserve Board, as the successor to the Office of Thrift Supervision, and will be subject to regulations, examinations, supervision and reporting requirements of the Federal Reserve Board, as the successor to the Office of Thrift Supervision.  See “Supervision and Regulation” for more information.
 
This investment involves a degree of risk, including the possible loss of your investment.
Please read “Risk Factors” beginning on page 13.
 
OFFERING SUMMARY
Price: $10.00 per Share
 
   
Minimum
   
Midpoint
   
Maximum
   
Adjusted Maximum
 
                         
Number of shares
    1,190,000       1,400,000       1,610,000       1,851,500  
Gross offering proceeds
  $ 11,900,000     $ 14,000,000     $ 16,100,000     $ 18,515,000  
Estimated offering expenses (excluding selling agent fees)
  $ 900,000     $ 900,000     $ 900,000     $ 900,000  
Estimated selling agent fees(1) 
  $ 283,864     $ 312,844     $ 341,824     $ 375,151  
Estimated net proceeds
  $ 10,716,136     $ 12,787,156     $ 14,858,176     $ 17,239,849  
Estimated net proceeds per share
  $ 9.01     $ 9.13     $ 9.23     $ 9.31  

 
(1)
See “The Conversion; Plan of Distribution—Marketing and Distribution; Compensation” for a discussion of Keefe, Bruyette & Woods, Inc.’s compensation for this offering.
 
 
(2)
If all shares of common stock are sold in the syndicated community offering, excluding shares purchased by the employee stock ownership plan and shares purchased by insiders of West End Indiana Bancshares, Inc., for which no selling agent commissions would be paid, the maximum selling agent commissions and expenses would be $616,000 at the minimum, $730,000 at the midpoint, $847,000 at the maximum and $981,000 at the maximum, as adjusted. See “The Conversion; Plan of Distribution–Marketing and Distribution; Compensation” for a discussion of fees to be paid to Keefe, Bruyette & Woods, Inc. and other FINRA member firms in the event that shares are sold in a syndicated community offering.
 
These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
 
Neither the Securities and Exchange Commission, the Office of Thrift Supervision, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Indiana Department of Financial Institutions, nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
For assistance, please call the Stock Information Center, toll free, at [SIC phone].
 

Keefe, Bruyette & Woods

The date of this prospectus is [prospectus date].

 
 

 
 
[MAP SHOWING MARKET AREA APPEARS ON INSIDE FRONT COVER]

 
 

 
 
TABLE OF CONTENTS
 
   
Page
     
 
2
 
13
 
24
 
26
 
27
 
29
 
29
 
30
 
31
 
33
 
39
 
40
 
57
 
58
 
89
 
99
 
100
 
115
 
116
 
141
 
145
 
150
 
151
 
152
 
152
 
152
 
153
 
F-1

 
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SUMMARY
 
The following summary highlights material information in this prospectus. It may not contain all the information that is important to you. For additional information, you should read this entire prospectus carefully, including the Consolidated Financial Statements and the notes to the Consolidated Financial Statements.
 
In this prospectus, the terms “we, “our,” and “us” refer to West End Indiana Bancshares, Inc., West End Bank, S.B., West End Bank, MHC and West End Bancshares, Inc., unless the context indicates another meaning.
 
West End Bank, S.B.
 
West End Bank, S.B. is an Indiana-chartered savings bank headquartered in Richmond, Indiana.  West End Bank, S.B. was organized in 1894 under the name West End Building and Loan Association and has operated continuously in Wayne County, Indiana since its founding. We reorganized into the mutual holding company structure in 2007 by forming West End Bank, MHC, our federally chartered mutual holding company.  West End Bank, MHC owns 100% of the outstanding shares of common stock of West End Bancshares, Inc., a federal corporation, which in turn owns 100% of the outstanding shares of common stock of West End Bank, S.B.
 
We provide financial services to individuals, families and businesses through our four banking offices located in the Indiana counties of Union and Wayne and two additional limited service branches located in an elementary school and high school in Richmond, Indiana at which we offer more limited banking services and at which we provide banking seminars to students who assist in the branch operations. See “Business of West End Bank, S.B.” Our principal business consists of attracting retail deposits from the general public in our market area and investing those deposits, together with funds generated from operations, and to a lesser extent, borrowings, in one- to four-family residential real estate loans, indirect automobile loans, commercial and multi-family real estate loans, and, to a lesser extent, second mortgages and equity lines of credit, construction loans and commercial business loans.  We also purchase investment securities consisting primarily of securities issued by United States Government agencies and government sponsored entities and mortgage-backed securities.  At March 31, 2011, we had total assets of $217.1 million, total deposits of $176.7 million and total equity of $17.4 million.
 
Our current management team joined West End Bank, S.B. in 2003 and 2004 and refocused our strategy to diversify our traditional thrift focus into a more commercial bank style of operation with a broadened base of financial products and services while emphasizing superior customer service.  While residential real estate lending has and will remain an important part of our operations, we have diversified our focus on non-residential lending, and most importantly emphasized indirect automobile lending. Our consumer lending business lines, as well as our interest rate risk strategies, including selling into the secondary market most of the fixed-rate one- to four-family residential real estate loans that we originate based on an asset/liability management analysis, has allowed us to continue to grow and remain profitable despite the challenging economy, interest rate environment of recent years and increasing regulatory burden placed on all financial institutions.
 
West End Bank, S.B.’s executive offices are located at 34 South 7th Street, Richmond, Indiana 47374.  Our telephone number at this address is (765) 962-9587.  Our website address is www.westendbank.com.  Information on our website is not incorporated into this prospectus and should not be considered part of this prospectus.
 
 
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West End Indiana Bancshares, Inc.
 
West End Indiana Bancshares, Inc. is a newly formed Maryland corporation that will own all of the outstanding shares of common stock of West End Bank, S.B. upon completion of the mutual-to-stock conversion and the offering.  West End Indiana Bancshares, Inc. was incorporated on June 24, 2011 and has not engaged in any business to date.
 
Our executive offices are located at 34 South 7th Street, Richmond, Indiana 47374.  Our telephone number at this address is (765) 962-9587.
 
Business Strategy
 
Over the last several years, our business strategy has included a broader array of financial products and services to consumers and businesses within our market area.  Highlights of our current business strategy include, subject to market conditions:
 
 
increasing our holdings of loans other than one- to four-family residential real estate loans;
 
 
continuing to emphasize the origination of one- to four-family residential real estate loans, while increasing, to the extent practicable, the amount of our adjustable-rate residential mortgage loan;
 
 
managing interest rate risk, including following our strategy of selling most of our fixed-rate one- to four-family residential real estate loans into the secondary market, while maximizing, to the extent practicable and subject to risk management considerations and market conditions, our net interest margin;
 
 
maintaining strong asset quality; and
 
 
executing our cross-marketing strategy, including community outreach programs, to enhance our profile in our market area, increase our relationships with small- to mid-sized businesses and professionals, and build our core deposits.
 
These strategies are intended to guide our investment of the net proceeds of the offering.  We intend to continue to pursue our business strategy after the conversion and the offering, subject to changes necessitated by future market conditions and other factors.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Business Strategy” for a further discussion of our business strategy.
 
Reasons for the Conversion
 
Our primary reasons for converting and raising additional capital through the offering are:
 
 
to increase our capital to enhance our financial strength and to support lending and deposit growth;
 
 
to enhance our lending capacity by increasing our regulatory lending limits;
 
 
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to have greater flexibility to structure and finance opportunities for expansion into new markets, including through de novo branching, branch acquisitions or acquisitions of other financial institutions, although we have no current arrangements or agreements with respect to any such transactions; and
 
 
to retain and attract qualified personnel by establishing stock-based benefit plans for management and employees.
 
Although our market area did not experience the extreme growth in 2003 through 2007 that characterized many “bubble” markets across the country, beginning in 2008 we were impacted by the extreme economic downturn and experienced higher than normal increases in loan delinquencies and foreclosures. Additionally, the significant changes in the financial services industry that have occurred in recent years as a result of the collapse of the financial markets in 2008 and the severe nationwide economic recession that followed, have severely strained the financial and managerial resources of community banks and will continue to do so in the future.  Management believes that West End Bank, S.B. will be better equipped to address these challenges by raising additional capital and adopting the stock holding company structure.
 
We believe the stock form of organization will better support the expansion of the products and services we can offer our customers. Management believes that the additional capital raised in the offering will enable us to take advantage of business opportunities that may not otherwise be available to us, while remaining an independent community-oriented institution.
 
As of March 31, 2011, West End Bank, S.B. was considered “well capitalized” for regulatory purposes and was not subject to a directive or a recommendation from the Federal Deposit Insurance Corporation or the Indiana Department of Financial Institutions to raise capital.  The proceeds from the stock offering will further improve our capital position during a period of significant economic, regulatory and political uncertainty.
 
Terms of the Conversion and the Offering
 
We are offering between 1,190,000 and 1,610,000 shares of common stock to eligible depositors and borrowers of West End Bank, S.B., to our employee benefit plans and, to the extent shares remain available, to the general public.  The number of shares of common stock to be sold may be increased to up to 1,851,500 as a result of demand for the shares or changes in the market for financial institution stocks.  Unless the number of shares of common stock to be offered is increased to more than 1,851,500 or decreased to less than 1,190,000, or the offering is extended beyond [extend date 1], subscribers will not have the opportunity to change or cancel their stock orders.
 
The purchase price of each share of common stock to be issued in the offering (other than shares we are contributing to our charitable foundation) is $10.00.  Investors will not be charged a commission to purchase shares of common stock in the offering.
 
Persons Who May Order Shares of Common Stock in the Offering
 
We are offering the shares of common stock in a “subscription offering” in the following descending order of priority:
 
 
First, to depositors of West End Bank, S.B. with aggregate account balances of at least $50 as of the close of business on March 31, 2010.
 
 
4

 
 
 
Second, to West End Bank, S.B.’s tax-qualified employee benefit plans (including the employee stock ownership plan we are establishing in connection with the conversion), which will receive, without payment therefor, nontransferable subscription rights to purchase in the aggregate up to 10% of the shares of common stock issued in the offering (including shares contributed to our charitable foundation).  We expect our employee stock ownership plan to purchase 8% of the shares of common stock issued in the offering (including shares contributed to our charitable foundation).
 
 
Third, to depositors of West End Bank, S.B. with aggregate account balances of at least $50 as of the close of business on [serd].
 
 
Fourth, to depositors of West End Bank, S.B. as of [omrd] and to borrowers of West End Bank as of September 28, 2007 whose borrowings as of that date remain outstanding as of ________, 2011.
 
Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering,” with a preference given to natural persons residing in the Indiana Counties of Union and Wayne.
 
How We Determined the Offering Range
 
The amount of common stock that we are offering is based on an independent appraisal of the estimated market value of West End Indiana Bancshares, Inc., assuming the conversion and the offering are completed.  RP Financial, LC, our independent appraiser, has estimated that, as of June 10, 2011, this market value (including the cash and shares to be contributed to the charitable foundation) ranged from $12.3 million to $16.5 million, with a midpoint of $14.4 million.  Based on this valuation and a $10.00 per share price, and including 38,000 shares that we intend to contribute to our charitable foundation, the number of shares of common stock being offered for sale by us will range from 1,190,000 shares to 1,610,000 shares.  The $10.00 per share price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions.
 
RP Financial, Inc. also considered that we intend to contribute 38,000 shares ($380,000) of our common stock and $125,000 in cash to a charitable foundation that we are establishing in connection with the conversion.  The intended contribution of cash and shares of common stock to the charitable foundation has the effect of reducing our estimated pro forma valuation.  See “Comparison of Valuation and Pro Forma Information With and Without the Charitable Foundation.”
 
Limits on How Much Common Stock You May Purchase
 
The minimum number of shares of common stock that may be purchased is 25. Generally, no individual, or individuals exercising subscription rights through a single qualifying account held jointly, may purchase more than 15,000 shares ($150,000) of common stock.  Additionally, if any of the following persons purchase shares of common stock, their purchases, in all categories of the offering, will be combined with your purchases and may not exceed 15,000 shares ($150,000).:
 
 
your spouse or relatives of you or your spouse living in your house;
 
 
most companies, trusts or other entities in which you are a trustee, have a substantial beneficial interest or hold a senior management position; or
 
 
other persons who may be your associates or persons acting in concert with you.
 
 
5

 
 
See the detailed descriptions of “acting in concert” and “associate” in “The Conversion; Plan of Distribution—Limitations on Common Stock Purchases.”
 
How We Intend to Use the Proceeds From the Offering
 
Assuming we sell 1,851,500 shares of common stock in the stock offering (the adjusted maximum of the offering range), and we have net proceeds of $17.2 million, we intend to distribute the net proceeds as follows:
 
 
$8.6 million (50.0% of the net proceeds) will be invested in West End Bank, S.B.;
 
 
$1.5 million (8.8% of the net proceeds) will be loaned to our employee stock ownership plan to fund its purchase of our shares of common stock;
 
 
$125,000 (0.7% of the net proceeds) will be contributed our charitable foundation; and
 
 
$7.0 million (40.5% of the net proceeds) will be retained by us.
 
We may use the funds we receive for investments, to pay cash dividends, to repurchase shares of common stock and for other general corporate purposes.  West End Bank, S.B. may use the proceeds it receives from West End Indiana Bancshares, Inc. to support increased lending and other products and services, and to repay short-term borrowings.  The net proceeds retained by West End Indiana Bancshares, Inc. and West End Bank, S.B. also may be used for future business expansion through acquisitions of banks, thrifts and other financial services companies, and opening or acquiring branch offices.  We have no current arrangements or agreements with respect to any such acquisitions or branch offices.  Initially, a substantial portion of the net proceeds will be invested in short-term investments and other securities consistent with our investment policy.
 
We do not anticipate the number of shares we sell in the stock offering will result in significant changes in the respective use of proceeds by West End Bank, S.B. and West End Indiana Bancshares, Inc.  Please see the section of this prospectus entitled “How We Intend to Use the Proceeds From the Offering” for more information on the proposed use of the proceeds from the offering, including a table showing the distribution of net proceeds at different points in the offering range.
 
Our Issuance of Cash and Shares of Our Common Stock to West End Bank Charitable Foundation
 
To further our commitment to our local community, we intend to establish a charitable foundation as part of the conversion and stock offering.  Assuming we receive approval from our members to fund the charitable foundation with shares of our common stock and cash, we intend to contribute $125,000 in cash and 38,000 shares ($380,000, based on the $10.00 per share offering price) of our common stock. As a result of the issuance of shares to the charitable foundation, we will record an after-tax expense of approximately $305,000 during the quarter in which the stock offering is completed. Because our intended contribution is not dependent upon the amount of shares that we sell in the offering, this expense will remain constant regardless of the amount of proceeds we raise.
 
The charitable foundation will be dedicated exclusively to supporting charitable causes and community development activities in the communities in which we operate.  The charitable foundation is expected to make contributions totaling approximately $25,250 in its first year of operation.
 
 
6

 
 
Issuing shares of common stock to the charitable foundation will:
 
 
dilute the voting interests of purchasers of shares of our common stock in the stock offering; and
 
 
result in an expense, and a reduction in earnings, during the quarter in which the contribution is made, equal to the full amount of the contribution to the charitable foundation, offset in part by a corresponding tax benefit.
 
The establishment and funding of the charitable foundation has been approved by the Boards of Directors of West End Bank, MHC, West End Bancshares, Inc., West End Bank, S.B. and West End Indiana Bancshares, Inc. and is subject to approval by members of West End Bank, MHC.  If the members do not approve the funding of the charitable foundation with shares of our common stock and cash, we may, in our discretion, complete the conversion and stock offering without the inclusion of the charitable foundation and without resoliciting subscribers.  We may also determine, in our discretion, not to complete the conversion and stock offering if the members do not approve the charitable foundation.
 
The amount of common stock that we would offer for sale would be greater if the offering were to be completed without the formation and funding of the West End Bank Charitable Foundation.  For a further discussion of the financial impact of the charitable foundation, including its effect on those who purchase shares in the offering, see “Risk Factors–The contribution of shares to the charitable foundation will dilute your ownership interest and adversely affect net income in 2011,” “Comparison of Valuation and Pro Forma Information With and Without the Charitable Foundation” and “West End Bank Charitable Foundation.”
 
You May Not Sell or Transfer Your Subscription Rights
 
Applicable regulations prohibit you from transferring your subscription rights.  If you order shares of common stock in the subscription offering, you will be required to state that you are purchasing the shares of common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights.  We intend to take legal action, including reporting persons to federal or state regulatory agencies, against anyone who we believe has sold or given away his or her subscription rights.  We will not accept your order if we have reason to believe that you have sold or transferred your subscription rights.
 
Deadline for Orders of Common Stock
 
If you wish to purchase shares of common stock in the offering, we must receive a properly completed original stock order and certification form, together with full payment for the shares of common stock, at the Stock Information Center or any of our branch offices no later than 4:30 p.m., Eastern Time, on [expire date].
 
Steps We May Take If We Do Not Receive Orders for the Minimum Number of Shares
 
If we do not receive orders for at least 1,190,000 shares of common stock (not counting shares to be contributed to our charitable foundation), we may take steps to issue the minimum number of shares of common stock in the offering range.  Specifically, we may:
 
 
increase the purchase limitations; and/or
 
 
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seek the approval, to the extent required, of the Office of Thrift Supervision or the Federal Reserve Board as its successor, to extend the offering beyond [extend date 1], so long as we resolicit subscriptions that we have previously received in the offering.
 
If a purchase limitation is increased, subscribers in the subscription offering who ordered the maximum amount will be, and, in our sole discretion, some other large subscribers may be, given the opportunity to increase their subscriptions up to the then-applicable limit.
 
Possible Change in the Offering Range
 
RP Financial, LC will update its appraisal before we complete the offering.  If, as a result of demand for the shares, or changes in market conditions, RP Financial, LC determines that our pro forma market value has increased, we may sell up to 1,851,500 shares in the offering without further notice to you.  If our pro forma market value at that time is either below $12.3 million or above $18.9 million, then, after consulting with the Office of Thrift Supervision, or the Federal Reserve Board as its successor, we may:
 
 
terminate the stock offering and promptly return all funds;
 
 
set a new offering range and give all subscribers the opportunity to confirm, modify or rescind their purchase orders for shares of West End Indiana Bancshares, Inc.’s common stock; or
 
 
take such other actions as may be permitted, to the extent such permission is required, by the Office of Thrift Supervision or the Federal Reserve Board as its successor, and the Securities and Exchange Commission.
 
Possible Termination of the Offering
 
We may terminate the offering at any time prior to the special meeting of members of West End Bank, MHC that is being called to vote upon the conversion and to approve the establishment and funding of the charitable foundation, and at any time after member approval with the approval, to the extent such approval is required, of the Office of Thrift Supervision, or the Federal Reserve Board, as its successor.
 
We must sell a minimum of 1,190,000 shares to complete the offering. If we terminate the offering because we fail to sell the minimum number of shares (not counting shares that we will contribute to the charitable foundation) or for any other reason, we will promptly return your funds with interest at our statement savings rate and we will cancel deposit account withdrawal authorizations.
 
Purchases by Officers and Directors
 
We expect our directors and officers, together with their associates, to subscribe for 70,750 shares of common stock in the offering, or 5.9% of the shares to be sold at the minimum of the offering range.  See “Subscriptions by Directors and Officers.”
 
Benefits to Management and Potential Dilution to Stockholders Following the Conversion
 
We expect our tax-qualified employee stock ownership plan to purchase 8% of the total number of shares of common stock that we sell in the offering (including shares contributed to our charitable foundation), or 131,840 shares of common stock, assuming we sell the maximum of the shares proposed to be sold.
 
 
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We also intend to implement one or more stock-based benefit plans no earlier than six months after completion of the conversion.  Stockholder approval of these plans will be required, and the stock-based benefit plans cannot be implemented until at least six months after the completion of the conversion pursuant to applicable regulations. We have not yet determined whether we will present these plans for stockholder approval within 12 months following the completion of the conversion or more than 12 months after the completion of the conversion.  If presented more than 12 months after the completion of the conversion, these plans would require the approval of our stockholders by a majority of votes cast; otherwise, they would require the approval of our stockholders by a majority of votes eligible to be cast.  Further, there are a number of restrictions that would apply to these plans if adopted within one year of the conversion, including limits on awards to non-employee directors and officers and vesting.  See “Management of West End Indiana Bancshares, Inc. – Stock-Based Benefit Plans.”  For example, if adopted within 12 months following the completion of the conversion, the stock-based benefit plans will reserve a number of shares of common stock equal to not more than 4% of the shares sold in the offering (including shares contributed to our charitable foundation) for restricted stock awards to key employees and directors, at no cost to the recipients, and will also reserve a number of stock options equal to not more than 10% of the shares of common stock sold in the offering (including shares contributed to our charitable foundation ) for key employees and directors.
 
If 4% of the shares of common stock sold in the offering (including shares contributed to our charitable foundation) are awarded under a stock-based benefit plan and come from authorized but unissued shares of common stock, stockholders would experience dilution of up to approximately 3.8% in their ownership interest in West End Indiana Bancshares, Inc.  If 10% of the shares of common stock sold in the offering (including shares contributed to our charitable foundation) are issued upon the exercise of options granted under a stock-based benefit plan and come from authorized but unissued shares of common stock, stockholders would experience dilution of approximately 9.1% in their ownership interest in West End Indiana Bancshares, Inc.
 
In connection with the conversion, we expect to enter into employment agreements with certain of our executive officers.  See “Management of West End Indiana Bancshares, Inc.—Executive Officer Compensation” and “Risk Factors – We have entered into employment agreements that may increase our compensation costs” for a further discussion of these agreements, including their terms and potential costs, as well as a description of other benefits arrangements.
 
 
9

 
 
The following table summarizes the number of shares of common stock and aggregate dollar value of grants (valuing each share granted at the offering price of $10.00) that are available under our employee stock ownership plan and one or more stock-based benefit plans if such plans are adopted within one year following the completion of the conversion and the offering.  The table shows the dilution to stockholders if all these shares are issued from authorized but unissued shares, instead of shares purchased in the open market.  The table also sets forth the number of shares of common stock to be acquired by the employee stock ownership plan for allocation to all employees.  A portion of the stock award and stock option grants shown in the table below may be made to non-management employees.
                                                 
   
Number of Shares to be Granted or
Purchased(3)
   
Dilution
Resulting
From
Issuance of
Shares for
Stock Benefit
Plans
   
Value of Grants (1)
 
   
At
Minimum
of Offering
Range
   
At
Maximum
of Offering
Range
   
As a
Percentage
of Common
Stock to be
Issued (2)
       
At
Minimum
Offering
Range
   
At
Maximum
Offering
Range
 
                           
(Dollars in thousands)
 
                                                 
Employee stock ownership plan
    98,240       151,160       8.00 %         $ 982     $ 1,512  
Stock awards
    49,120       75,580       4.00       3.8 %     491       756  
Stock options
    122,800       188,950       10.00       9.1 %     365       561  
Total
    270,160       415,690       22.00 %     12.3 %   $ 1,838     $ 2,829  


(1)
The actual value of restricted stock awards will be determined based on their fair value as of the date grants are made.  For purposes of this table, fair value is assumed to be the same as the offering price of $10.00 per share.  The fair value of stock options has been estimated at $2.97 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; dividend yield of 0%; an expected option life of 7.5 years; a risk-free interest rate of 3.47%; and a volatility rate of 16.46% based on an index of publicly traded thrift institutions.  The actual expense of stock options granted under a stock-based benefit plan will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted, which may or may not be the Black-Scholes model.
(2)
The stock-based benefit plans may award a greater number of options and shares, respectively, if the plans are adopted more than 12 months after the completion of the conversion.
(3)
For plans adopted within 12 months of the completion of the conversion, applicable regulations permit stock awards to encompass up to 4.0% and the ESOP and stock awards to encompass in the aggregate up to 12.0% of the shares issued, provided West End Bank, S.B. has tangible capital of 10.0% or more following the conversion
 
The actual value of restricted stock awards will be determined based on their fair value (the closing market price of shares of common stock of West End Indiana Bancshares, Inc.) as of the date grants are made.  The following table presents the total value of all shares to be available for awards of restricted stock under the stock-based benefit plan, assuming the shares for the plan are purchased or issued in a range of market prices from $8.00 per share to $14.00 per share at the time of the grant.
 
Share Price
   
49,120 Shares Awarded
at Minimum of Offering
Range
   
57,520 Shares Awarded
at Midpoint of Offering
Range
   
65,920 Shares Awarded
at Maximum of Offering
Range
   
75,580 Shares Awarded
at Maximum of Offering
Range, As Adjusted
 
(In thousands, except share price information)
 
                           
$ 8.00     $ 392,960     $ 460,160     $ 527,360     $ 604,640  
  10.00       491,200       575,200       659,200       755,800  
  12.00       589,440       690,240       791,040       906,960  
  14.00       687,680       805,280       922,880       1,058,120  
 
The grant-date fair value of the stock options granted under the stock-based benefit plans will be based, in part, on the closing price of shares of common stock of West End Indiana Bancshares, Inc. on the date the options are granted.  The fair value will also depend on the various assumptions utilized in the option-pricing model ultimately adopted.  The following table presents the total estimated value of the stock options to be available for grant under the stock-based benefit plans, assuming the range of market prices for the shares are $8.00 per share to $14.00 per share at the time of the grant.
 
 
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Exercise Price
   
Grant-Date Fair
Value Per Option
   
122,8000 Options at Minimum of Range
   
143,800 Options at Midpoint of Range
   
164,800 Options at Maximum of Range
   
188,950 Options at Maximum of Range, As Adjusted
 
(In thousands, except share price information)
 
   
$ 8.00     $ 2.38     $ 292,264     $ 342,244     $ 392,224     $ 449,701  
  10.00       2.97       364,716       427,086       489,456       561,182  
  12.00       3.56       437,168       511,928       586,688       672,662  
  14.00       4.16       510,848       598,208       685,568       786,032  
 
The tables presented above are provided for informational purposes only.  There can be no assurance that our stock price will not trade below $10.00 per share.  Before you make an investment decision, we urge you to carefully read this prospectus, including, but not limited to, the section entitled “Risk Factors” beginning on page 13.
 
Market for Common Stock
 
We anticipate that the common stock sold in the offering will be traded and quoted on the OTC Bulletin Board.  See “Market for the Common Stock.”
 
Our Policy Regarding Dividends
 
Our Board of Directors will have the authority to declare dividends on our common stock, subject to statutory and regulatory requirements.  However, no decision has been made with respect to the amount, if any, and timing of any dividend payments.  See “Our Policy Regarding Dividends.”
 
Conditions to Completion of the Conversion and the Offering
 
We cannot complete the conversion and the offering unless:
 
 
the plan of conversion and reorganization is approved by at least a majority of votes eligible to be cast by members of West End Bank, MHC. A special meeting of members to consider and vote upon the plan of conversion and reorganization and to vote upon the establishment and funding of the charitable foundation has been set for __________, 2011;
 
 
we have received orders to purchase at least the minimum number of shares of common stock offered; and
 
 
we receive all required final approvals of the Office of Thrift Supervision and the Federal Reserve Board, as applicable as the successor to the Office of Thrift Supervision, to complete the conversion and the offering.
 
Material Income Tax Consequences
 
The conversion qualifies as a tax-free reorganization.  Neither West End Indiana Bancshares, Inc., West End Bancshares, Inc., West End Bank, S.B., West End Bank, MHC nor Eligible Account Holders, Supplemental Eligible Account Holders or Other Members will recognize any gain or loss as a result of the conversion. See “—Material Income Tax Consequences” for a complete discussion of the income tax consequences of the transaction.
 
 
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How You Can Obtain Additional Information
 
Our branch office personnel may not, by law, assist with investment-related questions about the offering.  If you have any questions regarding the conversion or the offering, please call our Stock Information Center, toll free, at [SIC phone], Monday through Friday, between 8:30 a.m. and 4:30 p.m., Eastern Time.
 
TO ENSURE THAT EACH PERSON RECEIVES A PROSPECTUS AT LEAST 48 HOURS PRIOR TO THE EXPIRATION DATE OF [EXPIRE DATE] IN ACCORDANCE WITH FEDERAL LAW, NO PROSPECTUS WILL BE MAILED OR HAND-DELIVERED ANY LATER THAN FIVE DAYS OR TWO DAYS, RESPECTIVELY, PRIOR TO [EXPIRE DATE].
 
 
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RISK FACTORS
     
  You should consider carefully the following risk factors in evaluating an investment in our
shares of common stock.
 
 
Risks Related to Our Business
 
Our loan portfolio has greater risk than those of many savings institutions due to the substantial amount of indirect and other consumer loans in our portfolio.
 
Our loan portfolio includes a substantial number of indirect automobile loans which are automobile loans referred to us by participating automobile dealerships, as well as other consumer loans.  At March 31, 2011, our consumer loans totaled $53.4 million, or 34.6% of our total loan portfolio, of which indirect loans totaled $45.7 million, representing 29.6% of total loans.  At March 31, 2011, $13.3 million, or 29.1% of our total indirect loan portfolio, consisted of automobile loans where the borrower’s credit score was 660 or less.  These loans may be considered subprime.
 
As of March 31, 2011, we had $541,000 of consumer loans delinquent 60 days or more, which was 19.4% of total delinquent loans 60 days or more past due, and an additional $285,000 of non-performing consumer loans, which includes non-accrual loans and accruing loans past due 90 days or more. For the quarter ended March 31, 2011 and the year ended December 31, 2010, we had net charge-offs of $59,000 and $343,000, respectively, in our consumer loan portfolio.
 
Consumer loans generally have a greater risk of loss or default than one- to four-family residential real estate loans, particularly in the case of loans that are secured by rapidly depreciable assets, such as automobiles, or loans that are unsecured.  In these cases, we face the risk that any collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. Thus, the recovery and sale of such property could be insufficient to compensate us for the principal outstanding on these loans.  Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit our ability to recover on such loans. Finally, because indirect automobile loan applications are originated by automobile dealerships, although we underwrite the loans, we assume the risks associated with a dealership properly complying with federal, state and local laws.  As a result of our relatively large portfolio of consumer loans, it may become necessary to increase our provision for loan losses in the event our losses on these loans increase, which would reduce our profits.
 
We believe that indirect automobile loans and other consumer loans may provide growth opportunities in the future and intend to continue to emphasize the origination of these types of loans consistent with market conditions and risk management considerations.
 
Our loan portfolio has greater risk than those of many savings institutions due to the substantial amount of commercial and multi-family real estate and non-owner-occupied one- to four-family residential real estate loans in our portfolio.
 
At March 31, 2011, $28.1 million, or 18.2%, of our total loan portfolio, consisted of commercial and multi-family real estate loans. In addition, at March 31, 2011, $14.4 million, or 9.3% of our total loan portfolio, consisted of non-owner-occupied one- to four-family residential real estate loans. Commercial and multi-family real estate loans and non-owner-occupied one- to four-family residential real estate loans generally have more risk than the owner-occupied one- to four-family residential real estate loans that we originate.  Because the repayment of commercial and multi-family real estate loans and non-owner- occupied loans depends on the successful management and operation of the borrower’s properties or related businesses, repayment of such loans can be affected by adverse conditions in the local real estate market or economy.  Additionally, commercial and multi-family real estate loans may also involve relatively large loan balances to individual borrowers or groups of related borrowers.  A downturn in the real estate market or the local economy could adversely affect the value of properties securing the loan or the revenues from the borrower’s business, thereby increasing the amount of our nonperforming loans.
 
 
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We are not in a high-growth market area, and continued adverse economic conditions, especially affecting our market area, could adversely affect our financial condition and results of operations. Additionally, the United States economy remains weak and unemployment levels are high.
 
Our market area consists primarily of Union and Wayne Counties, Indiana. Union County has experienced a limited population growth of 2.27% from 2000 through 2010, and Wayne County’s population has declined during that same time period by (3.07)%. Additionally, as of December 2010, the unemployment rates in Union County and Wayne County were 9.5% and 11.1%, respectively, in each case higher than the 9.4% Indiana unemployment rate and the 8.9% national unemployment rate at this date.
 
During the last several years, economic conditions within our market area have declined significantly and local real estate values have declined significantly.  We believe that such conditions have contributed to increases in recent years in our non-performing assets as well as increases in our loan charge-offs and our provisions for loan losses.  Nonperforming assets and troubled debt restructuring, as a percent of total assets were 1.73% at March 31, 2011 compared to 1.52% at December 31, 2009.  Net charge-offs totaled $(264,000) for the three months ended March 31, 2011 compared to $(180,000) for the three months ended March 31, 2010 and net charge-offs increased from $(331,000) for 2008 to $(1.2 million) and $(708,000), for 2009 and 2010, respectively.  The provision for loan losses totaled $350,000 for the three months ended March 31, 2011 compared to $370,000 for the three months ended March 31, 2010.  At March 31, 2011, the allowance for loan losses totaled $1.8 million, or 1.16% of total loans, compared to $1.1 million, or 0.77% of total loans at December 31, 2009.
 
More generally, the United States experienced a severe economic recession in 2008 and 2009, the effects of which have continued.  Recent growth has been slow and unemployment remains at high levels; as a result, economic recovery is expected to be slow.  Loan portfolio quality has remained poor at many financial institutions reflecting, in part, the weak United States economy and high unemployment rates.  In addition, the value of real estate collateral supporting many commercial loans and home mortgages throughout the United States has declined.  The real estate downturn also has resulted in reduced demand for the construction of new housing and increased delinquencies in construction, residential and commercial mortgage loans in many markets across the United States.
 
We believe that the unfavorable economic conditions of the past several years will continue to have an unfavorable impact on our operations as long as they persist.
 
Future changes in interest rates could reduce our profits.
 
Future changes in interest rates could impact our financial condition and results of operations.
 
Net income is the amount by which net interest income and non-interest income exceeds non-interest expense and the provision for loan losses. Net interest income makes up a majority of our income and is based on the difference between:
 
 
interest income earned on interest-earning assets, such as loans and securities; and
 
 
interest expense paid on interest-bearing liabilities, such as deposits and borrowings.
 
 
14

 
 
We are vulnerable to changes in interest rates including the shape of the yield curve because of a mismatch between the terms to repricing of our assets and liabilities.  Historically, our liabilities repriced more quickly than our assets, which made us vulnerable to increases in interest rates.  For the years ended December 31, 2010 and 2009, our net interest margin was 3.53% and 3.61%, respectively. Our Asset/Liability Management Committee utilizes a computer simulation model to provide an analysis of estimated changes in net interest income in various interest rate scenarios. At March 31, 2011, in the event of an immediate 100 basis point decrease in interest rates, our model projects a decrease in our net interest income of (1.93)%, and in the event of an immediate 200 basis point increase in interest rates, our model projects an increase in our net interest income of 4.35%. A rising rate environment over a 24-month period shows a less favorable increase to our net interest income than the correlating rate change over a 12-month period.
 
Changes in interest rates can affect the average life of loans and mortgage-backed and related securities.  A reduction in interest rates results in increased prepayments of loans and mortgage-backed and related securities, as borrowers refinance their debt in order to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities. Additionally, increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable-rate loans.
 
If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings will decrease.
 
We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.  In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions.  If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover probable incurred losses in our loan portfolio, resulting in additions to our allowance.  While our allowance for loan losses was 1.16% of total loans at March 31, 2011, future additions to our allowance could materially decrease our net income.
 
In addition, the Federal Deposit Insurance Corporation and the Indiana Department of Financial Institutions periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs.  Any increase in our allowance for loan losses or loan charge-offs as required by regulatory authorities might have a material adverse effect on our financial condition and results of operations.
 
The Dodd-Frank Wall Street Reform and Consumer Protection Act will, among other things, tighten capital standards, create a new Consumer Financial Protection Bureau and result in new laws and regulations that are expected to increase our costs of operations.
 
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) will significantly change the current bank regulatory structure and affect the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies are given significant discretion in drafting the implementing rules and regulations, and consequently, many of the details and much of the impact of the Dodd-Frank Act may not be known for many months or years.
 
 
15

 
 
Certain provisions of the Dodd-Frank Act are expected to have a near term effect on us. For example, the new law provides that the Federal Reserve Board will supervise and regulate all savings and loan holding companies that were formerly regulated by the Office of Thrift Supervision, including West Bank, MHC and West End Bancshares, Inc. and, upon consummation of the conversion, West End Indiana Bancshares, Inc.
 
The Dodd-Frank Act also eliminates the federal prohibitions on paying interest on demand deposits, thus allowing businesses to have interest bearing checking accounts. Depending on competitive responses, this significant change to existing law could have an adverse effect on our interest expense.
 
The Dodd-Frank Act creates a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets will be examined by their applicable bank regulators.  The Dodd-Frank Act also weakens the federal preemption rules that have been applicable for national banks and federal savings associations, and gives state attorneys general the ability to enforce federal consumer protection laws.
 
Finally, the Dodd-Frank Act includes provisions which would limit the amount charged on debit card swipe fees which could reduce potential fee income.
 
It is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be written implementing rules and regulations will have on us. However, it is expected that at a minimum they will increase our operating and compliance costs and could increase our interest expense.
 
Strong competition within our market areas may limit our growth and profitability.
 
Competition in the banking and financial services industry is intense.  In our market area, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere.  Some of our competitors have greater name recognition and market presence that benefit them in attracting business, and offer certain services that we do not or cannot provide.  In addition, larger competitors may be able to price loans and deposits more aggressively than we do, which could affect our ability to grow and remain profitable on a long-term basis.  Our profitability depends upon our continued ability to successfully compete in our market area.  If we must raise interest rates paid on deposits or lower interest rates charged on our loans, our net interest margin and profitability could be adversely affected.  For additional information see “Business of West End Bank–Market Area and Competition.”
 
The financial services industry could become even more competitive as a result of new legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can.
 
 
16

 
 
We depend on our management team, including our indirect automobile lenders, to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.
 
We are dependent upon the services of our senior management team.  Our strategy and operations are directed by the senior management team.  We have benefited from consistency within our senior management team, with our top three executives averaging over seven years of service with West End Bank, S.B. and over a combined 60 years of financial institution experience.  Any loss of the services of the president and chief executive officer or other members of our senior management team, as well as the senior loan officers who are responsible for our indirect automobile lending and whose expertise in this product line area could be hard to replace in our market area, could impact our ability to implement our business strategy, and have a material adverse effect on our results of operations and our ability to compete in our markets. See “Management of West End Indiana Bancshares, Inc. –Benefit Plans and Agreements–Employment Agreement.”
 
We will need to implement additional finance and accounting systems, procedures and controls in order to satisfy our new public company reporting requirements.  This will increase our operating expenses.
 
In connection with the stock offering, we will become a public company.  The federal securities laws and regulations of the Securities and Exchange Commission require that we file annual, quarterly and current reports and that we maintain effective disclosure controls and procedures and internal control over financial reporting.  We expect that the obligations of being a public company, including substantial public reporting obligations, will require significant expenditures and place additional demands on our management team.  These obligations will increase our operating expenses and could divert our management’s attention from our operations.  The corresponding upgrade to our accounting systems will increase our operating costs.  In addition, such requirements may cause us to hire additional accounting, internal audit and/or compliance personnel.
 
We are in the process of formalizing our internal control over financial reporting, the finalization of which could identify deficiencies that may need to be remediated.
 
As we convert from a mutual holding company structure into a public holding company structure, we are in the process of formalizing certain internal controls over financial reporting and upgrading our accounting systems and processes, as required by the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the Securities and Exchange Commission.  As a relatively small savings bank, our current controls were not as formalized as would be expected for a public company.  As we formalize our internal control structure and realign duties to achieve better segregation of duties among our personnel, we may identify additional deficiencies in internal control that may need to be remediated.
 
We operate in a highly regulated environment and may be adversely affected by changes in laws and regulations.
 
We are subject to extensive regulation, supervision, and examination by the Federal Deposit Insurance Corporation, the Indiana Department of Financial Institutions, and, with respect to our holding companies, the Office of Thrift Supervision.  In addition, when the operations of the Office of Thrift Supervision terminate on or about July 21, 2011, the regulation of West End Indiana Bancshares, Inc. will be transferred to the Federal Reserve Board. Such regulators govern the activities in which we may engage, primarily for the protection of depositors.  These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a financial institution, the classification of assets by a financial institution, and the adequacy of a financial institution’s allowance for loan losses.  Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, or legislation, could have a material impact on us and our operations.  Because our business is highly regulated, the laws, rules and applicable regulations are subject to regular modification and change.  Laws, rules and regulations may be adopted in the future that could make compliance more difficult or expensive or otherwise adversely affect our business, financial condition or prospects.
 
 
17

 
 
Changes in accounting standards could affect reported earnings.
 
The accounting standard setters, including the Financial Accounting Standards Board, the Securities and Exchange Commission and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of our consolidated financial statements. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply new or revised guidance retroactively.
 
Future legislative or regulatory actions responding to perceived financial and market problems could impair our rights against borrowers.
 
There have been proposals made by members of Congress and others that would reduce the amount distressed borrowers are otherwise contractually obligated to pay under their mortgage loans and limit an institution’s ability to foreclose on mortgage collateral. If proposals such as these, or other proposals limiting our rights as a creditor, are implemented, we could experience increased credit losses or increased expense in pursuing our remedies as a creditor.
 
Risks Related to this Stock Offering
 
Our stock price may decline when trading commences.
 
If you purchase shares in the offering, you may not be able to sell them at or above the $10.00 purchase price.  After the shares of our common stock begin trading, the trading price of the common stock will be determined by the marketplace, and will be influenced by many factors outside of our control, including prevailing interest rates, investor perceptions, securities analyst research reports and general industry, geopolitical and economic conditions.  Publicly traded stocks, including stocks of financial institutions, often experience substantial market price volatility.  These market fluctuations might not be related to the operating performance of particular companies whose shares are traded.
 
The capital we raise in the stock offering will reduce our return on equity.  This could negatively affect the trading price of our shares of common stock.
 
Net income divided by average equity, known as “return on equity,” is a ratio many investors use to compare the performance of a financial institution to its peers.  For the year ended December 31, 2010, we had a return on equity of 2.88%.  Following the stock offering, we expect our consolidated equity to increase from $17.4 million at March 31, 2011 to between $26.7 million at the minimum of the offering range and $32.5 million at the adjusted maximum of the offering range.  Based upon our earnings for the year ended December 31, 2010, and these pro forma equity levels, we anticipate that our return on equity will be 1.87% and 1.53% at the minimum and adjusted maximum of the offering range, respectively. We expect our return on equity to remain relatively low until we are able to leverage the additional capital we receive from the stock offering.  Although we anticipate  increasing net interest income using proceeds of the stock offering, our return on equity will be reduced by the capital raised in the stock offering, higher expenses from the costs of being a public company, and added expenses associated with our employee stock ownership plan and the stock-based benefit plan we intend to adopt.  Until we can increase our net interest income and non-interest income, our return on equity may reduce the value of our shares of common stock.
 
 
18

 
 
The contribution to the charitable foundation will dilute your ownership interest and adversely affect net income in 2011.
 
We intend to establish and fund a charitable foundation in connection with the conversion and stock offering.  We intend to contribute $125,000 in cash and 38,000 shares ($380,000) for an aggregate contribution of $505,000 to the charitable foundation.  The amount of our contribution will not be dependent upon the amount of the net proceeds raised in the stock offering.
 
The contribution will have an adverse effect on our net income for the quarter and year in which we make the issuance and contribution to the charitable foundation.  The after-tax expense of the contribution will reduce net income in fiscal 2011 by approximately $305,000 million.  We had net income of $498,000 for 2010.  Persons purchasing shares in the stock offering will have their ownership and voting interests in West End Indiana Bancshares, Inc. diluted by up to 3.1% at the minimum of the offering range due to the issuance of shares of common stock to the charitable foundation.
 
Our contribution to the charitable foundation may not be tax deductible, which could reduce our profits.
 
We believe that the contribution to the charitable foundation will be deductible for federal income tax purposes. However, the Internal Revenue Service may disagree with our determination and not grant tax-exempt status to the charitable foundation. If the contribution is not deductible, we would not receive any tax benefit from the contribution.  It is expected that the value of the contribution will be $505,000.  In the event that the Internal Revenue Service does not grant tax-exempt status to the charitable foundation or the contribution to the charitable foundation is otherwise not tax deductible, we would recognize as after-tax expense the full value (i.e., $505,000) of the entire contribution.
 
In addition, even if the contribution is tax deductible, we may not have sufficient profits to be able to use the deduction fully. Pursuant to the Internal Revenue Code, an entity is permitted to deduct up to 10% of its taxable income (income before income taxes) in any one year for charitable contributions.  Any contribution in excess of the 10% limit may be deducted for federal and state income tax purposes over each of the five years following the year in which the charitable contribution is made.  Accordingly, a charitable contribution could, if necessary, be deducted over a six-year period.  Our pre-tax income over this period may not be sufficient to fully use this deduction.
 
Our stock-based benefit plans will increase our costs, which will reduce our income.
 
We anticipate that our employee stock ownership plan will purchase 8% of the total shares of common stock sold in the stock offering (including shares contributed to the charitable foundation) with funds borrowed from West End Indiana Bancshares, Inc.  We will record annual employee stock ownership plan expense in an amount equal to the fair value of shares of common stock committed to be released to employees.  If shares of common stock appreciate in value over time, compensation expense relating to the employee stock ownership plan will increase.
 
 
19

 
 
We also intend to adopt a stock-based benefit plan after the stock offering that would award participants restricted shares of our common stock (at no cost to them) and/or options to purchase shares of our common stock.  The number of shares of restricted stock or stock options reserved for issuance under any initial stock-based benefit plan may not exceed 4% and 10% (including shares issued to the charitable foundation), respectively, of our total outstanding shares, if these plans are adopted within 12 months after the completion of the conversion.  We may grant shares of common stock and stock options in excess of these amounts provided the stock-based benefit plan is adopted more than one year following the stock offering.  Assuming the market price of the common stock is $10.00 per share; the options are granted with an exercise price of $10.00 per share; the dividend yield on the stock is 0%; the expected option life is 7.5 years; the risk free interest rate is 3.47% (based on the ten-year Treasury rate) and the volatility rate on the shares of common stock is 16.46% (based on an index of publicly traded thrift institutions), the estimated grant-date fair value of the options utilizing a Black-Scholes option pricing analysis is $2.97 per option granted.  Assuming this value is amortized over a five-year vesting period, the corresponding annual pre-tax expense associated with the stock options would be $112,000 at the adjusted maximum.  In addition, assuming that all shares of restricted stock are awarded at a price of $10.00 per share, and that the awards vest over a five-year period, the corresponding annual pre-tax expense associated with restricted stock awarded under the stock-based benefit plan would be $151,000 at the adjusted maximum.  However, if we grant shares of common stock or options in excess of these amounts, such grants would increase our costs further.
 
The shares of restricted stock granted under the stock-based benefit plan will be expensed by us over their vesting period at the fair market value of the shares on the date they are awarded.  If the shares of restricted stock to be granted under the plan are repurchased in the open market (rather than issued directly from authorized but unissued shares by West End Indiana Bancshares, Inc.) and cost the same as the purchase price in the stock offering, the reduction to stockholders’ equity due to the plan would be between $491,000 at the minimum of the offering range and $756,000 at the adjusted maximum of the offering range.  To the extent we repurchase shares of common stock in the open market to fund the grants of shares under the plan, and the price of such shares exceeds the offering price of $10.00 per share, the reduction to stockholders’ equity would exceed the range described above.  Conversely, to the extent the price of such shares is below the offering price of $10.00 per share, the reduction to stockholders’ equity would be less than the range described above.
 
The implementation of stock-based benefit plans may dilute your ownership interest.
 
We intend to adopt one or more stock-based benefit plans, which will allow participants to be awarded shares of common stock (at no cost to them) and/or options to purchase shares of our common stock, following the stock offering.  If these stock-based benefit plans are funded from the issuance of authorized but unissued shares of common stock, stockholders would experience a reduction in ownership interest totaling 12.3%.
 
Although the implementation of the stock-based benefit plan will be subject to stockholder approval, historically, the overwhelming majority of stock-based benefit plans adopted by savings institutions and their holding companies following mutual-to-stock conversions have been approved by stockholders.
 
We have not determined whether we will adopt stock-based benefit plans more than one year following the stock offering.  Stock-based benefit plans adopted more than one year following the stock offering may exceed regulatory restrictions on the size of stock-based benefit plans adopted within one year, which would increase our costs.
 
 
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If we adopt stock-based benefit plans within one year following the completion of the stock offering, then we may grant shares of common stock or stock options under our stock-based benefit plans for up to 4% and 10%, respectively, of our total outstanding shares including shares held by the charitable foundation.  The amount of stock awards and stock options available for grant under the stock-based benefit plans may exceed these amounts, provided the stock-based benefit plans are adopted more than one year following the stock offering.  Although the implementation of the stock-based benefit plan will be subject to stockholder approval, the determination as to the timing of the implementation of such a plan will be at the discretion of our Board of Directors. Stock-based benefit plans that provide for awards in excess of these amounts would increase our costs beyond the amounts estimated in “–Our stock-based benefit plans will increase our costs, which will reduce our income.”  Stock-based benefit plans that provide for awards in excess of these amounts could also result in dilution to stockholders in excess of that described in “–The implementation of stock-based benefit plans will dilute your ownership interest.”
 
We intend to enter into employment agreements with certain of our executive officers that may increase our compensation costs.
 
Effective as of the consummation date of our Conversion and stock offering, we intend to enter into employment agreements with each of our President and Chief Executive Officer, Senior Vice President and Chief Lending Officer, Senior Vice President and Chief Financial Officer, and one other senior officer.  In the event of involuntary or good reason termination of employment, or certain types of termination following a change in control, the employment agreements provide for cash severance benefits that would cost us approximately $1.68 million in the aggregate based on a change in control and termination occurring as of March 31, 2011. These amounts may be reduced, if necessary, to an amount that would not qualify the payments to be deemed an “excess parachute payment” under Section 280G of the Internal Revenue Code of 1986, as amended. In addition, our President and Chief Executive Officer would be entitled to a contribution to his supplemental executive retirement plan, the present value of which is approximately $107,000. For additional information see “Management of West End Indiana Bancshares, Inc.—Executive Officer Compensation.”
 
We have broad discretion in using the proceeds of the stock offering.  Our failure to effectively use such proceeds could reduce our profits.
 
We will use a portion of the net proceeds to finance the purchase of shares of common stock in the stock offering by the employee stock ownership plan, and may use the remaining net proceeds to pay dividends to stockholders, repurchase shares of common stock, purchase investment securities, deposit funds in West End Bank, S.B., acquire other financial services companies or for other general corporate purposes.  West End Bank, S.B. may use the proceeds it receives to fund new loans, establish or acquire new branches, purchase investment securities, reduce a portion of our borrowings, or for general corporate purposes. We have not identified specific amounts of proceeds for any of these purposes and we will have significant flexibility in determining the amount of net proceeds we apply to different uses and the timing of such applications.  Our failure to utilize these funds effectively could reduce our profitability. We have not established a timetable for the deployment of the proceeds and we cannot predict how long we will require to effectively deploy the proceeds.
 
Our stock value may be negatively affected by federal and state regulations that restrict takeovers.
 
For three years following the stock offering, applicable conversion regulations prohibit any person from acquiring or offering to acquire more than 10% of our common stock without the prior written approval of the Office of Thrift Supervision, or the Federal Reserve Board as its successor.  Applicable regulations also require approval or nonobjection for any acquisition of “control” of the West End Indiana Bancshares, Inc. which may include an acquisition of as little as 10% of our outstanding shares.  See “Restrictions on Acquisition of West End Indiana Bancshares, Inc.” for a discussion of applicable regulations regarding acquisitions.
 
 
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The corporate governance provisions in our articles of incorporation and bylaws, and the corporate governance provisions under Maryland law, may prevent or impede the holders of our common stock from obtaining representation on our board of directors and may impede takeovers of the company that our board might conclude are not in the best interest of West End Indiana Bancshares, Inc. or its stockholders.  In addition, the Indiana Financial Institutions Act and regulations issued thereunder may make takeovers of West End Indiana Bancshares, Inc. more difficult.
 
Provisions in our articles of incorporation and bylaws may prevent or impede holders of our common stock from obtaining representation on our Board of Directors and may make takeovers of West End Indiana Bancshares, Inc. more difficult. For example, our Board of Directors is divided into three staggered classes.  A classified board makes it more difficult for stockholders to change a majority of the directors because it generally takes at least two annual elections of directors for this to occur. Additionally, our bylaws contain residency requirements, limitations on the ability of individuals affiliated with competing institutions to serve as board members of West End Indiana Bancshares, Inc., and integrity provisions which limit individuals with past regulatory orders or sanctions from serving on the Board of Directors. Our articles of incorporation include a provision that no person will be entitled to vote any shares of our common stock in excess of 10% of our outstanding shares of common stock.  This limitation does not apply to the purchase of shares by a tax-qualified employee stock benefit plan established by us.  In addition, our articles of incorporation and bylaws restrict who may call special meetings of stockholders and how directors may be removed from office.  Additionally, in certain instances, the Maryland General Corporation Law requires a supermajority vote of our stockholders to approve a merger or other business combination with a large stockholder, if the proposed transaction is not approved by a majority of our directors.  Furthermore, the acquisition or change of control of West End Indiana Bancshares, Inc. is subject to applicable provisions of the Indiana Financial Institutions Act and regulations issued thereunder, which may make takeovers of West End Indiana Bancshares, Inc. more difficult.  See “Restrictions on Acquisition of West End Indiana Bancshares, Inc.”
 
We have never issued common stock and there is no guarantee that a liquid market will develop.
 
We have never issued capital stock and there is no established market for our common stock.  We expect that our common stock will be quoted on the OTC Bulletin Board, subject to completion of the offering and compliance with certain conditions.  Keefe Bruyette & Woods, Inc. has advised us that it intends to make a market in shares of our common stock following the offering, but it is under no obligation to do so or to continue to do so once it begins. The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker.  The number of active buyers and sellers of the shares of common stock at any particular time may be limited.  Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment.  In addition, our public “float,” which is the total number of our outstanding shares less the shares held by our employee stock ownership plan and our directors and executive officers, is likely to be quite limited.  As a result, it is unlikely that an active trading market for the common stock will develop or that, if it develops, it will continue.  Furthermore, we cannot assure you that, if you purchase shares of common stock, you will be able to sell them at or above $10.00 per share.  Purchasers of common stock in this stock offering should have long-term investment intent and should recognize that there will be a limited trading market in the common stock.  This may make it difficult to sell the common stock after the stock offering and may have an adverse impact on the price at which the common stock can be sold.
 
 
22

 
 
We may take other actions to meet the minimum required sales of shares if we cannot find enough purchasers in the community.
 
If we are not able to reach the minimum of the offering range, we may do any of the following: increase the maximum purchase limitations and allow all maximum purchase subscribers to increase their orders to the new maximum purchase limitations; terminate the offering and promptly return all funds; set a new offering range, notifying all subscribers of the opportunity to confirm, cancel or change their orders; or take such other actions as may be permitted, to the extent such permission is required, by the Office of Thrift Supervision.
 
The distribution of subscription rights could have adverse income tax consequences.
 
If the subscription rights granted to certain depositors of West End Bank, S.B. and certain borrowers of West End Bank, S.B. are deemed to have an ascertainable value, receipt of such rights may be taxable in an amount equal to such value.  Whether subscription rights are considered to have ascertainable value is an inherently factual determination.  We have received an opinion from RP Financial, LC that such rights have no value; however, such opinion is not binding on the Internal Revenue Service.
 
 
23

 

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
 
The following tables set forth selected historical financial and other data of West End Bank, MHC for the periods and at the dates indicated.  The information at December 31, 2010 and 2009 and for the years ended December 31, 2010 and 2009 is derived in part from, and should be read together with, the audited financial statements and notes thereto of West End Bank, MHC beginning at page F-1 of this prospectus.  The information at December 31, 2008, 2007 and 2006 and for the years then ended is derived in part from audited financial statements that are not included in this prospectus.  The information at March 31, 2011 and for the three months ended March 31, 2011 and 2010 is unaudited and reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented.  The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the results to be achieved for the remainder of 2011 or any other period. The following information is only a summary, and should be read in conjunction with our financial statements and notes beginning on page F-1 of this prospectus.
 
   
At March 31,
2011
   
At December 31,
 
        2010     2009     2008     2007     2006  
   
(In thousands)
 
Selected Financial Condition Data:
                                   
Total assets
  $ 217,064     $ 215,989     $ 190,141     $ 177,542     $ 173,014     $ 161,847  
Investment securities
    41,695       41,216       24,700       19,521       22,030       22,719  
Loans receivable, net
    152,526       151,810       144,235       138,343       134,148       123,885  
Deposits
    176,689       175,371       145,269       126,985       115,233       108,323  
Federal Home Loan Bank advances
    22,000       22,000       27,200       32,700       41,300       37,400  
Total equity
    17,406       17,320       16,867       16,553       15,982       15,512  
 
    For the Three Months Ended March 31,    
For the Years Ended December 31,
 
    2011     2010     2010     2009     2008     2007     2006  
   
(Dollars in thousands)
 
Selected Operating Data:
                                         
Interest and dividends
  $ 2,721     $ 2,668     $ 10,934     $ 10,916     $ 10,886     $ 10,412     $ 9,306  
Interest expense
    841       1,044       4,045       4,510       5,315       5,950       4,915  
Net interest income
    1,880       1,624       6,889       6,406       5,571       4,462       4,391  
Provision for loan losses
    350       370       1,294       1,589       525       215       380  
Non-interest income
    391       412       1,491       1,399       1,085       982       915  
Non-interest expenses
    1,690       1,486       6,359       5,821       5,573       4,990       4,779  
Income before income taxes
    231       180       727       395       558       239       147  
Income tax expense (benefit)
    80       46       229       68       146       (3 )     18  
Net income
    151       134       498       327       412       242       129  
                                                         
Performance Ratios:
                                                       
Return on average assets (annualized)
    0.28 %     0.27 %     0.24 %     0.17 %     0.23 %     0.14 %     0.08 %
Return on average equity (annualized)
    3.42 %     3.12 %     3.12 %     1.92 %     2.52 %     1.55 %     0.84 %
Interest rate spread (annualized)(1)
    3.64 %     3.44 %     3.39 %     3.40 %     3.11 %     2.58 %     2.67 %
Net interest margin (annualized)(2)
    3.76 %     3.59 %     3.53 %     3.61 %     3.36 %     2.83 %     2.95 %
Non-interest expense to average assets (annualized)
    3.13 %     3.02 %     3.05 %     3.09 %     3.16 %     2.95 %     3.00 %
Efficiency ratio(3) 
    74.42 %     74.11 %     77.00 %     75.85 %     84.13 %     91.66 %     90.92 %
Average interest-earning assets to average interest-bearing liabilities
    107.10 %     106.22 %     106.72 %     108.34 %     107.68 %     106.77 %     108.37 %
Average equity to average assets
    8.17 %     8.72 %     8.33 %     9.05 %     9.26 %     9.23 %     9.68 %
                                                         
 
 
24

 
 
    For the Three Months Ended March 31,    
For the Years Ended December 31,
 
    2011     2010     2010     2009     2008     2007     2006  
   
(Dollars in thousands)
 
                                                         
Capital Ratios:
                                                       
Total capital to risk weighted assets
    12.9 %     12.7 %     13.0 %     12.7 %     13.7 %     13.7 %     14.7 %
Tier 1 capital to risk weighted assets
    11.7 %     11.7 %     11.8 %     11.9 %     13.1 %     13.2 %     14.2 %
Tier 1 capital to average assets
    7.9 %     8.5 %     7.9 %     8.6 %     9.2 %     9.1 %     9.6 %
                                                         
Asset Quality Ratios:
                                                       
Allowance for loan losses as a percentage of total loans
    1.16 %     0.89 %     1.11 %     0.77 %     0.51 %     0.38 %     0.40 %
Allowance for loan losses as a percentage of non-performing loans
    63.96 %     65.05 %     65.65 %     50.23 %     29.33 %     83.12 %     556.67 %
Net (charge-offs) recoveries to average outstanding loans during the period
    (0.68 )%     (0.50 )%     (0.47 )%     (0.81 )%     (0.24 )%     (0.16 )%     (0.21 )%
Non-performing loans as a percentage of total loans
    1.81 %     1.37 %     1.69 %     1.52 %     1.73 %     0.46 %     0.07 %
Non-performing loans as a percentage of total assets
    1.29 %     0.99 %     1.20 %     1.17 %     1.36 %     0.36 %     0.06 %
Total non-performing assets and troubled debt restructuring as a percentage of total assets
    1.73 %     1.35 %     1.87 %     1.52 %     1.49 %     0.46 %     0.25 %
                                                         
Other:
                                                       
Number of offices
    4       4       4       4       4       4       4  
 

 
(1)
Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.
 
(2)
Represents net interest income as a percentage of average interest-earning assets.
 
(3)
Represents noninterest expense divided by the sum of net interest income and noninterest income, excluding gains or losses on the sale of securities.
 
 
25

 
 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This prospectus contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may” and words of similar meaning.  These forward-looking statements include, but are not limited to:
 
 
statements of our goals, intentions and expectations;
 
 
statements regarding our business plans, prospects, growth and operating strategies;
 
 
statements regarding the asset quality of our loan and investment portfolios; and
 
 
estimates of our risks and future costs and benefits.
 
These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control.  In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.  We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this prospectus.
 
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
 
 
general economic conditions, either nationally or in our market areas, that are worse than expected;
 
 
competition among depository and other financial institutions;
 
 
our success in continuing to emphasize consumer lending, including indirect automobile lending;
 
 
our ability to improve our asset quality even as we increase our non-residential lending;
 
 
our success in maintaining our commercial and multi-family real estate and our non-owner occupied one- to four-family residential real estate and commercial business lending;
 
 
changes in the interest rate environment that reduce our margins or reduce the fair value of our financial instruments;
 
 
adverse changes in the securities markets;
 
 
changes in laws or government regulations or policies affecting financial institutions, including changes in deposit insurance premiums, regulatory fees and capital requirements, which increase our compliance costs;
 
 
our ability to enter new markets successfully and capitalize on growth opportunities;
 
 
changes in consumer spending, borrowing and savings habits;
 
 
26

 
 
 
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;
 
 
changes in our organization, compensation and benefit plans;
 
 
loan delinquencies and changes in the underlying cash flows of our borrowers;
 
 
changes in our financial condition or results of operations that reduce capital available to pay dividends; and
 
 
changes in the financial condition or future prospects of issuers of securities that we own.
 
Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.  Please see “Risk Factors” beginning on page 13.
 
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING
 
Although we cannot determine what the actual net proceeds from the sale of the shares of common stock in the offering will be until the offering is completed, we anticipate that the net proceeds will be between $10.7 million and $14.9 million, or $17.2 million if the offering range is increased by 15%.
 
We intend to distribute the net proceeds from the stock offering as follows:
 
   
Based Upon the Sale at $10.00 Per Share of
 
   
1,190,000 Shares
   
1,400,000 Shares
   
1,610,000 Shares
   
1,851,500 Shares
(1)
 
   
Amount
   
Percent
of Net Proceeds
   
Amount
   
Percent
of Net Proceeds
   
Amount
   
Percent
of Net Proceeds
   
Amount
   
Percent
of Net Proceeds
 
   
(Dollars in thousands)
 
                                                 
Stock offering proceeds
  $ 11,900           $ 14,000           $ 16,100           $ 18,515        
Less offering expenses
    1,184             1,213             1,242             1,275        
Net offering proceeds
  $ 10,716       100.0 %   $ 12,787       100.0 %   $ 14,858       100.0 %   $ 17,240       100.0 %
                                                                 
Use of net proceeds:
                                                               
To West End Bank, S.B.
  $ 5,358       50.0 %   $ 6,394       50.0 %   $ 7,429       50.0 %   $ 8,620       50.0 %
To fund loan to employee stock ownership plan
    982       9.2       1,150       9.0       1,318       8.9       1,512       8.8  
Proceeds contributed to foundation
    125       1.2       125       1.0       125       0.8       125       0.7  
Retained by West End Indiana Bancshares, Inc.
  $ 4,251       39.7 %   $ 5,118       40.0 %   $ 5,986       40.3 %   $ 6,983       40.5 %


(1)
As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.
 
 
27

 
 
Payments for shares of common stock made through withdrawals from existing deposit accounts will not result in the receipt of new funds for investment but will result in a reduction of West End Bank, S.B.’s deposits.  The net proceeds may vary because the total expenses relating to the offering may be more or less than our estimates.  For example, our expenses would increase if a syndicated community offering were used to sell shares of common stock not purchased in the subscription and community offerings.
 
West End Indiana Bancshares, Inc. may use the proceeds it retains from the stock offering:
 
 
to fund a loan to the employee stock ownership plan to purchase shares of common stock in the stock offering;
 
 
to invest in short-term and other securities consistent with our investment policy;
 
 
to pay cash dividends to stockholders;
 
 
to repurchase shares of our common stock; and
 
 
for other general corporate purposes.
 
With the exception of the funding of the loan to the employee stock ownership plan, West End Indiana Bancshares, Inc. has not quantified its plans for use of the offering proceeds for each of the foregoing purposes. Initially, we intend to invest a substantial portion of the net proceeds in short-term investments, investment-grade debt obligations and mortgage-backed securities.
 
Under currently applicable regulations, we may not repurchase shares of our common stock during the first year following the conversion, except to fund equity benefit plans other than stock options or except when extraordinary circumstances exist and with prior regulatory approval.
 
West End Bank, S.B. will receive a capital contribution equal to at least 50% of the net proceeds of the offering plus such additional amounts as may be necessary so that, upon completion of the offering, West End Bank, S.B. will have a tangible capital to assets ratio of at least 10%. West End Bank, S.B. may use the net proceeds it receives from the Offering:
 
 
to invest in residential, commercial and multifamily real estate, commercial business and consumer loans, including indirect automobile loans;
 
 
to expand its banking franchise by establishing or acquiring new branches, or by acquiring other financial institutions or other financial services companies, although no such transactions are contemplated at this time;
 
 
to invest in short-term and other securities consistent with our investment policy;
 
 
to repay short-term borrowings; and
 
 
for other general corporate purposes.
 
West End Bank, S.B. has not quantified its plans for use of the offering proceeds for any of the foregoing purposes.
 
 
28

 
 
OUR POLICY REGARDING DIVIDENDS
 
Following completion of the stock offering, our Board of Directors will have the authority to declare dividends on our shares of common stock, subject to statutory and regulatory requirements.  However, no decision has been made with respect to the payment of dividends.  In determining whether to pay a cash dividend and the amount of such cash dividend, the Board of Directors is expected to take into account a number of factors, including capital requirements, our consolidated financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions.  No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future.  Special cash dividends, stock dividends or returns of capital, to the extent permitted by applicable law, regulations and policy, may be paid in addition to, or in lieu of, regular cash dividends.  We will file a consolidated tax return with West End Bank, S.B.  Accordingly, it is anticipated that any cash distributions made by us to our stockholders would be treated as cash dividends and not as a non-taxable return of capital for federal and state tax purposes.  Additionally, pursuant to bank conversion regulations, during the three-year period following the stock offering, we will not take any action to declare an extraordinary dividend to stockholders that would be treated by recipients as a tax-free return of capital for federal income tax purposes.
 
Pursuant to our Articles of Incorporation, we are authorized to issue preferred stock.  If we issue preferred stock, the holders thereof may have a priority over the holders of our shares of common stock with respect to the payment of dividends.  For a further discussion concerning the payment of dividends on our shares of common stock, see “Description of Capital Stock–Common Stock.”
 
Dividends we can declare and pay will depend, in part, upon receipt of dividends from West End Bank, S.B., because initially we will have no source of income other than dividends from West End Bank, S.B., earnings from the investment of proceeds from the sale of shares of common stock, and interest payments received in connection with the loan to the employee stock ownership plan.  Applicable regulations impose significant limitations on “capital distributions” by depository institutions. See “Supervision and Regulation–Federal Banking Regulation–Capital Distributions.”
 
Any payment of dividends by West End Bank, S.B. to us that would be deemed to be drawn out of West End Bank, S.B.’s bad debt reserves would require a payment of taxes at the then-current tax rate by West End Bank, S.B. on the amount of earnings deemed to be removed from the reserves for such distribution.  West End Bank, S.B. does not intend to make any distribution to us that would create such a federal tax liability.  See “Taxation—Federal Taxation” and “—State Taxation.”
 
MARKET FOR THE COMMON STOCK
 
West End Indiana Bancshares, Inc. is a newly formed company and has never issued capital stock.  West End Bank, MHC, as a mutual institution, has never issued capital stock.  West End Indiana Bancshares, Inc. anticipates that its common stock will be quoted on the OTC Bulletin Board.  Keefe, Bruyette & Woods, Inc. has advised us that it intends to make a market in our common stock following the conversion and stock offering, but it is under no obligation to do so.
 
The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker.  The number of active buyers and sellers of the shares of common stock at any particular time may be limited.  Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment.  In addition, our public “float,” which is the total number of our outstanding shares less the shares held by our employee stock ownership plan and our directors and executive officers, is likely to be quite limited.  As a result, it is unlikely that an active trading market for the common stock will develop or that, if it develops, it will continue.  Furthermore, we cannot assure you that, if you purchase shares of common stock, you will be able to sell them at or above $10.00 per share.  Purchasers of common stock in this stock offering should have long-term investment intent and should recognize that there will be a limited trading market in the common stock.  This may make it difficult to sell the common stock after the stock offering and may have an adverse impact on the price at which the common stock can be sold.
 
 
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HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
 
At March 31, 2011, West End Bank, S.B. exceeded all of the applicable regulatory capital requirements. The table below sets forth the historical equity capital and regulatory capital of West End Bank, S.B. at March 31, 2011, and the pro forma regulatory capital of West End Bank, S.B., after giving effect to the sale of shares of common stock at a $10.00 per share purchase price.  The table assumes the receipt by West End Bank, S.B. of 50% of the net offering proceeds plus such additional amounts as may be necessary so that, upon completion of the offering, West End Bank, S.B. will have a tangible capital to assets ratio of at least 10%.  See “How We Intend to Use the Proceeds from the Offering.”
 
 
   
West End Bank, S.B.
Historical at March
31,
2011
   
Pro Forma at March 31, 2011, Based Upon the Sale in the Offering of
 
       
1,190,000 Shares
   
1,400,000 Shares
   
1,610,000 Shares
   
1,851,500 Shares (1)
 
   
Amount
   
Percent of
Assets (2)
   
Amount
   
Percent of
Assets (2)
   
Amount
   
Percent of
Assets (2)
   
Amount
   
Percent of
Assets (2)
   
Amount
   
Percent of
Assets (2)
 
   
(Dollars in thousands)
 
       
Equity
  $ 17,394       8.02 %   $ 21,770       9.79 %   $ 22,637       10.13 %   $ 23,505       10.47 %   $ 24,502       10.86 %
                                                                                 
Tier 1 leverage capital
  $ 16,943       7.87 %   $ 21,319       9.66 %   $ 22,186       10.01 %   $ 23,054       10.35 %   $ 24,051       10.74 %
Requirement
    10,762       5.00       11,030       5.00       11,082       5.00       11,134       5.00       11,193       5.00  
Excess
  $ 6,181       2.87 %   $ 10,289       4.66 %   $ 11,104       5.01 %   $ 11,920       5.35 %   $ 12,858       5.74 %
                                                                                 
Tier 1 risk-based capital
  $ 16,943       11.70 %   $ 21,319       14.61 %   $ 22,186       15.18 %   $ 23,054       15.76 %   $ 24,051       16.41 %
Requirement
    8,690       6.00       8,755       6.00       8,767       6.00       8,779       6.00       8,794       6.00  
Excess
  $ 8,253       5.70 %   $ 12,564       8.61 %   $ 13,419       9.18 %   $ 14,275       9.76 %   $ 15,257       10.41 %
                                                                                 
Total risk-based capital (3)
  $ 18,728       12.93 %   $ 23,104       15.83 %   $ 23,971       16.41 %   $ 24,839       16.98 %   $ 25,836       17.63 %
Requirement
    14,484       10.00       14,591       10.00       14,612       10.00       14,632       10.00       14,656       10.00  
Excess
  $ 4,244       2.93 %   $ 8,513       5.83 %   $ 9,359       6.41 %   $ 10,207       6.98 %   $ 11,180       7.63 %
                                                                                 
Reconciliation of capital infused into West End Bank, S.B.:
                                                                 
Net proceeds
    $ 5,358             $ 6,394             $ 7,429             $ 8,620          
Less: Common stock acquired by employee stock ownership plan
      (982 )             (1,150 )             (1,318 )             (1,512 )        
Pro forma increase
    $ 4,376             $ 5,244             $ 6,111             $ 7,108          
 

(1)
As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.
(2)
Leverage capital levels are shown as a percentage of total adjusted assets. Risk-based capital levels are shown as a percentage of risk-weighted assets.
(3)
Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 50% risk weighting.
 
 
30

 
 
CAPITALIZATION
 
The following table presents the historical consolidated capitalization of West End Bank, MHC at March 31, 2011 and the pro forma consolidated capitalization of West End Indiana Bancshares, Inc., after giving effect to the conversion and the offering, based upon the assumptions set forth in the “Pro Forma Data” section.
 
   
West End Bank,
MHC Historical
at March 31,
2011
   
West End Indiana Bancshares, Inc. Pro Forma,
Based Upon the Sale in the Offering at $10.00 per Share of
 
       
1,190,000
Shares
   
1,400,000
Shares
   
1,610,000
Shares
   
1,851,500
Shares (1)
 
   
(Dollars in thousands)
 
                                         
Deposits (2)
  $ 176,689     $ 176,689     $ 176,689     $ 176,689     $ 176,689  
Borrowings
    22,000       22,000       22,000       22,000       22,000  
Total deposits and borrowed funds
  $ 198,689     $ 198,689     $ 198,689     $ 198,689     $ 198,689  
Stockholders’ equity:
                                       
Preferred stock $0.01 par value, 1,000,000 shares authorized; none issued or outstanding
  $     $       $       $       $    
Common stock $0.01 par value, 30,000,000 shares authorized; assuming shares outstanding as shown (3)
          12       14       16       19  
Additional paid-in capital (4)
          11,084       13,153       15,222       17,601  
Retained earnings (5)
    17,337       17,337       17,337       17,337       17,337  
Accumulated other comprehensive income
    69       69       69       69       69  
                                         
Less:
                                       
Common stock to be acquired by employee stock ownership plan (6)
          (982 )     (1,150 )     (1,318 )     (1,512 )
Common stock to be acquired by stock-based benefit plans (7)
          (491 )     (575 )     (659 )     (756 )
After-tax expense of contribution to charitable foundation
          (305 )     (305 )     (305 )     (305 )
Total stockholders’ equity
  $ 17,406     $ 26,724     $ 28,543     $ 30,362     $ 32,453  
                                         
Total stockholders’ equity as a percentage of total assets (2)
    8.02 %     11.80 %     12.51 %     13.20 %     13.98 %
 

(1)
As adjusted to give effect to an increase in the number of shares of common stock that could occur due to a 15% increase in the offering range to reflect demand for shares or changes in market conditions following the commencement of the subscription and community offerings.
(2)
Does not reflect withdrawals from deposit accounts for the purchase of shares of common stock in the conversion and offering. These withdrawals would reduce pro forma deposits and assets by the amount of the withdrawals.
(3)
No effect has been given to the issuance of additional shares of West End Indiana Bancshares, Inc. common stock pursuant to one or more stock-based benefit plans.  If these plans are implemented within 12 months following the completion of the stock offering, an amount up to 10% and 4% of the shares of West End Indiana Bancshares, Inc. common stock sold in the offering, including shares issued to our charitable foundation, will be reserved for issuance upon the exercise of stock options and for issuance as restricted stock awards, respectively.  See “Management of West End Indiana Bancshares, Inc.”
(4)
The sum of the par value of the total shares outstanding and additional paid-in capital equals the net stock offering proceeds at the offering price of $10.00 per share.
(5)
The retained earnings of West End Bank, S.B. will be substantially restricted after the conversion.  See “Our Policy Regarding Dividends,” “The Conversion; Plan of DistributionLiquidation Rights” and “Supervision and Regulation.”
 
(footnotes continue on following page)
 
 
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(continued from previous page)
 
(6)
Assumes that 8% of the shares sold in the offering (including shares to be contributed to the charitable foundation)will be acquired by the employee stock ownership plan financed by a loan from West End Indiana Bancshares, Inc.  The loan will be repaid principally from West End Bank, S.B.’s contributions to the employee stock ownership plan.  Since West End Indiana Bancshares, Inc. will finance the employee stock ownership plan debt, this debt will be eliminated through consolidation and no asset or liability will be reflected on West End Indiana Bancshares, Inc.’s consolidated financial statements.  Accordingly, the amount of shares of common stock acquired by the employee stock ownership plan is shown in this table as a reduction of total stockholders’ equity.
(7)
Assumes a number of shares of common stock equal to 4% of the shares of common stock to be sold in the offering (including shares to be contributed to the charitable foundation) will be purchased for grant by one or more stock-based benefit plans in open market purchases.  The dollar amount of common stock to be purchased is based on the $10.00 per share subscription price in the offering and represents unearned compensation. This amount does not reflect possible increases or decreases in the value of common stock relative to the subscription price in the offering.  As West End Indiana Bancshares, Inc. accrues compensation expense to reflect the vesting of shares pursuant to the stock-based benefit plans, the credit to equity will be offset by a charge to noninterest expense. Implementation of the stock stock-based benefit plans will require stockholder approval.  The funds to be used by the stock-based benefit plans will be provided by West End Indiana Bancshares, Inc.
 
 
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PRO FORMA DATA
 
The following tables summarize historical data of West End Bank, MHC and pro forma data of West End Indiana Bancshares, Inc. at and for the year ended December 31, 2010 and the three months ended March 31, 2011.  This information is based on assumptions set forth below and in the table, and should not be used as a basis for projections of market value of the shares of common stock following the conversion and offering.
 
The net proceeds in the tables are based upon the following assumptions:
 
 
all shares of common stock will be sold in the subscription and community offerings;
 
 
our employee stock ownership plan will purchase 8% of the shares of common stock sold in the stock offering including shares contributed to the charitable foundation, with a loan from West End Indiana Bancshares, Inc.  The loan will be repaid in substantially equal payments of principal and interest over a period of 20 years;
 
 
Keefe, Bruyette & Woods, Inc. will receive a fee equal to 1.50% of the dollar amount of the shares of common stock sold in the stock offering.  Shares purchased by our employee stock benefit plans or by our officers, directors and employees, and their immediate families and shares contributed to our charitable foundation will not be included in calculating the shares of common stock sold for this purpose;; and
 
 
expenses of the stock offering, other than fees to be paid to Keefe Bruyette & Woods, Inc., will be $900,000.
 
We calculated pro forma consolidated net income for the three months ended March 31, 2011 and the year ended December 31, 2010 as if the estimated net proceeds were received had been invested at an assumed interest rate of 2.24 (1.35% on an after-tax basis).  This represents the three-year United States Treasury Note as of March 31, 2011, which, in light of current market interests rates, we consider to more accurately reflect the pro forma reinvestment rate than the arithmetic average of the weighted average yield earned on our interest earnings assets and the weighted average rate paid on our deposits.
 
We calculated historical and pro forma per share amounts by dividing historical and pro forma amounts of consolidated net income and stockholders’ equity by the indicated number of shares of common stock.  We adjusted these figures to give effect to the shares of common stock purchased by the employee stock ownership plan.  We computed per share amounts for each period as if the shares of common stock were outstanding at the beginning of each period, but we did not adjust per share historical or pro forma stockholders’ equity to reflect the earnings on the estimated net proceeds.
 
The pro forma tables give effect to the implementation of stock-based benefit plans.  Subject to the receipt of stockholder approval, we have assumed that the stock-based benefit plans will acquire for restricted stock awards a number of shares of common stock equal to 4% of our outstanding shares of common stock at the same price for which they were sold in the stock offering.  We assume that shares of common stock are granted under the plans in awards that vest over a five-year period.
 
 
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We have also assumed that the stock-based benefit plans will grant options to acquire shares of common stock equal to 10% of our outstanding shares of common stock.  In preparing the tables below, we assumed that stockholder approval was obtained, that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the stock options had a term of ten years and vested over five years.  We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $2.97 for each option.  In addition to the terms of the options described above, the Black-Scholes option pricing model assumed an estimated volatility rate of 16.46% for the shares of common stock, a dividend yield of 0%, an expected option life of 7.5 years and a risk-free interest rate of 3.47%.
 
We may grant options and award shares of common stock under one or more stock-based benefit plans in excess of 10% and 4%, respectively, of our total outstanding shares if the stock-based benefit plans are adopted more than one year following the stock offering.  In addition, we may grant options and award shares that vest sooner than over a five-year period if the stock-based benefit plans are adopted more than one year following the stock offering.
 
As discussed under “How We Intend to Use the Proceeds from the Stock Offering,” we intend to contribute at least 50%, plus such additional amounts as may be necessary so that, upon completion of the offering, West End Bank, S.B. will have a tangible capital to assets ratio of at least 10%.  We will retain the remainder of the net proceeds from the stock offering and use a portion of the proceeds we retain for the purpose of making a loan to the employee stock ownership plan and retain the rest of the proceeds for future use.
 
The pro forma table does not give effect to:
 
 
withdrawals from deposit accounts for the purpose of purchasing shares of common stock in the stock offering;
 
 
our results of operations after the stock offering; or
 
 
changes in the market price of the shares of common stock after the stock offering.
 
The following pro forma information may not represent the financial effects of the stock offering at the date on which the stock offering actually occurs and you should not use the table to indicate future results of operations.  Pro forma stockholders’ equity represents the difference between the stated amount of our assets and liabilities, computed in accordance with GAAP.  We did not increase or decrease stockholders’ equity to reflect the difference between the carrying value of loans and other assets and their market value.  Pro forma stockholders’ equity is not intended to represent the fair market value of the shares of common stock and may be different than the amounts that would be available for distribution to stockholders if we liquidated.  Pro forma stockholders’ equity does not give effect to the impact of intangible assets, the liquidation account we will establish in the conversion or tax bad debt reserves in the unlikely event we are liquidated.
 
 
34

 
 
   
At or For the Year Ended December 31, 2010
Based Upon the Sale at $10.00 Per Share of
 
   
1,190,000
Shares
   
1,400,000
Shares
   
1,610,000
Shares
   
1,851,500 Shares (1)
 
   
(Dollars in thousands, except per share amounts)
 
                         
Gross Proceeds of Offering
  $ 11,900     $ 14,000     $ 16,100     $ 18,515  
Plus: market value of shares issued to charitable foundation
    380       380       380