<PAGE>
As filed with the Securities and Exchange Commission on March June 25, 1996
Registration No. 333-2470
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
(INCLUDING EXHIBITS)
CHESTER BANCORP, INC.
----------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 6035 [to be applied for]
- -------------------------------- ------------------ -------------------
(State or other jurisdiction of (Primary SICC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
1112 STATE STREET
CHESTER, ILLINOIS 62233-1659
(618) 826-5038
----------------------------------------------------------------
(Address and telephone number of principal executive offices)
John F. Breyer, Jr., Esquire
Victor L. Cangelosi, Esquire
BREYER & AGUGGIA
Suite 470 East
1300 I Street, N.W.
Washington, D.C. 20005
------------------------------
(Name and address of agent for service)
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 of 1933, please check the
following bow and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
=========================================================================================================================
Calculation of Registration Fee
=========================================================================================================================
Title of Each Class of Securities Proposed Maximum Proposed Offering Proposed Maximum Amount of
Being Registered Amount Being Price(1) Aggregate Offering Registration Fee
Registered(1) Price(1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 Par Value 2,314,375 $10.00 $23,143,750 $7,981(2)
=========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee. As
described in the Prospectus, the actual number of shares to be issued and sold
are subject to adjustment based upon the estimated pro forma market value of the
registrant and market and financial conditions.
(2) Previously paid.
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
statement 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 Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Cross Reference Sheet showing the location in the Prospectus
of the Items of Form S-1
<TABLE>
<S> <C> <C>
1. Forepart of the Registration Forepart of the Registration Statement;
Statement and Outside Front Outside Front Cover Page
Cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page; Outside Back
Cover Pages of Prospectus Cover Page
3. Summary Information, Risk Factors Prospectus Summary; Risk Factors
and Ratio of Earnings
to Fixed Charges
4. Use of Proceeds Use of Proceeds; Capitalization
5. Determination of Offering Price Market for Common Stock
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution The Conversion
9. Description of Securities to be Description of Capital Stock
Registered
10. Interests of Named Experts and Legal and Tax Opinions; Experts
Counsel
11. Information with Respect to the
Registrant
(a) Description of Business Business of the Holding Company;
Business of the Bank
(b) Description of Property Business of the Bank -- Properties
(c) Legal Proceedings Business of the Bank -- Legal
Proceedings
(d) Market Price of and Dividends Outside Front Cover Page; Market for
on the Registrant's Common Equity Common Stock; Dividend Policy
and Related Stockholder Matters
(e) Financial Statements Financial Statements; Pro Forma Data
(f) Selected Financial Data Selected Financial and Other Data
(g) Supplementary Financial *
Information
</TABLE>
<PAGE>
PROSPECTUS CHESTER BANCORP, INC.
UP TO 1,782,500 SHARES OF COMMON STOCK (ANTICIPATED MAXIMUM)
(PROPOSED HOLDING COMPANY FOR CHESTER SAVINGS BANK, FSB TO BECOME
CHESTER NATIONAL BANK AND CHESTER NATIONAL BANK OF MISSOURI)
Chester Bancorp, Inc. ("Holding Company"), a Delaware corporation, is
offering between 1,317,500 and 1,782,500 shares of its common stock, $.01 par
value per share ("Common Stock"), in connection with the conversion of Chester
Savings Bank, FSB ("Savings Bank") from a federally chartered mutual savings
bank to a federally chartered capital stock savings bank ("Converted Savings
Bank") and the issuance of the Savings Bank's capital stock to the Holding
Company. The conversion of the Savings Bank to the Converted Savings Bank and
the acquisition of the Converted Savings Bank by the Holding Company are
collectively referred to herein as the "Stock Conversion." Immediately
following consummation of the Stock Conversion, the Converted Savings Bank
intends to convert from a federal stock savings bank to a national bank ("Bank
Conversion"), to be known as "Chester National Bank" ("Converted Bank"). In
connection with the Bank Conversion, the Holding Company will form a de novo
national bank subsidiary headquartered in Perryville, Missouri, to be known as
"Chester National Bank of Missouri" ("De Novo Bank"), which, following a $3.0
million initial capitalization funded by a portion of the Stock Conversion
proceeds, will purchase all of the installment loans and a portion of the
mortgage loans of the Savings Bank's branch office located in Perryville,
Missouri ("Bank Formation"). The Converted Bank and the De Novo Bank are
collectively referred to herein as the "Banks." The Stock Conversion, the Bank
Conversion and the Bank Formation are referred to herein collectively as the
"Conversion" and are being undertaken pursuant to a plan of conversion adopted
by the Board of Directors of the Savings Bank ("Plan" or "Plan of Conversion").
Pursuant to the Plan, nontransferable rights to subscribe for the Common
Stock ("Subscription Rights") have been granted, in order of priority, to (i)
depositors with $50.00 or more on deposit at the Savings Bank as of January 15,
1995 ("Eligible Account Holders"), (ii) the Banks' employee stock ownership plan
("ESOP"), a tax-qualified employee benefit plan, (iii) depositors with $50.00 or
more on deposit at the Savings Bank as of June 30, 1996 ("Supplemental Eligible
Account Holders"), and (iv) depositors of the Savings Bank as of __________,
1996 ("Voting Record Date") and borrowers of the Savings Bank with loans
outstanding as of _____ __, 199_ which continue to be outstanding as of the
Voting Record Date ("Other Members"), subject to the priorities and purchase
limitations set forth in the Plan of Conversion ("Subscription Offering").
SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE. PERSONS SELLING OR OTHERWISE
TRANSFERRING THEIR SUBSCRIPTION RIGHTS TO SUBSCRIBE FOR COMMON STOCK IN THE
SUBSCRIPTION OFFERING OR SUBSCRIBING FOR COMMON STOCK ON BEHALF OF ANOTHER
PERSON WILL BE SUBJECT TO FORFEITURE OF SUCH RIGHTS AND POSSIBLE FURTHER
SANCTIONS AND PENALTIES IMPOSED BY THE OFFICE OF THRIFT SUPERVISION ("OTS") OR
ANOTHER AGENCY OF THE UNITED STATES GOVERNMENT. See "THE CONVERSION -- The
Subscription, Direct Community and Public Offerings" and "-- Limitations on
Purchases of Shares." After, but subject to the prior rights of holders of
Subscription Rights, the Holding Company is offering the Common Stock for sale
to members of the general public through a direct community offering ("Direct
Community Offering") with preference given to natural persons who are permanent
residents of Randolph, Perry or Jackson counties of Illinois or Perry County,
Missouri ("Local Community"), subject to the right of the Holding Company to
accept or reject orders in whole or in part in the Direct Community Offering.
The Subscription Offering and the Direct Community Offering are at times
referred to herein as the "Subscription and Direct Community Offering."
Depending on market conditions, the shares of Common Stock may be offered for
sale in the Direct Community Offering to eligible members of the general public
on a best efforts basis by a selling group of broker-dealers managed by EVEREN
Securities, Inc. ("EVEREN Securities"). In addition, depending on market
conditions upon the completion of the Direct Community Offering, any shares not
subscribed for in the Subscription and Direct Community Offering may be offered
to the general public in an underwritten public offering ("Public Offering") to
be managed by EVEREN Securities. The Subscription and Direct Community Offering
and the Public Offering are referred to collectively as the "Offerings."
FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES OF COMMON STOCK, CALL THE
CONVERSION CENTER AT (618) 826-3217 AND ASK FOR AN EVEREN SECURITIES, INC.
REPRESENTATIVE.
_______________________________
FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE 1.
________________________________
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT
BE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE
SAVINGS ASSOCIATION INSURANCE FUND ("SAIF") OR ANY OTHER GOVERNMENT AGENCY.
_________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OTS, THE FDIC OR ANY OTHER FEDERAL AGENCY
OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC
OR ANY OTHER AGENCY OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
EVEREN SECURITIES, INC. (continued on the next page)
The date of this Prospectus is _______ __, 1996
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Estimated Underwriting
Purchase and Other Fees and Estimated Net
Price(1) Expenses(2) Proceeds(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Price Per Share ......................... $10.00 $9.51 $9.51
- ------------------------------------------------------------------------------------------------------------------------------------
Midpoint Price Per Share ........................ $10.00 $0.42 $9.58
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum Price Per Share ......................... $10.00 $0.36 $9.64
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum Price Per Share, as adjusted(4) ......... $10.00 $0.32 $9.68
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum Total(5) ................................ $13,175,000 $650,000 $12,525,000
- ------------------------------------------------------------------------------------------------------------------------------------
Midpoint Total(6) ............................... $15,500,000 $650,000 $14,850,000
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum Total(7) ................................ $17,825,000 $650,000 $17,175,000
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum Total, as adjusted(4)(8) ................ $20,498,750 $650,000 $19,848,750
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by
RP Financial, LC. ("RP Financial") as of June 14, 1996, which states
that the estimated aggregate pro forma market value of the Holding
Company and the Savings Bank as converted ranged from $13,175,000 to
$17,825,000, with a midpoint of $15,500,000 ("Estimated Valuation
Range"). Based on the Estimated Valuation Range, the Board of
Directors of the Savings Bank established the estimated aggregate
price range of $13,175,000 to $17,825,000, or between 1,317,500 and
1,782,500 shares of Common Stock at the $10.00 price per share
("Purchase Price"). The final aggregate Purchase Price, which will
be determined at the time of the closing of the Subscription and
Direct Community Offering, is subject to change due to material
changes in the financial condition or performance of the Savings
Bank or in market conditions or general financial or economic
conditions. RP Financial's appraisal is based upon estimates and
projections that are subject to change, and the valuation must not
be construed as a recommendation as to the advisability of
purchasing such shares or that a purchaser will thereafter be able
to sell such shares at or above the Purchase Price. See "THE
CONVERSION -- Stock Pricing and Number of Shares to be Issued."
(2) Includes estimated costs to the Holding Company and the Savings Bank
arising from the Conversion, including fees to be paid to EVEREN
Securities in connection with the Offerings. Such fees may be
deemed to be underwriting fees and EVEREN Securities may be deemed
to be an underwriter. Expenses of the Conversion are estimated to
total approximately $650,000. Actual expenses, and thus net
proceeds, may be more or less than estimated amounts. The Holding
Company and the Savings Bank have agreed to indemnify EVEREN
Securities against certain liabilities, including liabilities that
may arise under the Securities Act of 1933, as amended ("Securities
Act"). See "USE OF PROCEEDS" and "THE CONVERSION -- Plan of
Distribution for the Subscription, Direct Community and Public
Offerings."
(3) Actual net proceeds may vary substantially from the estimated
amounts depending upon the relative number of shares sold in the
Offerings. See "USE OF PROCEEDS" and "PRO FORMA DATA."
(4) Gives effect to an increase in the number of shares which could be
sold in the Conversion, either in the Subscription Offering, Direct
Community Offering or Public Offering, due to an increase in the pro
forma market value of the Holding Company and the Savings Bank as
converted up to 15% above the maximum of the Estimated Valuation
Range, without the resolicitation of subscribers or any right of
cancellation. The ESOP shall have a first priority right to
subscribe for such additional shares up to an aggregate of 8% of the
Common Stock issued in the Conversion. The issuance of such
additional shares will be conditioned on a determination by RP
Financial that such issuance is compatible with its determination of
the estimated pro forma market value of the Holding Company and the
Savings Bank as converted. See "THE CONVERSION -- Stock Pricing and
Number of Shares to be Issued."
(5) Assumes the issuance of 1,317,500 shares at $10.00 per share.
(6) Assumes the issuance of 1,550,000 shares at $10.00 per share.
(7) Assumes the issuance of 1,782,500 shares at $10.00 per share.
(8) Assumes the issuance of 2,049,875 shares at $10.00 per share.
With the exception of the ESOP, which is expected to purchase 8% of
the Common Stock issued in the Stock Conversion, subject to the approval
of the OTS, NO ELIGIBLE ACCOUNT HOLDER, SUPPLEMENTAL ELIGIBLE ACCOUNT
HOLDER OR OTHER MEMBER MAY SUBSCRIBE IN THEIR CAPACITY AS SUCH IN THE
SUBSCRIPTION OFFERING SHARES OF
<PAGE>
COMMON STOCK HAVING AN AGGREGATE PURCHASE PRICE OF MORE THAN $400,000
(40,000 SHARES BASED ON THE PURCHASE PRICE); NO PERSON, TOGETHER WITH
ASSOCIATES OF AND PERSONS ACTING IN CONCERT WITH SUCH PERSON, MAY
PURCHASE IN THE DIRECT COMMUNITY OFFERING AND THE PUBLIC OFFERING MORE
THAN 9.99% OF THE SHARES OF COMMON STOCK ISSUED IN THE CONVERSION; AND NO
PERSON, TOGETHER WITH ASSOCIATES AND PERSONS ACTING IN CONCERT WITH SUCH
PERSON, MAY PURCHASE MORE THAN 9.99% OF THE SHARES OF COMMON STOCK ISSUED
IN THE OFFERINGS. Under certain circumstances, the maximum purchase
limitation may be increased or decreased at the sole discretion of the
Savings Bank and the Holding Company. See "THE CONVERSION -- The
Subscription, Direct Community and Public Offerings" and "-- Procedure
for Purchasing Shares in the Subscription and Direct Community Offering"
for other purchase and sale limitations. The minimum subscription is 25
shares.
THE SUBSCRIPTION OFFERING WILL EXPIRE AT NOON, CENTRAL TIME, ON
______, 1996 ("EXPIRATION DATE"), UNLESS EXTENDED BY THE SAVINGS BANK AND
THE HOLDING COMPANY FOR UP TO __ DAYS TO ___________, 1996. SUCH
EXTENSION MAY BE GRANTED WITHOUT ADDITIONAL NOTICE TO SUBSCRIBERS. THE
DIRECT COMMUNITY OFFERING, IF ANY, IS ALSO EXPECTED TO TERMINATE AT ____,
CENTRAL TIME, ON ______, 1996 OR AT A DATE THEREAFTER, HOWEVER, IN NO
EVENT LATER THAN _________, 1996. The Holding Company must receive at
the Savings Bank's main office the accompanying original Stock Order Form
(facsimile copies and photocopies will not be accepted) and a fully
executed separate Certification Form ("Certification Form") along with
full payment (or appropriate instructions authorizing a withdrawal from a
deposit account at the Savings Bank) of $10.00 per share for all shares
subscribed for or ordered by the Expiration Date. Funds so received will
be placed in segregated accounts created for this purpose at the Savings
Bank, and interest will be paid at the passbook rate (___% per annum as
of the date hereof) from the date payment is received until the
Conversion is consummated or terminated. These funds will be otherwise
unavailable to the depositor until such time. Payments authorized by
withdrawals from deposit accounts will continue to earn interest at the
contractual rate until the Conversion is consummated or terminated,
although such funds will be unavailable for withdrawal until the
Conversion is consummated or terminated. Payment for shares of Common
Stock by wire transfer will not be accepted. ORDERS SUBMITTED ARE
IRREVOCABLE UNTIL THE CONSUMMATION OF THE CONVERSION. If the Conversion
is not consummated within 45 days after the last day of the Subscription
and Direct Community Offering (which date will be no later than ________
__, 1996) and the OTS consents to an extension of time to consummate the
Conversion, subscribers will be notified in writing of the time period
within which the subscriber must notify the Savings Bank of his or her
intention to increase, decrease or rescind his or her subscription. If
an affirmative response to any such resolicitation is not received by the
Holding Company or the Savings Bank from subscribers, such orders will be
rescinded and all funds will be returned promptly with interest. If such
period is not extended or, in any event, if the Conversion is not
consummated by ________, 1996, all subscription funds will be promptly
returned, together with accrued interest, and all withdrawal
authorizations terminated.
The Savings Bank and the Holding Company have engaged EVEREN
Securities as their financial advisor and to assist the Holding Company
in the sale of the Common Stock in the Offerings. In addition, in the
event the Common Stock is not fully subscribed for in the Subscription
and Direct Community Offering, EVEREN Securities will manage the Public
Offering. Neither EVEREN Securities nor any other registered broker-
dealer is obligated to take or purchase any shares of Common Stock in the
Offerings. The Holding Company and the Savings Bank reserve the right,
in their absolute discretion, to accept or reject, in whole or in part,
any or all orders in the Direct Community or Public Offerings either at
the time of receipt of an order or as soon as practicable following the
termination of the Offerings. See "THE CONVERSION -- Plan of
Distribution for the Subscription, Direct Community and Public
Offerings."
Prior to the Offerings, the Holding Company has not issued any
capital stock and accordingly there has been no market for the shares
offered hereby. There can be no assurance that an active and liquid
trading market for the Common Stock will develop or, if developed, will
be maintained. See "RISK FACTORS -- Absence of Prior Market for the
Common Stock." The Holding Company has received conditional approval to
list the Common Stock on the Nasdaq National Market under the symbol
"CNBI." EVEREN Securities has advised the Holding Company that it
intends to act as a market maker for the Holding Company's Common Stock
following the Conversion. See "MARKET FOR COMMON STOCK."
<PAGE>
CHESTER BANCORP, INC.
CHESTER, ILLINOIS
[Map to be filed by amendment]
THE CONVERSION IS CONTINGENT UPON APPROVAL OF THE PLAN OF CONVERSION BY
AT LEAST A MAJORITY OF THE ELIGIBLE VOTING MEMBERS OF THE SAVINGS BANK,
THE SALE OF AT LEAST 1,487,500 SHARES OF COMMON STOCK PURSUANT TO THE
PLAN OF CONVERSION, AND RECEIPT OF ALL APPLICABLE REGULATORY APPROVALS.
<PAGE>
- --------------------------------------------------------------------------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT
BE INSURED OR GUARANTEED BY THE FDIC, THE SAIF OR ANY OTHER GOVERNMENT
AGENCY.
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The information set forth below should be read in conjunction with and is
qualified in its entirety by the more detailed information and Financial
Statements (including the Notes thereto) presented elsewhere in this Prospectus.
The purchase of Common Stock is subject to certain risks. See "RISK FACTORS."
CHESTER BANCORP, INC.
The Holding Company is a Delaware corporation organized in March 1996 at
the direction of the Savings Bank for the purpose of serving as the holding
company of the Converted Savings Bank upon consummation of the Stock Conversion,
and of the Converted Bank and the De Novo Bank following consummation of the
Bank Conversion and the Bank Formation, respectively. The Holding Company has
engaged in organizational activities only to date. The Holding Company has
received OTS approval to become a savings and loan holding company through the
acquisition of the Converted Savings Bank. The Holding Company also has received
approval from the Board of Governors of the Federal Reserve System ("Federal
Reserve") to become a bank holding company under the Bank Holding Company Act,
as amended ("BHCA") through the acquisition of the Converted Bank and the De
Novo Bank. Immediately following the Stock Conversion, the only significant
assets of the Holding Company will be all of the outstanding capital stock of
the Converted Savings Bank (and, following the Bank Conversion and the Bank
Formation, all of the outstanding capital stock of the Converted Bank and the De
Novo Bank), that portion of the Conversion proceeds permitted by the OTS to be
retained by the Holding Company and a note receivable from the ESOP. The Holding
Company has received approval from the OTS to retain 50% of the net proceeds
received in the Conversion, after deducting amounts necessary to fund the ESOP.
See "USE OF PROCEEDS." Upon consummation of the Conversion, the Holding
Company's principal business will be the business of the Converted Bank and the
De Novo Bank. Management believes that the holding company structure and
retention of proceeds could facilitate possible geographic expansion and
diversification through future acquisitions of other financial institutions and
national banks such as other mutual or stock savings institutions and also
enable the Holding Company to diversify, should it decide to do so, into a
variety of banking-related activities other than transactions described herein.
There are no present plans, arrangements, agreements, or understandings, written
or oral, regarding any such acquisitions or activities. The holding company
structure will also facilitate the repurchase of shares in the open market,
subject to regulatory restrictions and market conditions. The principal office
of the Holding Company is located at 1112 State Street, Chester, Illinois 62233,
and its telephone number is (618) 826-5038.
CHESTER SAVINGS BANK, FSB
The Savings Bank is a federally chartered mutual savings bank located in
Chester, Illinois, which is approximately 60 miles south of St. Louis, Missouri.
Originally chartered in 1919 as an Illinois-chartered mutual savings and loan
association under the name "Chester Building and Loan Association," the Savings
Bank converted to a federal charter and adopted its current name in 1990. In
1989, the Savings Bank acquired Heritage Federal Savings and Loan Association
("Heritage Federal") which at the time of the acquisition had assets of
approximately $50 million and offices in Sparta, Red Bud and Pinckneyville,
Illinois. The Savings Bank is regulated by the OTS, its primary federal
regulator, and the FDIC, the insurer of its deposits. The Savings Bank's
deposits are federally insured by the FDIC under the SAIF. The Savings Bank is a
member of the Federal Home Loan Bank ("FHLB")
(i)
<PAGE>
System. At March 31, 1996, the Savings Bank had total assets of $136.8 million,
total deposits of $108.5 million and total equity of $11.9 million, or 8.7% of
total assets.
The Savings Bank is a community oriented financial institution which has
traditionally offered a variety of savings products to its retail customers
while concentrating its lending activities on real estate mortgage loans.
Lending activities have been focused primarily on the origination of loans
secured by one- to four-family residential dwellings. To a lesser extent,
lending activities also have included the origination of consumer loans and
commercial real estate and multi-family loans. At March 31, 1996, the Savings
Bank's gross loan portfolio totaled $56.7 million, of which 80.9% were one- to
four-family residential mortgage loans, 11.3% were consumer loans and 5.8% were
commercial real estate and multi-family loans. In addition, the Savings Bank has
maintained a significant portion of its assets in marketable securities. The
Savings Bank's investment portfolio has been weighted toward United States
Treasury and agency securities. This portfolio also has included a significant
amount of tax exempt state and municipal securities. In addition, the Savings
Bank has invested in mortgage-backed securities to supplement its lending
operations. Investments and mortgage-backed securities totaled $57.5 million and
$16.9 million, respectively, at March 31, 1996.
The Savings Bank's primary market area is comprised of Randolph, Perry,
Jackson and Williamson counties of Illinois and Perry and Cape Girardeau
counties in Missouri. The Savings Bank faces strong competition in its market
area. See "RISK FACTORS -- Dependence on Local Economy and Competition Within
Market Area." The Savings Bank's principal executive office is located at 1112
State Street, Chester, Illinois 62233, and its telephone number is (618) 826-
5038.
CHESTER NATIONAL BANK AND CHESTER NATIONAL BANK OF MISSOURI
Management of the Savings Bank believes that the Bank Conversion and Bank
Formation are in the best interests of the Savings Bank, its members and the
communities it serves. As national banks, the Banks will possess broader
investment and lending authorities than the Savings Bank now possesses as a
federally chartered savings bank, particularly in the areas of commercial real
estate and commercial business lending. See "RISK FACTORS -- Certain Loan
Underwriting Considerations and Risk of Future Lending Strategy" and " -- Bad
Debt Recapture."
Upon consummation of the Bank Conversion and the Bank Formation, the
Savings Bank will operate as a national bank. The Banks will succeed to all of
the assets and liabilities of the Converted Savings Bank (which, pursuant to the
Stock Conversion will have succeeded to all of the assets and liabilities of the
Savings Bank), and will initially continue to conduct business in substantially
the same manner as the Savings Bank prior to the Conversion. Over time, however,
management anticipates an increase in the percentage of commercial real estate
and commercial business loans in the Bank's loan portfolio subject to market
conditions. It is anticipated that the Banks will continue to diversify their
loan and deposit mix and add other services in connection with the Bank
Conversion and Bank Formation. Management anticipates considering the
introduction of a number of new business products including, debit cards, trust
powers, home equity loans and commercial deposits. Accordingly, management
anticipates that the Banks will incur initial start-up and ongoing expenses as
various programs and services are introduced or expanded and in connection with
the staffing, development and marketing of these products. These expenses could
negatively impact earnings for a period of time while the expected income from
these new programs and services increases to a degree sufficient to cover the
additional expenses. No final determination has been made by management in
connection with these services and products; therefore, no costs associated with
these services and products can be projected at this time. Diversification of
the Banks' loan portfolio is expected to alter each institution's risk profile.
Management believes, however, that the continued diversification of the Banks'
asset and deposit bases and the addition of new banking services are essential
for long-term earnings performance.
Upon the consummation of the Bank Conversion and Bank Formation, the Banks'
capital structure will resemble that of many recently converted mutual thrift
institutions, with relatively high capital levels. Subject to market conditions,
lending opportunities and other factors, however, the Banks expect to continue
their business strategy and will seek to deploy the capital received in the
Stock Conversion and Bank Formation into non-residential
(ii)
<PAGE>
lending so that their asset composition and capital structure will more closely
resemble that of national banks. This redeployment of funds may take a period of
time to accomplish and has certain risks associated with it. Non-residential
lending is generally considered to involve a higher degree of risk than
residential real estate lending. See "RISK FACTORS -- Return on Equity After
Conversion," "-- Certain Loan Underwriting Considerations" and "--Risks of
Lending Strategy."
Upon consummation of the Conversion, the Holding Company will be a bank
holding company regulated by the Federal Reserve. The deposits of the Converted
Bank will continue to be insured by the SAIF of the FDIC. The existing deposits
of the Savings Bank's Perryville Branch that will be acquired by the De Novo
Bank will be insured by the SAIF, but new deposits will be insured by the Bank
Insurance Fund ("BIF") of the FDIC. Accordingly, the Banks will continue to be
subject to regulation and supervision by the FDIC. The Banks will not be
regulated and supervised by the OTS, but rather by the Office of the Comptroller
of the Currency ("OCC").
THE CONVERSION
The Savings Bank is converting from a federally chartered mutual savings
bank to a federally chartered capital stock savings bank as a wholly owned
subsidiary of the Holding Company, and as soon as possible thereafter the
Converted Savings Bank intends to convert to a national bank, the Converted
Bank. The Converted Bank will be a national bank known as "Chester National
Bank." In connection with the Bank Conversion, the Holding Company will form the
De Novo Bank, to be known as "Chester National Bank of Missouri," which,
following a $3.0 million initial capitalization funded by a portion of the Stock
Conversion proceeds, will purchase all of the installment loans and a portion of
the mortgage loans of the Savings Bank's Perryville branch office. Upon
consummation of the Stock Conversion, the Converted Savings Bank will issue all
of its outstanding capital stock to the Holding Company in exchange for a
portion of the net proceeds from the sale of the Common Stock in the Stock
Conversion. Subject to receipt of all regulatory approvals, the Bank Conversion
and the Bank Formation would be consummated immediately thereafter and would
result in no change of management, directors, employees or office locations.
Consummation of the Conversion is subject to the approval of the Plan of
Conversion by the Savings Bank's members and the following regulatory approvals:
(i) OTS approval of the Plan of Conversion and the Holding Company's acquisition
of the Converted Savings Bank, (ii) OTS and OCC approvals of the Bank
Conversion, (iii) OCC approval of the Bank Formation, including the chartering
of the De Novo Bank, (iv) FDIC approval of insurance of accounts for the De Novo
Bank, and (v) Federal Reserve approval of the Holding Company's acquisition of
the Banks. While the Holding Company and the Savings Bank expect receipt of all
such approvals in a timely manner, delays in receiving any such approvals may
result in a significant delay in the consummation of the Conversion. See "RISK
FACTORS -- Risk of Delayed Offering."
The Plan of Conversion requires that the aggregate purchase price of the
Common Stock to be issued in the Stock Conversion be based upon an independent
appraisal of the estimated pro forma market value of the Holding Company and the
Banks as converted. RP Financial has advised the Savings Bank that in its
opinion, at June __, 1996, the aggregate estimated pro forma market value of the
Holding Company and the Savings Bank as converted ranged from $13,175,000 to
$17,825,000, or from 1,317,500 shares to 1,782,500 shares, assuming a $10.00 per
share Purchase Price. The appraisal of the pro forma market value of the Holding
Company and the Savings Bank as converted is based on a number of factors and
should not be considered a recommendation to buy shares of the Common Stock or
any assurance that after the Conversion shares of Common Stock will be able to
be resold at or above the Purchase Price. The appraisal will be updated or
confirmed prior to the consummation of the Stock Conversion.
The Savings Bank's Board of Directors has formed the Holding Company to
serve upon consummation of the Conversion as a holding company with the
Converted Savings Bank as its subsidiary, and, following the Bank Conversion and
the Bank Formation, the Banks as its subsidiaries. Management of the Savings
Bank believes that the Conversion offers a number of advantages which will be
important to the future growth and performance of the
(iii)
<PAGE>
Savings Bank. The Conversion is intended: (i) to provide substantially increased
capital for investment in its business to expand the operations of the Banks;
(ii) to provide future access to capital markets; (iii) to enhance the ability
to expand through mergers and acquisitions and to diversify its operations into
new business activities (currently, there are no specific plans, arrangements or
understandings, written or oral, regarding any such activities other than as
described herein); and (iv) to afford depositors and others the opportunity to
become stockholders of the Holding Company and thereby participate more directly
in any future growth of the Banks.
THE SUBSCRIPTION, DIRECT COMMUNITY AND PUBLIC OFFERINGS
The Holding Company is offering up to 1,782,500 shares of Common Stock at
$10.00 per share to holders of Subscription Rights in the following order of
priority: (i) Eligible Account Holders; (ii) the Savings Bank's ESOP; (iii)
Supplemental Eligible Account Holders; and (iv) Other Members. In the event the
number of shares offered in the Conversion is increased above the maximum of the
Estimated Valuation Range, the Savings Bank's ESOP shall have a first priority
right to purchase any such shares exceeding the maximum of the Estimated
Valuation Range up to an aggregate of 8% of the Common Stock issued in the
Conversion. After, and subject to the prior rights of holders of Subscription
Rights, any shares of Common Stock not subscribed for in the Subscription
Offering may be offered in the Direct Community Offering to the general public
with preference being given to natural persons who are permanent residents of
the Local Community. The Savings Bank has engaged EVEREN Securities to consult
with and advise the Holding Company and the Savings Bank in the Offerings, and
EVEREN Securities has agreed to use its best efforts to assist the Holding
Company with the solicitation of subscriptions and purchase orders for shares of
Common Stock in the Offerings. EVEREN Securities is not obligated to take or
purchase any shares of Common Stock in the Offerings. If all shares of Common
Stock to be issued in the Conversion are not sold through the Subscription and
Direct Community Offering, then the Holding Company may offer the remaining
shares in a Public Offering managed by EVEREN Securities, which would occur as
soon as practicable following the close of the Subscription and Direct Community
Offering but may commence during the Subscription and Direct Community Offering,
subject to the prior rights of subscribers in the Subscription Offering and to
the right of the Holding Company to accept or reject orders in the Direct
Community Offering and the Public Offering in whole or in part. All shares of
Common Stock will be sold at the same price per share in the Public Offering as
in the Subscription and Direct Community Offering. ORDERS SUBMITTED ARE
IRREVOCABLE UNTIL THE CONSUMMATION OF THE CONVERSION. See "USE OF PROCEEDS,"
"PRO FORMA DATA" and "THE CONVERSION -- Stock Pricing and Number of Shares to be
Issued." The Subscription Offering will expire at Noon, Central Time, on
___________, 1996, unless extended by the Savings Bank and the Holding Company
for up to __ days. The Direct Community Offering and Public Offering, if any,
are also expected to terminate on ________ __, 1996, and may terminate on a date
thereafter, however, in no event later than ________ __, 1996.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS
Prior to the consummation of the Stock Conversion, no person may transfer
or enter into any agreement or understanding to transfer the legal or beneficial
ownership of the Subscription Rights issued under the Plan or the shares of
Common Stock to be issued upon the exercise of Subscription Rights. Each person
exercising Subscription Rights will be required to certify that a purchase of
Common Stock is solely for the purchasers' own account and there is no agreement
or understanding regarding the sale or transfer of such shares. THE HOLDING
COMPANY AND THE SAVINGS BANK MAY PURSUE ANY AND ALL LEGAL AND EQUITABLE REMEDIES
IN THE EVENT THEY BECOME AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS AND WILL
NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE TRANSFER OR PURPORTED TRANSFER OF
SUBSCRIPTION RIGHTS.
PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING COMMON STOCK
To ensure that each purchaser receives a Prospectus at least 48 hours prior
to the Expiration Date, in accordance with Rule 15c2-8 under the Securities
Exchange Act of 1934, as amended ("Exchange Act"), no Prospectus will be mailed
later than five days or hand delivered any later than two days prior to the
Expiration Date.
(iv)
<PAGE>
Execution of the Stock Order Form will confirm receipt or delivery of a
Prospectus in accordance with Rule 15c2-8. Stock Order Forms will be distributed
only with a Prospectus.
To ensure that Eligible Account Holders, Supplemental Eligible Account
Holders, and Other Members are properly identified as to their stock purchase
priorities, such parties must list all deposit accounts, or in the case of Other
Members who are only borrowers, loans held at the Savings Bank, on the Stock
Order Form giving all names on each deposit account and/or loan and the account
and/or loan numbers at the applicable eligibility date.
Full payment by check, cash, money order, bank draft or withdrawal
authorization (payment by wire transfer will not be accepted) must accompany an
original Stock Order Form (facsimile copies and photocopies will not be
accepted) and a fully executed separate Certification Form. ORDERS CANNOT AND
WILL NOT BE ACCEPTED WITHOUT A FULLY EXECUTED SEPARATE CERTIFICATION FORM. See
"THE CONVERSION -- Procedure for Purchasing Shares in the Subscription and
Direct Community Offering."
PURCHASE LIMITATIONS
With the exception of the ESOP, which is expected to subscribe for 8% of
the shares of Common Stock issued in the Stock Conversion, no Eligible Account
Holder, Supplemental Eligible Account Holder or Other Member may purchase in
their capacity as such in the Subscription Offering shares of Common Stock
having an aggregate purchase price of more than $400,000 (40,000 shares based on
the Purchase Price); no person, together with associates of and persons acting
in concert with such person, may purchase more than 9.99% of the Common Stock
issued in the Conversion in the Direct Community Offering and the Public
Offering and no person, together with associates and persons acting in concert
with such person, may purchase more than 9.99% of the shares of Common Stock
issued in the Offerings . THIS MAXIMUM PURCHASE LIMITATION MAY BE DECREASED AS
CONSISTENT WITH OTS REGULATIONS IN THE SOLE DISCRETION OF THE HOLDING COMPANY
AND THE SAVINGS BANK, SUBJECT TO ANY REQUIRED REGULATORY APPROVAL. The minimum
purchase is 25 shares. In addition, stock orders received either through the
Direct Community Offering or the Public Offering may be accepted or rejected, in
whole or in part, at the discretion of the Holding Company and the Savings Bank.
See "THE CONVERSION -- Limitations on Purchases of Shares." In the event of an
oversubscription, shares will be allocated in accordance with the Plan of
Conversion. See "THE CONVERSION -- The Subscription, Direct Community and Public
Offerings."
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION
The Purchase Price in the Offerings is a uniform price for all subscribers,
including members of the Savings Bank's Board of Directors, its management and
tax-qualified employee plans, and was set by the Boards of Directors of the
Holding Company and the Savings Bank. The number of shares to be offered at the
Purchase Price is based upon an independent appraisal of the aggregate pro forma
market value of the Holding Company and the Savings Bank, as converted. The
aggregate pro forma market value was estimated by RP Financial to range from
$13,175,000 to $17,825,000 as of June 14, 1996, or from 1,317,500 to 1,782,500
shares based on the Purchase Price. See "THE CONVERSION --Stock Pricing and
Number of Shares to be Issued." The appraisal of the pro forma value of the
Holding Company and the Banks as converted will be updated or confirmed at the
completion of the Offerings. The maximum of the Estimated Valuation Range may be
increased by up to 15% and the number of shares of Common Stock to be issued in
the Conversion may be increased to 2,049,875 shares due to material changes in
the financial condition or performance of the Savings Bank, changes in market
conditions or general financial and economic conditions. No resolicitation of
subscribers will be made and subscribers will not be permitted to modify or
cancel their subscriptions unless the gross proceeds from the sale of the Common
Stock are more than 15% above the maximum of the current Estimated Valuation
Range. THE APPRAISAL IS NOT INTENDED AND SHOULD NOT BE CONSTRUED AS A
RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING SUCH STOCK NOR
CAN ASSURANCE BE GIVEN THAT PURCHASERS OF THE COMMON STOCK IN THE STOCK
CONVERSION WILL BE ABLE TO SELL SUCH SHARES THEREAFTER AT A PRICE THAT IS EQUAL
TO OR ABOVE THE PURCHASE PRICE. Further, the pro forma stockholders' equity is
not intended to represent the fair market value
(v)
<PAGE>
of the Common Stock and may be greater than amounts that would be available for
distribution to stockholders in the event of liquidation.
BENEFITS OF THE CONVERSION TO MANAGEMENT
ESOP. In connection with the Conversion, the Savings Bank will adopt the
ESOP, a tax-qualified employee benefit plan, for officers and employees of the
Savings Bank. The ESOP intends to purchase 8% of the shares of Common Stock
issued in the Offerings (142,600 shares of Common Stock, based on the issuance
of the maximum of the Estimated Valuation Range). In the event that the ESOP's
subscription is not filled in its entirety, the ESOP may purchase additional
shares in the open market or may purchase additional authorized but unissued
shares with cash contributed to it by the Savings Bank. For additional
information concerning the ESOP, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Impact of New Accounting
Pronouncements and Regulatory Policies -- Accounting for Employee Stock
Ownership Plans" and "MANAGEMENT OF THE SAVINGS BANK -- Benefits --Employee
Stock Ownership Plan."
MRP. The Holding Company expects to seek approval of the Management
Recognition Plan and Trust ("MRP") at a meeting of stockholders occurring no
earlier than six months following consummation of the Conversion. The MRP, which
will be funded with a number of shares equal to 4% of the number of shares
issued in the Conversion, is a non-tax-qualified restricted stock plan intended
for the benefit of key employees and directors of the Holding Company and the
Savings Bank. If stockholder approval of the MRP is obtained, it is expected
that shares of Common Stock of the Holding Company will be awarded pursuant to
such plan to key employees and directors of the Holding Company and the Savings
Bank (which shares will be awarded at no cost to such recipients). Subject to
approval by stockholders and vesting provisions, key employees and directors are
initially intended to be granted 71,300 restricted shares of Common Stock under
the MRP (based on the issuance of the maximum of the Estimated Valuation Range),
with an aggregate value of $713,000 based on the Purchase Price of $10.00 per
share. It is presently intended that Michael W. Welge, Chairman of the Board,
Chief Financial Officer and a Director of the Savings Bank, Howard A. Boxdorfer,
President and Director of the Savings Bank, and Edward K. Collins, Executive
Vice President, Chief Executive Officer and Director of the Savings Bank, will
receive awards of restricted stock equal to 1.0%, 1.0% and 0.4%, respectively,
of the number of shares of Common Stock issued in the Conversion, or 42,780
shares (based on the issuance of the maximum of the Estimated Valuation Range)
with an aggregate value of $427,800 based on the Purchase Price. Other officers
and employees (7 persons) will be awarded a number of shares equal to in the
aggregate 0.76% of the shares of Common Stock issued in the Conversion, or
13,547 shares at the maximum of the Estimated Valuation Range. Each nonemployee
director of the Savings Bank (4 persons) will receive an award equal to 0.16% of
the number of shares issued in the Conversion, or 11,408 shares at the maximum
of the Estimated Valuation Range. See "MANAGEMENT OF THE SAVINGS BANK --
Benefits --Management Recognition Plan."
STOCK OPTION PLAN. The Holding Company expects to seek stockholder approval
of the 1996 Stock Option Plan ("Stock Option Plan"), which will reserve a number
of shares equal to 10% of the number of shares issued in the Conversion, at a
meeting of stockholders occurring no earlier than six months following
consummation of the Conversion. If stockholder approval of the Stock Option Plan
is obtained, it is expected that options to acquire up to 178,250 shares of
Common Stock of the Holding Company will be awarded to key employees and
directors of the Holding Company and the Savings Bank (based on the issuance of
the maximum of the Estimated Valuation Range). The exercise price of such
options will be 100% (110% for incentive stock options granted to a 10%
shareholder) of the fair market value of the Common Stock on the date the option
is granted. It is presently intended that Messrs. Welge, Boxdorfer and Collins
will be granted options to purchase a number of shares equal to 2.0%, 1.5% and
2.0%, respectively, of the number of shares of Common Stock sold in the
Offerings, or 98,038 shares based upon the maximum of the Estimated Valuation
Range. Other officers and employees (12 persons) will be granted options
covering 2.0% of the number of shares of Common Stock issued in the Conversion,
or 35,650 shares at the maximum of the Estimated Valuation Range. The current
nonemployee directors of the Savings Bank (4 persons) will receive, in the
aggregate, options for 2.0% of the shares of Common
(vi)
<PAGE>
Stock issued in the Conversion, or 35,650 shares at the maximum of the Estimated
Valuation Range. Options granted to officers and directors are valuable only to
the extent that such options are exercisable and the market price for the
underlying share of capital stock is in excess of the exercise price. An option
effectively eliminates the market risk of holding the underlying security since
no consideration is paid for the option until it is exercised and, therefore,
the recipient may, within the limits of the term of the option, wait to exercise
the option until the market price exceeds the exercise price. For additional
information concerning the Stock Option Plan, see "MANAGEMENT OF THE SAVINGS
BANK --Benefits -- 1996 Stock Option Plan."
EMPLOYMENT AND SEVERANCE AGREEMENTS. The Holding Company and the Savings
Bank have agreed to enter into employment agreements with Messrs. M. Welge and
Collins which provide certain benefits in the event of their termination
following a change in control of the Holding Company and the Banks. In the event
of a change in control of the Holding Company or the Banks, as defined in the
agreements, Messrs. Welge and Collins will be entitled to a cash severance
amount equal to the greater of $250,000 or 2.99 times his average annual
compensation during the five-year period preceding the change in control.
Assuming a change of control occurred as of December 31, 1995, the aggregate
amounts payable to each of Messrs. M. Welge and Collins under these agreements
would have been $250,000. See "MANAGEMENT OF THE SAVINGS BANK -- Executive
Compensation -- Employment Agreements."
For information concerning the possible voting control of officers,
directors and employees following the Conversion, see "RISK FACTORS --Anti-
takeover Considerations -- Voting Control by Insiders."
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock are estimated to range
from $12.5 million to $17.2 million, or to $19.8 million if the Estimated
Valuation Range is increased by 15%, depending upon the number of shares sold
and the expenses of the Conversion. The Holding Company has received the
approval of the OTS to purchase all of the capital stock of the Converted
Savings Bank to be issued in the Conversion in exchange for 50% of the net
proceeds. This will result in the Holding Company retaining approximately $6.3
million to $8.6 million of the net proceeds, or up to $9.9 million if the
Estimated Valuation Range is increased by 15%, and the Converted Savings Bank
receiving an equal amount.
Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Converted Savings Bank's capital and will support the expansion of
the Converted Savings Bank's existing business activities. The Converted Savings
Bank will use the funds contributed to it for general corporate purposes, to
fund certain tax payments associated with a portion of the recapture of the
Savings Bank's bad debt reserve associated with the Bank Conversion as discussed
under "RISK FACTORS --Bad Debt Recapture" and investment in United States
Treasury and agency securities with laddered maturities up to five years. The
Converted Savings Bank plans to use a portion of the proceeds, initially up to
$10 million, to reduce or repay its outstanding reverse repurchase agreements.
The $3.0 million initial capital cash infusion into the De Novo Bank by the
Holding Company will be invested by the De Novo Bank in United States Treasury
or agency securities with laddered maturities up to five years. Shares of Common
Stock may be purchased with funds on deposit at the Savings Bank, which will
reduce deposits by the amounts of such purchases. The net amount of funds
available to the Savings Bank for additional investment following receipt of the
Conversion proceeds will be reduced to the extent shares are purchased with
funds on deposit.
A portion of the net proceeds retained by the Holding Company will be used
for a loan by the Holding Company to the ESOP to enable it to purchase 8% of the
shares of Common Stock issued in the Conversion. Such loan would fund the entire
purchase price of the ESOP shares ($1,426,000 at the maximum of the Estimated
Valuation Range) and would be repaid principally from the Converted Savings
Bank's contributions to the ESOP and from dividends payable on the Common Stock
held by the ESOP. The remaining proceeds retained by the Holding Company
initially will be used to capitalize the De Novo Bank and invested primarily in
certificates of deposit and securities of the type currently held by the Savings
Bank. Such proceeds will be available for additional contributions to the
Converted Savings Bank in the form of debt or equity, to support future growth
and diversification activities, as a source of dividends to the stockholders of
the Holding Company to the extent permitted under Delaware law and OTS
regulations (following the Bank Conversion and the Bank Formation, such dividend
(vii)
<PAGE>
payments will be regulated by Delaware law and regulations and policies of the
Federal Reserve and the OCC) and for future repurchases of Common Stock
(including possible repurchases to fund the MRP). Currently, there are no
specific plans, arrangements, agreements or understandings, written or oral,
regarding any of the foregoing activities.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock. The Holding
Company has applied to have the Common Stock listed on the Nasdaq National
Market under the symbol "CNBI." EVEREN Securities has indicated its intention to
act as a market maker in the Common Stock following the consummation of the
Conversion, depending on trading volume and subject to compliance with
applicable laws and regulatory requirements. Furthermore, EVEREN Securities has
agreed to use its best efforts to assist the Holding Company in obtaining
additional market makers for the Common Stock. No assurance can be given that
the Common Stock will be listed on the Nasdaq National Market or that an active
and liquid trading market for the Common Stock will develop. Further, no
assurance can be given that purchasers will be able to sell their shares at or
above the Purchase Price after the Conversion. See "RISK FACTORS -- Absence of
Prior Market for Common Stock" and "MARKET FOR COMMON STOCK."
DIVIDENDS
The Board of Directors of the Holding Company anticipates paying quarterly
cash dividends on the Common Stock, subsequent to the Conversion, at an annual
rate equal to $0.20 per share ($0.05 per share quarterly) commencing in the
first full quarter following the Conversion, subject to the following factors
that the Board of Directors of the Holding Company will consider at the intended
time of declaration and payment: the Banks' current and projected earnings,
financial condition, regulatory capital requirements, including applicable
statutory and regulatory restrictions on the payment of dividends, and other
relevant factors. Accordingly, no assurances can be given that any dividends
will be declared or, if declared, what the amount of dividends will be or
whether such dividends, once declared, will continue. The Holding Company may
pay stock dividends in lieu of or in addition to cash dividends, or may combine
periodic special dividends with regular dividends. See "DIVIDEND POLICY" and
"REGULATION -- Regulation of the Banks."
OFFICERS' AND DIRECTORS' COMMON STOCK PURCHASES AND BENEFICIAL OWNERSHIP
Officers and directors of the Savings Bank (11 persons) and their
associates are expected to subscribe for an aggregate of approximately $3.8
million of Common Stock, or 21.62% of the shares based on the maximum of the
Estimated Valuation Range. See "THE CONVERSION -- Shares to be Purchased by
Management Pursuant to Subscription Rights." In addition, purchases by the ESOP
and subsequent purchases by the MRP, and the exercise of stock options issued
under the Stock Option Plan, will increase the number of shares beneficially
owned by officers, directors and employees. See "RISK FACTORS -- Anti-takeover
Considerations --Voting Control by Insiders." The MRP and Stock Option Plan are
subject to approval by the stockholders of the Holding Company at a meeting to
be held no earlier than six months following consummation of the
Conversion.
RISK FACTORS
See "RISK FACTORS" for a discussion of certain risks related to the
Offerings that should be considered by all prospective investors.
(viii)
<PAGE>
SELECTED FINANCIAL INFORMATION
The following tables set forth certain information concerning the financial
position, results of operations and other data of the Savings Bank at the dates
and for the periods indicated. This information is qualified in its entirety by
reference to the detailed information and Financial Statements and notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
At March 31, At December 31,
---------------------------------------------
1996 1995 1994 1993 1992 1991
------------ ---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
CONDITION DATA:
Total assets......................... $136,806 $134,781 $141,755 $141,396 $138,869 $136,431
Loans receivable, net................ 55,754 57,021 58,157 61,193 65,643 70,997
Mortgage-backed securities, net(1)... 16,906 15,413 13,136 7,402 10,559 14,661
Investments, net (2)................. 57,543 57,605 64,410 67,390 57,994 47,064
Savings deposits (3)................. 108,515 106,718 129,712 130,231 128,731 127,257
Securities sold under agreements
to repurchase...................... 15,000 15,000 -- -- -- --
Retained earnings --
substantially restricted........... 11,870 11,712 10,675 9,682 8,778 7,603
</TABLE>
<TABLE>
<CAPTION>
Three
Months
Ended
March 31, Year Ended December 31,
----------------- ----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income...................... $2,280 $ 2,244 $ 9,035 $ 8,696 $ 9,132 $ 10,392 $ 11,843
Interest expense..................... 1,335 1,329 5,474 5,089 5,526 6,826 8,648
------ -------- -------- -------- -------- -------- --------
Net interest income................. 945 915 3,561 3,607 3,606 3,566 3,195
Provision for loan losses........... 7 (2) 161 69 30 70 56
------ -------- -------- -------- -------- -------- --------
Net interest income after...........
provision for loan losses.......... 938 917 3,400 3,538 3,576 3,496 3,139
Loss on sale of certificates
of deposit, net..................... (54) -- -- -- -- -- --
Gain (loss) on sale of investment
securities and mortgage-backed
securities, net.................... 7 47 98 -- -- (228) --
Other noninterest income............. 43 31 140 114 129 131 130
Noninterest expense.................. 613 572 2,338 2,374 2,277 2,216 1,967
------ -------- -------- -------- -------- -------- --------
Income before income tax expense
and cumulative effect of change
in accounting principle........... 321 423 1,300 1,278 1,428 1,183 1,302
Income taxes........................ 77 109 299 285 307 257 210
------ -------- -------- -------- -------- -------- --------
Income before cumulative effect
of change in accounting principle.. 244 314 1,001 993 1,121 926 1,092
Cumulative effect of change in
accounting principle(4)............ -- -- -- -- (227) -- --
------ -------- -------- -------- -------- -------- --------
Net income.......................... $ 244 $ 314 $ 1,001 $ 993 $ 894 $ 926 $ 1,092
====== ======== ======== ======== ======== ======== ========
</TABLE>
(footnotes on second following page)
(ix)
<PAGE>
<TABLE>
<CAPTION>
At or for the
Three Months
Ended March 31, At or for the Year Ended December 31,
--------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
KEY OPERATING RATIOS:
Performance Ratios:
Return on average assets (net
income divided by average assets)...... 0.72% 0.91% 0.73% 0.69% 0.79%(5) 0.68% 0.80%
Return on average equity (net
income divided by average equity)...... 8.28 11.60 8.94 9.76 12.15(5) 11.31 15.72
Interest rate spread (difference
between average yield on interest
-earning assets and average cost of
interest-bearing liabilities)(6)....... 2.63 2.49 2.43 2.45 2.45 2.49 2.19
Net interest margin (net interest
income as a percentage of average
interest-earning assets)(7)............ 2.89 2.74 2.70 2.62 2.65 2.71 2.43
Non-interest expense to
average assets......................... 1.80 1.65 1.70 1.66 1.61 1.62 1.45
Average interest-earning assets to
average interest-bearing liabilities... 106.47 106.10 106.48 104.91 104.66 104.29 103.60
Asset Quality:
Allowance for loan losses to total
loans at end of period................. 0.71 0.42 0.68 0.42 0.34 0.28 0.22
Ratio of allowance for loan
losses to non-performing loans......... 178.38 65.85 244.79 64.65 59.53 38.78 0.16
Net charge-offs to average outstanding
loans during the period................ -- -- 0.03 0.05 0.01 0.06 0.04
Ratio of non-performing assets to
total assets(8)........................ 0.32 0.33 0.27 0.31 0.44 0.84 1.24
Capital Ratios:
Average equity to average assets........ 8.65 7.81 8.15 7.12 6.53 6.01 5.10
Equity to assets at end of period....... 8.68 8.08 8.69 7.53 6.85 6.32 5.57
</TABLE>
<TABLE>
<CAPTION>
At March 31, At December 31,
-----------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Number of:
Real estate loans outstanding.......... 1,469 1,484 1,542 1,704 1,899 2,097
Deposit accounts....................... 12,354 12,282 12,742 13,184 13,636 14,478
Full-service offices................... 6 6 6 6 6 6
Loan production offices................ 1 1 -- -- -- --
</TABLE>
(footnotes on next page)
(x)
<PAGE>
________________
(1) Includes mortgage backed securities available for sale of $2.1 million and
$2.2 million at March 31, 1996 and December 31, 1995, respectively.
(2) Includes investment securities, interest-bearing deposits, federal funds
sold, certificates of deposits, and FHLB stock. Includes U.S. government
securities available for sale of $17.4 million and $6.5 million at March
31, 1996 and December 31, 1995, respectively.
(3) During the year ended December 31, 1995, $15.0 million of certificates of
deposit were converted into reverse repurchase agreements and, therefore,
are not reflected in deposit totals.
(4) Resulted from the adoption of SFAS No. 109, "Accounting for Income Taxes"
on January 1, 1993.
(5) Excludes cumulative effect of change in accounting principle.
(6) Does not consider tax-equivalent basis of tax exempt state and municipal
securities. Interest rate spread, after considering tax equivalent basis of
such securities, is 2.60%, 2.61%, 2.62%, 2.57%, and 2.19% for 1995, 1994,
1993, 1992 and 1991, respectively, and 2.79% and 2.65% for the three months
ended March 31, 1996 and 1995, respectively.
(7) Does not consider tax-equivalent basis of tax exempt state and municipal
securities. Net interest margin, after considering tax equivalent basis of
such securities, is 2.87%, 2.79%, 2.82%, 2.79% and 2.43% for 1995, 1994,
1993, 1992 and 1991, respectively, and 3.06% and 2.89% for the three months
ended March 31, 1996 and 1995, respectively.
(8) Non-performing assets include loans which are contractually past due 90
days or more, loans accounted for on a nonaccrual basis and real estate
acquired through foreclosure.
(xi)
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RISK FACTORS
Before investing in shares of the Common Stock offered hereby,
prospective investors should carefully consider the matters presented
below, in addition to matters discussed elsewhere in this Prospectus.
CERTAIN LOAN UNDERWRITING CONSIDERATIONS AND RISK OF LENDING STRATEGY
Historically, the Savings Bank's primary lending activity has been the
origination of conventional first mortgage loans secured by one- to four-family
owner occupied residences, which amounted to $45.8 million (including those
guaranteed by the Federal Housing Administration ("FHA")), or 80.9% of total
loans, at March 31, 1996. However, at that same date, the Savings Bank also had
$2.7 million, or 4.8% of total loans, in commercial real estate loans and $6.4
million, or 11.3% of total loans, in consumer loans outstanding. Although both
commercial real estate and consumer lending generally provide higher yields and
greater interest rate sensitivity than residential mortgage loans, they
generally involve greater risk than residential mortgage loans. Commercial real
estate lending risks include delays in leasing the collateral property and
excessive collateral vacancy rates, among others. Consumer lending risks include
rapid collateral depreciation rates, the susceptibility of the borrower's
financial stability to adverse personal events such as job loss, divorce,
illness or personal bankruptcy, among others. See "BUSINESS OF THE SAVINGS BANK
- -- Lending Activities -- Commercial Real Estate and Multi-family Lending" and
"-- Consumer and Other Loans."
The Banks will operate in substantially the same manner as the Savings Bank
initially following the consummation of the Bank Conversion. However, it is
anticipated that, subject to market conditions, competition and related factors,
among other things, the Banks intend to pursue a business strategy that places
greater emphasis on commercial business, commercial real estate and consumer
lending as these types of lending, as well as residential mortgage lending, are
emphasized by commercial banks, including national banks. Accordingly, the post-
Bank Conversion risk profile of the Banks' loan portfolios can be expected to be
greater than that of the Savings Bank. There can be no assurances that this
change in risk profile will not have a material adverse effect on the Banks'
financial condition and results of operations as a result of higher levels of
loan delinquencies and loan losses. Furthermore, this strategy may take a period
of time to fully implement and may require the expenditure of additional funds
to provide the resources necessary to originate the anticipated volume of
commercial loans. The success of this strategy will depend on the level of
interest rates, market conditions and other factors that are beyond the control
of the Banks, and could be adversely affected by the condition of the national
economy and the economy of the Bank's primary market area in particular.
DEPENDENCE ON LOCAL ECONOMY AND COMPETITION WITHIN MARKET AREA
The primary market served by the Savings Bank in southwestern Illinois has
experienced population shrinkage (Randolph and Perry Counties in Illinois) or
slow growth (in the other counties served) over the last several years, because
of the rural agricultural nature, the local troubled coal mining sector and a
number of plant/business closings, including a recent large printing plant
closing in Sparta, Illinois where the Savings Bank has a branch. Market area
conditions have limited local mortgage loan demand led to some deposit
withdrawals. Local conditions led the Savings Bank to open a branch office and
loan production office in southwestern Missouri where the economy is more
attractive. Since local mortgage loan demand has been limited, in order to
continue to meet local financing needs, it became necessary to invest in
securities and become active in other forms of lending such as consumer lending.
At March 31, 199, the Savings Bank's loan portfolio consisted of loans made to
borrowers and collateralized by properties located principally in this market
area. Principally all of the Savings Bank's depositors reside in this market
area as well.
A downturn in the economy of the Savings Bank's market area could have an
adverse effect on the quality of the Savings Bank's loan portfolio. In addition,
because the Savings Bank operates in a market area with a small population and
limited growth prospects, the Savings Bank's ability to achieve loan and deposit
growth is limited.
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Future growth opportunities for the Savings Bank depend largely on market area
growth and the Savings Bank's ability to compete effectively within and outside
its market area.
In the face of significant competition by financial and non-bank entities
over the last few years, the Savings Bank has had limited success in increasing
its retail deposit base, excluding the historical benefit of the large corporate
relationship described under "-- Potential Reduction of Certain Funding
Liabilities" and the Heritage Federal acquisition. The Savings Bank competes for
deposits and loans with a number of financial institutions in a four contiguous
county market area that has a population of approximately 135,000. In three of
the counties served, Chester Savings' market share is low and its average branch
size is below average. A number of the competing financial institutions are
larger than the Savings Bank and are subsidiaries of large regional bank holding
companies.
BAD DEBT RECAPTURE
Under current applicable provisions of the Internal Revenue Code ("Code"),
certain thrift institutions (like the Savings Bank) are allowed to maintain
higher tax bad debt reserve levels than allowed for commercial banks. As a
result, such thrift institutions are able to shelter a larger portion of their
earnings from tax than can commercial banks. However, if such thrift
institutions convert to commercial banks, they must restate their tax bad debt
reserve as of the first year of conversion. As a result of the Bank Conversion,
therefore, the excess of the Savings Bank's bad debt tax reserve as of the close
of the tax year immediately preceding the year of Bank Conversion over the
restated reserve level must be included in the Converted Bank's taxable income
ratably over a six-year period. Accordingly, given that the Bank Conversion is
expected to be consummated during the Converted Bank's tax year ending December
31, 1996, such recapture by the Converted Bank is expected to amount to
approximately $2.5 million, which amount will be included ratably into taxable
income and the associated taxes paid over the subsequent six-year period.
Assuming an effective tax rate of 38.0% the amount of tax to be paid on such
recapture would total approximately $951,000. See "TAXATION -- Federal Taxation
- -- Tax Bad Debt Reserves."
POTENTIAL REDUCTION OF CERTAIN FUNDING LIABILITIES
Michael W. Welge, Chairman of the Board and Chief Financial Officer of the
Savings Bank, is the Executive Vice President, Treasurer and Secretary of
Gilster-Mary Lee Corporation ("Gilster-Mary Lee"), a food manufacturing and
packaging company headquartered in Chester, Illinois. Over the last several
years, the Savings Bank has maintained a relationship (primarily a deposit
relationship) with Gilster-Mary Lee, which at times has had as much as $25
million or more in funds on deposit typically with relatively short terms. At
March 31, 1996, the present balance of funds was approximately $21.2 million,
$15.0 million of which was in short-term reverse repurchase agreements. Gilster-
Mary Lee has notified the Savings Bank of its intent to draw down the balance of
such funds by at least $10 million in the short-term and maintain much smaller
balances in the future. The loss of funds will impair earnings as there is no
intent to replace the reverse repurchase agreements with other wholesale funds.
Ample liquidity is maintained by the Savings Bank to cover the withdrawal of
such deposits, the reduction of such borrowings, or both.
POTENTIAL ADVERSE IMPACT OF CHANGES IN INTEREST RATES
The financial condition and operations of the Savings Bank, and of savings
institutions in general, are influenced significantly by general economic
conditions, by the related monetary and fiscal policies of the federal
government and by the regulations of the OTS and the FDIC. Deposit flows and the
cost of funds are influenced by interest rates of competing investments and
general market rates of interest. Lending activities are affected by the demand
for mortgage financing and for consumer and other types of loans, which in turn
is affected by the interest rates at which such financing may be offered and by
other factors affecting the supply of housing and the availability of funds. The
Savings Bank's profitability, like that of most financial institutions, is
dependent to a large extent on its net interest income, which is the difference
between the interest income received from its interest-earning assets and the
interest expense incurred in connection with its interest-bearing liabilities.
At
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March 31, 1996 the Savings Bank's total interest-bearing liabilities maturing or
repricing within one-year exceeded total interest-earning assets maturing or
repricing in the same period by $14.0 million, representing a cumulative
negative gap of 10.21% of total assets. Accordingly, the Savings Bank, like
other savings institutions, is vulnerable to an increase in interest rates to
the extent that its interest-earning assets have longer effective maturities or
periods to repricing than do its interest-bearing liabilities. Under such
circumstances, material and prolonged increases in interest rates generally
would adversely affect net interest income, while material and prolonged
decreases in interest rates generally would have a favorable effect on net
interest income.
Changes in the level of interest rates also affect the amount of loans
originated by the Savings Bank and, thus, the amount of loan and commitment
fees, as well as the value of the Savings Bank's investment securities and other
interest-earning assets. Moreover, volatility in interest rates also can result
in disintermediation, or the flow of funds away from savings institutions into
direct investments, such as United States Government and corporate securities
and other investment vehicles which, because of the absence of federal insurance
premiums and reserve requirements, generally pay higher rates of return than
insured savings deposits.
To better control the impact of changes in interest rates, the Savings Bank
has sought to improve the match between asset and liability maturities,
repricings and rates by, among other things, maintaining liquidity significantly
in excess of the regulatory requirements, originating adjustable-rate mortgage
("ARM") loans as market conditions permit, originating short-term consumer
loans, and investing in adjustable-rate securities. At March 31, 1996, the
Savings Bank had $18.7 million of adjustable-rate loans, net of undisbursed
loans in process, in its loan portfolio, most of which reprice every year, and
$37.5 million of fixed-rate loans in its loan portfolio. The Savings Bank
originates ARM loans at initial "teaser" rates below the rate that would prevail
were the market rate index used for repricing applied initially. Furthermore,
the Savings Bank's ARM loans contain annual and lifetime interest rate
adjustment limits which, in a rising interest rate environment, may prevent such
loans from repricing to market interest rates. While management anticipates that
the Savings Bank's ARM loans will better offset the adverse effects of an
increase in interest rates as compared to fixed-rate mortgages, the increased
mortgage payments required of ARM borrowers in a rising interest rate
environment could potentially cause an increase in delinquencies and defaults.
In order to address the foregoing risks, it is generally the practice of the
Savings Bank to qualify its borrowers based on the maximum interest rate that
could be charged at the first adjustment period. The Savings Bank has not
historically had an increase in such delinquencies and defaults on ARM loans,
but no assurance can be given that such delinquencies or defaults would not
occur in the future. The marketability of the underlying property also may be
adversely affected in a high interest rate environment. Moreover, the Savings
Bank's ability to originate ARM loans may be affected by changes in the level of
interest rates and by market acceptance of the terms of such loans.
RETURN ON EQUITY AFTER CONVERSION
Return on equity (net income for a given period divided by average equity
during that period) is a ratio used by many investors to compare the performance
of a particular financial institution to its peers. The Holding Company's post-
Conversion pro forma return on equity will be less than the Savings Bank's pre-
Conversion return on equity because of the increase in consolidated equity of
the Holding Company that will result from the net proceeds of the Offerings. See
"SELECTED FINANCIAL INFORMATION" for numerical information regarding the Savings
Bank's historical return on equity and "CAPITALIZATION" for a discussion of the
Holding Company's estimated pro forma consolidated capitalization as a result of
the Conversion.
In order for the Holding Company to achieve a return on equity comparable
to the historical levels achieved by the Savings Bank prior to the Conversion,
the Holding Company would have to either increase net income or reduce
stockholders' equity, or both, commensurate with the increase in equity as a
result of the Conversion. Reductions in equity could be achieved by, among other
things, the payment of regular cash dividends or periodic special dividends
(although no assurances can be given as to whether any dividends will be paid
or, if paid, their amount and frequency), the repurchase of shares of Common
Stock subject to regulatory restrictions, or the acquisition of other financial
institutions (neither the Holding Company nor the Savings Bank has any present
plans,
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arrangements, or understandings, written or oral, regarding any repurchase or
acquisitions). See "DIVIDEND POLICY" and "USE OF PROCEEDS." Achievement of
increased net income levels will depend on several important factors outside the
control of management, such as general economic conditions, including the level
of market interest rates, competition and related factors, among others. See "--
Dependence on Local Economy and Competition Within Market Area" and "Potential
Adverse Impact of Changes in Interest Rates." The expenses associated with the
ESOP and the MRP (see "PRO FORMA DATA"), are expected to depress earnings
levels. Other post-Conversion expenses could also be expected to contribute
initially to reduced earnings levels. Although the Banks will operate initially
in substantially the same manner as the Savings Bank following the consummation
of the Bank Conversion, the Banks anticipate to continue to diversify their loan
and deposit mix and add other banking services. Management of the Banks
anticipates considering the introduction of various new business products
including, but not limited to, debit cards, trust powers, home equity loans and
commercial deposits. Accordingly, management anticipates that the Banks will
incur start-up and on-going expenses as various programs and services are
introduced and banking products are expanded and in connection with the
staffing, development and marketing of these products. Since no determination
has been made by management in connection with these services and products, the
costs associated with these services and products cannot be projected at this
time. Accordingly, it is uncertain whether these expenses would have a material
adverse effect on earnings and, therefore, further depress post-Conversion
return on equity. Furthermore, approximately 54.4% of the Savings Bank's assets
at March 31, 1996 were invested in investments and mortgage-backed securities
because of both reduced loan demand in the Savings Bank's market area and the
need to maintain adequate liquidity should certain funding liabilities be
withdrawn from the Savings Bank (see "-- Potential Reduction of Certain Funding
Liabilities."). Investments and mortgage-backed securities generally earn lower
yields than loans. To the extent that the Banks' post-Conversion asset
composition continues to be weighted toward investment and mortgage-backed
securities, return on equity could be expected to be adversely affected.
The Savings Bank intends to deploy the net proceeds of the Offerings to
increase earnings per share and book value per share without assuming undue
risk, with the goal of achieving a return on equity comparable to the average
for publicly traded financial institutions and their holding companies. This
goal will likely take a number of years to achieve and no assurances can be
given that this goal can be attained.
RECAPITALIZATION OF SAIF AND ITS IMPACT ON SAIF PREMIUMS
In August 1995, the FDIC substantially reduced deposit insurance premiums
for well-capitalized, well-managed financial institutions that are members of
the Bank Insurance Fund ("BIF"). The initial reduction in BIF premiums went into
effect in September 1995. In November 1995 the FDIC further revised the premium
schedule for BIF-insured banks to provide a range of 0% to 0.27%, with a minimum
annual premium effective January 1996. Under the new assessment schedule,
approximately 92% of BIF members pay only the statutory minimum annual
assessment of $2,000. With respect to SAIF member institutions, the FDIC has
retained the existing rate schedule of 23 to 31 basis points. Chester National
Bank will be a member of SAIF and the deposits of Chester National Bank of
Missouri that are received from the Perryville Branch will be SAIF rather than
BIF insured. SAIF premiums may not be reduced for several years because SAIF has
lower reserves than BIF and is responsible for more troubled financial
institutions. Deposit insurance premiums are often a significant component of
noninterest expense for insured depository institutions. The reduction in BIF
premiums may place the Savings Bank at a competitive disadvantage because BIF-
insured institutions (such as most commercial banks) may be able to offer more
attractive loan rates, deposit rates, or both. The magnitude of the competitive
advantage of BIF-insured institutions due to a disparity in deposit insurance
premiums and its impact on the Savings Bank's results of operations cannot be
determined at this time.
Several alternatives to mitigate the effect of the BIF/SAIF premium
disparity have been suggested by the federal banking regulators, by members of
Congress, by industry groups and by the Clinton Administration, including a
merger of the funds and/or a payment by all SAIF-member institutions, including
the Savings Bank, of a one-time assessment to increase SAIF's reserves to $1.25
per $100 of deposits. Such assessment is estimated to be approximately 85 basis
points on the amount of deposits held by a SAIF-member institution at March 31,
1995. The
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payment of a one-time fee would have the effect of immediately reducing the
capital and earnings of SAIF-member institutions by the amount of the fee. Based
on the Savings Bank's assessable deposits of $123.6 million at March 31, 1995
(the date specified in the proposed legislation), a one-time assessment of 85
basis points would equal approximately $1.1 million, or $651,000 after taxes
assuming a 38.0% combined federal and state tax rate. This assessment, if it
occurred, would represent, on a pro forma basis at March 31, 1996, a decrease in
book value per share of $0.49 and $0.37 based on the sale of shares at the
minimum of the Estimated Valuation Range and at the maximum of the Estimated
Valuation Range, respectively. Management cannot predict whether any
legislation, including legislation imposing such a fee, will be enacted, or, if
enacted, the amount of any one-time fee or whether ongoing SAIF premiums will be
reduced to a level equal to that of BIF premiums. See "REGULATION."
ANTI-TAKEOVER CONSIDERATIONS
PROVISIONS IN THE HOLDING COMPANY'S GOVERNING INSTRUMENTS AND DELAWARE LAW.
Certain provisions included in the Holding Company's Certificate of
Incorporation and in the Delaware General Corporation Law ("DGCL") might
discourage potential takeover attempts, particularly those which have not been
negotiated with the Board of Directors. As a result, these provisions might
preclude takeover attempts which certain stockholders may deem to be in their
interest and might tend to perpetuate existing management. These provisions
include, among other things, a provision for approval of certain business
combinations. In addition, the Certificate of Incorporation provides for the
election of directors to staggered terms of three years and for their removal
without cause only upon the vote of holders of 80% of the outstanding voting
shares. Certain provisions of the Certificate of Incorporation of the Holding
Company cannot be amended by stockholders unless an 80% stockholder vote is
obtained. The Bylaws of the Holding Company also contain provisions regarding
the timing and content of stockholder proposals and nominations. The existence
of these anti-takeover provisions could result in the Holding Company being less
attractive to a potential acquiror and in stockholders receiving less for their
shares than otherwise might be available in the event of a takeover attempt. See
"RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY."
VOTING CONTROL BY INSIDERS. Directors and officers of the Savings Bank and
the Holding Company and their associates expect to purchase 383,967 shares of
Common Stock, or 21.62% of the shares issued in the Offerings at the maximum of
the Estimated Valuation Range. Directors and officers are also expected to
control indirectly the voting of approximately 8% of the shares of Common Stock
issued in the Conversion through the ESOP (assuming shares have been allocated
under the ESOP). Under the terms of the ESOP, the unallocated shares will be
voted by the ESOP trustees in the same proportion as the votes cast by
participants with respect to the allocated shares.
At a meeting of stockholders to be held no earlier than six months
following the consummation of the Conversion, the Holding Company expects to
seek approval of the Holding Company's MRP, which is a non-tax-qualified
restricted stock plan for the benefit of key employees and directors of the
Holding Company and the Savings Bank. Assuming the receipt of stockholder
approval, the Holding Company expects to reserve for issuance common stock of
the Holding Company on behalf of the MRP in an amount equal to 4% of the Common
Stock issued in the Conversion, or 71,300 shares at the maximum of the Estimated
Valuation Range. Under the terms of the MRP, the MRP committee or the MRP
trustees will have the power to vote unallocated and unvested shares. In
addition, the Holding Company intends to reserve for future issuance pursuant to
the Stock Option Plan a number of authorized shares of Common Stock equal to 10%
of the Common Stock issued in the Conversion (178,250 shares at the maximum of
the Estimated Valuation Range). The Holding Company also intends to seek
approval of the Stock Option Plan at a meeting of stockholders to be held no
earlier than six months following the consummation of the Conversion.
Assuming (i) the receipt of stockholder approval for the MRP and the Stock
Option Plan, (ii) the open market purchase of shares on behalf of the MRP, (iii)
the purchase by the ESOP of 8% of the Common Stock sold in the Offerings, and
(iv) the exercise of stock options equal to 10% of the number of shares of
Common Stock issued in the Conversion, directors, officers and employees of the
Holding Company and the Savings Bank would
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have voting control, on a fully diluted basis, of 39.58% of the Common Stock,
based on the issuance of the maximum of the Estimated Valuation Range.
Notwithstanding additional stockholder support, 's potential voting control may
effectively preclude or impede takeover attempts that certain stockholders deem
to be in their best interest, and may tend to perpetuate existing management,
particularly since the Holding Company's Certificate of Incorporation requires
an 80% stockholder vote to approve certain business combinations and other
corporate actions.
PROVISIONS OF EMPLOYMENT AND SEVERANCE AGREEMENTS. The employment
agreements with Messrs. M. Welge and Collins provide for cash severance payments
in the event of a change in control of the Holding Company or the Savings Bank
in an amount equal to the greater of $250,000 or 2.99 times the executive's
average annual compensation during the five-year period preceding the change in
control. Such agreements also provide for the continuation of certain insurance
benefits for a three-year period following the change in control. These
provisions may have the effect of increasing the cost of acquiring the Holding
Company, thereby discouraging future attempts to take over the Holding Company
or the Savings Bank.
See "MANAGEMENT OF THE SAVINGS BANK -- Benefits," "DESCRIPTION OF CAPITAL
STOCK OF THE HOLDING COMPANY" and "RESTRICTIONS ON ACQUISITION OF THE HOLDING
COMPANY."
REGULATORY AND STATUTORY PROVISIONS. Federal regulations prohibit for a
period of three years after completion of the Conversion, the ownership of more
than 10% of the Savings Bank or the Holding Company without prior OTS approval.
Federal law also requires OTS approval prior to the acquisition of "control" (as
defined in OTS regulations) of an insured institution.
ABSENCE OF PRIOR MARKET FOR THE COMMON STOCK
The Holding Company has never issued capital stock and, consequently, there
is no existing market for the Common Stock. Although the Holding Company has
applied to list the Common Stock on the Nasdaq National Market under the symbol
"CNBI," there can be no assurance that the Holding Company will meet Nasdaq
National Market listing requirements upon the consummation of the Conversion,
which include a minimum market capitalization, at least two market makers and a
minimum number of record holders. Making a market in securities involves
maintaining bid and ask quotations and being able, as principal, to effect
transactions in reasonable quantities at those quoted prices, subject to various
securities laws and other regulatory requirements. The development of a public
trading market depends upon the existence of willing buyers and sellers, the
presence of which is not within the control of the Holding Company, the Savings
Bank or any market maker. It is not expected that an active and liquid trading
market for the Common Stock will develop due to the relatively small size of the
Offerings and the small number of shareholders expected following the
Conversion. Accordingly, purchasers should consider the illiquid nature of any
investment in the Common Stock. Furthermore, there can be no assurance that
purchasers will be able to sell their shares at or above the Purchase Price. See
"MARKET FOR COMMON STOCK."
DILUTIVE EFFECT OF BENEFIT PROGRAMS
At a meeting held no earlier than six months following consummation of the
Conversion, the Holding Company expects to seek stockholder approval of the MRP.
If approved, the Holding Company intends to reserve for issuance under the MRP
an amount of Common Stock of the Holding Company equal to 4% of the shares
issued in the Conversion. Such shares of Common Stock of the Holding Company may
be acquired by the Holding Company in the open market or from authorized but
unissued shares of Common Stock of the Holding Company. In the event that the
MRP utilizes authorized but unissued shares of Common Stock from the Holding
Company, the voting interests of existing stockholders will be diluted and net
income per share and stockholders' equity per share will be decreased. See "PRO
FORMA DATA" and "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Management
Recognition Plan."
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At a meeting held no earlier than six months following consummation of the
Conversion, the Holding Company expects to seek stockholder approval of the
Stock Option Plan. If approved, the Stock Option Plan will provide for options
for up to a number of shares of Common Stock of the Holding Company equal to 10%
of the shares issued in the Conversion. Such shares may be authorized but
unissued shares of Common Stock of the Holding Company and, upon exercise of the
options, will result in the dilution of the voting interests of existing
stockholders and will decrease net income per share and stockholders' equity per
share. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- 1996 Stock Option
Plan."
If the ESOP is not able to purchase 8% of the shares of Common Stock issued
in the Offerings, the ESOP may purchase newly issued shares from the Holding
Company. In such event, the voting interests of existing stockholders will be
diluted and net income per share and stockholders' equity per share will be
decreased. See "MANAGEMENT OF THE SAVINGS BANK-- Benefits -- Employee Stock
Ownership Plan."
POSSIBLE INCREASE IN THE NUMBER OF SHARES ISSUED IN THE CONVERSION
The number of shares to be issued in the Conversion may be increased as a
result of an increase in the Estimated Valuation Range of up to 15% to reflect
changes in market and in the financial condition of the Savings Bank prior to
the consummation of the Conversion. In the event that the Estimated Valuation
Range is so increased, the Holding Company expects to issue up to 1,782,500
shares of Common Stock at the Purchase Price for an aggregate price of up to
$17,825,000. An increase in the number of shares issued will decrease the
Holding Company's net income per share and stockholders' equity and will
increase stockholders' equity and net income on a pro forma basis, and will also
increase the Purchase Price as a percentage of pro forma stockholders' equity
per share and net income per share.
The ESOP intends to purchase 8% of the Common Stock issued in the
Conversion. In the event the number of shares issued in the Conversion is
increased as a result of an increase in the Estimated Valuation Range, the ESOP
shall have a first priority right to subscribe for such 301,875 additional
shares, up to an aggregate of 8% of the Common Stock issued in the Conversion.
See "PRO FORMA DATA" and "THE CONVERSION -- Stock Pricing and the Number of
Shares to be Issued."
POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS
If the Subscription Rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members of the Savings Bank are
deemed to have an ascertainable value, receipt of such rights may be a taxable
event (either as capital gain or ordinary income), which may be recognizable by
all or only by those Eligible Account Holders, Supplemental Eligible Account
Holders or Other Members who exercise the Subscription Rights (either as capital
gain or ordinary income) in an amount equal to such value. Additionally, the
Savings Bank could be required to recognize a gain for tax purposes on such
distribution. Whether Subscription Rights are considered to have ascertainable
value is an inherently factual determination. The Savings Bank has been advised
by RP Financial that such rights have no value; however, RP Financial's
conclusion is not binding on the Internal Revenue Service ("IRS"). See "THE
CONVERSION -- Effects of Conversion to Stock Form on Depositors and Borrowers of
the Savings Bank -- Tax Effects."
RISK OF DELAYED OFFERING
The Holding Company and the Savings Bank expect to consummate the
Conversion within the time periods indicated in this Prospectus. Nevertheless,
it is possible, although not anticipated, that there could be a significant
delay in the consummation of the Conversion as a result of delays in receiving
OTS and OCC approvals of the Bank Conversion or in receiving the approval of the
Federal Reserve of the Holding Company's acquisition of the Banks. If the
Conversion is not completed by ___________, 1996 (45 days after the last day of
the fully extended Subscription Offering) and the OTS consents to an extension
of time to consummate the Conversion, subscribers will be given the right to
modify or rescind their subscriptions. In such event, unless an affirmative
indication is received
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from subscribers that they wish to continue to subscribe for shares, their funds
will be returned promptly, together with interest at the Savings Bank's passbook
rate, or their withdrawal authorizations will be terminated.
CHESTER BANCORP, INC.
The Holding Company was organized as a Delaware corporation at the
direction of the Savings Bank in March 1996 for the purpose of serving as the
holding company of the Converted Savings Bank upon its conversion from mutual to
stock form, and of the Banks following the Bank Conversion and the Bank
Formation. The Holding Company has received the approval of the OTS to become a
savings and loan holding company and to acquire 100% of the capital of the
Savings Bank. The Holding Company also has received the approval of the Federal
Reserve to become a bank holding company and to acquire 100% of the capital
stock of the Banks. Prior to the Conversion, the Holding Company will not engage
in any material operations. Upon consummation of the Conversion, the Holding
Company's principal business will be the business of the Banks, and the Holding
Company will register with the Federal Reserve as a bank holding company under
the BHCA. See "BUSINESS OF THE HOLDING COMPANY."
The management of the Holding Company is set forth under "MANAGEMENT OF THE
HOLDING COMPANY." Initially, the Holding Company will neither own nor lease any
property, but will instead use the premises, equipment and furniture of the
Savings Bank in accordance with applicable law and regulations. Presently, the
Holding Company does not intend to employ any persons other than officers who
are also officers of the Savings Bank, but will utilize the support staff of the
Savings Bank from time to time in accordance with applicable laws and
regulations. Additional employees will be hired as appropriate to the extent the
Holding Company expands or changes its business in the future.
The holding company structure will permit the Holding Company to expand the
financial services currently offered through the Savings Bank. Management
believes that the holding company structure and retention of a portion of the
proceeds of the Offerings will, should it decide to do so, facilitate the
expansion and diversification of its operations. The holding company structure
will also enable the Holding Company to repurchase its stock without adverse tax
consequences. There are no present plans, arrangements, agreements, or
understandings, written or oral, regarding any such activities or repurchases.
See "REGULATION -- Regulation of the Holding Company."
The Holding Company's principal executive office is located at 1112 State
Street, Chester, Illinois, and its telephone number is (618) 826-5038.
CHESTER SAVINGS BANK, FSB
The Savings Bank is a federally chartered mutual savings bank located in
Chester, Illinois, which is approximately 60 miles South of St. Louis, Missouri.
Originally chartered in 1919 as an Illinois-chartered mutual savings and loan
association under the name "Chester Building and Loan Association," the Savings
Bank converted to a federal charter and adopted its current name in 1990. In
1989, the Savings Bank acquired Heritage Federal which at the time of the
acquisition had assets of approximately $50 million and offices in Sparta, Red
Bud and Pinckneyville, Illinois. The Savings Bank is regulated by the OTS, its
primary federal regulator, and the FDIC, the insurer of its deposits. The
Savings Bank's deposits are federally insured by the FDIC under the SAIF. The
Savings Bank is a member of the FHLB System. At March 31, 1996, the Savings Bank
had total assets of $136.8 million, total deposits of $108.5 million and total
equity of $11.9 million, or 8.7% of total assets.
The Savings Bank is a community oriented financial institution which has
traditionally offered a variety of savings products to its retail customers
while concentrating its lending activities on real estate mortgage loans.
Lending activities have been focused primarily on the origination of loans
secured by one- to four-family residential dwellings. To a lesser extent,
lending activities also have included the origination of consumer loans and
commercial
8
<PAGE>
real estate and multi-family loans. At March 31, 1996, the Savings Bank's gross
loan portfolio totaled $56.7 million, of which 80.9% were one- to four-family
residential mortgage loans, 11.3% were consumer loans and 5.8% were commercial
real estate and multi-family loans. In addition, the Savings Bank has maintained
a significant portion of its assets in marketable securities. The Savings Bank's
investment portfolio has been weighted toward United States Treasury and agency
securities. This portfolio also has included a significant amount of tax exempt
state and municipal securities. In addition, the Savings Bank has invested in
mortgage-backed securities to supplement its lending operations. Investments and
mortgage-backed securities totaled $57.5 million and $16.9 million,
respectively, at March 31, 1996.
The Savings Bank's primary market area is comprised of Randolph, Perry,
Jackson and Williamson counties of Illinois and Perry and Cape Girardeau
counties in Missouri. See "BUSINESS OF THE SAVINGS BANK -- Market Area." The
Savings Bank faces strong competition in its market area. See "RISK FACTORS --
Dependence on Local Economy and Competition Within Market Area." The Savings
Bank's principal executive office is located at 1112 State Street, Chester,
Illinois 62233, and its telephone number is (618) 826-5038.
CHESTER NATIONAL BANK AND CHESTER NATIONAL BANK OF MISSOURI
Upon consummation of the Conversion, the Banks will succeed to all of the
assets and liabilities of the Converted Savings Bank and will initially continue
to conduct business in substantially the same manner as the Savings Bank prior
to the Conversion. It is anticipated that the Banks will continue to diversify
their loan and deposit mix and add other services in connection with the
Conversion. Management anticipates considering the introduction of a number of
new business products including, but not limited to, debit cards, trust powers,
home equity loans and commercial deposits. Accordingly, management anticipates
that the Banks will incur initial start-up and ongoing expenses as various
programs and services are introduced and in connection with the staffing,
development and marketing of these products. Such expenses could negatively
impact earnings for a period of time while the expected income from these new
programs and services increases to a degree sufficient to cover the additional
expenses. No final determination has been made by management in connection with
these services and products; therefore, no costs associated with these services
and products can be projected at this time. Diversification of the Banks' loan
portfolio is expected to alter the risk profiles of the Banks. Management
believes, however, that the continued diversification of the Banks' asset and
deposit bases and the addition of new banking services are essential for long-
term earnings performance.
The deposits of Chester National Bank will continue to be insured by the
SAIF of the FDIC. The existing deposits of Chester National Bank of Missouri
will continue to be insured by the SAIF, but new deposits will be insured by the
BIF of the FDIC. Accordingly, the Banks will continue to be subject to
regulation and supervision by the FDIC. The Banks will not be regulated and
supervised by the OTS, but rather by the OCC.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock offered hereby are
estimated to range from $12.5 million to $17.2 million, or up to $19.8 million
if the Estimated Valuation Range is increased by 15%. See "PRO FORMA DATA" for
the assumptions used to arrive at such amounts. The Holding Company has received
the approval of the OTS to purchase all of the capital stock of the Converted
Savings Bank to be issued in the Conversion in exchange for 50% of the net
proceeds of the Offerings, $3.0 million of which will be infused into the De
Novo Bank as its initial capitalization. This will result in the Holding Company
retaining approximately $3.3 million to $5.6 million of net proceeds, or up to
$6.9 million if the Estimated Valuation Range is increased by 15%, and the
Savings Bank receiving an equal amount.
Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Banks' capital and will support the expansion of the Banks'
existing business activities. The Banks will use the funds contributed to it for
general corporate purposes, to fund certain tax payments associated with a
portion of the recapture of the
9
<PAGE>
Savings Bank's bad debt reserve, and investment in United States Treasury and
agency securities with laddered maturities up to five years. The Converted
Savings Bank may consider using a portion of the proceeds to reduce its
outstanding reverse repurchase agreements. The $3.0 million initial capital cash
infusion into the De Novo Bank by the Holding Company is expected to be invested
initially by the De Novo Bank in United States Treasury or agency securities
with laddered maturities up to five years. Shares of Common Stock may be
purchased with funds on deposit at the Savings Bank, which will reduce deposits
by the amounts of such purchases. The net amount of funds available to the
Savings Bank for additional investment following receipt of the Conversion
proceeds will be reduced to the extent shares are purchased with funds on
deposit.
In connection with the Conversion and the establishment of the ESOP, the
Holding Company intends to loan the ESOP the amount necessary to purchase 8% of
the shares of Common Stock sold in the Conversion. The Holding Company's loan to
fund the ESOP may range from $1,054,000 to $1,426,000 based on the sale of
1,317,500 shares to the ESOP (at the minimum of the Estimated Valuation Range)
and 1,782,500 shares (at the maximum of the Estimated Valuation Range),
respectively, at $10.00 per share. If 15% above the maximum of the Estimated
Valuation Range, or 2,049,875 shares, are sold in the Conversion, the Holding
Company's loan to the ESOP would be $1,639,900. It is anticipated that the ESOP
loan will have a 15-year term with interest payable at 8.00% per annum. The loan
will be repaid principally from the Banks' contributions to the ESOP and from
any dividends paid on the Common Stock.
The remaining net proceeds retained by the Holding Company initially will
be invested primarily in certificates of deposit and securities of the type
currently held by the Savings Bank. Such proceeds will be available for
additional contributions to the Banks in the form of debt or equity, to support
future diversification or acquisition activities, as a source of dividends to
the stockholders of the Holding Company and for future repurchases of Common
Stock to the extent permitted under applicable law and federal regulations.
Currently, there are no specific plans, arrangements, agreements or
understandings, written or oral, regarding any diversification or acquisition
activities other than as described herein.
Upon consummation of the Conversion, the Board of Directors will have the
authority to adopt stock repurchase plans, subject to statutory and regulatory
requirements. Since the Holding Company has not yet issued stock, there is
currently insufficient information upon which an intention to repurchase stock
could be based. The facts and circumstances upon which the Board of Directors
may determine to repurchase stock in the future may include but are not limited
to: (i) market and economic factors such as the price at which the stock is
trading in the market, the volume of trading, the attractiveness of other
investment alternatives in terms of the rate of return and risk involved in the
investment, the ability to increase the book value and/or earnings per share of
the remaining outstanding shares, and the ability to improve the Holding
Company's return on equity; (ii) the avoidance of dilution to stockholders by
not having to issue additional shares to cover the exercise of stock options or
to fund employee stock benefit plans; and (iii) any other circumstances in which
repurchases would be in the best interests of the Holding Company and its
stockholders. Any stock repurchases will be subject to a determination by the
Board of Directors that both the Holding Company and the Savings Bank will be
capitalized in excess of all applicable regulatory requirements after any such
repurchases and that capital will be adequate, taking into account, among other
things, the level of non-performing and other risk assets, the Holding Company's
and the Savings Bank's current and projected results of operations and
asset/liability structure, the economic environment and tax and other regulatory
considerations. See "THE CONVERSION -- Restrictions on Repurchase of Stock."
DIVIDEND POLICY
GENERAL
The Board of Directors of the Holding Company currently anticipates paying
quarterly cash dividends on the Common Stock subsequent to the Conversion at an
annual rate equal to $0.20 per share ($0.05 per share quarterly) commencing in
the first full quarter following the Conversion, subject to the factors
discussed below at
10
<PAGE>
the intended time of declaration and payment. The payment of dividends on the
Common Stock will be subject to the requirements of applicable law and the
determination by the Board of Directors of the Holding Company that the net
income, capital and financial condition of the Holding Company, industry trends
and general economic conditions justify the payment of dividends. The rate of
such dividends and the initial or continued payment thereon will depend upon
various factors at the intended time of declaration and payment, including the
Banks' profitability and liquidity, alternative investment opportunities, and
regulatory restrictions on dividend payments and on capital levels applicable to
the Banks. Accordingly, there can be no present assurance that any dividends
will be paid. Periodically, the Board of Directors, if market, economic and
regulatory conditions permit, may combine or substitute periodic special
dividends with or for regular dividends. In addition, since the Holding Company
initially will have no significant source of income other than dividends from
the Banks and earnings from investment of the net proceeds of the Conversion
retained by the Holding Company, the payment of dividends by the Holding Company
will depend in part upon the amount of the net proceeds from the Conversion
retained by the Holding Company and the Holding Company's earnings thereon and
the receipt of dividends from the Banks, which is subject to various tax and
regulatory restrictions on the payment of dividends. Dividend payments by the
Holding Company are subject to regulatory restriction under Federal Reserve
policy as well as to limitation under applicable provisions of Delaware
corporate law. Under Delaware law, dividends may be paid either out of surplus
or, if there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. Assuming the issuance of
1,750,000 shares of the Common Stock at the midpoint of the Estimated Valuation
Range, and based on the assumptions set forth under "USE OF PROCEEDS," the
Holding Company estimated that it would retain approximately $5.4 million in net
proceeds after funding the ESOP loan and initially capitalizing the De Novo
Bank, which would be available for the payment of dividends and for other
corporate purposes. For additional information, see "REGULATION -- Regulation of
the Bank" and "-- Regulation of the Holding Company," "TAXATION -- Federal
Taxation," and Notes 11 and 18 of Notes to Financial Statements included
elsewhere herein.
CURRENT REGULATORY RESTRICTIONS
Dividends from the Holding Company will depend, in part, upon receipt of
dividends from the Converted Savings Bank because the Holding Company initially
will have no source of income other than dividends from the Converted Savings
Bank and earnings from the investment of the net proceeds from the Conversion
retained by the Holding Company. At March 31, 1996, the Savings Bank met the
criteria to be designated a Tier 1 association, as defined herein, and
consequently could at its option (after prior notice to and no objection made by
the OTS) distribute up to 100% of its net income during the calendar year plus
50% of its surplus capital ratio at the beginning of the calendar year less any
distributions previously paid during the year. There can be no assurance that
dividends will in fact be paid on the Common Stock or that, if paid, such
dividends will not be reduced or eliminated in future periods.
Subsequent to the Bank Conversion and Bank Formation, dividends from the
Holding Company will depend upon the receipt of dividends from the Banks and the
payment of such dividends is subject to the restrictions contained in the OCC
regulations. See "REGULATION -- Regulation of the Banks" for information
regarding the payment of dividends by the Banks to the Holding Company.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock and, consequently, there
is no existing market for the Common Stock. Although the Holding Company has
applied to list the Common Stock on the Nasdaq National Market under the symbol
"CNBI," there can be no assurance that the Holding Company will meet Nasdaq
National Market listing requirements, which include a minimum market
capitalization, at least two market makers and a minimum number of record
holders. Making a market involves maintaining bid and ask quotations and being
able, as principal, to effect transactions in reasonable quantities at those
quoted prices, subject to various securities laws and other regulatory
requirements. EVEREN Securities has indicated its intention to act as a market
maker in the Common Stock following the consummation of the Conversion,
depending on trading volume and subject to
11
<PAGE>
compliance with applicable laws and regulatory requirements. Furthermore, EVEREN
Securities has agreed to use its best efforts to assist the Holding Company in
obtaining additional market makers for the Common Stock. There can be no
assurance there will be two or more market makers for the Common Stock. The
development of a liquid public market depends on the existence of willing buyers
and sellers, the presence of which is not within the control of the Savings
Bank, the Holding Company or any market maker. Furthermore, there can be no
assurance that purchasers will be able to sell their shares at or above the
Purchase Price.
12
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the Savings
Bank at March 31, 1996, and the pro forma consolidated capitalization of the
Holding Company after giving effect to the assumptions set forth under "PRO
FORMA DATA," based on the sale of the number of shares of Common Stock set forth
below in the Conversion at the minimum, midpoint and maximum of the Estimated
Valuation Range, and based on the sale of 2,049,875 shares (representing the
shares that would be issued in the Conversion after giving effect to an
additional 15% increase in the maximum valuation in the Estimated Valuation
Range, subject to receipt of an updated appraisal confirming such valuation and
OTS approval). A CHANGE IN THE NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION
MAY MATERIALLY AFFECT PRO FORMA CONSOLIDATED CAPITALIZATION.
<TABLE>
<CAPTION>
Holding Company
Pro Forma Consolidated Capitalization
Based Upon the Sale of
------------------------------------------------------
1,317,500 1,550,000 1,782,500 2,049,875
Savings Shares at Shares at Shares at Shares at
Bank $10.00 $10.00 $10.00 $10.00
Historical Per Share(1) Per Share(1) Per Share(2) Per Share(2)
---------- ------------ ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Savings deposits(3)..................... $108,515 $ 108,515 $ 108,515 $ 108,515 $ 108,515
Reverse repurchase agreements(4)........ 15,000 15,000 15,000 15,000 15,000
ESOP borrowings(5)...................... -- -- -- -- --
--------- ---------- ---------- ---------- ----------
Total savings deposits and
borrowed funds......................... $123,515 $ 123,515 $ 123,515 $ 123,515 $ 123,515
========= ========== ========== ========== ==========
Stockholders' equity:
Preferred stock:
100,000 shares, par
value $.01 per share,
authorized; none to be issued
or outstanding.....................
Common Stock:
3,000,000 shares, par
value $.01 per share, authorized;
specified number of shares
assumed to be issued and
outstanding as
reflected(6)....................... -- 13 16 18 20
Additional paid-in capital........... -- 12,512 14,834 17,157 19,829
Retained earnings(8)................. 11,870 10,919 10,919 10,919 10,919
Less:
Common Stock acquired
by ESOP(5)....................... -- (1,054) (1,240) (1,426) (1,640)
Common Stock acquired
by MRP(7)........................ -- (527) (620) (713) (820)
--------- ---------- ---------- ---------- ----------
Total stockholders' equity.............. $ 11,870 $ 21,863 $ 23,909 $ 25,955 $ 28,308
========= ========== ========== ========== ==========
</TABLE>
(footnotes on following page)
13
<PAGE>
_________________
(1) Does not reflect the possible increase in the Estimated Valuation Range to
reflect changes in market or financial conditions or the issuance of
additional shares under the Stock Option Plan.
(2) This column represents the pro forma capitalization of the Holding Company
in the event the aggregate number of shares of Common Stock issued in the
Conversion is 15% above the maximum of the Estimated Valuation Range as a
result of changes in market or financial conditions. See "PRO FORMA DATA"
and Footnote 1 thereto.
(3) Withdrawals from deposit accounts for the purchase of Common Stock are not
reflected. Such withdrawals will reduce pro forma deposits by the amounts
thereof.
(4) See "RISK FACTORS -- Potential Reduction of Certain Funding Liabilities"
for a discussion of such reverse repurchase agreements.
(5) Assumes that 8% of the Common Stock issued in the Conversion will be
acquired by the ESOP in the Conversion with funds borrowed from the Holding
Company. In accordance with generally accepted accounting principles
("GAAP"), the amount of Common Stock purchased by the ESOP represents
unearned compensation and is, accordingly, reflected as a reduction of
capital. As shares are released to ESOP participant accounts, a
corresponding reduction in the charge against capital will occur. Since the
funds are borrowed from the Holding Company, the borrowing will be
eliminated in consolidation and no liability will be reflected in the
consolidated financial statements of the Holding Company. See "MANAGEMENT
OF THE SAVINGS BANK -- Benefits -- Employee Stock Ownership Plan."
(6) Each of the Banks' authorized capital will consist solely of 1,000 shares
of common stock, par value $1.00 per share, 1,000 shares of which will be
issued to the Holding Company, and 9,000 shares of preferred stock, no par
value per share, none of which will be issued in connection with the
Conversion.
(7) Assumes the purchase in the open market at the Purchase Price, pursuant to
the proposed MRP, of a number of shares equal to 4% of the shares of Common
Stock issued in the Conversion at the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Valuation Range. The issuance of an
additional 4% of the shares of Common Stock for the MRP from authorized but
unissued shares of Holding Company Common Stock would dilute the ownership
interest of stockholders by 3.85%. The shares are reflected as a reduction
of stockholders' equity. See "RISK FACTORS -- Possible Dilutive Effect of
Benefit Programs," "PRO FORMA DATA" and "MANAGEMENT OF THE SAVINGS BANK --
Benefits -- Management Recognition Plan." The MRP is subject to stockholder
approval and is expected to be adopted by stockholders at a meeting to be
held no earlier than six months following consummation of the Conversion.
(8) Retained earnings are substantially restricted by applicable regulatory
capital requirements and includes unrealized gain on securities available-
for-sale, net of taxes. Additionally, the Converted Bank will be prohibited
from paying any dividend that would reduce its regulatory capital below the
amount in the liquidation account, which will be established for the
benefit of the Savings Bank's Eligible Account Holders and Supplemental
Eligible Account Holders at the time of the Conversion and adjusted
downward thereafter as such account holders cease to be depositors. See
"THE CONVERSION -- Effects of Conversion to Stock Form on Depositors and
Borrowers of the Savings Bank -- Liquidation Account." The difference in
amount between the pro forma retained earnings of the Holding Company and
the historical retained earnings of the Savings Bank is attributable to the
expected after-tax effect of the bad debt recapture discussed under "RISK
FACTORS -- Bad Debt Recapture."
14
<PAGE>
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE
The Savings Bank is currently subject to OTS regulatory capital
requirements. After the Bank Conversion, however, the Banks will be required to
satisfy FDIC regulatory capital requirements, which are similar but not
identical to the OTS capital requirements. The following table sets forth the
Savings Bank's historical capital position relative to the various minimum OTS
regulatory capital requirements. The next table sets forth the Banks' historical
capital position relative to the FDIC capital requirements to which the Banks
will be subject, and thereafter presents pro forma data of the Holding Company
relative to the Federal Reserve's regulatory capital requirements. Pro forma
data assumes that the Common Stock has been sold as of March 31, 1996, at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range, as well as the effect of the bad debt recapture discussed under "RISK
FACTORS--Bad Debt Recapture." For additional information regarding the financial
condition of the Savings Bank and the assumptions underlying the pro forma
capital calculations set forth below, see "USE OF PROCEEDS," CAPITALIZATION" and
"PRO FORMA DATA" and the Financial Statements and related notes appearing
elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA AT MARCH 31, 1996
----------------------------------------------------------------------------------
Minimum of Estimated Midpoint of Estimated Maximum of Estimated
Valuation Range Valuation Range Valuation Range
--------------------------- -------------------------- ------------------------
1,317,500 Shares 1,550,000 Shares 3,782,500 Shares
March 31, 1996 at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share
--------------------- ---------------------- --------------------------- -------------------------
Percent of Percent of Percent of Percent of
Adjusted Adjusted Adjusted Adjusted
Total Total Total Total
Amount Assets (1) Amount Assets (1) Amount Assets(1) Amount Assets(1)
------ ---------- ------ ---------- ------ --------- ------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CHESTER SAVINGS BANK, FSB $11,870 8.68% $16,278 11.63% $17,281 12.25% $18,284 12.85%
GAAP capital(5)............ ======= ===== ======= ===== ======= ===== ======= =====
Tangible capital........... $11,920 8.71% $16,328 11.66% $17,331 12.28% $18,334 12.88%
Tangible capital
requirement............... 2,053 1.50 2,100 1.50 2,118 1.50 2,135 1.50
------- ----- ------- ----- ------- ----- ------- -----
Excess..................... $ 9,867 7.21% $14,228 10.16 $15,213 10.78% $16,199 11.38%
======= ===== ======= ===== ======= ===== ======= =====
Core capital............... $11,920 8.71% $16,328 11.66% $17,331 12.28% $18,334 12.88%
Core capital requirement(2) 4,106 3.00 4,200 3.00 4,235 3.00 4,270 3.00
------- ----- ------- ----- ------- ----- ------- -----
Excess..................... $ 7,814 5.71% $12,128 8.66% $13,096 9.28% $14,064 9.88%
======= ===== ======= ===== ======= ===== ======= =====
Risk-based capital(3)(4)... $12,308 25.95% $16,716 34.78% $17,719 36.69% $18,722 38.58%
Risk-based 3,795 8.00 3,845 8.00 3,864 8.00 3,883 8.00
capital requirement....... ------- ----- ------- ----- ------- ----- ------- -----
$ 8,513 17.95% $12,871 26.78% $13,855 28.69% $14,839 30.58%
Excess..................... ======= ===== ======= ===== ======= ===== ======= =====
<CAPTION>
15% above
Maximum of Estimated
Valuation Range
------------------------
2,049,875 Shares
at $10.00 Per Share
------------------------
Percent of
Adjusted
Total
Amount Assets
<S> <C> <C>
CHESTER SAVINGS BANK, FSB
GAAP capital(5)............ $19,438 13.53%
======= =====
Tangible capital........... $19,488 13.56%
Tangible capital
requirement............... 2,155 1.50
------- -----
Excess..................... $17,333 12.06%
======= =====
Core capital............... $19,488 13,56%
Core capital requirement(2) 4,310 3.00
------- -----
Excess..................... $15,178 10.56%
======= =====
$19,876 40.73%
Risk-based capital(3)(4)...
Risk-based 3,904 8.00
capital requirement....... ------- -----
$15,972 32.73%
Excess..................... ======= =====
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA AT MARCH 31, 1996
----------------------------------------------------------------------------------
Minimum of Estimated Midpoint of Estimated Maximum of Estimated
Valuation Range Valuation Range Valuation Range
--------------------------- -------------------------- ------------------------
1,317,500 Shares 1,550,000 Shares 3,782,500 Shares
March 31, 1996 at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share
----------------------- ---------------------- --------------------------- -------------------------
Percent of Percent of Percent of Percent of
Adjusted Adjusted Adjusted Adjusted
Total Total Total Total
Amount Assets (1) Amount Assets (1) Amount Assets(1) Amount Assets(1)
------ ---------- ------ ---------- ------ --------- ------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CHESTER NATIONAL BANK
GAAP capital (5)........... $11,870 8.68% $16,278 11.63% $17,281 12.25% $18,284 12.85%
======= ==== ======= ===== ======= ===== ======= =====
Tier 1 capital (1)......... $11,920 8.71% $16,328 11.66% $17,331 12.28% $18,334 12.88%
Minimum Tier 1 (leverage)
requirement............. 4,106 3.00 4,200 3.00 4,235 3.00 4,270 3.00
----- ---- ------- ----- ------- ----- ------- -----
Total.................. $ 7,814 5.71% $12,128 8.66% $13,096 9.28% $14,064 9.88%
======= ==== ======= ===== ======= ===== ======= =====
CHESTER NATIONAL BANK
OF MISSOURI
GAAP capital............... $ -- --% $ 3,000 47.91% $ 3,000 47.71% $ 3,000 47.51%
------- ---- ------- ----- ------- ----- ------- -----
Tier 1 capital (1)......... -- -- $ 3,000 47.91% $ 3,000 47.71% $ 3,000 47.51%
Minimum Tier 1 (leverage)
requirement............. -- -- 188 3.00 189 3.00 189 3.00
------- ---- ------- ------- ------- ------- ------- -----
Total.................. $ -- --% $ 2,812 44.91% $ 2,811 44.71% $ 2,811 44.51%
======= ===== ======= ======= ======= ======= ======= =====
15% above
Maximum of Estimated
Valuation Range
------------------------
2,049,875 Shares
------------------------
at $10.00 Per Share
Percent of
Adjusted
Total
Amount Assets
------- -----
CHESTER NATIONAL BANK
GAAP capital (5)........... $19,438 13.53%
======= =====
Tier 1 capital (1)......... $19,488 13.56%
Minimum Tier 1 (leverage)
requirement............. 4,310 3.00
------- -----
Total.................. $15,178 10.56%
======= =====
CHESTER NATIONAL BANK
OF MISSOURI
GAAP capital............... $ 3,000 47.28%
------- -----
Tier 1 capital (1)......... $ 3,000 47.28%
Minimum Tier 1 (leverage)
requirement............. 190 3.00
------- -----
Total.................. $ 2,810 44.28%
======= =====
</TABLE>
<TABLE>
<CAPTION>
March 31, 1996 PRO FORMA AT MARCH 31, 1996
---------------------------- -----------------------------------------------------------------
Percent of
Adjusted Total or Percent of Percent of Percent of
Risk-weighted Risk-weighted Risk-weighted Risk-weighted
Amount Assets (1) Amount Assets (1) Amount Assets Amount
------ --------------- ------ ---------- ------- ------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
CHESTER BANCORP, INC.
Tier 1 Capital............. $ -- --% $21,913 14.83% $23,959 15.99% $26,005 %
Tier 1 Leverage
Requirement............... -- -- 4,434 3.00 4,495 3.00 4,557
--------- --------- ------- ----- ------- ----- -------
Excess..................... $ -- --% $17,479 11.83% $19,464 12.99% $21,448 %
========= ========= ======= ===== ======= ===== =======
Risk-based capital(1)...... $ -- -- $22,301 44.94% $24,347 48.66% $26,393 %
Minimum risk-based capital
requirement.............. -- -- 3,970 8.00 4,003 8.00 4,036
--------- --------- ------- ----- ------- ----- -------
Excess..................... $ -- --% $18,331 36.94% $20,344 40.66% $22,357 %
========= ========= ======= ===== ======= ===== =======
<CAPTION>
Percent of Percent of
Risk-weighted Risk-weighted
Assets (1) Amount Assets (1)
---------- ------ ----------
<S> <C> <C> <C>
CHESTER BANCORP, INC.
Tier 1 Capital............. 17.12% $28,358 18.39%
Tier 1 Leverage
Requirement............... 3.00 4,627 3.00
----- ------- -----
Excess..................... 14.12% $23,731 15.39%
===== ======= =====
Risk-based capital(1)...... 52.32% $28,746 56.46%
Minimum risk-based capital
requirement.............. 8.00 4,073 8.00
----- ------- -----
Excess..................... 44.32% $24,673 48.46%
===== ======= =====
</TABLE>
16
<PAGE>
_____________
(1) Based upon adjusted total assets for purposes of the tangible capital and
core capital requirements, and risk-weighted assets for purposes of the
risk-based capital requirement.
(2) The current OTS core capital requirement for savings associations is 3% of
total adjusted assets. The OTS has proposed core capital requirements which
would require a core capital ratio of 3% of total adjusted assets for
thrifts that receive the highest supervisory rating for safety and
soundness and a core capital ratio of 4% to 5% for all other thrifts.
(3) Percentage represents total core and supplementary capital divided by total
risk-weighted assets.
(4) Assumes reinvestment of net proceeds into assets with risk weights
of 20%.
(5) The following table presents a reconciliation of pro forma GAAP capital for
Chester Savings Bank, FSB (to become Chester National Bank) and Chester
National Bank of Missouri at March 31, 1996:
<TABLE>
<CAPTION>
15% Above
Minimum of Midpoint of Maximum of Maximum of
Estimated Estimated Estimated Estimated
Valuation Range Valuation Range Valuation Range Valuation Range
--------------- --------------- --------------- ---------------
(In thousands)
<S> <C> <C> <C> <C>
Capital Impact on Chester Savings Bank, FSB/
Chester National Bank:
GAAP Capital at March 31, 1996................. $11,870 $11,870 $11,870 $11,870
Cash Infused into Chester Savings Bank, FSB/
Chester National Bank........................ 6,262 7,425 8,587 9,923
Less: ESOP Adjustment....................... (903) (1,063) (1,222) (1,406)
Less: Bad Debt Recapture.................... (951) (951) (951) (951)
------- ------- ------- -------
Pro Forma GAAP Capital......................... $16,278 $17,281 $18,284 $19,438
======= ======= ======= =======
Capital Impact on Chester National Bank
of Missouri:
GAAP Capital at March 31, 1996................ $ -- $ -- $ -- $ --
Cash Infused into Chester National Bank
of Missouri................................. 3,151 3,177 3,204 3,234
Less: ESOP Adjustment....................... (151) (177) (204) (234)
------- ------- ------- -------
Pro forma GAAP Capital......................... $ 3,000 $ 3,000 $ 3,000 $ 3,000
======= ======= ======= =======
</TABLE>
17
<PAGE>
PRO FORMA DATA
Under the Plan of Conversion, the Common Stock must be sold at an aggregate
price equal to the estimated pro forma market value of the Holding Company and
the Savings Bank, as converted, based upon an independent valuation. The
Estimated Valuation Range as of June 14, 1996 is from a minimum of $13.2 million
to a maximum of $17.8 million with a midpoint of $15.5 million or, at a price
per share of $10.00, a minimum number of shares of 1,317,500, a maximum number
of shares of 1,782,500 and a midpoint number of shares of 1,550,000. The actual
net proceeds from the sale of the Common Stock cannot be determined until the
Conversion is consummated. However, net proceeds set forth on the following
table are based upon the following assumptions: (i) EVEREN Securities will
receive a non-refundable retainer fee of $15,000 and a completion fee of
$200,000 in the Offerings; (ii) none of the shares will be sold in the Public
Offering for which EVEREN Securities would receive an underwriting fee of 7.0%;
(iii) Conversion expenses will total approximately $650,000. Actual expenses may
vary from this estimate, and the fees paid will depend upon the percentages and
total number of shares sold in the Subscription Offering, Direct Community
Offering and the Public Offering and other factors.
The pro forma consolidated net income of the Holding Company for the year
ended December 31, 1995 and the three months ended March 31, 1996 has been
calculated as if the Stock Conversion had been consummated at the beginning of
such period and the estimated net proceeds received by the Holding Company and
the Converted Savings Bank had been invested at 5.38% at the beginning of such
period, which represents the one-year United States Treasury Bill yield as of
March 31, 1996. While OTS regulations provide for the use of a yield
representing the arithmetic average of the weighted average yield earned by the
Savings Bank on its interest-earning assets and the rates paid on its deposits,
the Holding Company believes the U.S. Treasury Bill yield represents a more
realistic yield on the Savings Bank's investments. As discussed under "USE OF
PROCEEDS," the Holding Company expects to retain 50% of the net proceeds of the
Offerings from which it will fund the ESOP loan and the initial capitalization
of the De Novo Bank. Pro forma after-tax return of 3.3% and are used for both
the Holding Company and the Savings Bank for the year ended December 31, 1995,
after giving effect to an incremental combined federal and state tax rate of
38.0%. Historical and pro forma per share amounts have been calculated by
dividing historical and pro forma amounts by the indicated number of shares of
Common Stock. Per share amounts have been computed as if the Common Stock had
been outstanding at the beginning of the period or at the dates shown, but
without any adjustment of per share historical or pro forma stockholders' equity
to reflect the earnings on the estimated net proceeds.
The following table summarizes the historical net income and total equity
of the Savings Bank and the pro forma consolidated net income and stockholders'
equity of the Holding Company for the periods and at the dates indicated, based
on the minimum, midpoint and maximum of the Estimated Valuation Range and based
on a 15% increase in the maximum of the Estimated Valuation Range. No effect has
been given to (i) the shares to be reserved for issuance under the Holding
Company's Stock Option Plan, which is expected to be adopted by stockholders at
a meeting to be held no earlier than six months following consummation of the
Conversion; (ii) withdrawals from deposit accounts for the purpose of purchasing
Common Stock in the Conversion; (iii) the issuance of shares from authorized but
unissued shares to the MRP, which is expected to be adopted by stockholders at a
meeting to be held no earlier than six months following consummation of the
Conversion; or (iv) the establishment of a liquidation account for the benefit
of Eligible Account Holders and Supplemental Eligible Account Holders. See
"MANAGEMENT OF THE SAVINGS BANK -- Benefits -- 1996 Stock Option Plan" and "THE
CONVERSION -- Stock Pricing and Number of Shares Issued." Shares of Common Stock
may be purchased with funds on deposit at the Savings Bank, which will reduce
deposits by the amounts of such purchases. Accordingly, the net amount of funds
available for investment will be reduced to the extent shares are purchased with
funds on deposit.
THE FOLLOWING PRO FORMA INFORMATION MAY NOT BE REPRESENTATIVE OF THE
FINANCIAL EFFECTS OF THE CONVERSION AT THE DATE ON WHICH THE CONVERSION ACTUALLY
OCCURS AND SHOULD NOT BE TAKEN AS INDICATIVE OF FUTURE RESULTS OF OPERATIONS.
STOCKHOLDERS' EQUITY REPRESENTS THE DIFFERENCE BETWEEN THE STATED AMOUNTS OF
CONSOLIDATED ASSETS AND LIABILITIES OF THE HOLDING COMPANY COMPUTED IN
ACCORDANCE WITH GAAP. STOCKHOLDERS' EQUITY HAS NOT BEEN INCREASED OR DECREASED
TO REFLECT THE DIFFERENCE BETWEEN THE CARRYING VALUE OF LOANS AND OTHER ASSETS
AND MARKET VALUE. STOCKHOLDERS' EQUITY IS NOT INTENDED TO REPRESENT FAIR MARKET
VALUE NOR DOES IT REPRESENT AMOUNTS THAT WOULD BE AVAILABLE FOR DISTRIBUTION TO
STOCKHOLDERS IN THE EVENT OF LIQUIDATION.
18
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended December 31, 1995
---------------------------------------------------------------------------
Minimum of Midpoint of Maximum of 15% Above
Estimated Estimated Estimated Maximum of
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
--------- --------- --------- ---------------
1,317,500 1,550,000 1,782,500 2,049,875(1)
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds............................... $13,175 $15,500 $17,825 $20,499
Less:
Estimated Offering expenses.................. 650 650 650 650
------- ------- ------- -------
Estimated net proceeds....................... $12,525 $14,850 $17,175 $19,849
Less:
Common Stock acquired by ESOP................ (1,054) (1,240) (1,426) (1,640)
Common Stock to be acquired by MRP........... (527) (620) (713) (820)
------- ------- ------- -------
Estimated investable proceeds
to the Holding Company.................... $10,944 $12,990 $15,036 $17,389
======= ======= ======= =======
Consolidated net income:
Historical.................................. $ 1,001 $ 1,001 $ 1,001 $ 1,001
Pro forma income on net proceeds(2)......... 365 433 502 580
Pro forma ESOP adjustments(3)............... (44) (51) (59) (68)
Pro forma MRP adjustments(4)................ (65) (77) (88) (102)
------- ------- ------- -------
Pro forma(10)............................. $ 1,257 $ 1,306 $ 1,356 $ 1,411
======= ======= ======= =======
Consolidated net income per share(5)(6):
Historical.................................. $0.82 $0.70 $0.61 $0.53
Pro forma income on net proceeds............ 0.30 0.30 0.30 0.31
Pro forma ESOP adjustments(3)............... (0.04) (0.04) (0.04) (0.04)
Pro forma MRP adjustments(4)................ (0.05) (0.05) (0.05) (0.05)
----- ----- ----- -----
Pro forma(10)............................. $1.03 $0.91 $0.82 $0.75
===== ===== ===== =====
Consolidated stockholders' equity (book
value)(7):
Historical.................................. $11,712 $11,712 $11,712 $11,712
Estimated net proceeds...................... 12,525 14,850 17,175 19,849
Less:
Bad debt recapture.......................... (951) (951) (951) (951)
Common Stock acquired by ESOP............... (1,054) (1,240) (1,426) (1,640)
Common Stock to be acquired by MRP(4)....... (527) (620) (713) (820)
------- ------- ------- -------
Pro forma(7).............................. $21,705 $23,751 $25,797 $28,150
======= ======= ======= =======
Consolidated stockholders' equity per
share(6)(8):
Historical(6)............................... $8.89 $7.56 $6.57 $5.71
Estimated net proceeds...................... 9.51 9.58 9.64 9.68
Bad debt recapture.......................... (0.72) (0.61) (0.53) (0.46)
Common Stock acquired by ESOP............... (0.80) (0.80) (0.80) (0.80)
Common Stock to be acquired by MRP(4)....... (0.40) (0.40) (0.40) (0.40)
------- ------- ------- -------
Pro forma(11)............................. $ 16.48 $ 15.33 $ 14.48 $ 13.73
======= ======= ======= =======
Purchase Price as a percentage of pro forma
stockholders' equity per share.............. 60.68% 65.23% 69.06% 72.83%
===== ===== ===== =====
Purchase Price as a multiple of pro forma
net earnings per share...................... 9.71x 10.99x 12.20x 13.33x
===== ====== ====== ======
</TABLE>
(footnotes on following page)
19
<PAGE>
<TABLE>
<CAPTION>
At or For the Three Months Ended March 31, 1996
---------------------------------------------------------------------------
Minimum of Midpoint of Maximum of 15% Above
Estimated Estimated Estimated Maximum of
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
--------- --------- --------- ---------------
1,317,500 1,550,000 1,782,500 2,049,875(1)
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds...................................... $13,175 $15,500 $17,825 $20,499
Less:
Estimated Offering expenses......................... 650 650 650 650
------- ------- ------- -------
Estimated net proceeds.............................. $12,525 $14,850 $17,175 $19,849
Less:
Common Stock acquired by ESOP....................... (1,054) (1,240) (1,426) (1,640)
Common Stock to be acquired by MRP.................. (527) (620) (713) (820)
------- ------- ------- -------
Estimated investable proceeds
to the Holding Company........................... $10,944 $12,990 $15,036 $17,389
======= ======= ======= =======
Consolidated net income:
Historical......................................... $ 244 $ 244 $ 244 $ 244
Pro forma income on net proceeds(2)................ 91 108 125 145
Pro forma ESOP adjustments(3)...................... (11) (13) (15) (17)
Pro forma MRP adjustments(4)....................... (16) (19) (22) (25)
------- ------- ------- -------
Pro forma(10).................................... $ 308 $ 320 $ 332 $ 347
======= ======= ======= =======
Consolidated net income per share(5)(6):
Historical......................................... $0.20 $0.17 $0.15 $0.13
Pro forma income on net proceeds................... 0.07 0.08 0.08 0.08
Pro forma ESOP adjustments(3)...................... (0.01) (0.01) (0.01) (0.01)
Pro forma MRP adjustments(4)....................... (0.01) (0.01) (0.01) (0.01)
----- ----- ----- -----
Pro forma(10).................................... $0.25 $0.23 $0.21 $0.19
===== ===== ===== =====
Consolidated stockholders' equity (book value)(7):
Historical......................................... $11,870 $11,870 $11,870 $11,870
Estimated net proceeds............................. 12,525 14,850 17,175 19,849
Less:
Bad debt recapture................................. (951) (951) (951) (951)
Common Stock
acquired by ESOP.................................. (1,054) (1,240) (1,426) (1,640)
Common Stock to be acquired by MRP(4).............. (527) (620) (713) (820)
------- ------- ------- -------
Pro forma(7)..................................... $21,863 $23,909 $25,955 $28,308
======= ======= ======= =======
Consolidated stockholders' equity per share(6)(8):
Historical(6)...................................... $9.01 $7.66 $6.66 $5.79
Estimated net proceeds............................. 9.51 9.58 9.64 9.68
Bad debt recapture................................. (0.72) (0.61) (0.53) (0.46)
Common Stock acquired by ESOP...................... (0.80) (0.80) (0.80) (0.80)
Common Stock to be acquired by MRP(4).............. (0.40) (0.40) (0.40) (0.40)
------- ------- ------- -------
Pro forma(11).................................... $ 16.60 $ 15.43 $ 14.57 $ 13.81
======= ======= ======= =======
Purchase Price as a percentage of pro forma
stockholders' equity per share..................... 60.24% 64.81% 68.63% 72.41%
Purchase Price as a multiple of pro forma
net earnings per share............................. 10.00x 10.87x 11.90x 13.16x
</TABLE>
(footnotes on following page)
20
<PAGE>
________________
(1) Gives effect to the sale of an additional 267,375 shares in the Conversion,
which may be issued as a result of an increase in the pro forma market
value of the Holding Company and the Savings Bank as converted, without the
resolicitation of subscribers or any right of cancellation. The issuance of
such additional shares will be conditioned on a determination of the
independent appraiser that such issuance is compatible with its
determination of the estimated pro forma market value of the Holding
Company and the Savings Bank as converted. See "THE CONVERSION -- Stock
Pricing and Number of Shares to be Issued."
(2) No effect has been given to withdrawals from accounts for the purpose of
purchasing Common Stock in the Conversion.
(3) It is assumed that 8% of the shares of Common Stock offered in the Stock
Conversion will be purchased by the ESOP. The funds used to acquire such
shares will be borrowed by the ESOP (at an interest rate equal to 8.00% per
annum), from the net proceeds retained by the Holding Company. The amount
of this borrowing has been reflected as a reduction from gross proceeds to
determine estimated net proceeds. The Savings Bank intends to make
contributions to the ESOP in amounts at least equal to the principal and
interest requirement of the debt. As the debt is paid down, stockholders'
equity will be increased. The Converted Savings Bank's payment of the ESOP
debt is based upon equal installments of principal over a 15-year period,
assuming a combined federal and state tax rate of 38.0%. Interest income
earned by the Holding Company on the ESOP debt offsets the interest paid by
the Savings Bank on the ESOP loan. No reinvestment is assumed on proceeds
contributed to fund the ESOP. The ESOP expense reflects adoption of
Statement of Position ("SOP") 93-6, which will require recognition of
expense based upon shares committed to be released and the exclusion of
unallocated shares from earnings per share computations. The valuation of
shares committed to be released would be based upon the average market
value of the shares during the year, which, for purposes of this
calculation, was assumed to be equal to the $10.00 per share Purchase
Price. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Employee Stock
Ownership Plan."
(4 ) In calculating the pro forma effect of the MRP, it is assumed that the
required stockholder approval has been received, that the shares were
acquired by the MRP at the beginning of the period presented in open market
purchases at the Purchase Price and that 20% of the amount contributed was
an amortized expense during such period. The issuance of authorized but
unissued shares of the Common Stock instead of open market purchases would
dilute the voting interests of existing stockholders by approximately 3.85%
and pro forma net income per share would be $1.01, $0.89, $0.81 and $0.74
at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range for the year ended December 31, 1995,
respectively, and $0.25, $0.22, $0.20 and $0.18 at March 31, 1996,
respectively, and pro forma stockholders' equity per share would be $16.24,
$15.13, $14.31 and $13.59 at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Valuation Range at December 31, 1995,
respectively, and $16.35, $15.22, $14.39 and $13.67 for the three months
ended March 31, 1996, respectively. Shares issued under the MRP vest 20%
per year and, for purposes of this table, compensation expense is
recognized on a straight-line basis over each vesting period. In the event
the fair market value per share is greater than $10.00 per share on the
date of stockholder approval of the MRP, total MRP expense would increase.
The total estimated MRP expense was multiplied by 20% (the total percent of
shares for which expense is recognized in the first year) resulting in pre-
tax MRP expense of $105,400, $124,000, $142,600, and $163,990 at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range for the year ended December 31, 1995, respectively, and
$26,350, $31,000, $35,650 and $40,998 for the three months ended March 31,
1996, respectively. No effect has been given to the shares reserved for
issuance under the proposed Stock Option Plan. If stockholders approve the
Stock Option Plan following the Conversion, the Holding Company will have
reserved for issuance under the Stock Option Plan authorized but unissued
shares of Common Stock representing an amount of shares equal to 10% of the
shares sold in the Conversion. If all of the options were to be exercised
utilizing these authorized but unissued shares rather than treasury shares
(which could be acquired), the voting interests of existing stockholders
would be diluted by approximately 9.1%. See "MANAGEMENT OF THE SAVINGS
BANK -- Benefits -- 1996 Stock Option Plan" and "-- Management Recognition
Plan" and "RISK FACTORS -- Possible Dilutive Effect of Benefit
Programs."
21
<PAGE>
(5) Per share amounts are based upon shares outstanding of 1,217,370,
1,432,200, 1,647,030 and 1,894,085 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range for the year ended
December 31, 1995 and 1,213,418, 1,427,550, 1,641,683 and 1,887,935 for the
three months ended March 31, 1996, respectively, which includes the shares
of Common Stock sold in the Conversion less the number of shares assumed to
be held by the ESOP not committed to be released on a weighted-average
basis in the year following the Conversion.
(6) Historical per share amounts have been computed as if the shares of Common
Stock expected to be issued in the Conversion had been outstanding at the
beginning of the period or on the date shown, but without any adjustment of
historical net income or historical retained earnings to reflect the
investment of the estimated net proceeds of the sale of shares in the
Conversion, the additional ESOP expense or the proposed MRP expense, as
described above.
(7) "Book value" represents the difference between the stated amounts of the
Savings Bank's assets and liabilities. The amounts shown do not reflect the
liquidation account that will be established for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in the
Conversion, or the federal income tax consequences of the restoration to
income of the Savings Bank's special bad debt reserves for income tax
purposes, which would be required in the unlikely event of liquidation. See
"THE CONVERSION -- Effects of Conversion to Stock Form on Depositors and
Borrowers of the Savings Bank" and "TAXATION." The amounts shown for book
value do not represent fair market values or amounts distributable to
stockholders in the unlikely event of liquidation.
(8) Per share amounts are based upon shares outstanding of 1,317,500,
1,550,000, 1,782,500 and 2,049,875 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, respectively.
(9) Neither represents, nor is intended to represent, possible future price
appreciation or depreciation of the Common Stock.
(10) Pro forma consolidated net income per share would be ($0.28), ($0.21),
($0.15) and ($0.10) at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range for the year ended December 31,
1995 and ($1.07), ($0.89), ($0.77) and ($0.66) for the three months ended
March 31, 1996, respectively, assuming the implementation of the one-time
SAIF assessment discussed under "RISK FACTORS -- Recapitalization of SAIF
and its Impact on SAIF Premiums" and the bad debt recapture discussed under
"RISK FACTORS -- Bad Debt Recapture."
(11) The proposed one-time SAIF assessment and the bad debt reserve recapture
discussed in footnote (10) above would have an effect on pro forma
consolidated stockholders' equity per share. Assuming implementation of the
proposed SAIF assessment and the bad debt recapture, pro forma consolidated
stockholders' equity per share would be $15.99, $14.91, $14.12 and $13.42
at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range at December 31, 1995, respectively, and $16.11,
$15.01, $14.20 and $13.49 for three months ended March 31, 1996,
respectively.
22
<PAGE>
CHESTER SAVINGS BANK, FSB
STATEMENTS OF INCOME
The Statement of Income of Chester Savings Bank, FSB for the fiscal
year ended December 31, 1995 has been audited by KPMG Peat Marwick LLP, St.
Louis, Missouri, independent auditors, whose report thereon appears elsewhere in
this Prospectus. The Statements of Income of Chester Savings Bank, FSB for the
fiscal years ended December 31, 1994 and 1993 have been audited by Kerber, Eck &
Braeckel LLP, independent auditors, whose report thereon also appears elsewhere
in this Prospectus. These statements should be read in conjunction with the
Financial Statements and related Notes included elsewhere herein. The Statements
of Income for the three months ended March 31, 1996 and 1995 are unaudited, but
in the opinion of management, reflect all adjustments necessary for a fair
presentation of the results for such periods. All such adjustments are of a
normal recurring nature. The results for the three month period ended March 31,
1996 are not necessarily indicative of the results of the Savings Bank that may
be expected for the entire year.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------- -------------------------------
1996 1995 1995 1994 1993
---- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Interest income:
Loans receivable......................................... $ 1,244,178 $ 1,231,202 $5,026,068 $4,831,691 $5,542,355
Mortgage-backed securities............................... 263,074 229,763 955,249 770,264 750,997
Investment securities.................................... 520,886 568,892 2,139,821 1,821,823 1,418,384
Interest-bearing deposits and federal funds sold......... 241,241 204,587 874,839 1,230,257 1,372,017
Other.................................................... 10,662 9,173 39,064 41,890 48,043
---------- ---------- ---------- ---------- ----------
Total interest income................................ 2,280,041 2,243,617 9,035,041 8,695,925 9,131,796
---------- ---------- ---------- ---------- ----------
Interest expense:
Savings deposits......................................... 1,151,227 1,328,471 5,279,535 5,089,295 5,526,076
Securities sold under agreements to repurchase........... 183,336 -- 194,144 -- --
---------- ---------- ---------- ---------- ----------
Total interest expense............................... 1,334,563 1,328,471 5,473,679 5,089,295 5,526,076
---------- ---------- ---------- ---------- ----------
Net interest income.................................. 945,478 915,146 3,561,362 3,606,630 3,605,720
Provision for loan losses................................. 7,500 (2,300) 161,319 69,309 29,627
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses.......................... 937,978 917,446 3,400,043 3,537,321 3,576,093
---------- ---------- ---------- ---------- ----------
Noninterest income:
Late charges and other fees.............................. 26,852 22,566 102,363 81,412 92,425
Loss on sale of certificates of deposit.................. (53,714) -- -- -- --
Gain on sale of investment securities, net............... 6,837 47,447 52,497 -- --
Gain on sale of mortgage-backed
securities, net........................................ -- -- 45,919 -- --
Other.................................................... 16,359 7,706 37,376 32,835 36,267
---------- ---------- ---------- ---------- ----------
Total noninterest income............................. (3,666) 77,719 238,155 114,247 128,692
---------- ---------- ---------- ---------- ----------
Noninterest expense:
General and administrative:
Compensation and employee benefits...................... 327,266 280,773 1,095,268 1,172,522 1,137,737
Occupancy............................................... 70,651 70,310 293,634 300,908 282,337
Data processing......................................... 41,041 40,646 166,809 158,242 156,522
Advertising............................................. 10,504 11,158 54,576 60,303 47,991
Federal insurance premiums.............................. 61,732 74,978 294,762 300,982 249,784
Other................................................... 102,198 94,590 415,255 414,451 384,292
---------- ---------- ---------- ---------- ----------
Total general and administrative..................... 613,392 572,455 2,320,304 2,407,408 2,258,663
(Gain) loss on real estate acquired by foreclosure, net.. 228 68 17,994 (33,626) 10,834
Provision for losses on real estate
acquired by foreclosure................................. -- -- -- -- 7,500
---------- ---------- ---------- ---------- ----------
Total noninterest expense............................ 613,620 572,523 2,338,298 2,373,782 2,276,997
---------- ---------- ---------- ---------- ----------
Income before income tax expense
and cumulative effect of change
in accounting principle............................ 320,692 422,642 1,299,900 1,277,786 1,427,788
Income tax expense........................................ 77,000 109,000 299,000 284,742 306,661
---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
change in accounting principle...................... 243,692 313,642 1,000,900 993,044 1,121,127
Cumulative effect of change in accounting principle....... -- -- -- -- (227,097)
---------- ---------- ---------- ---------- ----------
Net income........................................... $ 243,692 $ 313,642 $1,000,900 $ 993,044 $ 894,030
========== ========== ========== ========== ==========
</TABLE>
See accompanying Notes to Financial Statements.
23
<PAGE>
FINANCIAL CONDITION AT MARCH 31, 1996 COMPARED TO DECEMBER 31, 1995
ASSETS. The Savings Bank's total assets increased by $2.0 million, or
1.5%, to $136.8 million at March 31, 1996 from $134.8 million at December 31,
1995. The increase in the Savings Bank's asset size resulted primarily from a
$1.8 million increase in savings deposits. The funds received from the
additional deposits and the decline in certificates of deposit and loans
receivable of $5.6 million and $1.3, respectively, were used to increase
investment securities and mortgage-backed securities by $7.3 million and $1.5
million, respectively.
Loans receivable decreased $1.3 million, or 2.2%, to $55.8 million at March
31, 1996 from $57.0 million at December 31, 1995. Loan originations for the
three months ended March 31, 1996 totaled $3.4 million while principal
repayments totaled $4.6 million. Although loan originations remained relatively
consistent with the comparable period in 1995, principal repayments increased by
$1.0 million to $4.6 million for the three months ended March 31, 1996 from $3.6
million for the three months ended March 31, 1995.
Mortgage-backed securities at March 31, 1996 were $16.9 million compared to
$15.4 million at December 31, 1995. The $1.5 million, or 9.7%, increase in 1996
resulted from $2.0 million of mortgage-backed security purchases exceeding
$463,000 of principal repayments.
Investment securities increased $7.3 million, or 18.9%, to $45.6 million at
March 31, 1996 from $38.3 million at December 31, 1995. The increase in 1996 was
attributable to the $28.8 million of investment security purchases exceeding the
$21.4 million of maturities and sales of investment securities.
Certificates of deposit, federal funds sold, interest-bearing deposits, and
cash, on a combined basis, decreased $6.0 million, or 29.3%, to $14.4 million at
March 31, 1996 from $20.4 million at December 31, 1995. The decrease in 1996 was
due to the $5.6 million decline in certificates of deposit from December 31,
1995 to March 31, 1996. Management determined in 1995 to reinvest the proceeds
from certificate of deposit maturities and sales into other types of
investments.
LIABILITIES. Savings deposits increased $1.8 million, or 1.7%, to $108.5
million at March 31, 1996 from $106.7 million at December 31, 1995. The increase
in the deposit base was mainly due to the $1.9 million of additional deposits
made during the three months ended March 31, 1996 by Gilster-Mary Lee.
Glister-Mary Lee had savings deposits of $6.2 million and $4.3 million with the
Savings Bank at March 31, 1996 and December 31, 1995, respectively. In addition,
Gilster-Mary Lee had $15.0 million of reverse repurchase agreements at March 31,
1996. Gilster-Mary Lee has notified the Savings Bank of its intent to draw down
the balance of such funds by at least $10.0 million in the short-term and
maintain much smaller balances in the future. The loss of funds is expected to
impair earnings as there is no intent to replace the savings deposits or reverse
repurchase agreements with other wholesale funds. At March 31, 1996, the Savings
Bank maintained an adequate liquidity level to cover the withdrawal of such
deposits, the reduction of such borrowings, or both.
FINANCIAL CONDITION AT DECEMBER 31, 1995 COMPARED TO DECEMBER 31, 1994
ASSETS. The Savings Bank's total assets decreased by $7.0 million, or
4.9%, to $134.8 million at December 31, 1995 from $141.8 million at December 31,
1994. The decline in the Savings Bank's asset size primarily resulted from an
$8.8 million reduction in the investment in certificates of deposit, the
proceeds of which were used to fund savings withdrawals in excess of those
converted to reverse repurchase agreements which reflected management's
determination to compete less aggressively on rates, thereby permitting some
deposit runoff.
Loans receivable decreased $1.1 million, or 2.0%, to $57.0 million at
December 31, 1995 from $58.2 million at December 31, 1994. Loan originations for
1995 totaled $15.3 million while principal repayments totaled $16.1 million.
Although principal repayments remained relatively consistent with the 1994
amount, loan originations increased $2.2 million in 1995, compared to 1994
originations.
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Mortgage-backed securities at December 31, 1995 were $15.4 million compared
to $13.1 million at December 31, 1994. The $2.3 million, or 17.3%, increase in
1995 resulted from $6.2 million of mortgage-backed security purchases exceeding
$1.6 million of principal repayments and $2.4 million of sales.
Investment securities decreased $2.8 million, or 6.7%, to $38.3 million at
December 31, 1995 from $41.1 million at December 31, 1994. The decrease in 1995
was attributable to the $45.6 million of maturities and sales of investment
securities exceeding the $42.7 million of investment security purchases.
Certificates of deposit, federal funds sold, interest-bearing deposits, and
cash, on a combined basis, decreased $5.4 million, or 20.9%, to $20.4 million at
December 31, 1995 from $25.8 million at December 31, 1994. The decrease in 1995
was the result of an $8.8 million decline in certificates of deposit from 1994
to 1995. Management determined in 1995 to reinvest the proceeds from certificate
of deposit maturities into other types of investments. Also, the Savings Bank
needed to use its excess liquidity to fund the $8.0 million net outflow of
savings deposits.
LIABILITIES. Savings deposits decreased $23.0 million, or 17.7%, to $106.7
million at December 31, 1995 from $129.7 million at December 31, 1994. The
declining deposit base in 1995 was partially due to the conversion of $15.0
million of deposit liabilities into reverse repurchase agreements and the
remaining $8.0 million reduction reflected management's determination to compete
less aggressively on rates, thereby permitting some deposit runoff.
RESULTS OF OPERATIONS
The Savings Bank's operating results depend primarily on the level of net
interest income, which is the difference between the interest income earned on
its interest-earning assets (loans, mortgage-backed securities, investment
securities, federal funds sold, Federal Home Loan Bank Stock, and interest-
bearing deposits) and the interest expense paid on its interest-bearing
liabilities (deposits and borrowings). Operating results are also significantly
affected by provisions for losses on loans, noninterest income and noninterest
expense. Each of these factors is significantly affected not only by the Savings
Bank's policies, but, to varying degrees, by general economic and competitive
conditions and by policies of federal regulatory authorities.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
1995
NET INCOME. The Savings Bank's net income for the three months ended March
31, 1996 was $244,000 compared to $314,000 for the three months ended March 31,
1995. The fluctuation in net income was positively affected by a $30,000
increase in net interest income and was negatively affected by an $81,000
decrease in noninterest income and a $41,000 increase in noninterest expense.
NET INTEREST INCOME. Net interest income totaled $945,000 for the three
months ended March 31, 1996 compared to $915,000 for the three months ended
March 31, 1995. The $30,000, or 3.3%, increase in net interest income was
primarily the result of an increase in the Savings Bank's interest rate spread
from 2.49% in 1995 to 2.63% in 1996. The increase in 1996 resulted from a more
significant increase in the average yield on loans as compared to the increase
in the average cost of interest-bearing liabilities.
INTEREST INCOME. Interest income totaled $2.3 million for the three months
ended March 31, 1996 compared to $2.2 million for the three months ended March
31, 1995. The $36,000, or 1.6%, increase in interest income resulted primarily
from an increase in the average yield on interest-earning assets to 6.98% in
1996 from 6.71% in 1995. This increase was partially offset by a $3.0 million,
or 2.2%, decline in average interest-earning assets from $133.7 million in 1995
to $130.7 million in 1996. The increase in average yield on interest-earning
assets was primarily the result of interest rates on adjustable-rate mortgages
repricing upward and the impact of higher short-term interest rates during the
first quarter of 1996.
Interest income earned on loans receivable increased $13,000, or 1.1%, for
the three months ended March 31, 1996. This fluctuation was mainly due to the
increase in the average yield on loans receivable from 8.49% in
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1995 to 8.87% in 1996. This improvement in yield was partially offset by a $1.9
million, or 3.2%, decline in the average balance of loans receivable. The higher
yield in 1996 was primarily due to the impact of adjustable-rate mortgages that
repriced upward and the continued investment in higher yielding consumer loans.
Interest income on mortgage-backed securities increased $33,000, or 14.5%,
to $263,000 for the three months ended March 31, 1996 from $230,000 for the
three months ended March 31, 1995. This increase is a result of the average
balance of mortgage-backed securities increasing from $12.8 million in 1995 to
$15.8 million in 1996. The $3.0 million, or 23.7%, increase in the average
balance was attributable to $2.0 million and $6.2 million of mortgage-backed
security purchases made during the three months ended March 31, 1996 and the
year ended December 31, 1995, respectively. These purchases were well in excess
of repayment and sales activity. The increase in the average balance of
mortgage-backed securities was partially offset by the decline in the average
yield on mortgage-backed securities from 7.20% for the three months ended March
31, 1995 to 6.66% for the three months ended March 31, 1996. The average yield
on mortgage-backed securities decreased due to the impact of repayments of
higher yielding mortgage-backed securities that occurred in 1995 and 1994, and
the purchase of mortgage-backed securities with lower yields.
Interest earned on investment securities was $521,000 for the three months
ended March 31, 1996 compared to $569,000 for the three months ended March 31,
1995. The $48,000, or 8.4%, decrease was the result of a $3.9 million, or 8.5%,
decline in the average balance of investments. The reduction in the average
balance resulted from the continued liquidation of the Savings Bank's
certificate of deposit portfolio and reinvestment of the proceeds from
maturities and sales into mortgage-backed securities and other investment
securities. The certificates of deposit portfolio has declined $6.4 million, or
60.6%, since March 31, 1995. The average yield on investment securities remained
relatively constant at 5.15% and 5.11% for the three months ended March 31, 1996
and 1995, respectively.
Interest income on interest-bearing deposits increased $37,000, or 17.9%,
to $241,000 for the three months ended March 31, 1996 compared to $205,000 for
the three months ended March 31, 1995. This fluctuation was attributable to an
increase in the average yield on interest-bearing deposits from 4.63% in 1995 to
5.54% in 1996. The increase in average yield on interest-bearing deposits was
primarily the result of higher short-term interest rates during the first
quarter of 1996. This increase was partially offset by a decrease in the average
balance of interest-bearing deposits from $17.7 million for the three months
ended March 31, 1995 to $17.4 million for the three months ended March 31, 1996.
INTEREST EXPENSE. Interest expense on savings deposits decreased $177,000,
or 13.3%, to $1.1 million for the three months ended March 31, 1996 from $1.3
million for the three months ended March 31, 1995. This decrease resulted from
the $18.3 million, or 14.5%, reduction in the average balance of deposits from
$126.0 million in 1995 to $107.8 million in 1996. The decline in average
deposits was partially due to the conversion of $15.0 million of deposit
liabilities into reverse repurchase agreements during October 1995. The reverse
repurchase agreements were still outstanding during the three months ended March
31, 1996 and had interest expense of $183,000. The remaining decrease in average
deposits was attributable to increased competition in the Savings Bank's
marketplace and also reflected management's decision to compete less
aggressively on deposit rates paid. The decrease in the average balance of
deposits was partially offset by a slight increase in the average cost of
deposits from 4.22% in 1995 to 4.28% in 1996.
PROVISION FOR LOAN LOSSES. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and the general economy. Such evaluation
considers numerous factors including general economic conditions, loan portfolio
composition, prior loss experience, the estimated fair value of the underlying
collateral, and other factors that warrant recognition in providing for an
adequate loan loss allowance.
During the three months ended March 31, 1996, the Savings Bank's provision
for loan losses was $7,500 compared to a negative provision of $2,300 for the
three months ended March 31, 1995. The negative provision in 1995 resulted from
a decline in the level of credit card loans at March 31, 1995.
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The Savings Bank's allowance for loan losses was $396,000, or .71%, of
loans outstanding at March 31, 1996, compared to $390,000, or .68%, of loans
outstanding at December 31, 1995. The Savings Bank's level of net loans
charged-off during the three months ended March 31, 1996 was negligible. Based
on current levels in the allowance for loan losses in relation to loans
receivable and delinquent loans, management's continued effort to favorably
resolve problem loan situations, and the low level of chargeoffs in recent
years, management believes the allowance was adequate at March 31, 1996.
The breakdown of general loss allowances and specific loss allowances is
made for regulatory accounting purposes only. General loan loss allowances are
added back to capital to the extent permitted in computing risk-based capital.
Both general and specific loss allowances are charged to expense. The financial
statements of the Savings Bank are prepared in accordance with generally
accepted accounting principles (GAAP) and, accordingly, provisions for loan
losses are based on management's assessment of the factors set forth above. The
Savings Bank regularly reviews its loan portfolio, including problem loans, to
determine whether any loans are impaired, require classification and/or the
establishment of appropriate reserves. Management believes it has established
its existing allowance for loan losses in accordance with GAAP, however, future
additions may be necessary if economic conditions or other circumstances differ
substantially from the assumptions used in making the initial determination.
NONINTEREST INCOME. The Savings Bank's noninterest income decreased
$81,000, or 104.7%, from $78,000 for the three months ended March 31, 1995 to
$(4,000) for the three months ended March 31, 1996. This decrease resulted from
a $54,000 loss on the sale of certificates of deposit and a $41,000 decline in
gains recognized from the sale of investment securities. Proceeds from the sale
of investment securities in 1996 and 1995 totaled $3.0 million and $4.0 million,
respectively. The sales of investment securities for both periods consisted of
U.S. government obligations that were classified as available for sale. The $4.5
million of proceeds from the sale of certificates of deposit during the three
months ended March 31, 1996 resulted from management's decision to liquidate the
certificate of deposit portfolio with one of its brokers due to concerns related
to the broker's management of the portfolio. The Savings Bank also made the
decision in 1995 to not reinvest in certificates of deposit as they matured. The
proceeds from the maturity and sale of certificates of deposit were invested in
mortgage-backed securities and other investment securities.
NONINTEREST EXPENSE. Noninterest expense was $614,000 for the three months
ended March 31, 1996 and $573,000 for the three months ended March 31, 1995. The
$41,000, or 7.2%, increase resulted from a $46,000 increase in compensation and
employee benefits. The increase in compensation and employee benefits was mainly
attributable to the adoption in January 1996 of a retirement plan for members of
the Board of Directors who reach director emeritus status. During the three
months ended March 31, 1996, $52,000 of expense related to the plan was
recognized. During December 1995, the plan was funded through the purchase of
life insurance contracts on the directors. The cash surrender value of the life
insurance contracts totaled $182,000 as of March 31, 1996 and is included in
other assets in the balance sheet. Compensation and benefits can be expected to
increase following consummation of the Conversion as a result of the
implementation of the ESOP, MRP and other benefit plans. See "PRO FORMA DATA"
and "MANAGEMENT OF THE SAVINGS BANK." In addition, non-interest expense is also
expected to increase as a result of the enactment of proposed legislation that
would levy a one-time insurance assessment on all SAIF- member institutions. See
"RISK FACTORS -- Recapitalization of SAIF and its Impact on SAIF Premiums."
INCOME TAX EXPENSE. The Savings Bank's effective tax rate for the three
months ended March 31, 1996 and 1995 was 24.0% and 25.8%, respectively. The
effective tax rate for each period was below the statutory federal rate of 34%
due to the Savings Bank's significant investment in tax exempt securities.
Income tax expense is also expected to increase in future periods as a result of
the recapture of the Savings Bank's bad debt reserve as a result of the Bank
Conversion. See "RISK FACTORS -- Bad Debt Recapture."
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COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
NET INTEREST INCOME. Net interest income totaled $3.56 million for 1995
compared to $3.61 million for 1994. The $45,000, or 1.3%, decrease in net
interest income was primarily the result of a decline in the Savings Bank's
interest rate spread from 2.45% in 1994 to 2.43% in 1995. Although the Savings
Bank's interest rate spread declined, net interest income benefitted from an
increase in the ratio of average interest-earning assets to average interest-
bearing liabilities from 104.91% in 1994 to 106.48% in 1995.
INTEREST INCOME. Interest income totaled $9.0 million for 1995 compared to
$8.7 million for 1994. The $339,000, or 3.9%, increase in interest income
resulted primarily from an increase in the average yield on interest-earning
assets to 6.84% in 1995 from 6.33% in 1994. This increase was partially offset
by a $5.4 million, or 3.9%, decline in average interest-earning assets from
$137.5 million in 1994 to $132.1 million in 1995. The increase in average yield
on interest-earning assets was primarily the result of market interest rates
which began rising in 1994 and continued through the first part of 1995 thus
resulting in upward adjustments in rates on the Savings Bank's ARMs and enabling
the Savings Bank to originate loans and purchase investments at higher rates.
Interest income earned on loans receivable increased $194,000, or 4.0%, to
$5.0 million in 1995 from $4.8 million in 1994. This fluctuation was mainly due
to the increase in the average yield on loans receivable from 8.23% in 1994 to
8.77% in 1995. This improvement in yield was partially offset by a $1.4 million,
or 2.3%, decline in the average balance of loans receivable. The higher yield in
1995 was primarily due to the impact of rising interest rates on adjustable-rate
mortgages that repriced during 1994 and 1995 and the continued increase in the
level of higher yielding consumer loans.
Interest income on mortgage-backed securities increased $185,000, or 24.0%,
to $955,000 in 1995 from $770,000 in 1994. This increase is a result of the
average balance of mortgage-backed securities increasing from $11.0 million in
1994 to $13.6 million in 1995. This $2.6 million, or 24.0%, increase in the
average balance was attributable to $6.2 million and $8.1 million of mortgage-
backed securities purchases made in 1995 and 1994, respectively, which exceeded
repayment and sales activity. The average yield on mortgage-backed securities
remained constant at 7.02% for both 1995 and 1994.
Interest earned on investment securities was $2.1 million in 1995 compared
to $1.8 million in 1994. The $318,000, or 17.5%, increase was the result of an
increase in the average yield from 4.49% in 1994 to 5.08% in 1995, coupled with
a 3.2% increase in the average balance of investments. The increased yield in
1995 was due to the replacement of lower yielding investments that matured
during 1994 and 1995 with purchases of higher yielding investment securities.
Interest income on interest-bearing deposits decreased $355,000, or 28.9%,
to $875,000 in 1995 from $1.2 million in 1994. This decline was primarily
attributable to the average balance of interest-bearing deposits decreasing $8.0
million, or 30.3%, to $18.3 million in 1995 from $26.3 million in 1994. The
decline in the average balance was mainly due to the reinvestment of proceeds
from certificate of deposit maturities into higher yielding investment
securities and mortgage-backed securities. This decrease was partially offset by
an increase in the average yield on interest-bearing deposits from 4.68% in 1994
to 4.78% in 1995.
INTEREST EXPENSE. Interest expense increased $384,000 or, 7.6%, to $5.5
million in 1995 from $5.1 million in 1994. This increase resulted from the net
impact of an increase in the average cost of deposits from 3.88% in 1994 to
4.39% in 1995, offset by an 8.2% decline in the average balance of deposits. The
increase in the average cost of deposits reflected the impact of rising interest
rates which began in 1994 and continued through the first part of 1995. The
decline in average deposits was partially due to the conversion of $15.0 million
of deposit liabilities into reverse repurchase agreements during October 1995.
The reverse repurchase agreements were outstanding only in 1995 and had interest
expense of $194,000. The remaining decrease in average deposits was attributable
to increased competition in the Savings Bank's marketplace and also reflected
management's decision to compete less aggressively on rates, thereby permitting
some deposit runoff.
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PROVISION FOR LOAN LOSSES. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in the loan portfolio and the general economy. Such evaluation
considers numerous factors including general economic conditions, loan portfolio
composition, prior loss experience, the estimated fair value of the underlying
collateral, and other factors that warrant recognition in providing for an
adequate loan loss allowance.
During 1995, the Savings Bank's provision for loan losses was $161,000
compared to $69,000 for 1994. Although loan quality is high and recent loss
experience is minimal, management determined that an increase in the level of
the allowance for loan losses was necessary based on its analysis of various
relevant factors, including: the composition of the Savings Bank's consumer loan
portfolio; historical loss experience and the level of the allowance for loan
losses to outstanding loans of institutions in the Savings Bank's peer group;
delinquency trends; and, the prevailing and projected economic conditions of the
Savings Bank's market area.
The Savings Bank's allowance for loan losses was $390,000, or 0.68% of
loans outstanding at December 31, 1995, compared to $246,000, or 0.42% of loans
outstanding at December 31, 1994. The Savings Bank's level of net loans charged
off as a percentage of average loans receivable was 0.03% and 0.05% for 1995 and
1994, respectively. Based on current levels in the allowance for loan losses in
relation to loans receivable and delinquent loans, management's continued effort
to favorably resolve problem loan situations, and the low level of charge-offs
in recent years, management believes the allowance is adequate at December 31,
1995.
The breakdown of general loss allowances and specific loss allowances is
made for regulatory accounting purposes only. General loan loss allowances are
added back to capital to the extent permitted in computing risk-based capital.
Both general and specific loss allowances are charged to expense. The financial
statements of the Savings Bank are prepared in accordance with generally
accepted accounting principles ("GAAP") and, accordingly, provisions for loan
losses are based on management's assessment of the factors set forth above. The
Savings Bank regularly reviews its loan portfolio, including problem loans, to
determine whether any loans are impaired, require classification and/or the
establishment of appropriate reserves. Management believes it has established
its existing allowance for loan losses in accordance with GAAP, however, future
reserves may be necessary if economic conditions or other circumstances differ
substantially from the assumptions used in making the initial determination.
NONINTEREST INCOME. The Savings Bank's noninterest income increased
$124,000, or 108.5%, from $114,000 in 1994 to $238,000 in 1995. This increase
resulted from a $21,000 increase in late charges and other fees and $52,000 and
$46,000 of gains recognized from the sale of investment securities and mortgage-
backed securities, respectively. Proceeds from the sale of investment securities
and mortgage-backed securities totaled $29.4 million and $2.4 million,
respectively. There were no sales of investment securities or mortgage-backed
securities in 1994. In accordance with the adoption of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115") in 1994, the Savings Bank classified all
investment securities and mortgage-backed securities as held to maturity. On
November 15, 1995, the Financial Accounting Standards Board ("FASB") issued a
special report, "A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities" ("Special Report"), that
allowed, from the date of issuance of the Special Report through December 31,
1995, all entities a one-time opportunity to reconsider their ability and intent
to hold securities to maturity and transfer securities from held to maturity
without "tainting" the remainder held to maturity securities. As a result of the
Special Report, management reconsidered the classification of held to maturity
securities and during December 1995 transferred $7.6 million and $2.2 million of
investment securities and mortgage-backed securities, respectively, to available
for sale. The investment securities transferred were comprised of U.S. agency
securities and mortgage-backed bonds.
The proceeds from sales of investment securities in 1995 consisted of $7.5
million of U.S. agency securities and mortgage-backed bonds transferred to
available for sale in conjunction with the provisions of the Special Report, as
discussed above, and $21.9 million of U.S. government obligations that were sold
prior to the issuance of the Special Report. The U.S. government obligations
sold consisted of $18.0 million of securities purchased during 1995 and
classified as available for sale and $3.9 million of securities purchased in
1994 that were
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classified as held to maturity at the end of 1994. Management reclassified all
U.S. Government obligations classified as held to maturity at December 31, 1994
to available for sale in 1995 due to the change in intent that was established
with the initial purchase in 1995 of U.S. Government obligations that were
classified as available for sale. The amount of U.S. government obligations
transferred to available for sale in 1995 was $11.7 million.
The proceeds from the sale of mortgage-backed securities in 1995 consisted
of securities purchased prior to 1995 that were classified as held to maturity
at December 31, 1994. The sales of these mortgage-backed securities were in
effect maturities as the sales occurred only after a substantial portion of the
original principal outstanding had been collected.
Though the Savings Bank recorded gains from sales of investment and
mortgage-backed securities in 1995, there can be no assurance that such gains,
from the available for sale portfolio, will continue or that losses will not
occur in future periods.
NONINTEREST EXPENSE. Noninterest expense was $2.3 million for 1995 and
$2.4 million for 1994. The $35,000, or 1.5%, decrease primarily represented the
net result of a $77,000 decrease in compensation and employee benefits, offset
by a $52,000 reduction in gains on real estate acquired by foreclosure. The
decrease in compensation and employee benefits was mainly the result of a
$100,000 decline in bonuses paid to employees in 1995 as compared to 1994.
Compensation and benefits can be expected to increase following consummation of
the Conversion as a result of the implementation of the ESOP, MRP, Directors
Emeritus Plan, and other benefit plans. See "PRO FORMA DATA" and "MANAGEMENT OF
THE SAVINGS BANK -- Benefits." The fluctuation in gain/loss on real estate
acquired by foreclosure was due primarily to the 1994 balance including the
impact of a $43,000 gain on sale of one foreclosed property that had been
carried as real estate owned for a number of years.
INCOME TAX EXPENSE. The Savings Bank's effective tax rate for 1995 and
1994 was 23.0% and 22.3%, respectively. The effective tax rate for each year was
below the statutory federal rate of 34% due to the Savings Bank's significant
investment in tax exempt securities.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
NET INCOME. The Savings Bank's net income for 1994 was $993,000 compared
to $894,000 for 1993. Net income in 1993 included a $227,000 reduction for the
cumulative effect of a change in accounting principle which resulted from the
adoption of SFAS 109, "Accounting for Income Taxes." The fluctuation in net
income also reflected an increase in the provision for loan losses and
noninterest expense of $40,000 and $97,000, respectively.
NET INTEREST INCOME. Net interest income totaled $3.61 million for both
1994 and 1993. The consistency of net interest income is due to the interest
rate spread being constant at approximately 2.45% for both years. In addition,
the ratio of average interest-earning assets to average interest-bearing
liabilities remained relatively steady at 104.91% for 1994 and 104.66% for 1993.
The offsetting volume and rate effects that combined to result in these stable
ratios are set forth below.
INTEREST INCOME. Interest income was $8.7 million for 1994 compared to
$9.1 million for 1993. The $436,000, or 4.8%, decrease in interest income
resulted primarily from a decrease in the average yield on interest-earning
assets to 6.33% in 1994 from 6.70% in 1993. This decrease was partially offset
by a $1.3 million, or 0.9%, increase in average interest-earning assets from
$136.2 million in 1993 to $137.5 million in 1994. The decrease in average yield
on interest-earning assets was primarily the result of the lagging impact of a
declining interest rate environment that existed during 1993 and continued for
the first quarter of 1994. Another factor was the reinvestment of relatively
high levels of loan repayments that occurred due to refinancing in 1993 and the
first quarter of 1994 into lower yielding investments.
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Interest income earned on loans receivable decreased $711,000, or 12.8%, to
$4.8 million in 1994 from $5.5 million in 1993. This fluctuation was the result
of a decrease in the average yield on loans receivable from 8.76% in 1993 to
8.23% in 1994, coupled with the $4.6 million, or 7.2%, decline in the average
balance of loans receivable. The lower yield in 1994 was primarily the result of
the impact of lower interest rates on adjustable-rate mortgages that repriced
during 1993 and the first quarter of 1994 and the significant level of
prepayments associated with higher yielding loans that occurred during 1993 and
the first part of 1994.
Interest income on the mortgage-backed securities increased $19,000, or
2.6%, to $770,000 in 1994 from $751,000 in 1993. This increase is the result of
an increase in the average balance of mortgage-backed securities from $8.9
million in 1993 to $11.0 million in 1995, offset by a decline in the average
yield on mortgage-backed securities from 8.41% in 1993 to 7.02% in 1994. The
$2.0 million, or 22.8%, increase in the average balance was attributable to $8.1
million of mortgage-backed security purchases made in 1994. Proceeds from loan
repayments were used to increase the investment in mortgage-backed securities.
The average yield on mortgage-backed securities decreased due to the impact of
repayments of higher yielding mortgage-backed securities that occurred in 1994
and 1993, and the purchase in 1994 of mortgage-backed securities with lower
yields.
Interest earned on investment securities was $1.8 million in 1994 compared
to $1.4 million in 1993. The $403,000, or 28.4%, increase was the result of an
increase in the average yield from 4.01% in 1993 to 4.49% in 1994, coupled with
a 13.5% increase in the average balance of investments. The increased yield in
1994 was due to the replacement of lower yielding investments that matured
during 1993 and 1994 with purchases of higher yielding investment securities.
Proceeds from loan repayments were also used to increase the level of investment
securities.
Interest income on interest-bearing deposits decreased $142,000, or 10.3%,
to $1.2 million in 1994 from $1.4 million in 1993. This decline was attributable
to the average balance of interest-bearing deposits decreasing $1.1 million, or
4.2%, to $26.3 million in 1994 from $27.4 million in 1993, coupled with a
decrease in the average yield on interest-bearing deposits from 5.00% in 1993 to
4.68% in 1994.
INTEREST EXPENSE. Interest expense decreased $437,000 or, 7.9%, to $5.1
million in 1994 from $5.5 million in 1993. This decrease was due to the decline
in the average cost of deposits from 4.25% in 1993 to 3.88% in 1994. The level
of average deposits was relatively consistent from 1993 to 1994. The decrease in
the average cost of deposits resulted from the continued effect of declining
market rates of interest which permitted lowering of deposit rates that occurred
throughout 1993 and continued through the first part of 1994.
PROVISION FOR LOAN LOSSES. The Savings Bank's provision for loan losses
was $69,000 in 1994 compared to $30,000 in 1993. The increased provision in 1994
was made by management to cover the loss exposure related to a larger credit
card portfolio.
NONINTEREST INCOME. The Savings Bank's noninterest income decreased
$14,000, or 11.2%, from $129,000 in 1993 to $114,000 in 1994. This decrease
resulted primarily from an $11,000 decline in late charges and other fees.
NONINTEREST EXPENSE. Noninterest expense was $2.4 million in 1994 and $2.3
million in 1993. The $97,000, or 4.3%, increase primarily represented the net
result of increased expenses for all general and administrative expense line
items, offset by a decrease in losses on real estate acquired by foreclosure.
The increases in compensation and employee benefits, occupancy expense, data
processing, advertising and other noninterest expense were relatively minimal
and not unusual. The increase in federal insurance premiums resulted from a
reduced insurance assessment in 1993 by the FDIC for the effect of the final
secondary reserve credit distribution. The fluctuation in the gain/loss on real
estate acquired by foreclosure was due primarily to the 1994 balance including
the impact of a $43,000 gain on sale of one foreclosed property that had been
carried as real estate owned for a number of years.
31
<PAGE>
INCOME TAX EXPENSE. The Savings Bank's effective tax rate for 1994 and
1993 was 22.3% and 21.5%, respectively. The effective tax rate for each year was
below the statutory federal rate of 34% due to the Savings Bank's significant
investment in tax exempt securities.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. On January 1, 1993,
the Savings Bank adopted SFAS No. 109, "Accounting for Income Taxes" ("SFAS
109") which resulted in a decrease in net income of $227,000 for the cumulative
effect of a change in accounting principle. The net deferred tax liability that
was established as a result of the adoption of SFAS 109 represents future tax
expenses derived from temporary differences between the book carrying value and
tax basis of assets and liabilities which had not been previously recognized.
32
<PAGE>
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS/COST
The following table sets forth certain information for the periods
indicated regarding average balances of assets and liabilities as well as the
total dollar amounts of interest income from average interest-earning assets and
interest expense on average interest-bearing liabilities and average yields and
costs. Yields and costs are derived by dividing income or expense by the average
monthly balance of assets or liabilities, respectively, for the periods
presented. Average balances are derived from month-end balances instead of daily
balances, which management believes has not caused any material difference in
the information presented.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1996 1995
-------------------------- ---------------------------
At Average Average
March 31, Average Yield/ Average Yield/
1996 Balance Interest Cost Balance Interest Cost
----------- ------- -------- ------- -------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable, net (1)........................ 8.74% $ 56,127 $1,244 8.87% $ 57,986 $1,231 8.49%
Investments, net (2)(6).......................... 5.20 41,357 532 5.15 45,211 578 5.11
Mortgage-backed securities, net.................. 6.46 15,807 263 6.66 12,783 230 7.20
Interest-bearing deposits (3).................... 5.37 17,411 241 5.54 17,729 205 4.63
-------- ------ -------- ------
Total interest-earning assets................. 6.89 130,702 2,280 6.98 133,709 2,244 6.71
---- ------ ---- ------ ----
Non-interest-earning assets 5,561 4,978
-------- --------
Total assets.................................. $136,263 $138,687
======== ========
INTEREST-BEARING LIABILITIES:
Deposits......................................... 4.28 $107,759 1,152 4.28 $126,024 1,329 4.22
Reverse repurchase agreements.................... 4.44 15,000 183 4.88 -- -- --
-------- ------ -------- -----
Total interest-bearing liabilities............ 4.30 122,759 1,335 4.35 126,024 1,329 4.22
---- ------ ---- ----- ----
Non-interest-bearing liabilities.................. 1,713 1,831
-------- --------
Total liabilities............................. 124,472 127,855
Retained earnings................................. 11,791 10,832
-------- --------
Total liabilities and retained earnings....... $136,263 $138,687
======== ========
Net interest income.............................. $ 945 $ 915
===== =====
Interest rate spread 2.59% 2.63% 2.49%
(4)(7).......................................... ==== ==== ====
N/A 2.89% 2.74%
Net interest margin (5)(8)....................... ==== ==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities......... 106.47% 106.10%
====== ======
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1995 1994
-------------------------- ----------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
-------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable, net (1)........................ $ 57,326 $5,026 8.77% $ 58,698 $4,832 8.23%
Investments, net (2)(6).......................... 42,852 2,179 5.08 41,537 1,864 4.49
Mortgage-backed securities, net.................. 13,609 955 7.02 10,972 770 7.02
Interest-bearing deposits (3).................... 18,316 875 4.78 26,272 1,230 4.68
-------- ------ -------- ------
Total interest-earning assets................. 132,103 9,035 6.84 137,479 8,696 6.33
------ ---- ------ ----
Non-interest-earning assets 5,165 5,521
-------- --------
Total assets.................................. $137,268 $143,000
======== ========
INTEREST-BEARING LIABILITIES:
Deposits......................................... $120,308 5,280 4.39 $131,046 5,089 3.88
Reverse repurchase agreements.................... 3,750 194 5.17 -- -- --
-------- ------ -------- ------
Total interest-bearing liabilities............ 124,058 5,474 4.41 131,046 5,089 3.88
------ ---- ------ ----
Non-interest-bearing liabilities.................. 2,016 1,775
-------- --------
Total liabilities............................. 126,074 132,821
Retained earnings................................. 11,194 10,179
-------- --------
Total liabilities and retained earnings....... $137,268 $143,000
======== ========
Net interest income.............................. $3,561 $3,607
====== ======
Interest rate spread
(4)(7).......................................... 2.43% 2.45%
==== ====
Net interest margin (5)(8)....................... 2.70% 2.62%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities......... 106.48% 104.91%
====== ======
</TABLE>
_______________________
(1) Average balance includes non-accrual loans.
(2) Includes FHLB stock and investment securities.
(3) Includes interest-bearing deposits, federal funds sold, and certificates of
deposit.
(4) Represents the difference between the average yield on interest-earning
assets and the average cost of interest-bearing liabilities.
(5) Represents net interest income as a percentage of average interest-earning
assets.
(6) Does not consider tax equivalent basis of tax exempt state and municipal
securities. Average yield on investment securities, after considering tax
equivalent basis of such securities, is 5.67%, 5.57%, 5.62% and 5.04% for
the three months ended March 31, 1996 and 1995 and the years ended December
31, 1995 and 1994, respectively. The tax equivalent yield on such
securities was 5.89%, 5.56%, 5.87% and 5.69% for the three months ended
March 31, 1996 and 1995 and the years ended December 31, 1995 and 1994,
respectively.
(7) Does not consider tax-equivalent basis of tax exempt state and municipal
securities. Interest rate spread, after considering tax equivalent basis of
such securities, is 2.79%, 2.65%, 2.60% and 2.61% for the three months
ended March 31, 1996 and 1995 and the years ended December 31, 1995 and
1994, respectively.
(8) Does not consider tax-equivalent basis of tax exempt state and municipal
securities. Net interest margin, after considering tax equivalent basis of
such securities, is 2.89%, 2.74%, 2.87% and 2.79% for the three months
ended March 31, 1996 and 1995 and the years ended December 31, 1995 and
1994, respectively.
33
<PAGE>
RATE/VOLUME ANALYSIS
The following table sets forth the effects of changing volumes and rates on
net interest income of the Savings Bank. Information is provided with respect to
(i) effects on interest income and expense attributable to changes in volume
(changes in volume multiplied by prior rate); (ii) effects on interest income
and expense attributable to changes in rate (changes in rate multiplied by prior
volume); and (iii) changes in rate/volume (change in rate multiplied by change
in volume).
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended December 31,
1996 Compared to Three 1995 Compared to Year
Months Ended March 31, 1995 Ended December 31, 1994
Increase (Decrease) Increase (Decrease)
Due to Due to
---------------------------------------------- --------------------------------------
Total Total
Rate/ Increase Rate/ Increase
Volume Rate Volume (Decrease) Volume Rate Volume (Decrease)
---------- ---------- ---------- ---------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net (1) $ (39) $ 58 $ (6) $ 13 $(113) $317 $(10) $ 194
Investments, net (2) (50) 5 (2) (47) 59 245 11 315
Mortgage-backed securities, net 54 (17) (4) 33 185 -- -- 185
Interest-bearing deposits (3) (4) 40 1 37 (372) 26 (9) (355)
----- ---- ---- ----- ----- ---- ---- -----
Total net change in income
on interest-earning assets (39) 86 (11) 36 (241) 588 (8) 339
----- ---- ---- ----- ----- ---- ---- -----
Interest-bearing liabilities:
Deposits (193) 19 (3) (177) (417) 668 (61) 190
Reverse repurchase agreements 183 -- -- 183 194 -- -- 194
----- ---- ---- ----- ----- ---- ---- -----
Total net change in expense on
interest-bearing liabilities (10) 19 (3) 6 (223) 668 (61) 384
----- ---- ---- ----- ----- ---- ---- -----
Net change in net interest income $ (29) $ 67 $ (8) $ 30 $ (18) $(80) $ 53 $ (45)
===== ==== ==== ===== ===== ==== ==== =====
<CAPTION>
Year Ended December 31,
1994 Compared to Year
Ended December 31, 1993
Increase (Decrease)
Due to
-----------------------------------------
Total
Rate/ Increase
Volume Rate Volume (Decrease)
------- --------- --------- ----------
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable, net (1) $(400) $(335) 25 $(710)
Investments, net (2) 198 175 24 397
Mortgage-backed securities, net 171 (124) (28) 19
Interest-bearing deposits (3) (57) (88) 3 (142)
----- ----- ---- -----
Total net change in income
on interest-earning assets (88) (372) 24 (436)
----- ----- ---- -----
Interest-bearing liabilities:
Deposits 38 (482) 7 (437)
Reverse repurchase agreements -- -- -- --
----- ----- ---- -----
Total net change in expense on
interest-bearing liabilities 38 (482) 7 (437)
----- ----- ---- -----
Net change in net interest income $(126) $ 110 $ 17 $ 1
===== ===== ==== =====
</TABLE>
________________
(1) Average balance includes nonaccrual loans.
(2) Includes FHLB stock and investment securities.
(3) Includes interest-bearing deposits, federal funds sold, and certificates of
deposit.
34
<PAGE>
ASSET AND LIABILITY MANAGEMENT
The principal operating objective of the Savings Bank is the achievement of
a positive interest rate spread that can be sustained during fluctuations in
prevailing interest rates. Since the Savings Bank's principal interest-earning
assets have substantially longer terms to maturity than its primary source of
funds, i.e., deposit liabilities, increases in general interest rates will
generally result in an increase in the Savings Bank's cost of funds before the
yield on its asset portfolio adjusts upward. The Savings Bank has generally
sought to reduce its exposure to adverse changes in interest rates by attempting
to achieve a closer match between the periods in which their interest-bearing
liabilities and interest-earning assets can be expected to reprice through the
origination of adjustable-rate mortgages and investment in loans and securities
with shorter terms.
The term "interest rate sensitivity" refers to those assets and liabilities
which mature and reprice periodically in response to fluctuations in market
rates and yields. Many savings banks have historically operated in a mismatched
position with interest-sensitive liabilities greatly exceeding interest-
sensitive assets in the short-term time periods. As noted above, one of the
principal goals of the Savings Bank's asset/liability program is to more closely
match the interest rate sensitivity characteristics of its asset and liability
portfolios.
In order to manage interest rate risk, the Savings Bank's Executive
Committee monitors the difference between the Savings Bank's maturing and
repricing assets and liabilities and to develop and implement strategies to
decrease the "negative gap" between the two. The primary responsibilities of the
committee are to assess the Savings Bank's asset/liability mix, recommend
strategies to the Board of Directors that will enhance income while managing the
Savings Bank's vulnerability to changes in interest rates and report to the
Board of Directors the results of the strategies used.
In order to increase the interest rate sensitivity of its assets, the
Savings Bank has originated adjustable rate residential mortgage loans and
maintained a consistent level of short- and intermediate-term investment
securities and interest-bearing deposits. At March 31, 1996, the Savings Bank
had $18.7 million of adjustable rate mortgages, $29.4 million of investment
securities, mortgage-backed securities and interest-bearing deposits maturing
within one year, and $33.3 million of investment securities, mortgage-backed
securities and interest-bearing deposits maturing within one to five years. The
Savings Bank had $1.9 million in adjustable rate mortgage-backed securities at
March 31, 1996, which were purchased in the secondary market. In addition, at
March 31, 1996 the Savings Bank had $6.4 million of consumer loans which
typically have maturities of five years or less.
In managing its future interest rate sensitivity, the Savings Bank intends
to continue to stress the origination of adjustable rate mortgages and loans
with shorter maturities, the maintenance of a consistent level of short and
intermediate-term securities, and pricing strategies that extend the term of
deposit liabilities.
INTEREST RATE SENSITIVITY ANALYSIS
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific period if it
will mature or reprice within that period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that time period. A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities, and is considered negative when the amount
of interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets. Generally, during a period of rising interest rates, a
negative gap would adversely affect net interest income while a positive gap
would result in an increase in net interest income, while conversely during a
period of falling interest rates, a negative gap would result in an increase in
net interest income and a positive gap would negatively affect net interest
income.
35
<PAGE>
At March 31, 1996, total interest-bearing liabilities maturing or repricing
within one year exceeded total interest-earning assets maturing or repricing in
the same period by $14.0 million, representing a cumulative negative one-year
gap of 10.21% of total assets. Like many savings banks, the Savings Bank has
historically had a cumulative negative gap position. Although the Savings Bank
has made efforts to reduce its exposure as a result of this one-year position,
it is expected that the Savings Bank will maintain a negative gap position in
the immediate future, which to the extent interest rates rise, will adversely
impact the Savings Bank's net interest income.
36
<PAGE>
The following table presents the Savings Bank's interest sensitivity gap
between interest-earning assets and interest-bearing liabilities at March 31,
1996 based on the assumptions set forth on the following page.
<TABLE>
<CAPTION>
Within Over Over Over Over
Six 6 Months 1-3 3-5 5-10 10
Months to One Year Years Years Years Years Total
------ ----------- ----- ----- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Fixed-rate mortgage loans.................... $ 5,416 $ 4,385 $10,819 $ 5,093 $ 4,419 $ 1,103 $ 31,235
Adjustable-rate mortgage loans............... 10,436 7,502 769 -- -- -- 18,707
Mortgage-backed securities................... 2,919 2,178 6,313 3,935 1,561 -- 16,906
Consumer loans............................... 1,856 983 2,945 450 -- -- 6,234
Investments, net............................. 20,515 4,807 26,881 4,480 860 -- 57,543
-------- -------- ------- ------- ------- ------- --------
Total rate sensitive assets............... 41,142 19,855 47,727 13,958 6,840 1,103 130,625
-------- -------- ------- ------- ------- ------- --------
Interest-bearing liabilities:
Deposits:
Regular savings and NOW accounts............ 3,658 2,994 7,444 3,342 2,354 368 20,160
Money market deposit accounts............... 9,652 4,826 4,524 283 19 -- 19,304
Certificates of deposit..................... 29,194 9,641 29,184 1,032 -- -- 69,051
Borrowings:
Repurchase agreements....................... 15,000 -- -- -- -- -- 15,000
-------- -------- ------- ------- ------- ------- --------
Total rate sensitive liabilities......... 57,504 17,461 41,152 4,657 2,373 368 123,515
-------- -------- ------- ------- ------- ------- --------
Excess (deficiency) of interest
sensitivity assets over interest
sensitivity liabilities................... $(16,362) $ 2,394 $ 6,575 $ 9,301 $ 4,467 $ 735 $ 7,110
======== ======== ======= ======= ======= ======= ========
Cumulative excess (deficiency) of
interest sensitivity assets................ $(16,362) $(13,968) $(7,393) $ 1,908 $ 6,375 $ 7,110
======== ======== ======= ======= ======= =======
Cumulative ratio of interest-earning assets
to interest-bearing liabilities............ 71.55% 81.37% 93.63% 101.58% 105.18% 150.76%
Interest sensitivity gap to total assets..... (11.96) 1.75 4.81 6.80 3.26 .54
Ratio of interest-earning assets to
interest-bearing liabilities............... 71.55 113.71 115.98 299.72 288.24 299.73
Ratio of cumulative gap to total assets...... (11.96) (10.21) (5.40) 1.40 4.66 5.20
</TABLE>
37
<PAGE>
In preparing the table above, it has been assumed that: (i) adjustable-
rate first mortgage loans with a current index will prepay at a rate of 15% per
year; (ii) fixed-rate mortgage loans on one- to four-family residences with
terms to maturity of 15 years will prepay at a rate of 36% per year; (iii) fixed
rate mortgage loans on one- to four-family residences with terms to maturity of
other than 15 years will prepay at a rate of 10%; (iv) fixed-rate mortgage loans
on non-residential properties will prepay at a rate of 8%; (v) adjustable-rate
mortgage loans on non-residential properties will prepay at a rate of 9%; (vi)
consumer loans will prepay at rates ranging from 6% to 7%; (vii) fixed maturity
deposits will not be withdrawn prior to maturity; and, (viii) interest-bearing
checking, savings accounts and money market demand accounts will decay, based on
industry experience, at the following rates:
<TABLE>
<CAPTION>
6 Months Over 1 Over 3 Over 5
6 Months Through Through Through Through Over 10
or Less 1 Year 3 Years 5 Years 10 Years Years
--------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing checking.. 18.1% 14.9% 36.9% 16.6% 11.7% 1.8%
Savings accounts........... 18.1 14.9 36.9 16.6 11.7 1.8
Money market demand........ 50.0 25.0 23.4 1.5 0.1 --
</TABLE>
NET PORTFOLIO VALUE. The interest rate risk component ("IRR") of the
risk-based capital rule is a dollar amount that is deducted from total capital
for the purpose of calculating an institution's risk-based capital requirement
and is measured in terms of the sensitivity of its net portfolio value ("NPV")
to changes in interest rates. NPV is the difference between incoming and
outgoing discounted cash flows from assets, liabilities, and off-balance sheet
contracts. An institution's IRR is measured as the change to its NPV as a
result of a hypothetical 200 basis point change in market interest rates. A
resulting change in NPV of more than 2% of the estimated market value of its
assets will require the institution to deduct from its regulatory capital 50% of
that excess change.
The following table is provided by the OTS and sets forth as of March 31,
1996 the estimated changes in NPV based on the indicated interest rate
environments. No effect has been given to any steps that management of the
Savings Bank may take to counter the effects of interest rate movements
presented in the table.
<TABLE>
<CAPTION>
Change in
Interest Rates
in Basis Points Net Portfolio Value
---------------------------------------
(Rate Shock) Amount $ Change % Change
----------------- ------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
200 $10,968 $(1,259) (10.30)
100 11,846 (381) (3.12)
Static 12,227 -- --
(100) 12,624 397 3.25
(200) 13,009 782 6.40
</TABLE>
NPV IS NOT AN INDICATION OF THE MARKET VALUE OR LIQUIDATION VALUE OF THE SAVINGS
BANK.
The Savings Bank's asset and liability structure results in a decrease in
NPV in a rising interest rate scenario and an increase in NPV in a declining
interest rate scenario. During periods of rising rates, the value of monetary
assets declines. Conversely, during periods of falling rates, the value of
monetary assets increases. However, the amount of change in value of specific
assets and liabilities due to changes in rates is not the same in a rising rate
environment as in a falling rate environment (i.e., the amount of value increase
under a specific rate decline may not equal the amount of value decrease under
an identical upward rate movement).
As with any method of measuring interest rate risk, certain shortcomings
are inherent in the method of analysis presented in the foregoing tables. For
example, although certain assets and liabilities may have similar
38
<PAGE>
maturities or periods to repricing, they may react in different degrees to
changes in market interest rates. Also, the interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets, such as substantially all of the Savings
Bank's ARM loans, have features that restrict changes in interest rates on a
short-term basis and over the life of the asset. Further, in the event of a
change in interest rates, expected rates of prepayments on loans and early
withdrawals from certificates could likely deviate significantly from those
assumed in calculating the tables. Therefore, the data presented in the tables
should not be relied upon as indicative of actual results.
LIQUIDITY AND CAPITAL RESOURCES
The Savings Bank is required to maintain minimum levels of liquid assets as
defined by OTS regulations. This requirement, which may be varied at the
direction of the OTS depending upon economic conditions and deposit flows, is
based upon a percentage of deposits and short-term borrowings. The required
minimum ratio is currently 5%. The Savings Bank has historically maintained a
level of liquid assets in excess of regulatory requirements. The Savings Bank's
liquidity ratio at March 31, 1996 was 34.7%.
The Savings Bank's primary sources of funds consist of deposits, reverse
repurchase agreements, repayments and prepayments of loans and mortgage-backed
securities, maturities of investments and interest-bearing deposits, and funds
provided from operations. While scheduled repayments of loans and mortgage-
backed securities and maturities of investment securities are predictable
sources of funds, deposit flows and loan prepayments are greatly influenced by
general interest rates, economic conditions and competition. The Savings Bank
manages the pricing of its deposits to maintain a steady deposit base. The
Savings Bank uses its liquidity resources principally to fund existing and
future loan commitments, to fund maturing certificates of deposit and deposit
withdrawals, to invest in other interest-bearing assets, to maintain liquidity,
and to meet operating expenses. Management believes that loan repayments and
other sources of funds will be adequate to meet and exceed the Savings Bank's
liquidity needs for 1996.
A major portion of the Savings Bank's liquidity consists of cash and cash
equivalents, which include investments in highly liquid, short-term deposits.
The level of these assets is dependent on the Savings Bank's operating,
investing, lending and financing activities during any given period. At March
31, 1996, cash and cash equivalents totaled $10.3 million.
The primary investing activities of the Savings Bank include origination of
loans and purchase of mortgage-backed securities and investment securities.
During 1995, purchases of investment securities and mortgage-backed securities
totaled $42.7 million and $6.2 million, respectively, while loan originations
totaled $15.3 million. These investments were funded primarily from loan and
mortgage-backed security repayments of $17.7 million, investment security sales
and maturities of $45.6 million, sales of mortgage-backed securities of $2.4
million, and $10.8 million of certificate of deposit maturities. In addition,
during 1995, $15.0 million of savings deposits were converted into reverse
repurchase agreements and the $8.0 million deposit runoff was funded with excess
liquidity.
Liquidity management is both a daily and long-term function of business
management. If the Savings Bank requires funds beyond its ability to generate
them internally, the Savings Bank believes that it could borrow additional funds
from the FHLB. At March 31, 1996, the Savings Bank had no outstanding advances
from the FHLB.
At March 31, 1996, the Savings Bank had $377,000 in outstanding commitments
to originate loans, all of which were at fixed rates. In addition, the Savings
Bank had no commitments to fund outstanding credit lines at March 31, 1996. The
Savings Bank anticipates that it will have sufficient funds available to meet
its current commitments. Certificates of deposit which are scheduled to mature
in one year or less totaled $42.5 million at March 31, 1996. Except as discussed
under "RISK FACTORS -- Potential Reduction of Certain Funding Liabilities, "
based on historical experience, management believes that a significant portion
of such deposits will remain with the Savings Bank. If
39
<PAGE>
a significant portion of these deposits did not review, the loss of such funds
could have an adverse effect on earnings to the extent that replacement funds,
either in the form of borrowings or new deposits, are at higher interest
rates.
At March 31, 1996, the Savings Bank exceeded all of its regulatory capital
requirements. For further information regarding the Savings Bank's regulatory
capital at March 31, 1996, and on a pro forma basis, see "HISTORICAL AND PRO
FORMA REGULATORY CAPITAL COMPLIANCE."
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been
prepared in accordance with GAAP, which require the measurement of financial
position and results of operations in terms of historical dollars without
considering changes in the relative purchasing power of money over time because
of inflation. Unlike most industrial companies, virtually all of the assets and
liabilities of the Savings Bank are monetary in nature. As a result, interest
rates have a more significant impact on the Savings Bank's performance than the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or in the same magnitude as the prices of goods and
services. In the current interest rate environment, liquidity and maturity
structure of the Savings Bank's assets and liabilities are critical to the
maintenance of performance levels.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN. In May 1993, the FASB
issued Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS 114"), which became effective for the
Savings Bank beginning January 1, 1995. SFAS 114 requires a lender to consider a
loan to be impaired if the lender believes it is probable that it will be unable
to collect all principal and interest due according to the contractual terms of
the loan. If a loan is impaired, the lender will be required to record a loan
valuation allowance equal to the difference between the present value of the
estimated future cash flows discounted at the loan's effective rate and the
current book value of the loan. This accounting change will significantly change
the accounting by lenders previously allowed under SFAS 15. Based upon the
status of the loan portfolio, the adoption of SFAS 114 did not have a material
effect on the Savings Bank's financial position.
ACCOUNTING FOR INVESTMENTS IN DEBT AND EQUITY SECURITIES. In May 1993, the
FASB issued SFAS 115. SFAS 115 expands the required use of fair value accounting
for investments in debt and equity securities, and allows debt securities to be
classified as "held to maturity" and reported in the financial statements at
amortized cost only if the reporting entity has the present intent and ability
to hold those securities to maturity. Furthermore, the statement clarifies that
securities which might be sold in response to changes in market interest rates,
changes in the security's prepayment risk, increases in loan demand, or other
similar factors must be classified as "available for sale" and carried at fair
value in the financial statements. Unrealized gains and losses are recorded, net
of related income tax effect, as a separate component of stockholders' equity
until realized. The Savings Bank adopted SFAS 115 on January 1, 1994 and
classified all investment securities and mortgage-backed securities as "held to
maturity." On November 15, 1995, the FASB issued the Special Report. Due to
uncertainties surrounding the regulatory capital treatment for unrealized gains
and losses on available for sale securities at the time SFAS 115 was required to
be implemented, the Special Report was issued to allow all entities a one-time
opportunity to reconsider their ability and intent to hold securities to
maturity and transfer securities from held to maturity without "tainting" the
remainder held to maturity securities. Those securities transferred would be
accounted for prospectively under SFAS 115. These transfers were only allowed
during the period from the date of issuance of the Special Report through
December 31, 1995.
As a result of the Special Report, management reconsidered the
classification of held to maturity securities and transferred $7,589,274 and
$2,169,407 of investment securities and mortgage-backed securities,
respectively, to available for sale during December 1995. As a result of the
transfers, a net decrease of $33,465 was recorded as a separate component of
retained earnings.
40
<PAGE>
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND
DISCLOSURES. During October 1994, the FASB issued Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan-
Income Recognition and Disclosures" ("SFAS 118") which amends SFAS 114 to allow
a creditor to use existing methods for recognizing interest income on an
impaired loan. Prior to the issuance of SFAS 118, SFAS 114 provided for two
alternative income recognition methods to be used to account for changes in the
net carrying amount of an impaired loan subsequent to the initial measurement of
impairment. Under the first income recognition method, a creditor would accrue
interest on the net carrying amount of the loan as an adjustment to the
provision for losses. Under the second income recognition method, a creditor
would recognize all changes in the net carrying amount of the loan as an
adjustment to the provision for losses on loans. While those income recognition
methods are no longer required, SFAS 118 does not preclude a creditor from using
either of these methods.
The initial impact of applying SFAS 114 and SFAS 118 will not be reported
as an accounting change, but rather as a component of the provision for losses
on loans charged to operations. SFAS 114 and SFAS 118 are required to be
accounted for on a prospective basis and are effective for fiscal years
beginning after December 15, 1994 (January 1, 1995 for the Savings Bank).
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS. In May 1995, the FASB issued
Statement of Financial Accounting Standards 122, "Accounting for Mortgage
Servicing Rights", an amendment of FASB Statement No. 65 ("SFAS 122"). SFAS 122
amends SFAS 65, "Accounting for Certain Mortgage Banking Activities", to require
that a mortgage banking enterprise recognize as separate assets rights to
service mortgage loans for others, however those servicing rights are acquired.
A mortgage banking enterprise that acquires mortgage servicing rights through
either the purchase or origination of mortgage loans and sells or securitizes
those loans with servicing rights retained should allocate the total cost of the
mortgage loans to the mortgage servicing rights and the loans (without the
mortgage servicing rights) based on their relative fair values, if it is
practicable to estimate those fair values. If it is not practicable to estimate
the fair values of the mortgage servicing rights and the mortgage loans (without
the mortgage servicing rights), the entire cost of purchasing or originating the
loans should be allocated to the mortgage loans, and no cost should be allocated
to mortgage servicing rights. SFAS 122 also requires that a mortgage banking
enterprise assess its capitalized mortgage servicing rights for impairment based
on the fair value of those rights. SFAS 122 must be applied prospectively for
fiscal years beginning after December 15, 1995, with earlier adoption
encouraged, to transactions in which a mortgage banking enterprise sells or
securitizes mortgage loans with servicing rights retained and to impairment
evaluations of all amounts capitalized as mortgage servicing rights, including
those purchased before the adoption of SFAS 122. Retroactive capitalization of
mortgage servicing rights retained in transactions in which a mortgage banking
enterprise originates mortgage loans and sells or securitizes those loans before
the adoption of SFAS 122 is prohibited. The Savings Bank plans to adopt the
provisions of SFAS 122 effective January 1, 1996. Management does not believe
the adoption of SFAS 122 will have a material effect on the Savings Bank's
financial position.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS. In March 1995, the FASB
issued SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS 121 is effective for fiscal years
beginning after December 15, 1995. Earlier application is permitted. SFAS 121
will require, among other things, that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Management will adopt the
provisions of SFAS 121 on January 1, 1996, but believes that the adoption of
SFAS 121 will not have a material impact on the Savings Bank's financial
statements.
ACCOUNTING FOR EMPLOYEE STOCK OWNERSHIP PLANS. In November 1993, the
American Institute of Certified Public Accountants ("AICPA") issued SOP 93-6,
which requires an employer to record compensation expense in an amount equal to
the fair value of shares committed to be released to employees from an employee
stock ownership plan. Assuming shares of Common Stock appreciate in value over
time, the adoption of SOP 93-6 may increase compensation expense relating to the
ESOP to be established in connection with the Stock Conversion as compared with
prior guidance which required the recognition of compensation expense based on
the cost of shares acquired
41
<PAGE>
by the ESOP. The effect of SOP 93-6 on net income and book value per share in
fiscal 1996 and future periods cannot be predicted due to the uncertainty of the
fair value of the shares of Common Stock subsequent to their issuance.
DISCLOSURES OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES. In December
1994, the AICPA issued SOP 94-6, "Disclosure of Certain Significant Risks and
Uncertainties." SOP 94-6 is effective for fiscal years ending after December 15,
1995. Earlier application is permitted. SOP 94-6 will require, among other
things, that entities include in their financial statements disclosures about
the nature of their operations and the use of estimates in the preparation of
financial statements. In addition, SOP 94-6 requires disclosures about current
vulnerability due to certain concentrations. Management believes that the
adoption of SOP 94-6 did not have a material impact on the Savings Bank's
financial statements.
BUSINESS OF THE HOLDING COMPANY
GENERAL
The Holding Company was organized as a Delaware business corporation at the
direction of the Board of Directors of the Savings Bank in March 1996 for the
purpose of becoming a savings and loan holding company to own all of the
outstanding capital stock of the Converted Savings Bank in connection with the
Stock Conversion and thereafter, becoming a bank holding company to own all the
outstanding capital stock of the Banks in connection with the Bank Conversion
and the Bank Formation. Upon consummation of the Bank Conversion and Bank
Formation, the Banks will become wholly owned subsidiaries of the Holding
Company.
BUSINESS
Prior to the Conversion, the Holding Company will not engage in any
significant operations. Upon consummation of the Conversion, the Holding
Company's sole business activity will be the ownership of all of the capital
stock of the Banks. In the future, the Holding Company may acquire or organize
other operating subsidiaries, although there are no current plans, arrangements,
agreements or understandings, written or oral, to do so.
Initially, the Holding Company will neither own nor lease any property but
will instead use the premises, equipment and furniture of Chester National Bank
with the payment of appropriate rental fees, as required by applicable law.
Since the Holding Company will only hold the capital stock of the Banks,
the competitive conditions applicable to the Holding Company will be the same as
those confronting the Banks. See "BUSINESS OF THE SAVINGS BANK --Competition."
BUSINESS OF THE SAVINGS BANK
GENERAL
The Savings Bank's principal business consists of attracting deposits from
the general public through a variety of deposit programs and using these funds
to originate one- to four-family residential mortgage loans and consumer loans
within the Savings Bank's lending market area and to invest in investment and
mortgage-backed securities. To a lesser extent, the Savings Bank also originates
commercial real estate loans, consumer loans, and other loans. Substantially all
of the Savings Bank's first mortgage loans are secured by properties located
within Illinois or Missouri. At March 31, 1996, the Savings Bank's gross loan
portfolio totaled $56.7 million, of which 80.9% were one- to four-family
residential mortgage loans, 4.8% were
42
<PAGE>
commercial real estate loans and 11.3% were consumer loans. At March 31, 1996,
the Savings Bank's investments and mortgage-backed securities totaled $74.4
million, or 54.4% of total assets.
MARKET AREA
The Savings Bank operates out of its headquarters in Chester, Illinois
(Randolph County), four full-service branch offices in Illinois and one full-
service branch office in Missouri. The Illinois branches are located in
Randolph County (Sparta and Red Bud), Perry County (Pinckneyville) and Jackson
County (Carbondale). The Missouri full-service branch is located just across
the Mississippi River in Perry County (Perryville), approximately 15 miles from
Chester. The Savings Bank also operates a loan production office in Cape
Girardeau County, Missouri (Cape Girardeau) approximately 45 miles southeast of
Chester.
The local market area is primarily rural and covers a fairly large
geographic area in southwestern Illinois and southeastern Missouri. The closest
major metropolitan area is the St. Louis area, approximately 60 miles to the
north. The largest town served is Carbondale, which has a population of
approximately 27,000, while the smallest town served, Red Bud, has a population
of approximately 3,000. Perryville, Missouri has a population of approximately
7,000.
The economy in southwestern Illinois is historically based in coal mining
and agriculture, although both industries have declined in recent decades. The
decline of mining employment has had a significant adverse impact on the economy
of the market area, particularly in Randolph and Perry counties, Illinois. Loan
demand in these counties has been limited as unemployment is high and the
population has been declining. Randolph County's already weak economy was
adversely effected in early 1996 when Spartan Printing Company, one of the
County's largest manufacturing employers with approximately 1,000 employees,
closed. Somewhat offsetting the unfavorable operating environment in Randolph
and Perry Counties has been the Jackson County market, whose largest city,
Carbondale, is home to Southern Illinois University (the "University"). The
University has enhanced the economic stability of Jackson County both through
direct employment and by supporting a number of ancillary businesses. The
Perryville market is rural and small, and economic stability is supported by its
largest employer, Gilster-Mary Lee. The operating environment in Perryville has
generally been more favorable than Randolph and Perry counties.
The Savings Bank faces significant competition from many financial
institutions for deposits and loan originations. See "-- Competition" and "RISK
FACTORS -- Dependence on Local Economy and Competition Within Market Area."
LENDING ACTIVITIES
GENERAL. The principal lending activity of the Savings Bank is the
origination of conventional mortgage loans for the purpose of purchasing,
constructing or refinancing owner-occupied, one- to four-family residential
property. To a significantly lesser extent, the Savings Bank also originates
multi-family, commercial real estate, land and consumer loans. The Savings
Bank's net loans receivable totalled $55.8 million at March 31, 1996,
representing 40.8% of total assets.
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<PAGE>
LOAN PORTFOLIO ANALYSIS. The following table sets forth the composition of
the Savings Bank's loan portfolio by type of loan and type of security as of the
dates indicated. The Savings Bank had no concentration of loans exceeding 10% of
total loans other than as set forth below.
<TABLE>
<CAPTION>
At March 31, At December 31,
--------------------------------------
1996 1995 1994
----------------- ------------------ ------------------
Amount Percent Amount Percent Amount Percent
------- ------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Type of Loan:
- ------------
Mortgage loans:
Conventional.................. $46,147 81.42% $ 47,213 81.45% $ 48,275 81.68%
FHA.......................... 322 0.57 344 0.59 405 0.69
Commercial................... 2,700 4.76 2,870 4.95 3,588 6.07
Construction................. 1,096 1.93 1,172 2.02 485 0.82
------- ------ -------- ------ -------- ------
Total mortgage loans....... 50,265 88.68 51,599 89.01 52,753 89.26
------- ------ -------- ------ -------- ------
Consumer loans:
Automobile................... 1,824 3.22 1,713 2.95 1,339 2.26
Home improvement............. 1,591 2.81 1,348 2.33 1,211 2.05
Credit cards................. 851 1.50 939 1.62 828 1.40
Savings account.............. 419 0.74 440 0.76 506 0.86
Other........................ 1,729 3.05 1,928 3.33 2,463 4.17
------- ------ -------- ------ -------- ------
Total consumer loans....... 6,414 11.32 6,368 10.99 6,347 10.74
------- ------ -------- ------ -------- ------
Total loans................ 56,679 100.00% 57,967 100.00% 59,100 100.00%
====== ====== ======
Less:
Loans in process............. 503 533 676
Deferred fees and discounts.. 26 23 21
Allowance for losses......... 396 390 246
------- -------- --------
Loans receivable, net....... $55,754 $ 57,021 $ 58,157
======= ======== ========
Type of Security:
- ----------------
Residential real estate:
One- to four-family.......... $45,842 80.88% $ 47,201 81.43% 47,579 80.51%
Multi-family................. 583 1.03 600 1.03 764 1.29
Commercial real estate........ 2,700 4.76 2,870 4.95 3,588 6.07
Agriculture and land.......... 1,140 2.01 928 1.60 822 1.39
Consumer loans................ 6,414 11.32 6,368 10.99 6,347 10.74
------- ------ -------- ------ -------- ------
Total loans................. 56,679 100.00% 57,967 100.00% 59,100 100.00%
====== ====== ======
Less:
Loans in process............. 503 533 676
Deferred fees and discounts.. 26 23 21
Allowance for losses......... 396 390 246
------- -------- --------
Total loans................. $55,754 $ 57,021 $ 58,157
======= ======== ========
</TABLE>
RESIDENTIAL REAL ESTATE LENDING. The primary lending activity of the
Savings Bank is the origination of mortgage loans to enable borrowers to
purchase or refinance existing one- to four-family homes. Management believes
that this policy of focusing on one- to four-family residential mortgage loans
located in its market area has been successful in contributing to interest
income while keeping credit losses low. At March 31, 1996, $45.8 million, or
80.9% of the Savings Bank's gross loan portfolio, consisted of loans secured by
one- to four-family residential real estate. The average principal balance of
the loans in the Savings Bank's one- to four-family portfolio was approximately
$31,200 at March 31, 1996. The Savings Bank presently originates for retention
in its portfolio both ARM loans with terms of up to 25 years and fixed-rate
mortgage loans with terms of up to 20 years. Borrower demand for ARM loans
versus fixed-rate mortgage loans
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<PAGE>
is a function of the level of interest rates, the expectations of changes in the
level of interest rates and the difference between the initial interest rates
and fees charged for each type of loan. The relative amount of fixed-rate
mortgage loans and ARM loans that can be originated at any time is largely
determined by the demand for each in a competitive environment. At March 31,
1996, $18.7 million, or 33.0% of the Savings Bank's gross loans, were subject to
periodic interest rate adjustments.
The loan fees charged, interest rates and other provisions of the
Savings Bank's ARM loans are determined by the Savings Bank based on its own
pricing criteria and competitive market conditions. The Savings Bank originates
one-year ARM loans secured by owner-occupied residences whose interest rates and
payments generally are adjusted annually to a rate typically equal to 2.75%
above the one-year or, occasionally the three-year, constant maturity United
States Treasury ("CMT") index. At March 31, 1996, the Savings Bank had
approximately $3.3 million of ARM loans, the interest rates for which are based
on the Eleventh District Cost of Funds Index, a lagging index. Such loans were
acquired in connection with the Heritage Federal acquisition. The Savings Bank
occasionally offers ARM loans with initial rates below those which would prevail
under the foregoing computations, determined by the Savings Bank based on market
factors and competitive rates for loans having similar features offered by other
lenders for such initial periods. At March 31, 1996, the initial interest rate
on ARM loans offered by the Savings Bank ranged from 6.50% to 7.50% per annum.
The periodic interest rate cap (the maximum amount by which the interest rate
may be increased or decreased in a given period) on the Savings Bank's ARM loans
is generally 2% per year and the lifetime interest rate cap is generally 6% over
the initial interest rate of the loan.
The Savings Bank does not originate negative amortization loans. The terms
and conditions of the ARM loans offered by the Savings Bank, including the index
for interest rates, may vary from time to time. The Savings Bank believes that
the adjustment features of its ARM loans provide flexibility to meet competitive
conditions as to initial rate concessions while preserving the Savings Bank's
objectives by limiting the duration of the initial rate concession.
The retention of ARM loans in the Savings Bank's loan portfolio helps
reduce the Savings Bank's exposure to changes in interest rates. There are,
however, unquantifiable credit risks resulting from the potential of increased
costs due to changed rates to be paid by the customer. It is possible that
during periods of rising interest rates the risk of default on ARM loans may
increase as a result of repricing and the increased costs to the borrower. See
"RISK FACTORS -- Potential Adverse Impact of Changes in Interest Rates."
Furthermore, because the ARM loans originated by the Savings Bank generally
provide, as a marketing incentive, for initial rates of interest below the rates
which would apply were the adjustment index used for pricing initially
(discounting), these loans are subject to increased risks of default or
delinquency. Another consideration is that although ARM loans allow the Savings
Bank to increase the sensitivity of its asset base to changes in the interest
rates, the extent of this interest sensitivity is limited by the periodic and
lifetime interest rate adjustment limits. Because of these considerations, the
Savings Bank has no assurance that yields on ARM loans will be sufficient to
offset increases in the Savings Bank's cost of funds.
While fixed-rate single-family residential real estate loans are normally
originated with five to seven year balloon payments or terms up to 20 years,
such loans typically remain outstanding for substantially shorter periods. This
is because borrowers often prepay their loans in full upon sale of the property
pledged as security or upon refinancing the original loan. In addition,
substantially all mortgage loans in the Savings Bank's loan portfolio contain
due-on-sale clauses providing that the Savings Bank may declare the unpaid
amount due and payable upon the sale of the property securing the loan.
Typically, the Savings Bank enforces these due-on-sale clauses to the extent
permitted by law and as business judgment dictates. Thus, average loan maturity
is a function of, among other factors, the level of purchase and sale activity
in the real estate market, prevailing interest rates and the interest rates
payable on outstanding loans.
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<PAGE>
The Savings Bank generally requires title insurance insuring the status of
its lien on all of the real estate secured loans. The Savings Bank also requires
earthquake, fire and extended coverage casualty insurance and, if appropriate,
flood insurance in an amount at least equal to the outstanding loan balance.
Appraisals are obtained on all properties and are conducted by
independent fee appraisers approved by the Board of Directors. The Savings
Bank's lending policies generally limit the maximum loan-to-value ratio on
mortgage loans secured by owner-occupied properties to 80% of the lesser of the
appraised value or the purchase price, with the condition that the loan-to-value
ratio may be increased to 95% provided that private mortgage insurance coverage
is obtained for the amount in excess of 80%.
COMMERCIAL REAL ESTATE AND MULTI-FAMILY LENDING. Historically, the Savings
Bank has engaged in limited amounts of commercial real estate and multi-family
lending. At March 31, 1996, commercial real estate loans aggregated $2.7
million, or 4.8% of the total loan portfolio and multi-family loans aggregated
$583,000 or 1.0% of the total loan portfolio. The principal balance of such
loans in the Savings Bank's loan portfolio ranged from approximately $100,000 to
$600,000 at March 31, 1996. Substantially all of these loans are secured by
properties located in the Savings Bank's market area. Such properties include
churches, a library, golf courses and professional offices. Of this amount,
approximately $499,000 or 15.2% were secured by churches. Commercial real estate
and multi-family loans are generally made for balloon terms of 5 to 10 years
with a maximum amortization of 20 years.
Commercial real estate and multi-family loans generally involve greater
risks than one- to four-family residential mortgage loans. Payments on loans
secured by such properties often depend on successful operation and management
of the properties. Repayment of such loans may be subject to a greater extent to
adverse conditions in the real estate market or the economy. The Savings Bank
seeks to minimize these risks in a variety of ways, including limiting the size
of such loans, limiting the maximum loan-to-value ratio to 75% and strictly
scrutinizing the financial condition of the borrower, the quality of the
collateral and the management of the property securing the loan. All of the
properties securing the Savings Bank's income property loans are inspected by
the Savings Bank's lending personnel before the loan is made. The Savings Bank
also obtains appraisals on each property in accordance with applicable
regulations.
Following the Conversion, the Savings Bank plans on placing greater
emphasis on commercial real estate lending and commercial business lending. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Business Strategy" and "RISK FACTORS --Certain Loan Underwriting
Considerations and Risk of Lending Strategy."
CONSTRUCTION LENDING. The Savings Bank originates residential construction
loans to individuals to construct one- to four-family homes. The Savings Bank
generally does not originate speculative construction loans (i.e., loans to
builders to construct homes for which there are no contracts for sale in place).
At March 31, 1996, construction loans totalled $1.1 million, or 1.9% of the
gross loan portfolio.
Substantially all construction loans made to individuals provide for the
Savings Bank to originate a permanent loan upon the completion of construction,
which is generally an ARM loan as described under "--Residential Real Estate
Lending." The origination fee for construction loans is generally 1.0% of the
principal amount. Construction loans are generally made for terms of up to six
months.
Construction lending is generally considered to involve a higher level of
risk as compared to one- to four-family residential permanent lending because of
the inherent difficulty in estimating both a property's value at completion of
the project and the estimated cost of the project. The nature of these loans is
such that they are generally more difficult to evaluate and monitor. If the
estimate of value proves to be inaccurate, the Savings Bank may be confronted
at, or prior to, the maturity of the loan, with a project whose value is
insufficient to assure full repayment.
46
<PAGE>
AGRICULTURE AND LAND LENDING. The Savings Bank originates loans secured by
farm residences and combinations of farm residences and farm real estate. The
Savings Bank also originates loans for the acquisition of land upon which the
purchaser can then build. At March 31, 1996, the agriculture and land loan
portfolio totalled $1.1 or 2.0% of total loans, substantially all of which were
secured by properties located in the Savings Bank's market area. Agriculture and
land loans are generally made for the same terms and at the same interest rates
as those offered on commercial real estate and multi-family loans, with a loan-
to-value ratio which is generally limited to 75% .
Loans secured by farm real estate generally involve greater risks than
one- to four-family residential mortgage loans. Payments on loans secured by
such properties may, in some instances, be dependent on farm income from the
properties. To address this risk, the Savings Bank historically has not
considered farm income when qualifying borrowers. In addition, such loans are
more difficult to evaluate. If the estimate of value proves to be inaccurate,
the Savings Bank may be confronted with a property the value of which is
insufficient to assure full repayment in the event of default and foreclosure.
CONSUMER AND OTHER LOANS. The Savings Bank offers a variety of secured or
guaranteed consumer loans, including automobile loans, home improvement loans,
unsecured loans and loans secured by savings deposits. Consumer loans are made
at fixed interest rates and for varying terms. At March 31, 1996 the Savings
Bank's consumer loans totalled approximately $6.4 million, or 11.3% of total
loans. The Savings Bank views consumer lending as an important component of its
business operations because consumer loans generally have shorter terms and
higher yields than one-to four-family real estate loans, thus reducing exposure
to changes in interest rates. In addition, the Savings Bank believes that
offering consumer loans helps to expand and create stronger ties to its customer
base.
The largest category of consumer loans in the Savings Bank's portfolio
consists principally of direct loans secured by automobiles. The Savings Bank
generally does not originate loans secured by recreational vehicles. At March
31, 1996, consumer loans secured by automobiles totalled $1.8 million, or 3.2%,
of the Savings Bank's total loan portfolio. Automobile loans are offered with
maturities of up to 60 months for new automobiles and up to 48 months for used
automobiles. Loans secured by used automobiles will have maximum terms which
vary depending upon the age of the automobile and will be made based on amounts
as set forth in the NADA "bluebook."
The second largest category of consumer loans in the Savings Bank's
portfolio consists of home improvement loans. At March 31, 1996, home
improvement loans totalled $1.6 million, or 2.8%, of the Savings Bank's total
loan portfolio. The Savings Bank's home improvement loans are secured by the
borrower's principal residence. The maximum amount of a home improvement loan is
generally 80% of the appraised value of a borrower's real estate collateral less
the amount of any prior mortgages or related liabilities. With respect to
substantially all home improvement loans, the Savings Bank holds the first
mortgage on the borrower's residence. Home improvement loans are approved with
fixed interest rates which are determined by the Savings Bank based upon market
conditions. Such loans may be fully amortized over the life of the loan or have
a balloon feature. The maximum term for a home improvement loan is five
years.
The Savings Bank began offering proprietary VISA credit cards during 1993
and, at March 31, 1996, there were approximately 800 credit card accounts with a
total balance of $851,000. This program has been offered to residents of the
Savings Bank's primary market area but card recipients need not otherwise be a
customer of the Savings Bank. The VISA card program currently provides an
individual borrowing limit of $3,500 or less, a fixed rate of interest of 9.9%,
and a "rebate" feature. The Savings Bank may alter the general terms of this
program as it seeks to expand its credit card program.
The Savings Bank had $532,000, or 0.9% of total loans in unsecured
consumer loans at March 31, 1996. These loans are made for a maximum of 30
months or less with fixed rates of interest and are offered primarily to
existing customers of the Savings Bank.
47
<PAGE>
The Savings Bank employs strict underwriting standards for consumer loans.
These procedures include an assessment of the applicant's payment history on
other debts and ability to meet existing obligations and payments on the
proposed loans. Although the applicant's creditworthiness is a primary
consideration, the underwriting process also includes a comparison of the value
of the security, if any, to the proposed loan amount. The Savings Bank
underwrites and originates substantially all of its consumer loans internally
which management believes limits exposure to audit risks relating to loans
underwritten or purchased from brokers or other outside sources.
Consumer loans may entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
assets that depreciate rapidly, such as automobiles. In the latter case,
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment for the outstanding loan and the remaining deficiency often
does not warrant further substantial collection efforts against the borrower. In
addition, consumer loan collections are dependent on the borrower's continuing
financial stability, and thus are more likely to be adversely affected by job
loss, divorce, illness or personal bankruptcy. Furthermore, the application of
various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount which can be recovered on such loans. Such
loans may also give rise to claims and defenses by the borrower against the
Savings Bank as the holder of the loan, and a borrower may be able to assert
claims and defenses which it has against the seller of the underlying
collateral.
COMMERCIAL BUSINESS LENDING. The Savings Bank intends to attempt to
originate small commercial business loans in order to diversify its credit risk
and increase the average yield and repricing speed of its interest-earning
assets. The Savings Bank is developing the capabilities for this type of
lending, but as of March 31, 1996 has not originated any commercial business
loans. There can be no assurances that the Savings Bank will be successfully in
its efforts to originate commercial business loans.
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<PAGE>
MATURITY OF LOAN PORTFOLIO. The following table sets forth at March 31,
1996 certain information regarding the dollar amount of loans maturing in the
Savings Bank's portfolio based on contractual terms to maturity, but does not
include scheduled payments or potential prepayments. Demand loans (loans having
no stated repayment schedule and no stated maturity) and overdrafts are reported
as due in one year or less. Loan balances do not include undisbursed loan
proceeds, unearned discounts, and allowance for loan losses.
<TABLE>
<CAPTION>
After After After
During the Year 3 Years 5 Years 10 Years
Ended March 31, Through Through Through Beyond
----------------------------
1997 1998 1999 5 Years 10 Years 15 Years 15 Years Total
------ ------ ------ ------- -------- -------- -------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate mortgage......... $ 165 $ 130 $ 566 $1,300 $10,589 $17,989 $15,730 $46,469
Commercial real estate....... 238 17 295 174 969 525 482 2,700
Construction................. 1,096 -- -- -- -- -- -- 1,096
Home improvement............. 97 188 479 476 351 -- -- 1,591
Automobile................... 147 219 596 862 -- -- -- 1,824
Credit cards................. 851 -- -- -- -- -- -- 851
Other........................ 937 389 224 418 180 -- -- 2,148
------ ----- ------ ------ ------- -------- -------- -------
Total loans................ $3,531 $ 943 $2,160 $3,230 $12,089 $18,514 $16,212 $56,679
====== ===== ====== ====== ======= ======== ======== =======
</TABLE>
The following table sets forth the dollar amount of all loans due after
March 31, 1997, which have fixed interest rates and have floating or adjustable
interest rates.
<TABLE>
<CAPTION>
Fixed Floating- or
Rates Adjustable-Rates
------- ----------------
<S> <C> <C>
(In Thousands)
Real estate mortgage..................... $28,212 $18,092
Commercial real estate................... 1,851 611
Construction............................. -- --
Home improvement......................... 1,494 --
Automobile............................... 1,677 --
Credit cards............................. -- --
Other.................................... 1,211 --
------- -------
Total................................... $34,445 $18,703
======= =======
</TABLE>
49
<PAGE>
Scheduled contractual principal repayments of loans generally do not
reflect the actual life of such assets. The average life of loans ordinarily is
substantially less than their contractual terms because of prepayments. In
addition, due-on-sale clauses on loans generally give the Savings Bank the right
to declare loans immediately due and payable in the event, among other things,
that the borrower sells the real property subject to the mortgage and the loan
is not repaid. The average life of mortgage loans tends to increase, however,
when current mortgage loan market rates are higher than rates on existing
mortgage loans and, conversely, decrease when rates on existing mortgage loans
are higher than current mortgage loan market rates.
LOAN SOLICITATION AND PROCESSING. Loan applicants come primarily from walk-
in customers including previous and present customers of the Savings Bank and to
a lesser extent referrals by real estate agents. Upon receipt of a loan
application from a prospective borrower, a credit report and other data are
obtained to verify specific information relating to the loan applicant's
employment, income and credit standing. An appraisal of the real estate offered
as collateral generally is undertaken by a Board-approved independent fee
appraiser who is certified by the State of Illinois.
All mortgage loans must be approved by the Savings Bank's Executive
Committee. Unsecured consumer loans up to $3,500 and secured consumer loans up
to $20,000 may be approved by an individual loan officer. Amounts in excess of
these limits must be approved by the Executive Committee. Management of the
Savings Bank believes its local decision-making capabilities and the
accessibility of its senior officers is an attractive quality to customers
within its market area. The Savings Bank's loan approval process allows
consumer loans to be approved in one to two days and mortgage loans to be
approved and closed in approximately two weeks.
LOAN ORIGINATIONS, SALES AND PURCHASES. During the years ended December 31,
1995 and 1994, the Savings Bank's total loan originations were $15.3 million and
$13.0 million, respectively and $3.4 million and $3.3 million for the three
months ended March 31, 1996 and 1995, respectively. While the Savings Bank
originates both adjustable-rate and fixed-rate loans, its ability to generate
each type of loan depends upon relative customer demand for loans in its market.
Consistent with its asset/liability management strategy, the Savings Bank's
policy has been to retain in its portfolio nearly all of the loans that it
originates. Any loan sales are generally made without recourse to the Savings
Bank. See "RISK FACTORS -- Certain Lending Considerations."
The Savings Bank has originated loans for sale through its newly formed
Cape Girardeau loan production office; however, such loans are funded by the
purchaser of the loan at closing and closed in the name of such purchaser.
During the year ended December 31, 1995, the Savings Bank originated $618,000 of
such loans which were funded by two investors and $702,000 for the three months
ended March 31, 1996.
50
<PAGE>
The following table shows total loans originated and repaid during the
periods indicated. No loans were purchased or sold during the periods
indicated.
<TABLE>
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
------------------ -----------------------
1996 1995 1995 1994
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Total loans at beginning
of period................. $57,021 $58,157 $58,157 $61,193
------- ------- ------- -------
Loans originated:
Single-family residential.. 1,417 1,040 6,349 3,833
Commercial real estate..... -- 69 57 1,436
Construction loans......... 235 799 2,262 699
Agriculture and land....... 182 18 364 278
Consumer................... 1,528 1,405 6,249 6,791
------- ------- ------- -------
Total loans originated... 3,362 3,331 15,281 13,037
------- ------- ------- -------
Loan principal repayments... 4,624 3,589 16,063 16,157
Increase (decrease) in
other items, net.......... (5) (13) (354) 84
------- ------- ------- -------
Total loans at
end of period............. $55,754 $57,886 $57,021 $58,157
======= ======= ======= =======
</TABLE>
LOAN COMMITMENTS. The Savings Bank issues, without fee, commitments for
one-to four-family residential mortgage loans conditioned upon the occurrence of
certain events. Such commitments are made in writing on specified terms and
conditions and at a specified interest rate and are honored for up to three
months from the date of loan approval. The Savings Bank had outstanding net loan
commitments of approximately $377,000 at March 31, 1996, all of which were for
fixed rate loans. In addition, the Savings Bank had no commitments to fund
outstanding credit lines at March 31, 1996. See Note 13 of Notes to the
Financial Statements.
LOAN ORIGINATION AND OTHER FEES. The Savings Bank, in some instances,
receives loan origination fees. Loan fees are a percentage of the principal
amount of the mortgage loan which are charged to the borrower for funding the
loan. The amount of fees charged by the Savings Bank is generally up to 1.0% for
mortgage loans and construction loans. Current accounting standards require that
origination fees received (net of certain loan origination costs) for
originating loans to be deferred and amortized into interest income over the
contractual life of the loan. Net deferred fees or costs associated with loans
that are prepaid are recognized as income at the time of prepayment. The Savings
Bank had $14,000 of net deferred loan fees at March 31, 1996.
NON-PERFORMING ASSETS AND DELINQUENCIES. When a mortgage loan borrower
fails to make a required loan payment when due, the Savings Bank institutes
collection procedures. The first written notice is mailed to a delinquent
borrower 10-15 days after the due date, followed by a second written notice
mailed and a telephone call approximately 15 days thereafter. On or about 60
days after the due date, a certified letter is sent to the delinquent borrower.
Foreclosure procedures are instituted on or about 90 days after the due date if
the delinquency continues to that date.
Consumer loan collection procedures are substantially the same as those for
mortgage loans. In most cases, delinquencies are cured promptly; however, if, by
the 120th day of delinquency the delinquency has not been cured,
51
<PAGE>
the Savings Bank begins legal action to repossess the collateral. At the 120th
day of delinquency, the Savings Bank charges off the full principal amount of
the loan.
The Savings Bank's Board of Directors is informed monthly as to the status
of all mortgage and consumer loans that are delinquent more than 30 days, the
status on all loans currently in foreclosure, and the status of all foreclosed
and repossessed property owned by the Savings Bank.
The following table sets forth information regarding the Savings Bank's
delinquent loans, excluding loans 90 days or more delinquent and accounted for
on a non-accrual basis.
<TABLE>
<CAPTION>
At March 31, At December 31,
---------------------- ----------------------------------------------
1996 1995 1994
---------------------- --------------------- -----------------------
Percentage Percentage Percentage
Principal of Gross Principal of Gross Principal Of Gross
Balance Loans Balance Loans Balance Loans
--------- ----------- --------- ----------- --------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans delinquent for:
30 - 59 days......... $ 970 1.71% $ 443 0.76% $ 379 0.64%
60 - 89 days......... 85 0.15 65 0.12 56 0.10
------ ---- ----- ---- ----- ----
$1,055 1.86% $ 508 0.88% $ 435 0.74%
====== ==== ===== ==== ===== ====
</TABLE>
52
<PAGE>
The following table sets forth information with respect to the Savings
Bank's non-performing assets at the dates indicated. The Savings Bank had no
restructured loans within the meaning of SFAS No. 15 at any of the dates
indicated.
<TABLE>
<CAPTION>
At March 31, At December 31,
--------------------------
1996 1995 1994
------------ ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Non-performing loans:
Loans accounted for on a non-accrual basis:
Real estate:
Residential........................................ $ 123 $ 56 $ 337
Commercial......................................... 50 49 --
Consumer............................................ 34 40 6
----- ------ ------
Total............................................. 207 145 343
----- ------ ------
Accruing loans which are contractually
past due 90 days or more:
Residential real estate............................. -- -- 37
Consumer............................................ 15 14 --
----- ------ ------
Total............................................. 15 14 37
----- ------ ------
Total non-performing loans........................ 222 159 380
Real estate acquired by
foreclosure, net................................... 210 209 64
----- ------ ------
Total non-performing assets....................... $ 432 $ 368 $ 444
===== ====== ======
Total non-performing loans to
net loans......................................... 0.40% 0.28% 0.65%
===== ==== ====
Total allowance for loan losses
to non-performing loans........................... 178.38% 244.79% 64.65%
====== ====== =====
Total non-performing assets to
total assets....................................... 0.32% 0.27% 0.31%
==== ==== ====
</TABLE>
Interest income which would have been recorded for the year ended December
31, 1995 and the three months ended March 31, 1996 had non-accruing loans been
current in accordance with their original terms amounted to approximately
$25,000 and $4,000, respectively . The amount of interest included in the
results of operations on such loans for the year ended December 31, 1995 and the
three months ended March 31, 1996 amounted to approximately $18,000 and $512,
respectively.
At March 31, 1996, management of the Savings Bank was unaware of any
material loans not disclosed in the above table but where known information
about possible credit problems of the borrowers caused management to have
serious doubts as to the ability of such borrowers to comply with their loan
repayment terms at that date and which may result in future inclusion in the
non-performing assets category.
REAL ESTATE ACQUIRED BY FORECLOSURE. See Note 1 of Notes to the Financial
Statements for a discussion of the Savings Bank's procedures for accounting for
real estate acquired by foreclosure. The Savings Bank had $210,000 in real
estate acquired by foreclosure at March 31, 1996, which consisted of three
parcels of residential real estate, the largest of which was $183,000.
53
<PAGE>
ASSET CLASSIFICATION. The OTS has adopted various regulations regarding
problem assets of savings institutions. The regulations require that each
insured institution review and classify its assets on a regular basis. In
addition, in connection with examinations of insured institutions, OTS examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: substandard,
doubtful and loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified as loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted. If an asset or portion thereof is classified as loss, the insured
institution establishes specific allowances for loan losses for the full amount
of the portion of the asset classified as loss. All or a portion of general loan
loss allowances established to cover possible losses related to assets
classified substandard or doubtful may be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital. Assets that do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are designated "special mention" and monitored by the Savings Bank.
The aggregate amounts of the Savings Bank's classified assets including
assets designated special mention and general and specific loss allowances at
the dates indicated, were as follows:
<TABLE>
<CAPTION>
At March 31, At December 31,
------------------
1996 1995 1994
------------ ---- ----
(In Thousands)
<S> <C> <C> <C>
Loss...................... $ 8 $ 8 $ --
Doubtful.................. -- -- --
Substandard assets........ 199 137 497
Special mention........... -- -- --
---- ---- ----
Total................... $207 $145 $497
==== ==== ====
General loss allowances... $388 $382 $246
Specific loss allowances.. 8 8 --
---- ---- ----
Total loss allowances... $396 $390 $246
==== ==== ====
</TABLE>
ALLOWANCE FOR LOAN LOSSES. The Savings Bank has established a systematic
methodology for determining provisions for loan losses. The methodology is set
forth in a formal policy and considers the need for an overall general valuation
allowance as well as specific allowances for individual loans.
In originating loans, the Savings Bank recognizes that losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan, general economic conditions and, in the case of a secured loan, the
quality of the security for the loan. The Savings Bank increases its allowance
for loan losses by charging provisions for loan losses against the Savings
Bank's income.
The allowance for loan losses is maintained to cover losses inherent in the
portfolio of performing loans. Management reviews the adequacy of the allowance
at least quarterly based on management's assessment of numerous factors,
including, but not necessarily limited to, general economic conditions, loan
portfolio composition, prior loss experience, and independent appraisals. In
addition to the allowance for estimated losses on identified problem loans, an
overall unallocated allowance is established to provide for unidentified credit
losses. In estimating such losses, management considers various risk factors
including geographic location, loan collateral, and payment history. Specific
valuation allowances are established to absorb losses on loans for which full
collectibility may not
54
<PAGE>
be reasonably assured. The amount of the allowance is based on the estimated
value of the collateral securing the loan and other analyses pertinent to each
situation.
At March 31, 1996, the Savings Bank had an allowance for loan losses of
$396,000. Management believes that the amount maintained in the allowance will
be adequate to absorb losses inherent in the portfolio. Although management
believes that it uses the best information available to make such
determinations, future adjustments to the allowance for loan losses may be
necessary and results of operations could be significantly and adversely
affected if circumstances differ substantially from the assumptions used in
making the determinations.
While the Savings Bank believes it has established its existing allowance
for loan losses in accordance with GAAP, there can be no assurance that
regulators, in reviewing the Savings Bank's loan portfolio, will not request the
Savings Bank to increase significantly its allowance for loan losses. In
addition, because future events affecting borrowers and collateral cannot be
predicted with certainty, there can be no assurance that the existing allowance
for loan losses is adequate or that substantial increases will not be necessary
should the quality of any loans deteriorate as a result of the factors discussed
above. Any material increase in the allowance for loan losses may adversely
affect the Savings Bank's financial condition and results of operations.
The following table sets forth an analysis of the Savings Bank's allowance
for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
-------------------- ------------------------
1996 1995 1995 1994
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Allowance at beginning of period.... $390 $246 $ 246 $ 207
---- ---- ----- -----
Provision for loan losses(1) 7 (2) 161 69
Recoveries........................... -- -- -- --
Charge-offs:
Residential real estate -- -- -- 23
Consumer............................ 1 -- 17 7
----- ----- ----- -----
Total charge-offs................ 1 -- 17 30
----- ----- ----- -----
Allowance at end of period........... $396 $244 $ 390 $ 246
===== ===== ===== =====
Ratio of allowance to total
loans outstanding at
the end of the period.............. 0.71% 0.42% 0.68% 0.42%
==== ==== ==== ====
Ratio of net charge-offs to
average loans outstanding
during the period.................. --% --% 0.03% 0.05%
==== ==== ==== ====
</TABLE>
__________
(1) See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Comparison of Operating Results for the Years
Ended December 31, 1995 and 1994 -- Provision for Loan Losses" for a
discussion of the change between 1995 and 1994.
55
<PAGE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated. The portion of the allowance
to each loan category does not necessarily represent the total available for
losses within that category since the total allowance applies to the entire loan
portfolio. The allocation of the allowance to each category is not necessarily
indicative of future losses and does not restrict the use of the allowance to
absorb losses in any other category .
<TABLE>
<CAPTION>
At March 31, At December 31,
----------------------------------------------------------
1996 1995 1994
---------------------------- ---------------------------- ----------------------------
As a % % of As a % % of As a % % of
of Out- Loans in of Out- Loans in of Out- Loans in
standing Category standing Category standing Category
Loans in to Total Loans in to Total Loans in to Total
Amount Category Loans Amount Category Loans Amount Category Loans
------ --------- --------- ------ --------- --------- ------ --------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate -- mortgage:
Residential(1)................... $248 .53% 81.9% $244 0.51% 82.4% $143 0.30% 81.8%
Commercial....................... 69 2.56 4.8 69 2.40 5.0 42 1.17 6.1
Agriculture and land............. 7 .61 2.0 5 0.54 1.6 3 0.36 1.4
Consumer(1)........................ 72 1.12 11.3 72 1.13 11.0 58 0.91 10.7
---- ------ ---- ------ ---- -----
Total allowance for loan losses.. $396 100.00% $390 100.00% $246 100.0%
==== ====== ==== ====== ==== =====
</TABLE>
_________________
(1) See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS --Comparison of Operating Results for the Years Ended
December 31, 1995 and 1994 -- Provision for Loan Losses" for a discussion
of the changes between December 31, 1995 and 1994.
INVESTMENT ACTIVITIES
GENERAL. Federal savings banks have authority to invest in various types of
liquid assets, including United States Treasury obligations, securities of
various federal agencies and of state and municipal governments, deposits at the
FHLB-Chicago, certificates of deposit of federally insured institutions, certain
bankers' acceptances and federal funds. Subject to various restrictions, such
savings institutions may also invest a portion of their assets in commercial
paper, corporate debt securities and ARM funds, the assets of which conform to
the investments that federally chartered savings institutions are otherwise
authorized to make directly. Savings institutions are also required to maintain
minimum levels of liquid assets which vary from time to time. See "REGULATION --
Federal Home Loan Bank System." The Savings Bank maintains its liquidity above
the required levels in part because of the large amount of funds held from
Gilster-Mary Lee. See "RISK FACTORS -- Potential Reduction of Certain Funding
Liabilities."
The Savings Bank's policies generally limit investments to U.S. Government
and agency securities, certificates of deposit in other financial institutions
and municipal bonds, and mortgage-backed securities. All of the Savings Bank's
investment securities are subject to market risk insofar as increases in market
rates of interest may cause a decrease in their market value. Investment
decisions are made by the Savings Bank's Chairman and Chief Financial Officer
Michael W. Welge and reported at monthly Board of Directors' meetings.
At March 31, 1996, the Savings Bank's investment portfolio totaled $74.4
million and consisted principally of United States Government and agency
obligations, mortgage-backed securities, certificates of deposit in other
financial institutions, municipal obligations, investment-bearing deposits and
FHLB Stock. At December 31, 1995, the Savings Bank's investment portfolio did
not contain any securities of a single
56
<PAGE>
issuer (other than the United States Government and agencies thereof) which had
an aggregate book value in excess of 10% of the Savings Bank's equity at that
date.
The Savings Bank adopted SFAS 115 effective January 1, 1994. SFAS 115
requires that investments be categorized as held to maturity, trading or
available for sale, based upon management's intent as to the ultimate
disposition of each security acquired. As of March 31, 1996, the held to
maturity investment portfolio of the Savings Bank contained securities with an
amortized cost of $28.2 million and a fair value of $28.2 million and consisted
of United States agency obligations, municipal and state obligations and
mortgage-backed bonds. At March 31, 1996, the Savings Bank's investment
securities available for sale portfolio consisted of U.S. Government obligations
with an amortized cost of $17.5 million and a fair value of $17.4 million. At
March 31, 1996, the Savings Bank held no securities that were classified as
trading securities.
Thrift Bulletin Number 52 ("TB-52"), the OTS Policy Statement on securities
portfolio policies and unsuitable investment practices, requires that
institutions classify mortgage derivative products acquired, including certain
tranches of CMOs, as "high-risk mortgage securities" if such products exhibit
greater price volatility than a benchmark fixed-rate 30-year mortgage-backed
pass-through security. Institutions may only hold high-risk mortgage securities
to reduce interest-rate risk in accordance with safe and sound practices and
must also follow certain prudent safeguards in the purchase and retention of
such securities. At December 31, 1995, the Savings Bank did not have any
securities that would be identified under TB-52 as "high-risk mortgage
securities." The Savings Bank does not invest in CMO residual interests or in
CMO tranches that met the definition of a high-risk mortgage security at the
time of investment.
INVESTMENT STRATEGY. Historically, the Savings Bank has maintained a
substantial proportion of its assets in investments and mortgage-related
securities. The objectives of these investments are to: (i) provide sufficient
liquidity to fund the operational needs of the Savings Bank, (ii) provide a
stable base of income with minimal credit risk, (iii) invest those deposit funds
in excess of the mortgage and consumer lending volumes available to the Savings
Bank in its market area, (iv) invest the deposit and reverse repurchase
agreement funds attributable to Gilster-Mary Lee, (v) assist the Savings Bank in
meeting its qualified thrift lender ("QTL") test for regulatory and tax
purposes, and (vi) generally assist in managing the interest rate risk of the
Savings Bank. The Savings Bank invests in U.S. Government and U.S. Government
agency securities, securities of U.S. Government-sponsored enterprises (e.g.,
FNMA and FHLMC), tax-exempt securities of states and municipalities, short-term
interest-bearing deposits and federally insured certificates of deposits in
other financial institutions, FHLB-Chicago stock, and mortgage-related
securities (including mortgage-backed securities and collateralized mortgage
obligations). The foregoing securities serve different functions within the
context of the Savings Bank's investment practices.
U.S. Government securities, all of which were available for sale at March
31, 1996, function as the Savings Bank's principal source of liquidity for its
operations. Accordingly, the Savings Bank limits maturities to five years or
less and typically purchases shorter maturities of two years or less. Though the
primary function of the U.S. Government securities portfolio is liquidity, the
Savings Bank seeks to improve the yield or expected total return of the
portfolio by selectively readjusting the maturity structure of the portfolio as
securities mature, or occasionally, through sale and reinvestment.
U.S. Government agency, Government-sponsored enterprise, and tax-exempt
state and municipal securities and short-term interest-bearing deposits and
federally insured certificates of deposits in other financial institutions
function as a income base and non-lending investment vehicle for the Savings
Bank. Management views the foregoing investments generally as substitutes for
each other, and the relative proportion of them in the portfolio depends on the
relative yields of each as compared to their perceived credit risks and interest
rate sensitivities. As these investments mature, the Savings Bank seeks to
reinvest the proceeds in those investments that, at that time, provide an
attractive trade-off among the foregoing factors. With respect to the tax-exempt
state and municipal securities portfolio, the Savings Bank also seeks to invest
so as to meet specific community needs in its primary market area and to take
advantage of the federal and, on some securities, state tax exemption for the
interest thereon.
57
<PAGE>
As a general rule, the Savings Bank limits it tax-exempt investments to those
having a rating by a nationally recognized statistical rating organization of
"AA" or better or those unrated securities issued by entities within its market
area. Generally, the Savings Bank also limits the maturities of all of the
foregoing securities to five years or less. Currently, the Savings Bank plans to
replace maturing certificates of deposit with other types of investments.
Mortgage-related securities also contribute to the Savings Bank's income
base and have the additional benefit of helping to satisfy the Savings Bank's
QTL test. Following consummation of the Bank Conversion, the Savings Bank will
likely reduce its mortgage-backed securities. The Savings Bank has no current
plans to expand or reduce its holdings of collateralized mortgage obligations.
MORTGAGE-BACKED SECURITIES. The Savings Bank purchases mortgage-backed
securities primarily to supplement its lending activities and to assist it in
satisfying the QTL Test (see "REGULATION -- Federal Regulations of Savings
Banks--Qualified Thrift Lender Test") and, to a lesser extent, to: (i) generate
positive interest rate spreads on large principal balances with minimal
administrative expense; (ii) lower the credit risk of the Savings Bank as a
result of the guarantees provided by FHLMC, FNMA, and GNMA; (iii) enable the
Savings Bank to use mortgage-backed securities as collateral for financing; and
(iv) increase the Savings Bank's liquidity. National banks are not subject to
the QTL Test. Accordingly, following the Conversion to the extent that there is
low loan demand in the Banks' primary market area, the Banks expect to reduce
the Savings Bank's current investment in mortgage-backed securities in favor of
United States Government and agency securities and other investment securities.
The Savings Bank has invested primarily in federal agency securities,
principally FNMA, FHLMC and GNMA. The Savings Bank also invests in
collateralized mortgage obligations ("CMOs") that have fixed interest rates. At
March 31, 1996, net mortgage-backed and related securities totaled $16.9
million, or 12.4% of total assets. At March 31, 1996,11.1% of the mortgage-
backed and mortgage related securities were adjustable-rate and 88.9% were
fixed-rate. The mortgage-backed securities portfolio had coupon rates ranging
from 5.45% to 9.00% and had a weighted average yield of 6.46% at March 31, 1996.
The estimated fair value of the Savings Bank's mortgage-backed securities
available for sale at March 31, 1996 was $2.1 million.
Mortgage-backed securities (which also are known as mortgage participation
certificates or pass-through certificates) typically represent a participation
interest in a pool of single-family or multi-family mortgages. The principal and
interest payments on these mortgages are passed from the mortgage originators,
through intermediaries (generally United States Government agencies and
government sponsored enterprises) that pool and resell the participation
interests in the form of securities, to investors such as the Savings Bank. Such
United States Government agencies and government sponsored enterprises, which
guarantee the payment of principal and interest to investors, primarily include
the FHLMC, FNMA and the GNMA. Mortgage-backed securities typically are issued
with stated principal amounts, and the securities are backed by pools of
mortgages that have loans with interest rates that fall within a specific range
and have varying maturities. Mortgage-backed securities generally yield less
than the loans that underlie such securities because of the cost of payment
guarantees and credit enhancements. In addition, mortgage-backed securities are
usually more liquid than individual mortgage loans and may be used to
collateralize certain liabilities and obligations of the Savings Bank. These
types of securities also permit the Savings Bank to optimize its regulatory
capital because they have a low risk weighting.
CMOs are generally classified as derivative financial instruments because
they are created by redirecting the cash flows from the pool of mortgages or
mortgage-backed securities underlying these securities to create two or more
classes (or tranches) with different maturity or risk characteristics designed
to meet a variety of investor needs and preferences. Management believes these
securities may represent attractive alternatives relative to other investments
due to the wide variety of maturity, repayment and interest rate options
available. Current investment practices of the Savings Bank prohibit the
purchase of high risk CMOs pursuant to TB 52. The Savings Bank held investment
grade CMOs with a net carrying value of $8.2 million at March 31, 1996. CMOs
may be sponsored by private issuers, such as mortgage bankers or money center
banks, or by United States
58
<PAGE>
Government agencies and government sponsored entities. At March 31, 1996, the
Savings Bank did not own any privately issued CMOs.
Derivatives also include "off balance sheet" financial products whose value
is dependent on the value of an underlying financial asset, such as a stock,
bond, foreign currency, or a reference rate or index. Such derivatives include
"forwards," "futures," "options" or "swaps." The Savings Bank has not invested
in, and currently does not intend to invest in, these "off balance sheet"
derivative instruments, although the Savings Bank's investment policy does not
prohibit such investments. The Savings Bank evaluates its mortgage-related
securities portfolio quarterly for compliance with applicable regulatory
requirements, including testing for identification of high risk investments
pursuant to Federal Financial Institutions Examination Council standards. At
March 31, 1996, the Savings Bank did not have any derivatives or high risk
securities.
Of the Savings Bank's $16.9 million mortgage-backed securities portfolio at
March 31, 1996, $10.3 million with a weighted average yield of 6.47% had
contractual maturities within ten years and $6.6 million with a weighted average
yield of 6.49% had contractual maturities over ten years. However, the actual
maturity of a mortgage-backed security may be less than its stated maturity due
to prepayments of the underlying mortgages. Prepayments that are faster than
anticipated may shorten the life of the security and may result in a loss of any
premiums paid and thereby reduce the net yield on such securities. Although
prepayments of underlying mortgages depend on many factors, including the type
of mortgages, the coupon rate, the age of mortgages, the geographical location
of the underlying real estate collateralizing the mortgages and general levels
of market interest rates, the difference between the interest rates on the
underlying mortgages and the prevailing mortgage interest rates generally is the
most significant determinant of the rate of prepayments. During periods of
declining mortgage interest rates, if the coupon rate of the underlying
mortgages exceeds the prevailing market interest rates offered for mortgage
loans, refinancing generally increases and accelerates the prepayment of the
underlying mortgages and the related security. Under such circumstances, the
Savings Bank may be subject to reinvestment risk because, to the extent that the
Savings Bank's mortgage-backed securities amortize or prepay faster than
anticipated, the Savings Bank may not be able to reinvest the proceeds of such
repayments and prepayments at a comparable rate. In contrast to mortgage-backed
securities in which cash flow is received (and hence, prepayment risk is shared)
pro rata by all securities holders, the cash flow from the mortgages or
mortgage-backed securities underlying CMOs are segmented and paid in accordance
with a predetermined priority to investors holding various tranches of such
securities or obligations. A particular tranche of CMOs may therefore carry
prepayment risk that differs from that of both the underlying collateral and
other tranches. At March 31, 1996, adjustable-rate investments account for 11.1%
of the Savings Bank's mortgage-backed securities portfolio.
59
<PAGE>
The following table sets forth the composition of the Savings Bank's
mortgage-backed securities portfolio at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------
At March 31, 1996 1995 1994
---------------------- ----------------------- ----------------------
Carrying Percent of Carrying Percent of Carrying Percent of
Value Portfolio Value Portfolio Value Portfolio
-------- ---------- -------- ----------- -------- -----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities:
Available for sale (at
market value):
GNMA............................. $ 497 2.94% $ 517 3.35% $ -- --%
FNMA............................. 1,618 9.57 1,690 10.97 -- --
------ ----- ------- ------ ----- -----
Total mortgage-backed
securities available
for sale...................... 2,115 12.51 2,207 14.32 -- --
------ ----- ------- ------ ----- -----
Held to maturity (at
amortized cost):
GNMA............................. 1,461 8.64 1,515 9.83 2,626 19.99
FNMA............................. 146 0.86 153 0.99 3,117 23.73
FHLMC............................ 4,993 29.54 5,326 34.56 7,393 56.28
Collateralized mortgage
obligations..................... 8,191 48.45 6,212 40.30 -- --
------- ------ ------- ------ ----- -----
Total mortgage-backed
securities held to maturity 14,791 87.49 13,206 85.68 13,136 100.00
------- ------ ------- ------ ------ ------
Total mortgage-backed
securities................... $16,906 100.00% $15,413 100.00% $13,136 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
The following table shows purchases, sales and repayments of mortgage-
backed securities during the periods indicated.
<TABLE>
<CAPTION>
Three Months
Ended
March 31, Year Ended December 31,
----------------- -----------------------
1996 1995 1995 1994
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Mortgage-backed securities, net,
at beginning of period.................. $15,413 $13,136 $13,136 $ 7,402
Purchases................................ 1,973 -- 6,200 8,060
Sales.................................... -- -- (2,409) --
Repayments............................... (463) (447) (1,637) (2,341)
Increase (decrease) in other items, net (17) 5 123 15
------- ------- ------- -------
Mortgage-backed securities, net,
at end of period........................ $16,906 $12,694 $15,413 $13,136
======= ======= ======= =======
</TABLE>
60
<PAGE>
The following table sets forth the composition of the Savings
Bank's investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
At March 31, At December 31,
-----------------------------------------------------
1996 1995 1994
------------------------ ------------------------- ------------------------
Carrying Percent of Carrying Percent of Carrying Percent of
Value Portfolio Value Portfolio Value Portfolio
-------- ---------- ---------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Investment securities:
Available for sale (at market value)-
securities of U.S. government........... $17,412 30.3% $ 6,524 11.3% $ -- --%
------- ------ ------- ------- ------- -------
Held to maturity (at cost):
Securities of U.S. government........... -- -- -- -- 11,743 18.2
Securities of U.S. agencies............. 6,947 12.1 10,017 17.4 7,392 11.5
Mortgage-backed bonds................... 8,071 14.0 8,606 15.0 7,296 11.3
Securities of states and municipalities. 13,171 22.9 13,199 22.9 14,679 22.8
------- ----- ------- ------ ------- ------
Total investment securities held to
maturity.............................. 28,189 49.0 31,822 55.3 41,110 63.8
------- ----- ------- ------ ------- ------
Total investment securities............ 45,601 79.3 $38,346 66.6 41,110 63.8
------- ----- ------- ------ ------- ------
Interest-bearing deposits................... 1,678 2.9 3,493 6.1 1,623 2.5
Federal funds sold.......................... 5,500 9.5 5,400 9.4 2,500 3.9
Certificates of deposit..................... 4,142 7.2 9,762 16.9 18,582 28.9
FHLB stock, at cost......................... 622 1.1 604 1.0 595 0.9
------- ------ ------- ------ ------- ------
Total investments...................... $57,543 100.00% $57,605 100.00% $64,410 100.00%
======= ======= ======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1996
--------------------------------------------------------------------------------
More than More than
One Year or Less One to Five Years Five to Ten Years More than Ten Years
------------------ ------------------- ------------------- ---------------------
Weighted Weighted Weighted Weighted
Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield
-------- ------- -------- ------- -------- ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment securities:
Available for sale (at market value)-
securities of U.S. government............. $ 3,986 4.98% $13,426 5.58% $ -- --% $ -- --%
Held to maturity (at amortized cost):
Securities of U.S. agencies................ 1,548 4.52 5,399 6.09 -- -- -- --
Mortgage-backed bonds...................... 7,571 5.58 500 4.88 -- -- -- --
Securities of states and municipalities(1). 4,882 5.63 7,469 6.05 705 7.47 115 9.84
------- ------- ----- ----
Total investment securities.............. $17,987 5.37% $26,794 5.80% $ 705 7.47% $115 9.84%
======= ======= ===== ====
</TABLE>
_________________
(1) Tax exempt state and municipal securities are presented on a tax equivalent
basis.
U.S. GOVERNMENT AND AGENCY OBLIGATIONS. The Savings Bank's
portfolio of United States Government and agency obligations had a
fair value of $24.3 million ($24.4 million at amortized cost) at March
31, 1996. The portfolio consisted of short to medium-term (up to five
years) securities, of which $17.5 million (at amortized cost) of U.S.
Government obligations were held in the Savings Bank's available for
sale portfolio.
61
<PAGE>
MUNICIPAL BONDS. The Savings Bank's municipal bond portfolio, which at
March 31, 1996, totaled $13.3 million at estimated fair value ($13.2 million at
amortized cost), was comprised primarily of general obligation bonds (i.e.,
----
backed by the general credit of the issuer) and revenue bonds (i.e., backed only
----
by revenues from the specific project being financed) issued by various housing
authorities and public hospital, water and sanitation districts in various
states. At March 31, 1996, general obligation bonds and revenue bonds totaled
$9.4 million and $3.8 million, respectively. The bonds are purchased with
laddered maturities of up to four years with an average principal amount of
approximately $250,000. Most of the municipal bonds are rated by a nationally
recognized statistical rating organization (e.g., Moody's or Standard and
Poor's) and the unrated bonds have been purchased principally from local
authorities. At March 31, 1996, the Savings Bank's municipal bond portfolio was
comprised of 82 bonds, the average principal amount of which was $157,000. At
such date the weighted average life of the portfolio was approximately 3.5 years
and had an weighted average coupon rate of 6.00%. At that date, the largest
security in the portfolio was a revenue bond issued by the local public
hospital, with an amortized cost of $945,000 and a fair value of $1.0 million.
Because interest earned on municipal bonds is exempt from federal, and, in
certain cases, state and local income taxes, the municipal bond portfolio has
contributed to an effective income tax rate for the Savings Bank below the
federal tax rate and one that the Savings Bank believes is below its peers.
See Note 11 of the Notes to the Financial Statements.
CERTIFICATES OF DEPOSIT. The Savings Bank has invested in certificates of
deposit at other banks with maturities of six months to five years and at March
31, 1996 had $4.1 million of such deposits. In order to obtain FDIC insurance
coverage, these deposits are placed at various financial institutions throughout
the United States by a broker in amounts less than $100,000.
GOVERNMENT SPONSORED ENTERPRISE SECURITIES. At March 31, 1996, the Savings
Bank's held to maturity investment portfolio included securities issued by the
FNMA and the FHLMC. At March 31, 1996, such bonds had an aggregate amortized
cost of $8.1 million, an average life of approximately three years, and an
average coupon rate of 5.54%.
DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS
GENERAL. Deposits, repurchase agreements and loan repayments are the major
sources of the Savings Bank's funds for lending and other investment purposes.
Scheduled loan repayments are a relatively stable source of funds, while deposit
inflows and outflows and loan prepayments are influenced significantly by
general interest rates and money market conditions. Borrowings through the
FHLB-Chicago or reverse repurchase agreements may be used on a short-term basis
to compensate for reductions in the availability of funds from other sources.
At March 31, 1996, the Savings Bank had no borrowings from the FHLB-Chicago. At
March 31, 1996, the Savings Bank had $15.0 million outstanding in reverse
repurchase agreements which resulted from a transfer of funds from a money
market deposit account to a reverse repurchase agreement. See Note 9 and Note
10 of the Notes to the Financial Statements.
DEPOSIT ACCOUNTS. Substantially all of the Savings Bank's depositors are
residents of the States of Illinois and Missouri. Deposits are attracted from
within the Savings Bank's market area through the offering of a broad selection
of deposit instruments, including NOW accounts, money market deposit accounts,
regular savings accounts, certificates of deposit and retirement savings plans.
Deposit account terms vary, according to the minimum balance required, the time
periods the funds must remain on deposit and the interest rate, among other
factors. In determining the terms of its deposit accounts, the Savings Bank
considers current market interest rates, profitability to the Savings Bank,
matching deposit and loan products and its customer preferences and concerns.
The Savings Bank reviews its deposit mix and pricing weekly.
In the unlikely event the Savings Bank is liquidated after the Conversion,
depositors will be entitled to full payment of their deposit accounts prior to
any payment being made to the Holding Company, as the sole stockholder of the
Savings Bank.
62
<PAGE>
The following table sets forth certain information concerning the Savings
Bank's time deposits and other interest-bearing deposits at March 31, 1996.
<TABLE>
<CAPTION>
Weighted Percentage
Average Original Minimum of Total
Interest Rate Term Category Amount Balance Deposits
- ------------- -------- -------- ------- ------- ----------
(In Thousands)
<S> <S> <C> <C> <C> <C>
- -- % None Non-interest bearing checking $ 100 $ 35 0.03%
2.00 None NOW accounts 100 9,155 8.44
3.36 None Money market demand 2,500 19,304 17.79
2.75 None Passbook 30 10,970 10.11
Certificates of Deposit
-----------------------
3.61 91-day Fixed-term, fixed-rate 500 252 0.23
4.35 4 months Fixed-term, fixed-rate 5,000 2,377 2.19
4.21 6 months Fixed-term, fixed-rate 500 9,657 8.90
4.44 6 months Fixed-term, fixed-rate 50,000 963 0.89
6.44 11 months Fixed-term, fixed-rate 5,000 3,452 3.18
4.93 1 year Fixed-term, fixed-rate 500 8,865 8.17
5.08 18 months Fixed-term, fixed-rate 500 3,008 2.77
5.47 30 months Fixed-term, fixed-rate 100 8,773 8.08
5.23 30 months Fixed-term, fixed-rate 500 29,227 26.93
5.13 4 years Fixed-term, fixed-rate 500 1,281 1.18
7.75 6 years Fixed-term, fixed-rate 500 62 0.06
8.00 8 years Fixed-term, fixed-rate 500 31 0.03
5.03 Various Fixed-term, fixed rate 100,000 1,103 1.02
-------- ------
$108,515 100.00%
======== ======
</TABLE>
The following table indicates the amount of the Savings Bank's certificates
of deposit of $100,000 or more by time remaining until maturity as of March 31,
1996.
<TABLE>
<CAPTION>
Certificates
Maturity Period of Deposit
--------------- -------------
(In Thousands)
<S> <C>
Three months or less........... $1,517
Over three through six months.. 970
Over six through 12 months..... 689
Over 12 months................. 2,106
------
Total..................... $5,282
======
</TABLE>
63
<PAGE>
DEPOSIT FLOW
The following table sets forth the balances of savings deposits in the
various types of savings accounts offered by the Savings Bank at the dates
indicated.
<TABLE>
<CAPTION>
At March 31, At December 31,
------------------------------ -----------------------------------------------
1996 1995 1994
------------------------------ --------------------------- ----------------
Percent Percent Percent
of Increase of Increase of
Amount Total (Decrease) Amount Total (Decrease) Amount Total
------ ----- ---------- ------ ------- ---------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing checking........ $ 35 0.03% $ (13) $ 48 0.04% $ (15) $ 63 0.05%
NOW checking......................... 9,155 8.44 274 8,881 8.32 195 8,686 6.70
Passbook............................. 10,970 10.11 501 10,469 9.81 (970) 11,439 8.82
Money market demand(1)............... 19,304 17.79 2,648 16,656 15.61 (15,905) 32,561 25.10
Fixed-rate certificates which........
mature in the year ending(2)(3):...
Within 1 year...................... 42,540 39.20 (3,888) 46,428 43.51 (5,031) 51,459 39.67
After 1 year, but within 2 years... 15,941 14.69 2,751 13,190 12.36 (5,824) 19,014 14.66
After 2 years, but within 5 years.. 10,570 9.74 (476) 11,046 10.35 4,556 6,490 5.00
-------- ------ ------- -------- ------ -------- -------- ------
Total........................ $108,515 100.00% $ 1,797 $106,718 100.00% $(22,994) $129,712 100.00%
======== ====== ======= ======== ====== ======== ======== ======
</TABLE>
___________________
(1) The reduction in the balance of money market demand accounts was the result
of a $15.0 million transfer to reverse repurchase agreements by Gilster-
Mary Lee during the year ended December 31, 1995.
(2) At March 31, 1996 and at December 31, 1995, and 1994, jumbo certificates
amounted to $5.3 million, $5.8 million and $7.5 million, respectively.
(3) IRA accounts included in certificate balances are $8.8 million, $8.6
million and, $9.0 million at March 31, 1996 and December 31, 1995 and 1994,
respectively.
TIME DEPOSITS BY RATES
The following table sets forth the time deposits in the Savings Bank
classified by rates at the dates indicated.
<TABLE>
<CAPTION>
At March 31, At December 31,
----------------------
1996 1995 1994
------------ ---- ----
(In Thousands)
<S> <C> <C> <C>
2.00 - 3.99%........... $ 436 $ 195 $11,110
4.00 - 5.99%........... 66,126 66,132 64,973
6.00 - 7.99%........... 2,458 4,306 789
8.00 - 9.99%........... 31 31 92
------- ------- -------
Total................ $69,051 $70,664 $76,964
======= ======= =======
</TABLE>
64
<PAGE>
The following table sets forth the amount and maturities of time deposits at
March 31, 1996.
<TABLE>
<CAPTION>
Amount Due
-----------------------------------------
Percent
Over Over Over of Total
Less Than 1-2 2-3 3-4 Certificate
One Year Years Years Years Total Accounts
--------- ----- ----- ----- ----- --------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
2.00 - 3.99%............... $ 436 $ -- $ -- $ -- $ 436 0.63%
4.00 - 5.99%............... 39,652 15,914 9,906 654 66,126 95.77
6.00 - 7.99%............... 2,421 27 10 -- 2,458 3.56
8.00 - 9.99%............... 31 -- -- -- 31 0.04
------- ------- ------ ---- ------- ------
Total.................... $42,540 $15,941 $9,916 $654 $69,051 100.00%
======= ======= ====== ==== ======= ======
</TABLE>
The following table sets forth the average balances and interest rates
based on monthly balances for transaction accounts and certificates of deposit
for the periods indicated.
<TABLE>
<CAPTION>
Three
Months Ended Year Ended
March 31, December 31,
--------------------------------------------- ----------------------------------------------
1996 1995 1995 1994
-------------------- -------------------- ---------------------- --------------------
Interest- Interest- Interest- Interest-
Bearing Certifi- Bearing Certifi- Bearing Certifi- Bearing Certifi-
Demand cates of Demand cates of Demand cates of Demand cates of
Deposits Deposit Deposits Deposit Deposits Deposit Deposits Deposit
-------- -------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Balance............. $38,772 $68,987 $46,299 $79,725 $39,693 $79,365 $52,771 $78,275
Average Rate................ 2.61% 5.21% 3.25% 4.78% 3.38% 4.96% 3.14% 4.39%
</TABLE>
SAVINGS ACTIVITIES
The following table sets forth the savings activities of the Savings Bank
for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------- -------------------------
1996 1995 1995 1994
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Beginning balance....................... $106,718 $129,712 $129,712 $130,231
-------- -------- -------- --------
Net increase (decrease)
before interest credited............... 984 (7,083) (26,610) (4,441)
Interest credited....................... 813 956 3,616 3,922
-------- -------- -------- --------
Net increase (decrease) in
savings deposits....................... 1,797 (6,127) (22,994) (519)
-------- -------- -------- --------
Ending balance.......................... $108,515 $123,585 $106,718 $129,712
======== ======== ======== ========
</TABLE>
65
<PAGE>
BORROWINGS
The Savings Bank has the ability to use advances from the FHLB-Chicago to
supplement its supply of lendable funds and to meet deposit withdrawal
requirements. The FHLB-Chicago functions as a central reserve bank providing
credit for savings and loan associations and certain other member financial
institutions. As a member of the FHLB-Chicago, the Savings Bank is required to
own capital stock in the FHLB-Chicago and is authorized to apply for advances on
the security of such stock and certain of its mortgage loans and other assets
(principally securities which are obligations of, or guaranteed by, the U.S.
Government) provided certain creditworthiness standards have been met. Advances
are made pursuant to several different credit programs. Each credit program has
its own interest rate and range of maturities. Depending on the program,
limitations on the amount of advances are based on the financial condition of
the member institution and the adequacy of collateral pledged to secure the
credit. At March 31, 1996 and December 31, 1995 and during the years ended
December 31, 1995 and 1994 and the three months ended March 31, 1996 and 1995,
the Savings Bank had no borrowings from the FHLB-Chicago, although it may decide
to make use of such instruments in the future.
The Savings Bank also uses reverse repurchase agreements due generally
within one year as a source of funds. At March 31, 1996, reverse repurchase
agreements totalled $15.0 million with a weighted average interest rate of 4.44%
secured by a pledge of certain investment and mortgage-backed securities with an
amortized cost of $16.0 million and a market value of $15.9 million. See "RISK
FACTORS -- Potential Reduction of Certain Funding Liabilities" and Note 10 of
the Notes to the Financial Statements.
The following tables set forth certain information regarding short-term
borrowings by the Savings Bank at the dates and for the periods indicated.
<TABLE>
<CAPTION>
At March 31, At December 31,
-------------------------
1996 1995 1994
------------ ---- ----
<S> <C> <C> <C>
Weighted average rate paid on:
Securities sold under agreements to repurchase........... 4.44% 5.10% --
</TABLE>
<TABLE>
<CAPTION>
At or For the
Three Months
Ended At or For the Year
March 31, Ended December 31,
----------------- ---------------------
1996 1995 1995 1994
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Maximum amount of borrowings outstanding
at any month end:
Securities sold under agreements to repurchase... $15,000 -- $15,000 --
Approximate average short-term borrowings
outstanding with respect to:
Securities sold under agreements to repurchase.. $15,000 -- N/M(2) --
Approximate weighted average rate paid on:(1)
Securities sold under agreements to repurchase... 4.88 -- 5.17% --
</TABLE>
___________________
(1) Computed using the weighted rates of each individual transaction.
(2) Not meaningful.
66
<PAGE>
COMPETITION
In the face of significant competition by financial and non-bank entities
over the last few years, the Savings Bank has had limited success in increasing
its retail deposit base, excluding the historical benefit of the large corporate
relationship with Gilster-Mary Lee and the Heritage Federal acquisition. The
Savings Bank competes for deposits and loans with a number of financial
institutions in a four contiguous county market area that has approximately
135,000 people. In three of the counties served, the Savings Bank's market share
is low and average branch size is below average. A number of the competing
financial institutions are larger than the Savings Bank and are subsidiaries of
larger regional bank holding companies. The Savings Bank also faces competition,
to an unquantifiable extent, from money market mutual funds and local and
regional securities firms.
67
<PAGE>
PROPERTIES
The following table sets forth the Savings Bank offices, as well as certain
additional information relating to the offices, as of March 31, 1996.
<TABLE>
<CAPTION>
Year Building Land Building
Location County Opened Owned/Leased Owned/Leased Square Footage Deposits
- -------- ------ ------ ------------ ------------ -------------- --------
37f (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Main Office
- -----------
1112 State Street Randolph 1919 Owned Owned 10,345 $57,662
Chester, Illinois 62233
Branch Offices
- --------------
2467 West Main Jackson 1988 Leased(2) Leased 3,400 5,008
Carbondale, Illinois 62903
101 South Main Perry 1989(1) Owned Owned 1,950 9,819
Pinckneyville, Illinois 62274
165 West Broadway Randolph 1989(1) Owned Owned 11,142 26,712
Sparta, Illinois 62286
1414 South Main Randolph 1989(1) Owned Owned 1,032 5,572
Red Bud, Illinois 62278
1010 North Main Perry 1990 Owned Owned 3,900 3,742
Perryville, Missouri 63775
Loan Production Office
- ----------------------
125 South Broadview Plaza, Suite #1 Cape Girardeau 1995 Leased(3) Leased 720 N/A
Cape Girardeau, Missouri 63703
</TABLE>
_____________
(1) Acquired in connection with the acquisition of Heritage Federal in 1989.
(2) Lease expires in 1997 with an option to renew.
(3) Lease expires in 1996 with an option to renew.
68
<PAGE>
PERSONNEL
As of March 31, 1996, the Savings Bank had 37 full-time employees and six
part time employees, none of whom were represented by a collective bargaining
unit. The Savings Bank believes its relationship with its employees is
good.
LEGAL PROCEEDINGS
Periodically, there have been various claims and lawsuits involving the
Savings Bank, such as claims to enforce liens, condemnation proceedings on
properties in which the Savings Bank holds security interests, claims involving
the making and servicing of real property loans and other issues incident to the
Savings Bank's business. The Savings Bank is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of the Savings Bank.
69
<PAGE>
MANAGEMENT OF THE HOLDING COMPANY
The Board of Directors of the Holding Company is divided into three
classes, each of which contains approximately one third of the Board. The
Directors shall be elected by the stockholders of the Holding Company for
staggered three-year terms, or until their successors are elected and qualified.
One class of Directors, consisting of Messrs. Welsh, Beck and McDonald, has a
term of office expiring at the first annual meeting of stockholders, a second
class, consisting of Messrs. Collins, Verseman and C. Welge, has a term of
office expiring at the second annual meeting of stockholders, and a third class,
consisting of Messrs. M. Welge and Boxdorfer, has a term of office expiring at
the third annual meeting of stockholders. The executive officers of the Holding
Company are elected annually and hold office until their respective successors
have been elected and qualified or until death, resignation or removal by the
Board of Directors.
The following individuals are executive officers of the Holding
Company and hold the offices set forth opposite their names below.
<TABLE>
<CAPTION>
Name Position with Holding Company
---- -----------------------------
<S> <C>
Michael W. Welge Chairman of the Board and President
Edward K. Collins Chief Executive Officer and Secretary
</TABLE>
Since the formation of the Holding Company, none of the executive
officers, directors or other personnel has received remuneration from the
Holding Company. Information concerning the principal occupations, employment
and compensation of the directors and officers of the Holding Company during the
past five years is set forth under "MANAGEMENT OF THE SAVINGS BANK --
Biographical Information."
MANAGEMENT OF THE SAVINGS BANK
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of the Savings Bank is presently composed of
eight members who are elected for terms of three years, approximately one third
of whom are elected annually in accordance with the Bylaws of the Savings Bank.
The executive officers of the Savings Bank are elected annually by the Board of
Directors and serve at the Board's discretion. The following table sets forth
information with respect to the Directors and executive officers of the Savings
Bank.
DIRECTORS
<TABLE>
<CAPTION>
Current Director Term
Name Age (1) Position with the Savings Bank Since Expires
- ---- ------- ------------------------------ -------- -------
<S> <C> <C> <C> <C>
Michael W. Welge 55 Chairman of the Board,
Chief Financial Officer
and Director 1980 1999
Howard A. Boxdorfer 80 President and Director 1970 1999
Edward K. Collins 51 Executive Vice President, Chief
Executive Officer and Director 1996 1998
Thomas E. Welch, Jr. 56 Senior Vice President and Director 1990 1997
John R. Beck, M.D. 61 Director 1989 1997
Allen R. Verseman 61 Director 1992 1998
James C. McDonald 66 Director 1990 1997
Carl H. Welge 52 Director 1980 1998
</TABLE>
70
<PAGE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
Name Age (1) Position with the Savings Bank
- ---- ------- ----------------------------------
<S> <C> <C>
Mary Jo Homan 32 Treasurer
Robert H. Gross 39 Vice President and Secretary
William P. Wingerter, Sr. 62 Vice President and Branch Manager
</TABLE>
_____________________
(1) As of December 31, 1995.
BIOGRAPHICAL INFORMATION
Set forth below is certain information regarding the Directors and
executive officers of the Savings Bank. Unless otherwise stated, each Director
and executive officer has held his or her current occupation for the last five
years. All Directors and executive officers reside in Chester, Illinois, except
as otherwise noted. There are no family relationships among or between the
directors or executive officers except for Michael W. Welge and Carl H. Welge
who are second cousins.
Michael W. Welge is Chairman of the Board of Directors and Chief
Financial Officer. He has responsibility for various management functions,
including financial management and investment portfolio management,
determination of all employee compensation and employment decisions. Mr. Welge
has been employed for the past 34 years at Gilster-Mary Lee where he currently
serves as its Executive Vice President, Secretary and Treasurer. He has been
active in civic affairs and is a past President of both the Chester Chamber of
Commerce and the Chester School Board. He is a Board member and past Chairman of
the Board of Directors of Millers Mutual Insurance Company of Alton, Illinois.
For the past 16 years Mr. Welge has served as an Alderman of the City Council of
Chester. Mr. Welge has also been the President and a director of several local
corporations and clubs.
Howard A. Boxdorfer has been employed as an officer of the Savings
Bank since 1969 and has been President since 1980. He is a member of the Lions
Club and the Chester Chamber of Commerce.
Edward K. Collins has been an officer of the Savings Bank since
January 1995 and is responsible for the Savings Bank's supervisions and
performance of operations and lending. Prior to his employment at the Savings
Bank, Mr. Collins was Executive Vice President and Senior Loan Officer of Union
Bank of Illinois from August 1991 to December 1994 and was President, Chief
Executive Officer and a Director of First National Bank & Trust, Syracuse,
Nebraska, from August 1988 to August 1991. Mr. Collins resides in Ellis Grove,
Illinois. Mr. Collins is a member of the Board of Directors of the Chester
Chamber of Commerce.
Thomas E. Welch, Jr. has been employed as an officer of the Savings
Bank since 1990 when Heritage Federal was acquired by the Savings Bank. Mr.
Welch is the Senior Vice President and Compliance Officer for the Savings Bank
and manages the Sparta branch. He resides in Sparta, Illinois.
John R. Beck, M.D. is a self-employed physician. He is a member of
the Hospital staff of Memorial Hospital, Chester, Illinois, and a director of
Home Health Care.
Allen R. Verseman has been employed for 27 years at Gilster-Mary Lee
and currently serves as Plant Superintendent.
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James C. McDonald has been employed for 43 years at the U.S. Postal
Service. He is a Trustee of the Presbyterian Church, Sparta, Illinois, and is a
member of the Sparta Building Commission and the Sparta Senior Citizen Board.
Mr. McDonald resides in Sparta, Illinois.
Carl H. Welge has been employed for six years at Gilster-Mary Lee and
currently serves as Accounts Receivable Supervisor. He is a member of the
Memorial Hospital Board of Directors and a member of the Friends of Chester
Public Library.
Mary Jo Homan has been employed by the Savings Bank since 1983 and is
responsible for accounting and personnel and has served as Treasurer since
January 1, 1996. She is a member of the Finance Committee of St. Mary's Church,
Ellis Grove, Illinois.
Robert H. Gross has been employed by the Savings Bank since 1983. He
serves as the Senior Lending Officer and is Secretary for the Board of
Directors. Mr. Gross resides in Ellis Grove, Illinois.
William P. Wingerter, Sr. has been employed by the Savings Bank since
1988. He is the branch manager in Perryville, Missouri and is responsible for
Missouri operations. He is a member of the Chamber of Commerce and is the
elected Chairman of the Board of the Perry County Memorial Hospital. He resides
in Perryville, Missouri.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Savings Bank is conducted through meetings and
activities of the Board of Directors and its committees. During the fiscal year
ended December 31, 1995, the Board of Directors held 16 meetings. No director
attended fewer than 75% of the total meetings of the Board of Directors and of
committees on which such director served.
Each year an Audit Committee is appointed, and consists of the entire
Board of Directors with the exception of those Directors that are employees of
the Savings Bank. The purpose of this Committee is to review financial data of
the Savings Bank and retain the Savings Bank's independent auditor. During the
fiscal year ended December 31, 1995, the Audit Committee met two times.
The Savings Bank's Executive Committee consists of Directors M. Welge,
Boxdorfer and Collins, the Secretary and two rotating Directors. The Executive
Committee meets weekly, and the committee has full authority of the Board of
Directors in order to conduct business in a timely matter. The Executive
Committee also functions as the Savings Bank's Loan Committee, Compensation
Committee, and Asset Liability Committee. All actions of the Executive
Committee are subsequently ratified by the full Board of Directors. The
Executive Committee met 52 times during the fiscal year ended December 31, 1995.
DIRECTORS' COMPENSATION
BOARD AND COMMITTEE FEES. Directors received a fee of $700 per month
during the year ended December 31, 1995, with no additional fees paid for
committee meetings, except for the rotating Directors who serve on the Executive
Committee who receive $50 per meeting attended. Director's fees totalled
$58,000 for the year ended December 31, 1995. It is currently anticipated that
after consummation of the Conversion directors' fees will be paid by the Holding
Company and no separate fees will be paid for service on the Board of Directors
of the Savings Bank.
DIRECTOR EMERITUS PLAN. Effective January 18, 1996, the Board of
Directors of the Savings Bank adopted the Director Emeritus Plan to compensate
and reward directors of the Savings Bank for service to the Savings Bank. Under
the Director Emeritus Plan, a director is designated a Director Emeritus upon
(i) attaining age 81 or (ii) upon resignation from the Board in the event of
retirement, a change in control of the Savings Bank (as defined in the
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plan), or failure to be reelected. Upon designation, a Director Emeritus will
receive an annual fee equal to the product of $500 and the Director Emeritus'
years of service as a regular Board member. The fee is payable for a 10-year
period beginning on the later to occur of (i) the first anniversary of the
Director Emeritus' designation or (ii) the date the Director Emeritus attains
age 65. In the event of a Director Emeritus' death prior to his receipt of all
Director Emeritus fees, the Savings Bank will make a lump sum payment equal to
the lesser of the remaining payments due or three times the Director Emeritus
fee to the Director Emeritus' designated beneficiary. The Director Emeritus
Plan will be funded with life insurance policies. The estimated expense of the
Director Emeritus Plan is expected to be $170,000 for fiscal 1996.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following information is furnished
for the Chief Executive Officer of the Savings Bank for the year ended December
31, 1995. No executive officer of the Savings Bank received salary and bonus in
excess of $100,000 during the year ended December 31, 1995.
<TABLE>
<CAPTION>
================================================================================
SUMMARY COMPENSATION TABLE(1)
- --------------------------------------------------------------------------------
Annual Compensation
- --------------------------------------------------------------------------------
Other
Annual
Name and Position Year Salary Bonus Compensation
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Edward K. Collins 1995 $70,000 $7,000 $8,370
Executive Vice President, Chief
Executive Officer and Director
================================================================================
</TABLE>
_________________________
(1) Compensation information for fiscal years ended December 31, 1994 and
1993 has been omitted because the Savings Bank was not a public
company at such times. Excludes certain additional benefits, the
aggregate amounts of which do not exceed 10% of total salary and
bonus.
EMPLOYMENT AGREEMENT. In connection with the Conversion, the Holding
Company and the Savings Bank (collectively, the "Employers") will enter into a
three-year employment agreement with Mr. Collins. Under the agreement, the
initial salary level for Mr. Collins will be $80,000, which amount will be paid
by the Savings Bank and may be increased at the discretion of the Board of
Directors or an authorized committee of the Board. On each anniversary of the
commencement date of the agreement, the term of the agreement may be extended
for an additional year. The agreement is terminable by the Employers at any
time or upon the occurrence of certain events specified by federal regulations.
The employment agreement provides for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Employers. Severance payments also will be
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to a change in control, Mr. Collins is assigned
duties inconsistent with his position, duties, responsibilities and status
immediately prior to such change in control. The term "change in control" is
defined in the agreement as having occurred when, among other things, (a) a
person other than the Holding Company purchases shares of Common Stock pursuant
to a tender or exchange offer for such shares, (b) any person (as such term is
used in Sections 13(d)
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and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly
or indirectly, of securities of the Holding Company representing 25% or more of
the combined voting power of the Holding Company's then outstanding securities,
(c) the membership of the Board of Directors changes as the result of a
contested election, or (d) shareholders of the Holding Company approve a merger,
consolidation, sale or disposition of all or substantially all of the Holding
Company's assets, or a plan of partial or complete liquidation.
The severance payments from the Employers will equal the greater of
$250,000 or 2.99 times Mr. Collins' average annual compensation during the five-
year period preceding the change in control. Such amount will be paid in a lump
sum within 10 business days following the termination of employment. Assuming
that a change in control had occurred at December 31, 1995, Mr. Collins would be
entitled to severance payments of $250,000. Section 280G of the Internal
Revenue Code of 1986, as amended ("Code"), states that severance payments that
equal or exceed three times the base compensation of the individual are deemed
to be "excess parachute payments" if they are contingent upon a change in
control. Individuals receiving excess parachute payments are subject to a 20%
excise tax on the amount of such excess payments, and the Employers would not be
entitled to deduct the amount of such excess payments.
The agreement restricts Mr. Collins' right to compete against the
Employers for a period of one year from the date of termination of the agreement
if he voluntarily terminates his employment, except in the event of a change in
control. The Board of Directors of the Holding Company or the Savings Bank may,
from time to time, also extend employment agreements to other senior executive
officers.
The Employers also will enter into an employment agreement with Mr. M.
Welge on substantially the same terms as those contained in Mr. Collins'
agreement.
BENEFITS
GENERAL. The Savings Bank currently provides health, dental, life and
disability insurance benefits for full-time employees, subject to certain
deductibles.
RETIREMENT PLAN. The Savings Bank is a participant in the Financial
Institution Retirement Fund ("FIRF"), a multi-employer, non-contributory defined
benefit retirement plan. The FIRF plan covers all employees who have completed
one year of service and have attained the age of 21 years and provides for
monthly retirement benefits determined based on the employee's base salary and
years of service. The normal retirement age is 65 and the early retirement age
is before age 65, but generally after age 55. Normal retirement benefits are
equal to 2.0% multiplied by the years of service to the Savings Bank and the
employee's average salary for the five highest consecutive years preceding
retirement. Benefits under the plan are not subject to offset for social
security benefits. If an employee elects early retirement, but defers the
receipt of benefits until age 65, the formula for computation of early
retirement benefits is the same as if the employee had retired at the normal
retirement age. However, if the employee elects early retirement and receives
benefits prior to age 65, benefits are reduced by applying an early retirement
factor based on the number of years the early retirement date precedes age 65.
Benefits under the plan are fully vested upon the completion of five years of
employment. Separate actuarial valuations are not made for individual members
of the plan. Pension costs and funding include normal costs. According to
FIRF, plan assets exceeded vested benefits as of December 31, 1995, the date of
the most current actuarial valuation. Pension expense for the fiscal year ended
December 31, 1995 was $84,000. See Note 12 of the Notes to the Financial
Statements.
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<PAGE>
The following table illustrates annual pension benefits payable upon
retirement, based on various levels of compensation and years of service.
<TABLE>
<CAPTION>
Highest Five-Year
Average Annual Years of Service
--------------------------------------------------
Compensation 5 10 15 25 35
- ----------------- ----- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
$ 10,000............... 1,000 2,000 3,000 5,000 7,000
20,000............... 2,000 4,000 6,000 10,000 14,000
30,000............... 3,000 6,000 9,000 15,000 21,000
40,000............... 4,000 8,000 12,000 20,000 28,000
60,000............... 6,000 12,000 18,000 30,000 42,000
80,000............... 8,000 16,000 24,000 40,000 56,000
100,000............... 10,000 20,000 30,000 50,000 70,000
120,000............... 12,000 24,000 36,000 60,000 84,000
</TABLE>
EMPLOYEE STOCK OWNERSHIP PLAN. The Board of Directors has authorized
the adoption by the Savings Bank of an ESOP for employees of the Savings Bank to
become effective upon the consummation of the Conversion. The ESOP is intended
to satisfy the requirements for an employee stock ownership plan under the Code
and the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Full-time employees of the Holding Company and the Savings Bank who have been
credited with at least 1,000 hours of service during a 12-month period and who
have attained age 21 are eligible to participate in the ESOP.
In order to fund the purchase of up to 8% of the Common Stock to be
issued in the Conversion, it is anticipated that the ESOP will borrow funds from
the Holding Company. Such loan will equal 100% of the aggregate purchase price
of the Common Stock. The loan to the ESOP will be repaid principally from the
Savings Bank's contributions to the ESOP and any dividends paid on Common Stock
held by the ESOP over the anticipated 15-year term of the loan. The interest
rate for the ESOP loan is expected to be 8.00% per annum. See "PRO FORMA DATA."
In any plan year, the Savings Bank may make additional discretionary
contributions to the ESOP for the benefit of plan participants in either cash or
shares of Common Stock, which may be acquired through the purchase of
outstanding shares in the market or from individual stockholders or which
constitute authorized but unissued shares or shares held in treasury by the
Holding Company. The timing, amount, and manner of such discretionary
contributions will be affected by several factors, including applicable
regulatory policies, the requirements of applicable laws and regulations, and
market conditions.
Shares purchased by the ESOP with the proceeds of the loan will be
held in a suspense account and released on a pro rata basis as the loan is
repaid. Discretionary contributions to the ESOP and shares released from the
suspense account will be allocated among participants on the basis of each
participant's proportional share of total compensation. Forfeitures will be
reallocated among the remaining plan participants.
Participants will vest in their accrued benefits under the ESOP upon
the completion of five years of service. Benefits may be payable upon a
participant's retirement, early retirement, death, disability, or termination of
employment. The Savings Bank's contributions to the ESOP are not fixed, so
benefits payable under the ESOP cannot be estimated.
Messrs. M. Welge, Boxdorfer and Collins have been appointed by the
Board of Directors of the Savings Bank to serve as trustees of the ESOP. Under
the ESOP, the trustees must vote all allocated shares held in the ESOP in
accordance with the instructions of plan participants and allocated shares for
which no instructions are received must be voted in the same ratio on any matter
as those shares for which instructions are given.
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Pursuant to SOP 93-6, compensation expense for a leveraged employee
stock ownership, such as the ESOP, is recorded at the fair market value of the
ESOP shares committed to be released to participants' accounts. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS --Impact of New Accounting Pronouncements -- Accounting for Employee
Stock Ownership Plans."
If the ESOP purchases newly issued shares from the Holding Company,
total stockholders' equity would neither increase nor decrease. However, on a
per share basis, stockholders' equity and per share net earnings would decrease
because of the increase in the number of outstanding shares.
The ESOP will be subject to the requirements of ERISA and the
regulations of the IRS and the Department of Labor issued thereunder. The
Savings Bank intends to request a determination letter from the IRS regarding
the tax-qualified status of the ESOP. Although no assurance can be given that a
favorable determination letter will be issued, the Savings Bank expects that a
favorable determination letter will be received by the ESOP.
1996 STOCK OPTION PLAN. The Board of Directors of the Holding Company
intends to adopt the Stock Option Plan and expects to submit the Stock Option
Plan to the stockholders for approval at a meeting held no earlier than six
months following consummation of the Conversion. The approval of a majority
vote of the Holding Company's outstanding shares is required prior to the
implementation of the Stock Option Plan. The Stock Option Plan will comply with
all applicable regulatory requirements. However, the Stock Option Plan will not
be approved or endorsed by the OTS.
The Stock Option Plan will be designed to attract and retain qualified
management personnel and nonemployee directors, to provide such officers, key
employees and nonemployee directors with a proprietary interest in the Holding
Company as an incentive to contribute to the success of the Holding Company and
the Banks, and to reward officers and key employees for outstanding performance.
The Stock Option Plan will provide for the grant of incentive stock options
("ISOs") intended to comply with the requirements of Section 422 of the Code and
nonqualified stock options ("NQOs"). Upon receipt of stockholder approval of
the Stock Option Plan, stock options may be granted to key employees of the
Holding Company and its subsidiaries, including the Banks. Nonemployee
directors will receive stock option awards in accordance with a formula set
forth in the Stock Option Plan. The Stock Option Plan will be administered and
interpreted by a committee of the Board of Directors ("Committee") which is
"disinterested" pursuant to applicable regulations under the federal securities
laws. Unless sooner terminated, the Stock Option Plan will continue in effect
for a period of 10 years from the date the Stock Option Plan is adopted by the
Board of Directors.
A number of authorized shares of Common Stock equal to 10% of the
number of shares of Common Stock issued in connection with the Conversion will
be reserved for future issuance under the Stock Option Plan (201,250 shares
based on the issuance of 2,012,500 shares at the maximum of the Estimated
Valuation Range). Such shares will be authorized but unissued shares or treasury
shares. In the event of a stock split, reverse stock split, stock dividend, or
similar event, the number of shares of Common Stock under the Stock Option Plan,
the number of shares to which any award relates and the exercise price per share
under any option may be adjusted by the Committee to reflect the increase or
decrease in the total number of shares of Common Stock outstanding.
Under the Stock Option Plan, the Committee will determine which
officers and key employees will be granted options, whether such options will be
ISOs or NQOs, the number of shares subject to each option, and the
exercisability of such options. The per share exercise price of an option will
equal 100% (110% for ISOs granted to a 10% shareholder) of the fair market value
of a share of Common Stock on the date the option is granted.
The number of options granted to nonemployee directors and the terms
thereof will be determined under a formula set forth in the Stock Option Plan.
The formula will provide that no individual nonemployee director may be awarded
an option covering in excess of 5% of the number of shares of Common Stock
reserved under the Plan. All options granted to nonemployee directors will be
NQOs and such options will be granted at an exercise price equal to 100% of the
fair market value of the Common Stock on the date the option is granted.
Options granted
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upon the effective date of the Stock Option Plan will vest ratably over a five-
year period following the date of grant. However, unvested options will be
immediately exercisable in the event of the recipient's death or disability.
Unvested options will also be immediately exercisable in the event of a change
in control of the Holding Company or the Savings Bank (as defined in the Stock
Option Plan), to the extent authorized or not prohibited by applicable law or
regulations.
Each stock option that is awarded to an officer or key employee will
remain exercisable at any time on or after the date it vests through the earlier
to occur of the tenth anniversary of the date of grant or two months after the
date on which the optionee terminates employment (one year in the event of the
optionee's termination by reason of death or disability), unless such period is
extended by the Committee. Each stock option that is awarded to a nonemployee
director will remain exercisable through the earlier to occur of the tenth
anniversary of the date of grant or one year (two years in the event of a
nonemployee director's death or disability) following the termination of a
nonemployee director's service on the Board. Except in limited circumstances,
all stock options are nontransferable except by will or the laws of descent or
distribution.
The Stock Option Plan also provides that upon the payment of an
"extraordinary dividend" by the Holding Company, each optionee will receive a
cash payment equivalent to the dividends that would have been payable to such
optionee had the options been exercised on or before the record date of such
dividend. For purposes of the Stock Option Plan, an "extraordinary dividend" is
a dividend payable at a rate in excess of the Savings Bank's weighted average
cost of funds on interest bearing liabilities for the 12-month period preceding
the record date of the dividend.
Under current provisions of the Code, the federal tax treatment of
ISOs and NQOs is different. With respect to ISOs, an optionee who satisfies
certain holding period requirements will not recognize income at the time the
option is granted or at the time the option is exercised. If the holding period
requirements are satisfied, the optionee will generally recognize capital gain
or loss upon a subsequent disposition of the shares of Common Stock received
upon the exercise of a stock option. If the holding period requirements are not
satisfied, the difference between the fair market value of the Common Stock on
the date of grant and the option exercise price, if any, will be taxable to the
optionee at ordinary income tax rates. A federal income tax deduction generally
will not be available to the Holding Company as a result of the grant or
exercise of an ISO, unless the optionee fails to satisfy the holding period
requirements. With respect to NQOs, the grant of an NQO is generally not a
taxable event for the optionee and no tax deduction will be available to the
Holding Company. However, upon the exercise of an NQO, the difference between
the fair market value of the Common Stock on the date of exercise and the option
exercise price generally will be treated as compensation to the optionee upon
exercise, and the Holding Company will be entitled to a compensation expense
deduction in the amount of income realized by the optionee.
Subject to stockholder approval of the Stock Option Plan, the
Committee intends to grant awards under the Stock Option Plan equal to the
following percentages of shares issued in the Offerings: Mr. M. Welge - 2.0%;
Mr. Boxdorfer - 1.5%; Mr. Collins -- 2.0%; and other officers and employees (12
persons) -- 2.0%. In addition, the current nonemployee directors of the Savings
Bank (four persons) are expected to receive an aggregate award equal to 2.0% of
the number of shares issued in the Offerings. The balance of the shares reserved
under the Stock Option Plan, or a number of shares equal to 0.5% of the number
of shares issued in the Offerings, are expected to be allocated in the future to
current and prospective officers and employees.
MANAGEMENT RECOGNITION PLAN. Following the Conversion, the Board of
Directors of the Holding Company intends to adopt the MRP for officers,
employees, and nonemployee directors of the Holding Company and the Banks. The
MRP will enable the Holding Company and the Bank, to provide participants with a
proprietary interest in the Holding Company as an incentive to contribute to the
success of the Holding Company and the Banks.
The MRP is expected to be submitted to stockholders for approval at a
meeting to be held no earlier than six months following consummation of the
Conversion. The approval of a majority vote of the Holding Company's
stockholders is required prior to implementation of the MRP. The MRP will
comply with all applicable regulatory
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requirements. However, the OTS will not approve or endorse the MRP. The MRP
expects to acquire a number of shares of Common Stock equal to 4.0% of the
Common Stock issued in connection with the Conversion (80,500 shares based on
the issuance of 2,012,500 shares in the Conversion at the maximum of the
Estimated Valuation Range). Such shares will be acquired on the open market, if
available, with funds contributed by the Holding Company to a trust which the
Holding Company may establish in conjunction with the MRP ("MRP Trust") or from
authorized but unissued or treasury shares of the Holding Company.
A committee of the Board of Directors of the Holding Company will
administer the MRP, the members of which will also serve as trustees of the MRP
Trust, if formed. The trustees will be responsible for the investment of all
funds contributed by the Holding Company to the MRP Trust. Shares of Common
Stock granted pursuant to the MRP will be in the form of restricted stock
vesting ratably over a five-year period following the date of grant. During the
period of restriction, all shares will be held in escrow by the Holding Company
or by the MRP Trust. If a recipient terminates employment for reasons other
than death or disability, the recipient will forfeit all rights to allocated but
unvested shares which are then subject to restriction. In the event of the
recipient's death or disability, all restrictions will expire and all allocated
shares will become fully vested. In addition, all allocated shares will vest
upon a change of control of the Holding Company or the Savings Bank (as defined
in the MRP), to the extent authorized or not prohibited by applicable law or
regulation.
The Board of Directors of the Holding Company may terminate the MRP at
any time and, upon termination, all unallocated shares of Common Stock will
revert to the Holding Company.
A recipient of an MRP award in the form of restricted stock will
generally not recognize income upon an award of shares of Common Stock, and the
Holding Company will not be entitled to a federal income tax deduction, until
the termination of the restrictions. Upon such termination, the recipient will
recognize ordinary income in an amount equal to the fair market value of the
Common Stock at the time and the Holding Company will be entitled to a deduction
in the same amount after satisfying federal income tax withholding requirements.
However, the recipient may elect to recognize ordinary income in the year the
restricted stock is granted in an amount equal to the fair market value of the
shares at that time, determined without regard to the restrictions. In that
event, the Holding Company will be entitled to a deduction in such year and in
the same amount. Any gain or loss recognized by the recipient upon subsequent
disposition of the stock will be either a capital gain or capital loss.
Subject to stockholder approval of the MRP, the Committee intends to
grant awards under the MRP equal to the following percentages of shares issued
in the Offerings: Mr. M. Welge - 1.0%; Mr. Boxdorfer - 1.0%; Mr. Collins --
0.4%; other officers and employees (7 persons) -- 0.76%. In addition, the
current nonemployee directors of the Savings Bank (four persons) will receive an
aggregate award equal to 0.64% of the number of shares issued in the Offerings.
A reserve of unallocated shares equal to 0.2% of the number of shares issued in
the Offerings may be allocated in the future to current and prospective
directors, officers and employees.
TRANSACTIONS WITH THE SAVINGS BANK
Current law requires that all loans or extensions of credit to
executive officers and directors must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and does not involve more than the
normal risk of repayment or present other unfavorable features. The Savings Bank
is prohibited from making any new loans or extensions of credit to the Savings
Bank's executive officers and directors at different rates or terms than those
offered to the general public, and has adopted a policy to this effect. The
aggregate amount of loans by the Savings Bank to its executive officers and
directors was $219,000 at December 31, 1995, or approximately 0.79% of pro forma
stockholders' equity (based on the issuance of the maximum of the Estimated
Valuation Range).
See also "RISK FACTORS -- Potential Reduction of Certain Funding
Liabilities" for information regarding the Savings Bank's relationship with
Gilster-Mary Lee, of which the Savings Bank's Chairman of the Board and Chief
Financial Officer, Michael W. Welge, is an executive officer.
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REGULATION
GENERAL
The Savings Bank is subject to extensive regulation, examination and
supervision by the OTS as its chartering agency, and the FDIC, as the insurer of
its deposits. The activities of federal savings institutions are governed by
the Home Owners' Loan Act, as amended (the "HOLA") and, in certain respects, the
Federal Deposit Insurance Act ("FDIA") and the regulations issued by the OTS and
the FDIC to implement these statutes. These laws and regulations delineate the
nature and extent of the activities in which federal savings associations may
engage. Lending activities and other investments must comply with various
statutory and regulatory capital requirements. In addition, the Savings Bank's
relationship with its depositors and borrowers is also regulated to a great
extent, especially in such matters as the ownership of deposit accounts and the
form and content of the Savings Bank's mortgage documents. The Savings Bank
must file reports with the OTS and the FDIC concerning its activities and
financial condition in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with, or acquisitions of,
other financial institutions. There are periodic examinations by the OTS and
the FDIC to review the Savings Bank's compliance with various regulatory
requirements. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Any change in such policies, whether by the OTS, the
FDIC or Congress, could have a material adverse impact on the Holding Company,
the Savings Bank and their operations. The Holding Company, as a savings and
loan holding company, will also be required to file certain reports with, and
otherwise comply with the rules and regulations of the OTS.
FEDERAL REGULATION OF SAVINGS BANKS
OFFICE OF THRIFT SUPERVISION. The OTS is an office in the Department
of the Treasury subject to the general oversight of the Secretary of the
Treasury. The OTS generally possesses the supervisory and regulatory duties and
responsibilities formerly vested in the Federal Home Loan Bank Board. Among
other functions, the OTS issues and enforces regulations affecting federally
insured savings associations and regularly examines these institutions.
FEDERAL HOME LOAN BANK SYSTEM. The FHLB System, consisting of 12
FHLBs, is under the jurisdiction of the Federal Housing Finance Board ("FHFB").
The designated duties of the FHFB are to: supervise the FHLBs; ensure that the
FHLBs carry out their housing finance mission; ensure that the FHLBs remain
adequately capitalized and able to raise funds in the capital markets; and
ensure that the FHLBs operate in a safe and sound manner.
The Savings Bank, as a member of the FHLB-Chicago, is required to
acquire and hold shares of capital stock in the FHLB-Chicago in an amount equal
to the greater of (i) 1.0% of the aggregate outstanding principal amount of
residential mortgage loans, home purchase contracts and similar obligations at
the beginning of each year, or (ii) 1/20 of its advances (borrowings) from the
FHLB-Chicago. The Savings Bank is in compliance with this requirement with an
investment in FHLB-Chicago stock of $622,000 at March 31, 1996.
Among other benefits, the FHLB provides a central credit facility
primarily for member institutions. It is funded primarily from proceeds derived
from the sale of consolidated obligations of the FHLB System. It makes advances
to members in accordance with policies and procedures established by the FHFB
and the Board of Directors of the FHLB-Chicago.
FEDERAL DEPOSIT INSURANCE CORPORATION. The FDIC is an independent
federal agency established originally to insure the deposits, up to prescribed
statutory limits, of federally insured banks and to preserve the safety and
soundness of the banking industry. In 1989 the FDIC also became the insurer, up
to the prescribed limits, of the deposit accounts held at federally insured
savings associations and established two separate insurance funds: the BIF
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and the SAIF. As insurer of deposits, the FDIC has examination, supervisory and
enforcement authority over all savings associations.
The Savings Bank's accounts are insured by the SAIF. The FDIC insures
deposits at the Savings Bank to the maximum extent permitted by law. The
Savings Bank currently pays deposit insurance premiums to the FDIC based on a
risk-based assessment system established by the FDIC for all SAIF-member
institutions. Under applicable regulations, institutions are assigned to one of
three capital groups which are based solely on the level of an institution's
capital --"well capitalized," "adequately capitalized," and "undercapitalized" -
- - which are defined in the same manner as the regulations establishing the
prompt corrective action system under Section 38 of the FDIA, as discussed
below. These three groups are then divided into three subgroups which reflect
varying levels of supervisory concern, from those which are considered to be
healthy to those which are considered to be of substantial supervisory concern.
The matrix so created results in nine assessment risk classifications, with
rates currently ranging from .23% for well capitalized, financially sound
institutions with only a few minor weaknesses to .31% for undercapitalized
institutions that pose a substantial risk of loss to the SAIF unless effective
corrective action is taken. Until the second half of 1995, the same rate matrix
applied to BIF-member institutions. The FDIC is authorized to raise assessment
rates in certain circumstances. The Savings Bank's assessments expensed for the
year ended December 31, 1995, were $295,000.
In August 1995 and again in November 1995, the FDIC substantially
reduced deposit insurance premiums for well-capitalized, well-managed financial
institutions that are members of the BIF. As a result of the revisions the rates
were reduced to a range of 0% to 0.27% with approximately 92% of BIF members
paying the statutory minimum annual assessment of $2,000. With respect to SAIF
member institutions, the FDIC has retained the existing rate schedule of 23 to
31 basis points. The latest reduction in BIF premiums went into effect January
1, 1996. The Savings Bank is, and after the Conversion will remain, a member of
the SAIF rather than the BIF. SAIF premiums may not be reduced for several years
because the SAIF has lower reserves than the BIF and is responsible for more
troubled financial institutions. See "RISK FACTORS --Recapitalization of SAIF
and Its Impact on SAIF Premiums."
The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any condition imposed by an agreement with the FDIC. It also may suspend
deposit insurance temporarily during the hearing process for the permanent
termination of insurance, if the institution has no tangible capital. If
insurance of accounts is terminated, the accounts at the institution at the time
of termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC. Management is
aware of no existing circumstances which could result in termination of the
deposit insurance of the Savings Bank.
LIQUIDITY REQUIREMENTS. Under OTS regulations, each savings
institution is required to maintain an average daily balance of liquid assets
(cash, certain time deposits and savings accounts, bankers' acceptances, and
specified U.S. Government, state or federal agency obligations and certain other
investments) equal to a monthly average of not less than a specified percentage
(currently 5.0%) of its net withdrawable accounts plus short-term borrowings.
OTS regulations also require each savings institution to maintain an average
daily balance of short-term liquid assets at a specified percentage (currently
1.0%) of the total of its net withdrawable savings accounts and borrowings
payable in one year or less. Monetary penalties may be imposed for failure to
meet liquidity requirements. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital
Resources."
PROMPT CORRECTIVE ACTION. Under Section 38 of the FDIA, as added by
the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
each federal banking agency is required to implement a system of prompt
corrective action for institutions which it regulates. The federal banking
agencies have promulgated substantially similar regulations to implement this
system of prompt corrective action. Under the regulations, an institution shall
be deemed to be (i) "well capitalized" if it has a total risk-based capital
ratio of 10.0% or more, has
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a Tier I risk-based capital ratio of 6.0% or more, has a leverage ratio of 5.0%
or more and is not subject to specified requirements to meet and maintain a
specific capital level for any capital measure; (ii) "adequately capitalized" if
it has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based
capital ratio of 4.0% or more and a leverage ratio of 4.0% or more (3.0% under
certain circumstances) and does not meet the definition of "well capitalized;"
(iii) "undercapitalized" if it has a total risk-based capital ratio that is less
than 8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a
leverage ratio that is less than 4.0% (3.0% under certain circumstances); (iv)
"significantly undercapitalized" if it has a total risk-based capital ratio that
is less than 6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a
leverage ratio that is less than 3.0%; and (v) "critically undercapitalized" if
it has a ratio of tangible equity to total assets that is equal to or less than
2.0%.
Section 38 of the FDIA and the implementing regulations also provide
that a federal banking agency may, after notice and an opportunity for a
hearing, reclassify a well capitalized institution as adequately capitalized and
may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category if the institution is in an unsafe or unsound condition or has received
in its most recent examination, and has not corrected, a less than satisfactory
rating for asset quality, management, earnings or liquidity. (The OTS may not,
however, reclassify a significantly undercapitalized institution as critically
undercapitalized.)
An institution generally must file a written capital restoration plan
which meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with the appropriate federal banking
agency within 45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized. Immediately upon becoming
undercapitalized, an institution shall become subject to the provisions of
Section 38 of the FDIA, which sets forth various mandatory and discretionary
restrictions on its operations.
At March 31, 1996, the Savings Bank was categorized as "well
capitalized" under the prompt corrective action regulations of the OTS.
STANDARDS FOR SAFETY AND SOUNDNESS. The FDIA requires the federal
banking regulatory agencies to prescribe, by regulation, standards for all
insured depository institutions relating to: (i) internal controls, information
systems and internal audit systems; (ii) loan documentation; (iii) credit
underwriting; (iv) interest rate risk exposure; (v) asset growth; and (vi)
compensation, fees and benefits. The federal banking agencies recently adopted
final regulations and Interagency Guidelines Prescribing Standards for Safety
and Soundness ("Guidelines") to implement safety and soundness standards
required by the FDIA. The Guidelines set forth the safety and soundness
standards that the federal banking agencies use to identify and address problems
at insured depository institutions before capital becomes impaired. The agencies
also proposed asset quality and earnings standards which, if adopted in final,
would be added to the Guidelines. Under the final regulations, if the OTS
determines that the Savings Bank fails to meet any standard prescribed by the
Guidelines, the agency may require the Savings Bank to submit to the agency an
acceptable plan to achieve compliance with the standard, as required by the
FDIA. The final regulations establish deadlines for the submission and review of
such safety and soundness compliance plans.
QUALIFIED THRIFT LENDER TEST. All savings associations are required
to meet a qualified thrift lender ("QTL") test set forth in Section 10(m) of the
HOLA and regulations of the OTS thereunder to avoid certain restrictions on
their operations. A savings institution that fails to become or remain a QTL
shall either become a national bank or be subject to the following restrictions
on its operations: (1) the association may not make any new investment or engage
in activities that would not be permissible for national banks; (2) the
association may not establish any new branch office where a national bank
located in the savings institution's home state would not be able to establish a
branch office; (3) the association shall be ineligible to obtain new advances
from any FHLB; and (4) the payment of dividends by the association shall be
subject to the rules regarding the statutory and regulatory dividend
restrictions applicable to national banks. Also, beginning three years after the
date on which the savings institution ceases to be a QTL, the savings
institution would be prohibited from retaining any investment or engaging in any
activity not permissible for a national bank and would be required to repay any
outstanding advances to any
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FHLB. In addition, within one year of the date on which a savings association
controlled by a company ceases to be a QTL, the company must register as a bank
holding company and become subject to the rules applicable to such companies. A
savings institution may requalify as a QTL if it thereafter complies with the
QTL test.
Currently, the QTL test requires that 65% of an institution's
"portfolio assets" (as defined) consist of certain housing and consumer-related
assets on a monthly average basis in nine out of every 12 months. Assets that
qualify without limit for inclusion as part of the 65% requirement are loans
made to purchase, refinance, construct, improve or repair domestic residential
housing and manufactured housing; home equity loans; mortgage-backed securities
(where the mortgages are secured by domestic residential housing or manufactured
housing); FHLB stock; and direct or indirect obligations of the FDIC. In
addition, the following assets, among others, may be included in meeting the
test subject to an overall limit of 20% of the savings institution's portfolio
assets: 50% of residential mortgage loans originated and sold within 90 days of
origination; 100% of consumer and educational loans (limited to 10% of total
portfolio assets); and stock issued by the FHLMC or the FNMA. Portfolio assets
consist of total assets minus the sum of (i) goodwill and other intangible
assets, (ii) property used by the savings institution to conduct its business,
and (iii) liquid assets up to 20% of the institution's total assets. At March
31, 1996, the qualified thrift investments of the Savings Bank were
approximately 68.1% of its portfolio assets.
CAPITAL REQUIREMENTS. Under OTS regulations a savings association
must satisfy three minimum capital requirements: core capital, tangible capital
and risk-based capital. Savings associations must meet all of the standards in
order to comply with the capital requirements. The Holding Company is not
subject to any minimum capital requirements.
OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets). Core capital
is defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries," which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities. In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion of
certain assets from capital and to appropriately account for the investments in
and assets of both includable and nonincludable subsidiaries. Institutions that
fail to meet the core capital requirement would be required to file with the OTS
a capital plan that details the steps they will take to reach compliance. In
addition, the OTS' prompt corrective action regulation provides that a savings
institution that has a leverage ratio of less than 4% (3% for institutions
receiving the highest CAMEL examination rating) will be deemed to be
"undercapitalized" and may be subject to certain restrictions. See "--Federal
Regulation of Savings Banks -- Prompt Corrective Action."
As required by federal law, the OTS has proposed a rule revising its
minimum core capital requirement to be no less stringent than that imposed on
national banks. The OTS has proposed that only those savings associations rated
a composite one (the highest rating) under the CAMEL rating system for savings
associations will be permitted to operate at or near the regulatory minimum
leverage ratio of 3%. All other savings associations will be required to
maintain a minimum leverage ratio of 4% to 5%. The OTS will assess each
individual savings association through the supervisory process on a case-by-case
basis to determine the applicable requirement. No assurance can be given as to
the final form of any such regulation, the date of its effectiveness or the
requirement applicable to the Savings Bank.
Savings associations also must maintain "tangible capital" not less
than 1.5% of the Savings Bank's adjusted total assets. "Tangible capital" is
defined, generally, as core capital minus any "intangible assets" other than
purchased mortgage servicing rights.
Each savings institution must maintain total risk-based capital equal
to at least 8% of risk-weighted assets. Total risk-based capital consists of the
sum of core and supplementary capital, provided that supplementary capital
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cannot exceed core capital, as previously defined. Supplementary capital
includes (i) permanent capital instruments such as cumulative perpetual
preferred stock, perpetual subordinated debt, and mandatory convertible
subordinated debt, (ii) maturing capital instruments such as subordinated debt,
intermediate-term preferred stock and mandatory convertible subordinated debt,
and (iii) general valuation loan and lease loss allowances up to 1.25% of risk-
weighted assets.
The risk-based capital regulation assigns each balance sheet asset
held by a savings institution to one of four risk categories based on the amount
of credit risk associated with that particular class of assets. Assets not
included for purposes of calculating capital are not included in calculating
risk-weighted assets. The categories range from 0% for cash and securities that
are backed by the full faith and credit of the U.S. Government to 100% for
repossessed assets or assets more than 90 days past due. Qualifying residential
mortgage loans (including multi-family mortgage loans) are assigned a 50% risk
weight. Consumer, commercial, home equity and residential construction loans are
assigned a 100% risk weight, as are nonqualifying residential mortgage loans and
that portion of land loans and nonresidential construction loans which do not
exceed an 80% loan-to-value ratio. The book value of assets in each category is
multiplied by the weighing factor (from 0% to 100%) assigned of that category.
These products are then totalled to arrive at total risk-weighted assets. Off-
balance sheet items are included in risk-weighted assets by converting them to
an approximate balance sheet "credit equivalent amount" based on a conversion
schedule. These credit equivalent amounts are then assigned to risk categories
in the same manner as balance sheet assets and included risk-weighted assets.
The OTS has incorporated an interest rate risk component into its
regulatory capital rule. Under the rule, savings associations with "above
normal" interest rate risk exposure would be subject to a deduction from total
capital for purposes of calculating their risk-based capital requirements. A
savings association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
----
outgoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200 basis point increase or
decrease in market interest rates divided by the estimated economic value of the
association's assets, as calculated in accordance with guidelines set forth by
the OTS. A savings association whose measured interest rate risk exposure
exceeds 2% must deduct an interest rate risk component in calculating its total
capital under the risk-based capital rule. The interest rate risk component is
an amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
association's assets. That dollar amount is deducted from an association's
total capital in calculating compliance with its risk-based capital requirement.
Under the rule, there is a two quarter lag between the reporting date of an
institution's financial data and the effective date for the new capital
requirement based on that data. The rule also provides that the Director of the
OTS may waive or defer an association's interest rate risk component on a case-
by-case basis. Under certain circumstances, a savings association may request
an adjustment to its interest rate risk component if it believes that the OTS-
calculated interest rate risk component overstates its interest rate risk
exposure. In addition, certain "well-capitalized" institutions may obtain
authorization to use their own interest rate risk model to calculate their
interest rate risk component in lieu of the OTS-calculated amount. The OTS has
postponed the date that the component will first be deducted from an
institution's total capital until savings associations become familiar with the
process for requesting an adjustment to its interest rate risk component.
See "HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE" for a table that
sets forth in terms of dollars and percentages the OTS tangible, core and risk-
based capital requirements, the Savings Bank's historical amounts and
percentages at March 31, 1996, and pro forma amounts and percentages based upon
the assumptions stated therein.
LIMITATIONS ON CAPITAL DISTRIBUTIONS. OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers. In addition, OTS regulations require the Savings Bank to give the OTS
30 days' advance notice of any proposed declaration of dividends, and the OTS
has the authority under its supervisory powers to prohibit the payment of
dividends. The regulation utilizes a three-tiered approach which permits
various levels of distributions based primarily upon a savings association's
capital level.
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A Tier 1 savings association has capital in excess of its fully
phased-in capital requirement (both before and after the proposed capital
distribution). A Tier 1 savings association may make (without application but
upon prior notice to, and no objection made by, the OTS) capital distributions
during a calendar year up to 100% of its net income to date during the calendar
year plus one-half its surplus capital ratio (i.e., the amount of capital in
----
excess of its fully phased-in requirement) at the beginning of the calendar year
or the amount authorized for a Tier 2 association. Capital distributions in
excess of such amount require advance notice to the OTS. A Tier 2 savings
association has capital equal to or in excess of its minimum capital requirement
but below its fully phased-in capital requirement (both before and after the
proposed capital distribution). Such an association may make (without
application) capital distributions up to an amount equal to 75% of its net
income during the previous four quarters depending on how close the association
is to meeting its fully phased-in capital requirement. Capital distributions
exceeding this amount require prior OTS approval. Tier 3 associations are
savings associations with capital below the minimum capital requirement (either
before or after the proposed capital distribution). Tier 3 associations may not
make any capital distributions without prior approval from the OTS.
The Savings Bank is currently meeting the criteria to be designated a
Tier 1 association and, consequently, could at its option (after prior notice
to, and no objection made by, the OTS) distribute up to 100% of its net income
during the calendar year plus 50% of its surplus capital ratio at the beginning
of the calendar year less any distributions previously paid during the year.
LOANS TO ONE BORROWER. Under the HOLA, savings institutions are
generally subject to the national bank limit on loans to one borrower.
Generally, this limit is 15% of the Savings Bank's unimpaired capital and
surplus, plus an additional 10% of unimpaired capital and surplus, if such loan
is secured by readily-marketable collateral, which is defined to include certain
financial instruments and bullion. The OTS by regulation has amended the loans
to one borrower rule to permit savings associations meeting certain
requirements, including capital requirements, to extend loans to one borrower in
additional amounts under circumstances limited essentially to loans to develop
or complete residential housing units. At March 31, 1996, the Savings Bank's
limit on loans to one borrower was $1.7 million. At March 31, 1996, the Savings
Bank's largest aggregate amount of loans to one borrower was $605,000, all of
which were performing according to their original terms.
COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act
("CRA"), a federal statute, all federally-insured financial institutions have a
continuing and affirmative obligation consistent with safe and sound operation
to help meet all the credit needs of its delineated community. The CRA does not
establish specific lending requirements or programs nor does it limit an
institution's discretion to develop the types of products and services that it
believes are best suited to meet the all the credit needs of its delineated
community. The CRA requires the federal banking agencies, in connection with
regulatory examinations, to assess an institution's record of meeting the credit
needs of its delineated community and to take such record into account in
evaluating certain regulatory applications filed by an institution. The CRA
requires public disclosure of an institution's CRA rating. The OTS has informed
the Savings Bank that it has received a "satisfactory" rating as a result of its
latest evaluation.
ACTIVITIES OF SAVINGS BANK AND THEIR SUBSIDIARIES. When a savings
association establishes or acquires a subsidiary or elects to conduct any new
activity through a subsidiary that the association controls, the savings
association must notify the FDIC and the OTS 30 days in advance and provide the
information each agency may, by regulation, require. Savings associations also
must conduct the activities of subsidiaries in accordance with existing
regulations and orders.
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The OTS may determine that the continuation by a savings association
of its ownership control of, or its relationship to, the subsidiary constitutes
a serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary. The FDIC
also may determine by regulation or order that any specific activity poses a
serious threat to the SAIF. If so, it may require that no SAIF member engage in
that activity directly.
TRANSACTIONS WITH AFFILIATES. Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank. A
savings and loan holding company, its subsidiaries and any other company under
common control are considered affiliates of the subsidiary savings association
under the HOLA. Generally, Sections 23A and 23B: (i) limit the extent to which
the insured association or its subsidiaries may engage in certain covered
transactions with an affiliate to an amount equal to 10% of such institution's
capital and surplus and place an aggregate limit on all such transactions with
affiliates to an amount equal to 20% of such capital and surplus, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a non-
affiliate. The term "covered transaction" includes the making of loans, the
purchase of assets, the issuance of a guaranty and similar types of
transactions.
Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies; (ii) a savings association may not purchase or invest in securities
issued by an affiliate (other than securities of a subsidiary); and (iii) the
OTS may, for reasons of safety and soundness, impose more stringent restrictions
on savings associations but may not exempt transactions from or otherwise
abridge Section 23A or 23B. Exemptions from Section 23A or 23B may be granted
only by the Federal Reserve Board, as is currently the case with respect to all
FDIC-insured banks. The Savings Bank has not been significantly affected by the
rules regarding transactions with affiliates.
The Savings Bank's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such persons,
is currently governed by Sections 22(g) and 22(h) of the Federal Reserve Act,
and Regulation O thereunder. Among other things, these regulations require that
such loans be made on terms and conditions substantially the same as those
offered to unaffiliated individuals and not involve more than the normal risk of
repayment. Regulation O also places individual and aggregate limits on the
amount of loans the Savings Bank may make to such persons based, in part, on the
Savings Bank's capital position, and requires certain board approval procedures
to be followed. The OTS regulations, with certain minor variances, apply
Regulation O to savings institutions.
REGULATORY AND CRIMINAL ENFORCEMENT PROVISIONS. Under the FDIA, the
OTS has primary enforcement responsibility over savings institutions and has the
authority to bring action against all "institution-affiliated parties,"
including stockholders, and any attorneys, appraisers and accountants who
knowingly or recklessly participate in wrongful action likely to have an adverse
effect on an insured institution. Formal enforcement action may range from the
issuance of a capital directive or cease and desist order to removal of officers
or directors, receivership, conservatorship or termination of deposit insurance.
Civil penalties cover a wide range of violations and can amount to $25,000 per
day, or $1 million per day in especially egregious cases. Under the FDIA, the
FDIC has the authority to recommend to the Director of the OTS that enforcement
action be taken with respect to a particular savings institution. If action is
not taken by the Director, the FDIC has authority to take such action under
certain circumstances. Federal law also establishes criminal penalties for
certain violations.
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REGULATION OF THE BANKS
The Banks will be national banks subject to regulation, supervision
and examination by the OCC. In addition, the Banks' deposits will be insured by
the FDIC up to the maximum amount permitted by law, and the Converted Bank is
therefore subject to regulation, supervision and examination by the FDIC.
The Holding Company and the Banks will be legal entities separate and
distinct. Various legal limitations restrict the Banks from lending or
otherwise supplying funds to the Holding Company (an "affiliate"), generally
limiting such transactions with the affiliate to 10% of the bank's capital and
surplus and limiting all such transactions to 20% of the bank's capital and
surplus. Such transactions, including extensions of credit, sales of securities
or assets and provision of services, also must be on terms and conditions
consistent with safe and sound banking practices, including credit standards,
that are substantially the same or at least as favorable to the bank as those
prevailing at the time for transactions with unaffiliated companies.
Federal banking laws and regulations govern all areas of the operation
of the Banks, including reserves, loans, mortgages, capital, issuance of
securities, payment of dividends and establishment of branches. Federal bank
regulatory agencies also have the general authority to limit the dividends paid
by insured banks and bank holding companies if such payments should be deemed to
constitute an unsafe and unsound practice. The respective primary federal
regulators of the Holding Company and the Banks have authority to impose
penalties, initiate civil and administrative actions and take other steps
intended to prevent the banks from engaging in unsafe or unsound practices.
Federally insured banks are subject, with certain exceptions, to
certain restrictions on extensions of credit to their parent holding companies
or other affiliates, on investments in the stock or other securities of
affiliates and on the taking of such stock or securities as collateral from any
borrower. In addition, such banks are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit or the providing of any
property or service.
Banks are also subject to the provisions of the Community Reinvestment
Act of 1977, which requires the appropriate federal bank regulatory agency, in
connection with its regular examination of a bank, to assess the bank's record
in meeting the credit needs of the community serviced by the bank, including low
and moderate income neighborhoods. The regulatory agency's assessment of the
bank's record is made available to the public. Further, such assessment is
required of any bank which has applied, among other things, to establish a new
branch office that will accept deposits, relocate an existing office or merge or
consolidate with, or acquire the assets or assume the liabilities of, a
federally regulated financial institution.
Dividends from the Banks will constitute the major source of funds for
dividends to be paid by the Holding Company. The amount of dividends payable by
the Banks to the Holding Company will depend upon the Banks' earnings and
capital position, and is limited by federal and state laws, regulations and
policies.
As national banks, the Banks may not pay dividends from their paid-in
surplus. All dividends must be paid out of undivided profits then on hand,
after deducting expenses, including reserves for losses and bad debts. In
addition, a national bank is prohibited from declaring a dividend on its shares
of common stock until its surplus equals its stated capital, unless there has
been transferred to surplus no less than one-tenth of the bank's net profits of
the preceding two consecutive half-year periods (in the case of an annual
dividend). The approval of the OCC is required if the total of all dividends
declared by a national bank in any calendar year exceeds the total of its net
profits for that year combined with its retained net profits for the preceding
two years, less any required transfers to surplus.
The OCC has the authority to prohibit any bank from engaging in an
unsafe or unsound practice in conducting its business. The payment of dividends,
depending upon the financial condition of the bank, could be deemed to
constitute such an unsafe or unsound practice. The Federal Reserve and the OCC
have indicated their
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view that it generally would be an unsafe and unsound practice to pay dividends
except out of current operating earnings. Moreover, the Federal Reserve has
indicated that bank holding companies should serve as a source of managerial and
financial strength to their subsidiary banks. Accordingly, the Federal Reserve
has stated that a bank holding company should not maintain a level of cash
dividends to its shareholders that places undue pressure on the capital of it
bank subsidiaries, or that can be funded only through additional borrowings or
other arrangements that may undermine the bank holding company's ability to
serve as a source of strength.
The amount of dividends actually paid during any one period will be
strongly affected by the Banks' management policy of maintaining a strong
capital position. Federal law further provides that no insured depository
institution may make any capital distribution (which would include a cash
dividend) if, after making the distribution, the institution would not satisfy
one or more of its minimum capital requirements. Moreover, the federal bank
regulatory agencies also have the general authority to limit the dividends paid
by insured banks if such payments should be deemed to constitute an unsafe and
unsound practice.
BANK HOLDING COMPANY REGULATION
GENERAL. Upon consummation of the Bank Conversion and the Bank
Formation, the Holding Company, as the sole shareholder of the Banks, will
become a bank holding company and will register as such with the Federal
Reserve. Bank holding companies are subject to comprehensive regulation by the
Federal Reserve under BHCA and the regulations of the Federal Reserve. As a bank
holding company, the Holding Company will be required to file with the Federal
Reserve annual reports and such additional information as the Federal Reserve
may require and will be subject to regular examinations by the Federal Reserve.
The Federal Reserve also has extensive enforcement authority over bank holding
companies, including, among other things, the ability to asses civil money
penalties to issue cease and desist or removal orders and to require that a
holding company divest subsidiaries (including its bank subsidiaries). In
general, enforcement actions may be initiated for violations of law and
regulations and unsafe or unsound practices.
Under the BHCA, a bank holding company must obtain Federal Reserve
approval before: (1) acquiring, directly or indirectly, ownership or control of
any voting shares of another bank or bank holding company if, after such
acquisition, it would own or control more than 5% of such shares (unless it
already owns or controls the majority of such shares); (2) acquiring all or
substantially all of the assets of another bank or bank holding company; or (3)
merging or consolidating with another bank holding company.
Any direct or indirect acquisition by a bank holding company or its
subsidiaries of more than 5% of the voting shares of, or substantially all of
the assets of, any bank located outside of the state in which the operations of
the bank holding company's banking subsidiaries are "principally conducted", may
not be approved by the Federal Reserve unless the laws of the state in which the
bank to be acquired is located specifically authorize such an acquisition. The
term "principally conducted" generally means the state in which the total
deposits of all banking subsidiaries is the largest. Accordingly, upon
consummation of the Bank Conversion the Holding Company's business will be
"principally conducted" in the State of Illinois because the total deposits of
the Converted Bank will exceed those of the De Novo Bank. Most states have
authorized interstate bank acquisitions by out-of-state bank holding companies
on either a regional or a national basis, and most such statutes require the
home state of the acquiring bank holding company to have enacted a reciprocal
statute. Illinois law permits bank holding companies located outside Illinois
to acquire banks or bank holding companies located in Illinois subject to the
requirements that the laws of the state in which the acquiring bank holding
company is located permit bank holding companies located in Illinois to acquire
banks or bank holding companies in the acquiror's state and that the laws of the
state in which the acquiror is located are not unduly restrictive when compared
to those imposed by the laws of Illinois.
The BHCA also prohibits a bank holding company, with certain
exceptions, from acquiring direct or indirect ownership or control of more than
5% of the voting shares of any company which is not a bank or bank holding
company, or from engaging directly or indirectly in activities other than those
of banking, managing or controlling banks, or providing services for its
subsidiaries. The principal exceptions to these prohibitions involve certain
non-
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bank activities which, by statute or by Federal Reserve regulation or order,
have been identified as activities closely related to the business of banking or
managing or controlling banks. The list of activities permitted by the Federal
Reserve includes, among other things, operating a savings institutions, mortgage
company, finance company, credit card company or factoring company, performing
certain data processing operations; providing certain investment and financial
advice; underwriting and acting as an insurance agent for certain types of
credit-related insurance; leasing property on a full-payout, non-operating
basis; selling money orders, travelers' checks and United States Savings Bonds;
real estate and personal property appraising; providing tax planning and
preparation services; and, subject to certain limitations, providing securities
brokerage services for customers. The Holding Company has no present plans to
engage in any of these activities.
DIVIDENDS. The Federal Reserve has issued a policy statement on the
payment of cash dividends by bank holding companies, which expresses the Federal
Reserve's view that a bank holding company should pay cash dividends only to the
extent that the company's net income for the past year is sufficient to cover
both the cash dividends and a rate of earning retention that is consistent with
the company's capital needs, asset quality and overall financial condition. The
Federal Reserve also indicated that it would be inappropriate for a company
experiencing serious financial problems to borrow funds to pay dividends.
Furthermore, under the prompt corrective action regulations adopted by the
Federal Reserve pursuant to FDICIA, the Federal Reserve may prohibit a bank
holding company from paying any dividends if the holding company's bank
subsidiary is classified as "undercapitalized." See "-- Prompt Corrective
Action."
Bank holding companies are required to give the Federal Reserve prior
written notice of any purchase or redemption of its outstanding equity
securities if the gross consideration for the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, is equal to 10% or more of their consolidated
net worth. The Federal Reserve may disapprove such a purchase or redemption of
it determines that the proposal would constitute an unsafe or unsound practice
or would violate any law, regulation, Federal Reserve order, or any condition
imposed by, or written agreement with, the Federal Reserve.
CAPITAL REQUIREMENTS. The Federal Reserve has established capital
requirements for bank holding companies that generally parallel the capital
requirements for national banks under the OCC's regulations. The Federal
Reserve regulations provide that capital standards will generally be applied on
a bank only (rather than a consolidated) basis on the case of a bank holding
company with less than $150 million in total consolidated assets. Assuming
sales of Common Stock at the minimum of the Estimated Valuation Range, the
Holding Company's total consolidation assets will exceed $150 million. See
"HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE" for a numerical presentation of
the Holding Company's pro forma capital based on the assumptions stated therein.
FEDERAL SECURITIES LAWS
The Holding Company has filed a Registration Statement with the SEC
under the Securities Act for the registration of the Common Stock to be issued
in the Conversion. Upon completion of the Conversion, the Common Stock will be
registered with the SEC under the Exchange Act and, under OTS regulations,
generally may not be deregistered for at least three years thereafter. The
Holding Company will then be subject to the information, proxy solicitation,
insider trading restrictions and other requirements of the Exchange Act.
The registration under the Securities Act of the Common Stock to be
issued in the Conversion does not cover the resale of such shares. Shares of the
Common Stock purchased by persons who are not affiliates of the Holding Company
may be resold without registration. Shares purchased by an affiliate of the
Holding Company may comply with the resale restrictions of Rule 144 under the
Securities Act. If the Holding Company meets the current public information
requirements of Rule 144 under the Securities Act, each affiliate of the Holding
Company who complies with the other conditions of Rule 144 (including those that
require the affiliate's sale to be aggregated with those of certain other
persons) would be able to sell in the public market, without registration, a
number of shares not to exceed, in any three-month period, the greater of (i) 1%
of the outstanding shares of the Holding Company or (ii) the average weekly
volume of trading in such shares during the preceding four calendar weeks.
Provision may
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be made in the future by the Holding Company to permit affiliates to have their
shares registered for sale under the Securities Act under certain circumstances.
There are currently no demand registration rights outstanding. However, in the
event the Holding Company, at some future time, determines to insure additional
shares from its authorized but unissued shares, the Holding Company might offer
registration rights to certain of its affiliates who want to sell their shares.
TAXATION
FEDERAL TAXATION
GENERAL. The following discussion summarizes certain Federal income
tax provisions applicable to the Savings Bank as a thrift institution and,
following the Bank Conversion, the Banks as national banks, and discusses all
material terms of the federal tax law as it applies to the Savings Bank. This
summary is based on the Code, IRS regulations, rulings and decisions currently
in effect, all of which are subject to change. For a discussion of the Federal
income tax consequences of the Plan of Conversion to the Savings Bank and its
the account holders and the holders of Common Stock, see "THE CONVERSION --
Effects of Conversion to Stock Form on Depositors and Borrowers of the Savings
Bank -- Tax Effects."
TAX BAD DEBT RESERVES. Federal thrift institutions are subject to the
provisions of the Code in the same general manner as other corporations.
However, savings institutions, such as the Savings Bank, which meet QTL tests
and other conditions prescribed by the Code, may benefit from certain favorable
provisions regarding their deductions from taxable income for annual additions
to their bad debt reserve. For purposes of the bad debt reserve deduction,
loans are separated into "qualifying real property loans," which generally are
loans secured by interests in real property, and nonqualifying real property
loans, which are all other loans. The bad debt reserve deduction with respect to
nonqualifying loans is based generally on actual loss experience over a period
of years ("experience method"). The amount of the bad debt reserve deduction
with respect to qualifying real property loans may be based upon the experience
method or a percentage of taxable income method determined without regard to
such deduction ("percentage of taxable income method").
The Savings Bank has elected to use the method which results in the
greatest deduction for federal income tax purposes. Historically, the Savings
Bank has elected to use the percentage of taxable income method. Under the
percentage of taxable income method, the bad debt reserve deduction for
qualifying real property loans is computed as a percentage, which Congress has
reduced from as much as 40% in recent years to 8% of "specially computed"
taxable income effective for taxable years beginning after 1986. The allowable
deduction under the percentage of taxable income method ("percentage bad debt
deduction") for taxable years beginning before 1987 was scaled downward if
certain assets ("qualifying assets") of an association amounted to less than 60%
of the dollar amount of the association's total assets. The percentage of
taxable income method was not available for any taxable years beginning before
1987 in which the qualifying assets of an association amounted to less than 60%
of its total assets. When the percentage of bad debt deduction was lowered to
8%, the 82% of qualifying assets requirement (72% for mutual savings banks) was
lowered to 60%. For all taxable years beginning after 1986, there is no bad
debt reserve deduction allowed under any method if less than 60% of the dollar
amount of the association's total assets are qualifying assets. Moreover, in
such a case, an association could be required to recapture, generally over a
period of up to six years, its existing bad debt reserve. As of March 31, 1996,
more than the required amount of the Savings Bank's total assets were qualifying
assets.
The bad debt deduction under the percentage of taxable income method
is limited to the extent that (i) the amount of the deduction accumulated in
reserves for qualifying real property loans may not exceed 6% of such loans
outstanding at the end of the taxable year, and (ii) the amount of the deduction
for the taxable year cannot be greater than the larger of (a) the amount of the
deduction that would be allowable for the taxable year under the experience
method, or (b) the amount which, when added to the bad debt reserve for losses
on nonqualifying loans, equals the amount by which 12% of total deposits or
withdrawable accounts of depositors at the close of the taxable year
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exceeds the sum of surplus, undivided profits and reserves at the beginning of
such year. It is not expected that either limitation will restrict the Savings
Bank from making the maximum addition to its bad debt reserve. The Savings
Bank's annual percentage bad debt deduction is reduced by the amount of the
deduction for losses on nonqualifying loans.
Historically, the availability of the percentage of taxable income
method has permitted qualifying thrifts to be taxed at a significantly lower
maximum marginal federal income tax rate than that applicable to corporations
generally. The reduction of the bad debt reserve deduction to 8% of specially
computed taxable income, together with the current corporate income tax rate of
34%, should result in a negligible change after 1987 in the maximum effective
rate of federal income tax payable by a qualifying thrift fully able to use the
percentage of taxable income method.
Earnings appropriated to the Savings Bank's excess tax basis bad debt
reserve aggregated approximately $2.5 million at March 31, 1996. See Note 12 to
the Notes to Financial Statements. Applicable regulations under the Code will
require the Banks to restate their tax reserve for bad debts as of the first
year of the Bank Conversion, using a formula set forth in the IRS regulations.
In general, the excess of the Savings Bank's tax bad debt reserve as of the
close of the taxable year immediately preceding the year of the Bank Conversion
must be included ratably in the Converted Bank's taxable income over a six-year
period. See "RISK FACTORS -- Bad Debt Recapture."
Following the Bank Conversion, the Banks, as national banks each with
less than $500 million in assets, will be eligible to maintain a tax bad debt
reserve. However, the Banks will be required to use the experience method
rather than the percentage of taxable income method, which is only available to
thrift institutions. In the event that the Banks' assets exceed the $500
million threshold, the Banks would be required to recapture its then outstanding
tax bad debt reserve in increasing increments over a four-year period.
Thereafter, the Banks would be required to use the direct or specific charge-off
method applicable to large banks in calculating their tax bad debt deduction.
Under the direct or specific charge-off method, the Banks would be entitled to a
bad debt deduction only in the taxable year in which a specific debt become
worthless or is shown to be recoverable only in part.
CORPORATE ALTERNATIVE MINIMUM TAX. The Code imposes a tax on
alternative minimum taxable income ("AMTI") at a rate of 20%. The excess of the
tax bad debt reserve deduction using the percentage of taxable income method
over the deduction that would have been allowable under the experience method is
treated as a preference item for purposes of computing the AMTI. In addition,
only 90% of AMTI can be offset by net operating loss carryovers. AMTI is
increased by an amount equal to 75% of the amount by which the Savings Bank's
adjusted current earnings exceeds its AMTI (determined without regard to this
preference and prior to reduction for net operating losses). For taxable years
beginning after December 31, 1986, and before January 1, 1996, an environmental
tax of .12% of the excess of AMTI (with certain modification) over $2.0 million
is imposed on corporations, including the Savings Bank, whether or not an
Alternative Minimum Tax ("AMT") is paid.
DIVIDENDS-RECEIVED DEDUCTION AND OTHER MATTERS. The Holding Company
may exclude from its income 100% of dividends received from the Banks as members
of the same affiliated group of corporations. The corporate dividends-received
deduction is generally 70% in the case of dividends received from unaffiliated
corporations with which the Holding Company and the Banks will not file a
consolidated tax return, except that if the Holding Company owns or the Banks
own more than 20% of the stock of a corporation distributing a dividend, then
80% of any dividends received may be deducted.
OTHER. There have not been any IRS audits of the Savings Bank's
federal income tax returns during the past five years.
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ILLINOIS TAXATION
The Savings Bank files Illinois income tax returns. For Illinois
income tax purposes, savings institutions are presently taxed at a rate equal to
7.3% of income. For these purposes, "net income" generally means federal
taxable income, subject to certain adjustments (including the addition of
interest income on State and municipal obligations and the exclusion of interest
income on United States Government obligations) and an allocation of income
between Illinois and other states. The exclusion of income on United States
Government obligations has the effect of reducing significantly the Illinois
taxable income of savings institutions. The Savings Bank is not currently under
audit with respect to its Illinois income tax returns. There have not been any
audits of the Savings Bank's Illinois tax returns by Illinois tax authorities
during the past five years.
MISSOURI TAXATION
A Missouri-based financial institution, such as Chester National Bank
of Missouri, is subject to an annual financial institution franchise tax of 7%
on its net income, generally computed in the same manner as federal taxable
income is computed. In addition, a Missouri-based financial institution is
responsible for Missouri corporate income tax, sales and use taxes and certain
property taxes. However, the payment of these taxes is available as a credit
against the financial institution franchise tax.
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THE CONVERSION
THE OTS HAS GIVEN APPROVAL TO THE PLAN SUBJECT TO THE PLAN'S APPROVAL BY
THE MEMBERS OF THE SAVINGS BANK ENTITLED TO VOTE ON THE MATTER AND SUBJECT TO
THE SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL.
OTS APPROVAL, HOWEVER, DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF
THE PLAN.
GENERAL
On March 12, 1996, the Savings Bank's Board of Directors adopted the Plan
of Conversion pursuant to which the Savings Bank will convert to stock form and
subsequently convert to a national bank to be known as Chester National Bank,
and a newly chartered bank subsidiary will be formed by the Holding Company to
be known as Chester National Bank of Missouri, which will purchase all of the
installment loans and a portion of the mortgage loans of the Savings Bank's
Perryville branch. All of the outstanding capital stock of the Chester National
Bank and Chester National Bank of Missouri will held by the Holding Company, a
newly formed Delaware corporation. The Holding Company and the Savings Bank
intend to pursue the business strategy described in this Prospectus with the
goal of enhancing long-term shareholder value. Neither the Holding Company nor
the Savings Bank has any existing plan to pursue any possible business
combination, and neither has any agreement or understanding, written or oral,
with respect to any possible business combination.
THE FOLLOWING DISCUSSION OF THE PLAN OF CONVERSION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE PLAN OF CONVERSION, WHICH IS ATTACHED AS EXHIBIT A
TO THE SAVINGS BANK'S PROXY STATEMENT AND IS AVAILABLE FROM THE SAVINGS BANK
UPON REQUEST. The OTS has approved the Plan of Conversion subject to the Plan's
approval by the members of the Savings Bank entitled to vote on the matter at a
Special Meeting called for that purpose to be held on ___________, 1996, and
subject to the satisfaction of certain other conditions imposed by the OTS in
its approval.
If the Board of Directors of the Savings Bank decides for any reason, such
as possible delays resulting from overlapping regulatory processing or policies
or conditions which could adversely affect the Savings Bank's or the Holding
Company's ability to consummate the Conversion and transact its business as
contemplated herein and in accordance with the Savings Bank's operating
policies, at any time prior to the issuance of the Common Stock, not to use the
holding company form of organization in implementing the Conversion, the Plan of
Conversion will be amended to not use the holding company form of organization
in the Conversion. In the event that such a decision is made, the Savings Bank
will promptly refund all subscriptions or orders received together with accrued
interest, withdraw the Holding Company's registration statement from the SEC and
will take all steps necessary to consummate the Conversion and proceed with a
new offering without the Holding Company, including filing any necessary
documents with the OTS. In such event, and provided there is no regulatory
action, directive or other consideration upon which basis the Savings Bank
determines not to consummate the Conversion, the Savings Bank will issue and
sell the common stock of the Savings Bank. There can be no assurance that the
OTS would approve the Conversion if the Savings Bank decided to proceed without
the Holding Company. The following description of the Plan assumes that a
holding company form of organization will be utilized in the Conversion. In the
event that a holding company form of organization is not utilized, all other
pertinent terms of the Plan as described below will apply to the Conversion of
the Savings Bank from mutual to stock form of organization and the sale of the
Savings Bank's common stock.
The Conversion will be accomplished through the adoption of a Federal Stock
Charter and Bylaws to authorize the issuance of capital stock by the Converted
Savings Bank, the issuance of all the Converted Savings Bank's capital stock to
be outstanding upon consummation of the Stock Conversion to the Holding Company,
the offer and sale of the Common Stock of the Holding Company and the conversion
of the Converted Savings Bank to the Converted Bank. Upon issuance of the
Converted Savings Bank's shares of capital stock to the Holding Company, the
Converted Savings Bank will be a wholly owned subsidiary of the Holding Company.
Following consummation of the Stock Conversion, the Bank Conversion whereby the
Converted Savings Bank will convert to
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the Converted Bank, and the Bank Formation whereby the De Novo Bank will
purchase all of the installment loans and a portion of the mortgage loans of the
Savings Bank's Perryville branch office, will be promptly effectuated.
The Holding Company has applied for approval from the OTS to become the
holding company of the Converted Savings Bank subject to the satisfaction of
certain conditions and to acquire all of the common stock of the Converted
Savings Bank to be issued in the Stock Conversion. The Stock Conversion will be
effected only upon completion of the sale of all of the shares of Common Stock
to be issued by the Holding Company pursuant to the Plan of Conversion. The
Savings Bank has applied for approval for the Bank Conversion from the OCC and
the Holding Company has applied for approval from the Federal Reserve for
continued ownership of 100% of the stock of the Converted Bank and the De Novo
Bank following the Bank Conversion and the Bank Formation.
The aggregate purchase price of the Common Stock to be issued in the
Conversion will be within the Estimated Valuation Range of between $13,175,000
and $17,825,000 which may be increased to $20,498,750, based upon an independent
appraisal of the estimated pro forma market value of the Common Stock prepared
by RP Financial. All shares of the Common Stock to be issued and sold in the
Stock Conversion will be sold at the same price. The independent appraisal will
be updated, if necessary, and the final price of the shares of the Common Stock
will be determined at the completion of the Subscription and Direct Community
Offering. RP Financial is a consulting firm experienced in the valuation and
appraisal of savings institutions. For additional information, see "-- Stock
Pricing and Number of Shares to be Issued."
The Plan of Conversion provides generally that (i) the Savings Bank will
convert from a federally chartered mutual savings bank to a federally chartered
stock savings bank; (ii) the issuance of all the Converted Savings Bank's
capital stock to be outstanding upon consummation of the Stock Conversion to the
Holding Company; (iii) the offer and sale of the Common Stock by the Holding
Company in the Subscription Offering to persons having Subscription Rights and
in a Direct Community Offering to certain members of the general public with
preference given first to natural persons and trusts of natural persons residing
in the Local Community; (iv) shares of Common Stock not subscribed for in the
Subscription and Direct Community Offering will be offered to certain members of
the general public in a Public Offering; (v) the Converted Savings Bank will
convert to a national bank; and (vi) the Holding Company will form a de novo
national bank subsidiary to be known as Chester National Bank of Missouri, which
will purchase all of the installment loans and a portion of the mortgage loans
of the Savings Bank's Perryville branch. See "USE OF PROCEEDS." The Conversion
will be effected only upon completion of the sale of at least $14,875,000 of
Common Stock to be issued pursuant to the Plan of Conversion.
As part of the Conversion, the Holding Company is making a Subscription
Offering of its Common Stock to holders of Subscription Rights in the following
order of priority: (i) Eligible Account Holders (depositors with $50.00 or more
on deposit as of January 15, 1995); (ii) the Savings Bank's ESOP; (iii)
Supplemental Eligible Account Holders (depositors with $50.00 or more on deposit
as of June 30, 1996); and (iv) Other Members (depositors of the Savings Bank as
of __________, 1996 and borrowers of the Savings Bank with loans outstanding as
of ____ __, 199_ which continue to be outstanding as of __________, 1996).
After the Subscription Offering and subject to the prior rights of holders of
Subscription Rights, the Holding Company is offering the Common Stock for sale
to certain members of the general public through a Direct Community
Offering.
Shares of Common Stock not sold in the Subscription and Direct Community
Offering may be offered in the Public Offering. Regulations require that the
Public Offering be completed within 45 days after completion of the Subscription
Offering unless extended by the Savings Bank or the Holding Company with the
approval of the regulatory authorities. If the Public Offering is determined
not to be feasible, the Board of Directors of the Savings Bank will consult with
the regulatory authorities to determine an appropriate alternative method for
selling the unsubscribed shares of Common Stock. The Plan of Conversion
provides that the Conversion must be completed within 24 months after the date
of the approval of the Plan of Conversion by the members of the Savings Bank.
No sales of Common Stock may be completed, either in the Subscription,
Direct Community or Public Offerings, unless the Plan of Conversion is approved
by the members of the Savings Bank.
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The completion of the Offerings, however, is subject to market conditions
and other factors beyond the Savings Bank's control. No assurance can be given
as to the length of time after approval of the Plan of Conversion at the Special
Meeting that will be required to complete the Public Offering or other sale of
the Common Stock. If delays are experienced, significant changes may occur in
the estimated pro forma market value of the Holding Company and the Savings Bank
as converted, together with corresponding changes in the net proceeds realized
by the Holding Company from the sale of the Common Stock. In the event the
Conversion is terminated, the Savings Bank would be required to charge all
Conversion expenses against current income.
Orders for shares of Common Stock will not be filled until at least
1,487,500 shares of Common Stock have been subscribed for or sold and the OTS
approves the final valuation and the Conversion closes. If the Conversion is
not consummated by ___________, 1996 (45 days after the last day of the fully
extended Subscription Offering) and the OTS consents to an extension of time to
consummate the Conversion, subscribers will be given the right to increase,
decrease or rescind their subscriptions. Unless an affirmative indication is
received from subscribers that they wish to continue to subscribe for shares,
the funds will be returned promptly, together with accrued interest at the
passbook rate from the date payment is received until the funds are returned to
the subscriber. If such period is not extended, or, in any event, if the
Conversion is not consummated by ______, 1996, all withdrawal authorizations
will be terminated and all funds held will be promptly returned together with
accrued interest at the Savings Bank's passbook rate from the date payment is
received until the Conversion is terminated.
PURPOSES OF CONVERSION
Management of the Savings Bank believes that the Conversion offers a number
of advantages which will be important to the future growth and performance of
the Savings Bank in that it is intended: (i) to improve the competitive position
of the Savings Bank in its market area and to support possible future expansion
(currently there are no specific plans, arrangements or understandings, written
or oral, regarding any such activities); (ii) to afford members of the Savings
Bank and others the opportunity to become stockholders of the Holding Company
and thereby participate more directly in, and contribute to, any future growth
of the Savings Bank; and (iii) to provide future access to capital markets.
The Savings Bank's Board of Directors has formed the Holding Company to
serve upon consummation of the Conversion as a holding company with the Savings
Bank as its subsidiary. The Savings Bank, as a mutual savings bank, does not
have stockholders and has no authority to issue capital stock. By converting to
the stock form of organization, the Holding Company and the Savings Bank will be
structured in the form used by holding companies of commercial banks and by a
growing number of savings institutions.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE SAVINGS
BANK
VOTING RIGHTS. Savings members and borrowers will have no voting rights in
the converted Savings Bank or the Holding Company and therefore will not be able
to elect directors of the Savings Bank or the Holding Company or to control
their affairs. Currently, these rights are accorded to savings members of the
Savings Bank. Subsequent to the Conversion, voting rights will be vested
exclusively in the Holding Company with respect to the Savings Bank and the
holders of the Common Stock as to matters pertaining to the Holding Company.
Each holder of Common Stock shall be entitled to vote on any matter to be
considered by the stockholders of the Holding Company. A stockholder will be
entitled to one vote for each share of Common Stock owned.
SAVINGS ACCOUNTS AND LOANS. The Savings Bank's savings accounts, account
balances and existing FDIC insurance coverage of savings accounts will not be
affected by the Conversion. Furthermore, the Conversion will not affect the
loan accounts, loan balances or obligations of borrowers under their individual
contractual arrangements with the Savings Bank.
TAX EFFECTS. The Savings Bank has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion will constitute a nontaxable
reorganization under Section 368(a)(1)(F) of the Code. Among other
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things, the opinion states that: (i) no gain or loss will be recognized to the
Savings Bank in its mutual or stock form by reason of its Conversion; (ii) no
gain or loss will be recognized to its account holders upon the issuance to them
of accounts in the Savings Bank immediately after the Conversion, in the same
dollar amounts and on the same terms and conditions as their accounts at the
Savings Bank in its mutual form plus interest in the liquidation account; (iii)
the tax basis of account holders' accounts in the Savings Bank immediately after
the Conversion will be the same as the tax basis of their accounts immediately
prior to Conversion; (iv) the tax basis of each account holder's interest in the
liquidation account will be zero; (v) the tax basis of the Common Stock
purchased in the Conversion will be the amount paid and the holding period for
such stock will commence at the date of purchase; and (vi) no gain or loss will
be recognized to account holders upon the receipt or exercise of Subscription
Rights in the Conversion, except to the extent Subscription Rights are deemed to
have value as discussed below. Unlike a private letter ruling issued by the
IRS, an opinion of counsel is not binding on the IRS and the IRS could disagree
with the conclusions reached therein. In the event of such disagreement, no
assurance can be given that the conclusions reached in an opinion of counsel
would be sustained by a court if contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that the
receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan will be taxable to the
extent, if any, that the Subscription Rights are deemed to have a fair market
value. RP Financial, a financial consulting firm retained by the Savings Bank,
whose findings are not binding on the IRS, has indicated that the Subscription
Rights do not have any value, based on the fact that such rights are acquired by
the recipients without cost, are nontransferable and of short duration and
afford the recipients the right only to purchase shares of the Common Stock at a
price equal to its estimated fair market value, which will be the same price
paid by purchasers in the Direct Community Offering for unsubscribed shares of
Common Stock. If the Subscription Rights are deemed to have a fair market value,
the receipt of such rights may only be taxable to those Eligible Account
Holders, Supplemental Eligible Account Holders (if any) and Other Members who
exercise their Subscription Rights. The Savings Bank could also recognize a gain
on the distribution of such Subscription Rights. Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members are encouraged to
consult with their own tax advisers as to the tax consequences in the event the
Subscription Rights are deemed to have a fair market value.
The Savings Bank has also received an opinion from Bryan Cave LLP, St.
Louis, Missouri, that, assuming the Conversion does not result in any federal
income tax liability to the Savings Bank, its account holders, or the Holding
Company, implementation of the Plan of Conversion will not result in any
Illinois income tax liability to such entities or persons.
The opinions of Breyer & Aguggia and Bryan Cave LLP and the letter from RP
Financial are filed as exhibits to the Registration Statement. See "ADDITIONAL
INFORMATION."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION PARTICULAR TO THEM.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of
the Savings Bank in its present mutual form, each depositor in the Savings Bank
would receive a pro rata share of any assets of the Savings Bank remaining after
payment of claims of all creditors (including the claims of all depositors up to
the withdrawal value of their accounts). Each depositor's pro rata share of
such remaining assets would be in the same proportion as the value of his or her
deposit account to the total value of all deposit accounts in the Savings Bank
at the time of liquidation.
After the Conversion, holders of withdrawable deposit(s) in the Savings
Bank including certificates of deposit ("Savings Account(s)") shall not be
entitled to share in any residual assets in the event of liquidation of the
Savings Bank. However, pursuant to OTS regulations, the Savings Bank shall, at
the time of the Conversion, establish a liquidation account in an amount equal
to its total equity as of the date of the latest statement of financial
condition contained herein.
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The liquidation account shall be maintained by the Savings Bank (and
assumed by the Banks) subsequent to the Conversion for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders who retain their
Savings Accounts in the Savings Bank. Each Eligible Account Holder and
Supplemental Eligible Account Holder shall, with respect to each Savings Account
held, have a related inchoate interest in a portion of the liquidation account
balance ("subaccount").
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder or a Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of such holder's "qualifying deposit" in the
Savings Account and the denominator is the total amount of the "qualifying
deposits" of all such holders. Such initial subaccount balance shall not be
increased, and it shall be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing day of the Savings Bank subsequent to January 15, 1995 is less than the
lesser of (i) the deposit balance in such Savings Account at the close of
business on any other annual closing date subsequent to January 15, 1995 or June
30, 1996 or (ii) the amount of the "qualifying deposit" in such Savings Account
on January 15, 1995 or June 30, 1996, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of
a downward adjustment, such subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Savings Bank or the Banks
(and only in such event) each Eligible Account Holder and Supplemental Eligible
Account Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then current adjusted subaccount
balance(s) for Savings Account(s) then held by such holder before any
liquidation distribution may be made to stockholders. No merger, consolidation,
bulk purchase of assets with assumptions of Savings Accounts and other
liabilities or similar transactions with another federally insured institution
in which the Savings Bank (or the Banks) is not the surviving institution(s)
shall be considered to be a complete liquidation. In any such transaction the
liquidation account shall be assumed by the surviving institution.
THE SUBSCRIPTION, DIRECT COMMUNITY AND PUBLIC OFFERINGS
THE OFFERINGS (INCLUDING THE PUBLIC OFFERING) ARE EXPECTED TO EXPIRE AT
NOON, CENTRAL TIME, ON THE EXPIRATION DATE, UNLESS EXTENDED OR CONTINUED AS
DESCRIBED ON THE COVER PAGE OF THIS PROSPECTUS.
SUBSCRIPTION OFFERING. In accordance with the Plan, nontransferable
Subscription Rights to purchase the Common Stock have been issued to all persons
and entities entitled to purchase the Common Stock in the Subscription Offering.
The amount of the Common Stock which these parties may purchase will be subject
to the availability of the Common Stock for purchase under the categories set
forth in the Plan. Subscription priorities have been established for the
allocation of stock to the extent that the Common Stock is available. These
priorities are as follows:
Category 1: ELIGIBLE ACCOUNT HOLDERS. Each depositor with $50.00 or more
on deposit at the Savings Bank as of January 15, 1995 will receive
nontransferable Subscription Rights to subscribe for up to the greater of 40,000
shares of Common Stock, one-tenth of 1% of the total offering of Common Stock or
15 times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock to be issued by a
fraction of which the numerator is the amount of qualifying deposit of the
Eligible Account Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders. If the exercise of Subscription
Rights in this category results in an oversubscription, shares of Common Stock
will be allocated among subscribing Eligible Account Holders so as to permit
each Eligible Account Holder, to the extent possible, to purchase a number of
shares sufficient to make his or her total allocation equal 100 shares or the
number of shares
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actually subscribed for, whichever is less. Thereafter, unallocated shares will
be allocated among subscribing Eligible Account Holders proportionately, based
on the amount of their respective qualifying deposits as compared to total
qualifying deposits of all Eligible Account Holders. Subscription Rights
received by officers and directors in this category based on their increased
deposits in the Savings Bank in the one-year period preceding January 15, 1995
are subordinated to the Subscription Rights of other Eligible Account Holders.
Category 2: ESOP. The Plan of Conversion provides that the ESOP shall
receive nontransferable Subscription Rights to purchase up to 8% of the shares
of Common Stock issued in the Conversion. The ESOP intends to purchase 8% of
the shares of Common Stock issued in the Conversion. In the event the number of
shares offered in the Conversion is increased above the maximum of the Estimated
Valuation Range, the ESOP shall have a priority right to purchase any such
shares exceeding the maximum of the Estimated Valuation Range up to an aggregate
of 8% of the Common Stock.
Category 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Each depositor with
$50.00 or more on deposit at the Savings Bank as of June 30, 1996 will receive
nontransferable Subscription Rights to subscribe for up to the greater of 40,000
shares of Common Stock, one-tenth of 1% of the total offering of Common Stock or
15 times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock to be issued by a
fraction of which the numerator is the amount of qualifying deposit of the
Supplemental Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders. If the
exercise of Subscription Rights in this category results in an oversubscription,
shares of Common Stock will be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each Supplemental Eligible Account Holder, to
the extent possible, to purchase a number of shares sufficient to make his or
her total allocation equal 100 shares or the number of shares actually
subscribed for, whichever is less. Thereafter, unallocated shares will be
allocated among subscribing Supplemental Eligible Account Holders
proportionately, based on the amount of their respective qualifying deposits as
compared to total qualifying deposits of all Supplemental Eligible Account
Holders.
Category 4: OTHER MEMBERS. Each depositor of the Savings Bank as of the
Voting Record Date and each borrower with a loan outstanding on ________ __,
19__ which continues to be outstanding as of the Voting Record Date will receive
nontransferable Subscription Rights to purchase up to 40,000 shares of Common
Stock in the Conversion to the extent available following subscriptions by
Eligible Account Holders and Supplemental Eligible Account Holders. In the
event of an oversubscription, the available shares will be allocated
proportionately based on the amount of their respective subscriptions.
SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE. PERSONS SELLING OR OTHERWISE
TRANSFERRING THEIR SUBSCRIPTION RIGHTS TO SUBSCRIBE FOR COMMON STOCK IN THE
SUBSCRIPTION OFFERING OR SUBSCRIBING FOR COMMON STOCK ON BEHALF OF ANOTHER
PERSON WILL BE SUBJECT TO FORFEITURE OF SUCH RIGHT AND POSSIBLE FURTHER
SANCTIONS AND PENALTIES IMPOSED BY THE OTS OR ANOTHER AGENCY OF THE U.S.
GOVERNMENT. Each person exercising Subscriptions Rights will be required to
certify that he or she is purchasing such shares solely for his or her own
account and that he or she has no agreement or understanding with any other
person for the sale or transfer of such shares. Once tendered, subscription
orders cannot be revoked without the consent of the Savings Bank and the Holding
Company.
The Subscription Offering and all Subscription Rights under the Plan will
expire at Noon, Central Time, on ___________, 1996, whether or not the Savings
Bank has been able to locate each person entitled to such Subscription Rights.
OTS regulations require that the Holding Company complete the sale of Common
Stock within 45 days after the close of the Subscription Offering. The
Subscription Offering may be extended by the Holding Company and the Savings
Bank up to ___________, 1996 without the OTS's approval. If the Direct
Community Offering and the Public Offerings are not completed by __________,
1996 (or ___________, 1996, if the Subscription Offering is fully extended), all
funds received will be promptly returned with interest at the passbook rate and
all withdrawal authorizations will be canceled or, if regulatory approval of an
extension of the time period has been granted, all subscribers and purchasers
will be given the right to increase, decrease or rescind their orders. If an
extension of time is obtained, all subscribers will be notified of such
extension and of the duration of any
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extension that has been granted, and will be given the right to increase,
decrease or rescind their orders. If an affirmative response to any
resolicitation is not received by the Holding Company from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest (or withdrawal authorizations will be canceled). No
single extension can exceed 90 days.
DIRECT COMMUNITY OFFERING. After the Subscription Offering, the Holding
Company may offer shares of the Common Stock to certain members of the general
public in a Direct Community Offering with preference given to natural persons
residing in the Local Community. Purchasers in the Direct Community Offering,
together with their associates and groups acting in concert, are each eligible
to purchase up to 9.99% of the shares of Common Stock in the Conversion. In the
event an insufficient number of shares are available to fill orders in the
Direct Community Offering, the available shares will be allocated on a pro rata
basis determined by the amount of the respective orders. Orders for the Common
Stock in the Direct Community Offering will be filled to the extent such shares
remain available after satisfaction of all orders received in the Subscription
Offering. The Direct Community Offering may terminate as early as Noon, Central
Time, on ___________, 1996 or any date thereafter, however, in no case later
than ___________, 1996, unless extended. Any extensions beyond ___________,
1996 would require a resolicitation of orders, wherein subscribers would be
given the opportunity to continue their orders, in which case they will need to
reconfirm affirmatively their subscriptions prior to the expiration of the
resolicitation offering or their subscription funds will be promptly refunded
with interest at the passbook rate, or be permitted to modify or cancel their
subscriptions. THE RIGHT OF ANY PERSON TO PURCHASE SHARES IN THE DIRECT
COMMUNITY OFFERING IS SUBJECT TO THE ABSOLUTE RIGHT OF THE HOLDING COMPANY AND
THE SAVINGS BANK TO ACCEPT OR REJECT SUCH PURCHASES IN WHOLE OR IN PART. THE
HOLDING COMPANY PRESENTLY INTENDS TO TERMINATE THE DIRECT COMMUNITY OFFERING AS
SOON AS IT HAS RECEIVED ORDERS FOR ALL SHARES AVAILABLE FOR PURCHASE IN THE
CONVERSION.
If all of the Common Stock offered in the Subscription Offering is
subscribed for, no Common Stock will be available for purchase in the Direct
Community Offering and all funds submitted pursuant to the Direct Community
Offering will be refunded promptly with interest.
PUBLIC OFFERING. In the event that shares of Common Stock remain
unsubscribed for after the completion of the Subscription and Direct Community
Offering, these shares may be sold to underwriters for resale in the Public
Offering. It is anticipated that EVEREN Securities will serve as the managing
underwriter of such Public Offering. An underwriting agreement between the
Holding Company and EVEREN Securities, with respect to the Public Offering, will
not be executed until after the completion of the Subscription and Direct
Community Offering. Whether the Public Offering occurs and an underwriting
agreement with EVEREN Securities is executed will depend upon, among other
things, the negotiation of a mutually acceptable underwriting agreement, the
market conditions then prevailing, the aggregate market value of the Common
Stock not subscribed for in the Subscription and Direct Community Offering and
the then current financial condition of the Savings Bank. In the event that
there is a Public offering, it is expected that EVEREN Securities will receive
underwriting compensation in an amount to be determined by the Holding Company
and EVEREN Securities, which is currently estimated to be 7.0% of the aggregate
Actual Purchase Price of the Common Stock sold in the Public Offering.
The number of shares of Common Stock to be sold in the Public Offering, if
any, at the Purchase Price per share will be determined by EVEREN Securities and
the Holding Company. No person may purchase in the Public Offering shares of
Common Stock with an aggregate purchase price of more than $400,000. Shares of
Common Stock purchased in the Direct Community Offering will be counted toward
meeting the maximum purchase limitations of the Public Offering.
The Public Offering will terminate no more than 45 days following the
Expiration Date, unless extended by the Holding Company with the approval of the
OTS. Such extensions may not be beyond _______, 1998.
In the event the Savings Bank is unable to find purchasers from the general
public for all unsubscribed shares, other purchase arrangements will be made by
the Board of Directors of the Savings Bank, if feasible. Such other
arrangements will be subject to the approval of the OTS. The OTS may grant one
or more extensions of the
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offering period, provided that (1) no single extension exceeds 90 days, (2)
subscribers are given the right to increase, decrease or rescind their
subscriptions during the extension period, and (3) the extensions do not go more
than two years beyond the date on which the members approved the Plan. If the
Conversion is not consummated by __________, 1996 (or, if the Subscription,
Direct Community and Public Offerings are fully extended, by ___________, 1996),
either all funds received will be returned with interest (and withdrawal
authorizations canceled) or, if the OTS has granted an extension of such period,
all subscribers will be given the right to increase, decrease or rescind their
subscriptions at any time prior to 20 days before the end of the extension
period. If an extension of time is obtained, all subscribers will be notified
of such extension and of their rights to modify their orders. If an affirmative
response to any resolicitation is not received by the Holding Company from a
subscriber, the subscriber's order will be rescinded and all funds received will
be promptly returned with interest (or withdrawal authorizations will be
canceled). No single extension can exceed 90 days.
PERSONS IN NON-QUALIFIED STATES. The Holding Company and the Savings Bank
will make reasonable efforts to comply with the securities laws of all states in
the United States in which persons entitled to subscribe for stock pursuant to
the Plan reside. However, the Holding Company and the Savings Bank are not
required to offer stock in the Subscription Offering to any person who resides
in a foreign country or resides in a state of the United States with respect to
which (i) a small number of persons otherwise eligible to subscribe for shares
of Common Stock reside in such state; or (ii) the Holding Company or the Savings
Bank determines that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including but not limited to a
request or requirement that the Holding Company and the Savings Bank or their
officers, directors or trustees register as a broker, dealer, salesman or
selling agent, under the securities laws of such state, or a request or
requirement to register or otherwise qualify the Subscription Rights or Common
Stock for sale or submit any filing with respect thereto in such state. Where
the number of persons eligible to subscribe for shares in one state is small,
the Holding Company and the Savings Bank will base their decision as to whether
or not to offer the Common Stock in such state on a number of factors, including
the size of accounts held by account holders in the state, the cost of reviewing
the registration and qualification requirements of the state (and of actually
registering or qualifying the shares) or the need to register the Holding
Company, its officers, directors or employees as brokers, dealers or salesmen.
LIMITATIONS ON PURCHASES OF SHARES
The Plan of Conversion provides for certain additional limitations to be
placed upon the purchase of Common Stock by eligible subscribers and others in
the Conversion. Each subscriber must subscribe for a minimum of 25 shares.
Additionally, no person by himself may purchase more than $400,000 of the Common
Stock, and no person with any associate or group of persons acting in concert,
shall purchase more than 9.99% of the shares of Common Stock issued in the
Conversion. Officers, directors and their associates may not purchase, in the
aggregate, more than 33% of the shares of Common Stock offered in the
Conversion. For purposes of the Plan, the directors are not deemed to be acting
in concert solely by reason of their Board membership. Pro rata reductions
within each Subscription Rights category will be made in allocating shares to
the extent that the maximum purchase limitations are exceeded.
The term "acting in concert" is defined in the Plan to mean (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; or (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. In
general, a person who acts in concert with another person ("other party") shall
also be deemed to be acting in concert with any person who is also acting in
concert with that other party.
The term "associate" of a person is defined in the Plan to mean (i) any
corporation or organization (other than the Savings Bank or a majority-owned
subsidiary of the Savings Bank) of which such person is an officer or partner or
is, directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as
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trustee or in a similar fiduciary capacity (excluding tax-qualified employee
plans); and (iii) any relative or spouse of such person, or any relative of such
spouse, who either has the same home as such person or who is a director or
officer of the Savings Bank or any of its parents or subsidiaries. For example,
a corporation of which a person serves as an officer would be an associate of
such person, and, therefore, all shares purchased by such corporation would be
included with the number of shares which such person could purchase individually
under the above limitations.
The term "officer" is defined in the Plan to mean an executive officer of
the Savings Bank, including its Chairman of the Board, President, Executive Vice
Presidents, Senior Vice Presidents, Chief Executive Officer and Chief Financial
Officer, and Vice Presidents in charge of principal business functions,
Secretary and Treasurer.
Common Stock purchased pursuant to the Conversion will be freely
transferable, except for shares purchased by directors and officers of the
Savings Bank and the Holding Company and for shares purchased by National
Association of Securities Dealers, Inc. ("NASD") members. See "-- Restrictions
on Transferability by Directors and Officers and NASD Members."
PLAN OF DISTRIBUTION FOR THE SUBSCRIPTION, DIRECT COMMUNITY AND PUBLIC OFFERINGS
The Savings Bank has retained EVEREN Securities to consult with and to
advise the Savings Bank and the Holding Company, and to assist the Holding
Company, on a best efforts basis, in the distribution of the shares of Common
Stock in the Subscription and Community Offering. The services that EVEREN
Securities will provide include, but are not limited to (i) training the
employees of the Savings Bank who will perform certain ministerial functions in
the Subscription and Community Offering regarding the mechanics and regulatory
requirements of the stock offering process, (ii) managing the Conversion Center
by assisting interested stock subscribers and by keeping records of all stock
orders, (iii) preparing marketing materials, and (iv) assisting in the
solicitation of proxies from the Savings Bank's members for use at the Special
Meeting. For its services, EVEREN Securities will receive a completion fee of
$200,000 in addition to a $15,000 non-refundable retainer fee which the Savings
Bank has already paid. In the event that selected dealers are used to assist in
the sale of shares of Common Stock in the Community Offering, such dealers will
be paid a fee of up to 5.0% (consisting of a 1.5% management fee to be paid to
EVEREN Securities which will be credited against the completion fee) of the
aggregate Purchase Price of the shares sold by such dealers. The Holding
Company and the Savings Bank have agreed to reimburse EVEREN Securities for its
out-of-pocket expenses and its legal fees (up to a total of $45,000) and to
indemnify EVEREN Securities against certain claims or liabilities, including
certain liabilities under the Securities Act, and will contribute to payments
EVEREN Securities may be required to make in connection with any such claims or
liabilities.
Sales of shares of Common Stock will be made primarily by registered
representatives affiliated with EVEREN Securities or by the broker-dealers
managed by EVEREN Securities. A Conversion Center will be established at the
office of the Savings Bank. The Holding Company will rely on Rule 3a4-1 of the
Exchange Act and sales of Common Stock will be conducted within the requirements
of such Rule, so as to permit officers, directors and employees to participate
in the sale of the Common Stock in those states where the law so permits. No
officer, director or employee of the Holding Company or the Savings Bank will be
compensated directly or indirectly by the payment of commissions or other
remuneration in connection with his or her participation in the sale of Common
Stock.
PROCEDURE FOR PURCHASING SHARES IN THE SUBSCRIPTION AND DIRECT COMMUNITY
OFFERING
To ensure that each purchaser receives a prospectus at least 48 hours prior
to the Expiration Date in accordance with Rule 15c2-8 under the Exchange Act, no
Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of the Order
Form will confirm receipt or delivery in accordance with Rule 15c2-8. Order
Forms will only be distributed with a Prospectus. The Savings Bank will accept
for processing only orders submitted on Order Forms.
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To purchase shares in the Subscription and Direct Community Offering, the
accompanying original Stock Order Form (facsimile copies and photocopies will
not be accepted) and a fully executed separate Certification Form, along with
the required full payment for each share subscribed, or with appropriate
authorization for withdrawal from the subscriber's deposit account with the
Savings Bank (which may be given by completing the appropriate blanks in the
Order Form), must be received by the Savings Bank by Noon, Central Time, on the
Expiration Date. Stock Order Forms and Certification Forms which are not
received by such time or are executed defectively or are received without full
payment (or appropriate withdrawal instructions) are not required to be
accepted. The Holding Company and the Savings Bank have the right to waive or
permit the correction of incomplete or improperly executed Stock Order Forms,
but do not represent that they will do so. Pursuant to the Plan of Conversion,
the interpretation by the Holding Company and the Savings Bank of the terms and
conditions of the Plan of Conversion and of the Stock Order Form will be final.
Once received, an executed Stock Order Form or Certification Form may not be
modified, amended or rescinded without the consent of the Savings Bank unless
the Conversion has not been consummated within 45 days after the end of the
Subscription Offering, unless such period has been extended.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the Eligibility Record Date (January 15,
1995) and/or the Supplemental Eligibility Record Date (June 30, 1996) and/or the
Voting Record Date (__________, 1996) must list all accounts on the Stock Order
Form giving all names in each account, the account number and the approximate
account balance as of such date.
Full payment for subscriptions may be made (i) in cash if delivered in
person at the Savings Bank, (ii) by check, bank draft, or money order, or (iii)
by authorization of withdrawal from deposit accounts maintained with the Savings
Bank. Appropriate means by which such withdrawals may be authorized are
provided on the Order Form. No wire transfers will be accepted and full payment
is required. Interest will be paid on payments made by cash, check, bank draft
or money order at the Savings Bank's passbook rate (___% as of the date hereof)
from the date payment is received until the consummation or termination of the
Conversion. If payment is made by authorization of withdrawal from deposit
accounts, the funds authorized to be withdrawn from a deposit account will
continue to accrue interest at the contractual rates until consummation or
termination of the Conversion (unless the certificate matures after the date of
receipt of the Order Form but prior to closing, in which case funds will earn
interest at the passbook rate from the date of maturity until consummation of
the Conversion), but a hold will be placed on such funds, thereby making them
unavailable to the depositor until consummation or termination of the
Conversion. At the consummation of the Conversion the funds received in the
Offerings will be used to purchase the shares of Common Stock ordered. THE
SHARES ISSUED IN THE CONVERSION CANNOT AND WILL NOT BE INSURED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY. In the event that the Conversion is not
consummated for any reason, all funds submitted will be promptly refunded with
interest as described above.
If a subscriber authorizes the Savings Bank to withdraw the amount of the
purchase price from his or her deposit account, the Savings Bank will do so as
of the effective date of Conversion. The Savings Bank will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum balance
requirement at the time that the funds actually are transferred under the
authorization the certificate will be canceled at the time of the withdrawal,
without penalty, and the remaining balance will earn interest at the Savings
Bank's passbook rate.
If the ESOP subscribes for shares during the Subscription Offering, the
ESOP will not be required to pay for the shares subscribed for at the time it
subscribes, but rather may pay for such shares of Common Stock subscribed for at
the Purchase Price upon consummation of the Conversion, provided that there is
in force from the time of its subscription until such time, a loan commitment
from an unrelated financial institution or the Holding Company to lend to the
ESOP, at such time, the aggregate Purchase Price of the shares for which it
subscribed.
IRAs maintained in the Savings Bank do not permit investment in the Common
Stock. A depositor interested in using his or her IRA funds to purchase Common
Stock must do so through a self-directed IRA. Since the Savings Bank does not
offer such accounts, it will allow such a depositor to make a trustee-to-trustee
transfer
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of the IRA funds to a trustee offering a self-directed IRA program with the
agreement that such funds will be used to purchase the Holding Company's Common
Stock in the Offerings. There will be no early withdrawal or IRS interest
penalties for such transfers. The new trustee would hold the Common Stock in a
self-directed account in the same manner as the Savings Bank now holds the
depositor's IRA funds. An annual administrative fee may be payable to the new
trustee. Depositors interested in using funds in an Savings Bank IRA to purchase
Common Stock should contact the Conversion Center at the Savings Bank no later
than __________, 1996 so that the necessary forms may be forwarded for execution
and returned prior to the Expiration Date. In addition, the provisions of ERISA
and IRS regulations require that officers, directors and 10% shareholders who
use self-directed IRA funds to purchase shares of Common Stock in the
Subscription and Direct Community Offering make such purchases for the exclusive
benefit of the IRAs.
Certificates representing shares of Common Stock purchased, and any refund
due, will be mailed to purchasers at such address as may be specified in
properly completed Stock Order Form to or the last address of such persons
appearing on the records of the Savings Bank as soon as practicable following
completion of the sale of all shares of Common Stock. Any certificates returned
as undeliverable will be disposed of in accordance with applicable law. Until
certificates for the Common Stock are available and delivered to subscribers and
purchasers, subscribers and purchasers may not be able to sell the shares of
Common Stock for which they subscribed or purchased.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
Federal regulations require that the aggregate purchase price of the
securities sold in connection with the conversion of a thrift institution be
based upon an estimated pro forma value of the Banks and the Holding Company
(i.e., taking into account the expected receipt of proceeds from the sale of
- -----
securities in the Conversion), as determined by an independent appraisal. The
Savings Bank and the Holding Company have retained RP Financial to prepare an
appraisal of the pro forma market value of the Holding Company and the Banks, as
well as a business plan. RP Financial will receive a fee expected to total
approximately $27,500 for its appraisal services and preparation of a business
plan, plus reasonable out-of-pocket expenses incurred in connection with the
appraisal. The Savings Bank has agreed to indemnify RP Financial under certain
circumstances against liabilities and expenses (including legal fees) arising
out of, related to, or based upon the Conversion.
RP Financial has prepared an appraisal of the estimated pro forma market
value of the Holding Company and the Banks taking into account the formation of
the Holding Company as the holding company for the Savings Bank. For its
analysis, RP Financial undertook substantial investigations to learn about the
Savings Bank's business and operations. Management supplied financial
information, including annual financial statements, information on the
composition of assets and liabilities, and other financial schedules. In
addition to this information, RP Financial reviewed the Savings Bank's Form AC
Application for Approval of Conversion and the Holding Company's Form SB-2
Registration Statement. Further, RP Financial visited the Savings Bank's
facilities and had discussions with the Savings Bank's management and its
special conversion legal counsel, Breyer & Aguggia. No detailed individual
analysis of the separate components of the Holding Company's or the Savings
Bank's assets and liabilities was performed in connection with the evaluation.
In estimating the pro forma market value of the Holding Company and the
Banks, as required by applicable regulatory guidelines, RP Financial's analysis
utilized three selected valuation procedures, the Price/Book ("P/B") method, the
Price/Earnings ("P/E") method, and Price/Assets ("P/A") method, all of which are
described in its report. RP Financial placed the greatest emphasis on the P/E
and P/B methods in estimating pro forma market value. In applying these
procedures, RP Financial reviewed among other factors, the economic make-up of
the Savings Bank's primary market area, the Savings Bank's financial performance
and condition in relation to publicly-traded institutions that RP Financial
deemed comparable to the Savings Bank, the specific terms of the offering of the
Holding Company's Common Stock, the pro forma impact of the additional capital
raised in the Conversion, conditions of securities markets in general, and the
market for thrift institution common stock in particular. RP Financial's
analysis provides an approximation of the pro forma market value of the Holding
Company and the
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Savings Bank based on the valuation methods applied and the assumptions outlined
in its report. Included in its report were certain assumptions as to the pro
forma earnings of the Holding Company after the Conversion that were utilized in
determining the appraised value. These assumptions included expenses of $650,000
an assumed after-tax rate of return on the net conversion proceeds of 3.4%
purchases by the ESOP of 8% of the stock sold in the Conversion and purchases in
the open market by the MRP of a number of shares equal to 4% of the stock sold
in the Conversion at the Purchase Price. See "PRO FORMA DATA" for additional
information concerning these assumptions. The use of different assumptions may
yield somewhat different results.
On the basis of the foregoing, RP Financial has advised the Holding Company
and the Savings Bank that, in its opinion, as of June 14, 1996, the aggregate
estimated pro forma market value of the Holding Company and the Banks and,
therefore, the Common Stock was within the valuation range of $13,175,000 to
$17,825,000 with a midpoint of $15,500,000. After reviewing the methodology and
the assumptions used by RP Financial in the preparation of the appraisal, the
Board of Directors established the Estimated Valuation Range which is equal to
the valuation range of $13,175,000 to $17,825,000 with a midpoint of
$15,500,000. Assuming that the shares are sold at $10.00 per share in the
Conversion, the estimated number of shares would be between 1,317,500 and
1,782,500 with a midpoint of 1,550,000. The Purchase Price of $10.00 was
determined by discussion among the Boards of Directors of the Savings Bank and
the Holding Company and EVEREN Securities, taking into account, among other
factors (i) the requirement under OTS regulations that the Common Stock be
offered in a manner that will achieve the widest distribution of the stock and
(ii) desired liquidity in the Common Stock subsequent to the Conversion. Since
the outcome of the Offerings relate in large measure to market conditions at the
time of sale, it is not possible to determine the exact number of shares that
will be issued by the Holding Company at this time. The Estimated Valuation
Range may be amended, with the approval of the OTS, if necessitated by
developments following the date of such appraisal in, among other things, market
conditions, the financial condition or operating results of the Savings Bank,
regulatory guidelines or national or local economic conditions.
RP Financial's appraisal report is filed as an exhibit to the Registration
Statement. See "ADDITIONAL INFORMATION."
If, upon completion of the Subscription and Direct Community Offering, at
least the minimum number of shares are subscribed for, RP Financial, after
taking into account factors similar to those involved in its prior appraisal,
will determine its estimate of the pro forma market value of the Banks and the
Holding Company upon Conversion, as of the close of the Subscription and Direct
Community Offering.
No sale of the shares will take place unless prior thereto RP Financial
confirms to the OTS that, to the best of RP Financial's knowledge and judgment,
nothing of a material nature has occurred which would cause it to conclude that
the actual total purchase price on an aggregate basis was incompatible with its
estimate of the total pro forma market value of the Holding Company and the
Banks at the time of the sale. If, however, the facts do not justify such a
statement, the Subscription, Direct Community and Public Offerings or other sale
may be canceled, a new Estimated Valuation Range and price per share set and new
Subscription, Direct Community and Public Offerings held. Under such
circumstances, subscribers would have the right to modify or rescind their
subscriptions and to have their subscription funds returned promptly with
interest and holds on funds authorized for withdrawal from deposit accounts
would be released or reduced.
Depending upon market and financial conditions, the number of shares issued
may be more or less than the range in number of shares shown above. In the
event the total amount of shares issued is less than 1,317,500 or more than
2,049,875, 15% above the maximum of the Estimated Valuation Range), for
aggregate gross proceeds of less than $13,175,000 or more than $20,498,750
subscription funds will be returned promptly with interest to each subscriber
unless he indicates otherwise. In the event a new valuation range is
established by RP Financial, such new range will be subject to approval by the
OTS.
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If purchasers cannot be found for an insignificant residue of unsubscribed
shares from the general public, other purchase arrangements will be made by the
Boards of Directors of the Savings Bank and the Holding Company, if possible.
Such other purchase arrangements will be subject to the approval of the OTS and
may provide for purchases for investment purposes by directors, officers, their
associates and other persons in excess of the limitations provided in the Plan
of Conversion and in excess of the proposed director purchases set forth herein,
although no such purchases are currently intended. If such other purchase
arrangements cannot be made, the Plan will terminate.
In formulating its appraisal, RP Financial relied upon the truthfulness,
accuracy and completeness of all documents the Savings Bank furnished it. RP
Financial also considered financial and other information from regulatory
agencies, other financial institutions, and other public sources, as
appropriate. While RP Financial believes this information to be reliable, RP
Financial does not guarantee the accuracy or completeness of such information
and did not independently verify the financial statements and other data
provided by the Savings Bank and the Holding Company or independently value the
assets or liabilities of the Holding Company and the Savings Bank. THE
APPRAISAL BY RP FINANCIAL IS NOT INTENDED TO BE, AND MUST NOT BE INTERPRETED AS,
A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF VOTING TO APPROVE THE
CONVERSION OR OF PURCHASING SHARES OF COMMON STOCK. MOREOVER, BECAUSE THE
APPRAISAL IS NECESSARILY BASED ON MANY FACTORS WHICH CHANGE FROM TIME TO TIME,
THERE IS NO ASSURANCE THAT PERSONS WHO PURCHASE SUCH SHARES IN THE CONVERSION
WILL LATER BE ABLE TO SELL SHARES THEREAFTER AT PRICES AT OR ABOVE THE PURCHASE
PRICE.
RESTRICTIONS ON REPURCHASE OF STOCK
Pursuant to OTS regulations, OTS-regulated savings associations (and their
holding companies) may not for a period of three years from the date of an
institution's mutual-to-stock conversion repurchase any of its common stock from
any person, except in the event of (i) an offer made to all of its stockholders
to repurchase the common stock on a pro rata basis, approved by the OTS; (ii)
the repurchase of qualifying shares of a director; or (iii) a purchase in the
open market by a tax-qualified or non-tax-qualified employee stock benefit plan
in an amount reasonable and appropriate to fund the plan. Furthermore, any
repurchases of its common stock are prohibited if the effect thereof would cause
the association's regulatory capital to be reduced below (a) the amount required
for the liquidation account or (b) the regulatory capital requirements imposed
by the OTS. Repurchases are generally prohibited during the first year
following conversion. However, recent OTS policy has relaxed this restriction,
particularly during the second six months after conversion. While an applicant
needs to demonstrate the existence of "exceptional circumstances" during the
first six months after conversion, the OTS has indicated that it would analyze
repurchases during months six through 12 after conversion on a case-by-case
basis. Upon 10 days' written notice to the OTS, and if the OTS does not object,
an institution may make open market repurchases of its outstanding common stock
during years two and three following the conversion, provided that (x) no more
than 5% of the outstanding common stock is to be purchased during any 12-month
period, (y) the repurchases do not cause the association to become
undercapitalized as defined under the OTS prompt corrective action regulations
and (z) the repurchase would not adversely affect the financial condition of the
association. No assurances, however, can be given that the OTS will approve a
repurchase program under current policy or that such policy will not change or
become more restrictive.
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information as to the approximate
purchases of Common Stock by each director and executive officer of the Savings
Bank, including their associates, as defined by applicable regulations. No
individual has entered into a binding agreement with respect to such intended
purchases. Directors and officers of the Savings Bank and their associates may
not purchase in excess of 33% of the shares sold in the Conversion and,
therefore, actual purchases could be more or less than indicated below. For
purposes of the following table, it has been assumed that sufficient shares will
be available to satisfy subscriptions in all categories. Directors, officers
and staff members will pay the same price for the shares for which they
subscribe as the price that will be paid by all other subscribers.
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<TABLE>
<CAPTION>
Percent of
Shares at
Name and Maximum of
Position with Anticipated Number of Anticipated Dollar Estimated
the Savings Bank Shares Purchased(1) Amount Purchased(1) Valuation Range(1)
- ---------------- --------------------- ------------------- ------------------
<S> <C> <C> <C>
Michael W. Welge 176,467 $1,764,670 9.99%
Chairman of the Board,
Chief Financial Officer
and Director
Howard A. Boxdorfer 20,000 200,000 1.12
President and Director
Edward K. Collins 30,000 300,000 1.68
Executive Vice President,
Chief Executive Officer and
Director
Thomas E. Welch, Jr. 17,500 175,000 0.98
Senior Vice President
and Director
John R. Beck, M.D. 50,000 500,000 2.81
Director
Allen R. Verseman 50,000 500,000 2.81
Director
James C. McDonald 20,000 200,000 1.12
Director
Carl H. Welge 12,500 125,000 0.70
Director
Mary Jo Homan 1,500 15,000 0.08
Treasurer
Robert H. Gross 2,000 20,000 0.11
Vice President and Secretary
William P. Wingerter, Sr. 4,000 40,000 0.22
------- ---------- -----
Vice President
and Branch Manager
Total 383,967 $3,839,670 21.62%
======= ========== =====
</TABLE>
_________________
(1) Excludes any shares awarded pursuant to the ESOP and MRP and options to
acquire shares pursuant to the Stock Option Plan. For a description of the
number of shares to be purchased by the ESOP and expected awards under the
MRP and Stock Option Plan, see "MANAGEMENT OF THE SAVINGS BANK --Benefits
--Employee Stock Ownership Plan," "-- Benefits -- 1996 Stock Option Plan"
and "--Benefits --Management Recognition Plan."
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RESTRICTIONS ON TRANSFERABILITY BY DIRECTORS AND OFFICERS AND NASD MEMBERS
Shares of Common Stock purchased by directors and officers of the Holding
Company may not be sold for a period of one year following consummation of the
Conversion, except in the event of the death of the stockholder or in any
exchange of the Common Stock in connection with a merger or acquisition of the
Holding Company. Shares of Common Stock received by directors or officers upon
exercise of options issued pursuant to the Stock Option Plan are not subject to
this restriction. Accordingly, shares of Common Stock issued by the Holding
Company to directors and officers shall bear a legend giving appropriate notice
of the restriction, and, in addition, the Holding Company will give appropriate
instructions to the transfer agent for the Holding Company's Common Stock with
respect to the restriction on transfers. Any shares issued to directors and
officers as a stock dividend, stock split or otherwise with respect to
restricted Common Stock shall be subject to the same restrictions.
Purchases of outstanding shares of Common Stock of the Holding Company by
directors, executive officers (or any person who was an executive officer or
director of the Savings Bank after adoption of the Plan of Conversion) and their
associates during the three-year period following Conversion may be made only
through a broker or dealer registered with the SEC, except with the prior
written approval of the OTS. This restriction does not apply, however, to
negotiated transactions involving more than 1% of the Holding Company's
outstanding Common Stock or to the purchase of stock pursuant to the Stock
Option Plan.
The Holding Company has filed with the SEC a registration statement under
the Securities Act for the registration of the Common Stock to be issued
pursuant to the Conversion. The registration under the Securities Act of shares
of the Common Stock to be issued in the Conversion does not cover the resale of
such shares. Shares of Common Stock purchased by persons who are not affiliates
of the Holding Company may be resold without registration. Shares purchased by
an affiliate of the Holding Company will be subject to the resale restrictions
of Rule 144 under the Securities Act. If the Holding Company meets the current
public information requirements of Rule 144 under the Securities Act, each
affiliate of the Holding Company who complies with the other conditions of Rule
144 (including those that require the affiliate's sale to be aggregated with
those of certain other persons) would be able to sell in the public market,
without registration, a number of shares not to exceed, in any three-month
period, the greater of (i) 1% of the outstanding shares of the Holding Company
or (ii) the average weekly volume of trading in such shares during the preceding
four calendar weeks. Provision may be made in the future by the Holding Company
to permit affiliates to have their shares registered for sale under the
Securities Act under certain circumstances.
In addition, under guidelines of the NASD, members of the NASD and their
associates are subject to certain restrictions on the transfer of securities
purchased in accordance with Subscription Rights and to certain reporting
requirements upon purchase of such securities.
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
The following discussion is a summary of certain provisions of federal law
and regulations and Delaware corporate law, as well as the Certificate of
Incorporation and Bylaws of the Holding Company, relating to stock ownership and
transfers, the Board of Directors and business combinations, all of which may be
deemed to have "anti-takeover" effects. The description of these provisions is
necessarily general and reference should be made to the actual law and
regulations and to the Certificate of Incorporation and Bylaws of the Holding
Company. See "ADDITIONAL INFORMATION" as to how to obtain a copy of these
documents.
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CONVERSION REGULATIONS
OTS regulations prohibit any person from making an offer, announcing an
intent to make an offer or participating in any other arrangement to purchase
stock or acquiring stock or subscription rights in a converting institution (or
its holding company) from another person prior to completion of its conversion.
Further, without the prior written approval of the OTS, no person may make such
an offer or announcement of an offer to purchase shares or actually acquire
shares in the converting institution (or its holding company) for a period of
three years from the date of the completion of the conversion if, upon the
completion of such offer, announcement or acquisition, that person would become
the beneficial owner of more than 10% of the outstanding stock of the
institution (or its holding company). The OTS has defined "person" to include
any individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution. However, offers made
exclusively to an association (or its holding company) or an underwriter or
member of a selling group acting on the converting institution's (or its holding
company's) behalf for resale to the general public are excepted. The regulation
also provides civil penalties for willful violation or assistance in any such
violation of the regulation by any person connected with the management of the
converting institution (or its holding company) or who controls more than 10% of
the outstanding shares or voting rights of a converting or converted institution
(or its holding company).
CHANGE OF CONTROL REGULATIONS
Under the Change in Bank Control Act, no person may acquire control of an
insured federal savings association or its parent holding company unless the OTS
has been given 60 days' prior written notice and has not issued a notice
disapproving the proposed acquisition. In addition, OTS regulations provide
that no company may acquire control of a savings association without the prior
approval of the OTS. Any company that acquires such control becomes a "savings
and loan holding company" subject to registration, examination and regulation by
the OTS.
Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the OTS that the acquiror has the
power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution. Acquisition of more than
10% of any class of a savings association's voting stock, if the acquiror also
is subject to any one of eight "control factors," constitutes a rebuttable
determination of control under the regulations. Such control factors include
the acquiror being one of the two largest stockholders. The determination of
control may be rebutted by submission to the OTS, prior to the acquisition of
stock or the occurrence of any other circumstances giving rise to such
determination, of a statement setting forth facts and circumstances which would
support a finding that no control relationship will exist and containing certain
undertakings. The regulations provide that persons or companies which acquire
beneficial ownership exceeding 10% or more of any class of a savings
association's stock must file with the OTS a certification form that the holder
is not in control of such institution, is not subject to a rebuttable
determination of control and will take no action which would result in a
determination or rebuttable determination of control without prior notice to or
approval of the OTS, as applicable. There are also rebuttable presumptions in
the regulations concerning whether a group "acting in concert" exists, including
presumed action in concert among members of an "immediate family."
The OTS may prohibit an acquisition of control if it finds, among other
things, that (i) the acquisition would result in a monopoly or substantially
lessen competition, (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the institution, or (iii) the competence,
experience or integrity of the acquiring person indicates that it would not be
in the interest of the depositors or the public to permit the acquisition of
control by such person.
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ANTI-TAKEOVER PROVISIONS IN THE HOLDING COMPANY'S CERTIFICATE OF INCORPORATION
AND BYLAWS AND DELAWARE LAW
A number of provisions of the Holding Company's Certificate of
Incorporation and Bylaws deal with matters of corporate governance and certain
rights of stockholders. The following discussion is a general summary of
certain provisions of the Holding Company's Certificate of Incorporation and
Bylaws and regulatory provisions relating to stock ownership and transfers, the
Board of Directors and business combinations, which might be deemed to have a
potential "anti-takeover" effect. These provisions may have the effect of
discouraging a future takeover attempt which is not approved by the Board of
Directors but which individual Holding Company stockholders may deem to be in
their best interests or in which stockholders may receive a substantial premium
for their shares over then current market prices. As a result, stockholders who
might desire to participate in such a transaction may not have an opportunity to
do so. Such provisions will also render the removal of incumbent Board of
Directors or management of the Holding Company more difficult. The following
description of certain of the provisions of the Certificate of Incorporation and
Bylaws of the Holding Company is necessarily general, and reference should be
made in each case to such Certificate of Incorporation and Bylaws, which are
incorporated herein by reference. See "ADDITIONAL INFORMATION" as to how to
obtain a copy of these documents.
BOARD OF DIRECTORS. The Board of Directors of the Holding Company is
divided into three classes, each of which shall contain approximately one-third
of the whole number of the members of the Board. The members of each class
shall be elected for a term of three years, with the terms of office of all
members of one class expiring each year so that approximately one-third of the
total number of directors are elected each year. The Holding Company's
Certificate of Incorporation provides that the size of the Board shall be as set
forth in the Bylaws. The Bylaws currently set the number of directors at eight.
The Certificate of Incorporation provides that any vacancy occurring in the
Board, including a vacancy created by an increase in the number of directors,
shall be filled by a vote of two-thirds of the directors then in office and any
director so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of the class to which the director has been
chosen expires. The classified Board is intended to provide for continuity of
the Board of Directors and to make it more difficult and time consuming for a
stockholder group to fully use its voting power to gain control of the Board of
Directors without the consent of the incumbent Board of Directors of the Holding
Company. The Certificate of Incorporation of the Holding Company provides that
a director may be removed from the Board of Directors prior to the expiration of
his term only for cause and only upon the vote of 80% of the outstanding shares
of voting stock. In the absence of this provision, the vote of the holders of a
majority of the shares could remove the entire Board, but only with cause, and
replace it with persons of such holders' choice.
CUMULATIVE VOTING, SPECIAL MEETINGS AND ACTION BY WRITTEN CONSENT. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. Moreover, the Certificate of Incorporation provides that special
meetings of stockholders of the Holding Company may be called only by the Board
of Directors of the Holding Company and that stockholders may take action only
at a meeting and not by written consent.
AUTHORIZED SHARES. The Certificate of Incorporation authorizes the
issuance of 3,000,000 shares of Common Stock and 100,000 shares of preferred
stock. The shares of Common Stock and preferred stock were authorized in an
amount greater than that to be issued in the Conversion to provide the Holding
Company's Board of Directors with as much flexibility as possible to effect,
among other transactions, financings, acquisitions, stock dividends, stock
splits and the exercise of employee stock options. However, these additional
authorized shares may also be used by the Board of Directors consistent with its
fiduciary duty to deter future attempts to gain control of the Holding Company.
The Board of Directors also has sole authority to determine the terms of any one
or more series of preferred stock, including voting rights, conversion rates,
and liquidation preferences. As a result of the ability to fix voting rights
for a series of preferred stock, the Board has the power to the extent
consistent with its fiduciary duty to issue a series of preferred stock to
persons friendly to management in order to attempt to block a tender offer,
merger or other transaction by which a third party seeks control of the Holding
Company, and thereby assist members of management to retain their positions.
The Holding Company's Board currently has no plans for the issuance of
additional shares, other than the issuance of shares of Common Stock upon
exercise of stock options.
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STOCKHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS WITH PRINCIPAL
STOCKHOLDERS. The Certificate of Incorporation requires the approval of the
holders of at least 80% of the Holding Company's outstanding shares of voting
stock to approve certain "Business Combinations" (as defined therein) involving
a "Related Person" (as defined therein) except in cases where the proposed
transaction has been approved in advance by a majority of those members of the
Holding Company's Board of Directors who are unaffiliated with the Related
Person and were directors prior to the time when the Related Person became an
Related Person. The term "Related Person" is defined to include any individual,
corporation, partnership or other entity (other than the Holding Company or its
subsidiary) which owns beneficially or controls, directly or indirectly, 10% or
more of the outstanding shares of voting stock of the Holding Company or an
affiliate of such person or entity. This provision of the Certificate of
Incorporation applies to any "Business Combination," which is defined to
include: (i) any merger or consolidation of the Holding Company with or into
any Related Person; (ii) any sale, lease, exchange, mortgage, transfer, or other
disposition of 25% or more of the assets of the Holding Company or combined
assets of the Holding Company and its subsidiaries to a Related Person; (iii)
any merger or consolidation of a Related Person with or into the Holding Company
or a subsidiary of the Holding Company; (iv) any sale, lease, exchange,
transfer, or other disposition of 25% or more of the assets of a Related Person
to the Holding Company or a subsidiary of the Holding Company; (v) the issuance
of any securities of the Holding Company or a subsidiary of the Holding Company
to a Related Person; (vi) the acquisition by the Holding Company or a subsidiary
of the Holding Company of any securities of a Related Person; (vii) any
reclassification of common stock of the Holding Company or any recapitalization
involving the common stock of the Holding Company; or (viii) any agreement or
other arrangement providing for any of the foregoing.
Under Delaware law, absent this provision, business combinations, including
mergers, consolidations and sales of substantially all of the assets of a
corporation must, subject to certain exceptions, be approved by the vote of the
holders of a majority of the outstanding shares of common stock of the Holding
Company and any other affected class of stock. One exception under Delaware law
to the majority approval requirement applies to stockholders owning 15% or more
of the common stock of a corporation for a period of less than three years.
Such 15% stockholder, in order to obtain approval of a business combination,
must obtain the approval of two-thirds of the outstanding stock, excluding the
stock owned by such 15% stockholder, or satisfy other requirements under
Delaware law relating to board of director approval of his or her acquisition of
the shares of the Holding Company. The increased stockholder vote required to
approve a business combination may have the effect of foreclosing mergers and
other business combinations which a majority of stockholders deem desirable and
place the power to prevent such a merger or combination in the hands of a
minority of stockholders.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to the
Holding Company's Certificate of Incorporation must be approved by a majority
vote of its Board of Directors and also by a majority of the outstanding shares
of its voting stock, provided, however, that an affirmative vote of at least 80%
of the outstanding voting stock entitled to vote (after giving effect to the
provision limiting voting rights) is required to amend or repeal certain
provisions of the Certificate of Incorporation, including the provision limiting
voting rights, the provisions relating to approval of certain business
combinations, calling special meetings, the number and classification of
directors, director and officer indemnification by the Holding Company and
amendment of the Holding Company's Bylaws and Certificate of Incorporation. The
Holding Company's Bylaws may be amended by its Board of Directors, or by a vote
of 80% of the total votes eligible to be voted at a duly constituted meeting of
stockholders.
STOCKHOLDER NOMINATIONS AND PROPOSALS. The Certificate of Incorporation of
the Holding Company requires a stockholder who intends to nominate a candidate
for election to the Board of Directors, or to raise new business at a
stockholder meeting to give not less than 30 nor more than 60 days' advance
notice to the Secretary of the Holding Company. The notice provision requires a
stockholder who desires to raise new business to provide certain information to
the Holding Company concerning the nature of the new business, the stockholder
and the stockholder's interest in the business matter. Similarly, a stockholder
wishing to nominate any person for election as a director must provide the
Holding Company with certain information concerning the nominee and the
proposing stockholder.
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PURPOSE AND TAKEOVER DEFENSIVE EFFECTS OF THE HOLDING COMPANY'S CERTIFICATE
OF INCORPORATION AND BYLAWS. The Board of Directors of the Savings Bank believes
that the provisions described above are prudent and will reduce the Holding
Company's vulnerability to takeover attempts and certain other transactions
which have not been negotiated with and approved by its Board of Directors.
These provisions will also assist the Savings Bank in the orderly deployment of
the Conversion proceeds into productive assets during the initial period after
the Conversion. The Board of Directors believes these provisions are in the best
interest of the Savings Bank and the Holding Company and its stockholders. In
the judgment of the Board of Directors, the Holding Company's Board will be in
the best position to determine the true value of the Holding Company and to
negotiate more effectively for what may be in the best interests of its
stockholders. Accordingly, the Board of Directors believes that it is in the
best interest of the Holding Company and its stockholders to encourage potential
acquirors to negotiate directly with the Board of Directors of the Holding
Company and that these provisions will encourage such negotiations and
discourage hostile takeover attempts. It is also the view of the Board of
Directors that these provisions should not discourage persons from proposing a
merger or other transaction at a price reflective of the true value of the
Holding Company and which is in the best interest of all stockholders.
Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common. Takeover attempts which
have not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms which may be less favorable than
might otherwise be available. A transaction which is negotiated and approved by
the Board of Directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value of the Holding
Company and its stockholders, with due consideration given to matters such as
the management and business of the acquiring corporation and maximum strategic
development of the Holding Company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above the current
market prices, such offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
which is under different management and whose objective may not be similar to
those of the remaining stockholders. The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Holding Company's remaining stockholders of benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners became less
than the 300 thereby allowing for Exchange Act deregistration.
Despite the belief of the Savings Bank and the Holding Company as to the
benefits to stockholders of these provisions of the Holding Company's
Certificate of Incorporation and Bylaws, these provisions may also have the
effect of discouraging a future takeover attempt which would not be approved by
the Holding Company's Board, but pursuant to which stockholders may receive a
substantial premium for their shares over then current market prices. As a
result, stockholders who might desire to participate in such a transaction may
not have any opportunity to do so. Such provisions will also render the removal
of the Holding Company's Board of Directors and of management more difficult.
The Board of Directors of the Savings Bank and the Holding Company, however,
have concluded that the potential benefits outweigh the possible disadvantages.
Pursuant to applicable law, at any annual or special meeting of its
stockholders after the Conversion, the Holding Company may adopt additional
charter provisions regarding the acquisition of its equity securities that would
be permitted for a Delaware business corporation. The Holding Company and the
Savings Bank do not presently intend to propose the adoption of further
restrictions on the acquisition of the Holding Company's equity securities.
The cumulative effect of the restriction on acquisition of the Holding
Company contained in the Certificate of Incorporation and Bylaws and Holding
Company, federal law and Delaware law may be to discourage potential takeover
attempts and perpetuate incumbent management, even though certain stockholders
of the Holding Company may deem a potential acquisition to be in their best
interests, or deem existing management not to be acting in their best interests.
110
<PAGE>
DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY
GENERAL
The Holding Company is authorized to issue 3,000,000 shares of Common
Stock, par value of $.01 per share, and 100,000 shares of preferred stock, par
value of $.01 per share. The Holding Company currently expects to issue up to
2,012,500 shares of Common Stock and no shares of preferred stock in the
Conversion. Each share of the Holding Company's Common Stock will have the same
relative rights as, and will be identical in all respects with, each other share
of Common Stock. Upon payment of the Purchase Price for the common stock, in
accordance with the Plan of Conversion, all such stock will be duly authorized,
fully paid and nonassessable.
THE COMMON STOCK OF THE HOLDING COMPANY WILL REPRESENT NONWITHDRAWABLE
CAPITAL, WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED BY
THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
COMMON STOCK
DIVIDENDS. The Holding Company can pay dividends out of statutory surplus
or from certain net profits if, as and when declared by its Board of Directors.
The payment of dividends by the Holding Company is subject to limitations which
are imposed by law and applicable regulation. See "DIVIDEND POLICY" and
"REGULATION." The holders of Common Stock of the Holding Company will be
entitled to receive and share equally in such dividends as may be declared by
the Board of Directors of the Holding Company out of funds legally available
therefor. If the Holding Company issues preferred stock, the holders thereof
may have a priority over the holders of the Common Stock with respect to
dividends.
STOCK REPURCHASES. The Plan and OTS regulations place certain limitations
on the repurchase of the Holding Company's capital stock. See "THE CONVERSION
- -- Restrictions on Repurchase of Stock" and "USE OF PROCEEDS."
VOTING RIGHTS. Upon Conversion, the holders of Common Stock of the Holding
Company will possess exclusive voting rights in the Holding Company. They will
elect the Holding Company's Board of Directors and act on such other matters as
are required to be presented to them under Delaware law or as are otherwise
presented to them by the Board of Directors. Except as discussed in
"RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY," each holder of Common
Stock will be entitled to one vote per share and will not have any right to
cumulate votes in the election of directors. If the Holding Company issues
preferred stock, holders of the Holding Company preferred stock may also possess
voting rights. Certain matters require a vote of 80% of the outstanding shares
entitled to vote thereon. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING
COMPANY."
As a federal mutual savings bank, corporate powers and control of the
Savings Bank are vested in its Board of Directors, who elect the officers of the
Savings Bank and who fill any vacancies on the Board of Directors as it exists
upon Conversion. Subsequent to Conversion, voting rights will be vested
exclusively in the owners of the shares of capital stock of the Savings Bank,
all of which will be owned by the Holding Company, and voted at the direction of
the Holding Company's Board of Directors. Consequently, the holders of the
Common Stock will not have direct control of the Savings Bank.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
the Savings Bank, the Holding Company, as holder of the Savings Bank's capital
stock, would be entitled to receive, after payment or provision for payment of
all debts and liabilities of the Savings Bank (including all deposit accounts
and accrued interest thereon) and after distribution of the balance in the
special liquidation account to Eligible Account Holders and Supplemental
Eligible Account Holders (see "THE CONVERSION"), all assets of the Savings Bank
available for distribution. In the event of liquidation, dissolution or winding
up of the Holding Company, the holders of its common stock would be entitled to
receive, after payment or provision for payment of all its debts and
liabilities,
111
<PAGE>
all of the assets of the Holding Company available for distribution. If Holding
Company preferred stock is issued, the holders thereof may have a priority over
the holders of the Common Stock in the event of liquidation or dissolution.
PREEMPTIVE RIGHTS; REDEMPTION. Holders of the Common Stock of the Holding
Company will not be entitled to preemptive rights with respect to any shares
which may be issued. The Common Stock is not subject to redemption.
PREFERRED STOCK
None of the shares of the authorized Holding Company preferred stock will
be issued in the Conversion and there are no plans to issue the preferred stock.
Such stock may be issued with such designations, powers, preferences and rights
as the Board of Directors may from time to time determine. The Board of
Directors can, without stockholder approval, issue preferred stock with voting,
dividend, liquidation and conversion rights which could dilute the voting
strength of the holders of the Common Stock and may assist management in
impeding an unfriendly takeover or attempted change in control.
RESTRICTIONS ON ACQUISITION
Acquisitions of the Holding Company are restricted by provisions in its
Certificate of Incorporation and Bylaws and by the rules and regulations of
various regulatory agencies. See "REGULATION" and "RESTRICTIONS ON ACQUISITION
OF THE HOLDING COMPANY."
REGISTRATION REQUIREMENTS
The Holding Company will register the Common Stock with the SEC pursuant to
Section 12(g) of the Exchange Act upon the completion of the Conversion and will
not deregister its Common Stock for a period of at least three years following
the completion of the Conversion. Upon such registration, the proxy and tender
offer rules, insider trading reporting and restrictions, annual and periodic
reporting and other requirements of the Exchange Act will be applicable.
LEGAL AND TAX OPINIONS
The legality of the Common Stock has been passed upon for the Holding
Company by Breyer & Aguggia, Washington, D.C. The federal tax consequences of
the Conversion have been opined upon by Breyer & Aguggia and the Illinois income
tax consequences of the Conversion have been opined upon by Bryan Cave LLP, St.
Louis, Missouri. Breyer & Aguggia and Bryan Cave LLP, have consented to the
references herein to their opinions. Certain legal matters will be passed upon
for EVEREN Securities, Inc. by Luse Lehman Gorman Pomerenk & Schick, P.C.,
Washington, D.C.
EXPERTS
The financial statements at December 31, 1995 and for the year ended
December 31, 1995 have been included in reliance on the report of KPMG Peat
Marwick LLP, independent certified public accountants, appearing elsewhere
herein and upon the authority of said firm as experts in accounting and
auditing.
The financial statements as of December 31, 1994 and for the two years in
the period ended December 31, 1994 included in this Prospectus have been audited
by Kerber, Eck & Braeckel LLP, independent certified public
112
<PAGE>
accountants, as stated in their report appearing herein, and have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
RP Financial has consented to the publication herein of the summary of its
letter to the Savings Bank setting forth its opinion as to the estimated pro
forma market value of the Holding Company and the Savings Bank and to the use of
its name and statements with respect to it appearing herein.
CHANGE IN ACCOUNTANTS
Prior to the fiscal year ended December 31, 1995, the Savings Bank's
financial statements were audited by Kerber, Eck & Braeckel LLP. Kerber, Eck &
Braeckel LLP was dismissed on December 12, 1995 and KPMG Peat Marwick LLP was
engaged on December 12, 1995 and continues as the independent auditors of the
Savings Bank. The decision to dismiss was recommended by the Audit Committee
and was approved by the Board of Directors. Accordingly, the Savings Bank's
statement of financial condition as of December 31, 1994 and related
consolidated statements of operations, equity and cash flows for the years ended
December 31, 1994 and 1993, and included in this Prospectus, were audited by
Kerber, Eck & Braeckel LLP and the financial statements for the year ended
December 31, 1995, and included in this Prospectus, were audited by KPMG Peat
Marwick LLP.
For the fiscal years ended December 31, 1994 and 1993 and up to the date of
the replacement of Kerber, Eck & Braeckel LLP, there were no disagreements with
Kerber, Eck & Braeckel LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which, if not
resolved to the satisfaction of Kerber, Eck & Braeckel LLP, would have caused it
to make a reference to the subject matter of the disagreement in connection with
its reports. The independent auditors' report on the financial statements for
the fiscal years ended December 31, 1994 and 1993 did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope, or accounting principles. The Savings Bank did not
consult with KPMG Peat Marwick LLP during its two most recent fiscal years nor
during any subsequent interim period prior to its engagement regarding the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Savings Bank's financial statements.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a Registration Statement on Form
S-1 (File No. 333-2470) under the Securities Act with respect to the Common
Stock offered in the Conversion. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Such
information may be inspected at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; 500 West
Madison Street, Suite 1400, Room 1100, Chicago, Illinois 60661; and 75 Park
Place, New York, New York 10007. Copies may be obtained at prescribed rates
from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Savings Bank has filed with the OTS an Application for Approval of
Conversion, which includes proxy solicitation materials for the Savings Bank's
Special Meeting and certain other information. This Prospectus omits certain
information contained in such Application. The Application, including the proxy
solicitation materials, exhibits and certain other information that are a part
thereof, may be inspected, without charge, at the offices of the OTS, 1700 G
Street, N.W., Washington, D.C. 20552 and at the office of the Regional Director
of the OTS at the Central Regional Office of the OTS, 200 West Madison Street,
Suite 1300, Chicago, Illinois, 60606.
113
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Chester Savings Bank, FSB
Chester, Illinois:
We have audited the accompanying balance sheet of Chester Savings Bank, FSB (the
Savings Bank) as of December 31, 1995, and the related statements of income,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Savings Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The accompanying financial statements of the Savings Bank as of
December 31, 1994 and for each of the years in the two-year period ended
December 31, 1994, were audited by other auditors whose report thereon dated
January 18, 1995, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the financial position of Chester Savings Bank, FSB as
of December 31, 1995, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
February 13, 1996
F-1
<PAGE>
[LETTERHEAD APPEARS HERE]
Independent Auditors' Report
----------------------------
Board of Directors
Chester Savings Bank, FBB
We have audited the accompanying statements of financial condition of Chester
Savings Bank, FSB as of December 31, 1994 and 1993, and the related statements
of earnings, retained earnings and cash flows for the years then ended. These
financial statements are the responsibility of the Savings Bank's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Chester Savings Bank, FSB as of
December 31, 1994 and 1993, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
KERBER, ECK & BRAECKEL LLP
Cape Girardeau, Missouri
January 18, 1995
F-2
<PAGE>
CHESTER SAVINGS BANK, FSB
Balance Sheets
March 31, 1996 (Unaudited)
and December 31, 1995 and 1994
<TABLE>
<CAPTION>
March 31, December 31,
------------------
Assets 1996 1995 1994
------ ---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Cash $ 3,113,237 $ 1,773,061 $ 3,119,987
Interest-bearing deposits 1,677,511 3,493,066 1,623,319
Federal funds sold 5,500,000 5,400,000 2,500,000
------------ ------------ -----------
Total cash and cash equivalents 10,290,748 10,666,127 7,243,306
Certificates of deposit 4,141,673 9,761,774 18,582,302
Investment securities:
Available for sale, at market value (cost
of $17,503,111 and $6,507,205 at March 31,
1996 and December 31, 1995, respectively) 17,412,500 6,524,190 -
Held to maturity, at cost (market
value of $28,157,311, $31,903,611,
and $39,999,853 at March 31, 1996 and
December 31, 1995 and 1994, respectively) 28,189,077 31,821,755 41,109,569
Mortgage-backed securities:
Available for sale, at market value
(cost of $2,105,408 and $2,169,407
at March 31, 1996 and December 31,
1995, respectively) 2,114,882 2,207,139 -
Held to maturity, at cost (market value of
$14,779,194, $13,331,707, and $12,622,832
at March 31, 1996 and December 31, 1995
and 1994, respectively) 14,791,246 13,205,662 13,136,061
Loans receivable, net 55,753,534 57,021,009 58,156,573
Accrued interest receivable 927,895 636,592 785,112
Real estate acquired by foreclosure, net 209,982 209,248 63,552
Stock in Federal Home Loan Bank, at cost 622,000 604,300 595,200
Office property and equipment, net 1,831,262 1,843,286 1,946,084
Income taxes receivable - - 62,074
Other assets 521,501 279,910 75,628
----------- ----------- -----------
$ 136,806,300 $ 134,780,992 $ 141,755,461
=========== =========== ===========
Liabilities and Retained Earnings
---------------------------------
Savings deposits $ 108,514,632 $ 106,717,849 $ 129,711,933
Securities sold under agreements to repurchase 15,000,000 15,000,000 -
Accrued interest on savings deposits 270,787 314,060 40,186
Accrued interest on securities sold
under agreements to repurchase 67,893 141,938 -
Advance payments by borrowers for taxes
and insurance 822,894 573,009 929,223
Income taxes payable 95,714 36,252 -
Deferred tax liability, net 39,781 103,886 120,260
Accrued expenses and other liabilities 124,878 181,551 278,425
------------ ----------- -----------
Total liabilities 124,936,579 123,068,545 131,080,027
------------ ----------- -----------
Commitments and contingencies
Retained earnings - substantially restricted:
Unappropriated 11,920,026 11,676,334 10,675,434
Unrealized gain (loss) on securities
available for sale, net of tax (50,305) 36,113 -
------------ ----------- ------------
Total retained earnings 11,869,721 11,712,447 10,675,434
----------- ----------- ------------
$ 136,806,300 $ 134,780,992 $ 141,755,461
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
CHESTER SAVINGS BANK, FSB
Statements of Retained Earnings
Three months ended March 31, 1996 (Unaudited) and
years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Unrealized
gain (loss)
on securities
available Total
for sale, retained
Unappropriated net of tax earnings
-------------- ----------- --------
<S> <C> <C> <C>
Balance, December 31, 1992 $ $8,788,360 $ (9,868) $ 8,778,492
Net income 894,030 - 894,030
Change in unrealized loss on
marketable equity securities - 9,868 9,868
---------- ----- -----------
Balance, December 31, 1993 9,682,390 - 9,682,390
Net income 993,044 - 993,044
---------- ----- -----------
Balance, December 31, 1994 10,675,434 - 10,675,434
Net income 1,000,900 - 1,000,900
Cumulative effect of transfer of
securities to available for sale,
net of tax - (33,465) (33,465)
Change in unrealized gain (loss) on
securities available for sale,
net of tax - 69,578 69,578
---------- ------ -----------
Balance, December 31, 1995 11,676,334 36,113 11,712,447
Net income 243,692 - 243,692
Change in unrealized gain (loss) on
securities available for sale,
net of tax - (86,418) (86,418)
---------- ------ -----------
Balance, March 31, 1996 $ 11,920,026 $ (50,305) $ 11,869,721
========== ====== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
CHESTER SAVINGS BANK, FSB
Statements of Cash Flows
Three months ended March 31, 1996 and 1995 (Unaudited)
and years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
March 31, December 31,
----------------- --------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 243,692 $ 313,642 $ 1,000,900 $ 993,044 $ 894,030
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Cumulative effect of change in accounting principle - - - - 227,097
Depreciation and amortization:
Office properties and equipment 25,770 29,675 118,168 128,605 113,897
Deferred fees, discounts, and premiums (26,655) (26,774) (82,198) (38,833) (25,071)
(Increase) decrease in accrued interest receivable (291,303) (36,217) 148,520 (153,928) (18,286)
Increase (decrease) in accrued interest payable (117,318) 65,276 415,812 6,354 (15,091)
Increase (decrease) in income taxes, net 44,792 102,089 63,349 (12,475) (6,715)
Loss on sale of certificates of deposit 53,714 - - - -
Gain on sale of investment securities, net (6,837) (47,447) (52,497) - -
Gain on sale of mortgage-backed securities - - (45,919) - -
Provision for loan losses 7,500 (2,300) 161,319 69,309 29,627
FHLB stock dividend - (9,100) (9,100) - -
Net change in other assets and other liabilities (298,362) (414,205) (301,156) 58,569 68,497
----------- ---------- ----------- ----------- ----------
Net cash provided by (used in) operating
activities (364,909) (25,361) 1,417,198 1,050,645 1,267,985
----------- ---------- ----------- ----------- ----------
Cash flows from investing activities:
Principal repayments on:
Loans receivable 4,623,553 3,588,653 16,062,634 16,156,976 20,748,467
Mortgage-backed securities 462,698 447,388 1,637,310 2,340,955 3,164,335
Proceeds from the maturity of certificates of deposit 1,081,000 8,076,000 10,784,000 8,417,000 5,307,000
Proceeds from the sale of certificates of deposit 4,486,286 - - - -
Proceeds from the maturity of investment securities
available for sale 1,500,000 - 2,825,000 - -
Proceeds from the sale of investment securities
available for sale 3,010,078 3,993,047 29,417,029 - -
Proceeds from the maturity of investment securities
held to maturity 16,898,567 1,855,000 13,375,000 13,930,790 9,373,462
Proceeds from the sale of mortgage-backed securities
held to maturity - - 2,409,229 - -
Proceeds from redemption of Federal Home Loan Bank stock - - - 280,200 -
Cash invested in:
Loans receivable (3,361,562) (3,330,722) (15,280,965) (13,036,846) (16,005,066)
Mortgage-backed securities held to maturity (1,972,500) - (6,199,609) (8,059,825) -
Investment securities held to maturity (13,250,000) (100,225) (20,951,499) (20,381,146) (20,735,687)
Investment securities available for sale (15,503,812) (8,558,028) (21,785,788) - -
Certificates of deposit - - (1,976,000) (5,041,055) (12,880,892)
FHLB stock (17,700) - - - -
Proceeds from sales of real estate acquired through
foreclosure - - 54,950 68,200 154,017
Purchase of office properties and equipment (13,746) (7,830) (15,370) (912,978) (204,721)
----------- ---------- ----------- ----------- ----------
Net cash provided by (used in)
investing activities (2,057,138) 5,963,283 10,355,921 (6,237,729) (11,079,085)
----------- ---------- ----------- ----------- ----------
Cash flows from financing activities:
Increase (decrease) in savings deposits 1,796,783 (6,127,135) (22,994,084) (519,546) 1,500,603
Increase in securities sold under agreements to
repurchase - - 15,000,000 - -
Increase (decrease) in advance payments by
borrowers for taxes and insurance 249,885 297,944 (356,214) (124,114) (79,713)
----------- ---------- ----------- ----------- ----------
Net cash provided by (used in) financing
activities 2,046,668 (5,829,191) (8,350,298) (643,660) 1,420,890
----------- ---------- ----------- ----------- ----------
Net increase (decrease) in cash and cash
equivalents (375,379) 108,731 3,422,821 (5,830,744) (8,390,210)
Cash and cash equivalents, beginning of period 10,666,127 7,243,306 7,243,306 13,074,050 21,464,260
----------- ---------- ----------- ----------- ----------
Cash and cash equivalents, end of period $ 10,290,748 $ 7,352,037 $ 10,666,127 $ 7,243,306 $ 13,074,050
=========== ========== =========== =========== ==========
Supplemental information:
Interest paid $ 1,454,605 $ 1,270,988 $ 5,057,867 $ 5,082,941 $ 5,541,167
Income taxes paid 32,208 6,911 235,651 297,000 370,000
=========== ========== =========== =========== ==========
Noncash investing and financing activities:
Loans transferred to real estate acquired by
foreclosure $ - $ 13,777 $ 296,524 $ 169,710 $ 260,962
Interest credited to savings deposits 812,979 956,104 3,616,000 3,922,000 4,093,000
Securities transferred to available for sale - 11,742,867 21,501,548 - -
=========== ========== =========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
March 31, 1996 and December 31, 1995 and 1994
(Information as of March 31, 1996 and for the three
months ended March 31, 1996 and 1995 is audited)
(1) Summary of Significant Accounting Policies
------------------------------------------
Following are the significant accounting policies which Chester Savings
Bank, FSB (the Savings Bank) follows in preparing and presenting its
financial statements:
Business
--------
The Savings Bank provides a full range of financial services to
individual and corporate customers through its home office in
Chester, Illinois and its four branch offices in neighboring
cities in Southern Illinois and one branch office in Perryville,
Missouri. The Savings Bank is subject to competition from other
financial institutions in the area, is subject to the regulations
of certain federal agencies, and undergoes periodic examinations
by those regulatory authorities.
Basis of Presentation
---------------------
The financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and
expenses for the year. Actual results could differ significantly
from those estimates.
Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the
allowance for loan losses and the valuation of real estate
acquired by foreclosure or in satisfaction of loans. In
connection with the determination of the allowances for losses on
loans and real estate acquired by foreclosure, management obtains
independent appraisals for significant properties.
Management believes that the allowances for losses on loans and real
estate acquired by foreclosure are adequate. While management
uses available information to recognize such losses, future
additions to the allowances may be necessary based upon changes
in economic conditions. In addition, various regulatory agencies,
as an integral part of their examination process, periodically
review the Savings Bank's allowances for losses. Such agencies
may require the Savings Bank to recognize additions to the
allowances based upon their judgments about information available
to them at the time of their examination.
Statement of Financial Accounting Standards (SFAS) No.E107,
Disclosures About Fair Value of Financial Instruments, requires
that the estimated fair value of the Savings Bank's financial
instruments be disclosed. Fair value estimates of financial
instruments are made at a specific point in time, based on
relevant market information and information about the financial
instruments. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the
entire holdings or a significant portion of a particular
financial instrument. Because no market exists for a significant
portion of the Savings Bank's financial instruments, some fair
value estimates are subjective in
(Continued)
F-6
<PAGE>
nature and involve uncertainties and matters of significant
judgment. Changes in assumptions could significantly affect these
estimates. Fair value estimates are presented for existing on-
balance-sheet and off-balance-sheet financial instruments without
attempting to estimate the value of anticipated future business
and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related
to the realization of the unrealized gains and losses can have a
significant affect on fair value estimates and have not been
considered in any of the estimates (see note 15).
Statements of Cash Flows
------------------------
For purposes of the statements of cash flows, the Savings Bank
considers all interest-bearing deposits with original maturities
of three months or less and federal funds sold to be cash
equivalents.
Unaudited Interim Financial Statements
--------------------------------------
The accompanying unaudited financial statements have been prepared in
accordance with the requirements for a fair presentation of
interim financial statements and are in accordance with generally
accepted accounting principles. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments,
that are necessary for a fair presentation of interim periods
presented have been reflected.
Investment Securities and Mortgage-Backed Securities
----------------------------------------------------
Effective January 1, 1994, the Savings Bank adopted SFAS No.E115,
Accounting for Certain Investments in Debt and Equity Securities.
SFASENo.E115 addresses the accounting and reporting for
investments in equity securities that have readily determinable
fair values, and all investments in debt securities. Under SFAS
No. 115, the Savings Bank classified its investment securities
and mortgage-backed securities into one of three categories:
. Held to maturity - includes investments in debt securities
which the Savings Bank has the positive intent and ability
to hold until maturity.
. Trading securities - includes investments in debt and
equity securities purchased and held principally for the
purpose of selling them in the near term.
. Available for sale - includes investments in debt and
equity securities not classified as held to maturity or
trading (i.e., investments which the Savings Bank has no
present plans to sell in the near term but may be sold in
the future under different circumstances).
Accounting for investment securities and mortgage-backed securities
under SFASENo.E115 is summarized as follows:
. Held to maturity - carried at amortized cost, adjusted for
amortization of premiums and accretion of discounts using
the interest method.
(Continued)
F-7
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
. Trading securities - carried at fair value. Gains and
losses on these securities, both realized and unrealized,
are included in income. The Savings Bank held no such
securities at March 31, 1996, December31, 1995, or
December 31, 1994.
. Available for sale - carried at fair value. Realized gains
and losses, based on amortized cost determined in
accordance with the specific identification method, are
included in income. Unrealized gains and losses are
recorded, net of related income tax effects, as a separate
component of retained earnings until realized.
Prior to January 1, 1994, investment securities and mortgage-backed
securities were carried at cost, adjusted for amortization of
premiums and discounts, using a method that approximated the
interest method. These securities were carried at cost because
management had determined that the Savings Bank had both the
intent and the ability to hold them to maturity.
In accordance with the adoption of SFAS No. 115 on January 1, 1994,
the Savings Bank classified all investment securities and
mortgage-backed securities as "held to maturity" and continued to
carry them at amortized cost.
On November 15, 1995, the Financial Accounting Standards Board (FASB)
issued a special report, A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity
Securities (the Special Report). Due to uncertainties surrounding
the regulatory capital treatment for unrealized gains and losses
on available-for-sale securities at the time SFAS No. 115 was
required to be implemented, the Special Report was issued to
allow all entities a one-time opportunity to reconsider their
ability and intent to hold securities to maturity and transfer
securities from held to maturity without "tainting" the remainder
held-to-maturity securities. Those securities transferred would
be accounted for prospectively under SFAS No.E115. These
transfers were only allowed during the period from the date of
issuance of the Special Report through December 31, 1995.
As a result of the Special Report, management reconsidered the
classification of held-to-maturity securities and transferred
$7,589,274 and $2,169,407 of investment securities and mortgage-
backed securities, respectively, to available for sale during
December 1995. As a result of the transfers: a market valuation
account was established for the available-for-sale securities of
$50,704 to decrease the recorded balance of such securities to
their fair value; a deferred tax asset of $17,239 was recorded to
reflect the tax effect of the market valuation account; and the
net decrease resulting from the market valuation adjustment of
$33,465 was recorded as a separate component of retained
earnings.
Loans Receivable and Related Fees
---------------------------------
Loans receivable are carried at cost, as management has determined
that the Savings Bank has the intent and the ability to hold them
for the foreseeable future. Interest is credited to income as
earned; however, interest receivable is accrued only if deemed
collectible. Generally,
(Continued)
F-8
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
the Savings Bank's policy is to place loans delinquent over 90
days on nonaccrual status and exclude interest on such loans from
income. Interest ultimately collected is credited to income in
the period received.
Loan fees and the related incremental direct costs of originating
loans are deferred and are amortized over the lives of the
related loans using the interest method.
The allowance for loan losses is maintained at an amount considered
adequate to provide for potential losses. The provision for loan
losses is based on periodic analysis of the loan portfolio by
management. In this regard, management considers numerous
factors, including, but not necessarily limited to, general
economic conditions, loan portfolio composition, prior loss
experience, and independent appraisals. In addition to the
allowance for estimated losses on identified problem loans, an
overall unallocated allowance is established to provide for
unidentified credit losses. In estimating such losses, management
considers various risk factors including geographic location,
loan collateral, and payment history.
Effective January 1, 1995, the Savings Bank adopted SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, and SFAS No.
118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures, which amends SFAS No. 114. SFAS No.
114, as amended by SFAS No. 118, defines the recognition criteria
for loan impairment and the measurement methods for certain
impaired loans and loans for which terms have been modified in
troubled-debt restructurings (a restructured loan). Specifically,
a loan is considered impaired when it is probable a creditor will
be unable to collect all amounts due - both principal and
interest - according to the contractual terms of the loan
agreement. When measuring impairment, the expected future cash
flows of an impaired loan are required to be discounted at the
loan's effective interest rate. Alternatively, impairment can be
measured by reference to an observable market price, if one
exists, or the fair value of the collateral for a collateral-
dependent loan. Regardless of the historical measurement method
used, SFAS No. 114 requires a creditor to measure impairment
based on the fair value of the collateral when the creditor
determines foreclosure is probable. Additionally, impairment of a
restructured loan is measured by discounting the total expected
future cash flows at the loan's effective rate of interest as
stated in the original loan agreement.
The Savings Bank applies the recognition criteria of SFAS No. 114 to
multi-family residential loans, commercial real estate loans,
agriculture loans, and restructured loans. Smaller balance,
homogeneous loans, including one-to-four family residential loans
and consumer loans, are collectively evaluated for impairment.
SFAS No. 118 amends SFAS No. 114 to allow a creditor to use
existing methods for recognizing interest income on impaired
loans. The Savings Bank has elected to continue to use its
existing nonaccrual methods for recognizing interest on impaired
loans. The adoption of SFAS No. 114 and SFAS No. 118 resulted in
no prospective adjustment to the allowance for loan losses and
did not affect the Savings Bank's policies regarding charge-offs
or recoveries.
(Continued)
F-9
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
Real Estate Acquired by Foreclosure
-----------------------------------
Real estate acquired by foreclosure is initially recorded on an
individual property basis at estimated fair value on the date of
foreclosure, thus establishing a new cost basis. Subsequent to
foreclosure, real estate is periodically evaluated by management
and a valuation allowance is established if the estimated fair
value, less cost to sell, of the property declines. Subsequent
increases in fair value are recorded through a reversal of the
valuation allowance, but not below zero. Costs incurred in
maintaining the properties are charged to expense.
Profit on sales of real estate owned is recognized when title has
passed, minimum down payment requirements have been met, the
terms of any notes received by the Savings Bank are such to
satisfy continuing payment requirements, and the Savings Bank is
relieved of any requirement for continued involvement in the real
estate. Otherwise, recognition of profit is deferred until such
criteria are met.
Stock in Federal Home Loan Bank
-------------------------------
The Savings Bank, as a member of the reconstituted Federal Home Loan
Bank System administered by the Federal Housing Finance Board, is
required to maintain an investment in capital stock of the
Federal Home Loan Bank of Chicago (FHLB) in an amount equal to
the greater of 1% of the aggregate outstanding balance of the
Savings Bank's loans secured by dwelling units at the beginning
of each year, or 5% of advances from the FHLB to the Savings
Bank. The stock is recorded at cost which represents redemption
value.
Office Properties and Equipment
-------------------------------
Office properties and equipment are stated at cost less accumulated
depreciation.
Depreciation is charged to expense using the straight-line method
based on the estimated useful lives of the related assets.
Estimated lives are 10 to 35 years for buildings and improvements
and three to 15 years for furniture and equipment.
Securities Sold Under Agreements to Repurchase
----------------------------------------------
The Savings Bank enters into sales of securities under repurchase
agreements (the agreements). The agreements are treated as
financings, and the obligation to repurchase securities sold is
reflected as a liability in the balance sheet.
Income Taxes
------------
Deferred income taxes result from income and expense recognition in
different accounting periods for income tax purposes than for
financial reporting purposes (temporary differences).
Effective January 1, 1993, the Savings Bank adopted SFAS No.E109,
Accounting for Income Taxes. Under the asset and liability method
of SFAS No.E109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their
(Continued)
F-10
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS No.E109, the
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date. The Savings Bank reported the cumulative effect
of the change in the method of accounting for income taxes of
$(227,097) in the statement of income for the year ended
December 31, 1993.
Reclassifications
-----------------
Certain reclassifications of 1995, 1994, and 1993 amounts have been
made to conform with the 1996 financial statement presentation.
(2) Regulatory Capital
------------------
As a result of the Financial Institutions Reform, Recovery and Enforcement
Act of 1989 (FIRREA), financial institutions are required to maintain
minimum tangible capital equal to 1.5% of total adjusted assets, a
minimum 3% core capital ratio, and an 8% risk-based capital ratio. The
risk-based capital requirement is calculated based on the credit risk
presented by both on-balance-sheet assets and off-balance-sheet
commitments and obligations. Assets are assigned a credit risk
weighting based upon their relative risk ranging from 0% for assets
backed by the full faith and credit of the United States or that pose
no credit risk to the institution to 100% for assets such as
delinquent or repossessed assets. As of March 31, 1996, the Savings
Bank was in compliance with all of these capital requirements.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
added a new section 38, "Prompt Corrective Action," which established
a system of new capital standards for all insured depository
institutions and requires regulatory action against depository
institutions which are "undercapitalized," "significantly
undercapitalized," or "critically under capitalized," as defined in
the statute and related regulations. In order to be "well
capitalized," savings associations generally must have minimum
leverage ratios of 5% as well as meeting the total and Tier 1 risk-
based capital requirements of 10% and 6%, respectively. At March 31,
1996, the Savings Bank's capital levels result in a determination of
"well capitalized" under section 38 of FDICIA.
The Savings Bank is required to maintain a minimum level of liquid assets
as defined by Office of Thrift Supervision (OTS) regulations. This
requirement, which may be varied at the direction of the OTS depending
on economic conditions and deposit flows, is based on a percentage of
deposits and short-term borrowings. The required minimum ratio is 5%.
The Savings Bank's liquidity ratio at March 31, 1996 and December 31,
1995 was 34.7% and 33.7%, respectively.
(Continued)
F-11
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
(3) Investment Securities
---------------------
The amortized cost and market value of investment securities classified as
available for sale at March 31, 1996 and December 31, 1995 follows:
<TABLE>
<CAPTION>
March 31, 1996
-----------------------------------------------
Gross Gross
unreal- unreal-
Amortized ized ized Market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities of
U.S. government $17,503,111 $1,863 $(92,474) $17,412,500
========== ===== ====== ==========
<CAPTION>
December 31, 1995
------------------------------------------------
Gross Gross
unreal- unreal-
Amortized ized ized Market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities of
U.S. government $ 6,507,205 $22,826 $(5,841) $6,524,190
========= ====== ===== =========
</TABLE>
Gross realized gains, gross realized losses, and gross proceeds on sales of
investment securities classified as available for sale follow:
<TABLE>
<CAPTION>
March 31, December 31,
-----------------
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Gross realized gains $ 6,837 $ 47,447 $ 140,933
Gross realized losses - - (88,436)
--------- --------- ----------
Net realized gain $ 6,837 $ 47,447 $ 52,497
========= ========= ==========
Gross proceeds $ 3,010,078 $ 3,993,047 $ 29,417,031
========= ========= ==========
</TABLE>
The proceeds from sales of investment securities classified as available
for sale during the year ended December 31, 1995 consisted of $7.5
million of U.S. agency securities and mortgage-backed bonds transferred
to available for sale in conjunction with the provisions of the FASB
Special Report and $21.9 million of U.S. government obligations that were
sold prior to the issuance of the FASB Special Report. The U.S.
government obligations sold consisted of $18.0 million of securities
purchased during fiscal 1995 and classified upon purchase as available
for sale and $3.9 million of securities purchased in fiscal 1994 that
were classified as held to maturity at December 31, 1994. Management
reclassified all U.S. government obligations classified as held to
maturity at December 31, 1994 to available for sale in 1995 due to the
change in intent that was established with the initial purchase in 1995
of U.S. government obligations that were classified as available for
sale. The amount of U.S. government obligations transferred to available
for sale in 1995 was approximately $11.7 million.
(Continued)
F-12
<PAGE>
CHESTER SAVING BANK, FSB
Notes to Financial Statements
The proceeds from sales of investment securities classified as available
for sale during the three months ended March 31, 1995 consisted of
U.S. government obligations that were purchased in 1995 and originally
classified as available for sale.
There were no sales of investment securities during the years ended
December 31, 1994 and 1993.
The amortized cost and market value of investment securities classified as
available for sale at March 31, 1996 and December 31, 1995, by
contractual maturity, follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
----------------------- ------------------------
Amortized Market Amortized Market
cost value cost value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Within one year $ 3,993,760 $ 3,986,094 $3,503,413 $3,502,170
Between one and
five years 13,509,351 13,426,406 3,003,792 3,022,020
---------- ---------- --------- ---------
$17,503,111 $17,412,500 $6,507,205 $6,524,190
========== ========== ========= =========
</TABLE>
The amortized cost and market value of investment securities classified as
held to maturity at March 31, 1996 and December 31, 1995 and 1994
follows:
<TABLE>
<CAPTION>
March 31, 1996
-------------------------------------------------
Gross Gross
unreal- unreal-
Amortized ized ized Market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities of U.S. agencies $ 6,946,854 $ 7,302 $ (91,775) $ 6,862,381
Mortgage-backed bonds 8,071,068 6,137 (44,429) 8,032,776
Securities of states and
municipalities 13,171,155 113,377 (22,378) 13,262,154
---------- ------- ------- ----------
$28,189,077 $126,816 $(158,582) $28,157,311
========== ======= ======== ==========
<CAPTION>
December 31, 1995
-------------------------------------------------
Gross Gross
unreal- unreal-
Amortized ized ized Market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities of U.S. agencies $10,017,220 $ 10,758 $(15,838) $10,012,140
Mortgage-backed bonds 8,606,035 9,822 (18,145) 8,597,712
Securities of states and
municipalities 13,198,500 121,509 (26,250) 13,293,759
---------- ------- ------ ----------
$31,821,755 $142,089 $(60,233) $31,903,611
========== ======= ====== ==========
</TABLE>
(Continued)
F-13
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statemets
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------------------------
Gross Gross
unreal- unreal-
Amortized ized ized Market
cost gains losses value
---- ----- ------ ------
<S> <C> <C> <C> <C>
Securities of U.S. government
and agencies $ 19,134,851 $ 4,664 $ (414,805) $18,724,710
Mortgage-backed bonds 7,296,140 232 (306,247) 6,990,125
Securities of states and
municipalities 14,678,578 2,818 (396,378) 14,285,018
----------- ------ ---------- -----------
$ 41,109,569 $ 7,714 $(1,117,430) $39,999,853
=========== ===== ========= ===========
</TABLE>
The amortized cost and market value of investment securities classified as
held to maturity at March 31, 1996 and December 31, 1995, by contractual
maturity, follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
----------------------- --------------------
Amortized Market Amortized Market
cost value cost value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Within one year $ 14,000,872 $ 13,967,826 $ 15,592,370 $ 15,577,829
Between one and
five years 13,368,205 13,315,948 15,389,385 15,433,305
Between five and
ten years 705,000 744,874 725,000 764,059
After ten years 115,000 128,663 115,000 128,418
----------- ---------- ---------- ----------
$ 28,189,077 $ 28,157,311 $ 31,821,755 $ 31,903,611
=========== ========== ========== ==========
</TABLE>
(4) Mortgage-Backed Securities
--------------------------
The amortized cost and market value of mortgage-backed securities
classified as available for sale at March 31, 1996 and December 31, 1995
follows:
<TABLE>
<CAPTION>
March 31, 1996
-------------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
GNMA $ 482,530 $ 14,314 $ - $ 496,844
FNMA 1,622,878 8,233 (13,073) 1,618,038
---------- ------- ------ ----------
$ 2,105,408 $ 22,547 $ (13,073) $ 2,114,882
========== ======= ====== ==========
December 31, 1995
-------------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
----- ----- ------ -----
<S> <C> <C> <C> <C>
GNMA $ 498,912 $ 17,830 $ - $ 516,742
FNMA 1,670,495 20,190 (288) 1,690,397
---------- ------- --- ----------
$ 2,169,407 $ 38,020 $ (288) $ 2,207,139
========== ======= === ==========
</TABLE>
(continued)
F-14
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
The amortized cost and market value of mortgage-backed securities classified as
available for sale at March 31, 1996 and December 31, 1995, by contractual
maturity, are shown below. Expected maturities will differ from contractual
maturities due to scheduled repayments and because borrowers may have the
right to prepay obligations with or without prepayment penalties. The
following table does not take into consideration the effects for scheduled
repayments or the effects of possible prepayments:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------------- -------------------
Amortized Market Amortized Market
cost value cost value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Between one and
five years $ 1,622,878 $ 1,618,038 $ 1,670,495 $ 1,690,397
After ten years 482,530 496,844 498,912 516,742
--------- --------- --------- ---------
$ 2,105,408 $ 2,114,882 $ 2,169,407 $ 2,207,139
========= ========= ========= =========
</TABLE>
The amortized cost and market value of mortgage-backed securities classified
as held to maturity at March 31, 1996 and December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
March 31, 1996
--------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
GNMA $ 1,460,749 $ 40,517 $ - $ 1,501,266
FNMA 146,030 4,812 (403) 150,439
FHLMC 4,993,687 26,515 (5,688) 5,014,514
Collateralized
mortgage
obligations 8,190,780 9,733 (87,538) 8,112,975
----------- -------- ------ ----------
$ 14,791,246 $ 81,577 $ (93,629) $ 14,779,194
=========== ======== ====== ==========
December 31, 1995
-----------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
GNMA $ 1,514,450 $ 49,175 $ - $ 1,563,625
FNMA 153,343 5,300 - 158,643
FHLMC 5,326,161 63,628 - 5,389,789
Collateralized
mortgage
obligations 6,211,708 29,309 (21,367) 6,219,650
---------- ------- ------ ----------
$ 13,205,662 $ 147,412 $ (21,367) $ 13,331,707
========== ======= ====== ==========
</TABLE>
(continued)
F-15
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
<TABLE>
<CAPTION>
December 31, 1994
------------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
GNMA $ 2,625,626 $ 11,927 $ (56,424) $ 2,581,129
FNMA 3,117,256 39,125 (128,620) 3,027,761
FHLMC 7,393,179 25,387 (404,624) 7,013,942
----------- ------- ------- -----------
$ 13,136,061 $ 76,439 $ (589,668) $ 12,622,832
=========== ======= ======= ===========
</TABLE>
The amortized cost and market value of mortgage-backed securities held to
maturity at March 31, 1996 and December 31, 1995, by contractual maturity, are
shown below. Expected maturities will differ from contractual maturities due
to scheduled repayments and because borrowers may have the right to prepay
obligations with or without prepayment penalties. The following table does not
take into considera tion the effects for scheduled repayments or the effects
of possible prepayments:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------------- -------------------
Amortized Market Amortized Market
cost value cost value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Within one year $ 106,295 $ 107,926 $ 246,828 $ 253,246
Between one and
five years 4,887,393 4,906,588 5,079,332 5,136,543
Between five and
ten years 3,723,219 3,686,325 1,750,282 1,758,200
After ten years 6,074,339 6,078,355 6,129,220 6,183,718
---------- ---------- ---------- ----------
$ 14,791,246 $ 14,779,194 $ 13,205,662 $ 13,331,707
========== ========== ========== ==========
</TABLE>
Gross realized gains, gross realized losses, and gross proceeds from sales of
mortgage-backed securities classified as held to maturity for the year ended
December 31, 1995 follows:
<TABLE>
<S> <C>
Gross realized gains $ 57,364
Gross realized losses (11,445)
---------
Net realized gain $ 45,919
=========
Gross proceeds $ 2,409,229
=========
</TABLE>
The sale of mortgage-backed securities classified as held to maturity during the
year ended December 31, 1995 were in effect maturities as the sale of these
mortgage-backed securities occurred only after a substantial portion of the
original principal outstanding had been collected.
Collateralized mortgage obligations at March 31, 1996 and December 31, 1995 were
collateralized by mortgage-backed securities issued by the Federal National
Mortgage Association or the Federal Home Loan Mortgage Corporation.
(continued)
F-16
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
(5) Loans Receivable, Net
---------------------
A comparative summary of loans receivable follows:
<TABLE>
<CAPTION>
March 31, December 31,
-----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Loans secured by real estate:
Residential:
1-4 family $ 45,842,564 $ 47,200,677 $ 47,578,387
Multifamily 583,102 600,141 763,934
----------- ----------- -----------
Total residential 46,425,666 47,800,818 48,342,321
Agriculture and land 1,139,535 928,001 822,024
Commercial 2,699,580 2,869,803 3,588,403
----------- ----------- -----------
Total loans secured by
real estate 50,264,781 51,598,622 52,752,748
----------- ----------- -----------
Consumer loans:
Automobile loans 1,824,378 1,712,752 1,339,354
Home improvement 1,590,944 1,348,307 1,211,201
Credit cards 851,342 939,105 827,745
Loans secured by deposits 418,770 440,367 505,965
Other 1,728,796 1,927,939 2,462,485
----------- ----------- -----------
Total consumer loans 6,414,230 6,368,470 6,346,750
----------- ----------- -----------
56,679,011 57,967,092 59,099,498
----------- ----------- -----------
Less:
Loans in process 503,233 532,810 676,091
Unearned discount, net 11,819 12,944 20,938
Deferred loan fees 14,428 10,615 171
Allowance for losses 395,997 389,714 245,725
----------- ----------- -----------
925,477 946,083 942,925
----------- ----------- -----------
$ 55,753,534 $ 57,021,009 $ 58,156,573
=========== =========== ===========
</TABLE>
The weighted average interest rate on loans was 8.74%, 8.76%, and 8.36% at
March 31, 1996 and DecemberE31, 1995 and 1994, respectively.
At March 31, 1996 and 1995 and December 31, 1995, 1994, and 1993, the
Savings Bank was servicing loans for others with aggregate unpaid
principal balances of approximately $887,000, $1,146,000, $979,000,
$1,221,000, and $1,727,000, respectively.
A summary of activity in the allowance for losses for the three months ended
March 31, 1996 and 1995 and the years ended DecemberE31, 1995, 1994, and
1993 follows:
<TABLE>
<CAPTION>
March 31, December 31,
-------------- --------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance, beginning
of period $ 389,714 $ 245,725 $ 245,725 $ 207,005 $ 183,005
Provision charged
to expense 7,500 (2,300) 161,319 69,309 29,627
Charge-offs (1,217) - (17,380) (30,714 (5,627
Recoveries - - 50 125 -
------- ------- ------- ------- -------
Balance, end of period $ 395,997 $ 243,425 $ 389,714 $ 245,725 $ 207,005
======= ======= ======= ======= =======
</TABLE>
F-17 (Continued)
<PAGE>
CHESTER SAVINGS BANK FSB
Notes to Financial Statements
A summary of loans receivable contractually in arrears three months or more is
as follows:
<TABLE>
<CAPTION>
March 31, December 31,
------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Residential real estate loans $ 123,112 $ 55,982 $ 373,686
Commercial real estate loans 49,649 49,404 -
Consumer loans 49,229 53,818 6,400
------- ------- -------
$ 221,990 $ 159,204 $ 380,086
======= ======= =======
Percent of loans receivable .40% .28% .65%
==== === ===
Number of loans 25 20 21
=== === ===
</TABLE>
A summary of loans on which interest is not being accrued and impaired loans
at March 31, 1996 and December 31, 1995 follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Nonaccrual loans $ 41,945 $ 41,945
Impaired loans continuing to accrue interest - -
------- -------
Total impaired loans $ 41,945 $ 41,945
======= =======
</TABLE>
The allowance for losses on impaired loans was $8,389 at March 31, 1996 and
December 31, 1995. The average balance of impaired loans during the three
months ended March 31, 1996 and 1995 and the year ended December 31, 1995 was
$41,945, $172,919, and $175,336, respectively.
A summary of interest income on nonaccrual and other impaired loans for the
three months ended March 31, 1996 and 1995 and the year ended December 31,
1995 follows:
<TABLE>
<CAPTION>
March 31, December 31,
---------------
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Income recognized:
Nonaccrual loans $ - $ 577 $ 6,133
Impaired loans continuing
to accrue interest - - -
---- ----- ------
$ - $ 577 $ 6,133
==== ===== ======
Interest income if interest
had accrued:
Nonaccrual loans $ 781 $ 2,880 $ 15,847
Impaired loans continuing
to accrue interest - - -
----- ----- ------
$ 781 $ 2,880 $ 15,847
===== ===== ======
</TABLE>
(Continued)
F-18
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
(6) Accrued Interest Receivable
-----------------------------
A comparative summary of accrued interest receivable follows:
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Loans receivable $ 231,606 $ 213,157 $ 154,836
Mortgage-backed securities 80,985 74,919 84,345
Investment securities 567,446 286,800 446,543
Interest-bearing deposits 47,858 61,716 99,388
------- ------- -------
$ 927,895 $ 636,592 $ 785,112
======= ======= =======
</TABLE>
(7) Real Estate Acquired by Foreclosure
-----------------------------------
A comparative summary of real estate acquired by foreclosure is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Foreclosed real estate $ 209,982 $ 26,434 $ -
Real estate in judgment - 182,814 63,552
------- ------- ------
$ 209,982 $ 209,248 $ 63,552
======= ======= ======
</TABLE>
A summary of activity in the allowance for losses follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Balance, beginning of year $ 96,888 $ 99,388
Provision charged to expense - 7,500
Charge-offs (96,888) (10,000)
Recoveries - -
-------- ------
Balance, end of year $ - $ 96,888
======== ======
</TABLE>
(8) Office Properties and Equipment
-------------------------------
A comparative summary of office properties and equipment follows:
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Land $ 190,434 $ 190,434 $ 190,434
Office buildings and improvements 2,326,913 2,326,913 2,317,658
Furniture, fixtures and equipment 982,664 968,918 962,803
--------- --------- ---------
3,500,011 3,486,265 3,470,895
Less accumulated depreciation 1,668,749 1,642,979 1,524,811
--------- --------- ---------
$ 1,831,262 $ 1,843,286 $ 1,946,084
========= ========= =========
</TABLE>
Depreciation expense for the three months ended March 31, 1996 and 1995 and
the years ended December 31, 1995, 1994, and 1993 amounted to $25,770, $29,675,
$118,168, $128,605, and $113,897, respectively.
(Continued)
F-19
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
(9) Deposits
----------
A comparative summary of deposits follows:
<TABLE>
<CAPTION>
March 31, 1996
-----------------
Percent
Stated to
rate Amount total
---- ------ -----
<S> <C> <C> <C>
Demand deposits:
NOW accounts 0-2.00% $ 9,189,875 8.5%
Money market demand 2.50-3.90 19,303,779 17.8
Passbook 2.50-2.75 10,970,210 10.1
----------- -----
39,463,864 36.4
----------- -----
Certificates of deposit:
Less than 3.00 183,331 .2
3.00-4.99 23,007,081 21.2
5.00-6.99 43,456,592 40.0
7.00-8.99 2,403,764 2.2
========= ----------- -----
69,050,768 63.6
----------- -----
$ 108,514,632 100.0%
=========== =====
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1995 1994
-------------------- -------------------
Percent Percent
Stated to to
rate Amount total Amount total
---- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Demand deposits:
NOW accounts 0-2.75% $ 8,928,957 8.4% $ 8,749,014 6.8%
Money market demand 2.40-4.15 16,655,540 15.6 32,560,742 25.1
Passbook 2.50-2.75 10,469,368 9.8 11,438,658 8.8
------------ ----- ----------- -----
36,053,865 33.8 52,748,414 40.7
------------ ----- ----------- -----
Certificates of deposit:
Less than 3.00 - - 619,470 .5
3.00-4.99 28,005,074 26.2 46,589,632 35.9
5.00-6.99 40,232,644 37.7 28,982,528 22.3
7.00-8.99 2,426,266 2.3 771,889 .6
========= ------------ ----- ----------- -----
70,663,984 66.2 76,963,519 59.3
------------ ----- ----------- -----
$ 106,717,849 100.0% $ 129,711,933 100.0%
============ ===== =========== =====
</TABLE>
The weighted average interest rate on deposits was 4.28%, 4.36%, and 4.19%
at March 31, 1996 and DecemberE31, 1995 and 1994, respectively.
(Continued)
F-20
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
A summary of the maturities of certificates of deposit at March 31, 1996
and December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
March 31, December 31,
--------------------------------------
1996 1995 1994
-------------------------- -------------------------- -------------------
Amount Percent Amount Percent Amount Percent
------ -------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Within one year $ 42,540,090 61.6% $ 46,427,751 65.7% $ 51,458,944 66.9%
Second year 15,940,665 23.1 13,190,439 18.7 19,014,581 24.7
Third year 9,915,776 14.4 10,389,828 14.7 5,815,256 7.6
Fourth year 654,237 .9 655,966 .9 254,134 .3
Thereafter - - - - 420,604 .5
---------- ---- ---------- ----- ---------- -----
$ 69,050,768 100.0% $ 70,663,984 100.0% $ 76,963,519 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
Interest expense on deposits, by type, for the three months ended March 31,
1996 and 1995 and the years ended December 31, 1995, 1994, and 1993 is
summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
------------------------ -----------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Passbook $ 73,078 $ 76,858 $ 295,348 $ 338,938 $ 390,228
NOW accounts 40,745 48,478 226,206 227,073 206,832
Money market
demand 139,485 251,050 819,795 1,088,818 848,641
Certificates
of deposit 897,919 952,085 3,938,186 3,434,466 4,080,375
---------- ---------- ---------- ----------- ---------
$1,151,227 $1,328,471 $5,279,535 $ 5,089,295 $ 5,526,076
========== ========== ========== =========== =========
</TABLE>
Certificates of deposit of $100,000 or more totaled $5,282,404, $5,844,512, and
$7,450,919 at March 31, 1996 and December 31, 1995 and 1994, respectively.
Investment securities and mortgage-backed securities with a carrying value of
approximately $8.8 million, $8.3 million, and $7.2 million at March 31, 1996
and December 31, 1995 and 1994, respectively, were pledged to secure certain
certificates of deposit in excess of insurance of accounts limitations.
A corporation affiliated with one of the Savings Bank's directors had savings
deposits of approximately $6.2 million, $4.3 million, and $15.8 million with
the Savings Bank at March 31, 1996 and DecemberE31, 1995 and 1994,
respectively.
(Continued)
F-21
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
(10) Securities Sold Under Agreements to Repurchase
----------------------------------------------
A summary of securities sold under agreements to repurchase (the
agreements) by contractual maturity, follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
Weighted Weighted
average average
interest interest
Amount rate Amount rate
------ ---- ------ ----
<S> <C> <C> <C> <C>
Between 30 and 90 days $ 14,500,000 4.40% $ - - %
After 90 days 500,000 5.63 15,000,000 5.10
---------- ----------
$ 15,000,000 4.44% $ 15,000,000 5.10%
========== ===== ========== ====
</TABLE>
The agreements are treated as financings and the obligations to repurchase
securities sold are reflected as a liability. All of the agreements were
to repurchase identical securities. The investment securities and
mortgage-backed securities underlying the agreements had a carrying value
and a market value of $16,034,488 and $15,921,600, respectively, at
MarchE31, 1996, and $16,567,655 and $16,612,086, respectively, at
DecemberE31, 1995.
The repurchase liability, stated rate, carrying value, and market value of
the agreements at March 31, 1996, by type of security and contractual
maturity, follows:
<TABLE>
<CAPTION>
Repurchase Stated Carrying Market
liability rate value value
--------- ---- ----- -----
<S> <C> <C> <C> <C>
Between 30 and 90 days:
Securities of
U.S. governments $ 500,000 4.40% $ 518,698 $ 518,698
Securities of
U.S. agencies 3,991,453 4.40 4,318,077 4,237,036
Mortgage-backed bonds 4,537,205 4.40 4,971,056 4,971,056
Mortgage-backed securities 5,471,342 4.40 5,470,974 5,442,787
----------- ---------- ----------
14,500,000 15,278,805 15,169,577
After 90 days - securities
of U.S. agencies 500,000 5.63 755,683 752,023
----------- ==== ---------- ----------
$ 15,000,000 $ 16,034,488 $ 15,921,600
=========== =========== ===========
</TABLE>
The agreements averaged approximately $15,000,000 during the three months
ended March 31, 1996 and $3,750,000 during the year ended December 31,
1995. There were no such agreements during the three months ended
MarchE31, 1995 or the years ended December 31, 1994 and 1993. The maximum
amount outstanding at any month-end during the three months ended
MarchE31, 1996 and the year ended December 31, 1995 was approximately
$15,000,000.
(Continued)
F-22
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
All of the agreements were with a corporation affiliated with one of the
Savings Bank's directors. The excess of the carrying value of the
securities sold over the amount of the repurchase liability, adjusted for
accrued interest, approximated $967,000 at March 31, 1996. The weighted
average maturity of the agreements was 38 days at March 31, 1996.
(11) Income Taxes
------------
If certain conditions are met, the Savings Bank, in determining taxable
income, is allowed a special bad debt deduction based on specified
experience formulas or on a percentage of taxable income before such
deduction. The Savings Bank used the percentage of taxable income method
in 1995, 1994, and 1993 and anticipates using this method in 1996, since
this method resulted in the maximum bad debt deduction. The bad debt
deduction under the percentage method is limited to 8% of taxable income.
The composition of income tax expense (benefit) for the three months ended
March 31, 1996 and 1995 and the years ended December 31, 1995, 1994, and
1993 is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
-------------------- ------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Current:
Federal $ 84,670 $ 97,051 $325,477 $272,989 $274,005
State 7,000 - 8,500 19,249 42,256
Deferred (14,670) 11,949 (34,977) (7,496) (9,600)
------- -------- -------- -------- --------
$ 77,000 $109,000 $299,000 $284,742 $306,661
======== ======== ======== ======== ========
</TABLE>
The reasons for the difference between expected federal income tax expense
computed at the federal statutory rate of 34% and the actual amount are
as follows:
<TABLE>
<CAPTION>
March 31, December 31,
--------------- --------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Computed "expected" income
tax expense $109,035 $143,698 $ 441,966 $ 434,447 $ 485,448
Items affecting federal
income tax rate:
State income taxes, net
of federal benefit 4,620 - 5,610 12,704 27,889
Tax-exempt interest (35,747) (34,545) (150,148) (152,500) (169,200)
Other (908) (153) 1,572 (9,909) (37,476)
-------- -------- --------- --------- ---------
$ 77,000 $109,000 $ 299,000 $ 284,742 $ 306,661
======== ======== ========= ========= =========
Effective tax rate 24.0% 25.8% 23.0% 22.3% 21.5%
==== ==== ==== ==== ====
</TABLE>
(Continued)
F-23
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
The components of deferred tax assets and deferred tax liabilities at
March 31, 1996 and December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
------------
1996 1995 1994
---- ----- ----
<S> <C> <C> <C>
Deferred tax assets:
General loan loss allowance $ 150,159 $ 147,725 $ 95,194
Deferred compensation 20,079 - -
Available-for-sale securities
market valuation 30,832 - -
Other, net 4,519 4,953 8,114
------- ------- -------
Total deferred tax assets 205,589 152,678 103,308
------- ------- -------
Deferred tax liabilities:
Available-for-sale securities
market valuation - (18,603) -
Excess of tax bad debt reserves
over base year (159,323) (154,897) (155,934)
Tax depreciation in excess of that
recorded for book purposes (60,114) (57,131) (45,166)
FHLB stock dividends (25,933) (25,933) (22,468)
------- ------- -------
Total deferred tax liabilities (245,370) (256,564) (223,568)
------- ------- -------
Net deferred tax liability $ (39,781) $(103,886) $(120,260)
======= ======= =======
</TABLE>
Retained earnings at March 31, 1996 include approximately $2.5 million for
which no deferred federal income tax liability has been recognized. These
amounts represent an allocation of income to bad debt deductions for tax
purposes only. If such retained earnings were subsequently used by the
Savings Bank for purposes other than to absorb loan losses, they would be
subject to federal income tax at the then prevailing corporate rate.
(12) Pension and Profit Sharing Plans
--------------------------------
Substantially all employees are included in a trusteed defined benefit
pension plan. The benefits contemplated by the plan are funded through
payments to the Financial Institutions Retirement Fund, which operates as
an industry-wide plan and does not report relative plan assets and
actuarial liabilities of the individual participating associations. The
cost of funding is charged to current operations. There is no unfunded
liability for past service. Expense for the three months ended March 31,
1996 and 1995 and the years ended December 31, 1995, 1994, and 1993 was
$16,707, $22,675, $83,840, $71,000, and $85,168, respectively.
(13) Financial Instruments With Off-Balance-Sheet Risk
-------------------------------------------------
The Savings Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and financial guarantees.
The Savings Bank's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend
credit and financial guarantees written is represented by the contractual
amount of these instruments. The Savings Bank uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
F-24 (Continued)
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since certain of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
The Savings Bank evaluates each customer's creditworthiness on a case-by-
case basis. The amount of collateral obtained if deemed necessary by the
Savings Bank upon extension of credit is based on management's credit
evaluation of the counterparty.
At March 31, 1996 and December 31, 1995 and 1994, the Savings Bank had
outstanding commitments to originate residential loans of approximately
$377,000, $65,000, and $341,000, respectively, all of which were at fixed
rates. In addition, the Savings Bank had commitments to fund outstanding
credit lines of approximately $-0-, $25,000, and $-0- at March 31, 1996
and December 31, 1995 and 1994, respectively. Commitments to extend
credit may involve elements of interest rate risk in excess of the amount
recognized in the balance sheets. Interest rate risk on commitments to
extend credit results from the possibility that interest rates may have
moved unfavorably from the position of the Savings Bank since the time
the commitment was made.
(14) Commitments and Contingencies
-----------------------------
As discussed more fully in note 13, the Savings Bank has outstanding
commitments to originate loans in the ordinary course of business.
The Savings Bank is involved in various litigation arising in the ordinary
course of business. In the opinion of management, at the present time,
disposition of the suits and claims will not have a material effect on
the financial position of the Savings Bank.
(15) Fair Values of Financial Instruments
------------------------------------
The estimated fair values of the Savings Bank's interest-earning assets and
interest-bearing liabilities at March 31, 1996 and December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
----------------------- -----------------------
Carrying Estimated Carrying Estimted
value fair value value fair value
----- ---------- ----- ----------
<S> <C> <C> <C> <C>
Interest-earning assets:
Cash and cash equivalents $ 10,290,748 $ 10,290,748 $ 10,666,127 $ 10,666,127
Certificates of deposit 4,141,673 4,141,673 9,761,774 9,761,774
Investment securities 45,601,577 45,569,811 38,345,945 38,427,801
Mortgage-backed securities 16,906,128 16,894,076 15,412,801 15,538,846
Loans receivable 55,753,534 56,317,000 57,021,009 57,982,083
Stock in Federal Home
Loan Bank 622,000 622,000 604,300 604,300
----------- ----------- ----------- -----------
$ 133,315,660 $ 133,835,308 $ 131,811,956 $ 132,980,931
=========== =========== =========== ===========
Interest-bearing liabilities:
Deposits:
Checking, money market
demand, and passbooks $ 39,463,864 $ 39,463,864 $ 36,053,865 $ 36,053,865
Certificates of deposit 69,050,768 68,966,000 70,663,984 70,525,081
Securities sold under
agreements to repurchase 15,000,000 15,000,000 15,000,000 15,000,000
----------- ----------- ----------- -----------
$ 123,514,632 $ 123,429,864 $ 121,717,849 $ 121,578,946
=========== =========== =========== ===========
</TABLE>
F-25 (Continued)
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument listed above:
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents consist of cash, interest-bearing deposits with
maturities of three months or less, and federal funds sold. The carrying
value is considered a reasonable estimate of fair value of these
financial instruments due to their short-term nature.
Certificates of Deposit
-----------------------
The carrying value is considered a reasonable estimate of fair value of the
financial instrument due to original maturities not exceeding one year.
Investment and Mortgage-Backed Securities
-----------------------------------------
Fair values are based on quoted market prices or dealer quotes.
Loans Receivable
----------------
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type, such as residential real
estate, commercial real estate, and consumer loans. Each loan category is
further segmented into fixed and adjustable rate interest terms and by
performing and nonperforming categories.
The fair value of performing loans is calculated by discounting scheduled
cash flows through the estimated maturity using estimated market discount
rates that reflect the credit and interest rate risk inherent in the
loan. The estimate of maturity is based on the Savings Bank's historical
experience, with repayments for each loan classification modified, as
required, by an estimate of the effect of current economic and lending
conditions.
Fair value for significant nonperforming loans is based on recent external
appraisals. Assumptions regarding credit risk, cash flows, and discount
rates are judgmentally determined using available market information and
specific borrower information.
Stock in Federal Home Loan Bank
-------------------------------
Stock in Federal Home Loan Bank is valued at cost, which represents
redemption value and approximates fair value.
Deposits
--------
The fair value of deposits with no stated maturity, such as checking, money
market demand, and passbook, is equal to the amount payable on demand at
March 31, 1996 and December 31, 1995.
The fair value of certificates of deposit, all of which have stated
maturities, is based on the discounted value of contractual cash flows.
The discount rate is estimated using the rates currently offered for
deposits of similar remaining maturities.
Securities Sold Under Agreements to Repurchase
----------------------------------------------
The carrying value is considered a reasonable estimate of fair value of
this financial instrument due to original maturities not exceeding one
year.
(Continued)
F-26
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
(16) Recent Regulatory Developments
------------------------------
The deposits of the Savings Bank are presently insured by the Savings
Association Insurance Fund (SAIF), which together with the Bank Insurance
Fund (BIF), which insures the deposits of commercial banks, are the two
deposit insurance funds administered by the Federal Deposit Insurance
Corporation (FDIC). In August 1995, the FDIC substantially reduced
deposit insurance premiums for well-capitalized BIF-insured members and
in November 1995, further revised the premium schedule to provide a range
of 0% to .27% with a minimum annual premium of $2,000 effective January
1996. With respect to SAIF members, the FDIC retained the existing rate
schedule of .23% to .31%. As a result, BIF members pay substantially
lower premiums than the SAIF members. The FDIC has indicated that the
SAIF will not be adequately recapitalized until 2002, absent a
substantial increase in premium rates or the imposition of special
assessments. As a result of the disparity, SAIF members are placed at a
significant, competitive disadvantage to BIF members due to higher costs
for deposit insurance. Proposed legislation under consideration by the
United States Congress provides for a one-time assessment to be imposed
on all SAIF-insured deposits in order to recapitalize the SAIF. The
special assessment rate is anticipated to be .85% to .90% of insured
deposits as of a certain specified date, after which it is expected that
the insurance premiums would be equalized for BIF and SAIF members. The
Savings Bank estimates the one-time assessment would approximate $1.1
million on a pretax basis.
(17) Director Emeritus Retirement Plan
---------------------------------
On January 18, 1996, the Savings Bank adopted a retirement plan for
directors who reach director emeritus status. Eligibility for director
emeritus status is achieved when a director reaches age 81 or when a
director resigns for any reason. A director emeritus, upon the later of
the first anniversary of designation as a director emeritus, or the date
on which the director emeritus attains age 65, will receive, on an annual
basis for a period of 10 years following designation as a director
emeritus, an amount equal to $500 multiplied by the number of full years
of service as a director of the Savings Bank or any predecessor
institution that was previously merged with the Savings Bank. Vesting for
past service as a director will occur on December 31, 1996. Benefits to
be paid for future service will be accrued over the remaining period of
service as a director. During December 1995, the plan was funded through
the purchase of life insurance contracts on the directors. The cash
surrender value of the life insurance contracts totaled $182,478 and
$181,481 as of March 31, 1996 and December 31, 1995, respectively, and is
included in other assets in the balance sheet. Expense related to the
plan was $51,831 for the three months ended March 31, 1996.
(18) Adoption of Plan of Conversion to Stock Charter
-----------------------------------------------
On March 12, 1996, the Board of Directors of the Savings Bank adopted a
plan of conversion whereby the Savings Bank will be converted from a
federal mutual savings bank to a federal capital stock savings bank and
simultaneously form a Delaware corporation to act as the holding company
(the Holding Company) of the converted savings bank. Pursuant to the
plan, the Savings Bank will convert to a national bank to be known as
Chester National Bank (the Converted Bank), and a newly chartered bank
subsidiary
(Continued)
F-27
<PAGE>
CHESTER SAVINGS BANK, FSB
Notes to Financial Statements
will be formed by the Holding Company to be known as Chester National
Bank of Missouri. The stock of Chester National Bank and Chester National
Bank of Missouri will be held by the Holding Company. The price will be
determined by an independent appraisal of the Savings Bank and will
reflect its estimated pro forma market value, as converted. The plan
provides that nontransferrable subscription rights to purchase stock will
be offered first to the Savings Bank's eligible savings account holders,
second to the Savings Bank's tax-qualified employee stock ownership plan,
and then, to the extent that stock is available, to other Savings Bank
members. Concurrently with, during, or promptly after the subscription
offering, and on a lowest priority basis, an opportunity to subscribe may
also be offered to certain members of the general public in a direct
community offering.
Under current applicable provisions of the Internal Revenue Code, the
Savings Bank is allowed to maintain higher tax bad debt reserve levels
than allowed for national banks. As a result of the Savings Bank's
conversion to a national bank, the Converted Bank must restate its tax
bad debt reserve as of the first year of conversion. Accordingly, the
excess of the Savings Bank's bad debt reserve as of the close of the tax
year immediately preceding the year of conversion to a national bank over
the restated reserve level must be included in the Converted Bank's
taxable income ratably over a six-year period. The recapture by the
Converted Bank will total approximately $2.5 million.
Subsequent to conversion, savings account holders and borrowers will not
have voting rights in the Savings Bank. Voting rights will be vested
exclusively with the stockholders of the Holding Company. Savings
deposits will continue to be insured by the FDIC.
All costs associated with the conversion will be deferred and deducted from
the proceeds from the sale of stock. Conversion costs of $167,236 and
$10,756 were deferred at March 31, 1996 and December 31, 1995,
respectively.
For the purpose of granting eligible members of the Savings Bank a priority
in the event of future liquidation, the Savings Bank will, at the time of
conversion, establish a liquidation account equal to its net worth as of
the date of the latest balance sheet used in the final conversion
prospectus. In the event (and only in such an event) of future
liquidation of the Converted Bank, an eligible savings account holder who
continues to maintain his/her savings account shall be entitled to
receive a distribution from the liquidation account, in the proportionate
amount of the then current adjusted balance of the savings deposits then
held, before any distributions may be made with respect to capital stock.
F-28
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by the Holding Company, the Savings Bank or EVEREN Securities. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby to any person or in any jurisdiction in
which such offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so, or to any person to whom
it is unlawful to make such offer or solicitation in such jurisdiction. Neither
the delivery of this Prospectus nor any sale hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of the Holding Company or the Savings Bank since any of the dates as of
which information is furnished herein or since the date hereof.
<TABLE>
<CAPTION>
Table of Contents Page
----------------- ----
<S> <C>
Prospectus Summary...............................................
Selected Financial Information...................................
Risk Factors.....................................................
Chester Bancorp, Inc. ...........................................
Chester Savings Bank, FSB........................................
Chester National Bank and Chester National Bank of Missouri......
Use of Proceeds..................................................
Dividend Policy..................................................
Market for Common Stock..........................................
Capitalization...................................................
Historical and Pro Forma Capital Compliance......................
Pro Forma Data...................................................
Chester Savings Bank, FSB Statements of Income...................
Management's Discussion and Analysis of Financial................
Condition and Results of Operations..............................
Business of the Holding Company..................................
Business of the Savings Bank.....................................
Management of the Holding Company................................
Management of the Savings Bank...................................
Regulation.......................................................
Taxation.........................................................
The Conversion...................................................
Restrictions on Acquisition of the Holding Company...............
Description of Capital Stock of the Holding Company..............
Registration Requirements........................................
Legal and Tax Opinions...........................................
Experts..........................................................
Change in Accountants............................................
Additional Information...........................................
Index to Financial Statements....................................
</TABLE>
UNTIL THE LATER OF _________, 1996, OR 25 DAYS AFTER COMMENCEMENT OF THE PUBLIC
OFFERING, IF ANY, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
CHESTER BANCORP, INC.
[LOGO]
1,317,500 TO 1,782,500 SHARES OF
COMMON STOCK
____________________
PROSPECTUS
____________________
EVEREN SECURITIES, INC.
_________ __, 1996
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution(1)
<TABLE>
<S> <C>
Legal.................................... $135,000
Securities marketing legal fees.......... 45,000
Printing, postage and mailing............ 75,000
Appraisal and business plan preparation.. 27,500
Accounting fees.......................... 75,000
Securities marketing fees(1)............. 215,000
Data processing fees..................... 7,450
SEC registration fee..................... 7,981
Blue Sky filing fees and expenses........ 10,000
OTS filing fees.......................... 8,400
Other expenses........................... 43,669
--------
Total................................. $650,000
========
</TABLE>
_________________
(1) A flat fee across the Estimated Valuation Range, consisting of a non-
refundable retainer fee of $15,000 and a completion fee of $200,000.
Item 14. Indemnification of Officers and Directors
Section 145 of the Delaware General Corporation Law sets forth
circumstances under which directors, officers, employees and agents may be
insured or indemnified against liability which they may incur in their
capacities:
145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.--(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
<PAGE>
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
incurred by him any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
<PAGE>
Article XVI of the Certificate of Incorporation of the Registrant requires
indemnification of directors, officers and employees to the fullest extent
permitted by Delaware law, as follows:
"ARTICLE XVII
INDEMNIFICATION
A. Persons. The Corporation shall indemnify, to the extent provided in
-------
paragraphs B, D or F:
1. any person who is or was a director, officer or employee of the
Corporation; and
2. any person who serves or served at the Corporation's request as a
director, officer, employee, agent, partner or trustee of another corporation,
partnership, joint venture, trust or other enterprise.
B. Extent -- Derivative Suits. In case of a threatened, pending or
--------------------------
completed action or suit by or in the right of the Corporation against a person
named in paragraph A by reason of his holding a position named in paragraph A,
the Corporation shall indemnify such person if such person satisfies the
standard in paragraph C, for expenses (including attorneys' fees but excluding
amounts paid in settlement) actually and reasonably incurred by such person in
connection with the defense or settlement of the action or suit.
C. Standard -- Derivative Suits. In case of a threatened, pending or
----------------------------
completed action or suit by or in the right of the Corporation, a person named
in paragraph A shall be indemnified only if:
1. such person is successful on the merits or otherwise; or
2. such person acted in good faith in the transaction which is the
subject of the suit or action, and in a manner such person reasonably believed
to be in, or not opposed to, the best interest of the Corporation, including,
but not limited to, the taking of any and all actions in connection with the
Corporation's response to any tender offer or any offer or proposal of another
party to engage in a Business Combination (as defined in Article XIV) not
approved by the board of directors. However, such person shall not be
indemnified in respect of any claim, issue or matter as to which such person has
been adjudged liable to the Corporation unless (and only to the extent that) the
court in which the suit was brought shall determine, upon application, that
despite the adjudication but in view of all the circumstances, such person is
fairly and reasonably entitled to indemnity for such expenses as the court shall
deem proper.
D. Extent -- Nonderivative Suits. In case of a threatened, pending or
-----------------------------
completed suit, action or proceeding (whether civil, criminal, administrative or
investigative), other than a suit by or in the right of the Corporation,
together hereafter referred to as a nonderivative suit, against a person named
in paragraph A by reason of his holding a position named in paragraph A, the
Corporation shall indemnify such person if such person satisfies the standard in
paragraph E, for amounts actually and reasonably incurred by such person in
connection with the defense or settlement of the nonderivative suit, including,
but not limited to (i) expenses (including attorneys' fees), (ii) amounts paid
in settlement, (iii) judgments, and (iv) fines.
E. Standard -- Nonderivative Suits. In case of a nonderivative suit, a
-------------------------------
person named in paragraph A shall be indemnified only if:
1. such person is successful on the merits or otherwise; or
2. such person acted in good faith in the transaction which is the
subject of the nonderivative suit and in a manner such person reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
including, but not limited to, the taking of any and all actions in connection
with the Corporation's response to any tender offer or any offer or proposal of
another party to engage in a Business Combination (as defined in Article XIV of
this Certificate) not approved by the board of directors and, with respect to
any criminal action or proceeding, such person had no reasonable cause to
believe his conduct was unlawful. The termination of a nonderivative suit
<PAGE>
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
---------------
its equivalent shall not, in itself, create a presumption that the person failed
to satisfy the standard of this paragraph E.2.
F. Determination That Standard Has Been Met. A determination that the
----------------------------------------
standard of paragraph C or E has been satisfied may be made by a court, or,
except as stated in paragraph C.2 (second sentence), the determination may be
made by:
1. a majority vote of the directors of the Corporation who are not
parties to the action, suit or proceeding, even though less than a quorum; or
2. independent legal counsel (appointed by a majority of the
disinterested directors of the Corporation, whether or not a quorum) in a
written opinion; or
3. the stockholders of the Corporation.
G. Proration. Anyone making a determination under paragraph F may
---------
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advance Payment. The Corporation may pay in advance any expenses
---------------
(including attorneys' fees) which may become subject to indemnification under
paragraphs A through G if (i) the board of directors authorizes the specific
payment; and (ii) the person receiving the payment undertakes in writing to
repay the same if it is ultimately determined that such person is not entitled
to indemnification by the Corporation under paragraphs A through G.
I. Nonexclusive. The indemnification and advance of expenses provided by
------------
paragraphs A through H shall not be exclusive of any other rights to which a
person may be entitled by law, bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
J. Continuation. The indemnification provided by this Article XVI shall
------------
be deemed to be a contract between the Corporation and the persons entitled to
indemnification thereunder, and any repeal or modification of this Article XVI
shall not affect any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action, suit or proceeding
theretofore or thereafter brought based in whole or in part upon any such state
of facts. The indemnification and advance payment provided by paragraphs A
through H shall continue as to a person who has ceased to hold a position named
in paragraph A and shall inure to such person's heirs, executors and
administrators.
K. Insurance. The Corporation may purchase and maintain insurance on
---------
behalf of any person who holds or who has held any position named in paragraph
A, against any liability incurred by such person in any such position, or
arising out of such person's status as such, whether or not the Corporation
would have power to indemnify such person against such liability under
paragraphs A through H.
L. Savings Clause. If this Article XVI or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer, employee, and
agent of the Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the Corporation to the
full extent permitted by any applicable portion of this Article XVI that shall
not have been invalidated and to the full extent permitted by applicable law."
Item 15. Recent Sales of Unregistered Securities.
Not Applicable
<PAGE>
Item 16. Exhibits and Financial Statement Schedules:
The financial statements and exhibits filed as part of this
Registration Statement are as follows:
(a) List of Exhibits
<TABLE>
<S> <C>
1.1 -- Form of proposed Agency Agreement among Chester Bancorp, Inc., Chester Savings Bank, FSB and
EVEREN Securities, Inc. (a)
1.2 -- Engagement Letter by and between Chester Savings Bank, FSB and EVEREN Securities, Inc. (a)
2 -- Plan of Conversion of Chester Savings Bank, FSB (attached as an exhibit to the Proxy Statement
included herein as Exhibit 99.5)
3.1 -- Certificate of Incorporation of Chester Bancorp, Inc. (a)
3.2 -- Bylaws of Chester Bancorp, Inc. (a)
4 -- Form of Certificate for Common Stock (a)
5 -- Opinion of Breyer & Aguggia regarding legality of securities registered (a)
8.1 -- Form of Federal Tax Opinion of Breyer & Aguggia
8.2 -- Form of State Tax Opinion of Bryan Cave LLP
8.3 -- Opinion of RP Financial, LC. as to the value of subscription rights (a)
10.1 -- Proposed Form of Employment Agreement with Michael W. Welge (a)
10.2 -- Proposed Form of Employment Agreement with Edward K. Collins (a)
10.3 -- Proposed Form of Stock Option Plan (a)
10.4 -- Proposed Form of Management Recognition and Development Plan (a)
10.5 -- Proposed Form of Employee Stock Ownership Plan and Trust Agreement (a)
21 -- Subsidiaries of Chester Bancorp, Inc. (reference is made to the section entitled "BUSINESS OF THE
SAVINGS BANK -- Subsidiaries" in the Prospectus included in Part I of this registration statement)
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Kerber, Eck & Braeckel LLP
23.3 -- Consent of Breyer & Aguggia (contained in their opinion filed as Exhibit 5) (a)
23.4 -- Consent of RP Financial, LC. (a)
24 -- Power of Attorney (contained in the signature page to the Registration Statement)
99.1 -- Order and Acknowledgement Form (a)
99.2 -- Solicitation and Marketing Materials (a)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
99.3 -- Appraisal Agreement with RP Financial, LC. (a)
99.4 -- Appraisal Report of RP Financial, LC.
99.5 -- Proxy Statement for Special Meeting of Members of Chester Savings Bank, FSB
</TABLE>
_____________________
(a) Previously filed.
Financial Statements and Schedules
<TABLE>
<CAPTION>
CHESTER SAVINGS BANK, FSB Pages
<S> <C>
Independent Auditors' Reports...................................................... F-1
Balance Sheets as of December 31, 1995 and 1994.................................... F-3
Statements of Income for the Three Years Ended
December 31, 1995................................................................. 23
Statements of Retained Earnings for the Three Years
Ended December 31, 1995........................................................... F-4
Statements of Cash Flows for the Three Years Ended
December 31, 1995................................................................. F-5
Notes to Financial Statements...................................................... F-6
</TABLE>
All schedules are omitted as the required information either is not
applicable or is included in the Financial Statements or related Notes.
____________
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended ("Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act") (and, where
applicable, each filing of any employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the questions whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amended Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Chester, Illinois
on the 25th day of June, 1996.
CHESTER BANCORP, INC.
By: /s/ Edward K. Collins
---------------------------------------
Edward K. Collins
Chief Executive Officer, Secretary and
Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amended Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Michael W. Welge* Chairman of the Board, June 25, 1996
- -------------------------------------
Michael W. Welge President and Director
(Principal Financial Officer)
/s/ Edward K. Collins Chief Executive Officer, June 25, 1996
- -------------------------------------
Edward K. Collins Secretary and Director
(Principal Executive Officer)
/s/Howard A. Boxdorfer* Director June 25, 1996
- -------------------------------------
Howard A. Boxdorfer
/s/Thomas E. Welch, Jr.* Director June 25, 1996
- -------------------------------------
Thomas E. Welch, Jr.
/s/John R. Beck, M.D.* Director June 25, 1996
- -------------------------------------
John R. Beck, M.D.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/Allen R. Verseman* Director June 25, 1996
- -------------------------------------
Allen R. Verseman
/s/James E. McDonald* Director June 25, 1996
- -------------------------------------
James E. McDonald
/s/Carl H. Welge* Director June 25, 1996
- -------------------------------------
Carl H. Welge
</TABLE>
____________
* By power of attorney dated March 15, 1996.
<PAGE>
As filed with the Securities and Exchange Commission on March June 25, 1996
Registration No. 333-2470
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CHESTER BANCORP, INC.
-----------------------------------------------
(Exact name of small business issuer in its charter)
Delaware 6035 [to be applied for]
- ------------------------------- --------------------- -------------------
(State or other jurisdiction of (Primary SICC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
1112 STATE STREET
CHESTER, ILLINOIS 62233-1659
(618) 826-5038
---------------------------------------------------
(Address and telephone number of principal executive offices and place of
business)
John F. Breyer, Jr., Esquire
Victor L. Cangelosi, Esquire
BREYER & AGUGGIA
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
(202) 737-7900
--------------------------------------------------------
(Name, address and telephone number of agent for service)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<S> <C>
1.1 -- Form of proposed Agency Agreement among Chester Bancorp, Inc.,
Chester Savings Bank, FSB and EVEREN Securities, Inc.
1.2 -- Engagement Letter by and between Chester Savings Bank, FSB and EVEREN
Securities, Inc. (a)
2 -- Plan of Conversion of Chester Savings Bank, FSB (attached as an
exhibit to the Proxy Statement included herein as Exhibit 99.5)
3.1 -- Certificate of Incorporation of Chester Bancorp, Inc. (a)
3.2 -- Bylaws of Chester Bancorp, Inc. (a)
4 -- Form of Certificate for Common Stock (a)
5 -- Opinion of Breyer & Aguggia regarding legality of securities
registered (a)
8.1 -- Tax Opinion of Breyer & Aguggia
8.2 -- Tax Opinion of Bryan Cave LLP
8.3 -- Opinion of RP Financial, LC. as to the value of subscription rights
(a)
10.1 -- Proposed Form of Employment Agreement with Michael W. Welge (a)
10.2 -- Proposed Form of Employment Agreement with Edward K. Collins (a)
10.3 -- Proposed Form of Stock Option Plan (a)
10.4 -- Proposed Form of Management Recognition and Development Plan (a)
10.5 -- Proposed Form of Employee Stock Ownership Plan and Trust Agreement
(a)
21 -- Subsidiaries of Chester Bancorp, Inc. (reference is made to the
section entitled "BUSINESS OF THE SAVINGS BANK -- Subsidiaries" in
the Prospectus included in Part I of this registration statement)
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Kerber, Eck & Braeckel LLP
23.3 -- Consent of Breyer & Aguggia (contained in their opinion filed as
Exhibit 5)(a)
23.4 -- Consent of RP Financial, LC.(a)
24 -- Power of Attorney (contained in the signature page to the
Registration Statement)
99.1 -- Order and Acknowledgement Form
99.2 -- Solicitation and Marketing Materials
99.3 -- Appraisal Agreement with RP Financial, LC. (a)
99.4 -- Appraisal Report of RP Financial, LC.
99.5 -- Proxy Statement for Special Meeting of Members of Chester Savings
Bank, FSB
</TABLE>
_____________________
(a) Previously filed.
<PAGE>
EXHIBIT 1.1
FORM OF PROPOSED AGENCY AGREEMENT BETWEEN CHESTER BANCORP, INC.,
CHESTER SAVINGS BANK, FSB AND EVEREN SECURITIES, INC.
<PAGE>
Chester Bancorp, Inc.
(a Delaware corporation)
2,012,500 Shares (Anticipated Maximum)
Common Stock
(Par Value $.01 Per Share)
AGENCY AGREEMENT
May __, 1996
EVEREN Securities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601-1994
Gentlemen:
Chester Bancorp, Inc., a Delaware corporation (the "Company"), and Chester
Savings Bank, F.S.B., a federally chartered mutual savings bank (whether in
mutual or stock form, the "Bank"), hereby confirm their agreement with EVEREN
Securities, Inc. ("EVEREN Securities," "Agent" or "you"), as follows:
Introductory
- ------------
The Bank is in the process of converting from a federally chartered savings
bank in mutual form to a federally chartered savings bank in stock form in
accordance with a plan of conversion adopted by its Board of Directors on March
12, 1996 (the "Plan"). Pursuant to the Plan: (i) the Bank will be converted from
a federally chartered savings bank in mutual form to a federally chartered
savings bank in stock form; (ii) all to-be-issued and outstanding stock of the
Bank will be sold to the Company, which has been formed by the Bank to become
the holding company for the Bank; (iii) the Company will issue and sell its
common stock in a subscription and community offering which is described in the
Plan; and (iv) subsequently (a) the Bank in stock form will convert from a
federally chartered stock savings bank to a national bank under the name
"Chester National Bank" (the "Converted Bank") and (b) the Bank's Missouri
branch's assets will be purchased and its liabilities assumed by a de novo. bank
subsidiary of the Company under the name "Chester National Bank of Missouri"
(the "De Novo Bank"). Collectively, these transactions are referred to herein as
the "Conversion." The Bank has filed an application for (i) approval of the Plan
and the Conversion (the "Conversion Application") with the Office of Thrift
Supervision (the "OTS") in the form required by 12 C.F.R. Chapter V, Subchapter
D "Regulations Applicable to all Savings Institutions" (the "Savings
Institutions Regulations"); (ii) a Conversion Application with the Office of the
Comptroller of the Currency
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 2
(the "OCC") for the conversion of the Bank to the Converted Bank; (iii) an
application to the OCC to charter the De Novo Bank; (iv) an application with the
OCC to acquire assets and assume the liabilities of the Bank's Missouri branch
by the De Novo Bank; and (v) an insurance of accounts application with the
Federal Deposit Insurance Corporation (the "FDIC") to obtain deposit insurance
for the De Novo Bank. The Company has filed an Application on Form H-(e)-1 or H-
(e)1-S with the OTS for permission to acquire the capital stock of the Bank (the
"Holding Company Application"), and a FR Y-3 application (the "Y-3 Application")
with the Board of Governors of the Federal Reserve (the "FRB") for approval of
the Company to maintain control of the Converted Bank and to acquire control of
the De Novo Bank.
The Company has authorized capital of 3,100,000 shares of capital stock of
which 3,000,000 shares are common stock, par value $.01 per share (the "Common
Stock"), and 100,000 shares are preferred stock, $.01 par value per share. In
accordance with the Plan, the Company is offering 2,012,500 shares (anticipated
maximum) of the Common Stock (the "Shares"), in a subscription offering (the
"Subscription Offering") in the following order of priority: (1) holders of
deposit accounts as of January 15, 1995 ("Eligible Account Holders"); (2) the
Bank's tax-qualified Employee Stock Ownership Plan (the "ESOP"); (3) holders of
deposit accounts as of March 31, 1996 ("Supplemental Eligible Account Holders");
(4) depositors of the Bank as of the Voting Record Date and borrowers of the
Bank with loans outstanding as of ______________ which continue to be
outstanding as of the Voting Record Date ("Other Members"). In addition, the
ESOP shall have a first priority subscription right to the extent that the
number of shares of Common Stock sold in the Conversion exceeds the maximum of
the Estimated Valuation Range (as defined in the Prospectus). Concurrently
therewith, subject to the prior rights of holders of subscription rights, the
Company is offering for sale in a community offering to members of the general
public to whom a copy of the Prospectus and Stock Order Form are delivered (the
"Community Offering" and, when referred to together with the Subscription
Offering, the "Subscription and Community Offering"), the Shares of Common Stock
not so subscribed for in the Subscription Offering with a preference to natural
persons who are permanent residents of Randolph, Perry or Jackson Counties,
Illinois, or Perry County, Missouri. It is further acknowledged that the Bank
and the Company may reject any orders in the Community Offering.
Any subscription funds received by EVEREN Securities or other broker-
dealers under a selected dealers' agreement ("Selected Dealers' Agreement") in
the Community Offering shall be transmitted (either by U.S. Mail or similar type
of transmittal) to the Bank by 12:00 Noon, Central time, of the following
business day for deposit in the special interest-bearing accounts referred to in
Section 5(r) hereof. In addition, to the extent that EVEREN Securities desires
to solicit indications of interest from its customers, EVEREN Securities will
subsequently (i)
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Everen Securities, Inc.
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Page 3
contact any customer indicating interest to confirm the interest and give
instructions to execute and return an order form or to receive authorization to
execute the order form on a customer's behalf, (ii) mail acknowledgments of
receipt of orders to each customer confirming interest on the business day
following such confirmation, (iii) debit accounts of such customers on the fifth
business day (the "Debit Date") following receipt of the confirmation referred
to in (i), and (iv) forward completed order forms together with such funds to
the Bank on or before 12:00 Noon, Central time on the next business day
following the Debit Date for deposit in the special interest-bearing account
referred to in Section 5(r) hereof.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (File No. 33-_____) (the
"Registration Statement") containing a Prospectus relating to the Subscription
and Community Offering (the "Prospectus") for the registration of the Shares
under the Securities Act of 1933, as amended (the "1933 Act"), and has filed
such amendments thereto, if any, and such amended Prospectuses as may have been
required as of the date hereof. The Prospectus, as amended, on file with the
Commission at the time the Registration Statement initially becomes effective is
hereinafter called the "Prospectus," except that if the Company files a
Prospectus pursuant to Rule 424 of the rules and regulations of the Commission
under the 1933 Act (the "1933 Act Regulations") which differs from the
Prospectus on file at the time of the Registration Statement initially becomes
effective, or if the Company files an amendment to the Registration Statement
subsequent to the time it initially becomes effective and such amendment
contains a Prospectus which differs from the Prospectus on file at the time the
Registration Statement initially became effective, the term "Prospectus" shall
refer to the Prospectus filed pursuant to Rule 424 or contained in such
amendment to the Registration Statement from and after the time said Prospectus
is filed with or transmitted to the Commission for filing.
Any terms not expressly defined herein shall have the same definition and
meaning as is set forth in the Plan.
SECTION 1. Appointment of Agent; Compensation to the Agent
-----------------------------------------------
Subject to the terms and conditions herein set forth, the Bank and the
Company hereby appoint EVEREN Securities as their exclusive marketing agent to
consult with and advise the Bank and the Company, and to solicit subscriptions
for the Shares on behalf of the Bank and the Company, in connection with the
Company's offering of the Shares in the Subscription and Community Offering. On
the basis of the representations, warranties and agreements herein contained,
and subject to the terms and conditions herein set forth, EVEREN Securities
accepts such appointment and agrees to consult with and advise the Bank and the
Company as to the
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Everen Securities, Inc.
May ___, 1996
Page 4
matters set forth in EXHIBIT A attached hereto and agrees to use its best
efforts to solicit subscriptions for Shares in accordance with this Agreement;
provided, however, that the Agent shall not be responsible for obtaining
subscriptions for any specific number of Shares, shall not be required to
purchase any Shares and shall not be obligated to take any action which is
inconsistent with all applicable laws, regulations, decisions or orders or
decrees, directives, agreements or memoranda of or with any court, regulatory
body, administrative agency, or other government body. Shares will be offered
hereunder by means of order forms ("Order Forms"), the form of which is set
forth as Exhibit 99.1 to the Registration Statement. The Company, the Bank and
EVEREN Securities may jointly determine that EVEREN Securities may also assemble
and manage a selling group of broker-dealers, all of which will be members of
the National Association of Securities Dealers, Inc. (the "NASD") to participate
in the solicitation of subscriptions for the Shares on a "best efforts" basis
under a Selected Dealers' Agreement, the form of which is set forth as EXHIBIT B
to this Agreement. In the event that the Company and the Bank wish to make an
underwritten public offering of any Shares remaining unsubscribed following
completion of the Subscription and Community Offering, immediately prior to or
at the time the final prospectus becomes effective, EVEREN Securities would
intend to enter into a "firm commitment" underwriting agreement to offer the
remaining unsubscribed Shares to the public. The "firm commitment" would be
contingent upon the absence of material adverse developments and such other
conditions as shall be contained in a separate underwriting agreement.
In addition to the nonrefundable retainer of $15,000 previously paid to the
Agent and the expenses specified in Sections 6, 7 and 8 hereof, as compensation
for the Agent's services under this Agreement, the Company and the Bank will pay
the following fees to the Agent:
(a) A completion fee of $200,000;
(b) In the event the Company, the Bank and EVEREN Securities jointly agree
to utilize an assisting broker structure, to any registered broker or dealer
employed by EVEREN Securities or a selected dealer who is indicated on an Order
Form presented to the Company and the Bank as having assisted the purchaser in
the Subscription and Community Offering, an Assisting Broker's Fee (as defined
below) equal to 5.0% (consisting of a 1.5% management fee to EVEREN Securities
and a 3.5% sales commission to the broker) of the aggregate Actual Purchase
Price (as defined below) of the Shares sold in such manner. The management fees
pursuant to this subparagraph (b) shall be credited against the fee in
subparagraph (a) above. For purposes of this paragraph, "Assisting Broker's Fee"
is defined as the fee to be paid to any registered broker or dealer (including
EVEREN Securities) who has participated in the solicitation of purchase orders
for the Shares pursuant to a Selected Dealers' Agreement in the
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Everen Securities, Inc.
May ___, 1996
Page 5
form attached as Exhibit B to this Agreement, entered into by such broker or
dealer with EVEREN Securities and who is indicated on an executed Order Form or
supplement thereto presented to the Company or Association as having assisted
the purchaser in the Subscription and Community Offering, and "Actual Purchase
Price" is defined as the per share price at which the Shares are ultimately sold
in the Conversion; and
(c) In the event the Company, the Bank and EVEREN Securities jointly agree
to conduct an underwritten public offering of the Shares not sold in the
Subscription and Community Offering, a percentage of the aggregate Actual
Purchase Price of the Shares sold in any underwritten public offering to be
specified in the underwriting agreement, if any, which percentage is currently
estimated to be 7.0%. The Company and the Bank shall grant to EVEREN Securities
an option, for the purpose of covering overallotments in the sale of
unsubscribed Shares in the underwritten public offering, to acquire up to 15% of
the anticipated maximum number of Shares offered in the Subscription and
Community Offering at the same price as to be specified in the underwriting
agreement, if any, exercisable for a period of thirty days after the
underwritten public offering is commenced.
The compensation specified above shall be payable to the Agent in same day
funds on the Closing Date (as defined in Section 2 hereafter). The Bank and the
Company agree to reimburse the Agent for the costs and expenses specified in
Sections 6, 7 and 8 hereof, to the extent such costs and expenses are incurred
by the Agent.
The appointment of the Agent hereunder shall terminate upon termination of
the Subscription and Community Offering and satisfaction of the obligations of
the Bank and the Company pursuant to this Agreement.
SECTION 2. Closing Date; Release of Funds and Delivery of Certificates
-----------------------------------------------------------
If all conditions precedent to the consummation of the Conversion are
satisfied (including the conditions in Section 9 hereof), the Company agrees to
issue or have issued the Shares sold in the Subscription and Community Offering
and to release for delivery certificates for such Shares on the Closing Date (as
hereinafter defined) against payment therefor by release of funds from the
special interest-bearing accounts referred to in Section 5(r) hereof and by the
authorized withdrawal of funds from deposit accounts of Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members in accordance
with the Plan; provided, however, that no such funds shall be released to the
Company or withdrawn until the conditions specified in Section 9 hereof shall
have been complied with to the reasonable satisfaction of the Agent and
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Everen Securities, Inc.
May ___, 1996
Page 6
its counsel. Such release, withdrawal and payment shall be made at the Closing
Date, at 10:00 a.m. Central time, on a business day and at a place selected by
the Agent, on at least two business days' prior notice to the Company and the
Bank and no more than ten business days after the later of the expiration of the
Subscription and Community Offering, as extended, the solicitation of purchase
orders for shares under the Selected Dealers' Agreement, or such other time or
place as shall be agreed upon by the Agent, the Bank and the Company.
Certificates for Shares shall be delivered directly to the purchasers thereof or
in accordance with their directions. The hour and date upon which the Company
shall release or deliver the Shares sold in the Subscription and Community
Offering, in accordance with terms hereof, are herein called the "Closing Date."
SECTION 3. Subscription and Community Prospectus; Subscription and Community
-----------------------------------------------------------------
Offering
--------
The anticipated maximum number of Shares to be offered in the Subscription
and Community Offering and the subscription price is as set forth on the cover
page of the Prospectus. The total number of Shares may be increased or decreased
from the maximum by the Company after notification of the Agent, subject to
limitations set forth in the Plan and the Prospectus.
SECTION 4. Representations and Warranties
------------------------------
The Company and the Bank jointly and severally represent and warrant to the
Agent as follows:
(a) The Registration Statement was declared effective by the Commission on
______________, 1996. At the time the Registration Statement became effective,
the Registration Statement complied in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and the Registration
Statement, any preliminary or final Prospectus, any Blue Sky Application and any
Sales Document (as such terms are defined previously herein or in Section 7
hereof) authorized by the Company or the Bank for use in connection with the
Subscription and Community Offering did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and at the time any Prospectus was filed
with or mailed to the Commission for filing and at the Closing Date referred to
in Section 2, the Registration Statement, any preliminary or final Prospectus,
any Blue Sky Application or any Sales Document (as such terms are defined
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Everen Securities, Inc.
May ___, 1996
Page 7
previously herein or in Section 7 hereof) authorized by the Company or the Bank
for use in connection with the Subscription and Community Offering will not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading, provided, however, that the
representations and warranties in this Section 4(a) shall not apply to
statements in or omissions from such Registration Statement, Prospectus or Sales
Document made in reliance upon and in conformity with information furnished in
writing to the Company or the Bank by the Agent expressly regarding the Agent
for use in the Prospectus or Sales Document, which information solely consists
of the disclosure included in the Prospectus as the first paragraph under the
caption "The Conversion -- Plan of Distribution for the Subscription, Direct
Community and Public Offerings."
(b) The Bank has filed the Conversion Application with the OTS for
approval of the Plan and the Conversion in the form required by the Regulations
of the OTS and has published and posted notice of the adoption of the Plan and
the filing of the Conversion Application in the form and manner required by the
OTS. The Plan complies with the Savings Institutions Regulations and all
applicable rules, decisions and orders thereunder. The Conversion Application
has been approved by the OTS in accordance with the Savings Institutions
Regulations, and no order has been issued by, or to the best knowledge of the
Company and the Bank is pending before, the OTS to deny, prevent, suspend or
revoke such approval. At the time of approval by the OTS, the Conversion
Application was complete and accurate in all material respects, and the Company
and the Bank are not aware of any developments that would cause such Application
not to be complete and accurate in all material respects. The Prospectus and the
proxy statement for the solicitation of proxies from members for the special
meeting to approve the Plan (the "Proxy Statement") comply in all material
respects with the requirements, except as waived or modified by the OTS, of and
have been approved for use by the OTS to the extent required by the Savings
Institutions Regulations, provided, however, that the representations and
warranties in this Section 4(b) shall not apply to statements in or omissions
from such Prospectus or Proxy Statement made in reliance upon and in conformity
with information furnished in writing to the Company or the Bank by the Agent
expressly regarding the Agent for use in the Prospectus or Proxy Statement,
which information consists solely of the disclosure included in the Prospectus
as the first paragraph under the caption "The Conversion--Plan of Distribution
for the Subscription, Direct Community and Public Offerings."
(c) The Company has filed the Holding Company Application with the OTS to
permit the Company to acquire all of the issued and outstanding capital stock of
the Bank and has published notice of such Application in the form and manner
prescribed by the OTS. The Holding Company Application has been approved by the
OTS, and no order has been issued by, or to
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 8
the best knowledge of the Company and the Bank is pending before, the OTS to
deny, prevent, suspend or revoke such approval of such application. The Holding
Company Application was complete and accurate in all material respects at the
date of approval, and the Company and the Bank are not aware of any developments
that would cause such Application not to be complete and accurate in all
material respects.
(d) The Bank has filed the OCC Conversion Application, the OCC Purchase
and Assumption Application and the OCC De Novo Application in the form required
by the OCC. The OCC Conversion Application, OCC Purchase and Assumption
Application and OCC De Novo Application comply with the Banking Act and
applicable OCC rules, regulations, decisions, and orders. Each of the OCC
Conversion Application, OCC Purchase and Assumption Application and OCC De Novo
Application has been approved by the OCC, and no order has been issued by, or to
the best knowledge of the Bank is pending before the OCC to deny, prevent,
suspend or revoke such approvals. At the time of approval by the OCC, each of
the OCC Conversion Application, OCC Purchase and Assumption Application and the
OCC De Novo Application was complete and accurate in all material respects and
the Bank is not aware of any developments that would cause any of the OCC
Conversion Application, OCC Purchase and Assumption Application, or OCC De Novo
Application not to be complete and accurate in all material respects, and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
in light of the circumstances under which they were made, not misleading.
(e) The Company has filed a bank holding company application on Form FR Y-
3 (the "Y-3 Application") with the FRB. The Y-3 Application complies with the
Bank Holding Company Act and with applicable rules, regulations, decisions and
orders promulgated by the FRB. The Y-3 Application has been approved by the FRB
in accordance with its regulations, and no order has been issued by or to the
best knowledge of the Bank is pending before the FRB to deny, prevent, suspend
or revoke such approval. At the time of approval by the FRB, the Y-3 Application
was complete and accurate in all material respects, and the Bank is not aware of
any developments that would cause the Y-3 Application not to be complete and
accurate in all material respects, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances under
which they were made, not misleading.
(f) The Bank has filed with the FDIC an application to obtain insurance
for the deposit accounts of the De Novo Bank (the "FDIC Insurance Application").
The FDIC Insurance Application complies in all material respects with the
Federal Deposit Insurance Act and the FDIC Rules and Regulations for FDIC-
insured institutions. The FDIC has approved the FDIC
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 9
Insurance Application, and no order has been issued by, or to the best knowledge
of the Bank is pending before the FDIC to deny, prevent, suspend or revoke such
approval. At the time of approval by the FDIC, the FDIC Insurance Application
was complete and accurate in all material respects, and the Bank is not aware of
any developments that would cause the FDIC Insurance Application not to be
complete and accurate in all material respects, and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading.
(g) At the Closing Date referred to in Section 2 hereof, the Company and
the Bank will have complied in all material respects with all agreements and
satisfied all conditions on their part to be performed or satisfied at or prior
to the Closing Date under the Agreement, the Plan, the Holding Company
Application, the OCC Conversion Application, OCC Purchase and Assumption
Application, OCC De Novo Application, Y-3 Application, and FDIC Insurance
Application, and the applicable regulations, and all other applicable laws
(including state Blue Sky laws), regulations, decisions and orders, directives,
agreements and memoranda of or with any court, regulatory body, administrative
agency or other government body, including all terms, conditions, requirements
and conditions precedent to the Conversion imposed upon the Company or the Bank
by the Commission, the OTS, OCC, FRB, FDIC, or any other regulatory authority.
As of the date hereof, to the best of the Bank's knowledge, no person has sought
or intends to obtain review of the final action of the OTS in approving the
Plan, the final action of the OTS in approving the Holding Company Application,
the final action of the OCC in approving the OCC Conversion Application, OCC
Purchase and Assumption Application, OCC De Novo Application, the final action
of the FRB in approving the Y-3 Application, or the final action of the FDIC in
approving the FDIC Insurance Application.
(h) No order has been issued by the Commission, the OTS, OCC, FRB, FDIC,
or any other state regulatory or Blue Sky authority preventing or suspending the
use of the Prospectus, and no action by or before any such government entity to
revoke any approval, authorization or order of effectiveness related to the
Conversion is pending or, to the best of the Bank's knowledge, threatened.
(i) At the time of the approval of the Conversion Application and the Plan
by the OTS (including any amendment or supplement thereto) and at all times
subsequent thereto until the Closing Date, the Conversion Application and the
Plan will comply in all material respects with the then-applicable provisions of
the Savings Institutions Regulations. The Bank will file with the OTS promptly
after the date of the meeting at which the Plan is adopted by the members of the
Bank a certified copy of the minutes of the meeting at which the Plan was
adopted and any
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 10
additional information pertaining to the Plan that the OTS requires. The
Prospectus contained in the Conversion Application (including any amendments or
supplements thereto) will comply in all material respects with the Savings
Institutions Regulations, as well as the 1933 Act and the 1933 Act Regulations,
at the time of the approval of the Prospectus by the OTS, at the time of the
effectiveness with the Commission and at all times thereafter up to and
including the Closing Date. The Conversion Application, including the Prospectus
contained therein, did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided, however, that the representations and warranties
in this Section 4(f) shall not apply to statements in or omissions from the
Prospectus included in the Conversion Application made in reliance upon and in
conformity with information furnished in writing to the Company or the Bank by
the Agent expressly regarding the Agent for use in the Prospectus, which
information consists of the disclosure included in the Prospectus as the first
paragraph under the caption "The Conversion--Plan of Distribution for the
Subscription, Direct Community and Public Offerings."
(j) KPMG Peat Marwick LLP, and Kerber, Eck & Braeckel LLP, the firms which
certified the financial statements included in the Registration Statement and
the Prospectus and the Conversion Application, are, in respect to the Company
and the Bank, independent certified public accountants within the meaning of the
Code of Professional Conduct of the American Institute of Certified Public
Accountants and the published rules and regulations of the OTS, the FDIC and the
Commission.
(k) RP Financial, LC., the firm which prepared the appraisal report
described in the Registration Statement and the Prospectus (the "Appraisal"),
was not employed on a contingent basis and will not receive any interest in the
Company or the Bank in connection with the Subscription and Community Offering.
All financial and other information supplied to the Appraiser for use in
preparing the Appraisal was and is complete and accurate in all material
respects.
(l) The financial statements (including the schedules and the notes
related thereto) included in the Registration Statement and the Conversion
Application, and which are part of the Prospectus, present fairly the financial
condition, consolidated results of operations, equity and cash flows of the Bank
and its wholly owned subsidiary, at and for the dates indicated and the periods
specified and comply as to form in all material respects with all applicable
accounting requirements, including the Savings Institutions Regulations, the
1933 Act, the 1933 Act Regulations (including Commission Regulation S-X) and
generally accepted accounting principles consistently applied, except as
otherwise noted therein. Said financial statements have
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 11
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as otherwise
noted therein, and are consistent in all material respects with the most recent
financial statements and other reports filed by the Bank with the OTS or FDIC,
except that accounting principles employed in such filings conform to
requirements of such authorities and not necessarily to generally accepted
accounting principles. The other financial, statistical, and pro forma
information and related notes included in the Prospectus present fairly in all
material respects the information shown therein on a basis consistent with the
audited financial statements of the Bank included in the Prospectus, and, as to
the pro forma adjustments, the adjustments made therein have been properly
applied on the basis described therein.
(m) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, except as may otherwise be stated
therein: (i) there has not been any material change, financial or otherwise, in
the condition of the Company or the Bank, considered as one enterprise, or in
the earnings, capital, properties, or business affairs of the Bank or the
Company, whether or not arising in the ordinary course of business, (ii) there
has not been any material increase in the long-term debt of the Bank, nor has
the Bank issued any securities or incurred any liability or obligation for
borrowing other than in the ordinary course of business, consistent with past
practices, (iii) there have not been any material transactions entered into by
the Company or the Bank, except with respect to the Bank those transactions
entered into in the ordinary course of business, consistent with past practices;
(iv) the capitalization, liabilities, assets, properties and business of the
Company and the Bank conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus; (v) there
has not been any material increase in the aggregate dollar amount of the Bank's
criticized assets, loans more than 60 days past due or placed on the Bank's
watchlist, real estate acquired by foreclosure, by deed-in-lieu of foreclosure
or deemed in-substance foreclosure, or any material decrease in the equity or
total assets of the Bank; (vi) there has not been any material adverse change in
the aggregate amount of the Bank's deposits; (vii) there has not been a material
increase in the Bank's liability for borrowed money; (viii) there has not been a
material increase in the aggregate amount of the Bank's fixed-rate mortgage
loans and investment securities with a remaining term to maturity in excess of
seven years; and (ix) there has been no material adverse change in the Bank's
insurance coverage including, without limitation, cancellation or other
termination of the Bank's fidelity bond or any other type of insurance coverage.
Neither the Company nor the Bank has any material liability or any kind,
contingent or otherwise, except as set forth in the Registration Statement and
the Prospectus.
(n) The Bank is now a duly organized and validly existing federally
chartered savings bank in mutual form of organization and upon consummation of
the Conversion will become a
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 12
duly organized and validly existing federally-chartered savings bank in stock
form of organization; upon completion of the Bank Conversion the Converted Bank
shall be a duly organized and validly existing national bank and upon completion
of the De Novo Bank organization, the De Novo Bank shall be a duly organized and
validly existing national bank, in all instances duly authorized to conduct its
business and own its property as described in the Registration Statement and the
Prospectus; the Company and the Bank have obtained all licenses, permits and
other governmental authorizations currently required for the conduct of their
respective business, except where failure to obtain such licenses, permits or
authorizations would not have a material impact on the business or operations of
the Company or the Bank, as the case may be; all such licenses, permits and
governmental authorizations currently are in full force and effect, and the
Company and the Bank are in all material respects complying with all laws,
rules, regulations, decisions, decrees, orders, directives, agreements and
memoranda of or with any court, regulatory body, administrative agency or other
government body applicable to the operation of their respective businesses; and
the Bank is in good standing with the OTS, the FDIC and the Federal Home Loan
("FHLB") of Chicago, is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which its ownership of
property or leasing of properties or the conduct of its business requires such
qualification, unless the failure to be so qualified in one or more such
jurisdictions, either individually or in the aggregate, would not have a
material adverse effect on the condition, financial or otherwise, or the
business, operations or income of the Bank. The Bank does not own, directly or
indirectly, equity securities or any equity interest in any other business
enterprises. Upon completion of the sale by the Company of the Shares as
contemplated by the Prospectus, (i) the Bank will be converted pursuant to the
Plan to a federally chartered stock savings bank, (ii) all of the issued and
outstanding capital stock of the Bank will be owned by the Company free and
clear of any liens, encumbrances, claims or other restrictions, and (iii) the
Company will have no direct subsidiaries other than the Bank. Immediately
following the consummation of the stock conversion, the Bank will convert to a
national bank charter and the Company will form the De Novo Bank. Following the
Bank Conversion, the Company shall have no subsidiaries other than the Bank and
the De Novo Bank. The Conversion will have been effected in all material
respects in accordance with all applicable statutes, regulations, decisions and
orders (except to the extent waived or modified in writing by the OTS, OCC, FRB
or FDIC); and, except with respect to the filing of certain post-sale conversion
reports and documents in compliance with the OTS's resolutions or letters of
approval, all terms, conditions, requirements and provisions with respect to the
Conversion imposed by the Commission, the OTS, OCC, FRB, and/or the FDIC, if
any, will have been complied with by the Company and the Bank in all material
respects, or appropriate waivers will have been obtained, and all notice and
waiting periods will have been satisfied, waived or elapsed.
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Everen Securities, Inc.
May ___, 1996
Page 13
(o) The Bank is a member in good standing of the FHLB of Chicago. The
deposit accounts of the Bank are insured by the Savings Association Insurance
Fund (the "SAIF") as administered by the FDIC up to the maximum amount allowed
under law. Upon consummation of the Conversion, the liquidation account for the
benefit of Eligible Account Holders will be duly provided for in accordance with
the requirements of the Savings Institutions Regulations.
(p) Upon consummation of the Conversion, the authorized, issued and
outstanding equity capital of the Company will be within the range set forth in
the Registration Statement and the Prospectus under the caption "Capitalization"
and, no shares of Common Stock or other equity securities of the Company have
been or will be issued and outstanding prior to the Closing Date referred to in
Section 2; the Shares will have been duly and validly authorized for issuance
and, when issued and delivered by the Company pursuant to the Plan against
payment of the consideration calculated as set forth in the Plan and in the
Prospectus, will not violate any preemptive rights, except as disclosed in the
Prospectus, and will be duly and validly issued and fully paid and
nonassessable; the voting power, designation, preferences and other rights of
the Shares and the manner in which the Shares will be issued will conform in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus. Upon the issuance of the Shares, good title to the
Shares will be transferred from the Company to the purchasers thereof against
payment therefor free and clear of all liens, claims and encumbrances created or
suffered to be created by the Company.
(q) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus. The Company is qualified to do business as a foreign corporation in
the States of Illinois and Missouri, and in each jurisdiction in which the
conduct of its business or its ownership of properties requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on the business, operations or financial condition of the Company
and the Bank taken as a whole.
(r) As of the date hereof and as of the Closing Date, neither the Company
nor the Bank is in violation of their respective certificate of incorporation,
charter or bylaws (and the Bank will not be in violation of its charter or
bylaws in capital stock form upon consummation of the Conversion or upon
completion of its Conversion to a national bank charter); the consummation of
the Conversion, the execution, delivery and performance of this Agreement and
the consummation of the transactions herein contemplated have been duly and
validly authorized by all necessary corporate action on the part of the Company
and the Bank and this Agreement has been validly executed and delivered by the
Company and the Bank and is the valid, legal and
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 14
binding agreement of the Company and the Bank enforceable in accordance with its
terms, except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally or the rights of creditors of savings
associations insured by the FDIC, and subject, as to the enforcement of
remedies, to general equity principles, and except as the rights of
indemnification and contribution may be limited under applicable law or public
policy. The consummation of the transactions herein contemplated will not: (i)
conflict with or constitute a breach of, or default under, the respective
certificate of incorporation, charter or bylaws of the Company or the Bank (in
either mutual to stock form); (ii) conflict with, result in a breach of, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under any contract, lease or other instrument to
which the Company or the Bank is a party or in which the Company or the Bank has
a beneficial interest which would in any such case have a material adverse
effect on the business, operations or financial condition of the Company and the
Bank taken as a whole; (iii) violate any authorization, approval, judgment,
decree, order, statute, rule or regulation or any directive, agreement or
memoranda of or with any court, regulatory body, administrative agency or other
government body applicable to the Company or the Bank, which would in any such
case have a material adverse effect on the business, operations or financial
condition of the Company and the Bank taken as a whole; or (iv) with the
exception of the liquidation account provided for in the Conversion, result in
the creation of any material lien, charge or encumbrance upon any property of
the Company or the Bank.
(s) The Company and the Bank have all such power, authority,
authorizations, approvals and orders as may be required to enter into this
Agreement, to carry out the provisions and conditions hereof and to issue and
sell the capital stock of the Bank and the Shares as provided in the Plan and as
described in the Registration Statement and the Prospectus, subject to the
satisfaction of any conditions to approval of the Plan or the Conversion
Application, to the approval of the Holding Company Application by the OTS, to
the approval of the OCC to the OCC Conversion Application, OCC Purchase and
Assumption Application, and the OCC De Novo Application, the FDIC Insurance
Application, and to the FRB approval of the Y-3 Application, and except as may
be required under the Blue Sky laws of the various states.
(t) The Company and the Bank have good and marketable title to all
properties and assets which are material to the business of the Company and the
Bank and to those properties and assets described in the Registration Statement
and the Prospectus as owned by them, free and clear of all materials liens,
claims, encumbrances or restrictions, except as are described in the
Registration Statement and the Prospectus, and all of the leases and subleases
material to the business of the Company and the Bank under which the Company or
the Bank hold properties,
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Everen Securities, Inc.
May ___, 1996
Page 15
including those described in the Registration Statement and the Prospectus, are
valid and binding leases in full force and effect. There has been no unlawful
storage, treatment or disposal of waste by the Company, the Bank or any
Subsidiary (or any of their predecessors-in-interest) at any of the facilities
owned thereby or, to the best knowledge of the Company and the Bank at any
properties serving as collateral for the liens made by the Company or the Bank,
except for such violations which would not have a material adverse effect on the
business, operations or financial condition of the Company, the Bank and the
Subsidiary taken as a whole; there has been no material spill, discharge, leak,
emission, ejection, escape, dumping or release of any kind onto the properties
owned by the Company, the Bank or the Subsidiary or, to the best knowledge of
the Company and the Bank at any properties serving as collateral for liens made
by the Company or the Bank, or into the environment surrounding those
properties, of any toxic or hazardous substance as defined under any federal,
state or local regulations, laws or statutes, except for those releases
permissible under such regulations, laws or statutes or otherwise allowable
under applicable permits and except for such releases which would not have a
material adverse effect on the business, operations or financial condition of
the Company, the Bank and the Subsidiary taken as a whole.
(u) The Company and the Bank are not in violation of any directive from
the Commission, the FDIC, the OTS or any other agency to make any material
change in the method of conducting their businesses so as to comply in all
material respects with all applicable statutes and regulations (including,
without limitation, regulations, decisions, directives and orders of the
Commission, the FDIC and the OTS); the Company and the Bank have conducted and
are conducting their respective businesses so as to comply in all material
respects with all applicable statutes and regulations; and, except as set forth
in the Registration Statement and the Prospectus, there is no suit or proceeding
or charge, investigation or action before or by any court, regulatory authority
or governmental agency or body pending or, to the knowledge of the Company or
the Bank, threatened which might materially and adversely affect the Conversion,
the performance of this Agreement or the consummation of the transactions
contemplated in the Plan or described in the Registration Statement and the
Prospectus, or which might result in any material adverse change in the
condition (financial or otherwise), earnings, capital, properties, or business
affairs of the Company or the Bank or which would materially affect their
properties and assets.
(v) The Company and the Bank are in compliance in all material respects
with the applicable financial record-keeping and reporting requirements of the
Currency and Foreign Transaction Reporting Act of 1970, as amended, and the
regulations and rules thereunder.
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Everen Securities, Inc.
May ___, 1996
Page 16
(w) As of the Closing Date, the Bank and the Company shall have conducted
the Conversion in all material respects in accordance with the Plan and all
other applicable laws and regulations and in the manner described in the
Registration Statement and the Prospectus.
(x) The Bank has received an opinion of Breyer & Aguggia with respect to
the federal, and from Bryan Cave LLP with respect to the state, income tax
consequences of the Conversion of the Bank from mutual to stock form, the
acquisition of the capital stock of the Bank by the Company, the sale of the
Shares, and the Bank Conversion, the facts and representations upon which such
opinions are based are truthful, accurate and complete, and neither the Bank nor
the Company will take any action inconsistent therewith.
(y) No default exists, and no event has occurred which with notice or
lapse of time, or both, would constitute a default, on the part of the Company
or the Bank in the due performance and observance of any term, covenant or
condition of any indenture, mortgage, deed of trust, note, bank loan or credit
agreement or any other obligation, instrument or agreement to which the Company
or the Bank is party or by which any of them or any of their respective
properties is bound or affected in any respect which, in any such case, is
material to the Company or the Bank; no other party to any such agreement has
instituted or, to the knowledge of the Company or the Bank, threatened any
action or proceeding wherein the Company or the Bank would or might be alleged
to be in default thereunder which, if decided adversely, would have a material
adverse effect on the business, operations, or financial condition of the
Company or the Bank taken as a whole.
(z) No consent, approval, authorization or order of any court, regulatory
body, administrative agency or other governmental body is required for the
execution and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, except for compliance with the Savings
Institutions Regulations, the laws under which the Savings Institutions
Regulations are promulgated, the Bank Holding Company Act and regulations
promulgated thereunder, the Banking Act of 1933 and the regulations promulgated
thereunder, and the Federal Deposit Insurance Act, the state securities laws
applicable to the offering of the Shares, the clearance of such offering with
the NASD, and compliance with the registration provisions of the 1933 Act.
(aa) Except when extensions have been permitted, the Company and the Bank
have filed all federal, state, local and foreign income and franchise tax
returns required to be filed and have made timely payments of all taxes due and
payable in respect to such returns, no deficiency has been asserted with respect
thereto by any taxing authority, and no taxing authority has requested that the
Company or the Bank waive any applicable statute of limitation with respect to a
return
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 17
previously filed; the Company and the Bank have no knowledge of any tax
deficiency which has been asserted or threatened against the Company or the Bank
which could materially adversely affect their respective businesses or
operations.
(bb) None of the Company, the Bank or, to the best knowledge of the Company
and the Bank, any employee of the Bank has made any payment of funds of the
Company or the Bank as a loan for the purchase of the Shares, except with
respect to the ESOP, or made any other payment of funds prohibited by law, and
no funds have been set aside to be used for any payment prohibited by law.
(cc) Prior to the Conversion, the Bank was not authorized to issue shares
of capital stock, and neither the Bank nor the Company has: (i) placed any
securities within the last 18 months (except for notes to evidence other bank
loans and reverse repurchase agreements or other liabilities, to the extent that
such notes may be considered securities); (ii) since December 31, 1994 had any
material dealings with any member of the NASD or any person related to or
associated with such member other than discussions and meetings relating to the
proposed transactions contemplated hereby and routine purchases and sales U.S.
government and other securities; (iii) entered into a financial or management
consulting agreement, except as contemplated hereunder and except for the
engagement letter with the Agent, dated January 3, 1996; or (iv) engaged an
intermediary between the Agent and the Company or the Bank in connection with
the offering of Common Stock, and no person is being compensated in any manner
for such service.
(dd) The Company is not required to be registered under the Investment
Company Act of 1940, as amended.
(ee) The ESOP has been duly and validly formed in accordance with all
applicable laws and regulations and the references thereto in the Prospectus.
(ff) The Company and the Bank have not relied upon the Agent or its legal
counsel or other advisors for any legal (other than Blue Sky laws), tax, or
accounting advice in connection with the Conversion.
(gg) All the documents purporting to be final, definitive documents (and
not drafts) delivered or to be delivered by the Company and the Bank or their
respective representatives in connection with the issuance and sale of shares in
the Subscription and Community Offering, or in connection with the Agents' due
diligence, were on the dates on which they were delivered, true, complete and
correct in all material respects.
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Everen Securities, Inc.
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(hh) The Company and the Bank are not aware of any relationships that are
not already disclosed in the Prospectus that would be required to be disclosed
pursuant to Item 404 of Regulation S-K under the Exchange Act, or that would be
impermissible under applicable rules of the OTS, OCC, FRB or FDIC.
(ii) The representations and warranties made in this Agreement will be true
and correct as of the date hereof and as of the Closing Date.
Any certificate signed by an officer of the Bank or of the Company and
delivered to the Agent or its counsel that refers to this Agreement shall be
deemed to be a representation and warranty by the Bank or the Company to the
Agent as to the matters covered thereby with the same effect as if such
representation and warranty were set forth herein.
SECTION 5. Covenants of the Company and Association
----------------------------------------
The Company and the Bank hereby jointly and severally covenant with you as
follows.
(a) The Company and the Bank will not, at any time before or after the
Registration Statement, including any supplement filed pursuant to Rule 424
under the 1933 Act, is declared effective by the Commission or the Conversion
Application or the Plan is approved by the OTS, file any amendment to such
Registration Statement or Conversion Application or Plan without so notifying
you and without providing you and your counsel a reasonable opportunity to
review such amendment.
(b) The Company and the Bank will use their best efforts to cause the
Registration Statement to be declared effective by the Commission, the
Conversion Application and the Plan to be approved by the OTS, the OCC
Conversion Application, OCC Purchase and Assumption Application, and the OCC De
Novo Application to be approved by the OCC, the Y-3 Application to be approved
by the FRB, and the FDIC Insurance Application to be approved by the FDIC, and
will immediately upon receipt of any information concerning the events listed
below notify you and promptly confirm the notice in writing: (i) when the
Registration Statement has become effective the Conversion Application, the
Plan, the OCC Conversion Application, OCC Purchase and Assumption Application,
OCC De Novo Application, Y-3 Application, or FDIC Insurance Application, have
been approved; (ii) of the receipt of any comments from the Commission, the OTS,
the OCC, the FRB, the FDIC, or any other governmental entity with respect to the
Conversion or the transactions contemplated by this Agreement; (iii) any
requests by the Commission, the OTS, the OCC, the FRB, the FDIC, or any other
governmental entity
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 19
for any amendment or supplement to the Registration Statement, the Conversion
Application, the OCC Conversion Application, OCC Purchase and Assumption
Application, OCC De Novo Application, Y-3 Application, or FDIC Insurance
Application, or for additional information; (iv) of the issuance by the
Commission, the OTS, or any other governmental entity of any order or other
action suspending the Subscription and Community Offering or the use of the
Registration Statement or the Prospectus or any other filing of the Company and
the Bank under the Savings Institutions Regulations or other applicable law, or
the threat of any such action; (v) the issuance by the Commission or any state
authority of any stop order suspending the effectiveness of the Registration
Statement or of the initiation or threat of initiation or threat of any
proceedings for that purpose; or (vi) of the occurrence of any event mentioned
in paragraph (g) below. The Company and the Bank will make every reasonable
effort to prevent the issuance by the Commission, the OTS, or any other state
authority of any such order and, if any such order shall at any time be issued,
to obtain the lifting thereof at the earliest possible time.
(c) The Company will give you notice of its intention to file, and
reasonable time to review prior to filing, any amendment or supplement to the
Conversion Application, the Holding Company Application, the OCC Conversion
Application, OCC Purchase and Assumption Application, OCC De Novo Application,
Y-3 Application, and FDIC Insurance Application, or to the Registration
Statement or the Prospectus.
(d) The Company and the Bank have delivered or will deliver to you and to
your counsel two complete conformed copies (including all exhibits) of each of
the following documents: the Conversion Application and the Holding Company
Application, as originally filed and of each amendment or supplement thereto,
the Registration Statement, as originally filed and each amendment thereto, the
OCC Conversion Application, OCC Purchase and Assumption Application, OCC De Novo
Application, Y-3 Application, and FDIC Insurance Application, each of which as
originally filed and each amendment thereto.
(e) The Company will furnish to you, without charge, from time to time
during the period when the Prospectus is required to be delivered under the 1933
Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"), such
number of copies of such Prospectus (as amended or supplemented) as you may
reasonably request for the purposes contemplated by the 1933 Act or the 1934 Act
or the respective applicable rules and regulations of the Commission thereunder.
The Company authorizes the Agent to use the Prospectus (as amended or
supplemented, if amended or supplemented) for any lawful manner in connection
with the sale of the Shares by the Agent.
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 20
(f) The Company and the Bank will comply in all material respects with any
and all terms, conditions, requirements and provisions with respect to the
Conversion and the transactions contemplated thereby imposed by the Plan, the
OCC, the FRB, the FDIC, the OTS, the Savings Institutions Regulations (including
those related to purchase limitations), the OTS approval of the Holding Company
Application and by the 1933 Act, the 1933 Act Regulations, the 1934 Act and the
rules and regulations of the Commission promulgated under the 1934 Act (the
"1934 Act Regulations"), to be complied with prior to and subsequent to the
Closing Date. During the periods prior to the Closing Date and when the
Prospectus is required to be delivered, the Company and the Bank will comply in
all material respects, at their own expense, with all requirements imposed upon
them by the OTS, the Savings Institutions Regulations, and by the 1933 Act, the
1933 Act Regulations, the 1934 Act and the 1934 Act Regulations, including,
without limitations, Rule 10b-6 under the 1934 Act, in each case as from time to
time in force, in accordance with the provisions hereof and the Prospectus.
(g) If, at any time during the period when the Prospectus relating to the
Shares is required to be delivered (including the period after the expiration of
subscription rights and prior to the Closing), any event relating to or
affecting the Company or the Bank shall occur, as a result of which it is
necessary or appropriate, in the reasonable good faith opinion of the Agent's
counsel, to amend or supplement the Registration Statement or Prospectus in
order to make the Registration Statement or Prospectus not misleading in light
of the circumstances existing at the time it is delivered to a purchaser, the
Company and the Bank will, at their expense, forthwith prepare, file with the
Commission and the OTS and furnish to you a reasonable number of copies of an
amendment or amendments of, or a supplement or supplements to, the Registration
Statement or Prospectus (in form and substance satisfactory to you and your
counsel after a reasonable time for review) and Conversion Application which
will amend or supplement the Registration Statement or Prospectus and Conversion
Application so that as amended or supplemented it will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances existing at the
time the Prospectus is delivered to purchaser, not misleading. For the purpose
of this Agreement, the Company and the Bank each will timely furnish to you such
information with respect to itself as you may from time to time reasonably
request.
(h) The Company and the Bank will take all necessary actions, in
cooperation with you, and furnish to whomever the Agent may direct such
information as may be required to qualify or register the Shares for offering
and sale by the Company under the applicable securities or Blue Sky laws of each
jurisdiction as you may reasonably designate, provided, however, that the
Company shall not be obligated to qualify to do business in any jurisdiction in
which it is not so qualified. In each jurisdiction where any of the Shares shall
have been qualified or registered
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 21
as above provided, the Company will make and file such statements and reports in
each fiscal period as are or may be required by the laws of such jurisdictions.
(i) The Company will not sell or issue, contract to sell or otherwise
dispose of, for a period of 180 days after the Closing Date, without your prior
written consent which shall not be unreasonably withheld, any shares of Common
Stock other than the Shares or other than in connection with any employee
benefit plan or arrangement described in the Prospectus.
(j) During the period which the Common Stock is registered under the 1934
Act or for the three years from the Closing Date, whichever period is greater,
the Company will furnish to its shareholders as soon as practicable after the
end of each fiscal year an annual report (including a consolidated balance sheet
and consolidated statements of income, shareholders' equity and cash flows of
the Company and its subsidiaries as at the end of and for such year, certified
by independent public accountants in accordance with Regulation S-X under the
1933 Act).
(k) During the period of three years from the date hereof, the Company
will furnish to you: (i) as soon as practicable, a paper copy of each report of
the Company furnished generally to shareholders of the Company or furnished to
or filed with the Commission under the 1934 Act or any national securities
exchange or system on which any class of securities of the Company is listed or
quoted (including, but not limited to, reports on Forms 10-K, 10-Q and 8-K and
of all proxy statements and annual reports to shareholders), a copy of each
other report of the Company mailed to its shareholders or filed with the
Commission and each report of a public nature filed with the OCC, the FRB, the
OTS, the FDIC, or any other supervisory or regulatory authority or national
securities exchange or system on which any class of securities of the Company is
listed or quoted, each press release and material news items and articles
released by the Company or the Bank and such additional documents and
information with respect to the Company or the Bank as you may reasonably
request, and (ii) from time to time, such other non-confidential information
concerning the Company and the Bank as you may reasonably request.
(l) The Company and the Bank will use the net proceeds from the sale of
the Shares in the manner set forth in the Prospectus under the caption "Use of
Proceeds."
(m) Other than as permitted by the 1933 Act, the 1933 Act Regulations and
the laws of any state in which the Shares are qualified for sale, neither the
Company nor the Bank will distribute any Prospectus, offering circular or other
offering material in connection with the offer and sale of Shares.
<PAGE>
Everen Securities, Inc.
May ___, 1996
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(n) The Company will make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the period
covered thereby, an earning statement (in form complying with the provisions of
Rule 158 of the regulations promulgated under the 1933 Act) covering a twelve-
month period beginning not later than the first day of the Company's fiscal
quarter next following the effective date (as defined in said Rule 158) of the
Registration Statement.
(o) The Company will file with the Commission such reports on Form SR as
may be required pursuant to Rule 463 under the 1933 Act.
(p) The Company will promptly register the Shares under Section 12(g) of
the 1934 Act and not deregister the Shares for a period of at least three years
thereafter, unless such registration is no longer required.
(q) The Company will use its best efforts to obtain approval for quotation
of the Shares on the Nasdaq National Market, effective on or prior to the
Closing Date and will use its best efforts to maintain such quotation (or, in
lieu thereof, listing on a national or regional securities exchange) for a
minimum of three years following consummation of the Conversion.
(r) The Bank will maintain appropriate arrangements for depositing all
funds received from persons mailing subscriptions for or orders to purchase
Shares in the Subscription Offering and the Community Offering on an interest-
bearing basis at the rate described in the Prospectus until the Closing Date and
satisfaction of all conditions precedent to the release of the Bank's obligation
to refund payments received from persons subscribing for or ordering Shares in
the Subscription and Community Offering in accordance with the Plan as described
in the Prospectus or until refunds of such funds have been made to the person
entitled thereto in accordance with the Plan and as described in the Prospectus.
The Bank will maintain such records of all funds received as are necessary to
permit the funds of each subscriber to be separately insured by the SAIF (to the
maximum extent allowable) and to enable the Bank to make appropriate refunds of
such funds in the event that such funds are required to be made in accordance
with the Plan and as described in the Prospectus.
(s) The Company will promptly register with the OTS as a savings
institution holding company. Following the Bank Conversion the Company will
promptly register with the FRB as a bank holding company.
<PAGE>
Everen Securities, Inc.
May ___, 1996
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(t) The Company will take such actions and furnish such information as are
reasonably requested by the Agent in order for the Agent to ensure compliance
with the NASD's "Interpretation With Respect to Free Riding and Withholding."
(u) Prior to the Closing Date, the Company will conduct its business in
compliance in all material respects with all applicable federal and state laws,
rules, regulations, decisions, directives and orders including, without
limitation, all decisions, directives and orders of the OTS and the FDIC.
(v) Except with the prior notice to EVEREN Securities, the Bank will not
amend the Plan in any manner, and except with the prior written consent of
EVEREN Securities which consent shall not be unreasonably withheld, the Bank
will not amend the Plan in any manner that would materially adversely affect the
ability of the Company or EVEREN Securities to sell the Shares or would
materially alter the terms of this Agreement.
(w) The Company and the Bank will not, prior to the Closing Date, incur
any liability or obligation, direct or contingent, or enter into any material
transactions, other than in the ordinary course of business, except as
contemplated by the Prospectus.
(x) The Company and the Bank will use all reasonable efforts to comply
with, or cause to be complied with, the conditions precedent to the several
obligations of the Agent specified in Section 9 hereof.
SECTION 6. Payment of Expenses
-------------------
The Company and the Bank jointly and severally agree to pay all expenses
incident to the performance of the obligations of the Company and the Bank under
this Agreement, including, without limitation, the following: (i) the
preparation, issuance and delivery of certificates for the Shares to the
subscribers in the Subscription and Community Offering; (ii) the fees and
disbursements of the Company's and the Bank's counsel, accountants and other
advisors; (iii) the qualification of the Shares under all applicable securities
or Blue Sky laws, including filing fees and the fees and disbursements of
counsel in connection therewith and in connection with the preparation of a Blue
Sky survey; (iv) the printing and delivery to you in such quantities as you
shall reasonably request of copies of the Registration Statement, the Prospectus
and the Conversion and Holding Company Applications as originally filed, as
amended or supplemented and all other documents in connection with the
Conversion and this Agreement; (v) filing fees incurred in connection with the
review of the Subscription and
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 24
Community Offering by the Commission and by the NASD; (vi) the fees for listing
the shares on the Nasdaq National Market; (vii) fees and expenses relating to
the Appraisal; (viii) fees and expenses relating to advertising expenses,
temporary personnel expenses, conversion center expenses, investor meeting
expenses, and other miscellaneous expenses relating to the marketing by the
Agent of the Shares; (ix) the cost of printing all stock certificates and all
other documents applicable to the Conversion and the fees and charges of any
transfer agent, registrar and other agents; and (x) all reasonable out-of-pocket
expenses of EVEREN Securities including without limitation the fees and expenses
of your counsel, provided that such reimbursement shall not exceed $45,000
(excluding Blue Sky fees and expenses, including legal fees and expenses)
incurred by you in connection with the Conversion which shall be payable upon
demand. The reimbursement of expenses of the Agent provided in this Section 6
shall be in addition to all amounts payable to the Agent under Sections 1, 7 and
8 hereof.
SECTION 7. Indemnification
---------------
(a) The Company agrees to indemnify and hold harmless you, your officers,
directors, agents, servants and employees and each person, if any, who controls
you within the meaning of Section 15 of the 1933 Act or Section 20(a) of the
1934 Act, against any and all loss, liability, claim, damage or expense
whatsoever (including but not limited to settlement expenses), joint or several,
that you or any of them may suffer or to which you or any of them may become
subject under all applicable federal and state laws or otherwise, and to
promptly reimburse you and any such persons upon written demand for any expenses
(including fees and disbursements of counsel) incurred by you or any of them in
connection with investigating, preparing or defending any actions, proceedings
or claims (whether commenced or threatened) to the extent such losses, claims,
damages, liability or actions: (i) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in (a) the
Registration Statement (or any amendment or supplement thereto), the preliminary
or final Prospectus (or any amendment or supplement thereto), (b) any
application or other instrument or document of the Company or the Bank or based
upon written information supplied by the Company or the Bank or their
representatives (including counsel) filed in any state or jurisdiction to
register or qualify any or all of the Shares or the subscription rights
applicable thereto under the securities laws thereof (collectively, the "Blue
Sky Application"), or (c) any application or other document, advertisement, oral
statement, or communication ("Sales Information") prepared, made or executed by
or, with their respective consents, on behalf of the Company or the Bank, or
based upon written or oral information furnished by, or with their respective
consents, on behalf of the Company or the Bank, in connection with or in
contemplation of the transactions contemplated by this Agreement; (ii) arise out
of or are based upon the omission
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 25
or alleged omission to state in any of the foregoing documents or information, a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; or (iii) arise from any theory of liability whatsoever relating to
or arising from or based upon the Registration Statement (or any amendment or
supplement thereto), preliminary or final Prospectus (or any amendment or
supplement thereto), Blue Sky Application or Sales Information or other
documentation distributed in connection with the Conversion; provided, however,
that no indemnification is required under this paragraph (a) to the extent such
losses, claims, damages, liabilities or actions arise out of or are based upon
any untrue material statements or alleged untrue material statements in, or
material omission or alleged material omission from, the Registration Statement
(or any amendment or supplement thereto), preliminary or final Prospectus or
Sales Information made in reliance upon and in conformity with information
furnished in writing to the Company or the Bank by you regarding you expressly
for use in the Prospectus, which information consists of the disclosure included
in the Prospectus as the first paragraph under the caption "The Conversion --
Plan of Distribution for the Subscription, Direct Community and Public
Offerings."
(b) You agree to indemnify and hold harmless the Company and the Bank,
their directors, officers, agents, servants and employees, and each person, if
any, who controls the Company and the Bank with the meaning of Section 15 of the
1933 Act or Section 20(a) of the 1934 Act against any and all loss, liability,
claim, damage or expense whatsoever (including but not limited to settlement
expenses), joint or several, which they, or any of them, may suffer or to which
they, or any of them, may become subject under all applicable federal and state
laws or otherwise, and to promptly reimburse the Company, the Bank and any such
persons upon written demand for any expenses (including fees and disbursements
of counsel) incurred by them, or any of them, in connection with investigating,
preparing or defending any actions, proceedings or claims (whether commenced or
threatened) to the extent such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement (or any amendment of
supplement thereto) or the preliminary or final Prospectus (or any amendment or
supplement thereto), the Sales Information, or are based upon the omission or
alleged omission to state in any of the foregoing documents a material fact
required to be stated therein or necessary to make the statements therein in
light of the circumstances under which they were made, not misleading; provided,
however, that your obligations under this Section 7(b) shall exist only if, and
only to the extent, that such untrue statement or alleged untrue statement was
made in, or such material fact or alleged material fact was omitted from the
Registration Statement (or any amendment or supplement thereto) or the
preliminary or final Prospectus (or any amendment or supplement thereto) or the
Sales Information in reliance upon and in conformity with information furnished
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Everen Securities, Inc.
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in writing to the Company or the Bank by you regarding you expressly for use in
the Prospectus, which information consists of the disclosure included in the
Prospectus as the first paragraph under the caption "The Conversion--Plan of
Distribution for the Subscription Direct Community and Public Offerings."
(c) Each indemnified party shall give prompt written notice to each
indemnifying party of any action, proceeding, claim (whether commenced or
threatened), or suit instituted against it in respect of which indemnity may be
sought hereunder, but failure to so notify any indemnifying party shall not
relieve it from any liability which it may have on account of this Section 7 or
otherwise. An indemnifying party may participate at its own expense in the
defense of such action. In addition, if it so elects within a reasonable time
after receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties that
are defendants in such action, and such indemnified parties shall not be liable
for any fees and expenses of such counsel for the indemnified parties incurred
thereafter in connection with such action, proceeding or claim, other than
reasonable costs of investigation. In any action, proceeding or claim, the
indemnified party shall have the right to retain its own counsel, but the fees
and disbursements of such counsel shall be at its own expense unless (i) the
parties to any such action, proceeding or claim include both the indemnifying
party and the indemnified party and (ii) representation of both parties by the
same counsel reasonably would be deemed inappropriate due to actual or potential
conflicting interests between them. In no event shall the indemnifying parties
be liable for the fees and expenses of more than one separate firm of attorneys
(other than any special counsel that said firm may retain) for each indemnified
party in connection with any one action, proceeding or claim or separate but
similar or related actions, proceedings or claims in the same jurisdiction
arising out of the same general allegations or circumstances.
SECTION 8. Contribution
------------
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in Section 7 is due in accordance with
its terms but is for any reason held by a court to be unavailable from the
Company, the Bank, the Company and you shall contribute to the aggregate losses,
claims, damages and liabilities (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding of any claims asserted, but after deducting any
contribution received by the Bank and the Company or you from persons other than
the other party thereto, who may also be liable for contribution) in such
proportion so that you are
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Everen Securities, Inc.
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responsible for that portion represented by the percentage that the fees paid to
the Agent pursuant to Section 1 of this Agreement (not including expenses) bears
to the gross proceeds received by the Company from the sale of the Shares in the
Subscription and Community Offering and the Company shall be responsible for the
balance. If, however, the allocation provided above is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the Bank on the one hand and you on the other in connection with the
statements or omissions which resulted in such losses, claims, damage or
liabilities (or actions, proceedings or claims in respect thereof), as well as
any other relevant equitable considerations. The relative benefits received by
the Company or the Bank on the one hand and you on the other shall be deemed to
be in the same proportion as the total gross proceeds from the Subscription and
Community Offering (before deducting expenses) received by the Company bears to
the total fees (not including expenses) received by the Agent. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or other omission or
alleged omission to state a material fact relates to information supplied by the
Company and/or the Bank on the one hand or you on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and you agree that it would not
be just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above in this Section 8.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions, proceedings or claims in respect
thereof) referred to above in this Section 8 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action, proceeding or claim.
It is expressly agreed that the Agent shall not be liable for any loss,
liability, claim, damage or expense or be required to contribute any amount
which in the aggregate exceeds the amount paid to the Agent under the Agreement.
It is understood that the above-stated limitation on the Agent's liability is
essential to the Agent and that the Agent would not have entered into this
Agreement if such limitation had not been agreed to by the parties to this
Agreement. No person found guilty of any fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not also found guilty of such fraudulent
misrepresentation. The obligations of the Company and the Agent under this
Section 8 and under Section 7 hereof shall be in addition to any liability which
the Company, the Bank and the Agent may otherwise have. For purposes of this
Section 8, each of your officers and directors and each person, if any, who
controls you within the meaning of the 1933 Act and the 1934 Act shall have the
same rights to contribution as you and each person, if any, who controls the
Bank and the Company within the meaning of the 1933 Act and the 1934 Act,
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Everen Securities, Inc.
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and each officer and director of the Bank and the Company, shall have the same
rights to contribution as the Bank and the Company. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action,
suit, claim or proceeding against such party in respect of which a claim for
contribution may be made against another party under this Section 8, will notify
such party from whom contribution may be sought, but the omission to so notify
such party shall not relieve the party from whom contribution may be sought from
any other obligation it may have hereunder or otherwise than under this Section
8.
SECTION 9. Conditions of the Obligations of the Agent
------------------------------------------
Your obligations hereunder are subject, in your discretion, to the
condition that all representations and warranties and other statements of the
Bank and the Company herein are, at and as of commencement of the Subscription
and Community Offering and at and as of the Closing Date, true and correct in
all material respects, the condition that the Bank and the Company shall have
performed in all material respects all of its obligations hereunder to be
performed on or before such dates, and to the following further conditions
(which are solely for your benefit), unless waived in writing by you:
(a) The Registration Statement shall have been declared effective by the
Commission and the Conversion Application and the Holding Company Application
shall have been approved not later than 5:30 p.m., Eastern time, on the date of
this Agreement, or with your consent at a later time and date; and at the
Closing Date no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission or any state authority, and no order
or other action suspending the effectiveness of the Prospectus or the
consummation of the Conversion shall have been issued or proceedings therefor
initiated or threatened by the Commission, any state authority, the OTS, the
OCC, the FRB or the FDIC.
(b) At the Closing Date you shall have received:
(1) The favorable opinion, dated as of the Closing Date addressed to the
Agent and for its benefit, of Breyer & Aguggia, special counsel for the Company
and the Bank, and in form and substance to the effect that:
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware and has
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration
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Everen Securities, Inc.
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Statement and the Prospectus; the Company is qualified as a foreign corporation
to transact business and is in good standing in the States of Illinois and
Missouri and in each jurisdiction in which its ownership or leasing of
properties or the conduct of its business requires such qualification except
where the failure to so qualify would not have a material adverse effect on the
business, operations or financial condition of the Company and the Bank taken as
a whole.
(ii) At the Closing Date, the Bank has become a duly incorporated and validly
existing federally chartered savings association in stock form of organization,
duly authorized to conduct its business and own its property substantially as
described in the Registration Statement and the Prospectus; and the Bank is in
good standing with the OTS.
(iii) The Bank is a member in good standing of the FHLB of Chicago. The deposit
accounts of the Bank are insured by the SAIF up to the maximum amount allowed
under law; and, to such counsel's knowledge, no proceedings for the termination
or revocation of such insurance are pending or threatened. The description of
the liquidation account as set forth in the Registration Statement and the
Prospectus under the caption "The Conversion," to the extent that such
information constitutes matters of law and legal conclusions, has been reviewed
by such counsel and is accurate in all material respects.
(iv) Upon consummation of the Conversion, the authorized, issued and
outstanding capital stock of the Company will be within the range set forth in
the Registration Statement and the Prospectus under the caption
"Capitalization," and no shares of Common Stock have been issued prior to the
Closing Date; the Shares subscribed for pursuant to the Subscription and
Community Offering have been duly authorized and when issued and delivered by
the Company pursuant to the Plan against payment of the consideration therefor,
will be validly issued and fully paid and nonassessable (provided that, in
giving the foregoing opinion, counsel need express no opinion as to whether the
Company and the Bank have complied with the Plan in allocating Shares to
subscribers) and good title to the Shares will be transferred from the Company
to the purchasers thereof against payment therefor subject to such claims as may
be asserted against the purchaser by third party claimants; such Shares are the
only shares of capital stock of the Company outstanding; and, except for the
subscription rights under the Plan, the issuance of the Shares is not subject to
preemptive rights.
(v) Upon consummation of the Conversion, all of the issued and outstanding
capital stock of the Bank will have been duly authorized and validly issued and
fully paid, and nonassessable and, to the knowledge of such counsel, owned
beneficially and of record by the Company free and clear of any lien,
encumbrance, claim or other restriction.
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Everen Securities, Inc.
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(vi) This Agreement has been duly and validly authorized, executed and
delivered by the Company and the Bank and is a legal, valid and binding
agreement of the Company and the Bank, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally or the rights of creditors of savings
associations insured by the FDIC, and subject, as to the enforcement of
remedies, to general equity principles, and except as the rights of
indemnification and contribution may be limited under applicable law or public
policy.
(vii) The Plan complies in all material respects with the Savings Institutions
Regulations and all applicable rules, decisions and orders thereunder. The Plan
has been duly adopted by the required vote of the Directors of the Company and
the Directors and members of the Bank, and, to such counsel's knowledge, no
action has been taken, is pending or is threatened to revoke such approvals.
(viii) The Conversion Application as filed with the OTS complies as to form
in all material respects with the requirements of the Savings Institutions
Regulations and all applicable rules, decisions and orders thereunder and was
complete in all material respects (except no opinion need be rendered with
respect to financial statements and other financial and statistical information
included therein, the appraisal valuation and federal securities law matters
which are addressed elsewhere in counsel's opinion); the Conversion Application
has been approved by the OTS and the Prospectus and the Proxy Statement have
been authorized for use by the OTS. No action has been taken, is pending or, to
such counsel's knowledge, is threatened to revoke such approval and
authorizations.
(ix) The OTS has approved the Holding Company Application and the Company's
acquisition of the Bank; no action has been taken, is pending or, to such
counsel's knowledge, threatened to revoke such approval. The ESOP is not
required to register as a holding company.
(x) The OCC has approved each of the OCC Conversion Application, the OCC
Purchase and Assumption Application, and the OCC De Novo Application; no action
has been taken, is pending, or to such counsel's knowledge, threatened to revoke
such approvals.
(xi) The FRB has approved the Y-3 Application; no action has been taken, is
pending, or to such counsel's knowledge, threatened to revoke such approval.
(xii) The FDIC has approved the FDIC Insurance Application; no action has been
taken, is pending, or to such counsel's knowledge, threatened to revoke such
approval.
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(xiii) Subject to satisfaction of the conditions the OTS's approval of the
Conversion Application and Holding Company Application, and any conditions
imposed by the OCC, FRB or FDIC with respect to their approval, no further
approval, registration, authorization, consent or other order of any regulatory
agency, public board or body is required in connection with the execution and
delivery of this Agreement, the issuance of the Shares or the consummation of
the Conversion, except as may be required under the securities or Blue Sky laws
of various jurisdictions (as to which no opinion need be rendered).
(xiv) The Company and the Bank have conducted the Conversion in accordance with
the Plan and, to such counsel's knowledge, no person has sought to obtain
regulatory or judicial review of the final action of the OTS approving the Plan,
the Conversion Application, the Holding Company Application, or the Properties.
(xv) The Registration Statement is effective under the 1933 Act, and no stop
order suspending the effectiveness of the Registration Statement has been issued
under the 1933 Act or proceedings therefor initiated or, to such counsel's
knowledge, threatened by the Commission or any state authority.
(xvi) At such time as the Registration Statement became effective, (i) the
Registration Statement (and any amendment or supplement thereto) (other than the
financial statements and other financial and statistical data included therein
and the appraisal valuation, as to which no opinion need be rendered), complied
as to form in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations and (ii) the Prospectus (other than the financial
statements and other financial and statistical data included therein and the
appraisal valuation, as to which no opinion need be rendered) complied as to
form in all material respects with the requirements of the 1933 Act, the 1933
Act Regulations and the Savings Institutions Regulations and federal law. At the
time the Conversion Application, including the Prospectus contained therein, was
approved by the OTS, the Conversion Application, including the Prospectus
contained therein (and any amendment or supplement thereto), complied as to form
in all material respects with the requirements of the Savings Institutions
Regulations, federal law and all applicable rules and regulations promulgated
thereunder (other than the financial statements and other financial and
statistical data included therein and the appraisal valuation, as to which no
opinion need be rendered). At the time the OCC Conversion Application, OCC
Purchase and Assumption Application and OCC De Novo Application was approved by
the OCC, such applications complied with the Banking Act of 1933 and applicable
regulations of the OCC. At the time the Y-3 Application was approved it complied
with the Bank Holding Company Act and applicable regulations of the FRB. At the
time the FDIC Insurance Application was approved
<PAGE>
Everen Securities, Inc.
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by the FDIC it complied with the Federal Deposit Insurance Act and all
applicable regulations of the FDIC.
(xvii) The information in the Registration Statement and the Prospectus, under
the captions "Regulation," "The Conversion," "Restrictions on Acquisition of the
Holding Company," and "Description of Capital Stock of the Holding Company," to
the extent that such information constitutes matters of law, summaries of legal
matters, or proceedings, or legal conclusions, has been reviewed by such counsel
and is correct in all material respects. Further, the information under the
caption "Conversion--Tax Effects" has been reviewed by such counsel and
constitutes a correct summary, in all material respects, of the opinion rendered
by such counsel to the Bank and the Company with respect to the federal tax
consequences of the Conversion and of the opinions rendered by Bryan Cave LLP to
the Bank and the Company with respect to the state tax consequences of the
Conversion.
(xviii) The terms and provisions of the Shares conform to the description
thereof contained in the Registration Statement and the Prospectus, and the form
of certificate used to evidence the Shares is in due and proper form.
(xviv) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened which are required to be disclosed in the
Registration Statement or the Prospectus, other than those disclosed therein,
and all pending legal and governmental proceedings to which the Company or the
Bank is a party or to which any of their property is the subject which are not
described in the Registration Statement or the Prospectus, including ordinary
routine litigation incidental to their respective businesses, are, considered in
the aggregate, not material to the business, operations or financial condition
of the Company and the Bank taken as a whole.
(xx) To such counsel's knowledge, there are no contracts, indentures,
mortgages, loan agreements, notes, leases or other instruments required to be
described or referred to in the Registration Statement and the Prospectus or
required to be filed as exhibits thereto other than those described or referred
to therein or filed as exhibits thereto. The description in the Conversion
Application, the Registration Statement and the Prospectus of such documents and
exhibits is accurate, in all material respects.
(xxi) To such counsel's knowledge, the Company and the Bank have obtained all
material licenses, permits and other governmental authorizations currently
required for the conduct of their respective businesses, and all such material
licenses, permits and other governmental authorizations are in full force and
effect, and the Company and the Bank are in all material respects complying
therewith.
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Everen Securities, Inc.
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(xxii) Neither the Company nor the Bank is in violation of its respective
certificate of incorporation or charter (and the Bank will not be in violation
of its charter in stock form upon consummation of the Conversion, or of its
national bank charter following the Bank Conversion). To such counsel's
knowledge, neither the Company nor the Bank is in violation of any material
obligation, agreement, covenant or condition contained in any material contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which it
is a party or by which it or its property may be bound which violation would
have a material adverse effect on the business, operations or financial
condition of the Company and the Bank taken as a whole; to such counsel's
knowledge, the execution, delivery and performance of this Agreement will not
(i) conflict with, result in a breach of, or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under
any contract, lease or other instrument to which the Company or the Bank is a
party or in which the Company or the Bank has a beneficial interest, or any
applicable law, rule, regulation or order, which would in any such case have a
material adverse effect on the business, operations or financial condition of
the Company and the Bank taken as a whole; (ii) violate any authorization,
approval, judgment, decree, order, statute, rule or regulation applicable to the
Company or the Bank, which would in any such case have a material adverse effect
on the business, operations or financial condition of the Company and the Bank
taken as a whole, except no opinion need be rendered with respect to Blue Sky
laws, NASD and Nasdaq rules; or (iii) with the exception of the liquidation
account established in the Conversion, result in the creation of any material
lien, charge or encumbrance upon any property of the Company or the Bank. The
execution, delivery and performance of this Agreement will not result in any
violation of the provisions of the respective certificate of incorporation,
charter or bylaws of the Company or the Bank or any applicable law, regulation
or order (other than Blue Sky laws and regulations of the NASD as to which no
opinion need be rendered, and federal securities laws matters which are
addressed elsewhere in counsel's opinion). All provisions of the Bank's charter
in mutual form and in stock form comply in all material respects with federal
law and OTS regulations, and all provisions of the Company's certificate of
incorporation and bylaws comply in all material respects with the laws of the
State of Delaware.
(xxiii) To such counsel's knowledge, the Company and the Bank are not in
violation of any directive from the OTS or the FDIC to make any material change
in the method of conducting their businesses.
(xxiv) To such counsel's knowledge, none of the Company, Bank or its employees
or directors are affiliated or associated with any entity(ies) in a relationship
that would have to be disclosed in the Prospectus pursuant to Item 404 of
Regulation S-K under the Exchange Act that is not
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Everen Securities, Inc.
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already disclosed in the Prospectus, or that would be impermissible under
applicable rules of the OTS, OCC, FRB or FDIC.
The opinion shall be limited to matters governed by the laws of the United
States or the State of Delaware. In rendering such opinion, such counsel may
rely (A) as to matters involving the application of laws of any jurisdiction
other than the United States and the State of Delaware, to the extent such
counsel deems proper and specified in such opinion, upon the opinion of other
counsel of good standing acceptable to the Agent (providing that such counsel
states that the Agent is justified in relying upon such specified opinion or
opinions), and (B) as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of the Company and the Bank and
public officials; provided copies of any such opinion(s) or certificates are
delivered to you together with the opinion to be rendered hereunder by counsel
to the Company and the Bank. Such counsel may assume that any agreement is
the valid and binding obligation of any parties to such agreement other than the
Company or the Bank.
(2) The letter of Breyer & Aguggia, counsel to the Company and the Bank,
dated as of the Closing Date addressed to the Agent and for its benefit, in form
and substance to the effect that during the preparation of the Registration
Statement and the Prospectus, such counsel participated in conferences with the
independent public and internal accountants for, and certain officers and other
representatives of, the Company and the Bank, and, although they are not passing
upon and do not assume the responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus, based upon such conferences and a review of documents deemed
relevant, but without any other investigation or verification, nothing has come
to their attention that would lead them to believe that the Registration
Statement or any amendment or supplement thereto as of the date that it was
declared effective and as of the Closing Date, or the Prospectus as of its date
and as of the Closing Date contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (other than financial
statements and other financial and statistical data included therein and the
appraisal valuation, as to which they need express no opinion).
(3) The favorable opinion, dated as of the Closing Date, addressed to the
Agent and for its benefit, of local counsel for the Company and the Bank, in
form and substance satisfactory to EVEREN Securities to the effect that:
(i) To such counsel's knowledge, the Company and the Bank have good and
marketable title to all properties and assets which are material to the business
of the Company and the Bank and
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Everen Securities, Inc.
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to those properties and assets described in the Registration Statement as owned
by them, free and clear of all liens, charges, encumbrances or restrictions,
except such as are described in the Registration Statement or are not material
in relation to the business of the Company and the Bank considered as one
enterprise, and all of the leases and subleases material to the business of the
Company and the Bank under which the Company and the Bank hold properties as
described in the Registration Statement, are in full force and effect.
(ii) To such counsel's knowledge, neither the Company nor the Bank is in
violation of any material obligation, agreement, covenant or condition contained
in any material contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which it is a party or by which it or its property may be
bound; to such counsel's knowledge, the execution, delivery and performance of
this Agreement will not (i) conflict with, result in a breach of, or constitute
a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under any contract, lease or other instrument to which the
Company or the Bank is a party or in which the Company or the Bank has a
beneficial interest, or any applicable law, rule, regulation or order, which
would in any such case have a material adverse effect on the business,
operations or financial condition of the Company and the Bank taken as a whole;
(ii) violate any authorization, approval, judgment, decree, order, statute, rule
or regulation applicable to the Company or the Bank, which would in any such
case have a material adverse effect on the business, operations or financial
condition of the Company and the Bank taken as a whole, except no opinion need
be rendered with respect to Blue Sky laws, NASD and Nasdaq rules; or (iii) with
the exception of the liquidation account established in the Conversion, result
in the creation of any material lien, charge or encumbrance upon any property of
the Company or the Bank.
(4) The favorable opinion, dated as of the Closing Date, of Luse Lehman
Gorman Pomerenk & Schick, P.C., your counsel, with respect to such matters as
you may reasonably require. Such opinion may rely upon the opinions of counsel
to the Bank and the Company as such counsel deems proper in the reasonable
exercise of its judgment, and as to matters of fact, upon certificates of
officers and directors of the Company and the Bank delivered pursuant hereto or
as such counsel shall reasonably request.
(5) At the Closing Date, you shall receive a certificate of the Chief
Executive Officer and the Treasurer of the Company and of the Chief Executive
Officer and Treasurer of the Bank, dated as of such Closing Date, to the effect
that to the best of their knowledge after due inquiry: (i) since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, capital, properties, or business
affairs of the Company or the
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Bank, considered as one enterprise, whether or not arising in the ordinary
course of business; (ii) the representations and warranties in Section 4 are
true and correct with the same force and effect as through expressly made at and
as of the Closing Date; (iii) the Company and the Bank have complied in all
material respects with all agreements and satisfied all conditions on their part
to be performed or satisfied at or prior to the Closing Date under the
Agreement, the Plan, the Holding Company Application and the Savings
Institutions Regulations, approvals of the OCC, FRB and FDIC, and all other
applicable laws (including state Blue Sky laws), regulations, decisions and
orders, including all terms, conditions, requirements and conditions precedent
to the Conversion imposed upon the Company or the Bank by the Commission, the
OTS, the OCC, the FRB, the FDIC, or any other regulatory authority, and will
comply in all material respects with all obligations to be satisfied by them
after consummation of the Conversion; (iv) no stop order suspending the
effectiveness of the Registration Statement has been initiated or threatened by
the Commission or any state authority; and (v) no order suspending the
Subscription and Community Offering, the Conversion, the acquisition of all of
the shares of the Bank by the Company or the effectiveness of the Prospectus has
been issued and no proceedings for that purpose have been initiated or
threatened by the Commission, the FDIC, the OTS, the OCC, the FRB, or any other
state authority.
(d) Prior to and at the Closing Date: (i) in the reasonable opinion of the
Agent, there shall have been no material adverse change in the condition,
financial or otherwise, or in the earnings or the business affairs of the
Company or the Bank, considered as one enterprise, from the latest dates as of
which such condition is set forth in the Prospectus, except as referred to
therein; (ii) there shall have been no material transaction entered into by the
Company or the Bank, considered as one enterprise, from the latest date as of
which the financial condition of the Company or the Bank is set forth in the
Prospectus other than transactions referred to or contemplated therein; (iii)
the Company or the Bank shall not have received from the OTS, the OCC, the FRB,
or the FDIC, any direction (oral or written) to make any material change in the
method of conducting their businesses with which it has not complied in all
material respects (which direction, if any, shall have been disclosed to the
Agent) or which materially and adversely would affect the businesses, operations
or financial condition, income or business affairs of the Company or the Bank;
(iv) neither the Company nor the Bank shall have been in default (nor shall an
event have occurred which, with notice or lapse of time or both, would
constitute a default) under any provision of any agreement or instrument
relating to any outstanding indebtedness, which default or event would have a
material adverse effect on the business, operations or financial condition of
the Company and the Bank taken as a whole; (v) no action, suit or proceedings,
at law or in equity or before or by any federal or state commission, board or
other administrative agency, shall be pending or, to the knowledge of the
Company or the Bank, threatened against the Company or the Bank or affecting any
of their
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 37
properties wherein an unfavorable decision, ruling or finding would materially
and adversely affect the business, operations, financial condition or income of
the Company or the Bank, taken as a whole; and (vi) the Shares shall have been
qualified or registered for offering and sale under the securities or blue sky
laws of the jurisdiction as set forth in the final Blue Sky survey of your legal
counsel.
(e) Concurrently with the execution of this Agreement, the Agent shall
receive a letter from KPMG Peat Marwick LLP dated ______________, 1996, and
addressed to the Agent: (i) confirming that KPMG Peat Marwick LLP is a firm of
independent public accountants within the meaning of the Code of Professional
Conduct of the American Institute of Certified Public Accountants and the 1933
Act and the 1933 Act Regulations and no information concerning its respective
relationship with or interests in the Company or the Bank is required to be
disclosed by Item 10 of the Form S-1, and (ii) stating in effect that in their
opinion the financial statements and financial statement schedules of the
Company and the Bank for the years ended December 31, 1995, 1994 and 1993 as are
included in the Prospectus and covered by their opinion included therein, comply
as to form in all material respects with the applicable accounting requirements
of the 1933 Act and the 1933 Act Regulations, and generally accepted accounting
principles; (iii) stating in effect that, on the basis of certain agreed upon
procedures (but not an audit examination in accordance with generally accepted
auditing standards) consisting of a reading of the latest available unaudited
interim financial statements of the Bank prepared by the Bank, a reading of the
minutes of the members of the Bank and of the Boards of Directors of the Bank
and the Company and consultations with officers of the Bank responsible for
financial and accounting matters, nothing came to its attention which caused it
to believe that: (A) during the period from the date of the latest audited
financial statements included in the Prospectus to a specified date not more
than five business days prior to the date hereof, there was any material
increase in FHLB advances or other borrowings by the Company or the Bank, any
material increase in loans greater than ninety days delinquent, any material
increases in real estate owned, any material decrease in deposit accounts or any
changes in principles or methods of accounting whether by adoption or otherwise
(except as disclosed in the Prospectus); or (B) there was any material decrease
in consolidated net assets of the Bank at the date of such letter from the
amounts shown in the latest audited statement of condition included in the
Prospectus or there was any material decrease in net interest income, income
before income taxes, or net income of the Bank for the period from the date of
the latest audited income statement included in the Prospectus and ended on a
specified date not more than five business days prior to the date hereof as
compared to the corresponding period in the preceding year; and (iv) stating
that, in addition to the examination referred to in its opinion included in the
Prospectus and the performance of the procedures referred to in clause (iii) of
this subsection (e), it has compared with the general accounting records of the
Company and/or the Bank, as
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 38
applicable, which are subject to the internal controls of the Company's and/or
the Bank's, as applicable, accounting system and other data prepared by the
Company and/or the Bank, as applicable, directly from such accounting records,
to the extent specified in such letter, such amounts and/or percentages set
forth in the Prospectus as you may reasonably request; and they have found such
amounts and percentages to be in agreement therewith (subject to rounding).
(f) At the Closing Date, you shall receive a letter from KPMG Peat Marwick
LLP, dated the Closing Date, addressed to the Agent, confirming the statements
made by it in the letter delivered by it pursuant to subsection (e) of this
Section 9, the "specified date" referred to in clause (iii) thereof to be a date
specified in such letter, which shall not be more than five business days prior
to the Closing Date.
(g) At the Closing Date, your counsel shall be furnished with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the sale of the Shares as herein contemplated and
related proceedings or in order to evidence the occurrence or completeness of
any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company or the
Bank in connection with the Conversion and the sale of the shares as herein
contemplated shall be satisfactory in form and substance to you and your
counsel.
(h) The Company and the Bank shall not have sustained since the date of the
latest audited financial statements included in the Registration Statement and
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Registration Statement and Prospectus,
and since the respective dates as of which information is given in the
Registration Statement and Prospectus, there shall not have been any material
change in the consolidated long-term debt of the Company or the Bank other than
debt incurred in relation to the purchase of Shares by the ESOP, if any, or any
material change, or any development involving a prospective material change, in
or affecting the general affairs, management, financial position, shareholders'
equity, cash flow or results of operations of the Company or the Bank, otherwise
than as set forth or contemplated in the Registration Statement and Prospectus,
the effect of which, in any such case described above, is sufficiently material
and adverse as to make it impracticable or inadvisable to proceed with the
Subscription and Community Offering or the delivery of the Shares on the terms
and in the manner contemplated in Prospectus.
(i) Subsequent to the date hereof, there shall not have occurred any of the
following: (i) any domestic or international event or act or occurrence which
has materially disrupted, or in
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Everen Securities, Inc.
May ___, 1996
Page 39
your sole opinion will in the immediate future materially disrupt the securities
markets; (ii) the Company and the Bank, considered as one enterprise, shall have
sustained a material loss, whether or not insured, by reason of fire,
earthquake, flood, accident or other calamity, or from any labor dispute or
court or governmental action, order or decree; (iii) trading in securities on
the New York Stock Exchange or the American Stock Exchange shall have been
suspended or limited; (iv) material governmental restrictions shall have been
imposed on trading in securities generally (not in force and effect on the date
hereof); (v) a banking moratorium shall have been declared by federal or New
York or Missouri State authorities; (vi) the Dow Jones Industrial Average (the
"DJIA") shall on any day, from and including the date of this Agreement, have
declined 20% or more from the closing DJIA as reported in The Wall Street
---------------
Journal for the business day immediately preceding the effective date of the
- -------
Registration Statement; (vii) any outbreak of international hostilities or other
national or international calamity or crisis or change in economic or political
conditions shall have occurred, if the effect of such outbreak, calamity, crisis
or change on the financial markets of the United States would, in your sole
judgment, make the offering of the Shares impracticable; (viii) the passage by
the Congress of the United States or by any state legislative body of any act or
measure, or the adoption or proposed adoption of any orders, rules, legislation
or regulations by any governmental body, any authoritative accounting institute
or board or any governmental executive which is reasonably believed likely by
you to have a material adverse impact on the business, financial condition or
financial statements of the Company and the Bank, taken as a whole, or the
market for the Shares; (ix) any material adverse change shall have occurred
since the respective dates as of which information is given in the Registration
Statement and Prospectus in the condition (financial or other) of the Company
and the Bank considered as one enterprise or in the earnings, affairs or
business prospects of the Company and the Bank considered as one enterprise,
whether or not arising in the ordinary course of business; or (x) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority or the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs, which, in your sole opinion,
materially and adversely affects, or will materially and adversely affect, the
business of the Company and the Bank taken as a whole.
If any of the conditions specified in this Section shall not have been
fulfilled when and as required by this Agreement, or by ______________, 1996
(unless such date is extended by a written agreement signed by all of the
parties hereto), this Agreement and all of your obligations hereunder may be
canceled by you by notifying the Bank of such cancellation in writing (including
facsimile transmissions) or by telegram at any time at or prior to the Closing
Date, and any such cancellation shall be without liability of any party to any
other party except as otherwise provided in Sections 1, 6, 7 and 8 hereof.
Notwithstanding the above, if this
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 40
Agreement is canceled pursuant to this paragraph, the Bank and the Company
jointly and severally agree to reimburse you for all of your out-of-pocket
expenses, including without limitation the fees and expenses of your counsel,
provided that such reimbursement shall not exceed $45,000 (excluding Blue Sky
counsel fees and expenses), subject to the limits expressed in Section 6 hereof,
reasonably incurred by you, and your counsel, at its normal rates, in connection
with the preparation of the Registration Statement and the Prospectus, and in
contemplation of the proposed Subscription and Community Offering.
SECTION 10. Termination
-----------
(a) In the event the Company fails to sell all of the Shares within the
period specified in, and in accordance with the provisions of, the Plan or as
required by the Savings Institutions Regulations and applicable law, this
Agreement shall terminate upon refund by the Bank to each person who has
subscribed for or ordered any of the Shares the full amount which it may have
received from such persons, together with interest as provided in the
Prospectus, and no party to this Agreement shall have any obligation to the
other hereunder, except for payment by the Bank and/or the Company as set forth
in Sections 1, 6, 7, 8 and 9 hereof.
(b) This Agreement may be terminated by the Agent, with respect to the
Agent's obligations hereunder, by notifying the Company at any time at or prior
to the Closing Date, if any of the conditions specified in Section 9 hereof
shall not have been fulfilled when and as required by this Agreement or if the
services to be performed by the Agent have not been completed by ______________,
1996 (unless such date is extended by a written agreement signed by all of the
parties hereto).
SECTION 11. Survival
--------
The respective indemnities, agreements, representations, warranties and
other statements of the Bank, the Company and you, as set forth in this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of you or any of your officers or directors or any person controlling you, or
the Bank or the Company, or any officer, director or person controlling the Bank
or the Company, and shall survive termination of the Agreement and the receipt
or delivery of any payment for the Shares.
SECTION 12. Miscellaneous
-------------
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Everen Securities, Inc.
May ___, 1996
Page 41
Notices hereunder, except as otherwise provided herein, shall be given in
writing or by telegraph, addressed (a) to the Agent at 77 West Wacker Drive,
Chicago, Illinois 60601-1994 (Attention: Barry I. Forrester, Senior Vice
President), with a copy (which shall not constitute notice) to Breyer & Aguggia,
601 13th Street, N.W., Suite 1120-S, Washington, D.C. 20005 (Attention: Paul M.
Aguggia, Esq.), and (b) to the Bank and the Company at the Bank's principal
office at 1112 State Street, Chester, Illinois 62233-1659 (Attention: Edward K.
Collins, Executive Vice President and Chief Executive Officer), with a copy
(which shall not constitute notice) to Breyer & Aguggia, 1300 I Street, N.W.,
Suite 470-East, Washington, D.C. 20005 (Attention: John F. Breyer, Jr., Esq.).
This Agreement is made solely for the benefit of and will be binding upon
the parties hereto and their respective successors and the controlling persons,
directors and officers referred to in Section 7 hereof and no other person will
have any right or obligations hereunder. The term "successor" shall not include
any purchaser of any of the Shares.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois.
This Agreement may be signed in various counterparts which together will
constitute one agreement.
If the foregoing correctly sets forth the arrangement among the Company,
the Bank and the Agent, please indicate acceptance thereof in the space provided
below for that purpose, whereupon this letter and your acceptance shall
constitute a binding agreement.
Very truly yours,
CHESTER SAVINGS BANK, F.S.B. CHESTER BANCORP, INC.
By: ___________________________ By: _________________________
Edward K. Collins Edward K. Collins
Executive Vice President Executive Vice President
<PAGE>
Everen Securities, Inc.
May ___, 1996
Page 42
and Chief Executive Officer and Chief Executive Officer
Accepted as of the date first above written.
EVEREN SECURITIES, INC.
By:________________________________
<PAGE>
Chester Bancorp, Inc.
(a Delaware corporation)
Up to [ ] Shares (Anticipated Maximum)
(Par Value $.01 Per Share)
Form of Selected Dealers' Agreement
, 1995
[ ]
[ ]
[ ] [ ], [ ]
Gentlemen:
We have agreed to assist Chester Bancorp, Inc. (the "Company") and Chester
Savings Bank, F.S.B., a federally chartered mutual savings bank (the
"Association"), in connection with the offer and sale of up to [ ] shares of
the Company's common stock, $.01 par value (the "Shares"), to be issued in
connection with the conversion of the Bank to a federally chartered stock
savings bank (the "Conversion"). The total number of Shares may be decreased to
a minimum of [ ] Shares. The Shares, the number of shares to be issued,
and certain of the terms on which they are being offered, are more fully
described in the enclosed Prospectus dated ______, 1996 (the "Prospectus").
In connection with its Conversion, the Company has offered the Shares
concurrently in a Subscription Offering (to Eligible Account Holders, the Bank's
tax-qualified Employee Stock Ownership Plan ("ESOP"), Supplemental Eligible
Account Holders and Other Members of the Bank) and in a concurrent Community
Offering. The Shares are also being offered in accordance with the Plan of
Conversion by a selling group of broker-dealers.
We are offering the selected dealers (of which you are one) the opportunity
to participate in the solicitation of offers to buy the Shares and we will pay
you a fee in the amount of _____ percent (__%) of the dollar amount of the
Shares sold on behalf of the Company by you, as evidenced by the authorized
designation of your firm on the order form or forms of such Shares accompanying
the funds transmitted for payment therefor to the special account established by
the Company for the purpose of holding such funds. It is understood, of course,
that payment of your fee will be made only out of compensation received by us
for the Shares sold on behalf of the Company by you, as evidenced in accordance
with the preceding sentence. As soon as practicable after the closing date of
the offering, we will remit to you, out of our compensation as provided above,
the fees to which you are entitled hereunder.
<PAGE>
[SELECTED DEALER]
[ ][ ], 1996
Page 2
Each order form for the purchase of Shares must set forth the identity and
---- --------
address of each person to whom the certificates for such Shares should be issued
- -------
and delivered. Such order form should clearly identify your firm. You shall
instruct any subscriber who elects to send his order form to you to make any
accompanying check payable to "Chester Bancorp, Inc."
This offer is made subject to the terms and conditions herein set forth and
is made only to selected dealers which are (i) members in good standing of the
National Association of Securities Dealers, Inc. ("NASD") which have at least
$25,000 net capital and which are to comply with all applicable rules of the
NASD, including, without limitation, the NASD's Interpretation with Respect to
Free-Riding and Withholding and Section 24 of Article III of the NASD's Rules of
Fair Practice, or (ii) foreign dealers not eligible for membership in the NASD
which have at least $25,000 net capital who agree (A) not to sell any Shares
within the United States, its territories or possessions or to persons who are
citizens thereof or resident therein and (B) in making other sales to comply
with the above-mentioned NASD Interpretation, Sections 8, 24 and 36 of the
above-mentioned Article III as if they were NASD members, and Section 25 of such
Article III as it applies to non-member brokers or dealers in a foreign country.
By executing this Agreement, (i) you represent and warrant that you satisfy the
standards set forth in this paragraph for participation in the solicitation of
offers to buy the Shares and (ii) confirm that you will continue to comply with
the requirements of this paragraph until termination of this Agreement.
Orders for Shares will be strictly subject to confirmation and we, acting
on behalf of the Company and the Bank, reserve the right in our uncontrolled
discretion to reject any order in whole or in part, to accept or reject orders
in the order of their receipt or otherwise, and to allot. Neither you nor any
person is authorized by the Company, the Bank or by us to give any information
or make any representations other than those contained in the Prospectus in
connection with the sale of the Shares. No selected dealer is authorized to act
as agent for us when soliciting offers to buy the Shares from the public or
otherwise. No selected dealer shall engage in any stabilizing (as defined in
Rule 10b-7 promulgated under the Securities Exchange Act of 1934, as amended)
with respect to the Shares during the offering.
We and each selected dealer assisting in selling Shares pursuant hereto
agree to comply with the applicable requirements of the Securities Exchange Act
of 1934, as amended and applicable state rules and regulations. In addition, we
and each selected dealer confirm that the Securities and Exchange Commission
interprets Rule 15c2-8 promulgated under the Securities Exchange Act of 1934, as
amended, as requiring that a Prospectus be supplied to each person who is
expected to receive a confirmation of sale 48 hours prior to delivery of such
person's order form.
<PAGE>
[SELECTED DEALER]
[ ][ ], 1996
Page 3
We and each selected dealer further agree to the extent that our customers
desire to pay for shares with funds held by or to be deposited with us, in
accordance with the interpretation of the Securities and Exchange Commission of
Rule 15c2-4 promulgated under the Securities Exchange Act of 1934, as amended,
either (a) upon receipt of an executed order form or direction to execute an
order on behalf of a customer, to forward the offering price for the Shares
ordered on or before twelve noon of the business day following receipt or
execution of an order form by us to the Company for deposit in a segregated
account or (b) to solicit indications of interest in which event (i) we will
subsequently contact any customer indicating interest to confirm the interest
and give an order form or to receive authorization to execute the order form on
the customer's behalf, (ii) we will mail acknowledgments of receipt of orders to
each customer confirming interest on the business day following such
confirmation, (iii) we will debit accounts of such customers on the fifth
business day (the "debit date") following receipt of the confirmation referred
to in (i) and (iv) we will forward completed order forms together with such
funds to the Company on or before twelve noon on the next business day following
the debit date for deposit in a segregated account. We and each selected dealer
acknowledge that if the procedure in (b) is adopted, our customers' funds are
not required to be in their accounts until the debit date. We and each selected
dealer agree that no method of payment, other than as set forth in this
paragraph, will be employed for shares of Shares sold pursuant to this
Agreement.
Unless earlier terminated by us, this Agreement shall terminate upon the
closing date of this offering. We may terminate this Agreement or any provisions
hereof at any time by written or telegraphic notice to you. Of course, our
obligations hereunder are subject to the successful completion of the offering.
You agree that at any time or times prior to the termination of this
Agreement you will, upon our request, report to us the number of shares of
Shares sold on behalf of the Company by you under this Agreement.
We shall have full authority to take such actions as we may deem advisable
in respect of all matters pertaining to the offering. We shall be under no
liability to you except for the lack of good faith and for obligations expressly
assumed by us in this Agreement.
Upon application to us, we will inform you as to the states in which we
believe the Shares has been qualified for sale under, or are exempt from the
requirements of, the respective blue sky laws of such states, but we assume no
responsibility or obligation as to your rights to sell Shares in any state.
<PAGE>
[SELECTED DEALER]
[ ][ ], 1996
Page 4
Additional copies of the Prospectus and any supplements thereto will be
supplied in reasonable quantities upon request.
Any notice from us to you shall be deemed to have been duly given if
mailed, telephoned, or telegraphed to you at the address to which this Agreement
is mailed.
This Agreement shall be construed in accordance with the laws of the State
of Illinois.
<PAGE>
[SELECTED DEALER]
[ ][ ], 1996
Page 5
Please confirm your agreement hereto by signing and returning the
confirmation accompanying this letter at once to us at EVEREN Securities, Inc.,
77 West Wacker Drive, Chicago, Illinois 60601-1994. The enclosed duplicate copy
will evidence the agreement between us.
Sincerely,
EVEREN SECURITIES, INC.
By:___________________
<PAGE>
[SELECTED DEALER]
[ ][ ], 1996
Page 6
CONFIRMATION:
We hereby confirm our agreement to participate in the solicitation of
offers to purchase Shares upon the terms and conditions set forth herein and
certify that we are a member in good standing of the National Association of
Securities Dealers, Inc.
[SELECTED DEALER]
By:______________________
Date: [ ] [ ], 1996
<PAGE>
EXHIBIT 8.1
FEDERAL INCOME TAX OPINION OF BREYER & AGUGGIA
<PAGE>
[LETTERHEAD OF BREYER & AGUGGIA APPEARS HERE]
June 18, 1996
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
1112 State Street
Chester, Illinois 62233
Re: Certain Federal Income Tax Consequences Relating to Proposed Holding
Company Conversion and Subsequent Conversion to a National Bank
---------------------------------------------------------------
Gentlemen:
In accordance with your request, set forth herein is the opinion of this
firm relating to certain federal income tax consequences of (i) the proposed
conversion of Chester Savings Bank, FSB (the "Savings Bank") from a federally-
chartered mutual savings bank to a federally-chartered stock savings bank (the
"Converted Savings Bank") (the "Stock Conversion"); (ii) the concurrent
acquisition of 100% of the outstanding capital stock of the Converted Savings
Bank by a parent holding company formed at the direction of the Board of
Directors of the Savings Bank and to be known as Chester Bancorp, Inc. (the
"Holding Company"); and, thereafter, (iii) the conversion of the Converted
Savings Bank to a national bank to be known as Chester National Bank (the
"Converted Bank") (the "Bank Conversion"). The Stock Conversion and the Bank
Conversion are referred to herein collectively as the "Conversion."
For purposes of this opinion, we have examined such documents and questions
of law as we have considered necessary or appropriate, including but not limited
to the Plan of Conversion as adopted by the Savings Bank's Board of Directors as
adopted on March 12, 1996 (the "Plan"); the federal mutual charter and bylaws of
the Savings Bank; the certificate of incorporation and bylaws of the Holding
Company; the Affidavit of Representations dated June 17, 1996 provided to us by
the Savings Bank (the "Affidavit"), and the Prospectus (the "Prospectus")
included in the Registration Statement on Form S-1 filed with the Securities and
Exchange Commission ("SEC") on March 15, 1996 (the "Registration Statement"). In
such examination, we have assumed, and have not independently verified, the
genuineness of all signatures on original documents where due execution and
delivery are requirements to the
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Breyer & Aguggia
=========================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 2
effectiveness thereof. Terms used but not defined herein, whether capitalized or
not, shall have the same meaning as defined in the Plan.
BACKGROUND
----------
Based solely upon our review of such documents, and upon such information
as the Savings Bank has provided to us (which we have not attempted to verify in
any respect), and in reliance upon such documents and information, we set forth
herein a general summary of the relevant facts and proposed transactions,
qualified in its entirety by reference to the documents cited above.
The Savings Bank is a federally-chartered mutual savings bank which is in
the process of converting to a federally-chartered stock savings bank and,
thereafter, to a national bank. The Savings Bank was initially organized as a
state-chartered mutual savings and loan association in 1919 and converted to a
federally- chartered mutual savings bank in 1990. The Savings Bank is also a
member of the Federal Home Loan Bank System and its deposits are federally
insured under the Savings Association Insurance Fund ("SAIF") of the Federal
Deposit Insurance Corporation. The Savings Bank operates out of its main office
in Chester, Illinois, four branch offices in neighboring southern Illinois
communities and branch in Perryville, Missouri.
The Savings Bank is primarily engaged in the business of attracting
deposits from the general public and originating permanent loans secured by
first mortgages on one- to four-family residential properties and, to lesser
extent, consumer loans, loans secured by commercial real estate and multi-family
loans. At March 31, 1996, the Savings Bank had total assets of $136.8 million,
deposits of $108.5 million, and total equity of $11.9 million.
As a federally-chartered mutual savings bank, the Savings Bank has no
authorized capital stock. Instead, the Savings Bank, in mutual form, has a
unique equity structure. A savings depositor of the Savings Bank is entitled to
payment of interest on his account balance as declared and paid by the Savings
Bank, but has no right to a distribution of any earnings of the Savings Bank
except for interest paid on his deposit. Rather, such earnings become retained
earnings of the Savings Bank.
However, a savings depositor does have a right to share pro rata, with
--- ----
respect to the withdrawal value of his respective savings account, in any
liquidation proceeds distributed if the Savings Bank is ever liquidated.
Savings depositors and certain
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Breyer & Aggugia
==========================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 3
borrowers are members of the Savings Bank and thereby have voting rights in the
Savings Bank. Each savings depositor is entitled to cast votes based on the
balances of their withdrawable deposit account of the Savings Bank, and each
borrower member (hereinafter "borrower") is entitled to one vote in addition to
the votes (if any) to which such person is entitled in such borrower's capacity
as a savings depositor of the Savings Bank. All of the interests held by a
savings depositor in the Savings Bank cease when such depositor closes his
accounts with the Savings Bank.
The Holding Company was incorporated in March 1996 under the laws of the
State of Delaware as a general business corporation in order to act as a savings
institution holding company and a bank holding company. The Holding Company has
an authorized capital structure of 3,000,000 shares of common stock and 100,000
shares of preferred stock.
PROPOSED TRANSACTION
--------------------
The Board of Directors of the Savings Bank has decided that in order to
increase the Savings Bank's net worth, support future growth, increase the
amount of funds available for lending and investment, provide greater resources
for the expansion of customer services, and facilitate future expansion through
a greater emphasis on commercial lending, it would be advantageous for the
Savings Bank to convert from a federally-chartered mutual savings bank to a
federally-chartered stock savings bank and, thereafter, to convert to an
national bank. Further, the Board of Directors of the Savings Bank has
determined that in order to expand the financial services currently offered
through the Savings Bank and enhance flexibility of operations for
diversification of business opportunities, it would be advantageous to have the
stock of the Converted Savings Bank (and, after the Bank Conversion, the stock
of the Converted Bank) held by a parent holding company.
Accordingly, pursuant to the Plan, the Savings Bank will undergo the Stock
Conversion whereby it will be converted from a federally-chartered mutual
savings bank to a federally-chartered stock savings bank. As part of the Stock
Conversion, the Savings Bank will amend its existing mutual savings bank charter
and bylaws to read in the form of a Federal Stock Charter and Bylaws. The
Converted Savings Bank will then issue to the Holding Company shares of the
Converted Savings Bank's common stock, representing all of the shares of capital
stock to be issued by the Converted Savings Bank in the Conversion, in exchange
for payment by the Holding Company of 50% of the net proceeds realized by the
Holding Company from such sale of its Common Stock, less amounts necessary to
fund the Employee Stock Ownership Plan of the Savings Bank, or
<PAGE>
Breyer & Aguggia
========================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
such other percentage as the Office of Thrift Supervision ("OTS") may authorize
or require.
Also pursuant to the Plan, the Holding Company will offer its shares of
Common Stock for sale in a Subscription Offering and Direct Community Offering.
The aggregate purchase price at which all shares of Common Stock will be offered
and sold pursuant to the Plan and the total number of shares of Common Stock to
be offered in the Conversion will be determined by the Boards of Directors of
the Savings Bank and the Holding Company on the basis of the estimated pro forma
--- -----
market value of the Converted Bank as a subsidiary of the Holding Company. The
estimated pro forma market value will be determined by an independent appraiser.
--- -----
Pursuant to the Plan, all such shares will be issued and sold at a uniform price
per share. The Stock Conversion, including the sale of newly issued shares of
the stock of the Converted Savings Bank to the Holding Company, will be deemed
effective concurrently with the closing of the sale of the Common Stock. The
Bank Conversion will be consummated immediately following the consummation of
the Stock Conversion.
Under the Plan and in accordance with regulations of the OTS, the shares of
Common Stock will first be offered through the Subscription Offering pursuant to
non-transferable subscription rights on the basis of preference categories in
the following order of priority:
(1) Eligible Account Holders;
(2) Tax-Qualified Employee Stock Benefit Plans of the Savings Bank;
(3) Supplemental Eligible Account Holders; and
(4) Other Members.
Any shares of Common Stock not subscribed for in the Subscription Offering
will be offered in the Direct Community Offering in the following order of
priority:
(a) Natural persons residing in each county in which the Savings Bank has
a home or branch office; and
(b) The general public.
Any shares of Common Stock not subscribed for in the Community Offering
will be offered to certain members of the general public
<PAGE>
Breyer & Aguggia
========================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 5
on a best efforts basis by a selling group of broker dealers in a Syndicated
Community Offering.
The Plan also provides for the establishment of a Liquidation Account by
the Converted Savings Bank for the benefit of all Eligible Account Holders and
any Supplemental Eligible Account Holders in an amount equal to the net worth of
the Savings Bank as of the date of the latest statement of financial condition
contained in the final prospectus issued in connection with the Conversion. The
establishment of the Liquidation Account will not operate to restrict the use or
application of any of the net worth accounts of the Converted Savings Bank. The
account holders will have an inchoate interest in a proportionate amount of the
Liquidation Account with respect to each savings account held and will be paid
by the Converted Savings Bank in event of liquidation prior to any liquidation
distribution being made with respect to capital stock. Under the Plan, the Bank
Conversion shall not be deemed to be a liquidation of the Converted Savings Bank
for purposes of distribution of the Liquidation Account. Upon consummation of
the Bank Conversion, the Liquidation Account, together with the related rights
and obligations of the Converted Savings Bank, shall be assumed by the Converted
Bank.
Following the Stock Conversion, voting rights in the Converted Savings Bank
shall be vested in the sole holder of stock in the Converted Savings Bank, which
will be the Holding Company. Following the Bank Conversion, voting rights in
the Converted Bank will similarly be vested in the Holding Company. Voting
rights in the Holding Company, both after the Stock Conversion and after the
Bank Conversion, will be vested in the holders of the Common Stock.
The Stock Conversion will not interrupt the business of the Savings Bank.
The Converted Savings Bank will continue to engage in the same business as the
Savings Bank immediately prior to the Stock Conversion, and the Converted
Savings Bank will continue to have its savings accounts insured by the SAIF.
Each depositor will retain a withdrawable savings account or accounts equal in
dollar amount to, and on the same terms and conditions as, the withdrawable
account or accounts at the time of Stock Conversion except to the extent funds
on deposit are used to pay for Common Stock purchased in the Stock Conversion.
All loans of the Savings Bank will remain unchanged and retain their same
characteristics in the Converted Savings Bank.
Similarly, the Bank Conversion is not expected to interrupt the business of
the Converted Savings Bank. Management of the Savings Bank expects that, after
the Conversion, the Converted Bank will initially continue to conduct business
in substantially the same manner as the Savings Bank prior to the Conversion.
Over
<PAGE>
Breyer & Aguggia
========================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 6
time, the Converted Bank will continue the Savings Bank's diversification of its
loan portfolio into commercial loans. Further, the Bank Conversion is expected
to allow the Savings Bank to enhance its ability to structure its banking
services to respond to prevailing market conditions. The Converted Bank will
also continue to have its savings accounts insured by the SAIF. Each depositor
will retain a withdrawable savings account or accounts equal in dollar amount
to, and on the same terms and conditions as, the withdrawable account or
accounts at the time of Bank Conversion. All loans of the Converted Savings Bank
will remain unchanged and retain their same characteristics in the Converted
Bank.
The Plan must be approved by the OTS and by an affirmative vote of at least
a majority of the total votes eligible to be cast at a meeting of the Savings
Bank's members called to vote on the Plan. The Conversion is also subject to
approval of the Board of Governors of the Federal Reserve Board and the Office
of the Comptroller of the Currency.
Immediately prior to the Conversion, the Savings Bank will have a positive
net worth determined in accordance with generally accepted accounting
principles.
OPINION
-------
Based on the foregoing and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed transaction.
1. The Stock Conversion will constitute a reorganization within the
meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
as amended (the "Code"), and no gain or loss will be recognized to
either the Savings Bank or the Converted Savings Bank as a result of
the Stock Conversion (see Rev. Rul. 80-105, 1980-1 C.B. 78).
---
2. The assets of the Savings Bank will have the same basis in the hands
of the Converted Savings Bank as in the hands of the Savings Bank
immediately prior to the Stock Conversion (Section 362(b) of the
Code).
3. The holding period of the assets of the Savings Bank to be received by
the Converted Savings Bank will include the period during which the
assets were held by the
<PAGE>
Breyer & Aguggia
========================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 7
Savings Bank prior to the Stock Conversion (Section 1223(2) of the
Code).
4. No gain or loss will be recognized by the Converted Savings Bank on
the receipt of money from the Holding Company in exchange for shares
of common stock of the Converted Savings Bank (Section 1032(a) of the
Code). The Holding Company will be transferring solely cash to the
Converted Savings Bank in exchange for all the outstanding capital
stock of the Converted Savings Bank and therefore will not recognize
any gain or loss upon such transfer. (Section 351(a) of the Code; see
---
Rev. Rul. 69-357, 1969-1 C.B. 101).
5. No gain or loss will be recognized by the Holding Company upon receipt
of money from stockholders in exchange for shares of Common Stock
(Section 1032(a) of the Code).
6. No gain or loss will be recognized by the Eligible Account Holders and
Supplemental Eligible Account Holders of the Savings Bank upon the
issuance of them of deposit accounts in the Converted Savings Bank in
the same dollar amount and on the same terms and conditions in
exchange for their deposit accounts in the Savings Bank held
immediately prior to the Stock Conversion (Section 1001(a) of the
Code; Treas. Reg. (S)1.1001-1(a)).
7. The tax basis of the Eligible Account Holders' and Supplemental
Eligible Account Holders' savings accounts in the Converted Savings
Bank received as part of the Stock Conversion will equal the tax basis
of such account holders' corresponding deposit accounts in the Savings
Bank surrendered in exchange therefor (Section 1012 of the Code).
8. Gain or loss, if any, will be realized by the deposit account holders
of the Savings Bank upon the constructive receipt of their interest in
the liquidation account of the Converted Savings Bank and on the
nontransferable subscription rights to purchase stock of the Holding
Company in exchange for their proprietary rights in the Savings Bank.
Any such gain will be recognized by the Savings Bank deposit account
holders, but only in an amount non in excess of the fair market value
of the liquidation account and subscription rights received. (Section
1001 of the Code; Paulsen v. Commissioner, 469 U.S. 131 (1985); Rev.
-----------------------
Rul. 69-646, 1969-2 C.B. 54.)
<PAGE>
Breyer & Aguggia
========================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 8
9. The basis of each account holder's interest in the Liquidation Account
received in the Stock Conversion and to be established by the
Converted Savings Bank pursuant to the Stock Conversion will be equal
to the value, if any, of that interest.
10. No gain or loss will be recognized upon the exercise of a subscription
right in the Stock Conversion. (Rev. Rul. 56-572, 1956-2 C.B. 182).
11. The basis of the Common Stock acquired in the Stock Conversion will be
equal to the purchase price of such stock, increased, in the case of
such stock acquired pursuant to the exercise of subscription rights,
by the fair market value, if any, of the subscription rights exercised
(Section 1012 of the Code).
12. The holding period of the Common Stock acquired in the Stock
Conversion pursuant to the exercise of subscription rights will
commence on the date on which the subscription rights are exercised
(Section 1223(6) of the Code). The holding period of the Common Stock
acquired in the Community Offering will commence on the date following
the date on which such stock is purchased (Rev. Rul. 70-598, 1970-2
C.B. 168; Rev. Rul. 66-97, 1966-1 C.B. 190).
13. The Bank Conversion will constitute a reorganization within the
meaning of Section 368(a)(1)(F) of the Code (see Rev. Rul. 80-105,
---
1980-1 C.B. 78).
14. The assets of the Converted Savings Bank will have the same basis in
the hands of the Converted Bank as in the hands of the Converted
Savings Bank immediately prior to the Bank Conversion (Section 362(b)
of the Code).
15. The holding period of the assets of the Converted Savings Bank to be
received by the Converted Bank will include the period during which
the assets were held by the Converted Savings Bank prior to the Bank
Conversion (Section 1223(2) of the Code).
16. Following the Bank Conversion, the Converted Bank will not qualify as
a domestic building and loan association under the Code (see Rev. Rul.
---
90-54, 1990-1 C.B. 344). Accordingly, the Converted Bank will be
required to restate the balance of its tax bad debt reserves as of the
first day of its ineligibility year (the year in
<PAGE>
Breyer & Aguggia
========================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 9
which the Bank Conversion occurs). (Prop. Treas. Reg. (S)1.593-12(a)).
The excess of the Converted Bank's actual tax bad debt reserve as of
the close of the taxable year immediately preceding its ineligibility
year over the restated balance of its tax bad debt reserves must be
included in the gross income of the Converted Bank over six taxable
years, beginning with the ineligibility year. (Prop. Treas. Reg.
(S)1.593-13(d)).
SCOPE OF OPINION
----------------
Our opinion is limited to the federal income tax matters described above
and does not address any other federal income tax considerations or any federal,
state, local, foreign or other tax considerations. If any of the information
upon which we have relied is incorrect, or if changes in the relevant facts
occur after the date hereof, our opinion could be affected thereby. Moreover,
our opinion is based on the case law, Code, Treasury Regulations thereunder and
Internal Revenue Service rulings as they now exist. These authorities are all
subject to change, and such change may be made with retroactive effect. We can
give no assurance that, after such change, our opinion would not be different.
We undertake no responsibility to update or supplement our opinion. This
opinion is not binding on the Internal Revenue Service and there can be no
assurance, and none is hereby given, that the Internal Revenue Service will not
take a position contrary to one or more of the positions reflected in the
foregoing opinion, or that our opinion will be upheld by the courts if
challenged by the Internal Revenue Service.
CONSENTS
--------
We hereby consent to the filing of this opinion with the OTS as an exhibit
to the Application H-(e)1-S filed by the Holding Company with the OTS in
connection with the Conversion and the reference to our firm in the Application
H-(e)1-S under Item 110.55 therein.
We also hereby consent to the filing of this opinion with the SEC and the
OTS as exhibits to the Registration Statement and the Bank's Application for
Conversion on Form AC ("Form AC"), respectively, and the reference on our firm
in the Prospectus, which is a part of both the Registration Statement and the
Form AC,
<PAGE>
Breyer & Aguggia
========================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 10
under the headings "THE CONVERSION -- Effect of Conversion to Stock Form on
Depositors and Borrowers of the Savings Bank -- Tax Effects" and "LEGAL AND TAX
OPINIONS."
Very truly yours,
/s/ Breyer & Aguggia
----------------
BREYER & AGUGGIA
<PAGE>
EXHIBIT 8.2
STATE INCOME TAX OPINION OF BRYAN CAVE LLP
<PAGE>
[BYAN CAVE LETTERHEAD APPEARS HERE]
June 18, 1996
Board of Directors
Chester Savings Bank, FSB
1112 State Street
Chester, IL 62233
Re: Certain Illinois Income Tax Consequences Relating to Proposed
-------------------------------------------------------------
Holding Company Conversion and Subsequent Conversion to a
---------------------------------------------------------
National Bank
-------------
Gentlemen:
In accordance with your request, set forth herein is the opinion of
this firm relating to certain Illinois income tax consequences of (i) the
proposed conversion of Chester Savings Bank, FSB (the "Savings Bank") from a
federally-chartered mutual savings bank to a federally-chartered stock savings
bank (the "Converted Savings Bank") (the "Stock Conversion"); (ii) the
concurrent acquisition of 100% of the outstanding capital stock of the Converted
Savings Bank by a parent holding company formed at the direction of the Board of
Directors of the Savings Bank and to be known as Chester Bancorp, Inc. (the
"Holding Company"); and, thereafter, (iii) the conversion of the Converted
Savings Bank to a national bank to be known as Chester National Bank (the
"Converted Bank") (the "Bank Conversion"). In connection with the Bank
Conversion, the Holding Company will form a de novo subsidiary headquartered in
Perryville, Missouri, to be known as "Perryville National Bank" ("De Novo
Bank"), which, following a $3.0 million initial capitalization funded by the
Stock Conversion proceeds, will, through a purchase and assumption transaction,
assume all of the installment loans and a portion of the mortgage loans of the
Savings Bank's Perryville branch ("Bank Formation"). The Stock Conversion, the
Bank Conversion and the Bank Formation are referred to herein collectively as
the "Conversion."
Our opinion is based solely on the facts, assumptions and opinions set
forth in the federal tax opinion dated June 18, 1996 from Breyer & Aguggia, a
copy of which is attached hereto as Exhibit A (the "Federal Tax Opinion"),
---------
regarding the federal income tax consequences of the Conversion to the Savings
Bank, the Converted Savings Bank, the
<PAGE>
BRYAN CAVE LLP
Board of Directors
Chester Savings Bank, FSB
June 18, 1996
Page 2
Converted Bank, and the Holding Company and the deposit account holders of the
Savings Bank under the Internal Revenue Code of 1986, as amended (the "Code").
Unless defined in this letter, all words and phrases which are capitalized shall
have the meaning specified in the Federal Tax Opinion.
The State of Illinois will, for income tax purposes, treat the
Conversion in an identical manner as it is treated by the Internal Revenue
Service for federal income tax purposes. Based upon, and in reliance on, the
Federal Tax Opinion, and assuming the accuracy of the facts, assumptions and
opinions expressed in the Federal Tax Opinion, it is our opinion that, under the
laws of the State of Illinois, no adverse Illinois income tax consequences will
be incurred by the parties to the Conversion, including deposit account holders,
as a result of the Conversion, except to the extent income, gain or loss will be
recognized for federal income tax purposes as provided in the Federal Tax
Opinion.
The foregoing opinion is based on current Illinois law and the
assumptions stated in this letter. Our opinion is limited to the matters
discussed herein. No opinion is expressed on any matter other than the Illinois
income tax consequences discussed herein, including, but not limited to, any
franchise or capital stock taxes which might result from the implementation of
the Conversion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (Form S-1) of the Holding Company filed under the
Securities Act of 1933, as amended, the Savings Bank's Application for Approval
of Conversion (Form AC) filed with the Office of Thrift Supervision ("OTS"), and
to the reference to us in the prospectus and proxy statement included therein.
We also consent to the filing of this opinion as an exhibit to the Holding
Company Application H-(e)1-S filed on behalf of the Holding Company with the
OTS.
This opinion is rendered only for the purposes expressed herein and is
not to be relied upon by anyone other than you, without our express written
consent.
Very truly yours,
Bryan Cave LLP
By____________________________
<PAGE>
[LETTERHEAD APPEARS HERE]
June 18, 1996
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
1112 State Street
Chester, Illinois 62233
Re: Certain Federal Income Tax Consequences Relating to Proposed Holding
Company Conversion and Subsequent Conversion to a National Bank
--------------------------------------------------------------------
Gentlemen:
In accordance with your request, set forth herein is the opinion of this
firm relating to certain federal income tax consequences of (i) the proposed
conversion of Chester Savings Bank, FSB (the "Savings Bank") from a federally-
chartered mutual savings bank to a federally-chartered stock savings bank (the
"Converted Savings Bank") (the "Stock Conversion"); (ii) the concurrent
acquisition of 100% of the outstanding capital stock of the Converted Savings
Bank by a parent holding company formed at the direction of the Board of
Directors of the Savings Bank and to be known as Chester Bancorp, Inc. (the
"Holding Company"); and, thereafter, (iii) the conversion of the Converted
Savings Bank to a national bank to be known as Chester National Bank (the
"Converted Bank") (the "Bank Conversion"). The Stock Conversion and the Bank
Conversion are referred to herein collectively as the "Conversion."
For purposes of this opinion, we have examined such documents and questions
of law as we have considered necessary or appropriate, including but not limited
to the Plan of Conversion as adopted by the Savings Bank's Board of Directors as
adopted on March 12, 1996 (the "Plan"); the federal mutual charter and bylaws of
the Savings Bank; the certificate of incorporation and bylaws of the Holding
Company; the Affidavit of Representations dated June 17, 1996 provided to us by
the Savings Bank (the "Affidavit"), and the Prospectus (the "Prospectus")
included in the Registration Statement on Form S-1 filed with the Securities and
Exchange Commission ("SEC") on March 15,1996 (the "Registration Statement"). In
such examination, we have assumed, and have not independently verified, the
genuineness of all signatures on original documents where due execution and
delivery are requirements to the
<PAGE>
Breyer & Aguggia
======================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 2
effectiveness thereof. Terms used but not defined herein, whether capitalized or
not, shall have the same meaning as defined in the Plan.
BACKGROUND
----------
Based solely upon our review of such documents, and upon such information
as the Savings Bank has provided to us (which we have not attempted to verify in
any respect), and in reliance upon such documents and information, we set forth
herein a general summary of the relevant facts and proposed transactions,
qualified in its entirety by reference to the documents cited above.
The Savings Bank is a federally-chartered mutual savings bank which is in
the process of converting to a federally-chartered stock savings bank and,
thereafter, to a national bank. The Savings Bank was initially organized as a
state-chartered mutual savings and loan association in 1919 and converted to a
federally-chartered mutual savings bank in 1990. The Savings Bank is also a
member of the Federal Home Loan Bank System and its deposits are federally
insured under the Savings Association Insurance Fund ("SAIF") of the Federal
Deposit Insurance Corporation. The Savings Bank operates out of its main office
in Chester, Illinois, four branch offices in neighboring southern Illinois
communities and branch in Perryville, Missouri.
The Savings Bank is primarily engaged in the business of attracting
deposits from the general public and originating permanent loans secured by
first mortgages on one- to four-family residential properties and, to lesser
extent, consumer loans, loans secured by commercial real estate and multi-family
loans. At March 31, 1996, the Savings Bank had total assets of $136.8 million,
deposits of $108.5 million, and total equity of $11.9 million.
As a federally-chartered mutual savings bank, the Savings Bank has no
authorized capital stock. Instead, the Savings Bank, in mutual form, has a
unique equity structure. A savings depositor of the Savings Bank is entitled to
payment of interest on his account balance as declared and paid by the Savings
Bank, but has no right to a distribution of any earnings of the Savings Bank
except for interest paid on his deposit. Rather, such earnings become retained
earnings of the Savings Bank.
However, a savings depositor does have a right to share pro rata, with
--- ----
respect to the withdrawal value of his respective savings account, in any
liquidation proceeds distributed if the Savings Bank is ever liquidated.
Savings depositors and certain
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Breyer & Aguggia
======================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 3
borrowers are members of the Savings Bank and thereby have voting rights in the
Savings Bank. Each savings depositor is entitled to cast votes based on the
balances of their withdrawable deposit account of the Savings Bank, and each
borrower member (hereinafter "borrower") is entitled to one vote in addition to
the votes (if any) to which such person is entitled in such borrower's capacity
as a savings depositor of the Savings Bank. All of the interests held by a
savings depositor in the Savings Bank cease when such depositor closes his
accounts with the Savings Bank.
The Holding Company was incorporated in March 1996 under the laws of the
State of Delaware as a general business corporation in order to act as a savings
institution holding company and a bank holding company. The Holding Company has
an authorized capital structure of 3,000,000 shares of common stock and 100,000
shares of preferred stock.
PROPOSED TRANSACTION
--------------------
The Board of Directors of the Savings Bank has decided that in order to
increase the Savings Bank's net worth, support future growth, increase the
amount of funds available for lending and investment, provide greater resources
for the expansion of customer services, and facilitate future expansion through
a greater emphasis on commercial lending, it would be advantageous for the
Savings Bank to convert from a federally-chartered mutual savings bank to a
federally-chartered stock savings bank and, thereafter, to convert to an
national bank. Further, the Board of Directors of the Savings Bank has
determined that in order to expand the financial services currently offered
through the Savings Bank and enhance flexibility of operations for
diversification of business opportunities, it would be advantageous to have the
stock of the Converted Savings Bank (and, after the Bank Conversion, the stock
of the Converted Bank) held by a parent holding company.
Accordingly, pursuant to the Plan, the Savings Bank will undergo the Stock
Conversion whereby it will be converted from a federally-chartered mutual
savings bank to a federally-chartered stock savings bank. As part of the Stock
Conversion, the Savings Bank will amend its existing mutual savings bank charter
and bylaws to read in the form of a Federal Stock Charter and Bylaws. The
Converted Savings Bank will then issue to the Holding Company shares of the
Converted Savings Bank's common stock, representing all of the shares of capital
stock to be issued by the Converted Savings Bank in the Conversion, in exchange
for payment by the Holding Company of 50% of the net proceeds realized by the
Holding Company from such sale of its Common Stock, less amounts necessary to
fund the Employee Stock Ownership Plan of the Savings Bank, or
<PAGE>
Breyer & Aguggia
======================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 4
such other percentage as the Office of Thrift Supervision ("OTS") may authorize
or require.
Also pursuant to the Plan, the Holding Company will offer its shares of
Common Stock for sale in a Subscription Offering and Direct Community Offering.
The aggregate purchase price at which all shares of Common Stock will be offered
and sold pursuant to the Plan and the total number of shares of Common Stock to
be offered in the Conversion will be determined by the Boards of Directors of
the Savings Bank and the Holding Company on the basis of the estimated pro forma
--- -----
market value of the Converted Bank as a subsidiary of the Holding Company. The
estimated pro forma market value will be determined by an independent appraiser.
--- -----
Pursuant to the Plan, all such shares will be issued and sold at a uniform price
per share. The Stock Conversion, including the sale of newly issued shares of
the stock of the Converted Savings Bank to the Holding Company, will be deemed
effective concurrently with the closing of the sale of the Common Stock. The
Bank Conversion will be consummated immediately following the consummation of
the Stock Conversion.
Under the Plan and in accordance with regulations of the OTS, the shares of
Common Stock will first be offered through the Subscription Offering pursuant to
non-transferable subscription rights on the basis of preference categories in
the following order of priority:
(1) Eligible Account Holders;
(2) Tax-Qualified Employee Stock Benefit Plans of the Savings Bank;
(3) Supplemental Eligible Account Holders; and
(4) Other Members.
Any shares of Common Stock not subscribed for in the Subscription Offering
will be offered in the Direct Community Offering in the following order of
priority:
(a) Natural persons residing in each county in which the Savings Bank has
a home or branch office; and
(b) The general public.
Any shares of Common Stock not subscribed for in the Community Offering
will be offered to certain members of the general public
<PAGE>
Breyer & Aguggia
======================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 5
on a best efforts basis by a selling group of broker dealers in a Syndicated
Community Offering.
The Plan also provides for the establishment of a Liquidation Account by
the Converted Savings Bank for the benefit of all Eligible Account Holders and
any Supplemental Eligible Account Holders in an amount equal to the net worth of
the Savings Bank as of the date of the latest statement of financial condition
contained in the final prospectus issued in connection with the Conversion. The
establishment of the Liquidation Account will not operate to restrict the use or
application of any of the net worth accounts of the Converted Savings Bank. The
account holders will have an inchoate interest in a proportionate amount of the
Liquidation Account with respect to each savings account held and will be paid
by the Converted Savings Bank in event of liquidation prior to any liquidation
distribution being made with respect to capital stock. Under the Plan, the Bank
Conversion shall not be deemed to be a liquidation of the Converted Savings Bank
for purposes of distribution of the Liquidation Account. Upon consummation of
the Bank Conversion, the Liquidation Account, together with the related rights
and obligations of the Converted Savings Bank, shall be assumed by the Converted
Bank.
Following the Stock Conversion, voting rights in the Converted Savings Bank
shall be vested in the sole holder of stock in the Converted Savings Bank, which
will be the Holding Company. Following the Bank Conversion, voting rights in
the Converted Bank will similarly be vested in the Holding Company. Voting
rights in the Holding Company, both after the Stock Conversion and after the
Bank Conversion, will be vested in the holders of the Common Stock.
The Stock Conversion will not interrupt the business of the Savings Bank.
The Converted Savings Bank will continue to engage in the same business as the
Savings Bank immediately prior to the Stock Conversion, and the Converted
Savings Bank will continue to have its savings accounts insured by the SAIF.
Each depositor will retain a withdrawable savings account or accounts equal in
dollar amount to, and on the same terms and conditions as, the withdrawable
account or accounts at the time of Stock Conversion except to the extent funds
on deposit are used to pay for Common Stock purchased in the Stock Conversion.
All loans of the Savings Bank will remain unchanged and retain their same
characteristics in the Converted Savings Bank.
Similarly, the Bank Conversion is not expected to interrupt the business of
the Converted Savings Bank. Management of the Savings Bank expects that, after
the Conversion, the Converted Bank will initially continue to conduct business
in substantially the same manner as the Savings Bank prior to the Conversion.
Over
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Breyer & Aguggia
======================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 6
time, the Converted Bank will continue the Savings Bank's diversification of its
loan portfolio into commercial loans. Further, the Bank Conversion is expected
to allow the Savings Bank to enhance its ability to structure its banking
services to respond to prevailing market conditions. The Converted Bank will
also continue to have its savings accounts insured by the SAIF. Each depositor
will retain a withdrawable savings account or accounts equal in dollar amount
to, and on the same terms and conditions as, the withdrawable account or
accounts at the time of Bank Conversion. All loans of the Converted Savings Bank
will remain unchanged and retain their same characteristics in the Converted
Bank.
The Plan must be approved by the OTS and by an affirmative vote of at least
a majority of the total votes eligible to be cast at a meeting of the Savings
Bank's members called to vote on the Plan. The Conversion is also subject to
approval of the Board of Governors of the Federal Reserve Board and the Office
of the Comptroller of the Currency.
Immediately prior to the Conversion, the Savings Bank will have a positive
net worth determined in accordance with generally accepted accounting
principles.
OPINION
-------
Based on the foregoing and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed transaction.
1. The Stock Conversion will constitute a reorganization within the
meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
as amended (the "Code"), and no gain or loss will be recognized to
either the Savings Bank or the Converted Savings Bank as a result of
the Stock Conversion (see Rev. Rul. 80-105, 1980-1 C.B. 78).
---
2. The assets of the Savings Bank will have the same basis in the hands
of the Converted Savings Bank as in the hands of the Savings Bank
immediately prior to the Stock Conversion (Section 362(b) of the
Code).
3. The holding period of the assets of the Savings Bank to be received by
the Converted Savings Bank will include the period during which the
assets were held by the
<PAGE>
Breyer & Aguggia
======================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 7
Savings Bank prior to the Stock Conversion (Section 1223(2) of the
Code).
4. No gain or loss will be recognized by the Converted Savings Bank on
the receipt of money from the Holding Company in exchange for shares
of common stock of the Converted Savings Bank (Section 1032(a) of the
Code). The Holding Company will be transferring solely cash to the
Converted Savings Bank in exchange for all the outstanding capital
stock of the Converted Savings Bank and therefore will not recognize
any gain or loss upon such transfer. (Section 351(a) of the Code; see
---
Rev. Rul. 69-357, 1969-1 C.B. 101).
5. No gain or loss will be recognized by the Holding Company upon receipt
of money from stockholders in exchange for shares of Common Stock
(Section 1032(a) of the Code).
6. No gain or loss will be recognized by the Eligible Account Holders and
Supplemental Eligible Account Holders of the Savings Bank upon the
issuance of them of deposit accounts in the Converted Savings Bank in
the same dollar amount and on the same terms and conditions in
exchange for their deposit accounts in the Savings Bank held
immediately prior to the Stock Conversion (Section 1001(a) of the
Code; Treas. Reg. (S)1.1001-1(a)).
7. The tax basis of the Eligible Account Holders' and Supplemental
Eligible Account Holders' savings accounts in the Converted Savings
Bank received as part of the Stock Conversion will equal the tax basis
of such account holders' corresponding deposit accounts in the Savings
Bank surrendered in exchange therefor (Section 1012 of the Code).
8. Gain or loss, if any, will be realized by the deposit account holders
of the Savings Bank upon the constructive receipt of their interest in
the liquidation account of the Converted Savings Bank and on the
nontransferable subscription rights to purchase stock of the Holding
Company in exchange for their proprietary rights in the Savings Bank.
Any such gain will be recognized by the Savings Bank deposit account
holders, but only in an amount non in excess of the fair market value
of the liquidation account and subscription rights received. (Section
1001 of the Code; Paulsen v. Commissioner, 469 U.S. 131 (1985); Rev.
-----------------------
Rul. 69-646, 1969-2 C.B. 54.)
<PAGE>
Breyer & Aguggia
======================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 8
9. The basis of each account holder's interest in the Liquidation Account
received in the Stock Conversion and to be established by the
Converted Savings Bank pursuant to the Stock Conversion will be equal
to the value, if any, of that interest.
10. No gain or loss will be recognized upon the exercise of a subscription
right in the Stock Conversion. (Rev. Rul. 56-572, 1956-2 C.B. 182).
11. The basis of the Common Stock acquired in the Stock Conversion will be
equal to the purchase price of such stock, increased, in the case of
such stock acquired pursuant to the exercise of subscription rights,
by the fair market value, if any, of the subscription rights exercised
(Section 1012 of the Code).
12. The holding period of the Common Stock acquired in the Stock
Conversion pursuant to the exercise of subscription rights will
commence on the date on which the subscription rights are exercised
(Section 1223(6) of the Code). The holding period of the Common Stock
acquired in the Community Offering will commence on the date following
the date on which such stock is purchased (Rev. Rul. 70-598, 1970-2
C.B. 168; Rev. Rul. 66-97, 1966-1 C.B. 190).
13. The Bank Conversion will constitute a reorganization within the
meaning of Section 368(a)(1)(F) of the Code (see Rev. Rul. 80-105,
---
1980-1 C.B. 78).
14. The assets of the Converted Savings Bank will have the same basis in
the hands of the Converted Bank as in the hands of the Converted
Savings Bank immediately prior to the Bank Conversion (Section 362(b)
of the Code).
15. The holding period of the assets of the Converted Savings Bank to be
received by the Converted Bank will include the period during which
the assets were held by the Converted Savings Bank prior to the Bank
Conversion (Section 1223(2) of the Code).
16. Following the Bank Conversion, the Converted Bank will not qualify as
a domestic building and loan association under the Code (see Rev. Rul.
---
90-54, 1990-1 C.B. 344). Accordingly, the Converted Bank will be
required to restate the balance of its tax bad debt reserves as of the
first day of its ineligibility year (the year in
<PAGE>
Breyer & Aguggia
======================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 9
which the Bank Conversion occurs). (Prop. Treas. Reg. (S)1.593-12(a)).
The excess of the Converted Bank's actual tax bad debt reserve as of
the close of the taxable year immediately preceding its ineligibility
year over the restated balance of its tax bad debt reserves must be
included in the gross income of the Converted Bank over six taxable
years, beginning with the ineligibility year. (Prop. Treas. Reg.
(S)1.593-13(d)).
SCOPE OF OPINION
----------------
Our opinion is limited to the federal income tax matters described above
and does not address any other federal income tax considerations or any federal,
state, local, foreign or other tax considerations. If any of the information
upon which we have relied is incorrect, or if changes in the relevant facts
occur after the date hereof, our opinion could be affected thereby. Moreover,
our opinion is based on the case law, Code, Treasury Regulations thereunder and
Internal Revenue Service rulings as they now exist. These authorities are all
subject to change, and such change may be made with retroactive effect. We can
give no assurance that, after such change, our opinion would not be different.
We undertake no responsibility to update or supplement our opinion. This
opinion is not binding on the Internal Revenue Service and there can be no
assurance, and none is hereby given, that the Internal Revenue Service will not
take a position contrary to one or more of the positions reflected in the
foregoing opinion, or that our opinion will be upheld by the courts if
challenged by the Internal Revenue Service.
CONSENTS
--------
We hereby consent to the filing of this opinion with the OTS as an exhibit
to the Application H-(e)1-S filed by the Holding Company with the OTS in
connection with the Conversion and the reference to our firm in the Application
H-(e)1-S under Item 110.55 therein.
We also hereby consent to the filing of this opinion with the SEC and the
OTS as exhibits to the Registration Statement and the Bank's Application for
Conversion on Form AC ("Form AC"), respectively, and the reference on our firm
in the Prospectus, which is a part of both the Registration Statement and the
Form AC,
<PAGE>
Breyer & Aguggia
======================
Boards of Directors
Chester Bancorp, Inc.
Chester Savings Bank, FSB
June 18, 1996
Page 10
under the headings "THE CONVERSION -- Effect of Conversion to Stock Form on
Depositors and Borrowers of the Savings Bank -- Tax Effects" and "LEGAL AND TAX
OPINIONS."
Very truly yours,
/s/ Breyer & Aguggia
BREYER & AGUGGIA
<PAGE>
EXHIBIT 10.5
PROPOSED FORM OF EMPLOYEE STOCK OWNERSHIP
PLAN AND TRUST
<PAGE>
CHESTER NATIONAL BANK
---------------------
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
---------------------------------------
<PAGE>
WHEREAS, Chester Savings Bank, F.S.B. ("Company") intends to convert
from a mutual corporation to a stock corporation (the "Mutual Conversion"), and
to convert to a national bank to be known as Chester National Bank; and
WHEREAS, upon consummation of such Mutual Conversion, the Company
desires to establish the Chester National Bank Employee Stock Ownership Plan and
Trust ("Plan") for the benefit of its eligible employees;
NOW, THEREFORE, effective upon the effective date of the Mutual
Conversion, the Plan is adopted to read as follows.
<PAGE>
CHESTER NATIONAL BANK
---------------------
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
---------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 - NAME OF PLAN........................................ 1
SECTION 2 - DEFINITIONS......................................... 1
2.1 "Account"............................................. 1
2.2 "Act"................................................. 1
2.3 "Anniversary Date".................................... 1
2.4 "Board"............................................... 1
2.5 "Break in Service".................................... 1
2.6 "Code"................................................ 1
2.7 "Committee"........................................... 1
2.8 "Company"............................................. 1
2.9 "Company Stock"....................................... 2
2.10 "Compensation"........................................ 2
2.11 "Controlled Group".................................... 2
2.12 "Disability Retirement Date".......................... 2
2.13 "Determination of Disability"......................... 2
2.14 "Distribution Notice Period".......................... 2
2.15 "Effective Date"...................................... 3
2.16 "Employee"............................................ 3
2.17 "Employer"............................................ 3
2.18 "Equity Fund"......................................... 3
2.19 "ESOP Loan"........................................... 3
2.20 "Five Percent Owner".................................. 3
2.21 "Fixed Income Fund"................................... 3
2.22 "Hours of Employment"................................. 4
2.23 "Investment Manager".................................. 5
2.24 "Money Market Fund"................................... 5
2.25 "Normal Retirement Date".............................. 5
2.26 "Participant"......................................... 5
2.27 "Plan Administrator".................................. 5
2.28 "Plan Year"........................................... 5
2.29 "Qualified Plan"...................................... 5
2.30 "Service"............................................. 6
2.31 "Settlement Date"..................................... 6
2.32 "Trust"............................................... 6
2.33 "Trustee"............................................. 6
2.34 "Valuation Date"...................................... 6
SECTION 3 - ELIGIBILITY......................................... 6
3.1 Participants.......................................... 6
3.2 Former Participants................................... 6
3.3 Cessation of Participation............................ 7
SECTION 4 - CONTRIBUTIONS AND WITHDRAWALS....................... 7
4.1 Determination of Employer Contributions............... 7
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.2 Return of Contributions............................... 7
4.3 Participant Contributions............................. 8
4.4 Rollover Contributions and Transfers.................. 8
4.5 Withdrawal at 65...................................... 9
SECTION 5 - ALLOCATION OF CONTRIBUTIONS......................... 9
5.1 Participant Data...................................... 9
5.2 Allocations to Participant Accounts................... 9
5.3 Dividends and Stock Splits............................ 11
5.4 Benefit Limitations................................... 12
5.5 Reallocation of Excess Contributions and
Forfeitures........................................... 12
5.6 Valuation of Company Stock............................ 12
5.7 Rollover Contributions................................ 12
SECTION 6 - DIVERSIFICATION OF INVESTMENT IN COMPANY STOCK...... 13
6.1 General............................................... 13
6.2 Eligible Investment Amount............................ 13
6.3 Participant's Selection of Investment Fund............ 13
6.4 Transfer Between Investment Funds..................... 14
SECTION 7 - DISTRIBUTION OF ACCOUNTS............................ 14
7.1 Distributions of Company Stock........................ 14
7.2 Distributions of Other Assets......................... 15
7.3 Method of Distribution................................ 16
7.4 Special Limitations on Distributions.................. 16
7.5 Installment Distributions............................. 17
7.6 Election to Receive Payment in Shares of Company
Stock................................................. 17
7.7 Required Minimum Distributions........................ 17
7.8 Required Beginning Date............................... 17
7.9 Notification of Eligibility to Receive and Consent
to Disability Benefits................................ 18
SECTION 8 - VESTING............................................. 18
8.1 Retirement or Disability.............................. 18
8.2 Death................................................. 18
8.3 Other Termination of Service.......................... 18
8.4 Forfeitures........................................... 19
SECTION 9 - DISTRIBUTIONS AT DEATH.............................. 20
9.1 Limitations on Distributions.......................... 20
9.2 Distribution to Spouse................................ 20
9.3 Designation of Beneficiary............................ 21
9.4 Beneficiary Not Designated............................ 21
9.5 Spousal Consent to Designation of Beneficiary......... 21
SECTION 10 - LEAVES OF ABSENCE AND TRANSFERS.................... 22
10.1 Military Leave of Absence............................ 22
10.2 Other Leaves of Absence.............................. 22
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
SECTION 11 - ADMINISTRATION..................................... 22
11.1 Appointment of Committee............................. 22
11.2 Construction......................................... 23
11.3 Death, Resignation, or Removal of Committee
Member............................................... 23
11.4 Decisions and Delegation............................. 23
11.5 Meetings............................................. 24
11.6 Duties of the Committee.............................. 24
11.7 Payment of Expenses.................................. 25
11.8 Records of the Committee............................. 25
11.9 Indemnification...................................... 25
SECTION 12 - CLAIM PROCEDURE.................................... 25
12.1 Claim................................................ 25
12.2 Claim Decision....................................... 25
12.3 Request for Review................................... 26
12.4 Review on Appeal..................................... 26
12.5 Discharge of Claims.................................. 27
12.6 Method of Distribution............................... 27
SECTION 13 - TRUSTEE'S POWERS AND DUTIES........................ 27
13.1 Investment of Contributions.......................... 27
13.2 Other Investments.................................... 27
13.3 Title to Assets...................................... 28
13.4 General Powers and Authority......................... 28
13.5 Voting Rights........................................ 29
13.6 Other Dispositions of Company Stock.................. 30
13.7 Distributions........................................ 30
13.8 Safekeeping of Assets................................ 30
13.9 Prohibited Transactions.............................. 30
13.10 Receipt of Contributions............................. 31
13.11 Records.............................................. 31
13.12 Compensation of Trustee.............................. 31
13.13 Expenses; Taxes...................................... 31
13.14 Exclusive Benefit.................................... 31
13.15 Agency of Trustee.................................... 31
13.16 Resignation or Removal of Trustee.................... 31
13.17 Investment Manager................................... 32
13.18 Exempt Loans to the Plan............................. 32
13.19 Investment of Loan Proceeds.......................... 33
13.20 Pledge of Company Stock to Secure an Exempt Loan..... 33
13.21 Standard of Care..................................... 34
SECTION 14 - AMENDMENT AND TERMINATION.......................... 34
14.1 Amendment............................................ 34
14.2 Termination; Discontinuance of Contributions......... 35
SECTION 15 - MISCELLANEOUS...................................... 35
15.1 Participants' Rights................................. 35
15.2 Spendthrift Clause................................... 35
15.3 Delegation of Authority by Employer.................. 36
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
15.4 Distributions to Minors/Incompetents................. 36
15.5 Construction of Plan................................. 36
15.6 Gender and Number.................................... 36
15.7 Separability of Provisions........................... 36
15.8 Diversion of Assets.................................. 36
15.9 Service of Process................................... 37
15.10 Merger............................................... 37
15.11 Commencement of Benefits............................. 37
15.12 Qualified Domestic Relations Order................... 38
15.13 Leased Employees..................................... 40
15.14 Written Explanation of Rollover Treatment............ 40
15.15 Special Distribution Alternative..................... 41
15.16 Plan Binding......................................... 41
SECTION 16 - TOP HEAVY-DEFINITIONS.............................. 41
16.1 "Accrued Benefits"................................... 41
16.2 "Beneficiaries"...................................... 41
16.3 "Determination Date"................................. 41
16.4 "Former Key Employee"................................ 41
16.5 "Key Employee"....................................... 42
16.6 "Non-Key Employee"................................... 42
16.7 "Permissive Aggregation Group"....................... 42
16.8 "Required Aggregation Group"......................... 42
16.9 "Super Top-Heavy Group".............................. 42
16.10 "Top-Heavy Compensation"............................. 43
16.11 "Top-Heavy Group".................................... 43
SECTION 17 - TOP-HEAVY RULES.................................... 43
17.1 Special Top-Heavy Rules.............................. 43
17.2 Adjustments in Section 415 Limits.................... 45
</TABLE>
-iv-
<PAGE>
CHESTER NATIONAL BANK
---------------------
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
---------------------------------------
SECTION 1
---------
NAME OF PLAN
------------
The Plan shall be known as the "Chester National Bank Employee Stock
Ownership Plan and Trust." The Plan is intended to qualify as an employee stock
ownership plan under Section 401(a), 501(a) and 4975(e)(7) of the Code, and to
invest primarily in the stock of Chester Bancorp, Inc., a Delaware corporation
("CBI") or any corporation which is a member of the Controlled Group of which
Chester National Bank is a member; provided, however, that to the extent the
Plan invests in other assets, the Plan shall be considered a profit sharing plan
even though contributions are not dependent on profits.
SECTION 2
---------
DEFINITIONS
-----------
2.1 "Account" means the Account established for each Participant
-------
under this plan. Unless the context clearly reflects otherwise, reference to an
Account includes any separate subaccount created to reflect investments in
Company Stock and in other assets.
2.2 "Act" means the Employee Retirement Income Security Act of 1974,
---
Public Law 93-406, as amended.
2.3 "Anniversary Date" means the last day of any Plan Year.
----------------
2.4 "Board" means the board of directors of the Company.
-----
2.5 "Break in Service" means, for eligibility purposes an employment
----------------
year, and for other purposes a Plan Year in which a person completes 500 or
fewer Hours of Employment.
2.6 "Code" means the Internal Revenue Code of 1986, as amended.
----
2.7 "Committee" means the Committee appointed pursuant to Section
---------
11.
2.8 "Company" means Chester Savings Bank, F.S.B. prior to the
-------
conversion of Chester Savings Bank, F.S.B. from a mutual corporation to a stock
corporation. Subsequent to such conversion, "Company" means Chester National
Bank, a national bank corporation.
-1-
<PAGE>
2.9 "Company Stock" means shares of voting common stock or any class
-------------
of capital stock convertible into voting common stock which CBI, Chester
National Bank or any corporation which is a member of the Controlled Group, is
authorized to issue and which have a combination of voting power and dividend
rights equal to or in excess of that class of common stock of the Company having
the greatest voting power and the greatest dividend rights.
2.10 "Compensation" means the lesser of (a) $150,000 or the amount
------------
prescribed by applicable law, or (b) the gross amount received by an Employee
during the Plan Year for services rendered while a Participant. Compensation may
be rounded to the next lower even $100.00 for convenience in making allocations.
A Participant's Compensation shall include basic salary, commissions, wages,
overtime pay, and bonuses, but shall not include amounts contributed through a
salary reduction arrangement to a tax Qualified Plan which meets the
requirements of Section 401(k) of the Code or to a cafeteria plan which meets
the requirements of Section 125 of the Code, severance pay or Employer
contributions under Section 4.1 of this Plan or Employer contributions to or
benefits under any other Qualified Plan. For the Plan Year during which a
Participant dies, becomes permanently and totally disabled, or retires on his
Normal Retirement Date, a Participant's Compensation shall not exceed the gross
amount received by the Participant for services rendered prior to the
Participant's death, Disability Retirement Date, or Normal Retirement Date.
2.11 "Controlled Group" means the Company and all other entities
----------------
required to be aggregated with the Company under Sections 414(b), (c), or (m) of
the Code. For purposes of Section 5.4, in determining which entities shall be
aggregated under Section 414(b) or (c) of the Code, the modifications made by
Section 415(h) of the Code shall be applied.
2.12 "Disability Retirement Date" means the date on which a
--------------------------
Participant is determined by the Committee to be permanently and totally
disabled and has terminated his employment.
2.13 "Determination of Disability". A Participant shall be
---------------------------
considered permanently and totally disabled only if he has been totally disabled
by a physical or mental condition so as to be prevented thereby from continuing
in the employment of the Employer. A Participant shall be deemed to be
permanently and totally disabled when he is so certified by a qualified
physician who is acceptable to the Plan Administrator.
2.14 "Distribution Notice Period" means the period beginning not more
--------------------------
than 90 days and ending not less than 30 days before any Valuation Date.
-2-
<PAGE>
2.15 "Effective Date" means ______________, 19__, the date on which
--------------
the Company converted from a mutual company to a stock company
2.16 "Employee" means any person employed by the Employer on full-
--------
time basis. An Employee shall be deemed to be employed on a full-time basis if
he is designated as a full-time employee by the Employer. Notwithstanding the
preceding, "Employee" shall exclude any person who is a member of a collective
bargaining unit for which either
(a) a separate retirement plan has been established pursuant to
collective bargaining negotiations, or
(b) no separate plan has been established after collective
bargaining which has included discussion of retirement benefits, unless
such collective bargaining provided for coverage under this Plan.
2.17 "Employer" means the Company, Chester National Bank of Missouri
--------
or any other member of the Controlled Group which has, with the consent of the
Board, adopted the Plan.
2.18 "Equity Fund" means that portion of the Trust which will be
-----------
separately held and invested by the Trustee; it is anticipated that such Fund
shall be invested primarily in common stocks other than Company stock.
2.19 "ESOP Loan" means any loan the proceeds of which are used by the
---------
Trustee to purchase Company Stock and which satisfies the requirements of
Section 13.18 of the Plan.
2.20 "Five Percent Owner" means any person who owns (or is considered
------------------
as owning within the meaning of Section 318 of the Code) more than five percent
of the outstanding stock of any corporation in the Controlled Group or stock
possessing more than five percent of the total combined voting power of all
stock of any corporation in the Controlled Group or who owns more than five
percent of the capital or profits interest of any unincorporated entity in the
Controlled Group.
2.21 "Fixed Income Fund" means that portion of the Trust which will
-----------------
be separately held and invested by the Trustee; it is anticipated that such Fund
shall be invested primarily in preferred stocks, bonds, notes, debentures,
mortgages, interests in property, real or personal, the income return from which
is deemed to be reasonably certain or which is prescribed and fixed by law or by
the terms of the contract, document or instrument creating or evidencing such
property or interest in property.
-3-
<PAGE>
2.22 "Hours of Employment" means:
-------------------
(a) For each day for which a person is paid, or entitled to
payment by an Employer for the performance of duties, the person shall
receive credit for ten (10) hours of Employment. These hours shall be
credited to the person for the computation period or periods in which the
duties are performed.
(b) Each hour for which a person is directly or indirectly paid,
or entitled to payment, by the Employer on account of a period of time
during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday, illness,
incapacity (including permanent and total disability as defined in Section
2.12), layoff, jury duty, military duty or leave of absence; provided that
(1) no more than 501 Hours of Employment shall be credited
on account of a single continuous period during which no duties are
performed (whether or not such period occurs in a single computation
period), and
(2) no Hours of Employment shall be credited if payment was
made or due
(A) under a plan maintained solely for the purpose of
complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; or
(B) solely as reimbursement for medical or medically
related expenses incurred by the Employee.
(c) For a person on a leave of absence pursuant to Section 10.1
or Section 10.2, credit for such leave shall be given for the number of
regularly scheduled working hours included in the period of such leave;
(d) Each hour for which back pay, irrespective of mitigation of
damages, has been either awarded or agreed to by the Employer. Such Hours
of Employment shall be credited for the periods to which the award or
agreement pertains rather than the periods in which the award, agreement,
or payment is made, and no Hours of Employment shall be credited under this
paragraph which would duplicate any hours credited above.
(e) If a person provides timely information to the Plan
Administrator that he was absent from work for the Employer by reason of
pregnancy or the birth of a child of
-4-
<PAGE>
the person or the placement of a child with the person for adoption or the
care of such a child immediately following birth or placement for adoption,
then solely for purposes of determining whether such person has incurred a
Break in Service, such person shall receive credit for those hours which he
normally would have worked but for such absence (or for eight (8) hours for
each day of such absence if it cannot be determined how many hours normally
would have been worked), but no more than 501 hours shall be credited
pursuant to this subsection (e). Such hours shall be credited to the year
in which the absence begins, if such credit would prevent the person from
incurring a Break in Service for such year, and otherwise shall be credited
to the year following the year in which such absence begins.
Hours of Employment shall be calculated in accordance with Department
of Labor Regulation Section 2530.200b-2(b) and (c).
2.23 "Investment Manager" means the investment manager, if any,
------------------
appointed by the Committee pursuant to Section 13.17.
2.24 "Money Market Fund" means that portion of the Trust which will
-----------------
be separately held and invested by the Trustee; it is anticipated that such Fund
shall be invested primarily in prime money market instruments, United States
government obligations, United States government agency securities, bank
obligations, commercial paper, short-term corporate debt securities, Canadian
government securities, repurchase agreements, and savings and loan obligations.
2.25 "Normal Retirement Date" means the date on which a Participant
----------------------
terminates his employment with the Employer (except by death or permanent and
total disability as defined in Section 2.12) provided such date is on or after
such Participant's 65th birthday.
2.26 "Participant" means an Employee who has satisfied the
-----------
eligibility requirements of Section 3.1 and who has not become a former
Participant under Section 3.3.
2.27 "Plan Administrator" means the Committee appointed pursuant to
------------------
Section 11.
2.28 "Plan Year" means the 12-month period commencing on January 1
---------
and ending on December 31.
2.29 "Qualified Plan" means any plan qualified under Section 401 of
--------------
the Code. For purposes of Sections 16 and 17 only, the term "Qualified Plan"
also means a simplified employee pension described in Section 408(k) of the
Code.
-5-
<PAGE>
2.30 "Service" means the years (and fractions thereof) of a person's
-------
period of "Service" prior to the Effective Date, plus one additional year of
Service for each Plan Year commencing on or after the Effective Date, or the
first day of the Plan Year in which the person attains age 18, provided that the
person completes at least l,000 Hours of Employment during each such Plan Year.
No more than one year of Service may be earned in any Plan Year for any purpose
of the Plan.
2.31 "Settlement Date" means the Valuation Date coinciding with or
---------------
next preceding the date on which a distribution is to be made from the
Participant's Account.
2.32 "Trust" means the trust fund established under the Plan.
-----
2.33 "Trustee" means the trustee or any successor trustee appointed
-------
pursuant to Section 13 hereof.
2.34 "Valuation Date" means the last business day of the Plan Year
--------------
and such other date or dates as may be specified by the Trustee for the
valuation of all or any part of the Trust.
SECTION 3
---------
ELIGIBILITY
-----------
3.1 Participants. Each Employee shall become a Participant
------------
hereunder as of the January 1 or July 1 coinciding with or next following the
date 12 months from the date he commenced employment provided he has then
(a) attained twenty-one (21) years of age, and
(b) completed l,000 Hours of Employment with the Employer or, if
an Employee has not completed l,000 Hours of Employment during such
12-month period, then the date on which he completes one year of
Service.
If a person is not an Employee when he satisfies these requirements,
he shall not become a Participant until the day he again becomes an Employee.
3.2 Former Participants. A former Participant who was not vested in
-------------------
any portion of his Account at the time of his termination of employment and who
incurred five (5) or more consecutive Breaks in Service prior to his
reemployment shall be considered a new Employee who shall again become a
Participant after satisfying the requirements of Section 3.1. Any other Former
Participant who is reemployed by the Employer shall become a Participant on the
date he is reemployed as an Employee.
-6-
<PAGE>
3.3 Cessation of Participation. A person shall cease to be a
--------------------------
Participant and shall become a former Participant when he
(a) has ceased to be employed by the Employer, and
(b) has no undistributed Account balance under the Plan.
SECTION 4
---------
CONTRIBUTIONS AND WITHDRAWALS
-----------------------------
4.1 Determination of Employer Contributions. For each Plan Year,
---------------------------------------
the Employer will contribute to the trust which funds the Plan:
(a) any amount which shall be determined by a resolution of the
Board as a Compensation-related contribution; plus
(b) the amount necessary to repay the interest and principal due
for the Plan Year on any outstanding exempt loans to the Plan.
Any such contribution shall be paid to the Trustee not later than the time
prescribed by law for filing the Employer's federal income tax return for the
taxable year with or within which such Plan Year ends, including any extensions
thereof, and shall be applied in accordance with Section 5.
The Employer may make payment of such contributions for any Plan Year
in cash or, if no ESOP Loan is outstanding, in property, or partly in cash and
partly in property. Such contributions may be made in one or more installments,
as determined by the Board.
4.2 Return of Contributions. All Employer contributions are made
-----------------------
conditioned upon their deductibility for federal income tax purposes under
Section 404 of the Code. Amounts contributed by the Employer shall be returned
to the Employer from the Plan by the Trustee under the following circumstances
provided the Employer presents to the Trustee a written demand for such return:
(a) If a contribution was made by the Employer by a mistake of
fact, the excess of the amount of such contribution over the amount that
would have been contributed had there been no mistake of fact shall be
returned to the Employer within one year after the payment of the
contributions;
(b) If an Employer makes a contribution which is not deductible
under Section 404 of the Code, such
-7-
<PAGE>
contribution (but only to the extent it is disallowed) shall be returned to
the Employer within one year after the disallowance of the deduction. A
contribution shall be deemed to be disallowed on the date that a
"determination" within the meaning of Section 1313(a) of the Code is made
with respect thereto; or
(c) If the Plan does not initially qualify under Section 401 of
the Code, contributions made by an Employer shall be returned to the
Employer within one year after the date of denial of qualification of the
Plan.
Earnings attributable to such contributions shall not be returned to
the Employer, but losses attributable to such excess contributions shall be
deducted from the amount to be returned.
The amount to be returned to the Employer under this Section 4.2 shall
be limited to the extent necessary to insure that the balance in any
Participant's Account after the return is not less than the balance which would
have been in such Account if the mistaken or disallowed amount had not been
contributed; and reduced by the portion thereof which, prior to such return, has
been distributed to Participants or Former Participants in accordance with the
terms of this Plan.
4.3 Participant Contributions. Contributions to the Plan by
-------------------------
Participants are not required or permitted.
4.4 Rollover Contributions and Transfers. In accordance with the
------------------------------------
provisions of Section 5.7, the Committee may direct the Trustee to accept from
or on behalf of an Employee any cash or other assets the receipt of which would
constitute a rollover contribution as defined in Section 408(d)(3)(A)(ii) of the
Code or an eligible rollover contribution as defined in Section 402(c)(4) of the
Code which is excludible from income under Section 402(c)(1) of the Code. The
Committee may also direct the Trustee to accept from the trustee of another
Qualified Plan a direct transfer of cash or other assets which does not
constitute an eligible rollover contribution. Notwithstanding the preceding
sentence, the Trustee may not accept the direct transfer of any assets from any
Qualified Plan which does not constitute an eligible rollover contribution and
which would cause the Plan to be subject to the requirements of Section
401(a)(11) of the Code. Any contributions under this Section shall be segregated
in a separate account and shall be fully vested at all times. Unless accepted on
a Valuation Date, the assets of such account will be segregated from the other
assets of the Plan until the Valuation Date next following the date they are
accepted, and thereafter will share in the allocation of earnings and losses
under Section 5.2.
-8-
<PAGE>
4.5 Withdrawal at 65. A Participant who has attained age 65 may
----------------
elect, at such times and upon such forms as shall be prescribed by the Plan
Administrator, to have withdrawn from his Account under the Trust and paid to
him such part or all of the balance in his Account as is not represented by
Company Stock. A Participant who requests a withdrawal under this Section must
specify the Investment Fund or Funds from which the withdrawal is to be made.
SECTION 5
---------
ALLOCATION OF CONTRIBUTIONS
---------------------------
5.1 Participant Data. Promptly after the end of each Plan Year the
----------------
Employer shall deliver to the Trustee a list containing the following
information:
(a) the names of those Participants who were employed on the
last day of the Plan Year as of which the contribution is to be allocated;
and
(b) the Compensation paid to each such Participant during the
Plan Year.
5.2 Allocations to Participant Accounts. Subject to the provisions
-----------------------------------
of Sections 5.3, 5.4, and 5.7, the Plan Administrator shall open and maintain a
separate bookkeeping Account in the name of each Participant and shall credit to
each such Account that portion of the income, gains and losses of the Trust, and
of each contribution of the Employer to the Trust and of forfeitures, to which
the Participant for whom such Account is held shall be entitled. Separate
subaccounts shall be maintained to reflect an Account's investment in Company
Stock and in other assets. Allocations to each Account shall be determined as
follows:
(a) As of each Valuation Date the Trustee shall determine the
fair market value of the assets held by each Account under the Trust, and
the Plan Administrator shall adjust the balance of each such Account to
reflect the net income or interest earned or losses realized or unrealized
by such Account since the last such apportionment. Such adjustments shall
be made separately for subaccounts representing investments in Company
Stock and other investments. Dividends received on Company Stock shall be
allocated or distributed in accordance with Section 5.3 below. Income,
gains and losses shall be allocated among the subaccounts in the proportion
which the value of each Participant's subaccount as of the next preceding
Valuation Date (reduced by distributions and withdrawals thereafter) bears
to the aggregate value of all such subaccounts of the same type (as so
reduced) as of such date. Forfeitures shall be allocated among Accounts in
the same manner as, and
-9-
<PAGE>
as a part of, the allocation of Employer contributions, as provided in (b)
and (d) below.
(b) To the extent that Employer contributions are not required
to be applied to payments on an exempt loan, then after the adjustments and
allocations described in (a) above have been made, each Participant
described in (d) below shall have credited to his Account out of the
Employer's contribution and forfeitures an amount which bears the same
ratio to the total amount of such contribution and forfeitures as each
Participant's Compensation bears to the total Compensation of all
Participants. Employer contributions and forfeitures allocable to a
Participant shall be added to the Account for the Participant.
(c) To the extent that Employer contributions deemed deductible
under Code Section 404(a)(9) are applied to debt service payments on an
exempt loan, shares of Company Stock released from pledge as a result of
such payments shall be allocated to the appropriate subaccounts of
Participants instead of cash. Subject to the provisions of Section 5.3,
the number of shares to be allocated to a Participant's subaccount shall be
that portion of the shares released from pledge pursuant to Section 13
which the Participant's Compensation bears to the total Compensation of all
Participants.
(d) Forfeitures and Employer contributions shall be allocated
pursuant to (b) and (c), above, only among the Accounts of those
Participants who had at least 1,000 Hours of Employment during the Plan
Year and are Employees on the last day of such Plan Year; provided,
however, if a Participant's Normal Retirement Date, Disability Retirement
Date, or death occurs during the Plan Year, forfeitures and Employer
contributions shall be allocated to such a Participant's Account
irrespective of whether the Participant has completed 1,000 Hours of
Employment in the Plan Year or was an Employee on the last day of the Plan
Year.
(e) During the nonallocation period, as provided in Code Section
409(n), no portion of the assets of this Trust attributable to Company
Stock acquired by the Plan in a sale to which either of Code Sections 1042
or 2057 applies shall accrue or be allocated directly or indirectly for the
benefit of (i) any taxpayer who makes an election under Code Section 1042
or any decedent whose executor makes a qualified sale to which Code Section
2057 applies; (ii) any individual who is related to such taxpayer or
decedent within the meaning of Code Section 267(b); or (iii) any person who
owns (after application of Code Section 318(a)) more than twenty-five
percent (25%) in value of any class of
-10-
<PAGE>
outstanding employer securities (within the meaning of Code Section 409(l))
of the Company. For purposes of this Section the term "nonallocation
period" means the ten-year period beginning on the date of the sale of the
Company Stock and ending on the later of (i) the date which is 10 years
after the sale or (ii) the date of the Plan allocation attributable to the
final payment of acquisition indebtedness incurred in connection with such
sale.
5.3 Dividends and Stock Splits.
--------------------------
(a) While any exempt loan is outstanding, cash dividends
described in Code Section 404(k) which are so designated and received with
respect to Company Stock acquired with the proceeds of an ESOP Loan shall
be applied by the Trustee to reduce the amount due on such loan. If debt
service on an exempt loan is repaid by the application of such cash
dividends on allocated shares, then Company Stock which has a fair market
value equal to the amount of the cash dividends declared on such allocated
stock shall be allocated among Accounts of the Participants to whom the
cash dividends were otherwise allocable.
(b) If no exempt loan is outstanding, cash dividends received
with respect to Company Stock acquired with the proceeds of such loan,
which is held by the Trustee and is allocated to the Accounts of
Participants may, in the sole discretion of the Plan Administrator, be
distributed directly to the respective Participants, provided, however,
that such distribution must be made to the Participants within 90 days
after the end of the Plan Year in which the dividend is received by the
Trustee. Cash dividends received on Company Stock which is held by the
Trustee and is allocated to the Account of any Participant as of the record
date of the dividend, other than cash dividends which the Plan
Administrator determines to distribute currently to the Participants, shall
be added to the Accounts of the respective Participants as income of the
Trust unless the Plan Administrator elects to apply such dividends to the
acquisition of additional Company Stock, in which case the Company Stock so
acquired shall be added to the Accounts of the Participants to which the
dividends were attributable.
(c) Company Stock released from pledge on account of cash
dividends received on Company Stock held by the Trustee and not allocated
to the Account of any Participant shall be allocated by the Plan
Administrator in the same manner as Employer contributions pursuant to
Section 5.2(c).
(d) Any Company Stock received by the Trustee as a stock split
or dividend or as a result of a reorganization or other recapitalization of
the Company shall be allocated by applying the applicable stock split or
stock dividend
-11-
<PAGE>
factor to the appropriate shares in each Participant's Account. In the
event any rights, warrants or options are issued on Company Stock, the
Trustee on behalf of Participants shall exercise them for the acquisition
of additional Company Stock to the extent that cash is then available. Any
rights, warrants or options on Company Stock which cannot be exercised
because of the lack of cash shall be sold by the Trustee, if possible, and
any proceeds invested in shares of Company Stock which shall be allocated
to each Participant's Account in the ratio that the shares in such Account
before the issuance of the rights, warrants or options and with respect to
which the rights, warrants or options are issued bear to the total of all
of such shares in all Participants' Accounts.
5.4 Benefit Limitations. The allocations of Employer contributions
-------------------
and forfeitures to the Account of any Participant under this Plan for any Plan
Year shall be limited to the extent required by Code Section 415 as in effect
for that Plan Year. For purposes of this provision and Code Section 415,
Employer contributions but not cash dividends used to repay an ESOP Loan shall
be treated as an annual addition as provided in Treas. Reg. (S) 54.4975-
11(a)(8)(ii).
5.5 Reallocation of Excess Contributions and Forfeitures. If
----------------------------------------------------
Section 5.4 prevents the allocation to a Participant's Account of an amount
which otherwise would be so allocated for a particular Plan Year, then the
amount which cannot be allocated shall be held by the Trustee in suspense and
shall be allocated in the succeeding Plan Year as a part of the Employer's
contribution for such Plan Year or in a subsequent Plan Year when such
allocation may be made without violating the Code Section 415 limitation.
5.6 Valuation of Company Stock. All valuations of Company Stock
--------------------------
required by the Plan shall be at fair market value.
5.7 Rollover Contributions. For purposes of investment by the
----------------------
Trustee, any rollover contributions made pursuant to Section 4.4 shall be
credited to separate Accounts, which Accounts (a) shall not be invested in
Company Stock, and (b) shall share in allocations of the Trust's net annual
income or losses and in gains or losses at fair market value but shall in no
event share in Company Contributions or forfeitures. The separate Accounts
required to be established shall, (i) be invested in such assets as determined
by the Trustee and (ii) unless otherwise provided herein or unless sooner
distributed, be distributed at the same time and in the same manner as the
Account required to be maintained pursuant to this Section 5 for contributions
made by the Company.
-12-
<PAGE>
SECTION 6
---------
DIVERSIFICATION OF INVESTMENT
IN COMPANY STOCK
-----------------------------
6.1 General. Notwithstanding any other provision of this Plan, a
-------
Participant may elect, in accordance with Section 6.3, to direct the Trustee to
invest a portion (as determined in Section 6.2) of the value of his Account
attributable to the shares of Company Stock for each Plan Year during the
"Qualified Election Period" in the Fixed Income, Money Market and/or Equity
Funds. For purposes of this Section 6, the "Qualified Election Period" means the
six Plan Year period beginning with the later of the Plan Year during which the
Participant has attained age fifty-five or the Plan Year during which the
Participant completes ten years of participation in the Plan. A Participant's
election under this Section 6.1 shall apply only to the Plan Year for which the
election is being made.
6.2 Eligible Investment Amount. The amount eligible for investment
--------------------------
under Section 6.1 for any of the first five Plan Years of the Qualified Election
Period shall be determined by multiplying 25 percent by the adjusted value of
the Participant's Account comprised of shares of Company Stock as of the last
day of the Plan Year for which the election is made. Such adjusted value shall
be determined by multiplying the per share value of Company Stock as of the last
day of such Plan Year by the number of shares of Company Stock equal to the
difference between (a) and (b), as follows:
(a) the total number of shares of Company Stock which have ever
been allocated to the Participant's Account in the Plan determined as of
the Anniversary Date preceding the date of the election; minus
(b) the total number of shares of Company Stock previously
diversified pursuant to this Section 6.
The amount to be invested to a Participant for the sixth Plan Year of the
Qualified Election Period shall be determined pursuant to the above formula
after substituting the words "50 percent" for the words "25 percent" in that
sentence. In the event any stock dividend is declared or the Company Stock is
split, the Committee shall make the appropriate adjustments necessary to
determine the number of shares of Company Stock which may be invested under this
Section 6.
6.3 Participant's Selection of Investment Fund. A Participant's
------------------------------------------
election pursuant to Section 6.1 shall be made in 10% increments with respect to
the percentages of eligible amounts (as determined under Section 6.2) which is
to be allocated among the Fixed Income, Money Market and/or Equity Funds. Such
election shall be made in writing prior to the last
-13-
<PAGE>
day of the Plan Year for which the election is made on a form made available to
the Participant by the Committee. Any such election shall be executed by the
Committee as soon as administratively practicable after the end of the Plan Year
but in no event later than 90 days from such date.
6.4 Transfer Between Investment Funds. As of each Valuation Date, a
---------------------------------
Participant may elect, on forms to be provided by the Committee, to transfer all
or any portion of his Account which was previously invested in the Fixed Income
Fund, the Money Market Fund or the Equity Fund pursuant to Section 6.1 to any of
the other such Funds. Such transfers shall be subject to such reasonable
requirements as may be established by the Committee in order to effect such
transfer in an orderly manner and without adverse effect on the other
Participants' interests in the Funds.
SECTION 7
---------
DISTRIBUTION OF ACCOUNTS
------------------------
7.1 Distributions of Company Stock. Company Stock which is held
------------------------------
in a Participant's Account shall be distributed in whole shares only, and cash
shall be distributed for any fractional share which otherwise would be
distributed. If shares of Company Stock are to be distributed in more than one
installment, each installment before the last shall be made in whole shares
only, without adjustment for fractional shares which otherwise would be
distributable, and only upon the final installment shall an adjustment be made
for a fractional share.
(a) Distributions of that Company Stock acquired with proceeds
of one of the ESOP Loans shall commence in accordance with this Section
7.1(a), or, if later (and if applicable), in accordance with Section
7.1(c):
(1) In case of termination of employment for reasons other
than Retirement, Disability or death, 90 days following the later of
-----
(i) the last day of the fifth Plan Year after the Plan Year in which
the termination of employment occurred or (ii) the last day of the
Plan Year in which the ESOP Loan used to acquire those securities is
repaid in full, provided, however, that no such distribution shall be
made under this paragraph (1) if the Participant is reemployed by an
Employer before the distribution is made.
(2) In case of termination of employment on account of
Retirement, Disability or death, 90 days following the later of (i)
-----
the last day of the Plan Year after the Plan Year in which the
termination of employment occurred or (ii) the last day of the Plan
Year in which the ESOP Loan used to acquire those securities is repaid
in full.
-14-
<PAGE>
(b) Distributions of Company stock not acquired with the proceeds of
an ESOP Loan shall commence in accordance with this Section 7.1(b), or, if
later (and if applicable), in accordance with Section 7.1(c):
(1) In case of termination of employment for reasons other
than Retirement, Disability or death, 90 days following the earlier of
-------
(i) the last day of the fifth Plan Year after the Plan Year in which
the termination of employment occurred or (ii) the last day of the
Plan Year in which such ESOP Loan is repaid in full, provided,
however, that no such distribution shall be made under this paragraph
(1) if the Participant is re-employed by an Employer before the
distribution is made.
(2) In case of termination of employment on account of
Retirement, Disability or death, 90 days following the earlier of (i)
-------
the last day of the Plan Year after the Plan Year in which the
termination of employment occurred or (ii) the last day of the Plan
Year in which such ESOP Loan is repaid in full.
(c) In the event the Participant's vested Account exceeds (or at
the time of any prior distribution exceeded) $3,500 (including stock and
other assets) and the Participant does not consent to the distribution in
accordance with Section 7.9, such portion of the Account shall be
distributed in a single sum within 90 days after the close of either the
Plan Year in which the Participant attains (or would have attained) age 65
or, if later, the Plan Year of the Participant's Retirement.
7.2 Distributions of Other Assets. The vested portion of a
-----------------------------
Participant's Account which is invested in assets other than Company Stock shall
be distributed in cash (unless the Participant elects in accordance with Section
7.6 to receive a distribution of his Account in the form of shares of Company
Stock) within 90 days after the Valuation Date which next follows the
termination of the Participant's employment in whichever of the following
methods the Participant or Beneficiary shall elect:
(a) In a single sum; or
(b) In one or more installments, provided that the entire
amount shall be completely distributed not later than the later of the
dates specified in Section 7.4,
unless either (i) the Participant's vested Account balance exceeds (or at the
time of any prior distribution exceeded) $3,500.00 (including stock and other
assets) and the Participant does not consent to such distribution in accordance
with Section 7.9 (in which case such portion of the Account shall be
-15-
<PAGE>
distributed in a single sum within 90 days after the close of either the Plan
Year in which the Participant attains (or would have attained) age 65 or, if
later, the Plan Year of the Participant's Retirement), or (ii) the Participant
requests that such distribution be made in whole shares of Company Stock (in
which case distribution of cash equal to the value of any fractional share shall
be made within 90 days after the end of the Plan Year in which such request is
made, and the balance shall be distributed in whole shares of Company Stock
(which shall be purchased from the Company with the assets in the Participant's
Account) in accordance with the provisions of Section 7.1).
7.3 Method of Distribution. Distribution of a Participant's Account
----------------------
under Sections 7.1 and 7.2 hereof, shall be made in a single distribution unless
a Participant elects, at least 30 days preceding the date benefits will
commence, on forms provided by the Plan Administrator, to have his Account
distributed as follows:
(a) that portion of his Account which is invested in Company
Stock may be distributed in substantially equal annual payments over a
period no longer than the greater of five (5) years or, in the case of a
Participant with an Account balance in excess of $500,000, five (5) years
plus one (1) additional year for each $100,000 or fraction thereof by which
his Account balance exceeds $500,000 at the time distribution begins to be
made, but in all events the period of distribution will not exceed ten (10)
years; and
(b) that portion of his Account which is invested in assets
other than Company Stock may be distributed in one or more installments
subject to the limitations described in Section 7.4.
7.4 Special Limitations on Distributions. The entire balance of the
------------------------------------
Participant's Account will be distributed by the later of (i) the end of his
life expectancy, or (ii) the end of the joint and last survivor life expectancy
of the Participant and his designated beneficiary, in either case life
expectancies to be determined initially as of the date the Participant's
employment terminates or, if earlier, the date the benefit begins to be paid. If
a Participant's designated beneficiary is his spouse, life expectancies may be
redetermined thereafter, but they may not be redetermined more often than
annually thereafter.
If the Participant's spouse is not his beneficiary, the number of
annual installment payments elected must assure that at least 50 percent of the
present value of the Participant's account available for distribution is paid
within the life expectancy of the Participant, determined as of the date
installment distributions commence.
-16-
<PAGE>
7.5 Installment Distributions. Installment distributions shall be
-------------------------
made annually as soon as practicable after the Valuation Date. The portion of a
Participant's Account being held for future distribution in installments shall
be retained in the Plan and shall continue to share in the income, gains, and
losses of the Plan, but shall not share in Employer contributions or
forfeitures.
The amount of each installment shall be determined by dividing the
number of undistributed installments into the value of the Participant's Account
as of the Valuation Date coinciding with or immediately preceding the date on
which an installment distribution is to be made. If distributions are made in
Company Stock, each distribution before the last will be in the number of whole
shares determined under the preceding sentence, and the last distribution will
include cash for any fractional share.
7.6 Election to Receive Payment in Shares of Company Stock. A
------------------------------------------------------
Participant may elect to receive payment of the vested portion of his Account
which is invested in assets other than Company Stock in whole shares of Company
Stock in accordance with the provisions of Section 6. Such Company Stock shall
be purchased from the Company with the assets in the Participant's Account to
the extent the Company holds Company Stock.
7.7 Required Minimum Distributions. Notwithstanding anything to the
------------------------------
contrary contained in the Plan, the entire interest of a Participant will be
distributed in accordance with Section 401(a)(9) of the Code and the regulations
thereunder beginning no later than the Participant's Required Beginning Date as
determined under Section 7.8 below. Minimum distributions will be based on the
joint life and last survivor expectancy of such Participant and his designated
beneficiary, if any. For purposes of determining the amount of such minimum
distribution the Participant (or his spouse) may elect, at any time prior to his
Required Beginning Date, whether or not to have his (and if applicable, his
spouse's) life expectancy recalculated annually. Any such election shall be
irrevocable. If no such election is made, the Participant's (and if applicable,
his spouse's) life expectancy will not be recalculated. If distributions
commence in installments in order to comply with Section 401(a)(9), a
Participant may elect to receive the entire amount of his Account in a lump sum.
If such an election is made, the Participant will receive, on or before December
31 of the subsequent calendar year, a lump sum distribution of any subsequent
amounts allocated to his Account.
7.8 Required Beginning Date. The Required Beginning Date of a
-----------------------
Participant who is a Five Percent Owner with respect to the Plan Year ending in
the calendar year in which he attains age 70-1/2 shall be the April 1 following
the calendar year in which he attains age 70-1/2, provided, however, the
Required Beginning Date of a Participant who attained age 70-1/2 before January
1,
-17-
<PAGE>
1988, and who was not a Five Percent Owner at any time after the first day of
the Plan Year in which he attained age 66-1/2 shall be the April 1 following the
calendar year in which he terminates employment. The Required Beginning Date of
any other Participant shall be the April 1 following the calendar year in which
the Participant attains age 70-1/2.
7.9 Notification of Eligibility to Receive and Consent to Disability
----------------------------------------------------------------
Benefits.
- --------
(a) In the event that the amount to be distributed to a
Participant pursuant to Section 7.1 and Section 7.2 exceeds $3,500, such
Participant shall receive from the Plan Administrator, during a
Distribution Notice Period, a written notification of:
(i) the material features and the relative values of his
benefits under the optional forms of benefit available under the Plan; and
(ii) his right, if any, to defer receipt of benefits.
(b) The Participant's consent to the distribution of benefits must
be:
(i) in writing;
(ii) made after the Participant receives the notice described
in the preceding sentence; and
(iii) made within 90 days before the Valuation Date or other
date as of which distribution to the Participant is to be made.
SECTION 8
---------
VESTING
-------
8.1 Retirement or Disability. When a Participant's employment
------------------------
terminates by reason of Retirement or Disability, he shall receive a
distribution of the entire balance of his Account as of his Settlement Date in
accordance with the provisions of Section 7.
8.2 Death. When a Participant's employment terminates by reason of
-----
death, his Beneficiary shall be entitled to receive a distribution of the entire
balance of his Account as of his Settlement Date in accordance with the
provisions of Section 7.
8.3 Other Termination of Service. Except as noted below, if a
----------------------------
Participant's employment terminates before he dies,
-18-
<PAGE>
retires or becomes disabled, he shall be entitled to receive that
portion of his Account which is vested. The portion of a Participant's Account
which shall be vested and nonforfeitable shall be determined in accordance with
the following schedule:
<TABLE>
<CAPTION>
Years Percentage of
of Service Account Vested
---------- --------------
<S> <C>
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
</TABLE>
The Participant's Accounts attributable to rollover contributions made pursuant
to Section 4.4 shall be fully vested and nonforfeitable at all times.
8.4 Forfeitures. The nonvested portion of the Account of a
-----------
Participant whose employment with the Employer is terminated prior to the
earliest of his death, Disability Retirement Date, or Normal Retirement Date
shall be forfeited immediately when such Participant has both terminated
employment and received a distribution of his entire vested accounts balances or
when such Participant incurs five consecutive one-year Breaks in Service,
whichever first occurs. The nonvested amounts shall be placed in a separate
account until forfeited and shall be credited with an allocation of earnings and
losses pursuant to Section 5.2. If the Participant is not employed again by the
Employer on the date a forfeiture occurs under this Section, any forfeited
amounts plus earnings and losses thereon shall be allocated to the Accounts of
the other Participants as provided in Section 5.2. Following such forfeiture,
the Participant shall be 100% vested in the remaining balance, if any, of his
Accounts. If a Participant terminates employment with no vested interest in his
Employer Contribution Account, such Participant shall be treated as receiving a
distribution of the vested portion of his Employer Contribution Account on the
last day of the Plan Year in which his termination occurs, provided he is not
employed by the Employer on such date.
If a person who has incurred a forfeiture hereunder is reemployed by
the Employer during a Plan Year before he has incurred five consecutive Breaks
in Service, before any allocation is made under Section 5.2 for such Plan Year,
the amount in his account balance which was forfeited shall be restored without
adjustment for any subsequent gains or losses. Restoration will first be made
out of any unallocated forfeitures and, if such forfeitures are insufficient to
restore such person's account balance, restoration shall be made through an
Employer contribution. If such a restoration is made, the
-19-
<PAGE>
restored amount shall be maintained as a separate account, and the vested
portion of such account from time to time shall equal an amount ("X") determined
by the following formula:
X = P (AB + (R X D)) - (R X D)
For purposes of applying such formula: "P" is vested percentage at the relevant
time; "AB" is the account balance at the relevant time; "D" is the amount
previously distributed to the Participant upon his termination of employment;
and "R" is the ratio of the account balance which was restored. If an amount is
restored to a person under this Section, a separate Employer Contribution
Account shall be maintained for allocations made after his reemployment and
vesting with respect to such account shall be in accordance with Section 8.3.
SECTION 9
---------
DISTRIBUTIONS AT DEATH
----------------------
9.1 Limitations on Distributions. In the case of termination of
----------------------------
employment on account of death, benefits shall be paid out pursuant to Section
7, subject to the following limitations. If benefits began to be distributed to
the Participant before the Participant's death, any benefits which remain to be
paid after death will be distributed at least as rapidly as under the method of
distribution in effect at the date of death. If benefits had not begun to be
distributed before the Participant's death, distribution of the Participant's
entire benefit must begin and must be completed within five years after the date
of death, unless one of the following sentences applies. If the Participant's
spouse is the Beneficiary, benefits must begin to be distributed not later than
the later of one year after the Participant's death or the date on which the
Participant would have attained age 70-1/2, and must be paid over a period which
does not extend beyond the life expectancy of the Beneficiary determined at the
time benefits commence and redetermined no more often than annually thereafter.
If the Participant's spouse is not the Beneficiary, or if the spouse was the
Beneficiary but dies before all benefits have been distributed, benefits must
begin to be distributed not later than one year after the Participant's (or
spouse's) death, and must be paid over a period which does not extend beyond the
life expectancy of the Beneficiary determined at the time benefits commence.
9.2 Distribution to Spouse. Upon the death of a Participant, the
----------------------
entire balance of his Account shall be distributed to his surviving spouse, if
any, unless the surviving spouse has consented during the Participant's lifetime
in the manner required under Section 9.5 to a designated beneficiary and one or
more designated beneficiaries survives the Participant.
-20-
<PAGE>
9.3 Designation of Beneficiary. Each Participant shall have the
--------------------------
right to name and change primary and contingent beneficiaries under the Plan on
a form provided for that purpose by the Plan Administrator. If upon the death of
the Participant, the Participant has no surviving spouse or the Participant's
surviving spouse consented to the designation of a beneficiary in the manner
required under Section 9.5 the entire balance of his Account shall be divided
among the primary beneficiaries designated by such Participant who survive the
Participant, if any, otherwise the balance of his Account shall be divided among
the contingent beneficiaries who survive the Participant.
9.4 Beneficiary Not Designated. In the event the Participant has no
--------------------------
surviving spouse and has either failed to designate a beneficiary or no
designated beneficiary survives him, the amounts otherwise payable to a
beneficiary under the provisions of this Section 9 shall be paid to whichever of
the following relatives of the Participant, in the order of precedence set forth
below, survives the Participant:
(a) spouse;
(b) children and issue of predeceased children in equal shares per
stirpes;
(c) parents, in equal shares; or
(d) sisters and brothers and issue of predeceased sisters and
brothers in equal shares per stirpes.
If no such relatives survive the Participant, the amounts otherwise payable to a
beneficiary under the provisions of Section 9 shall be paid to the Participant's
executor or administrator.
9.5 Spousal Consent to Designation of Beneficiary. The spouse of a
---------------------------------------------
Participant may consent in writing to the designation of a beneficiary other
than the spouse or to a change in the designation of a beneficiary other than
the spouse. The spouse's consent must acknowledge the effect of such designation
of an alternate beneficiary (or change in the alternate beneficiary) and must be
witnessed by a notary public or plan representative. Any such consent must be
filed with the Plan Administrator in order to be effective. No consent need be
obtained in the event the Participant has no spouse or the Participant's spouse
cannot be located. In this event, the Participant must certify on a form
provided by the Employer that he has no spouse or that his spouse cannot be
located in order for his beneficiary designation to be effective.
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<PAGE>
SECTION 10
----------
LEAVES OF ABSENCE AND TRANSFERS
-------------------------------
10.1 Military Leave of Absence. So long as The Vietnam Era Veterans
-------------------------
Readjustment Act of 1974 or any similar law shall remain in force, providing for
reemployment rights for all persons in military service, as therein defined, an
Employee who leaves the employment of the Employer for military service in the
Armed Forces of the United States, as defined in such Act from time to time in
force, shall, for all purposes of this Plan, be considered as having been in the
employment of the Employer, with the time of his service in the military
credited to his Service; provided that upon such Employee being discharged from
the military service of the United States he applies for reemployment with the
Employer and takes all other necessary action to be entitled to, and to be
otherwise eligible for, reemployment rights, as provided by The Vietnam Era
Veterans Readjustment Act of 1974, or any similar law from time to time in
force.
Notwithstanding any other provision of the Plan, a Participant who is
on a military leave of absence as defined in the preceding paragraph will share
in the allocations of Employer Contributions under Section 5 for the Plan Year
in which such military leave commences but will not share in allocations for any
succeeding Plan Years ending before the Participant's return from such military
leave.
10.2 Other Leaves of Absence. An Employee on an Employer-approved
-----------------------
leave of absence not described in Section 10.1 shall for all purposes of this
Plan be considered as having continued in the employment of the Employer for the
period of such leave, provided that such leave qualifies as leave under the
Family Medical Leave Act or the Employee returns to the active employment of the
Employer before or at the expiration of such leave. Such approved leaves of
absence shall be given on a uniform, non-discriminatory basis in similar fact
situations.
Notwithstanding any other provision of the Plan, a Participant who is
on an Employer-approved leave of absence as defined in the preceding paragraph
will share in the allocations of Employer contributions under Section 5 for the
Plan Year in which such leave of absence begins but will not share in such
allocations for the Plan Year ending before the Participant's return from such
leave of absence.
SECTION 11
----------
ADMINISTRATION
--------------
11.1 Appointment of Committee. The Board shall appoint a Committee
------------------------
of one (1) or more persons who shall serve at the pleasure of the Board. If, at
any time, the Board has not
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<PAGE>
appointed a Committee, or there is no Committee, then the Company shall have all
of the duties, responsibilities, powers and authorities given to the Committee.
Upon death, written resignation, removal or inability of a member of the
Committee to continue, the Board shall appoint a successor. The Committee shall
appoint its own Chairman and Secretary. The Chairman of the Committee shall be
the agent for service of legal process on the Plan.
11.2 Construction. The Committee shall have the discretionary
------------
authority to construe, interpret and administer all provisions of the Plan and
to determine a Participant's eligibility for benefits on a uniform, non-
discriminatory basis in similar fact situations. Any decision of a majority of
the then members of the Committee shall govern and shall not be subject to
review by anyone; provided however, in no event may the duties, responsibilities
or liabilities of the Trustee be changed in any manner without the express
written consent of the Trustee. Any certification by the Company of information
requested by the Committee shall, for all purposes of this Plan, be binding on
all parties in interest.
11.3 Death, Resignation, or Removal of Committee Member. A member of
--------------------------------------------------
the Committee shall cease to be such upon his death, resignation, removal or
upon being declared legally incompetent. Any member of the Committee may resign
by notice in writing mailed or delivered to the Board.
11.4 Decisions and Delegation. A decision of the Committee may be
------------------------
made by a written document signed by all of the then members of the Committee or
by majority vote at a meeting of the Committee. The Secretary of the Committee
shall keep all records of meetings and of any action by the Committee and any
and all other records desired by the Committee.
The Committee may appoint such agents, who need not be members of the
Committee, as it may deem necessary for the effective exercise of its duties,
and may, to the extent not inconsistent herewith, delegate to such agents any
powers and non-discretionary duties, as the Committee may deem expedient or
appropriate. The Committee shall notify the Trustee by written instrument signed
by a majority of the members of the Committee of the persons having authority to
act for or on behalf of the Committee. The Trustee may rely on such designated
authority until revoked in writing by the Committee. All orders, requests, and
instructions of the Committee to the Trustee shall be in writing and signed by
such persons as shall be authorized by the Committee from time to time to issue
such orders, requests, and instructions on its behalf. The Trustee shall be
fully protected in acting in accordance with such orders, requests, and
instructions believed by it to be genuine and correct and to have been signed by
the proper parties.
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<PAGE>
No member of the Committee shall make any decision or take any action
covering exclusively or particularly his own benefits under the Plan. All such
matters shall be decided by a majority of the remaining members of the Committee
or, in the event of inability to obtain a majority, by the Board.
11.5 Meetings. The Committee shall hold meetings upon such notice,
--------
at such place or places and at such times as the Committee may determine.
Meetings may be called by the Chairman or any member of the Committee. A
majority of the Committee shall constitute a quorum for the transaction of
business.
11.6 Duties of the Committee. The Committee shall, as part of its
-----------------------
general duty to supervise and administer the Plan, have such powers, not
specifically reserved to the Board or to the Trustee, as may be necessary,
expedient, or advisable in administering the Plan and, without limiting the
generality of the foregoing grant of power or any grant of power elsewhere
stated herein, the Committee shall have the power:
(a) to make such rules, regulations and procedures as may be
deemed appropriate in carrying out the general purpose and intent of the
Plan, which rules, regulations and procedures shall be binding upon the
Company, the Participants, and beneficiaries;
(b) to direct the Trustee specifically in writing in regard to
the making of distribution payments, giving the names of the payees, the
amounts to be paid, and the time or times when payments shall be made;
(c) to direct the Trustee specifically in writing in regard to
the making of any other payments which the Trustee is not authorized to
make without direction in writing by the Committee;
(d) to decide any disputes which may arise with regard to the
rights of Participants, beneficiaries, or their legal representatives
pursuant to Section 12;
(e) to prepare, or to direct the Trustee to prepare, as soon as
practicable following the end of each Plan Year an annual statement which
reflects the status of each Participant's Account including any information
required to be furnished to Participants under federal, state or local law.
Such annual statements shall be distributed promptly upon completion to the
Employer and to each respective Participant; and
(f) to make equitable adjustments for any mistakes or errors
made in the administration of the Plan.
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<PAGE>
11.7 Payment of Expenses. The Committee shall serve without
-------------------
remuneration, but the reasonable expenses incurred by the Committee, including
reasonable fees and expenses of custodial agents, attorneys, Accountants, and
other advisors, shall be paid from the Trust (or by the Company if the Trust
Fund is unable to do so); provided, however, that the Company may, in its own
discretion, pay all or part of such expenses.
11.8 Records of the Committee. All acts and determinations of the
------------------------
Committee shall be duly recorded by the Secretary thereof (or under his
supervision), and all such records, together with such other documents as may be
necessary for the proper administration of the Plan, shall be preserved in the
custody of such Secretary. Such records and documents shall at all times be open
for inspection and copying by any person designated by the Board.
11.9 Indemnification. To the extent permitted by law, the Company
---------------
shall indemnify and save each member and former member of the Committee, each
Trustee, each former Trustee, and the Plan Administrator if, while serving as
such, he is or was an Employee, officer or director of the Company (each such
person being herein called an "Indemnitee"), and their respective heirs and
legal representatives, harmless from and against any loss, cost, or expense
including reasonable attorneys' fees which any such person may incur
individually, jointly, or jointly and severally, arising out of or in connection
with the administration of this Plan, including, without limitation of the
foregoing, any liability which may arise out of or in connection with the
management and control of the Trust, unless such liability is determined to be
due to willful breach of the Indemnitee's responsibilities under this Plan,
under ERISA, or other applicable law.
SECTION 12
----------
CLAIM PROCEDURE
---------------
12.1 Claim. A Participant or beneficiary or other person who
-----
believes that he is being denied a benefit to which he is entitled (hereinafter
referred to as "Claimant") may file a written request for such benefit with the
Plan Administrator, setting forth his claim. The request must be addressed to:
Plan Administrator, Chester National Bank Employee Stock Ownership Plan and
Trust, 1112 State Street, Chester, Illinois 62233.
12.2 Claim Decision. Upon receipt of a claim, the Plan Administrator
--------------
shall advise the Claimant that a reply will be forthcoming within 90 days and
shall in fact deliver such reply in writing within such period. The Plan
Administrator may, however, extend the reply period for an additional 90 days
for reasonable cause. If the claim is denied in whole or in part, the Plan
Administrator will adopt a written opinion using
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<PAGE>
language calculated to be understood by the Claimant setting forth:
(a) the specific reason or reasons for the denial;
(b) specific references to pertinent Plan provisions on which
the denial is based;
(c) a description of any additional material or information
necessary for the Claimant to perfect the claim and an explanation why such
material or such information is necessary;
(d) appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and
(e) the time limits for requesting a review under Section 12.3
and a review under Section 12.4.
12.3 Request for Review. Within 60 days after the receipt by the
------------------
Claimant of the written opinion described above, the Claimant may request in
writing that the Committee review the determination of the Plan Administrator.
Such request must be addressed to: Committee, Chester National Bank Employee
Stock Ownership Plan and Trust, 1112 State Street, Chester, Illinois 62233. The
Claimant or his duly authorized representative may, but need not, review the
pertinent documents and submit issues and comments in writing for consideration
by the Committee. If the Claimant does not request a review of the Plan
Administrator's determination by the Committee within such 60-day period, he
shall be barred and estopped from challenging the Plan Administrator's
determination.
12.4 Review on Appeal. Within 60 days after the Committee's receipt
----------------
of a request for review, he will review the Plan Administrator's determination.
After considering all materials presented by the Claimant, the Committee will
render a written opinion, written in a manner calculated to be understood by the
Claimant, setting forth the specific reasons for the decision and containing
specific references to the pertinent Plan provisions on which the decision is
based. If special circumstances require that the 60-day time period be extended,
the Committee will so notify the Claimant and will render the decision as soon
as possible but not later than 120 days after receipt of the request for review.
The Committee shall possess and exercise discretionary authority to make
determinations as to a Participant's eligibility for benefits and to construe
the terms of the Plan. The decision of the Committee shall be final and non-
reviewable unless found to be arbitrary and capricious by a court of competent
review. Such decision will be binding upon the Employer and the Claimant.
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<PAGE>
12.5 Discharge of Claims. Whenever any distribution is made to a
-------------------
Participant or his Beneficiary pursuant to the provisions of this Plan, such
distribution shall fully discharge the Trustee and the Plan Administrator from
all adverse claims with respect thereto unless, before or within 30 days after
such distribution is made, a written notice by or on behalf of any person
claiming to be entitled to all or part of such distribution is received by the
Trustee.
12.6 Method of Distribution. Distributions under the Plan shall be
----------------------
deemed to have been received as of the date such distribution is deposited in
the United States mail by the Trustee, addressed to the last known address of
the distributee, with postage prepaid.
SECTION 13
----------
TRUSTEE'S POWERS AND DUTIES
---------------------------
13.1 Investment of Contributions. Upon receipt of each Employer
---------------------------
contribution made under Section 4.1, the Trustee shall, within 30 days, apply
all cash received (less cash used to repay the interest or principal on a loan
to the Plan) to the purchase of those investments which the Trustee deems
appropriate. Each purchase of Company Stock shall be made at a price which does
not exceed the fair market value of such shares at the time of purchase. It is
the intention of this Plan that the Trustee acquire and hold Company Stock to
the extent possible with the assets available, subject to elections by
Participants in accordance with Section 5.2(e). The Trustee is expressly
authorized to invest up to one hundred percent (100%) of the assets of the Trust
in Company Stock.
13.2 Other Investments. The Trustee shall invest and reinvest all
-----------------
other cash contributed to or earned by the Plan as provided in Section 5 without
distinction between principal and income; provided, however, that an amount
which the Trustee deems reasonable to effect distributions and to pay
administrative expenses or amounts due on loans to the Plan may be held in cash
pending investment or distribution.
The Trustee shall invest such cash in such securities or property,
real or personal, wherever situated, as the Trustee shall deem advisable,
including, but not limited to, common or preferred stocks, bonds, and mortgages,
and other evidence of indebtedness or ownership, even though the same may not be
the types of investments which are authorized by the laws of the State of
Illinois for the investment of trust funds, but excluding any life insurance
policies.
The Trustee is authorized to invest part or all of the assets of the
Trust through the medium of one or more collective investment funds, and so long
as assets of the Trust are invested
-27-
<PAGE>
through such medium the declaration of trust establishing such fund or funds
shall be deemed to have been adopted and made a part of this Trust.
If the Trustee is a bank or trust company, the Trustee is authorized
to invest assets of the Trust in savings accounts, time certificates of deposit,
or collective investment funds through the banking department of the Trustee or
any affiliate of the Trustee.
13.3 Title to Assets. Title to all Plan assets including Company
---------------
Stock shall be and remain in the Trustee and any such assets may be registered
in its name, or in the name of its nominee, or in such form that title will pass
by delivery with or without the addition of words indicating that such
securities are held in a fiduciary capacity. The books and records of the
Trustee shall at all times show that all such instruments are part of the Trust.
13.4 General Powers and Authority. The Trustees shall have the
----------------------------
following powers and authority in the administration of the Trust:
(a) to purchase, or subscribe for, any securities or other
property, and to retain the same in trust;
(b) subject to Section 13.6 to sell, exchange, convey, transfer,
or otherwise dispose of any securities including all of the Company Stock
or other property held by it, by private contract or at public auction or
public sale;
(c) subject to Section 13.5, to vote any stocks, bonds or other
securities and to give general or special proxies or powers of attorney
with or without power of substitution;
(d) subject to Sections 13.6 and 13.7, to exercise any
conversion privileges, subscription rights, or other options and to make
any payments incidental thereto; to oppose or consent to, or otherwise
participate in, corporate reorganizations or other changes affecting
corporate securities, and to delegate discretionary powers, and to pay any
assessments or charges in connection therewith; and generally to exercise
any of the powers of an owner with respect to stocks, bonds, securities or
other property held as a part of the Trust;
(e) to borrow or raise money for the purposes of the Trust in
such amount, and upon such terms and conditions, as the Trustee shall deem
advisable;
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<PAGE>
(f) to issue its promissory note as Trustee for any sum
borrowed, and to secure the repayment thereof by pledging all, or any part
of the Trust;
(g) to keep such portion of the Trust in cash or cash balances
as the Trustee may, from time to time, deem to be in the best interests of
the Trust;
(h) to accept and retain for such time as it may deem advisable
any securities or other property received or acquired by it as Trustee
hereunder, whether or not such securities or other property would normally
be purchased as investments for the Trust;
(i) to make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments that
may be necessary or appropriate to carry out the powers granted in this
Plan;
(j) to settle, compromise, or submit to arbitration any claims,
debts, or damages due or owing to or from the Trust to commence or defend
suits or legal or administrative proceedings, and to represent the Trust in
all suits and legal and administrative proceedings; and
(k) to do all such acts, take all such proceedings, and exercise
all such rights and privileges, although not specifically mentioned in this
Plan, as the Trustee may deem necessary to administer the Trust, and to
carry out the purpose of this Trust.
The Trustee shall be under no duty, express or implied, to verify or
determine the amount of any contribution to be made by the Company under the
Plan or to compel any payment to be made to it by the Company and shall be
accountable only for cash and other property actually received by the Trust.
Any powers or duties granted to or imposed upon the Trustee that are
to be exercised according to the direction of the Committee shall be exercised
by the Trustee only if, when and as directed by the Committee in a written
instrument delivered to the Trustee, but if the Committee and the Trustee are
the same person or group of persons then no written communication shall be
required between them pursuant to this Section.
13.5 Voting Rights. The Trustee alone, except as provided in the
-------------
following sentences, shall have the power to vote any stocks, bonds or other
securities; to give general or special proxies or powers of attorney with or
without power of substitution; to exercise any conversion privileges,
subscription rights, or other options, and to make any payments incidental
thereto. With respect to any matter requiring a vote of the shareholders of the
Company to approve or disapprove any
-29-
<PAGE>
corporate merger, consolidation, recapitalization, reclassification,
liquidation, dissolution, sale of substantially all assets of a trade or
business, or other transaction which by reason of Illinois law or the Company's
articles of incorporation must be decided by more than a majority vote of
outstanding common shares voted, each Participant shall be entitled to advise
the Trustee as to how the shares of Company Stock allocated to the Participant's
Account should be voted on the issue, but only to the extent required by
Sections 401(a)(22) and 409(e)(3) of the Code and the regulations thereunder.
With respect to such matter, the Trustee shall vote those shares of Company
Stock held in the Plan as directed by each Participant. On such matters, any and
all fractional shares of Company Stock allocated to Participant Accounts shall
be combined and the Trustee shall vote, or not vote, such shares in the same
proportion and in the same manner as Participants direct that whole shares of
company Stock allocated to their Accounts be voted. Shares for which no
instructions are received from Participants or beneficiaries and shares held in
a suspense Account shall be voted by the Trustee as it shall determine. On all
other matters, the Trustee need not solicit instructions from Participants. The
Trustees shall vote all of the unallocated shares as the Trustees determine by a
two-thirds majority vote of the Trustees.
13.6 Other Dispositions of Company Stock. The Trustee shall not
-----------------------------------
sell, exchange convey, transfer or otherwise dispose of Company Stock allocated
to the Account of a Participant or beneficiary unless the Participant or
beneficiary has received notice from the Trustee of the proposed disposition and
has failed to object in writing by the date specified in the notice, which shall
not be earlier than 20 days after notice is mailed by the Trustee. This
provision shall apply only to a random sale of Company Stock which does not
effect all Participants equally.
13.7 Distributions. The Trustee shall make distributions to
-------------
Participants or beneficiaries in the form of cash or Company Stock at such times
and in such manners as it may be directed in writing by the Committee. The
Trustee shall not be responsible in any way for the application of such
distributions.
13.8 Safekeeping of Assets. The Trustee shall have the power to
---------------------
select such depositaries for the deposit of funds and for the safekeeping of
other property of the Plan as in the judgment of the Trustee may be necessary or
advisable in the administration of the Plan.
13.9 Prohibited Transactions. The Trustee may, in its discretion,
-----------------------
buy from and sell to the Company, any Employee, director, or stockholder thereof
and otherwise deal in any manner with the Company, any Employee, director or
stockholder thereof, provided that such transaction meets the requirements set
forth in Section 408(e) of the Employee Retirement Income Security Act
-30-
<PAGE>
of 1974 ("ERISA") or is otherwise exempted from the prohibited transactions set
forth in Section 406 of ERISA and will not result in the imposition of a tax
under Section 4975 of the Code.
13.10 Receipt of Contributions. The Trustee shall be under no
------------------------
obligation whatsoever to determine whether or not contributions delivered to it
hereunder comply with the provisions of this Plan and is obligated only to
receive and administer the same pursuant to the terms hereof. It shall be the
duty of the Committee to notify the Trustee in writing of all facts which may be
necessary in order to determine any matter, such as the time and amount of
distributions. The Trustee is hereby authorized to act solely upon the basis of
such notification and such facts received from the Company and to rely upon any
document or signature believed by it to be genuine.
13.11 Records. The Trustee shall keep true and accurate records of
-------
all transactions of the Plan, which shall be available for inspection and audit
by authorized representatives of the Company. Within ninety (90) days following
the close of the Plan Year, and within ninety (90) days after the removal or
resignation of the Trustee as provided in Section 13.16, the Trustee shall
prepare and deliver to the Company an accounting of the Plan transactions since
the last previous accounting.
13.12 Compensation of Trustee. If the Trustee is not the Company or
-----------------------
an affiliate or employee of the Company, the Trustee shall be entitled to
reasonable compensation for its services at rates to be determined by agreement
between the Committee and the Trustee.
13.13 Expenses; Taxes. The Trustee shall have the power, subject to
---------------
the approval of the Committee (which approval shall not be unreasonably
withheld), to pay from the assets of the Plan, unless paid by the Company, all
reasonable and necessary expenses and charges incurred in connection with the
administration, operation or termination of the Plan, including but not limited
to fees for attorneys, accountants, advisors and agents, premiums on insurance
of the type described in Section 11.7, brokerage fees, stock transfer taxes or
any other taxes.
13.14 Exclusive Benefit. The Trustee's duties under the Plan shall
-----------------
be discharged solely in the best interests of, and for the exclusive purpose of
providing benefits to, Participants and beneficiaries.
13.15 Agency of Trustee. No person contracting or in any way dealing
-----------------
with the Trustee shall be under any obligation to ascertain or inquire into any
powers of the Trustee, or whether such powers have been properly exercised, or
about the source of application of any funds received from or paid to the
Trustee.
13.16 Resignation or Removal of Trustee. The Trustee shall serve at
---------------------------------
the pleasure of the Committee. A Trustee may
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<PAGE>
resign upon sixty (60) days written notice to the Company. Upon the resignation,
removal, or inability of the Trustee to continue, the Committee shall appoint a
successor. Any successor Trustee shall execute, acknowledge, and deliver to the
Committee and the resigning Trustee an instrument accepting such appointment.
Such successor Trustee, without further act or conveyance, shall become vested
with all rights, powers, duties, and obligations with respect to the Plan assets
with like effect as if originally named as Trustee herein. Nevertheless, on the
written request of the Committee, the Trustee ceasing to act shall execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers, and Plan assets of the Trustee ceasing to act.
13.17 Investment Manager. The Committee may appoint an Investment
------------------
Manager to direct the Trustee with respect to the investment of all or a
specified portion of the assets of the Trust. Such appointment shall be made by
a resolution of the Committee and shall be effective as of the date specified in
such resolution, but not before it has been accepted in writing by the
Investment Manager and notice of the appointment and acceptance given to the
Trustee. After the effective date of the appointment of an Investment Manager,
the Trustee shall follow the directions of the Investment Manager with respect
to the investment of those assets specified in the resolution of appointment.
The Committee may remove or change the assets subject to the control of any
previously appointed Investment Manager, but the Trustee may follow the
instructions of a properly appointed Investment Manager until informed by the
Committee that such Investment Manager has been removed or his authority over
particular assets changed. No person or firm may be appointed as an Investment
Manager unless he meets the requirements of Section 3(38) of ERISA.
If the Committee appoints an Investment Manager, the Trustee shall not
be responsible for the investment of those assets over which the Investment
Manager has authority, and shall not be liable for the acts or omissions of the
Investment Manager with respect to such assets.
An Investment Manager shall have, with respect to those assets over
which he has authority, the same powers and authority, and shall be subject to
the same restrictions, as are granted to and imposed upon the Trustee by the
terms of this Plan.
13.18 Exempt Loans to the Plan. In addition to the authority granted
------------------------
in Section 13.4(e), the Trustee may borrow money through an exempt loan (as such
term is defined in Treasury Regulation Section 54.4975-7(b)(1)(iii)). Any such
loan shall be for a specific term, must bear a reasonable rate of interest, and
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<PAGE>
shall not be payable on demand, and shall be used only for the following
purposes:
(a) to acquire qualifying employer securities (as defined in
Treasury Regulation Section 54.4975-7(b)(1)(v));
(b) to repay such loan;
(c) to repay a prior exempt loan.
Except as otherwise provided in this Plan, no share of Company Stock
acquired with the proceeds of an exempt loan shall be subject to a put, call or
other option, or a buy-sell or similar arrangement. This provision shall be
nonterminable even if the Plan fails to remain qualified as an employee stock
ownership plan under Sections 401 and 4975 of the Code.
Payments of principal and interest on any exempt loan may be made by
the Trustee only from Employer contributions paid in cash, from earnings
attributable to such Employer contributions and from any such dividends received
by the Trustee on shares of Company Stock acquired with the proceeds of an
exempt loan.
13.19 Investment of Loan Proceeds. The Committee shall instruct the
---------------------------
Trustee how the proceeds of any exempt loan shall be used. Upon receipt of loan
proceeds, the Trustee shall, within 30 days, apply all cash received
exclusively to the purchase, in one or more transactions, of the maximum number
of whole shares of Company Stock which can be purchased with such cash. Such
purchase may be made from Company shareholders or directly from the Company.
Any purchase of shares of Company Stock shall be made at a price which does not
exceed the fair market value of such shares at the time of purchase.
13.20 Pledge of Company Stock to Secure an Exempt Loan.
------------------------------------------------
(a) Shares of Company Stock acquired with the proceeds of any
exempt loan to the Plan shall be held in a suspense account. Any pledge of
stock to secure any exempt loan must provide for the release of the shares
so pledged as debt service payments on the exempt loan(s) are made by the
Trustee.
(b) Except as provided in (c), below, the number of shares to be
released from pledge as a result of a payment on an exempt loan during each
Plan Year must be at least equal to the number of shares pledged to secure
such loan immediately before the payment multiplied by a fraction the
numerator of which is the sum of the principal and
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<PAGE>
interest paid during such Plan Year and the denominator of which is the sum
of the numerator plus the total payments of principal and interest
projected to be paid on the exempt loan in all future years. For purposes
of making such projection, interest to be paid in the future is to be
computed using the interest rate in effect as of the day on which the
calculation is being made.
(b) The Committee may elect at the time an exempt loan is made,
or the terms of the exempt loan may provide, that shares of Company Stock
shall be released from pledge to secure such exempt loan based solely on
the ratio that payments of principal bear to the total payments of
principal to be made under the loan. This method may be used, however, only
if (i) the exempt loan provides for payments of principal and interest at
least annually at a cumulative rate which is not less rapid at any time
than level annual payments which fully amortize the loan over ten (10)
years; (ii) interest included in any payment on the exempt loan is
disregarded only to the extent that it would be determined to be interest
under standard loan amortization tables; and (iii) the entire term of the
exempt loan, including any renewal, extension or refinancing, does not
exceed ten (10) years.
13.21 Standard of Care. The Trustee shall act with the care, skill,
----------------
prudence and diligence under the circumstances then prevailing which a prudent
person acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims.
SECTION 14
----------
AMENDMENT AND TERMINATION
-------------------------
14.1 Amendment. The Company shall have the right, by action of the
---------
Board, at any time and from time to time to amend, in whole or in part, any or
all of the provisions of the Plan. No such amendment, however, shall:
(a) authorize or permit any part of the assets of the Plan
(other than such part as is required to pay taxes and administration
expenses of the Plan) to be used for or diverted to purposes other than for
the exclusive benefit of the Participants or their beneficiaries;
(b) cause any reduction in the accrued benefit of a Participant
unless permitted by Code Section 411(d)(6)(c);
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<PAGE>
(c) cause or permit any portion of the assets of the Plan to
revert to or become the property of the Employer; or
(d) expand the duties of the Trustee unless such amendment has
been approved by the Trustee in writing;
provided, however, that if a favorable determination letter shall not be
received upon the initial submission to the Internal Revenue Service that the
Plan as herein set forth or as amended meets the requirements of Sections
401(a), 401(k) and 501(a) of the Code, the Company may, at its option, amend the
Plan in any manner which will result in a favorable determination letter being
issued by the Internal Revenue Service or the Company may withdraw all
contributions made by it and the Plan shall then terminate with the same effect
as if it had never been adopted. If any amendment violates Code Section
411(d)(6), the provisions of the Plan prior to the effective date of such
amendment shall apply.
14.2 Termination; Discontinuance of Contributions. The Company shall
--------------------------------------------
have the right at any time to terminate this Plan. Upon termination, partial
termination, or complete discontinuance of contributions, all Participants'
Accounts (or, in the case of a partial termination, the Accounts of all
affected Participants) shall become fully vested, and shall not thereafter be
subject to forfeiture.
SECTION 15
----------
MISCELLANEOUS
-------------
15.1 Participants' Rights. Neither the establishment of the Plan
--------------------
hereby created, nor any modification thereof, nor the creation of any fund or
Account, nor the payment of any benefits, shall be construed as giving to any
Participant or other person any legal or equitable right against the Employer,
any officer or Employee thereof, the Trustee or the Board except as herein
provided. Under no circumstances shall the terms of employment of any
Participant be modified or in any way affected hereby. Neither the Trustee nor
the Company guarantee the Trust against loss or other depreciation or diminution
in value, nor do they guarantee any payment or level of payment to any
individual. The liability of the Trustee or the Company to make any payment
hereunder is limited to the available assets of the Trust.
15.2 Spendthrift Clause. No benefit or beneficial interest provided
------------------
under the Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, either voluntary or
involuntary, and any attempt to so alienate, anticipate, sell, transfer, assign,
-35-
<PAGE>
pledge, encumber or charge the same shall be null and void. No such benefit or
beneficial interest shall be liable for or subject to the debts, contracts,
liabilities, engagements, or torts of any person to whom such benefits or funds
are or may be payable.
15.3 Delegation of Authority by Employer. Whenever the Employer,
-----------------------------------
under the terms of this Plan, is permitted or required to do or perform any act
or matter or thing, it shall be done and performed by any officer thereunto duly
authorized by the Board.
15.4 Distributions to Minors/Incompetents. In the event that any
------------------------------------
portion of the Plan becomes distributable under the terms hereof to a minor or
other person under legal disability as determined by the Plan Administrator, the
Plan Administrator shall, in its discretion, direct that such distribution be
made in one of the following ways: (a) to the legal representative of such minor
or other person; (b) to some relative or friend of such minor or other person
for his support or education; or (c) otherwise on behalf of such person in a
manner that the Plan Administrator determines will be beneficial. Any such
distribution shall be a complete discharge of any liability under the Plan to
such Participant or beneficiary and the Plan Administrator shall not be required
to see to the application of any such distribution so made to any of said
persons.
15.5 Construction of Plan. This Plan shall be construed, regulated
--------------------
and administered in accordance with the Act and, to the extent they are not
inconsistent with the Act, with the laws of the State of Illinois.
15.6 Gender and Number. Whenever any words are used herein in the
-----------------
masculine gender, they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form, they shall be construed as though they
were also used in the plural form in all cases where they would so apply.
Headings of sections and subsections are inserted for convenience of reference,
constitute no part of the Plan and are not to be considered in the construction
hereof.
15.7 Separability of Provisions. If any provision of this Plan shall
--------------------------
be for any reason invalid or unenforceable, the remaining provisions shall
nevertheless be carried into effect.
15.8 Diversion of Assets. No part of the assets of the Plan shall be
-------------------
used for, or diverted to, purposes other than the exclusive benefit of
Participants or their beneficiaries. Except as provided in Section 4.2, the
Employer shall have no beneficial interest in the assets of the Plan and no part
of the assets of
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<PAGE>
the Plan shall revert or be repaid to the Employer, directly or indirectly.
15.9 Service of Process. The President of the Company shall
------------------
constitute the Plan's agent for service of process.
15.10 Merger. In the event of any merger or consolidation with, or
------
transfer of assets or liabilities to, any other plan, each Participant shall (as
if the Plan had then terminated) receive a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the benefit he
would have been entitled to receive immediately before the merger,
consolidation, or transfer (if the Plan had then terminated).
15.11 Commencement of Benefits.
------------------------
(a) Notwithstanding any other Section of the Plan, the payment
of benefits under the Plan to the Participant will begin not later than
60th day after the close of the Plan Year in which the last of the
following occurs:
(1) the date on which the Participant attains age 65; or
(2) the 10th anniversary of the date on which the
Participant commenced participation in the Plan; or
(3) the Participant's termination of employment with the
Employer.
(b) Notwithstanding Section 15.11(a) or any other provision of
the Plan, if the amount of payment cannot be ascertained, or if it is not
possible to make payment because the Plan Administrator cannot locate the
Participant after making reasonable efforts to do so, a retroactive payment
may be made no later than 60 days after the earliest date on which the
amount of such payment can be ascertained or the date on which the
Participant is located, whichever is applicable.
(c) (1) If the Committee is unable to locate any person
entitled to receive distribution from an Account hereunder, such
Account shall be forfeited on the date two years after (i) the date
the Committee sends by certified mail a notice concerning the benefits
to such person at his last known address, or (ii) the Committee
determines that there is no last known address.
-37-
<PAGE>
(2) If an Account is forfeited under Section 15.11(c)(1)
and a person otherwise entitled to the Account subsequently files a
claim with the Committee during any Plan Year, before any allocations
for such Plan Year are made under Section 5.2 the Account will be
restored to the amount which was forfeited without regard to any
earnings or losses that would have been allocated. Such restoration
shall first be taken out of forfeitures which have not been allocated
and if such forfeitures are insufficient to restore such person's
Account balance, restoration shall be made by an Employer contribution
to the Plan.
(d) Each Participant, Former Participant or Beneficiary entitled
to benefits under the Plan must file with the Plan Administrator in writing
his post office address and each change of post office address. Any
communication, payment, statement, or notice addressed to such a person at
his latest post office address as filed with the Plan Administrator shall
be binding upon such person for all purposes of this Plan, and neither the
Plan Administrator nor the Trustee shall be obliged to search for, or
ascertain the whereabouts of any such person.
15.12 Qualified Domestic Relations Order. Notwithstanding anything
----------------------------------
in the Plan to the contrary, benefits may be distributed in accordance with the
terms of a Qualified Domestic Relations Order ("QDRO"). For this purpose a QDRO
is any Domestic Relations Order determined by the Employer to be a Qualified
Domestic Relations Order within the meaning of Section 414(p) of the Code
pursuant to this Section 15.12.
(a) A "Domestic Relations Order" means a judgment, decree, or
order (including the approval of a property settlement agreement) which
(1) relates to the provision of child support, alimony
payments, or marital property rights to a spouse, former spouse, child
or other dependent of a Participant,
(2) is made pursuant to a state domestic relations law, and
(3) creates or recognizes the existence of an Alternate
Payee's right, or assigns to the Alternate Payee the right, to receive
all or a portion of the benefits of the Participant under the Plan.
An "Alternate Payee" includes any spouse, former spouse, child,
or other dependent of a Participant who is
-38-
<PAGE>
designated by the Domestic Relations Order as having a right to receive all
or a portion of the benefits payable under the Plan with respect to the
concerned Participant.
(b) To be a QDRO, the Domestic Relations Order must meet the
specifications set forth in Section 414(p) of the Code and must clearly
specify the following:
(1) Name and last known mailing address of the Participant.
(2) Name and last known mailing address of each Alternate
Payee covered by the Domestic Relations Order.
(3) The amount or the percentage of the Participant's
benefit to be paid to each Alternate Payee, or the manner in which
such amount or percentage is to be determined.
(4) The number of payments or period to which the Domestic
Relations Order applies.
(5) Each Plan to which the Domestic Relations Order
applies.
(c) The status of any Domestic Relations Order as a QDRO shall
be determined under the following procedures:
(1) Promptly upon receiving a Domestic Relations Order, the
Employer will
(A) refer the Domestic Relations Order to legal
counsel for the Plan to render an opinion within 90 days (or such
earlier period as shall be provided by applicable law) whether
the Domestic Relations Order is a QDRO, and
(B) notify the affected Participant and any Alternate
Payee of the receipt by the Plan of the Domestic Relations Order
and of this procedure.
(2) Promptly upon receiving the determination made by the
Plan's legal counsel of the status of the Domestic Relations Order,
the affected Participant and each Alternate Payee (or any
representative designated by an Alternate Payee by written notice to
the Employer) shall be furnished a copy of such determination. The
notice of determination shall state
-39-
<PAGE>
(A) whether the Plan's legal counsel has determined
that the Domestic Relations Order is a QDRO, and
(B) once such legal counsel determines whether the
Domestic Relations Order constitutes a QDRO, that the Employer
will commence any payments currently due under the Plan to the
person or persons entitled thereto after the expiration of a
period of 60 days commencing on the date of the mailing of the
notice unless prior thereto the Employer receives notice of the
institution of legal proceedings disputing the determination.
The Employer shall, as soon as practical after such 60 day
period, ascertain the dollar amount currently payable to each
payee pursuant to the Plan and the QDRO, and any such amounts
shall be disbursed by the Plan.
(3) If there is a dispute on the status of a Domestic
Relations Order as a QDRO, there shall be a delay in making payments.
The Employer shall direct that the amounts otherwise payable be held
in a separate Account within the Plan. If within 18 months thereafter,
the Domestic Relations Order is determined not to be a valid QDRO, or
the status of the Domestic Relations Order has not been finally
determined, the segregated or escrow amounts (including interest
thereon) shall be paid to the person or persons who would have been
entitled to such amounts if there had been no Domestic Relations
Order. Any determination thereafter that the Domestic Relations Order
is a QDRO shall be applied prospectively only.
15.13 Leased Employees. Any person who is a leased employee (within
----------------
the meaning of Section 414(n) of the Code) of any member of the Controlled Group
shall be treated for all purposes of the Plan as if he were employed by a member
of the Controlled Group which has not adopted the Plan.
15.14 Written Explanation of Rollover Treatment. The Plan
-----------------------------------------
Administrator shall, when making an eligible rollover distribution, provide a
written explanation to the recipient of such distribution of his right to roll
over such distribution to an eligible retirement plan within sixty days after
the date on which the recipient receives a distribution and, if applicable, his
right to the special five or ten-year averaging and capital gains tax treatment
in the Code. Such written explanation will be provided to the recipient in
accordance with rules prescribed by the Internal Revenue Service.
-40-
<PAGE>
15.15 Special Distribution Alternative. Notwithstanding the
--------------------------------
preceding, a Participant eligible to receive a distribution from the Plan which
is an eligible rollover distribution (described in Section 402(c)(4) of the
Code) may direct the Trustee to pay the portion of such distribution which would
otherwise be includible in the Participant's taxable income directly to the
trustee of another eligible retirement plan. For this purpose, an eligible
retirement plan shall mean an individual retirement account (described in
Section 408(a) of the Code), an individual retirement annuity (described in
Section 408(b) of the Code) which is not an endowment contract, a qualified
trust (described in Section 401(a) of the Code and which is exempt from tax
under Section 501(a) of the Code) which is a defined contribution plan (the
terms of which permit the acceptance of rollover distributions), or an annuity
plan (described in Section 403(a) of the Code). Such written request shall be
made on a form provided by the Employer and must clearly specify the eligible
retirement plan to which such distribution is to be paid. The Employer shall
provide notice of this option to the Participant in accordance with rules
prescribed by the Internal Revenue Service.
15.16 Plan Binding. This Plan shall be binding upon the Company, its
------------
successors and assigns; upon the Participants and Former Participants, their
heirs, beneficiaries and legal representatives; and upon the Plan Administrator,
Trustee, any Investment Manager, and any other fiduciaries, their successors and
assigns. This Plan may be executed in one or more counterparts, and each of such
counterparts shall, for all purposes, be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
SECTION 16
----------
TOP HEAVY-DEFINITIONS
---------------------
16.1 "Accrued Benefits" means "the present value of accrued benefits"
----------------
as that phrase is defined under regulations issued under Section 416 of the
Code.
16.2 "Beneficiaries" means the person or persons to whom the share of
-------------
a deceased Participant's Account is payable.
16.3 "Determination Date" means for a Plan Year the last day of the
------------------
preceding Plan Year; provided, however, that in the case of the Plan Year of the
Plan beginning _________________, the Determination Date shall be
_________________.
16.4 "Former Key Employee" means any person presently or formerly
-------------------
employed by the Controlled Group (and the
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<PAGE>
Beneficiaries of such person) who during the Plan Year is not classified as a
Key Employee but who was classified as a Key Employee in a previous Plan Year;
provided, however, that a person who has not performed any services for the
Controlled Group at any time during the five year period ending on the
Determination Date (and the Beneficiaries of such persons) shall not be
considered a Former Key Employee.
16.5 "Key Employee" means any person presently or formerly employed
------------
by the Controlled Group (and the Beneficiaries of such person) who is a "key
employee" as that term is defined in Section 416(i) of the Code and the
regulations thereunder; provided, however, that a person who has not performed
any services for the Controlled Group at any time during the five year period
ending on the Determination Date (and the Beneficiaries of such persons) shall
not be considered a Key Employee. For purposes of determining whether a person
is a Key Employee, the definition of Top-Heavy Compensation shall be applied.
16.6 "Non-Key Employee" means any person presently or formerly
----------------
employed by the Controlled Group (and the Beneficiaries of such person) who is
not a Key Employee or a Former Key Employee; provided, however, that a person
who has not performed any services for the Controlled Group at any time during
the five year period ending on the Determination Date (and the Beneficiaries of
such persons) shall not be considered a Non-Key Employee.
16.7 "Permissive Aggregation Group" means each Qualified Plan of the
----------------------------
Controlled Group in the Required Aggregation Group plus each other Qualified
Plan which is not part of the Required Aggregation Group but which satisfies the
requirements of Sections 401(a)(4) and 410 of the Code when considered together
with the Required Aggregation Group.
16.8 "Required Aggregation Group" means each Qualified Plan
--------------------------
(including any terminated Qualified Plan) of the Controlled Group in which a Key
Employee participates during the Plan Year containing the Determination Date or
any of the four preceding Plan Years and each other Qualified Plan (including
any terminated Qualified Plan) of the Controlled Group which during this period
enables any Qualified Plan (including any terminated Qualified Plan) in which a
Key Employee participates to meet the requirements of Section 401(a)(4) or 410
of the Code.
16.9 "Super Top-Heavy Group" means, for a Plan Year, the Required
---------------------
Aggregation Group if, and only if, the sum of the Accrued Benefits (valued as of
the Determination Date for such Plan Year) under all Qualified Plans in the
Required Aggregation Group for Key Employees exceeds 90 percent of the sum of
the
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<PAGE>
Accrued Benefits (valued as of such Determination Date) under all Qualified
Plans in the Required Aggregation Group for all Key Employees and Non-Key
Employees; provided, however, that the Required Aggregation Group will not be a
Super Top-Heavy Group for a Plan Year if the sum of the Accrued Benefits (valued
as of the Determination Date for such Plan Year) under all Qualified Plans in
the Required Aggregation Group for Key Employees does not exceed 90 percent of
the sum of the Accrued Benefits (valued as of such Determination Date) under all
Qualified Plans in the Permissive Aggregation Group for all Key Employees and
Non-Key Employees. If the Qualified Plans in the Required or Permissive
Aggregation Group have different Determination Dates, the Accrued Benefits under
each such Plan shall be calculated separately, and the Accrued Benefits as of
Determination Dates for such Plans that fall within the same calendar year shall
be aggregated.
16.10 "Top-Heavy Compensation" means the lesser of, Compensation,
----------------------
$200,000 or the gross amount earned by an Employee from the Employer during the
Plan Year for services rendered while a Participant as shown on his Form W-2.
16.11 "Top-Heavy Group" means, for a Plan Year, the Required
---------------
Aggregation Group if, and only if, the sum of the Accrued Benefits (valued as of
the Determination Date for such Plan Year) under all Qualified Plans in the
Required Aggregation Group for Key Employees exceeds 60 percent of the sum of
the Accrued Benefits (valued as of such Determination Date) under all Qualified
Plans in the Required Aggregation Group for all Key Employees and Non-Key
Employees; provided, however, that the Required Aggregation Group will not be a
Top-Heavy Group for a Plan Year if the sum of the Accrued Benefits (valued as of
the Determination Date for such Plan Year) under all Qualified Plans in the
Required Aggregation Group for Key Employees does not exceed 60 percent of the
sum of the Accrued Benefits (valued as of such Determination Date) under all
Qualified Plans in the Permissive Aggregation Group for all Key Employees and
Non-Key Employees. If the Qualified Plans in the Required or Permissive
Aggregation Group have different Determination Dates, the Accrued Benefits under
each such Plan shall be calculated separately, and the Accrued Benefits as of
Determination Dates for such Plans that fall within the same calendar year shall
be aggregated.
SECTION 17
----------
TOP-HEAVY RULES
---------------
17.1 Special Top-Heavy Rules. If for any Plan Year the Plan is part
-----------------------
of a Top-Heavy Group, then, effective as of the
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<PAGE>
first day of such Plan Year a new Section 5.8 is added as follows:
5.8 Minimum Allocation If Plan Is Part of Top-Heavy Group.
-----------------------------------------------------
Notwithstanding the foregoing, for each Plan Year in which the Plan is part
of a Top-Heavy Group, the sum of the Employer contributions and forfeitures
allocated under the Plan to the Account of each Non-Key Employee who is
both a Participant and Employee on the last day of such Plan Year shall be
at least equal to the lesser of three percent of such Non-Key Employee's
Top-Heavy Compensation for such Plan Year or the largest percentage of Top-
Heavy Compensation allocated to the Account of any Key Employee; provided,
however, that if for any Plan Year a Non-Key Employee is a Participant in
both this Plan and one or more defined contribution plans, the Employer
need not provide the minimum allocation described in the preceding sentence
for such Non-Key Employee if the Employer satisfies the minimum allocation
requirement of Section 416(c)(2)(B) of the Code for the Non-Key Employee in
such other defined contribution plans. Amounts which a Non-Key Employee or
Key Employee elects to contribute on a pre-tax basis to a Qualified Plan
which meets the requirements of Section 401(k) of the Code shall not be
taken into Account in determining the minimum allocation provided under
this Section. In addition, matching contributions made on behalf of Non-Key
Employees may not be taken into account in determining the minimum
allocation provided under this Section 5.8.
If a person, other than a Key Employee, is entitled to receive a
contribution under this Plan for a year when he is also entitled to receive
a minimum benefit under a defined benefit plan within the Required
Aggregation Group, but he does not accrue a benefit under such plan which,
together with the amounts allocated to his Account under this Plan and all
other defined contribution plans in the Required Aggregation Group,
satisfies the requirements of Code Section 416, then the amount allocated
to his Account under this Plan shall be the lesser of (i) five percent (5%)
of his Compensation for the Plan Year, or (ii) that percentage of his
Compensation for the Plan year which, when combined with all other amounts
allocated to his accounts under other defined contribution plans in the
Required Aggregation Group and benefits accrued under all defined benefit
plans in such Group, will equal the minimum combined benefits to which he
is entitled under Code Section 416. If a Participant in this Plan is also
covered by a defined benefit plan which is part of the Required Aggregation
Group, then the Administrator shall adjust the
-44-
<PAGE>
limitations in Section 5.4 to satisfy the requirements of Code Section
416(h).
17.2 Adjustments in Section 415 Limits. If for any Plan Year the
---------------------------------
Plan is part of a Super Top-Heavy Group, or the Plan is part of a Top-Heavy
Group and fails to provide an allocation of Employer contributions and
forfeitures on behalf of each Non-Key Employee who is both a Participant and
Employee on the last day of such Plan Year equal to at least the lesser of four
percent of each such Non-Key Employee's Top-Heavy Compensation or the largest
percentage of Top-Heavy Compensation allocated on behalf of any Key Employee for
the Plan Year, effective as of the first day of such Plan Year the adjustments
to the limits in Section 5.4 set forth in Section 416(h) of the Code shall be
applied.
IN WITNESS WHEREOF, the Company, in its capacity as plan sponsor, and
____________________ in its capacity as Trustee, have caused this instrument to
be executed this ___ day of ___________,199_.
CHESTER NATIONAL BANK
By:_____________________________________
ATTEST:
________________________________________
The terms, conditions and provisions of the Plan and Trust are hereby
acknowledged and accepted this ___ day of ______________, 199_.
_______________________________________
Trustee
-45-
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP
<PAGE>
Independent Auditors' Consent
-----------------------------
The Board of Directors
Chester Savings Bank, FSB
Chester, Illinois:
We consent to the use of our report in Amendment 1 to the Registration Statement
on Form S-1 under the headings "Experts" and "Change in Accountants" contained
in the Prospectus, which is a part of such Registration Statement.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
June 20, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF KERBER, ECK & BRAECKEL LLP
<PAGE>
EXHIBIT 99.1
ORDER AND ACKNOWLEDGEMENT FORM
<PAGE>
CHESTER BANCORP, INC.
---------------------
SUBSCRIPTION OFFERING AND DIRECT COMMUNITY OFFERING
STOCK ORDER FORM INSTRUCTIONS AND GUIDE
---------------------------------------
COMPLETING THE STOCK ORDER FORM
Information on this Stock Order Form will be mechanically scanned. As a result,
it is important that the Stock Order Form be completed neatly and legibly.
Please print in capital letters, using black or blue ink, within the confines of
each box. Write one letter per box, from left to right, leaving one box blank
for a space. Write dollar amounts in the appropriate boxes utilizing the commas
and decimal places provided. Please see the example below.
First Name M.I. Last Name
_____________ ____ _________
You may mail your completed Stock Order Form, executed Certification Form, and
full payment in the postage-paid envelope that has been provided, or you may
deliver them to the main or any branch office of Chester Savings Bank, FSB
("Chester Savings"). Your properly completed original Stock Order Form
(facsimile copies and photocopies will not be accepted) and executed
Certification Form, and payment in full (or withdrawal authorization), at $10.00
per share, must be actually received by Chester Savings no later than Noon,
Central Time, on September [day], 1996 or your order will become void. If you
need further assistance, please call the Conversion Center at (618) [#] and ask
for an EVEREN Securities, Inc. representative. An EVEREN Securities
representative will be pleased to help you with the completion of your Stock
Order Form and Certification Form or answer any questions you may have.
ITEM 1 INSTRUCTIONS
- -------------------
Please check the box for the desired form of stock ownership. The stock
transfer industry has developed a uniform system of stockholder registrations
that will be used in the issuance of your Chester Bancorp, Inc. common stock
certificate. Stock ownership must be registered in one of the ways described
under these guidelines. If you have any questions or concerns regarding the
registration of your stock, please consult your legal advisor. Listed below are
some general guidelines for stockholder registration.
INDIVIDUAL
Include the first name, middle initial, and the last name of the subscriber.
Avoid the use of two initials. Please omit words that do not affect ownership
rights, such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
JOINT TENANTS
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership passes automatically to the surviving joint tenant(s) upon the death
of any joint tenant. All parties must agree to the transfer or sale of shares
held by joint tenants.
TENANTS IN COMMON
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of the
deceased co-tenant. All parties must agree to the transfer or sale of shares
held by tenants in common.
UNIFORM TRANSFER TO MINORS OR UNIFORM GIFT TO MINORS
Stock may be held in the name of a custodian for a minor under the Uniform Gift
to Minors Act ("UGTMA") or Uniform Transfer to Minors Act ("UTMA") of each
state. There may be only one custodian and one minor designated on a stock
certificate. The minor is the actual owner of the stock with the adult
custodian responsible for the investment until the minor reaches legal age. The
standard abbreviation for Custodian is "CUST". Standard
<PAGE>
U.S. Postal Service state abbreviations should be used to describe the
appropriate state. For example, stock held by John Doe as custodian for Susan
Doe under the Illinois Uniform Transfers to Minors Act will be abbreviated John
Doe, CUST Susan Doe UTMA, IL (use minor's social security number).
FIDUCIARIES
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
1. The name(s) of the fiduciary. If an individual, list the first name, middle
initial, and last name. If a corporation, list the corporation's title
before the individual.
2. The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
3. A description of the document governing the relationship, such as a trust
agreement or court order.
4. The date of the document governing the relationship, except that the date of
a trust created by a will need not be included in the description.
5. The name of the maker, donor, or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John Doe,
Trustee UAD 10-1-87 for Susan Doe. The standard abbreviation for "Under
Agreement Dated" is "UAD".
ITEM 2 INSTRUCTIONS
- -------------------
Please complete Item 2 as fully and accurately as possible. Please print in
capital letters and use black or blue ink. Leave one blank box for a space.
Please be certain to supply your social security or tax identification number as
well as your daytime and evening telephone number(s). It may be necessary to
call you if your order cannot be executed as given.
ITEM 3 INSTRUCTIONS
- -------------------
Please check this box if you are a member of the National Associaition of
Securities Dealers, Inc. ("NASD") or if this item otherwise applies to you.
ITEM 4 INSTRUCTIONS
- -------------------
Please check this box if you or any associate, as defined on the reverse side of
the Stock Order Form, or person acting in concert with you, also defined on the
reverse side of the Stock Order Form, has submitted another order for shares and
complete the continuation of Item 4 on the reverse side of the Stock Order Form.
ITEM 5 INSTRUCTIONS
- -------------------
Fill in the number of shares for which you wish to subscribe and the total
payment due. The amount due is determined by multiplying the number of shares
by the subscription price of $10.00 per share. Chester Bancorp, Inc. has
reserved the right to reject the subscription of any order received in the
Direct Community Offering, in whole or in part. The minimum number of shares
that may be subscribed for is 25. No Stock Order Form will be accepted for
fewer than 25 shares. The maximum number of shares which may be subscribed for
by each person by himself or herself (except for orders by Chester Savings' tax-
qualified employee stock benefit plans) is 40,000 shares, or $400,000. Also, no
person (except for Chester Savings' tax-qualified employee stock benefit plans)
by himself or herself or with an associate, and no group of persons acting in
concert, may subscribe for or purchase more than 9.99% of the shares issued in
the conversion. Please refer to Chester Bancorp, Inc.'s Prospectus under the
caption "The Conversion" for complete instructions on purchase limitations
applicable to all persons, their associates, and groups acting in concert with
them.
ITEM 6 INSTRUCTIONS
- -------------------
Please check this box if your method of payment is by cash, check, bank draft,
or money order and fill in the boxes to the right of Item 6 with the total
amount of cash, checks, bank drafts, and money orders submitted. Payment for
shares may be made in cash only if delivered by you in person at Chester
Savings' main or any branch office. Checks, bank drafts, or money orders should
made payable to Chester Bancorp, Inc. Your funds will earn interest
<PAGE>
at the Savings Bank's passbook rate until the conversion is consummated or
terminated. DO NOT MAIL CASH TO SUBSCRIBE FOR STOCK!
ITEM 7 INSTRUCTIONS
- -------------------
Please check this box if you intend to pay for your stock by a withdrawal from a
Chester Savings deposit account. Supply the account number(s) and the total
amount of your withdrawal authorization for each account in the boxes provided.
The amount submitted under Item 6 (if applicable) when added to the amount
withdrawn under Item 7 should equal the total amount of your stock purchase
under Item 5. There will be no penalty assessed for early withdrawals from
certificates of deposit used for stock purchases. SPECIAL ARRANGEMENTS MUST BE
MADE IF USING AN INDIVIDUAL RETIREMENT ACCOUNT ("IRA") FOR STOCK PURCHASES.
PLEASE CONTACT THE CONVERSION CENTER AT (618) [#] FOR INFORMATION REGARDING
SUBSCRIPTIONS USING AN IRA.
ITEM 8 INSTRUCTIONS
- -------------------
a. Please check this box to indicate whether you are a director or an officer of
Chester Savings or a member of such person's immediate family. A person's
immediate family consists of his or her spouse, parents, siblings, children
or grandchildren; the parents and siblings of his or her spouse; and the
spouses of his or her siblings or children.
b. Please check this box to indicate whether you are an employee of Chester
Savings or a member of such person's immediate family.
c. Please check this box if you were:
. A depositor of Chester Savings with a deposit balance of $50 or more on
January 15, 1995 (Eligible Account Holder);
. A depositor of Chester Savings with a deposit balance of $50 or more on
June 30, 1996 ("Supplemental Eligible Account Holder"); and/or
. A depositor of Chester Savings on [date], 1996 and/or a borrower of
Chester Savings on BOTH [date] and August [day], 1996 ("Other Member").
----
You must list all names on the account(s) and all account number(s) of accounts
you had at these dates in order to insure proper identification of your
subscription rights. Please list this account information on the reverse side
of the Stock Order Form in the boxes provided.
ITEM 10 INSTRUCTIONS
- --------------------
Please sign and date the Stock Order Form where indicated. Review both
documents carefully before you sign, including the acknowledgement on the Stock
Order Form. Normally, only one signature is required. An additional signature
is required only when payment is to be made by withdrawal from a deposit account
that requires multiple signatures to withdraw funds. ALL PERSONS LISTED IN ITEM
2 MUST SIGN THE CERTIFICATION FORM.
If you have any remaining questions, or if you would like assistance in
completing your Stock Order Form, you may call the special Conversion Center
telephone number (618) [#] and ask for a representative of EVEREN Securities.
The Conversion Center is open between the hours of 8:00 A.M. and 5:00 P.M.,
Central Time, Monday through Friday.
<PAGE>
Expiration Date: September [day], 1996
Noon, Central Time
Conversion Center
1112 State Street
Chester, IL 62233
(618) [#]
SUBSCRIPTION AND DIRECT COMMUNITY OFFERING STOCK ORDER FORM
Please read the Stock Order Form Instructions and Guide as you complete this
form.
STOCK REGISTRATION
Write one letter/number per box, beginning from the left. Leave one
blank box for a space.
(1) Form of Stock Ownership: __Individual __Joint tenants __Tenants in common
__Fiduciary __UTMA __IRA __Corporation __Partnership
__Other____________
(2) Name(s) in which your stock is to be registered (PLEASE PRINT CLEARLY IN
CAPITAL LETTERS. USE BLACK OR BLUE INK.)
First Name_______________________ M.I.____ Last Name______________
Joint Name_________________________________________________________________
Joint Name_________________________________________________________________
Address_____________________________________________________________________
City______________________ State______ Zip Code_________
County of Residence (First 8 Letters)____________________
Social Security or Tax ID No.______________
Daytime Phone________________ Evening Phone________________
(3) NASD AFFILIATION
___Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with an NASD member, a member of
the immediate family of any such person to whose support such person
contributes, directly or indirectly, or the holder of an account in which an
NASD member or person associated with an NASD member has a beneficial
interest. To comply with conditions under which an exemption from the NASD's
Interpretation With Respect to Free-Riding and Withholding is available, you
agree, if you have checked the NASD Affiliation box, (i) not to sell,
transfer, or hypothecate the stock for a period of three months following
issuance, and (ii) to report this subscription in writing to the applicable
NASD member within one day of payment therefor.
<PAGE>
(4) ASSOCIATES AND PERSONS ACTING IN CONCERT
Check here, and complete the reverse side of this Stock Order Form, if you
or any associates ("associate" is defined on the reverse side of this Stock
Order Form) or persons acting in concert with you ("acting in concert" is
defined on the reverse side of this Stock Order Form), have submitted other
orders for shares in the Subscription and Direct Community Offering.
AMOUNT OF ORDER
FILL BLANKS BEGINNING FROM THE LEFT (EXCEPT DOLLAR AMOUNTS)
Subscription Total
(5) Number of Price Payment
Shares _______ x $10.00 = Due $______________
(mininum number 25)
METHOD OF PAYMENT
FILL BLANKS BEGINNING FROM THE LEFT (EXCEPT DOLLAR AMOUNTS)
<TABLE>
<CAPTION>
<S> <C> <C>
(6) __Check, bank draft, or money order made payable Cash/Check Amount
to Chester Bancorp, Inc. (Cash can be used only $______________
if presented in person at Chester
Savings' main or
any branch office).
(7) __The undersigned authorizes withdrawal from Account Number(s) Amount
this (these) account(s) at Chester Savings. _____________ $______________
If using an IRA account to subscribe for stock, please _____________ $______________
call the Conversion Center immediately at _____________ $______________
(618) [#]. SPECIAL ADVANCE ARRANGEMENTS
MUST BE MADE FOR IRA ACCOUNTS BY
SEPTEMBER [DAY], 1996.
TOTAL (must match Total Payment Due in Item #5 above) $_____________
</TABLE>
PURCHASER INFORMATION
(8)a__Check here if you are a director or an officer of Chester Savings or a
member of such person's immediate family.
(8)b__Check here if you are an employee of Chester Savings or a member of such
person's immediate family.
(8)c__Check here if you are an Eligible Account Holder, Supplemental Eligible
Account Holder, or Other Member (including certain borrowers) of Chester
Savings and enter information regarding these accounts on the reverse side
of the Stock Order Form.
ACKNOWLEDGEMENT
(9) To be effective, this fully completed original Stock Order Form and executed
Certification Form must be actually received by Chester Savings no later
than Noon Central Time on September [day], 1996, unless extended; otherwise,
this Stock Order Form and all subscription rights will be void. Completed
original Stock Order Forms (facsimile copies and photocopies will not be
accepted) and executed Certification Forms, together with the required
payment or withdrawal authorization, may be delivered to the office of
Chester Savings or may be mailed to the Post Office Box indicated on the
business reply envelope provided. ALL RIGHTS EXERCISABLE HEREUNDER ARE NON-
TRANSFERABLE AND SHARES PURCHASED UPON EXERCISE OF SUCH RIGHTS MUST BE
PURCHASED FOR THE ACCOUNT OF THE PERSON EXERCISING SUCH RIGHTS. THE
UNDERSIGNED CERTIFIES THAT THERE IS NO AGREEMENT OR UNDERSTANDING REGARDING
THE TRANSFER OR SALE OF MY (OUR) SUBSCRIPTION RIGHTS OR ANY FURTHER SALE OF
THESE SHARES.
<PAGE>
It is understood that this Stock Order Form will be accepted in accordance
with, and subject to, the terms and conditions of the Plan of Conversion of
Chester Savings described in the Chester Bancorp, Inc. Prospectus, receipt of
which is hereby acknowledged at least 48 hours prior to the return of this
Stock Order Form to Chester Savings. If the Plan of Conversion is not
approved by the voting members of Chester Savings at a Special Meeting to be
held on September [day], 1996 or an adjournment thereof, or if the minimum
number of shares is not sold, all orders will be canceled and funds received
as payment, with accrued interest at the Savings Bank's passbook rate, will be
promptly returned.
SIGNATURE
(10)The undersigned agrees that after receipt by Chester Savings, this Stock
Order Form may not be modified, withdrawn, or canceled without Chester
Savings' consent unless the conversion is not consummated by [ ] [ ],
1996, and if authorization to withdraw from a deposit account at Chester
Savings has been given as payment for shares, the amount authorized for
withdrawal will not be available for withdrawal by the undersigned.
THE UNDERSIGNED ACKNOWLEDGES THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT
AND IS NOT FEDERALLY INSURED OR GUARANTEED. THE UNDERSIGNED ALSO
ACKNOWLEDGES RECEIPT OF A PROSPECTUS DATED AUGUST [ ], 1996.
Under penalty of perjury, I (we) certify that the Social Security or Tax ID
Number and the information provided under items 2, 3, and 4 of this Stock
Order Form are true, correct, and complete and that I am (we are) not
subject to back-up withholding.
Signature________________ Date________ Signature_____________ Date_________
YOUR ORDER CANNOT BE PROCESSED WITHOUT AN EXECUTED CERTIFICATION FORM.
<PAGE>
ITEM (4) - CONTINUED
List below all other orders submitted by you or "associates" (as defined below)
or by persons "acting in concert" (as defined below) with you.
Name(s) listed on the other Stock Order Form(s) Number of Shares Ordered
1._______________________________________________________
2._______________________________________________________
3._______________________________________________________
4._______________________________________________________
The term "associate" is used above to indicate any of the following
relationships with a person: (i) any corporation or organization (other than
Chester Bancorp or Chester Savings or a majority-owned subsidiary of Chester
Bancorp or Chester Savings) of which a person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity security; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity; and (iii) any relative or spouse of such person
or any relative of such spouse who has the same home as such person or who is
director or officer of Chester Bancorp or Chester Savings or any subsidiary of
Chester Bancorp or Chester Savings.
The term "acting in concert" is defined to mean (i) knowing participation in a
joint activity or interdependent conscious parallel action towards a common goal
whether or not pursuant to an express agreement; (ii) a combination of pooling
of voting or other interests in the securities of an issuer for a common purpose
pursuant to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise; or (iii) a person or company which
acts in concert with another person or company ("other party") shall also be
deemed to be acting in concert with any person or company who is also acting in
concert with that other party, except that any employee stock benefit plan of
will not be deemed to be acting in concert with its trustee or a person who
serves in a similar capacity solely for the purpose of determining whether stock
held by the trustee and stock held by the plan will be aggregated. No director
of Chester Bancorp, Inc. or Chester Savings shall be deemed to be acting in
concert with any other director of Chester Bancorp, Inc. or Chester Savings
solely by reason of their services in such capacities.
Item (8)c - continued
Account Title Account Number
1.___________________________________ ____________________
2.___________________________________ ____________________
3.___________________________________ ____________________
4.___________________________________ ____________________
<PAGE>
EXHIBIT 99.2
SOLICITATION AND MARKETING MATERIALS
<PAGE>
CHESTER BANCORP, INC.
PROPOSED HOLDING COMPANY FOR
CHESTER SAVINGS BANK, FSB
TO BECOME
CHESTER NATIONAL BANK AND CHESTER NATIONAL BANK OF MISSOURI
CHESTER, ILLINOIS
STOCK MARKETING PROGRAM
[LOGO OF EVEREN SECURITIES APPEARS HERE]
EVEREN Securities, Inc.
77 W. Wacker Dr. - 31st Floor
Chicago, IL 60601-1694
(800) 346-6616
<PAGE>
STOCK MARKETING PROGRAM FOR
CHESTER BANCORP, INC.
Table of Contents
-----------------
I. Press Releases
A. Explanation
B. Schedule
C. Distribution List
D. Press Release Examples
II. Advertisements
A. Explanation
B. Media Schedule
C. Examples
III. Question & Answer Brochure
A. Explanation
B. Method of Distribution
C. Examples
IV. Marketing Pieces
V. Subscription and Direct Community Offering Stock Order Form
VI. Certification Form
VII. Proxygram
VIII. Investor Meeting Script and Slide Show*
* To be filed by amendment, as applicable.
<PAGE>
I. PRESS RELEASES
A.Explanation
In an effort to provide customers, community members, and other
interested investors with prompt, accurate information in a
simultaneous manner, EVEREN Securities advises Chester Savings to
forward press releases to area newspapers, major newspapers, major
news services, and thrift industry publications at various points
during the conversion process.
Only press releases approved by Conversion Counsel and filed with
the OTS will be forwarded for publication in any manner.
B.Schedule
1. Plan of Conversion adopted by Chester Savings. (Note: Legal
notice already published.)
2. Conversion Application filed with Office of Thrift Supervision
(OTS). (Note: Legal notice will be published upon filing.)
3. OTS Approval of Conversion
4. Close of Stock Offering
C.Distribution List
MAJOR NEWSPAPERS
----------------
The Wall Street Journal.
------------------------
One South Wacker Drive, 21st Floor
Chicago, Illinois 60606
Jeff Taylor/News Desk
(312) 750-4100
Fax: 750-4153
National Mortgage News
----------------------
212 West 35th Street, 13th Floor
New York, New York 10001
Stan Strachan
(212) 563-4008
Fax: 564-8879
<PAGE>
American Banker
---------------
53 West Jackson, #230
Chicago, Illinois 60604-3607
Steve Klinkerman
(312) 629-0264
Fax: 939-4925
American Banker
---------------
One State Street Plaza - 26th Floor
New York, NY 10004
Daniel Kaplan
(212) 803-8423
Fax: (212) 843-9600
MAJOR NEWS SERVICES
-------------------
Dow Jones News Service
200 Liberty Street, 12th Floor
New York, New York 10281-1003
Peter Rooney
(212) 416-2471
FAX: 416-4008
Associated Press
50 Rockefeller Plaza, 5th Floor
New York, New York 10020-1666
Rob Wells
Fax: (212)621-1679
THRIFT INDUSTRY PUBLICATIONS
----------------------------
SNL Securities, L.P.
410 East Main Street
P.O. Box 2124
Charlottesville, Virginia 22902
Brian Hester
(804) 977-1600
Fax: 977-4466
LOCAL PUBLICATIONS
------------------
[Chester Savings to provide]
<PAGE>
D. Example #1 FOR IMMEDIATE RELEASE
---------------------
Contact: Edward K. Collins
Telephone: (618) 826-5038
CHESTER BANCORP, INC.
---------------------
PROPOSED HOLDING COMPANY FOR
----------------------------
CHESTER SAVINGS BANK, FSB
-------------------------
RECEIVES STOCK SALE APPROVAL
----------------------------
Chester, Illinois - ([ ] , 1996) Michael W. Welge, Chairman of the Board of
Chester Savings Bank, FSB in Chester, Illinois ("Chester Savings" or the
"Savings Bank"), announced today that Chester Savings has received approval from
the Office of Thrift Supervision to convert from a federally chartered mutual
savings bank to a federally chartered stock savings bank, subject to approval by
the Savings Bank's members. Following the conversion Chester Savings intends to
reorganize into commercial banks to be named Chester National Bank and Chester
National Bank of Missouri. Under the plan of conversion, Chester Bancorp, Inc.
("Chester Bancorp"), a Delaware corporation formed by Chester Savings to act as
its holding company, will offer between 1,317,500 and 1,782,500 newly issued
shares of common stock at a price of $10.00 per share. Depositors and certain
borrowers of Chester Savings and the tax-qualified employee stock benefit plans
of Chester Savings will have priority rights to subscribe for stock through a
Subscription Offering that is expected to close on [ ] [ ], 1996. A notice of
special meeting and proxy statement and a prospectus describing the plan of
conversion and Chester Bancorp's stock offering will be mailed to each eligible
subscriber on or about [ ] [ ], 1996. After the Subscription Offering, shares
may be offered to the general public, subject to availability and after
satisfaction of purchase orders submitted in the Subscription Offering, in a
Direct Community Offering to be managed by EVEREN Securities, Inc. Chester
Bancorp's common stock that is not sold in the
More ...
<PAGE>
Page Two
Chester Bancorp, Inc.
[ ] [ ], 1996
Subscription Offering and Direct Community Offering is expected to be sold in an
extension of the Direct Community Offering and/or an underwritten Public
Offering.
As a result of the conversion, Chester Savings will become a stock savings
bank and will be structured in the same corporate form as commercial banks and
most savings institutions. According to Mr. Welge, "Our day-to-day operations
will not change as a result of the conversion. The additional capital to be
raised as a result of the conversion will allow us to continue to expand and
enhance our customer services and complete our plans to become a commercial
bank."
Customers with questions concerning the stock offering should call the
Conversion Center at (618) [ ] and ask for an EVEREN Securities, Inc.
representative. Copies of the Prospectus may be obtained from any Conversion
Center representative.
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT
OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
THIS PRESS RELEASE IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO
BUY THE COMMON STOCK OF CHESTER BANCORP, INC. THE OFFER IS MADE ONLY BY THE
PROSPECTUS.
##########
<PAGE>
D.Example #2 FOR IMMEDIATE RELEASE
---------------------
Contact: Edward K. Collins
Telephone: (618) 826-5038
CHESTER BANCORP, INC. COMPLETES
-------------------------------
INITIAL STOCK OFFERING
----------------------
Chester, Illinois - ([ ] [ ], 1996) Michael W. Welge, Chairman of the Board
of Chester Savings Bank, FSB ("Chester Savings"), announced today that Chester
Savings' newly formed holding company, Chester Bancorp, Inc. ("Chester Bancorp")
has completed its initial stock offering in connection with Chester Savings'
conversion from mutual form to stock ownership. In the stock offering, [ ]
shares of Chester Bancorp common stock were sold at $10.00 per share.
Chester Savings' plan of conversion to the stock form of ownership was
approved by Chester Savings' members at a Special Meeting that was held on
[ ], 1996.
Chester Bancorp and Chester Savings intend to use the net proceeds of the
offerings to reduce or repay outstanding reverse repurchase agreements, to
expand the investment and lending activities of Chester Savings, and to fund tax
payments associated with the Savings Bank's plan to reorganize as commercial
banks to be named Chester National Bank and Chester National Bank of Missouri.
More...
<PAGE>
Page Two
Chester Bancorp, Inc.
[ ] [ ], 1996
Mr. Welge expressed his appreciation to the community for its response to
the stock offering. He noted that Chester Savings looks forward to enhancing its
ability to serve the needs of its customers and its community as a result of its
conversion to a stock savings bank. Chester Bancorp common stock is expected to
begin trading on The Nasdaq National Market/SM/ on or about [ ] [ ], 1996
under the symbol "CNBI". EVEREN Securities, Inc., which served as marketing
agent in the Subscription [and Direct Community] Offering, has indicated its
intention to act as a market maker in Chester Bancorp common stock when trading
commences.
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT
OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
THIS PRESS RELEASE IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO
BUY THE COMMON STOCK OF CHESTER BANCORP, INC. THE OFFER IS MADE ONLY BY THE
PROSPECTUS.
##########
<PAGE>
II. ADVERTISEMENTS
A. Explanation
The intended use of the attached advertisement "A" is to serve as a notice
to Chester Savings' customers and members of the local community that the
conversion offering is underway.
The intended use of advertisement "B" is to remind Chester Savings'
customers and other prospective investors of the closing date of the
Subscription and Direct Community Offering.
B. Media Schedule
1. Advertisement A - As appropriate, to be run immediately following
OTS approval (and SEC effectiveness) and periodically thereafter in
local and/or regional newspapers.
2. Advertisement B - As appropriate, to be run during the last week of
the Subscription [and Direct Community] Offering in local and/or
regional newspapers.
EVEREN Securities, Inc. may recommend that more advertisements be run in
order to remind customers and community members of the close of the
Subscription [and Direct Community] Offering.
Alternatively, EVEREN Securities, Inc. may, depending upon the response
from the customer base, recommend fewer or no advertisements be run. All
advertisements must be cleared by Conversion Counsel to Chester Savings and
filed with the OTS prior to use.
C. Examples
Advertisement A
Advertisement B
<PAGE>
Advertisement A
---------------------------------------------------------------------------
CHESTER BANCORP, INC.
Customers of Chester Savings Bank, FSB have the opportunity
to become charter stockholders in Chester Bancorp, Inc. (the
proposed holding company for Chester Savings Bank, FSB, to
become Chester National Bank and Chester National Bank of
Missouri). The shares are being offered directly by Chester
Bancorp, Inc., with the assistance of EVEREN Securities, Inc.
A PROSPECTUS RELATING TO THE SHARES MAY BE OBTAINED FROM ANY
CONVERSION CENTER REPRESENTATIVE AT CHESTER SAVINGS'
MAIN OFFICE, LOCATED AT:
CHESTER SAVINGS BANK, FSB
1112 STATE STREET
CHESTER, ILLINOIS 62233
OR,
CALL THE CONVERSION CENTER AT (618) [ ], AND ASK TO SPEAK WITH
AN EVEREN SECURITIES, INC. REPRESENTATIVE.
The common stock of Chester Bancorp, Inc. is not a deposit or
account and is not federally insured or guaranteed.
This announcement is neither an offer to sell nor a solicitation
of an offer to buy the common stock of Chester Bancorp, Inc.
The offer is made only by the Prospectus.
---------------------------------------------------------------------------
<PAGE>
Advertisement B
---------------------------------------------------------------------------
CUSTOMERS OF
CHESTER SAVINGS BANK, FSB
[ :00 .M.] ON [ ], 1996 IS THE DEADLINE
TO ORDER STOCK FROM CHESTER BANCORP, INC.
Customers of Chester Savings Bank, FSB have the opportunity to
become charter stockholders in Chester Bancorp, Inc. (the proposed
holding company for Chester Savings Bank, FSB, to become Chester
National Bank and Chester National Bank of Missouri) by purchasing
newly issued shares of its common stock. The shares are being
offered directly by Chester Bancorp, Inc., with the assistance of
EVEREN Securities, Inc.
A PROSPECTUS RELATING TO THE SHARES MAY BE OBTAINED FROM ANY
CONVERSION CENTER REPRESENTATIVE AT CHESTER SAVINGS'
MAIN OFFICE, LOCATED AT:
CHESTER SAVINGS BANK, FSB
1112 STATE STREET
CHESTER, ILLINOIS 62223
OR,
CALL THE CONVERSION CENTER AT (618) [ ] AND ASK TO SPEAK WITH AN
EVEREN SECURITIES, INC. REPRESENTATIVE.
The common stock of Chester Bancorp, Inc. is not a deposit or
account and is not federally insured or guaranteed.
This announcement is neither an offer to sell nor a solicitation
of an offer to buy the common stock of Chester Bancorp, Inc.
The offer is made only by the Prospectus.
-----------------------------------------------------------------------------
<PAGE>
III. QUESTION & ANSWER BROCHURE
A. Explanation
The Question & Answer brochure is an essential marketing tool in any
conversion. It serves to answer some of the most commonly asked questions
in plain, everyday language. Although most of the answers are taken
verbatim from the Notice of Special Meeting and Proxy Statement and from
the Prospectus, it saves the individual from searching for the answers to
simple questions.
B. Method of Distribution
There are four primary methods of distribution of Question & Answer
brochures, which are always accompanied by a Notice of Special Meeting and
Proxy Statement and/or a Prospectus.
1. Question & Answer brochures are sent out in standard information
packets to those parties possessing subscription rights.
2. Question & Answer brochures are available with Notice of Special
Meeting and Proxy Statements and Prospectuses in the Savings Bank's
offices.
3. Question & Answer brochures are distributed in information packets at
community meeting(s).
4. Question & Answer brochures are sent out in a standard information
packet to all interested investors who phone the Conversion Center
requesting information.
C. Example
1. Prospectus Question & Answer Brochure (to be included as the
organizational folder for marketing packages)
<PAGE>
[SAVINGS BANK'S LOGO]
CHESTER SAVINGS BANK, FSB
IS CONVERTING TO A STOCK INSTITUTION!
THE PROPOSED HOLDING COMPANY IS...
[HOLDING COMPANY'S LOGO]
CHESTER BANCORP, INC.
DETAILS ON
HOW TO VOTE
AND
HOW TO SUBSCRIBE FOR STOCK
ARE INSIDE *
<PAGE>
QUESTIONS & ANSWERS
about the Stock Conversion of
CHESTER SAVINGS BANK, FSB
and the Common Stock Offering of
[HOLDING COMPANY'S LOGO]
The Proposed Holding Company
for Chester Savings Bank, FSB
The Board of Directors of Chester Savings Bank, FSB ("Chester Savings" or
the "Savings Bank") has unanimously voted to convert Chester Savings from mutual
form to stock ownership ("Conversion"), subject to the approval of the
Conversion by the Savings Bank's members. As part of the Conversion, Chester
Savings has formed Chester Bancorp, Inc. ("Chester Bancorp") to act as its
holding company. Upon consummation of the Conversion, Chester Savings will
become a federally chartered stock savings bank and will be the wholly owned
subsidiary of Chester Bancorp. Following the Conversion, Chester Savings intends
to reorganize into commercial banks to be named Chester National Bank and
Chester National Bank of Missouri. The common stock of Chester Bancorp is being
offered on a priority basis in a Subscription Offering to certain of the Savings
Bank's depositors and borrowers and to the tax-qualified employee stock benefit
plans of Chester Savings. Following the Subscription Offering, members of the
general public may be offered the opportunity to subscribe for stock in a Direct
Community Offering. Subscriptions in the Direct Community Offering, if any, will
be subject to the prior subscription rights of those listed above and to the
delivery of a Prospectus, Certification Form, and Stock Order Form. Preference
in the Direct Community Offering, if any, will be given to natural persons who
are residents of Randolph, Perry, or Jackson Counties, Illinois or Perry County,
Missouri. Stock that is not sold in the Subscription Offering and Direct
Community Offering, is expected to be sold in an extension of the Direct
Community Offering and/or an underwriten Public Offering.
If you are a member with voting rights, you may have received more than one
Proxy Card, representing your opportunity to vote on multiple accounts. IT IS
IMPORTANT THAT YOU SIGN AND RETURN ALL PROXY CARDS TO CHESTER SAVINGS AS SOON AS
POSSIBLE. Please use the postage-paid envelope provided to return your Proxy
Card(s).
Further details on the Conversion, including reasons for Conversion, are
contained in Chester Savings' Notice of Special Meeting and Proxy Statement and
Chester Bancorp's Prospectus. Please read the Proxy Statement and the Prospectus
carefully.
- --------------------------------------------------------------------------------
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT OR ACCOUNT AND
IS NOT FEDERALLY INSURED OR GUARANTEED.
- --------------------------------------------------------------------------------
THE FOLLOWING INFORMATION WILL ANSWER FREQUENTLY ASKED QUESTIONS ABOUT THE
CONVERSION.
1. Q.WHAT IS A CONVERSION?
A. A conversion is a change in the legal form of ownership of a savings
institution from the mutual to the stock form. Chester Savings currently
operates as a federally chartered mutual savings bank with no
stockholders. Through the conversion process, Chester Savings will
become a federally chartered stock savings bank which, in turn, will be
owned by a publicly owned corporation, Chester Bancorp. This
corporation, in turn, will be owned by its stockholders, who will be, at
the time of Conversion, those depositors, borrowers, and other persons
who purchase Chester Bancorp stock in the Subscription Offering and the
Direct Community Offering or Public Offering, if any. After the
Conversion, Chester Savings intends to reorganize into commercial banks
to be named Chester National Bank and Chester National Bank of Missouri.
2. Q. WHY IS CHESTER SAVINGS CONVERTING?
A. The stock form of ownership is used by most business corporations and an
increasing number of savings institutions. Chester Savings has reached
an important point in its development with its decision to convert to
the stock form of ownership. The sale of stock in the Conversion will:
. Increase the capital of Chester Savings to improve its competitive
position and support expansion of its financial services.
. Afford members an opportunity to purchase stock in Chester Bancorp
and share in Chester Savings' future.
. Enhance Chester Savings' ability to open or acquire additional branch
offices as well as acquire other financial institutions (although no
openings or acquisitions are currently contemplated).
. Facilitate future access to the capital markets.
<PAGE>
3. Q. WILL THE CONVERSION HAVE ANY EFFECT ON SAVINGS AND CHECKING ACCOUNTS,
CERTIFICATE ACCOUNTS, OR LOANS WITH CHESTER SAVINGS?
A. NO. The Conversion will not change the general terms, balances, and
applicable FDIC insurance coverage of savings and checking accounts or
certificates of deposit. The balances and obligations of borrowers under
their loan agreements will not be affected. However, upon Conversion,
deposit account holders and certain borrowers will no longer have voting
rights in Chester Savings. Those voting rights will be vested in the
sole stockholder of the Savings Bank, Chester Bancorp. Voting rights in
Chester Bancorp will be exercised exclusively by stockholders of that
corporation, consisting initially of those persons who purchase stock in
the Subscription Offering and the Direct Community Offering or Public
Offering, if any. Moreover, with the exception of certain rights in a
liquidation account to be established in the Conversion, in the unlikely
event the Savings Bank were ever to liquidate following the Conversion,
depositors and certain borrowers will no longer be entitled to receive
any of the net assets of the Savings Bank remaining after payment of all
valid creditor claims (including payments to depositors to the extent of
their account balances).
4. Q. WILL THE CONVERSION CAUSE ANY CHANGES IN PERSONNEL OR MANAGEMENT?
A. No. The Conversion will not cause any changes in personnel or
management. The normal day-to-day operations of the Savings Bank will
continue as before.
5. Q. DID THE BOARD OF DIRECTORS OF CHESTER SAVINGS APPROVE THE CONVERSION?
A. Yes. The Board of Directors unanimously approved the Plan of Conversion
on March 12, 1996.
6. Q. DOES MY VOTE FOR CONVERSION MEAN THAT I MUST BUY STOCK IN CHESTER
BANCORP?
A. No. Voting for Conversion does not obligate you to purchase stock.
However, as a valued customer of Chester Savings you are entitled, if
you so desire, to subscribe for a stock on a priority basis, without
payment of a commission or fee, before it is offered to the general
public.
THE HOLDING COMPANY
-------------------
7. Q. WHAT IS A HOLDING COMPANY?
A. A holding company is a corporation which owns one or more other
corporations known as subsidiaries. Concurrently with the Conversion,
Chester Savings will become a wholly owned subsidiary of Chester
Bancorp, a Delaware corporation organized by Chester Savings.
8. Q. IF I DECIDE TO SUBSCRIBE FOR STOCK IN THIS OFFERING, WILL I BE
SUBSCRIBING FOR STOCK IN CHESTER BANCORP OR CHESTER SAVINGS?
A. You will own newly issued common stock in Chester Bancorp. As a savings
and loan holding company, Chester Bancorp will own all of the
outstanding stock of Chester Savings. Following the Conversion, Chester
Savings intends to reorganize into commercial banks to be named Chester
National Bank and Chester National Bank of Missouri.
9. Q. WHY DID THE BOARD OF DIRECTORS FORM CHESTER BANCORP?
A. The Directors of Chester Savings believe that the Conversion of Chester
Savings and concurrent holding company formation will result in a
financial services company with greater corporate flexibility and
resources to serve the financial needs of Chester Savings' customers and
stockholders.
10. Q. AS A CUSTOMER OF CHESTER SAVINGS, WHAT EFFECT WILL THE FORMATION OF
CHESTER BANCORP HAVE ON THE WAY I CURRENTLY TRANSACT BUSINESS WITH THE
SAVINGS BANK?
A. None. Please refer to Question Nos. 3 and 4.
THE SUBSCRIPTION OFFERING AND
DIRECT COMMUNITY OFFERING
-------------------------
11. Q. WHO IS ENTITLED TO SUBSCRIBE FOR CHESTER BANCORP COMMON STOCK?
A. In order of priority, the following parties may subscribe for Chester
Bancorp common stock:
SUBSCRIPTION OFFERING
Eligible Account Holders - Depositors of Chester Savings with a deposit
balance of $50 or more as of January 15, 1995 have a first priority
right to subscribe for stock.
Tax-Qualified Employee Plans - Chester Savings' tax-qualified employee
stock benefit plans (i.e., its Employee Stock Ownership Plan) have a
second priority right to subscribe for stock following Eligible Account
Holders.
Supplemental Eligible Account Holders - Depositors of Chester Savings as
of June 30, 1996 have a third priority right to subscribe for stock in
the Subscription and Direct Community Offering following Eligible
Account Holders and Tax-Qualified Employee Plans.
Other Members - Members of Chester Savings as of August [day], 1996, the
Voting Record Date (other than Eligible Account Holders and Supplemental
Eligible Account Holders), and certain borrowers of Chester Savings as
of both the Voting Record Date and [charter change date], have a
---
fourth priority right to subscribe for stock.
DIRECT COMMUNITY OFFERING
Members of the General Public - After the Subscription Offering, persons
to whom a Prospectus, Certification Form, and Stock Order Form have been
delivered, not qualifying in the priority categories listed above to
subscribe for stock in the Subscription Offering, may do so in the
Direct Community Offering, with a first preference to natural persons
residing in Randolph, Perry, or Jackson Counties, Illinois or Perry
County, Missouri.
* * * * *
<PAGE>
Though Chester Bancorp and Chester Savings will make reasonable efforts
to comply with the securities laws of all states in the United States in
which eligible subscribers reside, Chester Bancorp and Chester Savings
are not required to offer stock in the Subscription Offering to
residents of foreign countries or states in the United States with
respect to which (1) a small number of eligible subscribers reside, or
(2) registration qualifications or costs make compliance with a state's
securities laws impractical. Accordingly, persons residing in such
states are not eligible to subscribe for stock of Chester Bancorp during
the Subscription Offering. These persons, however, may purchase stock
after it begins trading. Please refer to Question No. 28.
12. Q. HOW DO I SUBSCRIBE FOR SHARES OF STOCK IN THE SUBSCRIPTION OFFERING?
A. You may order stock by completing an original Stock Order Form
(facsimile copies and photocopies will not be accepted), reading and
signing the separate Certification Form, and returning them along with
full payment or appropriate instructions authorizing a withdrawal from a
deposit account at Chester Savings to the Conversion Center on or prior
to the close of the Subscription Offering, which will occur at Noon,
Central Time on September [day], 1996. ORDERS NOT CONTAINING A COMPLETED
CERTIFICATION FORM WILL NOT BE ACCEPTED.
You may pay for your stock by check or money order, or by cash if
presented in person at Chester Savings' main or any branch office. Those
funds will earn interest at Chester Savings' passbook rate from the day
of receipt until the consummation or termination of the Conversion.
You may authorize Chester Savings to withdraw funds from your Chester
Savings certificate of deposit account or savings. The withdrawal of
funds from INDIVIDUAL RETIREMENT ACCOUNTS REQUIRE A SPECIAL PROCEDURE
DESCRIBED BELOW. These funds will continue to earn interest at the
stated rate in effect for your account until the maturity or repricing
date for the account. A hold will be placed on your account for the
funds you specify to be used in payment for shares of stock. You will
not have access to these funds from the day Chester Savings receives
your order until the consummation or termination of the Conversion.
Early withdrawal penalties will be waived for funds from certificates of
deposit used to purchase shares in the Subscription.
IF YOU WANT TO USE ALL OR A PORTION OF YOUR CHESTER SAVINGS INDIVIDUAL
RETIREMENT ACCOUNT TO SUBSCRIBE FOR STOCK, please call the Conversion
Center at (618) [#] for assistance. Individual Retirement Account
holders may make stock purchases from their deposits through a pre-
arranged custodian-to-custodian transfer. There will be no early
withdrawal or IRS penalties incurred by these transactions. Transfer
arrangements take time, so please contact the Conversion Center at your
earliest convenience. THE DEADLINE FOR IRA SUBSCRIPTIONS ARRANGED
THROUGH THE CONVERSION CENTER IS SEPTEMBER [DAY], 1996.
13. Q. WHEN MUST I PLACE MY ORDER FOR SHARES OF STOCK?
A. A properly completed, original Stock Order Form (facsimile copies and
photocopies will not be accepted) and an executed separate Certification
Form must be actually received by Chester Savings with full payment for
all shares subscribed for no later than Noon, Central Time on September
[day], 1996.
14. Q. HOW MANY SHARES OF STOCK ARE BEING OFFERED AND AT WHAT PRICE?
A. Chester Bancorp is offering a minimum of 1,317,500 shares of common
stock and up to a maximum of 1,782,500 shares of common stock at a price
of $10.00 per share. Having such a range is required by federal
regulations and allows for changing market conditions during the
Subscription Offering. Under certain circumstances, the maximum number
of shares may be increased up to 2,049,375 shares. During the
Subscription Offering, eligible purchasers may subscribe for shares at
the price of $10.00 per share.
15. Q. WILL I RECEIVE A DISCOUNT ON THE PRICE OF THE STOCK?
A. No. Federal regulations require that the offering price be the same for
everyone: customers, Chester Savings' employees, officers, and
directors, and the general public.
16. Q. WHAT IS THE MINIMUM AND MAXIMUM NUMBER OF SHARES THAT I CAN PURCHASE
DURING THE OFFERING PERIOD?
A. The maximum number of shares which may be subscribed for by each person
by himself or herself (except for orders by the Tax-Qualified Employee
Plans) is 40,000 shares, or $400,000. Also, no person (other than the
Tax-Qualified Employee Plans) by himself or herself or with an
associate, and no group of persons acting in concert, may subscribe for
or purchase more than 9.99% of the shares issued in the Conversion. No
Stock Order Form will be accepted for fewer than 25 shares.
17. Q. HOW WAS IT DETERMINED THAT UP TO 1,782,500 SHARES OF COMMON STOCK WOULD
BE ISSUED AT $10.00 PER SHARE?
A. The price range was determined on the basis of an appraisal of the PRO
FORMA market value of Chester Bancorp and Chester Savings as converted
by RP Financial, LC., a prominent financial consulting firm experienced
in appraising converting savings institutions.
18. Q. MUST I PAY A COMMISSION ON THE STOCK FOR WHICH I SUBSCRIBE?
A. No. You will not be charged a brokerage commission to subscribe for
stock in Chester Bancorp's initial stock offering.
19. Q. WILL I RECEIVE INTEREST ON FUNDS I SUBMIT FOR STOCK PURCHASES?
A. Yes. Chester Savings will pay interest Chester Savings' passbook rate
from the date received (with a completed Stock Order Form) during the
Subscription Offering and the Direct Community Offering, if any, until
consummation of the Conversion.
20. Q. IF I HAVE MISPLACED MY STOCK ORDER FORM AND CERTIFICATION FORM OR NEED
ASSISTANCE IN COMPLETING THE STOCK ORDER FORM, WHAT SHOULD I DO?
A. Chester Savings will mail you another Stock Order Form and Certification
Form, or you may obtain them from the Conversion Center. If you need
assistance in obtaining or completing a Stock Order Form, please call
the Conversion Center at (618) [#]. You may also visit
<PAGE>
the Conversion Center, located at 1112 State Street, Chester, Illinois.
21. Q. MAY I TRANSFER OR SELL MY (OUR) SUBSCRIPTION RIGHTS TO ANOTHER PARTY?
A. No. Pursuant to federal regulations, subscription rights granted to
Eligible Account Holders, Supplemental Eligible Account Holders, and
Other Members may be used to purchase stock only by the person(s) to
whom they are granted. THE TRANSFER OR ATTEMPTED TRANSFER OF
SUBSCRIPTION RIGHTS IS PROHIBITED BY FEDERAL LAW. Further, subscription
rights cannot be used to purchase stock pursuant to an agreement to
transfer the stock to another person. CHESTER BANCORP AND CHESTER
SAVINGS MAY PURSUE ANY AND ALL LEGAL AND EQUITABLE REMEDIES IN THE EVENT
THEY BECOME AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS, AND ORDERS
INVOLVING THE TRANSFER OR PURPORTED TRANSFER OF SUCH RIGHTS WILL NOT BE
HONORED.
22. Q. ONCE I PLACE AN ORDER, MAY I CHANGE MY MIND?
A. No. Once Chester Bancorp receives your subscription, it may not be
withdrawn or modified without Chester Savings' consent.
23. Q. WILL THERE BE ANY DIVIDENDS PAID ON THE STOCK?
A. The Board of Directors of Chester Bancorp anticipates paying quarterly
cash dividends on the common stock, subsequent to the Conversion, at an
annual rate equal to $0.20 per share ($0.05 per share quarterly)
commencing in the first full quarter following the Conversion, subject
to the following factors that the Board of Directors of the Holding
Company will consider at the intended time of declaration and payment:
current and projected earnings, financial condition, regulatory capital
requirements, including applicable statutory and regulatory restrictions
on the payment of dividends, and other relevant factors. Accordingly, no
assurances can be given that any dividends will be declared or, if
declared, what the amount of dividends will be or whether such
dividends, once declared, will continue.
24. Q. HOW MUCH STOCK DO THE DIRECTORS AND OFFICERS OF CHESTER SAVINGS INTEND
TO PURCHASE IN THE SUBSCRIPTION OFFERING?
A. Directors and officers intend to purchase approximately $3.9 million
(21.6% at the maximum of the offering range) of the stock to be offered
in the Conversion. The purchase price paid by directors and officers
will be the same as that paid by Chester Savings' depositors, borrowers,
and the general public.
25. Q. I CLOSED MY ACCOUNT SEVERAL MONTHS AGO. SOMEONE TOLD ME THAT I AM STILL
ELIGIBLE TO SUBSCRIBE FOR STOCK. IS THAT TRUE?
A. If you were a depositor of Chester Savings with a balance of $50 or more
on the Eligibility Record Date, January 15, 1996, or the Supplemental
Eligibility Record Date, June 30, 1996, you are entitled to subscribe
for stock even if you no longer hold your Chester Savings account.
26. Q. MAY I OBTAIN A LOAN FROM CHESTER SAVINGS TO PURCHASE SHARES USING
CHESTER BANCORP'S STOCK AS COLLATERAL?
A. NO. Federal regulations prohibit Chester Savings from making loans for
this purpose, but other lenders may make a loan for this purpose.
27. Q. WILL THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") INSURE THE
SHARES OF STOCK?
A. NO. The shares are not and may not be insured by the FDIC or any other
government agency. The FDIC will continue, however, to insure savings
accounts, checking accounts, and certificates of deposit up to the
applicable limits allowed by law.
28. Q. WILL THERE BE A MARKET FOR THE STOCK FOLLOWING THE CONVERSION SO THAT I
MAY BUY MORE SHARES OR SELL MY SHARES?
A. While neither Chester Bancorp nor Chester Savings has ever issued stock,
Chester Bancorp anticipates that its common stock will be quoted on The
Nasdaq National Market/SM/ under the symbol "CNBI" following
consummation of the Conversion, but no assurance can be given that an
established and liquid market for the common stock will develop or, if
developed, will be maintained.
FOR YOUR CONVENIENCE
In order to assist you during the stock offering period, a Conversion
Center has been established to answer your questions. Please visit the
Conversion Center at:
1112 State Street
Chester, Illinois
or call
(618) [#]
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED OR GUARANTEED.
THIS BROCHURE IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY
THE COMMON STOCK OF CHESTER BANCORP, INC.
THE OFFER IS MADE ONLY
BY THE PROSPECTUS.
<PAGE>
IV. MARKETING PIECES
COMBINATION QUESTION-AND-ANSWER BROCHURE/FOLDER
VC INITIAL MAILING--ALL ELIGIBLE ACCOUNT HOLDERS
B INITIAL MAILING--ELIGIBLE ACCOUNT HOLDERS-- "B" STATES
RESPONSE MAILINGS-- "B" STATES
J INITIAL MAILING--NON-BLUE SKY STATES
CC RESPONSE MAILINGS--ALL STATES
F CLOSED ACCOUNT MAILING
S STOCK-RETURN BUSINESS REPLY ENVELOPE
X PROXY-RETURN BUSINESS REPLY ENVELOPE
OA ORDER ACKNOWLEDGMENT
U INTEREST/REFUND CHECK--UNFILLED ORDERS
FP INTEREST/REFUND CHECK--FULL/PARTIAL ORDERS
CE CERTIFICATE ENCLOSURE
I INVESTOR MEETING INVITATION
C CERTIFICATION FORM
<PAGE>
MARKETING MATERIALS DISTRIBUTION
<TABLE>
<CAPTION>
====================================================================================================================================
PROXY PROXY STOCK ORDER
- ------------------------------------------------------------------------------------------------------------------------------------
TIMING ELIGIBILITY LOCATIONS LETTER Q&A/FOLDER CARD STMT. PROSPECTUS FORM INVITATION BRE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial ERD and VRD "A" states VC X X X X X, C I S,X
- ------------------------------------------------------------------------------------------------------------------------------------
Initial ERD only "A" states F X X X, C I S
- ------------------------------------------------------------------------------------------------------------------------------------
Initial ERD and VRD "B" states B, VC X X X X X, C I S,X
- ------------------------------------------------------------------------------------------------------------------------------------
Initial ERD only "B" states B, F X X X, C I S
- ------------------------------------------------------------------------------------------------------------------------------------
Initial ERD and VRD Non-blue sky J X X X
- ------------------------------------------------------------------------------------------------------------------------------------
Initial ERD only Non-blue sky J
- ------------------------------------------------------------------------------------------------------------------------------------
Response Any "A" states CC X X X, C I S
- ------------------------------------------------------------------------------------------------------------------------------------
Response Any "B" states B, CC X X X, C I S
- ------------------------------------------------------------------------------------------------------------------------------------
Order Subscriber "A" and "B" OA
- ------------------------------------------------------------------------------------------------------------------------------------
Pre-closing Subscriber "A" and "B" U
- ------------------------------------------------------------------------------------------------------------------------------------
Closing Stockholder "A" and "B" FP
- ------------------------------------------------------------------------------------------------------------------------------------
Closing Stockholder "A" and "B" CE
====================================================================================================================================
</TABLE>
Note: ERD includes SERD.
<PAGE>
August [ ], 1996
Dear Valued Customer:
We are pleased to announce that Chester Savings Bank, FSB ("Chester
Savings") is converting from a federally chartered mutual savings bank to a
federally chartered stock savings bank. As part of the conversion process,
Chester Savings has formed a new holding company, Chester Bancorp, Inc.
("Chester Bancorp"). Following the conversion, Chester Savings will be the
wholly owned subsidiary of Chester Bancorp and intends to reorganize into
commercial banks to be named Chester National Bank and Chester National Bank of
Missouri. Chester Bancorp common stock is being offered through a subscription
offering of NON-TRANSFERABLE subscription rights to certain of Chester Savings'
deposit account holders and borrowers and to Chester Savings' tax-qualified
employee stock benefit plans. After the subscription offering, Chester Bancorp's
common stock may also be offered through a direct community offering to certain
members of the general public.
AS AN ELIGIBLE CUSTOMER, YOU HAVE A PRIORITY RIGHT TO SUBSCRIBE FOR STOCK
DIRECTLY FROM CHESTER BANCORP, WITHOUT PAYMENT OF A COMMISSION OR FEE, BEFORE IT
IS OFFERED TO THE GENERAL PUBLIC. The enclosed materials relating to the
offering include a Prospectus, a brochure describing the conversion and
concurrent offering of Chester Bancorp common stock, a Stock Order Form, and a
Certification Form. If you decide to exercise your subscription rights, you must
return to Chester Bancorp a properly completed original Stock Order Form
--------
(facsimile copies and photocopies will not be accepted) and an executed
Certification Form together with full payment for the subscribed shares (or
appropriate instructions authorizing withdrawal of full payment from your
deposit account at Chester Savings) by Noon, Central Time on September [day],
1996. YOUR ORDER CANNOT BE PROCESSED UNLESS YOU RETURN AN EXECUTED CERTIFICATION
FORM. A postage-paid stock-return envelope is enclosed for your convenience.
If you have an IRA account with Chester Savings, you can subscribe for
stock with those funds without an early withdrawal penalty and without a
negative tax consequence to your retirement account. To do so, a self-directed
retirement account must be established. Funds from your Chester Savings IRA
account could then be directly transferred to the new account for this purpose.
There would be a minimal fee for setup and maintenance of such an account.
Please call our Conversion Center for more information about subscribing stock
through a self-directed retirement account. SUBSCRIPTIONS INVOLVING CHESTER
SAVINGS IRA ACCOUNTS MUST BE RECEIVED BY NOON, CENTRAL TIME, SEPTEMBER [DAY],
1996 TO ALLOW FOR ADDITIONAL PROCESSING TIME.
If you were a depositor of Chester Savings on August [day], 1996 or a
borrower as of both [date] , 1995 and August [day], 1996, you are eligible to
---
vote on the proposed conversion. If so, we are also enclosing a Notice of
Special Meeting and Proxy Statement concerning the meeting to be held on
September [day], 1996. YOUR VOTE IS IMPORTANT TO US. PLEASE SIGN THE PROXY CARD
AND MAIL IT TO US PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THE BOARD OF
DIRECTORS RECOMMENDS UNANIMOUSLY THAT YOU VOTE "FOR" THE CONVERSION. Execution
of the proxy card merely ensures that your votes are represented at the meeting
and in no way obligates you to purchase stock in the conversion.
If you have any questions regarding the conversion and subscription
offering, please call the special Conversion Center at (618) [#] from 8:00 A.M.
to 5:00 P.M. Central Time, Monday through Friday, and ask for an EVEREN
Securities representative.
Sincerely,
CHESTER SAVINGS BANK, FSB
Michael W. Welge Howard A. Boxdorfer Edward K. Collins
Chairman of the Board President Executive Vice President and
Chief Executive Officer
Enclosures
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT
OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
THIS LETTER IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY
THE COMMON STOCK OF CHESTER BANCORP, INC. THE OFFER IS MADE ONLY BY THE
PROSPECTUS.
VC
<PAGE>
August [ ], 1996
To: Those Eligible to Subscribe in the
Subscription and Direct Community Offering of
Chester Bancorp, Inc. and
Other Interested Investors
================================================================================
At the request of Chester Bancorp, Inc. ("Chester Bancorp"), we are enclosing
materials relating to the conversion of Chester Savings Bank, FSB ("Chester
Savings") from a federally chartered mutual savings bank to a federally
chartered stock savings bank and the concurrent formation of Chester Bancorp to
act as its holding company. After the conversion, Chester Savings intends to
reorganize into commercial banks to be named Chester National Bank and Chester
National Bank of Missouri. These materials include a Prospectus, a brochure
describing the conversion of Chester Savings and the offering of Chester Bancorp
common stock, a Stock Order Form, and a Certification Form.
As part of the conversion process, Chester Bancorp is offering newly issued
shares of its common stock through a subscription offering involving NON-
TRANSFERABLE subscription rights to certain of Chester Savings deposit account
holders and borrowers and to Chester Savings' tax-qualified employee stock
benefit plans. After the subscription offering, Chester Bancorp's common stock
may also be offered through a direct community offering to certain members of
the general public.
Please read these materials carefully. If you decide to subscribe for shares,
you must return to Chester Bancorp a properly completed original Stock Order
--------
Form (facsimile copies and photocopies will not be accepted) and executed
Certification Form together with the full required payment for the subscribed
shares (or appropriate instructions authorizing withdrawal of full payment from
your deposit account at Chester Savings) by Noon, Central Time, on September
[day], 1996. YOUR ORDER CANNOT BE PROCESSED UNLESS YOU RETURN AN EXECUTED
CERTIFICATION FORM. A postage-paid stock-return envelope is enclosed for your
convenience.
If appropriate, we are also enclosing a Notice of Special Meeting and Proxy
Statement concerning the meeting to be held on September [day], 1996 so that you
may vote on the proposed conversion. YOUR VOTE IS IMPORTANT. PLEASE SIGN THE
ENCLOSED PROXY CARD AND MAIL IT PROMPTLY TO CHESTER SAVINGS IN THE ENCLOSED
POSTAGE-PAID PROXY-RETURN ENVELOPE. THE BOARD OF DIRECTORS RECOMMENDS
UNANIMOUSLY THAT YOU VOTE "FOR" THE CONVERSION. Execution of the proxy card
merely ensures that your votes are represented at the meeting and in no way
obligates you to purchase stock in the conversion.
Chester Bancorp has asked us to forward the enclosed documents to you in view of
certain requirements of the securities laws of your state. We should not be
understood as recommending or soliciting any action by you with respect to the
stock offering or the Special Meeting.
If you have any questions, please call the special Conversion Center at (618)
[#] from 8:00 A.M. to 5:00 P.M. Central Time, Monday through Friday, and ask for
an EVEREN Securities representative.
Very truly yours,
EVEREN SECURITIES, INC.
Enclosures
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT
OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
THIS LETTER IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY
THE COMMON STOCK OF CHESTER BANCORP, INC. THE OFFER IS MADE ONLY BY THE
PROSPECTUS.
B
<PAGE>
August [ ], 1996
Dear Member:
We are pleased to announce that Chester Savings Bank, FSB ("Chester Savings") is
converting from a federally chartered mutual savings bank to a federally
chartered stock savings bank. As part of the conversion process, Chester
Savings has formed Chester Bancorp, Inc. ("Chester Bancorp") to act as its
holding company. Following the conversion, Chester Savings will be the wholly
owned subsidiary of Chester Bancorp and intends to reorganize into commercial
banks to be named Chester National Bank and Chester National Bank of Missouri.
Chester Bancorp common stock is being offered through a subscription offering of
NON-TRANSFERABLE subscription rights to certain of Chester Savings' eligible
deposit account holders and borrowers and to Chester Savings' tax-qualified
employee stock benefit plans. After the subscription offering, Chester Bancorp
common stock may also be offered through a direct community offering to certain
members of the general public.
If you were a depositor of Chester Savings on August [day], 1996 or a borrower
as of both [date], 1996 and August [day], you are eligible to vote on the
proposed conversion. If so, we are enclosing a Notice of Special Meeting and
Proxy Statement concerning the meeting to be held on September [day], 1996.
YOUR VOTE IS IMPORTANT TO US. PLEASE SIGN THE PROXY CARD AND MAIL IT TO US
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THE BOARD OF DIRECTORS
RECOMMENDS UNANIMOUSLY THAT YOU VOTE "FOR" THE CONVERSION. Execution of the
proxy card ensures that your votes are represented at the meeting.
Although you may be eligible to vote on the proposed conversion or otherwise
eligible to subscribe for shares, Chester Bancorp is unfortunately unable to
offer or sell its common stock to you because the small number of eligible
subscribers in your state, the registration of the conversion stock or the
registration or qualification of Chester Savings' employees, officers,
directors, and persons acting on its behalf as broker-dealers in your state make
it impractical, for reasons of cost or otherwise, to comply with the securities
laws of your state. Accordingly, neither this letter nor the enclosed Notice of
Special Meeting and Proxy Statement should be considered an offer to sell or a
solicitation of an offer to buy the common stock of Chester Bancorp.
If you have any questions about your voting rights or the Conversion in general,
please call the special Conversion Center at (618) [#], from 8:00 A.M. to 5:00
P.M. Central Time, Monday through Friday and ask for an EVEREN Securities
representative.
Sincerely,
CHESTER SAVINGS BANK, FSB
Michael W. Welge Howard A. Boxdorfer Edward K. Collins
Chairman of the Board President Executive Vice President and
Chief Executive Officer
Enclosures
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT
OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
THIS LETTER IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY
THE COMMON STOCK OF CHESTER BANCORP, INC. THE OFFER IS MADE ONLY BY THE
PROSPECTUS.
J
<PAGE>
August [ ], 1996
Dear Interested Investor:
Thank you for your interest in becoming a charter stockholder in Chester
Bancorp, Inc. ("Chester Bancorp"), the proposed holding company for Chester
Savings Bank, FSB ("Chester Savings"), to become Chester National Bank and
Chester National Bank of Missouri after the conversion. We appreciate this
opportunity to provide you with additional information on the sale of Chester
Bancorp common stock.
The enclosed information packet includes the following:
PROSPECTUS: This document provides detailed information about Chester
Bancorp's proposed stock offering and Chester Savings' operations.
Please read it carefully.
QUESTIONS AND ANSWERS: This brochure answers key questions about the
conversion and the stock offering.
STOCK ORDER FORM: Use this original form to order stock and return it with
your payment and an executed Certification Form in the enclosed
postage-paid stock-return envelope. Please fill out this form as
completely as possible. Facsimile copies and photocopies will not be
accepted. The deadline for ordering stock is Noon, Central Time, on
September [day], 1996.
CERTIFICATION FORM: Please read the Certification Form carefully, sign it,
and return it along with your Stock Order Form and payment in the
enclosed postage-paid stock-return envelope. YOUR ORDER CANNOT BE
PROCESSED UNLESS YOU COMPLETE AND RETURN THIS CERTIFICATION FORM.
If you have any questions regarding the conversion, the subscription
offering, or the direct community offering, please call the special Conversion
Center at (618) [#], from 8:00 A.M. to 5:00 P.M. Central Time, Monday through
Friday, and ask for an EVEREN Securities representative.
We are pleased to offer you this opportunity to become a stockholder in
Chester Bancorp.
Sincerely,
CHESTER BANCORP, INC.
Michael W. Welge Edward K. Collins
Chairman of the Board and Chief Executive Officer and
President Secretary
Enclosures
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT
OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
THIS LETTER IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY
THE COMMON STOCK OF CHESTER BANCORP, INC. THE OFFER IS MADE ONLY BY THE
PROSPECTUS.
CC
<PAGE>
August [ ], 1996
Dear Friend:
We are pleased to announce that Chester Savings Bank, FSB ("Chester
Savings") is converting from a federally chartered mutual savings bank to a
federally chartered stock savings bank. As part of this process, Chester Savings
has formed a new holding company, Chester Bancorp, Inc. ("Chester Bancorp").
Following the conversion, Chester Savings will be the wholly owned subsidiary of
Chester Bancorp and intends to reorganize into commercial banks to be named
Chester National Bank and Chester National Bank of Missouri.
In connection with the conversion and holding company formation, Chester
Bancorp is offering newly issued shares of its common stock to eligible parties
in a subscription offering. Capital raised from the sale of the common stock
will assist Chester Savings in achieving its future objectives and will increase
Chester Savings' capital position to improve its competitive position; support
its deposit, borrowing, lending, and investment activities; and facilitate its
reorganization into commercial banks.
AS A FORMER ACCOUNT HOLDER, YOU HAVE A PRIORITY RIGHT TO SUBSCRIBE FOR
STOCK DIRECTLY FROM CHESTER BANCORP, WITHOUT PAYMENT OF A COMMISSION OR FEE,
BEFORE IT IS OFFERED TO THE GENERAL PUBLIC. We appreciate this opportunity to
provide you with information on the sale of Chester Bancorp common stock.
The enclosed information package includes the following:
. PROSPECTUS: This document provides detailed information about Chester
Bancorp's proposed stock offering and Chester Savings' operations.
Please read it carefully.
. QUESTIONS AND ANSWERS: This brochure answers key questions about the
stock offering.
. STOCK ORDER FORM: Use this original order form to order stock and return
it with your payment and an executed Certification Form in the
enclosed postage-paid stock-return envelope. Please complete the
form as fully as possible. Photocopies and facsimiles will not be
accepted. The deadline for ordering stock is Noon Central time on
September [day], 1996.
. CERTIFICATION FORM: Please read the Certification Form carefully, sign
it, and return it along with your Stock Order Form and payment in
the enclosed postage-paid stock-return envelope. YOUR ORDER CANNOT
BE PROCESSED UNLESS YOU COMPLETE AND RETURN THE CERTIFICATION FORM.
If you have any questions regarding the conversion and subscription
offering, please call our special Conversion Center at (618) [#] from 8:00 A.M.
to 5:00 P.M. Central Time, Monday through Friday, and ask for an EVEREN
Securities representative.
Sincerely,
CHESTER SAVINGS BANK, FSB
Michael W. Welge Howard A. Boxdorfer Edward K. Collins
Chairman of the Board President Executive Vice President and
Chief Executive Officer
Enclosures
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT
OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
THIS LETTER IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY
THE COMMON STOCK OF CHESTER BANCORP, INC. THE OFFER IS MADE ONLY BY THE
PROSPECTUS.
F
<PAGE>
================================================================================
HAVE YOU ENCLOSED THE SEPARATE
CERTIFICATION FORM?
CHESTER SAVINGS BANK CANNOT ACCEPT OR PROCESS YOUR ORDER
UNLESS THE CERTIFICATION FORM IS PROPERLY SIGNED AND
INCLUDED ALONG WITH YOUR COMPLETED STOCK ORDER FORM.
________________________________________________________________________________
NO POSTAGE
STOCK RETURN NECESSARY
IF MAILED
IN THE
UNITED STATES
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. [ ] CHESTER, IL
POSTAGE WILL BE PAID BY ADDRESSEE
CHESTER SAVINGS BANK FSB
CONVERSION CENTER
1112 STATE STREET
CHESTER IL 62233
S
================================================================================
<PAGE>
================================================================================
NO POSTAGE
PROXY RETURN NECESSARY
IF MAILED
IN THE
UNITED STATES
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. [ ] CHESTER, IL
POSTAGE WILL BE PAID BY ADDRESSEE
CHESTER SAVINGS BANK FSB
CONVERSION CENTER
1112 STATE STREET
CHESTER IL 62233
X
================================================================================
<PAGE>
[CHESTER SAVINGS LETTERHEAD] ORDER ACKNOWLEDGMENT
[ ], 1996
[subscriber name]
[joint name] [tenancy]
[joint name] [tenancy]
[joint name] [tenancy]
[city], [state] [zip code]
Dear [salutation]:
This letter acknowledges your subscription for the shares of Chester
Bancorp, Inc. stock being offered in connection with the conversion of Chester
Savings Bank, FSB from mutual form to stock ownership. Our records indicate the
following:
Date received: [order date]
# of shares: [subscription]
at [$10.00] per share
Total amount subscribed: [dollars]
YOUR ORDER HAS BEEN ASSIGNED TO CATEGORY [CATEGORY] IN ACCORDANCE WITH
PRIORITIES ESTABLISHED IN THE PROSPECTUS, BEGINNING ON PAGE [___]. Please
contact the Conversion Center at (618) [ ] if you believe this category
assignment or any of the information listed above is incorrect.
THIS ACKNOWLEDGMENT DOES NOT CONSTITUTE CONFIRMATION THAT YOUR ORDER WILL
BE FILLED IN WHOLE OR IN PART. Your order will be filled in accordance with the
terms (including allocation procedures) set forth in Chester Savings Bank, FSB's
Plan of Conversion, which is summarized in Chester Bancorp, Inc.'s Prospectus.
If you have any further questions prior to the completion of the offering,
please feel free to call our Conversion Center at (618) [ ]. Thank you for your
order.
Sincerely,
CHESTER SAVINGS BANK, FSB
Michael W. Welge Howard A. Boxdorfer Edward K. Collins
Chairman of the Board President Executive Vice President and
Chief Executive Officer
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT
OR ACCOUNT AND IS NOT FEDERALLY ISSUED OR GUARANTEED.
OA
<PAGE>
[CHESTER SAVINGS LETTERHEAD]INTEREST/REFUND CHECK
UNFILLED ORDERS
IF APPROPRIATE
Date: / /96
Tax I.D. Number
[ - - ]
Dear Subscriber:
Thank you for your interest in Chester Bancorp, Inc.'s initial stock offering.
Unfortunately, no shares were available for issuance to subscribers in your
priority category. Consequently, we are returning your subscription funds,
along with interest at the rate of [ . 0] percent from the date of deposit
through [ ] [ ], 1996 as set forth in the Prospectus. Enclosed is a check
for both amounts.
While shares were not available for you in the Subscription [and Direct
Community] Offering, the stock is expected to trade on The Nasdaq National
Market/SM/ under the ticker symbol "CNBI" beginning on or about [ ],
1996. We look forward to your interest in the stock in the secondary market.
Sincerely,
CHESTER BANCORP, INC.
Michael W. Welge Edward K. Collins
Chairman of the Board and Chief Executive Officer and
President Secretary
Enclosure
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT
OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
U
<PAGE>
[CHESTER SAVINGS LETTERHEAD] INTEREST/REFUND CHECK
FULL/PARTIAL ORDERS
Date: [ ]/[ ]/96
Tax I.D. Number
[ - - ]
Dear Subscriber:
The funds you deposited with Chester Savings Bank, FSB for the purchase of
Chester Bancorp, Inc. common stock have been earning interest at the rate of [ .
0] percent from the date of deposit through [ ] [ ], 1996 as set forth in the
Prospectus. Enclosed is a check for the interest earned during that period. [If
appropriate: In the event that your order was reduced in size due to
oversubscription for shares in a category with a greater priority than yours, or
otherwise, the check also includes a refund of any remaining balance in your
subscription account.]
When trading in Chester Bancorp, Inc. common stock commences, you may find
it listed in The Nasdaq National Market/SM/ under the ticker symbol "CNBI".
Trading is expected to commence on or about [ ], 1996.
We appreciate the confidence you have shown in Chester Savings Bank, FSB
and look forward to having you as a long-term stockholder in our holding
company, Chester Bancorp, Inc.
Sincerely,
CHESTER BANCORP, INC.
Michael W. Welge Edward K. Collins
Chairman of the Board and Chief Executive Officer and
President Secretary
Enclosure
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT
OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
FP
<PAGE>
[CHESTER SAVINGS LETTERHEAD] CERTIFICATE ENCLOSURE
Date: [ ]/[ ]/96
Tax I.D. Number
[ - - ]
Dear Charter Stockholder:
We are proud to enclose with this letter a certificate representing your
ownership of common stock issued by Chester Bancorp, Inc. ("Chester Bancorp") in
connection with the recent conversion of Chester Savings Bank, FSB ("Chester
Savings") to the stock form of ownership. We welcome you as a charter
stockholder of Chester Bancorp and look forward to a lasting relationship.
Please take a moment to review your certificate to make certain the
name(s), address, and number of shares are correct. [If appropriate: Due to an
oversubscription among Category [ ] subscribers, your order may have been
reduced in size. As set forth in the Prospectus, the allocation of shares among
Category [ ] subscribers was based upon a subscriber's deposit size as of [ ][
], 1996 in relation to the total deposits of Category [ ] subscribers at that
date.] If you have any questions, please feel free to contact us at (618) [ ].
As set forth in the Prospectus, the funds you deposited with Chester
Savings for the purchase of Chester Bancorp common stock earned interest at the
rate of [ ]% per annum from the date of your deposit through [ ] [ ], 1996. Your
interest check as well as any remaining funds in your subscription account [If
appropriate: (due to an allocation of an oversubscription in your priority
category, or otherwise) will be mailed under separate cover].
We sincerely appreciate your support and confidence in Chester Bancorp and
its subsidiary, Chester Savings. We are looking forward to a lasting
relationship with you as both stockholder and customer.
Sincerely,
CHESTER BANCORP, INC.
Michael W. Welge Edward K. Collins
Chairman of the Board and Chief Executive Officer and
President Secretary
Enclosure
THE COMMON STOCK OF CHESTER BANCORP, INC. IS NOT A DEPOSIT
OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
CE
<PAGE>
[CARD STOCK] INVESTOR MEETING INVITATION
===================================================
The Officers, Directors and Employees
of
CHESTER SAVINGS BANK, FSB
cordially invite you
to attend a brief presentation
regarding the stock offering of
Chester Bancorp, Inc.
Please join us at
[ PLACE ]
[ ADDRESS ]
on
[ DATE ]
at [ ]
for [ ]
R.S.V.P.
(618) [#]
THE COMMON STOCK OF CHESTER BANCORP, INC. IS
NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY
INSURED OR GUARANTEED.
THIS LETTER IS NEITHER AN OFFER TO SELL NOR A
SOLICITATION OF AN OFFER TO BUY THE COMMON
STOCK OF CHESTER BANCORP, INC. THE OFFER IS
MADE ONLY BY THE PROSPECTUS.
===================================================
<PAGE>
I
- --------------------------------------------------------------------------------
PROXYGRAM
We recently sent you a special mailing which allows you, a member of
Chester Savings Bank, FSB, to vote on the conversion of Chester Savings from a
federally chartered mutual to a federally chartered stock savings bank. We
encourage you to review the proxy material you received previously and to VOTE
YES for conversion. YOUR VOTE COUNTS!
You may have received more than one Proxy Card, representing your
opportunity to vote on multiple accounts. It is important that you sign and
return ALL Proxy Cards to Chester Savings as soon as possible. Please use the
postage-paid envelope provided with the proxy card and materials you have
received.
If you have any questions or need replacement proxy cards, please call the
Conversion Center at (618) [#]. Collect calls will be accepted.
The Board of Directors and Management of
Chester Savings Bank, FSB
- --------------------------------------------------------------------------------
<PAGE>
CERTIFICATION FORM
-------------------
I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT, IS NOT FEDERALLY
INSURED OR GUARANTEED AND IS NOT GUARANTEED BY CHESTER SAVINGS BANK, FSB, BY
CHESTER BANCORP, INC., OR BY THE FEDERAL GOVERNMENT.
If anyone asserts that this security is federally insured or guaranteed, or is
as safe as an insured deposit, I should call the Regional Director of the Office
of Thrift Supervision, Ronald N. Karr at (312) 917-5000.
I further certify that, before purchasing the common stock par value $.01 per
share of Chester Bancorp, Inc. ("Chester Bancorp"), the proposed holding company
for Chester Savings Bank, FSB (the "Savings Bank"), I have received a Prospectus
dated August [ ], 1996.
The Prospectus that I have received contains disclosure concerning the nature of
the common stock of Chester Bancorp being offered and describes the risks
involved in the investment, including, but not limited to: (i) certain loan
underwriting considerations and the risks of the Savings Bank's revised lending
strategy after the conversion; (ii) the Savings Bank's dependence on the local
economy and the competition in its market area; (iii) the additional taxes
associated with the recapture of the Savings Bank's bad debt reserve; (iv) the
risk of potential reduction of the large repurchase agreements with and deposit
balances of a single customer; (v) the potential adverse impact of changes in
interest rates; (vi) the level of and prospects for Chester Savings' return on
equity after conversion; (vii) the recapitalization of the Savings Association
Insurance Fund ("SAIF") and its impact of SAIF premiums; (viii) (1) the
existence of anti-takeover provisions in Chester Bancorp's Certificate of
Incorporation and Delaware law, (2) the voting control of Chester Bancorp's
common stock by Chester Savings' board, management, and employee plans, (3) the
existence of anti-takeover provisions in, and the anti-takeover effect of
certain other provisions of, the charter and benefit plans of the Savings Bank,
and in the federal law governing the acquisition of control of savings
associations, and (4) the potential anti-takeover effect of the Savings Bank's
employment and severance agreements; (ix) the absence of a prior market for the
securities offered; (x) the possible dilutive effect of the Management
Retention Plan ("MRP"), Stock Option Plan, and Employee Stock Ownership Plan
("ESOP"); (xi) the possible increase in the number of shares issued in the
conversion; and (xii) the risk of a delayed offering.
For a more detailed description of the risks involved in the offering, see "Risk
Factors" at pages 1 through 7 of the Prospectus.
Signature: ______________________
Note: If the stock isto be held in joint
- -----
name, all parties must sign. Signature: ______________________
Date: ______________________
<PAGE>
CHESTER BANCORP, INC.
---------------------
SUBSCRIPTION OFFERING AND DIRECT COMMUNITY OFFERING
STOCK ORDER FORM INSTRUCTIONS AND GUIDE
---------------------------------------
COMPLETING THE STOCK ORDER FORM
Information on this Stock Order Form will be mechanically scanned. As a result,
it is important that the Stock Order Form be completed neatly and legibly.
Please print in capital letters, using black or blue ink, within the confines of
each box. Write one letter per box, from left to right, leaving one box blank
for a space. Write dollar amounts in the appropriate boxes utilizing the commas
and decimal places provided. Please see the example below.
First Name M.I. Last Name
__________ ______ _________
You may mail your completed Stock Order Form, executed Certification Form, and
full payment in the postage-paid envelope that has been provided, or you may
deliver them to the main or any branch office of Chester Savings Bank, FSB
("Chester Savings"). Your properly completed original Stock Order Form
(facsimile copies and photocopies will not be accepted) and executed
Certification Form, and payment in full (or withdrawal authorization), at $10.00
per share, must be actually received by Chester Savings no later than Noon,
Central Time, on September [day], 1996 or your order will become void. If you
need further assistance, please call the Conversion Center at (618) [#] and ask
for an EVEREN Securities, Inc. representative. An EVEREN Securities
representative will be pleased to help you with the completion of your Stock
Order Form and Certification Form or answer any questions you may have.
ITEM 1 INSTRUCTIONS
- -------------------
Please check the box for the desired form of stock ownership. The stock
transfer industry has developed a uniform system of stockholder registrations
that will be used in the issuance of your Chester Bancorp, Inc. common stock
certificate. Stock ownership must be registered in one of the ways described
under these guidelines. If you have any questions or concerns regarding the
registration of your stock, please consult your legal advisor. Listed below are
some general guidelines for stockholder registration.
INDIVIDUAL
Include the first name, middle initial, and the last name of the subscriber.
Avoid the use of two initials. Please omit words that do not affect ownership
rights, such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
JOINT TENANTS
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership passes automatically to the surviving joint tenant(s) upon the death
of any joint tenant. All parties must agree to the transfer or sale of shares
held by joint tenants.
TENANTS IN COMMON
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of the
deceased co-tenant. All parties must agree to the transfer or sale of shares
held by tenants in common.
UNIFORM TRANSFER TO MINORS OR UNIFORM GIFT TO MINORS
Stock may be held in the name of a custodian for a minor under the Uniform Gift
to Minors Act ("UGTMA") or Uniform Transfer to Minors Act ("UTMA") of each
state. There may be only one custodian and one minor designated on a stock
certificate. The minor is the actual owner of the stock with the adult
custodian responsible for the investment until the minor reaches legal age. The
standard abbreviation for Custodian is "CUST". Standard
<PAGE>
U.S. Postal Service state abbreviations should be used to describe the
appropriate state. For example, stock held by John Doe as custodian for Susan
Doe under the Illinois Uniform Transfers to Minors Act will be abbreviated John
Doe, CUST Susan Doe UTMA, IL (use minor's social security number).
FIDUCIARIES
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
1. The name(s) of the fiduciary. If an individual, list the first name, middle
initial, and last name. If a corporation, list the corporation's title
before the individual.
2. The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
3. A description of the document governing the relationship, such as a trust
agreement or court order.
4. The date of the document governing the relationship, except that the date of
a trust created by a will need not be included in the description.
5. The name of the maker, donor, or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John Doe,
Trustee UAD 10-1-87 for Susan Doe. The standard abbreviation for "Under
Agreement Dated" is "UAD".
ITEM 2 INSTRUCTIONS
- -------------------
Please complete Item 2 as fully and accurately as possible. Please print in
capital letters and use black or blue ink. Leave one blank box for a space.
Please be certain to supply your social security or tax identification number as
well as your daytime and evening telephone number(s). It may be necessary to
call you if your order cannot be executed as given.
ITEM 3 INSTRUCTIONS
- -------------------
Please check this box if you are a member of the National Associaition of
Securities Dealers, Inc. ("NASD") or if this item otherwise applies to you.
ITEM 4 INSTRUCTIONS
- -------------------
Please check this box if you or any associate, as defined on the reverse side of
the Stock Order Form, or person acting in concert with you, also defined on the
reverse side of the Stock Order Form, has submitted another order for shares and
complete the continuation of Item 4 on the reverse side of the Stock Order Form.
ITEM 5 INSTRUCTIONS
- -------------------
Fill in the number of shares for which you wish to subscribe and the total
payment due. The amount due is determined by multiplying the number of shares
by the subscription price of $10.00 per share. Chester Bancorp, Inc. has
reserved the right to reject the subscription of any order received in the
Direct Community Offering, in whole or in part. The minimum number of shares
that may be subscribed for is 25. No Stock Order Form will be accepted for
fewer than 25 shares. The maximum number of shares which may be subscribed for
by each person by himself or herself (except for orders by Chester Savings' tax-
qualified employee stock benefit plans) is 40,000 shares, or $400,000. Also, no
person (except for Chester Savings' tax-qualified employee stock benefit plans)
by himself or herself or with an associate, and no group of persons acting in
concert, may subscribe for or purchase more than 9.99% of the shares issued in
the conversion. Please refer to Chester Bancorp, Inc.'s Prospectus under the
caption "The Conversion" for complete instructions on purchase limitations
applicable to all persons, their associates, and groups acting in concert with
them.
ITEM 6 INSTRUCTIONS
- -------------------
Please check this box if your method of payment is by cash, check, bank draft,
or money order and fill in the boxes to the right of Item 6 with the total
amount of cash, checks, bank drafts, and money orders submitted. Payment for
shares may be made in cash only if delivered by you in person at Chester
Savings' main or any branch office. Checks, bank drafts, or money orders should
made payable to Chester Bancorp, Inc. Your funds will earn interest
<PAGE>
at the Savings Bank's passbook rate until the conversion is consummated or
terminated. DO NOT MAIL CASH TO SUBSCRIBE FOR STOCK!
ITEM 7 INSTRUCTIONS
- -------------------
Please check this box if you intend to pay for your stock by a withdrawal from a
Chester Savings deposit account. Supply the account number(s) and the total
amount of your withdrawal authorization for each account in the boxes provided.
The amount submitted under Item 6 (if applicable) when added to the amount
withdrawn under Item 7 should equal the total amount of your stock purchase
under Item 5. There will be no penalty assessed for early withdrawals from
certificates of deposit used for stock purchases. SPECIAL ARRANGEMENTS MUST BE
MADE IF USING AN INDIVIDUAL RETIREMENT ACCOUNT ("IRA") FOR STOCK PURCHASES.
PLEASE CONTACT THE CONVERSION CENTER AT (618) [#] FOR INFORMATION REGARDING
SUBSCRIPTIONS USING AN IRA.
ITEM 8 INSTRUCTIONS
- -------------------
a. Please check this box to indicate whether you are a director or an officer of
Chester Savings or a member of such person's immediate family. A person's
immediate family consists of his or her spouse, parents, siblings, children
or grandchildren; the parents and siblings of his or her spouse; and the
spouses of his or her siblings or children.
b. Please check this box to indicate whether you are an employee of Chester
Savings or a member of such person's immediate family.
c. Please check this box if you were:
. A depositor of Chester Savings with a deposit balance of $50 or more on
January 15, 1995 (Eligible Account Holder);
. A depositor of Chester Savings with a deposit balance of $50 or more on
June 30, 1996 ("Supplemental Eligible Account Holder"); and/or
. A depositor of Chester Savings on [date], 1996 and/or a borrower of
Chester Savings on BOTH [date] and August [day], 1996 ("Other Member").
----
You must list all names on the account(s) and all account number(s) of accounts
you had at these dates in order to insure proper identification of your
subscription rights. Please list this account information on the reverse side
of the Stock Order Form in the boxes provided.
ITEM 10 INSTRUCTIONS
- --------------------
Please sign and date the Stock Order Form where indicated. Review both
documents carefully before you sign, including the acknowledgement on the Stock
Order Form. Normally, only one signature is required. An additional signature
is required only when payment is to be made by withdrawal from a deposit account
that requires multiple signatures to withdraw funds. ALL PERSONS LISTED IN ITEM
2 MUST SIGN THE CERTIFICATION FORM.
If you have any remaining questions, or if you would like assistance in
completing your Stock Order Form, you may call the special Conversion Center
telephone number (618) [#] and ask for a representative of EVEREN Securities.
The Conversion Center is open between the hours of 8:00 A.M. and 5:00 P.M.,
Central Time, Monday through Friday.
<PAGE>
Expiration Date: September [day], 1996
Noon, Central Time
Conversion Center
1112 State Street
Chester, IL 62233
(618) [#]
SUBSCRIPTION AND DIRECT COMMUNITY OFFERING STOCK ORDER FORM
Please read the Stock Order Form Instructions and Guide as you complete this
form.
STOCK REGISTRATION
Write one letter/number per box, beginning from the left. Leave one blank box
for a space.
(1) Form of Stock Ownership: __Individual __Joint tenants __Tenants in common
__Fiduciary
__UTMA __IRA __Corporation __Partnership __Other____________
(2) Name(s) in which your stock is to be registered (PLEASE PRINT CLEARLY IN
CAPITAL LETTERS. USE BLACK OR BLUE INK.)
First Name_____________________ M.I.____ Last Name___________________
Joint Name_________________________________________________________________
Joint Name_________________________________________________________________
Address_____________________________________________________________________
City______________________ State______ Zip Code_________
County of Residence (First 8 Letters)____________________
Social Security or Tax ID No.______________
Daytime Phone________________ Evening Phone________________
(3) NASD AFFILIATION
___Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with an NASD member, a member of
the immediate family of any such person to whose support such person
contributes, directly or indirectly, or the holder of an account in which an
NASD member or person associated with an NASD member has a beneficial
interest. To comply with conditions under which an exemption from the NASD's
Interpretation With Respect to Free-Riding and Withholding is available, you
agree, if you have checked the NASD Affiliation box, (i) not to sell,
transfer, or hypothecate the stock for a period of three months following
issuance, and (ii) to report this subscription in writing to the applicable
NASD member within one day of payment therefor.
<PAGE>
(4) ASSOCIATES AND PERSONS ACTING IN CONCERT
Check here, and complete the reverse side of this Stock Order Form, if you
or any associates ("associate" is defined on the reverse side of this Stock
Order Form) or persons acting in concert with you ("acting in concert" is
defined on the reverse side of this Stock Order Form), have submitted other
orders for shares in the Subscription and Direct Community Offering.
AMOUNT OF ORDER
FILL BLANKS BEGINNING FROM THE LEFT (EXCEPT DOLLAR AMOUNTS)
Subscription Total
(5) Number of Price Payment
Shares _______ x $10.00 = Due $______________
(mininum number 25)
METHOD OF PAYMENT
FILL BLANKS BEGINNING FROM THE LEFT (EXCEPT DOLLAR AMOUNTS)
(6) __Check, bank draft, or money Cash/Check Amount
order made payable to Chester $______________
Bancorp, Inc. (Cash can be used
only if presented in person at
Chester Savings' main or any
branch office).
(7) __The undersigned authorizes Account Number(s) Amount
withdrawal from this (these) _____________ $______________
account(s) at Chester Savings. _____________ $______________
If using an IRA account to _____________ $______________
subscribe for stock, please call
the Conversion Center immediately
at (618) [#]. SPECIAL ADVANCE ARRANGEMENTS
MUST BE MADE FOR IRA ACCOUNTS BY
SEPTEMBER [DAY], 1996.
TOTAL (must match Total Payment Due in Item #5 above) $______________
PURCHASER INFORMATION
(8)a__Check here if you are a director or an officer of Chester Savings or a
member of such person's immediate family.
(8)b__Check here if you are an employee of Chester Savings or a member of such
person's immediate family.
(8)c__Check here if you are an Eligible Account Holder, Supplemental Eligible
Account Holder, or Other Member (including certain borrowers) of Chester
Savings and enter information regarding these accounts on the reverse side
of the Stock Order Form.
ACKNOWLEDGEMENT
(9) To be effective, this fully completed original Stock Order Form and executed
Certification Form must be actually received by Chester Savings no later
than Noon Central Time on September [day], 1996, unless extended; otherwise,
this Stock Order Form and all subscription rights will be void. Completed
original Stock Order Forms (facsimile copies and photocopies will not be
accepted) and executed Certification Forms, together with the required
payment or withdrawal authorization, may be delivered to the office of
Chester Savings or may be mailed to the Post Office Box indicated on the
business reply envelope provided. ALL RIGHTS EXERCISABLE HEREUNDER ARE NON-
TRANSFERABLE AND SHARES PURCHASED UPON EXERCISE OF SUCH RIGHTS MUST BE
PURCHASED FOR THE ACCOUNT OF THE PERSON EXERCISING SUCH RIGHTS. THE
UNDERSIGNED CERTIFIES THAT THERE IS NO AGREEMENT OR UNDERSTANDING REGARDING
THE TRANSFER OR SALE OF MY (OUR) SUBSCRIPTION RIGHTS OR ANY FURTHER SALE OF
THESE SHARES.
<PAGE>
It is understood that this Stock Order Form will be accepted in accordance
with, and subject to, the terms and conditions of the Plan of Conversion of
Chester Savings described in the Chester Bancorp, Inc. Prospectus, receipt
of which is hereby acknowledged at least 48 hours prior to the return of
this Stock Order Form to Chester Savings. If the Plan of Conversion is not
approved by the voting members of Chester Savings at a Special Meeting to be
held on September [day], 1996 or an adjournment thereof, or if the minimum
number of shares is not sold, all orders will be canceled and funds received
as payment, with accrued interest at the Savings Bank's passbook rate, will
be promptly returned.
SIGNATURE
(10)The undersigned agrees that after receipt by Chester Savings, this Stock
Order Form may not be modified, withdrawn, or canceled without Chester
Savings' consent unless the conversion is not consummated by [ ] [ ],
1996, and if authorization to withdraw from a deposit account at Chester
Savings has been given as payment for shares, the amount authorized for
withdrawal will not be available for withdrawal by the undersigned.
THE UNDERSIGNED ACKNOWLEDGES THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT
AND IS NOT FEDERALLY INSURED OR GUARANTEED. THE UNDERSIGNED ALSO
ACKNOWLEDGES RECEIPT OF A PROSPECTUS DATED AUGUST [ ], 1996.
Under penalty of perjury, I (we) certify that the Social Security or Tax ID
Number and the information provided under items 2, 3, and 4 of this Stock
Order Form are true, correct, and complete and that I am (we are) not
subject to back-up withholding.
Signature________________ Date________ Signature______________ Date_______
YOUR ORDER CANNOT BE PROCESSED WITHOUT AN EXECUTED CERTIFICATION FORM.
<PAGE>
ITEM (4) - CONTINUED
List below all other orders submitted by you or "associates" (as defined below)
or by persons "acting in concert" (as defined below) with you.
Name(s) listed on the other Stock Order Form(s) Number of Shares Ordered
1._______________________________________________________
2._______________________________________________________
3._______________________________________________________
4._______________________________________________________
The term "associate" is used above to indicate any of the following
relationships with a person: (i) any corporation or organization (other than
Chester Bancorp or Chester Savings or a majority-owned subsidiary of Chester
Bancorp or Chester Savings) of which a person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity security; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity; and (iii) any relative or spouse of such person
or any relative of such spouse who has the same home as such person or who is
director or officer of Chester Bancorp or Chester Savings or any subsidiary of
Chester Bancorp or Chester Savings.
The term "acting in concert" is defined to mean (i) knowing participation in a
joint activity or interdependent conscious parallel action towards a common goal
whether or not pursuant to an express agreement; (ii) a combination of pooling
of voting or other interests in the securities of an issuer for a common purpose
pursuant to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise; or (iii) a person or company which
acts in concert with another person or company ("other party") shall also be
deemed to be acting in concert with any person or company who is also acting in
concert with that other party, except that any employee stock benefit plan of
will not be deemed to be acting in concert with its trustee or a person who
serves in a similar capacity solely for the purpose of determining whether stock
held by the trustee and stock held by the plan will be aggregated. No director
of Chester Bancorp, Inc. or Chester Savings shall be deemed to be acting in
concert with any other director of Chester Bancorp, Inc. or Chester Savings
solely by reason of their services in such capacities.
Item (8)c - continued
Account Title Account Number
1.__________________________________ ____________________
2.__________________________________ ____________________
3.__________________________________ ____________________
4.__________________________________ ____________________
<PAGE>
EXHIBIT 99.4
APPRAISAL REPORT OF RP FINANCIAL, LC.
<PAGE>
- -------------------------------------------------------------------------
CONVERSION APPRAISAL REPORT
CHESTER BANCORP, INC.
PROPOSED HOLDING COMPANY FOR
CHESTER NATIONAL BANK
(CURRENTLY CHESTER SAVINGS BANK, FSB)
CHESTER, ILLINOIS AND
CHESTER NATIONAL BANK OF MISSOURI
(CURRENTLY PERRYVILLE BRANCH OF CHESTER SAVINGS BANK, FSB)
PERRYVILLE, MISSOURI
JUNE 14, 1996
- -------------------------------------------------------------------------
PREPARED BY:
RP FINANCIAL, LC.
1700 NORTH MOORE STREET
SUITE 2210
ARLINGTON, VIRGINIA 22209
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------------
Financial Services Industry Consultants
June 14, 1996
Board of Directors
Chester Savings Bank, FSB
1112 State Street
Chester, Illinois 62233
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the common
stock which is to be issued in connection with the mutual-to-stock conversion
("Stock Conversion") of Chester Savings Bank, FSB, Chester, Illinois ("Chester
Savings" or the "Bank"). The common stock issued in connection with the Bank's
Stock Conversion will simultaneously be acquired by a holding company, Chester
Bancorp, Inc. ("Chester Bancorp" or the "Holding Company"). The Stock Conversion
involves the issuance of shares of common stock to depositors, the Bank's
employee stock ownership plan ("ESOP"), a tax-qualified employee benefit plan,
Chester Savings' employees, officers and directors in a subscription offering.
Subject to these priorities, shares of stock may also be offered to members of
the local community and the public at large in a community offering.
This Appraisal is furnished pursuant to the conversion regulations
promulgated by the Office of Thrift Supervision ("OTS"). This Appraisal has been
prepared in accordance with the written valuation guidelines promulgated by the
OTS, most recently updated as of October 21, 1994. Specifically, this Appraisal
has been prepared in accordance with the "Guidelines for Appraisal Reports for
the Valuation of Savings and Loan Associations Converting from Mutual to Stock
Form of Organization" of the OTS, as successor to the Federal Home Loan Bank
Board ("FHLBB"), dated as of October 21, 1994; and applicable regulatory
interpretations thereof.
Description of Reorganization
- -----------------------------
The Board of Directors of the Bank has adopted a Plan of Conversion
pursuant to which the Bank will convert from a federally chartered mutual
savings bank to a federally chartered stock savings bank and issue all of its
outstanding shares to the Holding Company. The Holding Company will sell common
stock in the amount equal to the appraised value of the Bank. Immediately
following the consummation of the Stock Conversion, Chester Savings intends to
convert from a federal stock savings bank to a national bank ("Bank
Conversion"), to be known as Chester National Bank ("Converted Bank"). In
connection with the Bank Conversion, the Holding Company will form a de novo
national bank subsidiary headquartered in Perryville, Missouri, to be known as
Chester National Bank of Missouri ("De Novo Bank"), which following a $3.0
million initial capitalization funded by the Stock Conversion proceeds, will
assume the deposit liabilities and purchase all of the installment loans, a
portion of the mortgage loans and the fixed assets of Chester Savings' branch
office located in Perryville, Missouri. The national bank charter conversion
will cause the recapture of the bad debt reserve, which will reduce equity
concurrently by approximately $0.951 million.
_______________________________________________________________________________
WASHINGTON HEADQUATERS
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
<PAGE>
RP Financial, LC.
Board of Directors
June 14, 1996
Page 2
Immediately following the conversion, the most significant assets of the
Holding Company will be the capital stock of the Converted Bank and the De Novo
Bank and the net conversion proceeds remaining after purchase of the Converted
Bank's common stock by the Holding Company. The Holding Company will use 50
percent of the net conversion proceeds to purchase the Converted Bank's common
stock and $3.0 million to capitalize the De Novo Bank. A portion of the
remaining net conversion proceeds of the Holding Company will be used to fund a
loan to the ESOP of the two subsidiary Banks with the remainder to be used as
general working capital.
RP Financial, LC.
- -----------------
RP Financial, LC. ("RP Financial") is a financial consulting firm serving
the financial services industry nationwide that, among other things, specializes
in financial valuations and analyses of business enterprises and securities,
including the pro forma valuation for savings institutions converting from
mutual-to-stock form. The background and experience of RP Financial is detailed
in Exhibit V-1. We believe that, except for the fee we will receive for our
appraisal and assisting the Bank in the preparation of its business plan, we are
independent of the Bank and the other parties engaged by the Bank to assist in
the stock conversion process.
Valuation Methodology
- ---------------------
In preparing our appraisal, we have reviewed Chester Savings' various
applications filed with the following regulatory agencies: Office of Thrift
Supervision, Office of the Comptroller of the Currency, Federal Reserve Board,
Securities and Exchange Commission and the Federal Deposit Insurance
Corporation. We have conducted a financial analysis of the Bank that has
included due diligence related discussions with the Bank's management; KPMG Peat
Marwick LLP, the Bank's independent auditor; Breyer & Aguggia, and Bryan Cave
LLP the Bank's joint conversion counsel; and EVEREN Securities, Inc., which has
been retained by the Bank as a financial and marketing advisor in connection
with the Holding Company's stock offering. All conclusions set forth in the
appraisal were reached independently from such discussions. In addition, where
appropriate, we have considered information based on other available published
sources that we believe are reliable. While we believe the information and data
gathered from all these sources are reliable, we cannot guarantee the accuracy
and completeness of such information.
We have investigated the competitive environment within which the Bank
operates and have assessed the Bank's relative strengths and weaknesses. We have
kept abreast of the changing regulatory and legislative environment and analyzed
the potential impact on the Bank and financial institutions as a whole. We have
analyzed the potential effects of conversion on the Bank's operating
characteristics and financial performance as they relate to the pro forma market
value of Chester Savings. We have reviewed the economy in the Bank's primary
market area and have compared the Bank's financial performance and condition
with selected publicly-traded thrift institutions with similar characteristics
as the Bank's, as well as all publicly-traded thrifts. We have reviewed
conditions in the securities markets in general and in the market for thrift
stocks in particular, including the market for existing thrift issues and the
market for initial public offerings by thrifts.
Our appraisal is based on the Bank's representation that the information
contained in the regulatory applications and additional information furnished to
us by the Bank and its independent auditors are truthful, accurate and complete.
We did not independently verify the financial statements and other information
provided by the Bank and its independent auditors, nor did we independently
value the assets or liabilities of the Bank. The valuation considers the Bank
only as a going concern and should not be considered as an indication of the
liquidation value of Chester Savings.
<PAGE>
RP Financial, LC.
Board of Directors
June 14, 1996
Page 3
Our appraised value is predicated on a continuation of the current
operating environment for the Bank and for all insured financial institutions.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or significant world events) may occur from time to time,
often with great unpredictability and may materially impact the value of thrift
stocks as a whole or the Bank's value alone. It is our understanding the
Converted Bank and De Novo Bank intend to operated as independent institutions
and there are no current plans for selling control of the Converted Bank or the
De Novo Bank as converted institutions. To the extent that such factors can be
foreseen, they have been factored into our analysis.
Pro forma market value is defined as the price at which Chester Bancorp's
stock, immediately upon completion of the conversion offering, would change
hands between a willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowledge of relevant
facts.
Valuation Conclusion
- --------------------
It is our opinion that, as of June 14, 1996, the aggregate pro forma market
value of the shares to be issued was $15,500,000 at the midpoint, equal to
1,550,000 shares offered at a per share value of $10.00. Pursuant to OTS
conversion guidelines, the 15 percent offering range indicates a minimum value
of $13,175,000 and a maximum value of $17,825,000. Based on the $10.00 per share
offering price, this valuation range equates to an offering of 1,317,500 shares
at the minimum to 1,782,500 shares at the maximum. In the event that the Bank's
appraised value is subject to an increase, up to 2,049,875 shares may be sold at
an issue price of $10.00 per share, for an aggregate market value of
$20,498,750, without a resolicitation.
Limiting Factors and Considerations
- -----------------------------------
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to buy or sell
such shares at prices related to the foregoing valuation of the pro forma market
value thereof.
RP Financial's valuation was determined based on the financial condition
and operations of the Bank as of March 31, 1996, the date of the financial data
included in the Holding Company's prospectus.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated as provided for in the conversion regulations
and guidelines. These updates will consider, among other things, any
developments or changes in the Bank's financial performance and condition,
management policies, and current conditions in the equity markets for thrift
shares. These updates may also consider changes in other external factors which
impact value including, but not limited to:
<PAGE>
RP FINANCIAL, LC.
BOARD OF DIRECTORS
MARCH 8, 1996
PAGE 4
various changes in the legislative and regulatory environment, the stock market
and the market for thrift stocks, and interest rates. Should any such new
developments or changes be material, in our opinion, to the valuation of the
shares, appropriate adjustments to the estimated pro forma market value will be
made. The reasons for any such adjustments will be explained in the update at
the date of the release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/Ronald S. Riggins
Ronald S. Riggins
President
/s/Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<PAGE>
RP FINANCIAL, LC.
TABLE OF CONTENTS
CHESTER SAVINGS BANK, FSB
Chester, Illinois
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
<S> <C>
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
-----------
Introduction 1.1
Strategic Overview 1.2
Balance Sheet Trends 1.5
Income and Expense Trends 1.8
Interest Rate Risk Management 1.12
Lending Activities and Strategy 1.13
Asset Quality 1.15
Funding Composition and Strategy 1.16
Legal Proceedings 1.17
CHAPTER TWO MARKET AREA
-----------
Introduction 2.1
National Economic Factors 2.2
Market Area Demographics 2.4
Economy 2.6
Deposit Market Trends 2.8
Competition 2.10
CHAPTER THREE PEER GROUP ANALYSIS
-------------
Selection of Peer Group 3.1
Financial Condition 3.5
Income and Expense Components 3.8
Loan Composition 3.11
Interest Rate Risk 3.13
Credit Risk 3.15
Summary 3.15
</TABLE>
<PAGE>
RP FINANCIAL, LC.
TABLE OF CONTENTS
CHESTER SAVINGS BANK, FSB
Chester, Illinois
(continued)
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER FOUR VALUATION ANALYSIS
------------
<S> <C>
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.1
Valuation Analysis 4.2
1. Financial Condition 4.3
2. Profitability, Growth and Viability of Earnings 4.4
3. Asset Growth 4.6
4. Primary Market Area 4.6
5. Dividends 4.7
6. Liquidity of the Shares 4.8
7. Marketing of the Issue 4.9
A. The Public Market 4.9
B. The New Issue Market 4.13
C. The Acquisition Market 4.17
8. Management 4.17
9. Effect of Government Regulation and Regulatory Reform 4.18
Summary of Adjustments 4.18
Valuation Approaches 4.18
1. Price-to-Book ("P/B") 4.20
2. Price-to-Earnings ("P/E") 4.20
3. Price-to-Assets ("P/A") 4.21
Valuation Conclusion 4.22
</TABLE>
<PAGE>
RP FINANCIAL, LC.
LIST OF TABLES
CHESTER SAVINGS BANK, FSB
Chester, Illinois
<TABLE>
<CAPTION>
TABLE
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
1.1 Summary Balance Sheet Data 1.6
1.2 Historical Income Statements 1.9
2.1 State and County Summary Demographic Data 2.5
2.2 Major Market Area Employers 2.7
2.3 Selected Unemployment Rates 2.8
2.4 Deposit Summary 2.9
3.1 Peer Group of Publicly-Traded Thrifts 3.3
3.2 Balance Sheet Composition and Growth Rates 3.6
3.3 Income as a Percent of Average Assets and Yields, Costs, Spreads 3.9
3.4 Loan Portfolio Composition Comparative Analysis 3.12
3.5 Interest Rate Risk Comparative Analysis 3.14
3.6 Peer Group Credit Risk Comparative Analysis 3.16
4.1 Market Area Unemployment Rates 4.7
4.2 Conversion Pricing Characteristics 4.14
4.3 Market Pricing Comparatives 4.16
4.4 Public Market Pricing 4.23
</TABLE>
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
- ------------
Chester Savings Bank, FSB ("Chester Savings" or the "Bank"), organized in
1919 as a state chartered institution, is currently a federally chartered mutual
savings bank headquartered in Chester, Illinois. Through its main office, five
full service branch offices and one loan production, the Bank serves
southwestern Illinois and southeastern Missouri. The Bank maintains four branch
offices in the Illinois counties of Randolph (two branches), Perry and Jackson,
while the remaining branch office and the loan production office are located in
the Missouri counties of Perry and Cape Girardeau, respectively. In 1989,
Chester Savings acquired Heritage Federal Savings and Loan Association
("Heritage Federal"), with approximately $50 million in assets and 3 offices. In
general, Chester Savings operates in a fairly rural market area, with St. Louis
being the closest major metropolitan to the Bank's market area. St. Louis is
approximately 60 miles north of Chester. Chester Savings' deposits are insured
up to the maximum allowable amount by the Savings Association Insurance Fund
("SAIF") of the Federal Deposit Insurance Corporation ("FDIC"). At the present
time, the Bank is regulated by the Office of Thrift Supervision ("OTS").
Following the conversion transaction described below, the resulting two
subsidiary banks will be regulated by the Office of the Comptroller of the
Currency ("OCC"). At March 31, 1996, Chester Savings had $136.8 million in
assets, $108.5 million in deposits and equity of $11.9 million or 8.7 percent of
total assets. A summary of Chester Savings' key operating ratios for the past
five and one-quarter fiscal years are presented in Exhibit I-3.
Chester Bancorp, Inc. ("Chester Bancorp" or the "Holding Company"), a
Delaware corporation, organized to facilitate the mutual-to-stock conversion of
Chester Savings, will acquire all of the capital stock that the Bank will issue
upon its conversion from the mutual-to-stock form of ownership. Immediately
following the mutual-to-stock conversion, the Bank intends to convert from a
federal stock savings bank to a national bank, to be known as Chester National
Bank. Simultaneously, the Holding Company will form a de novo national bank
subsidiary headquartered in Perryville, Missouri, to be known as Chester
National Bank of Missouri, which, following a $3.0 million initial
capitalization funded by conversion proceeds, will assume the deposit
liabilities (approximately $3.0 million) and purchase all of the installment
loans, a portion of the mortgage loans and fixed assets of Chester Savings'
branch office located in Perryville, Missouri. The resulting de novo bank is
expected to have approximately $6 million in assets initially. Going forward,
all of the outstanding stock of Chester National Bank will be owned by the
Holding Company. Approximately 50 percent of the net proceeds received from the
sale of common stock will be used to purchase all of the then to be issued and
outstanding capital stock of the Chester National Bank. The balance of the
proceeds will be retained by the Holding Company. At this time, no other
activities are contemplated for Chester Bancorp other than the
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.2
ownership of the two subsidiary banks, a loan to the newly-formed employee stock
ownership plan ("ESOP") and investment of the cash retained at the holding
company in investment securities. In the future, Chester Bancorp may acquire or
organize other operating subsidiaries, although there are no specific plans at
present.
Strategic Overview
- ------------------
Chester Savings is a community-oriented financial institution, with a
primary strategic objective of meeting the borrowing and savings needs of its
local customer base. In general, the Bank has maintained a stable asset base and
stable earnings over the past several years following the Heritage Federal
acquisition, with the rural nature of the market area and contracting local
economy being factors that have curtailed growth by Chester Savings in recent
years. Most notably, the economy in southwestern Illinois has traditionally been
based in the coal mining and agriculture industries, both of which have been
declining in recent decades. The unfavorable local economy has resulted in high
unemployment, population outflows and weak loan demand. Further exacerbating the
downturn of the local economy was the recent shut down of one of Randolph
County's largest manufacturer employers (Spartan Printing Company), which once
employed approximately 1,000 employees, resulting in a substantial loss in jobs.
Accordingly, in light of the unfavorable operating environment, the Bank has
pursued a conservative operating strategy, which has emphasized maintaining a
high concentration of assets in investments and mortgage-backed securities and,
focusing lending activities on the origination of 1-4 family permanent mortgage
loans. In the face of weak market conditions, the Bank has recently pursued
expansion in Southeastern Missouri through a full service branch in Perryville
and a newly-opened loan production office in Cape Girardeau.
Chester Savings' asset growth is expected to come under further pressure,
as the result of the loss of interest-bearing funds held by a food manufacturing
and packaging company headquartered in Chester, Illinois. Specifically, Gilster-
Mary Lee Corporation ("Gilster-Mary Lee") has maintained significant funds with
the Bank over the past several years, primarily in the form of short-term
deposits with up to peak balances of $25 million or more. However, more
recently, the majority of the deposits were converted to repurchase agreements.
At March 31, 1996, funds attributable to Gilster-Mary Lee totaled $21.2 million,
consisting of $15.0 million of repurchase agreements and $6.2 million of
deposits from the pension fund. Gilster-Mary Lee has notified the Bank of its
intention to draw down the balance of funds maintained at the Bank by at least
$10.0 million in the near term and, in general, to maintain a lower balance of
funds at Chester Savings. It it the Bank's intention to fund the withdrawal of
funds with short-term liquidity and conversion proceeds, as opposed to replacing
the liquidity with other wholesale funds, thus impairing Bank earnings in the
short-term. Ample liquidity is maintained to cover all of Gilster-Mary Lee
Funds. The Bank's Chairman and Chief Financial Officer is the Executive Vice
President, Treasurer and Secretary of Gilster-Mary Lee.
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.3
Throughout its history, Chester Savings has pursued a traditional thrift
operating strategy and, thus, 1-4 family permanent mortgage lending has been the
focus of the Bank's lending activities. To a lesser extent, Chester Savings
originates commercial real estate, multi-family, construction, consumer,
agriculture and land loans. Consumer loans represent the most notable area of
lending diversification for the Bank, amounting to 11.3 percent of total loans
outstanding at March 31, 1996, versus a comparative concentration of 78.9
percent for 1-4 family permanent mortgage loans. In conjunction with the Bank's
conversion to a national bank charter and capitalizing on the experience of the
new CEO (who has considerable commercial banking experience), Chester Savings
intends to pursue a strategy of greater lending diversification that will place
more of an emphasis on consumer and commercial lending. However, the Bank's
ability to develop more sizable consumer and commercial loan portfolios will be
dependent upon a number of factors, including economic and competitive factors,
and, thus, it is the Bank's intention to pursue loan diversification gradually.
As a traditional institution, Chester Savings' earnings base is largely
dependent upon net interest income and operating expense levels. The Bank's
strategy has placed an emphasis on limiting the degree of interest rate risk
associated with the net interest margin, primarily through building an interest-
sensitive asset base. Strategies pursued by the Bank to enhance the interest-
sensitivity of interest-earning assets have included placing an emphasis on
originating 1-4 family adjustable rate loans for portfolio, selling fixed rate
mortgage loans with maturities of 20 years or more, and maintaining a relatively
high level of cash and investments. The investment portfolio is comprised
substantially of short- and intermediate-term securities, with laddered
maturities of less than five years.
Interest rate risk management is further supported by the Bank's control of
operating expenses, maintaining a favorable concentration of lower costing
savings and transaction accounts, and, to a lesser extent, lengthening CD
maturities through promoting certain long term CDs from time-to-time. As
indicated by the stability exhibited in the Bank's yield-cost spread in recent
years, the Bank's strategies have been relatively effective in insulating the
net interest margin from interest rate fluctuations. Over the past four and one-
quarter fiscal years, the Bank's yield-cost spread ranged from a low of 2.43
percent during fiscal 1995 to a high of 2.63 percent during the first quarter of
fiscal 1996.
Retail deposits have consistently served as the primary funding source for
the Bank, with the only recent borrowings utilized by Chester Savings consisting
of $15.0 million in short-term repurchase agreements resulting from the
conversion of the Gilster-Mary Lee deposits held in a money market account.
While this conversion reduced the Bank's deposit insurance costs, such
conversion contributed to the reduction in the concentration of transaction and
savings accounts. As of March 31, 1996, transaction and savings accounted for
36.4 percent of the Bank's deposits, versus a comparative measure of 40.7
percent at fiscal year end 1994.
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.4
The Bank's limited asset and earnings growth have in part been constrained
by weakness in the primary market area, as a contracting economy and a decline
in population has limited opportunities for loan and deposit growth. The Bank's
shrinkage has also reflected the intensity of competition by larger regional
financial institutions. The Board of Directors has elected to convert to the
stock form of ownership and to convert to a national bank charter to improve the
competitive position of Chester Savings. The additional capital realized from
conversion proceeds will increase liquidity to support funding of future loan
growth, which will place a greater emphasis on diversifying into consumer and
commercial loans. Funds realized from the conversion will also support repayment
of the repurchase agreements and serve to absorb the recapture of bad debt tax
reserve. Operating under a national bank charter, management has indicated that
the two subsidiary banks will also seek to add to the services and products that
are currently offered by the Bank, which will increase non-interest operating
income over time; however, initially, such expansion will result in higher
operating expenses, due to start-up costs associated with staffing, developing
and marketing the new products and services. The increase in capital realized
from the stock conversion will also serve to enhance net interest income by
increasing the interest-earning assets/interest-bearing liabilities ("IEA/IBL")
ratio, as well as serve as an alternative funding source to deposits in meeting
the future funding needs of the two subsidiary banks, which will in turn allow
for more competitive pricing in deposit rates. Additionally, the higher equity-
to-assets ratio will also better position the two subsidiary banks to take
advantage of expansion opportunities as they arise. Such expansion would most
likely occur through acquiring or establishing branches in areas that have more
favorable growth potential than the primary market area currently served by the
Bank. While the Bank has no other specific plans for expansion other than
internal growth, it is examining branch expansion in southeastern Missouri. The
initial use of proceeds are highlighted below.
o Chester Bancorp, Inc. The Holding Company funds, net of the loan to the
---------------------
ESOP, are expected to be invested initially into U.S. Treasury and agency
securities with laddered maturities ranging from overnight funds to five
years, with an average maturity of two years. Over time, the Holding
Company funds will be utilized for various corporate purposes, including
the payment of regular and possibly special cash dividends, acquisitions,
infusing additional equity into the subsidiary banks, repurchases of common
stock or purchases of stock for the recognition plans.
o Chester National Bank. Cash proceeds invested into the Chester Bank will
---------------------
be used immediately to partially repay maturing repurchase agreements,
reflecting the request of the second party to reduce such agreements.
o Chester National Bank of Missouri. Cash proceeds infused into the Bank
---------------------------------
will initially become part of general funds, invested initially into short-
to intermediate-term U.S. Treasury or agency securities with laddered
maturities ranging from overnight funds to five years, with an average
maturity of two years. The investments will gradually be reinvested into
loan originations.
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.5
Overall, it is the Bank's objective to pursue growth that will serve to
increase returns, while, at the same time, growth will not be pursued that
compromises the credit quality or increases the overall risk associated with the
operations of the two subsidiary banks. The Bank has acknowledged that it
intends to operate with excess capital in the near term, operating with a below
market return on equity, until such time as the new capital can be leveraged in
a safe and sound manner over an extended period of time.
Balance Sheet Trends
- --------------------
From December 31, 1991 through March 31, 1996, Chester Savings exhibited
annual asset growth of 0.1 percent (see Table 1.1), with the Bank's asset
balance peaking at $141.8 million at fiscal year end 1994. During this period,
the Bank's interest-earning asset composition exhibited a shift towards
investment securities, with the balance of loans receivable declining from 52.0
percent of assets at fiscal year end 1991 to 40.8 percent of assets at March 31,
1996. Assets have been funded primarily with retail deposits and retained
earnings. Borrowings typically have not been utilized by the Bank, and the $15.0
million of repurchase agreements at March 31, 1996 will be reduced significantly
upon maturity funded through liquidity and conversion proceeds maintained at the
subsidiary bank level.
Overall, the loan portfolio shrinkage of the last five and one-quarter
fiscal years was substantially offset by growth in investments and mortgage-
backed securities. The mortgage loan decline is attributable to local market
conditions, the competitive nature of mortgage lending and the desire to not
retain lower yielding, long-term fixed rate mortgage originations in portfolio.
From December 31, 1991 to March 31, 1996, investment securities increased from
34.5 percent to 42.1 percent of assets. In comparison to the 4.8 percent annual
growth rate exhibited in investment securities, the loan portfolio declined at a
5.5 percent annual rate. At March 31, 1996, the Bank's loan balance equaled
$55.8 million, versus a comparative balance of $71.0 million at December 31,
1991. Mortgage-backed securities increased at a 3.4 percent annual rate from
fiscal year end 1991 to March 31, 1996 and accounted for 12.4 percent of the
Bank's total assets at March 31, 1996.
The Bank's traditional emphasis on 1-4 family lending is readily apparent,
as loans secured by 1-4 family residences have consistently accounted for the
largest portion of the loan portfolio, although the proportion has declined to
total assets and is expected to continue to decline with the Bank's planned
community banking emphasis. Over the past two and one-quarter fiscal years, 1-4
family permanent mortgage loans have accounted for approximately 80.0 percent of
the loan portfolio. Loan diversification by the Bank consists primarily of
consumer loans, which accounted for 11.3 percent of the loan portfolio at March
31, 1996, followed by commercial real estate and multi-family loans, which
accounted for 5.8 percent of the loan portfolio at March 31, 1996. The balance
of the Bank's loan portfolio reflects minor diversification into construction
<PAGE>
RP FINANCIAL, LC
PAGE 1.6
Table 1.1
Chester Savings Bank, FSB
Historical Balance Sheets (1)
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------
1991 1992 1993
------------------ ----------------- -----------------
Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $ 136,431 100.00% $ 138,869 100.00% $ 141,396 100.00%
Loans receivable (net) 70.997 52.04% 65,643 47.27% 61,193 43.28%
Mortgage - backed
securities 14,661 10.75% 10,559 7.60% 7,402 5.23%
Investment securities 47,064 34.50% 57,994 41.76% 67,390 47.66%
Deposits 127,257 93.28% 128,731 92.70% 130,231 92.10%
Borrowing --- 0.00% --- 0.00% --- 0.00%
Equity 7,603 5.57% 8,778 6.32% 9,682 6.85%
<CAPTION>
At December 31,
------------------------------------
1994 1995 March 31, 1996
----------------- ----------------
Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $ 141,755 100.00% $ 134,781 100.00% $ 136,806 100.00%
Loans receivable (net) 58,157 41.03% $57,021 42.31% $55,754 40.75%
Mortgage - backed
securities 13,136 9.27% 15,413 11.44% 16,906 12.36%
Investment securities 64,410 45.44% 57,605 42,74% 57,543 42.06%
Deposits 129,712 91.50% 106,718 79.18% 108,515 79.32%
Borrowing --- 0.00% 15,000 11.19% 15,000 10.96%
Equity 10,675 7.53% 11,712 8.69% 11,870 8.68%
<CAPTION>
12/31/91-
3/31/96
Annualized
Growth Rate
-----------
Pct
---
(%)
<S> <C>
Total Amount of
Assets 0.06%
Loans receiable (net) -5.53%
Mortgage - backed
Securities 3.41%
Investment securities 4.84%
Deposits -3.68%
Borrowing NM.
Equity 11.05%
</TABLE>
___________________________
(1) Ratios are as a percent of ending assets.
Source: Chester Savings' prospectus
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.7
loans (1.9 percent of total loans outstanding at March 31, 1996) and agriculture
and land loans (2.0 percent of total loans outstanding at March 31, 1996).
Investment securities have accounted for a notable portion of the Bank's
interest-earning asset composition over the past five and one-quarter fiscal
years, which has been attributable to the lack of loan growth and the Bank's
general philosophy of maintaining a high concentration of investments to support
management of interest rate risk and credit risk as well as to meet the
considerable funds flows from Gilster-Mary Lee in the past. After peaking at
$67.4 million at fiscal year end 1993, the balance of investments has declined
during the past two and one-quarter fiscal years, as short-term assets funded
the liability shrinkage. At March 31, 1996, the Bank's portfolio of cash
equivalents and investments totaled $57.5 million and was comprised of cash
equivalents ($7.2 million), certificates of deposit ($4.1 million), U.S.
Treasury and agency obligations ($24.3 million), municipal bonds ($13.2
million), mortgage-backed bonds ($8.1 million) and FHLB stock ($0.6 million).
Exhibit I-4 provides historical detail of the Bank's investment portfolio. The
investment portfolio is comprised of short- and intermediate-term securities,
which have maturities of less than five years. Except for $17.4 million of U.S.
Government securities classified as "available for sale", all of the Bank's
investments were classified as "held to maturity" at March 31, 1996. The Bank
maintained an unrealized loss of $91,000 on the available for sale portfolio of
investment securities at March 31, 1996.
Mortgage-backed securities comprise the balance of the Bank's interest-
earning assets composition, serving as an investment alternative to 1-4 family
permanent mortgage loans and supporting the Bank's management of interest rate
risk and credit risk. After dropping to a 5-year low of $7.4 million at fiscal
year end 1993, the mortgage-backed securities balance has increased during the
past two and one-quarter fiscal years to offset the decline being experienced in
the 1-4 family mortgage loan balance and the loan portfolio in general, thereby
facilitating the ability to meet the minimum qualified thrift lender ("QTL")
ratio. The mortgage-backed securities portfolio consists of a fairly even mix of
pass-through securities and collateralized mortgage obligations ("CMOs"), with
those balances amounting to $8.7 million and $8.2 million, respectively, at
March 31, 1996. Mortgage-backed securities held by the Bank primarily consist of
securities that have been issued by GNMA, FHLMC or FNMA, and consist mostly of
fixed rate securities. However, in recent years, the Bank has emphasized
purchasing adjustable rate mortgage-backed securities. As of March 31, 1996, the
mortgage-backed securities portfolio consisted of $14.8 million of securities
classified as "held to maturity" and $2.1 million of securities classified as
"available for sale". The Bank maintained an unrealized gain of $9,000 on the
available for sale portfolio of mortgage backed securities at March 31, 1996.
Over the past five and one-quarter fiscal years, Chester Savings' funding
needs have been substantially met through retail deposits, internal cash flows
and retained earnings. From fiscal year end 1991 through fiscal year end 1994,
the Bank's balance of deposits was fairly stable and then declined notably in
fiscal 1995 following
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.8
the conversion of a majority of the Gilster-Mary Lee deposits to borrowings. A
slight increase in deposits was recorded in the first quarter of fiscal 1996,
while the borrowings balance remained unchanged. The conversion of the Gilster-
Mary Lee deposits served to increase the concentration of CDs comprising total
deposits, as the $15.0 million of deposits converted to repurchase agreements
were held in money market accounts. As of March 31, 1996, CDs comprised 63.6
percent of the Bank's deposits, versus a comparative ratio of 59.3 percent at
December 31, 1994. The Gilster-Mary Lee funds are expected to be reduced by
$10.0 million in the near term, which will be funded with the Bank's liquidity
and proceeds from the stock conversion. Afterwards the Glister Mary-Lee pension
fund with approximately $6.2 million on deposit and $5.0 million in repurchase
agreements will remain. While the Bank has not been notified that these
remaining funds will also be withdrawn, the Bank is maintaining ample liquidity
as a precaution.
Positive earnings during the past five and one-quarter fiscal years, net of
a slightly negative SFAS 115 adjustment at March 31, 1996, translated into an
annual capital growth rate of 11.1 percent for the Bank. Capital growth,
combined with nominal asset growth, served to increase the Bank's equity-to-
assets ratio from 5.6 percent at the end of fiscal 1991 to 8.7 percent at March
31, 1996. All of the Bank's capital is tangible capital, and the Bank maintained
capital surpluses relative to all of its regulatory capital requirements at
March 31, 1996. The recapture of the Bank's bad debt tax reserve in connection
with its conversion to a national bank charter will result in an estimated
reduction in capital of $951,000. The addition of conversion proceeds will serve
to strengthen Chester Savings' capital position and competitive posture within
its primary market area, as well as support expansion into other nearby markets
if favorable growth opportunities are presented.
Income and Expense Trends
- -------------------------
The Bank has reported positive earnings over the last five and one-quarter
fiscal years (see Table 1.2), ranging from a low of 0.63 percent of average
assets in fiscal 1993 to a high of 0.80 percent of average assets in fiscal
1991. For the twelve months ended March 31, 1996, Chester Savings recorded net
income of $931,000, or 0.68 percent of average assets. Consistent with the
Bank's traditional operating mode, net interest income and operating expenses
have been the dominant factors in Chester Savings' earnings. Non-interest
operating income has been a limited contributor to Chester Savings' earnings,
while non-recurring items, such as gains and losses realized from the sale of
investments, have generally had a small impact on earnings as well. Favorable
credit quality measures and a shrinking loan portfolio have been effective in
containing the amount of credit quality related losses recorded by the Bank. The
lower earnings reported in fiscal year 1993 was attributable to the negative
impact of an after-tax accounting adjustment, pertaining to Chester Savings'
adoption of SFAS 109. Overall, the Bank's reported earnings were generally
reflective of its core earnings, which have exhibited a high degree of stability
over the past five and one-quarter fiscal years.
<PAGE>
RP Financial, LC.
Page 1.9
Table 1.2
Chester Savings Bank, FSB
Historical Income Statement (1)
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
For the Fiscal Year Ended December 31,
----------------------------------------------------------------------------------------------
1991 1992 1993 1994
--------------------- -------------------- ------------------- -------------------
Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $11,843 8.68% $10,392 7.63% $ 9,132 6.44% $ 8.696 6.04%
Interest expense (8.648) -6.34% (6,826) -5.01% (5,526) -3.89% (5,089) -3.54%
------ ------ ------ ------ ------ ------ ------ ------
Net interest income $ 3,195 2.34% $ 3,566 2.62% $ 3,606 2.54% $ 3,607 2.51%
Provision for loan losses (56) -0.04% (70) -0.05% (30) -0.02% (69) -0.05%
---- ------ ---- ------ ---- ------ ---- ------
Net interest income after
provisions $ 3,139 2.30% $ 3,496 2.57% $ 3,576 2.52% $ 3,538 2.46%
Other income 130 0.10% 131 0.10% 129 0.09% 114 0.08%
Operating expenses (1,941) -1.42% (2,090) -1.53% (2,259) -1.59% (2,407) -1.67%
------ ------ ------ ------ ------ ------ ------ ------
Net operating income $ 1,328 0.97% $ 1,537 1.13% $ 1,446 1.02% $ 1,245 0.87%
Non-Operating Income
- --------------------
Gain(Loss) on loans and investments 0 0.00% (228) -0.17% 0 0.00% 0 0.00%
Real estate operations (26) -0.02% (126) -0.09% (18) -0.00% 33 0.02%
Income before taxes $ 1,302 0.95% $ 1,183 0.87% $ 1,428 1.01% $ 1,278 0.89%
Income taxes (210) -0.15% (257) -0.19% (307) -0.22% (285) -0.20%
----- ------ ----- ------ ----- ------ ----- ------
Net income before extraordinary
items $ 1,092 0.80% $ 926 0.68% $ 1,121 0.79% $ 993 0.69%
Extraordinary items(2) 0 0.00% 0 0.00% (227) -0.16% 0 0.00%
- ----- - ----- ----- ------ - -----
Net income (loss) $ 1,092 0.60% $ 926 0.68% $ 894 0.63% $ 993 0.69%
Estimated Core Earnings:
- ------------------------
Net income $ 1,092 0.80% $ 926 0.68% $ 894 0.63% $ 993 0.69%
Adjustments for non-operating
income 0 0.00% 228 0.17% 227 0.16% 0 0.00%
Tax effect (23.0%) 0 0.00% (52) -0.04% (52) -0.04% 0 0.00%
- ----- ---- ------ ---- ------ - -----
Estimated core net income $ 1,052 0.80% $ 1,102 0.81% $ 1,069 0.75% $ 993 0.69%
</TABLE>
<TABLE>
<CAPTION>
For the Fiscal Year Ended December 31, For the 12 Months
--------------------------------------
1995 Ended 3/31/96
--------------------------------------
Amount Pct Amount Pct
------ --- ------ ----
($000) (%) ($000) (%)
<S> <C> <C> <C> <C>
Interest income $ 9,035 6.59% $ 9,071 6.65%
Interest expense (5,474) -3.99% (5,480) -4.01%
------- ------ ------- ------
Net interest income $ 3,561 2.60% $ 3,591 2.63%
Provision for loan losses (161) -0.12% (17.1) -0.13%
----- ------ ------ ------
Net interest income after
provisions $ 3,400 2.48% $ 3,420 2.51%
Other income 140 0.10% 153 0.11%
Operating expenses (2,320) -1.69% (2,361) -1.73%
------- ------ ------- ------
Net operating income $ 1,220 0.89% $ 1,212 0.89%
Non-Operating Income
- --------------------
Gain(Loss) on loans and investments 98 0.07% 4 0.00%
Real estate operations (18) -0.01% (18) -0.01%
Income before taxes $ 1,300 0.95% $ 1,198 0.88%
Income taxes (299) -0.22% (267) -0.20%
----- ------ ----- ------
Net income before extraordinary
items $ 1,001 0.73% $ 931 0.68%
Extraordinary items(2) 0 0.00% 0 0.00%
- ----- - -----
Net income (loss) $ 1,001 0.73% $ 931 0.68%
Estimated Core Earnings:
- ------------------------
Net income $ 1,001 0.73% $ 931 0.68%
Adjustments for non-operating
income (98) -0.07% (4) -0.00%
Tax effect (23.0%) 23 0.02% 1 0.00%
-- ----- - -----
Estimated core net income $ 926 0.67% $ 928 0.68%
</TABLE>
______________________________
(1) Ratios are as a percent of average assets.
(2) Consists of cumulative effects of the adoption of SFAS - 109.
Sources: Chester Savings' prospectus and audited financial statements.
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.10
The stability of the Bank's earnings has been supported by limited
fluctuations in the net interest margin, which ranged from a low of 2.34 percent
in fiscal 1991 to a high of 2.63 percent for the twelve months ended March 31,
1996. Stability in the net margin indicates that the repricing mismatch between
interest-sensitive assets and interest-sensitive liabilities has been relatively
limited, thereby providing for similar corresponding increases and declines in
interest income and interest expense as a percent of average assets. Overall, in
comparison to most thrifts, the Bank's net interest margin has been maintained
at relatively low levels, which has been largely attributable to Chester
Savings' interest-earning asset composition. In particular, the Bank's yield
income has been somewhat depressed by an interest-earning asset composition that
includes a high concentration of short- and intermediate-term investments and a
low and declining concentration of loans. However, partially offsetting the
lower yielding nature of the Bank's interest-earning asset composition has been
the lower effective tax rate (ranging from 16.1 percent to 23.0 percent in 1991
and 1995, respectively), realized from Chester Savings' investments in tax
exempt municipal bonds. Chester Savings' net interest margin will likely be
enhanced by the stock offering, due to the reinvestment of interest-free capital
into interest-earning assets and the higher IEA/IBL ratio that will result from
the Bank's increased capital position. The planned growth into higher yielding
consumer and commercial loans, following the Bank's conversion to two national
bank charters, would also serve to strengthen the net interest margin. The
conversion proceeds are expected to be reinvested in taxable interest-earning
assets, thus the effective tax rate is expected to increase.
Examination of the Bank's historical net interest rate spreads provides
further insight to how stability has been maintained in the net interest margin.
As set forth in Exhibits I-3 and I-5, changes in the Bank's yield-cost spread
have been very limited over the past four and one-quarter fiscal years, with the
yield-cost spread ranging from a low of 2.43 percent in fiscal 1995 to a high of
2.63 percent in the first quarter of fiscal 1996. The increase exhibited in the
yield-cost spread during the first quarter of fiscal 1996 resulted primarily
from an increase in the Bank's yield on interest-earning assets, highlighting
the interest-sensitive nature of Chester Savings' interest-earning assets. To a
lesser extent, the widening of the yield-cost spread was attributable to lower
funding costs, with both deposit and borrowing costs declining slightly during
the quarter ended March 31, 1996.
Non-interest operating income has been a limited contributor to the Bank's
earnings, in light of Chester Savings' relatively narrow operating focus with
respect to diversifying into activities that generate non-interest operating
income. Throughout the period shown in Table 1.2, non-interest operating income
was maintained at approximately 0.10 percent of average assets. Service charges
and other fees earned from retail banking activities have accounted for most of
the Bank's non-interest operating income, with the balance of non-interest
operating income consisting of miscellaneous sources of income. Management has
indicated that development of non-interest operating income will be pursued more
aggressively following the conversion to a
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.11
national bank charter, through expanding the products and services offered by
the Bank. However, growth in non-interest operating income, if any, is not
expected to be significant in the near term, and, thus, the Bank's earnings can
be expected to remain highly dependent upon the net interest margin during the
forthcoming year.
While Chester Savings' limited diversification has constrained non-interest
operating income, it also has supported containment of the Bank's operating
expenses. For the twelve months ended March 31, 1996, Chester Savings' operating
expense to average assets ratio equaled 1.73 percent, versus an average for
SAIF-insured publicly-traded thrifts of 2.21 percent. Notwithstanding, the
Bank's relatively low operating expense ratio, Chester Savings' operating
expense ratio has increased over the past five and one-quarter fiscal years. In
comparison to the 1.73 percent ratio maintained during most recent twelve month
period, Chester Savings' operating expense to average assets ratio equaled 1.42
percent in fiscal 1991. Higher operating expenses combined with the absence of
asset growth have accounted for the upward trend exhibited in Chester Savings'
operating expense ratio. Overall, the Bank has been experiencing modest
compression in its core earnings, as indicated by the decline in Chester
Savings' expense coverage ratio (net interest income divided by operating
expenses). Chester Savings' expense coverage ratio equaled 1.60 times during
fiscal 1993, versus a comparative ratio of 1.52 times during the twelve months
ended March 31, 1996. The Bank's conversion to stock form will place further
upward pressure on operating expenses, due to increase costs associated with
operating as a publicly-traded institution and expenses related to the stock
benefit plans. Asset shrinkage resulting from the repayment of $10.0 million of
the repurchase agreements and additional expenses that may be incurred in
connection with the Bank's implementation of more of a commercial banking
strategy and a two bank operation versus one currently will also add upward
pressure to the operating expense ratio. However, at the same time, growth
facilitated by the increase in capital realized from conversion proceeds may
allow the two subsidiary banks to leverage operating expenses through future
growth.
Gains and losses resulting from the sale of investments typically have not
been a significant factor in the Bank's earnings, reflecting Chester Savings'
general philosophy of holding most securities to maturity. The $228,000 loss
recorded on the sale of securities in fiscal 1992 and the $98,000 gain recorded
on the sale of securities in fiscal 1995 stemmed from ongoing management of the
investment and mortgage-backed securities portfolios, which takes into account
the overall interest rate risk and yield of Chester Savings' investments. For
the twelve months ended March 31, 1996, the Bank posted modest gains, reflecting
gains realized from the sale of investment securities being largely negated by a
loss recorded on the sale of certificate of deposits. Going forward, gains and
losses from the sale of investments and mortgage-backed securities are expected
to remain a minor factor in the Bank's earnings. The only other notable non-
recurring item reflected in the Bank's earnings over the past five fiscal and
one-quarter fiscal years was the extraordinary item booked in fiscal 1993, which
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.12
reduced net income by $227,000, attributable to the cumulative effect of a
change in accounting principle which resulted from the adoption of SFAS 109.
Credit quality related losses recorded by the Bank have generally been
limited over the past five and one-quarter fiscal years, in light of the Bank's
maintenance of a low level of non-performing assets and a declining loan
balance. For the twelve months ended March 31, 1996, the Bank established loan
loss provisions of $171,000, or 0.13 percent of average assets, which was
slightly higher than recent historical levels. The increase in loan loss
provisions established was based on the increase in credit risk exposure
associated with the decline in the local market area economy and the planned
loan growth in higher risk types of loans. Exhibit I-6 sets forth the Bank's
loan loss allowance activity during fiscal years 1994 and 1995 and first quarter
of fiscal 1996. The minor gains and losses reflected in the Bank's real estate
operations consist of loss provisions established for real estate owned and
gains and losses recorded on the sale of real estate owned. Overall, the Bank's
planned lending diversification into higher yielding and higher risk types of
loans will increase the credit risk associated with earnings; however, based on
the current composition of the Bank's loan portfolio and the Bank's low level of
non-performing assets, credit quality related losses are not considered to
represent a significant threat to Chester Savings' future earnings in the near
term.
Interest Rate Risk Management
- -----------------------------
Chester Savings reported one and three year cumulative gap to assets ratios
of negative 10.2 percent and negative 5.4 percent, respectively, as of March 31,
1996 (see Exhibit I-7). The most recent OTS analysis, as of March 31, 1996,
indicated that Chester Savings' net portfolio value ("NPV") under a 200 basis
point instantaneous and sustained rise in interest rates would decline by 10.3
percent. The Bank's interest rate risk measures indicate that net interest
income will come under pressure during periods of rising interest rates;
however, as evidenced by the stability of Chester Savings' net interest margin
in recent years, Chester Savings' earnings exposure to a rising interest rate
environment is not considered to be significant. Strategies implemented by the
Bank to support control of interest rate risk include selling longer term (more
than 20 years) fixed rate mortgage loan originations to the secondary market,
maintaining a high concentration of interest-earning assets in investments with
maturities of less than five years, emphasizing the origination of adjustable
rate and short-term fixed rate loans, and promoting certain longer term CDs from
time-to-time. At March 31, 1996, $18.7 million, or 33.5 percent of net loans
receivable, were subject to periodic interest rate adjustments. Management of
interest rate risk is further supported by the Bank's control of operating
expenses. Chester Savings' exposure to rising interest rates will be further
reduced by the infusion of stock proceeds, as the proportion of interest-
sensitive liabilities meeting the Bank's funding needs will be reduced,
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.13
and the substantial portion of conversion proceeds will be initially invested in
short-and intermediate-term securities and used to fund repayment of the short-
term repurchase agreements.
Lending Activities and Strategy
- -------------------------------
The Bank's lending activities have traditionally concentrated on the
origination and retention of 1-4 family mortgage loans (see Exhibits I-8 and I-
9, which reflect loan composition and lending activity, respectively). As of
March 31, 1996, $44.7 million, or 78.9 percent, of Chester Savings' total loan
portfolio was comprised of loans secured by 1-4 family permanent mortgage loans.
The Bank's second largest category of loans was consumer loans, which totaled
$6.4 million, or 11.3 percent, of total loans outstanding at March 31, 1996.
Consumer lending, as well commercial lending, are planned growth areas for the
Bank, as the two subsidiary banks will seek to develop a loan portfolio
composition that is more reflective of a commercial banking strategy. The
balance of the loan portfolio was comprised of multi-family, commercial real
estate, agriculture, land and construction loans. Exhibit I-10 provides the
contractual maturity of the Bank's loan portfolio, by loan type, as of March 31,
1996.
Chester Savings originates both fixed rate and adjustable rate 1-4 family
loans, with most 1-4 family loan originations being underwritten to conform with
secondary market requirements. In the current lending environment, the Bank's
general practice has been to retain adjustable rate mortgage ("ARM") loans for
portfolio and sell longer-term fixed rate loans in the secondary market on a
servicing released basis. In this regard, fixed rate residential loans with
maturities of greater than 20 years are sold due to interest rate risk
considerations while loans with maturities of 20 years or less are retained for
portfolio as a yield enhancement measure (the majority of loans with terms of 20
years or less carry 15 year terms). Fixed rate loans with 5 to 7 year balloon
features are also originated for portfolio. ARM loans are typically made with
one and three year repricing frequencies, indexed to the U.S. Treasury rate with
a corresponding maturity. Certain ARM loans originated by the Bank are
convertible into 20 year maximum fixed rate loans at the prevailing market rate
at the time of the loan's conversion. In light of the highly competitive
environment for 1-4 family loan originations, Chester Savings offers ARM loans
at a discounted initial rate. While discounted ARM loans generally reprice up at
the first adjustment period, typically the adjusted rate is below the fully
indexed rate due to the annual rate cap limitation. The borrower is qualified at
the maximum rate permissible at the first adjustment period. The majority of
adjustable rate originations are one year ARMs with a 2.75 percent margin and
2/6 percent annual/lifetime caps.
On a limited basis, the Bank also originates construction loans to finance
the construction of 1-4 family residences. As of March 31, 1996, construction
loans accounted for $1.1 million, or 1.9 percent of the total loan
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.14
portfolio. Most of the Bank's construction lending activities are for the
construction of pre-sold homes, which convert to permanent loans upon completion
of the construction. Construction loans require payment of interest only during
the construction period, which is typically six months. Terms of construction
loans generally require a loan-to-value ratio of 80.0 percent or less.
Commercial real estate/multi-family lending has been a moderate area of
lending diversification for the Bank, with such loans totaling $3.3 million, or
5.8 percent of loans outstanding, at March 31, 1996. The Bank's commercial real
and multi-family loan portfolio include loans secured by small apartment
buildings, a library, professional offices, churches and golf courses, which are
located in Chester Savings' primary market area. Commercial real estate and
multi-family loans originated by the Bank generally have maximum loan-to-value
ratios of up to 75.0 percent, and the Bank originates both fixed rate and
adjustable rate loans. Adjustable rate loans carry interest rates indexed to the
comparable maturity Treasury plus a margin, while fixed-rate loans are priced at
a premium over the Bank's fixed-rate residential loan product. Most commercial
real estate and multi-family loans are generally for terms of five to ten years.
The Bank's residential and commercial real estate loan balances include
minor balances of land and agriculture loans, which totaled $1.1 million, or 2.0
percent of total loans, at March 31, 1996. Agriculture and land loans are
generally made for the same terms and the same interest rates as those offered
on commercial real estate and multi-family loans. Agriculture loans originated
by the Bank consist of loans secured by farm residences and combinations of farm
residences and farm real estate. In qualifying the borrower for a loan secured
by farm land, the Bank historically has excluded income generated by the farm.
Land and agriculture loans originated by Chester Savings are secured by local
properties.
Chester Savings' diversification into non-mortgage lending consists of
consumer loans, with direct automobile loans comprising the largest
concentration of the consumer loan balance. Of the $6.4 million of consumer
loans outstanding at March 31, 1996, automobile loans totaled $1.8 million, or
28.4 percent, of the consumer loan balance. Automobile loans are offered with
maturities of up to 60 months for new automobiles and up to 48 months for used
automobiles. Home improvement loans represent the second largest concentration
of the consumer loan portfolio, with such loans totaling $1.6 million at March
31, 1996. Home improvement loans are fixed rate loans offered for terms of up to
5 years and are subject to a maximum loan-to-value ratio of 80.0 percent or less
for the sum of all debt outstanding on the property. The substantial portion of
the Bank's home improvement loan portfolio consists of loans in which Chester
Savings holds the first mortgage on the borrower's residence. The balance of the
consumer loan portfolio consists of a variety of loans, including credit card,
personal loans, and loans secured by deposits.
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.15
To date, the Bank has been substantially inactive in the origination of
commercial business loans; however, with the addition of senior management that
is experienced in commercial business lending, expansion into commercial
business lending will be pursued following the conversion. Such expansion is
planned to include unsecured lending to local small to moderately sized
businesses and loans guaranteed by the Small Business Administration, consisting
of floating rate loans tied to the prime rate.
Exhibit I-9, which shows the Bank's loan originations, sales and repayments
over the past two and one-quarter fiscal years, highlights Chester Savings'
traditional emphasis on originating 1-4 family permanent mortgage loans and
recent strategy of emphasizing the origination of consumer loans. Originations
of 1-4 family permanent mortgage loans and consumer loans have accounted for
more than 80 percent of the Bank's lending volume over the past two and one-
quarter fiscal years, with construction lending generally being the next most
active area of originations for Chester Savings. The Bank recorded a modest
increase in loan volume during fiscal 1995, reflecting growth in the origination
of 1-4 family permanent mortgage loans and construction loans. Notwithstanding
the increase in originations, as well as a slight decline in repayments, Chester
Savings' loan balance continued to decline in fiscal 1995. Loan volume during
the first quarter of fiscal 1996 was approximately the same as the comparative
year ago period. As of March 31, 1996, the Bank maintained net loans receivable
of $55.8 million, versus a comparative balance of $58.2 million at December 31,
1994. The lending strategies of the two subsidiary banks are anticipated to
reverse the trend of loan shrinkage, through pursuing a more diversified lending
strategy. Such growth would serve to enhance the overall yield of the loan
portfolio, while the credit risk associated with the loan portfolio would
increase as well.
Asset Quality
- -------------
The Bank's historical 1-4 family lending emphasis and high concentration of
investments have generally supported favorable credit quality measures. As of
March 31, 1996, Chester Savings' balance of non-performing assets totaled
$432,000, or 0.32 percent of total assets. From fiscal year end 1991 through
fiscal year end 1995, Chester Savings' non-performing assets-to-assets ratio
trended steadily lower, declining from a five year peak of 1.24 percent at
fiscal year end 1991 to 0.27 percent at fiscal year end 1995. The slight
increase in the non-performing assets ratio during the first quarter of fiscal
1996 resulted from increases in non-accruing residential and consumer loans. As
shown in Exhibit I-11, non-performing assets held by the Bank consisted of
$222,000 of non-performing loans (non-accruing loans and accruing loans that are
more than 90 days past due) and $210,000 of real estate owned. Non-performing
loans held by the Bank at March 31, 1996 consisted mostly of residential loans
($123,000), with the balance comprised of consumer and commercial real estate
loans ($49,000 and $50,000, respectively).
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.16
The Bank reviews and classifies assets on a regular basis and establishes
loan loss provisions based on the overall quality, size and composition of the
loan portfolio, as well other factors such as historical loss experience,
industry trends and local real estate market and economic conditions. At March
31, 1996, the Bank had $199,000 of assets classified as Substandard and $8,000
of assets classified as Loss. The Bank maintained valuation allowances of
$396,000 at March 31, 1996, equal to 0.71 percent of net loans receivable and
91.7 percent of non-performing assets.
Funding Composition and Strategy
- --------------------------------
Deposits have consistently been the Bank's primary source of funds (see
Exhibits I-12 and I-13), and at March 31, 1996 deposits constituted 87.9 percent
of Chester Savings' interest-bearing liabilities. The Bank's deposit composition
has generally reflected a relatively high concentration of lower costing
transaction and savings accounts, which in part has been supported by the
Gilster-Mary Lee funds maintained in money market accounts. Accordingly, with
the conversion of $15 million of those funds to repurchase agreements, the level
of transaction and savings accounts maintained by the Bank dropped from 40.7
percent of total deposits at fiscal year end 1994 to 36.4 percent of total
deposits at March 31, 1996. Likewise, a notable portion of the deposit shrinkage
recorded by Chester Savings during fiscal 1995 was attributable to the
conversion of the Gilster-Mary Lee deposits to repurchase agreements, although
disintermediation in general and additional deposit withdrawals by Gilster-Mary
Lee accounted for slightly more than one-third of Bank's deposit run-off in
fiscal 1995. Deposit growth recorded during the first quarter of fiscal 1996
consisted mostly of money market funds, which was partially offset by a slight
decline in Chester Savings' balance of CDs.
As with most thrifts today, the concentration of the Bank's CDs have short-
term maturities. As of March 31, 1996, the CD portfolio totaled $69.1 million,
with 61.6 percent of those CDs having maturities of less than one year. Jumbo
CDs (CD accounts with balances of $100,000 or more) amounted to $5.3 million, or
7.6 percent of Chester Savings' total CDs at March 31, 1996. Chester Savings
generally does not pay premium rates for higher balance CDs. The Bank does not
utilize brokered CDs and typically offers CD rates that are priced in the middle
of the range of rates offered by its local competitors.
As of March 31, 1996, the Bank maintained borrowings of $15 million, which
consisted entirely of the Gilster-Mary Lee deposits that were converted to
repurchase agreements. Gilster-Mary Lee has notified the Bank of its intent to
reduce the repurchase agreement balance by $10 million in the near term, which
will be repaid in the near term with Chester Savings' liquidity and conversion
proceeds as opposed to other wholesale funding sources. It is anticipated that
the entire balance of repurchase agreements will be repaid in the intermediate-
term. Exhibit I-14 reflects the Bank's borrowing activities during the past two
and one-quarter
<PAGE>
RP FINANCIAL, L.C.
PAGE 1.17
fiscal years. Chester Savings' deposit growth, internal funding and conversion
proceeds are expected to be adequate enough to fund the substantial portion of
the Bank's lending and investment activities for the intermediate-term. If
additional borrowings are needed, the Bank has ample borrowing capacity with the
FHLB of Chicago. The two subsidiary banks are expected to borrow from the
Holding Company to finance the purchase of ESOP shares.
Legal Proceedings
- -----------------
From time to time, Chester Savings is involved as plaintiff or defendant in
various legal proceedings arising in the normal course of business. While the
ultimate outcome of these various legal proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of these
proceedings should not have a material effect on Chester Savings' financial
position or results of operations.
<PAGE>
RP FINANCIAL, L.C.
PAGE 2.1
II. MARKET AREA
Introduction
- ------------
Chester Savings operates out of its headquarters office in Chester,
Illinois (Randolph County), four other offices in Illinois and in Missouri
through one branch office in Perryville and one LPO in Cape Girardeau. The
Illinois branches are located in Randolph County (Sparta and Red Bud), Perry
County (Pinckneyville) and Jackson County (Carbondale). The Missouri branch
office is located just across the Mississippi River in Perry County
(Perryville), approximately 15 miles west from Chester, and the Cape Girardeau
LPO is approximately 30 miles south of Perryville. Exhibit II-1 shows the Bank's
office locations. Following the Reorganization, the Perryville office will be
operated as a separate subsidiary of the Bank and will be named Chester National
Bank of Missouri, and the Cape Girardeau LPO will also be an office of the
Chester National Bank of Missouri. The Bank considers the primary market area to
consist of the counties containing an office, with a secondary emphasis on
surrounding counties. This analysis evaluates the demographic and economic
trends in these county markets.
The Bank's market area is primarily rural in nature and covers a fairly
large geographic area in southwest Illinois. The closest major metropolitan area
to Chester is the St. Louis area, approximately 60 miles to the north.
Headquartered in a rural county, the Bank has sought to expand into larger
markets which provide greater opportunity for growth, such as Jackson County,
Illinois and Perry and Cape Girardeau Counties, Missouri. Presently, the most
attractive expansion area appears to be southeastern Missouri, particularly the
Cape Girardeau area.
The economy in southwestern Illinois is historically based in coal mining
and agriculture, although both industries have declined in recent decades. The
decline of mining employment has had a highly adverse impact on the economy of
the market area, particularly in Randolph and Perry Counties, Illinois, and loan
demand in these counties has been very limited. Unemployment in these counties
is currently quite high, and the population has been declining. Randolph
County's already weak economy was hit again in early 1996 when Spartan Printing
Company, the County's largest manufacturing employer which peaked at
approximately 1,000 employees, shut its doors. Somewhat offsetting the
unfavorable operating environment in Randolph and Perry Counties has been the
Jackson County market, whose largest city, Carbondale, is home to Southern
Illinois University (the "University"). The University, a state school, has
enhanced the economic stability of Jackson County both through direct employment
and by supporting a number of ancillary businesses. The Perryville market is
rural and small, and economic stability in Perryville is supported by its
largest employer, the Gilster Mary-Lee Corporation. The operating environment in
Perryville has generally been more favorable than in
<PAGE>
RP FINANCIAL, L.C.
PAGE 2.2
Randolph and Perry Counties. The Cape Girardeau market area is one of the
largest markets served by Chester Savings and has been experiencing
comparatively strong population and housing growth trends. The Chester National
Bank of Missouri may consider full service branch office expansion in the Cape
Girardeau area after the conversion.
Competition in the Bank's market area is significant. Chester Savings
competes with 6 savings institutions and 28 commercial banks who operate in the
same counties and offer similar products and services. The relatively high
unemployment and low economic growth in Randolph and Perry Counties, Illinois
has exacerbated the competition in these areas. Cape Girardeau provides growth
opportunities due to local banking consolidation coupled with favorable
population growth trends.
Future growth potential will depend to a large degree on the ability of the
local market areas to provide lending and deposit growth opportunities, and on
the ability of the two subsidiary banks to compete effectively in their
respective market areas. As such, future growth opportunities depend on a
variety of different aspects in the local markets, such as demographic growth
trends, the future growth and stability of the regional economy, and the nature
and intensity of the competitive environment. These factors have been briefly
examined to help determine the market's growth potential and relative economic
health of the Bank's market area.
National Economic Factors
- -------------------------
The national economy experienced moderate growth during 1995 with overall
GDP growth measured at 2.0 percent, down from the 1994 level of 3.5 percent.
During the first half of 1995, economic growth was sluggish as indicated by
higher unemployment, a decline in retail sales, and lower construction spending.
GDP growth during the second quarter of 1995 slowed to 1.3 percent annually,
which was the slowest growth in almost four years. In a move to revive the
sagging economy, the Federal Reserve cut short-term interest rates by 0.25
percent in early-July 1995. Amid mixed economic data, such as a drop in July
durable goods orders and an increase in July new housing starts, the Fed held
rates steady during its meeting in late-August. During the balance of the third
quarter, the general economy showed signs of expansion with inflation under
control. For example, construction picked up in most regions of the U.S., while
retail prices were relatively stable in the late summer. While third quarter GDP
growth was stronger than expected, increasing at an annual rate of 4.2 percent,
economic data through most of the fourth quarter suggested that the economy was
on track for a soft landing. Weak retail sales during the holiday shopping
season and a slight increase in the November unemployment rate provided
indications of a slowing national economy at the end of the fourth quarter.
<PAGE>
RP FINANCIAL, L.C.
PAGE 2.3
Economic data released in January 1996 continued to indicate a generally
sluggish economy, as highlighted by the Federal Reserve's mid-January "Beige
Book" report which indicated slowing economic growth in its latest nationwide
survey of economic conditions. Record-breaking winter weather conditions further
slowed the economy in January of 1996. However, unemployment declined sharply in
February, although the January figures were skewed by the weather and by
striking GM workers. A stronger than expected March employment report served to
rekindle inflation fears, although other economic indicators suggested that the
pace of economic growth was moderate and inflation was under control. An
accelerating economy was further indicated by first quarter GDP growth of 2.8
percent, which was well above 1995 fourth quarter growth of 0.5 percent. Higher
oil prices served to further heighten inflation concerns; however, wages, which
account for most of the inflation measures, did not signal that inflation was
heating up. In late-May, first quarter GDP growth was revised downward to 2.3
percent; however, other economic data, such as consumer demand, inventory levels
and employment indicated that the economic growth was accelerating in the second
quarter. Signs of a strengthening economy led economists to increase their
estimate of second quarter GDP growth to 3.5 percent.
In terms of interest rate trends, a weakening economy in the first half of
1995 led to a decline in both short-term and long-term interest rates. The Fed
increased short-term interest rates in February and July 1995, but a rally in
the bond market pushed long term rates lower in late-August and early-September.
Rates remained relatively flat throughout October and November given the
uncertainty regarding the federal debt. The slow pace of the economy prompted
the Federal Reserve to cut interest rates by 0.25 percent in late-December 1995
and late-January 1996. Generally improving economic conditions forestalled an
additional rate cut by the Fed in its late-March meeting, which served to push
interest rates higher. Interest rates increased sharply in early-May following
the release of the stronger than expected first quarter GDP growth, as the 30-
year U.S. Treasury bond edged above 7.0 percent. Bond prices recovered modestly
on the release of other economic data, such as lower than expected increases in
April consumer and wholesale prices, which suggested that inflation remained in
check. In mid-May the Federal Reserve indicated that it would not tighten
interest rates in the near term, which further served to calm the bond market.
The decline in interest rates was short-lived, as the strength of the economic
data in late-May increased expectations that the Federal Reserve would move to
tighten rates at its next meeting in early-July. Bond prices were further
depressed in early-June by the unexpectedly strong job growth recorded in May,
despite a slightly increase in the May unemployment rate. As of June 14, 1996
one- and thirty-year U.S. Government bonds were yielding 5.81 percent and 7.09
percent, respectively. Exhibit II-2 provides historical interest rate trends
from 1991 through June 14, 1996.
<PAGE>
RP FINANCIAL, L.C.
PAGE 2.4
Market Area Demographics
- ------------------------
The following section presents demographic details regarding Chester
Savings' market area. Table 2.1 displays comparative demographic trends for the
U.S., Illinois and the five counties served by the Bank. Population growth in
Illinois was lower than national averages between 1990 and 1995, with the market
area being one of the low growth areas in Illinois. Both Randolph and Perry
County recorded population declines between 1990 and 1995, a result of the
employment losses in these areas. The greater economic diversification and
stabilizing presence of the University stimulated moderate population growth in
Jackson County during this period. Likewise, the economic stability and steady
employment in Perry and Cape Girardeau Counties, Missouri have enabled higher
population growth rates than the other market area counties served by the Bank.
The relatively low number of residents of Perry County, Missouri is somewhat
misleading, however, since a large number of Randolph County residents commute
to jobs in Perry County. Household growth trends paralleled population growth
trends during the periods shown in Table 2.1, and those trends are projected to
continue through the year 2000.
All of the counties in the market area exhibited median household and per
capita income levels that were below state and national medians as of 1995. The
lowest per capita and median household income levels were recorded in Jackson
County, which has a large student population, a relatively young labor force,
and an employment structure dominated by relatively low-wage service and retail
jobs. Cape Girardeau County, Missouri recorded the highest per capita income in
the market area due to the higher proportion of manufacturing employment. In
general, the lower than average income levels in the market area reflect the
market area's primarily rural nature.
Overall, a continuation of the low growth in Chester Savings' market area
is expected to continue to restrict residential lending opportunities for the
Bank, with southeastern Missouri representing greater potential for residential
lending growth. The conversion will allow the Bank to expand geographically,
particularly in southeastern Missouri. Expansion into new markets and more of a
commercial banking emphasis can be expected to increase the Bank's credit risk
exposure, although the increased capital ratios following the stock conversion
will facilitate such expansion. In summary, the demographic characteristics of
Randolph and Perry Counties, Illinois are not considered to be conducive for
loan or deposit growth. On the other hand, the southeastern Missouri markets are
more favorable, although the Bank's market presence in both of these markets is
currently quite low, as will be described below.
<PAGE>
RP Financial, LC
Page 2.5
Table 2.1
Chester Savings Bank, FSB
State and County Summary Demographic Data
<TABLE>
<CAPTION>
Year Growth Rate Growth Rate
-----------------------------------
POPULATION (000) 1990 1995 2000 1990-95 1995-2000
--------------- ---- ---- ----- ------- ---------
(%) (%)
<S> <C> <C> <C> <C> <C>
UNITED STATES 248,710 263,006 277,084 1.1% 1.0%
ILLINOIS 11,431 11,821 12,201 0.7% 0.6%
MISSOURI 5,117 5,318 5,536 0.8% 0.8%
JACKSON COUNTY 61 62 63 0.3% 0.3%
PERRY COUNTY, IL 21 21 21 -0.2% -0.1%
RANDOLPH COUNTY 35 34 34 -0.1% -0.0%
PERRY COUNTY, MO 17 17 18 0.9% 0.8%
CAPE GIRARDEAU CO, MO 62 65 68 1.1% 1.0%
HOUSEHOLDS (000)
----------------
UNITED STATES 91,947 97,070 102,202 1.1% 1.0%
ILLINOIS 4,202 4,344 4,481 0.7% 0.6%
MISSOURI 1,961 2,039 2,123 0.8% 0.8%
JACKSON COUNTY 23 24 24 0.3% 0.3%
PERRY COUNTY, IL 8 8 8 -0.2% -0.1%
RANDOLPH COUNTY 12 12 12 -0.1% 0.0%
PERRY COUNTY, MO 6 6 7 0.9% 0.8%
CAPE GIRARDEAU CO, MO 23 25 26 1.1% 1.0%
MEDIAN HOUSEHOLD INCOME ($)
---------------------------
UNITED STATES $29,199 $33,610 $32,972 2.9% -0.4%
ILLINOIS 32,288 35,865 35,492 2.1% -0.2%
MISSOURI 26,600 28,782 27,847 1.6% -0.7%
JACKSON COUNTY 17,657 18,610 18,132 1.1% -0.5%
PERRY COUNTY, IL 22,755 23,824 22,304 0.9% -1.3%
RANDOLPH COUNTY 25,978 26,411 25,582 0.3% -0.6%
PERRY COUNTY, MO 23,742 28,688 30,320 3.9% 1.1%
CAPE GIRARDEAU CO, MO 24,610 27,286 26,809 2.1% -0.4%
PER CAPITA INCOME -1995 ($)
---------------------------
UNITED STATES $13,179 $16,405 ------ 4.5% ------
ILLINOIS 15,179 17,047 ------ 2.3% ------
MISSOURI 12,354 14,388 ------ 3.1% ------
JACKSON COUNTY 9,970 11,099 ------ 2.2% ------
PERRY COUNTY, IL 10,645 11,147 ------ 0.9% ------
RANDOLPH COUNTY 11,127 11,627 ------ 0.9% ------
PERRY COUNTY, MO 10,348 12,781 ------ 4.3% ------
CAPE GIRARDEAU CO, MO 11,920 13,403 ------ 2.4% ------
1995 AGE DISTRIBUTION(%) 0-14 Years 15-24 Years 25-44 Years 45-64 Years 65+ Years Median Age
------------------------ ---------- ----------- ----------- ----------- ---------- ----------
UNITED STATES 22.1 13.8 31.8 19.5 12.8 34.0
ILLINOIS 22.2 13.8 31.7 19.5 12.7 32.8
MISSOURI 22.1 13.6 30.4 19.9 14.0 33.5
JACKSON COUNTY 16.9 23.2 33.6 15.3 11.0 26.5
PERRY COUNTY, IL 21.5 13.1 27.8 20.8 16.9 35.5
RANDOLPH COUNTY 20.0 12.0 33.5 19.4 15.2 34.0
PERRY COUNTY, MO 23.0 13.4 27.9 18.8 16.7 34.4
CAPE GIRARDEAU CO, MO 20.4 16.7 30.5 18.8 13.6 32.2
Less Than 15,000 to $25,000 to $50,000 to 100,000 to
1995 HH INCOME DIST.(%) $15,000 24,999 $49,999 $99,999 $149,999 $ 150,000+
----------------------- ------- ------- ------- ------- -------- ----------
UNITED STATES 20.5 15.8 33.8 23.7 4.2 2.0
ILLINOIS 18.9 14.7 34.3 25.5 4.4 2.2
MISSOURI 24.1 18.3 34.8 19.2 2.4 1.2
JACKSON COUNTY 41.6 18.1 26.1 12.1 1.5 0.7
PERRY COUNTY, IL 31.4 20.2 35.4 12.1 0.5 0.5
RANDOLPH COUNTY 27.0 19.6 36.7 15.4 1.0 0.4
PERRY COUNTY, MO 23.6 17.6 38.4 18.4 1.6 0.4
CAPE GIRARDEAU CO, MO 26.6 18.4 35.9 16.3 1.7 1.1
HOUSING PERMIT DATA 1991 1992 1993 1994
------------------- ---- ---- ---- ----
UNITED STATES 1,105,748 1,094,933 1,390,017 1,371,637
ILLINOIS 32,846 40,430 44,742 49,290
MISSOURI 16,118 20,078 21,702 26,374
JACKSON COUNTY 50 46 94 99
PERRY COUNTY, IL N/A N/A N/A N/A
RANDOLPH COUNTY 88 80 58 49
PERRY COUNTY, MO 36 81 47 77
CAPE GIRARDEAU CO, MO 254 277 302 356
</TABLE>
Source: CACI, Inc.; U.S. Dept. of Commerce.
<PAGE>
RP FINANCIAL, L.C.
PAGE 2.6
Economy
- -------
The market area economy is based on a combination of manufacturing,
services and trade. Mining previously had a much larger role in the market area,
although mining employment has dropped off sharply in recent years, particularly
in Randolph and Perry Counties, Illinois. For example, in 1988 mining revenues
accounted for 42.6 percent and 6.6 percent of Perry and Randolph Counties total
revenues, respectively. By 1993, these proportions had declined to 30.7 percent
and 0.5 percent, respectively. Since 1993, three more mines have closed, and
today only one mine remains operating in Randolph County. Overall, mining
employment in southwest Illinois has declined by up to 75 percent to
approximately 5,000, from a level of up to 20,000 a decade ago, which has had a
dramatic impact on the regional economy. Prolonged labor strikes, declines in
energy prices and high sulphur coal have been notable factors that have
accounted for the decline in the local coal mining industry. The decline in
mining employment rippled through other employment sectors in these counties as
well, and the labor force in both counties dwindled as people left the area.
Today, mining jobs have been partially replaced by jobs in trade, services,
manufacturing and government. However, mining employment still accounts for
approximately 11.0 percent of total employment and 30.7 percent of total
revenues in Perry County, adding a degree of volatility to this market.
Randolph County today derives most of its employment from services and
government. Service employment is dominated by the three hospitals that operate
in the County (locations in Chester, Sparta, and Red Bud). Other health care
employment is provided by a number of nursing homes operating in the County. The
largest government employers in Randolph County are the Menard Prison, a maximum
security prison in Chester with 800 employees, and the Chester Mental Health
Center, a correctional facility for the criminally insane with 470 employees.
Other government employment is provided by the school system and a number of
state parks and historical landmarks. Manufacturing also plays a major role in
the Randolph County economy, although manufacturing employment plunged with the
recent closure of the Spartan Printing Company (which peaked at 1,000 employees)
in early-1996 and Snyder General Corporation in 1993 (850 employees). Today, the
largest manufacturing employer in Randolph County is the Gilster Mary-Lee
Corporation with approximately 3,000 total employees (1,350 employees in the
County), a food packaging company with two plants in Chester and three plants in
Steeleville. Locally, Gilster Mary-Lee Corporation also has four plants in Perry
County, Missouri.
Jackson County has the largest economy in the market area, which is
anchored by the University, a state school with a student body of approximately
25,000. The University itself employs approximately 6,100 full-time and part-
time employees, and acts as the foundation of the Carbondale economy. Government
employment is thus the largest employment sector in Jackson County, followed by
services and trade. Carbondale's population supports a number of medical
facilities, utilities, and other regionally-oriented
<PAGE>
RP FINANCIAL, L.C.
Page 2.7
employers, and the area acts as a retail center for the surrounding markets.
Overall, the Jackson County economy is more diversified than the Bank's other
market area economies and has been growing, and will thus provide the Bank with
its greatest opportunities for deposit and loan growth going forward.
Perry County, Missouri has a small economy based on manufacturing and
services. Most of the employment is in Perryville, led by the Gilster Mary-Lee
Corporation with approximately 1,650 employees in the County. Other large
employers include T.G. USA, a Toyota company with 400 to 500 employees, and
Sabreliner Corporation, an aeronautical engineering firm with approximately 300
employees. Perry County attracts large numbers of commuters from Randolph
County, which is located directly across the Mississippi River, and has been
able to absorb some of the employment losses in Randolph County. Although Perry
County has the smallest labor force among the markets served by the Bank, the
economic stability in the County has made Perry County the fastest growing
county in the Bank's market area.
The Cape Girardeau market also presents relatively favorable growth trends
and economic conditions for banking operations. The economy is relatively
diversified and the largest employer is the Proctor & Gamble Corporation. Other
large employers include Southeastern Missouri State University, several
hospitals, M&W Packaging and Thorngate LTD. (a manufacturer of men's apparel).
Agriculture is also important in nearby areas and supports a number of ancillary
businesses in Cape Girardeau. The healthy and growing economy in the Cape
Girardeau market has supported a growing population base and relatively low
unemployment levels currently. Table 2.2 displays some of the larger employers
in the market area.
Table 2.2
Major Market Area Employers
<TABLE>
<CAPTION>
Approximate
Employer County Industry # Employees
-------- ------ -------- -----------
<S> <C> <C> <C>
Southern Ill. Univ. Jackson Higher Education 6,100
Gilster-Mary Lee Corp. Perry, MO Food Mfg. 1,650
Randolph, IL Food Mfg. 1,350
Menard Correctional Center Randolph Government 800
Consolidated Coal Company Perry, IL Coal Mining 775
T.G. USA Corp. Perry, MO Automobile 650
Southern Ill. Hosp. Jackson Hospital 575
Chester Mental Health Ctr. Randolph Government 470
Tuck, Inc. Jackson Tape Mfg. 400
Ill. Dept. of Trans. Jackson State Transportation 350
Spartan Aluminum Randolph Aluminum Castings 350
Solar Press Perry, MO Printing 323
BICC Perry, IL Wire Cable Mfg. 275
</TABLE>
Source: County Chambers of Commerce.
<PAGE>
RP Financial, L.C.
Page 2.8
Market area unemployment trends are displayed in Table 2.3. Randolph County
and Perry County, Illinois have much higher than average unemployment rates due
to the loss of mining and manufacturing employment in these markets.
Unemployment in Randolph County has been exacerbated by the closure of the
Spartan Printing Company. Jackson County's greater economic diversification is
reflected in its lower than average unemployment rate. Perry and Cape Girardeau
Counties, Missouri have the lowest unemployment rates in the market area, a
reflection of the underlying stability and growth in these areas.
Overall, the economic conditions in Randolph and Perry Counties, Illinois
represent significant limitations for lending and deposit growth, while the
southeastern Missouri markets present more favorable growth opportunities. While
Jackson County has a substantially larger and more diversified economy than the
other counties in the market area and provides the most opportunities for
deposits and lending, competition among financial institutions is stronger in
Jackson County as well.
Table 2.3
Chester Savings Bank, FSB
Selected Unemployment Rates
<TABLE>
<CAPTION>
April 1995 April 1996
Region Unemployment Unemployment
------ ------------- -------------
<S> <C> <C>
United States 5.6% 5.4%
Illinois 5.2 5.2
Missouri 4.8 4.1
Randolph County 6.3 11.9
Perry County, IL 10.5 13.2
Jackson County 4.8 5.0
Perry County, MO 4.1 4.0
Cape Girardeau, MO 3.5 4.4
</TABLE>
Source: U.S. Bureau of Labor Statistics.
Deposit Market Trends
- ---------------------
Table 2.4 displays deposit trends for thrifts and commercial banks in
Chester Savings' market area from 1992 to 1994. The data indicates that Jackson
County was the only market area county that recorded positive deposit growth
between 1992 and 1994, although the growth was very low. Both Randolph and Perry
Counties, Illinois experienced deposit declines, reflecting the economic
stagnation occurring in these markets. The decline in savings institution
deposits in Perry County, Illinois was attributable to the acquisition of an
institution branch by a commercial bank. Savings institutions in Randolph County
and Perry County, Missouri,
<PAGE>
RP FINANCIAL, LC
PAGE 2.9
--------------------------------
Table 2.4
Chester Savings Bank, FSB
Deposit Summary
--------------------------------
<TABLE>
<CAPTION>
As of June 30,
----------------------------------------------------------------------
1992 1994
----------------------------------------------------------------------
Market Number of Market Number of
Deposits Share Branches Deposits Share Branches
-------- ----- -------- -------- ----- --------
` (Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
A. Deposit Summary
- ------------------
State of Ilinois $196,576,761 100.0% 4,078 $198,272,645 100.0% 4,153
Commercial Banks 136,257,479 69.3% 2,365 140,889,175 71.1% 2,529
Credit Unions 9,247,905 4.7% 821 11,533,235 5.8% 790
Savings and Loans 51,071,377 26.0% 892 45,850,235 23.1% 834
Jackson County $558,520 100.0% 23 $566,757 100.0% 24
Commercial Banks 386,924 69.3% 15 390,154 68.8% 16
Credit Unions 35,786 6.4% 4 38,173 6.7% 4
Savings and Loans 135,810 24.3% 4 138,430 24.4% 4
Chester Savings Bank(1) 5,772 4.3% 1 5,986 4.3% 1
Chester Savings Bank(2) 1.0% 1.1%
Perry County, Illinois $268,443 100.0% 8 $263,142 100.0% 8
Commercial Banks 235,984 87.9% 6 252,686 96.0% 7
Credit Unions 0 0.0% 0 0 0.0% 0
Savings and Loans 32,459 12.1% 2 10,456 4.0% 1
Chester Savings Bank(1) 10,299 31.7% 1 10,456 100.0% 1
Chester Savings Bank(2) 3.8% 4.0%
Randolph County $569,784 100.0% 22 $569,002 100.0% 22
Commercial Banks 359,547 63.1% 13 358,439 63.0% 13
Credit Unions 394 0.1% 2 489 0.1% 2
Savings and Loans 209,843 36.8% 7 210,074 36.9% 7
Chester Savings Bank(1) 108,015 51.5% 3 112,270 53.4% 3
Chester Savings Bank(2) 19.0% 19.7%
Perry County, Missouri $273,794 100.0% 8 $273,290 100.0% 8
Commercial Banks 211,303 77.2% 6 207,520 75.9% 6
Credit Unions 0 0.0% 0 0 0.0% 0
Savings and Loans 62,491 22.8% 2 65,770 24.1% 2
Chester Savings Bank(1) 16 0.0% 1 4,296 6.5% 1
Chester Savings Bank(2) 0.0% 1.6%
<CAPTION>
Deposit 1995 S&L Deposits Deposit
--------------------------------------
Growth Rate Market No. of Growth Rate
1992-1994 Deposits Share Branches 1994-1995
----------- -------- ----- -------- -----------
(%) (%)
<S> <C> <C> <C> <C> <C>
A. Deposit Summary
- ------------------
State of Ilinois 0.4%
Commercial Banks 1.7%
Credit Unions 11.7%
Savings and Loans -5.2% $32,994,834 649 -28.0%
Jackson County 0.7%
Commercial Banks 0.4%
Credit Unions 3.3%
Savings and Loans 1.0% $130,412 4 -5.8%
Chester Savings Bank (1) 1.8% 5,065 3.9% 1 -15.4%
Chester Savings Bank (2)
Perry County, Illinois -1.0%
Commercial Banks 3.5%
Credit Unions NM
Savings and Loans -43.2% $31,457 2 200.9%
Chester Savings Bank (1) 0.8% 10,037 31.9% 1 -4.0%
Chester Savings Bank (2)
Randolph County -0.1%
Commercial Banks -0.2%
Credit Unions 11.4%
Savings and Loans 0.1% $187,767 6 -10.6%
Chester Savings Bank (1) 2.0% 109,420 58.3% 3 -2.5%
Chester Savings Bank (2)
Perry County, Missouri -0.1%
Commercial Banks -0.9%
Credit Unions NM
Savings and Loans 2.6% 62,658 2 -4.7%
Chester Savings Bank(1) NM 3,415 5.5% 1 -20.5%
Chester Savings Bank(2)
</TABLE>
(1) Percent of county S&L deposits.
(2) Percent of total county deposits.
Sources: FDIC; OTS.
<PAGE>
RP FINANCIAL, L.C.
PAGE 2.10
recorded slight deposit growth, while commercial bank deposits declined.
Chester Savings recorded modest deposit growth in all of its market area
counties during this period. The most significant deposit growth occurred in
Randolph County, the location of three of the Bank's offices.
During 1995, Illinois thrifts lost considerable deposits, approximately 28
percent, as commercial banks continued to acquire thrifts. The 1995 deposit
loss experience by Chester Savings in each of the four counties where branches
are maintained was less pronounced, but represented a clear reversal from
previous growth trends. The 1995 deposit loss appears to be more a function of
disintermediation, and also reflected the partial conversion of the Gilster-Mary
Lee Corporation deposits to repurchase agreements at Chester Savings.
Competition
- -----------
Chester Savings faces significant competition in all of the towns where it
maintains an office, both from other thrifts and commercial banks. Most of the
other thrifts and commercial banks operating in the market area are locally-
owned, and all of the towns containing a branch of the Bank are also home to one
or more local commercial banks. In this respect, Chester Savings' branches are
at somewhat of a competitive disadvantage since the locally-based commercial
banks often maintain a strong community affinity with local residents. Chester
Savings also competes with several thrifts operating in the market area, two of
which are headquartered in Randolph County, the other in Jackson County.
Competition in Jackson County is exacerbated by the presence of the Southern
Illinois University Credit Union in Carbondale.
Overall, the market area has a relatively large number of financial
institutions for the size of the local population base. Going forward, the Bank
will have the capacity to enhance its competitive position with the increased
capital raised in the conversion. The capital will allow the two subsidiary
banks to be more rate and fee competitive and will provide additional funding
for any branch acquisitions.
In summary, Chester Savings' long history as a locally-owned financial
institution with a community orientation, as well as the Bank's strong financial
condition and history of profitable operations, is considered to be favorable in
terms of public perception. Furthermore, it is anticipated that Chester Savings'
competitive position will be enhanced following its stock offering and
reorganization into a commercial bank. However, given the strong competition and
somewhat limited demographic growth prospects in the market area, it will be
difficult for the subsidiary banks to realize growth without increasing market
share or expanding into new markets.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Chester Savings' operations versus a
group of comparable savings institutions (the "Peer Group") selected from the
universe of all publicly-traded savings institutions. The basis of the pro
forma market valuation of Chester Savings is provided by these institutions.
Factors affecting the Bank's pro forma value such as financial condition, credit
risk, interest rate risk, loan composition and recent operating results can be
readily assessed in relation to the Peer Group. Current market pricing of the
Peer Group, subject to appropriate adjustments to account for differences
between Chester Savings and the Peer Group, will then be used as a basis for the
pro forma valuation of Chester Savings' to-be-issued common stock.
Selection of Peer Group
- -----------------------
We consider the appropriate Peer Group to be comprised of only those
publicly-traded savings institutions whose common stock is either listed on a
national exchange or is NASDAQ listed, since the market for companies trading in
this fashion is regular and reported. We believe non-listed institutions are
inappropriate since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have also excluded from the Peer Group those
companies under acquisition, mutual holding companies and recent conversions,
since their pricing ratios are subject to distortion and/or do not have a
seasoned trading history.
Despite the fact that the conversion to stock form will be followed by an
immediate conversion to a national bank charter, we felt that the Peer Group
should consist solely of thrifts. The reason lies in the fact that despite the
national bank charter that will be adopted by the Bank shortly after completion
of the mutual-to-stock conversion, Chester Savings' asset composition and
earnings potential will still be typical of a thrift. Accordingly, capital
levels, earnings and the risks associated with Chester Savings' operations
should initially be more comparable to a thrift than to a commercial bank, and
investors will thus perceive the stock of comparable thrift institutions to be a
more accurate benchmark of Chester Savings' pro forma value.
From the universe of publicly-traded thrifts, we selected ten institutions
with characteristics similar to those of Chester Savings. In the selection
process, we applied two primary "screens" to the universe of all public
companies:
o Screen #1. Illinois institutions with assets between $100 to $500
------------------------------------------------------------------
million, equity-to-asset ratios greater than 10.0 percent, core return
----------------------------------------------------------------------
on average assets between 0.50 percent and 1.25 percent, cash and
-----------------------------------------------------------------
investments greater than 20.0 percent of assets, and non-performing
-------------------------------------------------------------------
assets less than 1.50 percent of assets. Five companies met the
----------------------------------------
criteria for Screen #1 and three were included for the Peer Group:
Fidelity Bancorp of Chicago, Great American Bancorp, and North
Bancshares of Chicago. The institutions not selected for the Peer
Group were Charter
<PAGE>
RP FINANCIAL, LC.
PAGE 3.2
Financial Inc. and Damen Financial Corp. of Chicago, which were
excluded on the basis of the recency of their conversions completed in
December 1995 and October 1995, respectively. Exhibit III-2 details
the financial characteristics of all publicly-traded Illinois
institutions.
o Screen #2. Mid-West institutions with assets between $100 to $500
------------------------------------------------------------------
million, equity-to-asset ratios of at least 12.0 percent, core return
---------------------------------------------------------------------
on average assets between 0.50 percent and 1.25 percent, cash and
-----------------------------------------------------------------
investments greater than 20.0 percent of assets, and non-performing
-------------------------------------------------------------------
assets less than 1.50 percent of assets. Apart from the Illinois
----------------------------------------
institutions already selected, 14 institutions met the selection
criteria for Screen #2 (see Exhibit III-3), and seven were included as
part of Chester Savings' Peer Group: ASB Financial Corp. of Ohio,
Enterprise Federal Bancorp of Ohio, FSF Financial Corp. of Minnesota,
First Federal Bancorp of Minnesota, Landmark Bancshares of Kansas,
Southern Missouri Bancorp of Missouri, and Western Ohio Financial
Corp. of Ohio.
In narrowing the Peer Group candidates from 14 to 7 companies, we
excluded three companies as the result of the recency of their
conversions. The companies excluded on the basis of the recency of
their conversions were First Federal Bancshares of Arkansas (May
1996), Frankfort First Bancorp of Kentucky (July 1995), and
Harrodsburg 1st Financial Bancorp of Kentucky (October 1995). Mid
Continent Bancshares of Kansas was excluded due to its mortgage
banking operating strategy, which resulted in a significantly
different earnings composition than exhibited by Chester Savings.
Specifically, Mid Continent's mortgage banking strategy provided for
significantly higher levels of non-interest operating income and
operating expenses as compared to the Bank's earnings. The remaining
three companies not selected for the Peer Group were excluded on the
basis of having less comparable interest-earning assets compositions
to Chester Savings' interest-earning assets composition and, in
particular, maintained relatively high concentrations of loans as a
percent of assets: Home Bancorp of Fort Wayne Indiana (73.7 percent),
MFB Corp. of Mishawaka Indiana (65.3 percent), and Milton Federal
Financial Corp. of Ohio (61.9 percent). Comparatively, Chester
Savings' loans-to-assets ratio equaled 40.8 percent. Exhibit III-3
details the financial characteristics of the 14 candidates considered
for the Peer Group.
Table 3.1 on the following page shows the general characteristics of each
of the Peer Group companies and Exhibit III-4 provides summary demographic data
for the primary market areas served by each of the Peer Group companies. While
there are some differences between the Peer Group companies and Chester Savings,
we believe that the Peer Group provides a good representation of publicly-traded
thrifts with operations comparable to those of the Bank and, thus, will provide
a good basis for valuation. The following sections present a comparison of
Chester Savings' financial condition, income and expense trends, loan
composition, interest rate risk and credit risk versus the Peer Group. The
conclusions drawn from the comparative analysis are then factored into the
valuation analysis discussed in the final chapter.
A summary description of the key characteristics of each of the Peer Group
companies, which we determined warranted their inclusion as a comparable
institution to Chester Savings, is detailed below.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(709) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat. (2) Assets Offices Year Date Price Value
- ------ --------------------------------- ------ --------------- ---------- ------ ------- ------ ----- ----- ------
($) ($MIL)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 433 5 09-30 12/93 16.62 51
FFHH FSF Financial Corp. of MN OTC Southern MN Thritf 327 11 09-30 10/94 12.12 47
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 320 5 12-31 07/94 23.25 54
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati Thrift 208 D 5 09-30 10/94 14.25 30
LARK Landmark Bancshares of KS OTC Central KS Thrift 193 5 09-30 03/94 15.25 30
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 162 8 06-30 04/94 14.75 25
GTPS Great American Bancorp OTC East Central IL Thrift 118 D 3 09-30 06/95 14.25 26
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 114 2 06-30 12/93 15.75 18
ASBP ASB Financial Corp. of OH OTC Siuthern OH Thrift 112 1 06-30 04/95 15.00 26
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 101 5 09-30 04/95 13.00 11
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift,
M.B.=Mortgage Banker, R.E.=Real Estate Developer,
Div.=Diversified, and Ret.=Retail Banking.
(3) FDIC savings bank institution.
Source: Corporate offering circulars, data derived from information
published in SNL Securities Quarterly Thrift Report, and financial
reports of publicly-traded thrifts.
Date of Last Update: 06/19/96
<PAGE>
RP FINANCIAL, LC.
PAGE 3.4
o ASB Financial Corp. of Ohio. Selected due to traditional thrift operating
strategy, comparable asset size, high level of capital, similar
concentration of deposits, very limited earnings from non-interest
operating income, low level of operating expenses, comparable degree of
lending diversification into higher risk types of loans and favorable
credit quality measures.
o Enterprise Federal Bancorp of Ohio. Selected due to traditional thrift
operating strategy, comparable asset size, similar size of branch network,
high level of capital, very limited earnings from non-interest operating
income, low level of operating expenses, comparable degree of lending
diversification into higher risk types of loans, and favorable credit
quality measures.
o FSF Financial Corp. of Minnesota. Selected due to traditional thrift
operating strategy, strong capital position, similar concentration of
assets maintained in cash and investments, comparable return on average
assets, and favorable credit quality measures.
o Fidelity Bancorp of Chicago Illinois. Selected due to Illinois market
area, traditional thrift operating strategy, similar size of branch
network, similar interest-bearing funding composition, comparable return on
average assets, comparable degree of lending diversification into higher
risk types of loans, and favorable credit quality measures.
o First Federal Bancorp of Minnesota. Selected due to traditional thrift
operating strategy, comparable asset size, similar size of branch network,
high level of cash and investments, similar concentration of deposits,
comparable return on average assets, and favorable credit quality measures.
o Great American Bancorp of Illinois. Selected due to Illinois market area,
traditional thrift operating strategy, comparable asset size, high level of
capital, comparable return on average assets, and favorable credit quality
measures.
o Landmark Bancshares of Kansas. Selected due to comparable asset size,
traditional thrift operating strategy, similar size of branch network,
strong capital position, similar interest-bearing funding composition,
comparable net interest margin, low level of operating expenses, very
limited earnings from non-interest operating income, comparable degree of
lending diversification into higher risk types of loans, and favorable
credit quality measures.
o North Bancshares of Chicago Illinois. Selected due to Illinois market
area, traditional thrift operating strategy, comparable asset size, high
level of capital, comparability of interest-earning asset composition,
comparable return on average assets, very limited earnings from non-
interest operating income, and favorable credit quality measures.
o Southern Missouri Bancorp of Missouri. Selected due to traditional thrift
operating strategy, comparable asset size, high level of capital, similar
interest-bearing funding composition, similar degree of lending
diversification into higher risk types of loans, and favorable credit
quality measures.
o Western Ohio Financial Corp. of Ohio. Selected due to traditional thrift
operating strategy, comparable size of branch network, high level of
capital, very limited earnings from non-interest operating income,
comparable degree of lending diversification into higher risk types of
loans, and favorable credit quality measures.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.5
In aggregate, the Peer Group companies are better capitalized than the
industry average (17.96 percent of assets versus 13.25 percent for the all SAIF
average), generate comparable earnings (0.84 percent ROAA versus 0.87 percent
for the all SAIF average), and generate a lower ROE (4.48 percent versus 8.08
percent for the all SAIF average). Overall, the Peer Group's average P/B ratio
and P/E multiple were below and above the respective comparable SAIF averages
(see below).
<TABLE>
<CAPTION>
As of June 14, 1996
-------------------
Peer All SAIF
Group Insured
------- -------
<S> <C> <C>
Equity-to-Assets 17.96% 13.13%
Return on Assets ("ROA") 0.84 0.87
Return on Equity ("ROE") 4.48 8.08
Price-to-Book ratio ("P/B") 89.99% 104.98%
Price-to-Earnings multiple ("P/E") 18.05x 14.29x
Price-to-Assets ratio ("P/A") 16.05% 13.13%
</TABLE>
Source: Table 4.4 - Chapter IV Valuation Analysis.
Ideally, the Peer Group companies would be comparable to Chester Savings in
terms of all of the selection criteria, but the universe of publicly-traded
thrifts does not provide for an appropriate number of such companies. However,
in general, the companies selected for the Peer Group were fairly comparable to
Chester Savings, as will be highlighted in the following comparative analysis.
Financial Condition
- -------------------
Table 3.2 shows comparative balance sheet measures for Chester Savings and
the Peer Group, reflecting the expected similarities and some differences given
the selection procedures outlined above. The Bank's and the Peer Group's ratios
reflect balances as of March 31, 1996. Chester Savings' net worth base of 8.7
percent was below the Peer Group's average net worth ratio of 18.0 percent;
however, with the addition of stock proceeds, the Bank's pro forma capital
position (consolidated with the holding company) can be expected to be
comparable to the Peer Group's ratio. All of Chester Savings' capital consisted
of tangible capital, while the Peer Group's capital included a nominal amount of
goodwill. Both the Bank's and the Peer Group's capital ratios reflected capital
surpluses with respect to the regulatory capital requirements, with the Peer
Group's ratios currently indicating greater capital surpluses. Again, on a pro
forma basis, the Bank's regulatory capital surpluses will be similar to the Peer
Group's.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virgina 22209
(703) 528-1700
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of March 31, 1996
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
---------------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tang Net MEMO:
Investments Loans NBS Deposits Funds Debt Worth & Intang Worth Pref. Stock
----------- ----- ----- -------- ------- ----- ------- --------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 44.3 40.8 12.4 79.3 11.0 0.0 8.7 0.0 8.7 0.0
SAIF-Insured Thrifts 19.6 64.2 13.0 73.5 11.9 0.1 12.9 0.2 12.7 0.1
State of IL 19.8 65.5 11.5 73.9 10.6 0.1 13.9 0.1 13.8 0.0
Comparable Group Average 28.6 58.5 10.0 68.8 11.7 0.0 18.0 0.1 17.8 0.0
Mid-West Companies 28.6 58.5 10.0 68.8 11.7 0.0 18.0 0.1 17.8 0.0
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 26.6 59.9 10.6 74.0 1.3 0.0 23.1 0.0 23.1 0.0
EFBI Enterprise Fed. Bancorp of OH(1) 24.4 58.6 15.4 64.2 19.3 0.0 15.6 0.0 15.5 0.0
FFMM FSF Financial Corp. of MN 38.8 58.9 0.0 57.8 25.7 0.0 16.0 0.0 16.0 0.0
FBCI Fidelity Bancorp of Chicago IL 22.3 70.2 5.6 69.6 16.8 0.0 12.0 0.0 12.0 0.0
BDJI First Fed. Bancorp. of MN 39.0 48.5 9.2 81.6 2.8 0.0 14.4 0.0 14.4 0.0
GTPS Great American Bancorp of IL(1) 22.0 65.8 5.0 69.6 0.0 0.0 29.4 0.0 29.4 0.0
LAHK Landmark Bancshares of KS 28.6 55.3 14.2 73.6 8.2 0.0 17.2 0.0 17.2 0.0
WBSI North Bancshares of Chicago IL 39.2 50.9 7.8 65.6 14.6 0.0 17.3 0.0 17.3 0.0
SMBC Southern Missouri Bncrp of MO 22.0 56.5 19.2 75.2 7.1 0.0 16.4 0.0 16.4 0.0
WOFC Western Ohio Fin. Corp. of OH 23.5 60.8 13.1 57.0 21.2 0.0 18.2 1.1 17.1 0.0
Balance Sheet Annual Growth Rates Regulatory Capital
----------------------------------------------------------------- ---------------------
Cash and Loans Borrows Net Tang Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ----- -------- -------- ------ -------- -------- ---- --------
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 -2.81 -8.28 1.53 -13.43 NM 8.80 8.80 8.71 8.71 25.95
SAIF-Insured Thrifts 11.71 10.50 9.48 6.51 -1.02 6.83 6.41 10.57 10.64 23.17
State of IL 13.20 17.40 10.35 7.06 -5.37 3.05 2.56 9.97 11.00 23.03
Comparable Group Average 18.98 23.88 21.54 10.65 14.12 -7.52 -8.29 15.02 15.02 31.31
Mid-West Companies 18.98 23.88 21.54 10.65 14.12 -7.52 -8.29 15.02 15.02 31.31
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 15.61 10.90 18.36 -1.36 NM NM NM 16.33 16.33 37.81
EFBI Enterprise Fed. Bancorp of OH(1) 31.88 71.72 22.49 13.82 NM -17.45 -17.42 NM NM NM
FFMM FSF Financial Corp. of MN 25.02 2.68 47.47 21.39 87.76 -11.81 -11.81 15.92 15.92 33.42
FBCI Fidelity Bancorp of Chicago IL 24.33 48.60 18.88 22.31 70.71 -3.14 -3.03 9.31 9.31 19.58
BDJI First Fed. Bancorp. of MN 1.30 0.45 2.34 2.05 NM NM NM 12.34 12.34 25.13
GTPS Great American Bancorp of IL(1) 11.92 79.53 1.37 -5.23 -100.00 NM NM 21.65 21.65 36.11
LAHK Landmark Bancshares of KS -3.76 -25.86 9.62 -0.82 -16.96 -8.11 -8.11 14.18 14.18 35.05
WBSI North Bancshares of Chicago IL 4.52 6.36 2.60 2.96 29.08 -6.02 -6.02 15.38 15.38 44.11
SMBC Southern Missouri Bncrp of MO 9.93 -21.07 24.60 2.74 NM -0.59 -0.59 12.33 12.33 26.24
WOFC Western Ohio Fin. Corp. of OH 69.02 65.51 67.70 48.61 NM -5.53 -11.03 17.70 17.70 24.30
</TABLE>
(1) Financial Information is for the quarter ending December 31, 1995.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.7
The interest-earning asset compositions for the Bank and the Peer Group
were somewhat similar, with loans and mortgage-backed securities constituting
the bulk of interest-earning assets for Chester Savings and the Peer Group.
Chester Savings' combined level of loans and mortgage-backed securities was
lower than the Peer Group's ratio (53.2 percent versus 68.5 percent for the Peer
Group), with the Bank maintaining a lower concentration of loans and a higher
concentration of mortgage-backed securities relative to the comparative Peer
Group ratios. Comparatively, the Bank's cash and investments to assets ratio was
higher than the comparable Peer Group ratio (44.3 percent versus 28.6 percent
for the Peer Group). Overall, Chester Savings' interest-earning assets amounted
to 97.5 percent of assets, which was slightly above the Peer Group's ratio of
97.1 percent.
Chester Savings' funding liabilities reflect a funding strategy similar to
that of the Peer Group's funding composition. The Bank's deposits equaled 79.3
percent of assets, which was higher than the Peer Group average of 68.8 percent.
Borrowings maintained as a percent of assets equaled 11.0 percent for the Bank
and 11.7 percent for the Peer Group. Accordingly, both Chester Savings and the
Peer Group were considered to have ample borrowing capacities. Total interest-
bearing liabilities maintained by the Bank and the Peer Group, as a percent of
assets, equaled 90.3 percent and 80.5 percent, respectively, with the Peer
Group's lower ratio being supported by maintenance of a higher capital position.
The Bank's current disadvantage will be eliminated on a pro forma basis.
A key measure of balance sheet strength for a thrift institution is its
IEA/IBL ratio. Presently, the Bank's IEA/IBL ratio is lower than the Peer
Group's ratio, based on respective ratios of 108.0 percent and 120.6 percent.
The additional capital realized from stock proceeds should address the lower
IEA/IBL ratio currently maintained by the Bank, as the interest free capital
realized in Chester Savings' stock offering will be deployed into interest-
earning assets.
The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. Chester Savings' growth rates are based on annualized
growth for the 15 months ended March 31, 1996, while the Peer Group's growth
rates are based on annual growth for the twelve months ended March 31, 1996.
Asset growth rates of negative 2.8 percent and positive 19.0 percent were posted
by the Bank and the Peer Group, respectively, with the Peer Group's strong
growth rate being in part supported by acquisition related growth. Most
notably, Western Ohio's 69.0 percent asset growth rate reflects the acquisition
of a $53 million institution. Asset shrinkage exhibited by Chester Savings
consisted of cash and investments and loans, which was slightly offset by an
increase in mortgage-backed securities. Comparatively, the Peer Group's asset
growth reflected strong growth in loans and mortgage-backed securities, which
was supplemented by growth in cash and investments. Overall, the Peer Group's
asset growth measures would tend to support greater earnings growth potential,
in comparison to the asset shrinkage realized historically and expected by
Chester Savings. While
<PAGE>
RP FINANCIAL, LC.
PAGE 3.8
Chester Savings' pro forma leverage capacity will be comparable to the Peer
Group's, the expected reduction in repurchase agreements, the local market
factors and intent not to use other wholesale funding should limit the Bank's
growth following the conversion.
The reduction in the Bank's liquidity was principally devoted toward
funding deposit run-off, although most of the deposit shrinkage was related to
the conversion of deposits held by Gilster-Mary Lee into repurchase agreements.
Accordingly, the Bank added $15.0 million of reverse repurchase agreements
during the 15 months ended March 31, 1996, which accounted for all of Chester
Savings' borrowings and, thus, the Bank's growth rate for borrowings was not
meaningful. Comparatively, deposits and borrowings funded the Peer Group's
asset growth, with the higher growth rate exhibited in borrowings being largely
attributable to the lower balance of borrowings comprising the Peer Group's
interest-bearing funding composition. However, the Peer Group's borrowings
growth rate shown in Table 3.2 was somewhat understated, as the "NM" borrowings
growth rate shown for five of the Peer Group companies included companies with
borrowings growth rates in excess of 100 percent. For the period shown in Table
3.2, all five of the Peer Group companies with "NMs" as growth rates recorded
borrowings growth rates in excess of 100 percent. Despite recording a lower
return on average assets ratio, Chester Savings posted a higher capital growth
rate than the Peer Group (positive 8.8 percent versus negative 7.5 percent for
the Peer Group). A higher capital position, as well as dividend payments and
stock repurchases, were factors that accounted for the Peer Group's less
favorable capital growth rate. Additionally, the Peer Group's capital growth
rate excluded three companies which posted a more than 100 percent increase in
capital, as the result of conversion proceeds being added to capital. Following
the increase in capital realized from conversion proceeds, the Bank's higher pro
forma capital position will serve to initially depress capital growth to a rate
that is more comparable to the Peer Group average.
Income and Expense Components
- -----------------------------
For the twelve months ended March 31, 1996, Chester Savings and the Peer
Group reported net income to average assets ratios of 0.68 percent and 0.84
percent, respectively (see Table 3.3). Both the Bank's and the Peer Group's
earnings were fairly representative of their core earnings, as gains and other
non-recurring items were not material factors in their respective earnings. A
lower level of operating expenses was recorded by the Bank, which was more than
offset by the Peer Group's strong net interest margin, higher level of non-
interest operating income and lower level of loss provisions.
The Peer Group's higher net interest margin was realized through
maintenance of both a higher interest income ratio and a lower interest expense
ratio. As highlighted in the yield-cost section of Table 3.3, the Peer Group's
higher interest income ratio was realized through earning a higher yield on
interest-earning
<PAGE>
RP FINANCIAL, LC
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1996
<TABLE>
<CAPTION>
Net Interest Income Other Income G&A/Other Exp.
------------------------------ --------------- ------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other G&A Goodwill
Income Income Expense NII on IEA Provis. fees Oper. Income Income Expense Amort.
------ ------ ------- --- ------ ------- ---- ----- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 0.68 6.65 4.01 2.63 0.13 2.50 0.00 -0.01 0.11 0.10 1.73 0.00
SAIF-Insured Thrifts 0.86 7.34 4.19 3.15 0.10 3.05 0.12 -0.01 0.30 0.42 2.21 0.02
State of IL 0.76 7.17 4.08 3.09 0.08 3.01 0.08 0.04 0.30 0.42 2.35 0.01
Comparable Group Average 0.84 7.14 3.85 3.29 0.03 3.26 0.02 0.01 0.22 0.25 2.34 0.00
Mid-West Companies 0.84 7.14 3.85 3.29 0.03 3.26 0.02 0.01 0.22 0.25 2.34 0.00
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 1.03 7.44 4.03 3.41 0.00 3.41 0.00 0.00 0.13 0.13 1.98 0.00
EFBI Enterprise Fed. Bancorp of OH(1) 1.12 7.19 4.06 3.13 0.00 3.13 0.00 0.02 0.06 0.08 2.00 0.02
FFHH FSF Financial Corp. of MN 0.63 7.07 3.99 3.08 0.01 3.07 0.10 0.00 0.32 0.42 2.44 0.00
FBCI Fidelity Bancorp of Chicago IL 0.77 7.30 4.12 3.19 0.04 3.14 0.00 0.00 0.25 0.25 2.21 0.02
BDJI First Fed. Bancorp. of 0.71 7.25 3.81 3.44 -0.01 3.45 0.00 0.00 0.41 0.41 2.67 0.00
GTPS Great America Bancorp of IL (1) 0.68 7.15 2.69 4.46 0.13 4.33 0.00 0.03 0.40 0.43 3.63 0.00
LARK Landmark Bancshares of KS 0.91 7.13 4.40 2.73 0.03 2.70 0.08 0.00 0.15 0.24 1.65 0.00
NBSI North Bancshares of Chicago IL 0.57 6.98 3.85 3.13 0.03 3.10 0.00 0.00 0.14 0.14 2.47 0.00
SMBC Southern Missouri Bncrp of MO 0.87 6.95 4.01 2.94 0.04 2.90 0.03 0.04 0.29 0.35 2.15 0.00
WOFC Western Ohio Fin. Corp of OH 1.10 6.91 3.49 3.41 0.04 3.38 0.00 0.00 0.05 0.05 2.15 0.00
<CAPTION>
Non-Op. Items Yields, Costs, and Spreads
---------------- -----------------------------
MEMO: MEMO
Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Gains Items On Assets or Funds Spread FTE Emp. Tax Rate
----- ----- ---------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 0.00 0.00 6.93 4.46 2.47 3,697 22.29
SAIF-Insured Thrifts 0.09 0.00 7.55 4.83 2.72 4,050 36.02
State of IL 0.07 0.00 7.48 4.84 2.65 3,642 35.33
Comparable Group Average 0.13 0.00 7.42 4.85 2.57 3,977 36.27
Mid-West Companies 0.13 0.00 7.42 4.85 2.57 3,977 36.27
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 0.00 0.00 7.93 5.24 2.68 5,078 34.17
EFBI Enterprise Fed. Bancorp of OH(1) 0.52 0.00 7.31 5.16 2.15 6,490 34.63
FFMM FSF Financial Corp. of 0.01 0.00 7.25 4.94 2.31 3,712 40.76
FBCI Fidelity Bancorp of Chicago IL 0.07 0.00 7.46 4.88 2.58 4,287 39.89
BDJI First Fed. Bancorp. of 0.00 0.00 7.51 4.58 2.92 2,513 40.78
GTPS Great America Bancorp of IL (1) 0.01 0.00 7.76 3.58 4.18 2,140 40.31
LARK Landmark Bancshares of KS 0.18 0.00 7.26 5.40 1.86 4,298 37.85
NBSI North Bancshares of Chicago IL 0.07 0.00 7.11 4.93 2.18 3,573 32.58
SMBC Southern Missouri Bncrp of MO 0.08 0.00 7.60 4.94 2.66 3,240 27.19
WOFC Western Ohio Fin. Corp of OH 0.40 0.00 7.04 4.82 2.22 4,438 34.51
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The Information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.10
assets, as Chester Savings and the Peer Group maintained comparable levels of
interest-earning assets as a percent of assets. The Peer Group's higher yield
on interest-earning assets was consistent with an asset composition which would
tend to be higher yielding, based on the Peer Group's higher concentration of
loans and lower concentration of cash and investments. Comparatively, while the
Bank maintained a lower cost of funds than the Peer Group, Chester Savings'
interest expense to assets ratio was slightly higher than the Peer Group's
ratio. The Peer Group's lower interest expense ratio was attributable to
maintenance of a higher level of capital and resulting lower level of interest-
bearing liabilities, as compared to the Bank's measures, and, thus, following
the increase in capital to be realized from conversion proceeds, Chester Savings
will be positioned to maintain a potentially lower interest expense ratio than
the Peer Group. Overall, Chester Savings and the Peer Group reported net
interest income to average assets ratios of 2.63 percent and 3.29 percent,
respectively.
In another key area of core earnings strength, the Bank maintained a lower
operating expense to average assets ratio than the Peer Group (1.73 percent
versus 2.34 percent for the Peer Group). Chester Savings achieved a lower
operating expense ratio, despite maintaining a slightly higher number of
employees for its asset size. Assets per full time employee equivalent equaled
$3.7 million for the Bank, versus a comparative measure of $4.0 million for the
Peer Group. However, more than offsetting Chester Savings' lower assets per
employee measure is the expense savings the Bank realizes from operating in a
relatively low cost market area. Comparatively, some of the Peer Group
companies operate in higher costing more urban markets, such as Chicago. The
Bank's asset composition was also a factor in supporting containment of
operating expenses, given the lower servicing costs of cash and investments
compared to loans. Chester Savings' and the Peer Group's respective operating
expense ratios were lower and higher than the average operating expense ratio
for all publicly-traded SAIF insured institutions (2.22 percent), which was
consistent with the more diversified operations maintained by some of the Peer
Group companies. Asset shrinkage resulting from the repayment of the repurchase
agreements will serve to place upward pressure on the Bank's operating expense
ratio and, on a post-conversion basis, the Bank's operating expenses can be
expected to increase with the addition of public company reporting expenses and
stock benefit plans.
When viewed together, net interest income and operating expenses provide
considerable insight into a thrift's earnings strength, since those sources of
income and expenses are typically the most prominent components of earnings and
are generally more predictable than losses and gains realized from the sale of
assets or other non-recurring activities. In this regard, as measured by the
difference between their net interest margins and operating expense ratios, the
strength of the Bank's and the Peer Group's core earnings were similar. Chester
Savings' net interest margin was 90 basis points above its operating expense
ratio, while the Peer Group's net interest margin exceeded its operating expense
ratio by 95 basis points. The Bank's apparent advantage of a slightly higher
expense coverage ratio, 1.52 times versus 1.41 times for the Peer Group, is
<PAGE>
somewhat diminished through incorporating non-interest operating income in
computing the efficiency ratio, with the Bank and the Peer Group posting
efficiency ratios of 63.4 percent and 66.1 percent, respectively.
Sources of non-interest operating income made a slightly higher
contribution to the Peer Group's earnings, with such income amounting to 0.10
percent and 0.25 percent of Chester Savings' and the Peer Group's average
assets, respectively. Both the Bank's and the Peer Group's non-interest
operating income ratios are indicative of traditional operating strategies,
which provides for relatively limited diversification into lines of business
that generate non-interest operating income. Favorable credit quality measures
and, in particular, relatively low levels of real estate owned served to limit
the impact real estate operations had on the Bank's and the Peer Group's non-
interest operating income. Overall, the Peer Group's higher level of non-
interest operating represented not only a current earnings advantage, but was
also considered to be more favorable in terms of limiting interest rate risk
exposure, as a higher level of non-interest operating indicates the
sustainability of earnings are less dependent upon the net interest margin.
Chester Savings' and the Peer Group's favorable credit quality measures
also served to limit the impact of loss provisions on their respective earnings,
with loss provisions established by the Bank and the Peer Group amounting to
0.13 percent and 0.03 percent of average assets, respectively. Gains realized
from the sale of loans and investments amounted to 0.13 percent of average
assets for the Peer Group, while the net impact of gains on the Bank's earnings
was negligible. Gains and losses resulting from the sale of loans and
investments are generally viewed as being non-recurring in nature, given that
they are highly dependent upon interest rate movements and typically do not
represent a core earnings activity for a thrift. Accordingly, the Peer Group's
gains will be discounted in evaluating the relative strengths and weaknesses of
Chester Savings' and the Peer Group's respective earnings. Extraordinary items
were not a factor in either the Bank's or the Peer Group's earnings for the
twelve months ended March 31, 1996.
Effective tax rates of 22.3 percent and 36.3 percent were posted by the
Bank and the Peer Group for the period covered in Table 3.3. The Bank's lower
effective tax rate was largely attributable to maintaining a notable portion of
the investment portfolio in tax-exempt municipal bonds. Accordingly, while the
Bank's investment in municipal bonds was a factor that served to depress its
level of interest income relative to the Peer Group's, it was somewhat offset by
the lower effective rate provided by those investments. Overall, the Bank's and
the Peer Group's reported earnings were fairly reflective of their core
earnings.
Loan Composition
- ----------------
Table 3.4 presents data related to the loan composition of Chester Savings
and the Peer Group. An emphasis on low risk residential lending was apparent in
both the Bank's and the Peer Group's loan
<PAGE>
RP FINANCIAL, LC
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of March 31, 1996
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
--------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Othes Assets
- ----------- --- ------ ------ ------- -------- -------- ------ --------- ------
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB 22.98 60.81 3.03 4.46 0.00 8.72 34.73 888 0
SAIF-Insured Thrifts 16.79 60.87 4.83 11.46 1.60 6.08 50.31 408,465 2,438
State of IL 15.62 61.77 1.87 12.22 1.72 7.18 49.81 106,665 155
Comparable Group Average 14.8 62.10 3.33 11.83 2.42 6.74 47.45 12,527 15
Comparable Group
- ----------------
ASPB ASB Financial Corp. of OH 13.86 61.81 1.18 14.58 2.65 6.93 42.34 0 0
EFBI Enterprise Fed. Bancorp of OH(1) 19.62 59.63 5.77 14.40 0.68 2.30 48.31 0 0
FFHH FSF Financial Corp. of MN 0.05 71.43 14.27 4.00 1.00 14.67 48.26 42,075 149
FBCI Fidelity Bancorp of Chicago IL 8.37 68.13 0.02 17.09 2.11 4.29 47.10 15,664 0
BDJI First Fed. Bancorp.of 15.50 49.05 0.81 18.07 2.55 14.98 50.15 214 0
GTPS Great American Bancorp of IL(1) 0.00 53.40 2.21 21.33 10.34 13.05 56.55 12,492 0
LARK Landmark Bancshares of KS 27.43 61.43 0.92 3.86 1.63 5.34 41.34 54,689 0
NBSI North Bancshares of Chicago IL 22.58 70.17 0.00 6.87 0.00 0.39 34.45 140 0
SMBC Southern Missouri Bncrp of MO 25.48 52.56 4.74 10.09 2.69 4.44 46.91 0 0
WOFC Western Ohio Fin. Corp. of OH 15.11 73.41 3.41 8.02 0.59 1.01 59.09 0 0
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc calculations. The information
provide in this table has been obtianed from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
informatian.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.13
compositions, with 1-4 family permanent mortgage loans and mortgage-backed
securities accounting for 83.8 percent and 76.9 percent of Chester Savings' and
the Peer Group's loan and MBS portfolios, respectively. Chester Savings' higher
ratio was attributable to its higher concentration of mortgage-backed
securities, as the Peer Group's ratio of 1-4 family permanent mortgage loans
exceeded the Bank's ratio. Loans serviced for others represented a more
significant off-balance sheet item for the Peer Group, which contributed to the
higher level of non-interest operating income recorded by the Peer Group.
Likewise, the Peer Group's higher operating expense ratio would also be in part
attributable to its more significant off-balance sheet activities. Servicing
intangibles were not a material factor in either the Bank's or the Peer Group's
balance sheets.
As indicated by the higher percentage of 1-4 family loans and mortgage-
backed securities maintained by the Bank, lending diversification was more
limited for Chester Savings compared to the Peer Group. The Bank's lending
diversification consisted primarily of consumer loans (8.7 percent of loans and
MBS), followed by multi-family/commercial real estate loans (4.5 percent of
loans and MBS). Comparatively, the Peer Group's primary area of lending
diversification consisted of multi-family/commercial real estate loans (11.8
percent of loans and MBS), followed by consumer and construction loans (6.7
percent and 3.3 percent of loans and MBS, respectively). Construction and land
loans represented a minor area of lending diversification for Chester Savings,
while commercial business loans accounted for a minor portion of the Peer
Group's lending diversification. The Peer Group's greater diversification into
higher risk type of loans, as well as higher overall level of loans comprising
assets, translated into a higher risk weighted assets-to-assets ratio for the
Peer Group, based on comparative ratios of 34.7 percent and 47.5 percent for the
Bank and the Peer Group, respectively. Overall, both the Bank's and the Peer
Group's risk weighted assets ratios were indicative of relatively low risk
operating strategies, with both ratios falling below the SAIF-insured average of
50.3 percent.
Interest Rate Risk
- ------------------
Table 3.5 reflects various key ratios highlighting the relative interest
rate risk exposure of the Bank versus the Peer Group companies. The data
indicates cumulative one year gap to assets ratios of negative 10.2 percent and
positive 1.2 percent for Chester Savings and the Peer Group, respectively. In
comparison to the Bank's negative short-term gap ratio, the Peer Group's
slightly positive one year gap ratio would tend to support greater stability in
the net interest margin during various interest rate environments. Most
notably, Chester Savings' negative one year gap indicates greater earnings
vulnerability to a rising interest rate environment, particularly in light of
the relatively low level of non-interest operating income generated by the Bank.
However, the greater interest rate risk currently associated with Chester
Savings' gap ratio should be largely addressed by the infusion of stock
proceeds, due to the increase in capital and resulting decline in interest-
sensitive liabilities meeting the Bank's funding needs.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.14
Table 3.5
Chester Savings Bank and the Peer Group
Interest Rate Risk Comparative Analysis
<TABLE>
<CAPTION>
Interest-Earning Non Interest-
Assets/ Earning
One Year Equity/ Interest-Bearing Assets(3)/
Gap/Assets(1) Assets Liabilities(2) Assets
---------- --------- ---------------- -------------
(%) (%) (%) (%)
<S> <C> <C> <C> <C>
Chester Savings Bank(4) -10.2% 8.7% 108.0% 2.7%
Peer Group Average 1.2% 18.0% 121.0% 3.1%
Peer Group(5)
- -------------
ASB Financial Corp. of OH NA 23.1% 129.0% 3.8%
Enterprise Fed. Bancorp of OH 7.3%(J95) 15.6% 117.8% 2.1%
FSF Financial Corp. of MN. 12.3%(M96) 16.0% 117.0% 2.3%
Fidelity Bancorp of Chicago IL -13.7%(S95) 12.0% 113.5% 2.5%
First Fed. Bancorp of MN -12.6%(M96) 14.4% 114.6% 3.4%
Great American Bancorp of IL NA 29.4% 133.3% 7.7%
Landmark Bancshares of KS 11.9%(M96) 17.2% 119.9% 2.0%
North Bancshares of Chicago IL 1.9%(M96) 17.3% 122.1% 2.1%
Southern Missouri Bncrp of MO NA 16.4% 118.7% 2.9%
Western Ohio Fin. Corp. of OH NA 18.2% 124.6% 3.0%
</TABLE>
(1) Latest date as of: M=March, J=June, S=September, D=December.
(2) Interest-earning assets includes cash; interest-bearing liabilities
includes non interest-bearing deposits but excludes escrows.
(3) Comprised of REO, non-accruing loans, and other non interest-earning
assets.
(4) Chester Savings' data is as of March 31, 1996.
(5) As of March 31, 1996 or most recent data available.
Sources: Chester Savings' prospectus and SNL Securities.
<PAGE>
RP FINANCIAL, LC.
PAGE 3.15
In terms of balance sheet composition, Chester Savings' interest rate risk
characteristics were considered to be generally less favorable than the Peer
Group's. The Peer Group's higher IEA/IBL ratio and higher equity-to-assets
ratio, and comparable level of non-interest earning assets, indicate that the
Peer Group's dependence on the yield-cost spread to sustain net interest income
was less than the Bank's. However, on a pro forma basis, the infusion of stock
proceeds and reduction of repurchase agreements should serve to address the
lower equity-to-assets and IEA/IBL ratios currently maintained by Chester
Savings.
Credit Risk
- -----------
Overall, Chester Savings' credit risk exposure appears to be similar to the
Peer Group's, with both the Bank's and the Peer Group's credit quality measures
being representative of limited credit risk exposure. As shown in Table 3.6,
Chester Savings' ratio of non-performing assets (REO, non-accruing loans and
accruing loans more than 90 days past due) to assets equaled 0.32 percent,
versus a comparative ratio of 0.50 percent for the Peer Group. The Peer Group's
slightly higher ratio was attributable to maintaining a higher level of non-
performing loans, which was consistent with the higher loans-to-assets ratio
maintained by the Peer Group. Loss reserve ratios as a percent of non-
performing assets indicated comparable credit risk exposure for the Bank and the
Peer Group as well, with the Bank and the Peer Group maintaining loss reserves
as a percent of non-performing assets of 91.7 percent and 100.6 percent,
respectively. Chester Savings maintained a higher level of loss reserves as a
percent of loans than the Peer Group (0.71 percent versus 0.56 percent for the
Peer Group), which, again, was supported by the lower level of loans maintained
by the Bank. Net loan charge-offs were not a material factor for either the
Bank or the Peer Group, during the period covered in Table 3.6.
Summary
- -------
Based on the above analysis and the criteria employed by RP Financial in
the selection of the companies for the Peer Group, RP Financial concluded that
the Peer Group forms a reasonable basis for determining the pro forma market
value of Chester Savings. Such general characteristics as asset size, capital
position, interest-earning asset composition, funding composition, core earnings
measures, loan composition, interest rate risk exposure and credit quality all
tend to support the reasonability of the Peer Group from a financial standpoint.
<PAGE>
RP Financial
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 2209
97030 528-1700
Table 3.6
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of March 31, 1996 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs Rsrves/
REO/ 90+Del NPLs Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Asset NPLS 90+Del Chargeoffs Loans
----------- ------ ------ ----- ----- ------- -------- ---------- ---------
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB 0.15 0.32 0.40 0.71 178.38 91.67 1 0.00
SAIF-Insured Thrifts 0.21 0.95 1.06 0.88 163.88 125.98 241 0.12
State of IL 0.18 0.58 0.54 0.64 202.81 132.81 92 0.08
Comparable Group Average 0.13 0.50 0.51 0.56 177.14 100.63 7 0.03
Comparable Group
----------------
ASBP ASB Financial Corp. of OH 0.59 1.48 1.46 1.30 89.56 53.58 9 0.05
EFBI Enterprise FEd. Bancorp of OH(1) 0.00 0.01 0.02 0.27 NA NA 0 0.00
FFHH FSF Financial Corp. of MN 0.05 0.09 0.08 0.39 488.31 250.67 18 0.04
FBJI Fidelity Bancorp. of Chicago IL 0.02 0.53 0.74 0.16 21.30 20.66 13 0.02
BDJI First Fed. Bancorp. of 0.17 0.23 0.02 0.98 NA 211.89 3 0.02
GTPS Great American Bancorp of IL(I) 0.00 0.45 NA 0.37 NA 53.28 25 0.13
LARK Landmark Bancshares of KS 0.04 0.37 0.20 0.64 315.98 97.05 0 0.00
NBSI North Bancshares of Chicago IL 0.00 NA NA 0.36 NA NA 0 0.00
SNBC Southern Missouri Bancorp of MO 0.42 0.97 0.97 0.66 68.84 39.01 3 0.01
WOFC Western Ohio Fin. Corp. of OH 0.00 0.34 0.55 0.44 78.86 78.86 0 0.00
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by Financial, LC.
<PAGE>
RP FINANCIAL, LC,
PAGE 4.1
IV. VALUATION ANALYSIS
Introduction
- ------------
This chapter presents the valuation analysis, prepared pursuant to the
approved valuation methodology promulgated by the OTS, and adopted by the FDIC
and numerous state banking agencies, and valuation factors used to determine the
estimated pro forma market value of the common stock of the Holding Company.
The common stock will be issued in conjunction with the conversion of Chester
Savings from the mutual-to-stock form of ownership. The valuation has been
prepared utilizing the pro forma valuation methodology promulgated by the OTS,
most recently set forth in their 1994 valuation guidelines, and regulatory
interpretations thereof.
Appraisal Guidelines
- --------------------
The OTS appraisal guidelines, originally released in October 1983, specify
the methodology for estimating the pro forma market value of an institution.
The methodology provides for: (1) selection of a peer group of comparable
publicly-traded institutions, subsequent guidance from the OTS limited
eligibility to only seasoned public companies in the peer group; (2) a financial
and operational comparison of the subject company to the peer group; and (3) a
valuation analysis in which the pro forma market value of the subject company is
determined based on the market pricing of the peer group as of the date of
valuation.
On October 21, 1994, the OTS released written revisions to the appraisal
guidelines, which had already been implemented in practice by the OTS. As
outlined in the guideline revisions, the basic appraisal methodology to be
followed is unchanged from the October 1983 guidelines. The revised guidelines,
however, limit the amount of a new issue discount which may be incorporated into
the valuation and thereby curtail the potential price appreciation in the after-
market.
RP Financial Approach to the Valuation
- --------------------------------------
RP Financial's valuation analysis complies with the appraisal guidelines as
revised and issued as of October 21, 1994. Accordingly, the valuation
incorporates a detailed analysis based on the Peer Group discussed in Chapter
III, incorporating "fundamental analysis" techniques. Additionally, the
valuation incorporates a "technical analysis" of recently completed stock
conversions, given the significant weight in the valuation process of limiting
the new issue discount. The pricing characteristics of recent conversions serve
as the best proxy for near-term aftermarket trading activity in newly issued
thrift shares, and the pricing
<PAGE>
RP FINANCIAL, LC.
PAGE 4.1
characteristics of such recent conversions have been applied to Chester Savings'
valuation in order to evaluate the Bank's potential aftermarket trading
characteristics. It should be noted that such analysis cannot possibly fully
account for all the market forces which impact trading activity and pricing
characteristics of a stock on a given day.
The pro forma market value determined herein is a preliminary value for the
Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Bank's operations and financial
condition; (2) monitor the Bank's operations and financial condition relative to
the Peer Group to identify any fundamental changes; (3) monitor the external
factors affecting value including, but not limited to, local and national
economic conditions, interest rates, and the stock market environment, including
the market for thrift stocks; and (4) monitor pending conversion offerings
(including those in the offering phase) both regionally and nationally. If
material changes should occur during the conversion process, RP Financial will
prepare updated valuation reports reflecting such changes and their related
impact on value, if any, over the course of the conversion process. RP
Financial will also prepare a final valuation update at the closing of the
conversion offering to determine if the preliminary range of value continues to
be appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Bank and for all thrifts. Subsequent changes in
the local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or major world events), which may occur from time to time (often with
great unpredictability) may materially impact the market value of all thrift
stocks, including Chester Savings, or Chester Savings' value alone. To the
extent a change in factors impacting the Bank's value can be reasonably
anticipated and/or quantified, RP Financial has incorporated the estimated
impact into the valuation analysis.
Valuation Analysis
- ------------------
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections focus on
differences between the Bank and the Peer Group and how those differences affect
our pro forma valuation. Emphasis is placed on the specific strengths and
weaknesses of the Bank relative to the Peer Group in such key areas as financial
condition, profitability, growth and viability of earnings, asset growth,
primary market area, dividends, liquidity of the issue, marketing of the issue,
management, and the effect of government regulations and/or regulatory reform.
We have also considered the market for thrift stocks, and in particular new
issues, to assess the impact on value of Chester Savings coming to market at
this time.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.3
1. Financial Condition
-------------------
The financial condition of an institution is an important determinant in
pro forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Bank's and the Peer Group's financial strengths are noted as follows:
o Overall A/L Composition. Residential assets, including 1-4 family
------------------------
permanent mortgage loans and MBS, funded by retail deposits were the
primary components of both Chester Savings' and the Peer Group's
balance sheets. The Peer Group's interest-earning asset composition
exhibited a higher concentration of loans and slightly greater
diversification into higher risk types of loans, relative to the
comparative measures for Chester Savings. Accordingly, in comparison
to Chester Savings, the Peer Group's interest-earning asset
composition would tend to indicate higher credit risk exposure and
higher yield potential. The lower credit risk associated with Chester
Savings' interest-earning asset composition was also indicated by its
higher level of cash and investments, in comparison to the Peer Group
average. However, neither the Bank's or the Peer Group's interest-
earning asset compositions were considered to represent high credit
exposure, as indicated by their respective risk weighted assets-to-
assets ratios which fell below the comparative SAIF-insured average.
Overall, the Bank's interest-earning assets-to-assets ratio was
comparable to the Peer Group's ratio. There were no material
differences in Chester Savings' and the Peer Group's funding
compositions, with retail deposits meeting the major portion of their
respective funding needs. Likewise, borrowings were utilized to a
similar degree by the Bank and the Peer Group, with both the Bank's
and the Peer Group's use of borrowings being somewhat limited. For
valuation purposes, RP Financial concluded no adjustment was warranted
for the Bank's asset/liability composition.
o Credit Quality. Both the Bank's and the Peer Group's credit quality
---------------
measures were generally indicative of limited credit risk exposure.
The Bank and the Peer Group recorded comparable credit quality
measures in terms of NPAs to assets (0.3 percent versus 0.5 percent
for the Peer Group) and reserves maintained as a percent of NPAs (91.7
percent versus 100.6 percent for the Peer Group). Chester Savings'
loss reserves as a percent of loans was slightly higher than the Peer
Group's ratio (0.7 percent versus 0.5 percent for the Peer Group).
Overall, we concluded that no adjustment was warranted for valuation
purposes.
o Balance Sheet Liquidity. The Bank operated with a higher balance of
------------------------
cash and investment securities than the Peer Group (44.3 percent of
assets versus 28.6 percent for the Peer Group), in part due to the
significant Gilster-Mary Lee funds that flow in and out of the Bank.
The Bank and the Peer Group were considered to have comparable
borrowing capacities, as indicated by the similar level of borrowings
maintained by Chester Savings and the Peer Group. The contemplated
repayment of approximately $10.0 million of the Bank's borrowings
would not materially alter Chester Savings' balance sheet liquidity
relative to the Peer Group's, as the reduction in liquidity would be
offset by a reduction in total assets, the level of volatile funds
would be reduced and the reduction will be particularly funded with
the conversion proceeds. Overall, the Bank's current balance sheet
liquidity is considered to be slightly more favorable than Peer
Group's, therefore, RP Financial concluded that Chester Savings'
balance sheet liquidity warranted a slight upward adjustment for
valuation purposes.
o Funding Liabilities. Retail deposits served as the primary interest-
--------------------
bearing source of funds for the Bank and the Peer Group, with
borrowings being utilized to a comparable degree by the
<PAGE>
RP FINANCIAL, LC.
PAGE 4.4
Bank and the Peer Group. The most distinguishing characteristic
between the Bank's and the Peer Group's funding liabilities is that
one relationship accounts for a significant portion of the Bank's
funding liabilities, thereby increasing the volatility associated with
Chester Savings' funding composition. The planned reduction of
approximately half, or $10 million, of those funds will serve to
lessen the volatility associated with the Bank's funding composition,
but at the same time will result in asset shrinkage and a reduction in
earnings. Accordingly, for purposes of the valuation, RP Financial
concluded that Chester Savings' funding composition warranted a slight
downward adjustment.
o Capital. The Bank operates with a lower pre-conversion capital ratio
--------
than the Peer Group, 8.7 percent and 17.8 percent of assets,
respectively. This disadvantage will be addressed as a result of the
stock offering, as the consolidated pro forma capital position of the
Holding Company will be comparable to the Peer Group's equity-to-
assets ratio. However, the increase in capital will also serve to
depress the Bank's return on equity, until the proceeds can be
effectively leveraged and redeployed into higher yielding loans.
Overall, RP Financial concluded that no valuation adjustment was
warranted for the Bank's capital position.
On balance, the characteristics of the Bank's and the Peer Group's
financial conditions were not materially different in most respects for
valuation purposes. While Chester Savings' pro forma liquidity represented a
positive valuation consideration, it was substantially offset by the higher
volatility associated with the Bank's funding composition. Therefore, we
concluded that no valuation adjustment was warranted for the Bank's financial
strength.
2. Profitability, Growth and Viability of Earnings
-----------------------------------------------
Earnings are an important factor in determining pro forma market value, as
the level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings are typically heavily factored
into an investment decision. The historical income statements of Chester
Savings and the Peer Group were generally reflective of traditional operating
strategies, with net interest income and operating expenses being the major
determinants of their respective earnings. The specific factors considered in
the valuation include:
o Reported Earnings. The Bank recorded lower earnings on a ROAA basis
------------------
(0.68 percent of average assets versus 0.84 percent for the Peer
Group). The Peer Group's reported earnings advantage was in part
supported by non-recurring gains, which amounted to 0.13 percent of
average assets. Comparatively, gains were not a factor in the Bank's
earnings. After factoring out the gains recorded by the Peer Group
and taking into account the pro forma impact of conversion proceeds on
Chester Savings' earnings, the Bank's and the Peer Group's reported
earnings indicated comparability in earnings strength. Therefore, no
adjustment was warranted for this factor.
o Core Earnings. Both the Bank's and the Peer Group's earnings were
--------------
derived largely from recurring sources, including net interest income,
non-interest operating income, and operating expenses. In these
measures, the Bank operated with a lower net interest margin, a lower
operating expense ratio and a lower level of non-interest operating
income, which combined
<PAGE>
RP FINANCIAL, LC.
PAGE 4.5
to result in a similar efficiency ratio as exhibited by the Peer
Group. Consistent with the Bank's and the Peer Group's favorable
credit quality measures, loss provisions were not a material factor in
their respective earnings. The Bank's core earnings will realize the
benefit of redeploying conversion proceeds into interest-earning
assets, which will be somewhat negated by the loss of net interest
income and higher operating expense ratio resulting from the
contemplated asset shrinkage that will occur in connection with the
planned repayment of approximately $10 million of repurchase
agreements. Additional operating expenses resulting from the
implementation of stock benefit plans and operating as a stock owned
company will also serve to place upward pressure on the Bank's
operating expense ratio, not to mention the additional cost of running
two subsidiary banks, one of which is practically a de novo operation.
Overall, we concluded that the Bank's and the Peer Group's core
earnings were comparable and no adjustment was warranted for the
Bank's core earnings.
o Interest Rate Risk. Interest rate risk as measured by gap data
-------------------
indicated a greater degree of interest rate risk associated with
Chester Savings' net interest margin. In terms of other measures of
interest rate risk, the Peer Group's capital and IEA/IBL ratios were
more favorable than the Bank's, while Chester Savings maintained a
comparable level of non-interest earning assets as the Peer Group. On
a pro forma basis, the infusion of stock proceeds will address the
lower equity-to-assets and IEA/IBL ratios currently maintained by the
Bank. Likewise, the Bank's negative gap position should be
substantially mitigated by the redeployment of stock proceeds into
interest-earning assets and the repayment of the short-term repurchase
agreements. Accordingly, RP Financial concluded no adjustment was
appropriate for this factor.
o Credit Risk. Loan loss provisions and real estate operations losses
------------
were not a significant factor in either Chester Savings' or the Peer
Group's earnings. In terms of future exposure to credit quality
related losses, the Bank's and Peer Group's credit quality measures
indicated relatively limited credit risk exposure. Lending
diversification into higher risk types of loans was slightly more
notable for the Peer Group, which, along with the Peer Group's higher
concentration of loans, translated into a modestly higher risk
weighted assets-to-assets ratio for the Peer Group. However, in light
of the relatively low levels of non-performing assets and the
relatively high loss reserve coverage ratios maintained by the Bank
and the Peer Group, the credit risk associated with both Chester
Savings' and the Peer Group's earnings was considered to be quite
limited. Accordingly, RP Financial concluded no adjustment was
warranted for valuation purposes.
o Earnings Growth Potential. While the Bank's conversion to a national
--------------------------
bank charter may facilitate earnings growth through expansion of
lending activities into higher yielding types of loans, such growth,
if any, will likely be a slow and gradual process and, thus, would not
have a dramatic impact on the Bank's near term earnings. Furthermore,
expected liability shrinkage, higher liquidity and market area
limitations are expected to curtail future earnings growth. On
balance, the Bank's earnings growth potential was considered to be
slightly less favorable than the Peer Group's for purposes of this
valuation.
Overall, except for the Bank's apparent less favorable earnings growth
potential, the strength and quality of Chester Savings' earnings were considered
to be comparable to the Peer Group's. Therefore, RP Financial concluded that a
slight downward valuation adjustment was warranted for profitability, growth and
viability of the Bank's earnings relative to the Peer Group's.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.6
3. Asset Growth
------------
Chester Savings' asset growth trends are less favorable than the Peer
Group's, both historically and prospectively, particularly in light of the
expected shrinkage that will result from the reduction in repurchase agreements.
While the Bank's pro forma capital position will provide for comparability in
terms of growth capacity, the characteristics of the Bank's market area,
including limited loan demand, further limit asset growth potential.
Accordingly, a moderate downward adjustment was warranted for this factor.
4. Primary Market Area
-------------------
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. Chester Savings' primary market
area has been experiencing generally weak demographic trends, which is
reflective of the down turn that has occurred in the local economy (see Exhibit
III-4). The loss of jobs resulting from the contraction of the mining industry,
as well as the shut down of one of the largest employers in Randolph County,
dims the prospect for future growth potential in the Bank's primary market area.
The relatively high level of unemployment and low economic growth in the primary
market area has served to intensify competitiveness for deposits and loans, with
the number of households in the primary market area declining from 1990 through
1995.
In general, the Peer Group companies operate in healthier and faster
growing market areas than the Bank's primary market area. Population growth and
per capita income measures in the primary market areas served by the Peer Group
companies were both more favorable than the comparative measures for Randolph
County. Likewise, as shown in Table 4.1 below, unemployment rates in the
primary market areas served by the Peer Group companies were generally
considerably lower than the unemployment rate in Randolph County. Overall, the
primary market areas served by the Peer Group companies are considered to be
more favorable in terms of supporting potential growth and in terms of limiting
credit risk exposure. Therefore, we concluded a moderate downward adjustment
was necessary for this factor.
<PAGE>
RP FINANCIAL, LC.
OAGE 4.7
Table 4.1
Market Area Unemployment Rates
Chester Savings Bank and the Peer Group Companies (1)
<TABLE>
<CAPTION>
April 1996
County Unemployment
------ -------------
<S> <C> <C>
Chester Savings Bank of IL Randolph 11.9%
Peer Group
----------
ASB Financial Corp. of OH Scioto 9.2%
Enterprise Fed. Bancorp of OH Hamilton 3.6
FSF Financial Corp. of MN McLeod 3.4
Fidelity Bancorp of IL Cook 5.4
First Fed. Bancorp of MN Beltrami 7.1
Great American Bancorp of IL Champaign 3.0
Landmark Bancshares of KS Ford 3.4
North Bancshares of Chicago IL Cook 5.4
Southern Missouri Bancorp of MO Butler 5.1
Western Ohio Fin. Corp. of OH Clark 4.5
</TABLE>
Unemployment rates are not seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
5. Dividends
---------
As set forth in the prospectus, the Holding Company intends to establish an
annual dividend of $0.20 per share, which would provide for a 2.0 percent yield,
based on the $10.00 per share initial offering price of the Holding Company's
stock, and a pro forma payout ratio of 25.23 percent. However, future
declarations of dividends by the Board of Directors will depend upon a number of
factors, including investment opportunities available to the Holding Company or
the subsidiary banks, capital requirements, regulatory limitations, the Holding
Company's and the Bank's financial condition and results of operations, tax
considerations and general economic conditions.
Historically, thrifts typically have not established dividend policies at
the time of their conversion to stock ownership. Newly converted institutions,
in general, have preferred to gain market seasoning, establish an earnings track
record and fully invest the conversion proceeds before establishing a dividend
policy. However, during the late-1980s and early-1990s, with negative publicity
surrounding the thrift industry, there was a tendency for more thrifts to
initiate moderate dividend policies concurrent with their conversion as a means
of increasing the attractiveness of the stock offering. Today, fewer
institutions are compelled to initially establish dividend policies at the time
of their conversion offering as (1) industry profitability has improved,
<PAGE>
RP FINANCIAL, LC.
PAGE 4.8
(2) the number of problem thrift institutions has declined, and (3) the stock
market cycle for thrift stocks is generally more favorable than in the early-
1990s. At the same time, with ROE ratios under pressure, due to high equity
levels, well-capitalized institutions are subject to increased competitive
pressures to offer dividends.
As publicly-traded thrifts' capital levels and profitability have improved
and as weakened institutions have been resolved, the proportion of institutions
with cash dividend policies has increased. Eight out of the ten institutions in
the Peer Group presently pay regular cash dividends, with implied dividend
yields ranging from 1.44 percent to 4.30 percent. The average dividend yield on
the stocks of the Peer Group institutions was 2.32 percent as of June 14, 1996,
representing an average earnings payout ratio of 36.01 percent. As of June 14,
1996, approximately 76 percent of all publicly-traded SAIF-insured thrifts had
adopted cash dividend policies (see Exhibit IV-1), exhibiting an average yield
of 2.48 percent and an average payout ratio of 34.59 percent. The dividend
paying thrifts generally maintain higher than average profitability ratios,
facilitating their ability to pay cash dividends, which supports a market
pricing premium on average relative to non-dividend paying thrifts.
The Holding Company's dividend yield is slightly lower than the Peer Group
average. However, given the comparability of the Bank's and the Peer Group's
dividend paying capacities, based on comparability of their earnings and capital
positions, the modest difference between the indicated dividend yields for the
Holding Company and the Peer Group was not considered to be a material valuation
consideration. Accordingly, no adjustment was necessary for this valuation
consideration.
6. Liquidity of the Shares
-----------------------
The Peer Group is by definition composed of companies that are traded in
the public markets, all of which trade on the NASDAQ system. Typically, the
number of shares outstanding and market capitalization provides an indication of
how much liquidity there will be in a particular stock. The market
capitalization of the Peer Group companies ranged from $10.7 million to $53.7
million as of June 14, 1996, with an average market value of $31.8 million. The
shares outstanding of the Peer Group members ranged from 819,000 to 3.9 million,
with average shares outstanding of approximately 2.1 million. The Bank's
conversion offering will result in a market value and shares outstanding at the
lower end of the Peer Group range, thus, we applied a slight downward adjustment
for this factor.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.9
7. Marketing of the Issue
----------------------
We believe that three separate markets exists for thrift stocks coming to
market such as Chester Savings: (1) the after-market for public companies, in
which trading activity is regular and investment decisions are made based upon
financial condition, earnings, capital, ROE and dividends; (2) the new issue
market in which converting thrifts are evaluated on a pro forma basis without
the benefit of prior operations as a publicly-held company and stock trading
history; and (3) the acquisition market for thrift franchises in Illinois. All
three of these markets were considered in the valuation of the Bank's to-be-
issued stock.
A. The Public Market
-----------------
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
In terms of assessing general stock market conditions, the stock
market has generally trended higher over the past year. In mid-June 1995, the
Dow Jones Industrial Average ("DJIA") approached the 4500 for the first time, as
the market rallied on news of slow economic growth and increased expectations of
an interest rate cut by the Federal Reserve. Technology stocks continued to
lead the market, reflecting the strong earnings growth recorded by the
technology sector in general. The first rate cut in nearly three years
propelled the stock market to further new highs in mid-July, as the DJIA closed
above the 4700 mark in the second week of July. A more upbeat assessment of the
economy by the Federal Reserve and mixed economic data, both of which lessened
the likelihood of further rate cuts by the Federal Reserve, caused the stock
market to retract modestly in late-July and early-August. Profit taking and
moderating expectations of earnings growth in the technology sector further
contributed to the pull-back in the stock market, while news of Disney's
acquisition of Cap Cities/ABC had little impact on the overall stock market.
The strengthening dollar also served to push the DJIA lower in late-August, as
the blue-chip multinational stocks experienced selling pressure in light of
lower earnings expectations from their foreign operations.
The sell-off in the stock market was brief, as the DJIA rebounded
during the first half of September 1995. Technology stocks initially led the
stock market upturn, as investors found technology issues more attractively
priced following the downturn in July and August. Favorable inflation data
bolstered the DJIA in mid-September, as well as provided for a rally in bond
prices. While the DJIA was further boosted by
<PAGE>
RP FINANCIAL, LC.
PAGE 4.10
AT&T's breakup announcement, weakness in the dollar and unfavorable inflation
data pushed bond and stock prices lower in late-September.
Quarterly earnings controlled the market in beginning of the fourth
quarter, with day-to-day fluctuations reflecting positive and negative earnings
surprises particularly in the technology sector. Economic data indicating that
the economy was on track for a soft landing provided for a rally in the bond
market and stability in the stock market in mid-October 1995, which was followed
by a broad sell-off in the stock market in late-October. The sell-off was
primarily attributable to increasing signs of consumer credit weakness and the
possibility that such weakness could lead to a recession. However, the downturn
was brief, as the DJIA rallied to new highs in early- and mid-November. The
rally was initially led by transportation issues, and continued strength in the
bond market. Investors poured into defensive issues during the first budget
impasse, with the DJIA posting several consecutive highs in mid-November. The
DJIA surged past the 5000 mark in late-November, reflecting strength in blue
chip issues and a mild rebound in the technology sector amid increasing
expectations that the Federal Reserve would cut short-term interest rates.
Defensive issues sustained the rally through early-December, while weakness in
the technology sector provided for a slight pull-back in the stock market in
mid-December. At the close of 1995, market activity was mixed. Favorable
inflation data led to a 0.25 percent cut in short-term interest rates by the
Federal Reserve in late-December, which served to initially lift stock prices.
However, the second budget impasse and weak holiday retail sales quickly erased
the positive impact of the interest rate cut, as the DJIA dropped sharply one
day after the Federal Reserve action. Bond prices rallied on news of the
sagging economy, as the 30-year bond yield fell below 6.0 percent in late-
December.
The stock market began 1996 on a down note, reflecting concern over
the budget stalemate in Washington. A sell-off in technology stocks further
sustained the decline in the stock market, as investors dumped technology stocks
on profit concerns. However, favorable inflation data and strong fourth quarter
earnings by some blue chip issues served to abbreviate the decline in the stock
market, with the DJIA posting several new highs in the second half of January.
Stock prices were further boosted by increasing expectations of another rate cut
by the Federal Reserve, which occurred at the end of January. The stock market
moved sharply higher in early-February, as the cut in short-term interest rates
and strong fourth quarter earnings posted by some large technology companies
served to renew investor interest in technology stocks. Low inflation and
modest economic growth translated into renewed interest for cyclical stocks as
well, with the DJIA posting five consecutive all-time highs during the week
ended February 9. Congressional testimony by the Federal Reserve Chairman
provided for significant swings in the stock market in mid-February, reflecting
changing investor sentiment regarding the possibility of future rate cuts. The
volatility continued through the end of February, reflecting turbulence in the
bond market and general uncertainty over future interest rate
<PAGE>
RP FINANCIAL, LC.
PAGE 4.11
trends. An unexpectedly large drop in the February unemployment rate provided
for a sharp one day sell-off in the stock market on March 8, as bond prices
plunged on news of the strong job growth and the possibility that an
accelerating economy may lead to higher inflation. However, the stock market
recovered the following week, as inflation fears were somewhat alleviated by
additional economic data which indicated a more modest pace of economic growth
than suggested by the unemployment data, including a 0.2 percent drop in
February wholesale prices. After trading in a narrow range through the end of
March, merger activity and a jump in IBM's stock price propelled the DJIA to a
new record in early-April. The upturn was brief, as bond and stock prices
slumped following the stronger than expected March employment report which
served to rekindle inflation fears.
Earnings reports dominated the stock market in mid-April 1996, with
day-to-day fluctuations in the market reflecting changing investor sentiment
regarding the strength of first quarter earnings and future earnings
expectations. Favorable fourth quarter earnings among technology issues pushed
the NASDAQ Composite Index to new highs in late-April and early-May, while blue
chip stocks lagged the overall market. Stronger than expected first quarter GDP
growth reported in early-May stirred major sell-offs in stocks and bonds,
resulting in the 30-year bond edging above 7.0 percent and a one day drop in the
DJIA of almost 77 points. Inflation concerns receded somewhat following a mid-
May report by the Federal Reserve, which indicated that inflation remained in
check and near term rate increases were not likely. The positive reading on
inflation by the Federal Reserve, along with the Federal Reserve's decision to
leave interest rates unchanged at its late-May meeting, served to strengthen
bond and stock prices, with the DJIA posting new highs in late-May and the 30-
year bond dropping below 7.0 percent. However, signs of an accelerating economy
and revised upward estimates of second quarter GDP growth provided for a
pullback in the stock market at the end of May. Stronger than expected job
growth in May further depressed bond prices in early-June, which served to stall
the stock market as well. On June 14, 1996, the DJIA closed at 5649.45,
translating into an 10.4 percent increase from year end 1995.
Similar to the overall stock market, the market for thrift stocks has
generally been favorable during the past twelve months. Following the stock
market in general, thrift issues continued to move higher through the second
quarter of 1995. Lower interest rates, healthy economies in most regions of the
U.S. and acquisition speculation all contributed to the upward trend exhibited
in thrift prices. The run-up in thrift prices moderated somewhat during July
and the first half of August 1995, reflecting profit taking, as thrift prices
approached historically high pricing multiples, and indications of lower
profitability due to shrinking net interest margins. However, the trend in
thrift issues remained generally positive, as acquisitions of thrift issues
continued at a healthy pace during the first half of the third quarter.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.12
The upward trend in thrift prices accelerated in late-August and the
first half of September 1995, as acquisition activity among financial
institutions became more pronounced. Most notably, acquisitions or mergers
involving some of the nation's largest banks were announced during the third
quarter, including the merger between Chase Manhattan and Chemical Bank which
resulted in the largest banking entity in the U.S. A court ruling favoring
thrifts seeking damages against the U.S. government for breach-of-contract
involving the accounting treatment of supervisory goodwill further heightened
interest in thrift stocks, as the SNL index closed 2.4 percent higher the day of
the ruling. Following the significant run-up recorded through mid-September,
slightly higher interest rates and profit taking nudged thrift prices lower in
late-September.
Lower interest rates and generally favorable third quarter earnings
propelled thrift prices higher during the first half of October 1995, while
credit quality concerns sparked a widespread sell-off in financial stocks during
late-October. In particular, the concerns were related to rising consumer
delinquencies, as indicated by a steady rise in the consumer delinquency index
maintained by the American Bankers Association. For the first time since 1991,
the index increased for three consecutive quarters. However, sustained by
acquisition activity and relatively low interest rates, thrift stocks edged
higher during the first half of November. A tax law change in the new
congressional budget, which would provide for the elimination of back taxes on
bad-debt reserves taken before 1988, served to push thrift stocks higher in
late-November, as investors speculated that the removal of the potential back
taxes would accelerate the pace of mergers and acquisitions in the thrift
industry. Uncertainty regarding the Federal Reserve's intentions on cutting
short-term interest rates provided for a relatively narrow trading range for
thrift stocks during the first half of December. The rate cut by the Fed and
reports of sluggish retail sales led to a rally in the bond market in late-
December, which, in turn, bolstered prices for thrift and bank issues.
Thrift stocks followed the stock market in general lower in early-
1996, reflecting concern that the absence of a budget agreement would lead to
higher interest rates. The downturn in thrift stocks was brief, as thrift
prices trended higher in the second half of January. Economic data which
indicated that inflation was low supported the recovery in thrift prices, with
the favorable inflation data serving to calm the credit markets amid increasing
expectations that interest rates would remain low. Thrift prices were further
boosted by the Federal Reserve's move to cut short-term interest rates at the
end of January and generally favorable fourth quarter earnings. Mixed
indications on the future direction of interest rates translated into a
relatively narrow trading range for thrift stocks throughout February.
Interest sensitive issues were among the stocks most severely affected
by the sell-off precipitated by the decline in the February 1996 unemployment
rate, as prospects for further near-term rate cuts by the Federal Reserve were
substantially eliminated by the explosive job growth. However, thrift prices
rebounded in late-March and early-April as interest rates stabilized. A bullish
outlook on the financial
<PAGE>
RP FINANCIAL, LC.
PAGE 4.13
institution sector in general served to further bolster prices in early-April,
as a number of analysts forecasted healthy first quarter earnings for thrift and
bank stocks and that the financial institution sector would outperform the
market in general during the balance of 1996. However, thrift prices declined
following the release of the March employment report, as interest sensitive
stocks were pulled lower by the unfavorable interest rate outlook. The downturn
was abbreviated by the generally strong first quarter earnings posted by bank
and thrift issues, which provided for a mild upward trend in thrift stocks in
mid-April. Paralleling the stock market in general, thrift prices dropped
sharply in early-May following the rise in interest rates caused by the strong
first quarter GDP growth. Thrift prices rebounded in mid-May, as interest rates
declined slightly on the strength of tame inflation news. At the end of May and
through mid-June, uncertainty over future interest rate trends provided for a
flat thrift stock market. The SNL Index for all publicly-traded thrifts closed
at 386.3 on June 14, 1996, an increase of 24.7 percent from one year ago.
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Bank's pro forma market value. The market for converting
thrifts was favorable throughout most of 1995, as the improving market for
thrift stocks in general translated into stronger demand for converting thrifts
as well. Demand for converting issues remained strong in the first quarter of
1996, with most offerings being oversubscribed and posting healthy increases in
near term aftermarket trading. In general, the market for the most recent
converting issues (offering completed within the past three months) has begun to
show signs of weakness, as indicated by fewer oversubscriptions and generally
weak aftermarket trading activity exhibited in the stocks of recently converted
institutions. In comparison to recent prior quarters, the price appreciation
exhibited in the most recent offerings has been limited, despite lower closing
P/B ratios on average, and in a few cases converting thrift issues have traded
below their IPO prices. As shown in Table 4.2, the median one week change in
price for offerings completed during the latest three months equaled positive
6.9 percent. Relative to all converting issues, the after-market performance of
recent Mid-West conversions has been less favorable. With the exception of one
Missouri conversion, the price appreciation exhibited by the recent Mid-West
conversions has been less than 10 percent and, as of June 14, 1996, the median
price increase was 1.3 percent (see table below).
<PAGE>
RP FINANCIAL, LC.
----------------------------------------------------------------
Table 4.2
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
----------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data Offering Insider Purchases
----------------------------------
Financial Info. Asset Quality Information
- ------------------------------------------------------------------------------------------------------------------------------------
Benefit Plans
--------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./ Recog. Mgmt.
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc. ESOP Plans & Dirs.
- ----------- ----- ---- ----- ------ ----- ------ ---- ----- ---- ----- -------------- -------
($Mil) (%) (%)(2) (%) ($Mil) (%) (%) (%) (%) (%)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CNS Bancorp MO * 06/12/96 CNSB $87 10.66% 0.19% 189% $16.5 132% 3.3% 8.0% 4.0% 8.0%
Westwood Financial Corp.(7) NJ 06/07/96 WWFC 85 7.05% 0.00% NM 3.9 99% 9.9% 0.0% 0.0% 2.5%
Lexington B&L Fin. Corp. MO * 06/06/96 LXMO 51 14.66% 1.88% 21% 12.7 115% 4.2% 8.0% 4.0% 4.3%
First Fed. Fin. Bancorp OH 06/04/96 FFFB 53 9.58% 0.08% 626% 6.7 103% 6.3% 8.0% 4.0% 13.4%
First Fed. Bancshares AR 05/03/96 FFBH 454 7.77% 0.13% 201% 51.5 94% 2.7% 8.0% 4.0% 2.6%
Citizens First Fin. Corp. IL 05/01/96 CBK 229 6.79% 0.33% 55% 28.2 123% 3.6% 8.0% 4.0% 6.5%
North Cincinnati SB(1) OH 05/01/96 P. Sheet 56 4.74% 0.03% 268% 4.0 132% 6.9% 6.0% 0.0% 16.1%
Reliance Bancshares WI * 04/19/96 RELI 32 31.16% 0.00% NM 20.5 132% 2.9% 4.0% 4.0% 9.5%
Catskill Financial Corp. NY 04/18/96 CATB 231 12.75% 0.70% 112% 56.7 132% 3.3% 8.0% 4.0% 2.6%
Yonkers Financial Corp. NY * 04/18/96 YFCB 210 7.72% 1.73% 23% 35.7 132% 2.7% 8.0% 4.0% 3.7%
Green Street Financial Corp.NC 04/04/96 GSFC 151 14.97% 0.19% 76% 43.0 132% 2.9% 8.0% 4.0% 3.4%
FFD Financial Corp. OH 04/02/96 FFDF 61 13.25% 0.16% 150% 14.5 132% 2.4% 8.0% 4.0% 5.4%
Patapsco Bancorp MD 04/02/96 P. Sheet 75 7.95% 0.60% 48% 7.3 91% 8.6% 8.0% 4.0% 7.4%
AMB Financial Corp. IN 04/01/96 AMFC 70 9.05% 0.53% 96% 11.2 132% 5.5% 8.0% 4.0% 5.8%
First Bergen Bancorp NJ 04/01/96 FBER 225 6.52% 3.26% 88% 31.7 132% 3.0% 8.0% 4.0% 2.4%
Heritage Financial Corp. IN 04/01/96 P. Sheet 14 27.53% 0.00% NM 4.9 99% 9.3% 8.0% 0.0% 13.2%
Jacksonville Bancorp(7) TX 04/01/96 JXVL 198 10.47% 1.41% 36% 16.2 106% 4.4% 8.0% 4.0% 2.0%
London Financial Corp. OH 04/01/96 LONF 35 9.45% 0.13% 416% 5.3 132% 6.9% 8.0% 4.0% 26.5%
Pittsb. Home Fin. Corp.(1) PA * 04/01/96 PHFC 162 6.89% 1.36% 42% 21.8 132% 3.3% 8.0% 4.0% 7.5%
Scotland Bancorp(1) NC * 04/01/96 SSB 58 15.36% 0.00% NM 18.4 115% 5.0% 8.0% 4.0% 6.9%
Stone Street Bancorp(1) NC 04/01/96 SSM 88 14.33% 0.00% NM 27.4 132% 3.7% 8.0% 4.0% 7.3%
WHG Bancshares MD 04/01/96 WHGB 85 10.14% 0.23% 77% 16.2 132% 3.5% 8.0% 4.0% 9.3%
PFF Bancorp, Inc. CA * 03/29/96 PFFB 1,925 5.75% 1.70% 54% 198.4 132% 2.2% 8.0% 4.0% 0.9%
Crazy Woman Creek Bncrp WY * 03/29/96 CRZY 38 15.80% 0.21% 349% 10.6 132% 3.9% 6.0% 4.0% 5.5%
Falmouth Co-Op. Bank(1) MA 03/28/96 FCB 74 11.78% 0.00% NM 14.5 132% 4.5% 8.0% 0.0% 8.4%
Community Federal Bancorp MS 03/26/96 CFTP 168 14.59% 0.39% 86% 46.3 132% 2.5% 8.0% 4.0% 6.7%
GA Financial, Inc. PA 03/26/96 GAF 521 9.25% 0.28% 56% 89.0 132% 2.4% 8.0% 4.0% 1.7%
North Central Bancshares(7) IA 03/21/96 FFFD 180 16.47% 0.17% 562% 26.3 106% 3.5% 3.2% 0.0% 0.5%
Averages: $200 11.87% 0.56% 165% 30.0 123% 4.4% 7.3% 3.3% 6.8%
Medians: 86 10.31% 0.20% 87% 17.5 132% 3.6% 8.0% 4.0% 6.1%
Averages, Excluding 2nd Steps $206 11.94% 0.56% 152% $31.7 125% 4.2% 7.7% 3.5% 7.4%
Medians, Excluding 2nd Steps 85 10.14% 0.21% 87% 18.4 132% 3.5% 8.0% 4.0% 6.7%
<CAPTION>
Pro Forma Data
----------------------------------------------
Pricing Ratios(4) Fin. Characteristics
----------------------------------------------
Conversion IPO
Institution State Date Ticker P/TB P/E P/A ROA TE/A ROE Price
- ----------- ----- ---- ------ ---- --- --- --- ---- --- -----
(%) (x) (%) (%) (%) (%) ($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CNS Bancorp MO * 06/12/96 CNSB 71.1% 22.3 16.4% 0.7% 23.1% 3.2% $10.00
Westwood Financial Corp.(7) NJ 06/07/96 WWFC 80.0% 10.1 7.3% 0.7% 9.2% 7.9% 10.00
Lexington B&L Fin. Corp. MO * 06/06/96 LXMO 70.1% 16.2 20.6% 1.3% 29.4% 4.3% 10.00
First Fed. Fin. Bancorp OH 06/04/96 FFFB 63.6% 17.4 11.5% 0.7% 18.0% 3.7% 10.00
First Fed. Bancshares AR 05/03/96 FFBH 65.0% 10.4 10.3% 1.0% 15.9% 6.3% 10.00
Citizens First Fin. Corp. IL 05/01/96 CBK 71.7% 17.8 11.2% 0.6% 15.6% 4.0% 10.00
North Cincinnati SB(1) OH 05/01/96 P. Sheet 65.0% NM 6.7% NM 10.3% NM 10.00
Reliance Bancshares WI * 04/19/96 RELI 72.3% 27.3 40.7% 1.5% 56.2% 2.7% 8.00
Catskill Financial Corp. NY 04/18/96 CATB 73.2% 21.2 20.4% 1.0% 27.8% 3.5% 10.00
Yonkers Financial Corp. NY * 04/18/96 YFCB 76.5% 16.6 14.8% 0.9% 19.4% 4.6% 10.00
Green Street Financial Corp.NC 04/04/96 GSFC 72.6% 16.2 22.9% 1.4% 31.5% 4.5% 10.00
FFD Financial Corp. OH 04/02/96 FFDF 71.0% 19.1 19.9% 1.0% 28.0% 3.7% 10.00
Patapsco Bancorp MD 04/02/96 P. Sheet 61.7% NM 8.9% NM 14.5% NM 10.00
AMB Financial Corp. IN 04/01/96 AMFC 72.1% 19.5 14.2% 0.7% 19.7% 3.7% 10.00
First Bergen Bancorp NJ 04/01/96 FBER 76.2% 29.5 12.6% 0.4% 16.5% 2.6% 10.00
Heritage Financial Corp. IN 04/01/96 P. Sheet 62.9% NM 27.2% 0.6% 43.2% 1.3% 10.00
Jacksonville Bancorp(7) TX 04/01/96 JXVL 77.7% 14.9 12.6% 0.8% 16.2% 5.2% 10.00
London Financial Corp. OH 04/01/96 LONF 70.0% 31.6 13.6% 0.4% 19.4% 2.2% 10.00
Pittsb. Home Fin. Corp.(1) PA * 04/01/96 PHFC 73.6% 18.5 12.1% 0.7% 16.4% 4.0% 10.00
Scotland Bancorp(1) NC * 04/01/96 SSB 76.3% 18.1 25.2% 1.4% 33.1% 4.2% 10.00
Stone Street Bancorp(1) NC 04/01/96 SSM 76.8% 18.4 24.7% 1.3% 32.2% 4.2% 15.00
WHG Bancshares MD 04/01/96 WHGB 72.8% 17.3 16.5% 1.0% 22.7% 4.2% 10.00
PFF Bancorp, Inc. CA * 03/29/96 PFFB 71.5% 25.4 9.5% 0.4% 13.2% 2.8% 10.00
Crazy Woman Creek Bncrp WY * 03/29/96 CRZY 70.2% 18.1 22.5% 1.2% 32.1% 3.9% 10.00
Falmouth Co-Op. Bank(1) MA 03/28/96 FCB 67.8% 20.2 16.6% 0.8% 24.4% 3.4% 10.00
Community Federal Bancorp MS 03/26/96 CFTP 72.2% 15.5 22.3% 1.4% 30.9% 4.7% 10.00
GA Financial, Inc. PA 03/26/96 GAF 71.5% 15.7 14.9% 1.0% 20.8% 4.6% 10.00
North Central Bancshares(7) IA 03/21/96 FFFD 74.2% 12.1 19.7% 1.6% 26.5% 6.1% 10.00
Averages: 71.4% 18.8 17.0% 0.9% 23.8% 4.1% $10.11
Medians: 71.9% 18.1 15.7% 0.9% 21.7% 4.0% 10.00
Averages, Excluding 2nd Steps 70.7% 19.6 17.4% 0.9% 24.6% 3.7% $10.12
Medians, Excluding 2nd Steps 71.5% 18.2 16.4% 1.0% 22.7% 3.9% 10.00
<CAPTION>
Post-IPO Pricing Trends
-----------------------------------------------
Closing Price:
-----------------------------------------------
First After After
Conversion Trading % First % First %
Institution State Date Ticker Day Chg. Week(5) Chg. Month(6) Chg.
- ----------- ----- ---- ------ --- ---- ------ ---- ------- ----
($) (%) ($) (%) ($) (%)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CNS Bancorp MO * 06/12/96 CNSB $11.00 10.0% $12.00 20.0% NA NA
Westwood Financial Corp.(7) NJ 06/07/96 WWFC 10.75 7.5% 10.38 3.8% NA NA
Lexington B&L Fin. Corp. MO * 06/06/96 LXMO 9.50 -5.0% 9.75 -2.5% $10.00 0.0%
First Fed. Fin. Bancorp OH 06/04/96 FFFB 10.75 7.5% 10.62 6.2% 10.75 7.5%
First Fed. Bancshares AR 05/03/96 FFBH 13.00 30.0% 13.38 33.8% 13.63 36.3%
Citizens First Fin. Corp. IL 05/01/96 CBK 10.50 5.0% 10.00 0.0% 10.13 1.3%
North Cincinnati SB(1) OH 05/01/96 P. Sheet NT NA NT NA NT NA
Reliance Bancshares WI * 04/19/96 RELI 8.38 4.7% 8.25 3.1% 7.94 -0.7%
Catskill Financial Corp. NY 04/18/96 CATB 10.38 3.8% 10.50 5.0% 10.38 3.8%
Yonkers Financial Corp. NY * 04/18/96 YFCB 9.75 -2.5% 10.00 0.0% 9.94 -0.6%
Green Street Financial Corp.NC 04/04/96 GSFC 12.75 27.5% 12.25 22.5% 12.31 23.1%
FFD Financial Corp. OH 04/02/96 FFDF 10.50 5.0% 10.13 1.3% 10.50 5.0%
Patapsco Bancorp MD 04/02/96 P. Sheet NT NA NT NA NT NA
AMB Financial Corp. IN 04/01/96 AMFC 10.50 5.0% 10.50 5.0% 10.5 5.0%
First Bergen Bancorp NJ 04/01/96 FBER 10.00 0.0% 9.50 -5.0% 9.63 -3.8%
Heritage Financial Corp. IN 04/01/96 P. Shee NT NA NT NA NT NA
Jacksonville Bancorp(7) TX 04/01/96 JXVL 9.75 -2.5% 9.63 -3.8% 9.88 -1.2%
London Financial Corp. OH 04/01/96 LONF 10.81 8.1% 10.63 6.3% 10.13 1.3%
Pittsb. Home Fin. Corp.(1) PA * 04/01/96 PHFC 11.00 10.0% 11.00 10.0% 10.62 6.2%
Scotland Bancorp(1) NC * 04/01/96 SSB 12.25 22.5% 12.50 25.0% 11.75 17.5%
Stone Street Bancorp(1) NC 04/01/96 SSM 17.50 16.7% 18.00 20.0% 17.75 18.3%
WHG Bancshares MD 04/01/96 WHGB 11.13 11.3% 11.44 14.4% 11.38 13.8%
PFF Bancorp, Inc. CA * 03/29/96 PFFB 11.38 13.8% 11.62 16.2% 11.63 16.3%
Crazy Woman Creek Bncrp WY * 03/29/96 CRZY 10.38 3.8% 10.75 7.5% 10.50 5.0%
Falmouth Co-Op. Bank(1) MA 03/28/96 FCB 10.75 7.5% 11.25 12.5% 10.75 7.5%
Community Federal Bancorp MS 03/26/96 CFTP 12.63 26.3% 13.13 31.3% 12.62 26.2%
GA Financial, Inc. PA 03/26/96 GAF 11.38 13.8% 11.50 15.0% 11.00 10.0%
North Central Bancshares(7) IA 03/21/96 FFFD 10.88 8.7% 10.69 6.9% 10.44 4.4%
Averages: $11.30 9.5% $11.17 10.2% $11.05 8.8%
Medians: 10.75 7.5% 10.69 6.9% 10.50 5.0%
Averages, excluding 2nd steps $11.19 10.2% $11.30 11.2% $11.13 9.5%
Medians, excluding 2nd steps 10.78 7.8% 10.88 8.8% 10.62 6.2%
</TABLE>
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded; "NA" - Not
Applicable, Not Available.
(1) Non-OTS regulated thrifts. June 17, 1996
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Latest price if offering less than one week old.
(6) Latest price if offering more than one week but less than one month old.
(7) Second-step conversions.
- --------------------------------------------------------------------------------
<PAGE>
RP FINANCIAL, LC.
PAGE 4.15
Pricing Characteristics of Recent Midwestern U.S. Conversions
<TABLE>
<CAPTION>
Pro Forma Clos. Price % Change in Price
Conversion P/B as % of 1st To
Date @ Conversion Mid Value Week 6/14/96
---- ------------- --------- ---- -------
<S> <C> <C> <C> <C> <C>
CNS Bancorp, Inc.-MO 6/96 71.1% 132% N/A 20.0% (1)
Lexington B&L Fin. Corp.-MO 6/96 70.1 115 3.8% 0.0
First Fed. Fin. Bancorp-OH 6/96 63.6 103 2.7 7.5
Citizens First Fin. Corp.-IL 5/96 71.7 123 0.0 (1.3)
Reliance Bancshares-WI 4/96 72.3 132 3.1 (1.6)
FFD Fin. Corp.-OH 4/96 71.0 132 1.3 1.9
AMB Fin. Corp.-IN 4/96 72.1 132 5.0 1.3
London Fin. Corp.-OH 4/96 70.0 132 6.3 5.0
--- ---
Median 3.5% 1.3%
</TABLE>
(1) Local acquisition recently announced.
In examining the current pricing characteristics of institutions
completing their conversions during the last three months (see Table 4.3), we
note there exists a considerable difference in pricing ratios compared to the
universe of all publicly-traded thrifts. Specifically, the current average P/B
ratio of the conversions completed in the most recent three month period of
76.64 percent reflects a discount of 27.0 percent from the average P/B ratio of
all publicly-traded SAIF-insured thrifts (equal to 104.98 percent), and the
average core P/E ratio of 17.66 times reflects a premium of 16.6 percent from
the all SAIF-insured public average core P/E ratio of 15.14 times. The pricing
ratios of the better capitalized but lower earning (based on return on equity
measures) recently converted thrifts suggest that the investment community has
determined to discount their stocks on a book basis until the earnings improve
through redeployment and leveraging of the proceeds over the longer term.
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market and the new issue market.
The overall market for thrift stocks is considered to be healthy, as thrift
stocks are currently exhibiting pricing ratios that are approaching historically
high levels. Investor interest in the new issue market has shown signs of
cooling, as indicated by fewer offerings being oversubscribed and fairly limited
price appreciation exhibited in post-conversion trading by most of the recent
conversions.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.3
Market Pricing Comparatives
Prices As of June 14, 1996
<TABLE>
<CAPTION>
Per Share Data
Market ----------------
Capitalization Book Pricing Ratios(3)
-------------------- -----------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- ------- ------ -------- ------- ------- ------- ------- ------- ---------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 17.21 119.16 1.25 16.52 14.29 104.98 13.13 108.21 15.14
Converted Last 3 Mths (no MHC) 11.04 38.13 0.48 14.39 17.41 76.64 18.95 77.16 17.66
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
AMFC AMB Financial Corp. of IN 10.12 11.37 0.31 14.37 NM 70.42 14.12 70.42 NM
CNSB CNS Bancorp of MO 12.00 19.84 0.45 14.07 NM 85.29 19.68 85.29 NM
CATB Catskill Fin. Corp. of NY 10.19 57.95 0.47 13.65 21.68 74.65 20.75 74.65 18.87
SCBK Citizens First Fin.Corp. of IL 9.87 27.81 0.56 13.95 17.63 70.75 11.02 70.75 16.18
CFTP Community Fed. Bancorp of MS 13.62 63.05 0.43 14.34 NM 94.98 31.44 94.98 NM
CRZY Crazy Woman Creek Bncorp of WY 10.25 10.84 0.34 14.57 NM 69.87 22.85 69.87 NM
FFDF FFD Financial Corp. of OH 10.19 14.83 0.52 14.08 19.60 72.37 20.28 72.37 19.60
FCB Falmouth Co-Op Bank of MA 10.25 14.91 0.25 14.84 NM 69.07 16.96 69.07 NM
FBER First Bergen Bancorp of NJ 9.31 29.55 0.20 13.46 NM 69.17 11.43 69.17 NM
FFBH First Fed. Bancshares of AR 13.75 70.87 0.96 15.38 14.32 89.40 14.22 89.40 14.32
FFFB First Fed. Fin. Bancorp of OH 10.75 7.22 0.58 15.73 18.53 68.34 12.34 68.34 18.53
GAF GA Financial Corp. of PA 11.00 97.90 0.33 14.34 NM 75.71 17.21 76.71 25.00
GSFC Green Street Fin. Corp. of NC 12.87 55.32 0.62 13.78 20.76 93.40 29.44 93.40 20.76
JXVL Jacksonville Bancorp of TX 10.62 28.27 0.59 13.37 18.00 79.43 13.27 79.43 18.00
LXMO Lexington B&L Fin. Corp. of MO 10.00 12.65 0.62 14.27 16.13 70.08 20.62 70.08 16.39
LONF London Financial Corp. of OH 10.50 5.55 0.37 14.81 NM 70.90 14.79 70.90 NM
FFFD North Central Bancshares of IA 11.00 44.12 0.65 13.72 16.92 80.17 23.15 80.17 18.03
PFFB PFF Bancorp of Pomona CA 11.44 226.94 0.10 14.57 NM 78.52 11.30 79.44 NM
PHFC Pittsburgh Home Fin. of PA 10.37 22.63 0.54 13.58 19.20 76.36 12.55 76.36 19.20
RELI Reliance Bancshares Inc of WI 7.87 20.16 0.29 11.06 NM 71.36 40.01 71.16 NM
SSB Scotland Bancorp of NC 12.37 22.76 0.38 14.38 NM 86.02 32.32 86.02 NM
SSM Stone Street Bancorp of NC 16.87 30.79 0.43 21.43 NM 78.72 26.52 78.72 NM
WHGB WHG Bancshares of MD 11.00 77.82 0.36 14.20 NM 77.46 15.95 77.46 NM
WWFC Westwood Fin. Corp. of NJ 10.38 6.72 0.99 14.61 10.48 71.05 7.61 82.97 10.48
YFCB Yonkers Fin. Corp. of NY 9.38 33.50 0.60 13.07 15.63 71.77 13.92 71.77 14.21
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -----------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
---------------- -------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ------ ------- ------ ------- ------- ------- ------- ------- -------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.35 1.98 25.53 1,297 13.25 0.95 0.87 8.08 0.81 7.29
Converted Last 3 Mths (no MHC) 0.06 0.48 2.77 243 24.57 0.77 0.83 4.37 0.84 4.47
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
AMFC AMB Financial Corp. of IN 0.00 0.00 0.00 81 20.06 0.71 0.49 4.30 0.49 4.30
CNSB CNS Bancorp of MO 0.00 0.00 0.00 101 23.07 0.70 0.74 3.20 0.62 2.70
CATB Catskill Fin. Corp. of NY 0.00 0.00 0.00 279 27.79 NA 0.96 3.44 1.10 3.96
CBK Citizens First Fin.Corp. of IL 0.00 0.00 0.00 252 15.57 NA 0.63 4.01 0.68 4.37
CFTP Community Fed. Bancorp of MS 0.00 0.00 0.00 201 33.10 0.34 1.17 6.28 1.14 6.13
CRZY Crazy Woman Creek Bncorp of WY 0.00 0.00 0.00 47 32.70 0.70 0.92 4.63 0.78 3.95
FFDF FFD Financial Corp. of OH 0.00 0.00 0.00 73 28.03 NA 1.04 3.69 1.04 3.69
FCB Falmouth Co-Op Bank of MA 0.00 0.00 0.00 88 24.56 NA 0.45 2.40 0.47 2.50
FBER First Bergen Bancorp of NJ 0.00 0.00 0.00 259 16.52 2.49 0.28 3.06 0.42 4.59
FFBH First Fed. Bancshares of AR 0.00 0.00 0.00 498 15.90 0.09 0.99 6.24 0.99 6.24
FFFB First Fed. Fin. Bancorp of OH 0.00 0.00 0.00 59 18.05 0.09 0.67 3.69 0.67 3.69
GAF GA Financial Corp. of PA 0.00 0.00 0.00 569 22.44 0.19 0.58 4.73 0.78 6.30
GSFC Green Street Fin. Corp. of NC 0.00 0.00 0.00 188 31.53 0.16 1.42 4.50 1.42 4.50
JXVL Jacksonville Bancorp of TX 0.50 4.71 NM 213 16.70 0.85 0.79 6.76 0.79 6.75
LXMO Lexington B&L Fin. Corp. of MO 0.00 0.00 0.00 61 29.42 1.15 1.28 4.34 1.26 4.27
LONF London Financial Corp. of OH 0.00 0.00 0.00 38 20.86 0.21 0.57 4.73 0.57 4.73
FFFD North Central Bancshares of IA 0.25 2.27 38.46 191 28.87 0.13 1.48 7.67 1.39 7.19
PFFB PFF Bancorp of Pomona CA 0.00 0.00 0.00 2,008 14.39 2.29 0.10 1.37 0.10 1.37
PHFC Pittsburgh Home Fin. of PA 0.00 0.00 0.00 180 16.43 1.53 0.65 3.98 0.65 3.98
RELI Reliance Bancshares Inc of WI 0.00 0.00 0.00 50 56.23 NA 1.47 2.62 1.47 2.62
SSB Scotland Bancorp of NC 0.00 0.00 0.00 70 37.58 NA 1.09 3.96 1.09 3.96
SSM Stone Street Bancorp of NC 0.44 2.61 NM 116 33.68 0.31 0.77 3.04 0.77 3.04
WHGB WHG Bancshares of MD 0.00 0.00 0.00 112 20.59 0.35 0.64 5.18 0.54 5.18
WWFC Westwood Fin. Corp. of NJ 0.25 2.41 25.25 88 10.71 NA 0.73 6.78 0.73 6.78
YFCB Yonkers Fin. Corp. of NY 0.00 0.00 0.00 241 19.39 1.63 0.89 4.59 0.98 5.05
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to
estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, Inc.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.17
C. The Acquisition Market
----------------------
Also considered in the valuation was the potential impact on Chester
Savings' stock price of recently completed and pending acquisitions of other
thrifts operating in Chester Savings' market area. As shown in Exhibit IV-4,
there were 14 Illinois thrifts acquired in 1994, 1995 and year-to-date 1996 and
three acquisitions are currently pending. In light of the Bank's strong pro
forma capital position, which would tend to make Chester Savings a less
attractive acquisition candidate, acquisition speculation is not expected to
have a material influence on the Bank's initial trading price. However, at the
same time, the fairly active acquisition market for Illinois thrifts, may imply
a certain degree of acquisition speculation for the Bank's stock. To the extent
that acquisition speculation may impact the Bank's offering, we have largely
taken this into account in selecting Illinois and other Mid-West based
companies, which operate in markets that have experienced a comparable level of
acquisition activity as the Bank's market area and, thus, are subject to the
same type of acquisition speculation that may influence Chester Savings' trading
price.
Taking these factors and trends into account, primarily recent trends
in the new issue market, market conditions overall, and recent trends in the
acquisition market, RP Financial concluded that no adjustment was appropriate in
the valuation analysis for purposes of marketing of the issue.
8. Management
----------
Chester Savings' management team has experience and expertise in all of the
key areas of the Bank's operations. Exhibit IV-5 provides summary resumes of
Chester Savings' Board of Directors and executive management. While the Bank
does not have the resources to develop a great deal of management depth, given
its small asset size and the significant impact acquiring significant depth
would have on operating expenses, management and the Board have been effective
in implementing an operating strategy that can be well managed by the Bank's
present management structure as indicated by Chester Savings' solid core
earnings and healthy capital position.
Similarly, the returns, capital positions, and other operating measures of
the Peer Group companies are indicative of well-managed financial institutions,
which have Boards and management teams that have been effective in implementing
conservative and competitive operating strategies. Therefore, on balance, we
concluded no valuation adjustment relative to the Peer Group was appropriate for
this factor.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.18
9. Effect of Government Regulation and Regulatory Reform
-----------------------------------------------------
Potential legislation may be impacting the pricing of thrifts including:
(1) recapitalizing SAIF through a special assessment, possibly coupled with
lower future annual deposit premiums; and, (2) recapturing post-1987 bad debt
reserves. Recent legislative developments seem to indicate such legislation
will not occur in 1996 as was previously widely believed. Since the Bank and
all ten of the Peer Group members are SAIF-insured, we believe any related
impact on the Bank's value has been implicitly accounted for in the pricing
ratios of the Peer Group. Comparatively, the Bank's conversion to a national
bank charter and full recapture of the bad debt reserve is considered to have
positive implications for the Bank, as it eliminates the uncertainty associated
with potentially having to recapture bad debt tax reserve in the future. The
related financial risk for the Peer Group companies is believed to be limited
given their strong capitalization, and such is expected to be the case for the
Bank. Exhibit IV-6 reflects the Bank's pro forma regulatory capital ratios. On
balance, RP Financial concluded that a slight upward adjustment to the Bank's
value was warranted for this factor.
Summary of Adjustments
- ----------------------
Overall, we believe the Bank's pro forma market value should be discounted
relative to the Peer Group as follows:
<TABLE>
<CAPTION>
Key Valuation Parameters: Valuation Adjustment
------------------------- --------------------
<S> <C>
Financial Condition No Adjustment
Profitability, Growth and Viability of Earnings Slight Downward
Asset Growth Moderate Downward
Primary Market Area Moderate Downward
Dividends No Adjustment
Liquidity of the Shares Slight Downward
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and Regulatory Reform Slight Upward
</TABLE>
Valuation Approaches
- --------------------
In applying the accepted valuation methodology promulgated by the OTS and
adopted by the FDIC, i.e., the pro forma market value approach, we considered
the three key pricing ratios in valuing Chester Savings' to-be-issued stock --
price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A") approaches
- -- all performed on a pro forma basis including the effects of the conversion
proceeds. In computing the pro forma impact of the conversion and the related
pricing ratios, we have incorporated the valuation parameters
<PAGE>
RP FINANCIAL, LC.
PAGE 4.19
disclosed in Chester Savings' prospectus for offering expenses, the effective
tax rate, and stock benefit plan assumptions (summarized in Exhibits IV-7 and
IV-8). A reinvestment rate of 5.63 percent was utilized, equal to the arithmetic
average of the Bank's average yield on interest-earnings assets and cost of
deposits for the three months ended March 31, 1996 (the reinvestment rate
calculation specified by OTS conversion guidelines). The 5.63 percent
reinvestment rate is reasonably similar (1) to the blended rate reflecting the
Bank's business plan as converted, incorporating the impact of deposit
withdrawals to fund a portion of the stock issued in conversion, and (2) the
current market rate on the short-term securities the proceeds would initially be
reinvested.
In our estimate of value, we assessed the relationship of the pro forma
pricing ratios relative to the Peer Group and the recent conversions.
RP Financial's valuation placed an emphasis on the following:
o P/E Approach. The P/E approach is generally the best indicator of
-------------
long-term value for a stock. Given the similarities between the Bank's
and the Peer Group's earnings and overall financial condition, the P/E
approach was carefully considered in this valuation. In applying the
P/E approach, we took into account reported and estimated core
earnings.
o P/B Approach. P/B ratios have generally served as a useful benchmark
-------------
in the valuation of thrift stocks, with the greater determinant of
long term value being earnings. RP Financial considered the P/B
approach to be a reliable indicator of value given current market
conditions, particularly the market for new conversions which often
exhibit P/E multiples that are well above industry averages and since
the P/E multiples do not reflect the actual impact of reinvestment,
leveraging and capital management strategies, we have modified the P/B
approach to exclude the impact of intangible assets (i.e.,
price/tangible book value or "P/TB"). Since the Bank has no goodwill
and the Peer Group has only a small amount of goodwill the resulting
differences in the P/B and P/TB ratios do not lead to different
valuation results.
o P/A Approach. P/A ratios are generally a less reliable indicator of
-------------
market value, as investors do not place significant weight on the size
of total assets as a determinant of market value. Furthermore, this
approach does not take into account the amount of stock purchases
funded by deposit withdrawals, thus understating the P/A ratio.
Investors place significantly greater weight on book value and
earnings -- which have received greater weight in our valuation
analysis. At the same time, the P/A ratio is an indicator of franchise
value, and, in the case of highly capitalized institutions, the high
P/A ratio limits the investment community's willingness to pay market
multiples for other pricing ratios when ROE is low.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the P/E and P/B approaches, RP Financial concluded that the
pro forma market value of the Bank's conversion stock is $15,500,000 at the
midpoint at this time.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.20
1. Price-to-Book ("P/B"). The application of the P/B valuation method
----------------------
requires calculating the Bank's pro forma market value by applying a valuation
P/B ratio to Chester Savings' pro forma book value. In deriving the Bank's pro
forma book value, an adjustment was made to account for the recapture of the bad
debt tax reserve necessitated by the Bank's conversion to a national bank
charter. This adjustment reduces the Bank's capital by approximately $0.951
million, or to $10.919 million, based on Chester Savings' equity position at
March 31, 1996. Based on the $15.5 million midpoint valuation, Chester Savings'
pro forma P/B and P/TB ratios were 65.72 percent. In comparison to the average
P/B and P/TB ratios for the Peer Group of 89.99 percent and 90.61 percent,
respectively, Chester Savings' valuation reflected discounts of 27.0 and 27.5
percent, respectively. RP Financial considered such discounts reasonable, in
light of the valuation adjustments referenced earlier.
Given the emphasis in the revised appraisal guidelines on limiting near
term aftermarket price increases in the stocks of converting institutions, RP
Financial also considered the pro forma P/B and P/TB ratios of recent
conversions in its valuation analysis. It is these companies that provide the
best proxy for aftermarket trading for a new issue such as Chester Savings'
conversion stock in that they share similar financial characteristics upon
completing their stock conversions. The pro forma P/B ratio is the key ratio
that investors have recently tended to emphasize in evaluating the trading of
new issues, based on many conversations with industry observers and investment
bankers. At the midpoint value of $15,500,000, Chester Savings' pro forma P/B
ratio of 65.72 percent was discounted by approximately 8.0 percent and 14.2
percent from the average of the recently completed stock conversions of 71.4
percent at closing (see Table 4.2) and 76.64 percent currently in the after-
market (see Table 4.3). The pricing in the upper portion of the range
approximates or exceeds the average closing ratios for the recent conversions
(see Table 4.2).
2. Price-to-Earnings ("P/E"). The application of the P/E valuation method
--------------------------
requires calculating the Bank's pro forma market value by applying a valuation
P/E multiple times the pro forma earnings base. Ideally, the pro forma earnings
base is composed principally of the Bank's recurring earnings base, that is,
earnings adjusted to exclude any one-time non-operating items, plus the
estimated after-tax earnings benefit of the reinvestment of net conversion
proceeds. Chester Savings' reported earnings equaled $931,000 for the twelve
months ended March 31, 1996. In deriving Chester Savings' core earnings, one
adjustment was made to reported earnings to account for the loss in net interest
income that will result from the planned repayment of approximately $10.0
million of repurchase agreements. Based on our discussions with management, it
was assumed that the repurchase agreements would be repaid with short-term
investments and other liquidity. The net interest rate spread maintained on the
funds to be used to repay the reverse repurchase agreements was calculated to
equal 0.79 percent (5.67 percent weighted average yield on short-term
investments, tax equivalent basis, versus 4.88 percent weighted average cost of
the repurchase agreements), which would result in a
<PAGE>
RP FINANCIAL, LC.
PAGE 4.21
reduction in net interest income of $79,000. On a tax effected basis, assuming
an effective tax rate of 38.0 percent, the reduction to core earnings was
$49,000. As shown below, Chester Savings' core earnings were determined to equal
$882,000 for the twelve months ended March 31, 1996. (Note: see Exhibit IV-9 for
the adjustments applied to the Peer Group's earnings in the calculation of core
earnings).
<TABLE>
<CAPTION>
Amount
------
<S> <C>
($000)
Net income $931
Adjustment for repayment of repurchase agreements(1) (49)
----
Core earnings estimate $882
</TABLE>
(1) Tax effected at 38.0 percent.
Based on Chester Savings' trailing twelve month reported and estimated core
earnings, and incorporating the impact of the pro forma assumptions discussed
previously, the Bank's pro forma P/E multiples at the $15,500,000 midpoint value
were 12.61 and 13.12 times, resulting in discounts of 30.1 percent and 32.5
percent, respectively, from the Peer Group averages of 18.05 and 19.43 times
reported and core earnings, respectively. The discounted earnings multiples
were consistent with valuation adjustments outlined earlier. In comparison to
all SAIF and Illinois publicly-traded thrifts, the Bank's midpoint P/E ratio
discount is much lower at 13.3 percent and 19.5 percent, respectively (based on
core earnings). Such discounts are substantially reduced or eliminated in the
upper portion of the range.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
------------------------
market value by applying a valuation P/A ratio to the Bank's pro forma asset
base, conservatively assuming no deposit withdrawals are made to fund stock
purchases. In all likelihood there will be deposit withdrawals, which results
in understating the pro forma P/A ratio which is computed herein. If the Bank
experiences typical deposit withdrawals in the range of 20 to 30 percent of the
offering, the Bank's P/A ratio could be expected to be as much as 5 percent
higher than computed pursuant to the OTS formula. Recognizing the pending
reduction in assets with the $10 million reduction in repurchase agreements, the
adjusted P/A ratio, before the impact of deposit withdrawals, approximates 11.04
percent at the $15.5 million value. With 30 percent deposit withdrawals, the
Bank's adjusted P/A ratio would exceed 13 percent, approximating the averages
for all SAIF and Illinois publicly-traded thrifts. At the midpoint of the
valuation range, Chester Savings' value equaled 10.72 percent of pro forma
assets based on the OTS formula. Comparatively, the Peer Group companies
exhibited an average P/A ratio of 16.05 percent.
<PAGE>
RP FINANCIAL, LC.
PAGE 4.22
* * * * * *
Given the emphasis in the revised appraisal guidelines on limiting the new
issue discount, RP Financial also considered the pro forma pricing ratios of
recent conversions both currently and at the time of conversion (see Tables 4.2
and 4.3). It is these companies (excluding the 3 second step conversions),
which perhaps provide the best proxy for after-market trading of the Bank's
stock. The Bank's pricing ratios over the range of value are consistent with
the medians of these companies at conversion, taking into account the Bank's
unique risks.
<TABLE>
<CAPTION>
Recent Conversions
Valuation Range at Closing(1)
---------------- ------------------
<S> <C> <C>
P/E (Reported Earnings) 11.7 - 15.8x 18.2x
P/B 61.2 - 73.2% 71.5%
P/A 9.2 - 13.8% 16.4%
</TABLE>
(1) Medians; excluding 3 second step conversions.
Source: Table 4.2.
Valuation Conclusion
- --------------------
Based on the foregoing, is our opinion that, as of June 14, 1996, the
aggregate pro forma market value of the Bank was $15,500,000 at the midpoint,
equal to 1,550,000 shares offered at $10.00 per share. Pursuant to the
conversion guidelines, the 15 percent offering range includes a minimum of
$13,175,000 and a maximum of $17,825,000. Based on the $10.00 per share
offering price, this valuation range equates to an offering of 1,317,500 shares
at the minimum to 1,782,500 shares at the maximum. The Holding Company's
offering also includes a provision for a super maximum, which if exercised,
would result in an offering size of $20,498,750, equal to 2,049,875 shares at
the $10.00 per share offering price. The comparative pro forma valuation ratios
relative to the Peer Group are shown in Table 4.4, and the key valuation
assumptions are detailed in Exhibit IV-7. The pro forma calculations for the
range are detailed in Exhibit IV-8.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Public Market Pricing
Chester Savings Bank, FSB and the Comparables
As of June 14, 1996
<TABLE>
<CAPTION>
Per Share Data
Market ---------------
Capitalization Book Pricing Ratios(3) Dividends(4)
--------------- --------------------------------------- -------------------
Price/ Market 12-Mth Value/ Amount/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield
-------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X) ($) (%)
Chester Savings Bank, FSB
- ------------------------- <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<S>
Superrange 10.00 20.50 0.66 13.66 15.26 73.19 13.75 73.19 15.81 0.20 2.00
Range Maximum 10.00 17.83 0.72 14.39 13.90 69.51 12.15 69.51 14.43 0.20 2.00
Range Midpoint 10.00 15.50 0.79 15.22 12.61 65.72 10.72 65.72 13.12 0.20 2.00
Range Minimum 10.00 13.18 0.89 16.34 11.21 61.20 9.24 61.20 11.68 0.20 2.00
SAIF-Insured Thrifts(7)
- -----------------------
Averages 17.21 119.16 1.25 16.52 14.29 104.98 13.13 108.21 15.14 0.35 1.98
Medians --- --- --- --- 14.29 99.35 11.84 102.42 15.42 --- ---
All Non-MHC State of IL(7)
- --------------------------
Averages 17.70 72.59 1.21 18.68 14.81 93.81 12.89 94.65 16.30 0.28 1.51
Medians --- --- --- --- 15.63 93.05 11.30 93.18 16.45 --- ---
Comparable Group Averages
- -------------------------
Averages 15.42 31.78 0.77 17.19 18.05 89.99 16.05 90.61 19.43 0.37 2.32
Medians --- --- --- --- 18.91 92.06 15.54 92.54 20.58 --- ---
State of IL
- ------------
AVND Avondale Fin. Corp. of IL 13.00 52.20 0.93 15.35 13.98 84.69 9.00 84.69 20.00 0.00 0.00
CSBF CSB Financial Group Inc of IL 9.12 9.44 0.32 12.30 NM 74.15 22.90 74.15 NM 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 28.50 76.04 2.28 31.99 12.50 89.09 15.13 89.09 12.56 0.00 0.00
CBSB Charter Financial Inc. of IL 11.50 57.20 0.65 12.95 17.69 88.80 19.01 91.20 17.69 0.24 2.09
CBK Citizens First Fin.Corp. of IL 9.87 27.81 0.56 13.95 17.63 70.75 11.02 70.75 16.18 0.00 0.00
DFIN Damen Fin. Corp. of Chicago IL 11.50 45.62 0.44 14.34 NM 80.20 19.39 80.20 NM 0.24 2.09
FBCI Fidelity Bancorp of Chicago IL 16.62 51.27 0.98 16.91 16.96 98.29 11.84 98.64 18.07 0.24 1.44
FNSC Financial Security Corp. of IL(7) 25.37 38.66 1.41 25.83 17.99 98.22 14.11 98.22 19.37 0.00 0.00
FFBI First Financial Bancorp of IL 16.00 7.55 1.12 16.66 14.29 96.04 8.52 96.04 13.68 0.00 0.00
FMBD First Mutual Bancorp of IL 13.00 56.58 0.61 16.56 21.31 78.50 19.83 78.50 22.03 0.28 2.15
FFDP FirstFed Bancshares of IL 16.00 54.19 1.10 16.62 14.55 96.27 8.68 100.82 23.19 0.40 2.50
GTPS Great American Bancorp of IL 14.25 26.36 0.41 18.72 NM 76.12 22.40 76.12 NM 0.40 2.81
HNFC Hinsdale Financial Corp. of IL 25.00 67.25 1.58 20.20 15.82 123.76 9.86 127.68 16.45 0.00 0.00
HMCI Homecorp, Inc. of Rockford IL 17.50 19.71 1.12 18.41 15.63 95.06 5.77 95.06 23.03 0.00 0.00
KNK Kankakee Bancorp of IL 19.25 27.70 1.15 24.73 16.74 77.84 7.63 83.91 17.04 0.40 2.08
LBCI Liberty Bancorp of Chicago IL 23.87 59.36 1.45 25.66 16.46 93.02 8.86 93.28 16.46 0.60 2.51
MAFB MAF Bancorp of IL 24.25 127.17 3.11 20.91 7.80 115.97 6.42 115.97 7.58 0.32 1.32
NBSI North Bancshares of Chicago IL 15.75 18.46 0.54 16.92 NM 93.09 16.14 93.09 NM 0.40 2.54
SWBI Southwest Bancshares of IL 27.12 50.74 2.27 22.42 11.95 120.96 14.52 120.96 12.00 1.08 3.98
SPBC St. Paul Bancorp, Inc. of IL 23.12 428.88 1.95 20.64 11.86 112.02 10.35 112.40 12.17 0.40 1.73
STND Standard Fin. of Chicago IL 15.12 253.49 1.03 16.05 14.68 94.21 11.59 94.26 16.26 0.32 2.12
SFSB SuburbFed Fin. Corp. of IL 17.50 22.07 1.41 20.52 12.41 85.28 6.09 85.78 14.46 0.32 1.83
WCBI WestCo Bancorp of IL 21.62 57.90 1.50 18.07 14.41 119.65 18.72 119.65 14.51 0.45 2.08
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------ -------------------------------------------------------
Reported Core
Payout Total Equity/ NPAs/ --------------- ---------------
Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------------ ------- ------- ------- ------- ------- ------- -------
(%) ($Mil) (%) (%) (%) (%) (%) (%)
Chester Savings Bank, FSB
- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Superrange 30.52 155 18.79 0.28 0.90 4.80 0.87 4.63
Range Maximum 27.81 153 17.48 0.28 0.87 5.00 0.84 4.82
Range Midpoint 25.23 150 16.31 0.29 0.85 5.21 0.82 5.01
Range Minimum 22.42 148 15.10 0.29 0.82 5.46 0.79 5.24
SAIF-Insured Thrifts(7)
- -----------------------
Averages 25.53 1,297 13.25 0.95 0.87 8.08 0.81 7.29
Medians --- --- --- --- --- --- --- ---
All Non-MHC State of IL(7)
- --------------------------
Averages 24.31 680 14.40 0.58 0.78 6.48 0.75 6.09
Medians --- --- --- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 36.01 209 17.96 0.50 0.84 4.48 0.75 4.04
Medians --- --- --- --- --- --- --- ---
State of IL
- -----------
AVND Avondale Fin. Corp. of IL 0.00 580 10.63 0.85 0.65 6.66 0.45 4.65
CSBF CSB Financial Group Inc of IL 0.00 41 30.89 0.78 0.82 3.62 0.82 3.62
CBCI Calumet Bancorp of Chicago IL 0.00 502 16.99 1.23 1.21 7.25 1.20 7.22
CBSB Charter Financial Inc. of IL 36.92 301 21.41 0.49 1.12 6.95 1.12 6.95
CBK Citizens First Fin.Corp. of IL 0.00 252 15.57 NA 0.63 4.01 0.68 4.37
DFIN Damen Fin. Corp. of Chicago IL 54.55 235 24.17 0.14 0.81 5.02 0.79 4.91
FBCI Fidelity Bancorp of Chicago IL 24.49 433 12.05 0.53 0.77 5.66 0.73 5.31
FNSC Financial Security Corp. of IL(7) 0.00 274 14.36 2.77 0.77 5.66 0.71 5.26
FFBI First Financial Bancorp of IL 0.00 89 8.87 0.40 0.69 6.63 0.72 6.93
FMBD First Mutual Bancorp of IL 45.90 285 25.26 0.09 0.98 4.24 0.95 4.10
FFDP FirstFed Bancshares of IL 36.36 624 9.02 0.14 0.63 6.51 0.39 4.08
GTPS Great American Bancorp of IL NM 118 29.42 0.45 0.68 2.82 0.68 2.82
HNFC Hinsdale Financial Corp. of IL 0.00 682 7.97 0.13 0.62 8.20 0.59 7.88
HMCI Homecorp, Inc. of Rockford IL 0.00 342 6.07 3.24 0.37 6.28 0.25 4.26
KNK Kankakee Bancorp of IL 34.78 363 9.80 0.59 0.50 4.56 0.49 4.48
LBCI Liberty Bancorp of Chicago IL 41.38 670 9.53 0.12 0.56 5.51 0.56 5.51
MAFB MAF Bancorp of IL 10.29 1,980 5.54 0.46 0.88 15.21 0.90 15.65
NBSI North Bancshares of Chicago IL 74.07 114 17.34 NA 0.57 3.03 0.52 2.75
SWBI Southwest Bancshares of IL 47.58 350 12.00 0.25 1.19 8.94 1.19 8.90
SPBC St. Paul Bancorp, Inc. of IL 20.51 4,143 9.24 0.74 0.88 9.69 0.86 9.44
STND Standard Fin. of Chicago IL 31.07 2,187 12.31 0.14 0.87 6.21 0.79 5.61
SFSB SuburbFed Fin. Corp. of IL 22.70 362 7.14 0.27 0.51 7.04 0.44 6.04
WCBI WestCo Bancorp of IL 30.00 309 15.65 0.58 1.32 8.47 1.31 8.41
</TABLE>
Comparable Group
- ----------------
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Public Market Pricing
Chester Savings Bank, FSB and the Comparables
As of June 14, 1996
<TABLE>
<CAPTION>
Per Share Data
Market ---------------
Capitalization Book Pricing Ratios(3) Dividends(4)
--------------- --------------------------------------- ---------------
Price/ Market 12-Mth Value/ Amount/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X) ($) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASBP ASB Financial Corp. of OH 15.00 25.71 0.64 15.04 23.44 99.73 23.01 99.73 23.44 0.30 2.00
EFBI Enterprise Fed. Bancorp of OH 14.25 29.71 0.99 15.52 14.39 91.82 14.31 91.99 20.96 0.00 0.00
FFHH FSF Financial Corp. of MN 12.12 46.80 0.48 13.51 NM 89.71 14.32 89.71 NM 0.50 4.13
FBCI Fidelity Bancorp of Chicago IL 16.62 51.27 0.98 16.91 16.96 98.29 11.84 98.64 18.07 0.24 1.44
BDJI First Fed. Bancorp. of MN 13.00 10.65 0.85 17.65 15.29 73.65 10.59 73.65 15.29 0.00 0.00
GTPS Great American Bancorp of IL 14.25 26.36 0.41 18.72 NM 76.12 22.40 76.12 NM 0.40 2.81
LARK Landmark Bancshares of KS 15.25 29.75 0.94 17.05 16.22 89.44 15.38 89.44 18.60 0.40 2.62
NBSI North Bancshares of Chicago IL 15.75 18.46 0.54 16.92 NM 93.09 16.14 93.09 NM 0.40 2.54
SMBC Southern Missouri Bncrp of MO 14.75 25.43 0.78 15.41 18.91 95.72 15.70 95.72 20.21 0.50 3.39
WOFC Western Ohio Fin. Corp. of OH 23.25 53.68 1.10 25.19 21.14 92.30 16.80 98.02 NM 1.00 4.30
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------ -------------------------------------------------------
Reported Core
Payout Total Equity/ NPAs/ --------------- ---------------
Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ------- ------- ------- ------- ------- ------- -------
(%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASBP ASB Financial Corp. of OH 46.88 112 23.07 1.48 1.03 4.75 1.03 4.75
EFBI Enterprise Fed. Bancorp of OH 0.00 208 15.58 0.01 1.12 5.47 0.77 3.75
FFHH FSF Financial Corp. of MN NM 327 15.97 0.09 0.62 3.34 0.62 3.34
FBCI Fidelity Bancorp of Chicago IL 24.49 433 12.05 0.53 0.77 5.66 0.73 5.31
BDJI First Fed. Bancorp. of MN 0.00 101 14.38 0.23 0.70 5.24 0.70 5.24
GTPS Great American Bancorp of IL NM 118 29.42 0.45 0.68 2.82 0.68 2.82
LARK Landmark Bancshares of KS 42.55 193 17.20 0.37 0.91 5.28 0.79 4.60
NBSI North Bancshares of Chicago IL 74.07 114 17.34 NA 0.57 3.03 0.52 2.75
SMBC Southern Missouri Bncrp of MO 64.10 162 16.40 0.97 0.88 5.01 0.82 4.69
WOFC Western Ohio Fin. Corp. of OH NM 320 18.20 0.34 1.10 4.22 0.83 3.18
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) EPS (common earnings per share) is based on actual trailing twelve month
data and is shown on a pro forma basis.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets;
P/TB = Price to Tangible Book; and P/CORE = Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity and
total assets balances.
(7) Excludes from averages and medians those companies the subject of actual
or rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, Inc.
<PAGE>
EXHIBITS
<PAGE>
RP FINANCIAL, L.C.
LIST OF EXHIBITS
Exhibit
Number Description
- ------- -----------
I-1 Map of Office Locations
I-2 Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 Gap Table
I-8 Loan Portfolio Composition
I-9 Loan Originations, Purchases, and Sales
I-10 Contractual Maturity By Loan Type
I-11 Non-Performing Assets
I-12 Deposit Composition
I-13 Time Deposit Rate/Maturity
I-14 Borrowings
II-1 List of Offices
II-2 Historical Interest Rates
III-1 General Characteristics of Publicly-Traded
Institutions
III-2 Financial Analysis of Publicly-Traded Illinois Thrifts
<PAGE>
RP FINANCIAL, L.C.
LIST OF EXHIBITS(continued)
III-3 Financial Analysis of Peer Group Candidates
III-4 Peer Group Market Area Comparative Analysis
IV-1 Stock Prices: June 14, 1996
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Directors and Executive Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet
IV-8 Pro Forma Effect of Conversion Proceeds
IV-9 Peer Group Core Earnings Analysis
V-1 Firm Qualifications Statement
<PAGE>
EXHIBIT I-1
Chester Savings Bank, FSB
Map of Office Locations
<PAGE>
[MAP OF COUNTY-TOWN ILLINOIS]
<PAGE>
[MAP OF COUNTY-TOWN MISSOURI]
<PAGE>
EXHIBIT I-2
Chester Savings Bank, FSB
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Chester Savings Bank, FSB
Key Operating Ratios
<TABLE>
<CAPTION>
At or for the
Three Months
Ended March 31, At or for the Year Ended December 31,
--------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
KEY OPERATING RATIOS:
Performance Ratios:
Return on average assets (net
income divided by average assets).......... 0.72% 0.91% 0.73% 0.69% 0.79%(5) 0.68% 0.80%
Return on average equity (net
income divided by average equity).......... 8.28 11.60 8.94 9.76 12.15(5) 11.31 15.72
Interest rate spread (difference
between average yield on interest
-earning assets and average cost of
interest-bearing liabilities)(6)............ 2.63 2.49 2.43 2.45 2.45 2.49 2.19
Net interest margin (net interest
income as a percentage of average......
interest-earning assets)(7)................. 2.89 2.74 2.70 2.62 2.65 2.71 2.43
Non-interest expense to
average assets............................. 1.80 1.65 1.70 1.66 1.61 1.62 1.45
Average interest-earning assets to......
average interest-bearing liabilities........ 106.47 106.10 106.48 104.91 104.66 104.29 103.60
Asset Quality:
Allowance for loan losses to total......
loans at end of period...................... 0.71 0.42 0.68 0.42 0.34 0.28 0.22
Ratio of allowance for loan
losses to non-performing loans.............. 178.38 65.85 244.79 64.65 59.53 38.78 0.16
Net charge-offs to average outstanding
loans during the period..................... -- -- 0.03 0.05 0.01 0.06 0.04
Ratio of non-performing assets to.......
total assets(8)............................. 0.32 0.33 0.27 0.31 0.44 0.84 1.24
Capital Ratios:
Average equity to average assets............. 8.65 7.81 8.15 7.12 6.53 6.01 5.10
Equity to assets at end of period............ 8.68 8.08 8.69 7.53 6.85 6.32 5.57
</TABLE>
Source: Chester Savings' Prospectus.
<PAGE>
EXHIBIT I-4
CHESTER SAVINGS BAN, FSB
INVESTMENT PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
At March 31, At December 31,
-------------------------------------------------
1996 1995 1994
-------------------- ---------------------- -----------------------
Carrying Percent of Carrying Percent of Carrying Percent of
Value Portfolio Value Portfolio Value Portfolio
-------- ---------- -------- ---------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Investment securities:
Available for sale (at market value)-
securities of U.S. government............. $17,412 30.3% $ 6,524 11.3% $ -- --%
------- ------- ------- ------- -------- ---------
Held to maturity (at cost):
Securities of U.S. government............. -- -- -- -- 11,743 18.2
Securities of U.S. agencies............... 6,947 12.1 10,017 17.4 7,392 11.5
Mortgage-backed bonds..................... 8,071 14.0 8,606 15.0 7,296 11.3
Securities of states and municipalities... 13,171 22.9 13,199 22.9 14,679 22.8
------- ------ ------- ------- -------- --------
Total investment securities held to
maturity............................... 28,189 49.0 31,822 55.3 41,110 63.8
------- ------ ------- ------- -------- --------
Total investment securities............. 45,601 79.3 $38,346 66.6 41,110 63.8
------- ------ ------- ------- -------- --------
Interest-bearing deposits...................... 1,678 2.9 3,493 6.1 1,623 2.5
Federal funds sold............................. 5,500 9.5 5,400 9.4 2,500 3.9
Certificates of deposit........................ 4,142 7.2 9,762 16.9 18,582 28.9
FHLB stock, at cost............................ 622 1.1 604 1.0 595 0.9
------- ------ ------- ------- -------- --------
Total investments....................... $57,543 100.00% $57,605 100.00% $64,410 100.00%
======= ======= ======= ======== ======== =========
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1996
-----------------------------------------------------------------------------------
More than More than
One Year or Less One to Five Years Five to Ten Years More than Ten Years
------------------- ------------------- ------------------- --------------------
Weighted Weighted Weighted Weighted
Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield
-------- ------- -------- ------- -------- ------ -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment securities:
Available for sale (at market value)-
securities of U.S. government............ $ 3,986 4.98% $13,426 5.58% $ -- --% $ -- --%
Held to maturity (at amortized cost):
Securities of U.S. agencies............... 1,548 4.52 5,399 6.09 -- -- -- --
Mortgage-backed bonds.... 7,571 5.58 500 4.88 -- -- -- --
Securities of states and municipalities(1) 4,882 5.63 7,469 6.05 705 7.47 115 9.84
------- ------- ------- -----
Total investment securities.............. $17,987 5.37% $26,794 5.80% $ 705 7.47% $115 9.84%
======= ======= ======= =====
</TABLE>
_________________
(1) Considers tax equivalent basis of tax exempt state and municipal
securities.
Source: Chester Savings' prospectus.
<PAGE>
EXHIBIT I-5
Chester Savings Bank, FSB
Yields and Costs
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1996 1995
------------------------------ ------------------------------
At Average Average
March 31, Average Yield/ Average Yield/
1996 Balance Interest Cost Balance Interest Cost
----------- ------- -------- ------ ------- -------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable, net (1)................... 8.74% $ 56,127 $1,244 8.87% $ 57,986 $1,231 8.49%
Investments, net (2)(6)..................... 5.20 41,357 532 5.15 45,211 578 5.11
Mortgage-backed securities, net............. 6.46 35,807 263 6.66 12,783 230 7.20
Interest-bearing deposits (3)............... 5.37 17,411 241 5.54 17,729 205 4.63
-------- ----- -------- ------
Total interest-earning assets............. 6.89 130,702 2,280 6.98 133,709 2,244 6.71
---- ----- ----- ------ ----
Non-interest-earning assets................... 5,561 4,978
------- -------
Total assets.............................. $136,263 $138,687
======== ========
INTEREST-BEARING LIABILITIES:
Deposits.................................... 4.28 $107,759 1,152 4.28 $126,024 1,329 4.22
Reverse repurchase agreements............... 4.44 15,000 183 4.88 -- -- --
-------- ----- ------- -----
Total interest-bearing liabilities........ 4.30 122,759 1,335 4.35 126,024 1,329 4.22
---- ----- ---- ----- ----
Non-interest-bearing liabilities............ 1,713 1,831
-------- -------
Total liabilities......................... 124,472 127,855
Retained earnings........................... 11,791 10,832
-------- -------
Total liabilities and retained earnings... $136,263 $138,687
======= =======
Net interest income........................ $ 945 $915
====== ====
Interest rate spread (4)(7)................ 2.59% 2.63% 2.49%
==== ===== =====
Net interest margin (5)(8)................. N/A 2.89% 2.74%
==== ===== =====
Ratio of average interest-earning assets to
average interest-bearing liabilities ...... 106.47% 106.10%
====== ======
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------
1996 1995
------------------------------ ------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------ ------- -------- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable, net (1)................... $57,326 $ 5,026 8.77% $ 58,698 $ 4,832 8.23%
Investments, net (2)(6)..................... 42,852 2,179 5.08 41,537 1,864 4.49
Mortgage-backed securities, net............. 13,609 955 7.02 10,972 770 7.02
Interest-bearing deposits (3)............... 18,316 875 4.78 26,272 1,230 4.68
------- ----- ------- -----
Total interest-earning assets............. 132,103 9,035 6.84 137,479 8,696 6.33
----- ---- ----- ----
Non-interest-earning assets................... 5,165 5,521
------- -------
Total assets.............................. $137,268 $143,000
======== ========
INTEREST-BEARING LIABILITIES:
Deposits.................................... $120,308 5,280 4.39 $131,046 5,089 3.88
Reverse repurchase agreements............... 3,750 194 5.17 -- -- --
------- ----- ------- -----
Total interest-bearing liabilities........ 124,058 5,474 4.41 131,046 5,089 3.88
----- ---- ----- ----
Non-interest-bearing liabilities............ 2,016 1,775
------- -------
Total liabilities......................... 126,074 132,821
Retained earnings........................... 11,194 10,179
------- -------
Total liabilities and retained earnings $137,268 $143,000
======== ========
Net interest income........................ $3,561 $3,607
====== ======
Interest rate spread (4)(7)................ 2.43% 2.45%
==== ====
Net interest margin (5)(8)................. 2.70% 2.62%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities ...... 106.48% 104.91%
====== ======
</TABLE>
_________________
(1) Average balance includes non-accrual loans.
(2) Includes FHLB stock and investment securities.
(3) Includes interest-bearing deposits, federal funds sold, and certificates of
deposit.
(4) Represents the difference between the average yield on interest-earning
assets and the average cost of interest-bearing liabilities.
(5) Represents net interest income as a percentage of average interest-earning
assets.
(6) Does not consider tax equivalent basis of tax exempt state and municipal
securities. Average yield on investment securities, after considering tax
equivalent basis of such securities, is 5.67%, 5.57%, 5.62% and 5.04% for
the three months ended March 31, 1996 and 1995 and the years ended December
31, 1995 and 1994, respectively.The tax equivalent yield on such securities
was 5.89%, 5.56%, 5.87% and 5.69% for the three months ended March 31, 1996
and 1995 and the years ended December 31, 1995 and 1994, respectively.
(7) Does not consider tax-equivalent basis of tax exempt state and municipal
securities. Interest rate spread, after considering tax equivalent basis of
such securities, is 2.79%, 2.65%, 2.60% and 2.61% for the three months
ended March 31, 1996 and 1995 and the years ended December 31, 1995 and
1994, respectively.
(8) Does not consider tax-equivalent basis of tax exempt state and municipal
securities. Net interest margin, after considering tax equivalent basis of
such securities, is 2.89%, 2.74%, 2.87% and 2.79% for the three months
ended March 31, 1996 and 1995 and the years ended December 31, 1995 and
1994, respectively.
Source: Chester Savings' prospectus.
<PAGE>
EXHIBIT I-6
Chester Savings Bank, FSB
Loan Loss Allowance Activity
<TABLE>
<CAPTION>
Three Months
Ended March31, Year Ended December 31,
-------------------- -------------------------
1996 1995 1995 1994
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Allowances at beginning of period........ $390 $246 $ 246 $ 207
---- ---- ----- -----
Provision for loan losses(1)............. 7 (2) 161 69
Recoveries............................... -- -- -- --
Charge-offs:
Residential real estate................. -- -- -- 23
Consumer................................ 1 -- 17 7
---- ---- ----- -----
Total charge-offs..................... 1 -- 17 30
---- ---- ----- -----
Allowance at end of period............... $396 $244 $ 390 $ 246
==== ==== ===== =====
Ratio of allowance to total
loans outstanding at the
end of the period....................... 0.71% 0.42% 0.68% 0.42%
==== ==== ===== ====
Ratio of net charge-offs to average
loans outstanding during the period..... --% --% 0.03% 0.05%
==== ==== ===== ====
</TABLE>
_________
(1) See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Comparison of Operating Results for the Years
Ended December 31, 1995 and 1994 -- Provision for Loan Losses" for a
discussion of the change between 1995 and 1994.
Source: Chester Savings' prospectus.
<PAGE>
EXHIBIT 1-7
Chester Savings Bank, FSB
Gap Table
<TABLE>
<CAPTION>
Within Over Over Over Over
Six 6 Months 1-3 3-5 5-10 10
Months to One Year Years Years Years Years Total
------ ----------- ----- ----- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Fixed-rate mortgage loans...................... $ 5,416 $ 4,385 $10,819 $ 5,093 $ 4,419 $ 1,103 $ 31,235
Adjustable-rate mortgage loans................. 10,436 7,502 769 -- -- -- 18,707
Motgage-backed securities...................... 2,919 2,178 6,313 3,935 1,561 -- 16,906
Consumer loans................................. 1,856 983 2,945 450 -- -- 6,234
Investments, net............................... 20,515 4,807 26,881 4,480 860 -- 57,543
------ ------ ------ ------ ----- ----- -------
Total rate sensitive assets.................. 41,142 19,855 47,727 13,958 6,840 1,103 130,625
------ ------ ------ ------ ----- ----- -------
Interest-bearing liabilities
Deposits:
Regular savings and NOW accounts............. 3,658 2,994 7,444 3,342 2,354 368 20,160
Money market deposit accounts................ 9,652 4,826 4,524 283 19 -- 19,304
Certificates of deposit...................... 29,194 9,641 29,184 1,032 -- -- 69,051
Borrowings:
Repurchase agreements........................ 15,000 -- -- -- -- -- 15,000
------ ------ ------ ------ ----- ----- -------
Total rate sensitive liabilities............ 57,504 17,461 41,152 4,657 2,373 368 123,515
------ ------- ------- ------- ------- ------- -------
Excess (deficiency) of interest
sensitivity assets over interest
sensitivity liabilities...................... $(16,362) $ 2,394 $ 6,575 $ 9,301 $ 4,467 $ 735 $ 7,110
-------- ------- ------- ------- -------- ------- --------
Cumulative excess (deficiency) of
interest sensitivity assets.................. $(16,362) $(13,968) $(7,393) $ 1,908 $ 6,375 $ 7,110
-------- -------- -------- ------- ------- -------
Cumulative ratio of interest-earming assets
to interest-bearing liabilities.............. 71.55% 81.37% 93.63% 101.58% 105.18% 150.76%
Interest sensitivity gap to total assets....... (11.96) 1.75 4.81 6.80 3.26 .54
Ratio of interest-earning assets to
interest-bearing liabilities................. 71.55 113.71 115.98 299.72 288.24 299.73
Ratio of cumulative gap to total assets........ (11.96) (10.21) (5.40) 1.40 4.66 5.20
</TABLE>
Source: Chester Savings' prospectus.
<PAGE>
EXHIBIT 1-8
Chester Savings Bank, FSB
Loan Portfolio Composition
<TABLE>
<CAPTION>
At March 31, At December 31,
-----------------------------------------
1996 1995 1994
----------------- ------------------ -----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------- ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Type of Loan:
- ------------
Mortgage loans:
Conventional.................. $46,147 81.42% $ 47,213 81.45% $ 48,275 81.68%
FHA.......................... 322 0.57 344 0.59 405 0.69
Commercial................... 2,700 4.76 2,870 4.95 3,588 6.07
Construction................. 1,096 1.93 1,172 2.02 485 0.82
------- ----- ------- ----- ------- -----
Total mortgage loans........ 50,265 88.68 51,999 89.01 52,753 89.26
======= ===== ======= ===== ======= =====
Consumer loans:
Automobile................... 1,824 3.22 1,713 2.95 1,339 2.26
Home Inprovement............. 1,591 2.81 1,348 2.33 1,211 2.05
Credit cards................. 851 1.50 939 1.62 828 1.40
Savings account.............. 419 0.74 440 0.76 506 0.86
Other........................ 1,729 3.05 1,928 3.33 2,463 4.17
------- ----- ------- ----- ------- -----
Total consumer loans........ 6,414 11.32 6,368 10.99 6,347 10.74
------- ----- ------- ----- ------- -----
Total loans................. 56,679 100.00% 57,967 100.00% 59,100 100.00%
====== ====== ======
Less:
Loans in process............. 503 533 676
Deferred fees and discounts.. 26 23 21
Allowance for losses......... 396 390 246
-------- -------- --------
Loans receivable, net....... $55,754 $ 57,021 $ 58,157
======== ======== ========
Type of Security:
Residential real estate:
One- to four-family.......... $45,842 80.88% $47,201 81.43% 47,579 80.51%
Multi-family................. 583 1.03 600 1.03 764 1.29
Commercial real estate........ 2,700 4.76 2,870 4.95 3,588 6.07
Agriculture and land.......... 1,140 2.01 928 1.6 822 1.39
Consumer loans................ 6,414 11.32 6,368 10.99 6,347 10.74
------- ------ ------- ------ ------- ------
Total loans................. 56,679 100.00% 57,967 100.00% 59,100 100.00%
====== ====== ======
Less:
Loans in process............. 503 533 676
Deferred fees and discounts.. 26 23 21
Allowance for losses......... 396 390 246
------ -------- --------
Total loans................. $55,754 $ 57,021 $ 58,157
======= ======== ========
</TABLE>
Source: Chester Saving's prospectus.
<PAGE>
EXHIBIT 1-9
Chester Savings Bank, FSB
Loan Originations, Purchases, and Sales
<TABLE>
<CAPTION>
Three Months
Ended March, 31 Year Ended December 31,
----------------------- -----------------------
1996 1995 1995 1994
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Total loans at beginning
of period............................... $57,021 $58,157 $58,157 $61,193
------- ------- ------- -------
Loans originated:
Single-family residential............... 1,417 1,040 6,349 3,833
Commercial real estate.................. - 69 57 1,436
Construction loans...................... 235 799 2,262 699
Agriculture and land.................... 182 18 364 278
Consumer................................ 1,528 1,405 6,249 6,791
------- ------- ------- -------
Total loans originated............... 3,362 3,331 15,281 13,037
------- ------- ------- -------
Loan principal repayments................. 4,624 3,589 16,063 16,157
Increase (decrease)in
other items, net........................ (5) (13) (354) 84
------- ------- ------- -------
Total loans at
end of period........................... $55,754 $57,886 $57,021 $58,157
------- ------- ------- -------
</TABLE>
Source: Chester Savings' prospectus.
<PAGE>
EXHIBIT I-10
Chester Savings Bank, FSB
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
After After After
During the Year 3 Years 5 Years 10 Years
Ended March 31, Through Through Through Beyond
----------------------
1997 1998 1999 5 Years 10 Years 15 Years 15 Years Total
---- ---- ---- ------- -------- -------- -------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate mortgage...... $ 165 $130 $ 566 $1,300 $10,589 $17,989 $15,730 $46,469
Commercial real estate.... 238 17 295 174 969 525 482 2,700
Construction.............. 1,096 -- -- -- -- -- -- 1,096
Home improvement.......... 97 188 479 476 351 -- -- 1,591
Automobile................ 147 219 596 862 -- -- -- 1,824
Credit cards.............. 851 -- -- -- -- -- -- 851
Other..................... 937 389 224 418 180 -- -- 2,148
------ ----- ------ ------ ------- -------- -------- -------
Total loans............. $3,531 $943 $2,160 $3,230 $12,089 $18,514 $16,212 $56,679
====== ===== ====== ====== ======= ======== ======== =======
</TABLE>
Source: Chester Savings' prospectus.
<PAGE>
EXHIBIT I-11
Chester Savings Bank, FSB
Non-Performing Assets
<TABLE>
<CAPTION>
At March 31, At December 31,
---------------------
1996 1995 1994
----------- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Non-performing loans:
Loans accounted for on a non-accrual basis:
Real estate:
Residential................................ $ 123 $ 56 $ 337
Commercial................................. 50 49 --
Consumer.................................... 34 40 6
------ ------ -----
Total..................................... 207 145 343
------ ------ -----
Accruing loans which are contractually
past due 90 days or more:
Residential real estate..................... -- -- 37
Consumer.................................... 15 14 --
------ ------ -----
Total..................................... 15 14 37
------ ------ -----
Total non-performing loans................ 222 159 380
Real estate acquired by
foreclosure, net........................... 210 209 64
------ ------ -----
Total non-performing assets............... $ 432 $ 368 $ 444
====== ===== =====
Total non-performing loans to
net loans................................. 0.40% 0.28% 0.65%
====== ==== ====
Total allowance for loan losses
to non-performing loans................... 178.38% 244.79% 64.65%
====== ====== =====
Total non-performing assets to
total assets............................... 0.32% 0.27% 0.31%
====== ==== ====
</TABLE>
Source: Chester Savings' prospectus.
<PAGE>
EXHIBIT I-12
Chester Savings Bank, FSB
Deposit Composition
<TABLE>
<CAPTION>
At March 31, At December 31,
----------------------------- -----------------------------------------------
1996 1995 1994
----------------------------- ---------------------------- -----------------
Percent Percent Percent
of Increase of Increase of
Amount Total (Decrease) Amount Total (Decrease) Amount Total
------ ----- ---------- ------ ----- ---------- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing checking........ $ 35 0.03% $ (13) $ 48 0.04% $ (15) $ 63 0.05%
NOW checking......................... 9,155 8.44 274 8,881 8.32 195 8,686 6.70
Passbook............................. 10,970 10.11 501 10,469 9.81 (970) 11,439 8.82
Money market demand(1)............... 19,304 17.79 2,648 16,656 15.61 (15,905) 32,561 25.10
Fixed-rate certificates which........
mature in the year ending(2)(3):
Within 1 year...................... 42,540 39.20 (3,888) 46,428 43.51 (5,031) 51,459 39.67
After 1 year, but within 2 years... 15,941 14.69 2,751 13,190 12.36 (5,824) 19,014 14.66
After 2 years, but within 5 years.. 10,570 9.74 (476) 11,046 10.35 4,556 6,490 5.00
-------- ------ ------- -------- ------ -------- -------- ------
Total........................ $108,515 100.00% $ 1,797 $106,718 100.00% $(22,994) $129,712 100.00%
======== ====== ======= ======== ====== ======== ======== ======
</TABLE>
______________
(1) The reduction in the balance of money market demand accounts was the
result of a $15.0 million transfer to reverse repurchase agreements by
Gilster-Mary Lee during the year ended December 31, 1995.
(2) At March 31, 1996 and at December 31, 1995, and 1994, jumbo
certificates amounted to $5.3 million, $5.8 million and $7.5 million,
respectively.
(3) IRA accounts included in certificate balances are $8.8 million, $8.6
million and, $9.0 million at March 31, 1996 and December 31, 1995 and
1994, respectively.
Source: Chester Savings' prospectus
<PAGE>
EXHIBIT I-13
Chester Savings Bank, FSB
Time Deposit Rate/Maturity
<TABLE>
<CAPTION>
Amount Due
-----------------------------------
Percent
Over Over Over of Total
Less Than 1-2 2-3 3-4 Certificate
One Year Years Years Years Total Accounts
-------- ----- ----- ----- ----- --------
(In Thousands)
<S>
<C> <C> <C> <C> <C> <C>
2.00 - 3.99%............. $ 436 $ -- $ -- $ -- $ 436 0.63%
4.00 - 5.99%............. 39,652 15,914 9,906 654 66,126 95.77
6.00 - 7.99%............. 2,421 27 10 -- 2,458 3.56
8.00 - 9.99%............. 31 -- -- -- 31 0.04
------- ------- ------ ----- ------- ------
Total.................. $42,540 $15,941 $9,916 $654 $69,051 100.00%
======= ======= ====== ===== ======= ======
</TABLE>
Source: Chester Savings' prospectus.
<PAGE>
EXHIBIT I-14
Chester Savings Bank, FSB
Borrowings
<TABLE>
<CAPTION>
At March 31, At December 31,
------------------
1996 1995 1994
------------- ---- ----
<S> <C> <C> <C>
Weighted average rate paid on:
Securities sold under agreements to repurchase...... 4.44% 5.10% --
</TABLE>
<TABLE>
<CAPTION>
At or For the
Three Months
Ended At or For the Year
March 31, Ended December 31,
---------------- -------------------
1996 1995 1995 1994
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Maximum amount of borrowings outstanding
at any month end:
Securities sold under agreements to repurchase..... $15,000 -- $15,000 --
Approximate average short-term borrowings
outstanding with respect to:
Securities sold under agreements to repurchase.... $15,000 -- N/M(2) --
Approximate weighted average rate paid on:(1)
Securities sold under agreements to repurchase..... 4.88 -- 5.17% --
</TABLE>
______________________
(1) Computed using the weighted rates of each individual transaction.
(2) Not meaningful.
Source: Chester Savings' prospectus.
<PAGE>
EXHIBIT II-1
Chester Savings Bank, FSB
List of Offices
<TABLE>
<CAPTION>
Year Building Land Building
Location County Opened Owned/Leased Owned/Leased Square Footage Deposits
- -------- ------ ------ ------------ ------------ -------------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Main Office
- -----------
1112 State Street Randolph 1919 Owned Owned 10,345 $57,662
Chester, Illinois 62233
Branch Offices
- --------------
2467 West Main Jackson 1988 Leased(2) Leased 3,400 5,008
Carbondale, Illinois 62903
101 South Main Perry 1989(1) Owned Owned 1,950 9,819
Pinckneyville, Illinois 62274
165 West Broadway Randolph 1989(1) Owned Owned 11,142 26,712
Sparta, Illinois 62286
1414 South Main Randolph 1989(1) Owned Owned 1,032 5,572
Red Bud, Illinois 62278
1010 North Main Perry 1990 Owned Owned 3,900 3,742
Perryville, Missouri 63775
Loan Production Office
- ----------------------
125 South Broadview Plaza, Suite # 1 Cape Girardeau 1995 Leased(3) Leased 720 N/A
Cape Girardeau, Missouri 63703
</TABLE>
_____________
(1) Acquired in connection with the acquisition of Heritage Federal in 1989.
(2) Lease expires in 1997 with an option to renew.
(3) Lease expires in 1996 with an option to renew.
Source: Chester Savings' prospectus.
<PAGE>
EXHIBIT II-2
Historical Interest Rates
<PAGE>
HISTORICAL INTEREST RATES(1)
<TABLE>
<CAPTION>
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
- --------------- ----- ------ ------ -------
<S> <C> <C> <C> <C>
1991: Quarter 1 8.75% 5.92% 6.24% 8.26%
Quarter 2 8.50% 5.72% 6.35% 8.43%
Quarter 3 8.00% 5.22% 5.38% 7.80%
Quarter 4 6.50% 3.95% 4.10% 7.47%
1992: Quarter 1 6.50% 4.15% 4.53% 7.97%
Quarter 2 6.50% 3.65% 4.06% 7.79%
Quarter 3 6.00% 2.75% 3.06% 7.38%
Quarter 4 6.00% 3.15% 3.59% 7.40%
1993: Quarter 1 6.00% 2.95% 3.18% 6.93%
Quarter 2 6.00% 3.09% 3.45% 6.67%
Quarter 3 6.00% 2.97% 3.36% 6.03%
Quarter 4 6.00% 3.06% 3.59% 6.34%
1994: Quarter 1 6.25% 3.56% 4.44% 7.09%
Quarter 2 7.25% 4.22% 5.49% 7.61%
Quarter 3 7.75% 4.79% 5.94% 7.82%
Quarter 4 8.50% 5.71% 7.21% 7.88%
1995: Quarter 1 9.00% 5.86% 6.47% 7.43%
Quarter 2 9.00% 5.57% 5.63% 6.63%
Quarter 3 8.75% 5.42% 5.68% 6.51%
Quarter 4 8.50% 5.09% 5.14% 5.96%
1996: Quarter 1 8.25% 5.14% 5.38% 6.67%
As of June 14, 1996 8.25% 5.23% 5.81% 7.09%
</TABLE>
(1) End of period data.
Source: SNL Securities
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California Companies
- --------------------
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 49,782 335 12-31 10/72 26.62 2,995
GWF Great Western Fin. Corp. of CA NYSE CA,FL Div. 43,763 418 12-31 / 23.75 3,259
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 35,014 232 12-31 05/59 54.50 3,195
GLN Glendale Fed. Bk, FSB of CA NYSE CA Div. 14,368 148 06-30 10/83 18.50 816
CAL CalFed Inc. of Los Angeles CA NYSE CA,NV Div. 14,280 126 12-31 03/83 18.37 906
CSA Coast Savings Financial of CA NYSE California R.E. 8,240 89 12-31 12/85 32.62 606
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 4,653 52 12-31 01/71 20.75 352
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,166 25 12-31 12/83 17.50 186
WES Westcorp Inc. of Orange CA NYSE California Div. 3,077 25 12-31 05/86 18.25 472
BVFS Bay View Capital Corp. of CA OTC San Francisco CA M.B. 2,910 27 12-31 05/86 33.50 231
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,333 36 12-31 / 27.00 162
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,114 18 12-31 10/91 21.50 108
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,008 23 03-31 03/96 11.44 227
FRC First Republic Bancorp of CA (3) NYSE CA,NV M.B. 1,973 10 12-31 / 14.25 105
CFHC California Fin. Hld. Co. of CA OTC Central CA Thrift 1,278 22 12-31 04/83 20.87 97
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 858 14 12-31 04/94 9.62 39
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 773 9 12-31 / 8.50 22
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 754 12 06-30 06/95 9.75 64
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 693 8 06-30 12/93 14.37 56
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 442 11 12-31 / 16.00 37
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 333 6 06-30 06/95 8.62 24
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 319 6 12-31 02/95 11.87 41
NHSL NHS Financial, Inc. of CA OTC Central CA R.E. 293 3 12-31 / 10.87 27
PCCI Pacific Crest Capital of CA (3) OTC Southern CA R.E. 287 4 12-31 / 8.00 24
PSSB Palm Springs SB of CA OTC Southern CA Thrift 192 4 12-31 / 13.87 16
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 115 4 12-31 01/96 10.00 9
FSSB First FS&LA of San Bern. CA OTC San Bernard. CA Thrift 103 4 06-30 12/92 10.00 3
</TABLE>
Florida Companies
- -----------------
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Florida Companies (continued)
- -----------------------------
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 1,643 40 12-31 11/83 13.50 159
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,465 23 09-30 09/93 21.75 113
HOFL Home Financial Corp. of FL OTC Southern FL R.E. 1,227 8 09-30 10/94 13.62 337
HARB Harbor FSB, MHC of FL (45.7) OTC Eastern FL Thrift 933 22 09-30 01/94 25.75 127
FFFL Fidelity FSB, MHC of FL(47.2) OTC Southeast FL Thrift 792 20 12-31 01/94 13.25 89
BKUNA BankUnited SA of FL OTC Miami FL Thrift 738 6 09-30 12/85 7.50 43
CMSV Commty. Svgs, MHC of FL(47.6) OTC Southeast FL Thrift 632 17 09-30 10/94 15.25 74
SCSL Suncoast S&LA of Hollywood FL OTC Southeastern FL M.B. 466 4 06-30 11/85 6.12 12
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 331 7 12-31 01/94 18.50 49
FFFG F.F.O. Financial Group of FL OTC Central FL R.E. 306 10 12-31 10/88 2.81 24
FFPC Florida First Bancorp of FL OTC Northwestern FL Thrift 304 9 12-31 11/86 11.19 38
FPRY First Financial Bancorp of FL OTC Northern FL Thrift 240 6 09-30 03/88 21.25 19
FFML First Family Bank, FSB of FL OTC Central FL Thrift 153 D 5 06-30 10/92 21.00 11
Mid-Atlantic Companies
- ----------------------
DME Dime Savings Bank, FSB of NY (3) NYSE NY,NJ,FL M.B. 19,414 87 12-31 08/86 13.12 1,297
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 14,469 84 06-30 01/94 29.37 1,541
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 8,411 121 12-31 08/86 10.25 490
ASFC Astoria Financial Corp. of NY OTC New York City NY Thrift 6,708 46 12-31 11/93 27.37 600
COFD Collective Bancorp Inc. of NJ OTC Southern NJ Thrift 5,059 79 06-30 02/84 24.25 495
LISB Long Island Bancorp of NY OTC Long Island NY M.B. 4,834 36 09-30 04/94 30.12 749
RCSB RCSB Financial, Inc. of NY (3) OTC NY M.B. 4,111 31 11-30 04/86 25.62 346
ALBK ALBANK Fin. Corp. of Albany NY OTC NY,MA Thrift 3,333 57 06-30 04/92 27.25 371
ROSE TR Financial Corp. of NY OTC New York, NY Thrift 3,002 15 12-31 06/93 26.50 237
NYB New York Bancorp, Inc. of NY AMEX Southeastern NY Thrift 2,754 27 09-30 01/88 25.25 296
GRTR Greater New York SB of NY (3) OTC New York NY Div. 2,576 14 12-31 06/87 11.25 150
BKCO Bankers Corp. of NJ (3) OTC Central NJ Thrift 1,916 14 12-31 03/90 17.25 221
NWSB Northwest SB, MHC of PA(29.9) OTC Pennsylvania Thrift 1,767 46 06-30 11/94 11.75 275
MLFB MLF Bancorp of Villanova PA OTC Philadelphia PA M.B. 1,766 17 03-31 08/94 23.75 148
RELY Reliance Bancorp of NY OTC NYC NY Thrift 1,744 17 06-30 03/94 15.63 144
CMSB Cmnwealth SB, MHC of PA (46.3) OTC Philadelphia PA M.B. 1,658 35 06-30 01/94 21.50 186
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
- ----------------------------------
NSBK Northside SB of Bronx NY (3) OTC New York NY Thrift 1,580 17 09-30 04/86 36.25 175
JSBF JSB Financial, Inc. of NY OTC New York City R.E. 1,548 13 12-31 06/90 33.12 342
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,485 9 12-31 09/93 28.31 121
QCSB Queens County SB of NY (3) OTC New York City NY R.E. 1,260 9 12-31 11/93 47.62 291
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,259 13 12-31 11/86 7.50 106
HARS Harris SB, MHC of PA (23.1) OTC Southeast PA Thrift 1,249 25 12-31 01/94 17.00 191
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,143 25 02-28 06/87 28.50 90
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,049 22 06-30 02/84 16.87 102
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,023 17 06-30 07/94 15.87 81
FSLA First SB, SLA MHC of NJ (37.6) OTC Eastern NJ Thrift 959 22 12-31 06/92 15.75 103
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 914 28 06-30 07/87 26.00 84
PKPS Poughkeepsie SB of NY OTC Poughkeepsie NY R.E. 839 7 12-31 11/85 5.25 66
WFSB 1st Washington Bancorp of VA OTC DC Metro Area Thrift 795 17 06-30 05/87 7.94 78
PSBK Progressive Bank, Inc. of NY (3) OTC Eastern NY Thrift 786 15 12-31 08/84 29.50 78
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 757 8 09-30 10/94 14.00 160
FFIC Flushing Fin. Corp. of NY (3) OTC New York, NY Thrift 739 7 12-31 11/95 15.87 126
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 680 9 12-31 06/90 13.50 54
FSNJ First SB of NJ, MHC (45.0) OTC Northern NJ Thrift 657 D 4 05-31 01/95 14.37 43
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 634 14 03-31 10/95 12.31 65
FSFI First State Fin. Serv. of NJ OTC Northeastern NJ Thrift 629 12 09-30 12/87 10.37 42
FCIT First Cit. Fin. Corp of MD OTC DC Metro Area Thrift 624 14 12-31 12/86 17.75 52
PSAB Prime Bancorp, Inc. of PA OTC Southeastern PA Thrift 609 17 12-31 11/88 17.62 66
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 569 10 12-31 03/96 11.00 98
BFSI BFS Bankorp, Inc. of NY OTC New York NY R.E. 566 5 09-30 05/88 38.50 63
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 543 7 12-31 06/95 13.69 112
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 519 11 06-30 07/94 14.50 66
TSBS Trenton SB, FSB MHC of NJ(35.0 OTC Central NJ Thrift 519 10 12-31 08/95 14.25 127
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 506 14 12-31 12/88 17.50 43
CONE Conestoga Bancorp of Roslyn NY OTC New York, NY Thrift 494 8 03-31 03/94 21.00 100
FSPG First Home SB, SLA of NJ OTC NJ,DE Thrift 466 10 12-31 04/87 18.00 37
CJFC Central Jersey Fin. Corp of NJ OTC Central NJ Thrift 466 D 6 03-31 09/84 30.75 82
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 455 8 07-31 12/93 20.50 46
MSBB MSB Bancorp of Middletown NY (3) OTC Southeastern NY Thrift 454 D 9 09-30 08/92 16.12 46
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
- ----------------------------------
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 452 4 09-30 09/86 17.50 68
IROQ Iroquois Bancorp of Auburn NY (3) OTC Central NY Thrift 451 9 12-31 01/86 14.50 34
ANBK American Nat'l Bancorp of MD OTC Baltimore MD R.E. 449 9 07-31 11/95 9.87 39
AHCI Ambanc Holding Co. of NY (3) OTC East-Central NY Thrift 392 9 12-31 12/95 9.56 52
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 368 8 12-31 10/89 20.00 66
CARV Carver FSB of New York, NY OTC New York, NY Thrift 363 D 8 03-31 10/94 7.87 18
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 356 4 12-31 04/93 21.50 50
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 348 9 12-31 07/83 6.25 23
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 347 5 12-31 03/87 20.75 30
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 340 9 12-31 01/95 14.62 36
CNSK Covenant Bank for Svgs. of NJ (3) OTC Southern NJ Thrift 339 10 12-31 / 12.00 24
FFWM First Fin. Corp of Western MD OTC Western MD Thrift 326 9 06-30 01/92 20.75 45
PBIX Patriot Bank Corp. of PA OTC Southeast PA Thrift 313 7 12-31 12/95 13.12 46
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 301 8 09-30 06/88 16.00 22
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 286 6 12-31 01/96 9.87 30
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 279 P 3 09-30 04/96 10.19 58
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 278 5 09-30 01/95 17.00 22
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 275 6 06-30 03/87 18.25 29
HARL Harleysville SA of PA OTC Southeastern PA Thrift 274 4 09-30 08/87 18.37 24
LFED Leeds FSB, MHC of MD (35.3) OTC Baltimore MD Thrift 267 1 06-30 03/94 13.75 47
IFSB Independence FSB of DC OTC Washington DC Ret. 264 D 4 12-31 06/85 8.00 10
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 263 D 3 07-31 / 5.50 23
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 260 4 09-30 09/93 24.25 15
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 259 2 09-30 04/96 9.31 30
FIBC Financial Bancorp of NY OTC New York, NY Thrift 252 5 09-30 08/94 12.50 23
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 241 P 4 09-30 04/96 9.38 33
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 240 5 06-30 11/93 20.75 36
GDVS Greater DV SB,MHC of PA(19.9) (3) OTC Southeast PA Thrift 236 7 12-31 03/95 10.00 33
ESBK Elmira SB of Elmira NY (3) OTC NY,PA Ret. 223 6 12-31 03/85 16.75 12
HFMD Home Federal Corporation of MD OTC Western MD Thrift 217 7 12-31 02/84 10.75 27
CTBK Center Banks, Inc. of NY (3) OTC Central NY Thrift 215 7 12-31 05/86 13.75 13
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 194 3 06-30 12/95 11.75 48
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 193 6 06-30 02/87 14.75 22
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- --------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ------------------------------ ------ --------------- --------- ------ ------- ------ ----- ------ -------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
- ----------------------------------
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 180 P 6 09-30 04/96 10.37 23
SBFL SB Fing. Lakes MHC of NY(33.0) OTC Western NY Thrift 177 3 04-30 11/94 16.00 29
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 166 3 12-31 06/95 12.00 17
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 154 D 6 03-31 08/94 13.12 24
TPNZ Tappan Zee Fin. Corp. of NY OTC Southeast NY Thrift 115 1 03-31 10/95 12.25 20
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 112 5 09-30 04/96 11.00 18
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 88 P 2 03-31 06/96 10.38 7
THBC Troy Hill Bancorp of PA OTC Pittsburgh PA Thrift 80 2 06-30 06/94 13.00 14
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 57 2 09-30 07/93 16.50 4
BRFC Bridgeville SB, FSB of PA OTC Western PA Thrift 56 1 12-31 10/94 13.75 15
Mid-West Companies
- ------------------
SFB Standard Fed. Bancorp of MI NYSE MI,IN,OH M.B. 13,505 164 12-31 01/87 38.12 1,193
COFI Charter One Financial of OH OTC Northeastern OH Div. 13,174 94 12-31 01/88 35.19 1,588
RFED Roosevelt Fin. Grp. Inc. of MO OTC MO,IL,KS Div. 9,135 78 12-31 01/87 19.25 811
TCB TCF Financial Corp. of MN NYSE MN,IL,MI,WI,OH Div. 7,039 180 12-31 06/86 33.12 1,187
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK M.B. 6,617 91 06-30 12/84 38.62 582
FFHC First Financial Corp. of WI OTC WI,IL Div. 5,419 129 12-31 12/80 22.37 669
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,143 52 12-31 05/87 23.12 429
SECP Security Capital Corp. of WI OTC Wisconsin Div. 3,345 42 06-30 01/94 61.25 584
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 2,598 33 03-31 01/92 37.06 211
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 2,477 40 12-31 03/94 26.87 394
STND Standard Fin. of Chicago IL OTC Chicago IL Thrift 2,187 13 12-31 08/94 15.12 253
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 1,980 13 06-30 01/90 24.25 127
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,755 32 03-31 07/92 34.00 168
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,477 28 12-31 08/83 24.00 199
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,382 40 12-31 11/89 21.88 138
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,296 13 09-30 06/93 25.25 148
DNFC D&N Financial Corp. of MI OTC MI,WI Ret. 1,232 33 12-31 02/85 13.44 92
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,143 D 21 12-31 04/93 26.00 109
FFSW First Fed Fin. Serv. of OH OTC Northeastern OH Thrift 993 18 12-31 04/87 28.37 93
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ --------------------- ------ -------- --------- ------ ------- ------ ----- ------ -------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
- ------------------------------
AADV Advantage Bancorp of WI OTC WI,IL Thrift 980 15 09-30 03/92 34.00 117
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 772 18 12-31 06/90 21.25 95
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 745 12 12-31 08/94 16.37 89
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 719 24 12-31 07/92 5.37 23
IFSL Indiana Federal Corp. of IN OTC Northwestern IN Thrift 718 15 12-31 02/87 20.37 96
HNFC Hinsdale Financial Corp. of IL OTC Chicago IL M.B. 682 10 09-30 07/92 25.00 67
FFEC First Fed. Bancshares of WI OTC Northwest WI Thrift 672 18 12-31 10/94 15.25 105
LBCI Liberty Bancorp of Chicago IL OTC Chicago IL Thrift 670 4 12-31 12/91 23.87 59
NASB North American SB of MO OTC KS,MO M.B. 664 8 09-30 09/85 30.50 69
GSBC Great Southern Bancorp of MO OTC Southwest MO Div. 659 25 06-30 12/89 27.50 122
FFDP FirstFed Bancshares of IL OTC Chicago IL Thrift 624 3 12-31 07/92 16.00 54
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 606 15 06-30 01/88 27.25 61
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 580 6 03-31 04/95 13.00 52
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 574 18 06-30 04/92 15.19 46
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 573 9 06-30 06/93 23.25 121
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 572 20 12-31 12/83 16.00 73
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 542 7 12-31 06/94 16.12 84
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 528 9 06-30 10/95 10.75 118
SSBK Strongsville SB of OH OTC Cleveland OH Thrift 505 12 12-31 / 21.25 54
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 502 5 06-30 02/92 28.50 76
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 498 P 8 12-31 05/96 13.75 71
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 470 10 03-31 01/88 13.12 46
FFSX First FS&LA. MHC of IA (45.0) OTC Western IA Thrift 437 12 06-30 06/92 25.75 44
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 433 5 09-30 12/93 16.62 51
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 383 8 12-31 02/87 13.00 43
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 378 D 11 03-31 04/94 15.75 34
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 374 4 12-31 03/94 17.00 34
PFSL Pocahnts Fed, MHC of AR (46.4) OTC Northeast AR Thrift 369 5 09-30 04/94 14.75 24
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 363 10 03-31 12/92 19.25 28
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 362 12 12-31 02/92 17.50 22
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 351 7 06-30 07/87 22.00 93
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 350 5 12-31 06/92 27.12 51
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 344 7 12-31 / 19.62 39
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 342 9 12-31 06/90 17.50 20
HVFD Haverfield Corp. of OH OTC Cleveland OH Thrift 340 11 12-31 03/85 18.00 34
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 339 3 06-30 01/94 15.00 22
INBI Industrial Bancorp of OH OTC Northern OH Thrift 327 10 12-31 08/95 11.87 66
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 327 11 09-30 10/94 12.12 47
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 320 5 12-31 07/94 23.25 54
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 318 7 06-30 12/92 20.25 31
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 313 8 09-30 03/95 14.87 46
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 310 8 09-30 09/93 23.50 42
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 309 1 12-31 06/92 21.62 58
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 301 6 09-30 12/95 11.50 57
WBCI WFS Bancorp of Wichita KS OTC Wichita KS Thrift 292 D 4 09-30 06/94 22.87 36
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 291 7 09-30 06/94 18.50 38
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 285 7 12-31 07/95 13.00 57
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 281 6 09-30 07/87 20.25 48
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 280 4 06-30 08/87 11.25 28
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 279 D 6 06-30 11/90 20.25 22
FNSC Financial Security Corp. of IL OTC Chicago IL Thrift 274 2 12-31 12/92 25.37 39
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 273 3 06-30 04/87 26.62 18
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 264 6 12-31 06/94 15.75 29
WFCO Winton Financial Corp. of OH OTC Cincinnati OH R.E. 262 4 09-30 08/88 13.50 27
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 256 6 03-31 09/93 18.25 46
OSBF OSB Fin. Corp. of Oshkosh WI OTC Eastern WI Thrift 254 7 12-31 06/92 24.00 27
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 252 P 6 12-31 05/96 9.87 28
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 249 4 12-31 03/96 9.94 40
WAYN Wayne S&L Co., MHC of OH(46.7) OTC Central OH Thrift 249 6 03-31 06/93 20.75 31
DFIN Damen Fin. Corp. of Chicago IL OTC Chicago IL Thrift 235 4 11-30 10/95 11.50 46
CRCL Circle Financial Corp.of OH OTC Cincinnati OH Thrift 229 8 06-30 08/91 34.00 24
CBIN Community Bank Shares of IN OTC Southeast IN Thrift 224 6 12-31 04/95 13.62 27
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 216 7 12-31 01/88 15.00 18
WCHI Workingmens Cap. Hldgs of IN OTC South Central IN Thrift 214 2 12-31 06/90 20.00 36
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 208 D 5 09-30 10/94 14.25 30
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 205 4 12-31 02/93 20.12 25
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ------ ----- ------ -------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
- ------------------------------
CBCO CB Bancorp of Michigan City IN OTC Northwest IN Thrift 205 3 03-31 12/92 17.25 20
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 203 7 06-30 12/93 18.00 19
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 201 4 09-30 03/94 14.00 29
SBCN Suburban Bancorp. of OH OTC Cincinnati OH Thrift 197 8 06-30 09/93 15.00 22
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 196 7 12-31 04/95 11.50 25
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 195 2 06-30 06/93 24.00 33
LARK Landmark Bancshares of KS OTC Central KS Thrift 193 5 09-30 03/94 15.25 30
FFFD North Central Bancshares of IA OTC Central IA Thrift 191 4 12-31 03/96 11.00 44
GFED Guaranty FS&LA,MHC of MO(31.1) OTC Southwest MO Thrift 186 4 06-30 04/95 11.62 36
PULB Pulaski SB, MHC of MO (29.0) OTC St. Louis MO Thrift 179 5 09-30 05/94 14.75 31
MARN Marion Capital Holdings of IN OTC Central IN Thrift 179 2 06-30 03/93 20.75 42
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 178 9 12-31 07/92 15.87 26
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 173 6 09-30 06/92 24.50 19
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 172 3 09-30 04/95 13.50 38
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 172 2 09-30 10/94 12.87 30
LSBI LSB Bancorp of Lafayette IN OTC Central IN Thrift 163 3 12-31 02/95 16.25 16
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 162 8 06-30 04/94 14.75 25
THIR Third Financial Corp. of OH OTC Piqua OH Thrift 156 4 09-30 03/93 31.87 36
SJSB SJS Bancorp of St. Joseph MI OTC Southwest MI Thrift 151 4 06-30 02/95 20.75 20
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 149 3 06-30 03/93 19.25 14
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 146 2 06-30 04/95 14.50 26
JXSB Jcksnville SB,MHC of IL(43.3%) OTC Central IL Thrift 142 4 12-31 04/95 14.00 18
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 141 3 12-31 06/95 11.75 24
FBSI First Bancshares of MO OTC Southcentral MO Thrift 140 5 06-30 12/93 15.50 20
FFWD Wood Bancorp of OH OTC Northern OH Thrift 140 6 06-30 08/93 18.50 19
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 139 2 06-30 03/95 10.75 25
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 139 3 06-30 07/95 11.87 41
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 137 5 12-31 11/92 25.75 9
MFCX Marshalltown Fin. Corp. of IA OTC Central IA Thrift 126 2 09-30 03/94 15.50 22
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 119 6 09-30 10/92 6.25 11
GTPS Great American Bancorp of IL OTC East Central IL Thrift 118 D 3 09-30 06/95 14.25 26
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 114 2 06-30 12/93 15.75 18
PTRS The Potters S&L Co. of OH OTC Northeast OH Thrift 114 5 12-31 12/93 16.25 9
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 112 1 06-30 04/95 15.00 26
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 2 09-30 10/95 15.00 33
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 102 1 09-30 10/93 17.75 10
CNSB CNS Bancorp of MO OTC Central MO Thrift 101 P 5 12-31 06/96 12.00 20
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 101 5 09-30 04/95 13.00 11
WCFB Webster CityFSB,MHC of IA(45.2 OTC Central IA Thrift 97 1 12-31 08/94 13.50 28
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 94 3 06-30 12/94 13.69 13
FSBS First Ashland Fin. Corp. of KY OTC Northeast KY Thrift 90 D 3 09-30 04/95 18.00 26
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 89 2 12-31 10/93 16.00 8
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 88 2 09-30 06/95 16.75 26
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 86 3 03-31 10/94 10.25 10
CIBI Community Inv. Corp. of OH OTC NorthCentral OH Thrift 85 D 3 06-30 02/95 15.25 11
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 84 2 06-30 08/95 13.37 19
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 83 3 03-31 09/95 11.75 12
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 81 S 4 06-30 08/95 13.37 11
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 81 1 06-30 01/94 20.25 10
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 81 4 12-31 04/96 10.12 11
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 77 D 1 09-30 02/95 17.50 15
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 76 1 12-31 06/95 13.75 18
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 76 3 06-30 03/95 12.25 10
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 74 2 06-30 01/94 16.00 13
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 73 P 1 06-30 04/96 10.19 15
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 73 3 06-30 03/95 9.87 6
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 73 2 06-30 01/95 13.87 16
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 72 3 06-30 06/94 15.50 7
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 70 D 3 09-30 10/94 13.00 12
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 1 09-30 03/95 11.25 11
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 68 D 1 03-31 12/95 11.00 15
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 61 P 1 09-30 06/96 10.00 13
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 59 2 09-30 06/95 12.87 11
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 59 1 12-31 01/95 19.50 18
FFFB First Fed. Fin. Bancorp of OH OTC Southern OH Thrift 59 P 2 09-30 06/96 10.75 7
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 56 2 06-30 02/95 16.87 11
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
- ------------------------------
MFSB Mutual Bancompany of MO OTC Central MO Thrift 53 1 06-30 02/95 21.37 7
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 50 P 1 June 04/96 7.87 20
SHFC Seven Hills Fin. Corp. of OH OTC Cincinnati OH Thrift 46 3 06-30 12/93 16.00 9
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 42 2 09-30 02/95 17.69 6
CSBF CSB Financial Group Inc of IL OTC Centralia IL Thrift 41 1 09-30 10/95 9.12 9
LONF London Financial Corp. of OH OTC Central OH Thrift 38 1 09-30 04/96 10.50 6
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 37 1 03-31 12/95 12.25 9
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT(32.3) (3) OTC Southwestern CT Div. 6,916 79 12-31 07/88 22.37 876
WBST Webster Financial Corp. of CT OTC Central CT Thrift 3,813 39 12-31 12/86 28.75 233
CFCX Center Fin. Corp of CT (3) OTC Western CT M.B. 3,670 36 12-31 08/86 22.87 331
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH Div. 3,302 76 12-31 12/86 20.25 345
SBOS Boston Bancorp of MA (3) OTC Eastern MA Thrift 1,715 D 7 10-31 11/83 41.87 220
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 1,429 23 09-30 02/87 23.75 107
DSBC DS Bancor Inc. of Derby CT (3) OTC Southwestern CT Thrift 1,248 22 12-31 12/85 31.25 95
ANDB Andover Bancorp, Inc. of MA (3) OTC Northeastern MA M.B. 1,142 10 12-31 05/86 24.25 103
SISB SIS Bank of Sprinfield MA (3) OTC Central MA Div. 1,135 20 12-31 02/95 17.25 99
WLDN Walden Bancorp of MA (3) OTC Eastern MA M.B. 1,019 16 04-30 12/85 18.75 100
MDBK Medford Savings Bank of MA (3) OTC Eastern MA Thrift 981 16 12-31 03/86 21.50 97
CFX Cheshire Fin. Corp. of NH (3) AMEX S.W. NH,MA M.B. 958 23 12-31 02/87 14.37 109
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 938 13 12-31 / 16.75 85
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 933 12 12-31 06/87 17.00 44
FMLY Family Bancorp of Haverhill MA (3) OTC MA,NH Div. 887 21 12-31 11/86 24.25 99
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 859 14 12-31 05/86 32.87 90
EBCP Eastern Bancorp of NH OTC VT, NH M.B. 825 23 09-30 11/83 24.00 58
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 801 10 12-31 08/87 10.75 65
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 712 15 12-31 11/86 13.56 76
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 678 8 12-31 10/95 12.25 81
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 671 10 12-31 07/86 14.25 72
GROV GroveBank for Savings of MA (3) OTC Eastern MA Thrift 586 7 12-31 08/86 25.37 39
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
New England Companies (continued)
- ---------------------------------
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 542 8 12-31 06/94 20.37 48
FMCT Farmers & Mechanics Bank of CT (3) OTC Central CT Thrift 537 12 12-31 11/93 30.25 50
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 533 9 12-31 10/86 9.87 33
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 517 15 12-31 12/81 24.50 56
CBNH Community Bankshares Inc of NH (3) OTC Southcentral NH M.B. 517 5 06-30 05/86 17.75 43
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 510 5 12-31 07/86 1.47 24
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 478 7 12-31 06/86 15.37 29
MWBX Metro West of MA (3) OTC Eastern MA Thrift 478 9 12-31 10/86 4.12 57
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 424 11 04-30 07/86 20.00 37
PBNB Peoples Sav. Fin. Corp. of CT (3) OTC Central CT Thrift 406 8 12-31 08/86 20.50 39
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 403 3 12-31 07/86 20.75 56
PETE Primary Bank of NH (3) OTC Southern NH Ret. 393 8 12-31 10/93 12.25 24
MIDC Midconn Bank of Kensington CT (3) OTC Central CT Thrift 365 10 09-30 09/86 16.00 30
HSBK Hibernia SB of Quincy MA (3) OTC Eastern MA R.E. 355 5 12-31 09/86 14.50 23
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 355 6 12-31 07/86 12.50 46
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 324 6 12-31 05/86 5.50 23
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 318 D 11 04-30 10/86 15.50 30
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 292 12 06-30 02/86 6.75 28
POBS Portsmouth Bank Shrs Inc of NH (3) OTC Southeastern NH Thrift 267 3 12-31 02/88 13.87 80
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 252 10 12-31 05/86 9.87 17
BTHL Bethel Bancorp. of ME (3) OTC Eastern ME Thrift 218 8 06-30 08/87 13.00 16
TBK Tolland Bank of CT (3) AMEX Northern CT Thrift 217 7 12-31 12/86 9.75 11
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 179 4 12-31 12/88 14.00 18
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 174 5 12-31 11/86 3.25 21
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 167 2 12-31 08/88 13.00 24
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 134 4 12-31 05/93 10.75 13
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 127 10 12-31 06/93 22.00 8
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 111 D 4 04-30 12/87 14.75 13
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 88 2 09-30 03/96 10.25 15
NTMG Nutmeg FS&LA of CT OTC CT M.B. 85 3 12-31 / 7.25 5
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 54 2 03-31 11/89 19.12 4
GLBK Glendale Co-op. Bank of MA (3) OTC Boston MA Thrift 36 D 1 04-30 01/94 16.50 4
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 22,344 246 12-31 03/83 29.62 2,133
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 4,929 87 09-30 11/82 21.50 916
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,498 41 06-30 / 14.75 80
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 1,369 28 12-31 / 24.00 154
MSEA Metropolitan Bancorp of WA OTC Western WA R.E. 778 10 03-31 01/90 13.62 51
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 605 7 09-30 10/95 14.12 159
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 595 D 15 03-31 11/95 14.62 147
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 489 12 03-31 08/86 12.56 83
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 371 6 12-31 12/85 13.25 32
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 326 6 06-30 08/92 16.50 34
RVSB Rvrview SB,FSB MHC of WA(40.3) OTC Southwest WA M.B. 210 9 03-31 10/93 15.00 32
South-East Companies
- --------------------
LFCT Leader Fin. Corp of Memphis TN OTC Tennessee M.B. 3,178 22 12-31 09/93 45.50 452
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,449 32 09-30 11/83 18.75 119
AMFB American Federal Bank of SC OTC Northwest SC Thrift 1,339 41 12/31 01/89 15.75 172
MGNL Magna Bancorp of MS OTC MS,AL M.B. 1,291 61 06-30 03/91 35.00 244
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,205 17 12-31 10/94 14.12 147
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 982 29 9-30 12/83 21.75 87
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 716 9 06-30 12/95 16.50 284
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 714 23 06-30 01/78 12.75 72
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 667 15 12-31 08/92 35.00 56
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 625 11 12-31 11/80 7.37 37
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 624 14 12-31 04/95 16.00 118
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 624 16 12-31 12/85 12.50 65
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 558 D 10 03-31 04/86 16.00 50
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 518 11 12-31 10/94 17.50 95
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 441 8 09-30 09/90 20.19 55
FSFC First So.east Fin. Corp. of SC OTC Northwest SC Thrift 359 11 06-30 10/93 17.87 73
TSH Teche Holding Company of LA AMEX Southern LA Thrift 346 8 09-30 04/95 13.25 54
FFRV Fid. Fin. Bkshrs. Corp. of VA OTC Southern VA Thrift 322 7 12-31 05/86 12.50 28
ESX Essex Bancorp of VA AMEX VA,NC M.B. 316 14 12-31 / 2.25 2
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 314 16 03-31 08/91 17.25 26
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-East Companies (continued)
- --------------------------------
JEBC Jefferson Bancorp of Gretna LA OTC Southeast LA Thrift 265 6 12-31 08/94 22.12 49
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 256 5 06-30 01/94 18.25 68
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 252 9 12-31 07/80 8.00 25
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 227 8 12-31 / 34.00 26
FLAG Flag Financial Corp of GA OTC Western GA M.B. 226 3 12-31 12/86 12.50 25
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 201 1 09-30 03/96 13.62 63
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 188 P 3 09-30 04/96 12.87 55
PLE Pinnacle Bank of AL AMEX Central AL Thrift 186 5 06-30 12/86 16.12 14
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 163 5 09-30 07/95 16.50 33
NFSL Newnan SB, FSB of Newnan GA OTC Western GA M.B. 161 D 8 03-31 03/86 19.75 29
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 160 3 03-31 03/88 20.00 25
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 142 6 09-30 02/87 7.00 14
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 125 2 06-30 12/95 13.25 35
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 124 3 06-30 06/93 22.75 36
VAFD Valley FSB of Sheffield AL OTC Northern AL Thrift 119 4 09-30 10/87 32.00 12
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 118 3 09-30 08/94 16.62 20
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 116 2 12-31 04/96 16.87 31
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 111 D 4 06-30 10/95 13.25 19
GSLC Guaranty Svgs & Loan FA of VA OTC Charltsvl VA M.B. 103 3 06-30 / 8.37 8
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 102 3 12-31 01/95 16.00 14
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 90 3 12-31 12/93 18.00 12
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 89 2 09-30 02/95 12.25 10
CZF Citisave Fin. Corp. of LA AMEX Baton Rouge LA Thrift 80 5 12-31 07/95 14.25 14
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 79 3 09-30 07/95 12.00 14
SSB Scotland Bancorp of NC AMEX Thrift 70 1 09-30 04/96 12.37 23
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 44 1 06-30 07/94 16.50 12
South-West Companies
- --------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,807 40 12-31 / 18.56 92
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 242 D 4 03-31 06/93 17.75 15
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 213 6 09-30 04/96 10.62 28
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 19, 1996(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-West Companies (continued)
- --------------------------------
LBFI L&B Financial of S. Springs TX OTC Northeast TX Thrift 143 5 06-30 09/94 16.25 26
LOAN Horizon Bancorp, Inc of TX (3) OTC Austin TX R.E. 127 D 7 04-30 / 10.75 15
FSBC First SB, FSB of Clovis NM OTC Eastern NM Thrift 115 3 12-31 08/86 5.50 4
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 115 2 09-30 01/95 14.75 18
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 70 1 06-30 06/95 13.50 13
Western Companies (Excl CA)
- ---------------------------
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,493 25 12-31 01/96 13.19 268
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 588 18 06-30 01/94 14.37 63
GBCI Glacier Bancorp of MT OTC Western MT Div. 398 13 06-30 03/84 21.75 73
SFBM Security Bancorp of MT OTC Southcentral MT Thrift 360 16 06-30 11/86 20.25 30
UBMT United SB, FA of MT OTC Central MT Thrift 105 4 12-31 09/86 18.25 22
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 73 2 12-31 09/93 18.50 12
MORG Morgan Financial Corp. of CO OTC Northeast CO Thrift 72 1 06-30 01/93 12.25 10
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 47 1 09-30 03/96 10.25 11
</TABLE>
Other Areas
- -----------
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and
Ret.=Retail Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 06/19/96
<PAGE>
EXHIBIT III-2
Financial Analysis of Publicly-Traded Illinois Thrifts
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of March 31, 1996
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 44.3 40.8 12.4 79.3 11.0 0.0 8.7 0.0 8.7 0.0
SAIF-Insured Thrifts 19.6 64.2 13.0 73.5 11.9 0.1 12.9 0.2 12.7 0.1
State of IL 19.8 65.5 11.5 73.9 10.6 0.1 13.9 0.1 13.8 0.0
Comparable Group
- ----------------
State of IL
- -----------
AVND Avondale Fin. Corp. of IL 37.8 39.9 20.0 56.8 30.8 0.0 10.6 0.0 10.6 0.0
CSBF CSB Financial Group Inc of IL(3) 41.1 52.2 5.1 68.6 0.0 0.0 30.9 0.0 30.9 0.0
CBCI Calumet Bancorp of Chicago IL 17.0 73.9 3.9 72.9 8.6 0.0 17.0 0.0 17.0 0.0
CBSB Charter Financial Inc. of IL 22.3 69.2 5.6 66.6 10.8 0.0 21.4 0.5 20.9 0.0
CBK Citizens First Fin.Corp. of IL 8.0 82.0 6.4 91.8 0.0 0.0 6.8 0.0 6.8 0.0
DFIN Damen Fin. Corp. of Chicago IL 41.5 37.8 18.4 53.3 21.8 0.0 24.2 0.0 24.2 0.0
FBCI Fidelity Bancorp of Chicago IL 22.3 70.2 5.6 69.6 16.8 0.0 12.0 0.0 12.0 0.0
FNSC Financial Security Corp. of IL(2) 19.8 68.7 5.3 68.9 15.1 0.0 14.4 0.0 14.4 0.0
FFBI First Financial Bancorp of IL 16.8 72.0 8.9 78.7 11.3 0.0 8.9 0.0 8.9 0.0
FMBD First Mutual Bancorp of IL 16.1 80.7 0.0 68.6 4.5 0.0 25.3 0.0 25.3 0.0
FFDP FirstFed Bancshares of IL 19.3 53.0 24.8 73.1 16.2 0.0 9.0 0.4 8.6 0.0
GTPS Great American Bancorp of IL(1) 22.0 65.8 5.0 69.6 0.0 0.0 29.4 0.0 29.4 0.0
HNFC Hinsdale Financial Corp. of IL 7.4 89.4 0.9 69.2 20.1 0.0 8.0 0.2 7.7 0.0
HMCI Homecorp, Inc. of Rockford IL 8.8 77.0 7.1 92.7 0.0 0.0 6.1 0.0 6.1 0.0
JXSB Jcksnville SB,MHC of IL(43.3%) 7.5 78.2 9.6 86.7 0.3 0.0 11.8 0.0 11.8 0.0
KNK Kankakee Bancorp of IL 23.3 63.7 9.9 81.0 8.1 0.0 9.8 0.7 9.1 0.0
LBCI Liberty Bancorp of Chicago IL 7.5 74.4 15.0 75.1 14.0 0.0 9.5 0.0 9.5 0.0
MAFB MAF Bancorp of IL 19.8 75.1 2.0 69.3 21.5 1.3 5.5 0.0 5.5 0.0
NBSI North Bancshares of Chicago IL 39.2 50.9 7.8 65.6 14.6 0.0 17.3 0.0 17.3 0.0
SWBI Southwest Bancshares of IL 19.5 69.5 6.0 72.4 14.2 0.0 12.0 0.0 12.0 0.0
SPBC St. Paul Bancorp, Inc. of IL 9.7 67.3 19.7 79.8 8.6 0.8 9.2 0.0 9.2 0.0
STND Standard Fin. of Chicago IL 11.5 51.7 34.6 73.4 13.0 0.0 12.3 0.0 12.3 0.0
SFSB SuburbFed Fin. Corp. of IL 6.1 44.2 47.4 82.3 9.3 0.0 7.1 0.0 7.1 0.0
WCBI WestCo Bancorp of IL 30.0 68.5 0.0 81.6 0.0 0.0 15.6 0.0 15.6 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------ -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 -2.81 -8.28 1.53 -13.43 NM 8.80 8.80 8.71 8.71 25.95
SAIF-Insured Thrifts 11.71 10.50 9.48 6.51 -1.02 6.83 6.41 10.57 10.64 23.17
State of IL 13.20 17.40 10.35 7.06 -5.37 3.05 2.56 9.97 11.00 23.03
Comparable Group
- ----------------
State of IL
- -----------
AVND Avondale Fin. Corp. of IL 7.42 NM -17.56 -5.17 NM NM NM 10.44 10.44 23.79
CSBF CSB Financial Group Inc of IL(3) 24.41 37.74 17.24 -3.29 NM NM NM NM NM NM
CBCI Calumet Bancorp of Chicago IL 1.44 0.45 1.59 4.85 -23.42 5.38 5.38 11.99 11.99 19.94
CBSB Charter Financial Inc. of IL 10.65 8.31 11.32 11.82 -41.35 NM NM NM 16.96 30.16
CBK Citizens First Fin.Corp. of IL 57.30 73.73 56.05 59.97 -100.00 NM NM 6.89 6.89 12.94
DFIN Damen Fin. Corp. of Chicago IL 19.41 NM -17.30 -2.86 10.80 NM NM 16.57 16.57 48.10
FBCI Fidelity Bancorp of Chicago IL 24.33 48.60 18.88 22.31 70.71 -3.14 -3.03 9.31 9.31 19.58
FNSC Financial Security Corp. of IL(2 -0.49 63.71 -9.80 -7.46 31.85 7.89 7.89 11.40 11.09 21.30
FFBI First Financial Bancorp of IL 23.37 -5.62 31.24 10.81 NM -0.43 -0.43 7.87 7.87 15.81
FMBD First Mutual Bancorp of IL 19.34 69.70 15.66 -1.25 47.67 NM NM NM 25.26 50.03
FFDP FirstFed Bancshares of IL 11.94 -4.95 17.19 -0.49 NM -2.90 -2.67 7.65 7.65 18.00
GTPS Great American Bancorp of IL(1) 11.92 79.53 1.37 -5.23 -100.00 NM NM 21.65 21.65 36.11
HNFC Hinsdale Financial Corp. of IL 0.91 11.23 0.42 9.63 -23.34 10.46 7.08 7.24 7.47 13.57
HMCI Homecorp, Inc. of Rockford IL 1.87 -19.78 2.10 1.66 NM 6.70 6.70 5.30 5.30 9.39
JXSB Jcksnville SB,MHC of IL(43.3%) 2.96 NM -2.03 0.15 -61.10 38.97 38.99 11.86 11.86 17.52
KNK Kankakee Bancorp of IL 18.28 18.15 17.95 10.45 NM -1.91 -7.04 8.62 8.62 16.60
LBCI Liberty Bancorp of Chicago IL 12.71 27.85 11.92 9.40 61.21 -4.30 -4.28 7.73 7.73 15.73
MAFB MAF Bancorp of IL 14.57 -12.53 25.12 4.51 63.00 8.08 8.08 5.42 5.42 11.39
NBSI North Bancshares of Chicago IL 4.52 6.36 2.60 2.96 29.08 -6.02 -6.02 15.38 15.38 44.11
SWBI Southwest Bancshares of IL -0.65 -2.43 -0.65 -1.38 25.16 -17.03 -17.03 8.25 8.25 16.98
SPBC St. Paul Bancorp, Inc. of IL 0.86 23.01 -1.04 3.29 -19.63 7.17 7.25 9.00 9.00 17.52
STND Standard Fin. of Chicago IL 21.22 -21.10 31.32 10.59 NM -4.10 -4.07 9.56 9.56 24.08
SFSB SuburbFed Fin. Corp. of IL 10.43 1.59 11.49 15.15 -19.36 9.68 10.00 6.29 6.31 14.75
WCBI WestCo Bancorp of IL 4.49 8.16 3.13 4.62 NM 2.12 2.12 12.43 12.43 30.45
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
(2) Excluded from averages due to announced or pending acquisition.
(3) Growth rates have been annualized from available financial information.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-2
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1996
<TABLE>
<CAPTION>
Net Interest Income Other Income
---------------------------- -----------------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 0.68 6.65 4.01 2.63 0.13 2.50 0.00 -0.01 0.11 0.10
SAIF-Insured Thrifts 0.86 7.34 4.19 3.15 0.10 3.05 0.12 -0.01 0.30 0.42
State of IL 0.76 7.17 4.08 3.09 0.08 3.01 0.08 0.04 0.30 0.42
Comparable Group
- ----------------
State of IL
- -----------
AVND Avondale Fin. Corp. of IL 0.65 7.60 4.42 3.18 0.31 2.86 0.03 -0.01 0.12 0.14
CSBF CSB Financial Group Inc of IL 0.82 6.64 3.18 3.46 0.22 3.24 0.00 0.00 0.17 0.17
CBCI Calumet Bancorp of Chicago IL 1.21 7.74 4.15 3.59 0.16 3.43 0.06 0.06 0.19 0.31
CBSB Charter Financial Inc. of IL 1.11 7.56 3.89 3.68 0.12 3.55 0.10 -0.01 0.42 0.50
CBK Citizens First Fin.Corp. of IL 0.42 7.18 4.43 2.75 0.06 2.68 0.25 0.00 0.24 0.49
DFIN Damen Fin. Corp. of Chicago IL 0.81 7.12 4.53 2.59 0.02 2.57 0.04 0.00 0.07 0.12
FBCI Fidelity Bancorp of Chicago IL 0.77 7.30 4.12 3.19 0.04 3.14 0.00 0.00 0.25 0.25
FNSC Financial Security Corp. of IL(2) 0.77 7.68 4.54 3.14 0.00 3.14 0.00 -0.22 0.35 0.13
FFBI First Financial Bancorp of IL 0.69 6.97 3.83 3.14 0.09 3.05 0.23 0.00 0.29 0.52
FMBD First Mutual Bancorp of IL 0.99 7.09 3.60 3.50 0.01 3.49 0.04 -0.01 0.25 0.28
FFDP FirstFed Bancshares of IL 0.63 7.12 4.84 2.28 0.12 2.16 0.09 0.00 0.14 0.23
GTPS Great American Bancorp of IL(1) 0.68 7.15 2.69 4.46 0.13 4.33 0.00 0.03 0.40 0.43
HNFC Hinsdale Financial Corp. of IL 0.62 6.79 4.41 2.38 0.02 2.36 0.06 0.11 1.28 1.46
HMCI Homecorp, Inc. of Rockford IL 0.37 7.24 4.52 2.72 0.11 2.61 0.45 0.07 0.04 0.55
JXSB Jcksnville SB,MHC of IL(43.3%) 0.43 7.38 4.18 3.20 0.04 3.16 0.04 0.00 0.33 0.37
KNK Kankakee Bancorp of IL 0.50 7.20 4.12 3.08 0.04 3.05 0.04 -0.01 0.29 0.33
LBCI Liberty Bancorp of Chicago IL 0.56 6.96 4.44 2.52 0.00 2.52 0.02 0.00 0.12 0.14
MAFB MAF Bancorp of IL 0.88 7.13 4.70 2.42 0.03 2.39 0.13 0.38 0.46 0.96
NBSI North Bancshares of Chicago IL 0.57 6.98 3.85 3.13 0.03 3.10 0.00 0.00 0.14 0.14
SWBI Southwest Bancshares of IL 1.19 7.56 4.14 3.41 0.01 3.41 0.04 0.16 0.15 0.35
SPBC St. Paul Bancorp, Inc. of IL 0.88 6.85 4.01 2.85 0.04 2.81 0.04 0.03 0.71 0.77
STND Standard Fin. of Chicago IL 0.87 7.00 3.91 3.09 0.12 2.98 0.00 0.00 0.23 0.23
SFSB SuburbFed Fin. Corp. of IL 0.51 6.93 4.05 2.88 0.03 2.85 0.20 0.00 0.53 0.73
WCBI WestCo Bancorp of IL 1.32 7.49 3.91 3.57 0.00 3.57 0.07 0.00 0.15 0.22
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
----------------- --------------
MEMO: MEMO:
GAA Goodwill Net Extrao. Yield Cost Yid Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- -------- ------ ------ --------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 1.73 0.00 0.00 0.00 5.93 4.46 2.47 3,697 22.29
SAIF-Insured Thrifts 2.21 0.02 0.09 0.00 7.55 4.83 2.72 4,050 36.02
State of IL 2.35 0.01 0.07 0.00 7.48 4.84 2.55 3,642 35.33
Comparable Group
- ----------------
State of IL
- -----------
AVND Avondale Fin. Corp. of IL 2.26 0.00 0.29 0.00 7.78 5.16 2.62 4,998 37.58
CSBF CSB Financial Group Inc of IL 2.12 0.00 0.00 0.00 6.78 4.48 2.30 4,579 36.28
CBCI Calumet Bancorp of Chicago IL 1.98 0.00 0.01 0.00 8.14 5.08 3.07 3,694 31.70
CBSB Charter Financial Inc. of IL 2.17 0.05 0.00 0.00 7.79 4.70 3.09 3,539 39.47
CBK Citizens First Fin.Corp. of IL 2.60 0.00 0.13 0.00 8.89 5.72 3.17 2,524 39.33
DFIN Damen Fin. Corp. of Chicago IL 1.82 0.00 0.02 0.00 7.30 5.49 1.81 7,131 5.00
FBCI Fidelity Bancorp of Chicago IL 2.21 0.02 0.07 0.00 7.46 4.88 2.58 4,287 39.89
FNSC Financial Security Corp. of IL(2) 2.33 0.00 0.09 0.00 8.19 5.35 2.84 4,091 25.22
FFBI First Financial Bancorp of IL 3.13 0.00 -0.05 0.00 7.13 4.33 2.80 2,272 NM
FMBD First Mutual Bancorp of IL 2.28 0.00 0.06 0.00 7.35 4.85 2.50 2,594 36.13
FFDP FirstFed Bancshares of IL 1.74 0.03 0.36 0.00 7.34 5.48 1.86 5,474 35.45
GTPS Great American Bancorp of IL(1) 3.63 0.00 0.01 0.00 7.76 3.58 4.18 2,180 40.31
HNFC Hinsdale Financial Corp. of IL 2.85 0.01 0.04 0.00 6.95 4.90 2.05 2,186 42.24
HMCI Homecorp, Inc. of Rockford IL 2.74 0.00 0.18 0.00 7.69 4.86 2.83 1,931 38.73
JXSB Jcksnville SB,MHC of IL(43.3%) 2.96 0.00 0.12 0.00 7.76 4.77 2.99 1,958 37.34
KNK Kankakee Bancorp of IL 2.62 0.04 0.01 0.00 7.44 4.68 2.76 3,052 31.25
LBCI Liberty Bancorp of Chicago IL 1.75 0.00 0.00 0.00 7.19 5.04 2.15 6,012 37.82
MAFB MAF Bancorp of IL 1.89 0.00 0.00 -0.03 7.36 5.11 2.25 3,604 38.81
NBSI North Bancshares of Chicago IL 2.47 0.00 0.07 0.00 7.11 4.93 2.18 3,573 32.58
SWBI Southwest Bancshares of IL 2.02 0.00 0.01 0.00 7.92 4.87 3.05 3,604 31.73
SPBC St. Paul Bancorp, Inc. of IL 2.22 0.00 0.03 0.00 7.09 4.49 2.60 3,843 36.53
STND Standard Fin. of Chicago IL 1.96 0.00 0.14 0.00 7.17 4.61 2.55 4,662 36.36
SFSB SuburbFed Fin. Corp. of IL 2.87 0.02 0.11 0.00 7.09 4.42 2.67 2,551 37.01
WCBI WestCo Bancorp of IL 1.75 0.00 0.01 0.00 7.59 4.79 2.81 5,523 35.69
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
(2) Excluded from averages due to announced or pending acquisition.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-2
Market Prices Comparatives
Prices As of June 14, 1996
<TABLE>
<CAPTION>
Per Share Data
Market ----------------
Capitalization Book Pricing Ratios(3)
-------------- --------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------ ----- ------- ------ ------ ------ ------ --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 17.21 119.16 1.25 16.52 14.29 104.98 13.13 108.21 15.14
State of IL 17.54 69.77 1.87 18.45 14.81 94.27 12.87 95.07 16.30
Comparable Group
- ----------------
State of IL
- -----------
AVND Avondale Fin. Corp. of Il 13.00 52.20 0.93 15.35 13.98 84.69 9.00 84.69 20.00
CSBF CSB Financial Group Inc. of IL 9.12 9.44 0.32 12.30 NN 74.15 22.90 74.15 NN
CBCI Calumet Bancorp of Chicago IL 28.50 76.04 2.28 31.99 12.50 89.09 15.13 89.09 12.56
CBSB Charter Financial Inc. of IL 11.50 57.20 0.65 12.95 17.69 88.80 19.01 91.20 17.69
CBK Citizens First Fin. Corp. of IL 9.87 27.81 0.56 13.95 17.63 70.75 11.02 70.75 16.18
DFIN Damen Fin. Corp. of Chicago IL 11.50 45.52 0.43 14.34 NN 80.20 19.39 80.20 NN
FBCI Fidelity Bancorp of Chicago IL 16.62 51.27 0.98 16.32 16.96 98.29 11.84 98.64 18.07
FNSC Financial Security Corp. of IL (7) 25.37 38.66 1.41 25.83 17.99 98.22 14.11 98.22 19.37
FFBI First Financial Bancorp of IL 16.00 7.55 1.12 16.66 14.29 96.04 8.52 96.04 13.68
FMBD First Mutual Bancorp of IL 13.00 56.58 0.61 16.56 21.31 78.50 19.83 78.50 22.03
FFDP FirstFed Bancshares of IL 16.00 54.19 1.10 16.62 14.55 96.27 8.68 100.82 23.19
GTPS Great American Bancorp of IL 14.25 26.36 0.41 18.72 NM 76.12 22.40 76.12 NM
HNFC Hinsdale Financial Corp. of IL 25.00 67.25 1.58 20.20 15.82 123.76 9.86 127.68 16.45
HMCI Homecorp, Inc. of Rockford IL 17.50 19.71 1.12 18.41 15.63 95.06 5.77 95.06 23.03
JXSB Jcksnville SB,MHC of IL (43.3%) 14.00 7.81 0.48 13.41 NM 104.40 12.31 104.40 NM
KNK Kankakee Bancorp of IL 19.25 27.70 1.15 24.73 16.74 77.84 7.63 83.91 17.04
LBCI Liberty Bancorp of Chicago IL 23.87 59.36 1.45 25.66 16.46 93.02 8.86 93.28 16.46
MAFB MAF Bancorp of IL 24.25 127.17 3.11 20.91 7.80 115.97 6.42 115.97 7.58
NBSI North Bancshares of Chicago IL 15.75 18.46 0.54 16.92 NM 93.09 16.14 93.09 NM
SWBI Southwest Bancshares of IL 27.12 50.74 2.27 22.42 11.95 120.96 14.52 120.96 12.00
SPBC St. Paul Bancorp, Inc. of IL 23.12 428.88 1.95 20.64 11.86 112.02 10.35 112.40 12.17
STND Standard Fin. of Chicago IL 15.12 253.49 1.03 16.05 14.68 94.21 11.59 94.26 16.26
SFSB SuburbFed Fin. Corp. of IL 17.50 22.07 1.41 20.52 12.41 85.28 6.09 85.78 14.46
WCBI WestCo Bancorp of IL 21.62 57.90 1.50 18.07 14.41 119.65 18.72 119.65 14.51
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- ------------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- ---------------------- -------- ----- -------- ------ ------ ------ ------- ----- ------- ------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.35 1.98 25.53 1,297 13.25 0.95 0.87 8.08 0.81 7.29
State of IL 0.28 1.57 24.31 657 14.29 0.58 0.77 6.36 0.73 5.96
Comparable Group
- ----------------
State of IL
- -----------
AVND Avondale Fin. Corp. of IL 0.00 0.00 0.00 580 10.63 0.85 0.65 6.66 0.45 4.65
CSBF CSB Financial Group Inc of IL 0.00 0.00 0.00 41 30.89 0.78 0.82 3.62 0.82 3.62
CBCI Calumet Bancorp of Chicago IL 0.00 0.00 0.00 502 16.99 1.23 1.21 7.25 1.20 7.22
CBSB Charter Financial Inc. of IL 0.24 2.09 36.92 301 21.41 0.49 1.12 6.95 1.12 6.95
CBK Citizens First Fin.Corp. of IL 0.00 0.00 0.00 252 15.57 NA 0.63 4.01 0.68 4.37
DFIN Damen Fin. Corp. of Chicago IL 0.24 2.09 54.55 235 24.17 0.14 0.81 5.02 0.79 4.91
FBCI Fidelity Bancorp of Chicago IL 0.24 1.44 24.49 433 12.05 0.53 0.77 5.66 0.73 5.31
FNSC Financial Security Corp. of IL (7) 0.00 0.00 0.00 274 14.36 2.77 0.77 5.66 0.71 5.26
FFBI First Financial Bancorp of IL 0.00 0.00 0.00 89 8.87 0.40 0.69 6.63 0.72 6.93
FMBD First Mutual Bancorp of IL 0.28 2.15 45.90 285 25.26 0.09 0.98 4.24 0.95 4.10
FFDP FirstFed Bancshares of IL 0.40 2.50 36.36 624 9.02 0.14 0.63 6.51 0.39 4.08
GTPS Great American Bancorp of IL 0.40 2.81 NM 118 29.42 0.45 0.68 2.82 0.68 2.82
HNFC Hinsdale Financial Corp. of IL 0.00 0.00 0.00 682 7.97 0.13 0.62 8.20 0.59 7.88
HMCI Homecorp, Inc. of Rockford IL 0.00 0.00 0.00 342 6.07 3.24 0.37 6.28 0.25 4.26
JXSB Jcksnville SB,MHC of IL (43.3%) 0.40 2.86 NM 142 11.79 0.52 0.43 3.82 0.35 3.10
KNK Kankakee Bancorp of IL 0.40 2.08 34.78 363 9.80 0.59 0.50 4.56 0.49 4.48
LBCI Liberty Bancorp of Chicago IL 0.60 2.51 41.38 670 9.53 0.12 0.56 5.51 0.56 5.51
MAFB MAF Bancorp of IL 0.32 1.32 10.29 1,980 5.54 0.46 0.88 15.21 0.90 15.65
NBSI North Bancshares of Chicago IL 0.40 2.54 74.07 114 17.34 NA 0.57 3.03 0.52 2.75
SWBI Southwest Bancshares of IL 1.08 3.98 47.58 350 12.00 0.25 1.19 8.94 1.19 8.90
SPBC St. Paul Bancorp, Inc. of IL 0.40 1.73 20.51 4,143 9.24 0.74 0.88 9.69 0.86 9.44
STND Standard Fin. of Chicago IL 0.32 2.12 31.07 2,187 12.31 0.14 0.87 6.21 0.79 5.61
SFSB SuburbFed Fin. Corp. of IL 0.32 1.83 22.70 362 7.14 0.27 0.51 7.04 0.44 6.04
WCBI WestCo Bancorp of IL 0.45 2.08 30.00 309 15.65 0.58 1.32 8.47 1.31 8.41
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, Inc.
<PAGE>
EXHIBIT III-3
Financial Analysis of Peer Group Candidates
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-3
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of March 31, 1996
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ----- --- -------- ------- ----- ------ -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 44.3 40.8 12.4 79.3 11.0 0.0 8.7 0.0 8.7 0.0
SAIF-Insured Thrifts 19.6 64.2 13.0 73.5 11.9 0.1 12.9 0.2 12.7 0.1
State of IL 19.8 65.5 11.5 73.9 10.6 0.1 13.9 0.1 13.8 0.0
Comparable Group Average 27.6 62.1 7.8 72.0 8.2 0.0 18.6 0.1 18.5 0.0
Mid-West Companies 27.6 62.1 7.8 72.0 8.2 0.0 18.6 0.1 18.5 0.0
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 26.6 59.9 10.6 74.0 1.3 0.0 23.1 0.0 23.1 0.0
EFBI Enterprise Fed. Bancorp of OH(1) 24.4 58.6 15.4 64.2 19.3 0.0 15.6 0.0 15.5 0.0
FFHH FSF Financial Corp. of MN 38.8 58.9 0.0 57.8 25.7 0.0 16.0 0.0 16.0 0.0
BDJI First Fed. Bancorp. of MN 39.0 48.5 9.2 81.6 2.8 0.0 14.4 0.0 14.4 0.0
FFBH First Fed. Bancshares of AR 23.6 74.7 0.1 91.7 0.0 0.0 7.8 0.0 7.8 0.0
FKKY Frankfort First Bancorp of KY 21.5 77.0 0.0 61.6 3.3 0.0 34.5 0.0 34.5 0.0
HFFB Harrodsburg 1st Fin Bcrp of KY 31.0 67.7 0.1 70.5 0.0 0.0 28.7 0.0 28.7 0.0
HBFW Home Bancorp of Fort Wayne IN 24.7 73.7 0.0 82.5 0.0 0.0 16.4 0.0 16.4 0.0
LARK Landmark Bancshares of KS 28.6 55.3 14.2 73.6 8.2 0.0 17.2 0.0 17.2 0.0
MFBC MFB Corp. of Mishawaka IN 30.5 65.3 2.7 74.7 4.7 0.0 19.3 0.0 19.3 0.0
MCBS Mid Continent Bancshares of KS 28.8 50.7 12.7 71.1 14.5 0.0 12.5 0.0 12.5 0.0
MFFC Milton Fed. Fin. Corp. of OH 24.0 61.9 11.7 73.0 6.5 0.0 20.0 0.0 20.0 0.0
SMBC Southern Missouri Bncrp of MO 22.0 56.5 19.2 75.2 7.1 0.0 16.4 0.0 16.4 0.0
WOFC Western Ohio Fin. Corp. of OH 23.5 60.8 13.1 57.0 21.2 0.0 18.2 1.1 17.1 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
-------------------------------------------------------------- ----------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
-------- ----------- ----- -------- -------- ------ -------- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 -2.81 -8.28 1.53 -13.43 NM 8.80 8.80 8.71 8.71 25.95
SAIF-Insured Thrifts 11.71 10.50 9.48 6.51 -1.02 6.83 6.41 10.57 10.64 23.17
State of IL 13.20 17.40 10.35 7.06 -5.37 3.05 2.56 9.97 11.00 23.03
Comparable Group Average 17.99 19.06 17.39 9.44 37.98 -4.51 -5.04 15.09 15.09 32.71
Mid-West Companies 17.99 19.06 17.39 9.44 37.98 -4.51 -5.04 15.09 15.09 32.71
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 15.61 10.90 18.36 -1.36 NM NM NM 16.33 16.33 37.81
EFBI Enterprise Fed. Bancorp of OH(1) 31.88 71.72 22.49 13.82 NM -17.45 -17.42 NM NM NM
FFHH FSF Financial Corp. of MN 25.02 2.68 47.47 21.39 87.76 -11.81 -11.81 15.92 15.92 33.42
BDJI First Fed. Bancorp. of MN 1.30 0.45 2.34 2.05 NM NM NM 12.34 12.34 25.13
FFBH First Fed. Bancshares of AR 7.02 -13.16 15.65 6.60 NM 12.06 12.06 7.75 7.75 15.59
FKKY Frankfort First Bancorp of KY 25.75 NM 5.46 -1.65 1.56 NM NM 26.33 26.33 55.69
HFFB Harrodsburg 1st Fin Bcrp of KY 17.25 87.47 0.03 -6.26 NM NM NM 19.50 19.50 41.75
HBFW Home Bancorp of Fort Wayne IN 2.16 -20.22 12.92 3.10 NM -2.28 -2.28 12.84 12.84 30.01
LARK Landmark Bancshares of KS -3.76 -25.86 9.62 -0.82 -16.96 -8.11 -8.11 14.18 14.18 35.05
MFBC MFB Corp. of Mishawaka IN 8.04 16.76 4.51 3.63 NM 0.28 0.28 15.40 15.40 37.61
MCBS Mid Continent Bancshares of KS 28.71 NM 6.82 28.20 79.57 -1.39 -1.20 10.40 10.40 28.80
MFFC Milton Fed. Fin. Corp. of OH 13.95 53.53 5.52 12.17 NM -10.28 -10.28 15.11 15.11 33.82
SMBC Southern Missouri Bncrp of MO 9.93 -21.07 24.60 2.74 NM -0.59 -0.59 12.33 12.33 26.24
WOFC Western Ohio Fin. Corp. of OH 69.02 65.51 67.70 48.61 NM -5.53 -11.03 17.70 17.70 24.30
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1996
<TABLE>
<CAPTION>
Net Interest Income Other Income
---------------------------- -------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 0.68 6.65 4.01 2.63 0.13 2.50 0.00 -0.01 0.11 0.10
SAIF-Insured Thrifts 0.86 7.34 4.19 3.15 0.10 3.05 0.12 -0.01 0.30 0.42
State of IL 0.76 7.17 4.08 3.09 0.08 3.01 0.08 0.04 0.30 0.42
Comparable Group Average 0.95 7.09 3.99 3.10 0.02 3.08 0.10 0.00 0.23 0.34
Mid-West Companies 0.95 7.09 3.99 3.10 0.02 3.08 0.10 0.00 0.23 0.34
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 1.03 7.44 4.03 3.41 0.00 3.41 0.00 0.00 0.13 0.13
EFBI Enterprise Fed. Bancorp of OH(1) 1.12 7.19 4.06 3.13 0.00 3.13 0.00 0.02 0.06 0.08
FFHH FSF Financial Corp. of MN 0.63 7.07 3.99 3.08 0.01 3.07 0.10 0.00 0.32 0.42
BDJI First Fed. Bancorp. of MN 0.71 7.25 3.81 3.44 -0.01 3.45 0.00 0.00 0.41 0.41
FFBH First Fed. Bancshares of AR 0.77 6.79 4.49 2.30 0.03 2.28 0.00 0.00 0.22 0.22
FKKY Frankfort First Bancorp of KY 1.08 7.03 3.44 3.58 0.01 3.58 0.00 0.00 0.10 0.10
HFFB Harrodsburg 1st Fin Bcrp of KY 1.05 7.08 3.93 3.15 0.04 3.11 0.02 0.00 0.10 0.11
HBFW Home Bancorp of Fort Wayne IN 0.85 7.23 4.38 2.85 0.02 2.84 0.00 0.00 0.07 0.07
LARK Landmark Bancshares of KS 0.91 7.13 4.40 2.73 0.03 2.70 0.08 0.00 0.15 0.24
MFBC MFB Corp. of Mishawaka IN 0.69 6.83 3.88 2.94 0.02 2.93 0.00 0.00 0.18 0.18
MCBS Mid Continent Bancshares of KS 1.37 6.96 4.13 2.83 0.04 2.79 1.22 -0.01 1.08 2.29
MFFC Milton Fed. Fin. Corp. of OH 1.13 7.41 3.77 3.64 0.05 3.59 0.01 0.00 0.13 0.14
SMBC Southern Missouri Bncrp of MO 0.87 6.95 4.01 2.94 0.04 2.90 0.03 0.04 0.29 0.35
WOFC Western Ohio Fin. Corp. of OH 1.10 6.91 3.49 3.41 0.04 3.38 0.00 0.00 0.05 0.05
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
--------------- ------------- --------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------ ----- ----- --------- -------- ------ --------- ---------
Chester Savings Bank, FSB
- -------------------------
March 31, 1996 1.73 0.00 0.00 0.00 6.93 4.46 2.47 3,697 22.29
SAIF-Insured Thrifts 2.21 0.02 0.09 0.00 7.55 4.83 2.72 4,050 36.02
State of IL 2.35 0.01 0.07 0.00 7.48 4.84 2.65 3,642 35.33
Comparable Group Average 2.06 0.00 0.12 0.00 7.38 5.04 2.34 4,300 35.69
Mid-West Companies 2.06 0.00 0.12 0.00 7.38 5.04 2.34 4,300 35.69
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 1.98 0.00 0.00 0.00 7.93 5.24 2.68 5,078 34.17
EFBI Enterprise Fed. Bancorp of OH (1) 2.00 0.02 0.52 0.00 7.31 5.16 2.15 6,490 34.63
FFHH FSF Financial Corp. of MN 2.44 0.00 0.01 0.00 7.25 4.94 2.31 3,712 40.76
BDJI First Fed. Bancorp. of MN 2.67 0.00 0.00 0.00 7.51 4.58 2.92 2,513 40.78
FFBH First Fed. Bancshares of SR 1.40 0.00 0.06 0.00 7.67 5.42 2.25 3,585 32.84
FKKY Frankfort First Bancorp of KY 1.94 0.00 0.00 -0.06 7.14 4.79 2.35 5,545 34.34
HFFB Harrodsburg 1st Fin Bcrp of KY 1.63 0.00 0.00 0.00 7.17 5.11 2.06 7,247 34.50
HBFW Home Bancorp of Fort Wayne IN 1.49 0.00 0.00 0.00 7.36 5.34 2.01 4,010 39.92
LARK Landmark Bancshares of KS 1.65 0.00 0.18 0.00 7.26 5.40 1.86 4,298 37.85
MFBC MFB Corp. of Mishawaka IN 1.98 0.00 0.01 0.00 6.94 4.96 1.98 4,100 39.90
MCBS Mid Continent Bancshares of KS 3.27 0.03 0.32 0.00 7.54 4.90 2.64 2,123 34.55
MFFC Milton Fed. Fin. Corp. of CH 2.15 0.00 0.12 0.00 7.61 4.94 2.67 3,816 33.75
SMBC Southern Missouri Bncrp of MO 2.15 0.00 0.08 0.00 7.60 4.94 2.66 3,240 27.19
WOFC Western Ohio Fin. Corp. of OH 2.15 0.00 0.40 0.00 7.04 4.82 2.22 4,438 34.51
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we caned guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-3
Market Pricing Comparatives
Prices As of June 14, 1996
<TABLE>
<CAPTION>
Market Per Share Data
---------------
Capitalization Book Pricing Ratios(3)
--------------- ---------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------- ------- ------- ------- ------- ------- ------- -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 17.21 119.16 1.25 16.52 14.29 104.98 13.13 108.21 15.14
State of IL 17.54 69.77 1.17 18.45 14.81 94.27 12.87 95.07 16.30
Comparable Group Average 14.89 36.37 0.84 16.48 17.71 90.57 17.39 91.00 18.28
Mid-West Companies 14.89 36.37 0.84 16.48 17.71 90.57 17.39 91.00 18.28
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 15.00 25.71 0.64 15.04 23.44 99.73 23.01 99.73 23.44
EFBI Enterprise Fed. Bancorp of OH 14.25 29.71 0.99 15.52 14.39 91.82 14.31 91.99 20.96
FFHH FSF Financial Corp. of MN 12.12 46.80 0.48 13.51 NM 89.71 14.32 89.71 NM
BDJI First Fed. Bancorp. of MN 13.00 10.65 0.85 17.65 15.29 73.65 10.59 73.65 15.29
FFBH First Fed. Bancshares of AR 13.75 70.87 0.96 15.38 14.32 89.40 14.22 89.40 14.32
FKKY Frankfort First Bancorp of KY 11.87 40.95 0.53 13.87 22.40 85.58 29.54 85.58 NM
HFFB Harrodsburg 1st Fin Bcrp of KY 15.00 32.73 0.49 14.28 NM 105.04 30.11 105.04 NM
HBFW Home Bancorp of Fort Wayne IN 14.87 46.01 0.86 16.60 17.29 89.58 14.71 89.58 17.29
LARK Landmark Bancshares of KS 15.25 29.75 0.94 17.05 16.22 89.44 15.38 89.44 18.60
MFBC MFB Corp. of Mishawaka IN 14.00 29.09 0.63 18.67 22.22 74.99 14.48 74.99 22.58
MCBS Mid Continent Bancshares of KS 18.50 38.13 1.75 17.68 10.57 104.64 13.11 104.82 12.50
MFFC Milton Fed. Fin. Corp. of OH 12.87 29.61 0.79 14.91 16.29 86.32 17.25 86.32 17.63
SMBC Southern Missouri Bncrp of MO 14.75 25.43 0.78 15.41 18.91 95.72 15.70 95.72 20.21
WOFC Western Ohio Fin. Corp. of OH 23.25 53.68 1.10 25.19 21.14 92.30 16.80 98.02 NM
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Amount/ Payout Total Equity/ NPAs/ Reported Core
-------------------- -------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ------ ------- ------ ------- ------- ------- ------- ------- -------
(x) ($) (%) (%) ($Mil) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.35 1.98 25.53 1,297 13.25 0.95 0.87 8.08 0.81 7.29
State of IL 0.28 1.57 24.31 657 14.29 0.58 0.77 6.36 0.73 5.96
Comparable Group Average 0.32 2.10 29.85 225 19.15 0.38 0.99 5.18 0.89 4.70
Mid-West Companies 0.32 2.10 29.85 225 19.15 0.38 0.99 5.18 0.89 4.70
Comparable Group
- ----------------
Mid-West Companies
- ------------------
ASBP ASB Financial Corp. of OH 0.30 2.00 46.88 112 23.07 1.48 1.03 4.75 1.03 4.75
EFBI Enterprise Fed. Bancorp of OH 0.00 0.00 0.00 208 15.58 0.01 1.12 5.47 0.77 3.75
FFHH FSF Financial Corp. of MN 0.50 4.13 NM 327 15.97 0.09 0.62 3.34 0.62 3.34
BDJI First Fed. Bancorp. of MN 0.00 0.00 0.00 101 14.38 0.23 0.70 5.24 0.70 5.24
FFBH First Fed. Bancshares of AR 0.00 0.00 0.00 498 15.90 0.09 0.99 6.24 0.99 6.24
FKKY Frankfort First Bancorp of KY 0.36 3.03 67.92 139 34.52 0.10 1.36 4.94 1.08 3.91
HFFB Harrodsburg 1st Fin Bcrp of KY 0.40 2.67 NM 109 28.66 0.60 1.05 4.73 1.05 4.73
HBFW Home Bancorp of Fort Wayne IN 0.20 1.34 23.26 313 16.42 NA 0.86 5.00 0.86 5.00
LARK Landmark Bancshares of KS 0.40 2.62 42.55 193 17.20 0.37 0.91 5.28 0.79 4.60
MFBC MFB Corp. of Mishawaka IN 0.00 0.00 0.00 201 19.31 0.05 0.69 3.41 0.68 3.36
MCBS Mid Continent Bancshares of KS 0.40 2.16 22.86 291 12.53 0.21 1.37 9.90 1.16 8.37
MFFC Milton Fed. Fin. Corp. of OH 0.48 3.73 60.76 172 19.98 0.40 1.13 4.93 1.05 4.56
SMBC Southern Missouri Bncrp of MO 0.50 3.39 64.10 162 16.40 0.97 0.88 5.01 0.82 4.69
WOFC Western Ohio Fin. Corp. of OH 1.00 4.30 NM 320 18.20 0.34 1.10 4.22 0.83 3.18
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB
Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, Inc.
<PAGE>
EXHIBIT III-4
Peer Group Market Area Comparative Analysis
<PAGE>
Exhibit III-4
Peer Group Primary Market Area Demographic/Competition Trends
<TABLE>
<CAPTION>
Proj.
Population Pop. 1990-95 1995-2000
-----------------------
Institution County 1990 1995 2000 % Change % Change Median Age
- ----------- ------ ---- ---- ---- -------- -------- ----------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
ASB Financial Corp. of OH Scioto 80 82 84 2.4% 2.2% 35.7
Enterprise Fed. Bancorp of OH Hamilton 866 866 866 -0.0% -0.0% 33.7
FSF Financial Corp. of MN McLeod 12 12 13 4.8% 4.2% 33.7
Fidelity Bancorp of IL Cook 1,879 1,896 1,910 0.9% 0.8% 34.0
First Fed. Bancorp of MN Beltrami 34 38 42 11.0% 9.5% 29.0
Great American Bancorp of IL Champaign 173 165 162 -4.6% -1.9% 29.0
Landmark Bancshares of KS Ford 10 10 11 6.2% 4.8% 30.7
North Bancshares of Chicago IL Cook 1,879 1,896 1,910 0.9% 0.8% 34.0
Southern Missouri Bncrp of MO Butler 15 16 17 4.8% 4.3% 36.9
Western Ohio Fin. Corp. of OH Clark 148 148 148 0.2% 0.2% 35.4
--- --- --- ---- ---- ----
AVERAGES: 510 513 516 2.7% 2.5% 33.2
MEDIANS: 114 115 116 1.6% 1.5% 33.9
CHESTER SAVINGS BANK OF IL RANDOLPH 35 34 34 -0.5% -0.2% 34.0
<CAPTION>
Per Capita Income Deposit
-----------------------
% State Market
Amount Average Share(1)
<S> <C> <C> <C>
ASB Financial Corp. of OH 10,837 69.0% 13.5%
Enterprise Fed. Bancorp of OH 18,004 114.6% 0.5%
FSF Financial Corp. of MN 19,188 91.2% 19.8%
Fidelity Bancorp of IL 17,825 104.6% 0.3%
First Fed. Bancorp of MN 12,572 59.7% 14.1%
Great American Bancorp of IL 14,069 82.5% 5.0%
Landmark Bancshares of KS 11,422 80.3% 17.9%
North Bancshares of Chicago IL 17,825 104.6% 0.1%
Southern Missouri Bncrp of MO 10,436 72.5% 9.2%
Western Ohio Fin. Corp. of OH 14,727 93.8% 10.5%
------ ----- -----
14,691 87.3% 9.1%
14,398 86.9% 9.9%
Chester Savings Bank of IL 11,627 68.2% 19.2%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total
county deposits.
Source: CACI, Inc; FDIC; OTS.
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of June 14, 1996
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Weekly Thrift Market Line - Part One
Prices As Of June 14, 1996
Market Capitilization Price Change Data
-------------------------- --------------------------------------
Shares Market 52 Week (1) % Change From
------------- ---------------
Price/ Outst- Capital- Last Last Dec. 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2)
- --------------------- -------- ------- -------- ------ ----- ------ ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF - Insured Thrifts (no FHC)
- ------------------------------------------------
SAIF-Insured Thrifts(322) 17.33 5,867 125.7 18.77 14.11 17.26 0.38 132.74
NYSE Traded Companies(12) 28.39 46,329 1,312.3 30.65 21.28 26.64 -0.97 183.98
AMEX Traded Companies(17) 13.84 3,282 49.0 14.97 12.32 13.91 -0.40 206.86
NASDAQ Listed QTC Companies(293) 17.04 4,204 76.9 18.46 13.90 16.95 0.49 125.02
California Companies(25) 19.30 23,611 604.6 20.87 14.93 19.30 0.31 51.51
Florida Companies(10) 13.03 5,174 58.6 14.72 10.52 12.97 0.23 68.90
Mid-Atlantic Companies(63) 16.81 5,737 104.7 18.28 13.88 16.69 0.65 114.42
Mid-West Companies(149) 17.92 3,827 64.7 19.28 14.55 17.84 0.51 157.61
New England Companies(9) 17.64 3,542 70.4 19.55 14.89 17.60 -0.26 178.79
North-West Companies(6) 17.42 11,909 232.2 18.18 13.05 17.97 -2.48 73.18
South-East Companies(45) 16.45 3,530 57.9 18.10 13.57 16.37 0.36 179.05
South West Companies (7) 13.45 1,879 28.2 14.96 11.87 13.46 0.17 -18.52
Western Companies (Excl CA)(8) 16.10 1,158 51.1 16.88 13.47 16.16 -0.35 221.28
Thrift Strategy(248) 16.21 3,484 59.7 17.60 13.55 16.14 0.44 102.02
Mortgage Banker Strategy(39) 21.27 11,484 324.5 22.68 16.16 21.17 0.07 216.05
Real Estate Strategy(16) 18.50 6,379 122.3 19.55 13.30 18.55 -0.06 97.09
Diversified Strategy(15) 25.50 29,926 697.3 27.46 19.60 25.52 -0.08 191.69
Retail Banking Strategy (4) 12.03 3,261 81.7 13.72 10.15 11.78 2.80 176.80
Companies Issuing Dividends(244) 18.50 6,249 143.0 20.19 15.10 18.54 0.33 152.71
Companies Without Dividends(78) 13.37 4,684 72.1 14.37 11.04 13.31 0.53 53.63
Equity/Assets less than 6 (29) 16.92 19,811 421.3 18.20 12.83 16.77 0.80 76.78
Equity/Assets 6-12%(147) 19.42 5,433 134.8 21.10 15.31 19.39 0.12 154.44
Equity/Assets greater than 12%(146) 15.34 3,506 57.5 16.59 13.18 15.26 0.55 95.43
Converted Last 3 Mths (no MHC)(20) 11.26 3,631 41.7 11.90 10.62 11.16 0.97 0.00
Actively Traded Companies(53) 23.15 17,267 440.5 24.08 18.29 23.07 0.46 157.85
Market Value Below $20 Million(83) 14.06 962 12.6 15.51 12.05 14.05 0.06 85.52
Holding Company Struture (275) 17.77 5,929 132.5 19.25 14.60 17.70 0.44 125.71
Assets Over $1 Billion(61) 24.57 19,220 482.3 26.37 18.86 24.54 0.25 155.85
Assets Over $500 Million-$1 Billion(56) 17.58 5,025 78.2 18.81 14.13 17.40 0.91 175.99
Asstes Over $250-$500 Million(79) 15.87 2,632 38.6 17.36 13.40 15.79 0.35 99.16
Assets Less than $250 Million (126) 14.39 1,114 19.3 15.72 12.10 14.37 0.21 78.59
Goodwil Companies (133) 19.63 9,664 226.5 21.28 15.43 19.54 0.57 155.93
Non-Goodwill Companies(189) 15.65 3,114 52.6 16.95 13.16 15.62 0.24 89.83
Acquitors of FSLIC Cases(14) 24.87 34,581 976.9 26.26 18.96 24.99 -0.25 197.38
<CAPTION>
Current Per Share Financials
---------------------------------------------
Tangible
Trailing 12 Mo. Book Book
Dec. 31, 12 Mo. Core Value/ Value/ Assets/
Financial Institution 1995(2) EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------- -------- ------- ------- -------- -------
(%) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF - Insured Thrifts (no FHC)
- ------------------------------------------------
SAIF-Insured Thrifts(322) 1.53 1.28 1.15 16.74 16.31 164.37
NYSE Traded Companies(12) 2.55 2.35 1.96 21.40 20.05 355.85
AMEX Traded Companies(17) 1.35 0.79 0.75 15.14 14.97 104.13
NASDAQ Listed QTC Companies(293) 1.48 1.26 1.13 16.63 16.22 159.37
California Companies(25) 3.87 1.03 0.86 18.35 17.86 280.83
Florida Companies(10) 3.13 1.23 0.77 12.43 12.14 175.66
Mid-Atlantic Companies(63) 1.19 1.38 1.31 16.38 15.79 167.39
Mid-West Companies(149) 1.09 1.32 1.17 17.52 17.21 150.12
New England Companies(9) -2.08 1.56 1.31 18.76 17.22 254.16
North-West Companies(6) 8.15 1.30 1.20 13.13 12.35 171.31
South-East Companies(45) 2.26 1.11 1.06 14.72 14.44 122.20
South West Companies (7) -6.18 1.14 1.07 16.25 15.66 213.08
Western Companies (Excl CA)(8) 5.07 1.07 1.00 16.40 15.00 113.11
Thrift Strategy(248) 0.84 1.09 1.03 16.56 16.21 143.76
Mortgage Banker Strategy(39) 4.31 2.00 1.43 17.48 16.54 250.48
Real Estate Strategy(16) 4.44 1.64 1.61 16.99 16.29 202.91
Diversified Strategy(15) 3.07 2.00 1.97 18.72 18.22 236.99
Retail Banking Strategy (4) -3.72 1.13 0.86 13.56 13.05 158.37
Companies Issuing Dividends(244) 3.34 1.82 1.27 17.41 16.91 168.32
Companies Without Dividends(78) 2.28 0.83 0.75 14.56 14.44 152.15
Equity/Assets less than 6%(29) 4.37 1.39 1.09 14.29 13.44 291.39
Equity/Assets 6-12%(147) 2.02 1.68 1.47 17.33 16.62 210.91
Equity/Assets greater than 12%(146) 0.30 0.85 0.84 15.65 16.58 93.12
Converted Last 3 Mths (no MHC)(20) -2.25 0.47 0.49 14.58 14.57 67.09
Actively Traded Companies(53) 3.28 1.99 1.87 18.69 17.91 251.89
Market Value Below $20 Million(83) -2.54 1.05 0.83 16.21 16.14 133.60
Holding Company Struture(275) 1.11 1.28 1.15 17.27 16.83 163.56
Assets Over $1 Billion(61) 4.12 2.00 1.82 20.00 18.71 275.21
Assets Over $500 Million-$1 Billion(56) 3.05 1.34 1.24 16.25 15.78 174.93
Asstes Over $250-$500 Million(79) 1.81 1.23 0.97 15.81 15.48 154.89
Assets Less than $250 Million(126) -0.97 0.91 0.86 15.87 15.84 108.31
Goodwil Companies (133) 3.45 1.54 1.38 17.40 16.38 216.23
Non-Goodwill Companies(189) -0.01 1.08 0.98 16.26 16.26 126.77
Acquitors of FSLIC Cases(14) -0.92 2.19 1.93 18.94 17.75 297.22
</TABLE>
(1) Average of high /low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trading twelth month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) RDA (return on assets) and ROE (return on equity) are indicated ratiuos
based on trading twelve month common earnings and average common equity and
assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trading twelve month earnings.
(8) Excluded from averages due to actual or restored acquisition activities or
unusual operating characteristics.
(9) For MIC institutions, market value reflects share price multiplied by
public (non-HHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completerness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 2209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
------------------------- -----------------------------------------------------
Shares Market 52 Week (1) (%) Change From
--------------- -------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- -------- ---------- --------- ------- ------- ------ ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF - Insured Thrifts (no MHC)
- -----------------------------------------------
BIF - Insured Thrifts(71) 16.54 6,942 121.5 17.96 12.99 16.49 0.20 98.59 4.61
NYSE Traded Companies(3) 13.69 53,098 700.8 14.25 10.44 13.87 -1.27 123.54 10.76
AMEX Traded Companies(4) 14.72 3,115 47.7 15.69 13.16 14.44 1.86 28.64 -5.17
NASDAQ Listed OTC Companies(64) 16.76 5,591 106.4 18.18 13.07 16.73 0.14 102.49 4.92
California Companies(2) 11.13 5,155 64.2 11.88 7.88 11.38 -2.06 216.67 9.48
Mid-Atlantic Companies(19) 18.80 10,955 171.8 20.?1 15.06 18.70 0.39 75.79 1.33
Mid-West Companies(1) 7.87 2,562 20.2 8.50 7.50 7.50 4.93 0.00 0.00
New England Companies(44) 16.01 3,644 54.2 17.39 12.47 15.97 0.19 109.50 5.75
North-West Companies(4) 17.51 22,775 598.8 19.28 13.85 17.72 -1.07 41.36 2.13
South-West Companies(1) 10.75 1,387 14.9 11.50 7.50 10.50 2.38 0.00 19.44
Thrift Strategy(44) 16.41 3,552 54.0 17.76 13.10 16.34 0.28 96.54 5.86
Mortgage Banker Strategy(11) 18.15 15,785 238.1 19.54 14.17 18.16 0.19 138.65 4.56
Real Estate Strategy(7) 16.10 3,715 70.0 17.10 11.27 16.15 -0.75 138.17 10.62
Diversified Strategy(7) 16.10 21,376 482.8 19.14 12.17 16.04 0.48 39.06 -5.23
Retail Banking Strategy(2) 14.50 1,330 17.9 17.13 13.13 14.38 0.76 16.56 -6.80
Companies Issuing Dividends(50) 18.67 5,716 123.2 20.19 14.59 18.61 0.26 103.18 5.53
Companies Without Dividends(21) 11.59 9,782 117.7 12.81 9.30 11.58 0.07 76.78 2.09
Equity/Assets (Less than)6%(B) 11.33 23,161 285.7 12.59 8.35 11.44 -1.04 67.51 -2.77
Equity/Assets 6-12%(51) 17.19 5,331 108.7 18.74 13.47 17.10 0.46 105.10 5.76
Equity/Assets (More than)12%(12) 16.58 4,782 83.2 17.57 13.53 16.68 -0.27 -6.48 3.25
Converted Last 3 Mths (no MHC) (3) 9.44 3,235 31.0 10.21 9.27 9.33 1.45 0.00 0.00
Actively Traded Companies(30) 17.70 11,015 208.8 18.95 13.90 17.66 0.34 120.05 4.69
Market Value Below $20 Million(31) 13.84 982 12.5 14.73 10.58 13.87 0.08 81.45 8.38
Holding Company Structure(45) 17.09 6,768 135.5 18.55 13.58 17.08 -0.02 102.66 5.55
Assets Over $1 Billion(17) 22.45 19,874 397.4 23.79 16.63 22.52 -0.40 96.13 6.06
Assets $500 Million-$1 Billion(17) 18.94 4,578 77.0 20.42 15.54 18.72 1.33 125.45 0.24
Assets $250-$500 Million(22) 13.27 3,576 38.8 15.08 10.80 13.18 0.15 93.15 3.80
Assets less than $250 Million(15) 13.14 1,567 15.9 14.08 10.13 13.20 -0.22 75.56 8.94
Goodwill Companies(35) 18.17 9,700 185.7 19.87 14.58 18.02 0.87 104.95 3.91
Non-Goodwill Companies (36) 14.96 4,270 59.4 16.12 11.55 15.01 -0.44 88.69 5.36
<CAPTION>
Current Per Share Financials
--------------------------------------------------------
Tangible
Trailing 12Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ---------- --------- --------- --------- -----------
($) ($) ($) ($) ($)
Market Averages. BIF - Insured Thrifts (no MHC)
- -----------------------------------------------
BIF - Insured Thrifts(71) 1.43 1.36 15.26 14.77 176.07
NYSE Traded Companies(3) 0.52 0.64 12.58 12.51 232.41
AMEX Traded Companies(4) 1.14 0.71 14.49 13.78 150.26
NASDAQ Listed OTC Companies(64) 1.49 1.43 15.41 14.92 175.90
California Companies(2) 0.64 0.55 11.42 11.41 182.68
Mid-Atlantic Companies(19) 1.50 1.47 16.97 16.80 190.76
Mid-West Companies(1) 0.29 0.29 11.06 11.06 19.67
New England Companies(44) 1.48 1.38 15.06 14.38 178.02
North-West Companies(4) 1.43 1.42 14.17 13.64 148.84
South-West Companies(1) 1.24 0.97 7.91 7.64 91.48
Thrift Strategy(44) 1.40 1.33 15.72 15.26 166.23
Mortgage Banker Strategy(11) 1.55 1.54 16.29 15.55 229.21
Real Estate Strategy(7) 1.46 1.34 12.71 12.67 124.13
Diversified Strategy(7) 1.86 1.69 12.78 12.04 186.36
Retail Banking Strategy(2) 0.19 0.20 16.33 15.86 258.61
Companies Issuing Dividends(50) 1.71 1.63 16.52 15.89 194.35
Companies Without Dividends(21) 0.80 0.73 12.33 12.18 133.72
Equity/Assets (Less than)6%(B) 0.92 0.79 9.66 9.56 180.00
Equity/Assets 6-12%(51) 1.61 1.52 15.44 14.80 193.50
Equity/Assets (More than)12%(12) 0.93 0.94 17.77 17.77 91.78
Converted Last 3 Mths (no MHC) (3) 0.34 0.36 13.18 13.18 43.07
Actively Traded Companies(30) 1.58 1.56 16.07 15.29 197.35
Market Value Below $20 Million(31) 1.19 1.07 15.01 14.46 175.71
Holding Company Structure(45) 1.52 1.48 15.60 15.08 167.99
Assets Over $1 Billion(17) 2.04 1.98 18.17 17.50 236.53
Assets $500 Million-$1 Billion(17) 1.66 1.49 17.23 16.77 193.64
Assets $250-$500 Million(22) 1.09 1.06 12.80 12.36 143.09
Assets less than $250 Million(15) 1.12 1.04 13.97 13.57 147.21
Goodwill Companies(35) 1.57 1.44 16.35 15.36 215.23
Non-Goodwill Companies (36) 1.30 1.28 14.20 14.20 138.13
</TABLE>
(1) Average of high/low or bid/ask price share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common
equity and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unsual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness of
such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 2209
97030 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
------------------------- -------------------------------------------------
Shares Market 52 Week (1) (%) Change From
--------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- -------- ---------- --------- ------- ------- ------ ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. BIF - Insured Thrifts (no MHC)
- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 15.96 5,017 24.2 18.09 12.44 16.08 -0.50 107.50 -4.31
BIF-Insured Thrifts(2) 16.19 21,219 135.4 18.06 12.32 15.19 4.91 184.24 0.54
NASDAQ Listed OTC Companies(21) 15.98 6,637 35.3 18.09 12.43 15.99 0.04 133.08 -3.83
Florida Companies(3) 18.08 5,505 45.3 21.50 14.55 18.42 -1.03 0.00 -11.71
Mid-Atlantic Companies(9) 14.11 7,692 26.4 16.56 11.52 14.22 -0.73 57.50 -6.42
Mid-West Companies(7) 16.45 1,911 11.9 17.80 12.31 16.34 0.88 157.50 -1.56
New England Companies(1) 22.37 39,166 264.3 23.12 15.25 20.37 9.82 184.24 17.74
North-West Companies(1) 15.00 2,155 11.8 17.00 11.36 16.00 -6.25 0.00 3.16
Thrift Strategy(18) 15.68 5,070 23.9 17.87 12.33 15.74 -0.15 107.50 -5.41
Mortgage Banker Strategy(2) 15.00 2,155 11.8 17.00 11.36 16.00 -6.25 0.00 3.16
Diversified Strategy(1) 22.37 39,666 264.3 23.12 15.25 20.37 9.82 184.24 17.74
Companies Issuing Dividends(21) 15.98 6,637 35.3 18.09 12.43 15.99 0.04 133.08 -3.83
Equity/Assets Less than 6 1/4(1) 14.75 1,610 11.0 17.25 11.00 15.75 -6.35 0.00 -7.06
Equity/Assets 6-12 ???(13) 17.50 8,081 46.2 19.73 13.29 17.53 -0.18 133.08 -4.01
Equity/Assets More than 12 1/4(7) 13.55 4,880 20.2 15.39 11.14 13.37 1.33 0.00 -3.05
Actively Traded Companies(1) 15.75 6,512 31.5 17.50 12.50 16.00 -1.56 57.50 -4.55
Market Value Below $20 Million(1) 14.00 1,250 7.9 14.25 10.50 14.00 0.00 0.00 0.94
Holding Company Structure(1) 15.75 6,512 31.5 17.50 12.50 16.00 -1.56 57.50 -4.55
Assets Over $1 Billion(4) 17.04 24,584 115.8 19.04 13.29 16.33 3.43 184.24 -0.11
Assets $500 Million-$1 Billion(6) 16.44 5,826 38.6 19.42 13.34 16.65 -0.77 57.50 -7.79
Assets $250-$500 Million(3) 18.08 2,255 15.9 20.87 13.75 18.50 -2.71 157.50 -4.77
Assets less than $250 Million(8) 14.45 2,159 10.0 15.69 10.92 14.42 0.40 0.00 -1.90
Goodwill Companies(10) 16.57 11,223 56.0 18.50 12.72 16.53 -0.12 133.08 -1.48
Non-Goodwill Companies(11) 15.50 2,885 18.4 17.75 12.18 15.54 0.17 0.00 -5.74
MHC Institutional(21) 15.98 6,637 35.3 18.09 12.43 15.99 0.04 133.08 -3.83
<CAPTION>
Current Per Share Financials
--------------------------------------------------------
Tangible
Trailing 12Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ---------- --------- --------- --------- -----------
($) ($) ($) ($) ($)
Market Averages. BIF - Insured Thrifts (no MHC)
- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(19) 0.85 0.83 13.16 12.91 126.55
BIF-Insured Thrifts(2) 1.13 0.94 11.49 11.49 124.34
NASDAQ Listed OTC Companies(21) 0.88 0.84 13.00 12.77 126.33
Florida Companies(3) 1.29 1.26 14.73 14.68 145.72
Mid-Atlantic Companies(9) 0.56 0.62 12.15 11.77 107.34
Mid-West Companies(7) 0.87 0.79 13.39 13.37 136.71
New England Companies(1) 1.90 1.53 14.12 14.12 176.59
North-West Companies(1) 1.21 1.09 10.71 9.48 97.22
Thrift Strategy(18) 0.80 0.79 13.06 12.88 125.16
Mortgage Banker Strategy(2) 1.21 1.09 10.71 9.48 97.22
Diversified Strategy(1) 1.90 1.53 14.12 14.12 176.59
Companies Issuing Dividends(21) 0.88 0.84 13.00 12.77 126.33
Equity/Assets Less than 6 1/4(1) 1.23 1.26 13.64 13.64 229.43
Equity/Assets 6-12 ???(13) 0.96 0.96 14.20 13.92 148.90
Equity/Assets More than 12 1/4(7) 0.68 0.58 10.84 10.68 72.92
Actively Traded Companies(1) 1.24 1.19 13.98 12.14 147.32
Market Value Below $20 Million(1) 0.48 0.39 13.41 13.41 113.76
Holding Company Structure(1) 1.24 1.19 13.98 12.14 147.32
Assets Over $1 Billion(4) 1.12 0.99 11.88 11.56 121.22
Assets $500 Million-$1 Billion(6) 1.04 1.06 14.49 14.12 143.41
Assets $250-$500 Million(3) 1.21 1.18 15.94 15.90 187.55
Assets less than $250 Million(8) 0.54 0.51 11.19 11.04 92.49
Goodwill Companies(10) 1.08 0.95 13.16 12.65 128.21
Non-Goodwill Companies (11) 0.71 0.76 12.87 12.87 124.80
MHC Institutional(21) 0.88 0.84 13.00 12.77 126.33
</TABLE>
(1) Average of high/low or bid/ask price share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data
and is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common
equity and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unsual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following maket averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded
companies, and RP Financial, Inc. calculations. The information
provided in this report has been obtained from sources we believe
are reliable, but we cannot guarantee the accuracy or completeness of
such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
------------------------- ----------------------------------------------------------
Shares Market 52 Week (1) % Change From
------------------ ---------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(s) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- -------- -------- ------ -------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 26.62 112,512 2,995.1 27.75 21.00 26.50 0.45 41.97 0.45
CAL CalFed Inc. of Los Angeles CA 18.37 49,313 905.9 19.00 12.37 18.62 -1.34 -9.01 16.63
CSA Coast Savings Financial of CA 32.62 18,583 606.2 34.62 19.37 33.37 -2.25 182.18 -5.78
CFB Commercial Federal Corp. of NE 38.62 15,067 581.9 38.87 27.12 38.12 1.31 946.61 2.30
DME Dime Savings Bank, FSB of NY* 13.12 98,847 1,296.9 13.25 9.87 13.12 0.00 30.42 12.91
DSL Downey Financial Corp. of CA 20.75 16,973 352.2 24.05 16.79 21.62 -4.02 21.06 -4.60
FRC First Republic Bancorp of CA* 14.25 7,349 104.7 15.25 11.00 14.62 -2.53 216.67 8.61
FED FirstFed Fin. Corp, of CA 17.50 10,624 185.9 18.50 12.37 17.25 1.45 8.36 23.94
GLN Glendale Fed. Bk, FSB of CA 18.50 44,085 815.6 19.00 12.37 18.75 -1.33 13.85 4.99
GDW Golden West Fin. Corp. of CA 54.50 58,623 3,195.0 56.25 44.37 54.62 -0.22 108.09 -1.36
GWF Great Western Fin. Corp. of CA 23.75 137,205 3,258.6 27.12 20.25 23.50 1.06 36.73 -6.39
GPT GreenPoint Fin. Corp. of NY(B)* 29.37 52,457 1,540.7 30.50 22.44 29.75 -1.28 N.A. 9.79
SFB Standard Fed. Bancorp of MI 38.12 31,289 1,192.7 43.12 31.87 38.87 -1.93 309.45 -3.18
TCB TCF Financial Corp. of MN 33.12 35,?35 1,186.9 37.62 22.94 33.62 -1.49 399.55 0.00
WES Westcorp Inc. of Orange CA 18.25 25,836 471.5 21.91 14.52 18.57 -3.29 148.98 3.58
AMEX Traded Companies
- ---------------------
BKC American Bank of Waterbury CT* 24.50 2,286 56.0 27.62 21.37 24.12 1.58 30.67 -10.09
BFD BostonFed Bancorp of NA 12.25 6,590 80.7 12.62 10.00 12.25 0.00 N.A. 4.26
CFX Cheshire Fin. Corp. of NH* 14.37 7,561 108.7 17.50 1?.50 13.75 4.51 20.76 -8.06
CZF Citisave Fin. Corp. of LA 14.25 965 13.8 16.50 12.75 15.75 -9.52 N.A. -3.39
CBK Citizens First Fin.Corp of IL 9.87 2,818 27.8 10.50 9.75 10.00 -1.30 N.A. N.A.
ESX Essex Bancorp of VA(B) 2.25 1,05? 2.4 5.50 0.04 2.31 -2.60 -86.57 19.68
FCB Falmouth Co-Op Bank of MA* 10.25 1,455 14.9 11.37 10.25 10.25 0.00 N.A. N.A.
GAF GA Financial Corp. of PA 11.00 8,900 97.9 11.50 10.75 10.75 2.33 N.A. N.A.
KNK Kankakee Bancorp of IL 19.25 1,439 27.7 21.00 18.25 19.37 -0.62 92.50 2.01
KYF Kentucky First Bancorp of KY 13.37 1,389 18.6 13.62 11.37 13.62 -1.84 N.A. 8.08
NYB New York Bancorp. Inc. of NY 25.25 11,725 296.1 26.12 19.00 25.25 0.00 256.14 12.22
PDB Piedmont Bancorp of MC 13.25 2,645 35.0 13.62 12.00 13.12 0.99 N.A. 6.00
PLE Pinnacle Bank of AL 16.12 890 14.3 19.25 15.50 16.00 0.75 138.81 -10.44
SSB Scotland Bancorp of NC 12.37 1,840 22.8 12.62 11.62 12.12 2.06 N.A. N.A.
SZB SouthFirst Bancshares of AL 12.25 855 10.5 16.00 11.25 12.00 2.08 N.A. -20.97
SRM Southern Banc Company of AL 13.25 1,455 19.3 13.37 11.37 13.25 0.00 N.A. 2.95
SSM Stone Street Bancorp of NC 16.87 1,825 30.8 18.50 16.75 16.87 0.00 N.A. N.A.
TSH Teche Holding Company of LA 13.25 4,094 54.2 14.50 11.75 13.25 0.00 N.A. -3.64
FTF Texarkana Fst. Fin. Corp of AR 16.50 1,984 32.7 16.50 10.00 16.37 0.79 N.A. 16.85
THR Three Rivers Fin. Corp. of MI 13.37 860 11.5 13.62 11.37 13.25 0.91 N.A. 9.14
TBK Tolland Bank of CT* 9.75 1,157 11.3 10.25 7.50 9.62 1.35 34.88 2.63
WSB Washington SB, FSB of ND 5.50 4,220 23.2 6.25 3.56 5.63 -2.31 340.00 10.00
NASDAQ Listed OTC Companies
- ---------------------------
?BCV 1st Bancorp of Vincennes IM 26.62 666 17.7 34.05 26.00 25.00 2.38 N.A. -8.74
?FSB 1st Washington Bancorp of VA(B) 7.94 9,883 78.5 8.00 5.00 7.94 0.00 98.30 13.43
ALBK ALBANK Fin. Corp. of Albany NY 27.25 13,605 370.7 30.62 21.46 27.25 0.00 17.20 9.00
AMFC AMB Financial Corp. of IN 10.12 1,124 11.4 11.00 9.75 10.00 1.20 N.A. N.A.
ASBP ASB Financial Corp. of OH 15.00 1,714 25.7 16.50 11.37 15.00 0.00 N.A. -5.48
ABBK Abington Savings Bank of NA(B)* 15.37 1,884 29.0 18.50 12.75 14.50 6.00 132.18 -10.90
AADV Advantage Bancorp of WI 34.00 3,449 117.3 34.50 23.40 34.00 0.00 269.57 12.58
AFCB Affiliated Comm BC, Inc of MA 16.75 5,072 85.0 18.00 16.06 16.62 0.78 N.A. -3.57
ALBC Albion Banc Corp. of Albion NY 16.50 261 4.3 18.75 14.25 17.00 -2.94 26.92 0.00
ATSB AmTrust Capital Corp. of IN 9.87 567 5.6 11.25 8.25 10.00 -1.30 N.A. -3.71
<CAPTION>
Current Per Share Financials
------------------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- -------- ---------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 3.65 0.44 20.40 19.12 442.46
CAL CalFed Inc. of Los Angeles CA 1.68 1.58 13.08 13.08 289.58
CSA Coast Savings Financial of CA 2.09 1.81 22.89 22.51 443.41
CFB Commercial Federal Corp. of NE 3.47 3.45 26.57 23.87 439.20
DME Dime Savings Bank, FSB of NY* 0.68 0.93 9.98 9.87 196.40
DSL Downey Financial Corp. of CA 1.68 1.47 22.83 22.43 274.12
FRC First Republic Bancorp of CA* 0.35 0.34 15.17 15.15 268.42
FED FirstFed Fin. Corp, of CA 0.71 0.79 19.38 18.07 392.11
GLN Glendale Fed. Bk, FSB of CA 0.42 0.99 17.49 16.12 325.92
GDW Golden West Fin. Corp. of CA 4.42 4.37 19.79 37.43 597.27
GWF Great Western Fin. Corp. of CA 1.92 1.75 18.42 36.13 318.96
GPT GreenPoint Fin. Corp. of NY(B)* 2.03 2.12 29.18 16.62 275.83
SFB Standard Fed. Bancorp of MI 3.92 3.54 30.02 25.61 431.63
TCB TCF Financial Corp. of MN 2.78 2.63 15.10 14.44 196.44
WES Westcorp Inc. of Orange CA 1.42 0.71 11.78 11.74 119.08
AMEX Traded Companies
- ---------------------
BKC American Bank of Waterbury CT* 2.82 0.32 19.37 18.37 226.11
BFD BostonFed Bancorp of NA 0.20 0.17 13.90 13.90 102.85
CFX Cheshire Fin. Corp. of NH* 1.15 0.95 11.99 10.70 126.74
CZF Citisave Fin. Corp. of LA 1.02 0.70 15.02 15.01 82.51
CBK Citizens First Fin.Corp of IL 0.56 0.61 13.95 13.95 89.59
ESX Essex Bancorp of VA(B) 0.97 -2.35 7.72 -0.25 300.25
FCB Falmouth Co-Op Bank of MA* 0.25 0.26 14.84 14.84 60.43
GAF GA Financial Corp. of PA 0.31 0.44 14.34 14.34 63.90
KNK Kankakee Bancorp of IL 1.15 1.13 24.73 22.94 252.38
KYF Kentucky First Bancorp of KY 0.57 0.57 14.28 14.28 60.46
NYB New York Bancorp. Inc. of NY 2.72 2.58 13.58 13.58 234.92
PDB Piedmont Bancorp of MC 0.58 0.59 14.05 14.05 47.20
PLE Pinnacle Bank of AL 1.71 1.53 17.10 16.50 208.76
SSB Scotland Bancorp of NC 0.38 0.38 14.38 14.38 38.27
SZB SouthFirst Bancshares of AL 0.55 0.76 15.48 15.48 103.98
SRM Southern Banc Company of AL 0.36 0.36 15.51 15.34 76.12
SSM Stone Street Bancorp of NC 0.43 0.43 21.43 21.43 63.62
TSH Teche Holding Company of LA 0.92 0.90 14.51 14.51 84.54
FTF Texarkana Fst. Fin. Corp of AR 1.48 1.11 16.98 16.98 82.35
THR Three Rivers Fin. Corp. of MI 0.51 0.49 14.90 14.81 94.69
TBK Tolland Bank of CT* 1.12 0.82 11.74 11.19 187.76
WSB Washington SB, FSB of ND 0.57 0.42 5.03 5.03 62.24
NASDAQ Listed OTC Companies
- ---------------------------
?BCV 1st Bancorp of Vincennes IM 9.81 -0.71 32.33 32.33 410.09
?FSB 1st Washington Bancorp of VA(B) 0.51 0.21 4.79 4.79 80.47
ALBK ALBANK Fin. Corp. of Albany NY 2.21 2.21 23.58 20.81 244.99
AMFC AMB Financial Corp. of IN 0.31 0.31 14.37 14.37 71.65
ASBP ASB Financial Corp. of OH 0.64 0.64 15.04 15.04 65.18
ABBK Abington Savings Bank of NA(B)* 0.85 0.56 16.52 14.45 253.96
AADV Advantage Bancorp of WI 2.51 2.26 27.77 24.06 284.11
AFCB Affiliated Comm BC, Inc of MA 1.21 1.45 18.97 18.82 185.00
ALBC Albion Banc Corp. of Albion NY 0.56 0.56 23.26 23.26 217.21
ATSB AmTrust Capital Corp. of IN 0.37 0.08 13.32 13.18 128.87
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- ----------------------------------------------------
Shares Market 52 Week (1) % Change From
---------------- --------------------------
Price/ Outst- Capital- Last Last Dec. 31, Dec. 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ -------- -------- ------- -------- ------- ------- ----------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHCI Banc Holding Co. of NY* 9.56 5,422 51.8 10.31 9.38 9.38 1.92 N.A. -5.44
ASBI Ameriana Bancorp of IN 13.00 3,325 43.2 14.44 11.25 13.00 0.00 40.85 -8.77
AFFFZ America First Fin. Fund of CA 27.00 6,011 162.3 29.75 24.50 26.00 3.85 44.00 -9.24
AMFB American Federal Bank of SC 15.75 10,921 172.0 16.5 13.75 16.00 -1.56 231.58 3.28
AMBK American Nat'l Bancorp of ID 9.87 3,980 39.3 10.25 8.05 10.00 -1.30 N.A. 1.23
ABCW Anchor Bancorp Wisconsin of WI 34.00 4,934 167.8 36.25 25.80 34.50 -1.45 15.76 -5.21
A?DB Andover Bancorp, Inc. of MA* 24.25 4,243 102.9 26.06 18.25 25.75 -5.83 125.58 14.82
ASFC Astoria Financial Corp. of NY 27.37 27,917 599.9 28.13 17.69 27.00 1.37 4.27 19.99
AVND Avondale Fin. Corp. of IL 13.00 4,015 52.2 15.25 12.72 13.25 -1.89 N.A. -10.34
BFSI BFS Bancorp, Inc. of NY 38.50 1,635 62.9 39.50 24.75 39.50 -2.53 324.94 9.22
BXCI Bancorp Connecticut of CT 20.75 2,706 56.1 21.04 12.71 19.56 6.08 137.14 40.30
BWFC Bank West Fin. Corp. of MI 10.75 2,296 24.7 10.87 8.75 10.75 0.00 N.A. 6.23
BANC BankAtlantic Bancorp of FL 13.50 11,743 158.5 16.00 10.24 14.00 -3.57 159.62 -10.00
BKUHA BankUnited SA of FL 7.50 5,693 42.7 8.75 6.12 7.75 -3.25 38.12 22.55
BKCO Bankers Corp. of NJ* 17.25 12,794 220.7 18.78 16.25 17.25 0.00 176.00 6.15
BVFS Bay View Capital Corp. of CA 33.50 6,900 231.2 35.25 24.00 33.00 1.52 69.62 17.54
BFSB Bedford Bancshares of VA 16.62 1,195 19.9 18.75 15.25 16.00 3.88 58.29 -4.32
BTHL Bethel Bancorp of NE* 13.00 1,203 15.6 13.25 10.75 13.00 0.00 10.64 13.04
SBOS Boston Bancorp of NA(8)* 41.87 5,251 219.9 44.00 35.75 42.00 -0.31 154.68 4.02
BSBC Branford SB of CT 3.25 6,553 21.3 3.50 2.12 3.37 -3.56 53.30 13.24
BRFC Bridgeville SB, FSB of PA 13.75 1,124 15.5 15.25 12.25 14.25 -3.51 -3.51 -5.17
BYFC Broadway Fin. Corp. of CA 10.00 893 8.9 11.00 10.00 10.00 0.00 N.A. N.A.
CBCO CB Bancorp of Michigan City IN 17.25 1,188 20.5 19.25 12.50 17.25 0.00 56.82 -4.17
CCFH CCF Holding Company of GA 12.00 1,131 13.6 12.75 10.75 11.50 4.35 N.A. -5.88
CEHF CEHF?D Financial Corp of CA 21.50 5,011 108.2 23.41 17.50 21.50 0.00 37.12 -1.47
CFSB CFSB Bancorp of Lansing MI 21.25 4,475 95.1 24.00 17.73 20.62 3.06 136.11 -1.16
CKFB CKF Bancorp of Danville KY 19.50 932 18.2 20.25 12.75 20.00 -2.50 N.A. 1.30
CSBF CSB Financial Group Inc of IL 9.12 1,035 9.4 9.62 8.81 9.00 1.33 N.A. -4.00
CFHC California Fin. Hld. Co. of CA 20.87 4,665 97.4 21.85 15.00 20.50 1.80 98.76 1.80
CBCI Calument Bancorp of Chicago IL 28.50 2,668 76.0 29.50 26.50 28.00 1.79 40.74 2.70
CAFI Camco Fin. Corp. of OH 19.62 1,971 38.7 20.00 13.81 20.00 -1.90 N.A. 9.00
CNR? Cameron Fin. Corp. of MO 13.50 2,850 38.5 15.50 11.37 14.00 -3.57 N.A. -6.05
CAPS Capital Savings Bancorp of MO 18.00 1,039 18.7 19.50 16.50 18.00 0.00 38.85 -2.70
CARV Carver FSB of New York, NY 7.87 2,314 18.2 10.75 6.81 7.62 3.28 25.92 -12.56
CASB Cascade SB of Everett WA 16.50 2,040 33.7 16.50 12.40 20.00 -17.50 28.91 24.06
CATB Catskill Fin. Corp. of NY* 10.19 5,687 58.0 10.75 10.06 10.25 -0.59 N.A. N.A.
CNIT Cenit Bancorp of Norfolk VA 35.00 1,606 56.2 40.25 33.00 34.00 2.94 120.40 -4.76
CTBK Center Banks, Inc. of NY* 13.75 932 12.8 15.25 13.00 13.75 0.00 25.00 -2.20
CFCK Center Fin. Corp of CT(8)* 22.87 14,487 331.3 22.87 14.12 20.87 9.58 238.81 30.69
CEBK Central Co-Op. Bank of NA* 15.50 1,933 30.00 17.00 10.75 15.25 1.64 195.24 3.33
CJFC Central Jersey Fin. Corp. of NJ(8) 30.75 2,668 82.0 31.31 19.00 30.25 1.65 229.94 23.00
CBSB Charter Financial Inc. of IL 11.50 4,974 57.2 12.25 8.52 11.50 0.00 N.A. 6.38
CDFI Charter One Financial of OH(8) 35.19 45,115 1,587.6 38.00 24.25 35.62 -1.21 101.09 14.92
CYAL Chester Valley Bancorp of PA 18.25 1,580 28.8 20.48 18.12 18.62 -1.99 61.08 -5.19
CRCL Circle Financial Corp. of OH(8) 34.00 708 24.1 35.50 25.00 33.84 0.47 209.09 25.93
CT?N CitFed Bancorp of Day??? OH 37.06 5,686 210.7 38.81 26.50 36.75 0.84 311.78 7.42
CLAS Classic Bancshares of KY 11.00 1,322 14.5 11.75 10.50 11.12 -1.08 N.A. -6.38
CNSB Comwealth SB, NHC of PA (46.3)(8) 21.50 8.642 82.8 24.87 14.87 21.88 -1.74 N.A. -4.44
CBSA Coastal Bancorp of Houston TX 18.56 4,958 92.0 18.75 15.63 18.62 -0.32 N.A. 6.06
CFCP Coastal Fin. Corp. of SC 20.19 2,742 55.4 21.50 14.80 20.00 0.95 101.90 27.78
CDFD Collective Bancorp Inc. of NJ 24.25 20,407 498.9 28.25 20.00 24.12 0.54 218.24 -4.41
CMSV County. Svgs, NHC of FL (47.6) 15.25 4,869 36.3 18.25 14.25 14.75 3.39 N.A. -10.29
CBIN Community Bank Shares of IN 13.62 1,984 27.0 14.75 12.00 13.62 0.00 N.A. -4.42
CBHH Community Bankshares Inc of ???? 17.75 2,416 42.9 19.75 15.75 17.37 2.19 373.33 -5.94
CFTP Community Fed. Bancorp of MS 13.62 4,629 63.0 13.62 12.50 13.50 0.89 N.A. N.A.
<CAPTION>
Current Per Share Financials
---------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------- -------- -------- --------- ---------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
AHCI Banc Holding Co. of NY* -0.02 -0.03 13.87 13.87 72.36
ASBI Ameriana Bancorp of IN 1.00 0.97 13.41 13.39 115.21
AFFFZ America First Fin. Fund of CA 3.20 3.18 26.41 25.79 388.14
AMFB American Federal Bank of SC 1.55 1.69 10.07 9.29 122.62
AMBK American Nat'l Bancorp of ID 0.37 0.36 12.31 12.31 112.82
ABCW Anchor Bancorp Wisconsin of WI 2.94 2.85 24.00 23.37 355.61
A?DB Andover Bancorp, Inc. of MA* 2.25 2.36 20.44 20.44 269.10
ASFC Astoria Financial Corp. of NY 2.21 2.19 26.16 21.18 306.07
AVND Avondule Fin. Corp. of IL 0.93 0.65 15.35 15.35 144.39
BFSI BFS Bancorp, Inc. of NY 6.20 5.99 28.20 28.20 346.45
BXCI Bancorp Connecticut of CT 1.65 1.65 16.09 16.09 148.88
BWFC Bank West Fin. Corp. of MI 0.41 0.24 11.99 11.99 60.63
BANC BankAtlantic Bancorp of FL 1.44 1.12 11.65 10.70 139.90
BKUHA BankUnited SA of FL 1.12 0.86 7.93 7.49 129.72
BKCO Bankers Corp. of NJ* 1.62 1.71 14.69 14.38 149.72
BVFS Bay View Capital Corp. of CA -0.46 1.15 29.46 28.72 421.78
BFSB Bedford Bancshares of VA 1.20 1.20 15.85 15.85 98.41
BTHL Bethel Bancorp of NE* 1.08 0.83 13.72 11.53 181.37
SBOS Boston Bancorp of NA(8)* 7.08 3.39 40.29 40.29 326.62
BSBC Branford SB of CT* 0.20 0.20 2.31 2.31 26.59
BRFC Bridgeville SB, FSB of PA 0.59 0.59 14.13 14.13 49.57
BYFC Broadway Fin. Corp. of CA 0.49 0.55 14.73 14.73 129.03
CBCO CB Bancorp of Michigan City IN 2.07 2.07 15.79 15.79 172.41
CCFH CCF Holding Company of GA 0.59 0.56 14.79 14.79 69.65
CEHF CEHF?D Financial Corp of CA 1.97 1.36 21.02 20.98 420.11
CFSB CFSB Bancorp of Lansing MI 1.58 1.55 14.30 14.30 172.40
CKFB CKF Bancorp of Danville KY 0.75 0.75 17.21 17.21 63.05
CSBF CSB Financial Group Inc of IL 0.32 0.32 12.30 12.30 39.82
CFHC California Fin. Hld. Co. of CA 0.77 0.67 18.48 18.32 273.69
CBCI Calument Bancorp of Chicago IL 2.28 2.27 11.99 31.99 188.31
CAFI Camco Fin. Corp. of OH 2.12 1.62 14.52 14.52 174.38
CNR? Cameron Fin. Corp. of MO. 0.97 0.96 16.06 16.06 60.52
CAPS Capital Savings Bancorp of MO 1.75 1.75 20.34 20.34 194.95
CARV Carver FSB of New York, NY 0.31 0.40 15.12 14.38 155.97
CASB Cascade SB of Everett WA* 0.86 0.45 9.94 9.94 159.93
CATB Catskill Fin. Corp. of NY 0.47 0.54 13.65 13.65 49.12
CNIT Cenit Bancorp of Norfolk VA 1.57 1.84 29.00 27.92 415.61
CTBK Center Banks, Inc. of NY* 1.27 1.31 16.32 16.32 230.66
CFCK Center Fin. Corp of CT(8)* 1.60 1.09 15.46 14.44 253.30
CEBK Central Co-Op. Bank of NA * 0.99 0.93 16.38 14.30 164.61
CJFC Central Jersey Fin. Corp. of NJ(8) 1.89 1.80 20.58 19.13 174.74
CBSB Charter Financial Inc. of IL 0.65 0.65 12.95 12.61 60.48
CDFI Charter One Financial of OH(8) 0.37 2.39 20.16 19.84 292.01
CYAL Chester Valley Bancorp of PA 1.54 1.48 15.90 15.90 173.78
CRCL Circle Financial Corp. of OH 1.47 1.26 34.51 29.94 324.02
CTZN Citfed Bancorp of Dayton OH 2.84 2.32 30.62 26.54 456.89
CLAS Classic Bancshares of KY 0.21 0.19 14.76 14.76 51.28
CMSB Comwealth SB, NMC PA (46.3) (8) 1.27 1.13 15.93 14.00 191.82
CBSA Coastal Bancorp of Houston TX 1.93 1.92 18.76 15.22 566.10
CFCP Coastal Fin. Corp. of SC 1.51 1.36 9.79 9.79 160.91
CDFD Collective Bancorp Inc. of NJ 2.62 2.56 17.47 16.22 247.89
CMSV County, Svgs, NHC of FL(47.6) 0.99 9.96 15.35 15.35 129.90
CBIN Community Bank Shares of IN 0.96 0.94 12.84 12.84 113.06
CBHH Community Bankshares Inc of NH* 1.41 1.17 15.46 15.46 213.92
CFTP Community Fed. Bancorp of MS 0.43 0.42 14.34 14.34 43.32
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- --------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Market Capitilization Price Change Data
------------------------ ----------------------------------------------------
Shares Market 52 Week (1) % Change From
---------------- ----------------------------
Price/ Outst- Capital- Last Last Dec. 31, Dec. 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ -------- ------ ------ ------- ------ -------- ---------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CFFC Community Fin. Corp. of VA 20.00 1,270 25.4 21.00 13.50 21.00 -4.76 185.71 11.11
CIBI Community Inv. Corp. of OH 15.25 701 10.7 17.50 12.75 14.75 3.39 N.A. 0.00
CONE Connestoga Bancorp of Roslyn NY(8) 21.00 4,742 99.6 21.12 14.37 21.00 0.00 N.A. 4.37
COOP Cooperative BA. for Svgs. of NY 17.25 1,492 25.7 22.50 17.25 17.25 0.00 72.50 -15.85
CNSK Covenant Bank for Svgs. of NJ* 12.00 1,959 23.5 13.22 8.62 12.00 0.00 N.A. -9.23
CRZY Crazy Woman Creek Bancorp of WY 10.25 1,058 10.8 11.00 10.25 10.37 -1.16 N.A. N.A.
DNFC D&M Financial Corp. of NI 13.44 6,829 91.8 13.62 9.38 12.37 8.65 53.60 10.89
DSBC DS Bancorp Inc. of Derby CT* 31.25 3,029 94.2 33.00 23.33 31.37 -0.38 89.97 22.55
DFCH Danen Fin. Corp pf Chicago IL 11.50 3,967 45.6 11.94 11.00 11.62 -1.03 N.A. 1.14
DIBX Dime Financial Corp. of CT* 14.25 5,024 71.5 14.50 9.50 13.75 3.64 35.71 5.56
EBSI Eagle Bancshares of Tucker GA 16.03 3,117 49.9 19.00 13.62 16.00 0.00 120.69 -15.79
EGFC Eagle Financial Corp. of CT 23.75 4,491 106.7 27.75 20.75 23.50 1.06 171.43 -9.52
ETFS East Texas Fin. Serv. of TX 14.75 1,194 17.6 16.75 13.75 14.75 0.00 N.A. -9.23
EBCF Eastern Bancorp of NM 24.00 2,398 57.6 27.50 19.25 24.25 -1.03 186.74 -10.28
ESBK Elmira SB of Elmira NY* 15.75 706 11.8 18.75 14.50 16.50 1.52 16.56 -10.67
EFBI Enterprise Fed. Bancorp of OH 14.25 2,085 29.7 18.00 13.75 14.25 0.00 N.A. -3.39
EQSB Equitable FSB of Wheaton NO 24.25 600 14.6 24.25 20.37 22.50 7.78 -66.19 7.78
FFFG F.F.D Financial Group of FL 2.81 8,430 23.7 3.00 2.25 2.69 4.46 N.A. 9.77
FCBF FCB Fin. Corp of Meenah WI 19.25 2,513 45.9 18.50 15.50 17.50 4.29 N.A. -1.35
FFBS FFBS Bancorp of Columbus NS 22.75 1,573 35.8 24.00 15.50 23.00 -1.09 N.A. 33.82
FFDF FFD Financial Corp. of DH 10.19 1,455 14.8 10.75 10.00 10.37 -1.74 N.A. N.A.
FFLC FFLC Bancorp of Leesburg FL 18.50 2,638 48.8 20.25 16.00 17.75 4.23 N.A. -1.33
FFFC FFWA Financial Corp. of VA 17.50 5,426 95.0 17.50 13.25 16.75 4.48 N.A. 27.27
FFWC FFW Corporation of Wabash SH 19.25 739 14.2 19.75 16.50 19.25 0.00 N.A. -2.53
FFYF FFY Financial Corp. of DH 23.25 5,193 120.7 23.50 19.00 23.25 0.00 94.44 10.71
FNOD FFS Financial Corp. of NJ 17.50 2,467 43.2 17.50 12.50 15.25 7.69 N.A. 2.94
FFHY FSF Financial Corp. of NH 12.12 3,861 46.8 13.50 10.75 11.69 3.68 365.45 -6.77
FNLY Family Bancorp of Haverhill MA(8)* 24.25 4,087 99.1 24.37 14.67 24.12 0.54 N.A. 35.70
FHCI Farmers & Mechanics Bank of CT(8)* 30.25 1,661 50.2 30.25 15.75 19.12 58.21 46.20 37.50
FCBC Fed One Bancorp pf Wheeling WY 14.52 2,489 36.4 16.25 13.00 14.62 0.00 42.86 -3.31
FFRV Fid. Fin. Bkshrs.Corp. of VA 12.50 2,279 28.5 14.75 10.75 12.50 0.00 N.A. -9.88
FBCI Fidelity Bancorp of Chicago IL 16.62 3,085 51.3 17.00 13.25 16.62 0.00 106.99 8.13
FSBI Fidelity Bancorp Inc. of PA 16.00 1,367 21.9 17.50 13.41 16.00 0.00 N.A. 6.67
FFFL Fidelity FSB. WHC of Fl(47.2) 13.25 6,720 82.0 17.00 10.91 13.50 -1.85 59.57 -18.46
FFED Fidelity Fed. Bancorp of IN 11.25 2,493 28.0 14.77 10.45 12.00 -6.25 N.A. -23.83
FFDN Fidelity Financial of OH 9.94 4,073 40.5 10.88 5.61 10.00 -0.50 N.A. -8.72
FIBC Financial Bancorp of NY 12.50 1,873 23.4 14.82 11.75 12.87 -2.87 153.7 -9.09
FWSC Financial Security Corp. of IL(8) 25.37 1,524 38.7 26.50 16.50 25.37 0.00 N.A. 14.02
FSBS First Ashland Fin. Corp. of NY(8) 18.00 1,463 26.3 18.37 13.00 18.00 0.00 21.57 24.14
FSBI First Bancshares of MO 15.50 1,302 20.2 17.00 14.50 15.75 -1.59 N.A. -3.13
FBBC First Bell Bancorp of PA 13.69 8,166 111.8 14.25 10.00 13.44 1.86 N.A. 2.39
FBER First Bergen Bancorp of NJ 9.31 3,174 29.5 10.00 9.25 9.25 0.65 104.26 N.A.
FCIT First Cit. Fin. Corp. of ND 17.75 2,914 51.7 19.09 14.09 17.75 0.00 299.7 2.78
FFBA First Colorado Bancorp of Co 13.19 20,302 267.8 13.62 7.75 13.25 -0.45 N.A. 20.02
FDEF First Defiance Fin. Corp. of OH 10.75 10,978 118.0 11.00 7.41 10.62 1.22 79.17 6.23
FESX First Essex Bancorp of MA 10.75 6,035 64.9 12.00 8.13 10.37 3.66 161.54 -5.45
FFES First FS&LA of E. Hartford CT 17.00 2,594 44.1 21.50 16.75 17.00 0.00 0.00 -15.00
FSSB First FS&LA of San Bern. CA 10.00 328 3.3 14.50 10.00 10.00 0.00 157.50 -20.00
FFSX First FS&LA. WHC of IA (45.S) 25.75 1,706 19.5 28.62 18.00 25.75 0.00 223.08 -3.74
FFNL First Family Bank, FSB of Fl 21.00 545 11.4 23.00 14.50 21.12 -0.57 86.88 0.00
FFSW First Fed Fin. Serv. of OH 28.37 3,275 92.9 28.37 18.10 28.00 1.32 N.A. 31.40
BDJL First Fed. Bancorp. of NH 13.00 819 10.6 14.75 11.25 13.50 -3.70 N.A. -5.45
FFBH First Fed. Bancshares of AR 13.75 5,154 70.9 14.00 13.00 13.75 0.00 N.A. N.A.
FFLC First Fed. Bancshares of WI 15.25 6,855 104.5 16.19 12.00 16.00 -4.69 N.A. 0.00
FIFC First Fed. Capital Corp. of WI 21.88 6,298 137.8 22.87 15.75 22.00 -0.55 94.49 21.56
<CAPTION>
Current Per Share Financials
-----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ --------- -----
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
CFFC Community Fin. Corp. of VA 1.58 1.58 17.24 17.24 125.82
CIBI Community Inv. Corp. of OH 1.20 1.14 17.45 17.45 121.56
CONE Connestoga Bancorp of Roslyn NY(8) 0.68 0.55 16.86 16.85 104.25
COOP Cooperative BA. for Svgs. of NY 0.60 0.51 19.64 17.27 210.32
CNSK Covenant Bank for Svgs. of NJ* 0.97 0.97 8.74 8.74 172.93
CRZY Crazy Woman Creek Bancorp of WY 0.34 0.29 14.67 14.67 44.86
DNFC D&M Financial Corp. of NI 1.80 1.59 10.16 10.00 180.40
DSBC DS Bancorp Inc. of Derby CT* 2.69 2.41 26.99 26.06 411.93
DFCH Danen Fin. Corp pf Chicago IL 0.44 0.43 14.34 14.34 59.32
DIBX Dime Financial Corp. of CT* 1.93 2.17 10.63 10.10 133.64
EBSI Eagle Bancshares of Tucker GA 1.53 1.48 11.91 11.91 179.12
EGFC Eagle Financial Corp. of CT 3.65 1.79 22.70 16.42 312.09
ETFS East Texas Fin. Serv. of TX 0.87 0.81 18.90 18.90 96.28
EBCF Eastern Bancorp of NM 2.10 1.74 26.48 24.93 343.99
ESBK Elmira SB of Elmira NY* 0.46 0.46 19.89 19.00 315.91
EFBI Enterprise Fed. Bancorp of OH 0.99 0.68 15.52 15.49 99.61
EQSB Equitable FSB of Wheaton NO 3.42 3.39 22.75 22.75 433.56
FFFG F.F.D Financial Group of FL 0.15 0.15 2.18 2.18 36.26
FCBF FCB Fin. Corp of Meenah WI 1.02 1.00 18.78 18.78 101.73
FFBS FFBS Bancorp of Columbus NS 1.00 1.00 15.37 15.37 78.55
FFDF FFD Financial Corp. of DH 0.52 0.52 14.08 14.06 50.24
FFLC FFLC Bancorp of Leesburg FL 1.14 1.15 21.26 21.26 125.29
FFFC FFWA Financial Corp. of VA 1.19 1.16 15.57 15.26 95.42
FFWC FFW Corporation of Wabash SH 1.74 1.94 21.76 21.76 201.48
FFYF FFY Financial Corp. of DH 1.34 1.38 20.25 20.25 110.37
FNOD FFS Financial Corp. of NJ 1.69 1.69 13.49 13.12 204.99
FFHY FSF Financial Corp. of NH 0.48 0.48 13.51 13.51 84.61
FNLY Family Bancorp of Haverhill MA(8)* 2.01 - 1.8 16.84 15.41 217.12
FHCI Farmers & Mechanics Bank of CT(8)* 0.20 0.07 17.95 17.95 323.27
FCBC Fed One Bancorp pf Wheeling WY 1.31 1.31 16.63 15.65 136.43
FFRV Fid. Fin. Bkshrs.Corp. of VA 1.35 1.33 12.01 12.00 141.10
FBCI Fidelity Bancorp of Chicago IL 0.98 0.92 16.91 16.85 140.37
FSBI Fidelity Bancorp Inc. of PA 1.25 1.23 16.06 15.93 220.51
FFFL Fidelity FSB. WHC of Fl(47.2) 0.73 0.68 12.06 11.92 117.84
FFED Fidelity Fed. Bancorp of IN 1.38 1.3 5.7 5.70 112.37
FFDN Fidelity Financial of OH 0.46 0.46 12.47 12.47 61.22
FIBC Financial Bancorp of NY 0.80 0.79 18.33 14.25 134.48
FWSC Financial Security Corp. of IL(8) 1.41 1.31 25.83 25.83 179.85
FSBS First Ashland Fin. Corp. of NY(8) 0.51 0.51 16.25 16.24 61.67
FSBI First Bancshares of MO 0.80 0.79 18.26 18.22 107.89
FBBC First Bell Bancorp of PA 0.94 0.93 13.99 13.99 66.45
FBER First Bergen Bancorp of NJ 0.20 0.30 13.46 13.46 81.46
FCIT First Cit. Fin. Corp. of ND 1.45 1.18 13.45 13.45 214.18
FFBA First Colorado Bancorp of Co 0.69 0.69 11.9 11.76 73.52
FDEF First Defiance Fin. Corp. of OH 0.53 0.52 12.22 12.22 48.12
FESX First Essex Bancorp of MA 1.28 1.08 10.18 10.18 132.80
FFES First FS&LA of E. Hartford CT 1.98 -1.96 22.29 22.22 359.84
FSSB First FS&LA of San Bern. CA -0.52 10.9 17.77 16.97 314.90
FFSX First FS&LA. WHC of IA (45.S) 1.62 1.49 21.53 21.42 255.87
FFNL First Family Bank, FSB of Fl 2.34 1.38 15.77 15.77 281.19
FFSW First Fed Fin. Serv. of OH 2.41 1.94 16.15 14.69 303.35
BDJL First Fed. Bancorp. of NH 0.85 0.85 17.65 17.65 122.75
FFBH First Fed. Bancshares of AR 0.96 0.96 15.38 15.38 96.71
FFLC First Fed. Bancshares of WI 0.82 0.80 14.04 13.47 98.07
FIFC First Fed. Capital Corp. of WI 1.88 1.38 15.03 14.15 219.45
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- ---------------------------------------------------
Shares Market 52 Week (1) % Change From
--------------- ---------------------------
Price/ Outst- Capital- Last Last Dec. 31, Dec. 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ---------- ------ ------ ------ ------ -------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ----------------------------------------
FFFB First Fed. Fin Bancorp of OH 10.75 672 7.2 10.63 10.00 10.63 1.13 N.A. N.A.
FFKY First Fed. Fin. Corp. of KY 22.00 4,215 92.7 22.00 14.12 21.80 4.76 39.68 43.14
FFBL First Federal Bancorp of OH 24.50 785 19.2 24.50 14.25 24.50 0.00 145.00 20.99
FFWM First Fin. Corp. of Western MD 20.75 2,188 45.4 23.75 17.75 20.00 3.75 107.50 5.06
FFCH First Fin. Holdings Inc. of SC 18.75 6,366 119.4 22.25 18.00 18.50 1.35 53.06 -2.60
FPRY First Financial Bancorp of FL(8) 21.25 894 19.0 21.37 17.50 20.37 4.32 185.62 4.94
FFBI First Financial Bancorp of IL 16.00 472 7.6 16.25 14.50 15.50 3.23 N.A. 0.00
FFHC First Financial Corp. of WI 22.37 29,885 668.5 24.00 15.37 23.00 -2.74 42.03 -2.74
FFHS First Franklin Corp. of OH 15.00 1,187 17.8 17.50 12.25 15.12 -0.79 14.33 -5.48
FGHC First Georgia Hold. Corp. of GA 7.00 2,024 14.2 7.81 4.17 7.00 0.00 82.77 -8.74
FSPG First Home SB, SLA of NJ 18.00 2,030 36.5 19.00 14.00 17.75 1.41 200.00 -5.26
FFSL First Independence Corp. of KS 17.75 583 10.3 19.25 15.50 17.75 0.00 N.A. -5.33
FISB First Indiana Corp. of IN 24.00 8,278 198.7 25.19 16.25 24.50 -2.04 77.78 11.84
FKFS First Keystone Fin. Corp. of PA 17.00 1,292 22.0 20.87 13.75 17.25 -1.45 N.A. -18.54
FLFC First Liberty Fin Corp. of GA 21.75 3,982 86.5 22.75 16.25 22.12 -1.67 185.43 2.98
CASM First Midwest Fin. Corp. of LA 23.50 1,790 42.1 24.25 16.87 23.50 0.00 N.A. 0.00
FHBD First Mutual Bancorp of IL 13.00 4,352 56.6 14.75 11.12 12.75 1.96 N.A. -4.55
FNSB First Mutual SB of Bellevue WA* 13.25 2,447 32.4 16.00 6.90 13.12 0.99 70.97 -2.14
FHGB First Northern Cap. Corp. of WI 16.00 4,557 72.9 16.50 13.25 15.69 1.98 9.89 -3.03
FFPB First Palm Beach Bancorp of FL 21.75 5,181 112.7 24.87 18.75 21.25 2.35 N.A. 2.98
FSHJ First SB, of NJ, NHC (45.0) 11.37 3,017 19.5 19.50 12.50 14.12 1.77 N.A. -16.70
FSBC First SB, FSB of Clovis NM 5.50 696 3.8 7.00 5.12 5.50 0.00 -18.52 -18.52
FSLA First SB, SLA NHC of NJ (37.6) 15.75 6,512 31.5 17.50 12.50 16.00 -1.56 57.50 -4.55
SOPH First SB, SSB, Moore Co. of NC 18.25 3,744 68.3 20.25 17.25 18.75 -2.67 N.A. 2.47
FWNB First Savings Bancorp of WA* 14.62 10,065 147.2 15.37 12.37 15.00 -2.53 N.A. 11.43
SHEN First Shenango Bank of PA 21.50 2,308 49.6 22.25 18.50 20.50 4.48 N.A. 4.88
FSFC First So.east Fin. Corp. of SC 17.87 4,101 73.3 20.25 16.87 17.87 0.00 N.A. -5.95
FSFI First State Fin. Serv. of NJ 10.37 4,025 41.7 14.12 10.00 10.00 3.70 155.42 -23.86
FFDP FirstFed Bancshares of IL 16.00 3,387 54.2 16.75 12.00 16.12 -0.74 140.24 12.91
FLAG Flag Financial Corp. of GA 12.50 2,008 25.1 15.00 10.75 12.75 -1.96 27.55 -9.09
FFPC Florida First Bancorp of FL(8) 11.19 3,374 37.8 11.19 5.50 11.12 0.63 495.21 51.83
FFIC Flushing Fin. Corp. of NY 15.87 7,958 126.3 16.50 14.12 15.75 0.76 N.A. 3.25
FBHC Fort Bend Holding Corp. of TX 17.75 817 14.5 20.25 16.50 17.75 0.00 N.A. -1.39
FTSB Fort Thomas Fin. Corp. of KY 16.75 1,574 26.4 17.00 11.25 16.75 0.00 N.A. 38.20
FKXY Frankfort First Bancorp of KY 11.87 3,450 41.0 15.87 11.00 11.37 4.40 N.A. -10.42
GFSB GFS Bancorp of Grinnell IA 20.25 515 10.4 20.75 15.25 20.50 -1.22 N.A. 1.25
GUPB GFSB Bancorp of Gallup NM 13.50 949 12.8 15.00 12.87 14.00 -3.57 N.A. -5.26
GWBC Gateway Bancorp of KY 13.87 1,176 16.3 16.25 13.50 14.00 -0.93 N.A. -2.67
GBCI Glacier Bancorp of MT 21.75 3,360 73.1 22.27 16.14 21.75 0.00 350.31 18.14
GLBK Glendale Co-op. Bank of MA* 16.50 247 4.1 19.00 12.75 17.50 -5.71 N.A. -12.00
GFCO Glenway Financial Corp. of OH 20.25 1,091 22.1 24.50 16.19 20.50 -1.22 N.A. -17.35
GTPS Great American Bancorp of IL 14.25 1,850 26.4 15.12 11.87 13.75 3.64 N.A. -2.13
GTFN Great Financial Corp. of KY 26.87 14,653 393.7 27.37 18.62 27.00 -0.48 N.A. 14.34
GSBC Great Southern Bancorp of MO 27.50 4,434 121.9 27.50 17.62 27.50 0.00 841.78 11.11
GOYS Greater OY SB, NHC of PA(19.9)* 10.00 3,272 6.5 13.00 9.38 10.00 0.00 N.A. -16.67
GRYR Greater New York SB of NY* 11.25 13,289 349.5 13.31 9.25 11.00 2.27 20.84 -6.25
GSFC Green Street Fin. Corp. of NC 12.87 4,289 55.3 13.12 12.12 12.62 1.98 N.A. N.A.
GROW GroveBank for Savings of MA* 25.37 1,538 39.0 26.50 23.00 25.25 0.48 186.02 -2.51
GFED Guaranty FS&LA,NHC of MO(31.1) 11.62 3,125 9.0 12.50 8.00 11.50 1.04 N.A. -2.11
GSLC Guaranty Svgs & Loan FA of VA 8.37 919 7.7 8.50 6.31 8.50 -1.53 N.A. 8.00
HEMT HF Bancorp of Hemet CA 9.75 6,612 64.5 10.25 8.19 10.00 -2.50 N.A. -1.22
HFFC HF Financial Corp. of SD(8) 15.19 3,055 46.4 16.75 13.00 15.00 1.27 203.80 -0.39
HFMC HFMC Financial Corp. of NC 16.50 17,192 283.7 16.50 13.12 16.12 2.36 N.A. 25.76
HMMF HMM Financial, Inc. of NM 16.12 5,180 83.5 16.12 13.56 15.69 2.74 N.A. 0.75
HALL Hallmark Capital Corp. of WI 15.00 1,433 21.6 16.25 13.25 14.81 1.28 N.A. -3.21
<CAPTION>
Current Per Share Financials
------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- ------- ------ ------- -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ----------------------------------------
FFFB First Fed. Fin Bancorp of OH 0.58 0.58 15.73 15.73 87.15
FFKY First Fed. Fin. Corp. of KY 1.32 1.15 11.69 10.91 83.28
FFBL First Federal Bancorp of OH 2.39 2.35 17.23 17.21 220.63
FFWM First Fin. Corp. of Western MD 0.64 0.59 18.70 18.70 149.22
FFCH First Fin. Holdings Inc. of SC 1.62 1.65 15.04 15.04 227.64
FPRY First Financial Bancorp of FL(8) 1.47 1.10 17.07 17.07 268.88
FFBI First Financial Bancorp of IL 1.12 1.17 16.66 16.66 187.74
FFHC First Financial Corp. of WI 2.34 2.27 13.30 12.63 181.34
FFHS First Franklin Corp. of OH 1.10 1.08 17.31 17.31 182.08
FGHC First Georgia Hold. Corp. of GA 0.59 0.59 5.73 5.07 70.22
FSPG First Home SB, SLA of NJ 2.19 2.13 14.97 14.57 229.74
FFSL First Independence Corp. of KS 1.95 1.95 22.03 22.03 174.32
FISB First Indiana Corp. of IN 2.11 1.79 15.98 15.75 178.41
FKFS First Keystone Fin. Corp. of PA 1.01 1.09 17.84 17.84 215.33
FLFC First Liberty Fin Corp. of GA 2.15 1.70 16.84 14.14 246.53
CASM First Midwest Fin. Corp. of LA 1.95 1.55 21.72 20.25 173.02
FHBD First Mutual Bancorp of IL 0.61 0.59 16.56 16.56 65.56
FNSB First Mutual SB of Bellevue WA* 1.45 1.43 10.07 10.07 151.61
FHGB First Northern Cap. Corp. of WI 1.03 0.88 15.98 15.98 125.56
FFPB First Palm Beach Bancorp of FL 1.69 1.68 21.60 21.03 282.84
FSHJ First SB, of NJ, NHC (45.0) 0.08 0.66 17.70 17.70 217.79
FSBC First SB, FSB of Clovis NM 0.53 0.41 7.86 7.86 165.94
FSLA First SB, SLA NHC of NJ (37.6) 1.24 1.19 13.98 12.14 147.32
SOPH First SB, SSB, Moore Co. of NC 1.00 1.02 17.94 17.94 68.45
FWNB First Savings Bancorp of WA* 0.53 0.52 15.25 15.25 59.11
SHEN First Shenango Bank of PA 1.44 1.36 20.40 20.40 154.12
FSFC First So.east Fin. Corp. of SC 0.78 0.77 17.19 17.19 87.66
FSFI First State Fin. Serv. of NJ 0.96 0.75 10.69 10.13 156.19
FFDP FirstFed Bancshares of IL 1.10 0.69 16.62 15.87 184.23
FLAG Flag Financial Corp. of GA 1.05 0.93 10.76 10.76 112.53
FFPC Florida First Bancorp of FL(8) 0.75 0.69 6.24 6.24 90.11
FFIC Flushing Fin. Corp. of NY 0.48 0.46 17.39 17.39 92.91
FBHC Fort Bend Holding Corp. of TX 2.13 1.93 21.52 21.52 295.91
FTSB Fort Thomas Fin. Corp. of KY 0.70 0.70 13.58 13.58 55.88
FKXY Frankfort First Bancorp of KY 0.53 0.42 13.87 13.87 40.18
GFSB GFS Bancorp of Grinnell IA 1.57 1.54 18.91 18.91 157.11
GUPB GFSB Bancorp of Gallup NM 0.76 0.76 17.09 17.09 74.21
GWBC Gateway Bancorp of KY 0.66 0.66 15.52 15.52 62.08
GBCI Glacier Bancorp of MT 1.76 1.76 11.41 11.39 118.52
GLBK Glendale Co-op. Bank of MA* 1.13 0.95 23.71 23.71 145.36
GFCO Glenway Financial Corp. of OH 1.37 1.31 24.02 23.39 255.37
GTPS Great American Bancorp of IL 0.41 0.41 18.72 18.72 63.62
GTFN Great Financial Corp. of KY 1.55 1.26 19.19 18.88 169.06
GSBC Great Southern Bancorp of MO 2.48 2.33 15.04 14.79 148.62
GOYS Greater OY SB, NHC of PA(19.9)* 0.35 0.35 8.86 8.86 72.09
GRYR Greater New York SB of NY* 0.89 0.87 11.01 11.01 193.82
GSFC Green Street Fin. Corp. of NC 0.62 0.62 13.78 13.78 43.71
GROW GroveBank for Savings of MA* 2.96 2.79 23.79 23.74 381.30
GFED Guaranty FS&LA,NHC of MO(31.1) 0.58 0.31 8.59 8.59 59.37
GSLC Guaranty Svgs & Loan FA of VA 0.70 0.43 6.93 6.93 112.04
HEMT HF Bancorp of Hemet CA 0.20 0.20 13.05 13.04 114.09
HFFC HF Financial Corp. of SD(8) 1.41 1.10 16.86 16.01 187.90
HFMC HFMC Financial Corp. of NC 0.32 0.38 14.21 14.21 41.56
HMMF HMM Financial, Inc. of NM 1.13 1.01 17.54 17.54 104.64
HALL Hallmark Capital Corp. of WI 1.14 1.02 18.38 18.38 235.12
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------- ---------------------------------------------------
Shares Market 52 Week (1) % Change From
-------------- ---------------------------
Price/ Outst- Capital- Last Last Dec. 31, Dec. 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- -------- ------- ------ ------ ------- ----- ------- ---------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HARB Harbour FSB, NHC of FL (45.7) 25.75 4,925 57.7 29.25 18.50 27.00 -4.63 N.A. -6.36
HRBF Harbour Federal Bancorp of MD 13.12 1,858 24.4 15.50 12.50 12.87 1.94 31.20 -9.52
HFSA Hardin Bancorp of Hardin MD 11.75 1,058 12.4 13.00 11.25 11.75 0.00 N.A. -7.84
HARL Harleysville SA of PA 16.37 1,287 23.6 19.75 14.75 18.37 0.00 3.49 22.47
HARS Harris SB, NHC of PA (23.1) 17.00 11,211 42.5 20.50 15.50 16.75 1.49 N.A. -15.00
HFFB Harrodsburg 1st Fin Bcrp of KY 15.00 2,182 32.7 15.75 12.37 15.25 -1.64 N.A. 0.00
HHFC Harvest Home Fin. Corp. of OH 13.00 895 11.6 13.00 10.00 13.00 0.00 N.A. 6.12
HAVN Haven Bancorp of Woodhaven NY 28.31 4,287 121.4 28.31 17.75 27.75 2.02 N.A. 19.86
HVFO Haverfield Corp. of OH 18.00 1,904 34.3 18.75 12.27 17.75 1.41 16.13 33.33
HTHR Hawthorne Fin. Corp. of CA 8.50 2,599 22.1 8.50 2.25 7.50 13.33 -69.09 70.00
HSBK Hibernia SB of Quincy MA* 14.50 1,556 22.6 18.00 13.75 14.75 -1.69 90.29 -10.77
HBNK Highland Federal Bank of CA 16.00 2,296 36.7 17.00 11.00 16.37 -2.26 N.A. 3.23
HIFS Hingham Inst. for Sav. of MA* 14.00 1,297 18.2 14.75 10.50 14.50 -3.45 207.02 -5.08
HDFC Hinsdale Financial Corp. of IL 25.00 2,690 67.3 26.00 17.80 23.50 6.38 150.00 16.28
HBFW Home Bancorp of Fort Wayne IN 14.87 3,094 46.0 15.00 12.87 14.75 0.81 N.A. -2.49
HBBI Home Building Bancorp of IN 17.69 322 5.7 18.00 12.87 17.69 0.00 N.A. 7.21
HOMF Home Fed Bancorp of Seymour IN 27.25 2,224 60.5 27.25 21.25 25.75 1.87 81.67 2.83
HFMO Home Federal Corporation of MO(8) 10.75 2,519 27.1 11.37 5.87 10.25 4.88 10.26 38.71
HOFL Home Financial Corp. of FL(8) 13.62 24,771 337.4 76.25 13.06 13.81 -1.38 172.40 -12.13
HPBC Home Port Bancorp, Inc. of MA* 13.00 1,842 23.9 15.00 10.00 13.75 -5.45 62.50 10.64
HMCI Homecorp, Inc. of Rockford IL 17.50 1,126 19.7 18.50 14.00 17.50 0.00 75.00 5.29
HBAN Horizon Bancorp, Inc. of TX* 10.75 1,387 14.9 11.50 7.50 10.50 2.38 N.A. 19.44
HZFS Horizon Fin'l. Services of IA 15.50 443 6.9 16.37 11.75 15.50 0.00 N.A. 1.64
HAZB Horizon Financial Corp. of WA* 12.56 6,580 82.6 13.75 11.37 12.75 -1.49 -6.48 -3.38
IBSF IBS Financial Corp. of NJ 14.00 11,410 159.7 15.46 11.93 14.00 0.00 N.A. 2.64
ISBF ISB Financial Corp. of LA 16.00 7,381 118.1 17.00 14.00 15.63 2.37 N.A. 6.67
IFSB Independence FSB of DC 8.00 1,279 10.2 9.25 6.75 7.50 6.67 300.00 -5.21
INCB Indiana Comm. Bank, SB of IN 13.69 922 12.6 16.75 11.75 14.00 -2.21 N.A. -10.23
IFSL Indiana Federal Corp. of IN 20.37 4,737 96.5 21.25 16.25 19.12 6.54 170.16 -4.14
IMBI Industrial Bancorp of OH 11.87 5,554 65.9 16.00 11.75 11.75 1.02 N.A. -13.67
IWBK Interwest SB of Oak Harbor WA 24.00 6,434 154.4 25.12 13.75 24.37 -1.52 140.00 17.82
IPSN Ipswich SB of Ipswich MA* 10.75 1,174 12.6 10.87 4.60 10.50 2.38 N.A. 30.30
IROQ Iroquois Bancorp of Auburn NY* 14.50 2,349 34.1 15.50 11.12 14.50 0.00 107.14 11.54
JSBF JSB Financial, Inc. of NY 33.12 10,333 342.2 34.87 28.87 32.62 1.53 188.00 4.74
JKVL Jacksonville Bancorp of TX 10.62 2,662 28.3 11.99 7.32 10.12 4.94 N.A. -8.76
JXSB Jacksonville SB, NHC of IL(43.3A) 14.00 1,250 7.8 14.25 10.50 14.00 0.00 N.A. 0.94
JEBC Jefferson Bancorp of Gretna LA(8) 22.12 2,196 49.6 22.50 19.00 22.50 -1.69 N.A. 14.91
JSBA Jefferson Svgs Bancorp of MO 26.00 4,182 108.7 30.75 18.00 27.25 -4.59 N.A. -6.31
JOAC Joachin Bancorp of MO 12.25 760 9.3 13.50 11.50 12.75 -3.92 N.A. -9.26
KSAV KS Bancorp of Kemly NC 18.00 663 11.9 22.00 15.75 18.00 0.00 N.A. 2.86
KSBK KSB Bancorp of Kingfield NE* 22.00 374 8.2 22.25 15.50 22.25 -1.12 N.A. 14.29
KFBI Klamath First Bancorp of OR 14.12 11,254 158.9 14.25 12.50 14.25 -0.91 N.A. 2.69
LBFI L & B Financial of S. Springs TX(8) 16.25 1,584 25.7 16.87 11.50 16.50 -1.52 N.A. 14.04
LSBI LSB Bancorp of Lafayette IN 16.25 965 15.7 17.37 13.50 15.75 3.17 N.A. -5.80
LVSB Lakeview SB of Paterson NJ 20.50 2,266 46.5 20.50 15.23 19.00 7.89 N.A. 20.23
LARK Landmark Bancshares of KS 15.25 1,951 29.8 15.25 11.75 15.25 0.00 N.A. 10.91
LARL Laurel Capital Group of PA 14.75 1,508 22.2 16.50 13.67 15.00 -1.67 15.23 -4.84
LSBK Lawrence Savings Bank of NA* 5.50 ?,245 23.3 6.62 3.75 5.37 2.42 59.88 19.05
LFCT Leader Fin. Corp of Memphis TN(8) 45.50 9,924 451.5 46.37 27.50 45.62 -0.26 N.A. 21.76
LFED Leeds FSB, MHC of MD (35.5) 13.75 3,448 17.2 16.75 12.25 14.00 -1.79 N.A. -3.51
LXMO Lexington B&L Fin. Corp. of MO 10.00 1,265 12.7 10.00 9.50 9.75 2.56 N.A. N.A.
LBCI Liberty Bancorp of Chicago IL 23.87 2,487 59.4 26.87 22.25 22.75 4.92 138.70 -5.47
LIFB Life Bancorp of Norfolk VA 14.12 10,403 146.9 16.62 13.81 14.12 0.00 N.A. -5.87
LFBI Little Falls Bancorp of NJ 9.87 3,042 30.0 11.50 9.50 9.87 0.00 N.A. N.A.
LOGN Logansport Fin Corp. of IN 13.75 1,322 18.2 13.75 11.25 12.75 7.84 N.A. 5.77
<CAPTION>
Current Per Share Financials
-------------------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- -------- ------ -------- ---------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies
- ---------------------------
<S> <C> <C> <C> <C> <C>
HARB Harbour FSB, NHC of FL (45.7) 2.15 2.14 16.78 16.78 189.41
HRBF Harbour Federal Bancorp of MD 0.67 0.67 15.79 15.79 83.00
HFSA Hardin Bancorp of Hardin MD 0.48 0.48 15.16 15.16 78.81
HARL Harleysville SA of PA 1.71 1.71 15.02 15.02 212.90
HARS Harris SB, NHC of PA (23.1) 0.73 0.73 13.45 12.60 111.45
HFFB Harrodsburg 1st Fin Bcrp of KY 0.49 0.49 14.28 14.28 49.82
HHFC Harvest Home Fin. Corp. of OH 0.69 0.69 14.65 14.65 78.56
HAVN Haven Bancorp of Woodhaven NY 2.23 2.23 21.82 21.69 346.41
HVFO Haverfield Corp. of OH 1.19 1.19 14.81 14.76 178.38
HTHR Hawthorne Fin. Corp. of CA -0.59 -0.59 11.26 11.19 297.46
HSBK Hibernia SB of Quincy MA* 1.42 1.42 14.85 14.85 228.19
HBNK Highland Federal Bank of CA 0.43 0.43 15.08 15.08 192.47
HIFS Hingham Inst. for Sav. of MA* 1.45 1.45 13.88 13.88 138.31
HDFC Hinsdale Financial Corp. of IL 1.58 1.58 20.20 19.58 253.54
HBFW Home Bancorp of Fort Wayne IN 0.86 0.86 16.60 16.60 101.09
HBBI Home Building Bancorp of IN 0.59 0.59 18.61 18.61 131.70
HOMF Home Fed Bancorp of Seymour IN 3.18 3.18 22.59 21.72 272.60
HFMO Home Federal Corporation of MO(8) 1.00 1.00 7.41 7.31 86.02
HOFL Home Financial Corp. of FL(8) 0.83 0.83 12.64 12.64 49.55
HPBC Home Port Bancorp, Inc. of MA* 1.57 1.57 10.20 10.20 90.59
HMCI Homecorp, Inc. of Rockford IL 1.12 1.12 18.41 18.41 303.50
HBAN Horizon Bancorp, Inc. of TX* 1.24 1.24 7.91 7.68 91.48
HZFS Horizon Fin'l. Services of IA 0.72 0.72 18.66 18.66 161.22
HAZB Horizon Financial Corp. of WA* 1.10 1.10 12.03 12.03 74.31
IBSF IBS Financial Corp. of NJ 0.71 0.71 13.53 13.53 66.34
ISBF ISB Financial Corp. of LA 0.98 0.98 16.37 16.36 84.50
IFSB Independence FSB of DC 1.10 1.10 13.36 11.88 206.21
INCB Indiana Comm. Bank, SB of IN 0.67 0.67 15.35 15.35 102.47
IFSL Indiana Federal Corp. of IN 1.56 1.56 14.88 13.83 151.51
IMBI Industrial Bancorp of OH 0.82 0.82 11.26 11.26 58.96
IWBK Interwest SB of Oak Harbor WA 2.07 2.07 14.63 14.21 212.71
IPSN Ipswich SB of Ipswich MA* 1.43 1.43 7.22 7.22 114.20
IROQ Iroquois Bancorp of Auburn NY* 1.60 1.60 11.67 11.67 192.02
JSBF JSB Financial, Inc. of NY 2.19 2.19 32.70 32.70 149.84
JKVL Jacksonville Bancorp of TX 0.59 0.59 13.37 13.37 80.04
JXSB Jacksonville SB, NHC of IL(43.3A) 0.48 0.40 13.41 13.41 113.76
JEBC Jefferson Bancorp of Gretna LA(8) 1.21 1.21 16.13 16.13 120.69
JSBA Jefferson Svgs Bancorp of MO 1.52 1.52 19.19 15.72 273.30
JOAC Joachin Bancorp of MO 0.28 0.28 14.15 14.15 48.39
KSAV KS Bancorp of Kemly NC 1.51 1.51 20.56 20.53 135.55
KSBK KSB Bancorp of Kingfield NE* 2.67 2.67 23.33 21.47 340.57
KFBI Klamath First Bancorp of OR 8.66 0.66 14.90 14.90 53.73
LBFI L & B Financial of S. Springs TX(8) 0.93 0.93 15.50 15.50 90.42
LSBI LSB Bancorp of Lafayette IN 1.28 1.28 17.96 17.96 168.41
LVSB Lakeview SB of Paterson NJ 2.20 2.20 19.99 15.35 200.86
LARK Landmark Bancshares of KS 0.94 0.94 17.05 17.05 99.13
LARL Laurel Capital Group of PA 1.71 1.71 13.67 13.67 127.99
LSBK Lawrence Savings Bank of NA* 0.78 0.78 5.76 5.76 76.21
LFCT Leader Fin. Corp of Memphis TN(8) 4.04 4.04 25.71 25.71 320.21
LFED Leeds FSB, MHC of MD (35.5) 0.78 0.78 12.65 12.65 77.34
LXMO Lexington B&L Fin. Corp. of MO 0.62 0.62 14.27 14.27 48.50
LBCI Liberty Bancorp of Chicago IL 1.45 1.45 25.66 25.59 269.38
LIFB Life Bancorp of Norfolk VA 0.89 0.89 14.74 14.20 115.79
LFBI Little Falls Bancorp of NJ 0.18 0.18 14.29 13.14 93.87
LOGN Logansport Fin Corp. of IN 0.76 0.76 15.49 15.49 57.86
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
------------------------- ---------------------------------------------------
Shares Market 52 Week (1) % Change From
--------------------- --------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------ ------- ----- ------ ------ ------- -------- ---------
($) (000) ($MIL) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
LONF London Financial Corp. of OH 10.50 529 5.6 11.25 9.75 10.50 0.00 N.A. N.A.
LISB Long Island Bancorp of NY 30.12 24,859 748.8 30.44 18.75 29.87 0.84 N.A. 14.22
NAFB MAF Bancorp of IL 24.25 5,244 127.2 26.81 20.45 24.50 -1.02 185.29 -3.00
NBLF NBLA Financial Corp. of NO(8) 24.00 1,372 32.9 26.00 13.50 23.75 1.05 N.A. 23.90
NFBC NFB Corp. of Nishanaka IN 14.00 2,078 29.1 16.25 13.00 14.00 0.00 N.A. -5.08
NLFB NLF Bancorp of Villanova PA 23.75 6,247 148.4 25.00 18.75 23.75 0.00 N.A. 6.74
NSBB NSB Bancorp of Middletown NY* 16.12 2,833 45.7 27.25 15.00 15.75 2.35 61.20 -12.86
NSBF NSB Financial Corp. of NI 16.87 676 11.4 19.50 14.50 16.75 0.72 N.A. -11.21
MGNL Magna Bancorp of NS 15.00 6,959 243.6 36.25 21.00 34.00 2.94 600.00 21.74
MARH Marton Capital Holdongs of IN 20.75 2,003 41.5 20.75 18.50 20.00 3.75 N.A. 3.75
NFCX Narshalltown Fin. Corp. of IA(8) 15.50 1,431 21.9 16.75 12.75 15.50 0.00 N.A. -1.59
NFSL Maryland Fed. Bancorp of MD 28.50 3,150 89.8 33.25 28.50 29.52 -1.78 171.43 -5.00
MASB Hassbank Corp. or Reading NA* 32.57 2,734 29.9 34.50 26.00 33.25 -1.14 166.59 3.53
MFLA Mayflower Co-Op. Bank of MA* 14.75 873 12.9 14.75 9.50 14.75 3.51 195.00 34.09
NDBK Nedford Savings Bank of MA* 21.50 4,530 97.4 24.25 17.25 21.25 1.18 207.14 0.00
NERI Neritrust FSB of Thibodaux LA 34.00 774 26.3 34.00 17.75 34.00 0.00 N.A. 9.68
MUBX Metro West of MA* 4.12 13,882 57.2 4.87 3.25 4.25 -3.05 0.00 0.00
MSEA Metropolitan Bancorp of MA 13.62 3,710 50.5 15.00 10.12 13.62 0.00 87.35 4.77
MCBS Mid Continent Bancshares of KS 18.50 2,061 38.1 19.00 15.50 18.62 -0.64 N.A. 0.00
MIFC Mid Iowa Financial Corp. of IA 6.25 1,730 10.8 7.87 4.75 6.25 0.00 25.00 -19.35
MCBN Mid-Coast Bancorp of NE 19.12 229 4.4 20.25 14.05 19.12 0.00 234.85 11.68
MIDC Midcomm Bank of Kensington CI* 16.00 1,904 20.5 16.00 13.00 15.25 4.92 52.38 14.29
MIBI Midwest Bancshares, Inc. of IA 25.75 157 9.2 27.12 22.12 25.15 0.00 157.50 0.00
MNFD Midwest Fed. Fin. Corp. of WI 15.87 1,633 25.9 16.00 8.25 16.00 -0.81 217.40 47.63
HFFC Hilton Fed. Fin. Corp. of CH 12.87 2,301 29.6 17.12 11.50 12.87 0.00 N.A. 20.80
MIVI Miss. View Hold. Co. of NY 11.25 958 10.8 12.25 9.38 11.25 0.00 N.A. -1.06
MBBC Monterey Bay Bancorp of CA 11.87 3,414 40.5 13.06 9.37 11.87 0.00 N.A. 2.15
MOAG Morgan Financial Corp. of CO 12.25 833 10.2 12.50 9.00 12.25 0.00 N.A. -2.00
MFSB Mutual Bancompany of NO(8) 21.37 333 7.1 21.75 12.50 23.00 1.76 N.A. 18.72
MSBK Mutual SB, FSB of Bay City NI 5.37 4,272 22.9 7.37 5.25 5.50 -2.36 -38.63 -10.50
NUTB ???? Thrift Bancshares of NH 9.87 1,690 16.7 11.00 9.00 10.12 -2.47 113.64 -2.47
NHSL ???? Financial, Inc. of CA(8) 10.87 2,523 27.4 11.00 7.75 10.87 0.00 38.83 8.70
NSLB NS&L Bancorp of Neasho NO 12.87 888 11.4 13.75 11.75 12.87 0.00 N.A. -2.87
NHSA Nensil Bancorp. of CI* 6.75 4,179 28.2 7.50 5.75 7.50 -10.00 5.97 -3.57
NFSL Newman SB, FSB of Newman GA 19.75 1,447 28.6 19.75 12.75 18.25 8.22 58.00 14.49
NASB North American SB of NO 30.50 2,276 69.4 32.37 22.50 29.50 3.39 617.65 -4.69
NBSI North Bancshares of Chicago IL 15.75 1,172 18.5 16.25 12.87 15.63 0.77 N.A. 16.67
FFFO North Central Bancshares of IA 11.00 5,011 44.1 12.68 9.22 10.25 7.32 N.A. 4.27
NEIB Northeast Indiana Bncrp of IN 11.75 2,062 24.2 13.50 11.25 11.50 2.17 N.A. -2.08
NSBK Northside SB of Bronx NY* 36.25 4,815 174.5 36.25 23.00 36.12 0.36 127.27 18.85
NMEQ Northeast Equity Corp. of WI 10.25 981 10.1 11.37 8.75 10.25 0.00 N.A. -5.70
NNSB Northwest SB, NHC of PA(29.9) 11.75 23,376 40.5 13.50 9.12 11.87 -1.01 N.A. -3.05
NSSY Norwalk Savings Society of CT* 20.37 2,371 48.3 21.88 15.37 19.87 2.52 N.A. 7.21
NSSB Norwich Financial Corp. of CT* 13.56 5,604 76.0 15.25 11.25 13.37 1.42 93.71 5.36
NTHG Nutmeg FS&LA of CT 7.25 708 5.1 7.75 5.17 7.50 -3.33 N.A. 8.70
CHSL CHSL Financial Corp. of CH 20.12 1,224 24.6 22.00 17.25 20.75 -3.04 N.A. -6.42
OSBF OSB Fin. Corp. of Oshkosh WI 24.00 1,141 27.4 24.87 22.75 22.75 5.49 108.70 1.05
OFCP Ottawa Financial Corp. of WI 16.37 5,455 89.3 16.75 13.31 16.25 0.74 N.A. 4.73
PFFB PFF Bancorp of Po??ona CA 11.44 19,837 225.9 11.75 10.75 11.25 1.69 N.A. N.A.
PVFC PVF Capital Corp. of OH 20.25 1,549 31.4 20.75 12.04 19.00 6.58 203.60 10.96
PCCI Pacific Crest Capital of CA* 8.00 2,963 23.7 8.50 4.75 8.13 -1.60 N.A. 10.34
PALN Palfed, Inc. of Afken SC 12.50 5,222 65.3 13.50 10.75 12.62 -0.95 -18.67 5.31
PSSB Palm Springs SB of CA(8) 13.87 1,131 15.7 14.00 7.62 13.75 0.87 206.86 58.51
PBCI Pa?rapo Bancorp, Inc. of NL 20.00 3,317 66.3 26.12 18.25 19.00 5.26 255.24 -6.98
PVSA Parkyale Financial Corp of PA 26.00 3,233 84.1 28.50 19.40 26.00 0.00 214.01 -5.45
<CAPTION>
Current Per Share Financials
----------------------------------------------------------
Tangible
Trailing 12 No. Book Book
12 No. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share Share
- --------------------- -------- ------- -------- -------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
LONF London Financial Corp. of OH 0.37 0.37 14.81 14.81 70.99
LISB Long Island Bancorp of NY 1.84 1.72 20.79 20.79 194.47
NAFB MAF Bancorp of IL 3.11 3.20 28.91 20.91 377.61
NBLF NBLA Financial Corp. of NO(8) 1.00 1.00 20.67 20.67 142.18
NFBC NFB Corp. of Nishanaka IN 0.63 0.62 18.67 18.67 96.68
NLFB NLF Bancorp of Villanova PA 1.86 1.65 22.46 21.90 282.67
NSBB NSB Bancorp of Middletown NY* 0.83 0.89 15.53 15.26 160.30
NSBF NSB Financial Corp. of NI 1.53 1.40 15.86 18.86 83.31
MGNL Magna Bancorp of NS 3.08 2.91 18.12 17.02 185.43
MARH Marton Capital Holdongs of IN 1.23 1.23 21.48 21.48 89.53
NFCX Narshallton Fin. Corp. of IA(8) 0.29 0.29 13.71 13.71 89.46
NFSL Maryland Fed. Bancorp of MD 2.71 2.37 29.85 29.34 362.96
MASB Hassbank Corp. or Reading NA 3.24 3.17 31.91 31.91 314.16
MFLA Mayflower Co-Op. Bank of MA* 0.95 0.89 12.51 12.23 125.78
NDBK Nedford Savings Bank of MA* 2.15 2.11 19.24 17.45 216.55
NERI Neritrust FSB of Thibodaux LA 2.89 2.99 21.83 21.83 293.44
MUBX Metro West of MA* 0.41 0.41 2.57 2.57 34.41
MSEA Metropolitan Bancorp of MA 1.39 1.50 13.71 12.41 209.75
MCBS Mid Continent Bancshares of KS 1.75 1.49 17.68 17.65 141.15
MIFC Mid Iowa Financial Corp. of IA 0.53 0.51 6.23 6.22 69.01
MCBN Mid-Coast Bancorp of NE 1.33 1.22 21.51 21.51 237.39
MIDC Midcomm Bank of Kensington CI* 0.64 0.62 18.13 15.11 191.83
MIBI Midwest Bancshares, Inc. of IA 3.71 3.62 26.58 26.58 383.22
MNFD Midwest Fed. Fin. Corp. of WI 1.22 0.98 10.20 9.74 109.15
HFFC Hilton Fed. Fin. Corp. of CH 0.79 0.73 14.91 14.91 74.62
MIVI Miss. View Hold. Co. of NY 0.95 0.90 13.78 13.78 73.05
MBBC Monterey Bay Bancorp of CA 0.18 0.22 13.99 13.82 93.40
MOAG Morgan Financial Corp. of CO 0.80 0.77 12.61 12.61 86.02
MFSB Mutual Bancompany of NO(8) 0.34 0.39 18.73 18.73 160.09
MSBK Mutual SB, FSB of Bay City NI 0.02 -0.16 9.19 9.19 163.46
NUTB ???? Thrift Bancshares of NH 0.83 0.87 11.49 11.49 149.40
NHSL ???? Financial, Inc. of CA(8) 0.19 0.18 9.78 9.76 115.98
NSLB NS&L Bancorp of Neasho NO 0.59 0.55 15.62 15.62 66.50
NHSA Nensil Bancorp. of CI* 1.47 1.46 7.77 7.77 69.77
NFSL Newman SB, FSB of Newman GA 2.10 1.83 12.86 12.77 111.03
NASB North American SB of NO 3.74 3.57 21.44 20.58 291.85
NBSI North Bancshares of Chicago IL 0.54 0.49 16.92 16.92 97.56
FFFO North Central Bancshares of IA 0.65 0.61 13.72 13.72 47.52
NEIB Northeast Indiana Bncrp of IN 0.70 0.70 13.92 13.92 68.43
NSBK Northside SB of Bronx NY* 3.73 3.22 25.40 25.16 328.23
NMEQ Northeast Equity Corp. of WI 0.86 0.82 12.09 12.09 88.03
NNSB Northwest SB, NHC of PA(29.9) 0.73 0.73 8.07 7.97 75.61
NSSY Norwalk Savings Society of CT* 1.59 1.36 18.24 18.24 228.47
NSSB Norwich Financial Corp. of CT* 0.98 0.98 13.43 12.12 126.99
NTHG Nutmeg FS&LA of CT 0.76 0.46 7.20 7.20 120.33
CHSL CHSL Financial Corp. of CH 1.53 1.49 20.85 20.85 167.86
OSBF OSB Fin. Corp. of Oshkosh WI 0.38 0.66 28.00 28.00 222.36
OFCP Ottawa Financial Corp. of WI 0.72 0.72 14.92 11.96 136.66
PFFB PFF Bancorp of Po??ona CA 0.10 0.10 14.57 14.40 101.23
PVFC PVF Capital Corp. of OH 2.26 1.99 13.77 13.77 205.36
PCCI Pacific Crest Capital of CA* 0.93 8.75 7.56 7.56 96.93
PALN Palfed, Inc. of Afken SC 0.82 0.69 10.09 9.60 119.41
PSSB Palm Springs SB of CA(8) 1.07 0.57 10.34 10.34 169.84
PBCI Pa?rapo Bancorp, Inc. of NL 1.59 1.59 17.21 17.05 111.06
PVSA Parkyale Financial Corp of PA 2.90 2.71 20.99 20.89 282.71
</TABLE>
<PAGE>
RP FINANCIAL, LC
- ---------------------------------------
Financial Services Industry Consultants
1700 Worth Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As of June 14,1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -----------------------------------------------------
Shares Market 52 Week (1) % Change From
----------------- --------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Instution Shares(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- ------------------- --------- ------- ------- ------- -------- ------- ------- -------- --------
($) (000) ($Mil) ($) (%) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ----------------------------------------
PBTX Patriot Bank Corp. of PA 13.12 3,498 45.9 13.12 12.31 13.00 0.92 N.A. 1.94
PEEK Peekskill Fin. Corp. of NY 11.75 4,100 48.2 12.12 11.12 12.00 -2.0? N.A. -3.05
PFBS Pennfed fin. Services of NJ 15.87 5,077 80.6 16.00 12.25 15.12 4.96 N.A. 7.59
PMBC Pennfirst Bancorp of PA 13.50 3,996 53.9 13.75 11.87 13.75 -1.82 69.17 0.00
PBKB People's SB of Brockton MA* 9.87 3,340 33.0 10.50 5.75 10.00 -1.30 66.16 -6.00
PFDC People's Bancorp of Auburn IN 20.25 2,356 47.7 22.50 18.00 20.62 -1.79 15.71 -1.79
PBCT Peoples Bank, NHC of CT (32.3)* 22.37 39,166 264.3 23.12 15.25 20.37 9.82 184.24 17.74
PHBK Peoples Heritage Fin Grp of WE* 20.25 17,028 364.8 22.75 15.00 20.12 0.65 32.27 -10.99
PBHB Peoples Sav. Fin. Corp. of CT" 20.50 1,915 39.3 22.50 18.00 20.50 0.00 107.70 6.49
???? Permanent Bancorp of IN 15.75 2,186 34.4 18.50 14.00 16.00 -1.56 N.A. -3.08
???? Perpetual Midwest Fin. of IA 17.00 2,017 34.3 17.75 12.25 17.00 0.00 N.A. 3.03
PCBC Perry Co. Fin. Corp. of NO 17.50 856 15.0 21.50 14.75 17.25 1.45 N.A. -10.26
PHFC Pittsburg House Fin. of PA 10.37 2,182 22.6 11.12 9.87 10.00 3.70 N.A. N.A.
PfSL ???? Fed , VHC of AR (46.4) 14.75 1,610 11.0 17.25 11.00 15.75 -6.35 N.A. -7.06
POBS Ports??? Bank Shrs Inc of (NH)(8)* 13.87 5,737 79.6 15.20 10.78 13.75 0.87 33.24 -7.96
PKPS Poughkeepsfe SB of NY 5.25 12,535 65.8 5.00 4.52 5.50 -4.55 -32.26 0.00
???? Primary Bank of HH" 12.25 1,953 23.9 15.50 11.75 12.25 0.00 N.A. -2.93
PSAB Prime Bancorp, Inc. of PA 17.62 3,723 65.6 20.68 15.68 17.50 0.69 153.89 -12.99
PFHC Progress financial Corp. of PA 6.25 3,730 23.3 7.25 4.75 6.50 -3.85 -42.23 11.01
PSBK Progressive Bank, Inc. of NY* 29.50 2,631 77.6 29.75 24.25 29.00 1.72 120.64 0.00
PULB Pulaski SB, NHC of HO (29.0) 14.75 2,094 8.9 16.50 11.75 14.00 5.36 N.A. -1.67
PULS Pulse Bancorp of S. River NJ 17.50 3,886 68.0 17.75 14.50 17.31 1.10 41.47 2.94
QCFB QCf Bancorp of Virginnia VA 14.50 1,783 25.9 15.12 12.00 14.00 3.57 N.A. -1.69
QCBC Quaker City Bancorp of CA 14.37 3,928 56.4 14.75 11.12 14.50 -0.90 91.60 3.50
QCSB Queens County SB of NY" 47.62 6,110 291.0 47.87 31.50 47.62 0.00 N.A. 20.37
RCSB RCSB Financial, Inc. of NY" 25.62 13,514 346.2 25.81 19.00 24.75 3.52 108.12 7.87
???? Raritan Bancorp. of Raritan NJ* 20.75 1,427 29.6 22.50 20.50 21.19 -2.08 112.82 -3.49
REDF RedFed Bancorp of Redlands CA 9.62 4,060 39.1 10.62 7.75 9.62 0.00 N.A. -4.94
RELY Reliance Bancorp of NY 15.63 9,226 144.2 16.50 13.12 15.50 0.84 N.A. 6.91
RELY Reliance Banshares Inc of WI* 7.87 2,562 20.2 8.50 7.50 7.50 4.93 N.A. N.A.
RFED Roosevelt Fin. Grp. Inc. of MO 19.25 42,118 810.8 19.75 15.25 18.25 5.48 393.59 -0.62
RYSA Ryrview SB, FSB NHC of WA(40.3) 15.00 2,155 11.8 17.00 11.36 16.00 -5.25 N.A. 3.16
SCCB S. Carolina ???. Bashrs of SC 15.50 747 12.3 20.50 14.75 16.50 0.00 N.A. -8.94
SBFL SB Fing. Lakes NHC of NY(33.0) 16.00 1,785 9.4 16.75 9.50 16.50 -3.03 N.A. -1.54
SFED SFS Bancorp of Scheneclady NY 12.00 1,395 16.7 13.50 11.00 11.75 2.13 N.A. -7.69
SGVB SGY Bancorp of ???. Covina CA 8.62 2,728 23.5 10.12 8.00 8.62 0.00 N.A. -11.59
SISB SIS Bank of Springfield NA* 17.25 5,718 98.6 18.75 12.25 16.87 2.25 N.A. 5.38
SJSB SJS Bancorp of St. Joseph NI 20.75 983 20.4 20.75 14.75 20.75 0.00 N.A. 5.06
SHCB Sandwhich Co-op, Bank of NA 20.00 1,873 37.5 21.50 15.63 19.37 3.25 132.02 9.59
???? Security Bancorp of MI 20.25 1,462 29.6 21.25 19.50 20.50 -1.22 161.29 -3.57
SECP Securtiy Capital Corp. of NI 61.25 9,536 584.1 62.50 48.00 61.00 0.41 N.A. 1.66
SFSL Security First Corp. of CH 13.12 3,532 46.3 15.75 11.50 13.25 -0.98 -16.70 -7.93
SHFC Seven Hills Fin. Corp. of OH(8) 16.00 536 8.6 17.37 14.37 14.50 10.34 6.67 10.34
SHFC Sho-?? Fin Corp. of MO 15.75 1,821 28.7 16.75 14.50 15.63 0.77 N.A. 5.00
SQSI Sobieski Bancorp of S. Bend IN 12.25 837 10.3 13.25 10.12 12.00 2.08 N.A. 5.77
SOSA Somerset Savings Bank of MA(8)* 3.47 16,652 24.5 1.88 1.12 1.50 -2.00 -71.29 7.30
SHBC Southern Missouri Bancrp of MO 14.75 1,724 25.4 17.50 13.50 14.00 5.35 N.A. -1.67
SHBI Southwest Bancshares of IL 27.12 1,871 50.7 28.25 26.00 27.25 -0.48 171.20 2.34
SVRM Soverign Bancorp of PA 10.25 47,838 490.3 11.25 8.75 10.37 -1.16 129.31 6.33
STFR St. Francis Cap. Corp. of WI 25.25 5,857 147.9 28.00 19.00 25.50 -0.98 N.A. 8.60
SPBC St. Paul Bancorp, Inc. of IL 23.12 18,550 428.9 26.62 22.25 23.50 -1.62 37.05 -9.33
STND Standard Fin. of Chicago IL 15.12 16,765 253.5 15.37 12.87 15.25 -0.85 N.A. 3.42
SFFC Statefed Financial Corp. of IA. 16.00 823 13.2 19.75 15.25 16.00 0-00 N.A. -11.70
SFIN Statewide Fin. Corp. of NJ 12.31 5,270 64.9 13.75 11.75 12.12 1.57 N.A. -5.74
SISA Sterling Financial Corp. of NA 14.75 5,476 80.0 14.75 10.23 14.00 5.36 62.27 7.27
<CAPTION>
Current Per Share Financials
----------------------------------------------
Tangible
Trailing 12 mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
-------- ------- ------- ------- --------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
PBTX Patriot Bank Corp. of PA 0.42 0.43 15.47 15.47 89.46
PEEK Peekskill Fin. Corp. of NY 0.44 0.46 14.49 14.49 47.24
PFBS Pennfed fin. Services of NJ 1.32 1.43 10.08 14.32 201.45
PMBC Pennfirst Bancorp of PA 1.00 0.99 13.37 12.18 170.28
PBKB People's SB of Brockton MA* 0.74 0.53 7.87 7.45 159.62
PFDC People's Bancorp of Auburn IN 1.70 1.69 18.19 18.19 119.18
PBCT Peoples Bank, NHC of CT (32.3)* 1.90 1.53 14.12 14.12 176.59
PHBK Peoples Heritage Fin Grp of WE* 2.14 2.11 16.24 13.97 193.90
PBHB Peoples Sav. Fin. Corp. of CT" 1.80 1.88 22.94 21.22 212.15
???? Permanent Bancorp of IN 0.53 0.53 19.26 18.96 172.88
???? Perpetual Midwest Fin. of IA 0.73 0.73 17.87 17.87 185.44
PCBC Perry Co. Fin. Corp. of NO 0.88 0.88 18.84 18.84 90.32
PHFC Pittsburg House Fin. of PA 0.54 0.54 13.58 13.58 82.64
PfSL ???? Fed , VHC of AR (46.4) 1.23 1.26 13.64 13.64 229.43
POBS Ports??? Bank Shrs Inc of (NH)(8)* 1.06 0.89 11.69 11.68 46.61
PKPS Poughkeepsfe SB of NY 1.23 1.62 5.69 5.69 66.95
???? Primary Bank of HH" -0.08 -0.07 12.76 12.71 201.31
PSAB Prime Bancorp, Inc. of PA 1.61 1.43 15.44 14.44 163.57
PFHC Progress financial Corp. of PA 0.81 0.63 5.15 5.11 93.30
PSBK Progressive Bank, Inc. of NY* 2.73 2.81 26.45 26.45 298.58
PULB Pulaski SB, NHC of HO (29.0) 0.73 0.69 10.82 10.82 85.58
PULS Pulse Bancorp of S. River NJ 1.36 1.37 13.84 13.84 116.43
QCFB QCf Bancorp of Virginnia VA 1.28 1.28 17.81 17.81 81.66
QCBC Quaker City Bancorp of CA 0.84 0.81 17.43 17.33 176.42
QCSB Queens County SB of NY" 3.39 3.50 35.00 35.00 206.14
RCSB RCSB Financial, Inc. of NY" 2.43 2.39 22.19 21.45 304.21
???? Raritan Bancorp. of Raritan NJ* 1.94 1.91 17.60 17.16 243.06
REDF RedFed Bancorp of Redlands CA -1.06 -1.02 11.90 11.90 211.32
RELY Reliance Bancorp of NY -1.14 1.09 16.75 11.30 199.07
RELY Reliance Banshares Inc of WI* 0.29 0.29 11.06 11.06 19.67
RFED Roosevelt Fin. Grp. Inc. of MO 1.35 1.83 10.54 9.96 216.88
RYSA Ryrview SB, FSB NHC of WA(40.3) 1.21 1.09 10.71 9.48 97.22
SCCB S. Carolina ???. Bashrs of SC 0.80 0.80 16.80 16.80 59.02
SBFL SB Fing. Lakes NHC of NY(33.0) -0.52 -0.19 11.40 11.40 98.92
SFED SFS Bancorp of Scheneclady NY 0.74 0.74 16.68 16.68 118.59
SGVB SGV Bancorp of ???. Covina CA 0.12 0.12 11.94 11.94 122.09
SISB SIS Bank of Springfield NA* 2.79 2.33 14.73 14.73 198.53
SJSB SJSB Bancorp of St. Joseph NI 0.88 0.86 17.89 17.89 153.36
SHCB Sandwhich Co-op, Bank of NA 1.92 1.80 19.46 18.18 226.31
???? Security Bancorp of MI 1.71 1.27 21.98 18.82 246.25
SECP Securtiy Capital Corp. of CH 2.99 3.09 59.20 59.20 350.74
SFSL Security First Corp. of 1.50 1.57 11.58 11.26 132.97
SHFC Seven Hills Fin. Corp. of OH(8) 0.31 0.29 16.01 18.01 84.91
SHFC Sho-?? Fin Corp. of MO 1.08 1.07 17.36 17.36 184.91
SQSI Subieski Bancorp of S. Bend IN 0.39 0.39 16.87 16.87 91.23
SOSA Somerset Savings Bank of MA(8)* 0.10 0.10 1.67 1.67 30.60
SHBC Southern Missouri Bancrp of MO 0.78 0.73 15.41 15.41 93.96
SHBI Southwest Bancshares of IL 2.27 2.26 22.42 22.42 186.82
???? Soverign Bancorp of PA 1.13 1.02 7.15 4.63 175.82
STFR St. Francis Cap. Corp. of WI 2.70 1.84 23.08 22.04 221.20
SPBC St. Paul Bancorp, Inc of IL 1.95 1.90 28.64 20.57 223.33
STND Standard Fin. of Chicago IL 1.03 0.93 16.05 16.04 130.43
SFFC Statefed Financial Corp. of IA. 1.03 1.03 18.13 18.13 90.14
SFIN State???? Fin. Corp. of NJ 0.53 0.65 13.36 13.32 120.39
SISA Sterling Financial Corp. of NA 0.92 0.90 11.55 9.26 276.01
</TABLE>
<PAGE>
RP FINANCIAL, LC
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part One
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
--------------------------- ------------------------------------------------
Shares Market 52 Week (1) % Change From
---------------- ------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- -------- ------ ------- ------- ------- ----- ------ ------- -------
($) (000) ($Mil) ($) ($) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SSBK Strongsville SB of OH 21.25 2,531 53.8 21.75 17.00 21.50 -1.16 N.A. 8.97
SFSB SuburbFed. Fin. Corp. of IL 17.50 1,261 22.1 18.17 14.83 17.62 -0.68 162.37 6.06
SBCN Suburban Bancorp. of OH 15.00 1,481 22.2 18.50 14.50 14.50 3.45 N.A. -18.92
SCSL Suncoast SALA of Hollywood FL 6.12 1,990 12.2 7.19 5.81 6.25 -2.08 -10.13 -2.08
THRD TR Financial Corp. of PA 14.50 4,523 65.6 16.00 13.25 14.62 -0.82 N.A. -5.66
ROSE TR Financial Corp. of NY 26.50 8,948 237.1 27.75 17.37 26.12 1.45 N.A. 3.92
TPMZ Tappan Zee Fin. Corp. of NY 12.25 1,620 19.8 13.00 11.25 12.00 2.08 N.A. -2.93
PTAS The Potters S&A Co. of OH 16.25 533 8.7 18.50 15.25 16.25 0.00 N.A. -4.75
THIR Third Financial Corp. of OH(8) 31.87 1,136 36.2 32.00 18.25 31.25 1.98 N.A. 21.41
TSBS Trenton SB, FSB NHC of NJ (35.0) 14.25 8,912 14.4 15.00 11.37 14.50 -1.72 N.A. 9.62
TRIC Tri-County Bancorp of WY 18.50 631 11.7 16.50 13.87 18.50 0.00 N.A. 12.12
THBC Troy Hill Bancorp of PA 13.00 1,058 13.9 14.00 11.50 13.37 -2.77 N.A. 0.00
TWIN Twin City Bancorp of TN 16.00 898 14.4 18.25 13.50 16.00 0.00 N.A. -5.88
UFRM United FS&LA of Rocky Mount NC 8.00 3,065 24.5 8.50 5.25 8.25 -3.03 146.15 6.67
UBMT United SB, FA of MT 18.25 1,223 22.3 18.75 17.00 18.25 0.00 73.81 4.29
VABF Va. Beach Fed. Fin. Corp of VA 7.37 4,962 36.6 9.94 6.81 7.62 -3.28 57.14 -4.90
VAFD Valley FSB of Sheffield AL(8) 32.00 367 11.7 35.25 24.87 32.00 0.00 204.76 -8.57
VFFC Virginia First Savings of VA 12.75 5,615 71.6 12.75 8.37 12.25 4.08 ***.** 12.14
MBCI MFS Bancorp of Wichita KS (8) 22.87 1,561 35.7 22.87 18.75 22.87 0.00 N.A. 3.39
WHGB WHG Bancshares of MO 11.00 1,520 17.8 11.25 10.87 11.50 -4.35 N.A. N.A.
WSFS WSFS Financial Corp. of DE 7.50 14,179 106.1 10.00 5.63 7.87 -4.70 3.45 -16.67
WSFC WFS Financial Corp. of PA 20.75 2,736 36.0 22.25 16.00 20.75 0.00 N.A. 8.53
WLDK Walden Bancorp of MA 18.75 5,312 99.6 20.00 15.75 18.75 0.00 163.34 -1.32
WANB Warren Bancorp of Peabody MA 12.50 3,718 46.5 13.25 8.00 12.50 0.00 270.92 11.11
WFSL Washington FSBLA of Seattle WA 21.50 42,592 915.7 23.46 19.32 21.56 -0.28 47.36 -7.73
WAMU Washington Mutual Inc. of WA 29.62 72,007 2,132.8 32.00 22.75 30.00 -1.27 59.59 2.60
WAYN Wayne S&L Co., MHC of OH(46.7) 20.75 1,492 13.7 22.00 17.1? 20.50 1.22 N.A. -5.29
WCFB Webster City FSB, NHC of IA(15.2) 13.50 2,100 12.8 13.50 9.75 12.87 4.90 N.A. 8.00
WBST Webster Financial Corp. of CT 28.75 8,104 233.0 30.50 23.00 28.00 2.68 204.68 -2.54
WEFC Wells Fin. Corp. of Wells NM 11.50 2,188 25.2 11.50 9.06 11.25 2.22 N.A. 4.55
WCBI WestCo Bancorp of IL 21.62 2,678 57.9 22.00 14.83 22.00 -1.73 116.20 21.26
WSTR Westerfed Fin. Corp. of MI 14.37 4,395 63.2 17.12 14.25 14.37 0.00 N.A. -13.54
WOFC Western Ohio Fin. Corp. of OH 23.25 2,309 53.7 24.37 18.75 23.00 1.09 N.A. 0.00
WFCO Winton Financial Corp. of OH(8) 13.50 1,985 26.8 15.00 10.87 12.25 10.20 N.A. 24.20
FFND Wood Bancorp of OH 18.50 1,034 19.1 19.50 14.12 18.75 -1.33 N.A. 2.78
WCHI Workingmens Cap. Hldgs of IN(8) 20.00 1,798 36.0 20.25 15.50 19.87 0.65 300.00 14.29
YFCB Yonkers Fin. Corp. of NY 9.38 3,571 33.5 10.12 9.31 9.62 -2.49 N.A. N.A.
YFED York Financial Corp. of PA 16.87 6,050 102.1 18.86 14.32 16.62 1.50 78.52 0.00
<CAPTION>
Current Per Share Financials
------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
EPS(3) EPS(3) Share Share(4) Share
--------- ------ ------- --------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SSBK Strongsville SB of OH 1.88 1.59 16.50 16.15 199.38
SFSB SuburbFed. Fin. Corp. of IL 1.41 1.21 20.52 20.40 287.29
SBCN Suburban Bancorp. of OH 0.53 0.77 17.31 17.31 133.11
SCSL Suncoast SALA of Hollywood FL 0.74 -0.92 6.59 6.56 234.42
THRD TR Financial Corp. of PA 0.94 0.91 16.43 16.43 114.79
ROSE TR Financial Corp. of NY 2.71 2.14 20.91 20.91 335.49
TPMZ Tappan Zee Fin. Corp. of NY 0.52 0.48 13.80 13.80 70.86
PTAS The Potters S&A Co. of OH 1.15 1.13 20.79 20.79 213.62
THIR Third Financial Corp. of OH(8) 1.89 1.69 24.87 24.87 137.05
TSBS Trenton SB, FSB NHC of NJ (35.0) 1.05 0.70 11.08 10.83 58.20
TRIC Tri-County Bancorp of WY 0.98 0.95 20.75 20.75 116.38
THBC Troy Hill Bancorp of PA 1.02 0.93 16.73 16.73 75.36
TWIN Twin City Bancorp of TN 1.21 1.05 15.70 15.70 114.06
UFRM United FS&LA of Rocky Mount NC 0.73 0.64 6.81 6.81 82.27
UBMT United SB, FA of MT 1.32 1.31 20.12 20.12 85.51
VABF Va. Beach Fed. Fin. Corp of VA 0.32 0.01 8.28 8.28 125.95
VAFD Valley FSB of Sheffield AL(8) 1.09 1.06 26.14 26.14 323.23
VFFC Virginia First Savings of VA 1.48 1.22 9.82 9.46 127.15
MBCI MFS Bancorp of Wichita KS (8) 0.86 0.94 21.35 21.34 187.16
WHGB WHG Bancshares of MO 0.36 0.36 14.20 14.20 68.95
WSFS WSFS Financial Corp. of DE 1.91 1.13 5.21 5.14 88.82
WSFC WFS Financial Corp. of PA 1.63 1.82 20.93 20.93 138.41
WLDK Walden Bancorp of MA 1.58 1.75 17.98 15.38 191.48
WANB Warren Bancorp of Peabody MA 1.56 1.49 8.54 8.54 95.45
WFSL Washington FSBLA of Seattle WA 1.88 1.80 14.04 13.36 115.73
WAMU Washington Mutual Inc. of WA 2.62 2.61 19.33 17.19 310.31
WAYN Wayne S&L Co., MHC of OH(46.7) 0.95 0.89 15.32 15.32 166.56
WCFB Webster City FSB, NHC of IA(15.2) 0.51 0.51 10.32 10.32 46.31
WBST Webster Financial Corp. of CT 2.00 2.14 24.27 18.45 470.53
WEFC Wells Fin. Corp. of Wells NM 0.72 0.70 13.40 13.40 ?9.66
WCBI WestCo Bancorp of IL 1.50 1.49 18.07 18.07 115.48
WSTR Westerfed Fin. Corp. of MI 0.99 0.93 17.77 17.77 133.82
WOFC Western Ohio Fin. Corp. of OH 1.10 0.83 25.19 23.72 138.40
WFCO Winton Financial Corp. of OH(8) 1.04 0.85 10.42 10.14 132.09
FFND Wood Bancorp of OH 1.56 1.51 19.72 19.72 135.12
WCHI Workingmens Cap. Hldgs of IN(8) 1.07 1.05 14.55 14.55 118.84
YFCB Yonkers Fin. Corp. of NY 0.60 0.66 13.07 13.07 67.39
YFED York Financial Corp. of PA 1.65 1.44 15.22 15.22 179.33
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Weekly Thrifts Market Line - Part Two
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
------------------------------------------------------- ------------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings
---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------- ------- ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Average. SAIF-Insured Thrifts(no MHCs)
- ------------------------------------------------
SAIF-Insured Thrifts(322) 13.31 13.12 0.87 8.17 6.97 0.81 7.35 0.97 127.98 0.88
NYSE Traded Companies(12) 6.31 5.96 0.70 11.72 7.94 0.58 9.64 1.58 62.19 1.33
AMEX Traded Companies(17) 18.40 18.32 0.83 6.71 5.46 0.80 6.35 0.61 132.94 0.70
NASDAQ Listed OTC Companies(293) 13.32 13.13 0.88 8.10 7.01 0.83 7.31 0.95 131.00 0.87
California Companies(25) 7.62 7.48 0.33 5.18 3.79 0.27 4.11 2.34 50.59 1.32
Florida Companies(10) 7.64 7.46 0.75 12.69 9.73 0.53 6.73 1.08 105.23 1.01
Mid-Atlantic Companies(63) 11.93 11.63 0.87 9.02 7.89 0.84 8.63 1.25 86.49 1.09
Mid-West Companies(149) 14.72 14.58 0.94 7.87 6.90 0.87 7.12 0.59 169.82 0.71
New England Companies(9) 8.08 7.66 0.63 8.69 8.61 0.53 7.21 1.35 49.90 1.10
North-West Companies(6) 10.61 10.24 0.96 10.34 7.28 0.90 9.45 0.87 71.09 0.84
South-East Companies(45) 15.70 15.54 1.02 8.66 6.71 0.97 8.06 0.99 124.58 0.86
South-West Companies(7) 12.45 12.34 0.72 7.33 8.19 0.69 6.85 0.86 41.09 0.86
Western Companies (Exc1 CA)(8) 17.09 16.91 1.04 7.61 6.38 0.99 7.17 0.26 211.25 0.67
Thrift Strategy(248) 14.89 14.72 0.87 7.09 6.36 0.83 6.64 0.86 137.28 0.81
Mortgage Banker Strategy(39) 7.52 7.21 0.84 11.92 9.29 0.64 8.38 1.32 77.80 0.94
Real Estate Strategy(16) 9.03 8.89 0.90 10.74 8.87 0.92 11.02 1.86 84.24 1.54
Diversified Strategy(15) 7.97 7.78 0.97 12.92 8.05 0.92 12.63 1.02 151.77 1.27
Retail Banking Strategy(4) 9.43 9.18 0.73 9.92 9.80 0.58 7.67 1.37 75.18 0.92
Companies Issuing Dividends(244) 13.25 13.04 0.95 8.76 7.41 0.58 7.95 0.84 138.57 0.84
Companies Without Dividends(78) 13.49 13.38 0.64 6.35 5.59 0.60 5.49 1.38 106.29 1.01
Equity/Assets less than 6%(29) 4.98 4.73 0.52 10.66 7.40 0.41 8.06 1.74 83.49 1.06
Equity/Assets 6-12%(147) 8.54 8.24 0.84 10.30 8.45 0.75 9.15 1.17 110.62 1.03
Equity/Assets greater than 12%(146) 19.67 19.61 0.98 5.58 5.41 0.96 5.44 0.58 156.51 0.59
Converted Last 3 Mths (no MHC)(20) 23.59 23.58 0.82 4.54 4.26 0.83 4.66 0.78 157.79 0.79
Actively Traded Companies(53) 8.58 8.30 0.92 11.34 8.38 0.88 10.65 1.43 85.94 1.03
Market Value Below $20 Million(93) 15.71 15.67 0.84 6.73 6.84 0.75 5.30 0.85 117.93 0.72
Holding Company Structure(275) 13.86 13.68 0.87 7.76 6.71 0.82 7.12 0.92 130.77 0.85
Assets Over $1 Billion(51) 8.05 7.58 0.83 11.08 8.20 0.75 10.10 1.15 101.18 1.03
Assets $500 Million-$1 Billion(56) 11.31 11.07 0.85 8.76 7.01 0.81 5.14 1.34 133.20 1.03
Assets $250-$500 Million(79) 11.54 11.35 0.83 8.37 7.42 0.74 6.84 0.93 135.90 0.90
Assets less than $250 Million(126) 18.06 18.04 0.93 6.28 6.03 0.89 5.88 0.70 135.29 0.72
Goodwill Companies(133) 9.27 8.82 0.82 9.66 7.66 0.74 8.47 1.17 97.22 0.96
Non-Goodwill Companies(189) 16.24 16.24 0.91 7.10 6.46 0.87 6.55 0.81 152.50 0.82
Acquirors of FSLIC Cases(14) 7.07 6.70 0.88 12.89 9.72 0.84 12.16 1.45 57.18 0.92
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(5)
----------------------------------------- ----------------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
-------- ---- ------ ---- ---------- -------- --------- ------------
(X) (%) (%) (%) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts (no WICs)
- -----------------------------------------------
SAIF-Insured Thrifts(322) 14.18 104.06 13.03 107.30 15.01 0.34 1.87 25.85
NYSE Traded Companies(12) 12.83 134.82 8.65 143.08 14.52 0.42 1.49 16.50
AMEX Traded Companies(17) 15.97 93.51 16.27 94.20 17.16 0.35 2.37 26.64
NASDAQ Listed OTC Companies(293) 14.16 103.31 13.03 106.48 14.93 0.33 1.86 26.26
California Companies(25) 13.77 101.59 7.45 104.33 15.53 0.27 1.13 16.04
Florida Companies(10) 11.59 107.59 7.96 110.30 13.96 0.16 0.87 11.16
Mid-Atlantic Companies(63) 12.97 101.95 11.48 106.87 13.55 0.32 1.78 23.48
Mid-West Companies(149) 14.83 102.90 14.15 105.10 15.73 0.34 1.91 27.20
New England Companies(9) 11.32 93.54 7.48 102.87 12.94 0.51 2.76 32.40
North-West Companies(6) 14.91 134.17 13.05 143.27 14.27 0.27 1.32 18.23
South-East Companies(45) 14.87 113.25 16.53 115.83 15.26 0.37 2.23 30.64
South-West Companies(7) 13.51 81.31 9.90 85.14 14.38 0.30 2.13 21.90
Western Companies (Exc1 CA)(8) 15.12 102.67 16.20 104.74 16.03 0.43 2.49 36.99
Thrift Strategy(248) 14.97 98.51 14.01 100.93 15.57 0.33 1.97 28.45
Mortgage Banker Strategy(39) 11.24 120.44 9.15 128.56 13.21 0.34 1.52 16.80
Real Estate Strategy(16) 12.84 110.26 9.66 112.25 13.03 0.17 0.83 8.83
Diversified Strategy(15) 12.25 148.58 11.72 153.48 12.72 0.60 2.41 27.99
Retail Banking Strategy(4) 12.29 91.51 8.42 94.49 16.07 0.14 1.33 18.06
Companies Issuing Dividends(244) 14.18 108.11 13.49 111.82 14.92 0.45 2.48 34.59
Companies Without Dividends(78) 14.18 91.53 11.59 93.31 15.40 0.00 0.00 0.00
Equity/Assets less than 6%(29) 10.98 119.25 5.98 128.32 12.88 0.24 1.17 13.46
Equity/Assets 6-12%(147) 12.50 113.46 9.57 118.30 13.50 0.35 1.83 22.52
Equity/Assets greater than 12%(146) 16.89 91.77 17.85 92.26 17.24 0.33 2.06 32.14
Converted Last 3 Mths (no MHC)(20) 17.67 77.24 18.44 77.29 18.20 0.05 0.48 2.14
Actively Traded Companies(53) 11.72 124.78 10.51 131.82 12.36 0.48 2.12 25.20
Market Value Below $20 Million(93) 14.84 87.10 33.44 87.59 15.84 0.26 1.76 25.31
Holding Company Structure(275) 14.60 103.31 13.45 106.59 15.24 0.35 1.92 26.84
Assets Over $1 Billion(51) 12.29 126.35 9.95 136.51 13.35 0.45 2.00 23.95
Assets $500 Million-$1 Billion(56) 13.77 107.05 11.82 110.72 14.69 0.29 1.57 22.61
Assets $250-$500 Million(79) 13.49 104.07 11.62 105.98 14.65 0.33 1.97 26.11
Assets less than $250 Million(126) 15.98 91.19 16.06 91.49 16.42 0.29 1.90 28.43
Goodwill Companies(133) 12.64 113.80 10.29 121.50 13.91 0.39 1.89 24.16
Non-Goodwill Companies(189) 15.39 97.00 15.01 97.00 15.90 0.30 1.87 27.15
Acquirors of FSLIC Cases(14) 10.89 130.26 9.07 137.91 12.61 0.43 1.99 21.15
</TABLE>
(1) Average of high/low or old/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances: ROI (return on investment) is current EPS divided by
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or restored acquisition activities or
manual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------------------- ----------------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings HPAs Resvs/ Resvs/
------------------------- -----------------
Financial Institution Assets Assets ROA(5) ROE(5) ROE(5) ROA(5) ROE(5) Assets HPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------- ------- ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages, BIF - Insured
Thrifts (no NHCS)
- ------------------------------
BIF-Insured Thrifts(71) 10.43 10.18 0.93 10.98 8.80 0.88 10.18 1.68 93.53 1.49
NYSE Traded Companies(3) 5.37 5.33 0.24 4.68 3.92 0.30 5.92 2.64 36.28 1.17
AMEX Traded Companies(4) 12.21 11.77 0.75 8.27 7.54 0.53 5.60 2.73 45.60 1.37
NASDAQ Listed OTC Companies(64) 10.48 10.24 0.97 11.39 9.06 0.93 10.65 1.60 97.47 1.51
California Companies(2) 6.78 6.77 0.61 11.41 7.04 0.51 9.40 4.57 31.17 1.83
Mid-Atlantic Companies(19) 10.53 10.46 0.83 10.28 8.05 0.81 9.47 1.52 80.22 1.43
Mid-West Companies(1) 56.23 56.23 1.47 2.62 3.68 1.47 2.62 0.00 0.00 0.49
New England Companies(44) 9.03 8.68 0.94 11.21 9.40 0.89 10.47 1.56 87.70 1.60
North-West Companies(4) 13.71 13.54 1.12 12.13 8.04 1.11 12.03 0.31 255.34 0.95
South-West Companies(1) 8.65 8.35 1.54 17.77 11.53 1.20 13.90 0.42 127.82 0.78
Thrift Strategy(44) 12.01 11.76 0.94 10.03 8.54 0.90 9.53 1.57 88.31 1.45
Mortgage Banker Strategy(11) 7.29 6.88 0.74 10.13 8.21 0.73 10.10 1.16 121.43 1.22
Real Estate Strategy(7) 9.61 9.56 1.24 14.45 9.78 1.12 12.71 2.07 95.15 1.73
Diversified Strategy(7) 6.87 5.55 1.16 18.46 13.00 0.98 15.19 2.69 91.76 2.03
Retail Banking Strategy(2) 6.32 5.16 0.05 0.82 1.05 0.05 0.86 1.31 68.51 1.24
Companies Issuing Dividends(50) 9.20 8.89 1.01 11.72 9.42 0.97 11.11 1.14 108.75 1.39
Companies Without Dividends(21) 13.27 13.18 0.74 9.26 7.36 0.68 8.03 3.25 48.95 1.72
Equity/Assets less than 6%(8) 5.38 5.31 0.74 10.03 9.43 0.58 10.93 3.69 44.18 1.81
Equity/Assets 6-12%(51) 8.25 7.93 0.95 11.78 9.57 0.90 11.09 1.50 94.12 1.51
Equity/Assets greater than
12%(12) 23.69 23.69 0.97 5.38 4.78 0.99 5.44 1.31 137.58 1.19
Converted Last 3 Mths
(no NHC) (3) 36.19 36.19 0.96 2.82 3.58 1.01 3.03 0.00 0.00 1.14
Actively Traded Companies(30) 8.50 8.10 0.90 10.73 8.87 0.89 10.63 1.29 95.02 1.52
Market Value Below $20 Million(11) 9.98 9.72 0.80 9.69 8.62 0.71 8.54 1.54 89.01 1.21
Holding Company Structure(45) 11.59 11.33 1.04 11.60 9.26 1.00 10.88 1.48 101.04 1.57
Assets Over $1 Billion(17) 7.83 7.54 0.98 13.40 9.74 0.93 12.27 1.99 79.90 1.57
Assets $500 Million-$1
Billion(17) 10.22 9.93 0.93 10.87 8.54 0.84 9.76 1.17 110.59 1.58
Assets $250-$500 Million(22) 10.17 9.94 0.89 10.50 8.68 0.88 10.10 2.02 80.14 1.51
Assets less than $250 Million(15) 13.41 13.22 0.94 9.44 8.31 0.58 8.67 1.43 108.50 1.31
Goodwill Companies(35) 7.85 7.35 0.82 10.93 8.65 0.74 9.68 1.44 84.25 1.41
Non-Goodwill Companies(36) 12.93 12.93 1.03 11.02 8.98 1.02 10.65 1.93 103.15 1.57
<CAPTION>
Pricing Ratios Dividends Date(6)
------------------------------------------------ ------------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- -------- ------- --------- -------- ------- ---------
(%) (%) (%) (%) (%) ($) (%) (%)
Market Averages, BIF - Insured
Thrifts (?? NHCS)
- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(71) 11.39 110.33 10.75 113.88 11.64 0.37 2.00 22.27
NYSE Traded Companies(3) 19.29 112.70 5.99 113.49 14.11 0.00 0.00 0.00
AMEX Traded Companies(4) 11.11 99.61 11.08 105.97 13.51 0.52 2.64 32.48
NASDAQ Listed OTC Companies(64) 11.25 111.00 10.90 114.45 11.51 0.37 2.83 22.34
California Companies(2) 8.60 99.19 6.78 99.25 10.67 0.00 0.00 0.00
Mid-Atlantic Companies(19) 12.56 110.36 10.85 111.48 12.07 0.37 1.61 19.16
Mid-West Companies(1) 0.00 71.16 40.01 71.16 0.00 0.00 0.00 0.00
New England Companies(44) 11.11 110.11 9.65 114.95 11.57 0.40 2.36 25.15
North-West Companies(4) 10.62 121.27 14.98 126.04 10.68 0.40 2.10 25.55
South-West Companies(1) 8.67 135.90 11.75 140.71 11.08 0.16 1.49 12.90
Thrift Strategy(44) 11.78 105.96 11.66 109.14 11.88 0.38 2.10 23.88
Mortgage Banker Strategy(11) 11.87 113.81 8.23 118.90 11.75 0.38 2.06 23.71
Real Estate Strategy(7) 10.97 126.85 12.46 127.65 12.14 0.31 1.51 15.05
Diversified Strategy(7) 8.98 124.46 8.50 131.34 9.65 0.34 1.80 17.14
Retail Banking Strategy(2) 8.00 90.11 5.89 92.27 0.00 0.32 1.91 0.00
Companies Issuing Dividends(50) 11.07 114.87 10.43 119.46 11.24 0.53 2.87 31.29
Companies Without Dividends(21) 12.39 99.82 11.50 100.97 12.85 0.00 0.00 0.00
Equity/Assets less than 6%(8) 12.31 122.37 6.56 124.14 12.93 0.05 0.47 6.31
Equity/Assets 6-12%(51) 10.89 113.55 9.34 118.07 11.15 0.45 2.45 26.26
Equity/Assets greater than 12%(12) 14.90 88.01 19.91 88.01 14.53 0.19 0.79 13.43
Converted Last 3 Mths (no NHC)(3) 21.68 71.63 25.91 71.63 18.87 0.00 0.00 0.00
Actively Traded Companies(30) 11.83 112.19 9.42 117.80 11.48 0.46 2.43 25.33
Market Value Below $20 Million(11) 10.64 98.44 9.21 102.23 12.21 0.23 1.57 14.71
Holding Company Structure(45) 10.90 110.13 11.90 114.05 11.20 0.40 2.17 28.86
Assets Over $1 Billion(17) 11.03 122.64 9.67 127.82 50.90 0.43 1.64 18.01
Assets $500 Million-$1 Billion(17) 11.04 111.35 10.98 115.50 12.22 0.53 2.78 32.38
Assets $250-$500 Million(22) 12.07 107.70 10.28 110.25 11.46 0.32 2.02 23.46
Assets less than $250 Million(15) 11.09 101.42 12.19 104.20 12.15 0.23 1.59 14.99
Goodwill Companies(35) 11.95 112.44 8.77 119.65 12.23 0.48 2.49 29.15
Non-Goodwill Companies(36) 10.81 108.29 12.68 108.29 12.08 0.26 1.53 16.06
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earning per share) is based on actual trailing twelve month data and is
not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on Investment) is current EPS divided by ??????
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
----------------------------------------------------- --------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings MPAs Resvs/ Resvs/
---------------------- -------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets MPAs Loans
- --------------------- ------ ------ ------ ------ ------ ------ ------ ------ ---- -----
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages, MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(19) 11.89 11.67 0.78 6.84 5.19 0.73 6.57 0.69 83.87 0.82
BIF-Insured Thrifts(2) 10.14 10.14 0.80 9.31 6.00 0.69 7.88 2.36 44.03 1.42
NASDAQ Listed OTC Companies(21) 11.72 11.52 0.78 7.09 5.27 0.73 6.70 0.85 79.44 0.88
Florida Companies(3) 10.30 10.26 0.89 8.83 6.78 0.86 6.60 0.72 107.38 0.97
Mid-Atlantic Companies(9) 12.45 12.12 0.68 5.25 4.03 0.68 5.55 1.11 50.81 0.89
Mid-West Companies(7) 12.13 12.12 0.74 6.65 5.19 0.64 5.90 0.59 94.58 0.76
New-England Companies(1) 8.00 8.00 1.11 14.65 8.49 0.89 11.81 1.66 65.45 1.65
North-West Companies(1) 11.02 9.75 1.30 11.97 8.07 1.17 10.78 0.26 119.16 0.51
Thrift Strategy(18) 11.97 11.81 0.74 6.39 4.94 0.70 6.19 0.84 77.83 0.85
Mortgage Banker Strategy(2) 11.02 9.75 1.30 11.97 8.07 1.17 10.78 0.26 119.16 0.51
Diversified Strategy(1) 8.00 8.00 1.11 14.56 8.49 0.89 11.81 1.66 65.45 1.65
Companies Issuing Dividends(21) 11.72 11.52 0.78 7.09 5.27 0.73 6.70 0.85 79.44 0.88
Equity/Assets less than 6%(1) 5.95 5.95 0.56 9.43 8.34 0.58 9.66 0.26 146.44 1.14
Equity/Assets 6-12%(13) 9.93 9.69 0.68 7.17 5.22 0.68 7.14 0.89 87.47 0.90
Equity/Assets more than 12%(7)* 15.61 15.44 1.00 6.61 4.94 0.83 5.53 0.87 46.77 0.79
Actively Traded Companies(1) 9.49 8.24 0.86 9.52 7.87 0.83 9.13 0.96 55.11 1.08
Market Value Below $20 Million(1) 11.79 11.79 0.43 3.82 3.43 0.35 3.10 0.52 90.42 0.60
Holding Company Structure(1) 9.49 8.24 0.85 9.52 7.87 0.83 9.13 0.96 55.11 1.08
Assets Over $1 Billion(4) 10.25 9.95 0.95 9.86 6.33 0.87 8.88 1.13 67.59 1.17
Assets $500 Million-$1 Billion(6) 11.26 10.96 0.90 7.95 6.02 0.83 7.78 0.76 81.42 0.95
Assets $250-$500 Million(3)* 10.24 10.22 0.74 7.85 6.77 0.73 7.72 0.15 187.85 0.64
Assets less than $250 Million(8)* 13.17 13.01 0.65 5.11 3.76 0.60 4.70 1.09 51.85 0.80
Goodwill Companies(10) 11.19 10.75 0.95 8.90 6.39 0.82 7.79 0.68 93.85 0.80
Non-Goodwill Companies(11) 22.15 12.15 0.55 5.60 4.36 0.66 5.82 0.99 65.03 0.94
MHC Institutions(21) 11.72 11.52 0.78 7.09 5.27 0.73 6.70 0.85 79.44 0.88
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ----- -------- ----- -------- ------ ----- -----
(%) (%) ( %) (%) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages, MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(19) 16.51 123.04 14.76 125.84 17.68 0.60 3.82 44.90
BIF-Insured Thrifts(2) 11.77 135.65 13.27 135.65 14.62 0.58 3.59 42.11
NASDAQ Listed OTC Companies(21) 16.20 124.30 14.61 126.82 17.48 0.60 3.79 44.59
Florida Companies(3) 15.18 120.89 12.19 121.32 15.80 0.83 4.59 63.26
Mid-Atlantic Companies(9) 16.66 119.55 15.05 123.35 18.78 0.44 3.15 35.56
Mid-West Companies(7) 17.99 124.06 15.31 124.15 18.42 0.71 4.57 54.74
New-England Companies(1) 11.77 158.43 12.67 158.43 14.62 0.80 3.58 42.11
North-West Companies(1) 12.40 140.06 15.43 158.23 13.76 0.20 1.33 16.53
Thrift Strategy(18) 16.83 121.53 14.68 123.32 17.98 0.61 3.94 48.96
Mortgage Banker Strategy(2) 12.40 140.06 15.43 158.23 13.76 0.20 1.33 16.53
Diversified Strategy(1) 11.77 158.43 12.67 158.43 14.62 0.80 3.58 42.11
Companies Issuing Dividends(21) 16.20 124.30 14.61 126.82 17.48 0.60 3.79 44.59
Equity/Assets less than 6%(1) 11.99 158.43 6.43 108.14 11.71 0.80 5.42 65.04
Equity/Assets 6-12%(13) 15.14 124.30 12.38 128.28 16.75 0.59 3.29 43.23
Equity/Assets more than 12%(7) 18.95 108.14 19.62 126.99 20.74 0.60 4.43 33.33
Actively Traded Companies(1) 12.70 125.00 10.69 129.74 13.24 0.40 2.54 32.26
Market Value Below $20 Million(1) 0.00 125.35 12.31 104.40 0.00 0.40 2.85 0.00
Holding Company Structure(1) 12.70 112.66 10.59 129.74 13.24 0.40 2.54 32.26
Assets Over $1 Billion(4) 17.05 143.47 14.49 146.93 18.11 0.56 3.18 41.60
Assets $500 Million-$1 Billion(6) 14.36 114.19 13.06 117.74 17.13 0.63 3.71 48.03
Assets $250-$500 Million(3) 15.17 112.14 11.42 112.35 15.54 0.72 4.29 54.74
Assets less than $250 Million(8) 18.62 129.25 17.02 131.52 19.48 0.56 3.90 16.53
Goodwill Companies(10) 15.48 127.29 14.19 132.90 17.31 0.48 2.89 34.96
Non-Goodwill Companies(11) 17.01 121.85 14.96 121.85 17.67 0.70 4.53 63.85
MHC Institutions(21) 16.20 124.30 14.61 126.82 17.48 0.60 3.79 44.59
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trading twelve month data and is
not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwil, value or core deposits, etc.).
(5) ROA (return on assets) and ROE (return on Equity) are indicated ratios based
on trading twelve month common earnings and average common equity and assets
balances; ROI (return on investments) is current EPS divided by
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated divided as a percent of trading twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unsual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Assets Quality Ratios
------------------------------------------------- ----------------------------
Tang-
Equity/ Eqiuty/ Reported Earnings Core Earnings NPAS Resvs/ Resvs/
------------------- --------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ -------- ------ ------- ------- ------- ------- ------- ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHN Ahmanson and Co. H.F. of CA 4.61 4.32 0.80 17.30 13.71 0.10 2.09 2.30 33.64 1.25
CAL Calfed Inc. of Los Angeles CA 4.52 4.52 0.58 13.78 9.15 0.55 12.96 1.61 77.66 1.85
CSA Coast Savings Financial of CA 5.16 5.08 0.46 9.62 6.41 0.40 8.33 1.62 48.77 1.17
CFB Commercial Federal Corp. of HE 6.05 5.43 0.84 15.46 8.98 0.84 15.37 1.02 73.31 1.02
DNE Dime Savings Bank, FSB of NY* 5.08 5.03 0.34 6.97 5.18 0.46 9.54 NA NA 1.24
DSL Downey Financial Corp. of CA 8.33 8.18 0.61 7.57 8.10 0.53 6.62 2.03 29.06 0.66
FRC First Republic Bancorp of CA* 5.65 5.64 0.14 2.38 2.46 0.13 2.31 2.64 36.28 1.09
FED FirstFed Fin. Corp. of CA 4.69 4.61 0.13 3.94 4.06 0.20 4.38 2.56 73.84 2.55
GLN Glendale Fed. Bk, FSB of CA 5.37 4.95 0.12 2.49 2.27 0.29 5.87 2.08 65.06 1.78
GDW Golden West Fin. Corp. of CA 6.56 5.27 0.75 11.76 8.11 0.74 11.63 1.37 31.65 0.53
GNF Great Western Fin. Corp. of 5.78 5.06 0.60 10.98 8.08 0.54 10.01 1.81 43.93 1.15
GPT GreenPoint Fin. Corp. of NY(B)* 10.58 5.03 0.92 6.87 6.91 0.96 7.17 2.94 24.69 1.67
SFB Standard Fed. Bancorp of NY 6.95 5.93 0.94 13.84 10.28 0.85 12.50 0.45 59.52 0.38
TCB TCF Finacial Corp. of M? 7.69 7.35 1.37 20.13 8.39 1.29 19.04 0.92 102.63 1.23
NES Westcorp Inc. of Drange CA 9.89 9.86 1.21 13.72 7.78 0.60 6.86 1.24 107.17 2.37
AMEX Traded Companies
- ---------------------
BKC American Bank of Waterbury CT* 8.57 8.12 0.96 10.74 8.24 0.39 4.36 2.95 33.54 1.46
BFD BostonFed Bancorp of MA 13.51 13.51 0.21 2.42 1.63 0.18 2.05 1.67 40.40 0.85
CFX Cheshire Fin. Corp. of MH* 9.46 8.44 0.99 10.03 8.03 0.82 8.28 1.09 76.02 1.08
CZF Citisave Fin. Corp. of LA 18.18 18.17 1.28 9.16 7.16 0.88 6.28 0.30 38.75 0.21
CBK Citizens First Fin. Corp. of IL 15.57 15.57 0.63 4.01 5.67 0.68 4.37 NA NA 0.24
ESX Essex Bancorp of VA(B) 2.57 -0.08 0.32 7.80 43.11 -0.78 -18.91 3.32 47.35 1.88
FCB Falmouth Co-Op Bank of NA* 24.56 24.56 0.45 2.40 2.44 0.47 2.50 NA NA 1.31
GAF GA Financial Corp. of PA 22.44 22.?4 0.58 4.73 3.00 0.78 6.30 0.19 78.79 0.41
KHK Kankankee Bancorp of IL 9.80 9.09 0.50 1.56 5.97 0.49 4.48 0.59 110.93 1.02
KYF Kentucky First Bancorp of KY 23.62 23.62 1.12 5.40 4.26 1.12 5.40 0.15 299.19 0.87
NYB New York Bancorp, Inc. of NY 5.78 5.78 1.18 19.84 10.77 1.12 18.82 1.63 45.81 1.22
PDB Piedmont Bancorp, Inc. of NC 29.77 29.77 1.34 6.02 4.38 1.36 6.12 0.72 65.30 0.66
PLE Pinnacle Bank of AL 8.19 7.90 0.79 10.40 10.61 0.71 9.31 0.22 393.63 1.04
SSB Scotland Bancorp of NC 37.58 37.58 1.09 3.96 3.07 1.09 3.96 NA NA 0.52
S?B SouthFirst Bancshares of AL 14.89 14.89 0.55 3.25 4.49 0.76 4.49 0.56 52.60 0.45
SRN Southern Banc Company of AL 20.38 20.15 0.50 4.33 2.72 0.50 4.33 NA NA 0.25
SSN Stone Street Bancorp of NC 33.68 33.68 0.77 3.04 2.55 0.77 3.04 0.31 126.92 0.60
TSH Teche Holding Company of LA 17.16 17.16 1.17 7.06 6.94 1.14 6.91 0.24 362.84 1.10
FTF Texarkana Fst. Fin. Corp of 20.62 20.62 1.85 11.49 9.97 1.39 8.62 0.36 196.08 0.89
THR Three Rivers Fin. Corp. of HI 15.74 15.64 0.59 6.68 3.81 0.57 6.41 0.73 70.06 0.77
TBK Tolland Bank of CT* 6.25 5.96 0.61 9.90 11.49 0.44 7.25 4.14 27.24 1.62
WSB Washington SB, FSB of MD 8.08 8.08 0.94 12.56 10.36 0.69 9.25 NA NA 0.95
NASDAQ Listed OTC Companies
- ---------------------------
FBCY 1st Bancorp of Vincennes IN 7.88 7.88 2.25 35.91 36.85 -0.16 -2.50 0.38 86.69 0.46
WFSB 1st Washington Bancorp of VA(8) 5.95 5.95 0.64 11.09 6.42 0.26 4.57 0.87 86.57 1.70
ALBK ALBANK Fin. Corp of Albany N 9.62 8.49 0.99 9.39 8.11 0.99 9.39 1.03 70.00 1.09
AMFC AHB Financial Corp. of IN 20.06 20.06 0.49 4.30 3.06 0.49 4.30 0.71 63.16 0.66
ASBP ASB Financial Corp. of OH 23.07 23.07 1.03 4.75 4.27 1.03 4.75 1.48 53.58 1.30
ABBK Abington Savings Bank of MA(B)* 6.50 5.69 0.36 5.29 5.53 0.24 3.48 0.37 83.30 0.58
AACY Advantage Bancorp of WI 9.77 8.47 0.90 9.33 7.38 0.81 8.40 0.56 100.02 1.04
AFCB Affiliated Comm BC, Inc of MA 10.25 10.17 0.71 6.31 7.22 0.86 7.55 1.34 57.09 1.28
ALBC Albion Banc Corp. of Albion NY 10.71 10.71 0.30 2.87 4.00 0.25 2.43 0.72 61.31 0.55
ATSB AmTrust Capital Corp. Of IN 10.34 10.23 0.31 2.75 3.75 0.07 0.59 1.31 38.02 0.73
AHCI Ambacc Holding Co. of NY 19.17 19.17 -0.03 -0.23 -0.21 -0.04 -0.35 4.22 24.58 1.64
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
-------------------------------------------- -------------------------
Price/ Price/ Ind- Divi-
Price/ Price/ Price/ Tang- Core Div./ Dend Payout
Financial Institution Earning Book Assets Book Earning Share Yield Ratio(7)
- --------------------- ------- ------- ------ ------ ------- ------- ------- ---------
(%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHN Ahmanson and Co. H.F. of CA 7.29 130.49 6.02 139.23 NM 0.88 3.31 24.13
CAL Calfed Inc. of Los Angeles CA 10.93 140.44 6.34 140.44 11.63 0.00 0.00 0.00
CSA Coast Savings Financial of CA 15.61 142.51 7.36 144.91 18.02 0.00 0.00 0.00
CFB Commercial Federal Corp. of HE 11.13 145.35 8.79 161.79 11.19 0.40 1.04 11.53
DNE Dime Savings Bank, FSB of NY* 19.29 131.46 6.58 132.93 14.11 0.00 0.00 0.00
DSL Downey Financial Corp. of CA 12.35 90.89 7.57 92.51 14.12 0.48 2.31 28.57
FRC First Republic Bancorp of CA* NM 93.94 5.31 94.06 NM 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA 24.65 95.21 4.46 96.85 22.15 0.00 0.00 0.00
GLN Glendale Fed. Bk, FSB of CA NM 105.77 5.68 114.76 18.69 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 12.33 136.97 9.12 145.61 12.47 0.38 0.70 8.60
GNF Great Western Fin. Corp. of 12.37 128.94 7.45 147.24 13.57 1.00 4.21 52.08
GPT GreenPoint Fin. Corp. of NY(B)* 14.47 100.65 10.65 176.71 13.85 0.50 2.72 39.41
SFB Standard Fed. Bancorp of NY 9.72 126.98 8.83 148.85 10.77 0.75 1.99 19.39
TCB TCF Finacial Corp. of M? 11.91 219.34 16.86 229.36 12.59 0.75 2.26 26.98
NES Westcorp Inc. of Drange CA 12.85 154.92 15.33 155.45 NM 0.38 2.08 26.76
AMEX Traded Companies
- ---------------------
BKC American Bank of Waterbury CT* 12.13 125.48 10.84 133.37 NM 1.35 5.55 67.33
BFD BostonFed Bancorp of MA NM 88.13 11.91 88.13 NM 0.20 1.63 NM
CFX Cheshire Fin. Corp. of MH* 12.50 119.85 11.34 134.30 15.13 0.72 5.01 62.61
CZF Citisave Fin. Corp. of LA 13.97 94.87 17.25 94.94 20.36 0.30 2.11 29.41
CBK Citizens First Fin. Corp. of IL 17.63 70.75 11.02 70.75 16.18 0.00 0.00 0.00
ESX Essex Bancorp of VA(B) 2.32 29.15 0.75 NM NM 0.00 0.00 0.00
FCB Falmouth Co-Op Bank of NA* NM 69.07 16.96 69.07 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA NM 76.71 17.21 76.71 25.00 0.00 0.00 0.00
KHK Kankankee Bancorp of IL 16.74 71.84 7.63 83.91 17.04 0.40 2.08 34.78
KYF Kentucky First Bancorp of KY 23.46 93.63 22.11 93.63 23.46 0.50 3.74 NM
NYB New York Bancorp, Inc. of NY 9.28 185.94 10.75 185.94 9.79 0.80 3.17 29.41
PDB Piedmont Bancorp, Inc. of NC 22.84 94.31 28.07 94.31 22.46 0.48 3.62 NM
PLE Pinnacle Bank of AL 9.43 94.27 7.72 97.70 10.54 0.72 4.47 42.11
SSB Scotland Bancorp of NC NM 86.02 32.32 86.02 NM 0.00 0.00 0.00
S?B SouthFirst Bancshares of AL 22.27 79.13 11.78 79.13 16.12 0.50 4.08 NM
SRN Southern Banc Company of AL NM 85.43 17.41 86.38 NM 0.35 2.64 NM
SSN Stone Street Bancorp of NC NM 78.72 26.52 78.72 NM 0.4? 2.61 NM
TSH Teche Holding Company of LA 14.40 91.32 15.67 91.32 14.72 0.50 3.77 54.35
FTF Texarkana Fst. Fin. Corp of 11.15 97.17 20.04 97.17 14.86 0.45 2.73 30.41
THR Three Rivers Fin. Corp. of HI NM 89.73 14.12 90.28 NM 0.30 2.2? 58.82
TBK Tolland Bank of CT* 8.71 83.05 5.19 87.13 11.89 0.00 0.00 0.00
WSB Washington SB, FSB of MD 9.65 109.34 8. 84 109.34 13.10 0.10 1.82 17.54
NASDAQ Listed OTC Companies
- ---------------------------
FBCY 1st Bancorp of Vincennes IN 2.71 82.34 6.49 82.34 NM 0.40 1.50 4.08
WFSB 1st Washington Bancorp of VA 15.57 165.76 9.87 165.76 NM 0.12 1.51 23.53
ALBK ALBANK Fin. Corp of Albany N 12.33 115.56 11.12 130.95 12.33 0.48 1.76 21.72
AMFC AHB Financial Corp. of IN NM 70.42 14.12 70.42 NM 0.00 0.00 0.00
ASBP ASB Financial Corp. of OH 23.44 99.73 23.01 99.73 23.44 0.30 2.00 46.82
ABBK Abington Savings Bank of MA(B)* 18.08 93.04 6.05 106.37 NM 0.40 2.60 47.06
AACY Advantage Bancorp of WI 13.55 122.43 11.97 141.31 15.04 0.32 0.94 12.75
AFCB Affiliated Comm BC, Inc of MA 13.84 88.30 9.05 89.00 11.55 0.48 2.87 39.67
ALBC Albion Banc Corp. of Albion NY 25.00 70.94 7.60 79.94 NM 0.31 1.88 46.97
ATSB AmTrust Capital Corp. Of IN NM 74.10 7.65 74.89 NM 0.00 0.00 0.00
AHCI Ambacc Holding Co. of NY NM 68.93 13.21 68.93 NM 0.00 0.00 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
-------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Assets Quality Ratios
------------------------------------------------- ----------------------------
Tang-
Equity/ Eqiuty/ Reported Earnings Core Earnings NPAS Resvs/ Resvs/
------------------- --------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------ -------- ------ ------- ------- ------- ------- ------- -----
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- -------------------------------------------
ASBI American Bancorp of IN 11.64 11.62 0.93 7.22 7.69 0.90 7.00 0.56 50.63 0.40
AFFFZ America First Fin. Fund of CA 6.80 6.64 0.81 12.56 11.85 0.81 12.48 0.65 46.82 0.50
APFB American Federal Bank of SC 8.21 7.58 1.29 16.11 9.84 1.41 17.57 0.50 151.68 1.27
ANBX American Nat'l BAncaorp of ND 10.91 10.91 0.34 3.61 3.75 0.33 3.51 1.40 69.89 1.61
ABCH Anchor BAncorp Wisconsin of WI 6.75 6.57 0.87 12.13 8.65 0.85 11.80 0.61 214.80 1.63
ANDB Andover BAncorp, Inc . of MA 7.60 7.50 0.87 11.60 9.28 0.91 12.17 1.60 63.49 1.46
ASFC Astoria Financial Corp. of NY 8.55 6.95 0.75 8.45 8.07 0.74 8.37 0.85 23.49 0.62
AVID Avondale Fin.Corp . of IL 10.63 10.63 0.65 6.66 7.15 0.45 4.65 0.85 82.48 1.72
BFST BFS Bankorp, Inc of NY 8.14 8.14 1.84 24.85 16.10 1.78 24.01 1.45 69.83 1.13
BXCT Bancorp Connecticut of CT 10.81 10.81 1.18 10.65 7.95 1.18 10.65 1.69 74.29 2.13
BWFC Bank West Fin. Corp. of 19.78 19.78 0.69 3.38 3.81 0.41 1.98 0.08 112.71 0.13
BARIC BankAtlantic Bancorp of FL 8.33 7.55 0.97 14.59 10.67 0.76 11.35 1.25 91.39 2.12
BKURA BankUnited SA of FL 6.11 5.77 1.02 25.11 14.93 0.78 20.05 0.90 32.13 0.38
BKCO Bankers Corp, of NJ 9.81 9.60 1.12 11.36 9.39 1.18 11.99 1.59 24.80 0.56
BVCS Bay View Capital Corp, of CA 6.98 6.81 -3.10 -1.46 -1.37 0.76 3.66 1.23 76.86 1.33
BFSB Bedford BAnkshares of VA 16.11 16.11 1.25 7.57 7.22 1.26 7.57 1.24 43.93 0.64
BTHL Bethel Bancorp, of NE 7.56 6.36 3.61 8.16 8.31 0.47 6.27 NA NA 1.48
SBOS Boston Bancorp of MA(B) 12.34 12.34 1.91 21.36 16.91 0.91 10.23 0.65 18.09 0.61
BSBC Branford Bancshares of VA 8.69 8.69 0.76 9.05 6.15 0.76 9.05 2.31 67.06 2.77
BRFC Bridgeville SB, FSB of PA 28.51 28.51 1.24 4.21 4.29 1.24 4.21 0.25 102.85 0.70
BYFC Broadway Fin, Corp, of CA 11.42 11.42 0.40 6.29 4.90 0.45 7.06 2.40 34.37 1.05
CBCO CB Bancorp of Michigan City IN 9.16 9.16 1.36 13.92 12.00 1.35 13.92 0.84 77.80 1.45
CCFH CCF Holding Company of GA 21.23 21.23 0.86 5.27 4.92 0.82 4.91 0.63 84.80 0.90
CEHF CEIFED Financial Corp, of CA 5.00 4.99 0.48 9.87 9.16 0.33 6.81 1.22 54.40 0.89
CFSB CFSB Bancorp of Lansing NI 8.29 8.29 0.94 11.62 7.44 0.92 11.40 0.09 652.31 0.69
CKFB CKF Bancorp of Dansville KY 27.30 27.30 1.24 4.40 3.85 1.24 4.40 1.70 10.61 0.21
CSBF CSB Financial Group Inc of IL 30.89 30.89 0.82 3.62 3.51 0.82 3.62 0.78 37.38 0.55
CFHC California Fin, Hld, Co, of CA 6.75 6.69 0.28 4.24 3.69 0.24 3.69 1.39 46.09 0.87
CBCI Calumet Bancorp of Chicago IL 16.99 16.99 1.21 7.25 8.00 1.20 7.22 1.23 82.56 1.36
CAFI Canco Fin, Corp, of NY 8.33 8.33 1.22 15.53 10.81 0.93 11.87 0.56 54.79 0.36
CMRN Cameron Fin, Corp. of MO 26.54 26.54 1.61 5.79 7.19 1.59 5.73 0.79 86.49 0.81
CAPS Capital Savings Bancorp of MO 10.43 10.43 0.95 8.92 9.72 0.95 8.92 0.20 152.91 0.38
CARV Carver FSB of New York, NY 9.63 9.16 0.20 2.06 3.94 0.25 2.66 1.13 27.64 1.88
CASB Cascade SB of Everett WA 6.22 6.22 0.56 8.94 5.21 0.29 4.68 2.40 37.69 1.26
CATB Catskill Fin, Corp of CT(8) 27.79 27.79 0.96 3.44 4.61 1.10 3.96 NA NA 1.63
CNIT Cenit Bancorp, of Norfolk VA 6.98 6.72 0.42 5.90 4.49 0.49 6.92 0.51 109.75 1.17
CTBK Center Banks, Inc, of NY 7.08 7.08 0.56 8.10 9.24 0.58 8.35 1.07 115.49 1.55
CFCX Center Fin, Corp, of CT 6.10 5.70 0.70 11.37 7.00 0.47 7.75 2.61 44.43 1.46
CEBX Central Co-Op, Bank of MA 9.95 8.69 0.60 6.40 6.39 0.57 6.01 2.31 41.68 1.39
CJFC Central Jersey Fin, Corp of NJ(8 11.78 10.95 1.11 10.71 6.15 1.06 10.20 1.91 33.63 1.30
CBSB Charter Financial Inc. of IL 21.41 20.85 1.12 6.95 5.65 5.65 6.95 0.49 149.63 1.05
COFI Charter One Financial of OH(8) 6.90 6.79 0.18 2.81 1.05 1.18 18.12 0.42 117.80 0.92
CVAL Chester Valley BAncorp of PA 9.15 9.15 0.91 10.02 8.44 0.87 9.63 1.03 92.67 1.20
CRCL Circle Financial Corp, of OH(8) 10.65 9.24 0.50 4.34 4.32 0.43 3.72 0.10 213.87 0.35
CTZN Citfwed Bancorp of DAyton OH 6.70 5.81 0.68 9.99 7.66 0.55 8.16 0.85 74.34 1.06
CLAS Classic Bacshares of KY 28.78 28.78 0.44 2.82 1.91 0.40 2.55 0.51 77.33 0.62
CMSB Cmnwealth SB, WIc of PA (46.3)(8 8.30 7.30 0.78 8.32 5.91 0.69 7.40 0.44 103.05 0.85
CBSA Coastal Bancorp of Dayton OH 3.31 2.69 0.37 10.64 10.40 0.37 10.58 0.67 32.48 0.54
CFCP Coastal Fin, Corp, of SC 6.08 6.08 0.99 16.43 7.48 0.89 14.80 0.42 209.91 1.02
COFD Collective Bancorp Inc, of NJ 7.05 6.54 1.06 15.87 10.80 1.04 15.51 0.57 45.24 0.53
CNSV Commty, Svgs, NHC of FL(47,6) 11.82 11.82 0.83 6.60 5.49 0.81 6.40 0.12 44.70 1.02
CBIN Community Bankshares of IL 11.36 11.36 0.90 8.26 7.05 0.88 8.09 0.12 219.42 0.50
CBNH Community BankShares Inc, OH 7.23 7.23 0.78 10.93 7.94 0.65 9.07 0.46 159.64 1.09
CFTP Community Fed, Bancorp of MS 33.10 33.10 1.17 6.28 3.16 1.14 6.13 0.34 84.38 0.53
CFFC Community Fin, Corp of VA 13.70 13.70 1.29 9.70 7.90 1.29 9.70 0.45 139.66 0.70
CIBI Community Inv, Inc of OH 14.36 14.36 1.29 7.31 7.87 0.95 7.33 0.73 69.06 0.68
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------------- ---------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ DEND Payout
Financial Institutions Earning Book Assets Book Earnings Share Yield Ratio(7)
(x) (%) (%) (%) (x) $ (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- -------------------------------------------
ASBI American Bancorp of IN 13.00 96.94 11.28 97.09 13.40 0.56 4.31 56.00
AFFFZ America First Fin. Fund of CA 8.44 102.23 6.96 104.69 8.49 1.60 5.93 50.00
APFB American Federal Bank of SC 10.16 156.41 12.8 169.54 9.32 0.40 2.54 25.81
ANBX American Nat'l BAncaorp of ND NA 80.18 8.75 80.18 NM 0.00 0.00 0.00
ABCH Anchor BAncorp Wisconsin of WI 11.56 141.67 9.56 145.49 11.8 0.40 1.18 13.61
ANDB Andover BAncorp, Inc . of MA 10.78 118.64 9.01 118.64 10.28 0.50 2.47 26.67
ASFC Astoria Financial Corp. of NY 12.38 104.63 8.94 128.62 12.50 0.44 1.61 19.91
AVID Avondale Fin.Corp . of IL 13.98 84.69 9.00 84.69 20.00 0.00 0.00 0.00
BFST BFS Bankorp, Inc of NY 6.21 136.52 11.11 136.52 6.43 0.00 0.00 0.00
BXCT Bancorp Connecticut of CT 12.58 128.96 13.94 128.96 12.58 0.72 3.47 43.64
BWFC Bank West Fin. Corp. of NM 89.66 17.73 89.66 NM 0.28 2.60 68.29
BARIC BankAtlantic Bancorp of FL 9.38 155.8 9.65 126.17 12.05 0.18 1.33 12.50
BKURA BankUnited SA of FL 6.70 94.58 5.78 100.13 8.72 0.00 0.00 0.00
BKCO Bankers Corp, of NJ 10.65 117.43 11.52 119.96 10.09 0.56 3.25 34.57
BVCS Bay View Capital Corp, of CA NM 113.71 7.94 116.64 NM 0.60 1.79 NA
BFSB Bedford BAnkshares of VA 13.85 104.86 16.89 104.86 13.85 0.36 2.17 30.00
BTHL Bethel Bancorp, of NE 12.04 94.75 7.17 112.75 15.66 0.32 2.46 29.63
SBOS Boston Bancorp of MA(B) 5.91 103.92 12.82 103.92 12.35 0.76 1.82 10.73
BSBC Branford Bancshares of VA 16.25 140.69 12.22 140.69 16.25 0.00 0.00 0.00
BRFC Bridgeville SB, FSB of PA 23.31 97.31 27.74 97.31 23.31 0.32 2.33 54.24
BYFC Broadway Fin, Corp, of CA 20.41 67.89 7.75 67.89 18.18 0.20 2.00 40.82
CBCO CB Bancorp of Michigan City IN 8.33 109.25 10.01 109.25 8.33 0.00 0.00 0.00
CCFH CCF Holding Company of GA 20.34 81.14 17.23 81.14 21.43 0.40 3.33 67.80
CEHF CEIFED Financial Corp, of CA 10.91 102.28 5.12 102.48 15.81 0.33 1.53 16.75
CFSB CFSB Bancorp of Lansing NI 13.45 148.60 12.33 148.60 13.71 0.44 2.07 27.85
CKFB CKF Bancorp of Dansville KY NM 113.31 30.93 113.31 NM 0.40 2.05 53.33
CSBF CSB Financial Group Inc of IL NM 74.15 22.90 74.15 NM 0.00 0.00 0.00
CFHC California Fin, Hld, Co, of CA NM 112.93 7.63 113.92 NM 0.44 2.11 57.14
CBCI Calumet Bancorp of Chicago IL 12.50 89.09 15.13 89.09 12.56 0.00 0.00 0.00
CAFI Canco Fin, Corp, of NY 9.25 135.12 11.25 135.12 12.11 0.46 2.34 21.70
CMRN Cameron Fin, Corp. of MO 13.92 84.06 22.31 84.06 14.06 0.28 2.07 28.87
CAPS Capital Savings Bancorp of MO 10.29 88.50 9.23 88.50 10.29 0.36 2.00 20.57
CARV Carver FSB of New York, NY NM 52.05 5.01 54.73 19.68 0.00 0.00 0.00
CASB Cascade SB of Everett WA 19.19 166.00 10.32 166.00 NM 0.00 0.00 0.00
CATB Catskill Fin, Corp of CT(8) 21.68 74.65 20.75 74.65 18.87 0.00 0.00 0.00
CNIT Cenit Bancorp, of Norfolk VA 22.29 120.69 8.42 125.36 19.02 0.80 2.29 50.96
CTBK Center Banks, Inc, of NY 10.83 84.25 5.96 84.25 10.50 0.24 1.75 18.90
CFCX Center Fin, Corp, of CT 14.29 147.93 9.03 158.38 20.98 0.28 1.22 17.50
CEBX Central Co-Op, Bank of MA 15.66 94.63 9.42 108.39 16.67 0.00 0.00 0.00
CJFC Central Jersey Fin, Corp of NJ(8) 16.27 149.42 17.60 160.74 17.08 1.12 3.64 59.26
CBSB Charter Financial Inc. of IL 17.69 88.80 19.01 91.20 17.69 0.24 2.09 36.92
COFI Charter One Financial of OH(8) NM 174.55 12.05 177.37 14.72 0.92 2.61 NM
CVAL Chester Valley BAncorp of PA 11.85 114.78 10.50 114.78 12.33 0.40 2.19 25.97
CRCL CircleFinancial Corp, of OH(8) 23.13 98.52 10.49 113.56 NM 0.68 2.00 46.26
CTZN Citfwed Bancorp of DAyton OH 13.05 121.03 8.11 139.64 15.97 0.28 0.76 9.86
CLAS Classic Bacshares of KY NM 74.53 21.45 74.53 NM 0.00 0.00 0.00
CMSB Cmnwealth SB, WIc of PA (46.3)(8) 16.93 134.97 11.21 153.57 19.03 0.50 2.33 39.37
CBSA Coastal Bancorp of Dayton OH 9.62 98.93 3.28 121.94 9.67 0.40 2.16 20.73
CFCP Coastal Fin, Corp, of SC 13.37 206.23 12.55 206.23 14.85 0.50 2.48 33.11
COFD Collective Bancorp Inc, of NJ 9.26 138.81 9.78 149.51 9.47 0.80 3.30 30.53
CNSV Commty, Svgs, NHC of FL(47,6) 15.40 99.35 11.74 99.35 15.89 0.70 4.59 70.71
CBIN Community Bankshares of IL 14.19 106.07 12.05 106.07 14.49 0.34 2.50 35.42
CBNH Community BankShares Inc, OH 12.59 114.41 8.03 114.81 15.17 0.60 3.38 42.55
CFTP Community Fed, Bancorp of MS NM 94.98 31.44 94.98 NM 0.00 0.00 0.00
CFFC Community Fin, Corp of VA 12.66 116.01 15.90 116.01 12.66 0.52 2.60 32.91
CIBI Community Inv, Inc of OH 12.71 87.39 12.55 87.39 13.38 0.16 1.05 13.33
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------- --------------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings WPAs Resvs/ Resvs/
---------------------- ----------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets WPAs Loans
- --------------------- ------ ------ ------ ------ ------ ------- ------ ------ ------ -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Comapnies (continued)
- ---------------------------------------
CCME Contestoga Bancorp of Roslyn NY(8) 16.17 16.17 0.67 4.11 3.24 0.54 3.33 0.16 26.87 0.18
COOP Cooperative Bk. for Svgs. of NC 9.34 8.21 0.28 3.11 3.48 0.24 2.64 0.22 95.46 0.28
CNSK Covenant Bank for Svgs. of NJ 5.05 5.05 0.52 11.55 8.08 0.62 11.55 2.04 38.62 1.43
CRZY Crazy Woman Creek Bancorp of NY 32.70 32.70 0.92 4.63 3.32 0.78 3.95 0.70 85.20 1.14
DMFC D&M Financial Corp. of MI 5.63 5.54 1.05 19.69 13.39 0.93 17.40 0.59 138.44 0.98
DSBC DS Bancor Inc. of Derby CT 6.55 6.33 0.66 10.49 8.61 0.59 9.40 1.82 31.42 0.79
DFIM ???? Fin. Corp. of Chicago IL 24.17 24.17 0.81 5.02 3.83 0.79 4.91 0.14 92.58 0.35
DIBK Dime Financial Corp. of CT 7.95 7.56 1.50 19.84 13.54 1.69 22.30 0.99 199.52 2.98
EBSI Eagle Bancshares of Tucker GA 6.65 6.65 0.97 13.73 9.56 0.94 13.29 0.49 138.35 0.98
EGFC Eagle Financial Corp. of CT 7.14 5.16 1.30 17.60 15.41 0.63 8.61 1.23 55.16 1.20
ETFS East Texas Fin. Serv. of TX 19.63 19.63 0.89 4.59 5.90 0.83 4.27 0.45 55.47 0.65
EBCP Eastern Bancorp of MI 7.70 7.25 0.60 8.23 8.?5 0.50 6.82 1.81 23.60 0.74
ESBK Elmira SB of Elmira NY 6.30 6.01 0.14 2.29 2.75 0.14 2.29 0.80 89.84 1.00
EFBI Enterprise Fed. Bancorp of OH 15.58 15.55 1.12 5.47 6.95 0.77 3.75 0.01 N.A. 0.27
EQSB Equitable FSB of Wheaton MD 5.25 5.25 0.84 16.16 14.10 0.83 16.02 0.98 22.55 0.33
FFFG F.F.D. Financial Group of FL 6.01 6.01 0.46 6.98 5.34 0.46 6.98 3.77 45.17 2.74
FCBF FCB Fin. Corp. of ????? WI 18.46 18.46 1.03 5.31 5.59 1.01 5.21 NA NA 0.51
FFBS FFBS Bancorp of Columbus MS 19.57 19.57 1.13 6.46 4.40 1.31 6.46 0.70 76.75 0.79
FFDF FFD Financial Corp. of OH 28.03 28.03 1.04 3.69 5.10 1.04 3.69 NA NA 0.32
FFLC FFLC Bancorp of Leesburg FL 16.97 16.97 0.94 5.42 6.16 0.94 5.47 0.08 365.93 0.51
FFFC FFVA Financial Corp. of VA 16.32 15.99 1.30 7.25 6.80 1.27 7.06 0.48 132.38 1.09
FFUC FFW Corporation of Wabash TN 10.80 10.80 0.90 8.12 9.04 1.01 9.05 0.06 620.00 0.52
FFYF FFY Financial Corp. of OH 18.35 18.35 1.21 6.53 5.76 1.25 6.73 0.88 66.89 0.78
FHCO FHS Financial Corp. of NJ 6.58 6.40 0.84 13.04 9.66 0.84 13.04 1.41 49.19 0.95
FF?? FSF Financial Corp. of ?? 15.97 15.97 0.62 3.34 3.96 0.62 3.34 0.09 250.67 0.39
FMLY Family Bancorp of Haverhill NA(8) 7.76 7.10 0.96 12.66 8.20 0.86 11.34 1.19 61.53 1.42
FHCT Farmers & Mechanics Bank of CT(8) 5.55 5.55 0.06 1.13 0.66 -0.02 -0.39 2.52 33.97 1.43
FOBC Fed One Bancorp of Wheeling ?? 12.12 11.47 1.00 7.73 8.96 1.00 7.73 0.28 152.99 1.16
FFRV Fld. Fin. Bkshrs. Corp. of VA 8.51 8.50 0.99 11.83 10.80 0.97 11.56 1.16 84.92 1.20
FBCI Fidelity Bancorp of Chicago IL 12.05 12.00 0.77 5.66 5.90 0.73 5.31 0.53 20.65 0.16
FSBI Fidelity Bancorp, Inc. of PA 7.28 7.22 0.60 7.78 7.81 0.59 7.65 0.81 55.09 1.02
FFFL Fidelity FSB, NHC of FL(47.2) 10.23 10.12 0.64 6.24 5.51 0.60 5.81 0.38 78.38 0.41
FFED Fidelity Fed. Bancorp of IN 5.07 5.07 1.30 26.09 12.27 1.22 24.57 0.07 428.14 0.35
FFOH Fidelity Financial of OH 20.37 20.37 0.82 5.54 4.63 0.82 5.54 0.40 80.88 0.43
FIBC Financial Bancorp of NY 10.56 10.60 0.65 5.40 6.40 0.64 5.33 2.80 19.48 1.07
F?SC Financial Security Corp. of IL(8) 14.36 14.36 0.77 5.66 5.56 0.71 5.26 2.77 31.27 1.24
FSBS First Ashland Fin. Corp. of KY(8) 26.33 26.33 0.87 4.09 2.83 0.87 4.09 NA NA 0.17
FBSI First Bancshares of MO 16.92 16.89 0.78 4.33 5.16 0.77 4.27 0.83 83.74 0.44
FEBC First Bell Bancorp of PA 21.05 21.05 1.55 7.69 6.87 1.53 7.61 0.11 97.74 0.14
FBER First Bergen Bancorp of NJ 16.52 16.52 0.28 3.06 2.15 0.42 4.59 2.49 59.97 3.49
FCIT First Cit. Fin. Corp. of MO 6.28 6.28 0.71 11.35 8.17 0.58 9.23 3.43 33.61 1.63
FFBA First Colorado Bancorp of CO 16.19 16.00 0.98 8.50 5.23 0.98 8.50 0.25 84.38 8.33
FDEF First Defiance Fin. Corp. of OH 25.39 25.39 1.15 5.36 4.93 1.13 5.26 NA NA 0.48
FESX First Essex Bancorp of MA 7.67 7.67 0.94 13.05 11.91 0.79 11.01 0.77 108.82 1.32
FFES First FS&LA of E. Hartford CT 6.19 6.17 0.60 8.87 11.65 0.59 8.78 0.83 40.36 1.94
FSSB First FS&LA of San Bern. CA 5.64 5.19 -0.17 -2.90 -5.20 -0.35 -6.09 4.86 16.11 1.21
FFSK First FS&LA MHC of IA (45.0) 8.41 8.37 0.63 7.77 6.29 0.58 7.15 0.17 229.25 0.53
FFML First Family Bank, FSB of FL 5.61 5.61 0.82 16.10 11.14 0.48 9.50 0.42 105.69 0.61
FFSV First Fed Fin. Serv. of OH 5.32 4.84 0.85 15.68 8.49 0.69 12.62 0.15 196.94 0.47
???? First Fed. Bancorp. of MM 14.38 14.38 0.70 5.24 6.54 0.70 5.24 0.23 211.89 0.98
FFBM First Fed. Bancshares of AR 15.90 15.90 0.99 6.24 6.98 0.99 6.24 0.09 278.68 0.35
FFEC First Fed. Bancshares of WI 14.32 13.74 0.96 5.83 5.38 0.94 5.69 0.13 104.41 0.19
FTFC First Fed. Capital Corp. of MI 6.85 6.45 0.91 13.51 8.59 0.67 9.91 NA NA 0.84
FFFB First Fed. Fin. Bancorp of OH 18.05 18.05 0.67 3.69 5.40 0.67 3.69 0.09 517.39 0.86
FFKY First Fed. Fin. Corp. of KY 14.04 13.10 1.65 11.51 6.00 1.44 10.03 0.45 102.40 0.53
FFBZ First Federal Bancorp of OH 7.81 7.80 1.10 14.70 9.76 1.08 14.45 0.62 144.45 1.01
<CAPTION>
Pricing Ratios Dividend Data(6)
------------------------------------------ ----------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Earning Book Assets Book Earnings Share Yield Ratio(7)
------- ------ ------ ------- -------- ------- ------- -------
(X) (%) (%) (%) (X) (%) (%) (%)
NASDAQ Listed OTC Comapnies (continued)
- -----------------------------------------
CTME Contestoga Bancorp of Roslyn NY(8) NM 124.56 20.14 124.56 NM 0.00 0.00 0.00
COOP Cooperative Bk. for Svgs. of NC NM 87.83 8.20 99.88 NM 0.00 0.00 0.00
CNSK Covenant Bank for Svgs. of NJ 12.37 137.30 6.94 137.30 12.37 0.00 0.00 0.00
CRZY Crazy Woman Creek Bancorp of NY NM 69.87 22.85 69.87 NM 0.00 0.00 0.00
DMFC D&M Financial Corp. of MI 7.47 132.28 7.45 134.40 8.45 0.00 0.00 0.00
DSBC DS Bancor Inc. of Derby CT 11.62 115.78 7.59 119.92 12.97 0.24 0.77 0.92
DFIM ???? Fin. Corp. of Chicago IL NM 80.20 19.39 80.20 NM 0.24 2.09 54.55
DIBK Dime Financial Corp. of CT 7.38 134.05 10.66 141.09 6.59 0.28 1.96 14.51
EBSI Eagle Bancshares of Tucker GA 10.46 134.34 8.93 134.34 10.81 0.52 3.25 33.99
EGFC Eagle Financial Corp. of CT 6.49 104.63 7.47 144.64 13.27 0.92 3.87 25.14
ETFS East Texas Fin. Serv. of TX 16.95 78.04 15.32 78.04 18.21 0.20 1.36 22.99
EBCP Eastern Bancorp of MI 11.43 90.63 6.98 96.27 13.79 0.72 3.00 34.29
ESBK Elmira SB of Elmira NY NM 84.21 5.30 88.16 NM 0.64 3.82 NM
EFBI Enterprise Fed. Bancorp of OH 14.39 91.82 14.31 91.99 20.96 0.00 0.00 0.00
EQSB Equitable FSB of Wheaton MD 7.09 106.59 5.59 105.59 7.15 0.00 0.00 0.00
FFFG F.F.D. Financial Group of FL 18.73 128.90 7.75 128.90 18.73 0.00 0.00 0.00
FCBF FCB Fin. Corp. of ????? WI 17.89 97.18 17.94 97.18 18.25 0.72 1.95 70.59
FFBS FFBS Bancorp of Columbus MS 22.75 148.02 28.96 148.02 22.75 0.50 2.20 50.00
FFDF FFD Financial Corp. of OH 19.60 72.37 20.28 72.37 19.60 0.00 0.00 0.00
FFLC FFLC Bancorp of Leesburg FL 16.23 87.02 14.77 87.02 16.09 0.40 2.16 35.09
FFFC FFVA Financial Corp. of VA 14.71 112.40 18.34 114.63 15.09 0.40 2.29 33.61
FFWC FFW Corporation of Wabash TN 11.06 88.47 9.55 88.47 9.92 0.60 3.12 34.48
FFYF FFY Financial Corp. of OH 17.35 114.81 21.07 114.81 16.85 0.60 2.58 44.78
FHCO FHS Financial Corp. of NJ 10.36 129.73 8.54 133.38 10.36 0.20 1.14 11.83
FF?? FSF Financial Corp. of ?? NM 89.71 14.32 89.71 NM 0.50 4.13 NM
FMLY Family Bancorp of Haverhill NA(8) 12.06 144.00 11.17 157.37 13.47 0.48 1.98 23.88
FHCT Farmers & Mechanics Bank of CT(8) NM 168.52 9.36 168.52 NM 0.00 0.00 0.00
FOBC Fed One Bancorp of Wheeling ?? 11.16 88.45 10.72 93.42 11.16 0.5? 3.69 41.22
FFRV Fld. Fin. Bkshrs. Corp. of VA 9.26 104.08 8.66 104.17 9.40 0.20 1.69 14.81
FBCI Fidelity Bancorp of Chicago IL 16.96 98.29 11.84 98.64 10.07 0.24 1.44 24.49
FSBI Fidelity Bancorp, Inc. of PA 12.80 99.63 7.26 100.44 13.01 0.29 1.81 23.20
FFFL Fidelity FSB, NHC of FL(47.2) 18.15 109.87 11.24 111.16 19.49 0.60 4.53 NM
FFED Fidelity Fed. Bancorp of IN 8.15 197.37 10.01 197.37 8.65 0.80 7.11 57.97
FFOH Fidelity Financial of OH 21.61 79.71 16.24 79.71 21.61 0.20 2.01 47.48
FIBC Financial Bancorp of NY 15.63 87.23 9.30 87.72 15.82 0.30 2.40 37.50
F?SC Financial Security Corp. of IL(8) 17.99 98.22 14.11 98.22 19.37 0.00 0.00 0.00
FSBS First Ashland Fin. Corp. of KY(8) NM 110.84 29.19 110.84 NM 0.00 0.00 0.00
FBSI First Bancshares of MO 19.36 84.88 14.37 85.07 19.62 0.20 1.29 25.00
FEBC First Bell Bancorp of PA 14.56 97.86 20.60 97.86 14.72 0.20 1.46 21.28
FBER First Bergen Bancorp of NJ NM 69.17 11.43 69.17 NM 0.00 0.00 0.00
FCIT First Cit. Fin. Corp. of MO 12.24 131.97 8.29 131.97 15.04 0.00 0.00 0.00
FFBA First Colorado Bancorp of CO 19.12 110.84 17.94 112.16 19.12 0.30 2.27 43.48
FDEF First Defiance Fin. Corp. of OH 20.28 87.97 22.34 87.97 20.67 0.28 2.60 52.83
FESX First Essex Bancorp of MA 8.40 105.60 8.09 105.69 9.65 0.48 4.47 37.50
FFES First FS&LA of E. Hartford CT 8.59 76.27 4.72 76.51 8.67 0.60 3.53 30.30
FSSB First FS&LA of San Bern. CA NM 56.27 3.18 58.93 NM 0.00 0.00 NM
FFSK First FS&LA MHC of IA (45.0) 15.90 119.60 10.06 120.21 17.28 0.72 2.80 44.44
FFML First Family Bank, FSB of FL 8.97 133.16 7.47 133.16 15.22 0.16 0.76 6.84
FFSV First Fed Fin. Serv. of OH 11.77 175.67 9.35 193.12 14.62 0.48 1.69 19.92
???? First Fed. Bancorp. of MM 15.29 73.65 10.59 73.65 15.29 0.00 0.00 0.00
FFBM First Fed. Bancshares of AR 14.32 89.40 14.22 89.40 14.32 0.00 0.00 0.00
FFEC First Fed. Bancshares of WI 18.60 108.62 15.55 113.21 19.06 0.28 1.84 34.15
FTFC First Fed. Capital Corp. of MI 11.64 145.58 9.97 154.63 15.86 0.64 2.93 34.04
FFFB First Fed. Fin. Bancorp of OH 18.53 68.34 12.34 68.34 18.53 0.00 0.00 0.00
FFKY First Fed. Fin. Corp. of KY 16.67 188.20 26.42 201.65 19.13 0.48 2.18 36.36
FFBZ First Federal Bancorp of OH 10.25 142.19 11.10 142.36 10.43 0.44 1.80 18.41
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
------------------------------------------------------------ ------------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings NPAs Resvs/ Resvs/
---------------------- --------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- --------------------------------------
FFCM First Fin. Corp of Western MO 12.53 12.53 0.42 3.52 3.08 0.39 3.24 2.02 116.36 3.17
FFCH First Fin. Holdings Inc. of SC 6.61 6.61 0.75 11.29 3.64 0.77 11.50 1.36 55.75 0.93
FPRY First Financial Bancorp of FL(8) 6.35 6.35 0.57 8.93 6.92 0.43 6.68 NA NA 0.84
FFBI First Financial Bancorp of IL 8.87 8.87 0.69 6.63 7.00 0.72 6.93 0.40 98.60 0.55
FFHC First Financial Corp. of WI 7.33 6.96 1.28 18.96 10.46 1.24 18.40 0.52 85.22 0.67
FFHS First Franklin Corp. of OH 9.51 9.51 0.63 6.59 7.33 0.62 6.47 0.73 57.88 0.64
FGHC First Georgia Hold. Corp of GA 8.16 7.22 0.86 10.81 8.43 0.85 10.81 1.51 47.32 0.84
FSPG First Home SB, SLA of NJ 6.52 6.34 1.01 15.73 12.17 0.98 15.30 0.97 79.35 1.40
FFSL First Independence Corp. of NS 12.64 12.64 1.14 8.56 10.99 1.14 8.56 0.96 70.41 1.10
FISB First Indiana Corp. of IN 8.96 8.83 1.17 13.93 8.79 1.00 11.82 1.70 64.84 1.32
FKFS First Keystone fin. Corp of PA 8.28 8.28 0.48 5.48 5.94 0.52 5.92 2.86 19.07 0.91
FLFC First Liberty Fin. Corp. of GA 6.83 5.74 0.96 14.60 9.89 0.76 11.54 0.88 92.83 1.12
CASH First Midwest Fin. Corp. of IA 12.55 11.70 1.22 9.29 8.30 0.97 7.38 0.39 148.22 0.81
FNBD First Mutual Bancorp of IL 25.25 25.26 0.98 4.24 4.69 0.95 4.10 0.09 471.37 0.52
FMSB First Mutual SB of Bellevue WA* 6.64 6.64 1.02 15.30 10.94 1.01 15.08 0.19 359.89 0.83
FNGB First Northern Cap. Corp of WI 12.71 12.73 0.84 6.54 6.44 0.72 5.58 0.13 358.40 0.52
FFFB First Palm Beach Bancorp of FL 7.64 7.44 0.68 8.11 7.77 0.67 8.08 0.81 48.51 0.55
FSNJ First SB of NJ, NHC (45.0) 8.13 8.13 0.04 0.52 0.56 0.37 4.27 0.98 41.68 1.18
FSBC First SB, FSB of Clovis NA 4.74 4.74 0.31 6.79 9.64 0.24 5.25 1.44 21.82 0.98
FSLA First SB, SLA MHC of NJ (37.5) 9.49 8.24 0.86 9.52 7.87 0.83 9.13 0.96 55.11 1.08
SOPM First SB, SSB, Moore Co. of NC 26.21 25.21 1.48 5.67 5.48 1.50 5.78 0.03 936.92 0.35
FNMB First Savings Bancorp of WA* 25.80 25.80 1.02 8.65 3.63 1.00 8.48 0.23 283.53 1.12
SHEN First Shenango Bancorp of PA 13.24 13.24 1.01 7.19 6.70 0.95 6.79 0.49 146.55 1.10
FSFC First So.east Fin. Corp. of SC 19.61 19.61 0.90 4.60 4.36 0.89 4.55 0.14 238.66 0.52
FSFI First State Fin. Serv of NJ 6.84 6.49 0.63 9.28 9.26 0.49 7.25 4.97 21.02 1.28
FFOP FirstFed Bancshares of IL 9.02 8.61 0.63 6.51 6.88 0.39 4.08 0.14 145.75 0.38
FLAG Flag Financial Corp of GA 9.56 9.56 0.91 9.92 8.40 0.81 8.79 1.69 36.23 0.90
FFPC Florida First Bancorp of FL(8) 6.92 6.92 0.85 12.80 6.70 0.78 11.77 0.82 150.67 2.11
FFIC Flushing Fin. Corp. of NY* 18.72 18.72 0.58 4.55 3.02 0.56 4.36 0.90 80.61 1.78
FBIC Fort Bend Holding Corp. of IX 7.72 7.72 0.74 10.13 12.00 0.67 9.18 NA NA 1.42
FISB Fort Thomas Fin. Corp. of KY 24.30 24.30 1.30 5.84 4.18 1.30 5.84 1.78 19.53 0.42
FKKY Frankfort First Bancorp of KY 34.52 34.52 1.36 4.94 4.47 1.08 3.91 0.10 66.67 0.09
GFSB GFS Bancorp of Grinell IA 12.04 12.04 1.09 8.45 7.75 1.06 8.29 0.97 52.35 0.61
GUFB GFSB Bancorp of Gallup NN 23.03 23.03 1.24 5.07 5.63 1.24 5.07 NA NA 0.87
GMBC Gateway Bancorp of KY 25.00 25.00 1.05 3.92 4.76 1.05 3.92 0.19 57.04 0.45
GBCI Glacier Bancorp of NT 9.63 9.61 1.59 16.27 8.09 1.59 16.27 0.23 225.96 0.72
GLBK Glendale Co-op. Bank of NA* 16.31 16.31 0.78 4.96 6.85 0.65 4.17 NA NA 0.70
GFCO Glenway Financial Corp. of OH 9.41 9.16 0.56 5.87 6.77 0.54 5.62 NA NA 0.29
GIPS American Bancorp of IL 29.42 29.42 0.68 2.82 2.88 0.68 2.82 0.45 53.28 0.37
GIFM Great Financial Corp. of KY 11.35 11.17 1.00 8.15 5.77 0.81 6.62 4.16 11.85 8.67
GSBC Great Southern Bancorp of MO 10.12 9.95 1.72 17.10 9.02 1.62 16.07 2.03 106.34 2.54
GDVS Greater OV SB, NHC of PA(19.9) 12.29 12.29 0.48 3.95 3.50 0.48 3.95 3.05 22.60 1.18
GAIR Greater New York SB of NY* 5.68 5.68 0.46 8.39 7.91 0.45 8.20 9.21 9.89 2.16
GSFC Green Street Fin. Corp. of NC 31.53 31.53 1.42 4.50 4.82 1.42 4.50 0.16 67.98 0.19
GROV GroveBank for Savings of MA* 6.24 6.23 0.81 13.33 11.67 0.77 12.57 0.80 70.34 0.78
GFED Guaranty FS&LA, NHC of NO(31.1) 14.64 14.64 1.02 7.29 4.99 0.55 3.89 0.07 NA 1.59
GSLC Guaranty Svgs & Loan FA of VA 6.19 6.19 0.68 11.24 8.36 0.42 6.90 3.14 23.56 0.94
NENI NF bancorp of Heset CA 11.43 11.43 0.19 1.70 2.05 0.19 1.70 0.59 60.30 1.21
NFFC NF Financial Corp. of SO(8) 8.97 8.95 0.78 8.71 9.28 0.61 6.80 0.69 93.68 0.88
HFNC HFNC Financial Corp. of NC 34.11 34.11 0.80 3.76 1.94 0.95 4.46 1.62 64.19 1.59
MHNF MHN Financial, Inc. of MN 16.76 16.76 1.10 6.35 7.01 0.99 5.67 0.14 305.95 0.73
HALL Hallmark Capital Corp. of WI 7.82 7.82 0.57 6.40 7.60 0.51 5.73 0.09 390.48 0.60
HARB Harbour FSB, NHC of FL (45.7) 8.86 8.86 1.19 13.64 8.35 1.18 13.58 0.54 199.07 1.48
HRGF Harbour Federal Bancorp of MD 19.02 19.02 0.81 3.82 5.11 0.81 3.82 0.06 547.06 0.46
HFSA Hardin Bancorp of Hardin MD 19.24 19.24 0.64 4.18 4.09 0.64 4.18 0.11 140.43 0.29
HARL Hayleysville SA of PA 7.05 7.05 0.82 11.92 9.31 0.83 12.13 0.05 NA 0.78
<CAPTION>
Pricing Ratios Asset Quality Ratios
--------------------------------------------------- ------------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- -------- -------- ------- ---------- ------- ------- ------
(%) (%) (%) (%) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- --------------------------------------
FFCM First Fin. Corp of Western MO NA 110.96 13.91 110.96 NM 0.48 2.31 NM
FFCH First Fin. Holdings Inc. of SC 11.57 124.67 4.24 124.67 11.36 0.64 3.41 39.51
FPRY First Financial Bancorp of FL(8) 14.46 124.49 7.50 124.49 19.32 0.80 3.76 54.42
FFBI First Financial Bancorp of IL 14.29 96.04 8.52 96.04 13.68 0.00 0.00 0.00
FFHC First Financial Corp. of WI 9.56 168.20 12.34 177.12 9.85 0.60 2.68 25.64
FFHS First Franklin Corp. of OH 13.64 86.66 8.24 86.66 13.89 0.28 1.87 25.45
FGHC First Georgia Hold. Corp of GA 11.86 122.16 9.97 138.07 11.85 0.00 0.00 0.00
FSPG First Home SB, SLA of NJ 8.22 120.24 7.83 123.54 8.45 0.48 2.67 21.92
FFSL First Independence Corp. of NS 9.10 80.57 10.18 80.57 9.10 0.40 2.25 20.51
FISB First Indiana Corp. of IN 11.37 150.19 13.45 152.38 13.47 0.56 2.33 26.54
FKFS First Keystone fin. Corp of PA 16.83 95.29 7.89 95.29 15.60 0.00 0.00 0.00
FLFC First Liberty Fin. Corp. of GA 10.12 129.16 8.82 153.82 12.79 0.52 2.39 24.19
CASH First Midwest Fin. Corp. of IA 12.05 108.20 13.58 116.05 15.16 0.44 1.87 22.56
FNBD First Mutual Bancorp of IL 21.31 78.50 19.83 78.50 22.03 0.28 2.15 45.90
FMSB First Mutual SB of Bellevue WA* 9.14 131.58 8.74 131.58 9.27 0.20 1.51 13.79
FNGB First Northern Cap. Corp of WI 15.53 109.13 12.74 100.13 18.18 0.60 3.75 58.25
FFFB First Palm Beach Bancorp of FL 12.87 100.69 7.69 103.42 12.95 0.40 1.84 23.67
FSNJ First SB of NJ, NHC (45.0) NM 81.19 6.60 81.19 21.77 0.50 3.48 NM
FSBC First SB, FSB of Clovis NA 10.38 69.97 3.31 69.97 13.41 0.00 0.00 0.00
FSLA First SB, SLA MHC of NJ (37.5) 12.70 112.66 10.69 129.74 13.24 0.40 2.54 32.26
SOPM First SB, SSB, Moore Co. of NC 18.25 101.73 26.66 101.73 17.89 0.60 3.29 60.00
FNMB First Savings Bancorp of WA* NM 95.87 24.73 95.87 NM 0.20 1.37 37.74
SHEN First Shenango Bancorp of PA 14.93 105.39 13.95 105.39 15.81 0.48 2.23 33.33
FSFC First So.east Fin. Corp. of SC 22.91 103.96 20.39 103.96 23.21 0.48 2.69 61.54
FSFI First State Fin. Serv of NJ 10.80 97.01 6.64 102.37 13.83 0.22 2.12 22.92
FFOP FirstFed Bancshares of IL 14.55 96.27 8.68 100.82 23.19 0.40 2.50 36.36
FLAG Flag Financial Corp of GA 11.93 116.17 11.11 116.17 13.44 0.34 2.72 32.38
FFPC Florida First Bancorp of FL(8) 14.92 179.33 12.42 179.33 16.22 0.24 2.14 32.00
FFIC Flushing Fin. Corp. of NY* NM 91.26 17.08 91.26 NM 0.00 0.00 0.00
FBIC Fort Bend Holding Corp. of IX 8.33 82.48 6.00 82.48 9.20 0.28 1.58 13.15
FISB Fort Thomas Fin. Corp. of KY 23.93 123.34 29.97 123.34 23.93 0.25 1.49 35.71
FKKY Frankfort First Bancorp of KY 22.40 85.58 29.54 85.58 NM 0.36 3.03 67.92
GFSB GFS Bancorp of Grinell IA 12.90 107.09 12.89 107.09 13.15 0.30 1.48 19.11
GUFB GFSB Bancorp of Gallup NN 17.76 78.99 18.19 78.99 17.76 0.40 2.96 52.63
GMBC Gateway Bancorp of KY 21.02 89.37 22.34 89.37 21.02 0.40 2.88 60.61
GBCI Glacier Bancorp of NT 12.36 190.62 18.35 190.96 12.36 0.58 2.67 32.95
GLBK Glendale Co-op. Bank of NA* 14.60 69.59 11.35 69.59 17.37 0.00 0.00 0.00
GFCO Glenway Financial Corp. of OH 14.78 84.30 7.93 68.58 15.46 0.68 3.36 49.62
GIPS American Bancorp of IL NM 76.12 22.40 76.12 NM 0.50 2.81 NM
GIFM Great Financial Corp. of KY 17.34 140.02 15.89 142.32 21.33 0.48 1.79 30.97
GSBC Great Southern Bancorp of MO 11.09 182.85 18.50 185.94 11.80 0.70 2.55 28.23
GDVS Greater OV SB, NHC of PA(19.9) NM 112.87 13.87 112.87 NM 0.36 3.60 NM
GAIR Greater New York SB of NY* 12.64 102.18 5.80 102.18 12.93 0.00 0.00 0.00
GSFC Green Street Fin. Corp. of NC 20.76 93.40 29.44 93.40 20.76 0.00 0.00 0.00
GROV GroveBank for Savings of MA* 8.57 106.64 6.65 106.87 9.09 0.72 2.84 24.32
GFED Guaranty FS&LA, NHC of NO(31.1) 20.03 133.72 19.57 133.72 NM 0.64 5.51 NM
GSLC Guaranty Svgs & Loan FA of VA 11.96 120.78 7.47 120.78 19.47 0.10 1.19 14.29
NENI NF bancorp of Heset CA NM 74.71 8.55 74.77 NM 0.00 0.00 0.00
NFFC NF Financial Corp. of SO(8) 10.77 90.09 8.08 90.36 13.81 0.33 2.17 23.40
HFNC HFNC Financial Corp. of NC NM 116.12 39.61 116.12 NM 0.00 0.00 0.00
MHNF MHN Financial, Inc. of MN 14.27 91.90 15.41 91.90 15.96 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 13.16 81.61 6.38 81.61 14.71 0.00 0.00 0.00
HARB Harbour FSB, NHC of FL (45.7) 11.98 153.46 13.59 153.46 12.03 1.20 4.66 55.81
HRGF Harbour Federal Bancorp of MD 19.58 83.09 15.81 83.09 19.58 0.40 3.05 59.70
HFSA Hardin Bancorp of Hardin MD 24.48 77.51 14.91 77.51 24.48 0.40 3.40 NM
HARL Hayleysville SA of PA 10.74 122.30 8.63 122.30 10.56 0.40 2.18 23.39
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- --------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line - Part Two
Prices As Of June 14, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -------------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings NPAs Reves/ Reves/
---------------------- ---------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- --------------------------------------- --------------- -------- ------- --------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- --------------------------------------
HARS Harris SB, NHC of PA (23.1) 12.07 11.31 0.69 5.54 4.29 0.68 5.47 0.75 66.68 0.92
HFFB Harrodsburg 1st Fin. Corp. of KY 28.66 28.66 1.05 4.73 3.27 1.05 4.73 0.60 45.62 0.40
HHFC Harvest Home Fin. Corp. of OH 18.65 18.65 0.89 4.74 5.31 0.89 4.74 0.20 50.83 1.48
HAVN Haven Bancorp of Woodhaven NY 6.30 6.26 0.67 10.24 7.88 0.66 10.11 1.17 50.83 1.48
HNFD Haverfield Corp. of OH 8.30 8.27 0.65 8.20 6.61 0.62 7.11 0.70 103.98 0.99
HTHR Hawthorne Fin. Corp. of CA 3.79 3.76 -0.21 -5.46 -6.94 -0.27 -7.03 11.39 17.41 2.4?
HSBK Hibernia SB of Quincy MA* 6.51 6.51 0.68 9.99 9.79 0.54 7.95 0.42 146.75 1.83
HB?K Highland Federal Bank of CA 7.83 7.83 0.22 2.87 2.69 0.21 2.91 1.98 84.53 2.22
HIFS Hingham Inst. for Sav. of MA* 10.04 10.04 1.11 10.78 10.36 1.11 10.76 0.34 204.87 1 00
HNFC Hinsdale Financial Corp. of IL 7.97 7.72 0.62 8.20 6.32 0.59 7.88 0.13 277.71 0.39
HBFW Home Bancorp of Fort Wayne IN 16.42 16.42 0.86 5.00 5.78 0.86 5.00 NA NA 0.60
HBBI Home building Bancorp of IN 14.13 14.13 0.45 3.17 3.34 0.45 3.17 0.23 446.39 1.48
HOMF Home Fed Bancorp of Seymour IN 8.29 7.97 1.20 15.06 11.67 1.04 23.07 0.47 102.67 0.58
HPBC Home Federal Corporation of MD(8) 8.61 8.50 1.18 14.27 9.30 1.16 13.98 4.75 35.71 2.59
IXFL Home Financial Corp. of FL(8) 25.51 25.51 1.71 6.69 6.09 1.63 6.37 0.06 499.44 1.43
HPBC Home Port Bancorp, Inc. of TX* 11.26 11.26 1.75 15.23 12.08 1.76 15.32 0.65 216.13 1.75
H?CI Homecorp, Inc. of Rockford IL 6.07 6.07 0.37 6.28 6.40 0.25 4.26 3.24 15.53 0.65
LOAN Horizon Bancorp, Inc. of TX* 8.65 8.35 1.54 17.77 11.53 1.20 13.90 0.42 127.82 0.78
HZFS Horizon Fin'l. Services of IA 11.57 11.57 0.46 3.70 4.65 0.43 3.44 1.57 28.85 0.67
HRZB Horizon Financial Corp. of NA* 16.19 16.19 1.53 9.53 8.76 1.53 9.53 NA NA 0.82
IBSF IBS Financial Corp. of NJ 20.39 20.39 1.10 5.11 5.07 1.12 5.18 0.07 198.42 0.66
ISBF ISB Financial Corp. of LA 19.37 19.36 1.26 6.94 6.13 1.26 6.94 NA NA 0.91
IFSB Independence FSB of OC 6.48 5.57 0.55 8.92 13.75 0.26 4.22 2.68 7.65 0.38
INCB Indiana Comm. Bank, SB of IN 14.89 14.98 0.68 4.41 4.89 0.68 4.41 NA NA 0.61
IFSL Indiana Federal Corp. of IN 9.82 9.13 1.02 10.77 7.66 0.96 10.08 1.41 65.46 1.20
INBI Industrial Bancorp of OH 19.12 19.12 1.48 8.08 6.91 1.48 8.08 0.40 107.81 0.57
INBK Interwest SB of Oak Harbor WA 6.38 6.69 1.08 14.86 8.62 1.00 13.71 0.59 59.11 0.62
IPSW Ipswich SB of Ipswich NA* 6.32 6.32 1.39 22.24 13.30 1.21 19.44 2.23 46.20 1.37
IROQ Iroquois Bancorp of Auburn NY* 6.08 6.08 0.86 14.60 11.03 0.86 14.51 1.60 46.24 1.00
JSBF JSB Financial, Inc. of NY 21.82 21.82 1.47 6.73 6.61 1.55 7.13 NA NA 0.6?
JXYL Jacksonville Bancorp of TX 16.70 16.70 0.79 6.76 5.56 0.79 6.76 0.86 54.59 0.69
JXSB Jacksonville SB,NHC of IL(43.3%) 11.79 11.79 0.43 3.82 3.43 0.35 3.10 0.52 90.42 0.66
JEBC Jefferson Bancorp of Gretna LA(8) 13.36 13.36 1.00 7.78 5.47 1.00 7.78 0.45 54.63 1.88
JSBA Jefferson Svgs Bancorp of NO 7.02 5.75 0.50 8.20 5.85 0.59 8.04 0.97 48.62 0.66
JOAC Joachim Bancorp of NO 29.24 26.24 0.65 0.14 2.29 0.65 3.14 0.01 NA 0.31
KSAV KS Bancorp of Kenly NC 15.17 15.15 1.14 6.64 8.39 1.15 7.03 0.73 41.55 0.37
KSBK KSB Bancorp of Kingfield ME* 6.85 6.30 0.79 12.18 12.14 0.79 11.67 1.73 40.97 1.04
KFBI Kiamath First Bancorp of OR 27.73 27.73 1.34 6.14 0.67 1.34 6.14 0.11 134.99 0.20
LBFI LAB Financial of S. Springs TX(8) 17.14 17.14 1.07 5.78 5.72 1.05 5.71 0.50 120.17 1.35
LSBI LSB Bancorp of Lafayette IN 10.66 10.66 0.82 6.96 7.88 0.78 6.58 0.19 295.51 0.65
LVSB Lakeview SB of Paterson NJ 9.95 7.64 1.15 10.31 10.73 0.69 6.19 1.89 34.35 1.75
LARK Landmark Bancshares of KS 17.20 17.20 0.91 5.28 6.16 0.79 4.60 0.37 97.05 0.54
LARL Laurel Capital Group of PA 10.68 10.68 1.36 13.21 11.59 1.31 12.25 0.70 142.16 1.31
LSBX Lawrence Savings Bank of MA* 7.56 7.56 1.12 14.66 14.18 1.13 14.85 1.98 62.75 2.73
LFCT Leader Fin. Corp. of Memphis TN 8.03 8.03 1.41 17.25 8.88 1.37 16.87 16.9? 4.30 1.10
LFED Leeds FSB, NMC of MD (35.3) 16.36 16.36 1.03 6.35 5.67 1.03 6.35 0.01 NA 0.24
LXMO Lexington B&L Fin. Corp. of MD 29.42 29.42 1.26 4.34 6.20 1.26 4.27 1.15 35.02 0.49
LBCI Liberty Bancorp of Chicago IL 9.53 9.50 0.56 5.51 6.07 0.56 5.51 0.12 142.89 0.70
LIFB Life Bancorp of Norfolk VA 12.73 12.26 0.85 5.95 6.30 0.88 6.22 0.73 107.84 1.73
LFBI Little Falls Bancorp of NJ 15.22 14.00 0.22 2.42 1.82 0.16 1.75 1.56 20.85 0.54
LOGH Logansport Fin. Corp. of IN 26.77 26.77 1.41 5.71 5.53 1.40 5.63 0.37 79.86 0.44
LONF London Financial corp. of OH 20.86 20.86 0.57 4.73 3.52 0.57 4.73 0.21 239.74 0.69
LISB Long Island Bancorp of NY 10.69 10.69 0.95 8.77 8.11 0.89 8.20 NA NA 1.45
NAFB NAF Bancorp of IL 5.54 5.54 0.88 15.21 12.82 0.90 15.65 0.46 104.05 0.63
NBLF NBLA Financial Corp. of MD(8) 14.54 14.54 0.70 4.81 4.17 0.70 4.81 0.33 83.20 0.51
NFBC MFB Corp. of Mishawaka IN 19.31 19.31 0.69 3.41 4.50 0.68 3.36 0.05 325.00 0.25
<CAPTION>
Pricing Ratios Dividend Data(5)
----------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------- ------ ---------- -------- ------- ------
(X) (%) (%) (%) (X) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- --------------------------------------
HARS Harris SB, NHC of PA (23.1) 23.29 126.39 15.25 134.92 23.61 0.58 3.41 MN
HFFB Harrodsburg 1st Fin. Corp. of KY MN 105.04 30.11 105.04 MN 0.40 2.67 MN
HHFC Harvest Home Fin. Corp. of OH 18.84 88.74 16.55 88.74 18.84 0.40 3.08 57.97
HAVN Haven Bancorp of Woodhaven NY 12.70 129.74 8.17 130.52 12.87 0.60 2.12 26.91
HNFD Haverfield Corp. of OH 15.13 121.54 10.09 121.95 16.05 0.54 3.08 45.38
HTHR Hawthorne Fin. Corp. of CA MN 75.49 2.86 75.96 MN 0.00 3.00 MN
HSBK Hibernia SB of Quincy MA* 10.21 97.64 6.35 97.6? 12.83 0.28 1.93 19.72
HB?K Highland Federal Bank of CA MN 106.10 8.31 106.10 MN 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 9.66 100.86 10.12 100.86 9.66 0.32 2.29 22.07
HNFC Hinsdale Financial Corp. of IL 15.82 123.76 9.85 127.68 16.45 0.00 0.00 0.00
HBFW Home Bancorp of Fort Wayne IN 17.29 89.58 14.7? 89.58 17.29 0.20 1.34 23.25
HBBI Home building Bancorp of IN MN 95.06 13.43 95.06 MN 0.30 1.70 50.85
HOMF Home Fed Bancorp of Seymour IN ?.57 120.63 10.00 125.46 9.87 0.50 1.83 15.72
HPBC Home Federal Corporation of MD(8) 10.75 145.07 12.50 147.05 10.97 0.16 1.49 16.00
IXFL Home Financial Corp. of FL(8) 16.41 107.75 27.55 ?07.75 17.24 0.80 5.87 MN
HPBC Home Port Bancorp, Inc. of TX* 8.28 127.45 14.35 127.45 8.23 0.60 ?.62 30.22
H?CI Homecorp, Inc. of Rockford IL 15.63 95.06 5.17 95.06 23.03 0.00 0.00 0.00
LOAN Horizon Bancorp, Inc. of TX* 8.67 135.90 11.75 140.71 11.08 0.16 1.49 12.90
HZFS Horizon Fin'l. Services of IA 21.53 83.07 9.61 83.07 25.13 0.32 2.06 44.44
HRZB Horizon Financial Corp. of NA* 11.42 104.41 16.90 104.41 11.42 0.32 2.55 29.09
IBSF IBS Financial Corp. of NJ 19.72 103.47 21.10 103.47 19.44 0.24 1.71 33.80
ISBF ISB Financial Corp. of LA 16.33 97.7? 18.93 97.80 16.33 0.32 2.00 32.65
IFSB Independence FSB of OC 7.27 59.88 3.90 69.69 15.38 0.22 2.75 20.00
INCB Indiana Comm. Bank, SB of IN 20.43 89.19 13.36 89.19 20.43 0.35 2.56 52.24
IFSL Indiana Federal Corp. of IN 13.06 136.90 13.44 147.29 13.95 0.72 3.63 46.75
INBI Industrial Bancorp of OH 14.48 105.42 20.16 105.42 14.48 0.30 2.53 36.59
INBK Interwest SB of Oak Harbor WA 11.59 164.05 11.28 168.90 12.57 0.48 2.00 23.19
IPSW Ipswich SB of Ipswich NA* 7.52 148.89 9.41 148.89 8.60 0.20 1.86 13.99
IROQ Iroquois Bancorp of Auburn NY* 9.06 124.25 7.55 124.25 9.12 0.32 2.21 20.00
JSBF JSB Financial, Inc. of NY 15.12 101.28 22.10 101.28 14.28 1.20 3.62 54.79
JXYL Jacksonville Bancorp of TX 18.00 79.43 13.27 79.43 18.00 0.50 4.71 NM
JXSB Jacksonville SB,NHC of IL(43.3%) NM 104.40 12.01 104.40 NM 0.40 2.86 NM
JEBC Jefferson Bancorp of Gretna LA(8) 18.28 137.14 18.33 137.14 18.28 0.30 1.36 24.79
JSBA Jefferson Svgs Bancorp of NO 17.11 135.49 9.51 165.39 17.45 0.32 1.20 21.05
JOAC Joachim Bancorp of NO NM 86.57 25.32 86.57 NM 0.50 4.08 NM
KSAV KS Bancorp of Kenly NC 11.92 87.55 13.28 87.68 11.76 0.60 3.33 39.74
KSBK KSB Bancorp of Kingfield ME* 4.24 94.30 6.46 102.47 8.59 0.20 0.91 7.49
KFBI Kiamath First Bancorp of OR 23.39 94.77 26.28 94.77 21.39 0.26 1.84 39.39
LBFI LAB Financial of S. Springs TX(8) 17.47 104.84 17.97 104.84 17.66 0.40 2.46 43.01
LSBI LSB Bancorp of Lafayette IN 12.70 90.48 9.65 90.48 13.43 0.32 1.97 25.00
LVSB Lakeview SB of Paterson NJ 9.32 102.55 10.21 101.55 15.53 0.25 1.22 11.36
LARK Landmark Bancshares of KS 16.22 89.44 15.38 89.44 18.60 0.40 2.62 42.55
LARL Laurel Capital Group of PA 8.53 107.90 11.52 107.90 8.94 0.32 2.17 18.71
LSBX Lawrence Savings Bank of MA* 7.05 95.49 7.22 95.49 6.96 0.00 0.00 0.00
LFCT Leader Fin. Corp. of Memphis TN 11.26 176.97 14.21 176.97 11.52 0.72 1.58 17.82
LFED Leeds FSB, NMC of MD (35.3) 17.63 108.70 17.78 108.70 17.63 0.64 4.65 MN
LXMO Lexington B&L Fin. Corp. of MD 16.13 70.08 20.62 70.08 16.39 0.00 0.00 0.00
LBCI Liberty Bancorp of Chicago IL 16.46 93.02 8.86 93.28 16.46 0.60 2.51 41.33
LIFB Life Bancorp of Norfolk VA 15.87 95.79 12.19 99.44 15.18 0.44 3.12 49.44
LFBI Little Falls Bancorp of NJ NM 69.07 10.51 75.11 NM 0.10 1.01 55.56
LOGH Logansport Fin. Corp. of IN 18.09 88.77 23.76 88.77 18.33 0.40 2.91 52.63
LONF London Financial corp. of OH NM 70.90 14.79 70.90 NM 0.00 0.00 0.00
LISB Long Island Bancorp of NY 16.37 144.88 15.49 144.88 17.51 0.40 1.33 21.74
NAFB NAF Bancorp of IL 7.8 115.97 6.42 115.97 7.58 0.32 1.32 10.29
NBLF NBLA Financial Corp. of MD(8) 24.00 116.11 16.88 116.11 24.00 0.40 1.67 40.00
NFBC MFB Corp. of Mishawaka IN 22.22 74.99 14.48 74.99 22.58 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
---------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
(Continued)
Weekly Thrift Market Line - Part Two
Prices As of June 14,1996
Key Financial Ratios Asset Quality Ratios
------------------------------------------------------------------ --------------------
Tang-
Equity/ Equity/ Reported Earnings Core Earnings NPAs Resvs/
---------------------------- ------------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs
- --------------------- ------ ------ -------- -------- -------- -------- -------- ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
NLFB NLF Bancorp of Villanova PA 7.95 7.75 0.70 8.06 7.83 0.62 7.15 0.59 125.65
MSBB MSB Bancorp of Middletown NY* 9.69 9.52 0.53 5.65 5.15 0.57 6.05 NA NA
MSBF MSB Financial Corp. of MI 22.64 22.64 1.93 7.88 9.07 1.76 7.21 0.60 100.59
MGHL Magna Bancorp of MS 9.77 9.18 1.76 18.10 8.80 1.66 17.10 4.18 16.96
MARN Marion Capital Holdings of IN 23.99 23.99 1.40 5.77 5.93 1.40 5.77 0.93 120.08
MFCK Marshalltown Fin. Corp. of IA(8) 15.33 15.33 0.33 2.14 1.87 0.33 2.14 NA NA
MFSL Maryland Fed. Bancorp of MD 8.22 8.08 0.75 9.08 9.51 0.65 7.94 0.48 81.70
MASB NassBank Corp. of Reading MA* 10.16 10.16 1.04 10.42 9.86 1.02 10.20 0.33 87.49
NFLR Mayflower Co-op. Bank of NA* 9.87 9.65 0.84 7.86 6.44 0.79 7.37 1.68 59.62
MDBK Medford Savings Bank of MA* 8.88 8.05 1.02 11.63 10.00 1.00 11.41 0.55 135.58
ME?? Meritrust FSB of Thibodaux LA 7.44 7.44 1.01 13.99 8.50 1.01 13.99 0.23 131.08
M?BX Metro West of MA* 7.47 7.47 1.25 17.15 9.95 1.25 17.15 2.43 38.37
MSEA Metropolitan Bancorp of MA 6.54 5.92 0.71 10.67 10.21 0.77 11.51 NA NA
MCBS Mid Continent Bancshares of KS 12.53 12.50 1.37 9.90 9.46 1.16 8.37 0.21 59.97
MIFC Mid Iowa Financial Corp. of IA 9.03 9.01 0.83 8.92 8.48 0.80 8.59 0.15 142.62
MCBM Mid-Coast Bancorp of NE 9.06 9.06 0.56 6.32 6.96 0.51 5.80 1.10 36.89
MIDC Midconn Bank of Kensington CT* 9.45 7.88 0.34 3.56 4.00 0.32 3.45 2.04 24.62
MHBI Midwest Bancshares, Inc. of IA 6.94 6.94 0.99 14.20 14.41 0.96 13.86 0.27 175.00
MHFD Midwest Fed. Fin. Corp of MI 9.34 8.92 1.19 12.30 7.69 0.96 9.88 0.26 294.77
MFFC Milton Fed. Fin. Corp. of CH 19.98 19.98 1.13 4.93 6.14 1.05 4.56 0.40 54.24
MIVI Miss. View Hold. Co. of ?? 18.86 18.86 1.32 6.75 8.44 1.25 6.40 0.14 888.89
MBBC Monterrey Bay Bancorp of CA 14.98 14.80 0.19 1.27 1.52 0.23 1.55 0.60 71.38
MORG Morgan Financial Corp. of CO 14.66 14.66 0.97 6.43 6.53 0.93 6.18 0.28 60.61
MFSB Mutual Bancompany of MO(8) 11.70 11.70 0.20 1.83 1.59 0.23 2.10 NA NA
MSBK Mutual SB, FSB of Bay City MI 5.46 5.46 0.01 0.21 0.37 -0.09 -1.71 0.11 215.12
MHTB ?? Thrift Bancshares of ?? 7.69 7.69 0.57 7.35 8.41 0.59 7.70 1.39 56.18
MHSL MHS Financial, Inc. of CA(8) 8.43 8.42 0.17 1.97 1.75 0.16 1.85 2.05 57.88
MSLB MS&L Bancorp of Meosho NJ 23.49 23.49 0.93 4.27 4.58 0.87 3.98 0.18 40.95
??SB ???? Bancorp. of CT* 11.14 11.14 2.04 19.29 21.78 2.03 19.16 2.88 61.88
NFSL Newman SB, FSB of Newman GA 11.58 11.50 1.85 17.54 10.53 1.62 15.29 0.67 128.82
NASB North American SB of MO 7.35 7.05 1.33 18.45 12.26 1.27 17.61 3.36 26.33
NBSI North Bancshares of Chicago IL 17.34 17.34 0.57 3.03 3.43 0.52 2.75 NA NA
???? North Central Bancshares of IA 28.87 28.87 1.48 7.67 5.91 1.39 7.19 0.13 743.80
NEIB Northeast Indiana Bncrp of IN 20.34 20.34 1.10 5.50 5.96 1.10 5.50 0.25 272.13
NSBK Northside SB of Bronx NY* 7.74 7.67 1.14 15.51 10.29 0.98 13.39 0.51 84.90
NWEQ Northwest Equity Corp. of WI 13.73 13.73 1.08 6.99 8.39 1.03 6.67 0.92 54.33
NWSB Northwest SB, NHC of PA(29.9) 10.67 10.54 1.05 9.37 6.21 1.05 9.37 0.98 70.63
NSSY Norwalk Savings Society of CT* 7.98 7.98 0.75 8.92 7.81 0.64 7.63 3.01 27.48
NSSB Norwich Financial Corp. of CT* 10.58 9.54 0.84 7.50 7.23 0.84 7.50 1.92 113.80
NTMG Nutmeg FS&LA of CT 5.98 5.98 0.63 10.78 10.48 0.38 6.52 NA NA
OHSL OHSL Financial Corp. of OH 12.42 12.42 0.96 7.50 7.60 0.93 7.30 0.26 97.54
OSBF OSB Fin. Corp. of Oshkosh WI 12.59 12.59 0.17 1.33 1.58 0.30 2.31 0.14 258.58
OFCP Ottowa Financial Corp. of MI 10.92 8.75 0.92 4.93 4.40 0.92 4.93 0.38 95.16
PFFB PFF Bancorp of ???? CA 14.39 14.23 0.10 1.37 0.87 0.10 1.37 2.29 42.84
PVFC PVF Capital Corp. of OH 6.71 6.71 1.13 17.84 11.16 0.99 15.71 NA NA
PCCI Pacific Crest Capital of CA* 7.90 7.90 1.09 20.44 11.63 0.88 16.48 6.49 26.06
PALM Palfed, Inc. of Aiken SC 8.45 8.04 0.66 8.56 6.56 0.56 7.20 4.14 31.72
PSSB Palm Springs SB of CA(8) 6.09 6.09 0.62 10.84 7.71 0.33 5.78 4.09 15.83
PVSA Parkvale Financial Corp of PA 7.42 7.39 1.05 14.79 11.15 0.98 13.82 0.18 850.40
PBIX Patriot Bank Corp. of PA 17.29 17.29 0.56 3.99 3.20 0.57 4.08 0.23 243.20
PEEK Peekskill Fin. Corp. of NY 30.67 30.67 1.06 4.96 3.74 1.11 5.19 0.83 31.67
PFSB PennFed. Fin. Services of NJ 8.97 7.11 0.73 7.10 8.32 0.79 7.70 0.96 26.31
PWBC PennFirst Bancorp of PA 7.85 7.15 0.61 7.47 7.41 0.60 7.40 0.64 63.45
PBKB People's SB of Brackton MA* 4.93 4.67 0.73 12.13 7.50 0.53 8.69 1.27 76.25
PFDC Peoples Bancorp of Auburn IN 15.26 15.26 1.45 9.62 8.40 1.44 9.56 0.33 97.48
<CAPTION>
Pricing Ratios Dividend Data(5)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Resvs/ Price/ Price/ Price/ Tang- Core Div./ dend Payout
Loans Earning Book Assets Book Earnings Share Yield Ratio(7)
----- ------- ------ ------ ------ -------- ----- ----- --------
(%) (%) (%) (%) (%) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
NLFB NLF Bancorp of Villanova PA 1.64 12.77 105.74 8.40 108.45 14.39 0.76 3.29 40.86
MSBB MSB Bancorp of Middletown NY* 0.57 19.42 103.80 10.06 105.64 18.11 0.60 3.72 72.29
MSBF MSB Financial Corp. of MI 0.69 11.03 89.45 20.25 89.45 12.05 0.50 2.96 32.68
MGHL Magna Bancorp of MS 1.01 11.36 193.16 18.87 205.94 12.03 0.60 1.71 19.48
MARN Marion Capital Holdings of IN 1.42 16.87 96.60 23.18 96.60 16.87 0.80 3.86 65.04
MFCK Marshalltown Fin. Corp. of IA(8) 0.20 NM 113.06 17.33 113.06 NM 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 0.45 10.52 95.51 7.85 97.14 12.03 0.64 2.25 23.62
MASB NassBank Corp. of Reading MA* 1.00 10.15 103.01 10.46 103.01 10.37 0.88 2.68 27.16
NFLR Mayflower Co-op. Bank of NA* 1.49 15.53 117.91 11.63 120.61 16.57 0.40 2.71 42.11
MDBK Medford Savings Bank of MA* 1.38 10.00 111.75 9.93 123.21 10.19 0.68 3.16 31.63
ME?? Meritrust FSB of Thibodaux LA 0.62 11.76 155.75 11.59 155.75 11.76 0.60 1.76 20.76
M?BX Metro West of MA* 1.37 10.05 160.31 11.97 160.31 10.05 0.10 2.43 24.39
MSEA Metropolitan Bancorp of MA 1.76 9.80 99.34 6.49 109.75 9.08 0.00 0.00 0.00
MCBS Mid Continent Bancshares of KS 0.25 10.57 104.64 13.11 104.82 12.50 0.40 2.16 22.86
MIFC Mid Iowa Financial Corp. of IA 0.44 13.79 100.32 9.06 100.48 12.25 0.08 1.28 15.09
MCBM Mid-Coast Bancorp of NE 0.51 14.38 88.89 8.05 88.89 15.67 0.50 2.62 37.59
MIDC Midconn Bank of Kensington CT* 0.72 25.00 88.25 8.34 105.89 NM 0.60 3.75 NM
MHBI Midwest Bancshares, Inc. of IA 0.85 6.94 96.88 6.72 96.88 7.11 0.52 2.02 14.02
MHFD Midwest Fed. Fin. Corp of MI 1.06 13.01 155.59 14.54 162.94 16.19 0.15 0.95 12.30
MFFC Milton Fed. Fin. Corp. of CH 0.35 16.29 86.32 17.25 86.32 17.63 0.48 3.73 60.76
MIVI Miss. View Hold. Co. of ?? 2.07 11.84 81.64 15.40 81.64 12.50 0.00 0.00 0.00
MBBC Monterrey Bay Bancorp of CA 0.60 NM 84.85 12.71 85.89 NM 0.00 0.00 0.00
MORG Morgan Financial Corp. of CO 0.24 15.31 97.15 14.24 97.15 15.91 0.24 1.96 30.00
MFSB Mutual Bancompany of MO(8) NA NM 114.10 13.35 114.10 NM 0.00 0.00 0.00
MSBK Mutual SB, FSB of Bay City MI 0.83 NM 58.43 3.19 58.43 NM 0.00 0.00 0.00
MHTB ?? Thrift Bancshares of ?? 0.96 11.89 85.90 6.61 85.90 11.34 0.50 5.07 60.24
MHSL MHS Financial, Inc. of CA(8) 1.36 NM 111.15 9.37 111.37 NM 0.16 1.47 NM
MSLB MS&L Bancorp of Meosho NJ 0.15 21.81 82.39 19.35 82.39 23.40 0.50 3.89 NM
??SB ???? Bancorp. of CT* 3.42 4.59 86.67 9.67 86.87 4.62 0.20 2.96 13.61
NFSL Newman SB, FSB of Newman GA 1.07 9.40 153.58 17.79 154.56 10.79 0.40 2.03 19.05
NASB North American SB of MO 1.05 8.16 142.26 10.45 148.20 8.54 0.63 2.07 16.84
NBSI North Bancshares of Chicago IL 0.36 NM 93.09 16.14 93.09 NM 0.40 2.54 74.07
???? North Central Bancshares of IA 1.18 16.92 80.17 23.15 80.17 18.03 0.25 2.27 38.46
NEIB Northeast Indiana Bncrp of IN 0.74 16.79 84.41 17.17 84.41 16.79 0.30 2.55 42.86
NSBK Northside SB of Bronx NY* 1.67 9.72 142.72 11.04 144.08 11.26 1.00 2.76 26.81
NWEQ Northwest Equity Corp. of WI 0.51 11.92 84.78 11.64 84.78 12.50 0.36 3.51 41.86
NWSB Northwest SB, NHC of PA(29.9) 0.94 16.10 145.60 15.54 147.43 16.10 0.30 2.55 41.10
NSSY Norwalk Savings Society of CT* 1.20 12.81 111.68 8.92 111.68 14.98 0.00 0.00 0.00
NSSB Norwich Financial Corp. of CT* 3.44 13.84 100.97 10.68 111.88 13.84 0.40 2.95 40.82
NTMG Nutmeg FS&LA of CT 0.56 9.54 100.69 6.03 100.69 15.76 0.00 0.00 0.00
OHSL OHSL Financial Corp. of OH 0.36 13.15 96.50 11.99 96.50 13.50 0.76 3.78 49.67
OSBF OSB Fin. Corp. of Oshkosh WI 0.56 NM 85.71 10.79 85.74 NM 0.64 2.67 NM
OFCP Ottowa Financial Corp. of MI 0.45 27.74 109.72 11.98 136.87 22.74 0.32 1.95 44.44
PFFB PFF Bancorp of ???? CA 1.23 NM 78.52 11.30 79.44 NM 0.00 0.00 0.00
PVFC PVF Capital Corp. of OH NA 8.96 147.06 9.86 147.06 10.18 0.00 0.00 0.00
PCCI Pacific Crest Capital of CA* 2.56 8.60 104.44 8.25 104.44 10.67 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC 1.69 15.24 123.89 10.47 130.21 18.12 0.08 0.64 9.76
PSSB Palm Springs SB of CA(8) 0.75 12.96 134.14 8.17 134.14 24.33 0.12 0.87 11.21
PVSA Parkvale Financial Corp of PA 2.28 8.97 123.87 9.20 124.46 9.59 0.52 2.00 17.93
PBIX Patriot Bank Corp. of PA 0.88 NM 84.81 14.66 84.81 NM 0.24 1.83 57.14
PEEK Peekskill Fin. Corp. of NY 1.32 NM 81.09 24.87 81.09 NM 0.36 3.06 NM
PFSB PennFed. Fin. Services of NJ 0.44 12.02 87.78 7.88 110.82 11.10 0.00 0.00 0.00
PWBC PennFirst Bancorp of PA 1.45 13.50 100.97 7.93 110.84 13.64 0.36 2.67 36.00
PBKB People's SB of Brackton MA* 1.93 13.34 125.41 6.18 132.48 18.62 0.28 2.84 37.84
PFDC Peoples Bancorp of Auburn IN 0.41 11.91 111.32 16.99 111.32 11.98 0.56 2.77 32.94
</TABLE>
<PAGE>
RP FINANCIAL, LC.
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(Continued )
Weekly Thrift Market Line - Part Two
Prices As of June 14,1996
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang-
Equity/ Equity/ Reported Earnings Core Earnings NPAs Resvs/ Resvs/
--------------------- --------------
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------ ------ ----- ------ ------ ------ ------ ------ ---- ------
(%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAO Listed OTC Companies (continued)
- ---------------------------------------
PBCT Peoples Bank, FHC of Cf (32.2) 8.00 8.00 1.11 14.66 8.49 0.89 11.81 1.66 65.45 1.65
PNBK People's Heritage Fin.Grp pf NE* 8.38 7.20 1.21 14.20 10.57 1.19 14.00 1.24 130.41 2.11
PBNB Peoples Sav. Fin. Corp. of CT* 10.81 10.00 0.85 7.91 8.78 0.89 8.26 0.44 86.77 0.54
PERM Permanent Bancorp of IH 11.14 10.98 0.32 2.72 3.37 0.32 2.72 1.85 31.59 1.07
PNFI Perpetual Midwest Fin. of IA 9.64 9.64 0.41 4.10 4.29 0.41 4.10 0.53 136.14 0.93
PCBC Perry Co. Fin. Corp. of Mo 20.86 20.85 1.00 5.36 5.03 1.00 5.36 0.04 31.25 0.10
PHFC Pittsburgh Home Fin. of PA 16.43 16.43 0.65 3.98 5.21 0.66 3.98 1.53 34.96 0.93
PFSL Pocahnts Fed, NHC of AR (16.4) 5.95 5.95 0.56 9.43 8.34 0.58 9.66 0.26 146.44 1.14
POBS Portsmouth Bank Shrs Inc. of HN(8)* 25.05 25.06 2.29 9.01 7.64 1.93 7.56 0.21 122.90 0.83
PKPS Paughkeepsie SB of NY* 8.53 5.50 1.94 24.70 23.43 2.56 32.53 2.68 36.80 1.34
PEYE Primary Bank of NH 6.34 6.31 -0.04 -0.64 -0.65 -0.04 -0.56 1.81 47.13 1.49
PSAB Prime Bancorp, Inc. of PA 9.44 8.83 1.02 10.92 9.14 0.91 9.69 0.60 105.04 1.05
PFNC Progress Financial corp. of PA 5.52 5.48 0.86 19.19 12.95 0.67 14.93 1.33 44.33 0.94
PSPK Progressive Bank, Inc. of NY* 8.86 8.86 0.98 10.51 9.25 1.01 10.82 1.09 97.07 1.52
PULB Pulaski SB, NHC of NO (29.0) 12.63 12.53 0.84 6.93 4.95 0.79 6.56 0.67 37.37 0.31
PULS Pulse Bancorp of S. River NJ 11.89 11.89 1.17 10.07 7.77 1.18 10.14 1.45 38.35 1.88
QCFB QCF Bancorp of Virginia ?? 21.81 21.81 1.52 7.75 8.83 1.52 7.75 NA NA NA
QCBC Quaker City Bancorp of CA 9.69 9.82 0.50 4.91 5.85 0.48 4.74 2.31 57.33 1.51
QCSB Queens County SB of NY* 16.98 16.98 1.72 9.78 7.12 1.77 10.10 0.75 120.88 1.09
RCSB RCSB Financial, Inc. of NY* 7.29 7.05 0.80 10.95 9.48 0.79 10.77 0.83 76.65 1.27
RARB Raritan Bancorp. of Raritan NJ* 7.24 7.06 0.81 10.82 9.35 0.80 10.65 0.48 155.58 1.32
REDF Redfed Bancorp of Redlands CA 5.63 5.63 -0.47 -8.41 -11.02 -0.45 -8.09 4.50 31.29 1.76
RELY Reliance Bancorp of NY 8.86 5.98 0.38 6.79 7.29 0.85 6.49 0.35 29.31 0.54
RELY Reliance Bancshares of Inc. WI* 56.23 56.23 1.47 2.62 3.68 1.47 2.62 NA NA 0.49
RFED Roosevelt Fin. Grp. Inc. of MO 4.85 4.59 0.62 13.98 7.01 0.85 18.94 0.40 59.09 0.57
RVSB Rvrview SB, FSB NHC of WA (40.3) 11.02 9.75 1.30 11.97 8.07 1.17 10.78 0.26 119.16 0.51
SCCB S. Carolina Comm. Bnshrs of SC 28.46 28.46 1.36 4.54 4.85 1.36 4.54 NA NA 0.89
SAFL SB Fing. Lakes NHC of Ny (33.0) 11.52 11.52 -0.50 -4.46 -3.25 -0.20 -1.63 1.68 29.38 1.02
SFED SFS Bancorp of Schenectady NY 14.05 14.05 0.63 4.91 6.17 0.63 4.91 0.71 52.95 0.59
SGVB SGV Bancorp of W. Covina CA 9.78 9.78 0.11 1.12 1.39 0.11 1.12 1.84 13.07 0.31
SISB SIS Bank of springfield NA* 7.42 7.42 1.26 17.35 13.28 1.28 17.65 1.11 116.01 2.54
SOSB SJS Bancorp fo St. Joseph NI 11.67 11.67 0.63 5.03 4.24 0.61 4.91 0.29 144.27 0.67
SWCB Sandwich Co-op. Bank of MA* 8.60 8.03 0.85 10.27 9.60 0.79 9.63 1.34 64.69 1.31
SFAN Security Bancorp of MT 8.93 7.68 0.69 7.99 8.44 0.51 5.94 0.14 235.42 0.71
SECP Security Capital Corp. of WI 16.68 16.88 0.89 5.11 4.88 0.92 5.29 0.12 964.94 1.53
SFSL Security First Corp. of OH 8.71 8.47 1.10 13.57 11.43 1.23 14.21 0.44 208.07 1.02
SIFC Seven Hills Fin. Corp. of OH(8) 21.21 21.21 0.36 1.69 1.94 0.34 1.58 0.22 51.02 0.14
SNFC Sho-Ne fin. Corp. of MO 11.98 11.98 0.83 6.18 6.86 0.82 6.12 NA NA 0.75
SOBI Sobieski Bancorp of S.Bend IH 18.49 18.49 0.42 2.27 3.18 0.42 2.27 NA NA 0.41
SOSA Somerset Savings Bank o MA (8)* 5.46 5.46 0.32 6.25 6.80 0.32 6.25 9.74 15.15 1.88
SMBA Southern Missouri Bncrp of MO 16.40 16.40 0.80 5.01 5.29 0.82 4.69 0.97 39.01 0.66
SWBI Southwest Bancshares of IL 12.00 12.00 1.19 8.94 8.37 1.19 8.90 25 87.66 0.31
SVAN Sovereign Bancorp of PA 4.07 2.63 0.70 16.67 11.02 0.63 15.04 0.55 74.40 0.68
STFR St. Francis Cap. Corp. of WI 10.43 9.96 1.30 11.85 10.69 0.89 8.08 0.04 906.03 0.76
SPBC St. Paul Bancorp, Inc. of IL 9.24 9.21 0.88 9.69 8.43 0.86 9.44 0.74 125.05 1.35
STND Standard Fin. of Chicago IL 12.31 12.30 0.87 6.21 6.81 0.79 5.61 0.14 189.20 0.49
SFFC Statesfed Financial Corp. of LA 20.11 20.11 1.18 8.80 6.44 1.18 5.80 NA NA 0.38
SFIN Statewide Fin. Corp. of NJ 11.10 11.06 1.10 5.43 4.31 0.64 6.66 1.26 41.78 1.67
STSA Sterling Financial Corp. of MA 4.18 3.35 0.50 7.72 6.24 0.32 7.56 0.63 82.52 0.87
SSBK Strongsville SB of OH 8.28 8.10 0.40 11.90 8.85 0.85 10.06 0.49 45.78 0.31
SFSB Suburfield Fin. Corp. of IL 7.14 7.10 0.30 7.04 8.06 0.44 6.04 0.27 82.72 0.51
SBCN Suburban Bancorp of OH 13.00 13.00 0.50 2.98 3.53 0.57 4.33 0.20 794.18 2.06
SCSL Suncoast S&LA of Hollywood FL 2.81 2.80 0.25 11.53 12.09 -0.41 -14.33 0.31 47.77 0.19
THRD TF Financial Corp. of PA 14.31 14.31 0.56 5.57 6.48 0.89 5.39 0.35 82.72 0.53
ROSE TR Financial Corp. of NY 6.23 6.23 0.86 12.76 10.23 0.68 10.08 0.92 89.56 0.91
TPNZ Tappan Zee Fin. Corp. of NY 19.48 19.48 0.80 6.07 4.24 0.74 5.61 1.77 32.15 1.26
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------------------- -----------------------------
Price/ Price/ Ind- Divi-
Price/ Price/ Price/ Tang- Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earning Share Yield Ratio(7)
------- ---- ------ ----- -------- ----- ----- -----
(x) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (Continued)
- ---------------------------------------
PBCT Peoples Bank, FHc of Cf (32.2) 11.77 158.43 12.67 158.43 14.62 0.80 3.58 42.11
PNBK People's Heritage Fin.Grp pf NE 9.46 124.69 10.44 144.95 9.60 0.68 3.36 31.78
PBNB Peoples Sav. Fin. Corp. of Ct 11.39 89.36 9.66 96.61 10.90 0.92 4.49 51.11
PERM Permanent Bancorp of IH NA 81.78 9.11 82.89 NM 0.20 1.27 37.74
PNFI Perpetual Midwest Fin. of IA 23.29 95.13 9.17 95.13 23.29 0.30 1.76 41.10
PCBC Perry Co. fin. Corp. of No 19.89 92.89 19.38 92.89 19.89 0.30 1.71 34.09
PHFC Pittsburgh Home Fin. of PA 19.20 76.36 12.55 76.36 19.20 0.00 0.00 0.00
PFSL Pocahnts Fed. NHC of AR (16.4) 11.99 108.14 6.43 108.74 11.71 0.80 5.42 65.04
POBS Portsmouth Bank Shrs Inc. of HN(8)* 13.08 118.75 29.76 118.75 15.58 0.60 4.33 56.60
PKPS Paughkeepsie SB of NY 4.27 92.27 7.84 92.27 3.24 0.10 1.90 8.13
PEYE Primary Bank of MH NA 96.00 6.09 96.38 NM 0.00 0.00 NM
PSAB Prime Bancorp, Inc. of PA 10.94 114.12 10.77 122.02 12.32 0.63 3.85 42.24
PFNC Progress Financial corp. of PA 7.72 121.36 6.70 122.31 9.92 0.00 0.00 0.00
PSPK Progressive Bank, Inc. of NY 10.81 111.53 9.88 111.53 10.50 0.80 2.71 29.30
PULB Pulaski SB, NHC of NO (29.0) 20.21 136.32 17.22 136.32 21.39 0.80 5.42 NM
PULS Pulse Bancorp of S. River NJ 12.87 126.45 15.03 126.45 12.77 0.70 4.00 51.47
QCFB QCF Bancorp of Virginia VW 11.33 81.41 17.76 81.41 11.33 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 17.11 82.44 8.15 82.92 17.74 0.00 0.00 0.00
QCSB Queens County SB of NY 14.05 136.06 23.10 136.06 13.61 1.00 2.10 29.50
RCSB RCSB Financial, Inc. of NY 10.54 115.46 8.42 139.44 10.72 0.48 1.87 19.75
RARB Raritan Bancorp. of Raritan Nj 10.70 117.9 8.54 120.92 10.86 0.60 2.89 30.93
REDF Redfed Bancorp of Radlands CA NA 80.84 4.55 80.44 NM 0.00 0.00 NM
RELY Reliance Bancorp of NY 13.71 93.91 8.27 138.32 14.34 0.46 2.94 40.35
RELY Reliance Bancshares of Inc. WI NA 71.16 40.01 71.16 NM 0.00 0.00 0.00
RFED Roosevelt Fin. Grp. Inc. of HO 14.26 182.64 8.83 193.27 10.52 0.62 3.22 45.93
RVSB Rvrview SB, FSB NHC of WA (40.3) 12.40 140.06 15.43 158.23 13.75 0.20 1.33 16.53
SCCB S. Carolina Comm. Bnshrs of SC 20.63 98.21 27.96 98.21 20.63 0.63 3.64 75.00
SAFL SB Fing. Lakes NHC of Ny (33.0) NA 140.36 16.17 140.35 NM 0.43 2.50 NM
SFED SFS Bancorp of Schenectady NY 16.22 71.94 10.11 71.94 16.22 0.00 0.00 0.00
SGVB SGV Bancorp of W. Covina CA NA 72.19 7.06 72.19 NM 0.00 0.00 0.00
SISB SIS Bank of springfield NA* 7.53 117.11 8.69 117.11 7.40 0.00 0.00 0.00
SOSB SJS Bancorp fo St. Joseph NI 23.58 115.99 13.53 115.99 24.13 0.40 1.93 45.45
SWCB Sandwich Co-op. Bank of NA* 10.42 102.77 8.84 110.01 11.11 1.00 5.00 52.08
SFAN Security Bancorp of NT 11.84 92.13 8.22 107.03 15.94 0.64 3.16 37.43
SECP Security Capital Corp. of WI 20.48 103.46 17.46 103.46 19.82 0.60 0.98 20.07
SFSL Security First Corp. of OH 8.75 113.30 9.87 116.52 8.36 0.40 3.35 29.33
SIFC Seven Hills Fin. Corp. of OH(8) NA 88.84 18.84 88.84 NM 0.36 2.25 NM
SNFC Sho-Ne fin. Corp. of NO 14.58 90.73 10.87 90.73 14.72 0.00 0.00 0.00
SOBI Sobieski Bancorp of S.Bend IH NA 72.61 13.43 72.61 NM 0.00 0.00 0.00
SOSA Somerset Savings Bank o fNA(8)* 14.70 88.02 4.80 88.02 14.70 0.00 0.00 0.00
SMBA Southern Missouri Bncrp of MO 18.91 95.72 15.70 95.72 20.21 0.50 3.39 4.10
SWBI Southwest Bancshares of IL 11.95 120.96 14.52 120.96 12.00 1.08 3.98 47.58
SVAN Sovereign Bancorp of PA 9.07 143.36 5.83 221.38 10.05 0.08 0.78 7.06
STFR St.Francis Cap. Corp. of WI 9.35 109.40 11.42 114.56 13.72 0.40 1.58 14.81
SPBC St.Paul Bancorp, Inc. of IL 11.86 112.02 10.35 112.40 12.17 0.40 1.73 20.51
STND Standard Fin. of Chicago IL 14.68 94.21 11.59 94.26 16.26 0.32 2.12 31.07
SFFC Statesfed Financial Corp. of LA 15.53 88.25 17.75 29.25 15.53 0.40 2.50 38.83
SFIN Statewide Fin. Corp. of NJ 23.23 92.14 10.23 88.25 18.94 0.00 0.00 0.00
STSA Sterling Financial Corp. of WA 16.00 127.71 5.38 126.73 16.39 0.00 0.00 0.00
SSBK Strongsville SB of OH 13.30 128.79 10.66 88.77 13.36 0.40 2.26 25.53
SFSB Suburfield fin. Corp. of IL 12.41 85.28 6.09 85.78 14.46 0.32 1.83 22.7
SBCN Suburban Bancorp of OH NA 85.66 11.27 86.66 19.48 0.60 4.00 NM
SCSL Suncoast S&LA of Hollywood Fl 8.27 92.87 2.61 93.29 NM 0.00 0.00 0.00
THRD TF Financial Corp. of PA 15.43 88.25 12.63 92.42 15.93 0.32 2.21 34.04
ROSE TR Financial Corp. of Ny 9.70 126.73 7.90 159.29 12.38 0.64 2.42 23.62
TPNZ Tappan Zee Fin. Corp. of NY 23.56 88.77 17.29 131.88 NM 0.20 1.63 38.46
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
(continued)
Weekly Thrift Market Line-Part Two
Prices As of June 14, 1996
<TABLE>
<CAPTION>
Key Financial Ratios Assets Quality Ratios
------------------------------------------------------ ---------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings
------------------- ------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- ---------------------- ------ ------ ------ ------ ----- ----- ------ ------ ----- ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed DTC Companies (continued)
- ---------------------------------------
PTRS The Potters S&L Co. of OH 9.73 9.73 0.54 5.69 7.08 0.53 5.59 2.49 72.71 3.96
THER Third Financial Corp. of OH(8) 18.15 18.15 1.40 7.87 5.93 1.26 7.03 0.23 325.62 0.91
TSBS Trenton SB, FSB NHC of NJ(35.0 19.04 18.61 1.81 11.21 7.37 1.20 7.47 0.48 69.57 0.55
TRIC Tri-County Bancorp of WY 17.83 17.83 0.94 4.70 5.30 0.91 4.56 0.18 318.32 1.45
THBC Troy Hill Bancorp of PA 22.20 22.20 1.40 6.20 7.85 1.27 5.65 2.95 30.03 1.09
TWIN Twin City Bancorp of TN 13.76 13.76 1.07 7.77 7.56 0.93 6.74 0.46 39.79 0.26
UFRM United FS&LA of Rocky Mount NC 8.28 8.23 0.87 11.37 9.13 0.77 9.97 0.66 178.39 1.90
UBNT United SB, FA of NT 23.53 23.53 1.50 6.68 7.23 1.49 6.63 NA NA 0.25
VABF Va. Beach Fed. Fin. Corp of VA 6.57 6.57 0.23 3.94 4.38 0.01 0.12 1.76 36.50 0.93
VAFD Valley FSB of Sheffield AL(8) 8.09 8.09 0.32 4.06 3.41 0.31 3.95 0.79 42.34 0.43
VFFC Virginia First Savings of VA 7.72 7.44 1.19 16.32 11.61 0.98 13.45 2.89 31.46 1.01
WBCI WFS Bancorp of Nichita KS(8) 11.41 11.40 0.47 4.13 3.76 0.51 4.51 NA NA 0.72
WHGB WHG Bancshares of MD 20.59 20.59 0.61 5.18 3.27 0.64 5.18 0.35 42.31 0.23
WSFS WSFS Financial Corp. of DE* 5.87 5.79 2.17 42.73 25.47 1.29 25.28 3.27 59.85 3.01
WWFC WWS Financial Corp. of PA* 15.12 15.12 1.23 8.09 7.86 1.38 9.04 0.45 178.29 1.35
WLDK Walden Bancorp of MA* 9.37 8.02 0.96 10.85 8.43 1.07 12.02 0.75 158.52 1.89
WRNB Warren Bancorp of Peabody MA* 8.95 8.95 1.61 19.67 12.48 1.56 18.79 2.05 62.35 2.12
WFSL Washington FS&LA of Seattle WA 12.13 11.54 1.75 13.70 8.74 1.67 13.12 0.60 41.03 0.35
WAMU Washington Mutual Inc. of WA* 6.23 5.54 0.91 15.07 8.85 0.90 15.01 0.51 125.59 1.04
WAYN Wayne S&L Co., MHC of OH(46.7) 9.20 9.20 0.58 6.36 4.58 0.54 5.96 1.35 26.40 0.43
WCFB Webster CityFSB,MHC of IA(45.2 22.28 22.28 1.10 5.00 3.78 1.10 5.00 1.08 37.62 0.74
WBST Webster Financial Corp. of CT 5.16 3.92 0.51 10.33 6.96 0.55 11.05 1.44 89.48 1.86
WEFC Wells Fin. Corp. of Wells NM 14.95 14.95 0.81 6.24 6.26 0.79 6.07 0.39 70.55 0.32
WCBI Westco Bancorp of IL 15.65 15.65 1.32 8.47 6.94 1.31 8.41 0.58 49.47 0.41
WSTR Westernfed Fin. Corp. of MT 13.28 13.28 0.76 5.73 6.89 0.72 5.38 0.07 468.93 0.55
WOFC Western Ohio Fin. Corp. of OH 18.20 17.14 1.10 4.22 4.73 0.83 3.18 0.34 78.86 0.44
WFCD Winton Financial Corp. of OH(8) 7.89 7.68 0.93 12.26 7.70 0.76 10.02 0.53 64.84 0.41
FFWD Wood Bancorp of OH 14.99 14.59 1.17 8.14 8.43 1.14 7.88 0.18 192.22 0.46
WCHI Workingmens Cap. Hldgs of IN(8) 12.24 12.24 0.91 7.59 5.35 0.90 7.45 0.23 72.95 0.19
YFCB Yonkers Fin. Corp. of NY 19.39 19.39 0.89 4.59 6.40 0.98 5.05 1.63 26.77 1.09
YFED York Financial Corp. of PA 8.76 8.78 0.98 11.40 9.78 0.85 9.95 2.24 26.68 0.68
<CAPTION>
Pricing Ratios Dividend Data(5)
--------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang- Core Divi./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ---- ------ ---- ------- ------ ----- ------
(X) (%) (%) (%) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed DTC Companies (contiuned)
- ---------------------------------------
PTRS The Potters S&L Co. of OH 14.13 78.16 7.61 78.16 14.38 0.24 1.48 20.87
THER Third Financial Corp. of OH(8) 16.86 126.15 23.25 128.15 18.86 0.68 2.13 35.98
TSBS Trenton SB, FSB NHC of NJ(35.0 13.57 126.61 24.48 131.58 20.36 0.35 2.46 33.33
TRIC Tri-County Bancorp of WY 18.88 89.16 15.90 89.16 19.47 0.50 2.70 51.02
THBC Troy Hill Bancorp of PA 12.75 77.70 17.25 77.70 13.93 0.40 3.08 39.22
TWIN Twin City Bancorp of TN 13.22 101.91 14.03 101.91 15.24 0.64 4.00 52.89
UFRM United FS&LA of Rocky Mount NC 10.96 117.47 9.72 117.47 12.50 0.20 2.50 27.40
UBNT United SB, FA of NT 13.83 90.71 21.34 90.71 13.93 0.88 4.82 66.57
VABF Va. Beach Fed. Fin. Corp of VA 23.03 89.01 5.85 89.01 NM 0.16 2.17 50.00
VAFD Valley FSB of Sheffield AL(8) NM 122.42 9.90 122.42 NM 0.60 1.88 55.05
VFFC Virginia First Savings of VA 8.61 129.84 10.03 134.78 10.45 0.10 0.78 6.76
MBCI MFS Bancorp of Nichita KS(8) NM 107.12 12.22 107.17 24.33 0.40 1.75 46.51
MHGB MHG Bancshares of MD NM 77.46 15.95 77.46 NM 0.00 0.00 0.00
WSFS WSFS Financial Corp. of DE* 3.93 143.95 8.44 145.91 6.64 0.00 0.00 0.00
WFC WFS Financial Corp. of PA* 12.73 99.14 14.99 99.14 11.40 0.40 1.93 24.54
WLDK Walden Bancorp of MA* 11.87 104.28 9.77 121.91 10.71 0.64 3.41 40.51
WRNB Warren Bancorp of Peabody MA* 8.01 146.37 13.10 146.37 8.39 0.44 3.52 28.21
WFSL Washington FS&LA of Seattle WA* 11.44 153.13 18.58 160.93 11.94 0.88 4.09 46.81
WAMU Washington Mutual Inc. of WA* 11.31 153.23 9.55 172.31 11.35 0.88 2.97 33.59
WAYN Wayne S&L Co., MHC of OH(46.7) 21.84 135.44 12.46 135.44 23.31 0.84 4.05 NM
WCFB Webster CityFSB,MHC of IA(45.2) NM 130.81 29.15 130.81 NM 0.80 5.93 NM
WBST Webster Financial Corp. of CT 14,38 118.46 6.11 155.83 13.43 0.64 2.23 32.00
WEFC Wells Fin. Corp. of Wells NM 15.97 85.82 12.83 85.82 16.43 0.00 0.00 0.00
WCBI Westco Bancorp of IL 14.41 119.65 18.72 119.65 14.51 0.45 2.08 30.00
WSTR Westernfed Fin. Corp. of MT 14.52 80.87 10.74 80.87 15.45 0.34 2.37 34.34
WOFC Western Ohio Fin. Corp. of OH 21.14 92.30 16.80 98.02 NM 1.00 4.30 NM
WFCD Winton Financial Corp. of OH(8) 12.98 129.56 10.22 133.14 15.88 0.42 3.11 40.38
FFWD Wood Bancorp of OH 11.86 93.81 13.69 93.81 12.25 0.36 1.95 23.08
WCHI Workingmens Cap. Hldgs of IN(8) 18.69 137.46 16.83 137.46 19.05 0.36 1.80 33.54
YFCB Yonkers Fin. Corp. of NY 15.63 71.77 13.92 71.77 14.21 0.00 0.00 0.00
YFED York Financial Corp. of PA 10.22 110.84 9.73 110.84 11.72 0.60 3.55 36.36
</TABLE>
<PAGE>
EXHIBIT IV-2
Historical Stock Price Indices
<PAGE>
HISTORICAL STOCK PRICE INDICES(1)
<TABLE>
<CAPTION>
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
- --------------- ---- ------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
As of June 14, 1996 5649.5 665.9 1,213.2 386.3 228.3
</TABLE>
(1) End of period data.
Source: SNL Securities; Wall Street Journal
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
MONTHLY MARKET REPORT
INDEX VALUES
<TABLE>
<CAPTION>
INDEX VALUES PERCENT CHANGE SINCE
-------------------------------------------- ------------------------------------------
05/31/96 04/30/96 12/29/95 06/01/95 04/30/96 12/29/95 06/01/95
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub. Traded Thrifts 383.0 380.3 376.5 309.5 0.7 1.7 23.7
MHC Index 429.2 459.0 458.5 349.5 -6.5 -6.4 22.8
INSURANCE INDICES
- ------------------------------------------------------------------------------------------------------------------------------------
SAIF Thrifts 358.8 356.1 356.4 293.6 0.7 0.7 22.2
BIF Thrifts 455.6 452.6 436.9 357.2 0.6 4.3 27.5
STOCK EXCHANGE INDICES
- ------------------------------------------------------------------------------------------------------------------------------------
AMEX Thrifts 135.1 134.1 137.7 121.9 0.7 -1.8 10.8
NYSE Thrifts 256.2 249.9 257.6 212.6 2.5 -0.6 20.5
OTC Thrifts 459.9 460.3 449.5 368.8 -0.1 2.3 -24.7
GEOGRAPHICAL INDICES
- ------------------------------------------------------------------------------------------------------------------------------------
New England Thrifts 321.6 320.2 316.1 255.7 0.4 1.7 25.7
Mid-Atlantic Thrifts 746.6 745.4 720.1 596.6 0.2 3.7 25.1
Southwest Thrifts 262.5 253.4 241.7 193.0 3.6 8.6 36.0
Midwest Thrifts 967.3 981.7 951.5 775.3 -1.5 1.7 24.8
Southeast Thrifts 385.2 381.8 367.2 300.1 0.9 4.9 28.4
Western Thrifts 375.7 363.8 380.4 315.6 3.3 -1.2 19.0
ASSET SIZE INDICES
- ------------------------------------------------------------------------------------------------------------------------------------
Less than $250M 545.4 545.4 538.4 454.5 0.0 1.3 20.0
$250M to $500M 687.7 690.9 680.3 570.0 -0.5 1.1 20.6
$500M to $1B 436.1 430.0 431.4 357.1 1.4 1.1 22.1
$1B to $5B 431.6 431.3 421.7 341.9 0.1 2.4 26.2
Over $5B 236.8 231.7 233.5 192.5 2.2 1.4 23.0
COMPARATIVE INDICES
- ------------------------------------------------------------------------------------------------------------------------------------
Dow Jones Industrials 5643.2 5569.1 5117.1 4473.4 1.3 10.3 26.1
S&P 500 669.1 654.2 615.9 533.5 2.3 8.6 25.4
</TABLE>
All SNL indices are market-value weighted: i.e., an institution's effect on an
index is proportionate to that institution's market capitalization. All SNL
thrift indices, except for the SNL MHC Index, began at 100 on March 30, 1984.
The SNL MHC Index began at 201.082 on Dec. 31, 1992. The level of the SNL THRIFT
Index on that date. On March 30, 1984, the S&P 500 closed at 159.2 and the Dow
Jones Industrials stood at 1164.9.
New England: CT, ME, MA, NH, RI, VT; Middle Atlantic: DE, DC, PA, MD, NJ,
NY, PR; Southeast: AL, AR, FL, GA, MS, NC, SC, TN, VA, WV; Midwest: IA, IL,
IN, KS, KY, MI, MN, MO, ND, NE, OH, SD, WI; Southwest: CO, LA, NM, OK, TX,
UT; Western: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY
SOURCE: SNL SECURITIES.
JUNE 1996
<PAGE>
EXHIBIT IV-4
Market Area Acquisition Activity
<PAGE>
RP Financial, LC.
-----------------------------------------------------------------------
COMPLETED AND PENDING ACQUISITIONS OF THRIFTS IN ILLINOIS, 1994-PRESENT
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS TARGET COMPANY'S FINANCIAL DATA
AT COMPLETION DATE
- ------------------------------------------------------------------------------------------------------------------------------------
DATA ANNOUNCED/ TARGET/STATE POOLING/ EQUITY/ T.T. T.T. NPAS/(1) RESERVES/
COMPLETED ACQUIROR/STATE PURCHASE ASSETS ASSETS ROAA ROAE ASSETS NPAs
--------- -------------- -------- ------ ------- ---- ---- ------ ----
$0.000 (%) (%) (%) (%) (%)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
04/22/95 Financial Security Corp./IL Pooling $277,057 13.99% 0.86% 6.50% 2.00% 41.24%
Pending Pinnacle Bancgroup/IL
01/26/96 Barrington Bancorp. Barrington NA $67,775 16.98% 0.69% 4.12% 0.83% 83.96%
Pending First Chicago NBO Corp./IL
12/14/95 Bell Bancorp. Chicago Purchase $1,901,498 15.74% 0.69% 4.36% 1.23% 30.13%
Pending Standard Federal Bank/IL
11/29/95 N.S. Bancorp, Chicago Purchase $1,153,392 20.39% 1.87% 9.21% 0.30% 230.61%
05/30/96 MAF Bancorp, IL
09/15/95 Metro Savings Bank, Wood River Pooling $83,511 5.82% 0.10% 1.52% 0.27% 229.56%
03/07/96 Mercantile Bancorp /IL
10/12/94 First Robinson ?????., Robinson Pooling $106.505 9.72% 1.12% 12.63% 0.05% 1084.62%
11/01/95 Ambanc Corp/IL
01/09/95 Deebank Corp., Deerfield Pooling $757,787 8.19% 1.13% 14.40% 0.41% 149.97%
07/03/95 NSD Bancorp/MI
11/08/94 Peoples FS&LA, Chicago Purchase $32,385 18.91% 0.57% 3.28% 0.39% 44.34%
04/10/95 Mid--Clico, Inc. IL
08/26/94 First Moline Financial, Moline Pooling $83,264 6.96% 0.69% 9.07% 0.55% 48.11%
03/23/95 Firstar Corporation WI
10/26/94 FirstRock Bancorp, Rockford Pooling $398,118 12.40% 1.16% 9.78% 0.65% 105.26%
02/28/95 First Financial Corp./WI
07/27/94 King City FSB, Mt. Vernon Pooling $176,281 6.00% 0.46% 7.86% 0.13% 658.55%
02/01/95 CNB Bancshares, In
03/24/94 AmerFed Fin Corp.,Joliet Purchase $909,733 10.23% 0.86% 8.50% 0.53% 92.29%
01/09/95 NSD Bancorp, Mt
07/26/94 River Valley FSB, Peoria Purchase $502,718 5.73% 0.27% 4.10% 0.65% 27.99%
01/04/95 First Bank, Inc./MO
05/04/94 Amity Bancshares, Tinley Park Purchase $132,034 14.96% 0.75% 5.15% 0.05% 540.30%
12/19/94 Advantage Bancorp/WI
07/06/93 CraginFin Corp, Chicago Purchase $2,766,011 12.73% 1.23% 10.45% 0.98% 82.41%
06/06/94 ABN--AMRO Holdings/IL
10/12/93 LGF Bancorp, LaGrange Pooling $416,511 10.29% 0.88% 8.81% 0.46% 24.61%
04/29/94 First of America Bank Corp/Mt
06/01/93 Head of IL Bk FSB Sprg. Vly. Purchase $70,178 8.35% 1.53% 23.95% 0.36% 108.87%
01/07/94 Princeton National Bancorp/IL
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
ACQUISITION TERMS CONTROL PREMIUM ACQUISITION PRICING
AT COMPLETION DATE
- -----------------------------------------------------------------------------------------------------------
OFFER PRICE/
TOTAL OFFER CASH ONE DAY
DATA ANNOUNCED/ DEAL PRICE/ DEBT PRE-OFFER
COMPLETED VALUE SHARE STOCK PRICE P/B P/TB P/A P/E
--------- ----- ----- ----- ----- --- ---- --- ---
($MIL) ($) (X) (%) (%) (%) (%)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
04/22/95 $46.0 $28.50 Cash & 1.18 110% 110% 16.60% 21.10
Pending Stock
01/26/96 $17.1 $25.85 Stock 1.33 149% 149% 25.26% 35.90
Pending
12/14/95 $362.8 $37.50 Cash 1.14 115% 115% 18.05% 27.57
Pending
11/29/95 $267.0 $41.29 Cash & 1.14 107% 107% 23.15% 12.51
05/30/96 Stock
09/15/95 $9.0 $46.42 Stock Not Traded 156% 156% 10.88% 12.85
03/07/96
10/12/94 $20.4 $170.87 Stock Not Traded 197% 199% 19.15% 20.54
11/01/95
01/09/95 $119.8 $45.00 Stock 1.33 185% 186% 15.81% 14.20
07/03/95
11/08/94 $5.9 $19.00 Cash Not Traded 96% 95% 18.22% 30.26
04/10/95
08/26/94 $9.2 $31.00 Stock Not Traded 159% 159% 11.05% 16.46
03/23/95
10/26/94 $64.7 $27.10 Stock 1.22 133% 133% 15.25% 14.19
02/28/95
07/27/94 $19.8 $35.34 Stock 1.34 188% 199% 11.23% NM
02/01/95
03/24/94 $148.7 $45.00 Stock 1.37 156% 163% 16.35% 19.40
01/09/95
07/26/94 $37.4 $247.81 Cash Not Traded 129% 129% 7.44% NM
01/04/95
05/04/94 $24.8 $38.25 Cash 1.10 126% 126% 18.78% 25.00
12/19/94
07/06/93 $583.3 $38.00 Cash 1.51 150% 163% 20.37% 15.45
06/06/94
10/12/93 $70.8 $33.16 Stock 1.19 142% 142% 17.00% 16.30
04/29/94
06/17/93 $8.8 NA Stock Not Traded 112% 124% 9.40% 5.26
01/07/94
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) NPAs consist of REO, non-accruing loans, and loans 90+days delinquent.
June 5, 1996
<PAGE>
EXHIBIT IV-5
Directors and Executive Management Summary Resumes
<PAGE>
Chester Savings Bank, FSB
Directors and Executive Management Summary Resumes
Michael W. Welge is Chairman of the Board of Directors and Chief
Financial Officer. He has responsibility for various management functions,
including financial management and investment portfolio management,
determination of all employee compensation and employment decisions. Mr.
Welge has been employed for the past 34 years at Gilster-Mary Lee where he
currently serves as its Executive Vice President, Secretary and Treasurer.
He has been active in civic affairs and is a past President of both the
Chester Chamber of Commerce and the Chester School Board. He is a Board
member and past Chairman of the Board of Directors of Millers Munial
Insurance Company of Alton, Illinois. For the past 16 years Mr. Welge has
served as an Alderman of the City Council of Chester. Mr. Welge has also
been the President and a director of several local corporations and clubs.
Howard A. Boxdorfer has been employed as an officer of the Savings
Bank since 1969 and has been President since 1980. He is a member of the
Lions Club and the Chester Chamber of Commerce.
Edward k. Collins has been an officer of the Savings Bank since
January 1995 and is responsible for the Savings Bank's supervisions and
performance of operations and lending. Prior to his employment at the
Savings Bank, Mr. Collins was Executive Vice President and Senior Loan
Officer of union Bank of Illinois from August 1991 to December 1994 and was
President, Chief Executive Officer and a Director of First National Bank &
Trust. Syracuse, Nebraska, from August 1988 to August 1991. Mr. Collins
resides in Ellis Grove, Illinois. Mr. Collins is a member of the Board of
Directors of the Chester Chamber of Commerce.
Thomas E. Welch, Jr. has been employed as an officer of the Savings
Bank since 1990 when Heritage Federal was acquired by the Savings Bank. Mr.
Welch is the Senior Vice President and Compliance Officer for the Savings
Bank and manages the Sparta branch. He resides in Sparta, Illinois.
John R. Beck, M.D. is a self-employed physician. He is a member of the
Hospital staff of Memorial Hospital, Chester, Illinois, and a director of
Home Health Care.
Allen R. Verseman has been employed for 27 years at Gilster-Mary Lee
and currently serves as Plant Superintendent.
James C. McDonald has bee employed for 43 years at the U.S. Postal
Service. He is a Trustee of the Presbyterian Church, Sparta, Illinois, and
is a member of the Sparta Building Commission and the Sparta Senior Citizen
Board. Mr. McDonald resides in Sparta, Illinois.
Carl H. Welge has been employed for six years at Gilster-Mary Lee and
currently serves as Accounts Receivable Supervisor. He is a member of the
Memorial Hospital Board of Directors and a member of the Friends of Chester
Public Library.
Mary Jo Homan has been employed by the Savings Bank since 1983 and is
responsible for accounting and personnel and has served as Treasurer since
January 1, 1996. She is a member of the Finance Committee of St. Mary's
Church, Ellis Grove, Illinois.
Robert H. Gross has been employed by the Savings Bank since 1983. He
serves as the Senior Lending Officer and is Secretary for the Board of
Directors. Mr. Gross resides in Ellis Grove, Illinois.
William P. Wingerter, Sr. has been employed by the Savings Bank since
1988. He is the branch manager in Perryville, Missouri and is responsible
for Missouri operations. He is a member of the Chamber of Commerce and is
the elected Chairman of the Board of the Perry County Memorial Hospital. He
resides in Perryville, Missouri.
Source: Chester Savings' prospectus.
<PAGE>
EXHIBIT IV-6
Chester Savings Bank, FSB
Pro Forma Regulatory Capital Ratios
<PAGE>
EXHIBIT IV
Chester Savings Bank, FSB
Pro Forma Regulatory Capital Ratios
<TABLE>
<CAPTION>
PRO FORMA AT MARCH 31, 1996
------------------------------------------------------------------------------
Minimum of Estimated Midpoint of Estimated Maximum of Estimate
Valuation Range Valuation Range Valuation Range
------------------------ ------------------------- -----------------------
1,317,500 Shares 3,550,000 Shares 1,782,500 Shares
March 31, 1996 at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share
------------------- ------------------------ ------------------------- -----------------------
Percent of Percent of Percent of Percent of
Adjusted Adjusted Adjusted Adjusted
Total Total Total Total
Amount Assets(1) Amount Assets (1) Amount Assets (1) Amount Assets (1)
------ ---------- ------ ----------- ------ ------------ ------ --------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
CHESTER SAVINGS BANK, FSB
GAAP capital(5) ............ $11,870 8.68% $16,278 11.63% $17,281 12.25% $18,284 12.85%
======= ==== ======= ===== ======= ===== ======= =====
Tangible Capital............ $11,920 8.71% $16,328 11.66% $17,331 12.28% $18,334 12.88%
Tangible capital requirement 2,053 1.50 2,100 1.50 2,118 1.50 2,135 1.50
------- ---- ------ ----- ------- ----- ------- ------
Excess...................... $9,867 7.21% $14,228 10.16 $15,213 10.78% $16,199 11.38%
======= ==== ======= ===== ======= ===== ======= =====
Core Capital................ 11,920 8.71% $16.328 11.66% $17,331 12.28% $18,334 12.88%
Core Capital requirement(2). 4,106 3.00 4,200 3.00 4,235 3.00 4,270 3.00
------- ---- ------ ----- ------- ----- ------- -----
Excess...................... $ 7,814 5.71% $12,128 8.66% $13,096 9.28% $14,064 9.88%
======= ==== ======= ===== ======= ===== ======= =====
Risk-based capital(3)(4).... $12,308 25.95% $16,716 34.78% $17,719 36.69% $18,722 38.58%
Risk based
capital requirement........ 3,795 8.00 3,845 8.00 3,864 8.00 3,883 8.00
------- ---- ------ ----- ------- ----- ------- -----
Excess...................... $ 8,513 17.95% $12,871 26.78 $13,855 28.69% $14,839 30.58%
======= ==== ======= ===== ======= ===== ======= =====
CHESTER NATIONAL BANK
GAAP capital(5)............. 11,870 8.68% $16,278 11.63% $17,281 12.25% $18,284 12.85
======= ==== ======= ===== ======= ===== ======= =====
Tier 1 capital(1)........... $11,920 8.71% $16,328 11.63% $17,331 12.28% $18,334 12.88%
Minimum Tier 1 (leverage)
requirement............... 4,106 3.00 4,200 3.00 4,235 3.00 4,270 3.00
------- ---- ------ ----- ------- ----- ------- -----
Total....................... $ 7,814 5.71% $12,128 8.66% $13.096 9.28 $14,064 9.88
======= ==== ======= ===== ======= ===== ======= =====
CHESTER NATIONAL BANK
OF MISSOURI
GAAP capital................ $ -- --% $ 3,000 47.91% $ 3,000 47.71% $ 3,000 47.51
------- ---- ------ ----- ------- ----- ------- -----
Tier 1 capital(1)........... -- -- $ 3,000 47.91% $ 3,000 47.71 $ 3,000 47.51
Minimum Tier 1 (leverage)
requirement............... -- -- 188 3.00 189 3.00 189 3.00
------- ---- ------ ----- ------- ----- ------- -----
Total....................... $ -- --% $ 2,812 44.91 $ 2,811 44.71% $ 2,811 44.51
======= ==== ======= ===== ======= ===== ======= =====
<CAPTION>
----------------------------------------
15% above
Maximum of Estimated
Valuation Range
-------------------------------
2,049,875 Shares
at $10.00 Per Share
-------------------------------
Percent of
Adjusted
Total
Amount Assets (1)
------ -----------
<S> <C> <C>
CHESTER SAVINGS BANK, FSB
GAAP capital(5) ............ $19,438 13.53%
======= =====
Tangible Capital............ $19,488 13.56%
------- -----
Tangible capital requirement 2,155 1.50
------- -----
Excess...................... $17,333 12.06%
======= =====
Core Capital................ $19,888 13.56%
Core Capital requirement(2). 4,310 3.00
------- -----
Excess...................... $15,178 10.56%
======= =====
Risk-based capital(3)(4).... $19,876 40.73%
Risk based
capital requirement........ 3,904 8.00%
------- -----
Excess...................... $15,972 32.73%
======= =====
CHESTER NATIONAL BANK
GAAP capital(5)............. $19,438 13.53%
======= =====
Tier 1 capital(1)........... $19,488 13.56%
Minimum Tier 1 (leverage)
requirement............... 4,310 3.00
------- -----
Total....................... $15,178 10.56%
======= =====
CHESTER NATIONAL BANK
OF MISSOURI
GAAP capital................ $ 3,000 47.28%
------ -----
Tier 1 capital(1)........... $ 3,000 47.28%
Minimum Tier 1 (leverage)
requirement............... 190 3.00
------- ----
Total....................... $ 2,810 44.28%
======= =====
</TABLE>
SOURCE: CHESTER SAVINGS' PROSPECTUS.
<PAGE>
EXHIBIT IV-7
Pro Forma Analysis Sheet
<PAGE>
RP Financial, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 1
Chester Savings Bank, FSB
Prices as of June 14, 1996
<TABLE>
<CAPTION>
Comparable All IL All SAIF
Companies Companies Companies
---------------- ---------------- ---------------
Price Multiple: Symbol Subject(1) Mean Median Mean Median Mean Median
- -------------- ------ ---------- ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio = P/E 12.61x 18.05x 18.91x 14.81x 15.63x 14.29x 14.29x
Price-core earnings = P/CORE 13.12x 19.43x 20.58x 16.30x 16.45x 15.14x 15.42x
Price-book ratio = P/B 65.72% 89.99% 92.06% 93.81% 93.05% 104.98% 99.35%
Price-tng book ratio = P/TB 65.72% 90.61% 92.54% 94.65% 93.18% 108.21% 102.42%
Price-assets ratio = P/A 10.72% 16.05% 15.54% 12.89% 11.30% 13.13% 11.84%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
- --------------------
<S> <C> <C> <C>
Pre-Conv Earnings (Y) $ 931,000 Est ESOP Borrowings (E) $ 1,240,000
Pre-Conv Book Value (B) $ 10,919,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv Assets (A) $ 136,806,000 Amort of ESOP Borrowings (T) 15 Years
Reinvestment Rate(2) (R) 3.49% Recognition Plans Amount (M) $ 620,000
Est Conversion Exp(3) (X) 650,000 Recognition Plans Expense (N) $ 124,000
Proceeds Not Reinvested (Z) $ 1,240,000
</TABLE>
Calculation of Pro Forma Value After Conversion (5)
- -----------------------------------------------
1. V = P/E (Y-R(X+Z)-ES-(1-TAX)E/T-(1-TAX)N))-M V = $ 15,490,693
-----------------------------------------
1-(P/E)R
2. V = P/B (B-X-E) - M V = $ 15,501,338
-------------------
1-P/B
3. V = P/A (A-X-E) - M V = $ 15,505,147
------------------
1-P/A
<TABLE>
<CAPTION>
Total Price Total
Conclusion Shares Per Share Value
- ---------- -------- --------- --------
<S> <C> <C> <C>
Appraised Value 1,550,000 $10.00 $ 15,500,000
RANGE:
- ------
- - Minimum 1,317,500 $10.00 $ 13,175,000
- - Maximum 1,782,500 $10.00 $ 17,825,000
- - Superrange 2,049,875 $10.00 $ 20,498,750
</TABLE>
(1) Pricing ratios shown reflect the midpoint appraised value.
(2) Net return assumes a reinvestment rate of 5.63 percent, and a tax rate of
38.00 percent.
(3) Conversion expenses reflect estimated expenses as presented in offering
document.
(4) Assumes a borrowings cost of 0.00 percent and a tax rate of 38.00 percent.
(5) Assumes Recognition Plans installed on a post-conversion basis with
authorized but unissued shares.
<PAGE>
RP Financial, Inc.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-7
PRO FORMA ANALYSIS SHEET -- PAGE 2
Chester Savings Bank, FSB
Prices as of June 14, 1996
<TABLE>
<CAPTION>
Mean Pricing Median Pricing
---------------------- ------------------------
Valuation Approach Subject Peers (Disc) Peers (Disc)
- ------------------ ------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
P/E Price-earnings 12.61x 18.05x -30.12% 18.91x -33.30x
P/CORE Price-core earnings 13.12x 19.43x -32.48% 20.58x -36.27x
P/B Price-book 65.72% 89.99% -26.97% 92.06% -28.61%
P/TB Price-tang. book 65.72% 90.61% -27.47% 92.54% -28.98%
P/A Price-assets 10.72% 16.05% -33.23% 15.54% -31.04%
Average Premium (Discount) -30.05% -31.64%
</TABLE>
<PAGE>
EXHIBIT IV-8
Pro Forma Effect of Conversion Proceeds
<PAGE>
RP Financial, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528.1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Chester Savings Bank, FSB
At the Minimum of the Range
1. Conversion Proceeds
Pro.forma market value .............................. $ 13,175,000
Less: Estimated offering expenses ............... 650,000
-----------
Net Conversion Proceeds ............................. $ 12,525,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 12,525,000
Less: Held in Non.Earning Assets(5)(1) .......... 1,054,000
-----------
Net Proceeds Reinvested ............................. $ 11,471,000
Estimated net incremental rate of return ............ 3.49 %
-----------
Earnings Increase ................................... $ 400,407
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 43,565
Less: Recognition Plans Expense(4)............... 65,348
-----------
Net Earnings Increase ............................... $ 291,493
3. Pro.Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended March 31, 1996 $ 931,000 $ 1,222,493
12 Months ended March 31, 1996 $ 882,000 $ 1,173,493
(Core)
4. Pro.Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
March 31, 1996 $ 10,919,000 $ 11,471,000 (3) $ 22,390,000
5. Pro.Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
March 31, 1996 $ 136,806,000 $ 11,471,000 $ 148,277,000
NOTE: Shares for calculating per share amounts: 1,370,200
(1) Estimated ESOP borrowings of $ 1,054,000 with an after.tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
38.00 percent. ESOP financed by holding company . excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 15 years, amortization is
tax.effected.
(3) ESOP borrowings of $ 1,054,000 are omitted from net worth.
(4) $ 527,000 purchased by the Recognition Plans with an estimated pre.tax
expense of $ 105,400 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plans is purchased on post conversion
basis, but the related expense and ownership dilution have been
factored in the valuation.
<PAGE>
RP Financial, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528.1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Chester Savings Bank, FSB
At the Midpoint of the Range
1. Conversion Proceeds
Pro.forma market value .............................. $ 15,500,000
Less: Estimated offering expenses ............... 650,000
-----------
Net Conversion Proceeds ............................. $ 14,850,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 14,850,000
Less: Held in Non.Earning Assets(5)(1) .......... 1,240,000
-----------
Net Proceeds Reinvested ............................. $ 13,610,000
Estimated net incremental rate of return ............ 3.49 %
-----------
Earnings Increase ................................... $ 475,071
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 51,253
Less: Recognition Plans Expense(4)............... 76,880
-----------
Net Earnings Increase ............................... $ 346,937
3. Pro.Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended March 31, 1996 $ 931,000 $ 1,277,937
12 Months ended March 31, 1996 $ 882,000 $ 1,228,937
(Core)
4. Pro.Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ---------- -------- ----- ----------
March 31, 1996 $ 10,919,000 $ 13,610,000 (3) $ 24,529,000
5. Pro.Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ---------- -------- ----------------
March 31, 1996 $ 136,806,000 $ 13,610,000 $ 150,416,000
NOTE: Shares for calculating per share amounts: 1,612,000
(1) Estimated ESOP borrowings of $ 1,240,000 with an after.tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
38.00 percent. ESOP financed by holding company . excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 15 years, amortization is
tax.effected.
(3) ESOP borrowings of $ 1,240,000 are omitted from net worth.
(4) $ 620,000 purchased by the Recognition Plans with an estimated pre.tax
expense of $ 124,000 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plans is purchased on post conversion
basis, but the related expense and ownership dilution have been
factored in the valuation.
<PAGE>
RP Financial, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528.1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Chester Savings Bank, FSB
At the Maximum of the Range
1. Conversion Proceeds
Pro.forma market value .............................. $ 17,825,000
Less: Estimated offering expenses ............... 650,000
-----------
Net Conversion Proceeds ............................. $ 17,175,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 17,175,000
Less: Held in Non.Earning Assets(5)(1) .......... 1,426,000
-----------
Net Proceeds Reinvested ............................. $ 15,749,000
Estimated net incremental rate of return ............ 3.49 %
-----------
Earnings Increase ................................... $ 549,735
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 58,941
Less: Recognition Plans Expense(4)............... 88,412
-----------
Net Earnings Increase ............................... $ 402,381
3. Pro.Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended March 31, 1996 $ 931,000 $ 1,333,381
12 Months ended March 31, 1996 $ 882,000 $ 1,284,381
(Core)
4. Pro.Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ---------- -------- ----------------
March 31, 1996 $ 10,919,000 $ 15,749,000 (3) $ 26,668,000
5. Pro.Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ---------- -------- ----------------
March 31, 1996 $ 136,806,000 $ 15,749,000 $ 152,555,000
NOTE: Shares for calculating per share amounts: 1,853,800
(1) Estimated ESOP borrowings of $ 1,426,000 with an after.tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
38.00 per cent. ESOP financed by holding company . excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 15 years, amortization is
tax.effected.
(3) ESOP borrowings of $ 1,426,000 are omitted from net worth.
(4) $ 713,000 purchased by the Recognition Plans with an estimated pre.tax
expense of $ 142,600 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plans is purchased on post conversion
basis, but the related expense and ownership dilution have been
factored in the valuation.
<PAGE>
RP Financial, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Chester Savings Bank, FSB
At the Superrange Maximum
1. Conversion Proceeds
Pro-forma market value .............................. $ 20,498,750
Less: Estimated offering expenses ............... 650,000
-----------
Net Conversion Proceeds ............................. $ 19,848,750
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................. $ 19,848,750
Less: Held in Non-Earning Assets(5)(1) .......... 1,639,900
-----------
Net Proceeds Reinvested ............................. $ 18,208,850
Estimated net incremental rate of return ............ 3.49 %
-----------
Earnings Increase ................................... $ 635,598
Less: Estimated cost of ESOP borrowings(1) ...... 0
Less: Amortization of ESOP borrowings(2) ........ 67,783
Less: Recognition Plans Expense(4)............... 101,674
-----------
Net Earnings Increase ............................... $ 466,142
3. Pro-Forma Earnings (rounded)
Period Before Conversion After Conversion
------ ----------------- ----------------
12 Months ended March 31, 1996 $ 931,000 $ 1,397,142
12 Months ended March 31, 1996 $ 882,000 $ 1,348,142
(Core)
4. Pro-Forma Net Worth (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ---------------
March 31, 1996 $ 10,919,000 $ 18,208,850 (3) $ 29,127,850
5. Pro-Forma Net Assets (rounded)
Date Before Conversion Conversion Proceeds After Conversion
---- ----------------- ------------------- ----------------
March 31, 1996 $ 136,806,000 $ 18,208,850 $ 155,014,850
NOTE: Shares for calculating per share amounts: 2,131,870
(1) Estimated ESOP borrowings of $ 1,639,900 with an after-tax cost of 0.00
percent, assuming a borrowing cost of 0.00 percent and a tax rate of
38.00 percent. ESOP financed by holding company - excluded from
reinvestment and total assets.
(2) ESOP borrowings are amortized over 15 years, amortization is
tax-effected.
(3) ESOP borrowings of $ 1,639,900 are omitted from net worth.
(4) $ 819,950 purchased by the Recognition Plans with an estimated pre-tax
expense of $ 163,990 and a tax rate of 38.00 percent.
(5) Stock purchased by Recognition Plans is purchased on post conversion
basis, but the related expense and ownership dilution have been
factored in the valuation.
<PAGE>
EXHIBIT IV-9
Peer Group Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
(703) 528-1700
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1996
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Kxtd Core Income Estimated
to Common Gains (Loss) @ 34% Items to Common Shares Core EPS
---------- ------------ ----------- ---------- ----------- ------ -------
($000) ($000) ($000) ($000) ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
ASBP ASB Financial Corp. of OH 1.098 0 0 0 1,098 1,714 0.64
EFBI Enterprise Fed. Bancorp of OH (1) 2,059 -957 325 0 1,427 2,085 0.68
FFGE FSF Financial Corp. of MN 1,872 -16 5 0 1,861 3,861 0.48
FBCI Fidelity Bancorp of Chicago IL 3,009 -271 92 0 2,830 3,085 0.92
BDJI First Fed. Bancorp. of MN 700 -3 1 0 698 819 0.85
GTPS Great American Bancorp of IL (1) 767 -14 5 0 758 1,850 0.41
LARK Landmark Bancshares of Chicago Il 1,835 -370 126 0 1,591 1,591 0.82
NBSI North Bancshares of Chicago IL 629 -76 26 0 579 1,172 0.49
SMBC Southern Missouri Bncrp of MO 1,337 -126 43 0 1,254 1,724 0.73
WOFC Western Ohio Fin. Corp. of OH 2,533 -929 316 0 1,920 2,309 0.83
</TABLE>
(1) Financial information is for the quarter ending December 31, 1995.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, Inc. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1995 by RP Financial, LC.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
167
<PAGE>
FIRM QUALIFICATION
STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, with special emphasis on
federally-insured financial institutions. RP Financial has earned national
recognition as being knowledgeable, innovative and effective in implementing
solutions to complex management, financial and regulatory situations. RP
Financial establishes long-term client relationships through its wide array of
services, emphasis on quality and timeliness, hands-on involvement by our
principals and senior consulting staff, and careful structuring of strategic
plans and transactions. RP Financial's staff draws from backgrounds in financial
institution consulting, regulatory agencies and investment banking, thereby
providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Our planning services
involve conducting situation analyses and establishing mission statements,
strategic goals and objectives, with overall emphasis on enhancement of
franchise value, capital management and planning, earnings improvement and
operational issues. Our planning services include the development of strategies
in the following areas: capital formation and management, interest rate risk
management, development of investment and liquidity portfolio targets,
development of loan and servicing portfolio targets and development of funding
composition targets. Our proprietary financial simulation model provides the
basis for evaluating the financial impact of alternative strategies as well as
assessing the feasibility and compatibility of such strategies with regulations
and accounting guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, in-house data bases of public and non-public banks and savings
institutions, valuation expertise and regulatory and accounting knowledge, RP
Financial's M&A consulting focuses on structuring transactions to enhance
shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary and related industry companies, mark-to-market transactions, loan and
servicing portfolios, non-traded securities, deposit portfolios and core
deposits. Our principals and staff are highly experienced in performing
valuation appraisals which conform with regulatory guidelines and appraisal
industry standards. RP Financial is the nation's leading valuation firm for
mutual-to-stock conversions of mutual institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Consultant (16)
William E. Pommerening, Managing Consultant (11)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (10)
James J. Oren, Vice President (9)
Timothy M. Biddle, Vice President (7)
Alan P. Carruthers, Senior Consultant-Community (14)
<PAGE>
EXHIBIT 99.5
PROXY STATEMENT FOR SPECIAL MEETING OF MEMBERS OF
CHESTER SAVINGS BANK, FSB
<PAGE>
EXHIBIT 99.5
CHESTER SAVINGS BANK, FSB
1112 STATE STREET
CHESTER, ILLINOIS 62233
(618) 826-5038
NOTICE OF SPECIAL MEETING OF MEMBERS
TO BE HELD ON ________, 1996
Notice is hereby given that a special meeting ("Special Meeting") of
members of Chester Savings Bank, FSB ("Savings Bank") will be held at the
Savings Bank's office at 1112 State Street, Chester, Illinois, on ________,
________, 1996, at _:__ _.m., Central Time. Business to be taken up at the
Special Meeting shall be:
(1) To approve a Plan of Conversion ("Plan") adopted by the Board of
Directors on March 12, 1996, said Plan providing for the conversion of the
Savings Bank from a federally chartered mutual savings bank to a federally
chartered stock savings bank (the "Converted Savings Bank"), as a subsidiary of
Chester Bancorp, Inc., including the adoption of a Federal Stock Charter and
amended Bylaws for the Converted Savings Bank (the "Stock Conversion"), the
conversion of the Converted Savings Bank to a national bank to be known as
"Chester National Bank" (the "Bank Conversion"), and the formation of a de novo
national bank by the Holding Company to be known as "Chester National Bank of
Missouri," and any other matters that may lawfully come before the meeting of
members in connection with the Plan, including the power to vote for any changes
in the Plan which are not materially adverse to the interest of the members of
the Savings Bank, are deemed advisable by the Board of Directors of the Savings
Bank, and are approved by the Office of Thrift Supervision.
(2) To consider and vote upon any other matters that may lawfully come
before the Special Meeting.
Note: As of the date of mailing of this Notice, the Board of Directors is
not aware of any other matters that may come before the Special Meeting.
The members entitled to vote at the Special Meeting shall be those members
of the Savings Bank, at the close of business on __________, 1996 and who
continue as members until the Special Meeting, and should the Special Meeting
be, from time to time, adjourned to a later time, until the final adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT H. GROSS
SECRETARY
Chester, Illinois
___________, 1996
PLEASE SIGN AND RETURN PROMPTLY EACH PROXY CARD YOU RECEIVE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. THIS WILL ASSURE NECESSARY REPRESENTATION AT THE SPECIAL
MEETING, BUT WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU SO DESIRE. THE
PROXY IS SOLICITED ONLY FOR THIS SPECIAL MEETING (AND ANY ADJOURNMENTS THEREOF)
AND WILL NOT BE USED FOR ANY OTHER MEETING. YOU MAY REVOKE YOUR WRITTEN PROXY
BY WRITTEN INSTRUMENT DELIVERED TO ROBERT H. GROSS, SECRETARY, CHESTER SAVINGS
BANK, FSB AT THE ABOVE ADDRESS AT ANY TIME PRIOR TO OR AT THE SPECIAL MEETING.
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CHESTER SAVINGS BANK, FSB
1112 STATE STREET
CHESTER, ILLINOIS 62233
(618) 826-5038
PROXY STATEMENT
___________, 1996
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY THE BOARD OF DIRECTORS OF
CHESTER SAVINGS BANK, FSB FOR USE AT A SPECIAL MEETING OF MEMBERS TO BE HELD ON
________, ________, 1996, AND ANY ADJOURNMENT OF THAT MEETING, FOR THE PURPOSES
SET FORTH IN THE FOREGOING NOTICE OF SPECIAL MEETING. YOUR BOARD OF DIRECTORS
AND MANAGEMENT URGE YOU TO VOTE FOR THE PLAN OF CONVERSION.
PURPOSE OF MEETING -- SUMMARY
A special meeting of members ("Special Meeting") of Chester Savings Bank,
FSB ("Savings Bank") will be held at the Savings Bank's office at 1112 State
Street, Chester, Illinois, on ________, 1996, at _:__ _.m., Central Time, for
the purpose of considering and voting upon a Plan of Conversion from Federal
Mutual Savings Bank to National Bank and Formation of a Holding Company ("Plan
of Conversion"), which, if approved by a majority of the total votes of the
members eligible to be cast, will permit the Savings Bank to convert from a
federally chartered mutual savings bank to a federally chartered capital stock
savings bank ("Converted Savings Bank") and the issuance of the Savings Bank's
capital stock to the Holding Company. The conversion of the Savings Bank to the
Converted Savings Bank and the acquisition of the Converted Savings Bank by the
Holding Company are collectively referred to herein as the "Stock Conversion."
Immediately following consummation of the Stock Conversion, the Converted
Savings Bank intends to convert from a federal stock savings bank to a national
bank ("Bank Conversion"), to be known as "Chester National Bank" ("Converted
Bank"). In connection with the Bank Conversion, the Holding Company will form a
de novo national bank subsidiary headquartered in Perryville, Missouri, to be
known as "Chester National Bank of Missouri" ("De Novo Bank"), which, following
a $3.0 million initial capitalization funded by a portion of the Stock
Conversion proceeds, will purchase all of the installment loans and a portion of
the mortgage loans of the Savings Bank's branch office located in Perryville,
Missouri ("Bank Formation"). The Converted Bank and the De Novo Bank are
collectively referred to herein as the "Banks." The Stock Conversion, the Bank
Conversion and the Bank Formation are referred to herein collectively as the
"Conversion" and are being undertaken pursuant to a plan of conversion adopted
by the Board of Directors of the Savings Bank ("Plan" or "Plan of Conversion").
Members entitled to vote on the Plan of Conversion are members of the
Savings Bank as of ________, 1996, and who continue as members until the Special
Meeting, and should the Special Meeting be, from time to time, adjourned to a
later time, until the final adjournment thereof. The Conversion requires the
approval of not less than a majority of the total votes eligible to be cast at
the Special Meeting.
The Plan of Conversion provides in part that, after receiving final
authorization from the Office of Thrift Supervision ("OTS"), the Savings Bank
will offer for sale shares of common stock of the Holding Company ("Common
Stock"), through the issuance of nontransferable rights to subscribe for the
Common Stock ("Subscription Rights") have been granted, in order of priority, to
(i) depositors with $50.00 or more on deposit at the Savings Bank as of January
15, 1995 ("Eligible Account Holders"), (ii) the Banks' employee stock ownership
plan ("ESOP"), a tax-qualified employee benefit plan, (iii) depositors with
$50.00 or more on deposit at the Savings Bank as of June 30, 1996 ("Supplemental
Eligible Account Holders"), and (iv) depositors of the Savings Bank as of
__________, 1996 ("Voting Record Date") and borrowers of the Savings Bank with
loans outstanding as of _____ __, 199_ which continue to be outstanding as of
the Voting Record Date ("Other Members"), subject to the priorities
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and purchase limitations set forth in the Plan of Conversion ("Subscription
Offering"). After, but subject to the prior rights of holders of Subscription
Rights, the Holding Company is offering the Common Stock for sale to members of
the general public through a direct community offering ("Direct Community
Offering") with preference given to natural persons who are permanent residents
of Randolph, Perry or Jackson counties of Illinois or Perry County, Missouri
("Local Community"), subject to the right of the Holding Company to accept or
reject orders in whole or in part in the Direct Community Offering. The
Subscription Offering and the Direct Community Offering are at times referred to
herein as the "Subscription and Direct Community Offering." Depending on market
conditions, the shares of Common Stock may be offered for sale in the Direct
Community Offering to eligible members of the general public on a best efforts
basis by a selling group of broker-dealers managed by EVEREN Securities, Inc.
("EVEREN Securities"). In addition, depending on market conditions upon the
completion of the Direct Community Offering, any shares not subscribed for in
the Subscription and Direct Community Offering may be offered to the general
public in an underwritten public offering ("Public Offering") to be managed by
EVEREN Securities. The Subscription and Direct Community Offering and the
Public Offering are referred to collectively as the "Offerings."
Adoption of a Federal Stock Charter ("Federal Stock Charter") and Bylaws
("Bylaws") of the Savings Bank is an integral part of the Plan of Conversion.
Copies of the Plan of Conversion and the proposed Federal Stock Charter and
Bylaws for the Savings Bank are attached to this Proxy Statement as exhibits.
They provide, among other things, for the termination of voting rights of
members and their rights to receive any surplus remaining after liquidation of
the Savings Bank. These rights, except for the rights of Eligible Account
Holders and Supplemental Eligible Account Holders in the liquidation account,
will vest exclusively in the holders of the stock in the Holding Company and the
Savings Bank. For further information, see "THE CONVERSION -- Effects of
Conversion to Stock Form on Depositors and Borrowers of the Savings Bank."
CHESTER SAVINGS BANK, FSB
The Savings Bank is a federally chartered mutual savings bank located in
Chester, Illinois, which is approximately 60 miles south of St. Louis, Missouri.
Originally chartered in 1919 as an Illinois-chartered mutual savings and loan
association under the name "Chester Building and Loan Association," the Savings
Bank converted to a federal charter and adopted its current name in 1990. In
1989, the Savings Bank acquired Heritage Federal Savings and Loan Association
("Heritage Federal") which at the time of the acquisition had assets of
approximately $50 million and offices in Sparta, Red Bud and Pinckneyville,
Illinois. The Savings Bank is regulated by the OTS, its primary federal
regulator, and the FDIC, the insurer of its deposits. The Savings Bank's
deposits are federally insured by the FDIC under the SAIF. The Savings Bank is a
member of the Federal Home Loan Bank ("FHLB") System. At March 31, 1996 the
Savings Bank had total assets of $136.8 million, total deposits of $108.5
million and total equity of $11.9 million, or 8.7% of total assets.
The Savings Bank is a community oriented financial institution which has
traditionally offered a variety of savings products to its retail customers
while concentrating its lending activities on real estate mortgage loans.
Lending activities have been focused primarily on the origination of loans
secured by one- to four-family residential dwellings. To a lesser extent,
lending activities also have included the origination of consumer loans and
commercial real estate and multi-family loans. At March 31, 1996, the Savings
Bank's gross loan portfolio totaled $56.7 million, of which 80.9% were one- to
four-family residential mortgage loans, 11.3% were consumer loans and 8% were
commercial real estate and multi-family loans. In addition, the Savings Bank has
maintained a significant portion of its assets in marketable securities. The
Savings Bank's investment portfolio has been weighted toward United States
Treasury and agency securities. This portfolio also has included a significant
amount of tax exempt state and municipal securities. In addition, the Savings
Bank has invested in mortgage-backed securities to supplement its lending
operations. Investments and mortgage-backed securities totaled $57.5 million and
$16.9 million, respectively, at March 31, 1996 .
The Savings Bank's primary market area is comprised of Randolph, Perry,
Jackson and Williamson counties of Illinois and Perry and Cape Girardeau
counties in Missouri. The Savings Bank faces strong competition in its
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market area. See "RISK FACTORS -- Dependence on Local Economy and Competition
Within Market Area" in the Prospectus. The Savings Bank's principal executive
office is located at 1112 State Street, Chester, Illinois 62233, and its
telephone number is (618) 826-5038.
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
The Board of Directors of the Savings Bank has fixed the close of business
on __________, 1996 as the record date ("Voting Record Date") for the
determination of members entitled to notice of and to vote at the Special
Meeting. All holders of the Savings Bank's savings or other authorized accounts
are members of the Savings Bank under its current charter. All members of
record as of the close of business on the Voting Record Date who continue to be
members on the date of the Special Meeting or any adjournment thereof will be
entitled to vote at the Special Meeting or such adjournment.
Each eligible depositor member will be entitled at the Special Meeting to
cast one vote for each $100, or fraction thereof, of the aggregate withdrawal
value of all of his savings accounts in the Savings Bank as of the Voting Record
Date. Borrowers with loans outstanding as of __________, 1996 which continue to
be outstanding as of the Voting Record Date will be entitled to cast one vote
for the period of time such borrowings remain in existence. No member is
entitled to cast more than 1,000 votes. Any number of members present and
voting, represented in person or by proxy, at the Special Meeting will
constitute a quorum.
Approval of the Plan of Conversion will require the affirmative vote of a
majority of the total outstanding votes of the Savings Bank's members eligible
to be cast at the Special Meeting. As of the Voting Record Date for the Special
Meeting, there were approximately _______ votes eligible to be cast, of which
_______ votes constitutes a majority.
PROXIES
Members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. Enclosed is a proxy which may be used by any eligible
member to vote on the Plan of Conversion. All properly executed proxies
received by management will be voted in accordance with the instructions
indicated thereon by the members giving such proxies. If no instructions are
given, such proxies will be voted in favor of the Plan of Conversion. If any
other matters are properly presented at the Special Meeting and may properly be
voted on, all proxies will be voted on such matters in accordance with the best
judgment of the proxy holders named therein. If the enclosed proxy is returned,
it may be revoked at any time before it is voted by written notice to the
Secretary of the Savings Bank, by submitting a later dated proxy, or by
attending and voting in person at the Special Meeting. The proxies being
solicited are only for use at the Special Meeting and at any and all
adjournments thereof and will not be used for any other meeting. Management is
not aware of any other business to be presented at the Special Meeting.
The Savings Bank, as trustee for individual retirement accounts at the
Savings Bank, will vote in favor of the Plan of Conversion, unless the
beneficial owner executes and returns the enclosed proxy for the Special Meeting
or attends the Special Meeting and votes in person.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by officers, directors or regular employees of the
Savings Bank, in person, by telephone or through other forms of communication
and, if necessary, the Special Meeting may be adjourned to an alternative date.
Such persons will be reimbursed by the Savings Bank for their reasonable out-of-
pocket expenses incurred in connection with such solicitation.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE SAVINGS BANK UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE PLAN OF CONVERSION. VOTING IN FAVOR OF THE PLAN OF CONVERSION
WILL NOT OBLIGATE ANY VOTER TO PURCHASE ANY STOCK.
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THE CONVERSION
THE OTS HAS GIVEN APPROVAL TO THE PLAN SUBJECT TO THE PLAN'S APPROVAL BY
THE MEMBERS OF THE SAVINGS BANK ENTITLED TO VOTE ON THE MATTER AND SUBJECT TO
THE SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL.
OTS APPROVAL, HOWEVER, DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF
THE PLAN.
GENERAL
On March 12, 1996, the Savings Bank's Board of Directors adopted the Plan
of Conversion pursuant to which the Savings Bank will convert to stock form and
subsequently convert to a national bank to be known as Chester National Bank,
and a newly chartered bank subsidiary will be formed by the Holding Company to
be known as Chester National Bank of Missouri, which will purchase all of the
installment loans and a portion of the mortgage loans of the Savings Bank's
Perryville branch. All of the outstanding capital stock of the Chester National
Bank and Chester National Bank of Missouri will beheld by the Holding Company, a
newly formed Delaware corporation. The Holding Company and the Savings Bank
intend to pursue the business strategy described in this Prospectus with the
goal of enhancing long-term shareholder value. Neither the Holding Company nor
the Savings Bank has any existing plan to pursue any possible business
combination, and neither has any agreement or understanding, written or oral,
with respect to any possible business combination.
THE FOLLOWING DISCUSSION OF THE PLAN OF CONVERSION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE PLAN OF CONVERSION, WHICH IS ATTACHED AS EXHIBIT A
TO THE SAVINGS BANK'S PROXY STATEMENT AND IS AVAILABLE FROM THE SAVINGS BANK
UPON REQUEST. The OTS has approved the Plan of Conversion subject to the Plan's
approval by the members of the Savings Bank entitled to vote on the matter at a
Special Meeting called for that purpose to be held on ___________, 1996, and
subject to the satisfaction of certain other conditions imposed by the OTS in
its approval.
If the Board of Directors of the Savings Bank decides for any reason, such
as possible delays resulting from overlapping regulatory processing or policies
or conditions which could adversely affect the Savings Bank's or the Holding
Company's ability to consummate the Conversion and transact its business as
contemplated herein and in accordance with the Savings Bank's operating
policies, at any time prior to the issuance of the Common Stock, not to use the
holding company form of organization in implementing the Conversion, the Plan of
Conversion will be amended to not use the holding company form of organization
in the Conversion. In the event that such a decision is made, the Savings Bank
will promptly refund all subscriptions or orders received together with accrued
interest, withdraw the Holding Company's registration statement from the SEC and
will take all steps necessary to consummate the Conversion and proceed with a
new offering without the Holding Company, including filing any necessary
documents with the OTS. In such event, and provided there is no regulatory
action, directive or other consideration upon which basis the Savings Bank
determines not to consummate the Conversion, the Savings Bank will issue and
sell the common stock of the Savings Bank. There can be no assurance that the
OTS would approve the Conversion if the Savings Bank decided to proceed without
the Holding Company. The following description of the Plan assumes that a
holding company form of organization will be utilized in the Conversion. In the
event that a holding company form of organization is not utilized, all other
pertinent terms of the Plan as described below will apply to the Conversion of
the Savings Bank from mutual to stock form of organization and the sale of the
Savings Bank's common stock.
The Conversion will be accomplished through the adoption of a Federal Stock
Charter and Bylaws to authorize the issuance of capital stock by the Converted
Savings Bank, the issuance of all the Converted Savings Bank's capital stock to
be outstanding upon consummation of the Stock Conversion to the Holding Company,
the offer and sale of the Common Stock of the Holding Company and the conversion
of the Converted Savings Bank to the Converted Bank. Upon issuance of the
Converted Savings Bank's shares of capital stock to the Holding Company, the
Converted Savings Bank will be a wholly owned subsidiary of the Holding Company.
Following consummation of the Stock Conversion, the Bank Conversion whereby the
Converted Savings Bank will convert to
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the Converted Bank, and the Bank Formation whereby the De Novo Bank will
purchase all of the installment loans and a portion of the mortgage loans of the
Savings Bank's Perryville branch office, will be promptly effectuated.
The Holding Company has applied for approval from the OTS to become the
holding company of the Converted Savings Bank subject to the satisfaction of
certain conditions and to acquire all of the common stock of the Converted
Savings Bank to be issued in the Stock Conversion. The Stock Conversion will be
effected only upon completion of the sale of all of the shares of Common Stock
to be issued by the Holding Company pursuant to the Plan of Conversion. The
Savings Bank has applied for approval for the Bank Conversion from the OCC and
the Holding Company has applied for approval from the Federal Reserve for
continued ownership of 100% of the stock of the Converted Bank and the De Novo
Bank following the Bank Conversion and the Bank Formation.
The aggregate purchase price of the Common Stock to be issued in the
Conversion will be within the Estimated Valuation Range of between $14,875,000
and $20,125,000 which may be increased to $23,143,750, based upon an independent
appraisal of the estimated pro forma market value of the Common Stock prepared
by RP Financial. All shares of the Common Stock to be issued and sold in the
Stock Conversion will be sold at the same price. The independent appraisal will
be updated, if necessary, and the final price of the shares of the Common Stock
will be determined at the completion of the Subscription and Direct Community
Offering. RP Financial is a consulting firm experienced in the valuation and
appraisal of savings institutions. For additional information, see "-- Stock
Pricing and Number of Shares to be Issued."
The Plan of Conversion provides generally that (i) the Savings Bank will
convert from a federally chartered mutual savings bank to a federally chartered
stock savings bank; (ii) the issuance of all the Converted Savings Bank's
capital stock to be outstanding upon consummation of the Stock Conversion to the
Holding Company; (iii) the offer and sale of the Common Stock by the Holding
Company in the Subscription Offering to persons having Subscription Rights and
in a Direct Community Offering to certain members of the general public with
preference given first to natural persons and trusts of natural persons residing
in the Local Community; (iv) shares of Common Stock not subscribed for in the
Subscription and Direct Community Offering will be offered to certain members of
the general public in a Public Offering; (v) the Converted Savings Bank will
convert to a national bank; and (vi) the Holding Company will form a de novo
national bank subsidiary to be known as Chester National Bank of Missouri, which
will purchase all of the installment loans and a portion of the mortgage loans
of the Savings Bank's Perryville branch. See "USE OF PROCEEDS." The Conversion
will be effected only upon completion of the sale of at least $14,875,000 of
Common Stock to be issued pursuant to the Plan of Conversion.
As part of the Conversion, the Holding Company is making a Subscription
Offering of its Common Stock to holders of Subscription Rights in the following
order of priority: (i) Eligible Account Holders (depositors with $50.00 or more
on deposit as of January 15, 1995); (ii) the Savings Bank's ESOP; (iii)
Supplemental Eligible Account Holders (depositors with $50.00 or more on deposit
as of June 30, 1996); and (iv) Other Members (depositors of the Savings Bank as
of __________, 1996 and borrowers of the Savings Bank with loans outstanding as
of ____ __, 199_ which continue to be outstanding as of __________, 1996). After
the Subscription Offering and subject to the prior rights of holders of
Subscription Rights, the Holding Company is offering the Common Stock for sale
to certain members of the general public through a Direct Community
Offering.
Shares of Common Stock not sold in the Subscription and Direct Community
Offering may be offered in the Public Offering. Regulations require that the
Public Offering be completed within 45 days after completion of the Subscription
Offering unless extended by the Savings Bank or the Holding Company with the
approval of the regulatory authorities. If the Public Offering is determined not
to be feasible, the Board of Directors of the Savings Bank will consult with the
regulatory authorities to determine an appropriate alternative method for
selling the unsubscribed shares of Common Stock. The Plan of Conversion provides
that the Conversion must be completed within 24 months after the date of the
approval of the Plan of Conversion by the members of the Savings Bank.
No sales of Common Stock may be completed, either in the Subscription,
Direct Community or Public Offerings, unless the Plan of Conversion is approved
by the members of the Savings Bank.
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The completion of the Offerings, however, is subject to market conditions
and other factors beyond the Savings Bank's control. No assurance can be given
as to the length of time after approval of the Plan of Conversion at the Special
Meeting that will be required to complete the Public Offering or other sale of
the Common Stock. If delays are experienced, significant changes may occur in
the estimated pro forma market value of the Holding Company and the Savings Bank
as converted, together with corresponding changes in the net proceeds realized
by the Holding Company from the sale of the Common Stock. In the event the
Conversion is terminated, the Savings Bank would be required to charge all
Conversion expenses against current income.
Orders for shares of Common Stock will not be filled until at least
1,487,500 shares of Common Stock have been subscribed for or sold and the OTS
approves the final valuation and the Conversion closes. If the Conversion is not
consummated by ___________, 1996 (45 days after the last day of the fully
extended Subscription Offering) and the OTS consents to an extension of time to
consummate the Conversion, subscribers will be given the right to increase,
decrease or rescind their subscriptions. Unless an affirmative indication is
received from subscribers that they wish to continue to subscribe for shares,
the funds will be returned promptly, together with accrued interest at the
passbook rate from the date payment is received until the funds are returned to
the subscriber. If such period is not extended, or, in any event, if the
Conversion is not consummated by ______, 1996, all withdrawal authorizations
will be terminated and all funds held will be promptly returned together with
accrued interest at the Savings Bank's passbook rate from the date payment is
received until the Conversion is terminated.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE SAVINGS
BANK
VOTING RIGHTS. Savings members and borrowers will have no voting rights in
the converted Savings Bank or the Holding Company and therefore will not be able
to elect directors of the Savings Bank or the Holding Company or to control
their affairs. Currently, these rights are accorded to savings members of the
Savings Bank. Subsequent to the Conversion, voting rights will be vested
exclusively in the Holding Company with respect to the Savings Bank and the
holders of the Common Stock as to matters pertaining to the Holding Company.
Each holder of Common Stock shall be entitled to vote on any matter to be
considered by the stockholders of the Holding Company. A stockholder will be
entitled to one vote for each share of Common Stock owned.
SAVINGS ACCOUNTS AND LOANS. The Savings Bank's savings accounts, account
balances and existing FDIC insurance coverage of savings accounts will not be
affected by the Conversion. Furthermore, the Conversion will not affect the loan
accounts, loan balances or obligations of borrowers under their individual
contractual arrangements with the Savings Bank.
TAX EFFECTS. The Savings Bank has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion will constitute a nontaxable
reorganization under Section 368(a)(1)(F) of the Code. Among other things, the
opinion states that: (i) no gain or loss will be recognized to the Savings Bank
in its mutual or stock form by reason of its Conversion; (ii) no gain or loss
will be recognized to its account holders upon the issuance to them of accounts
in the Savings Bank immediately after the Conversion, in the same dollar amounts
and on the same terms and conditions as their accounts at the Savings Bank in
its mutual form plus interest in the liquidation account; (iii) the tax basis of
account holders' accounts in the Savings Bank immediately after the Conversion
will be the same as the tax basis of their accounts immediately prior to
Conversion; (iv) the tax basis of each account holder's interest in the
liquidation account will be zero; (v) the tax basis of the Common Stock
purchased in the Conversion will be the amount paid and the holding period for
such stock will commence at the date of purchase; and (vi) no gain or loss will
be recognized to account holders upon the receipt or exercise of Subscription
Rights in the Conversion, except to the extent Subscription Rights are deemed to
have value as discussed below. Unlike a private letter ruling issued by the IRS,
an opinion of counsel is not binding on the IRS and the IRS could disagree with
the conclusions reached therein. In the event of such disagreement, no assurance
can be given that the conclusions reached in an opinion of counsel would be
sustained by a court if contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that the
receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan will be taxable
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to the extent, if any, that the Subscription Rights are deemed to have a fair
market value. RP Financial, a financial consulting firm retained by the Savings
Bank, whose findings are not binding on the IRS, has indicated that the
Subscription Rights do not have any value, based on the fact that such rights
are acquired by the recipients without cost, are nontransferable and of short
duration and afford the recipients the right only to purchase shares of the
Common Stock at a price equal to its estimated fair market value, which will be
the same price paid by purchasers in the Direct Community Offering for
unsubscribed shares of Common Stock. If the Subscription Rights are deemed to
have a fair market value, the receipt of such rights may only be taxable to
those Eligible Account Holders, Supplemental Eligible Account Holders (if any)
and Other Members who exercise their Subscription Rights. The Savings Bank could
also recognize a gain on the distribution of such Subscription Rights. Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members are
encouraged to consult with their own tax advisers as to the tax consequences in
the event the Subscription Rights are deemed to have a fair market value.
The Savings Bank has also received an opinion from Bryan Cave LLP, St.
Louis, Missouri, that, assuming the Conversion does not result in any federal
income tax liability to the Savings Bank, its account holders, or the Holding
Company, implementation of the Plan of Conversion will not result in any
Illinois income tax liability to such entities or persons.
The opinions of Breyer & Aguggia and Bryan Cave LLP and the letter from RP
Financial are filed as exhibits to the Registration Statement. See "ADDITIONAL
INFORMATION."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION PARTICULAR TO THEM.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of
the Savings Bank in its present mutual form, each depositor in the Savings Bank
would receive a pro rata share of any assets of the Savings Bank remaining after
payment of claims of all creditors (including the claims of all depositors up to
the withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his or her
deposit account to the total value of all deposit accounts in the Savings Bank
at the time of liquidation.
After the Conversion, holders of withdrawable deposit(s) in the Savings
Bank including certificates of deposit ("Savings Account(s)") shall not be
entitled to share in any residual assets in the event of liquidation of the
Savings Bank. However, pursuant to OTS regulations, the Savings Bank shall, at
the time of the Conversion, establish a liquidation account in an amount equal
to its total equity as of the date of the latest statement of financial
condition contained herein.
The liquidation account shall be maintained by the Savings Bank (and
assumed by the Banks) subsequent to the Conversion for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders who retain their
Savings Accounts in the Savings Bank. Each Eligible Account Holder and
Supplemental Eligible Account Holder shall, with respect to each Savings Account
held, have a related inchoate interest in a portion of the liquidation account
balance ("subaccount").
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder or a Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of such holder's "qualifying deposit" in the
Savings Account and the denominator is the total amount of the "qualifying
deposits" of all such holders. Such initial subaccount balance shall not be
increased, and it shall be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing day of the Savings Bank subsequent to January 15, 1995 is less than the
lesser of (i) the deposit balance in such Savings Account at the close of
business on any other annual closing date subsequent to January 15, 1995 or June
30, 1996 or (ii) the amount of the "qualifying
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deposit" in such Savings Account on January 15, 1995 or June 30, 1996, then the
subaccount balance for such Savings Account shall be adjusted by reducing such
subaccount balance in an amount proportionate to the reduction in such deposit
balance. In the event of a downward adjustment, such subaccount balance shall
not be subsequently increased, notwithstanding any increase in the deposit
balance of the related Savings Account. If any such Savings Account is closed,
the related subaccount balance shall be reduced to zero.
In the event of a complete liquidation of the Savings Bank or the Banks
(and only in such event) each Eligible Account Holder and Supplemental Eligible
Account Holder shall be entitled to receive a liquidation distribution from the
liquidation account in the amount of the then current adjusted subaccount
balance(s) for Savings Account(s) then held by such holder before any
liquidation distribution may be made to stockholders. No merger, consolidation,
bulk purchase of assets with assumptions of Savings Accounts and other
liabilities or similar transactions with another federally insured institution
in which the Savings Bank (or the Banks) is not the surviving institution(s)
shall be considered to be a complete liquidation. In any such transaction the
liquidation account shall be assumed by the surviving institution.
REVIEW OF OTS ACTION
Any person aggrieved by a final action of the OTS which approves, with or
without conditions, or disapproves a plan of conversion pursuant to this part
may obtain review of such action by filing in the court of appeals of the United
States for the circuit in which the principal office or residence of such person
is located, or in the United States Court of Appeals for the District of
Columbia, a written petition praying that the final action of the OTS be
modified, terminated or set aside. Such petition must be filed within 30 days
after the publication of notice of such final action in the Federal Register, or
----------------
30 days after the mailing by the applicant of the notice to members as provided
for in 12 C.F.R. (S)563b.6(c), whichever is later. The further procedure for
review is as follows: A copy of the petition is forthwith transmitted to the OTS
by the clerk of the court and thereupon the OTS files in the court the record in
the proceeding, as provided in Section 2112 of Title 28 of the United States
Code. Upon the filing of the petition, the court has jurisdiction, which upon
the filing of the record is exclusive, to affirm, modify, terminate, or set
aside in whole or in part, the final action of the OTS. Review of such
proceedings is as provided in Chapter 7 of Title 5 of the United States Code.
The judgment and decree of the court is final, except that they are subject to
review by the United States Supreme Court upon certiorari as provided in Section
1254 of Title 28 of the United States Code.
ADDITIONAL INFORMATION
The Holding Company has filed with the Securities and Exchange Commission
("SEC") a Registration Statement on Form S-1 (File No. 333-2470) under the
Securities Act of 1933, as amended, with respect to the Common Stock offered in
the Conversion. The accompanying Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Such information may be
inspected at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549; 500 West Madison Street, Suite
1400, Room 1100, Chicago, Illinois 60661; and 75 Park Place, New York, New York
10007. Copies may be obtained at prescribed rates from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Savings Bank has filed with the OTS an Application for Approval of
Conversion, which includes proxy materials for the Savings Bank's Special
Meeting and certain other information. The accompanying Prospectus omits certain
information contained in such Application. The Application, including the proxy
materials, exhibits and certain other information that are a part thereof, may
be inspected, without charge, at the offices of the OTS, 1700 G Street, N.W.,
Washington, D.C. 20552 and at the office of the Regional Director of the OTS at
the Central Regional Office of the OTS, 200 West Madison Street, Suite 1300,
Chicago, Illinois, 60606.
8
<PAGE>
Copies of the Holding Company's Certificate of Incorporation and Bylaws may
be obtained by written request to the Savings Bank.
All persons eligible to vote at the Special Meeting should review both this
Proxy Statement and the accompanying Prospectus carefully. However, no person is
obligated to purchase any Common Stock. For additional information, you may call
the Conversion Center at (618) 826-3217.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT H. GROSS
SECRETARY
Chester, Illinois
____________, 1996
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN
PERSON AT THE SPECIAL MEETING, TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED
PROXY CARD(S) AS SOON AS POSSIBLE TO ASSURE THAT YOUR VOTES WILL BE COUNTED.
THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND THE SPECIAL
MEETING. YOU MAY REVOKE YOUR PROXY BY WRITTEN INSTRUMENT DELIVERED TO THE
SECRETARY OF THE SAVINGS BANK AT ANY TIME PRIOR TO OR AT THE SPECIAL MEETING OR
BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
________________________
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS IN THOSE
JURISDICTIONS IN WHICH IT IS LAWFUL TO MAKE SUCH OFFER.
9
<PAGE>
EXHIBIT A
CHESTER SAVINGS BANK, FSB
CHESTER, ILLINOIS
PLAN OF CONVERSION
FROM FEDERAL MUTUAL SAVINGS BANK TO NATIONAL BANK
AND FORMATION OF A HOLDING COMPANY
INTRODUCTION
------------
I. General
-------
On March 12, 1996, the Board of Directors of Chester Savings Bank, FSB,
Chester, Illinois ("Savings Bank"), after careful study and consideration,
adopted by unanimous vote this Plan of Conversion ("Plan"), which provides for
(i) the conversion of the Savings Bank from a federally chartered mutual savings
bank to a federally chartered stock savings bank under the name "Chester Savings
Bank, FSB" ("Converted Savings Bank"), (ii) the concurrent formation of a
holding company for the Converted Savings Bank ("Holding Company"), and (iii)
the subsequent (a) conversion of the Converted Savings Bank from a federally
chartered stock savings bank to a national bank under the name "Chester National
Bank" ("Converted Bank") and (b) the purchase of the assets and the assumption
of the liabilities of the Perryville, Missouri branch office of the Converted
Savings Bank by a de novo national bank subsidiary of the Holding Company under
the name "Chester National Bank of Missouri" ("De Novo Bank"). The conversion of
the Savings Bank to the Converted Savings Bank, the acquisition of control of
the Converted Savings Bank by the Holding Company and the issuance of stock by
the Holding Company as provided herein, are collectively referred to herein as
the "Stock Conversion." The conversion of the Converted Savings Bank to the
Converted Bank and the purchase of the assets and the assumption of the
liabilities of the Perryville, Missouri branch office of the Converted Savings
Bank by the De Novo Bank are collectively referred to herein as the "Bank
Conversion." The Stock Conversion and the Bank Conversion are referred to herein
collectively as the "Conversion."
All capitalized terms contained in the Plan shall have the meanings
ascribed to them in Section II hereof.
Pursuant to the Plan, shares of Conversion Stock in the Holding Company
will be offered as part of the Stock Conversion in a Subscription Offering
pursuant to nontransferable Subscription Rights at a predetermined and uniform
price first, to the Savings Bank's Eligible Account Holders, second to the Tax-
Qualified Employee Stock Benefit Plans, third to Supplemental Eligible Account
Holders of record as of the last day of the calendar quarter preceding OTS
approval of the Savings Bank's application to convert to stock form, and fourth
to Other Members of the Savings Bank. Any shares of Conversion Stock remaining
unsold after the Subscription Offering may be offered for sale to the public
through a Direct Community Offering and/or an Underwritten Public Offering, as
determined by the Boards of Directors of the Savings Bank and the Holding
Company in their sole discretion. The aggregate Purchase Price of the Conversion
Stock will be based upon an independent appraisal of the Savings Bank and will
reflect the estimated pro forma market value of the Converted Bank and the De
Novo Bank as subsidiaries of the Holding Company.
Immediately following consummation of the Stock Conversion, the Holding
Company, as the sole stockholder of the Converted Savings Bank, shall approve
the Bank Conversion and use part of the net proceeds of the Stock Conversion
retained by it to initially capitalize the De Novo Bank, and the Converted
Savings Bank and the De Novo Bank shall take such actions as may be necessary to
consummate the Bank Conversion.
The Stock Conversion is subject to regulations of the Director of the OTS of
the United States Department of the Treasury pursuant to Section 5(i) of the
Home Owners' Loan Act (Part 563b of the Rules and Regulations Applicable to All
Savings Associations).
<PAGE>
Consummation of the Conversion is subject to the approval of this Plan and
the Conversion by the OTS and by the affirmative vote of Members of the Savings
Bank holding not less than a majority of the total votes eligible to be cast at
a special meeting of the Members to be called to consider the Conversion.
Consummation of the Bank Conversion also requires approval of the OCC and the
Federal Reserve Board.
It is the desire of the Board of Directors to attract new capital to the
Savings Bank to increase its net worth, to support future savings growth, to
increase the amount of funds available for other lending and investment, to
provide greater resources for the expansion of customer services, to facilitate
future expansion and, because applicable laws and regulations do not provide for
the organization of mutual commercial banks, to enable the Savings Bank to
complete the Bank Conversion. In addition, the Board of Directors intends to
implement stock option plans and other stock benefit plans as part of the
Conversion in order to attract and retain qualified directors and officers. The
purpose of the Bank Conversion is to provide the Savings Bank with additional
operating flexibility and enhance its ability to provide a full range of banking
products and services to its community. The Savings Bank is currently
significantly in excess of the OTS reserve and liquidity requirements and will
be significantly in excess of the OCC's and Federal Reserve's requirements upon
conversion to a national bank. It is the further desire of the Board of
Directors to reorganize the Converted Savings Bank (or the Converted Bank and
the De Novo Bank upon the consummation of the Bank Conversion) as the wholly
owned subsidiary of the Holding Company to enhance flexibility of operations,
diversification of business opportunities and financial capability for business
and regulatory purposes and to enable the Converted Bank to compete more
effectively with other financial service organizations.
No change will be made in the Board of Directors or management of the
Savings Bank as a result of the Conversion.
II. Definitions
-----------
As used in this Plan, the terms set forth below have the following
meanings:
A. Acting in Concert: (1) Knowing participation in a joint activity or
-----------------
interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement; or (2) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangement,
whether written or otherwise. A Person (as defined by 12 C.F.R.
(S)563b.2(a)(26)) who acts in concert with another Person ("other party") shall
also be deemed to be acting in concert with any Person who is also acting in
concert with that other party, except that any Tax-Qualified Employee Stock
Benefit Plan will not be deemed to be acting in concert with its trustee or a
Person who serves in a similar capacity solely for the purpose of determining
whether stock held by the trustee and stock held by the Tax-Qualified Employee
Benefit Plan will be aggregated.
B. Associate: When used to indicate a relationship with any Person,
---------
means (l) any corporation or organization (other than the Savings Bank or a
majority-owned subsidiary of the Savings Bank, or the Holding Company) of which
such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent or more of any class of equity securities, (2)
any trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar fiduciary
capacity, except that it does not include a Tax-Qualified Employee Stock Benefit
Plan and (3) any relative or spouse of such Person or any relative of such
spouse, who has the same home as such Person or who is a director or officer of
the Savings Bank, any of its subsidiaries, or the Holding Company.
D. Bank Conversion: The (i) conversion of the Converted Savings Bank
---------------
from a federally chartered capital stock savings bank to a national bank and
(ii) the Purchase and Assumption Transaction.
E. Capital Stock: Any and all authorized stock in the Converted Savings
-------------
Bank.
A-2
<PAGE>
F. Common Stock: Any and all authorized common stock in the Holding
------------
Company subsequent to the Conversion.
G. Conversion: The Stock Conversion and the Bank Conversion together,
----------
except as provided in Paragraph III.H herein.
H. Conversion Stock: Common Stock to be issued and sold by the Holding
----------------
Company pursuant to the Plan.
I. Converted Bank: "Chester National Bank," the national bank resulting
--------------
from the Bank Conversion.
J. Converted Savings Bank: "Chester Savings Bank, FSB," the federally
----------------------
chartered capital stock savings bank resulting from the Stock Conversion.
K. De Novo Bank: "Chester National Bank of Missouri," the de novo
------------
national bank, initially capitalized by the Holding Company from the portion of
the net proceeds of the Stock Conversion retained by the Holding Company, that
will engage in the Purchase and Assumption Transaction.
L. Direct Community Offering: The offering for sale of Conversion Stock
-------------------------
to the public.
M. Eligibility Record Date: January 15, 1995.
-----------------------
N. Eligible Account Holder: Holder of a Qualifying Deposit in the
-----------------------
Savings Bank on the Eligibility Record Date.
O. FDIC: Federal Deposit Insurance Corporation.
----
P. FDIC Insurance Application: The application submitted to the FDIC to
--------------------------
obtain insurance for the deposit accounts of the De Novo Bank.
Q. Federal Reserve Board: The Board of Governors of the Federal Reserve
---------------------
System.
R. Form AC Application: The application submitted to the OTS for
-------------------
approval of the Stock Conversion.
S. H-(e)1 Application: The application submitted to the OTS on OTS Form
------------------
H-(e)1 or if applicable, Form H-(e)1-S, for approval of the Holding Company's
acquisition of all of the Capital Stock.
T. Holding Company: A corporation to be formed by the Savings Bank under
---------------
state law for the purpose of becoming a holding company through the issuance and
sale of its stock under the Plan, and concurrent acquisition of 100% of the
common stock of the Converted Savings Bank to be issued pursuant to the Plan and
100% of the common stock of the De Novo Bank.
U. Holding Company Stock: Any and all authorized stock of the Holding
---------------------
Company.
V. Local Community: Jackson, Perry and Randolph, Counties, Illinois, and
---------------
Cape Girardeau and Perry Counties, Missouri.
W. Market Maker: A dealer (i.e., any Person who engages directly or
------------
indirectly as agent, broker, or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system or furnishes bona fide competitive bid and offer quotations
A-3
<PAGE>
on request and (ii) is ready, willing and able to effect transactions in
reasonable quantities at his quoted prices with other brokers or dealers.
X. Members: All Persons or entities who qualify as members of the
-------
Savings Bank pursuant to its Charter and Bylaws prior to the Stock Conversion.
Y. OCC: The Office of the Comptroller of the Currency.
---
Z. OCC Conversion Application: The application submitted to the OCC for
--------------------------
the approval of the Bank Conversion.
AA. OCC De Novo Application: The application submitted to the OCC to
-----------------------
charter the De Novo Bank.
BB. OCC Purchase and Assumption Application: The application submitted to
---------------------------------------
the OCC for the approval of the Purchase and Assumption Transaction.
CC. Officer: An executive officer of the Savings Bank, which includes the
-------
Chairman of the Board, President, Executive Vice President, Senior Vice
Presidents, Vice Presidents in charge of principal business functions, the
Secretary and the Treasurer as well as any other person performing similar
functions.
DD. Order Forms: Forms, including a certification form specified in 12
-----------
C.F.R. 563.76(c), to be used for the purchase of Conversion Stock sent to
Eligible Account Holders and other parties eligible to purchase Conversion Stock
in the Subscription Offering pursuant to the Plan.
EE. Other Member: Holder of a Savings Account (other than Eligible
------------
Account Holders and Supplemental Eligible Account Holders) as of the Record Date
and borrowers from the Savings Bank as provided in the Savings Bank's Federal
Mutual Charter who continue to be borrowers from the Savings Bank as of the
Record Date.
FF. OTS: Office of Thrift Supervision of the United States Department of
---
the Treasury.
GG. OTS Bank Conversion Application: The application submitted to the OTS
-------------------------------
for approval of the Bank Conversion, including the Purchase and Assumption
Transaction.
HH. Person: An individual, corporation, partnership, association, joint
------
stock company, trust, unincorporated organization or a government or any
political subdivision thereof.
II. Plan: This Plan of Conversion, which provides for the conversion of
----
the Savings Bank from a federally chartered mutual savings bank to a federally
chartered capital stock savings bank (i.e., the Converted Savings Bank), the
concurrent formation of a holding company for the Converted Savings Bank, and
the subsequent conversion of the Converted Savings Bank from a federally
chartered capital stock savings bank to a national bank (i.e., the Converted
Bank) and the purchase of the assets and assumption of the liabilities of the
Perryville, Missouri branch office of the Converted Savings Bank by a de novo
national bank subsidiary of the Holding Company (i.e., the De Novo Bank).
JJ. Purchase and Assumption Transaction: The purchase of the assets and
-----------------------------------
assumption of the liabilities of the Perryville, Missouri branch office of the
Converted Savings Bank by the De Novo Bank.
KK. Qualifying Deposit: The deposit balance in any Savings Account as of
------------------
the Eligibility Record Date or the Supplemental Eligibility Record Date, as
applicable; provided, however, that no Savings Account with a deposit balance of
less than $50 shall constitute a Qualifying Deposit.
A-4
<PAGE>
LL. Record Date: Date which determines which Members are entitled to vote
-----------
at the Special Meeting.
MM. Registration Statement: The registration statement on Form S-1 or
----------------------
other applicable forms filed by the Holding Company with the SEC for the purpose
of registering the Conversion Stock under the Securities Act of 1933, as
amended.
NN. Savings Account(s): Withdrawable deposit(s) in the Savings Bank,
------------------
Converted Savings Bank or Converted Bank, as applicable, including certificates
of deposit.
OO. Savings Bank: Chester Savings Bank, FSB, in its present form as a
------------
federally chartered mutual savings bank.
PP. SEC: Securities and Exchange Commission.
---
QQ. Special Meeting: The special meeting of Members called for the
---------------
purpose of considering the Plan for approval.
RR. Stock Conversion: The conversion of the Savings Bank from a federally
----------------
chartered mutual savings bank to a federally chartered capital stock savings
bank through amendment of the Savings Bank's federal Charter and Bylaws, the
issuance and sale to the Holding Company of all the Capital Stock issued by the
Converted Savings Bank in connection therewith, and the issuance by the Holding
Company of the Conversion Stock, all in accordance with the Plan.
SS. Subscription Offering: The offering of Conversion Stock to Eligible
---------------------
Account Holders, Tax-Qualified Employee Stock Benefit Plans, Supplemental
Eligible Account Holders and Other Members under the Plan.
TT. Subscription Rights: Nontransferable, nonnegotiable, personal rights
-------------------
of Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans,
Supplemental Eligible Account Holders and Other Members to purchase Conversion
Stock.
UU. Supplemental Eligibility Record Date: The last day of the calendar
------------------------------------
quarter preceding the approval of the Plan by the OTS.
VV. Supplemental Eligible Account Holder: Holder of a Qualifying Deposit
------------------------------------
in the Savings Bank (other than an Officer or director or their Associates) on
the Supplemental Eligibility Record Date.
WW. Tax Qualified Employee Stock Benefit Plan: Any defined benefit plan
-----------------------------------------
or defined contribution plan of the Savings Bank or Holding Company, such as an
employee stock ownership plan, bonus plan, profit-sharing plan or other plan,
which, with its related trust meets the requirements to be "qualified" under
section 401 of the Internal Revenue Code. A "non-tax-qualified employee stock
benefit plan" is any defined benefit plan or defined contribution plan that is
not so qualified.
XX. Underwriters: Investment banking firms purchasing Conversion Stock
------------
from the Holding Company for resale to the public.
YY. Underwritten Public Offering: The offering for sale to the public by
----------------------------
the Underwriters on a firm commitment basis of the Conversion Stock remaining
unsubscribed following the Subscription and Direct Community Offering.
ZZ. Y-3 Application: The application submitted to the Federal Reserve
---------------
Board on Federal Reserve Board Form FR Y-3 for approval for the Holding Company
to maintain control of the Converted Bank and acquire control of the De Novo
Bank.
A-5
<PAGE>
III. Steps Prior to Submission of the Plan to the Members for Approval
-----------------------------------------------------------------
Prior to submission of the Plan to the Members for approval, the Savings
Bank must receive approval from the OTS of the Form AC Application. Prior to
such regulatory approval:
A. The Board of Directors shall adopt the Plan by a vote of not less than
two-thirds of its entire membership.
B. The Savings Bank shall notify the Members of the adoption of the Plan
by publishing a statement in a newspaper having a general circulation in each
community in which the Savings Bank maintains an office.
C. A press release relating to the proposed Conversion may be submitted
to the local media.
D. Copies of the Plan as adopted by the Board of Directors shall be made
available for inspection at each office of the Savings Bank.
E. The Savings Bank shall cause the Holding Company to be incorporated
under state law and the Board of Directors of the Holding Company shall concur
in the Plan by at least a two-thirds vote.
F. Promptly following the adoption of this Plan, the Savings Bank shall
file the OCC Conversion Application, the OCC Purchase and Assumption
Application, the FDIC Insurance Application and the OTS Bank Conversion
Application, and the Holding Company shall file a draft Y-3 Application.
G. As soon as practicable following the adoption of this Plan, the
Savings Bank shall file the Form AC Application, and the Holding Company shall
file the Registration Statement, the H-(e)1 Application and the final Y-3
Application. Upon filing of the Form AC Application, the Savings Bank shall
publish notice of the filing of the Form AC Application in a newspaper having a
general circulation in each community in which the Savings Bank maintains an
office and/or by mailing a letter to each of its Members, and shall publish such
other notices of the Conversion as may be required in connection with the H-(e)1
Application, the Y-3 Application, the OCC Purchase and Assumption Application,
the OCC De Novo Application, the OCC Conversion Application and the FDIC
Insurance Application by the regulations and policies of the OTS, the Federal
Reserve Board, the OCC and the FDIC, respectively.
H. The Board of Directors of the Savings Bank may, at any time, elect not
to proceed with the Bank Conversion or elect to defer the Bank Conversion, in
which event the OCC Conversion Application, the OCC Purchase and Assumption
Application, the OCC De Novo Application, the FDIC Insurance Application, the
OTS Bank Conversion Application and the Y-3 Application shall be withdrawn. In
the event the Bank Conversion is not pursued or is deferred, any references in
this Plan to the Conversion shall be deemed to constitute references to the
Stock Conversion and references to the Converted Bank shall be deemed to
constitute references to the Converted Savings Bank.
I. The Savings Bank shall obtain an opinion of its tax advisors or a
favorable ruling from the United States Internal Revenue Service which shall
state that the Conversion will not result in any gain or loss for federal income
tax purposes to the Savings Bank or its Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members. Receipt of a favorable opinion or
ruling is a condition precedent to completion of the Conversion.
IV. Meeting of Members
------------------
Subsequent to the approval of the Plan by the OTS, the Special Meeting
shall be scheduled in accordance with the Savings Bank's Bylaws. Promptly after
receipt of approval and at least 20 days but not more than 45 days prior to the
Special Meeting, the Savings Bank shall distribute proxy solicitation materials
to all Members and
A-6
<PAGE>
beneficial owners of accounts held in fiduciary capacities where the beneficial
owners possess voting rights, as of the Record Date. The proxy solicitation
materials shall include a copy of the proxy statement to be used in connection
with such solicitation (the "Proxy Statement") and other documents authorized
for use by the regulatory authorities and may also include a copy of the Plan
and/or a prospectus ("Prospectus") as provided in Paragraph V below. The
Savings Bank shall also advise each Eligible Account Holder and Supplemental
Eligible Account Holder not entitled to vote at the Special Meeting of the
proposed Conversion and the scheduled Special Meeting, and provide a postage
prepaid card on which to indicate whether he wishes to receive the Prospectus,
if the Subscription Offering is not held concurrently with the proxy
solicitation.
Pursuant to OTS regulations, an affirmative vote of not less than a
majority of the total outstanding votes of the Members is required for approval
of the Plan. Voting may be in person or by proxy. The OTS shall be notified
promptly of the actions of the Members.
By voting in favor of the adoption of the Plan and the Conversion, the
Members will be voting in favor of (i) the Stock Conversion and the adoption by
the Savings Bank of the Federal Stock Charter and Bylaws and (ii) the subsequent
Bank Conversion and the adoption by the Converted Savings Bank of the Converted
Bank articles of incorporation and bylaws.
V. Summary Proxy Statement
-----------------------
The Proxy Statement furnished to Members may be in summary form, provided
that a statement is made in bold-face type that a more detailed description of
the proposed transaction may be obtained by returning an enclosed postage
prepaid card or other written communication requesting supplemental information.
Without prior approval of the OTS, the Special Meeting shall not be held less
than 20 days after the last day on which the supplemental information statement
is mailed to requesting Members. The supplemental information statement may be
combined with the Prospectus if the Subscription Offering is commenced
concurrently with or during the proxy solicitation of Members for the Special
Meeting.
VI. Offering Documents
------------------
The Holding Company may commence the Subscription Offering and, provided
that the Subscription Offering has commenced, may commence the Direct Community
Offering concurrently with or during the proxy solicitation of Members. The
Holding Company may close the Subscription Offering before the Special Meeting,
provided that the offer and sale of the Conversion Stock shall be conditioned
upon approval of the Plan by the Members at the Special Meeting. The Savings
Bank's proxy solicitation materials may require Eligible Account Holders,
Supplemental Eligible Account Holders (if applicable) and Other Members to
return to the Savings Bank by a reasonable certain date a postage prepaid card
or other written communication requesting receipt of a Prospectus with respect
to the Subscription Offering, provided that if the Prospectus is not mailed
concurrently with the proxy solicitation materials, the Subscription Offering
shall not be closed until the expiration of 30 days after the mailing of the
proxy solicitation materials. If the Subscription Offering is not commenced
within 45 days after the Special Meeting, the Savings Bank may transmit, not
more than 30 days prior to the commencement of the Subscription Offering, to
each Eligible Account Holder, Supplemental Eligible Account Holder and other
eligible subscribers who had been furnished with proxy solicitation materials a
notice which shall state that the Savings Bank is not required to furnish a
Prospectus to them unless they return by a reasonable date certain a postage
prepaid card or other written communication requesting the receipt of the
Prospectus.
Prior to commencement of the Subscription Offering, the Direct Community
Offering and, if necessary, the Underwritten Public Offering, the Holding
Company shall file the Registration Statement and any post-effective amendments
thereto, if necessary. The Holding Company shall not distribute the final
Prospectus for the Subscription and Direct Community Offering or the
Underwritten Public Offering until the Registration Statement containing same
has been declared effective by the SEC and the Prospectus has been declared
effective by the OTS.
A-7
<PAGE>
VII. Combined Subscription and Direct Community Offering
---------------------------------------------------
Instead of a separate Subscription Offering, all Subscription Rights may
be exercised by delivery of properly completed and executed Order Forms to the
Savings Bank or selling group utilized in connection with the Direct Community
Offering. If a separate Subscription Offering is not held, orders for Conversion
Stock in the Direct Community Offering shall first be filled pursuant to the
priorities and limitations stated in Paragraph IX.C., below.
VIII. Consummation of the Conversion
------------------------------
A. Consummation of the Stock Conversion
------------------------------------
After receipt of all orders for Conversion Stock, and concurrently with
the execution thereof, the amendment of the Savings Bank's federal mutual
Charter and Bylaws to authorize the issuance of shares of Capital Stock and to
conform to the requirements of a federal capital stock savings and loan
association will be declared effective by the OTS, the amended Charter and
Bylaws approved by the Members will become effective, and the Savings Bank will
thereby be and become the Converted Savings Bank. At such time, the Conversion
Stock will be issued and sold by the Holding Company, the Capital Stock to be
issued in the Conversion will be issued and sold to the Holding Company, and the
Converted Savings Bank will become a wholly owned subsidiary of the Holding
Company. The Converted Savings Bank will issue to the Holding Company 1,000
shares of its common stock, representing all of the shares of Capital Stock to
be issued by the Converted Savings Bank in the Conversion, and the Holding
Company will make payment to the Converted Savings Bank of that portion of the
aggregate net proceeds realized by the Holding Company from the sale of the
Conversion Stock under the Plan as may be authorized or required by the OTS.
B. Consummation of the Bank Conversion
-----------------------------------
The Bank Conversion shall be deemed to occur and shall be effective upon
completion of all actions necessary or appropriate under applicable statutes and
regulations and the policies of the OCC and the OTS to complete the conversion
of the Converted Savings Bank to a national bank, the chartering of the De Novo
Bank and the Purchase and Assumption Transaction, including without limitation
the approval of the Bank Conversion by the Holding Company as the sole
stockholder of the Converted Savings Bank and the De Novo Bank, and the
Converted Savings Bank will thereby be and become the Converted Bank. Subject
to Paragraph III. H. above, the Bank Conversion shall be consummated as soon as
practicable following the consummation of the Stock Conversion.
IX. Stock Offering
--------------
A. Number of Shares
----------------
The number of shares of Conversion Stock to be offered pursuant to the
Plan shall be determined initially by the Board of Directors of the Savings Bank
and the Board of Directors of the Holding Company in conjunction with the
determination of the Purchase Price (as that term is defined in Paragraph IX.B.
below). The number of shares to be offered may be subsequently adjusted by the
Board of Directors prior to completion of the offering.
B. Independent Evaluation and Purchase Price of Shares
-- ---------------------------------------------------
All shares of Conversion Stock sold in the Conversion, including shares
sold in any Direct Community Offering, including shares sold in any Subscription
Offering, Direct Community Offering and Underwritten Public Offering, shall be
sold at a uniform price per share, referred to herein as the "Purchase Price."
The Purchase Price shall be determined by the Board of Directors of the Savings
Bank and the Board of Directors of the Holding Company immediately prior to the
simultaneous completion of all such sales contemplated by this Plan on the basis
of the estimated pro forma market value of the Converted Bank at such time. The
estimated pro forma market value of the Converted Bank shall be determined for
such purpose by an independent appraiser on the basis of such
A-8
<PAGE>
appropriate factors not inconsistent with the regulations of the OTS.
Immediately prior to the Subscription Offering, a aggregate subscription price
range shall be established which shall vary from 15% above to 15% below the
average of the minimum and maximum of the estimated price range. The maximum
subscription price (i.e., the per share amount to be remitted when subscribing
for shares of Conversion Stock) shall then be determined within the aggregate
subscription price range by the Board of Directors of the Savings Bank. The
subscription price range and the number of shares to be offered may be revised
after the completion of the Subscription Offering with OTS approval without a
resolicitation of proxies or Order Forms or both.
C. Method of Offering Shares
-------------------------
Subscription Rights shall be issued at no cost to Eligible Account Holders,
Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible Account
Holders and Other Members pursuant to priorities established by this Plan and
the regulations of the OTS. In order to effect the Conversion, all shares of
Conversion Stock proposed to be issued in connection with the Conversion must be
sold and, to the extent that shares are available, no subscriber shall be
allowed to purchase less than 25 shares; provided, however, that if the purchase
price is greater than $20 per share, the minimum number of shares which must be
subscribed for shall be adjusted so that the aggregate actual purchase price
required to be paid for such minimum number of shares does not exceed $500. The
priorities established for the purchase of shares are as follows:
1. Category 1: Eligible Account Holders
-------------------------------------
a. Each Eligible Account Holder shall receive, without payment,
Subscription Rights entitling such Eligible Account Holder to purchase that
number of shares of Conversion Stock which is equal to the greater of the
maximum purchase limitation established for the Direct Community Offering,
one-tenth of one percent of the total offering or 15 times the product
(rounded down to the next whole number) obtained by multiplying the total
number of shares of Conversion Stock to be issued by a fraction of which
the numerator is the amount of the Qualifying Deposit of the Eligible
Account Holder and the denominator is the total amount of Qualifying
Deposits of all Eligible Account Holders. If the allocation made in this
paragraph results in an oversubscription, shares of Conversion Stock shall
be allocated among subscribing Eligible Account Holders so as to permit
each such account holder, to the extent possible, to purchase a number of
shares of Conversion Stock sufficient to make his total allocation equal to
100 shares of Conversion Stock or the total amount of his subscription,
whichever is less. Any shares of Conversion Stock not so allocated shall
be allocated among the subscribing Eligible Account Holders on an equitable
basis, related to the amounts of their respective Qualifying Deposits as
compared to the total Qualifying Deposits of all Eligible Account Holders.
b. Subscription Rights received by Officers and directors of the
Savings Bank and their Associates, as Eligible Account Holders, based on
their increased deposits in the Savings Bank in the one-year period
preceding the Eligibility Record Date shall be subordinated to all other
subscriptions involving the exercise of Subscription Rights pursuant to
this Category.
2. Category 2: Tax-Qualified Employee Stock Benefit Plans
------------------------------------------------------
a. Tax-Qualified Employee Stock Benefit Plans of the Savings
Bank shall receive, without payment, non-transferable Subscription Rights
to purchase in the aggregate up to 8% of the Conversion Stock, including
shares of Conversion Stock to be issued in the Conversion as result of an
increase in the estimated price range after commencement of the
Subscription Offering and prior to the completion of the Conversion. Tax-
Qualified Employee Stock Benefit Plans may use funds contributed or
borrowed by the Holding Company or the Savings Bank and/or borrowed from an
independent financial institution to exercise such Subscription Rights, and
the Holding Company and the Savings Bank may make scheduled discretionary
contributions thereto, provided that such contributions do not cause the
Holding Company or the Savings Bank to fail to meet any applicable capital
requirements.
A-9
<PAGE>
b. Subscription Rights received pursuant to this category shall
be subordinated to Subscription Rights granted to Eligible Account Holders;
provided, however, that in the event the number of shares offered in the
Conversion is increased to an amount greater than the maximum of the
estimated price range as set forth in the Prospectus ("Maximum Shares"),
the Tax-Qualified Employee Stock Benefit Plans shall have a priority right
to purchase any such shares exceeding the Maximum Shares up to an aggregate
of 8% of the Conversion Stock.
3. Category 3: Supplemental Eligible Account Holders
--------------------------------------------------
a. In the event that the Eligibility Record Date is more than
15 months prior to the date of the latest amendment to the Form AC
Application filed prior to OTS approval, then, and only in that event, each
Supplemental Eligible Account Holder shall receive, without payment,
Subscription Rights entitling such Supplemental Eligible Account Holder to
purchase that number of shares of Conversion Stock which is equal to the
greater of the maximum purchase limitation established for the Direct
Community Offering, one-tenth of one percent of the total offering or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock to be issued by
a fraction of which the numerator is the amount of the Qualifying Deposit
of the Supplemental Eligible Account Holder and the denominator is the
total amount of the Qualifying Deposits of all Supplemental Eligible
Account Holders.
b. Subscription Rights received pursuant to this category shall
be subordinated to Subscription Rights granted to Eligible Account Holders
and Tax-Qualified Employee Stock Benefit Plans.
c. Any Subscription Rights to purchase shares of Conversion
Stock received by an Eligible Account Holder in accordance with Category
Number 1 shall reduce to the extent thereof the Subscription Rights to be
distributed pursuant to this Category.
d. In the event of an oversubscription for shares of Conversion
Stock pursuant to this Category, shares of Conversion Stock shall be
allocated among the subscribing Supplemental Eligible Account Holders as
follows:
(1) Shares of Conversion Stock shall be allocated so as to
permit each such Supplemental Eligible Account Holder, to the
extent possible, to purchase a number of shares of Conversion
Stock sufficient to make his total allocation (including the
number of shares of Conversion Stock, if any, allocated in
accordance with Category Number 1) equal to 100 shares of
Conversion Stock or the total amount of his subscription,
whichever is less.
(2) Any shares of Conversion Stock not allocated in
accordance with subparagraph (1) above shall be allocated among
the subscribing Supplemental Eligible Account Holders on an
equitable basis, related to the amounts of their respective
Qualifying Deposits as compared to the total Qualifying Deposits
of all Supplemental Eligible Account Holders.
4. Category 4: Other Members
--------------------------
a. Other Members shall receive Subscription Rights to purchase
shares of Conversion Stock, after satisfying the subscriptions of Eligible
Account Holders, Tax-Qualified Employee Stock Benefit Plans and
Supplemental Eligible Account Holders pursuant to Category Nos. l, 2 and 3
above, subject to the following conditions:
b. Each such Other Member shall be entitled to subscribe for the
greater of the maximum purchase limitation established for the Direct
Community Offering, or one-tenth of one percent of the total offering.
A-10
<PAGE>
c. In the event of an oversubscription for shares of Conversion
Stock pursuant to Category No. 4, the shares of Conversion Stock available
shall be allocated among the subscribing Other Members pro rata on the
basis of the amounts of their respective subscriptions.
D. Direct Community Offering
-------------------------
1. Any shares of Conversion Stock not purchased through the exercise
of Subscription Rights set forth in Category Nos. 1 through 4 above may be sold
by the Holding Company to Persons under such terms and conditions as may be
established by the Savings Bank's Board of Directors with the concurrence of the
OTS. The Direct Community Offering may commence concurrently with or as soon as
possible after the completion of the Subscription Offering and must be completed
within 45 days after completion of the Subscription Offering, unless extended
with the approval of the OTS. Subject to such terms, conditions and procedures
as may be determined by the Savings Bank and the Holding Company, shares of
Conversion Stock not subscribed for in the Subscription Offering may be sold by
a syndicate of broker-dealers to the general public in the Direct Community
Offering. No Person may purchase shares of Conversion Stock with an aggregate
purchase price that exceeds $400,000 pursuant to this Category. The right to
purchase shares of Conversion Stock under this Category is subject to the right
of the Savings Bank or the Holding Company to accept or reject such
subscriptions in whole or in part. In the event of an oversubscription for
shares in this Category, the shares available shall be allocated among
prospective purchasers in an amount equal to the lesser of 100 shares or the
number of shares subscribed for by each such prospective purchaser, if possible.
Thereafter, unallocated shares shall be allocated among the prospective
purchasers whose orders remain unsatisfied after the procedure described in the
immediately preceding sentence until such orders have been filled or the
remaining shares have been allocated. The offering price for which such shares
are sold to the general public in the Direct Community Offering shall be the
Purchase Price.
2. Orders received in the Direct Community Offering first shall be
filled up to a maximum of 2% of the Conversion Stock and thereafter remaining
shares shall be allocated on an equal number of shares basis per order until all
orders have been filled.
3. The Conversion Stock offered in the Direct Community Offering
shall be offered and sold in a manner that will achieve the widest distribution
thereof. Preference shall be given in the Direct Community Offering to natural
Persons and trusts of natural Persons residing in the Local Community.
E. Underwritten Public Offering
----------------------------
1. Any shares of Conversion Stock not purchased Subscription or
Direct Community Offering may be offered for sale to the Underwriters for resale
to the general public in an Underwritten Public Offering, under such terms and
conditions as may be established by the Holding Company's and the Savings Bank's
Boards of Directors with the concurrence of the OTS. The Underwritten Public
Offering may commence concurrently with or as soon as practicable after the
completion of the Subscription and Direct Community Offering and must be
completed within 45 days after completion of the Subscription Offering, unless
extended by the Savings Bank with the approval of the OTS. Such shares shall be
sold to the Underwriters for the Purchase Price less the underwriting discount,
which shall be an amount negotiated with the Underwriters and approved by the
OTS. The price at which such shares are sold to the general public in the
Underwritten Public Offering will be the same price paid for such shares in the
Subscription Offering and Direct Community Offering.
2. Orders received in the Underwritten Public Offering first shall
be filled up to a maximum of 2% of the Conversion Stock and thereafter remaining
shares shall be allocated on an equal number of shares basis per order until all
orders have been filled.
3. The Conversion Stock offered in the Underwritten Public Offering
shall be offered and sold in a manner that will achieve the widest distribution
thereof.
A-11
<PAGE>
4. In the event the Underwriters do not enter into an underwriting
agreement in a form satisfactory to the Holding Company, the Savings Bank and
the OTS, or if for any reason an Underwritten Public Offering of shares of
Conversion Stock not sold in the Subscription Offering and the Direct Community
Offering cannot be effected, or in the event that any insignificant residue of
shares of Conversion Stock is not sold in the Subscription Offering, Direct
Community Offering or Underwritten Public Offering, the Savings Bank and the
Holding Company shall use their best efforts to obtain other purchasers for such
shares in such manner and upon such conditions as may be satisfactory to the
OTS.
F. Limitations Upon Purchases
--------------------------
The following additional limitations and exceptions shall be imposed upon
purchases of shares of Conversion Stock:
1. Purchases of shares of Conversion Stock in the Conversion,
including purchases in the Direct Community Offering or any Underwritten Public
Offering by any Person shall not exceed $400,000 and purchases by any Person,
and Associates thereof, or a group of Persons Acting in Concert, shall not
exceed 9.99% of the shares of Conversion Stock issued in the Conversion, except
that Tax-Qualified Employee Stock Benefit Plans may purchase up to 8% of the
total Conversion Stock issued in the Conversion and shares to be held by the
Tax-Qualified Employee Stock Benefit Plans and attributable to a Person shall
not be aggregated with other shares purchased directly by or otherwise
attributable to such Person. The percentage amount by which any order for Common
Stock exceeds 5% of the total offering of Common Stock shall be aggregated with
the percentage amounts by which all other orders for the Common Stock exceed 5%
of the total offering of Common Stock. The aggregate amount shall not exceed 10%
of the total offering of Common Stock, except that this limitation shall not
apply to any Tax Qualified Employee Stock Benefit Plan.
2. Officers and directors and Associates thereof may not purchase in
the aggregate more than 33% of the shares issued in the Conversion.
3. The Savings Bank's and Holding Company's Boards of Directors will
not be deemed to be Associates or a group of Persons Acting in Concert with
other directors or trustees solely as a result of membership on the Board of
Directors.
4. No Person, together with Associates of or Persons Acting in
Concert with such Person, may purchase in the aggregate more than 9.99% of the
shares of Conversion Stock issued in the Conversion, including purchases in the
Direct Community Offering and any Underwritten Public Offering, except that Tax-
Qualified Employee Stock Benefit Plans may purchase up to 8% of the total
Conversion Stock issued and shares held or to be held by the Tax-Qualified
Employee Stock Benefit Plans and attributable to a Person shall not be
aggregated with other shares purchased directly by or otherwise attributable to
such Person. The percentage amount by which any order for Common Stock exceeds
5% of the total offering of Common Stock shall be aggregated with the percentage
amounts by which all other orders for the Common Stock exceed 5% of the total
offering of Common Stock. The aggregate amount shall not exceed 10% of the total
offering of Common Stock, except that this limitation shall not apply to any Tax
Qualified Employee Stock Benefit Plan.
5. The Savings Bank's and the Holding Company's Boards of Directors,
with the approval of the OTS and without further approval of Members, may, as a
result of market conditions and other factors, increase or decrease the purchase
limitation in paragraphs 1 and 4 above or the number of shares of Conversion
Stock to be sold in the Conversion. If the Savings Bank or the Holding Company,
as the case may be, increases the maximum purchase limitations or the number of
shares of Conversion Stock to be sold in the Conversion, the Savings Bank or the
Holding Company, as the case may be, is only required to resolicit Persons who
subscribed for the maximum purchase amount and may, in the sole discretion of
the Savings Bank or the Holding Company, as the case may be, resolicit certain
other large subscribers. If the Savings Bank or the Holding Company, as the case
may be, decreases the maximum purchase limitations or the number of shares of
Conversion Stock to be sold in the Conversion, the
A-12
<PAGE>
orders of any Person who subscribed for the maximum purchase amount shall be
decreased by the minimum amount necessary so that such Person shall be in
compliance with the then maximum number of shares permitted to be subscribed for
by such Person.
Each Person purchasing Conversion Stock in the Conversion shall be deemed
to confirm that such purchase does not conflict with the purchase limitations
under the Plan or otherwise imposed by law, rule or regulation. In the event
that such purchase limitations are violated by any Person (including any
Associate or group of Persons affiliated or otherwise Acting in Concert with
such Person), the Holding Company shall have the right, in its sole discretion,
either to reject the order or to purchase from such Person at the actual
Purchase Price per share all shares acquired by such Person in excess of such
purchase limitations or, if such excess shares have been sold by such Person, to
receive from such Person the difference between the actual Purchase Price per
share paid for such excess shares and the price at which such excess shares were
sold by such Persons. This right of the Holding Company to purchase such excess
shares shall be assignable by the Holding Company.
G. Restrictions On and Other Characteristics of the Conversion Stock
-----------------------------------------------------------------
1. Transferability. Conversion Stock purchased by Officers and
---------------
directors of the Savings Bank and officers and directors of the Holding Company
shall not be sold or otherwise disposed of for value for a period of one year
from the date of Conversion, except for any disposition (i) following the death
of the original purchaser or (ii) resulting from an exchange of securities in a
merger or acquisition approved by the regulatory authorities having
jurisdiction.
The Conversion Stock issued by the Holding Company to such Officers and
directors shall bear a legend giving appropriate notice of the one-year holding
period restriction. Said legend shall state as follows:
"The shares evidenced by this certificate are
restricted as to transfer for a period of one year from
the date of this certificate pursuant to Part 563b of
the Rules and Regulations of the Office of Thrift
Supervision. These shares may not be transferred prior
thereto without a legal opinion of counsel that said
transfer is permissible under the provisions of
applicable laws and regulations."
In addition, the Holding Company shall give appropriate instructions to the
transfer agent of the Holding Company's Stock with respect to the foregoing
restrictions. Any shares of Holding Company Stock subsequently issued as a
stock dividend, stock split or otherwise, with respect to any such restricted
stock, shall be subject to the same holding period restrictions for such Persons
as may be then applicable to such restricted stock.
2. Subsequent Purchases by Officers and Directors. Without prior
----------------------------------------------
approval of the OTS, if applicable, Officers and directors of the Savings Bank
and officers and directors of the Holding Company, and their Associates, shall
be prohibited for a period of three years following completion of the Conversion
from purchasing outstanding shares of Holding Company Stock, except from a
broker or dealer registered with the SEC. Notwithstanding this restriction,
purchases involving more than 1% of the total outstanding shares of Holding
Company Stock and purchases made and shares held by a Tax-Qualified or non-Tax-
Qualified Employee Stock Benefit Plan which may be attributable to such
directors and officers may be made in negotiated transactions without OTS
permission or the use of a broker or dealer.
3. Repurchase and Dividend Rights. Pursuant to OTS regulations, the
------------------------------
Holding Company may not, for a period of three years from the date of
Conversion, repurchase Holding Company Stock from any Person, with the exception
of (i) a repurchase on a pro rata basis pursuant to an offer approved by the OTS
and made to all stockholders, (ii) the repurchase of qualifying shares of a
director or (iii) a purchase in the open market by a Tax-Qualified Employee
Stock Benefit Plan or a non-Tax-Qualified Employee Stock Benefit Plan of the
Converted Bank or the Holding Company in an amount reasonable and appropriate to
fund the plan. Repurchases during the first year following the consummation of
the Conversion are generally prohibited unless "exceptional circumstances" are
A-13
<PAGE>
deemed to exist by the OTS. However, upon 10 days' written notification to the
District Director and to the Chief Counsel, Corporate and Securities Division of
the OTS, if the District Director does not object, the Holding Company may make
open market repurchases of outstanding Holding Company Stock during the second
and third years following the consummation of the Conversion, provided that (i)
no more than 5% of the outstanding Holding Company Stock is to be purchased
during any twelve-month period, (ii) the Converted Savings Bank's ratio of
regulatory capital to total liabilities would not be reduced below 6%, and (iii)
the repurchases would not adversely affect the financial condition of the
Converted Savings Bank. These restrictions and limitations upon repurchases
shall not apply following consummation of the Bank Conversion as set forth in
Paragraph VIII.B. herein unless the OTS approval of the Bank Conversion
otherwise requires.
OTS regulations also provide that the Converted Savings Bank may not
declare or pay a cash dividend on or repurchase any of its Capital Stock if the
result thereof would be to reduce the regulatory capital of the Converted
Savings Bank below the amount required for the Liquidation Account. Further,
any dividend declared or paid on, or repurchase of, the Capital Stock shall be
in compliance with the rules and regulations of the OTS, or other applicable
regulations.
The above limitations shall not preclude payment of dividends on, or
repurchases of, Capital Stock in the event applicable federal regulatory
limitations are liberalized subsequent to the Conversion. Further, such
restrictions and limitations upon repurchases of Capital Stock and upon the
declaration and payment of cash dividends thereon shall not apply following
consummation of the Bank Conversion as set forth in Paragraph VIII.B. herein
unless the OTS approval of the Bank Conversion otherwise requires.
4. Voting Rights. After the Stock Conversion, holders of Savings
-------------
Accounts in and obligors on loans of the Savings Bank will not have voting
rights in the Converted Savings Bank. After the Bank Conversion, holders of
Savings Accounts in and obligors on loans of the Converted Bank will not have
voting rights in the Converted Bank. Exclusive voting rights with respect to
the Holding Company shall be vested in the holders of Conversion Stock; holders
of Savings Accounts in and obligors on loans of the Converted Savings Bank and
the Converted Bank will not have any voting rights in the Holding Company except
and to the extent that such Persons become stockholders of the Holding Company,
and the Holding Company will have exclusive voting rights with respect to the
Converted Bank's Capital Stock.
H. Mailing of Offering Materials and Collation of Subscriptions
------------------------------------------------------------
The sale of all shares of Conversion Stock offered pursuant to the Plan
must be completed within 24 months after approval of the Plan at the Special
Meeting. After approval of the Plan by the OTS and the declaration of the
effectiveness of the Prospectus, the Holding Company shall distribute
Prospectuses and Order Forms for the purchase of shares of Conversion Stock in
accordance with the terms of the Plan.
The recipient of an Order Form shall be provided not less than 20 days nor
more than 45 days from the date of mailing, unless extended, properly to
complete, execute and return the Order Form to the Holding Company or the
Savings Bank. Self-addressed, postage prepaid, return envelopes shall accompany
all Order Forms when they are mailed. Failure of any eligible subscriber to
return a properly completed and executed Order Form within the prescribed time
limits shall be deemed a waiver and a release by such eligible subscriber of any
rights to purchase shares of Conversion Stock under the Plan.
The sale of all shares of Conversion Stock proposed to be issued in
connection with the Conversion must be completed within 45 days after the last
day of the Subscription Offering, unless extended by the Holding Company with
the approval of the OTS.
A-14
<PAGE>
I. Method of Payment
-----------------
Payment for all shares of Conversion Stock may be made in cash, by check or
by money order, or if a subscriber has a Savings Account in the Savings Bank
such subscriber may authorize the Savings Bank to charge the subscriber's
Savings Account. The Holding Company shall pay interest at not less than the
passbook rate on all amounts paid in cash or by check or money order to purchase
shares of Conversion Stock in the Subscription Offering from the date payment is
received until the Conversion is completed or terminated. The Savings Bank is
not permitted knowingly to loan funds or otherwise extend any credit to any
Person for the purpose of purchasing Conversion Stock.
If a subscriber authorizes the Savings Bank to charge the subscriber's
Savings Account, the funds shall remain in the subscriber's Savings Account and
shall continue to earn interest, but may not be used by such subscriber until
the Conversion is completed or terminated, whichever is earlier. The withdrawal
shall be given effect only concurrently with the sale of all shares of
Conversion Stock proposed to be sold in the Conversion and only to the extent
necessary to satisfy the subscription at a price equal to the Purchase Price.
The Savings Bank shall allow subscribers to purchase shares of Conversion Stock
by withdrawing funds from certificate accounts held with the Savings Bank
without the assessment of early withdrawal penalties, subject to the approval,
if necessary, of the applicable regulatory authorities. In the case of early
withdrawal of only a portion of such account, the certificate evidencing such
account shall be canceled if the remaining balance of the account is less than
the applicable minimum balance requirement. In that event, the remaining
balance shall earn interest at the passbook rate. This waiver of the early
withdrawal penalty is applicable only to withdrawals made in connection with the
purchase of Conversion Stock under the Plan.
Tax-Qualified Employee Stock Benefit Plans may subscribe for shares by
submitting an Order Form, along with evidence of a loan commitment from a
financial institution for the purchase of shares, during the Subscription
Offering and by making payment for the shares on the date of the closing of the
Conversion.
J. Undelivered, Defective or Late Order Forms; Insufficient Payment
----------------------------------------------------------------
If an Order Form (i) is not delivered and is returned to the Holding
Company or the Savings Bank by the United States Postal Service (or the Holding
Company or Savings Bank is unable to locate the addressee); (ii) is not returned
to the Holding Company or Savings Bank, or is returned to the Holding Company or
Savings Bank after expiration of the date specified thereon; (iii) is
defectively completed or executed; or (iv) is not accompanied by the total
required payment for the shares of Conversion Stock subscribed for (including
cases in which the subscribers' Savings Accounts are insufficient to cover the
authorized withdrawal for the required payment), the Subscription Rights of the
Person to whom such rights have been granted shall not be honored and shall be
treated as though such Person failed to return the completed Order Form within
the time period specified therein. Alternatively, the Holding Company or
Savings Bank may, but shall not be required to, waive any irregularity relating
to any Order Form or require the submission of a corrected Order Form or the
remittance of full payment for the shares of Conversion Stock subscribed for by
such date as the Holding Company or Savings Bank may specify. Subscription
orders, once tendered, shall not be revocable. The Holding Company's and
Savings Bank's interpretation of the terms and conditions of the Plan and of the
Order Forms shall be final.
K. Members in Non-Qualified States or in Foreign Countries
-------------------------------------------------------
The Holding Company shall make reasonable efforts to comply with the
securities laws of all states of the United States in which Persons entitled to
subscribe for shares of Conversion Stock pursuant to the Plan reside. However,
no such Person shall be offered or receive any such shares under the Plan who
resides in a foreign country or who resides in a state of the United States with
respect to which any of the following apply: (a) a small number of Persons
otherwise eligible to subscribe for shares of Conversion Stock reside in such
state; (b) the granting of Subscription Rights or offer or sale of shares of
Conversion Stock to such Persons would require the Holding Company to register,
under the securities laws of such state, as a broker or dealer or to register or
otherwise qualify
A-15
<PAGE>
its securities for sale in such state; or (c) such registration or qualification
would be impractical for reasons of cost or otherwise.
X. Federal Stock Charter and Bylaws for the Converted Savings Bank; Articles
-------------------------------------------------------------------------
of Incorporation and Bylaws for the Converted Bank and the De Novo Bank
-----------------------------------------------------------------------
As part of the Stock Conversion, an amended federal stock Charter and
Bylaws will be adopted to authorize the Converted Savings Bank to operate as a
federal capital stock savings bank. By approving the Plan, the Members of the
Savings Bank will thereby approve the amended federal stock Charter and Bylaws.
Prior to completion of the Conversion, the proposed federal stock Charter and
Bylaws may be amended in accordance with the provisions and limitations for
amending the Plan under Paragraph XVII below. The effective date of the
adoption of the Federal Stock Charter and Bylaws shall be the date of the
issuance of the Conversion Stock, which shall be the date of consummation of the
Stock Conversion.
As part of the Bank Conversion, articles of incorporation and bylaws for
the Converted Bank and the De Novo Bank will be adopted to allow the Converted
Bank and the De Novo Bank to operate as national banks. By approving the Plan,
the Members of the Savings Bank will thereby approve such articles of
incorporation and bylaws. Prior to completion of the Bank Conversion, the
articles of incorporation and bylaws may be amended in accordance with the
provisions and limitations for amending the Plan under Paragraph XVII below.
The effective date of the articles of incorporation and bylaws of the Converted
Bank and the De Novo Bank shall be the date of the consummation of the Bank
Conversion.
XI. Post Conversion Filing and Market Making
----------------------------------------
In connection with the Conversion, the Holding Company shall register the
Conversion Stock with the SEC pursuant to the Securities Exchange Act of 1934,
as amended, and shall undertake not to deregister such Conversion Stock for a
period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
various Market Makers to establish and maintain a market for the shares of its
stock. The Holding Company shall also use its best efforts to list its stock
through the Nasdaq Stock Market or on a national or regional securities
exchange.
XII. Status of Savings Accounts and Loans Subsequent to Conversion
-------------------------------------------------------------
All Savings Accounts shall retain the same status after Conversion as
these accounts had prior to Conversion. Each Savings Account holder shall
retain, without payment, a withdrawable Savings Account or accounts after the
Conversion, equal in amount to the withdrawable value of such holder's Savings
Account or accounts prior to Conversion. All Savings Accounts will continue to
be insured by the Savings Association Insurance Fund of the FDIC up to the
applicable limits of insurance coverage. All loans shall retain the same status
after the Conversion as they had prior to the Conversion. See Paragraph IX.F.4.
with respect to the termination of voting rights of Members.
XIII. Liquidation Account
-------------------
After the Conversion, holders of Savings Accounts shall not be entitled to
share in any residual assets in the event of liquidation of the Savings Bank.
However, the Savings Bank shall, at the time of the Conversion, establish a
liquidation account in an amount equal to its total net worth as of the date of
the latest statement of financial condition contained in the final Prospectus.
The function of the liquidation account shall be to establish a priority on
liquidation and, except as provided in Paragraph IX.F.3 above, the existence of
the liquidation account shall not operate to restrict the use or application of
any of the net worth accounts of the Savings Bank.
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<PAGE>
The liquidation account shall be maintained by the Converted Savings Bank
subsequent to the Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Converted Savings Bank. Each Eligible Account Holder and Supplemental Eligible
Account Holder shall, with respect to each Savings Account held, have a related
inchoate interest in a portion of the liquidation account balance
("subaccount").
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder and/or a Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of such holder's Qualifying Deposit in the
Savings Account and the denominator is the total amount of the Qualifying
Deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders. Such initial subaccount balance shall not be increased, and it shall
be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing date subsequent to the Eligibility Record Date is less than the lesser
of (i) the deposit balance in such Savings Account at the close of business on
any other annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date or (ii) the amount of the Qualifying
Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of
a downward adjustment, such subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Converted Savings Bank each
Eligible Account Holder and Supplemental Eligible Account Holder shall be
entitled to receive a liquidation distribution from the liquidation account in
the amount of the then current adjusted subaccount balance(s) for Savings
Account(s) then held by such holder before any liquidation distribution may be
made to stockholders. No merger, consolidation, bulk purchase of assets with
assumptions of Savings Accounts and other liabilities or similar transactions
with another federally-insured institution in which the Savings Bank is not the
surviving institution shall be considered to be a complete liquidation. In any
such transaction, the liquidation account shall be assumed by the surviving
institution.
The Bank Conversion shall not be deemed to be a complete liquidation of the
Converted Savings Bank for purposes of the distribution of the Liquidation
Account. Upon consummation of the Bank Conversion, the Liquidation Account, and
all rights and obligations of the Converted Savings Bank in connection
therewith, shall be assumed by the Converted Bank and the De Novo Bank.
XIV. Regulatory Restrictions on Acquisition of Holding Company
---------------------------------------------------------
A. OTS regulations provide that for a period of three years following
completion of the Conversion, no Person (i.e., individual, a group Acting in
Concert, a corporation, a partnership, an association, a joint stock company, a
trust, or any unincorporated organization or similar company, a syndicate or any
other group formed for the purpose of acquiring, holding or disposing of
securities of an insured institution or its holding company) shall directly, or
indirectly, offer to purchase or actually acquire the beneficial ownership of
more than 10% of any class of equity security of the Holding Company without the
prior approval of the OTS. However, approval is not required for purchases
directly from the Holding Company or the underwriters or selling group acting on
its behalf with a view towards public resale, or for purchases not exceeding 1%
per annum of the shares outstanding. Civil penalties may be imposed by the OTS
for willful violation or assistance of any violation. Where any Person,
directly or indirectly, acquires beneficial ownership of more than 10% of any
class of equity security of the Holding Company within such three-year period,
without the prior approval of the OTS, stock of the Holding Company beneficially
owned by such Person in excess of 10% shall not be counted as shares entitled to
vote and shall not be voted by any Person or counted as voting shares in
connection with any matter submitted to the stockholders for a
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vote. The provisions of this regulation shall not apply to the acquisition of
securities by Tax-Qualified Employee Stock Benefit Plans provided that such
plans do not have beneficial ownership of more than 25% of any class of equity
security of the Holding Company.
Upon consummation of the Bank Conversion, no Person (i.e., an individual,
a group Acting in Concert, a corporation, a partnership, an association, a joint
stock company, a trust or any unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution or its holding company) shall
directly, or indirectly, offer to purchase or actually acquire the beneficial
ownership of more than 10% of any class of Holding Company Stock without the
prior approval of the Federal Reserve Board.
B. The Holding Company may provide in its articles of incorporation a
provision that, for a specified period of up to five years following the date of
the completion of the Conversion, no Person shall directly or indirectly offer
to acquire or actually acquire the beneficial ownership of more than 10% of any
class of equity security of the Holding Company. Such provisions would not
apply to acquisition of securities by Tax-Qualified Employee Stock Benefit Plans
provided that such plans do not have beneficial ownership of more than 25% of
any class of equity security of the Holding Company. The Holding Company may
provide in its articles of incorporation for such other provisions affecting the
acquisition of its stock as shall be determined by its Board of Directors.
XV. Directors and Officers of the Converted Savings Bank
----------------------------------------------------
The Conversion shall not result in any change in the directors or
Officers. Each Person serving as a director of the Savings Bank at the time of
Conversion shall continue to serve as a member of the Converted Savings Bank's
Board of Directors, subject to the Converted Savings Bank's charter and bylaws.
The Persons serving as Officers immediately prior to the Conversion will
continue to serve at the discretion of the Board of Directors in their
respective capacities as Officers of the Converted Savings Bank.
XVI. Executive Compensation
----------------------
The Converted Bank, the De Novo Bank and the Holding Company may adopt,
subject to any required approvals, executive compensation or other benefit
programs, including but not limited to compensation plans involving stock
options, stock appreciation rights and restricted stock grants, employee
recognition programs, employment agreements and the like.
XVII. Amendment or Termination of Plan
--------------------------------
If necessary or desirable, the Plan may be amended by a two-thirds vote
of the Savings Bank's Board of Directors, at any time prior to submission of the
Plan and proxy materials to the Members. At any time after submission of the
Plan and proxy materials to the Members, the Plan may be amended by a two-thirds
vote of the Board of Directors only with the concurrence of the OTS. The Plan
may be terminated by a two-thirds vote of the Board of Directors at any time
prior to the Special Meeting, and at any time following such Special Meeting
with the concurrence of the OTS. In its discretion, the Board of Directors may
modify or terminate the Plan upon the order of the regulatory authorities
without a resolicitation of proxies or another meeting of the Members.
In the event that mandatory new regulations pertaining to conversions are
adopted by the OTS, the Federal Reserve Board or the OCC prior to the completion
of the Conversion, the Plan shall be amended to conform to the new mandatory
regulations without a resolicitation of proxies or another meeting of Members.
In the event that new conversion regulations adopted by the OTS prior to
completion of the Conversion contain optional provisions, the Plan may be
amended to utilize such optional provisions at the discretion of the Board of
Directors without a resolicitation of proxies or another meeting of Members.
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By adoption of the Plan, the Members authorize the Board of Directors to
amend and/or terminate the Plan under the circumstances set forth above.
XVIII. Expenses of the Conversion
--------------------------
The Holding Company and the Savings Bank shall use their best efforts to
assure that expenses incurred in connection with the Conversion shall be
reasonable.
XIX. Contributions to Tax-Qualified Plans
------------------------------------
The Holding Company and/or the Savings Bank may make discretionary
contributions to the Tax-Qualified Employee Stock Benefit Plans, provided such
contributions do not cause the Savings Bank the Converted Savings Bank, the
Converted Bank or the De Novo Bank, as applicable, to fail to meet its
regulatory capital requirements.
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EXHIBIT B
FEDERAL STOCK CHARTER
CHESTER SAVINGS BANK, FSB
SECTION 1. CORPORATE TITLE. The full corporate title of the bank is
Chester Savings Bank, FSB ("Bank").
SECTION 2. OFFICE. The home office shall be located in the City of
Chester, the County of Randolph, in the State of Illinois.
SECTION 3. DURATION. The duration of the Bank is perpetual.
SECTION 4. PURPOSE AND POWERS. The purpose of the Bank is to pursue
any or all of the lawful objectives of a Federal savings and loan association
chartered under section 5 of the Home Owners' Loan Act and to exercise all of
the express, implied, and incidental powers conferred thereby and by all acts
amendatory thereof and supplemental thereto, subject to the Constitution and
laws of the United States as they are now in effect, or as they may hereafter be
amended, and subject to all lawful and applicable rules, regulations, and orders
of the Office of Thrift Supervision ("Office").
SECTION 5. CAPITAL STOCK. The total number of shares of all classes
of the capital stock which the Bank has authority to issue is 10,000 of which
1,000 shares shall be common stock, of par value of $1.00 per share and of which
9,000 shares shall be serial preferred stock having no par value. The shares
may be issued from time to time as authorized by the board of directors without
the approval of its shareholders except as otherwise provided in this Section 5
or to the extent that such approval is required by governing law, rule, or
regulation. The consideration for the issuance of the shares shall be paid in
full before their issuance and shall not be less than the par value. Neither
promissory notes nor future services shall constitute payment or part payment
for the issuance of shares of the Bank. The consideration for the shares shall
be cash, tangible or intangible property (to the extent direct investment in
such property would be permitted to the Bank), labor or services actually
performed for the Bank, or any combination of the foregoing. In the absence of
actual fraud in the transaction, the value of such property, labor, or services,
as determined by the board of directors of the Bank, shall be conclusive. Upon
payment of such consideration, such shares shall be deemed to be fully paid and
nonassessable. In the case of a stock dividend, that part of the surplus of the
Bank which is transferred to stated capital upon the issuance of shares as a
share dividend shall be deemed to be the consideration for their issuance.
Except for shares issuable in connection with the conversion of the
Bank from the mutual to stock form of capitalization, no shares of common stock
(including shares issuable upon conversion, exchange or exercise of other
securities) shall be issued, directly or indirectly, to officers, directors, or
controlling persons of the Bank other than as part of a general public offering
or as qualifying shares to a director, unless their issuance or the plan under
which they would be issued has been approved by a majority of the total votes
eligible to be cast at a legal meeting.
Nothing contained in this section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share, except as
to the cumulation of votes for the election of directors: Provided, that this
restriction on voting separately by class or series shall not apply:
(i) To any provision which would authorize the
holders of preferred stock, voting as a class or series, to elect
some members of the board of directors, less than a majority
thereof, in the event of default in the payment of dividends on
any class or series of preferred stock;
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(ii) To any provision which would require the holders
of preferred stock, voting as a class or series, to approve the
merger or consolidation of the Bank with another corporation or
the sale, lease, or conveyance (other than by mortgage or pledge)
of properties or business in exchange for securities of a
corporation other than the Bank if the preferred stock is
exchanged for securities of such other corporation: Provided,
that no provision may require such approval for transactions
undertaken with the assistance or pursuant to the direction of
the Office, Federal Deposit Insurance Corporation or the
Resolution Trust Corporation;
(iii) To any amendment which would adversely change
the specific terms of any class or series of capital stock as set
forth in this Section 5 (or in any supplementary sections
hereto), including any amendment which would create or enlarge
any class or series ranking prior thereto in rights and
preferences. An amendment which increases the number of
authorized shares of any class or series of capital stock, or
substitutes the surviving Bank in a merger or consolidation for
the Bank, shall not be considered to be such an adverse change.
A description of the different classes and series, if any, of the Bank's
capital stock and a statement of the designations, and the relative rights,
preferences, and limitations of the shares of each class of and series, if any,
of capital stock are as follows:
A. COMMON STOCK. Except as provided in this Section 5 (or in any
supplementary sections thereto) the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder, except as to the
cumulation of votes for the election of directors.
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and of sinking fund, retirement fund, or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock and on any class or series
of stock entitled to participate therewith as to dividends out of any assets
legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the Bank,
the holders of the common stock (and the holders of any class or series of stock
entitled to participate with the common stock in the distribution of assets)
shall be entitled to receive, in cash or in kind, the assets of the Bank
available for distribution remaining after: (i) payment or provision for
payment of the Bank's debts and liabilities; (ii) distributions or provision for
distributions in settlement of its liquidation account; and (iii) distributions
or provision for distributions to holders of any class or series of stock having
preference over the common stock in the liquidation, dissolution, or winding up
of the Bank. Each share of common stock shall have the same relative rights as
and be identical in all respects with all the other shares of common stock.
B. PREFERRED STOCK. The Bank may provide in supplementary sections to its
charter for one or more classes of preferred stock, which shall be separately
identified. The shares of any class may be divided into and issued in series,
with each series separately designated so as to distinguish the shares thereof
from the shares of all other series and classes. The terms of each series shall
be set forth in a supplementary section to the charter. All shares of the same
class shall be identical except as to the following relative rights and
preferences, as to which there may be variations between different series:
(a) The distinctive serial designation and the number of shares
constituting such series;
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(b) The dividend rate or the amount of dividends to be paid on the shares
of such series, whether dividends shall be cumulative and, if so, from which
date(s) the payment date(s) for dividends, and the participating or other
special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such series;
(d) Whether the shares of such series shall be redeemable and, if so, the
price(s) at which, and the terms and conditions on which such shares may be
redeemed;
(e) The amount(s) payable upon the shares of such series in the event of
voluntary or involuntary liquidation, dissolution, or winding up of the Bank;
(f) Whether the shares of such series shall be entitled to the benefit of
a sinking or retirement fund to be applied to the purchase or redemption of such
shares, and if so entitled, the amount of such fund and the manner of its
application, including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the Bank and,
if so, the conversion price(s) or the rate(s) of exchange, and the adjustments
thereof, if any, at which such conversion or exchange may be made, and any other
terms and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such series
shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption of
supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established by a
supplementary charter section adopted by the board of directors, the Bank shall
file with the secretary to the board a dated copy of that supplementary section
of this charter establishing and designating the series and fixing and
determining the relative rights and preferences thereof.
SECTION 6. PREEMPTIVE RIGHTS. Holders of the capital stock of the Bank
shall not be entitled to preemptive rights with respect to any shares of the
Bank which may be issued.
SECTION 7. LIQUIDATION ACCOUNT. Pursuant to the requirements of the
Office's Regulations (12 CFR Subchapter D), the Bank shall establish and
maintain a liquidation account for the benefit of its savings account holders as
of January 15, 1995 and March 31, 1996. In the event of a complete liquidation
of the Bank, it shall comply with such regulations with respect to the amount
and the priorities on liquidation of each of the Bank's eligible savers'
inchoate interest in the liquidation account, to the extent it is still in
existence: Provided, that an eligible savers' inchoate interest in the
liquidation account shall not entitle such eligible saver to any voting rights
at meetings of the Bank's stockholders.
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SECTION 8. DIRECTORS. The Bank shall be under the direction of a Board of
Directors. The authorized number of directors, as stated in the Bank's bylaws,
shall not be fewer than five nor more than fifteen except when a greater number
is approved by the Director of the Office.
SECTION 9. AMENDMENT OF CHARTER. Except as provided in Section 5, no
amendment, addition, alteration, change, or repeal of this charter shall be
made, unless such is first proposed by the Board of Directors of the Bank, then
preliminarily approved by the Office, which preliminary approval may be granted
by the Office pursuant to regulations specifying preapproved charter amendments,
and thereafter approved by the shareholders by a majority of the total votes
eligible to be cast at a legal meeting. Any amendment, addition, alteration,
change, or repeal so acted upon shall be effective upon filing with the Office
in accordance with regulatory procedures or on such other date as the Office may
specify in its preliminary approval.
Attest: _____________________________ By: ___________________________
Secretary Chief Executive Officer
Chester Savings Bank, FSB Chester Savings Bank, FSB
Declared effective this ___ day of _________________, 1996.
Office of Thrift Supervision
By: _____________________________ By: ___________________________
Secretary Director
Office of Thrift Supervision Office of Thrift Supervision
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EXHIBIT C
BYLAWS
CHESTER SAVINGS BANK, FSB
ARTICLE I - HOME OFFICE
The home office of Chester Savings Bank, FSB ("Bank"), shall be located
at 1112 State Street, in the City of Chester, the County of Randolph, in the
State of Illinois.
ARTICLE II - SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All annual and special meetings of
shareholders shall be held at the home office of the Bank or at such other place
in the State of Illinois as the Board of Directors may determine.
SECTION 2. ANNUAL MEETING. A meeting of the shareholders of the Bank
for the election of directors and for the transaction of any other business of
the Bank shall be held annually within 120 days after the end of the Bank's
fiscal year on the third Wednesday of April, if not a legal holiday, and if a
legal holiday, then on the next day following which is not a legal holiday, at
10:00 a.m., Central Time, or at such other date and time within such 120-day
period as the Board of Directors may determine.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders for
any purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision ("Office"), may be called at any time by the
Chairman of the Board, the President, or a majority of the Board of Directors,
and shall be called by the Chairman of the Board, the President, or the
Secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the Bank entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the
meeting and shall be delivered to the home office of the Bank addressed to the
Chairman of the Board, the President, or the Secretary.
SECTION 4. CONDUCT OF MEETINGS. Annual and special meetings shall be
conducted in accordance with rules and procedures adopted by the Board of
Directors. The Board of Directors shall designate, when present, either the
Chairman of the Board or President to preside at such meetings.
SECTION 5. NOTICE OF MEETINGS. Written notice stating the place, day,
and hour of the meeting and the purpose(s) for which the meeting is called shall
be delivered not fewer than 10 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the Chairman of
the Board, the President, or the Secretary, or the directors calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the Bank as of the record date prescribed in Section 6 of
this Article II with postage prepaid. When any shareholders' meeting, either
annual or special, is adjourned for 30 days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting. It shall not be
necessary to give any notice of the time and place of any meeting adjourned for
less than 30 days or of the business to be transacted at the meeting, other than
an announcement at the meeting at which such adjourn ment is taken.
SECTION 6. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the Board of Directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall be not more
than 60 days and, in case of a meeting of shareholders, not fewer than 10 days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. When a determination of
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shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment.
SECTION 7. VOTING LISTS. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the Bank shall make a complete list of the shareholders entitled to
vote at such meeting, or any adjournment, arranged in alphabetical order, with
the address and the number of shares held by each. This list of shareholders
shall be kept on file at the home office of the Bank and shall be subject to
inspection by any shareholder at any time during usual business hours for a
period of 20 days prior to such meeting. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to
inspection by any shareholder during the entire time of the meeting. The
original stock transfer book shall constitute prima facie evidence of the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
In lieu of making the shareholder list available for inspection by
shareholders as provided in the preceding paragraph, the Board of Directors may
perform such acts as required by paragraphs (a) and (b) of Rule 14a-7 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as may
be duly requested in writing, with respect to any matter which may be properly
considered at a meeting of shareholders, by any shareholder who is entitled to
vote on such matter and who shall defray the reasonable expenses to be incurred
by the Bank in performance of the act or acts required.
SECTION 8. QUORUM. A majority of the outstanding shares of the Bank
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
is represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The share holders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to constitute less than a quorum.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies solicited on behalf of the management
shall be voted as directed by the shareholder or, in the absence of such
direction, as determined by a majority of the Board of Directors. No proxy
shall be valid more than eleven months from the date of its execution except for
a proxy coupled with an interest.
SECTION 10. VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS. When
ownership stands in the name of two or more persons, in the absence of written
directions to the Bank to the contrary, at any meeting of the shareholders of
the Bank any one or more of such shareholders may cast, in person or by proxy,
all votes to which such ownership is entitled. In the event an attempt is made
to cast conflicting votes, in person or by proxy, by the several persons in
whose names shares of stock stand, the vote or votes to which those persons are
entitled shall be cast as directed by a majority of those holding such shares
and present in person or by proxy at such meeting, but no votes shall be cast
for such stock if a majority cannot agree.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation may be voted by any officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his or her name.
Shares standing in the name of a trustee may be voted by him or her, either in
person or by proxy, but no trustee shall be entitled to vote shares held by him
or her without a transfer of such shares into his name. Shares standing in the
name of a receiver may be voted by such receiver, and shares held by or under
the control of a receiver may be voted by such receiver without the transfer
into his name if authority to do so is contained in an appropriate order of the
court or other public authority by which such receiver was appointed.
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A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Bank nor shares held
by another corporation, if a majority of the shares entitled to vote for the
election of directors of such other corporation are held by the Bank, shall be
voted at any meeting or counted in determining the total number of outstanding
shares at any given time for purposes of any meeting.
SECTION 12. CUMULATIVE VOTING. Unless otherwise provided in the Bank's
charter, every shareholder entitled to vote at an election for directors shall
have the right to vote, in person or by proxy, the number of shares owned by the
shareholder for as many persons as there are directors to be elected and for
whose election the shareholder has a right to vote, or to cumulate the votes by
giving one candidate as many votes as the number of such directors to be elected
multiplied by the number of shares shall equal or by distributing such votes on
the same principle among any number of candidates.
SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board of Directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the Chairman of the Board or the President may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails
or refuses to act, the vacancy may be filled by appointment by the Board of
Directors in advance of the meeting or at the meeting by the Chairman of the
Board or the President.
Unless otherwise prescribed by regulations of the Office, the duties of
such inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies; receiving votes,
ballots, or consents; hearing and determining all challenges and questions in
any way arising in connection with the rights to vote; counting and tabulating
all votes or consents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all shareholders.
SECTION 14. NOMINATING COMMITTEE. The Board of Directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the Bank. No nominations for directors
except those made by the nominating committee shall be voted upon at the annual
meeting unless other nominations by shareholders are made in writing and
delivered to the Secretary of the Bank at least five days prior to the date of
the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the Bank. Ballots bearing the names of all
persons nominated by the nominating committee and by shareholders shall be
provided for use at the annual meeting. However, if the nominating committee
shall fail or refuse to act at least 20 days prior to the annual meeting,
nominations for directors may be made at the annual meeting by any shareholder
entitled to vote and shall be voted upon.
SECTION 15. NEW BUSINESS. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the Secretary of the Bank at
least five days before the date of the annual meeting, and all business so
stated, proposed, and filed shall be considered at the annual meeting; but no
other proposal shall be acted upon at the annual meeting. Any shareholder may
make any other proposal at the annual meeting and the same may be discussed and
considered, but unless stated in writing and filed with the Secretary at least
five days before the meeting, such proposal shall be laid over for action at an
adjourned, special, or annual meeting of the shareholders taking place 30 days
or more thereafter. This provision shall not prevent the consideration and
approval or
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disapproval at the annual meeting of reports of officers, directors, and
committees; but in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated and filed as herein provided.
SECTION 16. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III - BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the Bank shall
be under the direction of its Board of Directors. The Board of Directors shall
annually elect a Chairman of the Board and a President from among its members
and shall designate, when present, either the Chairman of the Board or the
President to preside at its meetings.
SECTION 2. NUMBER AND TERM. The Board of Directors shall consist of
eight members and shall be divided into three classes as nearly equal in number
as possible. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. One class shall be
elected by ballot annually.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place, within the Bank's
normal lending territory, for the holding of additional regular meetings without
other notice than such resolution.
SECTION 4. QUALIFICATION. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the Bank unless
the Bank is a wholly owned subsidiary of a holding company.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board, the President,
or one-third of the directors. The persons authorized to call special meetings
of the Board of Directors may fix any place, within the Bank's normal lending
territory, as the place for holding any special meeting of the Board of
Directors called by such persons.
Members of the Board of Directors may participate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participations
shall constitute presence in person but shall not constitute attendance for the
purpose of compensation pursuant to Section 12 of this Article.
SECTION 6. NOTICE. Written notice of any special meeting shall be given
to each director at least two days prior thereto when delivered personally or by
telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall
be deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed or when delivered to the telegraph company if sent by
telegram. Any director may waive notice of any meeting by a writing filed with
the Secretary. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the Board of Directors need be
specified in the notice of waiver of notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors; but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall be
given in the same manner as prescribed by Section 6 of this Article III.
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SECTION 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.
SECTION 9. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken by the Board of Directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
SECTION 10. RESIGNATION. Any director may resign at any time by sending
a written notice of such resignation to the home office of the Bank addressed to
the Chairman of the Board or the President. Unless otherwise specified, such
resignation shall take effect upon receipt by the Chairman of the Board or the
President. More than three consecutive absences from regular meetings of the
Board of Directors, unless excused by resolution of the Board of Directors,
shall automatically constitute a resignation, effective when such resignation is
accepted by the Board of Directors.
SECTION 11. VACANCIES. Any vacancy occurring on the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the Board of Directors. A director elected to
fill a vacancy shall be elected to serve until the next election of directors by
the shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the Board of Directors for a
term of office continuing only until the next election of directors by the
shareholders.
SECTION 12. COMPENSATION. Directors, as such, may receive a stated
salary for their services. By resolution of the Board of Directors, a
reasonable fixed sum, and reasonable expenses of attendance, if any, may be
allowed for actual attendance at each regular or special meeting of the Board of
Directors. Members of either standing or special committees may be allowed such
compensation for actual attendance at committee meetings as the Board of
Directors may determine.
SECTION 13. PRESUMPTION OF ASSENT. A director of the Bank who is
present at a meeting of the Board of Directors at which action on any Bank
matter is taken shall be presumed to have assented to the action taken unless
his or her dissent or abstention shall be entered in the minutes of the meeting
or unless he or she shall file a written dissent to such action with the person
acting as the secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the Secretary of the Bank within five
days after the date a copy of the minutes of the meeting is received. Such
right to dissent shall not apply to a director who voted in favor of such
action.
SECTION 14. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director may be removed for cause by a vote of
the holders of a majority of the shares then entitled to vote at an election of
directors. If less than the entire board is to be removed, no one of the
directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part. Whenever the holders of
the shares of any class are entitled to elect one or more directors by the
provisions of the charter or supplemental sections thereto, the provisions of
this section shall apply, in respect to the removal of a director or directors
so elected, to the vote of the holders of the outstanding shares of that class
and not to the vote of the outstanding shares as a whole.
ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES
SECTION 1. APPOINTMENT. The Board of Directors, by resolution adopted
by a majority of the full board, may designate the chief executive officer and
two or more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the Board of Directors, or any director,
of any responsibility imposed by law or regulation.
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SECTION 2. AUTHORITY. The executive committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority of
the Board of Directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that the executive committee shall not have the authority of the Board of
Directors with reference to: the declaration of dividends; the amendment of the
charter or bylaws of the Bank, or recommending to the shareholders a plan of
merger, consolidation, or conversion; the sale, lease, or other disposition of
all or substantially all of the property and assets of the Bank otherwise than
in the usual and regular course of its business; a voluntary dissolution of the
Bank; a revocation of any of the foregoing; or the approval of a transaction in
which any member of the executive committee, directly or indirectly, has any
material beneficial interest.
SECTION 3. TENURE. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the Board of Directors following his or her
designation and until a successor is designated as a member of the executive
committee.
SECTION 4. MEETINGS. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee
may be called by any member thereof upon not less than one day's notice stating
the place, date, and hour of the meeting, which notice may be written or oral.
Any member of the executive committee may waive notice of any meeting and no
notice of any meeting need be given to any member thereof who attends in person.
The notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
SECTION 5. QUORUM. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
SECTION 6. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken by the executive committee at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the members of the executive committee.
SECTION 7. VACANCIES. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
SECTION 8. RESIGNATIONS AND REMOVAL. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full Board of Directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the President or Secretary of the Bank. Unless otherwise specified,
such resignation shall take effect upon its receipt; the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 9. PROCEDURE. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information at
the meeting held next after the proceedings shall have occurred.
SECTION 10. OTHER COMMITTEES. The Board of Directors may by resolution
establish an audit, loan, or other committee composed of directors as they may
determine to be necessary or appropriate for the conduct of the business of the
Bank and may prescribe the duties, constitution, and procedures thereof.
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ARTICLE V - OFFICERS
SECTION 1. POSITIONS. The officers of the Bank shall be a President,
one or more Vice Presidents, a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. The Board of Directors may also designate
the Chairman of the Board as an officer. The President shall be the Chief
Executive Officer unless the Board of Directors designates the Chairman of the
Board as Chief Executive Officer. The President shall be a Director of the
Bank. The offices of the Secretary and Treasurer may be held by the same person
and a Vice President may also be either the Secretary or the Treasurer. The
Board of Directors may designate one or more vice presidents as Executive Vice
President or Senior Vice President. The Board of Directors may also elect or
authorize the appointment of such other officers as the business of the Bank may
require. The officers shall have such authority and perform such duties as the
Board of Directors may from time to time authorize or determine. In the absence
of action by the Board of Directors, the officers shall have such powers and
duties as generally pertain to their respective offices.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Bank shall
be elected annually at the first meeting of the Board of Directors held after
each annual meeting of the stockholders. If the election of officers is not
held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly
elected and qualified or until the officer's death, resignation, or removal in
the manner hereinafter provided. Election or appointment of an officer,
employee, or agent shall not of itself create contractual rights. The Board of
Directors may authorize the Bank to enter into an employment contract with any
officer in accordance with regulations of the Office; but no such contract shall
impair the right of the Board of Directors to remove any officer at any time in
accordance with Section 3 of this Article V.
SECTION 3. REMOVAL. Any officer may be removed by the Board of
Directors whenever in its judgment the best interests of the Bank will be served
thereby, but such removal, other than for cause, shall be without prejudice to
any contractual rights, if any, of the person so removed.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. REMUNERATION. The remuneration of the officers shall be
fixed from time to time by the Board of Directors.
ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
SECTION 1. CONTRACTS. To the extent permitted by regulations of the
Board, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the Board of Directors may authorize any officer,
employee, or agent of the Bank to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Bank. Such authority may be
general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the Bank
and no evidence of indebtedness shall be issued in its name unless authorized by
the Board of Directors. Such authority may be general or confined to specific
instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the Bank shall be signed by one or more officers, employees, or agents
of the Bank in such manner as shall from time to time be determined by the Board
of Directors.
SECTION 4. DEPOSITS. All funds of the Bank not otherwise employed shall
be deposited from time to time to the credit of the Bank in any duly authorized
depositories as the Board of Directors may select.
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ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of
capital stock of the Bank shall be in such form as shall be determined by the
Board of Directors and approved by the Office. Such certificates shall be
signed by the Chief Executive Officer or by any other officer of the Bank
authorized by the Board of Directors, attested by the Secretary or an Assistant
Secretary, and sealed with the corporate seal or a facsimile thereof. The
signatures of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar
other than the Bank itself or one of its employees. Each certificate for shares
of capital stock shall be consecutively numbered or otherwise identified. The
name and address of the person to whom the shares are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Bank. All certificates surrendered to the Bank for transfer shall be canceled
and no new certificate shall be issued until the former certificate for a like
number of shares has been surrendered and canceled, except that in the case of a
lost or destroyed certificate, a new certificate may be issued upon such terms
and indemnity to the Bank as the Board of Directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock of
the Bank shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney authorized by a duly executed power of attorney and filed with the
Bank. Such transfer shall be made only on surrender for cancellation of the
certificate for such shares. The person in whose name shares of capital stock
stand on the books of the Bank shall be deemed by the Bank to be the owner for
all purposes.
ARTICLE VIII - FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Bank shall end on the 31st day of December of each
year. The Bank shall be subject to an annual audit as of the end of its fiscal
year by independent public accountants appointed by and responsible to the Board
of Directors. The appointment of such accountants shall be subject to annual
ratification by the shareholders.
ARTICLE IX - DIVIDENDS
Subject to the terms of the Bank's charter and the regulations and orders
of the Office, the Board of Directors may, from time to time, declare, and the
Bank may pay, dividends on its outstanding classes of capital stock.
ARTICLE X - CORPORATE SEAL
The Board of Directors shall provide an Bank seal which shall be two
concentric circles between which shall be the name of the Bank. The year of
incorporation or an emblem may appear in the center.
ARTICLE XI - AMENDMENTS
These bylaws may be amended in a manner consistent with regulations of
the Office at any time by a majority vote of the full Board of Directors or by a
majority vote of the votes cast by the stockholders of the Bank at any legal
meeting.
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