<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1996
REGISTRATION NO. 333-6069
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FOUNDATION BANCORP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OHIO 6036 31-1465239
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of Classification Code Number) identification
incorporation or organization) number)
</TABLE>
25 GARFIELD PLACE CINCINNATI, OHIO 45202
(513) 721-0120
(Address, including Zip Code, and telephone number, including
area code, of registrant's principal executive offices)
LAIRD L. LAZELLE
FOUNDATION BANCORP, INC.
25 GARFIELD PLACE
CINCINNATI, OHIO 45202
(513) 721-0120
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
------------------------
WITH COPIES TO:
TERRI R. ABARE
RICK J. LANDRUM
Vorys, Sater, Seymour and Pease
Atrium Two, 221 East Fourth Street
Cincinnati, Ohio 45202
(513) 723-4000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE 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 of the Securities Act of
1933, check the following box: /X/
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE (2) PRICE (2) FEE
<S> <C> <C> <C> <C>
Common shares, without par
value........................ 462,875 $10.00 $4,628,750 $1,596
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
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.
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<PAGE>
CROSS REFERENCE SHEET
SHOWING THE LOCATION IN THE PROSPECTUS OF THE ITEMS OF FORM S-1
<TABLE>
<CAPTION>
FORM S-1 ITEM AND CAPTION PROSPECTUS HEADING
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<C> <C> <S> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus..................................... Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus...... Cover Page; Back Cover Page
3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges................................................ PROSPECTUS SUMMARY; RISK FACTORS
4. Use of Proceeds.............................................. USE OF PROCEEDS
5. Determination of Offering Price.............................. Cover Page; THE CONVERSION -- Pricing and Number
of Common Shares to be Sold
6. Dilution..................................................... Not Applicable
7. Selling Security Holders..................................... Not Applicable
8. Plan of Distribution......................................... Cover Page; THE CONVERSION -- General;
-- Subscription Offering;
-- Community Offering;
-- Plan of Distribution
9. Description of Securities to be Registered................... DESCRIPTION OF AUTHORIZED SHARES
10. Interest of Named Experts and Counsel........................ Not Applicable
11. Information with Respect to the Registrant...................
(a) Description of Business........................... THE BUSINESS OF THE BANK
(b) Description of Property........................... THE BUSINESS OF THE BANK -- Properties
(c) Legal Proceedings................................. THE BUSINESS OF THE BANK -- Legal Proceedings
(d) Market Price and Dividends........................ Cover Page; MARKET FOR COMMON SHARES; DIVIDEND
POLICY
(e) Financial Statements.............................. FINANCIAL STATEMENTS
(f) Selected Financial Data........................... SELECTED FINANCIAL INFORMATION AND OTHER DATA
(g) Supplementary Financial Information............... Not Applicable
(h) Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(i) Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure........................................ Not Applicable
(j) Directors and Executive Officers.................. MANAGEMENT
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-1 ITEM AND CAPTION PROSPECTUS HEADING
- ------------------------------------------------------------------------ --------------------------------------------------
(k) Executive Compensation............................ MANAGEMENT -- Compensation; -- Defined
Contribution Plan; and -- Stock Benefit Plans
<C> <C> <S> <C>
(l) Security Ownership of Certain Beneficial
Owners and Management............................. THE CONVERSION -- Shares to be Purchased by
Management Pursuant to Subscription Rights
(m) Certain Relationships and Related
Transactions...................................... Not Applicable
12. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................... Not Applicable
</TABLE>
<PAGE>
PROSPECTUS UP TO 402,500 COMMON SHARES
$10 PURCHASE PRICE PER SHARE
FOUNDATION BANCORP, INC.
(PROPOSED HOLDING COMPANY FOR FOUNDATION SAVINGS BANK)
CINCINNATI, OHIO
Foundation Bancorp, Inc., an Ohio corporation (the "Holding Company"), is
hereby offering for sale up to 402,500 common shares, without par value (the
"Common Shares"), in connection with its acquisition of all of the capital stock
to be issued by Foundation Savings Bank, an Ohio mutual savings and loan
association which has its principal office in Cincinnati, Ohio (the "Bank"),
upon the conversion of the Bank from a mutual savings and loan association to a
permanent capital stock savings and loan association incorporated under the laws
of the State of Ohio (the "Conversion"). The sale of the Common Shares is
subject to the approval of the Bank's Plan of Conversion (the "Plan") and the
adoption of the Amended Articles of Incorporation and Amended Constitution of
the Bank by the members of the Bank at a Special Meeting to be held at m.,
Eastern Time, on , 1996, at , Cincinnati, Ohio (the
"Special Meeting").
Based on an independent appraisal of the pro forma market value of the Bank,
as converted, as of May 14, 1996, the aggregate purchase price of the Common
Shares offered in connection with the Conversion ranges from a minimum of
$2,975,000 to a maximum of $4,025,000 (the "Valuation Range"), resulting in a
range of 297,500 to 402,500 Common Shares at $10 per share. See "THE CONVERSION
- -- Pricing and Number of Common Shares to be Sold." Applicable regulations
permit the Holding Company to offer additional Common Shares in an amount not to
exceed 15% above the maximum of the Valuation Range, which would permit the
issuance of up to 462,875 Common Shares with an aggregate purchase price of
$4,628,750. The actual number of Common Shares sold in connection with the
Conversion will be based upon the final valuation of the Bank, as determined by
the independent appraiser upon the completion of this offering. If the final
valuation is greater than or equal to $2,975,000 and less than or equal to
$4,628,750, the number of Common Shares to be issued in connection with the
Conversion will not be less than 297,500, nor more than 462,875. If, due to
changing market conditions, the final valuation is less than $2,975,000 or more
than 462,875, subscribers will be given notice of such final valuation and a
resolicitation of subscribers will be conducted. See "THE CONVERSION -- Pricing
and Number of Common Shares to be Sold," "USE OF PROCEEDS," "CAPITALIZATION" and
"PRO FORMA DATA."
(CONTINUED ON NEXT PAGE)
THE COMMON SHARES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), THE OFFICE OF THRIFT
SUPERVISION OF THE DEPARTMENT OF THE TREASURY (THE "OTS"), THE FEDERAL DEPOSIT
INSURANCE CORPORATION (THE "FDIC"), THE OHIO DEPARTMENT OF COMMERCE, DIVISION OF
FINANCIAL INSTITUTIONS (THE "DIVISION"), OR THE SECURITIES COMMISSION OF ANY
STATE, NOR HAS THE SEC, THE OTS, THE FDIC, THE DIVISION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
AN INVESTMENT IN THE COMMON SHARES OFFERED HEREBY INVOLVES CERTAIN RISKS.
FOR A DISCUSSION OF SUCH RISKS AND OTHER FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS, SEE "RISK FACTORS" ON PAGE 10.
THE COMMON SHARES BEING OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS AND ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
FOR INFORMATION ON HOW TO SUBSCRIBE, PLEASE CALL THE CONVERSION INFORMATION
CENTER AT (513) - .
<TABLE>
<CAPTION>
ESTIMATED EXPENSES
SUBSCRIPTION AND UNDERWRITING ESTIMATED NET
PRICE COMMISSIONS (1) PROCEEDS (2)
Per share Minimum..................................... $10 $0.84 $9.16
<S> <C> <C> <C>
Per share Mid-point................................... $10 $0.72 $9.28
Per share Maximum..................................... $10 $0.62 $9.38
Per share Maximum, as adjusted (3).................... $10 $0.54 $9.46
Total Minimum......................................... $2,975,000 $251,000 $2,724,000
Total Mid-point....................................... $3,500,000 $251,000 $3,249,000
Total Maximum......................................... $4,025,000 $251,000 $3,774,000
Total Maximum, as adjusted (3)........................ $4,628,750 $251,000 $4,377,750
</TABLE>
(1) Expenses of the Conversion payable by the Bank and the Holding Company
include legal, accounting, appraisal, printing, mailing and miscellaneous
expenses. Such expenses also include a financial advisory fee of $50,000,
payable to Charles Webb & Company ("Webb"). Such fee may be deemed to be
underwriting fees. See "THE CONVERSION -- Plan of Distribution." Actual
expenses may vary from the estimates.
(2) Includes the net proceeds from purchases intended to be made by the
Foundation Bancorp, Inc. Employee Stock Ownership Plan (the "ESOP") with
funds borrowed by the ESOP from the Holding Company. See "PRO FORMA DATA"
and "MANAGEMENT -- Stock Benefit Plans -- Employee Stock Ownership Plan."
(3) Gives effect to the increase in the number of Common Shares sold in
connection with the Conversion of up to 15% above the maximum of the
Valuation Range. Such shares may be offered without the resolicitation of
persons who subscribe for Common Shares in the Subscription Offering and the
Community Offering (collectively, the "Offering"). See "THE CONVERSION --
Pricing and Number of Common Shares to be Sold."
THE DATE OF THIS PROSPECTUS IS , 1996.
CHARLES WEBB & COMPANY
<PAGE>
In accordance with the Plan, nontransferable subscription rights to purchase
Common Shares at a price of $10 per share are offered hereby in a subscription
offering (the "Subscription Offering"), subject to the rights and restrictions
established by the Plan, to (a) eligible depositors of the Bank as of May 31,
1995 (the "Eligibility Record Date"), (b) the ESOP and (c) members of the Bank
eligible to vote at the Special Meeting ("Other Eligible Members"). ALL
SUBSCRIPTION RIGHTS TO PURCHASE COMMON SHARES IN THE SUBSCRIPTION OFFERING ARE
NONTRANSFERABLE AND WILL EXPIRE AT .M., EASTERN TIME, ON , 1996
(the "Subscription Expiration Date"). See "THE CONVERSION -- Subscription
Offering." To the extent that all of the Common Shares are not subscribed for in
the Subscription Offering, the remaining Common Shares are hereby being offered
concurrently to the general public in a direct community offering in which
preference will be given to natural persons residing in Hamilton County, Ohio
(the "Community Offering"). See "THE CONVERSION -- Community Offering."
The minimum number of Common Shares any person may purchase in the Offering
is 25. Except for the ESOP, which may purchase up to 8% of the total Common
Shares sold in the Offering, (i) no Eligible Account Holder (hereinafter
defined), Supplemental Eligible Account Holder (hereinafter defined), if any, or
Other Eligible Member may purchase in the Offering more than 2.5% of the total
Common Shares sold in the Offering, (ii) no person, together with his or her
Associates (hereinafter defined) and other persons acting in concert with him or
her, may purchase in the Community Offering more than 2.5% of the total Common
Shares sold in the Offering, and (iii) no person, together with his or her
Associates and other persons acting in concert with him or her, may purchase
more than 5% of the total Common Shares sold in the Offering. In connection with
the exercise of subscription rights arising from a deposit account or a loan
account in which two or more persons have an interest, the aggregate maximum
number of Common Shares which the persons having an interest in such account may
purchase is 2.5% of the total Common Shares sold in the Offering. Subject to OTS
regulations, the maximum purchase limitation may be increased or decreased after
the commencement of the Offering in the sole discretion of the Boards of
Directors of the Holding Company and the Bank. If the maximum purchase
limitation is increased to more than 2.5% of the Common Shares, persons who have
subscribed for 2.5% of the Common Shares will be given the opportunity to
increase their subscriptions. See "THE CONVERSION -- Limitations on Purchases of
Common Shares."
Common Shares may be subsribed for in the Offering by returning the
accompanying Stock Order Form and Certification Form (the "Stock Order Form"),
along with full payment of the purchase price per share for all shares for which
subscription is made, so that it is received by the Bank no later than
m., Eastern Time, , 1996. See "THE CONVERSION -- Use of Order
Forms."
THE CONVERSION OF THE BANK FROM A MUTUAL SAVINGS AND LOAN ASSOCIATION TO A
PERMANENT CAPITAL STOCK SAVINGS AND LOAN ASSOCIATION IS CONTINGENT UPON (I) THE
APPROVAL OF THE PLAN AND THE ADOPTION OF THE AMENDED ARTICLES OF INCORPORATION
AND THE AMENDED CONSTITUTION BY THE BANK'S VOTING MEMBERS, (II) THE SALE OF THE
REQUISITE NUMBER OF COMMON SHARES, AND (III) CERTAIN OTHER FACTORS. SEE "THE
CONVERSION."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING INFORMATION IS NOT COMPLETE AND IS QUALIFIED IN ITS ENTIRETY
BY THE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND ACCOMPANYING NOTES
APPEARING ELSEWHERE IN THIS PROSPECTUS.
FOUNDATION BANCORP, INC.
The Holding Company was incorporated under Ohio law in April 1996 at the
direction of the Bank for the purpose of purchasing all of the capital stock of
the Bank to be issued in connection with the Conversion. The Holding Company has
not conducted and will not conduct any business before the completion of the
Conversion other than business related to the Conversion. Upon the consummation
of the Conversion, the Holding Company will be a unitary savings and loan
holding company, the principal assets of which initially will be the capital
stock of the Bank, the investments made with the net proceeds retained from the
sale of Common Shares in connection with the Conversion and a loan to be made by
the Holding Company to the ESOP to facilitate the ESOP's purchase of Common
Shares in the Conversion. See "USE OF PROCEEDS."
The office of the Holding Company is located at 25 Garfield Place,
Cincinnati, Ohio 45202, and its telephone number is (513) 721-0120.
FOUNDATION SAVINGS BANK
The Bank is a mutual savings and loan association which was organized under
Ohio law in 1888. As an Ohio savings and loan association, the Bank is subject
to supervision and regulation by the OTS and the Division. The Bank is a member
of the Federal Home Loan Bank (the "FHLB") of Cincinnati, and the deposits of
the Bank are insured up to applicable limits by the FDIC in the Savings
Association Insurance Fund (the "SAIF"). See "REGULATION."
The Bank conducts business from its office at 25 Garfield Place in
Cincinnati, Ohio. The principal business of the Bank is the origination of
permanent mortgage loans secured by first mortgages on one- to four-family
residential real estate located in Hamilton County, Ohio and the contiguous Ohio
counties of Clermont, Butler and Warren and the Kentucky counties of Boone and
Kenton. The Bank also originates mortgage loans secured by multifamily real
estate (over four units) and nonresidential real estate in its primary market
area. See "THE BUSINESS OF THE BANK -- Lending Activities." In addition to real
estate lending, the Bank originates a limited number of secured and unsecured
consumer loans. For liquidity and interest rate risk management purposes, the
Bank invests in interest-bearing deposits in other financial institutions, U.S.
Government and agency obligations, mortgage-backed securities and other
investments permitted by applicable law. See "THE BUSINESS OF THE BANK --
Investment Activities." Funds for lending and other investment activities are
obtained primarily from savings deposits, which are insured up to applicable
limits by the FDIC, and principal repayments on loans. Advances from the FHLB of
Cincinnati are utilized from time to time when other sources of funds are
inadequate to fund loan demand. See "THE BUSINESS OF THE BANK -- Deposits and
Borrowings."
In 1994, the Bank changed its operating strategy to become less reliant on
retirement deposits and to increase its loan originations. The Bank now has a
full-time loan originator who solicits mortgage loan applications. Loans
originated by the Bank are underwritten in accordance with national secondary
mortgage market standards. Depending on market conditions, the Bank either sells
or portfolios its loans. The Bank attempts to maintain an adequate net interest
margin, control expenses and enhance earnings with fee income and gains on the
sale of loans. Although the Bank intends to pursue a policy of prudent growth in
assets and deposits, its downtown location is not conducive to attracting lower
cost deposits such as checking and passbook accounts. Some of the results of
this strategy are summarized as follows:
- MORTGAGE LENDING. Approximately 50% of the Bank's mortgage loan portfolio
at March 31, 1996, consists of loans originated during the period from
January 1, 1994, to March 31, 1996. During such period, the Bank increased
its total investment in mortgage loans from $18.5 million to $21.3
million, an increase of $2.8 million, or 15.2%. At March 31, 1996,
approximately $19.0 million, or 88.9%, of the Bank's total loans were
secured by one- to four-family real estate. See "THE BUSINESS OF THE BANK
-- Lending Activities -- Loans Secured by One- to Four-Family Real
Estate."
3
<PAGE>
- ASSET QUALITY. Maintaining a high level of asset quality is a top priority
of the board and management of the Bank. The Bank's efforts to control
non-performing assets begin with prudent lending policies and stringent
underwriting standards. The Bank moves quickly to resolve delinquencies
and to dispose of real estate acquired through foreclosure. At April 30,
1996, the Bank had only one loan, with a principal balance of
approximately $2,000, delinquent in excess of sixty days and no real
estate owned acquired through foreclosure. See "THE BUSINESS OF THE BANK
-- Lending Activities -- Delinquent Loans, Nonperforming Assets and
Classified Assets."
- CAPITAL POSITION. At March 31, 1996, the Bank's equity to assets ratio was
8.73%. In addition, the Bank's ratio of tangible capital to total assets
and its risk-based capital ratio were 8.73% and 19.59%, respectively, both
of which substantially exceed the OTS requirements. See "REGULATION --
Office of Thrift Supervision -- Regulatory Capital Requirements."
- ASSET AND DEPOSIT GROWTH. From January 1, 1994, through March 31, 1996,
there was little or no change in the Bank's asset and deposit growth, with
assets remaining at approximately $31.7 million and deposits at
approximately $27.8 million. Although total assets and total deposits have
remained relatively constant over that period, the mix of the assets and
deposits has changed significantly as the Bank has focused on loan
originations. Cash and equivalents declined by $1.0 million, or 20.0%, and
mortgage-backed securities declined by $1.7 million, or 25.4%, with the
proceeds invested primarily in mortgage loans, which increased $2.8
million, or 15.2%. Retirement accounts, which totalled approximately 60%
of deposits at January 1, 1994, had been reduced to 40% of deposits at
March 31, 1996. During such period, capital increased $353,000, or 14.6%.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" and "THE BUSINESS OF THE BANK."
- NET INCOME. The Bank's net income decreased approximately $25,000, from
$66,100 for the nine months ended March 31, 1996, compared to the same
period in 1995, and decreased $70,000 for the fiscal year ended June 30,
1995, compared to 1994. Such decreases are attributable to various
factors. During the nine-month period, a decline in net interest income
accounted for nearly all of the decrease in net income as the Bank's
liabilities repriced more quickly than its assets during the recent period
of rising interest rates. The decline in net income from the 1994 to the
1995 fiscal year was primarily attributable to a decline in other income.
Net income for 1994 was favorably affected by a gain on sale of
investments. See "MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
- PROFITABILITY. The Bank's return on assets was .62%, .41% and .28% for the
fiscal years ended June 30, 1994 and 1995, and the nine months ended March
31, 1996, respectively. Such ratios have been, on average, 33 basis points
below the Bank's peer group average, as compiled by the OTS. The Bank's
return on average equity for the fiscal years June 30, 1994 and 1995, and
the nine months ended March 31, 1996, averaged 5.28%. The Bank's cost of
deposits has been, on average, 69 basis points higher than the Bank's peer
group average. The higher cost of deposits has been partially offset by
general and administrative expenses approximately 19 basis points lower
than the peer group. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
THE CONVERSION
GENERAL. The Boards of Directors of the Holding Company and the Bank have
unanimously approved the Plan. The Plan provides for the Conversion of the Bank
from a mutual savings and loan association to a permanent capital stock savings
and loan association incorporated under the laws of the State of Ohio. The OTS
and the Division have approved the Plan, subject to the approval of the Plan by
the Bank's voting members at the Special Meeting and the satisfaction of certain
other conditions. See "THE CONVERSION -- Conditions and Termination."
The principal factors considered by the Bank's Board of Directors in
reaching the decision to pursue a mutual-to-stock conversion are the numerous
competitive disadvantages which the Bank faces if it maintains
4
<PAGE>
its mutual form. These disadvantages relate to a variety of factors, including
growth opportunities, employee retention and regulatory uncertainty. The
Conversion will also provide the Bank with additional capital which will support
future growth. See "THE CONVERSION -- Reasons for the Conversion."
THE SUBSCRIPTION AND COMMUNITY OFFERINGS. Pursuant to the Plan,
subscription rights to purchase Common Shares at a price of $10 per share are
hereby offered to (a) each account holder who has one or more deposit accounts
with an aggregate balance of $50 or more (a "Qualifying Deposit") with the Bank
at the close of business on the Eligibility Record Date (the "Eligible Account
Holders"), (b) the ESOP and (c) Other Eligible Members. See "THE CONVERSION --
Subscription Offering."
Concurrently with the Subscription Offering, the Common Shares not
subscribed for in the Subscription Offering are hereby offered to the general
public in the Community Offering, in which preference will be given to natural
persons residing in Hamilton County, Ohio. The Boards of Directors of the
Holding Company and the Bank have the right to reject, in whole or in part, any
subscription for Common Shares submitted in the Community Offering. See "THE
CONVERSION -- Community Offering."
The Plan authorizes the Boards of Directors of the Holding Company and the
Bank to establish limits on the amount of Common Shares which may be purchased
by various categories of persons. Pursuant to the Plan, the Boards of Directors
have set the preliminary limitation that (i) no Eligible Account Holder,
Supplemental Eligible Account Holder, if any, or Other Eligible Member may
purchase in the Offering more than 2.5% of the total Common Shares sold in the
Offering, (ii) no person, together with his or her Associates (hereinafter
defined) and other persons acting in concert with him or her, may purchase in
the Community Offering more than 2.5% of the total Common Shares sold in the
Offering, and (iii) no person, together with his or her Associates and other
persons acting in concert with him or her, may purchase more than 5% of the
total Common Shares sold in the Offering. In connection with the exercise of
subscription rights arising from a deposit account or a loan account in which
two or more persons have an interest, the aggregate maximum number of Common
Shares which the persons having an interest in such account may purchase is 2.5%
of the total Common Shares sold in the Offering. Such limitations do not apply
to the ESOP, which intends to purchase up to 8% of the Common Shares sold in the
Offering. Subject to applicable regulations, the purchase limitation may be
increased or decreased after the commencement of the Offering in the sole
discretion of the Boards of Directors. See "THE CONVERSION -- Limitations on
Purchases of Common Shares." In addition to the purchase limitations established
by the Plan, OTS regulations impose restrictions on the acquisition of more than
10% of the outstanding shares of the Bank by any person or company individually
or acting in concert with others. See "RESTRICTIONS ON ACQUISITION OF THE
HOLDING COMPANY AND THE BANK." The sale of Common Shares pursuant to
subscriptions received in the Offering will be subject to the approval of the
Plan by the voting members of the Bank at the Special Meeting, to the
determination by the Boards of Directors of the Holding Company and the Bank of
the total number of Common Shares to be sold and to certain other conditions.
See "THE CONVERSION -- Subscription Offering; -- Community Offering; and --
Pricing and Number of Common Shares to be Sold."
The Subscription Offering will terminate and subscription rights will expire
if not exercised by .m., Eastern Time, on , 1996. The
Community Offering may be terminated at any time after orders for at least
462,875 shares have been received, but in no event later than ,
1996, unless extended. Any extension of the Community Offering beyond
, 1996, will require the consent of the OTS and the Division, and
persons who have subscribed for Common Shares in the Offering will be given
notice that they have the right to increase, decrease or rescind their
subscriptions for Common Shares. Persons who do not affirmatively elect to
continue their subscription or who elect to rescind their subscriptions during
any such extension will have all of their funds promptly refunded with interest.
Persons who elect to decrease their subscriptions will have the appropriate
portion of their funds promptly refunded with interest. See "THE CONVERSION --
Pricing and Number of Common Shares to be Sold."
NON-TRANSFERABILITY OF SUBSCRIPTION RIGHTS. Federal and Ohio regulations
provide that subscription rights are non-transferable. OTS regulations
specifically prohibit any person from transferring or entering into any
agreement or understanding before the completion of the Conversion to transfer
the ownership of
5
<PAGE>
the subscription rights issued in the Conversion or the shares to be issued upon
the exercise of such subscription rights. Persons attempting to violate such
provision may lose their rights to purchase Common Shares in the Conversion and
may be subject to penalties imposed by the OTS. Each person exercising
subscription rights will be required to certify that a purchase of Common Shares
is solely for the subscriber's own account and that there is no agreement or
understanding regarding the sale or transfer of such Common Shares.
PARTICIPATION OF WEBB IN THE OFFERINGS. The Holding Company and the Bank
have retained Charles Webb & Company ("Webb") to consult, advise and assist in
the sale of the Common Shares in the Offering on a "best efforts" basis. Webb
will receive a financial advisory fee in the amount of $50,000. In addition, the
Holding Company will reimburse Webb for certain expenses, including reasonable
legal fees. Such expenses shall not exceed $30,000. If the Holding Company and
Webb deem necessary, Webb may enter into agreements ("Selected Dealers
Agreements") with other National Association of Securities Dealers, Inc.
("NASD") member firms ("Selected Dealers") for assistance in the sale of Common
Shares. Selected Dealers will receive fees equal to 4% of the purchase price of
Common Shares sold, if any, pursuant to Selected Dealer Agreements. Webb is not
obligated to purchase any Common Shares.
PRICING OF THE COMMON SHARES. Keller & Company, Inc. ("Keller"), a
Columbus, Ohio, firm experienced in valuing thrift institutions, has prepared an
independent valuation of the estimated pro forma market value of the Bank, as
converted. Keller's valuation of the estimated pro forma market value of the
Bank, as converted, is $3,500,000 as of May 14, 1996 (the "Pro Forma Value").
Based on the Pro Forma Value of the Bank, the Valuation Range established in
accordance with the Plan is $2,975,000 to $4,025,000.
In the event that Keller determines at the close of the Offering that the
aggregate pro forma value of the Bank is higher or lower than the Pro Forma
Value, but is within the Valuation Range, the Holding Company will make an
appropriate adjustment by raising or lowering the total number of Common Shares
sold in the Conversion consistent with the final valuation. The total number of
Common Shares sold in the Conversion will be determined by the Board of
Directors consistent with the final valuation. If, due to changing market
conditions, the final valuation is outside the Valuation Range, subscribers will
be given notice of such final valuation and the right to increase, decrease or
rescind their subscriptions. Any person who does not affirmatively elect to
continue his subscription or elects to rescind his subscription before the date
specified in the notice will have all of his funds promptly refunded with
interest. Any person who elects to decrease his subscription will have the
appropriate portion of his funds promptly refunded with interest. See "THE
CONVERSION -- Pricing and Number of Common Shares to be Sold."
USE OF PROCEEDS. The Holding Company will retain up to 50% of the net
proceeds from the sale of the Common Shares, estimated to be $1.62 million at
the midpoint of the Valuation Range. The balance of the net proceeds will be
used to purchase all of the capital stock to be issued by the Bank and will
increase the regulatory capital of the Bank. The Bank anticipates that the net
proceeds will initially be invested in short-term U.S. Government and agency
obligations and will be available for general corporate purposes, including loan
originations. See "USE OF PROCEEDS."
The funds retained by the Holding Company will be used by the Holding
Company to make a loan to the ESOP and will be available for general corporate
purposes, including the payment of dividends. The funds retained by the Holding
Company will be available for the repurchase of shares, although the Holding
Company has no current intentions to pursue stock repurchases. OTS regulations
generally prohibit stock repurchases in the first six months following the
completion of the Conversion without OTS prior approval. See "THE CONVERSION --
Restrictions on Repurchase of Common Shares."
TAX CONSEQUENCES
The consummation of the Conversion is expressly conditioned upon the receipt
by the Holding Company and the Bank of a private letter ruling from the Internal
Revenue Service or an opinion of counsel to the effect that the Conversion will
constitute a tax-free reorganization as defined in Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). The Holding Company and
the Bank intend to proceed with the Conversion based upon an opinion received
from Vorys, Sater, Seymour and Pease, special
6
<PAGE>
counsel to the Bank and the Holding Company, that states, in part, that (1) no
gain or loss will be recognized by the Bank in connection with the Conversion or
the receipt from the Holding Company of proceeds from the sale of the Common
Shares, and (2) assuming that the subscription rights received by deposit
account holders in connection with the Conversion have no ascertainable fair
market value, no gain or loss will be recognized to the deposit account holders
of the Bank upon issuance to them of subscription rights or interests in the
Liquidation Account (hereinafter defined) and no taxable income will be realized
by deposit account holders as a result of their exercise of such subscription
rights. Although the Internal Revenue Service (the "IRS") could challenge the
assumption that the subscription rights have no ascertainable fair market value,
the Holding Company and the Bank have received an opinion from Keller supporting
such assumption. See "THE CONVERSION -- Principal Effects of the Conversion --
Tax Consequences."
MARKET FOR THE COMMON SHARES
There is presently no market for the Common Shares. The existence of a
market in the Common Shares upon the completion of the Conversion will depend
upon the presence in the marketplace of both willing buyers and willing sellers
at any given time. It is expected that the Common Shares will be traded in the
over-the-counter market and will be quoted through brokers participating on the
Nation Daily Quotation Service (the "NDQS"). Because of the limited size of the
Offering, however, it is unlikely that an active market for the Common Shares
will develop after the completion of the Conversion or, if such market does
develop, that it will continue. See "RISK FACTORS -- Limited Market for the
Common Shares" and "MARKET FOR THE COMMON SHARES."
DIVIDEND POLICY
The declaration and payment of dividends by the Holding Company will be
subject to the discretion of the Board of Directors of the Holding Company, to
the earnings and financial condition of the Holding Company and to general
economic conditions. If the Board of Directors of the Holding Company determines
in the exercise of its discretion that the net income, capital and consolidated
financial condition of the Holding Company and the general economy justify the
declaration and payment of dividends by the Holding Company, the Board of
Directors of the Holding Company may authorize the payment of dividends on the
Common Shares, subject to the limitation under Ohio law that a corporation may
pay dividends only out of surplus. There can be no assurance that dividends will
be paid on the Common Shares or, if paid, will continue to be paid.
BENEFITS OF THE CONVERSION TO DIRECTORS, OFFICERS AND EMPLOYEES OF THE HOLDING
COMPANY AND THE BANK
GENERAL. Among the factors considered by the Board of Directors of the Bank
in making the decision to pursue the Conversion is the ability of the Holding
Company and the Bank to utilize various types of stock benefit plans to attract
and retain qualified directors and employees. See "THE CONVERSION -- Reasons for
the Conversion."
EMPLOYEE STOCK OWNERSHIP PLAN. In connection with the Conversion, the
Holding Company has established the ESOP, which intends to purchase 8.0% of the
Common Shares issued in the Conversion. All full-time employees of the Holding
Company and the Bank who meet certain age and years of service criteria will be
eligible to participate in the ESOP. See "MANAGEMENT -- Stock Benefit Plans --
Employee Stock Ownership Plan."
STOCK OPTION PLAN. After the Conversion, the Holding Company intends to
establish a stock option and incentive plan (the "Stock Option Plan"). Under OTS
regulations, the Stock Option Plan cannot be implemented for at least six months
after the completion of the Conversion. See "MANAGEMENT -- Stock Benefit Plans
- -- Stock Option Plan." The Board of Directors of the Holding Company anticipates
that a number of shares equal to 10% of the Common Shares issued in the
Conversion will be reserved for issuance to directors, officers and employees
under the Stock Option Plan. The Stock Option Plan will be administered by a
committee comprised of three directors who are not employees of the Holding
Company (the "Committee"). Persons eligible for Awards under the Stock Option
Plan will consist of directors and managerial and other key employees of the
Holding Company or the Bank who hold positions with
7
<PAGE>
significant responsibilities or whose performance or potential contribution, in
the judgment of the Committee, will benefit the future success of the Holding
Company or the Bank. The Committee will consider the position, duties and
responsibilities of the directors and employees of the Holding Company and the
Bank, the value of their services to the Holding Company and the Bank and any
other factors the Committee may deem relevant. No determination has been made
with respect to option recipients.
Based on the purchase price of $10 per share in the Conversion, the
aggregate market value of shares which could be issued under the Stock Option
Plan would be between $297,500 and $462,875, based on the Valuation Range. Under
OTS regulations, if the Stock Option Plan is implemented during the first year
after the Conversion, the following restrictions will apply: (i) the number of
shares that may be awarded under the Stock Option Plan to directors who are not
full-time employees of the Holding Company or the Bank cannot exceed 5% of the
plan shares per person and 30% of the plan shares in the aggregate, or $23,144
and $138,863, respectively, based on a per share value of $10 and the adjusted
maximum of the Valuation Range; (ii) the number of shares that may be awarded to
any individual who is a full-time employee of the Holding Company or the Bank
may not exceed 25% of the plan shares, or $115,720 based on a per share value of
$10 and the adjusted maximum of the Valuation Range; and (iii) stock options
must be awarded with an exercise price of at least fair market value at the time
of grant. The ultimate value of any option granted at fair market value will
depend on future appreciation in the fair market value of the shares to which
the option relates. No decision has been made as to anticipated awards under the
Stock Option Plan.
RECOGNITION AND RETENTION PLAN. The Bank intends to establish a recognition
and retention plan (the "RRP") after the Conversion. Under OTS regulations, the
RRP cannot be implemented for at least six months after the completion of the
Conversion. See "MANAGEMENT -- Stock Benefit Plans -- Recognition and Retention
Plan." The Board of Directors of the Bank anticipates that a number of shares
equal to 4.0% of the Common Shares sold in the Conversion will be purchased by
or issued to the RRP. Shares held in the RRP will be available for awards to
selected directors, officers and employees of the Bank. The RRP will be
administered by a committee comprised of three directors who are not employees
of the Bank (the "RRP Committee"). In selecting the directors and employees to
whom awards will be granted and the number of shares covered by such awards, the
RRP Committee will consider the position, duties and responsibilities of the
directors and employees, the value of their services to the Bank and any other
factors the RRP Committee may deem relevant. No determination has been made with
respect to RRP award recipients.
Assuming the purchase of a number of shares equal to 4.0% of the Common
Shares issued in the Conversion at a purchase price of $10 per share, the shares
available for distribution under the RRP would have an aggregate market value of
between $119,000 and $185,150, based on the Valuation Range. See "PRO FORMA
DATA" for a discussion of the impact of the RRP on pro forma earnings per share.
Under OTS regulations, if the RRP is implemented during the first year after
the Conversion, the number of shares that could be awarded under each plan to
directors who are not full-time employees of the Holding Company cannot exceed
5% of the plan shares per person and 30% of the plan shares in the aggregate, or
$9,258 and $55,545, respectively, based on a per share value of $10 at the
adjusted maximum of the Valuation Range, and the number of shares that could be
awarded to any individual who is a full-time employee of the Holding Company or
its subsidiaries could not exceed 25% of the plan shares, or $46,288 based on a
per share value of $10 at the adjusted maximum of the Valuation Range. No
decision has been made as to anticipated awards under the RRP.
EMPLOYMENT AGREEMENT. In connection with the Conversion, the Bank will
enter into an employment agreement with Laird L. Lazelle, the President of the
Bank. The employment agreement with Mr. Lazelle will be for a term of three
years, with a salary not less than his current salary, which is $65,000. The
employment agreement also will provide for severance payments if the agreement
is terminated prior to the expiration of the term upon a change of control of
the Bank or for any reason other than just cause, as defined therein. The
payment that would have been made to Mr. Lazelle pursuant to the proposed
employment agreement, assuming termination of his employment agreement at March
31, 1996, following a change of control of the Bank, would have been
approximately $195,000. See "MANAGEMENT -- Employment Agreement."
8
<PAGE>
INVESTMENT RISKS
An investment in the Common Shares involves certain risks. Special attention
should be given to the matters discussed under "RISK FACTORS -- Interest Rate
Risk; -- Low Return on Assets and Return on Equity; -- Competition in Market
Area; -- Legislation and Regulation Which May Adversely Affect Operations and
Earnings; -- Potential Impact of Benefit Plans on Net Earnings and Shareholders'
Equity; -- Limited Market for the Common Shares; -- Price of the Common Shares
Upon Resale; -- Anti-Takeover Provisions Which May Discourage Sales of Common
Shares for Premium Prices; and -- Reliance on Key Personnel."
9
<PAGE>
SELECTED FINANCIAL INFORMATION AND OTHER DATA
The following table sets forth certain information concerning the financial
condition, earnings and other data regarding the Bank at the dates and for the
periods indicated. Such information should be read in conjunction with the
financial statements and notes thereto appearing elsewhere herein. In the
opinion of management, financial information at March 31, 1996 and 1995, and for
the nine months then ended reflect all adjustments (consisting only of normal
recurring accruals) which are necessary to present fairly the results for such
periods.
<TABLE>
<CAPTION>
AT MARCH 31, AT JUNE 30,
-------------------- -----------------------------------------------------
SELECTED FINANCIAL CONDITION AND OTHER DATA: 1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total amount of:
Assets........................................ $ 31,738 $ 29,898 $ 31,849 $ 31,056 $ 31,635 $ 30,091 $ 27,470
Cash and equivalents.......................... 4,236 1,477 3,943 2,462 4,639 3,110 2,949
Investment securities......................... 674 1,406 1,310 2,691 1,644 1,242 248
Mortgage-backed securities.................... 4,957 5,843 5,532 6,593 5,303 3,167 1,132
Loans receivable, net......................... 21,359 20,670 20,511 18,794 19,550 22,038 22,663
Deposits...................................... 27,780 25,777 27,737 27,348 29,062 27,617 25,363
FHLB advances................................. 842 1,208 1,192 955 -- -- --
Retained earnings............................. 2,772 2,673 2,706 2,581 2,385 2,259 2,025
Number of full-service offices.................. 1 1 1 1 1 1 1
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED MARCH 31, YEAR ENDED JUNE 30,
-------------------- -----------------------------------------------------
SUMMARY OF EARNINGS: 1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income........................................ $ 1,783 $ 1,593 $ 2,162 $ 2,069 $ 2,297 $ 2,479 $ 2,446
Interest expense....................................... 1,207 988 1,368 1,339 1,499 1,713 1,855
--------- --------- --------- --------- --------- --------- ---------
Net interest income.................................... 576 605 794 730 798 766 591
Provision for loan losses.............................. 34 9 12 33 83 5 5
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for loan losses.... 542 596 782 697 715 761 586
Other income........................................... 52 47 70 204 136 135 86
General, administrative and other expense.............. 496 509 679 627 639 537 514
--------- --------- --------- --------- --------- --------- ---------
Net income before provision for income taxes........... 98 134 173 274 212 359 158
Provision for income taxes............................. 32 43 48 79 85 125 39
--------- --------- --------- --------- --------- --------- ---------
Net income........................................... $ 66 $ 91 $ 125 $ 195 $ 127 $ 234 $ 119
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED MARCH 31, AT OR FOR THE YEAR ENDED JUNE 30,
---------------------- ----------------------------------------------------------
SELECTED FINANCIAL RATIOS: 1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Performance ratios:
Return on average assets................ 0.28% 0.41% 0.41% 0.62% 0.40% 0.81% 0.45%
Return on average equity................ 3.20 4.66 4.72 7.92 5.42 10.89 6.02
Interest rate spread.................... 2.00 2.33 2.25 2.02 2.22 2.27 1.75
Net interest margin..................... 2.47 2.73 2.66 2.35 2.57 2.69 2.28
Non-interest expense to average
assets................................. 2.08 2.25 2.23 1.99 2.03 1.85 1.96
Average equity to average assets........ 8.66 8.73 8.71 7.80 7.42 7.40 7.53
Equity to assets, end of period......... 8.73 8.94 8.50 8.32 7.54 7.51 7.37
Nonperforming assets to [average]
assets................................. 0.35 0.23 0.64 0.29 1.05 0.96 1.00
Nonperforming loans to total loans...... 0.52 0.34 0.95 0.49 1.70 0.98 1.16
Asset quality ratios:
Allowance for loan losses to [gross]
loans.................................. 0.48 0.47 0.47 0.38 0.51 0.07 0.04
Allowance for loan losses to
nonperforming loans.................... 93.69 140.00 50.52 77.42 30.33 6.98 3.44
Net (charge-offs) recoveries to average
loans.................................. (.18) .10 .07 (.32) .02 -- --
Average interest-earning assets to
average interest-bearing liabilities... 109.01 108.99 108.92 107.70 107.33 106.97 107.50
</TABLE>
10
<PAGE>
RISK FACTORS
INVESTMENT IN THE COMMON SHARES INVOLVES CERTAIN RISKS. BEFORE INVESTING,
PROSPECTIVE PURCHASERS SHOULD CONSIDER CAREFULLY THE FOLLOWING MATTERS.
INTEREST RATE RISK
The Bank's operating results are dependent to a significant degree on its
net interest income, which is the difference between interest income from loans
and investments and interest expense on deposits and borrowings. Like most
thrift institutions, the interest income and interest expense of the Bank change
as the interest rates on mortgages, securities and other assets and on deposits
and other liabilities change. Interest rates generally may change because of
general economic conditions, the policies of various regulatory authorities and
other factors beyond the Bank's control. The interest rates on specific assets
and liabilities of the Bank will change or "reprice" in accordance with the
contractual terms of the asset or liability instrument and in accordance with
customer reaction to general economic trends.
In the event that interest rates rise from their recent low levels, the
Bank's net interest income could be expected to be negatively affected if the
Bank's liabilities reprice at a faster rate than its assets. Moreover, rising
interest rates could negatively affect the Bank's earnings due to diminished
loan demand. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Asset and Liability Management."
LOW RETURN ON ASSETS AND RETURN ON EQUITY
For the last five years, the Bank's return on assets has ranged from a high
of .81% in 1992 to a low of .41% for 1995, with a median of .45%, and its return
on equity has ranged from a high of 10.89% for 1992 to a low of 4.72% for 1995,
with a median of 6.02%. For the nine months ended March 31, 1996, the Bank's
return on assets declined even further, to .28%, and its return on equity
declined to 3.20%. These ratios are significantly lower than those of comparable
institutions. While different factors have contributed to the Bank's results
each year, the persistent challenge facing the Bank is its cost of funds.
Although the Bank has taken steps to lower its cost of funds by eliminating
adjustable-rate retirement accounts, the Bank still has nearly 90% of its
deposits in certificates of deposit. Certificates of deposit are typically more
expensive than passbook savings and transaction accounts, but the Bank has had
limited success attracting the lower cost account types because of the
limitations of its downtown location. Although the Conversion proceeds will
provide the Bank with a source of interest-earning assets without an attendant
carrying cost, there can be no assurance that the Bank's return on assets will
improve substantially after the Conversion. Moreover, the increased capital
resulting from the Conversion is expected to further reduce the Bank's return on
equity for a prolonged period after the Conversion, which may adversely affect
the market value of the Common Shares.
COMPETITION IN MARKET AREA
The Bank faces strong direct competition for deposits and loans from
commercial banks, other savings associations, credit unions and mortgage banking
companies. Mortgage banking companies and other non-FDIC insured providers of
financial services are not subject to the same degree of regulatory oversight as
savings associations and thus have greater operational flexibility, without the
costs and burdens associated with compliance with OTS and FDIC regulations. The
Bank is also at a competitive disadvantage due to its small size and single
office location, which result in limited marketing capability and restricted
ability to take advantage of technological advancements. Because its market area
is limited to Hamilton County, Ohio and adjacent counties, a pronounced economic
downturn in such geographic area could be expected to have an adverse impact on
the Bank's performance. Because of the diversity of the Greater Cincinnati
economy and the distribution of the labor force over numerous industry sectors
and employers, however, the local economy tends to respond to national economic
cycles. See "THE BUSINESS OF THE BANK -- Market Area."
LEGISLATION AND REGULATION WHICH MAY ADVERSELY AFFECT OPERATIONS AND EARNINGS
The Bank is subject to extensive regulation by the OTS, the FDIC and the
Division. As a savings and loan holding company, the Holding Company will also
be subject to regulation and examination by the OTS.
11
<PAGE>
Such supervision and regulation of the Bank and the Holding Company are intended
primarily for the protection of depositors and not for the maximization of
shareholder value and may affect the ability of the Holding Company to engage in
various business activities and may have an adverse effect on the Holding
Company's net earnings. See "REGULATION."
Deposit insurance assessments paid by healthy savings associations exceeded
those paid by healthy commercial banks by approximately $.19 per $100 in
deposits in late 1995 and will exceed such assessments by $.23 per $100 in
deposits in 1996. This premium disparity could have a negative competitive
impact on the Bank and other institutions with SAIF deposits. Congress is
considering legislation to recapitalize the SAIF and eliminate the significant
premium disparity. The pending recapitalization plan provides for the payment of
a special assessment of approximately $.85 per $100 of SAIF deposits held at a
date to be determined. Based on the Bank's $25.8 million in deposits at March
31, 1995, if the special assessment is enacted into law, the Bank would pay an
additional assessment of approximately $219,000. Although the assessment should
be tax-deductible, it will reduce earnings and capital for the quarter in which
it is reported.
The recapitalization plan also provides for the merger of the SAIF and BIF
and for the elimination of the federal thrift charter or of the separate federal
regulation of thrifts. Under the legislation, the OTS would cease to exist and
the Bank would be regulated under federal law as a bank and, as a result, would
become subject to the more restrictive activity limitations imposed on national
banks. Proposed legislation would also eliminate the deduction for income tax
purposes of amounts designated as reserved for bad debts. See Note 12 of the
Notes to the Financial Statements. Such legislation would require, generally,
that bad debt reserves taken by such savings associations after 1987 using the
percentage of taxable income method would be included in future taxable income
of the Bank over a six-year period. The requirement that the Bank convert to a
bank charter and the proposed tax legislation could have an adverse effect on
the Holding Company and the Bank, although until such proposals are acted upon
by Congress, the extent of such effect is uncertain.
No assurances can be given that the SAIF recapitalization plan will be
enacted into law or in what form it may be enacted. If the proposed legislation
is not adopted, SAIF premiums may increase and the disparity between BIF and
SAIF premiums may become more pronounced, which would negatively impact the
Bank. See "REGULATION -- Federal Deposit Insurance Corporation -- Deposit
Insurance."
POTENTIAL IMPACT OF BENEFIT PLANS ON NET EARNINGS AND SHAREHOLDERS' EQUITY
Statement of Position No. 93-6, "Employers' Accounting for Employee Stock
Ownership Plans" ("SOP 93-6"), published by the American Institute of Certified
Public Accountants (the "AICPA") 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. If the Common Shares
acquired by the ESOP appreciate in value over time, the Holding Company may
incur increased compensation expense relating to the ESOP. See "PRO FORMA DATA"
for pro forma information which includes the effects of SOP 93-6 on net earnings
and shareholders' equity.
If the ESOP is unable to purchase all or part of the Common Shares for which
it subscribes, the ESOP may purchase Common Shares on the open market or may
purchase authorized but unissued shares of the Holding Company. If the ESOP
purchases authorized but unissued shares from the Holding Company, such
purchases would have a dilutive effect of up to approximately 7.4% on the
interests of the Holding Company's shareholders.
The ESOP loan will be repaid through cash contributions to the ESOP from the
Bank and the use of dividends paid on the Common Shares, if any. The Bank
currently anticipates that the ESOP loan will be repaid over a period of seven
years. The amount of cash or other assets that can be contributed to the ESOP
each year is limited by certain IRS regulations. The Bank intends to make the
maximum contribution to the ESOP permitted by such regulations, which could
result in repayment of the ESOP loan in fewer than seven years. A shorter
repayment period could result in increased compensation expense during the years
in which payments are made on the ESOP loan.
12
<PAGE>
It is anticipated that, following the consummation of the Conversion, the
Holding Company will adopt the Stock Option Plan and the RRP. The shares issued
to participants under the RRP could be newly issued shares or shares purchased
in the market. In the event the shares issued under the RRP consist of newly
issued common shares, the interests of existing shareholders would be diluted.
Shares issued pursuant to the exercise of options under the Stock Option Plan
will be authorized but unissued shares, unless the Holding Company has treasury
shares at the time of exercise and elects to use the treasury shares. At the
midpoint of the estimated Valuation Range, if all shares under these plans were
newly issued and the exercise price for the option shares were equal to the $10
per share purchase price in the Conversion, the pro forma book value per share
of the outstanding common shares at March 31, 1996, would decrease from $16.00
to $15.77. See "PRO FORMA DATA" and "MANAGEMENT -- Stock Benefit Plans."
LIMITED MARKET FOR THE COMMON SHARES
There is presently no market for the Common Shares. The existence of a
market in the Common Shares upon the completion of the Conversion will depend
upon the presence in the marketplace of both willing buyers and willing sellers
at any given time. It is expected that the Common Shares will be traded in the
over-the-counter market and will be quoted through brokers participating on the
NDQS. Because of the limited size of the Offering, however, it is unlikely that
an active market for the common shares will develop after the completion of the
Conversion or, if such market does develop, that it will continue. Investors
should consider, therefore, the potentially illiquid and long-term nature of an
investment in the Common Shares.
PRICE OF THE COMMON SHARES UPON RESALE
The aggregate offering price for the Common Shares is based upon an
independent appraisal of the Bank. The appraisal is not a recommendation as to
the advisability of purchasing Common Shares. See "THE CONVERSION -- Pricing and
Number of Common Shares to be Sold." No assurance can be given that persons
purchasing Common Shares will thereafter be able to sell such shares at a price
at or above the offering price. The appraisal of the pro forma market value of
the Bank, as converted, does not represent Keller's opinion as to the price at
which the Common Shares may trade. There can be no assurance that the Common
Shares may later be resold at the price at which they are purchased in
connection with the Conversion.
ANTI-TAKEOVER PROVISIONS WHICH MAY DISCOURAGE SALES OF COMMON SHARES FOR PREMIUM
PRICES
The Articles of Incorporation and Code of Regulations of the Holding Company
and the Amended Articles of Incorporation of the Bank contain certain provisions
that could deter or prohibit non-negotiated changes in the control of the
Holding Company and the Bank. Such provisions include a restriction on the
direct or indirect acquisition of more than 10% of the outstanding shares of the
Bank by any person during the five-year period following the effective date of
the Conversion, the ability to issue additional common shares and the
requirement of a 75% supermajority voting requirement for the approval of
certain matters, including mergers, acquisitions of a majority of the shares of
the Holding Company or the transfer of substantially all of the assets of the
Holding Company, if the Board of Directors recommends against the approval of
any such matter. See "DESCRIPTION OF AUTHORIZED SHARES" and "RESTRICTIONS ON
ACQUISITION OF THE HOLDING COMPANY AND THE BANK."
Officers and directors of the Holding Company and their Associates are
expected to purchase approximately 21% of the shares issued in connection with
the Conversion. In addition, officers of the Holding Company will be able to
vote shares allocated to their accounts under the ESOP, which intends to
purchase approximately 8% of the shares issued in connection with the
Conversion. The ESOP trustee must vote shares allocated under the ESOP as
directed by the participants to whom the shares are allocated and vote
unallocated shares in his sole discretion. The RRP trustees, who are expected to
be three directors of the Bank, will vote shares awarded but not distributed
under the RRP in their discretion. In view of the various provisions of the
Articles of Incorporation and the stock benefit plans of the Holding Company and
the Bank, the ESOP trustee, the RRP Committee and the directors and officers of
the Holding Company and the Bank will have a significant influence over the vote
on any takeover attempt or proxy contest and may be able to defeat such a
proposal. The Boards of Directors of the Holding Company and the Bank believe
that such provisions will be in the best interests of shareholders by
encouraging prospective acquirors to
13
<PAGE>
negotiate a proposed acquisition with the directors. Such provisions could,
however, adversely affect the market value of the Common Shares or deprive
shareholders of the opportunity to sell their shares for premium prices.
Federal law and Ohio law also restrict the acquisition of control of the
Holding Company and the Bank. Regulations of the OTS also restrict the ability
of any person to acquire the beneficial ownership of more than 10% of any class
of voting equity security of the Bank or the Holding Company without the prior
written approval of or lack of objection by the OTS. Any or all of these
provisions may facilitate the perpetuation of current management and discourage
proxy contests or takeover attempts not first negotiated with the Board of
Directors. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY AND THE
BANK."
RELIANCE ON KEY PERSONNEL
The Bank depends to a considerable degree on a limited number of key
management personnel. In particular, the loss of the services of Laird L.
Lazelle, the President and Chief Executive Officer of the Bank, could adversely
impact the Bank. In order to minimize the likelihood of such negative impact,
the Bank intends to enter into an employment agreement with Mr. Lazelle. The
bank maintains no "key man" life insurance policy with respect to Mr. Lazelle or
any other officer or director. See "MANAGEMENT -- Employment Agreement."
USE OF PROCEEDS
The following table presents the estimated gross and net proceeds from the
sale of the Common Shares in connection with the Conversion based on the
Valuation Range:
<TABLE>
<CAPTION>
MINIMUM MID-POINT MAXIMUM MAXIMUM, AS ADJUSTED
------------ ------------ ------------ ---------------------
<S> <C> <C> <C> <C>
Gross proceeds................................... $ 2,975,000 $ 3,500,000 $ 4,025,000 $ 4,628,750
Less estimated expenses.......................... 251,000 251,000 251,000 251,000
------------ ------------ ------------ -----------
Total net proceeds............................... $ 2,724,000 $ 3,249,000 $ 3,774,000 $ 4,377,750
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
The net proceeds may vary depending upon financial and market conditions at
the time of the completion of the Offering. See "THE CONVERSION -- Pricing and
Number of Common Shares to be Sold." Actual expenses may be more or less than
estimated. See "THE CONVERSION -- Plan of Distribution ."
The Holding Company will retain 50% of the net proceeds from the sale of the
Common Shares, approximately $1.62 million at the mid-point of the Valuation
Range. Such proceeds will be used by the Holding Company to lend up to $370,300,
at the maximum, as adjusted, of the Valuation Range, to the ESOP to acquire
Common Shares in the Offering and for general corporate purposes, which may
include dividends, repurchases of Common Shares and acquisitions of other
financial institutions. The Holding Company presently has no plans or agreements
relating to any such acquisitions or repurchases. OTS regulations generally
prohibit stock repurchases in the six months following the completion of the
Conversion without the prior approval of the OTS. See "THE CONVERSION --
Restrictions on Repurchase of Common Shares."
The remainder of the net proceeds received from the sale of the Common
Shares, approximately $1.34 million at the mid-point of the Valuation Range,
will be invested by the Holding Company in the capital stock to be issued by the
Bank to the Holding Company as a result of the Conversion. Such investment will
increase the regulatory capital of the Bank and will permit the Bank to expand
its lending and investment activities and to enhance customer services. The Bank
anticipates that such net proceeds will be used to originate mortgage loans.
14
<PAGE>
The following table presents the anticipated use of the net proceeds:
<TABLE>
<CAPTION>
MAXIMUM, AS
MINIMUM MID-POINT MAXIMUM ADJUSTED
-------------------------- -------------------------- -------------------------- -----------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT
----------- ------------- ----------- ------------- ----------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Proceeds to be invested
in capital stock of the
Bank.................... $ 1,362 50.0% $ 1,625 50.0% $ 1,887 50.0% $ 2,189
Proceeds to be retained
by the Holding
Company................. 1,124 41.3 1,344 41.4 1,565 41.5 1,819
Loan to the ESOP......... 238 8.7 280 8.6 322 8.5 370
----------- ----- ----------- ----- ----------- ----- -----------
Total net proceeds... $ 2,724 100.0% $ 3,249 100.0% $ 3,774 100.0% $ 4,378
----------- ----- ----------- ----- ----------- ----- -----------
----------- ----- ----------- ----- ----------- ----- -----------
<CAPTION>
PERCENTAGE
-------------
<S> <C>
Proceeds to be invested
in capital stock of the
Bank.................... 50.0%
Proceeds to be retained
by the Holding
Company................. 41.5
Loan to the ESOP......... 8.5
-----
Total net proceeds... 100.0%
-----
-----
</TABLE>
MARKET FOR THE COMMON SHARES
There is presently no market for the Common Shares. The existence of a
market in the Common Shares upon the completion of the Conversion will depend
upon the presence in the marketplace of both willing buyers and willing sellers
at any given time. It is expected that the Common Shares will be traded in the
over-the-counter market and will be quoted through brokers participating on the
NDQS. Because of the limited size of the Offering, however, it is unlikely that
an active market for the common shares will develop after the completion of the
Conversion or, if such market does develop, that it will continue. Investors
should consider, therefore, the potentially illiquid and long-term nature of an
investment in the Common Shares. See "RISK FACTORS -- Limited Market for the
Common Shares."
The appraisal of the pro forma market value of the Bank, as converted, does
not represent Keller's opinion as to the price at which the Common Shares may
trade. There can be no assurance that the Common Shares may later be resold at
the price at which they are purchased in connection with the Conversion.
DIVIDEND POLICY
The declaration and payment of dividends by the Holding Company will be
subject to the discretion of the Board of Directors of the Holding Company, to
the earnings and financial condition of the Holding Company and to general
economic conditions. If the Board of Directors of the Holding Company determines
in the exercise of its discretion that the net income, capital and consolidated
financial condition of the Holding Company and the general economy justify the
declaration and payment of dividends by the Holding Company, the Board of
Directors of the Holding Company may authorize the payment of dividends on the
Common Shares, subject to the limitation under Ohio law that a corporation may
pay dividends only out of surplus. There can be no assurance that dividends will
be paid on the Common Shares or, if paid, will continue to be paid.
Other than earnings on the investment of the proceeds retained by the
Holding Company, the only source of income of the Holding Company will be
dividends periodically declared and paid by the Board of Directors of the Bank
on the common shares of the Bank held by the Holding Company. The declaration
and payment of dividends by the Bank to the Holding Company will be subject to
the discretion of the Board of Directors of the Bank, to the earnings and
financial condition of the Bank, to general economic conditions and to federal
and state restrictions on the payment of dividends by thrift institutions. Under
regulations of the OTS applicable to converted savings associations, the Bank
will not be permitted to pay a cash dividend on its capital stock after the
Conversion if its regulatory capital would, as a result of the payment of such
dividend, be reduced below the amount required for the Liquidation Account or
the applicable regulatory capital requirement prescribed by the OTS. See "THE
CONVERSION -- Principal Effects of the Conversion -- Liquidation Account" and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Liquidity and Capital Resources." The Bank may not pay a dividend
unless such dividend also complies with a regulation of the OTS limiting capital
distributions by savings associations. Capital distributions, for purposes of
such regulation, include, without limitation,
15
<PAGE>
payments of cash dividends, repurchases and certain other acquisitions by an
association of its shares and payments to stockholders of another association in
an acquisition of such other association. See "REGULATION -- Office of Thrift
Supervision -- Limitations on Capital Distributions."
REGULATORY CAPITAL COMPLIANCE
The following table sets forth the historical and pro forma regulatory
capital of the Bank at March 31, 1996, based on the receipt of 50% of the net
proceeds for the number of Common Shares indicated. Estimated expenses used in
determining the net proceeds are $251,000:
<TABLE>
<CAPTION>
PRO FORMA CAPITAL AT MARCH 31, 1996, ASSUMING THE SALE OF:
------------------------------------------------------------------------------------------------------
297,500 COMMON SHARES 350,000 COMMON SHARES 402,500 COMMON SHARES
HISTORICAL AT MARCH 31, (OFFERING PRICE OF (OFFERING PRICE OF (OFFERING PRICE OF
1996 $10.00 PER SHARE) $10.00 PER SHARE) $10.00 PER SHARE)
------------------------ ------------------------ ------------------------ ------------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital under generally
accepted accounting
principles, before
adjustments (1)........... $ 2,772 8.73% $ 4,134 12.40% $ 4,397 13.07% $ 4,659 13.72%
----------- ----- ----------- ----- ----------- ----- ----------- -----
----------- ----- ----------- ----- ----------- ----- ----------- -----
Current tangible capital:
Capital level............ $ 2,772 8.73% $ 4,134 12.40% $ 4,397 13.07% $ 4,659 13.72%
Requirement (2).......... 476 1.50 500 1.50 505 1.50 509 1.50
----------- ----- ----------- ----- ----------- ----- ----------- -----
Excess................... $ 2,296 7.23% $ 3,634 10.90% $ 3,892 11.57% $ 4,150 12.22%
----------- ----- ----------- ----- ----------- ----- ----------- -----
----------- ----- ----------- ----- ----------- ----- ----------- -----
Current core capital:
Capital level............ $ 2,772 8.73% $ 4,134 12.40% $ 4,397 13.07% $ 4,659 13.72%
Requirement (2).......... 952 3.00 1,000 3.00 1,009 3.00 1,018 3.00
----------- ----- ----------- ----- ----------- ----- ----------- -----
Excess................... $ 1,820 5.73% $ 3,134 9.40% $ 3,388 10.07% $ 3,641 10.72%
----------- ----- ----------- ----- ----------- ----- ----------- -----
----------- ----- ----------- ----- ----------- ----- ----------- -----
Current risk-based
capital: (1)
Capital level (3)........ $ 2,868 19.59% $ 4,230 28.28% $ 4,493 29.91% $ 4,755 31.53%
Requirement (2).......... 1,171 8.00 1,197 8.00 1,202 8.00 1,207 8.00
----------- ----- ----------- ----- ----------- ----- ----------- -----
Excess................... $ 1,697 11.59% $ 3,033 20.28% $ 3,291 21.91% $ 3,548 23.53%
----------- ----- ----------- ----- ----------- ----- ----------- -----
----------- ----- ----------- ----- ----------- ----- ----------- -----
<CAPTION>
462,875 COMMON SHARES
(OFFERING PRICE OF
$10.00 PER SHARE)
------------------------
AMOUNT PERCENT
----------- -----------
<S> <C> <C>
Capital under generally
accepted accounting
principles, before
adjustments (1)........... $ 4,961 14.46%
----------- -----
----------- -----
Current tangible capital:
Capital level............ $ 4,961 14.46%
Requirement (2).......... 514 1.50
----------- -----
Excess................... $ 4,447 12.96%
----------- -----
----------- -----
Current core capital:
Capital level............ $ 4,961 14.46%
Requirement (2).......... 1,029 3.00
----------- -----
Excess................... $ 3,932 11.46%
----------- -----
----------- -----
Current risk-based
capital: (1)
Capital level (3)........ $ 5,057 33.37%
Requirement (2).......... 1,212 8.00
----------- -----
Excess................... $ 3,845 25.37%
----------- -----
----------- -----
</TABLE>
- ------------------------------
(1) Assumes that the net proceeds received by the Bank will be invested in
assets having a risk-weighting of 0%.
(2) Tangible and core capital are shown as a percent of adjusted total assets,
and risk-based capital levels are shown as a percent of risk-weighted
assets in accordance with OTS regulations. Reflects a reduction for
unearned ESOP and RRP shares equal to 8% and 4%, respectively, of the
Offering.
(3) Risk-weighted capital includes $96,000 of qualifying general loan loss
allowances.
16
<PAGE>
CAPITALIZATION
Set forth below is the historical capitalization of the Bank at March 31,
1996, and the pro forma consolidated capitalization of the Holding Company as
adjusted to give effect to the sale of Common Shares based on the Valuation
Range and estimated expenses. See "USE OF PROCEEDS" and "THE CONVERSION --
Pricing and Number of Common Shares to be Sold."
<TABLE>
<CAPTION>
PRO FORMA CAPITALIZATION OF THE HOLDING COMPANY
AT MARCH 31, 1996, ASSUMING THE SALE OF:
----------------------------------------------------------------------
HISTORICAL 297,500 COMMON 350,000 COMMON 402,500 COMMON 462,875 COMMON
CAPITALIZATION SHARES (OFFERING SHARES (OFFERING SHARES (OFFERING SHARES (OFFERING
OF THE BANK AT PRICE OF $10.00 PRICE OF $10.00 PRICE OF $10.00 PRICE OF $10.00
MARCH 31, 1996 PER SHARE) PER SHARE) PER SHARE) PER SHARE)
-------------- ---------------- ---------------- ---------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Deposits (1).................. $ 27,780 $ 27,780 $ 27,780 $ 27,780 $ 27,780
FHLB advances................. 842 842 842 842 842
------- ------- ------- ------- -------
Total deposits and borrowed
funds...................... $ 28,662 $ 28,662 $ 28,662 $ 28,662 $ 28,662
Capital and retained earnings:
Common Shares, no par value
per share:
authorized -- 1,000,000
shares; assumed outstanding
-- as shown (2).............. -- -- -- -- --
Additional paid-in capital
(3).......................... -- 2,724 3,249 3,774 4,378
Retained earnings............. 2,772 2,772 2,772 2,772 2,772
Less:
Common Shares acquired by the
ESOP (4)..................... -- (238) (280) (322) (370)
Common Shares acquired by
the RRP(5)................. -- (119) (140) (161) (185)
Total capital and retained
earnings................... $ 2,772 $ 5,139 $ 5,601 $ 6,063 $ 6,595
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
- ------------------------
(1) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Common Shares in the Conversion. Any such withdrawals
will reduce pro forma deposits by the amount of such withdrawals.
(2) The number of Common Shares to be issued will be determined on the basis of
the final valuation of the Bank. See "THE CONVERSION -- Pricing and Number
of Common Shares to be Sold." Common Shares assumed outstanding does not
reflect the issuance of any common shares which may be reserved for issuance
under the Stock Option Plan. See "MANAGEMENT -- Stock Benefit Plans -- Stock
Option Plan."
(3) Reflects receipt of the proceeds from the sale of the Common Shares, net of
estimated expenses, of approximately $2,724,000, $3,249,000, $3,774,000 and
$4,377,750 at the minimum, mid-point, maximum and maximum, as adjusted,
respectively, of the Valuation Range.
(4) Assumes that 8.0% of the Common Shares sold in connection with the
Conversion will be acquired by the ESOP with funds borrowed by the ESOP from
the Holding Company for a term of seven years at a rate of 6.11%. The ESOP
loan will be secured solely by the Common Shares purchased by the ESOP. The
Bank has agreed, however, to use its best efforts to fund the ESOP based on
future earnings, which
17
<PAGE>
best efforts funding will reduce the Bank's total capital and retained
earnings, as reflected in the table. If the ESOP is unable to purchase all
or part of the Common Shares for which it subscribes, the ESOP may purchase
common shares on the open market or may purchase authorized but unissued
shares of the Holding Company. If the ESOP purchases authorized but unissued
shares from the Holding Company, such purchases would have a dilutive effect
of approximately 7.4% on the interests of the Holding Company's
shareholders. See "MANAGEMENT -- Stock Benefit Plans -- Employee Stock
Ownership Plan" and "RISK FACTORS -- Potential Impact of Benefit Plans on
Net Earnings and Shareholders' Equity."
(5) Assumes that 4.0% of the Common Shares will be acquired in the open market
by the RRP after the Conversion at a price of $10 per share. There can be no
assurance that the RRP will be implemented, that a sufficient number of
shares will be available for purchase by the RRP, that shares could be
purchased at a price of $10 per share or that the shareholders will approve
the RRP if it is implemented during the first year after the Conversion. A
higher price per share, assuming the purchase of the entire 4.0% of the
shares, would reduce pro forma net earnings and pro forma shareholders'
equity. The RRP may purchase shares in the open market or may purchase
authorized but unissued shares from the Holding Company. If authorized but
unissued shares are purchased, the interests of existing shareholders would
be diluted approximately 3.85%. See "MANAGEMENT -- Stock Benefit Plans --
Recognition and Retention Plan."
PRO FORMA DATA
Set forth below are the pro forma consolidated net income of the Holding
Company for the nine months ended March 31, 1996, and for the year ended June
30, 1995, and the pro forma consolidated shareholders' equity of the Holding
Company at March 31, 1996, and June 30, 1995, along with the related pro forma
earnings per share and pro forma shareholders' equity per share amounts, giving
effect to the sale of the Common Shares in connection with the Conversion. The
computations are based on the assumed issuance of 297,500 Common Shares (minimum
of the Valuation Range), 350,000 Common Shares (mid-point of the Valuation
Range), 402,500 Common Shares (maximum of the Valuation Range) and 462,875
Common Shares (15% above the maximum of the Valuation Range). See "THE
CONVERSION -- Pricing and Number of Common Shares to be Sold." The pro forma
data is based on the following assumptions: (i) the sale of the Common Shares
occurred at the beginning of the period and yielded the net proceeds indicated;
(ii) such net proceeds were invested at the beginning of the period to yield
annualized after-tax net returns of 3.60%; and (iii) no withdrawals from
existing deposit accounts were made to purchase the Common Shares. The assumed
returns are based on the one-year U.S. Treasury bill yield of 5.45% in effect at
March 31, 1996. This rate was used as an alternative to the arithmetic average
of the Banks' interest-earning assets and interest-bearing liabilities.
Management believes that the U.S. Treasury bill yield is more indicative of the
rate of return that can be achieved on the investment of the Conversion
proceeds. Actual yields may differ, however, from the assumed returns. The pro
forma consolidated net income amounts derived from the assumptions set forth
herein should not be considered indicative of the actual results of operations
of the Holding Company that would have been attained for any period if the
Conversion had been actually consummated at the beginning of such period.
As the table demonstrates, pro forma consolidated earnings per share and pro
forma consolidated shareholders' equity per share decrease as the amount of
Common Shares sold moves from the minimum of the Valuation Range to the adjusted
maximum of the Valuation Range. Conversely, the offering price as a multiple of
pro forma earnings per share and as a percent of pro forma shareholders' equity
per share increase as the amount of Common Shares sold moves from the minimum of
the Valuation Range to the adjusted maximum of the Valuation Range.
THE PRO FORMA DATA AND ACCOMPANYING NOTES SHOULD BE READ IN CONJUNCTION WITH
THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE HEREIN. THE PRO
FORMA DATA IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT PURPORT TO
REPRESENT WHAT THE HOLDING COMPANY'S FINANCIAL POSITION OR RESULTS OF OPERATIONS
ACTUALLY WOULD HAVE BEEN HAD THE AFOREMENTIONED
18
<PAGE>
TRANSACTIONS BEEN COMPLETED AS OF THE DATE OR AT THE BEGINNING OF THE PERIODS
INDICATED, OR TO PROJECT THE HOLDING COMPANY'S FINANCIAL POSITION OR RESULTS OF
OPERATIONS AT ANY FUTURE DATE OR FOR ANY FUTURE PERIOD.
<TABLE>
<CAPTION>
AT AND FOR THE NINE MONTHS ENDED MARCH 31, 1996, ASSUMING THE SALE OF:
--------------------------------------------------------------------------
297,500 350,000 402,500 462,875
COMMON SHARES COMMON SHARES COMMON SHARES COMMON SHARES
(OFFERING PRICE (OFFERING PRICE (OFFERING PRICE (OFFERING PRICE
OF OF OF OF
$10.00 PER SHARE) $10.00 PER SHARE) $10.00 PER SHARE) $10.00 PER SHARE)
----------------- ----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds................................. $ 2,975 $ 3,500 $ 4,025 $ 4,629
Estimated expenses............................. (251) (251) (251) (251)
------ ------ ------ ------
Estimated net proceeds......................... 2,724 3,249 3,774 4,378
Less common stock acquired by the ESOP (1)..... (238) (280) (322) (370)
Less common stock acquired by the RRP (1)...... (119) (140) (161) (185)
------ ------ ------ ------
Net cash proceeds.............................. $ 2,367 $ 2,829 $ 3,291 $ 3,823
------ ------ ------ ------
------ ------ ------ ------
Net income:
Historical..................................... $ 66 $ 66 $ 66 $ 66
Pro forma net income on net proceeds........... 64 76 89 102
Pro forma adjustment for the ESOP (1).......... (17) (20) (23) (27)
Pro forma adjustment for the RRP (2)........... (12) (14) (16) (19)
------ ------ ------ ------
Pro forma net income........................... $ 101 $ 108 $ 116 $ 122
------ ------ ------ ------
------ ------ ------ ------
Per share net income:
Historical..................................... $ 0.32 $ 0.27 $ 0.23 $ 0.21
Pro forma net income on net proceeds........... 0.31 0.31 0.32 0.32
Pro forma adjustment for the ESOP (1).......... (0.08) (0.08) (0.08) (0.08)
Pro forma adjustment for the RRP (2)........... (0.06) (0.06) (0.06) (0.06)
------ ------ ------ ------
Pro forma earnings per share (3)(4)............ $ 0.49 $ 0.44 $ 0.41 $ 0.39
------ ------ ------ ------
------ ------ ------ ------
Offering price as a multiple of pro forma
earnings per share............................ 20.41 22.73 24.39 25.64
Shareholders' equity (5):
Historical..................................... $ 2,772 $ 2,772 $ 2,772 $ 2,772
Estimated net proceeds from the sale of Common
Shares........................................ 2,724 3,249 3,774 4,378
Less unearned ESOP shares (1).................. (238) (280) (322) (370)
Less unearned RRP shares (2)................... (119) (140) (161) (185)
------ ------ ------ ------
Pro forma shareholders' equity................. $ 5,139 $ 5,601 $ 6,063 $ 6,595
------ ------ ------ ------
------ ------ ------ ------
Per share shareholders' equity:
Historical..................................... $ 9.32 $ 7.92 $ 6.89 $ 5.99
Estimated net proceeds......................... 9.16 9.29 9.38 9.46
Less unearned ESOP shares (1).................. (0.80) (0.80) (0.80) (0.80)
Less unearned RRP shares (2)................... (0.40) (0.40) (0.40) (0.40)
------ ------ ------ ------
Pro forma shareholders' equity per share (3)... $ 17.28 $ 16.00 $ 15.07 $ 14.25
------ ------ ------ ------
------ ------ ------ ------
Ratio of offering price to pro forma
shareholders' equity per share................ 57.89% 62.49% 66.39% 70.19%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
- ------------------------
(Footnotes on page 21
19
<PAGE>
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED JUNE 30, 1995, ASSUMING THE SALE OF:
--------------------------------------------------------------------------
297,500 350,000 402,500 462,875
COMMON SHARES COMMON SHARES COMMON SHARES COMMON SHARES
(OFFERING PRICE (OFFERING PRICE (OFFERING PRICE (OFFERING PRICE
OF OF OF OF
$10.00 PER SHARE) $10.00 PER SHARE) $10.00 PER SHARE) $10.00 PER SHARE)
----------------- ----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds................................. $ 2,975 $ 3,500 $ 4,025 $ 4,629
Estimated expenses............................. (251) (251) (251) (251)
------ ------ ------ ------
Estimated net proceeds......................... 2,724 3,249 3,774 4,378
Less common stock acquired by the ESOP (1)..... (238) (280) (322) (370)
Less common stock acquired by the RRP (2)...... (119) (140) (161) (185)
------ ------ ------ ------
Net cash proceeds.............................. $ 2,367 $ 2,829 $ 3,291 $ 3,823
------ ------ ------ ------
------ ------ ------ ------
Net income:
Historical..................................... $ 125 $ 125 $ 125 $ 125
Pro forma net income on net proceeds........... 85 102 118 137
Pro forma adjustment for the ESOP (1).......... (22) (26) (30) (35)
Pro forma adjustment for the RRP (2)........... (16) (18) (21) (24)
------ ------ ------ ------
Pro forma net income........................... $ 172 $ 183 $ 192 $ 203
------ ------ ------ ------
------ ------ ------ ------
Per share net income:
Historical..................................... $ 0.45 $ 0.38 $ 0.33 $ 0.29
Pro forma net income on net proceeds........... 0.31 0.31 0.32 0.32
Pro forma adjustment for the ESOP (1).......... (0.08) (0.08) (0.08) (0.08)
Pro forma adjustment for the RRP (2)........... (0.06) (0.06) (0.06) (0.06)
------ ------ ------ ------
Pro forma earnings per share (3)(6)............ $ 0.62 $ 0.55 $ 0.51 $ 0.47
------ ------ ------ ------
------ ------ ------ ------
Offering price as a multiple of pro forma
earnings per share............................ 16.13 18.18 19.61 21.28
Shareholders' equity (5):
Historical..................................... $ 2,706 $ 2,706 $ 2,706 $ 2,706
Estimated net proceeds from the sale of Common
Shares........................................ 2,724 3,249 3,775 4,378
Less unearned ESOP shares (1).................. (238) (280) (322) (370)
Less unearned RRP shares (2)................... (119) (140) (161) (185)
------ ------ ------ ------
Pro forma shareholders' equity................. $ 5,073 $ 5,535 $ 5,998 $ 6,529
------ ------ ------ ------
------ ------ ------ ------
Per share shareholders' equity:
Historical..................................... $ 9.10 $ 7.73 $ 6.72 $ 5.85
Estimated net proceeds......................... 9.16 9.29 9.38 9.46
Less unearned ESOP shares (1).................. (0.80) (0.80) (0.80) (0.80)
Less unearned RRP shares (2)................... (0.40) (0.40) (0.40) (0.40)
------ ------ ------ ------
Pro forma shareholders' equity per share (3)... $ 17.06 $ 15.82 $ 14.90 $ 14.11
------ ------ ------ ------
------ ------ ------ ------
Ratio of offering price to pro forma
shareholders' equity per share................ 58.64% 63.23% 67.12% 70.90%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
- ------------------------
(Footnotes on next page)
20
<PAGE>
(1) Assumes that 8.0% of the Common Shares sold in connection with the
Conversion will be purchased by the ESOP and that the funds used to acquire
such shares will be borrowed by the Bank from the Holding Company with
repayment thereof secured solely by the Common Shares purchased by the ESOP.
The Bank has agreed, however, to use its best efforts to fund the ESOP based
on future earnings, which best efforts funding will reduce the income on the
equity raised in connection with the Conversion, as reflected in the table.
Assumes the level amortization of the ESOP loan over a period of seven
years, with assumed tax benefits of 34%. The amount of cash or other assets
that can be contributed to the ESOP each year is limited by certain IRS
regulations. The Bank intends to make the maximum contribution to the ESOP
permitted by such regulations, which could result in repayment of the ESOP
loan in fewer than seven years. A shorter repayment period could result in
increased compensation expense during the years in which payments are made
on the ESOP loan. See "MANAGEMENT -- Employee Stock Ownership Plan." The
Board of Directors may elect to issue the ESOP shares from authorized but
unissued shares. The issuance of authorized but unissued shares to the ESOP
would have the effect of diluting the percentage interest of existing
shareholders by 7.41%.
(2) Assumes that 4.0% of the Common Shares sold in connection with the
Conversion will be purchased by the RRP after the Conversion at a price of
$10 per share and that one-fifth of the purchase price of the RRP shares
will be expensed in each of the first five years after the Conversion. If
the RRP is implemented in the first year after the completion of the
Conversion, it will be subject to various OTS requirements, including the
requirement that the RRP be approved by the shareholders of the Holding
Company. There can be no assurance that the RRP will be approved by the
shareholders, that a sufficient number of shares will be available for
purchase by the RRP or that the shares could be purchased at $10 per share.
A higher per share price, assuming the purchase of the entire 4.0% of the
shares, would reduce pro forma net earnings and pro forma shareholders'
equity. If an insufficient number of shares is available in the open market
to fund the RRP at the desired level, the Holding Company may issue
additional authorized shares. The issuance of authorized but unissued shares
in an amount equal to 4.0% of the Common Shares issued in the Conversion
would result in a 3.85% dilution in earnings per share and book value per
share on a pro forma basis. See "MANAGEMENT -- Recognition and Retention
Plan and Trust."
(3) No effect has been given to shares reserved for issuance upon the exercise
of options pursuant to the Stock Option Plan. See "MANAGEMENT -- Stock
Option Plan."
(4) Assumes that the ESOP holds 23,800 shares, 28,000 shares, 32,200 shares and
37,030 shares, at the minimum, mid-point, maximum and adjusted maximum of
the Valuation Range, respectively, for purposes of computing earnings per
share. Pursuant to SOP 93-6, only ESOP shares which will be allocated over
the period are included in the earnings per share calculation. The
application of SOP 93-6 to the nine months ended March 31, 1996, reflects
weighted average shares outstanding of 277,100 shares, 326,000 shares,
374,900 shares and 431,135 shares at the minimum, mid-point, maximum and
adjusted maximum of the Valuation Range, respectively. SOP 93-6 also
requires ESOP expense to be measured based on the fair value of the shares
to be allocated. The table reflects the ESOP cost at the $10 offering price
of the Common Shares in the Conversion, which may be more or less than the
fair value at which the shares are ultimately allocated.
(5) The effect of the Liquidation Account is not included in these computations.
For additional information concerning the Liquidation Account, see "THE
CONVERSION -- Principal Effects of the Conversion -- Liquidation Account."
The amounts shown do not reflect the federal income tax consequences of the
potential restoration of the bad debt reserves to income for tax purposes,
which would be required in the event of liquidation. See "TAXATION --
Federal Taxation."
(6) Assumes that ESOP shares of 23,800 shares, 28,000 shares, 32,200 shares and
37,030 shares, at the minimum, mid-point, maximum and adjusted maximum of
the Valuation Range, respectively, are outstanding for purposes of computing
earnings per share. Pursuant to SOP 93-6, only ESOP shares which will be
allocated over the period are included in the earnings per share
calculation. The application of SOP 93-6 to the year ended June 30, 1995,
would result in an earnings per share presentation of $.62, $.55, $.51 and
$.47, reflecting weighted average shares outstanding of 277,100 shares,
326,000 shares, 374,900 shares and 431,135 shares at the minimum, mid-point,
maximum and adjusted maximum of the Valuation Range, respectively. SOP 93-6
also requires ESOP expense to be measured based on the fair value of the
shares to be allocated. The table reflects the ESOP cost at the $10 offering
price of the Common Shares in the Conversion, which may be more or less than
the fair value at which the shares are ultimately allocated.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Bank is primarily engaged in the business of attracting savings deposits
from the general public and investing such funds in mortgage loans secured by
one- to four-family residential real estate located in the Bank's primary market
area. The Bank also originates loans for the construction or improvement of one-
to four-family residential real estate, loans secured by multi-family
residential real estate (over four units) and nonresidential real estate and
consumer loans, and invests in U.S. Government and agency obligations,
interest-bearing deposits in other financial institutions, mortgage-backed
securities and other investments permitted by law.
Prior to 1994, Foundation's primary business activity was offering
retirement savings accounts, with those specialized accounts constituting as
much as 60% of total deposits. Lending activity was not pursued aggressively,
and the loans that were originated during that time did not conform to secondary
market underwriting and documentation standards.
In 1994, the Bank experienced a management change following the death of its
long-time managing officer. The Bank's business plan was revised and a new
course was charted to diversify the business of the Bank. In general, the new
business plan focused on the restructuring of the Bank's deposit liabilities,
primarily the discontinuation of short-term adjustable-rate individual
retirement accounts ("IRAs"), and the development of a lending program that
emphasized the active origination of loans.
The restructuring of the deposit liabilities occurred over a period of
approximately 18 months in 1994 and 1995. As existing accounts matured during
that period, the account holders were encouraged to transfer their retirement
accounts into more traditional fixed-rate time deposits. At March 31, 1996, the
Bank's deposits totalled $27.8 million, approximately 40% of which were IRAs
that were invested in the Bank's standard certificate of deposit products.
To increase its lending business, the Bank has become an approved
seller/servicer for the Federal National Mortgage Association ("FNMA") and has
established correspondent lending relationships with several national
institutional mortgage investors. Other enhancements to the lending function
include the addition to the Bank's staff of a loan originator and technological
improvements which enable the Bank to approve loans quickly, often within 24
hours of receipt of an application.
The principal determinants of the Bank's net income are the Bank's net
interest income and its operating expenses. As a result of its location in
downtown Cincinnati, the Bank generally has not attracted a significant number
of passbook and checking accounts, but has instead had to rely heavily on time
deposits. Moreover, the Bank has historically had to price its time deposits at
the top of the market to attract and retain accounts. These competitive
pressures have resulted in the Bank having a higher cost of funds than its peer
group. To some extent, the Bank has compensated for its lower than average net
interest income by maintaining expenses at levels below its peer group. Because
of its high concentration of certificate accounts, which are not as
labor-intensive as transaction accounts, and the automation of the lending
function, the Bank has approximately one-third fewer employees than its peer
group and a ratio of noninterest expense to assets that is approximately 50
basis points lower than its peer group average.
ANALYSIS OF FINANCIAL CONDITION
The Bank's assets totalled $31.7 million at March 31, 1996, a decrease in
total assets of $111,500, or 0.4%, from June 30, 1995, assets of $31.8 million.
The decrease in asset levels was attributable to the repayment of FHLB advances
in the amount of $350,000, resulting in a 29.3% reduction of total borrowings.
During the nine-month period ended March 31, 1996, investment securities
declined by $650,000, or 61.9%, as a result of maturities and prepayments, and
mortgage-backed securities balances decreased by $575,000, or 10.4%, as a result
of increased levels of repayments as the underlying mortgages were refinanced by
borrowers seeking lower interest rates. Also during the period, deposits
increased $43,000, or 0.2%, accrued expenses increased $22,000, or 18.9%, and
advances from borrowers for taxes and insurance increased $96,369, or 246.6%, as
a result of both a new loan policy requiring borrowers to maintain escrow
accounts and the timing of such tax and insurance payments.
22
<PAGE>
The foregoing changes funded an increase in cash and interest bearing
accounts of $293,400, or 7.4%, an increase in loans receivable of $848,500, or
4.1%, and the repayment of FHLB advances of $350,000, or 29.3%. Retained
earnings increased $66,000, or 2.4%, as a result of equivalent net income for
the nine months ended March 31, 1996.
The Bank's allowance for losses on loans totalled $103,700 at March 31,
1996, as compared to $98,100 at June 30, 1995. The $5,600 increase in the
allowance during the nine-month period was the result of a $34,000 provision and
write-offs, net of recoveries, of $28,400.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTH PERIODS ENDED MARCH 31, 1996
AND 1995
GENERAL. The Bank's net income totalled $66,000 for the nine months ended
March 31, 1996, a decrease of $25,500, or 27.9%, from the $91,500 in net
earnings for the same period in 1995. The decrease in earnings was the result of
a decrease in net interest income of $28,400, or 4.7%, and an increase in the
provision for losses on loans of $25,000, or 277.8%. These amounts were
partially offset by an increase in other income of $4,900, or 10.4%, a reduction
in general and administrative expense of $12,000, or 2.4%, and a decrease of
$11,000 in federal income taxes.
NET INTEREST INCOME. Total interest income for the nine months ended March
31, 1996, increased $190,200, or 11.9%, compared to the same period in the 1995
fiscal year, while interest expense increased $218,600, or 22.1%, resulting in a
decrease in net interest income of $28,400, or 4.7%. During the nine-month
period, which was a period of rising interest rates, the Bank's liabilities were
repricing more rapidly than its assets.
Interest income on loans increased $133,000, or 10.9%, for the nine months
ended March 31, 1996, as compared to the 1995 period. The increase resulted from
a higher portfolio balance and an increased weighted average yield. From July 1,
1995, to March 31, 1996, the weighted average yield on loans increased
approximately 30 basis points, despite borrowers refinancing to obtain lower
interest rates. Interest income on mortgage-backed securities decreased $8,700,
or 3.6%, due to lower portfolio balances, but aided by increased yields as the
adjustable rate securities repriced upward. From July 1, 1994, to March 31,
1996, the weighted average yield on the Bank's mortgage-backed securities
increased approximately 75 basis points. Interest on investments increased
$1,100, or 2.2%, and interest on interest-bearing deposits increased $64,800, or
86.2%, due to higher balances and higher interest rates. From July 1, 1995, to
March 31, 1996, the yield on interest-bearing deposits increased approximately
75 basis points.
Interest expense on deposits for the nine months ended March 31, 1996,
increased $220,800, or 23.3%, as a result of higher interest rates paid on
deposits. From June 30, 1994, to March 31, 1996, the weighted cost of deposits
increased 114 basis points. Interest on borrowings for the nine month period
decreased $2,200, or 5.3%, from 1995 to 1996 as the level of FHLB advances was
reduced.
Although both interest income and the cost of funds increased during the
nine months ended March 31, 1996, interest rates have been more volatile for
assets. The downward pressure on rates during the first quarter of 1996 was
greater in the 15 year to 30 year range than in the short end of the rate curve.
Consequently, mortgage loan rates dropped rapidly, resulting in higher yielding
mortgage loans being refinanced for lower rates. The Bank sold all of the
long-term, fixed-rate loans it originated during the period, which resulted in
an increase in lower-yielding cash and interest-bearing deposits. Rates then
stabilized in March 1996, effectively slowing the refinancing activity. The Bank
intends to reduce its cash balances by reinvesting in the mortgage market at
market rates which are currently 100 basis points higher than rates were in
February 1996.
PROVISION FOR LOSSES ON LOANS. The provision for losses on loans totalled
$34,000 for the nine months ended March 31, 1996, an increase of $25,000, or
277.8%, when compared to the $9,000 provision for the same period in 1995.
Additions to the allowance for loan losses are generally predicated on past loss
experience, the level of nonperforming loans, charge-offs, the outstanding
portfolio balance and the inherent risk related to the lending function. The
increase in loans receivable and the current period write-offs influenced the
need for an increase in the provision for loan losses. The allowance for loan
losses is a general reserve and not allocated to specific loans. After giving
effect to loan charge-offs of $28,000 incurred during the period, the provision
resulted in a net increase of approximately $5,600 in the allowance for loan
losses.
23
<PAGE>
OTHER INCOME. Other income totalled $52,000 for the nine months ended March
31, 1996, an increase of $4,900, or 10.4%, from the $47,100 in other income for
the comparable 1995 period. The gain on sale of loans increased $4,800, or
177.0%, due to a higher volume of loan sales as loan rates declined to levels
below management's requirements for portfolio investment. Other operating income
increased $1,200, or 17.4%, which was offset by a decrease in net investment
property income of $1,100, or 2.7%, due to higher real estate taxes.
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE. General, administrative and
other expense decreased by $12,000, or 2.4%, for the nine months ended March 31,
1996, as compared to the same period in 1995. The decline resulted primarily
from a decrease in compensation, fees and benefits of $13,500, or 4.9%, which
was partially offset by an increase in franchise tax of $1,400, or 5.9%. The
decrease in compensation, fees, and benefits was due to the increase in loan
origination and the related deferral of expenses under SFAS No. 91 and the cost
cutting measures implemented by management.
FEDERAL INCOME TAXES. The provision for federal income taxes totalled
$32,100 for the nine months ended March 31, 1996, a decrease of $11,000, or
25.4%, from the $43,100 provision for the comparable 1995 period, as a result of
a reduction of $38,300, or 28.45% in pretax earnings for the current period.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
GENERAL. The Bank's net income totalled $125,400 for the year ended June
30, 1995, a decrease of $69,900, or 35.8%, from the $195,300 in net earnings for
the 1994 fiscal year. The decrease was the result of an increase in general,
administrative and other expense of $51,200, or 8.2%, and the absence of a gain
on sale of investments of $132,400 which occurred during the 1994 fiscal year.
These decreases were partially offset by higher net interest income after
provision for loan losses of $85,000, or 12.2%, resulting from higher spreads.
NET INTEREST INCOME. Total interest income for the year ended June 30,
1995, increased $93,300, or 4.5%. The higher total interest income was partially
offset by an increase in the cost of funds of $29,000, or 2.2%, resulting in an
increase in net interest income of $64,400, or 8.8%.
Interest on loans for the year ended June 30, 1995, increased $61,000, or
3.8%, primarily as a result of a $1.7 million increase in loans receivable.
Interest on mortgage-backed securities increased $34,300, or 12.0%, which more
than offset the effects of a $1.1 million decrease in the portfolio as the
adjustable rate securities repriced upward. Interest on investment securities
increased $41,500, or 150.2%, as the securities were held for the full year in
1995, compared to 9.5 months in 1994. Interest on interest-bearing deposits
decreased $43,500, or 27.0%, as the average amount invested declined, due to
increased mortgage demand.
Interest paid on deposits for the year ended June 30, 1995, increased
$11,700, or 0.9%, the result of a larger portfolio balance and higher rates paid
for savings. Interest on borrowings increased $17,300, or 41.2%, due to a
$300,000 six month FHLB advance which was obtained in February 1995 and repaid
in September 1995.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the year ended
June 30, 1995, was $12,000, a decrease of $20,600, or 63.2%, from the 1994
provision. The decrease was predicated on the reduction in loans 90 or more days
delinquent and loans in foreclosure.
OTHER INCOME. Other income for the year ended June 30, 1995, was $69,700, a
decrease of $134,200 from 1994. In the 1995 period, other income included
$12,200 in gains on sale of loans. Prior to that time, the Bank had not sold
loans. Investment property income decreased $14,500, or 22.3%, due to a new
lease at a lower rental figure and higher real estate taxes. Other operating
income increased $1,700, or 30.7%, due to higher fees collected. Other income
for 1994 included nonrecurring gain on sale of equipment of $1,200 and a gain on
sale of investments of $132,400, resulting from the sale of Federal Home Loan
Mortgage Corporation ("FHLMC") stock.
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE. General, administrative and
other expense increased $51,200, or 8.2%, for the year ended June 30, 1995, as
compared to the 1994 fiscal year. The increase was principally the result of an
increase in compensation, fees and benefits totaling $72,400, or 24.8%, due to
the addition of one new employee and two new directors. Computer processing
expense increased $3,000, or
24
<PAGE>
9.8%, and franchise taxes increased $500, or 1.7%. These increases were
partially offset by a decrease in deposit insurance expense of $3,600, or 5.5%,
and a decrease in other operating expense of $20,100, or 15.3%, resulting from
cost saving measures instituted by management.
FEDERAL INCOME TAXES. Federal income taxes for the year ended June 30,
1995, decreased by $30,600, or 39.0%, as a direct result of lower net earnings
for the 1995 fiscal year, compared to 1994.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1994 AND 1993
GENERAL. Net income for the year ended June 30, 1994, totalled $195,300, an
increase of $68,800, or 54.3%, as compared to the 1993 fiscal year. The increase
was the result of an increase in other income of $67,700, or 49.6%, a decrease
in general, administrative and other expense of $12,200, or 1.9%, and a decrease
in the provision for loan losses of $50,000, or 60.5%, which were partially
offset by a decrease in net interest income of $68,000, or 8.5%. During the
first half of the 1994 fiscal year, which was a time of significant refinancing
activity generally, the Bank experienced significant loan payoffs, but was
inactive with respect to loan originations. The higher volume of payoffs
resulted in increased levels of cash, interest-bearing deposits and
mortgage-backed securities. Total interest income for the year ended June 30,
1994, decreased $228,200, or 9.9%, primarily the result of decreased interest on
loans. The cost of funds also decreased $160,200, or 10.7%, due to lower deposit
levels and a declining weighted average cost as interest rates generally
declined.
NET INTEREST INCOME. Interest income on loans for the year ended June 30,
1994, decreased $288,200, or 15.3%, as the portfolio was reduced due to
refinancing by borrowers to obtain lower rates. Interest on mortgage-backed
securities increased $54,300, or 23.4%, due to increased portfolio balances as
funds generated by loan prepayments were used purchase mortgage-backed
securities. Interest on investment securities increased $14,700, or 113.3%, due
to increased portfolio balances, and interest on interest-bearing deposits
decreased $8,900, or 5.3%, as the average balance declined.
Interest expense on deposits for the year ended June 30, 1994, decreased
$202,200, or 13.5%, as the Bank experienced an outflow of deposits as depositors
sought higher-yielding investments in the declining rate environment. Interest
expense on borrowings increased $42,000 as FHLB advances were obtained for the
first time as an alternative source to replace the declining deposit levels.
PROVISION FOR LOSSES ON LOANS. The provision for loan losses for the year
ended June 30, 1994, decreased by $50,000, or 60.5%, as a result of the lower
level of nonaccrual loans. The allowance for loan losses is a general reserve
and not allocated to specific loans.
OTHER INCOME. Other income for the year ended June 30, 1994, increased
$67,700, or 49.6%, resulting from a $71,100 gain on sale of FHLMC stock, a
$1,200 nonrecurring gain on sale of equipment and an increase in investment
property income of $700, or 1.0%, which were partially offset by a decrease of
$5,300, or 49.7%, in other operating income.
GENERAL, ADMINISTRATIVE AND OTHER EXPENSE. General, administrative and
other expense for the year ended June 30, 1994, decreased $12,300, or 1.9%,
compared to the 1993 fiscal year resulting from a decrease in compensation, fees
and benefits of $14,200, or 4.6%, and a decrease in occupancy and equipment of
$6,600, or 7.9%, due to benefits paid in connection with the death of the Bank's
former managing officer in 1993. These amounts were partially offset by
increased deposit insurance costs of $5,300, or 8.9%, increased franchise tax of
$2,200, or 7.7%, and increased computer servicing costs of $1,700, or 6.2%.
FEDERAL INCOME TAXES. Federal income tax for the year ended June 30, 1994,
decreased $6,800, or 8.0%, due to changes in accounting for taxes.
The following table sets forth certain average balance sheet information,
including the average yield on interest-earning assets and the average cost of
interest-bearing liabilities for the years indicated. Such yields and costs are
derived by dividing income or expense by the average monthly balance of
interest-earning assets or interest-bearing liabilities, respectively, for the
years presented. Average balances are derived from monthly balances, which
include nonaccruing loans in the loan portfolio.
25
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31, YEAR ENDED JUNE 30,
-------------------------------------------------------------------------- ------------------------
1996 1995 1995
------------------------------------ ------------------------------------ ------------------------
AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE AVERAGE INTEREST
OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/
BALANCE PAID RATE BALANCE PAID RATE BALANCE PAID
----------- ----------- ---------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing
deposits................ $ 3,216 $ 140 5.80% $ 1,922 $ 75 5.20% $ 2,200 $ 117
Investment securities.... 1,164 51 5.84 1,302 51 5.22 1,304 69
Mortgage-backed
securities.............. 5,218 234 5.98 6,137 242 5.26 6,028 321
Loans receivable......... 21,608 1,358 8.38 20,231 1,225 8.07 20,318 1,655
----------- ----------- ----------- ----------- ----------- -----------
Total interest-earning
assets................ 31,206 1,783 7.62 29,592 1,593 7.18 29,850 2,162
Non-interest-earning
assets.................. 585 537 553
----------- ----------- -----------
Total assets........... $ 31,791 $ 30,128 $ 30,403
----------- ----------- -----------
----------- ----------- -----------
Interest-bearing
liabilities:
NOW and money market
accounts................ $ 2,055 $ 42 2.73% $ 3,076 $ 60 2.60 $ 2,964 $ 79
Passbook savings
accounts................ 1,189 25 2.80 1,613 35 2.89 1,539 45
Certificates of
deposit................. 24,452 1,100 6.00 21,467 851 5.29 21,858 1,185
----------- ----------- ----------- ----------- ----------- -----------
Total deposits......... 27,696 1,167 5.62 26,156 946 4.82 26,361 1,309
FHLB advances............ 931 39 5.59 995 42 5.63 1,046 59
----------- ----------- ---------- ----------- ----------- ---------- ----------- -----------
Total interest-bearing
liabilities........... 28,627 1,206 5.62 27,151 988 4.85 27,407 1,368
----------- ---------- ----------- ---------- -----------
Non-interest-bearing
liabilities............. 412 347 350
----------- ----------- -----------
Total liabilities...... 29,039 27,498 27,757
Retained earnings........ 2,752 2,631 2,646
----------- ----------- -----------
Total liabilities and
retained earnings..... $ 31,791 $ 30,128 $ 30,403
----------- ----------- -----------
----------- ----------- -----------
Net interest income...... $ 577 $ 605 $ 794
----------- ----------- -----------
----------- ----------- -----------
Interest rate spread..... 2.00% 2.33%
---------- ----------
---------- ----------
Net interest margin (net
interest income as a
percentage of average
interest-earning
assets)................. 2.47% 2.73%
---------- ----------
---------- ----------
Average interest-earning
assets to average
interest-bearing
liabilities............. 109.01% 108.99%
---------- ----------
---------- ----------
<CAPTION>
1994 1993
------------------------------------ ------------------------------------
AVERAGE AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE
YIELD/ OUTSTANDING EARNED/ YIELD/ OUTSTANDING EARNED/ YIELD/
RATE BALANCE PAID RATE BALANCE PAID RATE
---------- ----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing
deposits................ 5.32% $ 4,727 $ 161 3.41% $ 5,472 $ 170 3.11%
Investment securities.... 5.29 573 28 4.89 244 13 5.32
Mortgage-backed
securities.............. 5.33 6,478 286 4.41 4,268 232 5.44
Loans receivable......... 8.15 19,242 1,594 8.28 21,028 1,882 8.95
----------- ----------- ----------- -----------
Total interest-earning
assets................ 7.24 31,020 2,069 6.67 31,012 2,297 7.41
Non-interest-earning
assets.................. 543 561
----------- -----------
Total assets........... $ 31,563 $ 31,573
----------- -----------
----------- -----------
Interest-bearing
liabilities:
NOW and money market
accounts................ 2.67 $ 3,425 $ 99 2.89 $ 2,870 $ 96 3.34
Passbook savings
accounts................ 2.92 2,245 67 2.98 2,698 145 5.37
Certificates of
deposit................. 5.42 22,318 1,131 5.07 23,325 1,258 5.39
----------- ----------- ----------- -----------
Total deposits......... 4.97 27,988 1,297 4.63 28,893 1,499 5.19
FHLB advances............ 5.64 815 42 5.16 -- -- --
---------- ----------- ----------- ---------- ----------- ----------- ----------
Total interest-bearing
liabilities........... 4.99 28,803 1,339 4.65 28,893 1,499 5.19
---------- ----------- ---------- ----------- ----------
Non-interest-bearing
liabilities............. 296 337
----------- -----------
Total liabilities...... 29,099 29,230
Retained earnings........ 2,464 2,343
----------- -----------
Total liabilities and
retained earnings..... $ 31,563 $ 31,573
----------- -----------
----------- -----------
Net interest income...... $ 730 $ 798
----------- -----------
----------- -----------
Interest rate spread..... 2.25% 2.02% 2.22%
---------- ---------- ----------
---------- ---------- ----------
Net interest margin (net
interest income as a
percentage of average
interest-earning
assets)................. 2.66% 2.35% 2.57%
---------- ---------- ----------
---------- ---------- ----------
Average interest-earning
assets to average
interest-bearing
liabilities............. 108.92% 107.70% 107.33%
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
26
<PAGE>
The following table sets forth, at the dates indicated, the weighted average
yields earned on the Bank's interest-earning assets, the weighted average
interest rates paid on interest-bearing liabilities and the interest rate spread
between the weighted average yields and rates at the dates presented.
<TABLE>
<CAPTION>
AT JUNE 30,
AT MARCH 31, -------------------------------------
1996 1995 1994 1993
--------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average yield on loans........................................ 8.14% 8.25% 7.80% 8.35%
Weighted average yield on investment securities portfolio.............. 6.33 5.72 4.99 5.30
Weighted average yield on mortgage-backed securities................... 5.41 4.52 5.06 5.30
Weighted average yield on interest-bearing deposits.................... 5.24 5.96 4.11 3.53
Weighted average yield on all interest-earning assets.................. 7.27 7.19 6.63 7.28
Weighted average rate paid on deposits................................. 5.58 5.62 4.40 4.88
Weighted average rate paid on FHLB advances............................ 5.51 5.85 5.50 --
Weighted average rate paid on all interest-bearing liabilities......... 5.58 5.57 4.48 4.88
Interest rate spread................................................... 1.69 1.62 2.15 2.40
</TABLE>
The table below describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected the Bank's interest income and interest expense during the years
indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to (i) changes in
volume (change in volume multiplied by prior year rate), (ii) changes in rate
(change in rate multiplied by prior year volume) and (iii) total changes in rate
and volume. The combined effects of changes in both volume and rate, which
cannot be separately identified, have been allocated proportionately to the
change due to volume and the change due to rate:
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31, YEAR ENDED JUNE 30,
------------------------------------- -------------------------------------------------------------
1996 VS. 1995 1995 VS. 1994 1994 VS. 1993
------------------------------------- ------------------------------------- ----------------------
INCREASE INCREASE INCREASE
(DECREASE) (DECREASE) (DECREASE)
DUE TO TOTAL DUE TO TOTAL DUE TO
---------------------- INCREASE ---------------------- INCREASE ----------------------
VOLUME RATE (DECREASE) VOLUME RATE (DECREASE) VOLUME RATE
----------- --------- ------------- ----------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income attributable
to:
Interest-bearing
deposits.................. $ 55 $ 10 $ 65 $ (109) $ 65 $ (44) $ (24) $ 15
Investments................ (5) 5 -- 39 2 41 16 (1)
Mortgage-backed
securities.............. (39) 31 (8) (21) 56 35 104 (50)
Loans receivable........... 86 47 133 88 (27) 61 (154) (134)
--- --------- ----- ----- --------- ----- ----- ---------
Total interest income.... 97 93 190 (3) 96 93 (58) (170)
--- --------- ----- ----- --------- ----- ----- ---------
Interest-bearing liabilities
Deposits................... 58 163 221 (78) 90 12 (46) (156)
FHLB advances.............. (3) -- (3) (13) 4 17 21 21
--- --------- ----- ----- --------- ----- ----- ---------
Total interest expense... 55 163 218 (65) 94 29 (25) (135)
--- --------- ----- ----- --------- ----- ----- ---------
Increase (decrease) in net
interest income............. $ 42 $ (70) $ (28) $ (62) $ 2 $ 64 $ (33) $ (35)
--- --------- ----- ----- --------- ----- ----- ---------
--- --------- ----- ----- --------- ----- ----- ---------
<CAPTION>
TOTAL
INCREASE
(DECREASE)
-------------
<S> <C>
Interest income attributable
to:
Interest-bearing
deposits.................. $ (9)
Investments................ 15
Mortgage-backed
securities.............. 54
Loans receivable........... (288)
-----
Total interest income.... (228)
-----
Interest-bearing liabilities
Deposits................... (202)
FHLB advances.............. 42
-----
Total interest expense... (160)
-----
Increase (decrease) in net
interest income............. $ (68)
-----
-----
</TABLE>
ASSET AND LIABILITY MANAGEMENT
The Bank, like other financial institutions, is subject to interest rate
risk to the extent that its interest-earning assets reprice differently than its
interest-bearing liabilities. As part of its effort to monitor and manage
interest rate risk, the Bank uses the "net portfolio value" ("NPV") methodology
recently adopted by the OTS as part of its capital regulations. Although the
Bank is not currently subject to the NPV regulation because such regulation does
not apply to institutions with less than $300 million in assets and risk-based
capital in excess of 12%, the application of the NPV methodology illustrates
certain aspects of the Bank's interest rate risk.
27
<PAGE>
Generally, NPV is the discounted present value of the difference between
incoming cash flows on interest-earning and other assets and outgoing cash flows
on interest-bearing and other liabilities. The application of the methodology
attempts to quantify interest rate risk as the change in the NPV which would
result from a theoretical 200 basis point (1 basis point equals .01%) change in
market interest rates.
Presented below, as of December 31, 1995, is an analysis of the Bank's
interest rate risk as measured by changes in NPV for instantaneous and sustained
parallel shifts of 100 basis points in market interest rates. The table also
contains the policy limits set by the Board of Directors of the Bank as the
maximum change in NPV that the Board of Directors deems advisable in the event
of various changes in interest rates. Such limits have been established with
consideration of the dollar impact of various rate changes and the Bank's strong
capital position.
As illustrated in the table, NPV is more sensitive to rising rates than
declining rates. Such difference in sensitivity occurs principally because, as
rates rise, borrowers do not prepay fixed-rate loans as quickly as they do when
interest rates are declining. Thus, in a rising interest rate environment,
because the Bank has a significant amount of fixed-rate loans in its loan
portfolio, the amount of interest the Bank would receive on its loans would
increase relatively slowly as loans are slowly prepaid and new loans are made at
higher rates. Moreover, the interest the Bank would pay on its deposits would
increase rapidly because the Bank's deposits generally have shorter periods to
repricing. The assumptions used in calculating the amounts in this table are OTS
assumptions.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------
CHANGE IN INTEREST RATE BOARD LIMIT % $ CHANGE % CHANGE IN
(BASIS POINTS) CHANGE IN NPV NPV
- ----------------------- -------------- --------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
+400 (60)% $ (1,678) (64)%
+300 (50) (1,185) (45)
+200 (35) (717) (28)
+100 (20) (302) (12)
0 0 0 0
-100 20 118 5
-200 35 90 3
-300 50 94 4
-400 60 171 7
</TABLE>
As with any method of measuring interest rate risk, certain shortcomings are
inherent in the NPV approach. For example, although certain assets and
liabilities may have similar maturities or periods of 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. Further, in the event of a change in interest
rates, expected rates of prepayment on loans and mortgage-backed securities and
early withdrawal levels from certificates of deposit would likely deviate
significantly from those assumed in making the risk calculations.
In a rising interest rate environment, the Bank's net interest income could
be expected to be negatively affected. Moreover, rising interest rates could
negatively affect the Bank's earnings due to diminished loan demand.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's principal sources of funds are deposits, loan and mortgage-backed
securities repayments, maturities of securities and other funds provided by
operations. The Bank also has the ability to borrow from the FHLB of Cincinnati.
See "REGULATION -- Federal Home Loan Banks." While scheduled loan repayments and
maturing investments are relatively predictable, deposit flows and early loan
and mortgage-backed securities prepayments are more influenced by interest
rates, general economic conditions and competition. The Bank maintains
investments in liquid assets based upon management's assessment of
28
<PAGE>
(i) the need for funds, (ii) expected deposit flows, (iii) the yields available
on short-term liquid assets and (iv) the objectives of the asset/liability
management program. During fiscal 1995, the Bank was able to increase total
deposits through a combined strategy involving both advertising and deposit
pricing.
OTS regulations presently require the Bank to maintain an average daily
balance of investments in United States Treasury securities, federal agency
obligations and other investments having maturities of five years or less in an
amount equal to 5% of the sum of the Bank's average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. The
liquidity requirement, which may be changed from time to time by the OTS to
reflect changing economic conditions, is intended to provide a source of
relatively liquid funds upon which the Bank may rely if necessary to fund
deposit withdrawals or other short-term funding needs. At March 31, 1996, the
Bank's regulatory liquidity ratio was 15.7%. At such date, the Bank had
commitments to originate loans totaling approximately $726,000 and one
commitment to sell a loan in the amount of $71,000. The Bank considers its
liquidity and capital reserves sufficient to meet its outstanding short- and
long-term needs. At March 31, 1996, the Bank had no material commitments for
capital expenditures. See Notes 9 and 10 of the Notes to Consolidated Financial
Statements.
The Bank's liquidity, primarily represented by cash and cash equivalents, is
a result of the funds used in or provided by the Bank's operating, investing and
financing activities. These activities are summarized below for the nine months
ended March 31, 1996, and for the years ended June 30, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
NINE MONTHS ENDED -------------------------------
MARCH 31, 1996 1995 1994 1993
------------------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income....................................................... $ 66 $ 125 $ 195 $ 127
Adjustments to reconcile net income to net cash from operating
activities...................................................... 192 12 (95) (30)
------ --------- --------- ---------
Net cash from operating activities............................... 258 137 100 97
Net cash provided by (used in) investment activities............. 342 718 (1,518) (13)
Net cash provided by (used in) financing activities.............. (307) 626 (759) 1,445
------ --------- --------- ---------
Net change in cash and cash equivalents.......................... 293 1,481 (2,177) 1,529
Cash and cash equivalents at beginning of period................. 3,943 2,462 4,639 3,110
------ --------- --------- ---------
Cash and cash equivalents at end of period....................... $ 4,236 $ 3,943 $ 2,462 $ 4,639
------ --------- --------- ---------
------ --------- --------- ---------
</TABLE>
The Bank is required by applicable law and regulation to meet certain
minimum capital standards. Such capital standards include a tangible capital
requirement, a core capital requirement or leverage ratio and a risk-based
capital requirement. See "REGULATION -- OTS Regulations -- Regulatory Capital
Requirements."
The tangible capital requirement requires savings associations to maintain
"tangible capital" of not less than 1.5% of the association's adjusted total
assets. Tangible capital is defined in OTS regulations as core capital minus any
intangible assets.
"Core capital" is comprised of common stockholders' equity (including
retained earnings), noncumulative preferred stock and related surplus, minority
interests in consolidated subsidiaries, certain nonwithdrawable accounts and
pledged deposits of mutual associations. OTS regulations require savings
associations to maintain core capital of at least 3% of the association's total
assets. The OTS has proposed to increase such requirement to 4% to 5%, except
for those associations with the highest examination rating and acceptable levels
of risk. See "REGULATION -- OTS Regulations -- Regulatory Capital Requirements."
OTS regulations require that savings associations maintain "risk-based
capital" in an amount not less than 8% of risk-weighted assets. Risk-based
capital is defined as core capital plus certain additional items of capital,
which in the case of the Bank includes a general loan loss allowance of $96,000
at March 31, 1996.
29
<PAGE>
The following table summarizes the Bank's regulatory capital requirements
and actual capital at March 31, 1996. See Note 9 of the Notes to Financial
Statements for a reconciliation of capital under generally accepted accounting
principles ("GAAP") and regulatory capital amounts.
<TABLE>
<CAPTION>
EXCESS OF ACTUAL
CURRENT REQUIREMENT CAPITAL OVER CURRENT
ACTUAL CAPITAL REQUIREMENT
---------------------- ----------------------- ---------------------- APPLICABLE
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ASSET TOTAL
--------- ----------- --------- ------------ --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
MARCH 31, 1996
Tangible capital................ $ 2,772 8.7% $ 476 1.5% $ 2,296 7.2% $ 31,733
Core capital.................... 2,772 8.7 952 3.0 1,820 5.7 31,733
Risk-based capital.............. 2,868 19.6 1,171 8.0 1,697 11.6 14,640
JUNE 30, 1995
Tangible capital................ $ 2,706 8.5% $ 478 1.5% $ 2,228 7.0% $ 31,844
Core capital.................... 2,706 8.5 955 3.0 1,751 5.5 31,844
Risk-based capital.............. 2,776 19.3 1,153 8.0 1,623 11.3 14,418
</TABLE>
IMPACT OF NEW ACCOUNTING STANDARDS
In May 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" ("SFAS No. 114"). Under the provisions of SFAS No.
114, a loan is considered impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. SFAS No. 114 requires
creditors to measure impairment of a loan based on the present value of expected
future cash flows, discounted at the loan's effective interest rate. If the
measure of the impaired loan is less than the recorded investment in the loan, a
creditor must recognize an impairment by recording a valuation allowance with a
corresponding charge to bad debt expense. SFAS No. 114 also applies to
restructured loans and eliminates the requirement to classify loans that are
in-substance foreclosures as foreclosed assets, except for loans where the
creditor has physical possession of the underlying collateral, but not legal
title. SFAS No. 114 applies to financial statements for fiscal years beginning
after December 15, 1994. In October 1994, the FASB issued SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures" ("SFAS No. 118"), which amends SFAS No. 114 to allow a creditor to
use existing methods for recognizing interest income on impaired loans. The Bank
will be required to adopt SFAS No. 114 for the year ending June 30, 1996, and
does not anticipate that the implementation of SFAS No. 114 and its amendment,
SFAS No. 118, will have a material impact on its results of operations or
financial position.
In November 1993, the American Institute of Certified Public Accountants
("AICPA") issued SOP 93-6, "Employers' Accounting for Employee Stock Ownership
Plans" ("SOP 93-6"), which is effective for fiscal years beginning after
December 15, 1993. SOP 93-6 will apply to the Bank for its fiscal year beginning
July 1, 1996. SOP 93-6 requires the application of its guidance for shares
acquired by ESOPs after June 30, 1992, but not yet committed to be released as
of the beginning of the year SOP 93-6 is adopted. SOP 93-6 will, among other
things, change the measure of compensation expense recorded by employers for
leveraged ESOPs from the cost of ESOP shares to the fair value of ESOP shares.
Under SOP 93-6, the Company will recognize compensation cost equal to the fair
value of the ESOP shares during the periods in which they become committed to be
released. To the extent that the fair value of the Bank's ESOP shares differ
from the cost of such shares, this differential will be charged or credited to
equity. Employers with internally leveraged ESOPs such as the Holding Company
will not report the loan receivable from the ESOP as an asset and will not
report the ESOP debt from the employer as a liability. See "MANAGEMENT -- Stock
Benefit Plans -- Employee Stock Ownership Plan."
In December 1991, the FASB issued SFAS No. 107, "Disclosures About Fair
Value of Financial Statements" ("SFAS No. 107"), which would require disclosure
of fair value information about financial instruments, whether or not recognized
in the balance sheet, for which it is practicable to estimate that value.
30
<PAGE>
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. The Bank will be required to adopt
SFAS No. 107 for the year ended June 30, 1996. Management does not anticipate
that the implementation of SFAS No. 107 will have a material impact on the
results of operations or financial position of the Bank.
In October, 1994, the FASB issued SFAS No. 119 "Disclosures about Derivative
Financial Instruments and Fair Value of Financial Instruments" ("SFAS No. 119").
SFAS No. 119 requires disclosures about the amounts, nature and terms of
derivative financial instruments which do not result in off-balance-sheet risk
of accounting loss. It requires that a distinction be made between financial
instruments held or issued for trading purposes (including dealing and other
trading activities measured at fair value with gains and losses recognized in
earnings) and financial instruments held or issued for purposes other than
trading. SFAS No. 119 is effective for financial statements issued for fiscal
years ended after December 31, 1995. Management does not expect any material
impact from the adoption of SFAS 119.
In May 1993, the FASB issued SFAS No. 115. SFAS No. 115 requires that
investments be classified as "held to maturity," "available for sale" or
"trading securities." The statement defines investments in securities as "held
to maturity" based upon a positive intent and ability to hold those securities
to maturity. Investments held to maturity would be reported at amortized cost.
Debt and equity securities that are bought and held principally for the purpose
of selling them in the near term are classified as "trading securities" and
would be reported at fair value, with unrealized gains and losses included in
operations. Equity and debt securities not classified as "held to maturity" or
"trading securities" are classified as "available for sale" and would be
recorded at fair value, with unrealized gains and losses excluded from
operations and reported as a separate component of stockholders' equity. The
Bank adopted SFAS No. 115 effective July 1, 1995. The adoption of SFAS No. 115
did not have an impact on the Bank's results of operations or financial
position. The Bank holds all investments as "held to maturity" carried at
amortized cost.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights." This statement requires 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 would allocate the total cost of the mortgage loans to the mortgage
servicing rights and the loans based on their relative fair value. Statement No.
122 is effective for fiscal years beginning after December 15, 1995. Management
does not expect an impact from the adoption of this standard.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed of." SFAS No. 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be held
and used and for long-lived assets and certain identifiable intangibles to be
disposed of. The standard requires an impairment loss to be recognized when the
carrying amount of the asset exceeds the fair value of the asset. The fair value
of the asset is the amount at which the asset would be bought or sold in a
current transaction between willing parties, that is, other than in a forced
liquidation sale. An entity that recognizes an impairment loss shall disclose
additional information in the financial statements related to the impaired
asset. All long-lived assets and certain identifiable intangibles to be disposed
of and for which management has committed to a plan to dispose of the assets,
whether by sale or abandonment, shall be reported at the lower of the carrying
amount or fair value less cost to sell. Subsequent revisions in estimates of
fair value less cost to sell shall be reported as adjustments to the carrying
amount of assets to be disposed of, provided that the carrying amount of the
asset does not exceed the carrying amount of the asset before an adjustment was
made to reflect the decision to dispose of the asset. The statement requires
additional disclosure in the footnotes regarding assets to be disposed of.
31
<PAGE>
In December 1994, the Accounting Standards Division of the AICPA approved
SOP 94-6, "Disclosure of Certain Significant Risks and Uncertainties." SOP 94-6
requires disclosure in the financial statements beyond those now being required
or generally made in the financial statements about the risks and uncertainties
existing as of the date of those financial statements in the following areas:
nature of operations, use of estimates in the preparation of financial
statements, certain significant estimates, and current vulnerability due to
certain concentrations. The standard is effective for financial statements
issued for fiscal years ending after December 15, 1995.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," establishing financial accounting and reporting standards for
stock-based employee compensation plans. SFAS No. 123 encourages all entities to
adopt a new method of accounting to measure compensation cost of all employee
stock compensation plans based on the estimated fair value of the award at the
date it is granted. Companies are, however, allowed to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting, which generally does not result in compensation expense recognition
for most plans. Companies that elect to remain with the existing accounting are
required to disclose in a footnote to the financial statements pro forma net
income and, if presented, earnings per share, as if SFAS No. 123 had been
adopted. The accounting requirements of SFAS No. 123 are effective for
transactions entered into during fiscal years that begin after December 15,
1995. Companies are required, however, to disclose information for awards
granted in their first fiscal year ending after December 15, 1994. Management
has not completed an analysis of the potential effects of SFAS No. 123 on its
financial condition or results of operations.
In June 1996 the FASB issued SFAS No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" which
established accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. The standards are based on
a consistent application of a financial-components approach that focuses on
control. Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. SFAS No. 125 provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. SFAS No. 125 supersedes SFAS No. 122.
SFAS No. 125 is effective for transactions occurring after December 31, 1996.
Management does not expect an impact from adoption of SFAS No. 125.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and notes thereto included herein have
been prepared in accordance with GAAP. GAAP requires the Bank to measure
financial position and operating results in terms of historical dollars. Changes
in the relative value of money due to inflation or recession are generally not
considered.
In management's opinion, changes in interest rates affect the financial
condition of a financial institution to a far greater degree than changes in the
inflation rate. While interest rates are greatly influenced by changes in the
inflation rate, they do not change at the same rate or in the same magnitude as
the inflation rate. Rather, interest rate volatility is based on changes in the
expected rate of inflation, as well as on changes in monetary and fiscal
policies.
32
<PAGE>
RECENT DEVELOPMENTS
The following tables set forth selected financial condition data for the
Bank at June 30, 1996, and March 31, 1996, and selected earnings data for the
Bank for the year ended June 30, 1996, and 1995. The results of operations
presented below are not necessarily indicative of the results that may be
expected for any other period. This information should be read in conjunction
with the financial statements and notes thereto presented elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
SELECTED FINANCIAL CONDITION AND OTHER DATA: 1996 1996
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets........................................................................... $ 30,835 $ 31,738
Cash and equivalents............................................................. 1,173 4,236
Investment securities............................................................ 1,178 674
Mortgage-backed securities....................................................... 4,641 4,957
Loans receivable, net............................................................ 23,267 21,359
Deposits......................................................................... 26,951 27,780
FHLB advances.................................................................... 825 842
Retained earnings................................................................ 2,793 2,772
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
SUMMARY OF EARNINGS: 1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income................................................ $ 576 $ 569 $ 2,359 $ 2,162
Interest expense............................................... 385 380 1,592 1,368
--------- --------- --------- ---------
Net interest income............................................ 191 189 767 794
Provision for loan losses...................................... 10 3 44 12
--------- --------- --------- ---------
Net interest income after provision/for loan losses............ 181 186 723 782
Other income................................................... 13 23 65 70
General, administrative and other expense...................... 179 170 675 679
--------- --------- --------- ---------
Net income before provision for income taxes(credit)........... 15 39 113 173
Provision for income taxes..................................... (5) 5 27 48
--------- --------- --------- ---------
Net income..................................................... $ 20 $ 34 $ 86 $ 125
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE AT OR FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
SELECTED FINANCIAL RATIOS: 1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Performance Ratios:
Return on average assets.................................. .26% .44% .27% .41%
Return on average equity.................................. 2.87 5.05 3.11 4.72
Interest rate spread...................................... 2.01 2.04 2.00 2.25
Net interest margin....................................... 2.49 2.47 2.47 2.66
Non-interest expense to average assets.................... 2.29 2.18 2.13 2.23
Average equity to average assets 8.91 8.63 8.72 8.71
Equity to assets, end of period........................... 9.06 8.50 9.06 8.50
Nonperforming assets to average assets.................... -- .62 -- .64
Nonperforming loans to total loans........................ -- .95 -- .95
Asset Quality Ratios:
Allowance for loan losses to gross loans.................. .47 .47 .47 .47
Allowance for loan losses to nonperforming loans.......... -- 50.52 -- 50.52
Net (charge-offs) recoveries to average loans............. .05 -- .14 .07
Average interest-earning assets to average
interest-bearing liabilities............................. 109.54 108.68 109.14 108.92
</TABLE>
33
<PAGE>
FINANCIAL CONDITION. Total assets decreased $903,000, or 2.8%, to $30.8
million at June 30, 1996, from $31.7 million at March 31, 1996. Cash and
equivalents decreased $3.1 million, or 72.3%, and mortgage-backed securities
decreased $316,000, or 6.4%. Approximately $829,000 from these two sources were
used to fund the decrease in deposits and the balance was used to purchase
investment securities, which increased approximately $504,000, and to originate
loans. Loans receivable increased $1.9 million during the quarter.
RESULTS OF OPERATIONS. Net income for the three month period ended June 30,
1996, was $20,000, compared to $34,000 for the same period in 1995, a decrease
of 41.2%. Interest income increased $7,000, or 1.2%, for the three months ended
June 30, 1996, primarily due to higher interest rates and a slightly larger
volume of average interest-earning assets. Total interest expense increased
$5,000 for the quarter, due to a higher cost of funds and an increase in average
interest-bearing liabilities. Total other income decreased $10,000, or 43.5%,
for the quarter ended June 30, 1996, as a result of fewer gains on sales of
loans. Total general, administrative and other expense increased $9,000 for the
three months ended June 30, 1996, due to higher employee benefit costs. Federal
income taxes decreased $10,000 for the quarter, due to lower earnings and
year-end tax adjustments. The provision for loan losses increased $7,000 for the
three months ended June 30, 1996, compared to the same periods in 1995, due to
management's decision to increase the reserve for loan losses as a result of the
increase in loans receivable and the related inherent risk in lending.
Net income for the year ended June 30, 1996, was $86,000, compared to
$125,000 for the year ended June 30, 1995, a decrease of 31.2%. Interest income
increased $197,000, or 8.35%, for the year ended June 30, 1996, compared to
1995, as a result of higher interest rates and a larger volume of
interest-earning assets. Total interest expense increased $224,000 for the year
ended June 30, 1996, due to a higher cost of funds and an increase in average
interest-bearing liabilities. Total other income decreased $5,000, or 7.14%, for
the year, as a result of fewer gains on sales of loans. Total general,
administrative and other expense decreased approximately $5,000 for the year
ended June 30, 1996, due to decreases in operating expenses as a result of
cost-saving measures implemented by management. Federal income taxes decreased
$21,000 for the year, compared to 1995, as a result of lower earnings. The
provision for loan losses increased $32,000 for the year ended June 30, 1996,
compared to the same period in 1995, due to management's decision to increase
the reserve for loan losses as a result of the increase in loans receivable and
the related inherent risk in lending.
THE BUSINESS OF THE BANK
GENERAL
The Bank is a mutual savings and loan association which was organized under
Ohio law in 1888 as "The Foundation Building and Loan Company." In February
1942, the name of the Bank was changed to "The Foundation Savings and Loan
Company" and in October 1990, the Bank adopted its present name. As an Ohio
savings and loan association, the Bank is subject to supervision and regulation
by the OTS, the Division and the FDIC. The Bank is a member of the FHLB of
Cincinnati, and the deposits of the Bank are insured up to applicable limits by
the FDIC in the SAIF. See "REGULATION."
The Bank conducts business from its office at 25 Garfield Place in
Cincinnati, Ohio. The principal business of the Bank is the origination of
permanent mortgage loans secured by first mortgages on one- to four-family
residential real estate located in Hamilton County, Ohio and the contiguous Ohio
counties of Clermont, Butler and Warren and the Kentucky counties of Boone and
Kenton. The Bank also originates mortgage loans secured by multifamily real
estate (over four units) and nonresidential real estate in its primary market
area. See "Lending Activities." In addition to real estate lending, the Bank
originates a limited number of secured and unsecured consumer loans. For
liquidity and interest rate risk management purposes, the Bank invests in
interest-bearing deposits in other financial institutions, U.S. Government and
agency obligations, mortgage-backed securities and other investments permitted
by applicable law. See "Investment Activities." Funds for lending and other
investment activities are obtained primarily from savings deposits, which are
insured up to applicable limits by the FDIC, and principal repayments on loans.
Advances from the FHLB of Cincinnati are utilized from time to time when other
sources of funds are inadequate to fund loan demand. See "Deposits and
Borrowings."
34
<PAGE>
Interest on loans and investments is the Bank's primary source of income.
The Bank's principal expense is interest paid on deposit accounts. Operating
results are dependent to a significant degree on the "net interest income" of
the Bank, which is the difference between interest income earned on loans,
mortgage-backed securities and other investments and interest paid on deposits
and borrowings. Like most thrift institutions, the Bank's interest income and
interest expense are significantly affected by general economic conditions and
by the policies of various regulatory authorities. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
MARKET AREA
The Bank conducts business from its office in Cincinnati, Ohio. The Bank's
primary market area for lending and deposit activity is Hamilton County, Ohio.
The Bank also frequently receives deposits from, and makes loans to, customers
in the contiguous Ohio counties of Clermont, Butler and Warren and the Kentucky
counties of Kenton and Boone.
Located in southwest Ohio and served by both Interstates 75 and 71, Hamilton
County is a major center for manufacturing, wholesaling and retailing. Major
employers in Hamilton County include manufacturing companies such as Procter &
Gamble Co., G.E. Aircraft Engines and Cincinnati Milacron, wholesale/retail
businesses such as The Kroger Co. and government entities such as the City of
Cincinnati, the University of Cincinnati and the Cincinnati Public Schools.
Hamilton County's population, approximately 866,000, has remained relatively
unchanged since 1990. By contrast, the period from 1990 to 1995 was
characterized by 5.7% growth in the national population and 2.8% in the
population of Ohio. Hamilton County had a higher per capita income than either
Ohio or the United States during the period from 1990 to 1995. In 1995, the per
capita income level in Hamilton County was $18,004 compared to $15,708 for Ohio
and $16,405 for the nation. The median household income in Hamilton County was
$29,498 in 1995, compared to $29,276 and $28,255 in Ohio and the United States
respectively. The housing in Hamilton County is 58.3% owner-occupied, compared
to 67.5% in Ohio and 64.2% in the United States. The median housing value in
Hamilton County in 1990 was $72,246, compared to $63,457 in the State of Ohio
and $79,098 in the United States.
An economic indicator that pertains more directly to the banking and thrift
industries is the issuance of new housing permits. In 1994, 1,676 new housing
permits were issued in Hamilton County, a 12.9% decrease from 1993, compared to
increases of 5.2% and 8.8% in Ohio and the United States, respectively. Another
key economic indicator is the rate of unemployment. Unemployment has declined
16.4% in Hamilton County since 1993, from 5.5% to 4.6%, compared to declines of
7.7% in Ohio and 7.4% in the United States.
The Bank competes with commercial banks, other savings associations and
credit unions for deposits. The Bank's market penetration in Hamilton County is
0.9% of savings association deposits and 0.2% of all financial institution
deposits.
LENDING ACTIVITIES
GENERAL. The Bank's principal lending activity is the origination of
conventional real estate loans secured by one- to four-family homes located in
the Bank's primary market area. Loans secured by multifamily properties
containing five units or more and nonresidential properties are also offered by
the Bank. The Bank does not originate first mortgage loans insured by the
Federal Housing Authority or guaranteed by the Veterans Administration. In
addition to real estate lending, the Bank originates a limited number of
consumer loans, including loans secured by deposit accounts, automobile loans
and unsecured loans.
35
<PAGE>
LOAN PORTFOLIO COMPOSITION. The following table presents certain
information in respect of the composition of the Bank's loan portfolio at the
dates indicated:
<TABLE>
<CAPTION>
AT JUNE 30,
----------------------------------------------------------------------
AT MARCH 31, 1996 1995 1994 1993
---------------------- ---------------------- ---------------------- ----------------------
PERCENT PERCENT PERCENT PERCENT
OF TOTAL OF TOTAL OF TOTAL OF TOTAL
AMOUNT NET LOANS AMOUNT NET LOANS AMOUNT NET LOANS AMOUNT NET LOANS
--------- ----------- --------- ----------- --------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family............ $ 18,990 88.91% $ 18,300 89.22% $ 16,714 88.93% $ 17,305 88.52%
Nonresidential................. 1,302 6.09 1,124 5.48 882 4.69 1,030 5.27
Multifamily.................... 798 3.74 636 3.10 688 3.66 722 3.69
Commercial loans............... -- -- -- -- -- -- 2 0.01
Consumer loans:
Property improvement loans..... -- -- -- -- 14 0.07 19 0.10
Passbook loans................. 58 0.27 111 0.54 66 0.35 579 2.96
ther consumer loans............ 353 1.65 501 2.44 566 3.01 81 0.41
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Total loans...................... $ 21,501 100.66% $ 20,672 100.78% $ 18,930 100.72% $ 19,738 100.96%
--------- ----------- --------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Less:
Loans in process............... 5 0.02 15 0.07 -- -- 5 0.02
Allowance for loan losses...... 104 0.49 98 0.48 72 0.38 101 0.52
Deferred loan fees............. 33 0.15 48 0.23 58 0.31 74 0.38
Unearned discounts............. -- -- -- -- 6 0.03 8 0.04
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Net loans...................... $ 21,359 100.00% $ 20,511 100.00% $ 18,794 100.00% $ 19,550 100.00%
--------- ----------- --------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- ----------- --------- -----------
</TABLE>
LOAN MATURITY. The following table sets forth certain information as of
March 31, 1996, regarding the dollar amount of loans maturing in the Bank's
portfolio based on their contractual terms to maturity. Demand loans and other
loans having no stated schedule of repayments or no stated maturity are reported
as due in one year or less.
<TABLE>
<CAPTION>
DUE DURING THE YEAR ENDING
DUE 4-5 DUE 6-10 DUE 11-20 DUE MORE
MARCH 31, YEARS YEARS YEARS THAN 20
------------------------------- AFTER AFTER AFTER YEARS AFTER
1997 1998 1999 3/31/96 3/31/96 3/31/96 3/31/96
--------- --------- --------- --------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family........................... $ 573 $ 669 $ 713 $ 1,578 $ 4,050 $ 3,992 $ 7,411
Nonresidential................................ 65 68 67 133 345 351 273
Multifamily................................... 30 33 36 78 221 284 116
--------- --------- --------- --------- ----------- ----------- -----------
Total real estate........................... $ 668 $ 770 $ 816 $ 1,788 $ 4,616 $ 4,627 $ 7,800
Consumer loans
Passbook loans................................ 52 212 58 31 -- -- --
Other consumer................................ 17 4 -- 37 -- -- --
--------- --------- --------- --------- ----------- ----------- -----------
Total....................................... $ 737 $ 986 $ 874 $ 1,856 $ 4,616 $ 4,627 $ 7,800
--------- --------- --------- --------- ----------- ----------- -----------
--------- --------- --------- --------- ----------- ----------- -----------
<CAPTION>
TOTAL
---------
<S> <C>
Real estate loans:
One- to four-family........................... $ 18,985
Nonresidential................................ 1,302
Multifamily................................... 798
---------
Total real estate........................... $ 21,085
Consumer loans
Passbook loans................................ 353
Other consumer................................ 58
---------
Total....................................... $ 21,496
---------
---------
</TABLE>
36
<PAGE>
The next table sets forth the dollar amount of all loans due after one year
from March 31, 1996, which have predetermined interest rates and have floating
or adjustable interest rates:
<TABLE>
<CAPTION>
DUE MORE THAN ONE YEAR
AFTER MARCH 31, 1996
---------------------------
(IN THOUSANDS)
<S> <C>
Fixed rates of interest................................ $ 10,022
Adjustable rates of interest........................... 10,737
-------
$ 20,759
-------
-------
</TABLE>
LOANS SECURED BY ONE- TO FOUR-FAMILY REAL ESTATE. The principal lending
activity of the Bank is the origination of permanent conventional loans secured
by one- to four-family residences, primarily single-family residences, located
within the Bank's primary market area. Each of such loans is secured by a first
mortgage on the underlying real estate and improvements thereon, if any. At
March 31, 1996, the Bank's one- to four-family residential real estate loan
portfolio was approximately $19.0 million, or 88.9% of total loans.
OTS regulations and Ohio law limit the amount which the Bank may lend in
relationship to the appraised value of the real estate and improvements at the
time of loan origination. In accordance with such regulations and laws, the Bank
typically makes loans on owner-occupied one- to four-family residences of up to
80% of the value of the real estate and improvements (the "Loan-to-Value Ratio"
or "LTV") and also makes loans with higher LTVs. The Bank makes loans on
non-owner-occupied or investment properties with maximum LTVs of 75%. Since
1994, the Bank has required that the principal amount of any loan which exceeds
80% LTV at the time of origination be covered by private mortgage insurance at
the expense of the borrower.
Fixed-rate loans are offered by the Bank, currently for terms of up to 30
years. Adjustable-rate residential real estate loans ("ARMs") are also offered
by the Bank for terms of up to 30 years. The interest rate adjustment periods on
the ARMs are one and three years, with adjustments tied to the one-year and
three-year U.S. Treasury bill rate. In addition, the Bank offers loans on which
the interest rates remain fixed for a period of three, five, seven or ten years
and then adjust annually according to the one-year U.S. Treasury bill rate. The
new interest rate at each change date is determined by adding 2.5% to 3.0% to
the prevailing index. The maximum allowable adjustment at each adjustment date
is 2%, with a maximum adjustment of 6% over the term of the loan.
The initial rate on ARMs originated by the Bank is sometimes less than the
sum of the index at the time of origination plus the specified margin. Such
loans may be subject to greater risk of default as the interest rate adjusts to
the fully-indexed level. The Bank attempts to reduce the risks by underwriting
such loans on the basis of the payment amount the borrower will be required to
pay during the second year of the loan, assuming the maximum possible rate
increase.
Adjustable-rate loans decrease the Bank's interest rate risk but involve
other risks, primarily credit risk, because as interest rates rise the payment
by the borrower rises to the extent permitted by the terms of the loan, thereby
increasing the potential for default. At the same time, the marketability of the
underlying property may be adversely affected by higher interest rates. The Bank
believes that these risks have not had a material adverse effect on the Bank to
date.
The Bank makes a limited number of loans for the construction and
improvement of single-family houses. At March 31, 1996, the Bank's loan
portfolio included approximately $124,000 in improvement loans, .58% of total
loans, net of the total of $5,000 in undisbursed portions of such loans.
LOANS SECURED BY MULTIFAMILY REAL ESTATE. In addition to loans on one- to
four-family properties, the Bank originates loans secured by multifamily
properties containing over four units. Multifamily loans are offered with fixed
or adjustable rates for terms of up to 20 years and have a maximum LTV of 75%.
Multifamily lending is generally considered to involve a higher degree of
risk than one- to four-family residential lending because the borrower typically
depends upon income generated by the project to cover
37
<PAGE>
operating expenses and debt service. The profitability of a project can be
affected by economic conditions, government policies and other factors beyond
the control of the borrower. The Bank attempts to reduce the risk associated
with multifamily lending by evaluating the creditworthiness of the borrower and
the projected income from the project and by obtaining personal guarantees on
loans made to corporations and partnerships. The Bank requests that borrowers
submit rent rolls and financial statements annually to enable the Bank to
monitor the loan.
At March 31, 1996, loans secured by multifamily properties totaled
approximately $798,000, or 3.7% of total loans.
LOANS SECURED BY NONRESIDENTIAL REAL ESTATE. At March 31, 1996,
approximately $1.3 million, or 6.1%, of the Bank's total loans were secured by
permanent mortgages on nonresidential real estate. Such loans have both fixed
and adjustable rates, terms of up to 20 years and LTVs of up to 70%. Among the
properties securing nonresidential real estate loans are office buildings and
other non-residential properties located in the Bank's primary market area. For
the last five years, the amount of the Bank's nonresidential real estate loans
as a percent of total loans has ranged from a low of 4.7% at June 30, 1994, to a
high of 6.1% at March 31, 1996.
Although the loans secured by nonresidential real estate typically have
higher interest rates than one- to four-family residential real estate loans,
nonresidential real estate lending is generally considered to involve a higher
degree of risk than residential lending due to the relatively larger loan
amounts and the effects of general economic conditions on the successful
operation of income-producing properties. The Bank has endeavored to reduce such
risk by limiting loan amounts and evaluating the credit history and past
performance of the borrower, the location of the real estate, the financial
condition of the borrower, the quality and characteristics of the income stream
generated by the property and appraisals supporting the property's valuation and
by obtaining personal guarantees from borrowers.
COMMERCIAL LOANS. In prior years, the Bank has made commercial loans to
businesses in its primary market area. Such loans are typically secured by a
security interest in inventory, accounts receivable or other assets of the
borrower. At March 31, 1996, the Bank had no commercial loan portfolio.
CONSUMER LOANS. The Bank occasionally makes various types of consumer
loans, including loans made to depositors on the security of their deposit
accounts, automobile loans and other secured loans and unsecured personal loans.
Consumer loans are made at fixed rates of interest and for terms of up to five
years. At March 31, 1996, the Bank had approximately $411,000, or 1.9% of total
loans, invested in consumer loans.
Consumer loans, particularly consumer loans which are unsecured or are
secured by rapidly depreciating assets such as automobiles, may entail greater
risk than do residential real estate loans. Repossessed collateral for a
defaulted consumer loan may not provide an adequate source of repayment of the
outstanding loan balance. The risk of default on consumer loans increases during
periods of recession, high unemployment and other adverse economic conditions.
LOAN SOLICITATION AND PROCESSING. Loan originations are developed from a
number of sources, including continuing business with depositors and borrowers,
solicitations by the Bank's lending staff and walk-in customers.
Loan applications for permanent real estate loans are taken by a loan
originator. The Bank typically obtains a credit report, verification of
employment and other documentation concerning the creditworthiness of the
borrower. An appraisal of the fair market value of the real estate which will be
given as security for the loan is prepared by a fee appraiser approved by the
Board of Directors. Upon the completion of the appraisal and the receipt of
information on the credit history of the borrower, the application for a loan is
submitted for review in accordance with the Bank's underwriting guidelines.
Loans of amounts less than $250,000 and which meet secondary market standards
may be approved by management, while loans of amounts greater than $250,000 or
which do not meet secondary market standards must be submitted to the full Board
of Directors.
38
<PAGE>
Under the Bank's loan guidelines, if a real estate loan application is
approved, title insurance is obtained on the real estate which will secure the
mortgage loan. Borrowers are required to carry satisfactory fire and casualty
insurance and flood insurance, if applicable, and to name the Bank as an insured
mortgagee.
The procedure for approval of construction loans is the same as for
permanent real estate loans, except that an appraiser evaluates the building
plans, construction specifications and estimates of construction costs. The Bank
also evaluates the feasibility of the proposed construction project and the
experience and record of the builder.
Consumer loans are underwritten on the basis of the borrower's credit
history and an analysis of the borrower's income and expenses, ability to repay
the loan and the value of the collateral, if any.
LOAN ORIGINATIONS, PURCHASES AND SALES. The Bank has sold a limited number
of loans in the secondary market in recent years. The Bank sells loans in order
to improve its liquidity or to manage its interest rate risk. The Bank has
released the right to service virtually all of the loans it has sold.
The following table presents the Bank's loan origination, purchase and sale
activity for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loans receivable-beginning of period....................... $ 20,511 $ 18,794 $ 18,794 $ 19,550 $ 22,038
Loans originated:
One- to four-family residential.......................... 5,780 3,910 5,090 2,707 5,834
Nonresidential........................................... 268 210 370 -- 95
Multifamily residential.................................... 194 -- -- -- --
Consumer................................................. 53 49 127 201 435
Passbook................................................. 24 -- 50 54 14
--------- --------- --------- --------- ---------
Total loans originated................................. 6,319 4,169 5,637 2,962 6,378
Reductions:
Principal repayments....................................... 4,375 2,093 3,331 3,770 8,847
Loans sold................................................. 1,115 182 564 -- --
Total reductions........................................... 5,490 2,275 3,895 3,770 8,847
Other changes, net (1)..................................... 19 (18) (25) 52 (19)
Loans receivable, end of period............................ $ 21,359 $ 20,670 $ 20,511 $ 18,794 $ 19,550
</TABLE>
- ------------------------
(1) Other items consist of loans in process, deferred loan fees and allowances
for loan losses
LOANS TO ONE BORROWER LIMITS. OTS regulations generally limit the aggregate
amount that a savings association may lend to any one borrower to an amount
equal to 15% of the association's unimpaired capital and unimpaired surplus
(collectively, "Unimpaired Capital"). A savings association may loan to one
borrower and certain related persons or entities an additional amount not to
exceed 10% of the association's Unimpaired Capital if the additional amount is
fully secured by certain forms of "readily marketable collateral." Real estate
is not considered "readily marketable collateral." In addition, the regulations
require that loans to certain related or affiliated borrowers be aggregated for
purposes of such limits. The level of unimpaired capital and surplus
notwithstanding, a savings association may lend up to $500,000 to any one
borrower or group of related borrowers. See "REGULATION - Office of Thrift
Supervision -- Lending Limit."
Based on such limits, the Bank was able to lend $500,000 to one borrower at
March 31, 1996. The largest amount the Bank had outstanding to one borrower and
related persons or entities at March 31, 1996, was
39
<PAGE>
approximately $456,000, consisting of two loans, the largest of which was
$306,075. Each of such loans is secured by commercial real estate located in the
Bank's primary market area and is performing in accordance with its terms.
LOAN ORIGINATION AND OTHER FEES. The Bank realizes loan origination fee and
other fee income from its lending activities and also realizes income from late
payment charges, application fees and fees for other miscellaneous services.
Loan origination fees and other fees are a volatile source of income,
varying with the volume of lending, loan repayments and general economic
conditions. All nonrefundable loan origination fees and certain direct loan
origination costs are deferred and recognized in accordance with SFAS No. 91 as
an adjustment to yield over the life of the related loan.
DELINQUENT LOANS, NONPERFORMING ASSETS AND CLASSIFIED ASSETS. The Bank
attempts to maintain a high level of asset quality through sound underwriting
policies and aggressive collection efforts.
Borrowers who become one to 30 days delinquent are not considered seriously
delinquent unless delinquency at such level continues for several months, in
which case a borrower is treated as chronically delinquent. Chronically
delinquent borrowers are referred to debt counseling, are advised to consider
selling the subject property and, if such efforts are unsuccessful, foreclosure
proceedings are initiated. In the absence of chronic delinquency, borrowers who
are one to 30 days delinquent receive delinquency notices at the end of the
month. Borrowers who are 30 to 59 days delinquent for two consecutive months or
who are 60 to 89 days delinquent receive telephone calls or personalized
letters. Borrowers who become more than 90 days delinquent receive default
notices and, absent corrective action, foreclosure proceedings are instituted.
The following table reflects the amount of loans in a delinquent status as
of the dates indicated:
<TABLE>
<CAPTION>
AT JUNE 30,
-------------------------------------------------------
AT MARCH 31, 1996 1995 1994
------------------------------------------ ---------------------------------------- -------------
PERCENT PERCENT
OF TOTAL OF TOTAL
NUMBER AMOUNT LOANS NUMBER AMOUNT LOANS NUMBER
--------------- ----------- ------------ ------------- ----------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Loans delinquent for:
30 - 59 days............. 4 $ 129 .60% 9 $ 468 2.26% 8
60 - 89 days............. 1 2 .01 3 48 .23 4
90 days and over......... 2 111 .52 4 194 .95 1
- -- --
----- --- ----- ---
Total delinquent
loans................. 7 $ 242 1.13% 16 $ 710 3.44% 13
- -- --
----- --- ----- ---
<CAPTION>
1993
----------------------------------------
PERCENT PERCENT
OF TOTAL OF TOTAL
AMOUNT LOANS NUMBER AMOUNT LOANS
----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Loans delinquent for:
30 - 59 days............. $ 469 2.48% 4 $ 123 .62%
60 - 89 days............. 115 .61% 5 157 .80
90 days and over......... 93 .49 5 333 1.70
--
----- --- ----- ---
Total delinquent
loans................. $ 677 3.58% 14 $ 613 3.12%
--
----- --- ----- ---
</TABLE>
Nonperforming assets include nonaccruing loans, accruing loans which are
delinquent 90 days or more, real estate acquired by foreclosure or by
deed-in-lieu thereof, in-substance foreclosures and repossessed assets. The Bank
ceases to accrue interest on real estate loans if the collateral value is not
adequate, in the opinion of management, to cover the outstanding principal and
interest.
40
<PAGE>
The following table sets forth information with respect to the accrual and
nonaccrual status of the Bank's loans and other nonperforming assets at the
dates indicated:
<TABLE>
<CAPTION>
AT MARCH 31, AT JUNE 30,
------------------------ -------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Accruing loans delinquent 90+ days................... $ 111 $ 70 $ 194 $ -- $ --
Loans accounted for on a nonaccrual basis:
Real estate
One- to four-family.............................. -- -- -- 93 333
Multifamily...................................... -- -- -- -- --
Nonresidential................................... -- -- -- -- --
Consumer........................................... -- -- -- -- --
----- ----------- ----------- ----------- -----------
Total nonaccrual loans........................... -- -- -- -- --
----- ----------- ----------- ----------- -----------
Total nonperforming loans........................ $ 111 $ 70 $ 194 $ 93 $ 333
----- ----------- ----------- ----------- -----------
----- ----------- ----------- ----------- -----------
Real estate owned.................................. -- -- -- -- --
----- ----------- ----------- ----------- -----------
Total nonperforming assets....................... $ 111 $ 70 $ 194 $ 93 $ 333
----- ----------- ----------- ----------- -----------
----- ----------- ----------- ----------- -----------
Allowance for loan losses........................ $ 104 $ 98 $ 98 $ 72 $ 101
----- ----------- ----------- ----------- -----------
----- ----------- ----------- ----------- -----------
Nonperforming assets as a percent of total
assets.......................................... .35% .23 % .61 % 0.30 % 1.05 %
Nonperforming loans as a percent of total
loans........................................... .52 % .34 % .95 % 0.49 % 1.70 %
Allowance for loan losses as a percent of
nonperforming loans............................. 93.69 % 140.00 % 50.52 % 77.42 % 30.33 %
</TABLE>
For the quarter ended March 31, 1996, the Bank had no gross interest income
which would have been recorded had nonaccruing loans been current in accordance
with their original terms.
Real estate acquired by the Bank as a result of foreclosure proceedings is
classified as real estate owned ("REO") until it is sold. When property is so
acquired it is recorded by the Bank at the estimated fair value of the real
estate, less estimated selling expenses, at the date of acquisition, and any
write-down resulting therefrom is charged to the allowance for loan losses.
Interest accrual, if any, ceases no later than the date of acquisition of the
real estate, and all costs incurred from such date in maintaining the property
are expensed. Costs relating to the development and improvement of the property
are capitalized to the extent of fair value.
The Bank classifies its own assets on a quarterly basis in accordance with
federal regulations. Problem assets are classified as "substandard," "doubtful"
or "loss." "Substandard" assets have one or more defined weaknesses and are
characterized by the distinct possibility that the Bank will sustain some loss
if the deficiencies are not corrected. "Doubtful" assets have the same
weaknesses as "substandard" assets, with the additional characteristics that (i)
the weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable and (ii) there is a high
possibility of loss. An asset classified "loss" is considered uncollectible and
of such little value that its continuance as an asset of the Bank is not
warranted.
41
<PAGE>
The aggregate amounts of the Bank's classified assets at the dates indicated
were as follows:
<TABLE>
<CAPTION>
AT MARCH 31, AT JUNE 30,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Classified assets:
Substandard............................................................. $ 431 $ 474 $ 441 $ 367 $ 516
Doubtful................................................................ -- -- -- -- --
Loss.................................................................... 6 4 28 -- 50
--------- --------- --------- --------- ---------
Total classified assets............................................... $ 437 $ 478 $ 469 $ 367 $ 566
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The Bank establishes general allowances for loan losses for any loan
classified as substandard or doubtful. If an asset, or portion thereof, is
classified as loss, the Bank must either establish a specific allowance for loss
in the amount of 100% of the portion of the asset classified loss or charge off
the amount of the loss classification. See "Allowance for Loan Losses."
Generally, the Bank has elected to charge off the portion of any real estate
loan deemed to be uncollectible.
The Bank analyzes each classified asset on a quarterly basis to determine
whether changes in the classifications are appropriate under the circumstances.
Such analysis focuses on a variety of factors, including the amount of any
delinquency and the reasons for the delinquency, if any, the use of the real
estate securing the loan, the status of the borrower and the appraised value of
the real estate. As such factors change, the classification of the asset will
change accordingly.
ALLOWANCE FOR LOAN LOSSES. Management, with oversight by the Board, reviews
on a quarterly basis the allowance for loan losses as it relates to a number of
relevant factors, including but not limited to, trends in the level of
delinquent and nonperforming assets and classified loans, current and
anticipated economic conditions in the primary lending area, past loss
experience and possible losses arising from specific problem assets. To a lesser
extent, management also considers loan concentrations to single borrowers and
changes in the composition of the loan portfolio. While management believes that
it uses the best information available to determine the allowance for loan
losses, unforeseen market conditions could result in adjustments, and net income
could be significantly affected if circumstances differ substantially from the
assumptions used in making the final determination.
The following table sets forth an analysis of the Bank's allowance for loan
losses for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
---------------------- ----------------------
1996 1995 1995 1994
--------- ----- ----- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at beginning of period.............................................. $ 98 $ 72 $ 72 $ 101
Charge-offs(1).............................................................. (28) (1) (4) (96)
Recoveries(1)............................................................... -- 18 18 34
--------- --- --- ---------
Net (charge-offs) recoveries(1)............................................. (28) 17 14 (62)
Provision for loan losses................................................... 34 9 12 33
--------- --- --- ---------
Balance at end of period.................................................... $ 104 $ 98 $ 98 $ 72
--------- --- --- ---------
--------- --- --- ---------
Ratio of net (charge-offs) recoveries to average loans outstanding during
the period................................................................. .13 .08 .07 .32
Ratio of allowance for loan losses to total loans........................... .48 .47 .47 .38
<CAPTION>
1993
---------
<S> <C>
Balance at beginning of period.............................................. $ 15
Charge-offs(1).............................................................. --
Recoveries(1)............................................................... 3
---------
Net (charge-offs) recoveries(1)............................................. 3
Provision for loan losses................................................... 83
---------
Balance at end of period.................................................... $ 101
---------
---------
Ratio of net (charge-offs) recoveries to average loans outstanding during
the period................................................................. --
Ratio of allowance for loan losses to total loans........................... .51
</TABLE>
- ------------------------
(1) All charge-offs and recoveries relate to loans secured by one- four-family
real estate, except $70,000 of charge-offs and $21,000 of recoveries during
the year ended June 30, 1994, and the recoveries during the year ended June
30, 1995, totalling $18,000, which relate to loans secured by
non-residential real estate.
42
<PAGE>
Management does not allocate portions of the allowance to particular types
of loans.
INVESTMENT ACTIVITIES
Federal regulation and Ohio law permit the Bank to invest in various types
of investments, including interest-bearing deposits in other financial
institutions, U.S. Treasury and agency obligations, mortgage-backed securities
and certain other specified investments. The Board of Directors of the Bank has
adopted an investment policy which authorizes management, under the supervision
of the Investment Committee of the Board, to make investments in U.S. Government
and agency securities, deposits in the FHLB, certificates of deposit in
federally-insured financial institutions, banker's acceptances issued by major
U.S. banks, corporate debt securities rated by a major statistical rating firm
as at least "AA," or equivalent, and municipal or other tax free obligations.
Laird L. Lazelle, the Bank's President, Michael S. Schwartz, the Chairman of the
Board and Dianne K. Rabe, its Vice President, have primary responsibility for
implementation of the investment policy. The Bank's investment policy is
designed primarily to provide and maintain liquidity within regulatory
guidelines, to maintain a balance of high quality investments to minimize risk
and to maximize return without sacrificing liquidity and safety. See
"REGULATION" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Analysis of Financial Condition, and -- Liquidity
and Capital Resources."
The following table sets forth the composition of the Bank's
interest-bearing deposits and investment securities at the dates indicated:
<TABLE>
<CAPTION>
AT MARCH 31, AT JUNE 30,
---------------------- ----------------------------------------------------------------------
1996 1995 1994 1993
---------------------- ---------------------- ---------------------- ----------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE
----------- --------- ----------- --------- ----------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits.......... $ 85 $ 85 $ 786 $ 786 $ 1,827 $ 1,827 $ 3,477 $ 3,477
Certificates of deposit............ -- -- -- -- 1,400 1,400 1,400 1,400
Investment securities:
Federal funds.................... 4,136 4,136 3,100 3,100 575 575 500 500
U.S. Government obligations...... 400 393 1,050 1,035 1,050 1,004 233 233
FHLB stock....................... 274 274 260 260 241 241 11 155
Mortgage-backed securities....... 4,957 4,831 5,532 5,409 6,593 6,444 5,303 5,345
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Total investments.............. $ 9,852 $ 9,719 $ 10,728 $ 10,590 $ 11,686 $ 11,491 $ 10,924 $ 11,110
----------- --------- ----------- --------- ----------- --------- ----------- ---------
----------- --------- ----------- --------- ----------- --------- ----------- ---------
</TABLE>
The maturities of the Bank's interest-bearing deposits and investment
securities at June 30, 1995, are indicated in the following table:
<TABLE>
<CAPTION>
AT JUNE 30, 1995
------------------------------------------------------------------------------------------------------
AFTER ONE THROUGH FIVE AFTER FIVE THROUGH TEN
ONE YEAR OR LESS YEARS YEARS AFTER TEN YEARS
------------------------ ------------------------ ------------------------ ------------------------
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>
Interest-bearing deposits... $ 786 5.95% $ -- -- % $ -- -- % $ -- -- %
Investment securities:
Federal funds............. 3,100 6.00 -- -- -- -- -- --
U.S. Government
obligations.............. 650 4.98 400 4.81 -- -- -- --
FHLB stock................ -- -- -- -- -- -- 260 6.50
Mortgage-backed
securities............... 131 3.28 91 7.25 146 6.92 5,164 5.83
----------- ----- ----- -----------
Total................... $ 4,667 5.77% $ 491 5.26% $ 146 6.92% $ 5,424 5.86%
----------- ----- ----- -----------
----------- ----- ----- -----------
<CAPTION>
TOTAL
--------------------------
CARRYING WEIGHTED
VALUE AVERAGE YIELD
----------- -------------
<S> <C> <C>
Interest-bearing deposits... $ 786 5.95%
Investment securities:
Federal funds............. 3,100 6.00%
U.S. Government
obligations.............. 1,050 4.92%
FHLB stock................ 260 6.50%
Mortgage-backed
securities............... 5,532 5.82%
-----------
Total................... $ 10,728 5.81%
-----------
-----------
</TABLE>
43
<PAGE>
The maturities of the Bank's interest-bearing deposits and investment
securities at March 31, 1996, are indicated in the following table:
<TABLE>
<CAPTION>
AT MARCH 31, 1996
------------------------------------------------------------------------------------------------------
AFTER ONE THROUGH FIVE AFTER FIVE THROUGH TEN
ONE YEAR OR LESS YEARS YEARS AFTER TEN YEARS
------------------------ ------------------------ ------------------------ ------------------------
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>
Interest-bearing deposits... $ 85 4.95% $ -- -- % $ -- -- % $ -- -- %
Investment securities:
Federal funds............. 4,136 5.25 -- -- -- -- -- --
U.S. Government
obligations.............. 250 5.75 150 6.06 -- -- -- --
FHLB stock................ -- -- -- -- -- -- 274 7.00
Mortgage-backed
securities............... 105 6.56 116 7.27 122 7.30 4,614 5.28
----------- ----- ----- -----------
Total................... $ 4,576 5.30% $ 266 6.59% $ 122 7.30% $ 4,888 5.38%
----------- ----- ----- -----------
----------- ----- ----- -----------
<CAPTION>
TOTAL
--------------------------
CARRYING WEIGHTED
VALUE AVERAGE YIELD
----------- -------------
<S> <C> <C>
Interest-bearing deposits... $ 85 4.95%
Investment securities:
Federal funds............. 4,136 5.25
U.S. Government
obligations.............. 400 5.87
FHLB stock................ 274 7.00
Mortgage-backed
securities............... 4,957 5.41
-----------
Total................... $ 9,852 5.40%
-----------
-----------
</TABLE>
DEPOSITS AND BORROWINGS
GENERAL. Deposits have traditionally been the primary source of the Bank's
funds for use in lending and other investment activities. In addition to
deposits, the Bank derives funds from interest payments and principal repayments
on loans and income on earning assets. Loan payments are a relatively stable
source of funds, while deposit inflows and outflows fluctuate more in response
to general interest rates and money market conditions. The Bank also utilizes
FHLB advances as an alternative source of funds. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
DEPOSITS. Deposits are attracted principally from within the Bank's primary
market area through the offering of a broad selection of deposit instruments,
including NOW accounts, demand deposit accounts, money market accounts, regular
passbook savings accounts, term certificate accounts, IRAs and Keogh accounts.
Interest rates paid, maturity terms, service fees and withdrawal penalties for
the various types of accounts are established periodically by management of the
Bank based on the Bank's liquidity requirements, growth goals and interest rates
paid by competitors. The Bank does not use brokers to attract deposits. The
amount of deposits from outside the Bank's primary market area is not
significant.
At March 31, 1996, the Bank's certificates of deposit totaled $24.7, or
89.0% of total deposits. Of such amount, approximately $18.8 million in
certificates of deposit mature within one year. Based on past experience and the
Bank's prevailing pricing strategies, management believes that a substantial
percentage of such certificates will be renewed with the Bank at maturity. If
there is a significant deviation from historical experience, the Bank can
utilize borrowings from the FHLB of Cincinnati as an alternative source of
funds.
44
<PAGE>
The following table sets forth the dollar amount of deposits in the various
types of accounts offered by the Bank at the dates indicated:
<TABLE>
<CAPTION>
AT JUNE 30,
----------------------------------------------------------------------
AT MARCH 31,
1996 1995 1994 1993
---------------------- ---------------------- ---------------------- ----------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
TOTAL TOTAL TOTAL TOTAL
AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS
--------- ----------- --------- ----------- --------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Transaction accounts:
Passbook savings accounts
(1)..................... $ 1,085 3.91% $ 1,288 4.64% $ 1,835 6.71% 2,880 9.91%
NOW and money market
accounts (2)............ 1,962 7.06 2,507 9.04 3,306 12.09 3,313 11.40
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Total transaction
accounts................ 3,047 10.97 3,795 13.68 5,141 18.80 6,193 21.31
Certificates of deposit
3.00% or less.......... 105 .38 425 1.53 250 .91 -- --
3.01 - 5.00%........... 1,593 5.73 4,157 14.99 18,975 69.38 6,550 22.54
5.01 - 7.00%........... 22,892 82.40 18,892 68.11 2,236 8.18 14,155 48.71
7.01 - 9.00%........... 143 .52 468 1.69 746 2.73 2,164 7.44
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Total certificates of
deposit (3)............. 24,733 89.03 23,942 86.32 22,207 81.20 22,869 78.69
--------- ----------- --------- ----------- --------- ----------- --------- -----------
Total deposits........... $ 27,780 100.00% $ 27,737 100.00% $ 27,348 100.00% $ 29,062 100.00%
--------- ----------- --------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- ----------- --------- -----------
</TABLE>
- ------------------------
(1) The weighted average rate on passbook savings accounts was 2.52%, 2.87% and
2.84% at March 31, 1996 and at June 30, 1995 and 1994, respectively.
(2) The weighted average rate on NOW and money market accounts was 2.56%, 2.77%
and 2.81% at March 31, 1996 and at June 30, 1995 and 1994, respectively.
(3) The weighted average rate on all certificates of deposit was 5.96%, 6.01%
and 4.91% at March 31, 1996, and at June 30, 1995 and 1994, respectively.
The following table shows rate and maturity information for the Bank's
certificates of deposit at March 31, 1996:
<TABLE>
<CAPTION>
AMOUNT DUE
-----------------------------------------------------------
OVER 2
UP TO ONE OVER 1 YEAR YEARS TO 3 OVER 3
RATE YEAR TO 2 YEARS YEARS YEARS TOTAL
- ------------------------------------------------------------- --------- ----------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
3.00% or less................................................ $ 105 $ -- $ -- $ -- $ 105
3.01% to 5.00%............................................... 1,280 78 161 74 $ 1,593
5.01% to 7.00%............................................... 17,226 4,514 646 506 $ 22,892
7.01% to 9.00%............................................... 143 -- -- -- $ 143
--------- ----------- ----- ----- ---------
Total certificates of deposit.............................. $ 18,754 $ 4,592 $ 807 $ 580 $ 24,733
--------- ----------- ----- ----- ---------
--------- ----------- ----- ----- ---------
</TABLE>
45
<PAGE>
The following table presents the amount of the Bank's certificates of
deposit of $100,000 or more by the time remaining until maturity at March 31,
1996:
<TABLE>
<CAPTION>
MATURITY
- -------------------------------------------------------------------------- AMOUNT
---------------
(IN THOUSANDS)
<S> <C>
Three months or less...................................................... $ 847
Over 3 months to 6 months................................................. 781
Over 6 months to 12 months................................................ 611
Over 12 months............................................................ 442
------
Total................................................................... $ 2,681
------
------
</TABLE>
The following table sets forth the Bank's deposit account balance activity
for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Beginning balance.......................................... $ 27,737 $ 27,348 $ 27,348 $ 29,062 $ 27,617
Net increase(decrease) before interest credited............ (1,124) (2,517) (920) (3,011) (54)
Interest credited.......................................... 1,167 946 1,309 1,297 1,499
Ending balance............................................. 27,780 25,777 27,737 27,348 29,062
--------- --------- --------- --------- ---------
Net increase (decrease)................................ $ 43 $ (1,571) $ 389 $ (1,714) $ 1,445
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
BORROWINGS. The FHLB System functions as a central reserve bank providing
credit for its member institutions and certain other financial institutions. See
"REGULATION -- Federal Home Loan Banks." As a member in good standing of the
FHLB of Cincinnati, the Bank is authorized to apply for advances from the FHLB
of Cincinnati, provided certain standards of creditworthiness have been met.
Under current regulations, an association must meet certain qualifications to be
eligible for FHLB advances. The extent to which an association is eligible for
such advances will depend upon whether it meets the Qualified Thrift Lender Test
(the "QTL Test"). See "REGULATION -- Office of Thrift Supervision -- Qualified
Thrift Lender Test." If an association meets the QTL Test, it will be eligible
for 100% of the advances it would otherwise be eligible to receive. If an
association does not meet the QTL Test, it will be eligible for such advances
only to the extent it holds specified QTL Test assets. At March 31, 1996, the
Bank was in compliance with the QTL Test.
During fiscal 1995 the Bank obtained advances from the FHLB of Cincinnati as
indicated in the following table:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
-------------------- ---------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average balance outstanding.............................................. 931 995 1,046 815 --
Maximum amount outstanding at any month end during the period............ 1,186 1,213 1,213 1,000 --
Balance outstanding at end of period..................................... 842 1,208 1,192 955 --
Weighted average interest rate during the period......................... 6.02% 5.36% 5.64% 5.16% --
Weighted average interest rate at end of period.......................... 5.51% 5.84% 5.85% 5.50% --
</TABLE>
COMPETITION
The Bank competes for deposits with other savings associations, savings
banks, commercial banks and credit unions and with the issuers of commercial
paper and other securities, such as shares in money market mutual funds. The
primary factors in competing for deposits are interest rates and convenience of
office location. In making loans, the Bank competes with other savings banks,
savings associations, commercial
46
<PAGE>
banks, mortgage brokers, consumer finance companies, credit unions, leasing
companies and other lenders. The Bank competes for loan originations primarily
through the interest rates and loan fees it charges and through the efficiency
and quality of services it provides to borrowers.
Competition in Hamilton County is intense due to the number of financial
institutions serving the area. Competition is affected by, among other things,
the general availability of lendable funds, general and local economic
conditions, current interest rate levels and other factors which are not readily
predictable. The Bank does not offer all of the products and services offered by
some of its competitors, particularly commercial banks. The Bank monitors the
product offerings of its competitors and adds new products when it can do so
competitively and cost effectively. The Bank's deposit market share in Hamilton
County is negligible.
The size of financial institutions competing with the Bank is likely to
increase as a result of changes in statutes and regulations eliminating various
restrictions on interstate and inter-industry branching and acquisitions. Such
increased competition may have an adverse effect upon the Bank.
PROPERTIES
The Bank leases the property at 25 Garfield Place where its office is
located.
EMPLOYEES
As of March 31, 1996, the Bank had eight full-time employees and no
part-time employees. The Bank provides health and long-term disability benefits,
life insurance, a 401(k) plan and a profit sharing plan for its employees. The
Bank believes that relations with its employees are excellent. None of the
employees of the Bank is represented by a collective bargaining unit.
LEGAL PROCEEDINGS
The Bank is not presently involved in any material legal proceedings. From
time to time, the Bank is a party to legal proceedings incidental to its
business to enforce its security interest in collateral pledged to secure loans
made by the Bank.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
THE HOLDING COMPANY. The Board of Directors of the Holding Company consists
of seven members divided into two classes. Each of the directors of the Bank is
also a director of the Holding Company. The terms of Ms. Emden, Mr. Silverglade
and Mr. Silverman will expire in 1996 and the terms of Ms. Dickhaut, Mr.
Lazelle, Mr. Levitch and Mr. Schwartz will expire in 1997.
The executive officers of the Holding Company are Laird L. Lazelle,
President and Dianne K. Rabe, Secretary and Treasurer.
THE BANK. The Constitution of the Bank provides for a Board of Directors
consisting of not less than five nor more than seven directors, with the number
to be fixed or changed by the members by resolution at the annual meeting. The
Board of Directors currently consists of seven directors divided into three
classes. One class of directors is elected each year. Each director serves for a
three-year term. The Board of Directors met 27 times during fiscal 1995 for
regular and special meetings. No director attended fewer than 75% of the
aggregate of such meetings and all meetings of the committees of which such
director was a member.
47
<PAGE>
The following table presents certain information with respect to the present
directors of the Bank, each of whom is also a director of the Holding Company,
and the executive officers of the Bank:
<TABLE>
<CAPTION>
YEAR OF
COMMENCEMENT
POSITION(S) WITH THE OF TERM
NAME AGE(1) BANK DIRECTORSHIP EXPIRES
- ------------------------------ --------- ------------------------------ -------------- ---------
<S> <C> <C> <C> <C>
Mardelle Dickhaut 63 Director and Secretary 1989 1996
Ruth C. Emden 69 Director 1994 1997
Laird L. Lazelle 57 Director and President 1994 1997
Robert E. Levitch 62 Director 1964 1998
Margo A. Liebert 52 Treasurer -- --
Dianne K. Rabe 44 Vice President -- --
Michael S. Schwartz 51 Chairman of the Board 1967 1998
Paul L. Silverglade 70 Director 1988 1996
Ivan J. Silverman 55 Director 1992 1997
</TABLE>
- ------------------------
(1) As of March 31, 1996.
MARDELLE DICKHAUT has served as Secretary of the Bank since 1979 and as a
director since 1989. Mrs. Dickhaut was employed at the Bank for 23 years prior
to her retirement in 1995.
RUTH C. EMDEN has served as a director of the Bank since 1994. Mrs. Emden is
the retired widow of Narvin I. Emden who served the Bank as President, Managing
Officer and Director for over 46 years. Mrs. Emden is active in community
service.
LAIRD L. LAZELLE is President and Chief Executive Officer of both the
Holding Company and the Bank and is the designated Managing Officer of the Bank.
Mr. Lazelle joined the Bank in January 1994. Mr. Lazelle has over 36 years of
financial institution experience, most recently as President and Chief Executive
Officer of The TriState Bancorp.
ROBERT E. LEVITCH has served as a director of the Bank since 1964. Mr.
Levitch has been a corrections officer with the Hamilton County Sheriff's
Department since 1980.
MARGO A. LIEBERT has served as Treasurer of the Bank since 1979 and is the
chief accounting officer for the Bank. Mrs. Liebert has been employed by the
Bank for 29 years.
DIANNE K. RABE is Vice President and is the chief operating officer of the
Bank and will also serve as Secretary/Treasurer of the Holding Company. Mrs.
Rabe is a Certified Public Accountant. Mrs. Rabe came to the Bank from another
Cincinnati thrift institution in 1992.
MICHAEL S. SCHWARTZ is an attorney at law practicing in Cincinnati, Ohio and
operates a title insurance agency. Mr. Schwartz is legal counsel to the Bank and
also provides title services for loans granted by the Bank. Mr. Schwartz has
served as a director of the Bank since 1967 and succeeded his father as Chairman
of the Board in 1993.
PAUL L. SILVERGLADE retired as the Corporate Office Personnel Director for
Federated Department Stores in 1981, after serving for 33 years. Mr. Silverglade
has been a director of the Bank since 1988 and serves as Chairman of the
Compensation Committee.
IVAN J. SILVERMAN is an investment consultant and Associate Vice President
with Gradison Division of McDonald & Company Securities, Inc. Mr. Silverman is
also the Mayor of the City of Montgomery, Ohio. Mr. Silverman has served as a
director of the Bank since 1992 and serves as Chairman of the Audit Committee.
COMMITTEES OF DIRECTORS
The Board of Directors of the Bank has an Audit Committee and a Compensation
Committee. The full Board of Directors serves as a nominating committee.
48
<PAGE>
The members of the Audit Committee are Mr. Silverman, Ms. Emden, Mr. Levitch
and Mr. Silverglade. The Audit Committee is responsible for selecting and
recommending to the Board of Directors a firm to serve as auditors for the Bank.
The Audit Committee met one time during fiscal 1995.
The Compensation Committee is comprised of Mr. Silverglade, Mr. Silverman
and Mr. Schwartz. The function of the Compensation Committee is to determine
compensation for the Bank's employees and to make recommendations to the Board
of Directors regarding employee benefits and related matters. The Compensation
Committee met once during fiscal 1995.
COMPENSATION
Each director of the Bank currently receives a fee of $7,500 per year.
The following table presents certain information regarding the cash
compensation received by Laird L. Lazelle, President of the Bank. No other
executive officer of the Bank received compensation exceeding $100,000 during
fiscal 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1)
- --------------------------------------------------------- --------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Laird L. Lazelle 1995 $ 69,488 $ 5,200 $ 6,000
President and Chief Executive Officer
</TABLE>
- ------------------------
(1) Consists of directors fees. Does not include amounts attributable to
miscellaneous benefits received by the named executive officer, the cost of
which was less than 10% of his annual salary and bonus.
DEFINED CONTRIBUTION PLAN
The Bank maintains a tax-qualified defined benefit plan (the "Pension Plan")
covering employees age 21 or older who have completed at least one year of
service to the Bank. Pursuant to the Pension Plan, a participant may elect to
allocate up to the lesser of 9% of his salary or $7,000 (multiplied by an
adjustment factor) to his account annually. The Bank makes a 50% matching
contribution and may also make additional discretionary contributions pursuant
to the Pension Plan. The Bank's contributions become vested at the rate of
one-fifth each year after two years of employment. The Bank's expense for
contributions to the Pension Plan for the nine months ended March 31, 1996, and
for the years ended June 30, 1995 and 1994, was $5,053, $10,585 and $10,167,
respectively.
STOCK BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN. The Holding Company intends to establish the
ESOP for the benefit of employees of the Holding Company and its subsidiaries,
including the Bank, who are age 21 or older and who have completed at least one
year of service with the Holding Company and its subsidiaries. The ESOP will
provide an ownership interest in the Holding Company to all full-time employees
of the Holding Company. The Board of Directors of the Holding Company believes
that the ESOP will be in the best interests of the Holding Company and its
shareholders.
The ESOP trust intends to borrow funds from the Holding Company with which
to acquire up to 8.0% of the Common Shares sold in the Conversion. Such loan
will be secured by the Common Shares purchased with the proceeds, and will be
repaid by the ESOP over a period of approximately seven years with discretionary
contributions to the ESOP and earnings on ESOP assets. Common Shares purchased
with such loan proceeds will be held in a suspense account for allocation among
participants as the loan is repaid.
The amount of cash or other assets that can be contributed to the ESOP each
year is limited by certain IRS regulations. The Bank intends to make the maximum
contribution to the ESOP permitted by such regulations, which could result in
repayment of the ESOP loan in fewer than seven years. A shorter repayment period
could result in increased compensation expense during the years in which
payments are made on the ESOP loan. See "PRO FORMA DATA."
49
<PAGE>
Contributions to the ESOP and shares released from the suspense account will
be allocated among participants on the basis of compensation. Except for
participants who retire, become disabled or die during the plan year, all other
participants must have completed at least 1,000 hours of service in order to
receive an allocation. Benefits become fully vested after five years of service.
Existing employees of the Holding Company and the Bank will be given credit for
years of service to the Bank prior to the effective date of the ESOP for vesting
purposes. Vesting will be accelerated upon retirement at or after age 65, death,
disability, termination of the ESOP or a change in control of the Bank. Shares
allocated to the account of a participant whose employment by the Bank
terminates prior to having satisfied the vesting requirement will be forfeited.
Forfeitures will be reallocated among remaining participating employees.
Benefits may be paid either in the Holding Company's common shares or in cash.
Benefits may be payable upon retirement, death, disability or separation from
service. Benefits payable under the ESOP cannot be estimated.
A Committee appointed by the Board of Directors of the Holding Company will
administer the ESOP. The Common Shares and other ESOP funds will be held and
invested by a trustee (the "ESOP Trustee"). The ESOP Committee may instruct the
ESOP Trustee regarding investments of funds contributed to the ESOP. The ESOP
Trustee must vote all allocated shares held in the ESOP in accordance with the
instructions of the participating employees. Shares for which employees do not
give instructions and unallocated shares will be voted by the ESOP Trustee.
The tax-qualified status of the ESOP and its purchase of the Common Shares
of the Holding Company are subject to the subsequent approval of the
Commissioner of the IRS (the "Commissioner"). The Holding Company will submit to
the Commissioner an application for approval of the ESOP. Although no assurances
can be given, the Holding Company expects that the ESOP will be approved by the
Commissioner.
STOCK OPTION PLAN. After the completion of the Conversion, the Board of
Directors of the Holding Company intends to adopt the Stock Option Plan, subject
to approval by the shareholders of the Holding Company. The purposes of the
Stock Option Plan include retaining and providing incentives to the directors,
officers and employees of the Holding Company and its subsidiaries by
facilitating their purchase of a stock interest in the Holding Company.
Options granted to the officers and key employees under the Stock Option
Plan may be "incentive stock options" within the meaning of Section 422 of the
Code (an "ISO"). Options granted under the Stock Option Plan to directors who
are not full-time employees of the Holding Company will not qualify under the
Code and thus will not be incentive stock options ("Non-qualified Options").
Although any eligible director, officer or employee of the Holding Company may
receive Non-qualified Options, it is anticipated that the non-employee directors
of the Holding Company will receive Non-qualified Options and other eligible
participants will receive ISOs.
The option exercise price shall be determined by the Committee at the time
of grant; provided, however, that the exercise price for an ISO or for any
option if the Stock Option Plan is implemented by the Holding Company during the
first year following the completion of the Conversion must not be less than 100%
of the fair market value of the shares on the date of the grant. No stock option
will be exercisable after the expiration of ten years from the date that it is
granted; provided, however, that in the case of an ISO granted to an employee
who owns more than 10% of the Bank's outstanding common shares at the time an
ISO is granted under the Stock Option Plan, the exercise price of the ISO may
not be less than 110% of the fair market value of the shares on the date of the
grant, and the ISO shall not be exercisable after the expiration of five years
from the date it is granted.
An option recipient cannot transfer or assign an option other than by will
or in accordance with the laws of descent and distribution. "Termination for
cause," as defined in the Stock Option Plan, will result in the annulment of any
outstanding options.
The Holding Company will receive no monetary consideration for the granting
of options under the Stock Option Plan. Upon the exercise of options, the
Holding Company will receive payment of cash, Holding Company common shares or a
combination of cash and common shares from option recipients in exchange for
shares issued.
50
<PAGE>
The Committee may grant options under the Stock Option Plan at such times as
they deem most beneficial to the Holding Company on the basis of the individual
participant's responsibility, tenure and future potential to the Holding
Company.
A number of shares equal to 10% of the Common Shares to be issued in
connection with the Conversion is expected to be reserved for issuance by the
Holding Company upon the exercise of options to be granted to certain directors,
officers and employees of the Holding Company and its subsidiaries from time to
time under the Stock Option Plan. Assuming the issuance of 462,875 Common Shares
in the Conversion, 46,288 Common Shares will be reserved for issuance under the
Stock Option Plan. No determination has been made regarding the recipients of
awards under the Stock Option Plan or the number of shares to be awarded to
individual recipients.
In accordance with OTS regulations, if the Stock Option Plan is implemented
by the Holding Company during the first year following the completion of the
Conversion, the following restrictions will apply: (i) the Stock Option Plan
must be approved by the shareholders of the Holding Company at an annual or
special meeting of shareholders, in either case to be held no earlier than six
months after the completion of the Conversion; (ii) awards to directors who are
not full-time employees of the Holding Company or the Bank may not exceed 5% of
the plan shares per person and 30% of the plan shares in the aggregate of the
total number of shares reserved for issuance under the plan, (iii) awards to
directors or other persons who are full-time employees of the Holding Company or
the Bank may not exceed 25% of the plan shares per person, and (iv) options will
become exercisable at the rate of one-fifth per year commencing no earlier than
one year from the date the Stock Option Plan is approved by the shareholders,
subject to acceleration of vesting only in the event of the death or disability
of a participant.
RECOGNITION AND RETENTION PLAN. After the completion of the Conversion, the
Bank intends to adopt the RRP. The purpose of the RRP is to provide directors
and certain key employees of the Bank with an ownership interest in the Bank in
a manner designed to compensate such directors and key employees for services to
the Bank. The Bank expects to contribute sufficient funds to enable the RRP to
purchase up to 18,515 Common Shares, assuming the issuance of 462,875 Common
Shares in connection with the Conversion.
The RRP Committee will consist of three directors who are not employees of
the Bank. The RRP Committee will administer the RRP and determine the number of
shares to be granted to eligible participants. Compensation expense in the
amount of the fair market value of the RRP shares will be recognized as the
shares are earned.
No determination has been made regarding recipients of RRP awards or the
number of shares to be awarded to individual recipients. In accordance with OTS
regulations, if the RRP is implemented during the first year following the
completion of the Conversion, the following restrictions will apply: (i) the RRP
must be approved by the shareholders of the Holding Company; (ii) awards to
directors who are not full-time employees of the Holding Company or the Bank may
not exceed 5% of the plan shares per person and 30% of the plan shares in the
aggregate of the total number of shares reserved for issuance under the plan;
(iii) awards to directors or other persons who are full-time employees of the
Holding Company or the Bank may not exceed 25% of the plan shares per person;
and (iv) RRP shares will be earned and nonforfeitable at the rate of one-fifth
per year on each of the first five anniversaries of the award, subject to
acceleration only in the event of the death or disability of a participant.
EMPLOYMENT AGREEMENT
The Bank currently has no employment agreements with any of its officers.
The Bank intends to enter into an employment agreement with Laird L. Lazelle
(the "Employment Agreement") upon the completion of the Conversion. The
Employment Agreement will provide for a term of three years and a salary and
performance review by the Board of Directors not less often than annually and
will provide for inclusion of Mr. Lazelle in any formally established employee
benefit, bonus, pension and profit-sharing plans for which senior management
personnel are eligible. The Employment Agreement will also provide for vacation
and sick leave in accordance with the Bank's prevailing policies.
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The Employment Agreement will be terminable by the Bank at any time. In the
event of termination by the Bank for "just cause," as defined in the Employment
Agreement, Mr. Lazelle will have no right to receive any compensation or other
benefits for any period after such termination. In the event of termination by
the Bank other than for just cause, at the end of the term of the Employment
Agreement or in connection with a "change of control," as defined in the
Employment Agreement, Mr. Lazelle will be entitled to a continuation of salary
payments for a period of time equal to the term of the Employment Agreement and
a continuation of benefits substantially equal to those being provided at the
date of termination of employment until the earliest to occur of the end of the
term of the Employment Agreement or the date Mr. Lazelle becomes employed
full-time by another employer.
The Employment Agreement also contains provisions with respect to the
occurrence within one year of a "change of control" of (1) the termination of
employment of Mr. Lazelle for any reason other than just cause, retirement or
termination at the end of the term of the agreement, or (2) a constructive
termination resulting from change in the capacity or circumstances in which Mr.
Lazelle is employed or a material reduction in his responsibilities, authority,
compensation or other benefits provided under the Employment Agreement without
his written consent. In the event of any such occurrence, Mr. Lazelle will be
entitled to payment of an amount equal to three times his then current annual
salary. In addition, Mr. Lazelle would be entitled to continued coverage under
all benefit plans until the earliest of the end of the term of the Employment
Agreement or the date on which he is included in another employer's benefit
plans as a full-time employee. The maximum which Mr. Lazelle may receive,
however, is limited to an amount which will not result in the imposition of a
penalty tax pursuant to Section 280G(b)(3) of the Code. "Control," as defined in
the Employment Agreement, generally refers to the acquisition by any person or
entity of the ownership or power to vote 10% or more of the voting stock of the
Bank or the Holding Company, the control of the election of a majority of the
directors of the Bank or the Holding Company or the exercise of a controlling
influence over the management or policies of the Bank or the Holding Company.
The aggregate payments that would have been made to Mr. Lazelle under the
Employment Agreement, assuming his termination at March 31, 1996, following a
change of control, would have been approximately $195,000.
CERTAIN TRANSACTIONS WITH THE BANK
In accordance with the OTS regulations, the Bank makes loans to executive
officers and directors of the Bank in the ordinary course of business and on the
same terms and conditions, including interest rates and collateral, as those of
comparable loans to other persons. Other than loans made to executive officers
and directors prior to 1989 for which closing costs were waived by the Bank, all
outstanding loans to executive officers and directors comply with such policy,
do not involve more than the normal risk of collectibility or present other
unfavorable features and are current in their payments. Loans to all directors
and executive officers of the Bank and their related interests totalled $247,127
at March 31, 1996. Such amount includes two loans, one in the amount of $66,642,
to a daughter of Ms. Emden, and the other in amount of $85,806, also to a
daughter of Ms. Emden.
REGULATION
GENERAL
As a savings and loan association incorporated under the laws of Ohio, the
Bank is subject to regulation, examination and oversight by the OTS and the
Superintendent of the Division (the "Ohio Superintendent"). Because the Bank's
deposits are insured by the FDIC, the Bank also is subject to general oversight
by the FDIC. The Bank must file periodic reports with the OTS, the Ohio
Superintendent and the FDIC concerning its activities and financial condition.
Examinations are conducted periodically by federal and state regulators to
determine whether the Bank is in compliance with various regulatory requirements
and is operating in a safe and sound manner. The Bank is a member of the FHLB of
Cincinnati.
The Holding Company will be a savings and loan holding company within the
meaning of the Home Owners Loan Act, as amended (the "HOLA"). Consequently, the
Holding Company will be subject to
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regulation, examination and oversight by the OTS and will be required to submit
periodic reports thereto. Because the Holding Company and the Bank are
corporations organized under Ohio law, they are also subject to the provisions
of the Ohio Revised Code applicable to corporations generally.
The United States Congress is considering legislation to recapitalize the
SAIF. See "-- Federal Deposit Insurance Corporation -- Assessments." In
connection with such legislation, Congress may eliminate the OTS and may require
that the Bank be regulated under federal law in the same fashion as banks. As a
result, the Bank may become subject to additional regulation, examination and
oversight by the FDIC. In addition, the Holding Company might become a bank
holding company, subject to examination, regulation and oversight by the Board
of Governors of the Federal Reserve ("FRB"), including greater activity and
capital requirements than imposed on it by the OTS.
OHIO SAVINGS AND LOAN LAW
The Ohio Superintendent is responsible for the regulation and supervision of
Ohio savings and loan associations in accordance with the laws of the State of
Ohio. Ohio law prescribes the permissible investments and activities of Ohio
savings and loan associations, including the types of lending that such
associations may engage in and the investments in real estate, subsidiaries and
corporate or government securities that such associations may make. The ability
of Ohio associations to engage in these state-authorized investments and
activities is subject to oversight and approval by the FDIC, if such investments
or activities are not permissible for a federally chartered savings and loan
association.
The Ohio Superintendent also has approval authority over any mergers
involving or acquisitions of control of Ohio savings and loan associations. The
Ohio Superintendent may initiate certain supervisory measures or formal
enforcement actions against Ohio associations. Ultimately, if the grounds
provided by law exist, the Ohio Superintendent may place an Ohio association in
conservatorship or receivership.
The Ohio Superintendent conducts regular examinations of the Bank
approximately once a year. Such examinations are usually conducted jointly with
one or both federal regulators. The Ohio Superintendent imposes assessments on
Ohio associations based on their asset size to cover the cost of supervision and
examination.
OFFICE OF THRIFT SUPERVISION
GENERAL. The OTS is an office in the Department of the Treasury and is
responsible for the regulation and supervision of all federally chartered
savings and loan associations and all other savings and loan associations the
deposits of which are insured by the FDIC. The OTS issues regulations governing
the operation of savings and loan associations, regularly examines such
associations and imposes assessments on savings associations based on their
asset size to cover the costs of this supervision and examination. The OTS also
may initiate enforcement actions against savings and loan associations and
certain persons affiliated with them for violations of laws or regulations or
for engaging in unsafe or unsound practices. If the grounds provided by law
exist, the OTS may appoint a conservator or receiver for a savings and loan
association.
REGULATORY CAPITAL REQUIREMENTS. The Bank is required by OTS regulations to
meet certain minimum capital requirements. For information regarding the Bank's
regulatory capital at March 31, 1996, and pro forma regulatory capital after
giving effect to the Conversion, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital
Resources" and "REGULATORY CAPITAL COMPLIANCE."
Current capital requirements call for tangible capital of 1.5% of adjusted
total assets, core capital (which for the Bank consists solely of tangible
capital) of 3.0% of adjusted total assets and risk-based capital (which for the
Bank consists of core capital and general valuation allowances) of 8.0% of
risk-weighted assets (assets, including certain off-balance sheet items, are
weighted at percentage levels ranging from 0% to 100% depending on the relative
risk).
The OTS has proposed to amend the core capital requirement so that those
associations that do not have the highest examination rating and an acceptable
level of risk will be required to maintain core capital of from 4% to 5%,
depending on the association's examination rating and overall risk. The Bank
does not anticipate that it will be adversely affected if the core capital
requirement regulation is amended as proposed.
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The OTS has adopted an interest rate risk component to the risk-based
capital requirement, though the implementation of that component has been
delayed. Pursuant to that requirement a savings association would have to
measure the effect of an immediate 200 basis point change in interest rates on
the value of its portfolio as determined under the methodology of the OTS. If
the measured interest rate risk is above the level deemed normal under the
regulation, the association will be required to deduct one-half of such excess
exposure from its total capital when determining its risk-based capital. In
general, an association with less than $300 million in assets and a risk-based
capital ratio in excess of 12% will not be subject to the interest rate risk
component, and the association qualifies for such exemption. Pending
implementation of the interest rate risk component, the OTS has the authority to
impose a higher individualized capital requirement on any savings association it
deems to have excess interest rate risk. The OTS also may adjust the risk-based
capital requirement on an individualized basis to take into account risks due to
concentrations of credit and non-traditional activities. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
Asset and Liability Management."
The OTS has adopted regulations governing prompt corrective action to
resolve the problems of capital deficient and otherwise troubled savings and
loan associations. At each successively lower defined capital category, an
association is subject to more restrictive and numerous mandatory or
discretionary regulatory actions or limits, and the OTS has less flexibility in
determining how to resolve the problems of the institution. The OTS has defined
these capital levels as follows: (i) well-capitalized associations must have
total risk-based capital of at least 10%, core risk-based capital (consisting
only of items that qualify for inclusion in core capital) of at least 6% and
core capital of at least 5%; (ii) adequately capitalized associations are those
that meet the regulatory minimum of total risk-based capital of 8%, core
risk-based capital (consisting only of items that qualify for inclusion in core
capital) of 4%, and core capital of 4% (except for associations receiving the
highest examination rating, in which case the level is 3%) but are not well-
capitalized; (iii) undercapitalized associations are those that do not meet
regulatory limits, but that are not significantly undercapitalized; (iv)
significantly undercapitalized associations have total risk-based capital of
less than 6%, core risk-based capital (consisting only of items that qualify for
inclusion in core capital) of less than 3% or core capital of less than 3%; and
(v) critically undercapitalized associations are those with core capital of less
than 2% of total assets. In addition, the OTS generally can downgrade an
association's capital category, notwithstanding its capital level, if, after
notice and opportunity for hearing, the association is deemed to be engaging in
an unsafe or unsound practice because it has not corrected deficiencies that
resulted in it receiving a less than satisfactory examination rating on matters
other than capital or it is deemed to be in an unsafe or unsound condition. An
undercapitalized association must submit a capital restoration plan to the OTS
within 45 days after it becomes undercapitalized. Undercapitalized associations
will be subject to increased monitoring and asset growth restrictions and will
be required to obtain prior approval for acquisitions, branching and engaging in
new lines of business. Critically undercapitalized institutions must be placed
in conservatorship or receivership within 90 days of reaching that
capitalization level, except under limited circumstances. The Bank's capital at
March 31, 1996, meets the standards for a well-capitalized institution.
Federal law prohibits a savings and loan association from making a capital
distribution to anyone or paying management fees to any person having control of
the association if, after such distribution or payment, the association would be
undercapitalized. In addition, each company controlling an undercapitalized
association must guarantee that the association will comply with its capital
plan until the association has been adequately capitalized on an average during
each of four preceding calendar quarters and must provide adequate assurances of
performance. The aggregate liability pursuant to such guarantee is limited to
the lesser of (i) an amount equal to 50% of the association's total assets at
the time the association became undercapitalized or (ii) the amount that is
necessary to bring the association into compliance with all capital standards
applicable to such association at the time the association fails to comply with
its capital restoration plan.
LIQUIDITY. OTS regulations require that savings associations maintain an
average daily balance of liquid assets (cash, certain time deposits, bankers'
acceptances and specified United States government, state or federal agency
obligations) equal to a monthly average of not less than 5% of its net
withdrawable
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savings deposits plus borrowings payable in one year or less. Federal
regulations also require each member institution to maintain an average daily
balance of short-term liquid assets of not less than 1% of the total of its net
withdrawable savings accounts and borrowings payable in one year or less.
Monetary penalties may be imposed upon member institutions failing to meet
liquidity requirements. The eligible liquidity of the Bank at March 31, 1996,
was approximately $4.6 million, or 15.69%, which exceeded the 5% liquidity
requirement by approximately $3.1 million. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Liquidity and
Capital Resources."
QUALIFIED THRIFT LENDER TEST. Savings and loan associations are required to
maintain a specified level of investments in assets that are designated as
qualifying thrift investments. Such investments are generally related to
domestic residential real estate and manufactured housing and include stock
issued by any FHLB, the Federal Home Loan Mortgage Corporation or the Federal
National Mortgage Association. The QTL test requires that 65% of an
institution's "portfolio assets" (total assets less goodwill and other
intangibles, property used to conduct business and 20% of liquid assets) consist
of qualified thrift investments on a monthly average basis in 9 out of every 12
months. The OTS may grant exceptions to the QTL test under certain
circumstances. If a savings and loan association fails to meet the QTL Test, the
Bank and its holding company will be subject to certain operating restrictions.
A savings and loan association that fails to meet the QTL Test will not be
eligible for new FHLB advances. See "-- Federal Home Loan Banks." At March 31,
1996, the Bank had QTL investments in excess of 65% of its total portfolio
assets.
LENDING LIMIT. OTS regulations generally limit the aggregate amount that a
savings association can lend to one borrower or group of related borrowers to an
amount equal to 15% of the association's unimpaired capital, which is defined
for this purpose as total capital for regulatory purposes. A savings association
may loan to one borrower an additional amount not to exceed 10% of the
association's unimpaired capital if the additional amount is fully secured by
certain forms of "readily marketable collateral." Real estate is not considered
"readily marketable collateral." Notwithstanding the level of unimpaired capital
and surplus, a savings association may lend up to $500,000 to any one borrower
or group of related borrowers. See "THE BUSINESS OF THE BANK -- Lending
Activities -- Loan Originations, Purchases and Sales."
TRANSACTIONS WITH INSIDERS AND AFFILIATES. Loans to insiders are also
subject to Sections 22(g) and (h) of the Federal Reserve Act ("FRA"), which
place restrictions on loans to executive officers, directors and principal
shareholders and their related interests. Generally, such loans must conform to
the lending limit on loans to one borrower, and the total of such loans to
executive officers, directors, principal shareholders and their related
interests cannot exceed the association's unimpaired capital and surplus or 200%
of unimpaired capital and surplus for eligible adequately capitalized
institutions with less than $100 million in assets. See "-- Lending Limits."
Most loans to directors, executive officers and principal shareholders must be
approved in advance by a majority of the "disinterested" members of the board of
directors of the association with any "interested" director not participating.
All loans to directors, executive officers and principal shareholders must be
made on terms substantially the same as offered in comparable transactions with
the general public. Loans to executive officers are subject to additional
limits. The Bank was in compliance with such restrictions at March 31, 1996. See
"MANAGEMENT -- Certain Transactions with the Bank."
Savings associations must comply with Sections 23A and 23B of the FRA,
pertaining to transactions with affiliates. An affiliate of a savings
association is any company or entity that controls, is controlled by or is under
common control with the savings and loan association. The Holding Company will
be an affiliate of the Bank. Generally, Sections 23A and 23B of the FRA (i)
limit the extent to which a savings and loan association or its subsidiaries may
engage in "covered transactions" with any one affiliate to an amount equal to
10% of such institution's capital stock and surplus, (ii) limit the aggregate of
all such transactions with all affiliates to an amount equal to 20% of such
capital stock and surplus, and (iii) require that all such transactions be on
terms substantially the same, or at least as favorable to the association, as
those provided in transactions with a non-affiliate. The term "covered
transaction" includes the making of loans, purchase of assets, issuance of a
guarantee and other similar types of transactions. In addition to the limits in
Sections 23A and 23B, a savings association may not make any loan or other
extension of credit to an affiliate
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unless the affiliate is engaged only in activities permissible for a bank
holding company and may not purchase or invest in securities of any affiliate
except shares of a subsidiary. The Bank was in compliance with these
requirements and restrictions at March 31, 1996.
LIMITATIONS ON CAPITAL DISTRIBUTIONS. The OTS imposes various restrictions
or requirements on the ability of associations to make capital distributions,
according to ratings of associations based on their capital level and
supervisory condition. Capital distributions, for purposes of such regulation,
include, without limitation, payments of cash dividends, repurchases and certain
other acquisitions by an association of its shares and payments to stockholders
of another association in an acquisition of such other association.
For purposes of the capital distribution regulations, each institution is
categorized in one of three tiers. Tier 1 consists of associations that, before
and after the proposed capital distribution, meet their fully phased-in capital
requirement. Associations in this category may make capital distributions during
any calendar year equal to the greater of 100% of their net income, current
year-to-date, plus 50% of the amount by which the lesser of such association's
tangible, core or risk-based capital exceeds its fully phased-in capital
requirement for such capital component, as measured at the beginning of the
calendar year, or the amount authorized for a tier 2 association. Tier 2
consists of associations that, before and after the proposed capital
distribution, meet their current minimum, but not fully phased-in capital
requirement. Associations in this category may make capital distributions up to
75% of their net income over the most recent four quarters. Tier 3 associations
do not meet their current minimum capital requirement and must obtain OTS
approval of any capital distribution. A tier 1 association deemed to be in need
of more than normal supervision by the OTS may be downgraded to a tier 2 or tier
3 association.
The Bank meets the requirements for a tier 1 association and has not been
notified of any need for more than normal supervision. The Bank will also be
prohibited from declaring or paying any dividends or from repurchasing any of
its stock if, as a result, the net worth of the Bank would be reduced below the
amount required to be maintained for the liquidation account established in
connection with the Conversion. In addition, as a subsidiary of the Holding
Company, the Bank will also be required to give the OTS 30 day's notice prior to
declaring any dividend on its stock. The OTS may object to the dividend during
that 30-day period based on safety and soundness concerns. Moreover, the OTS may
prohibit any capital distribution otherwise permitted by regulation if the OTS
determines that such distribution would constitute an unsafe or unsound
practice.
In December 1994, the OTS issued a proposal to amend the capital
distributions limits. Under that proposal, associations not owned by a holding
company with a CAMEL examination rating of 1 or 2 could make a capital
distribution without notice to the OTS, if they remain adequately capitalized,
as described above, after the distribution is made. Any other association
seeking to make a capital distribution that would not cause the association to
fall below the capital levels to qualify as adequately capitalized or better,
would have to provide notice to the OTS. Except under limited circumstances and
with OTS approval, no capital distributions would be permitted if it caused the
association to become undercapitalized or worse.
HOLDING COMPANY REGULATION. After the Conversion, the Holding Company will
be a savings and loan holding company within the meaning of the HOLA. As such,
the Holding Company will register with the OTS and will be subject to OTS
regulations, examination, supervision and reporting requirements, in addition to
the reporting requirements of the SEC. Congress is considering legislation which
may require that the Holding Company become a bank holding company regulated by
the FRB. Bank holding companies with more than $150 million in assets are
subject to capital requirements similar to those imposed on the Bank. They are
also subject to more restrictive activity and investment limits than savings and
loan holding companies, although they have more extensive interstate acquisition
authority than savings and loan holding companies. No assurances can be given
that such legislation will be enacted, and the Holding Company cannot be certain
of the impact such legislation may have on its future operations.
The HOLA generally prohibits a savings and loan holding company from
controlling any other savings and loan association or savings and loan holding
company, without prior approval of the OTS, or from acquiring or retaining more
than 5% of the voting shares of a savings and loan association or holding
company thereof, which is not a subsidiary. Under certain circumstances, a
savings and loan holding
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company is permitted to acquire, with the approval of the OTS, up to 15% of the
previously unissued voting shares of an undercapitalized savings and loan
association for cash without such savings and loan association being deemed to
be controlled by such holding company. Except with the prior approval of the
OTS, no director or officer of a savings and loan holding company or person
owning or controlling by proxy or otherwise more than 25% of such company's
stock may also acquire control of any savings institution, other than a
subsidiary institution, or any other savings and loan holding company.
The Holding Company will be a unitary savings and loan holding company.
Under current law, there are generally no restrictions on the activities of
unitary savings and loan holding companies, and such companies are the only
financial institution holding companies which may engage in commercial,
securities and insurance activities without limitation. The broad latitude under
current law is restricted if the OTS determines that there is reasonable cause
to believe that the continuation by a savings and loan holding company of an
activity constitutes a serious risk to the financial safety, soundness or
stability of its subsidiary savings and loan association. The OTS may impose
such restrictions as deemed necessary to address such risk, including limiting
(i) payment of dividends by the savings and loan association; (ii) transactions
between the savings and loan association and its affiliates; and (iii) any
activities of the savings and loan association that might create a serious risk
that the liabilities of the holding company and its affiliates may be imposed on
the savings and loan association. Notwithstanding the foregoing rules as to
permissible business activities of a unitary savings and loan holding company,
if the savings and loan association subsidiary of a holding company fails to
meet the QTL Test, then such unitary holding company would become subject to the
activities restrictions applicable to multiple holding companies. At March 31,
1996, the Bank met the QTL Test. See "-- Qualified Thrift Lender Test."
If the Holding Company were to acquire control of another savings
institution, other than through a merger or other business combination with the
Bank, or if the Bank failed to meet the QTL Test, the Holding Company would
become a multiple savings and loan holding company. Unless the acquisition is an
emergency thrift acquisition and each subsidiary savings and loan association
meets the QTL Test, the activities of the Holding Company and any of its
subsidiaries (other than the Bank or other subsidiary savings and loan
associations) would thereafter be subject to activity restrictions. The HOLA
provides that, among other things, no multiple savings and loan holding company
or subsidiary thereof that is not a savings institution shall commence or
continue for a limited period of time after becoming a multiple savings and loan
holding company or subsidiary thereof, any business activity other than (i)
furnishing or performing management services for a subsidiary savings
institution; (ii) conducting an insurance agency or escrow business; (iii)
holding, managing or liquidating assets owned by or acquired from a subsidiary
savings institution; (iv) holding or managing properties used or occupied by a
subsidiary savings institution; (v) acting as trustee under deeds of trust; (vi)
those activities previously directly authorized by federal regulation as of
March 5, 1987, to be engaged in by multiple holding companies; or (vii) those
activities authorized by the FRB as permissible for bank holding companies
[unless the OTS by regulation prohibits or limits such activities for savings
and loan holding companies] and which have been approved by the OTS prior to
being engaged in by a multiple holding company.
The OTS may approve an acquisition resulting in the formation of a multiple
savings and loan holding company that controls savings and loan associations in
more than one state only if the multiple savings and loan holding company
involved controls a savings and loan association that operated a home or branch
office in the state of the association to be acquired as of March 5, 1987, or if
the laws of the state in which the institution to be acquired is located
specifically permit institutions to be acquired by state-chartered institutions
or savings and loan holding companies located in the state where the acquiring
entity is located (or by a holding company that controls such state-chartered
savings institutions). As under prior law, the OTS may approve an acquisition
resulting in a multiple savings and loan holding company controlling savings and
loan associations in more than one state in the case of certain emergency thrift
acquisitions.
No subsidiary savings and loan association of a savings and loan holding
company may declare or pay a dividend on its permanent or nonwithdrawable stock
unless it first gives the OTS 30 days advance notice of such declaration and
payment. Any dividend declared during such period or without the giving of such
notice shall be invalid.
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FEDERAL DEPOSIT INSURANCE CORPORATION
DEPOSIT INSURANCE. The FDIC is an independent federal agency that insures
the deposits, up to prescribed statutory limits, of banks and thrifts and
safeguards the safety and soundness of the banking and thrift industries. The
FDIC administers two separate insurance funds, the BIF for commercial banks and
state savings banks and the SAIF for savings associations, state savings banks
that converted from savings associations and banks that have acquired deposits
from savings associations. The BIF and the SAIF are each required to maintain
designated levels of reserves. The FDIC has examination authority over all
insured depository institutions, including the Bank, and has authority to
initiate enforcement actions against federally insured savings associations if
the FDIC does not believe the OTS has taken appropriate action to safeguard
safety and soundness and the deposit insurance fund.
The deposit accounts of the Bank and of other savings associations are
insured by the FDIC in the SAIF. The reserves of the SAIF are currently below
the level required by law, because of a higher than anticipated reduction in the
amount of SAIF deposits and because a significant portion of the assessments
paid into the fund are used to pay the principal and interest on bonds issued by
FICO to pay the cost of resolving past thrift failures. The deposit accounts of
commercial banks are insured by the BIF administered by the FDIC, except to the
extent that such banks have acquired SAIF deposits. The reserves of the BIF
reached the level required by law in May 1995.
ASSESSMENTS. The FDIC is authorized to establish separate annual assessment
rates for deposit insurance for members of the BIF and members of the SAIF. The
FDIC may increase assessment rates for either fund if necessary to restore the
fund's ratio of reserves to insured deposits to the target level within a
reasonable time and may decrease such rates if such target level has been met.
The FDIC has established a risk-based assessment system for both SAIF and BIF
members. Under this system, assessments vary depending on the risk the
institution poses to its deposit insurance fund. Such risk level is determined
based on the institution's capital level and the FDIC's level of supervisory
concern about the institution.
Because of the differing reserve levels of the SAIF and the BIF, deposit
insurance assessments paid by healthy commercial banks were recently reduced
significantly below the level paid by healthy savings associations. Assessments
paid by healthy savings associations exceeded those paid by healthy commercial
banks by approximately $.19 per $100 in deposits in late 1995 and will exceed
them by $.23 per $100 in deposits beginning in 1996. Such premium disparity
could have a negative competitive impact on the Bank and other institutions with
SAIF deposits.
Congress is considering legislation to recapitalize the SAIF and to
eliminate the significant premium disparity between the BIF and the SAIF.
Currently, the recapitalization plan provides for the payment of a special
assessment of approximately $.85 per $100 of SAIF deposits held at some date to
be determined, in order to increase SAIF reserves to the level required by law.
Certain banks holding SAIF insured deposits would pay a lower special
assessment. In addition, the cost of prior thrift failures would be shared by
both the SAIF and the BIF. Such cost sharing might increase BIF assessments by
$.02 to $.025 per $100 in deposits. SAIF assessments for healthy savings
associations would be set at a significantly lower level after the special
assessment is paid by all SAIF institutions and could never be reduced below the
level set for healthy BIF institutions.
The recapitalization plan also provides for the merger of the SAIF and BIF
on January 1, 1998. However, the SAIF recapitalization legislation currently
provides for an elimination of the federal thrift charter or of the separate
federal regulation of thrifts prior to the merger of the deposit insurance
funds. The Bank would be regulated under federal law as a bank, and, as a
result, would become subject to the more restrictive activity limitations
imposed on national banks. Under current tax laws, savings associations meeting
certain requirements have been able to deduct from income for tax purposes
amounts designated as reserved for bad debts. See Note 13 of the Notes to the
Financial Statements. Currently, upon the conversion of a savings association to
a bank, certain amounts of such association's bad debt reserve must be
recaptured as taxable income over a six-year period if the association has used
the percentage of taxable income method to compute its reserve. Congress is
considering legislation requiring, generally, that even if a savings association
does not convert to a bank, bad debt reserves taken after 1987 using the
percentage of taxable
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income method must be included in future taxable income of the association over
a six-year period, although a two-year delay may be permitted for institutions
meeting a residential mortgage loan origination test. The requirement that the
Bank convert to a bank charter and the proposed tax legislation could have an
adverse effect on the Holding Company, although until such proposals are acted
upon by Congress, the extent of such effect is uncertain.
The Bank had $25.8 million in deposits at March 31, 1995. If the one-time
special assessment in the legislative proposal is enacted into law, the Bank
will pay an additional assessment of approximately $219,000, net of tax effects,
which will reduce capital and earnings for the quarter in which the special
assessment is recorded. However, it is expected that quarterly SAIF assessments
would be reduced significantly after such special assessment is paid.
No assurances can be given that the SAIF recapitalization plan will be
enacted into law or in what form it may be enacted. In addition, the Holding
Company can give no assurances that the disparity between BIF and SAIF
assessments will be eliminated and cannot be certain of the impact of its being
regulated as a bank holding company, the Bank being regulated as a bank or the
change in tax accounting for bad debt reserves until the legislation requiring
such change is enacted. If the proposed legislation is not enacted, SAIF
premiums may increase and the disparity between BIF and SAIF premiums may become
more pronounced, which would negatively impact the Bank.
FRB RESERVE REQUIREMENTS
FRB regulations currently require savings associations to maintain reserves
of 3% of net transaction accounts (primarily NOW accounts) up to $52.0 million
(subject to an exemption of $4.3 million) and of 10% of net transaction accounts
over $52.0 million. At March 31, 1996, the Bank was in compliance with the FRB's
reserve requirements.
FEDERAL HOME LOAN BANKS
The FHLBs provide credit to their members in the form of advances. See "THE
BUSINESS OF THE BANK -- Deposits and Borrowings." The Bank is a member of the
FHLB of Cincinnati and must maintain an investment in the capital stock of the
FHLB of Cincinnati in an amount equal to the greater of 1% of the aggregate
outstanding principal amount of the Bank's residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, and 5%
of its advances from the FHLB. The Bank is in compliance with this requirement
with an investment in stock of the FHLB of Cincinnati of $274,000 at March 31,
1996.
FHLB advances to members such as the Bank who meet the QTL Test are
generally limited to the lower of (i) 25% of the member's assets and (ii) 20
times the member's investment in FHLB stock. At March 31, 1996, the Bank's
maximum limit on advances was approximately $5.48 million. The granting of
advances is subject also to the FHLB's collateral and credit underwriting
guidelines.
Upon the origination or renewal of a loan or advance, the FHLB of Cincinnati
is required by law to obtain and maintain a security interest in collateral in
one or more of the following categories: fully disbursed, whole first mortgage
loans on improved residential property or securities representing a whole
interest in such loans; securities issued, insured or guaranteed by the U.S.
Government or an agency thereof; deposits in any FHLB; or other real estate
related collateral (up to 30% of the member association's capital) acceptable to
the applicable FHLB, if such collateral has a readily ascertainable value and
the FHLB can perfect its security interest in the collateral.
Each FHLB is required to establish standards of community investment or
service that its members must maintain for continued access to long-term
advances from the FHLBs. The standards take into account a member's performance
under the Community Reinvestment Act and its record of lending to first-time
home buyers. All long-term advances by each FHLB must be made only to provide
funds for residential housing finance. The FHLBs have established an "Affordable
Housing Program" to subsidize the interest rate of advances to member
associations engaged in lending for long-term, low- and moderate-income,
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owner-occupied and affordable rental housing at subsidized rates. The FHLB of
Cincinnati reviews and accepts proposals for subsidies under that program twice
a year. The Bank has not participated in such program.
TAXATION
FEDERAL TAXATION
The Holding Company is subject to the federal tax laws that apply to
corporations generally. With certain exceptions, the Bank is also subject to the
federal tax laws and regulations which apply to corporations generally. One such
exception permits thrift institutions such as the Bank which meet certain
definitional tests relating to the composition of assets and other conditions
prescribed by the Code to establish a reserve for bad debts and to make annual
additions thereto which may, within specified limits, be taken as a deduction in
computing taxable income. Legislation pending in Congress, however, may
eliminate this bad debt reserve provision in 1996 and may require the recapture
of post-1987 bad debt reserves over a six-year period beginning in 1998. See
"REGULATION -- Federal Deposit Insurance Corporation -- Assessments."
For purposes of the bad debt reserve deduction, loans are categorized as
"qualifying real property loans," which generally include loans secured by
improved real estate, and "nonqualifying loans," which include all other types
of loans. The amount of the bad debt reserve deduction for "nonqualifying loans"
is computed under the experience method. A thrift institution may elect annually
to compute its allowable addition to its bad debt reserves for qualifying loans
under either the experience method or the percentage of taxable income method.
For 1995, 1994 and 1993, the Bank used the percentage of taxable income method.
Under the experience method, the bad debt deduction for an addition to the
reserve for "qualifying real property loans" or "nonqualifying loans" is an
amount determined under a formula based upon a moving average of the bad debts
actually sustained by a thrift institution over a period of years or an amount
necessary to maintain a minimum reserve level amount for a statutory base year.
The percentage of specially computed taxable income that is used to compute
the percentage bad debt deduction is 8%. The percentage bad debt deduction thus
computed is reduced by the amount permitted as a deduction for nonqualifying
loans under the experience method. The availability of the percentage of taxable
income method permits qualifying thrift institutions to be taxed at a lower
effective federal income tax rate than that applicable to corporations
generally. The effective maximum federal income tax rate applicable to a
qualifying thrift institution (exclusive of any minimum tax or environmental
tax), assuming the maximum percentage bad debt deduction, is approximately
31.3%.
If less than 60% of the total dollar amount of an institution's assets (on a
tax basis) consist of specified assets (generally, loans secured by residential
real estate or deposits, educational loans, cash and certain governmental
obligations), such institution may not deduct any addition to a bad debt reserve
and generally must include reserves in excess of that allowable under the
experience method in income over a six-year period. At March 31, 1996, at least
60% of the Bank's total assets were specified assets. No representation can be
made as to whether the Bank will meet the 60% test for subsequent taxable years.
Under the percentage of taxable income method, the percentage bad debt
deduction cannot exceed the amount necessary to increase the balance in the
reserve for "qualifying real property loans" to an amount equal to 6% of such
loans outstanding at the end of the taxable year. Additionally, the total bad
debt deduction attributable to "qualifying real property loans" cannot exceed
the greater of (i) the amount deductible under the experience method and (ii)
the amount which, when added to the bad debt deduction for "nonqualifying
loans," equals the amount by which 12% of the amount comprising savings accounts
at year-end exceeds the sum of surplus, undivided profits and reserves at the
beginning of the year. At March 31, 1996, and for all prior years, the 6% and
12% limitations did not restrict the percentage bad debt deduction available to
the Bank. It is not expected that these limitations will be a limiting factor in
the foreseeable future.
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In addition to the regular income tax, the Bank is subject to an alternative
minimum tax which is imposed at a minimum tax rate of 20% on "alternative
minimum taxable income" (which is the sum of a corporation's regular taxable
income, with certain adjustments, and tax preference items), less any available
exemption. Such tax preference items include (i) 100% of the excess of a thrift
institution's bad debt deduction over the amount that would have been allowable
based on actual experience and (ii) interest on certain tax-exempt bonds issued
after August 7, 1986. In addition, 75% of the amount by which a corporation's
"adjusted current earnings" exceeds its alternative minimum taxable income
computed without regard to this preference item and prior to reduction by net
operating losses, is included in alternative minimum taxable income. Net
operating losses can offset no more than 90% of alternative minimum taxable
income. The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax. Payments of alternative minimum tax may be
used as credits against regular tax liabilities in future years. In addition,
for taxable years after 1986 and before 1996, the Bank is also subject to an
environmental tax equal to 0.12% of the excess of alternative minimum taxable
income for the taxable year (determined without regard to net operating losses
and the deduction for the environmental tax) over $2.0 million.
To the extent earnings appropriated to a thrift institution's bad debt
reserves for qualifying real property loans and deducted for federal income tax
purposes exceed the allowable amount of such reserves computed under the
experience method, and to the extent of the institution's supplemental reserves
for losses on loans (the "Excess"), such Excess may not, without adverse tax
consequences, be utilized for payment of cash dividends or other distributions
to a shareholder (including distributions in dissolution or liquidation) or for
any other purpose (except to absorb bad debt losses). Distribution of a cash
dividend by a thrift institution to a shareholder is treated as made: first, out
of the institution's post-1951 accumulated earnings and profits; second, out of
the Excess; and third, out of such other accounts as may be proper. As of March
31, 1996, the Bank's Excess for tax purposes totaled approximately $614,000. The
Bank believes it had approximately $1.9 million of accumulated earnings and
profits for tax purposes as of March 31, 1996, which would be available for
dividend distributions, provided regulatory restrictions applicable to the
payment of dividends are met. See "DIVIDEND POLICY." No representation can be
made as to whether the Bank will have current or accumulated earnings and
profits in subsequent periods.
The tax returns of the Bank have been closed by statute or audited through
1992. In the opinion of management, any examination of open returns would not
result in a deficiency which could have a material adverse effect on the
financial condition of the Bank.
OHIO TAXATION
The Bank is a "financial institution" for State of Ohio tax purposes. As
such, it is subject to the Ohio corporate franchise tax on "financial
institutions," which is imposed annually at a rate of 1.5% of the Bank's book
net worth determined in accordance with GAAP. As a "financial institution," the
Bank is not subject to any tax based upon net income or net profits imposed by
the State of Ohio.
The Holding Company is subject to the Ohio corporation franchise tax and a
special litter tax. The franchise tax, as applied to the Holding Company, is a
tax measured by both net earnings and net worth. The rate of tax is the greater
of (i) 5.1% on the first $50,000 of computed Ohio taxable income and 8.9% of
computed Ohio taxable income in excess of $50,000 and (ii) 0.582% times taxable
net worth.
In computing its tax under the net worth method, the Holding Company may
exclude 100% of its investment in the capital stock of the Bank after the
Conversion, as reflected on the balance sheet of the Holding Company, as long as
it owns at least 25% of the issued and outstanding capital stock of the Bank.
The calculation of the exclusion from net worth is based on the ratio of the
excludable investment (net of any appreciation or goodwill included in such
investment) to total assets multiplied by the net value of the stock. As a
holding company, the Holding Company may be entitled to various other deductions
in computing taxable net worth that are not generally available to operating
companies.
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THE CONVERSION
THE OTS AND THE DIVISION HAVE APPROVED THE PLAN, SUBJECT TO THE APPROVAL OF
THE PLAN BY THE MEMBERS OF THE BANK ENTITLED TO VOTE ON THE PLAN AND SUBJECT TO
THE SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS AND THE
DIVISION. OTS AND DIVISION APPROVAL DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE PLAN.
GENERAL
The Board of Directors of the Bank has unanimously adopted the Plan and
recommends that the Voting Members of the Bank approve the Plan at the Special
Meeting. During and upon completion of the Conversion, the Bank will continue to
provide the services presently offered to depositors and borrowers, will
maintain its existing office and will retain its existing management and
employees.
Based on the current Valuation Range, between 297,500 and 402,500 Common
Shares are expected to be offered in the Subscription Offering and the
concurrent Community Offering at a price of $10 per share. The actual number of
shares sold in connection with the Conversion will be determined upon completion
of the Offering based on the final valuation of the Bank, as converted. See
"Pricing and Number of Common Shares to be Sold."
The Common Shares will be offered in the Subscription Offering to the ESOP
and certain present and former depositors of the Bank. Any Common Shares not
subscribed for in the Subscription Offering may be sold to the general public in
the Community Offering in a manner which will seek to achieve the widest
distribution of the Common Shares, but which will give preference to natural
persons residing in Hamilton County, Ohio. Under OTS regulations, the Community
Offering must be completed within 45 days following the Subscription Expiration
Date, unless such period is extended by the Bank with the approval of the OTS
and the Division. If the Community Offering is determined not to be feasible, an
occurrence that is not currently anticipated, the Boards of Directors of the
Holding Company and the Bank will consult with the OTS and the Division to
determine an appropriate alternative method of selling unsubscribed Common
Shares up to the minimum of the Valuation Range. No alternative sales methods
are currently planned.
OTS and Ohio regulations require the completion of the Conversion within 24
months after the date of the approval of the Plan by the Voting Members of the
Bank. The commencement and completion of the Conversion will be subject to
market conditions and other factors beyond the Bank's control. Due to changing
economic and market conditions, no assurance can be given as to the length of
time that will be required to complete the sale of the Common Shares. If delays
are experienced, significant changes may occur in the estimated pro forma market
value of the Bank. In such circumstances, the Bank may also incur substantial
additional printing, legal and accounting expenses in completing the Conversion.
In the event the Conversion is not successfully completed, the Bank will be
required to charge all Conversion expenses against current earnings.
REASONS FOR THE CONVERSION
The principal factors considered by the Bank's Board of Directors in
reaching the decision to pursue a mutual-to-stock conversion are the uncertain
future of the mutual form of ownership generally and the numerous competitive
disadvantages which the Bank faces if it continues in mutual form. These
disadvantages relate to a variety of factors, including growth opportunities,
employee retention and regulatory uncertainty.
If the Bank is to continue to grow and prosper, the mutual form of
organization is the least desirable form from a competitive standpoint. The
opportunities for a mutual to expand through mutual-to-mutual mergers or
acquisitions are limited because cash is the only form of consideration a mutual
institution can offer to another institution. Although the Bank does not have
any specific acquisitions planned at this time, the Conversion will position the
Bank to take advantage of any acquisition opportunities which may present
themselves. Because a conversion to stock form is a time-consuming and complex
process, the Bank cannot wait until an acquisition is imminent to embark on the
conversion process.
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As an increasing number of the Bank's competitors convert to stock form and
acquire the ability to use stock-based compensation programs, the Bank, in
mutual form, would be at a disadvantage when it comes to attracting and
retaining qualified management. The Bank believes that the ESOP for all
employees and the Stock Option Plan and the RRP for directors and management are
important tools in achieving such goals, even though the Bank will be required
to wait until after the Conversion to implement the Stock Option Plan and the
RRP. See "MANAGEMENT -- Stock Benefit Plans."
Another benefit of the Conversion will be an increase in capital.
Notwithstanding the Bank's current capital position, the importance of higher
levels of capital cannot be ignored in the current interest rate environment. As
has been amply demonstrated in the past, changing accounting principles,
interest rate shifts and changing regulations can threaten even well-capitalized
institutions. As a mutual institution, the Bank can only increase capital
through retained earnings or the issuance of subordinated debentures, which do
not count as tier 1 capital for regulatory capital purposes. Capital that may
seem unnecessary now may help the Bank withstand future threats to its capital.
See "REGULATION -- Office of Thrift Supervision -- Regulatory Capital
Requirements."
PRINCIPAL EFFECTS OF THE CONVERSION
VOTING RIGHTS. Savings account holders and borrowers who are members of the
Bank in its mutual form will have no voting rights in the Bank as converted and
will not participate, therefore, in the election of directors or otherwise
control the Bank's affairs. Voting rights in the Holding Company will be held
exclusively by its shareholders, and voting rights in the Bank will be held
exclusively by the Holding Company. Each holder of the Holding Company's common
shares will be entitled to one vote for each share owned on any matter to be
considered by the Holding Company's shareholders. See "DESCRIPTION OF AUTHORIZED
SHARES."
SAVINGS ACCOUNTS AND LOANS. Savings accounts in the Bank, as converted,
will be equivalent in amount, interest rate and other terms to the present
savings accounts in the Bank, and the existing FDIC insurance on such deposits
will not be affected by the Conversion. The Conversion will not affect the terms
of loan accounts or the rights and obligations of borrowers under their
individual contractual arrangements with the Bank.
TAX CONSEQUENCES. The consummation of the Conversion is expressly
conditioned on receipt by the Bank of a private letter ruling from the Internal
Revenue Service or an opinion of counsel to the effect that the Conversion will
constitute a tax-free reorganization as defined in Section 368(a) of the Code.
The Bank intends to proceed with the Conversion based upon an opinion rendered
by its special counsel, Vorys, Sater, Seymour and Pease, to the following
effect:
(1) The Conversion constitutes a reorganization within the meaning of
Section 368(a)(1)(F) of the Code, and no gain or loss will be recognized by
the Bank in its mutual form or in its stock form as a result of the
Conversion. The Bank in its mutual form and the Bank in its stock form will
each be a "party to a reorganization" within the meaning of Section 368(b)
of the Code;
(2) No gain or loss will be recognized by the Bank upon the receipt of
money from the Holding Company in exchange for the capital stock of the
Bank, as converted;
(3) The assets of the Bank will have the same basis in its hands
immediately after the Conversion as they had in its hands immediately prior
to the Conversion, and the holding period of the assets of the Bank after
the Conversion will include the period during which the assets were held by
the Bank before the Conversion;
(4) No gain or loss will be recognized by the deposit account holders of
the Bank upon the issuance to them, in exchange for their respective
withdrawable deposit accounts in the Bank immediately prior to the
Conversion, of withdrawable deposit accounts in the Bank immediately after
the Conversion, in the same dollar amount as their withdrawable deposit
accounts in the Bank immediately
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prior to the Conversion, plus, in the case of Eligible Account Holders and
Supplemental Eligible Account Holders (hereinafter defined), the interests
in the Liquidation Account of the Bank, as described below;
(5) The basis of the withdrawable deposit accounts in the Bank held by
its deposit account holders immediately after the Conversion will be the
same as the basis of their deposit accounts in the Bank immediately prior to
the Conversion. The basis of the interests in the Liquidation Account
received by the Eligible Account Holders and Supplemental Eligible Account
Holders will be zero. The basis of the nontransferable subscription rights
received by Eligible Account Holders, Supplemental Eligible Account Holders
and Other Eligible Members will be zero (assuming that at distribution such
rights have no ascertainable fair market value);
(6) No gain or loss will be recognized by Eligible Account Holders,
Supplemental Eligible Account Holders or Other Eligible Members upon the
distribution to them of nontransferable subscription rights to purchase
Common Shares (assuming that at distribution such rights have no
ascertainable fair market value), and no taxable income will be realized by
such Eligible Account Holders, Supplemental Eligible Account Holders or
Other Eligible Members as a result of their exercise of such nontransferable
subscription rights;
(7) The basis of the Common Shares purchased by members of the Bank
pursuant to the exercise of subscription rights will be the purchase price
thereof (assuming that such rights have no ascertainable fair market value
and that the purchase price is not less than the fair market value of the
shares on the date of such exercise), and the holding period of such shares
will commence on the date of such exercise. The basis of the Common Shares
purchased other than by the exercise of subscription rights will be the
purchase price thereof (assuming in the case of the other subscribers that
the opportunity to buy in the Subscription Offering has no ascertainable
fair market value), and the holding period of such shares will commence on
the day after the date of the purchase;
(8) For purposes of Section 381 of the Code, the Bank will be treated as
if there had been no reorganization. The taxable year of the Bank will not
end on the effective date of the Conversion. Immediately after the
Conversion, the Bank in its stock form will succeed to and take into account
the tax attributes of the Bank in its mutual form immediately prior to the
Conversion, including the Bank's earnings and profits or deficit in earnings
and profits;
(9) The bad debt reserves of the Bank in its mutual form immediately
prior to the Conversion will not be required to be restored to the gross
income of the Bank in its stock form as a result of the Conversion and
immediately after the Conversion such bad debt reserves will have the same
character in the hands of the Bank in its stock form as they would have had
if there had been no Conversion. The Bank in its stock form will succeed to
and take into account the dollar amounts of those accounts of the Bank in
its mutual form which represent bad debt reserves in respect of which the
Bank in its mutual form has taken a bad debt deduction for taxable years
ending on or before the Conversion; and
(10) Regardless of book entries made for the creation of the Liquidation
Account, the Conversion will not diminish the accumulated earnings and
profits of the Bank available for the subsequent distribution of dividends
within the meaning of Section 316 of the Code. The creation of the
Liquidation Account on the records of the Bank will have no effect on its
taxable income, deductions for additions to reserves for bad debts under
Section 593 of the Code or distributions to stockholders under Section
593(e) of the Code.
For Ohio tax purposes, the tax consequences of the Conversion will be as
follows:
(1) The Bank is a "financial institution" for State of Ohio tax
purposes, and the Conversion will not change such status;
(2) The Bank is subject to the Ohio corporate franchise tax on
"financial institutions," which is imposed annually at a rate of 1.5% of the
Bank's equity capital determined in accordance with GAAP, and the Conversion
will not change such status;
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(3) As a "financial institution," the Bank is not subject to any tax
based upon net income or net profit imposed by the State of Ohio, and the
Conversion will not change such status;
(4) The Conversion will not be a taxable transaction to the Bank in its
mutual or stock form for purposes of the Ohio corporate franchise tax. As a
consequence of the Conversion, however, the annual Ohio corporate franchise
tax liability of the Bank will increase if the taxable net worth of the Bank
(i.e., book net worth computed in accordance with GAAP at the close of the
Bank's taxable year for federal income tax purposes) increases thereby; and
(5) The Conversion will not be a taxable transaction to any deposit
account holder or borrower member of the Bank in its mutual or stock form
for purposes of the Ohio corporate franchise tax and the Ohio personal
income tax.
The Bank has received an opinion from Keller to the effect that the
subscription rights have no ascertainable fair market value because the rights
are received by specified persons at no cost, may not be transferred and are of
short duration. The IRS could challenge the assumption that the subscription
rights have no ascertainable fair market value.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of the
Bank in its present mutual form, each depositor in the Bank would receive a pro
rata share of any assets of the Bank remaining after payment of the claims of
all creditors, including the claims of all depositors to the withdrawable value
of their savings accounts. A depositor's pro rata share of such remaining assets
would be the same proportion of such assets as the value of such depositor's
savings deposits bears to the total aggregate value of all savings deposits in
the Bank at the time of liquidation.
In the event of a complete liquidation of the Bank in its stock form after
the Conversion, each savings depositor would have a claim of the same general
priority as the claims of all other general creditors of the Bank. Except as
described below, each depositor's claim would be solely in the amount of the
balance in such depositor's savings account plus accrued interest. The depositor
would have no interest in the assets of the Bank above that amount. Such assets
would be distributed to the shareholders of the Bank.
For the purpose of granting a limited priority claim to the assets of the
Bank in the event of a complete liquidation thereof to Eligible Account Holders
and Supplemental Eligible Account Holders who continue to maintain savings
accounts at the Bank after the Conversion, the Bank will, at the time of
Conversion, establish the Liquidation Account in an amount equal to the retained
earnings of the Bank as of March 31, 1996. The Liquidation Account will not
operate to restrict the use or application of any of the regulatory capital of
the Bank.
Each Eligible Account Holder and Supplemental Eligible Account Holder will
have a separate inchoate interest (the "Subaccount") in a portion of the
Liquidation Account for Qualifying Deposits held on the Eligibility Record Date
or the Supplemental Eligibility Record Date (hereinafter defined).
The balance of each initial Subaccount shall be an amount determined by
multiplying the amount in the Liquidation Account by a fraction, the numerator
of which is the closing balance in the account holder's account as of the close
of business on the Eligibility Record Date or the Supplemental Eligibility
Record Date and the denominator of which is the total amount of all Qualifying
Deposits of Eligible Account Holders on the Eligibility Record Date or the
Supplemental Eligibility Record Date. The balance of each Subaccount may be
decreased but will never be increased. If, at the close of business on the last
day of any fiscal year subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date, the balance in the savings account to
which a Subaccount relates 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 as of the Eligibility Record
Date or the Supplemental Eligibility Record Date, the balance of the Subaccount
for such savings account shall be adjusted proportionately to the reduction in
such savings account balance. In the event of any such downward adjustment, such
Subaccount balance shall not be subsequently increased notwithstanding any
increase in the deposit balance of the related savings account. If any savings
account is closed, its related Subaccount shall be reduced to zero upon such
closing.
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In the event of a complete liquidation of the converted Bank (and only in
such event), each Eligible Account Holder and Supplemental Eligible Account
Holder shall receive from the Liquidation Account a distribution equal to the
current balance in each of such account holder's Subaccounts before any
liquidation distribution may be made to the shareholders of the Bank. Any assets
remaining after satisfaction of such liquidation rights and the claims of the
Bank's creditors would be distributed to the shareholders of the Bank. No
merger, consolidation, purchase of bulk assets or similar combination or
transaction with another financial institution, the deposits of which are
insured by the FDIC, will be deemed to be a complete liquidation for this
purpose and, in any such transaction, the Liquidation Account shall be assumed
by the surviving institution.
COMMON SHARES. SHARES ISSUED UNDER THE PLAN CANNOT AND WILL NOT BE INSURED
BY THE FDIC. For a description of the characteristics of the Common Shares, see
"DESCRIPTION OF AUTHORIZED SHARES."
INTERPRETATION AND AMENDMENT OF THE PLAN
To the extent permitted by law, all interpretations of the Plan by the
Boards of Directors of the Holding Company and the Bank will be final. The Plan
may be amended by the Boards of Directors of the Holding Company and the Bank at
any time with the concurrence of the OTS and the Division. If the Bank
determines, upon advice of counsel and after consultation with the OTS and the
Division, that any such amendment is material, subscribers will be notified of
the amendment and will be provided the opportunity to increase, decrease or
cancel their subscriptions. Any person who does not affirmatively elect to
continue his subscription or elects to rescind his subscription before the date
specified in the notice will have all of his funds promptly refunded with
interest. Any person who elects to decrease his subscription will have the
appropriate portion of his funds promptly refunded with interest.
CONDITIONS AND TERMINATION
The completion of the Conversion requires the approval of the Plan by the
Voting Members of the Bank at the Special Meeting and completion of the sale of
the Common Shares within 24 months following the date of such approval. If these
conditions are not satisfied, the Plan will automatically terminate and the Bank
will continue its business in the mutual form of organization. The Plan may be
voluntarily terminated by the Board of Directors at any time before the Special
Meeting and at any time thereafter with the approval of the OTS and the
Division.
SUBSCRIPTION OFFERING
THE SUBSCRIPTION OFFERING WILL EXPIRE AT .M., EASTERN TIME, ON THE
"SUBSCRIPTION EXPIRATION DATE." SUBSCRIPTION RIGHTS NOT EXERCISED BEFORE THE
SUBSCRIPTION EXPIRATION DATE WILL BE VOID, WHETHER OR NOT THE BANK HAS BEEN ABLE
TO LOCATE EACH PERSON ENTITLED TO SUCH SUBSCRIPTION RIGHTS.
Nontransferable subscription rights to purchase Common Shares are being
issued at no cost to all eligible persons and entities in accordance with the
preference categories established by the Plan, as described below. Each
subscription right may be exercised only by the person to whom it is issued and
only for his or her own account. EACH PERSON SUBSCRIBING FOR COMMON SHARES MUST
REPRESENT TO THE BANK THAT HE OR SHE IS PURCHASING THE COMMON SHARES 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 THE COMMON SHARES. ANY PERSON WHO
ATTEMPTS TO TRANSFER HIS OR HER SUBSCRIPTION RIGHTS MAY BE SUBJECT TO PENALTIES
AND SANCTIONS, INCLUDING LOSS OF THE SUBSCRIPTION RIGHTS.
The number of Common Shares which a person who has subscription rights may
purchase will be determined, in part, by the total number of Common Shares to be
issued and the availability of Common Shares for purchase under the preference
categories set forth in the Plan and certain other limitations. See "Limitations
on Purchases of Common Shares." The sale of any Common Shares pursuant to
subscriptions received is contingent upon approval of the Plan by the Voting
Members of the Bank at the Special Meeting.
The preference categories and preliminary purchase limitations which have
been established by the Plan, in accordance with applicable regulations, for the
allocation of Common Shares are as follows:
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(a) Each Eligible Account Holder shall receive, without payment
therefor, the nontransferable right to purchase in the Subscription Offering
up to 2.5% of the total Common Shares sold in the Offering. If the exercise
of subscription rights in this Category 1 results in an over-subscription,
Common Shares will be allocated among subscribing Eligible Account Holders
in a manner which will, to the extent possible, make the total allocation of
each subscriber equal 100 shares or the amount subscribed for, whichever is
less. Any Common Shares remaining after such allocation has been made will
be allocated among the subscribing Eligible Account Holders whose
subscriptions remain unfilled in the proportion which the amount of their
respective Qualifying Deposits on the Eligibility Record Date bears to the
total Qualifying Deposits of all Eligible Account Holders on such date. For
purposes of this paragraph (a), increases in the Qualifying Deposits of
directors and executive officers of the Bank during the twelve months
preceding the Eligibility Record Date shall not be considered.
Notwithstanding the foregoing, Common Shares in excess of 402,500, the
maximum of the Valuation Range, may be sold to the ESOP before fully
satisfying the subscriptions of Eligible Account Holders. No fractional
shares will be issued.
(b) The ESOP shall receive, without payment therefor, the
nontransferable right to purchase in the Subscription Offering an aggregate
amount of up to 10% of the Common Shares sold in the Offering, provided that
shares remain available after satisfying the subscription rights of Eligible
Account Holders up to the maximum of the Valuation Range pursuant to
paragraph (a) above. Although the Plan and OTS regulations permit the ESOP
to purchase up to 10% of the Common Shares, the Holding Company anticipates
that the ESOP will purchase 8% of the Common Shares. If the ESOP is unable
to purchase all or part of the Common Shares for which it subscribes, the
ESOP may purchase Common Shares on the open market or may purchase
authorized but unissued shares of the Holding Company. If the ESOP purchases
authorized but unissued shares from the Holding Company, such purchases
could have a dilutive effect on the interests of the Holding Company's
shareholders. See "RISK FACTORS -- Potential Impact of Benefit Plans on Net
Earnings and Shareholders' Equity."
(c) If the Eligibility Record Date is more than 15 months prior to the
date of the latest amendment to the Bank's conversion application filed with
the OTS, each account holder who has a Qualifying Deposit at the Bank as of
June 30, 1996 (the "Supplemental Eligible Account Holders"), will receive,
without payment, the non-transferable right to purchase in the Subscription
Offering up to 2.5% of the total Common Shares sold in the Offering,
provided that shares remain available after satisfying the subscription
rights of Eligible Account Holders and the ESOP pursuant to paragraphs (a)
and (b) above. If the exercise of subscription rights by Supplemental
Eligible Account Holders results in an oversubscription, Common Shares will
be allocated among subscribing Supplemental Eligible Account Holders in a
manner which will, to the extent possible, make the total allocation of each
subscriber equal 100 shares or the amount subscribed for, whichever is less.
Any Common Shares remaining after such allocation has been made will be
allocated among the subscribing Supplemental Eligible Account Holders whose
subscriptions remain unfilled in the proportion which the amount of their
respective Qualifying Deposits on June 30, 1996 (the "Supplemental
Eligibility Record Date"), bears to the total Qualifying Deposits of all
Supplemental Eligible Account Holders on such date. No fractional shares
will be issued.
Subscription rights received by Supplemental Eligible Account Holders will
be subordinate to the subscription rights of Eligible Account Holders and the
ESOP.
(d) Each Other Eligible Member, other than an Eligible Account Holder or
Supplemental Eligible Account Holder, shall receive, without payment
therefor, the nontransferable right to purchase in the Subscription Offering
up to 2.5% of the Common Shares to be sold in the Offering, provided that
shares remain available after satisfying the subscription rights of Eligible
Account Holders, the ESOP and Supplemental Eligible Account Holders pursuant
to paragraphs (a), (b) and (c) above. In the event of an oversubscription by
Other Eligible Members, the available Common Shares will be allocated among
subscribing Other Eligible Members in the same proportion that their
subscriptions bear to the total amount of subscriptions by all Other
Eligible Members.
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The subscription rights granted under this Plan are nontransferable. Each
subscription right may be exercised only by the person to whom it is issued and
only for such person's own account. Each person exercising subscription rights
will be required to certify that such person is purchasing for such person's own
account and that such person has no agreement or understanding for the sale or
transfer of the Common Shares to which such person subscribes. The Bank will use
the information provided on the Order Form to ensure that those persons
subscribing in the Subscription Offering have subscription rights and that the
orders submitted do not exceed applicable purchase limitations. In order to
ensure proper identification of subscription rights and proper allocations in
the event of an oversubscription, it is the responsibility of each subscriber to
provide correct account verification information and the correct address of the
subscriber's primary residence.
The Bank will make reasonable efforts to comply with the securities laws of
all states in the United States in which persons having subscription rights
reside. However, no such person will be offered or receive any Common Shares
under the Plan who resides in a foreign country or in a state of the United
States with respect to which each of the following apply: (i) under the
securities laws of such country or state, the granting of subscription rights or
the offer or sale of Common Shares to such persons would require the Holding
Company or its officers or directors to register as a broker or dealer or to
register or otherwise qualify its securities for sale in such country or state;
and (ii) such registration or qualification would be impracticable for reasons
of cost or otherwise.
COMMUNITY OFFERING
Concurrently with the Subscription Offering, the Holding Company is hereby
offering Common Shares in the Community Offering, subject to the limitations set
forth below, to the extent such shares remain available after the satisfaction
of all orders received in the Subscription Offering. If subscriptions are
received in the Subscription Offering for at least 462,875 Common Shares, Common
Shares may not be available for purchase in the Community Offering. All sales of
Common Shares in the Community Offering will be at the same price per share as
in the Subscription Offering. THE COMMUNITY OFFERING MAY BE TERMINATED AT ANY
TIME AFTER ORDERS FOR AT LEAST 462,875 COMMON SHARES HAVE BEEN RECEIVED, BUT IN
NO EVENT LATER THAN , 1996 (THE "COMMUNITY EXPIRATION DATE"), WITHOUT THE
CONSENT OF THE OTS AND THE DIVISION.
In the event shares are available for the Community Offering, members of the
general public, each together with his or her Associates and other persons
acting in concert with him or her, may purchase up to 2.5% of the total Common
Shares sold in the Offering. If an insufficient number of Common Shares is
available to fill all of the orders received in the Community Offering, the
available Common Shares will be allocated in a manner to be determined by the
Boards of Directors of the Holding Company and the Bank, subject to the
following:
(i) Preference will be given to natural persons who are residents of
Hamilton County, Ohio, the county in which the office of the Bank is
located;
(ii) Orders received in the Community Offering will first be filled up
to the lesser of the number of shares subscribed for or 2% of the total
number of Common Shares offered, with any remaining shares allocated on an
equal number of shares per order basis until all orders have been filled;
and
(iii) The right of any person to purchase Common Shares in the Community
Offering is subject to the right of the Holding Company and the Bank to
accept or reject such purchases in whole or in part.
The term "resident", as used herein with respect to the Community Offering,
means any natural person who, on the date of submission of an Order Form,
maintained a bona fide residence within Hamilton County, Ohio.
LIMITATIONS ON PURCHASES OF COMMON SHARES
The Plan provides for certain additional limitations to be placed upon the
purchase of Common Shares. To the extent Common Shares are available, the
minimum number of Common Shares that may be purchased by any party is 25, or
$250. No fractional shares will be issued. Purchases in the Offering are
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further subject to the limitations that (i) no Eligible Account Holder,
Supplemental Eligible Account Holder, if any, or Other Eligible Member may
purchase in the Offering more than 2.5% of the total Common Shares sold in the
Offering, (ii) no person, together with his or her Associates and other persons
acting in concert with him or her, may purchase in the Community Offering more
than 2.5% of the total Common Shares sold in the Offering, and (iii) no person,
together with his or her Associates and other persons acting in concert with him
or her, may purchase more than 5% of the total Common Shares sold in the
Offering. In connection with the exercise of subscription rights arising from a
deposit account or a loan account in which two or more persons have an interest,
the aggregate maximum number of Common Shares which the persons having an
interest in such account may purchase is 2.5% of the total Common Shares sold in
the Offering. Such limitation does not apply to the ESOP. Subject to applicable
regulations, the purchase limitation may be increased or decreased after the
commencement of the Offering by the Boards of Directors. A person's associates
consist of the following ("Associates"): (a) any corporation or organization
(other than the Bank) of which such person is an officer, partner or, directly
or indirectly, the beneficial owner of 10% or more of any class of equity
securities; (b) 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 (c) any relative or spouse of such person, or relative
of such spouse, who either has the same home as such person or who is a director
or officer of the Bank.
Executive officers and directors of the Bank, together with their
Associates, may not purchase, in the aggregate, more than 35% of the total
Common Shares sold in the Offering. Shares acquired by the ESOP will not,
pursuant to regulations governing the Conversion, be aggregated with the shares
purchased by the directors, officers and employees of the Bank.
Purchases of Common Shares in the Offering are also subject to the change in
control regulations of the OTS which restrict direct and indirect purchases of
10% or more of the stock of any savings bank by any person or group of persons
acting in concert, under certain circumstances. See "RESTRICTIONS ON ACQUISITION
OF THE HOLDING COMPANY AND THE BANK -- Federal Law and Regulation."
After the Conversion, Common Shares, except for shares purchased by
affiliates of the Bank, will be freely transferable, subject to OTS and Division
regulations.
PLAN OF DISTRIBUTION
The offering of the Common Shares is made only pursuant to this Prospectus,
copies of which are available at the office of the Bank. Officers and directors
of the Bank will be available to answer questions about the Conversion and may
also hold informational meetings for interested persons. Such officers and
directors will not be permitted to make statements about the Holding Company or
the Bank unless such information is also set forth in this Prospectus, nor will
they render investment advice. No officer, director or employee of the Holding
Company or the Bank will be compensated, directly or indirectly, for any
activities in connection with the offer or sale of Common Shares issued in the
Conversion.
To assist the Holding Company and the Bank in marketing the Common Shares,
the Holding Company and the Bank have retained Webb, a broker-dealer registered
with the SEC and a member of the NASD. Webb will consult with and advise the
Bank and assist with the sale of the Common Shares in connection with the
Conversion. The services to be rendered by Webb include the following: (1)
assisting the Holding Company and the Bank in conducting the Subscription
Offering and the Community Offering; (2) training and educating Bank personnel
about the Conversion process; (3) organizing and conducting meetings to provide
information to prospective investors about the Conversion; (4) keeping records
of orders for Common Shares; and (5) assisting in the collection of proxies from
members for use at the Special Meeting.
For its services, Webb will receive a financial advisory fee in the amount
of $50,000. Selected Dealers will receive fees equal to 4% of the purchase price
of Common Shares sold, if any, pursuant to Selected Dealer Agreements. In
addition, the Holding Company will reimburse Webb for certain expenses,
including reasonable legal fees. Such expenses shall not exceed $30,000. Webb is
not obligated to purchase any Common Shares.
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The Holding Company and the Bank have agreed to indemnify Webb and its
directors, officers, employees, agents and any controlling person against any
and all loss, liability, claim, damage or expense arising out of any untrue
statement, or alleged untrue statement, of a material fact contained in the
Summary Proxy Statement or the Prospectus, any application to regulatory
authorities, any "blue sky" application, or any other related document prepared
or executed by or on behalf of the Holding Company or the Bank with its consent
in connection with, or in contemplation of, the Conversion, or any omission
therefrom of a material fact required to be stated therein, unless such untrue
statement or omission, or alleged untrue statement or omission, was made in
reliance upon certain information furnished to the Bank by Webb expressly for
use in the Summary Proxy Statement or the Prospectus.
The Common Shares will be offered principally by the distribution of this
Prospectus and through activities conducted at the Conversion Information
Center, which will be located at the office of the Bank. The Conversion
Information Center will be staffed by one or more of Webb's employees, who will
be responsible for mailing materials relating to the Offering, responding to
questions regarding the Conversion and the Offering and processing stock orders.
A conspicuous legend that the Common Shares are not a federally-insured or
guaranteed deposit or account appears on all offering documents used in
connection with the Conversion and will appear on the certificates representing
the Common Shares. Any person purchasing Common Shares will be required to
execute the Stock Order Form certifying such person's knowledge that the Common
Shares are not federally-insured or guaranteed and that the purchaser has
received a Prospectus and understands the investment risk involved.
Sales of Common Shares will be made by registered representatives affiliated
with Webb. Management and the employees of the Bank may participate in the
Offering in clerical capacities, providing administrative support in effecting
sales transactions or answering questions relating to the proper execution of
the Stock Order Form. Management of the Bank may answer questions regarding the
business of the Bank. Other questions of prospective purchasers, including
questions as to the nature of the investment, will be directed to registered
representatives. Management and the employees of the Bank have been instructed
not to solicit offers to purchase Common Shares or to provide advice regarding
the purchase of Common Shares.
The Bank's personnel will assist in the above-described sales activities
pursuant to an exemption from registration as a broker or dealer provided by
Rule 3a4-1 promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act"). Rule 3a4-1 generally provides that an "associated person of an issuer" of
securities shall not be deemed a broker solely by reason of participation in the
sale of securities of such issuer if the associated person meets certain
conditions. Such conditions include, but are not limited to, that the associated
person participating in the sale of an issuer's securities not be compensated in
connection therewith at the time of participation, that such person not be
associated with a broker or dealer and that such person observe certain
limitations on his participation in the sale of securities. For purposes of this
exemption, "associated person of an issuer" is defined to include any person who
is a director, officer or employee of the issuer or a company that controls, is
controlled by or is under common control with the issuer.
EFFECT OF EXTENSION OF COMMUNITY OFFERING
If the Community Offering extends beyond , 1996, persons who have
subscribed for Common Shares in the Subscription Offering or in the Community
Offering will receive a written notice that they have the right to increase,
decrease or rescind their subscriptions for Common Shares at any time prior to
20 days before the end of the extension period. Any person who does not
affirmatively elect to continue his subscription or elects to rescind his
subscription during any such extension will have all of his funds promptly
refunded with interest. Any person who elects to decrease his subscription
during any such extension shall have the appropriate portion of his funds
promptly refunded with interest.
USE OF ORDER FORMS
Subscriptions for Common Shares in the Subscription Offering and the
Community Offering may be made only by completing and submitting a Stock Order
Form. Any person who desires to subscribe for
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Common Shares in the Subscription Offering must do so by delivering to the Bank,
by mail or in person, prior to .m., Eastern Time, on , 1996, a
properly executed and completed Stock Order Form, together with full payment of
the subscription price of $10 for each Common Share for which subscription is
made. No facsimile or photocopied Stock Order Forms will be accepted.
AN EXECUTED STOCK ORDER FORM, ONCE RECEIVED BY THE BANK, MAY NOT BE
MODIFIED, AMENDED OR RESCINDED WITHOUT THE CONSENT OF THE BANK, UNLESS (I) THE
COMMUNITY OFFERING IS NOT COMPLETED BY , 1996, OR (II) THE FINAL VALUATION
OF THE BANK, AS CONVERTED, IS LESS THAN $2,975,000 OR MORE THAN $4,628,750. IF
EITHER OF THOSE EVENTS OCCURS, PERSONS WHO HAVE SUBSCRIBED FOR COMMON SHARES IN
THE OFFERING WILL BE GIVEN A NOTICE THAT THEY HAVE A RIGHT TO INCREASE, DECREASE
OR RESCIND THEIR SUBSCRIPTIONS. ANY PERSON WHO DOES NOT AFFIRMATIVELY ELECT TO
CONTINUE HIS SUBSCRIPTION OR ELECTS TO RESCIND HIS SUBSCRIPTION DURING ANY SUCH
EXTENSION WILL HAVE ALL OF HIS FUNDS PROMPTLY REFUNDED WITH INTEREST. ANY PERSON
WHO ELECTS TO DECREASE HIS SUBSCRIPTION DURING ANY SUCH EXTENSION WILL HAVE THE
APPROPRIATE PORTION OF HIS FUNDS PROMPTLY REFUNDED WITH INTEREST. IN ADDITION,
IF THE MAXIMUM PURCHASE LIMITATION IS INCREASED TO MORE THAN 2.5% OF THE COMMON
SHARES, PERSONS WHO HAVE SUBSCRIBED FOR 2.5% OF THE COMMON SHARES WILL BE GIVEN
THE OPPORTUNITY TO INCREASE THEIR SUBSCRIPTIONS.
PAYMENT FOR COMMON SHARES
Payment of the subscription price for all Common Shares for which
subscription is made must accompany a completed Order Form in order for such
subscription to be valid. Payment for Common Shares may be made (i) in cash, if
delivered in person, (ii) by check, bank draft or money order, or (iii) by
authorization of withdrawal from savings accounts in the Bank (other than
non-self-directed IRAs and Keogh Accounts). The Bank cannot lend money or
otherwise extend credit to any person to purchase Common Shares.
Payments made in cash or by check, bank draft or money order will be placed
in a segregated savings account insured by the FDIC up to applicable limits
until the Conversion is completed or terminated. Interest will be paid by the
Bank on such account at the then current passbook savings account rate, which is
currently % with an annual percentage yield of %, from the date payment is
received until the Conversion is completed or terminated. Payments made by check
will not be deemed to have been received until such check has cleared for
payment.
Instructions for authorizing withdrawals from savings accounts are provided
in the Order Form. Once a withdrawal has been authorized, none of the designated
withdrawal amount may be used by a subscriber for any purpose other than to
purchase Common Shares, unless the Conversion is terminated. All sums authorized
for withdrawal will continue to earn interest at the contract rate for such
account or certificate until the completion or termination of the Conversion.
Interest penalties for early withdrawal applicable to certificate accounts will
be waived in the case of withdrawals authorized for the purchase of Common
Shares. If a partial withdrawal from a certificate account results in a balance
less than the applicable minimum balance requirement, the certificate will be
cancelled and the remaining balance will earn interest at the Bank's passbook
rate subsequent to the withdrawal.
In order to utilize funds in an IRA or Keogh account maintained at the Bank,
the funds must be transferred to a self-directed IRA or Keogh account that
permits the funds to be invested in stock. The beneficial owner of the IRA or
Keogh account must direct the trustee of the account to use funds from such
account to purchase Common Shares in connection with the Conversion. This cannot
be done through the mail. Persons who are interested in utilizing IRAs or Keogh
accounts at the Bank to subscribe for Common Shares should contact the
Conversion Information Center at (513) - for instructions and assistance.
Subscriptions will not be filled by the Bank until subscriptions have been
received in the Offering for up to 297,500 Common Shares, the minimum point of
the Valuation Range. If the Conversion is terminated, all funds delivered to the
Bank for the purchase of Common Shares will be returned with interest, and all
charges to savings accounts will be rescinded. If subscriptions are received for
at least 297,500 Common Shares, subscribers and other purchasers will be
notified by mail, promptly on completion of the sale of the Common Shares, of
the number of shares for which their subscriptions have been accepted. The funds
on
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deposit with the Bank for the purchase of Common Shares will be withdrawn and
paid to the Holding Company in exchange for the Common Shares. Certificates
representing Common Shares will be delivered promptly thereafter. The Common
Shares will not be insured by the FDIC.
If the ESOP subscribes for Common Shares in the Subscription Offering, it
will not be required to pay for the shares subscribed for at the time it
subscribes but may pay for such Common Shares upon consummation of the
Conversion.
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information regarding the
subscription rights intended to be exercised by the directors and executive
officers of the Bank:
<TABLE>
<CAPTION>
TOTAL PERCENT OF TOTAL AGGREGATE PURCHASE
NAME SHARES OFFERING (1) PRICE
- ------------------------------------------------- ----------- --------------------------- -----------------------
<S> <C> <C> <C>
Mardelle Dickhaut................................ 3,500 1.00% $ 35,000
Ruth C. Emden.................................... 5,250 1.50 52,500
Laird L. Lazelle................................. 8,750 2.50 87,500
Robert E. Levitch................................ 7,000 2.00 70,000
Margo Liebert.................................... 2,500 0.71 25,000
Dianne K. Rabe................................... 3,500 1.00 35,000
Michael S. Schwartz.............................. 8,750 2.50 87,500
Paul L. Silverglade.............................. 8,750 2.50 87,500
Ivan J. Silverman................................ 8,750 2.50 87,500
All directors and executive
officers as a group (2)......................... 74,250 21.21% $ 742,500
</TABLE>
- ------------------------
(1) Assumes that 350,000 Common Shares will be sold in the Offering at $10 per
share and that a sufficient number of Common Shares will be available to
satisfy the intended purchases by directors and executive officers. See
"Pricing and Number of Common Shares to be Sold."
(2) Includes intended purchases by Associates of directors and executive
officers, to the extent known.
All purchases by executive officers and directors of the Bank are being made
for investment purposes only and with no present intent to resell.
PRICING AND NUMBER OF COMMON SHARES TO BE SOLD
The aggregate offering price of the Common Shares sold in the Offering will
be based on the pro forma market value of the shares as determined by an
independent appraisal of the Bank. Keller, a firm which evaluates and appraises
financial institutions, was retained by the Bank to prepare an appraisal of the
estimated pro forma market value of the Bank, as converted. Keller will receive
a fee of $15,000 for its appraisal and one update. Such amount includes
out-of-pocket expenses.
Keller was selected by the Board of Directors because it has extensive
experience in the valuation of thrift institutions, particularly in the
mutual-to-stock conversion context. The Board of Directors interviewed Keller's
principal, reviewed the credentials of Keller's appraisal personnel and obtained
references and recommendations from other companies which have engaged Keller.
Keller is certified by the OTS as a mutual-to-stock conversion appraiser. The
Bank and Keller have no relationships which would affect Keller's independence.
The appraisal was prepared by Keller in reliance upon the information
contained herein. Keller also considered the following factors, among others:
the present and projected operating results and financial condition of the Bank
and the economic and demographic conditions in the Bank's existing market area;
the quality and depth of the Bank's management and personnel; certain historical
financial and other information relating to the Bank; a comparative evaluation
of the operating and financial statistics of the Bank with those of other thrift
institutions; the aggregate size of the Offering; the impact of the Conversion
on the Bank's regulatory capital and earnings potential; the trading market for
stock of comparable thrift institutions and thrift holding companies; and
general conditions in the markets for such stocks.
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Three valuation methods were used by Keller: price to book value; price to
earnings; and price to assets. The most emphasis was placed on the price to book
value method. The price to book value method compares the pro forma book value
of the Bank, which takes into consideration the going concern value of a thrift
institution, to the book value of the comparable group. Upward and downward
adjustments are made, as appropriate, to account for variations between the Bank
and the comparable group on specific factors. The net Conversion proceeds are
included for purposes of determining the pro forma book value of the Bank. The
book value method focuses on the Bank's financial condition and does not give as
much consideration to earnings. The price to earnings method is used to
ascertain the multiple of earnings at which the Bank is likely to trade, based
on the multiple of earnings at which a comparable group of thrift institutions
trades. The comparable group consisted of ten thrift institutions located in the
Midwest which had similar operating and financial characteristics to the Bank.
In calculating the price to earnings ratio, Keller used the Bank's core earnings
for the 12 months ended March 31, 1996. The use of core earnings eliminates
items which are not generated by the principle business activities of the Bank.
The price to assets method does not consider the Bank's financial condition or
earnings. Consequently, it is not heavily relied on in valuing financial
institutions.
The Pro Forma Value of the Bank, as converted, determined by Keller, is
$3,500,000 as of May 14, 1996. The Valuation Range established in accordance
with the Plan is $2,975,000 to $4,025,000, which, based upon a per share
offering price of $10, will result in the sale of between 297,500 and 402,500
Common Shares. The total number of Common Shares sold in the Offering will be
determined in the discretion of the Board of Directors, based on the Valuation
Range. Pro forma shareholders' equity per share and pro forma earnings per share
decrease moving from the low end to the high end of the Valuation Range. See
"PRO FORMA DATA."
In the event that Keller determines at the close of the Conversion that the
aggregate pro forma value of the Bank is higher or lower than the Pro Forma
Value, but is nevertheless equal to or greater than $2,975,000 or equal to or
less than $4,628,750, the Holding Company will make an appropriate adjustment by
raising or lowering the total number of Common Shares sold in the Offering
consistent with the final valuation. The total number of Common Shares sold in
the Offering will be determined in the discretion of the Board of Directors
consistent with the final valuation. If, due to changing market conditions, the
final valuation is less than $2,975,000 or more than $4,628,750, subscribers
will be given notice of such final valuation and the right to affirm, increase,
decrease or rescind their subscriptions. Any person who does not affirmatively
elect to continue his subscription or elects to rescind his subscription before
the date specified in the notice will have all of his funds promptly refunded
with interest. Any person who elects to decrease his subscription will have the
appropriate portion of his funds promptly refunded with interest.
The appraisal by Keller is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing Common Shares or
voting to approve the Conversion. In preparing the valuation, Keller has relied
upon and assumed the accuracy and completeness of the audited financial
statements and statistical information provided by the Bank. Keller did not
independently verify the financial statements and other information provided by
the Bank, nor did Keller value independently 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 the Bank. 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 purchasing Common Shares will thereafter be
able to sell such shares at the Conversion purchase price.
A copy of the complete appraisal is on file and open for inspection at the
offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552, at the Central
Regional Office of the OTS, 200 W. Madison Street, Suite 1300, Chicago, Illinois
60606, at the offices of the Division, 77 S. High Street, Columbus, Ohio 43215,
and at the offices of the Bank.
RESTRICTIONS ON REPURCHASE OF COMMON SHARES
Federal regulations generally prohibit the Holding Company from repurchasing
any of its capital stock for three years following the date of completion of the
Conversion, except as part of an open-market stock
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repurchase program during the second and third years following the Conversion
involving no more than 5% of the Holding Company's outstanding capital stock
during a twelve-month period. The OTS has recently indicated, however, that it
would permit repurchases beginning after six months following the completion of
the Conversion. In addition, after such a repurchase, the Bank's regulatory
capital must equal or exceed all regulatory capital requirements. Before
commencement of such a program, the Holding Company must provide notice to the
OTS, and the OTS may disapprove the program if the OTS determines that it would
adversely affect the financial condition of the Bank or if it determines that
there is no valid business purpose for such repurchase. Such repurchase
restrictions would not prohibit the ESOP or the RRP from purchasing Common
Shares during the first year following the Conversion.
Ohio regulations prohibit the Holding Company from repurchasing shares
during the first year after the Conversion if the effect thereof would be the
failure of the Bank to meet its capital requirements.
RESTRICTIONS ON TRANSFERABILITY OF COMMON SHARES BY DIRECTORS AND OFFICERS
Common Shares purchased by directors and executive officers of the Holding
Company will be subject to the restriction that such shares may not be sold for
a period of one year following completion of the Conversion, except in the event
of the death of the shareholder. Common Shares issued by the Holding Company to
directors and executive officers will bear a legend giving appropriate notice of
the restriction imposed upon them. In addition, the Holding Company will give
appropriate instructions to the transfer agent (if any) for the Common Shares in
respect of the applicable restriction for transfer of any restricted shares. Any
shares issued as a stock dividend, stock split or otherwise in respect of
restricted shares will be subject to the same restrictions.
Subject to certain exceptions, for a period of three years following the
Conversion, no director or officer of the Holding Company or the Bank, or any of
their Associates, may purchase any common shares of the Holding Company without
the prior written approval of the OTS, except through a broker-dealer registered
with the SEC. This restriction will not apply, however, to negotiated
transactions involving more than 1% of a class of outstanding common shares of
the Holding Company or shares acquired by any stock benefit plan of the Holding
Company or the Bank.
The Common Shares, like the stock of most public companies, are subject to
the registration requirements of the Securities Act. Accordingly, the Common
Shares may be offered and sold only in compliance with such registration
requirements or pursuant to an applicable exemption from registration. Common
Shares received in the Conversion by persons who are not "affiliates" of the
Holding Company may be resold without registration. Common Shares received by
affiliates of the Holding Company will be subject to resale restrictions. An
"affiliate" of the Holding Company, for purposes of Rule 144, is a person who
directly, or indirectly through one or more intermediaries, controls, or is
controlled by or is under common control with, the Holding Company. Rule 144
generally requires that there be publicly available certain information
concerning the Holding Company and that sales subject to Rule 144 be made in
routine brokerage transactions or through a market maker. If the conditions of
Rule 144 are satisfied, each affiliate (or group of persons acting in concert
with one or more affiliates) is entitled to sell in the public market, without
registration, in any three-month period, a number of shares which does not
exceed the greater of (i) 1% of the number of outstanding shares of the Holding
Company or (ii) if the shares are admitted to trading on a national securities
exchange or reported through the automated quotation system of a registered
securities association, the average weekly reported volume of trading during the
four weeks preceding the sale.
74
<PAGE>
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY AND THE BANK
GENERAL
Federal law and regulations, Ohio law, the Articles of Incorporation and
Code of Regulations of the Holding Company, the Amended Articles of
Incorporation and Amended Constitution of the Bank and certain employee benefit
plans to be adopted by the Holding Company and the Bank contain certain
provisions which may deter or prohibit a change of control of the Holding
Company and the Bank. Such provisions are intended to encourage any acquiror to
negotiate the terms of an acquisition with the Board of Directors of the Holding
Company, thereby reducing the vulnerability of the Holding Company to takeover
attempts and certain other transactions which have not been negotiated with and
approved by the Board of Directors.
Anti-takeover devices and provisions may, however, have the effect of
discouraging certain takeover attempts which are not approved by the Board of
Directors, even under circumstances in which shareholders may deem such
takeovers to be in their best interests or in which shareholders may receive a
substantial premium for their shares over then current market prices. As a
result, shareholders who might desire to participate in such a transaction may
not have an opportunity to participate by virtue of such devices and provisions.
Such provisions may also benefit management by discouraging changes of control
in which incumbent management would be removed from office. The following is a
summary of certain provisions of such laws, regulations and documents.
FEDERAL LAW AND REGULATION
FEDERAL DEPOSIT INSURANCE ACT. The FDIA provides that no person, acting
directly or indirectly or in concert with one or more persons, shall acquire
control of any insured savings association or holding company unless 60 days'
prior written notice has been given to the OTS and the OTS has not issued a
notice disapproving the proposed acquisition. Control, for purposes of the FDIA,
means the power, directly or indirectly, to direct the management or policies of
an insured institution or to vote 25% or more of any class of securities of such
institution. This provision of the FDIA is implemented by the OTS in accordance
with the Regulations for Acquisition of Control of an Insured Institution, 12
C.F.R. Part 574 (the "Control Regulations"). Control, for purposes of the
Control Regulations, exists in situations in which the acquiring party has
direct or indirect voting control of at least 25% of the institution's voting
shares or controls in any manner the election of a majority of the directors of
such institution or the Director of the OTS determines that such person
exercises a controlling influence over the management or policies of such
institution. In addition, control is presumed to exist, subject to rebuttal, if
the acquiring party (which includes a group "acting in concert") has voting
control of at least 10% of the institution's voting stock and any of eight
control factors specified in the Control Regulations exists. There are also
rebuttable presumptions in the Control Regulations concerning whether a group
"acting in concert" exists, including presumed action in concert among members
of an "immediate family." With certain limited exceptions, the Control
Regulations, including the rebuttable presumptions, apply to acquisitions of
Common Shares in connection with the Conversion and to acquisitions after the
Conversion.
Change in Control of Converted Banks. A regulation of the OTS provides that,
for a period of three years after the date of the completion of the Conversion,
no person shall, directly or indirectly, offer to acquire or acquire beneficial
ownership of more than 10% of any class of equity security of the Holding
Company or the Bank without the prior written approval of the OTS. In addition
to the actual ownership of more than 10% of a class of equity securities, a
person shall be deemed to have acquired beneficial ownership of more than 10% of
the equity securities of the Holding Company or the Bank if the person holds any
combination of stock and revocable and/or irrevocable proxies of the Holding
Company under circumstances that give rise to a conclusive control determination
or rebuttable control determination under the Control Regulations. Such
circumstances include (i) holding any combination of voting shares and revocable
and/or irrevocable proxies representing more than 25% of any class of voting
stock of the Holding Company enabling the acquiror (a) to elect one-third or
more of the directors, (b) to cause the Holding Company or the Bank's
shareholders to approve the acquisition or corporate reorganization of the
Holding Company, or
75
<PAGE>
(c) to exert a controlling influence on a material aspect of the business
operations of the Holding Company or the Bank, and (ii) acquiring any
combination of voting shares and irrevocable proxies representing more than 25%
of any class of voting shares.
Such three-year restriction does not apply (i) to any offer with a view
toward public resale made exclusively to the Holding Company or the Bank or any
underwriter or selling group acting on behalf of the Holding Company or the
Bank, (ii) unless made applicable by the OTS by prior written advice, to any
offer or announcement of an offer which, if consummated, would result in the
acquisition by any person, together with all other acquisitions by any such
person of the same class of securities during the preceding 12-month period, of
not more than 1% of the class of securities, or (iii) to any offer to acquire or
the acquisition of beneficial ownership of more than 10% of any class of equity
security of the Holding Company or the Bank by a corporation whose ownership is
or will be substantially the same as the ownership of the Holding Company or the
Bank if made more than one year following the date of the Conversion. The
foregoing restriction does not apply to the acquisition of the capital stock of
the Holding Company or the Bank by one or more tax-qualified employee stock
benefit plans, provided that the plan or plans do not have the beneficial
ownership in the aggregate of more than 25% of any class of equity security of
the Holding Company or the Bank.
HOLDING COMPANY RESTRICTIONS. Federal law generally prohibits a savings and
loan holding company, without prior approval of the Director of the OTS, from
(i) acquiring control of any other savings association or savings and loan
holding company, (ii) acquiring substantially all of the assets of a savings
association or holding company thereof, or (iii) acquiring or retaining more
than 5% of the voting shares of a savings association or holding company thereof
which is not a subsidiary.
Under certain circumstances, a savings and loan holding company is permitted
to acquire, with the approval of the Director of the OTS, up to 15% of the
previously unissued voting shares of an undercapitalized savings association for
cash without such savings association being deemed to be controlled by the
holding company. Except with the prior approval of the Director of the OTS, no
director or officer of the savings and loan holding company or person owning or
controlling by proxy or otherwise more than 25% of such company's voting shares
may acquire control of any savings institution, other than a subsidiary
institution or any other savings and loan holding company.
OHIO LAW
MERGER MORATORIUM STATUTE. Ohio has a merger moratorium statute regulating
certain takeover bids affecting certain public corporations which have
significant ties to Ohio. The statute prohibits, with some exceptions, any
merger, combination or consolidation and any of certain other sales, leases,
distributions, dividends, exchanges, mortgages or transfers between such an Ohio
corporation and any person who has the right to exercise, alone or with others,
10% or more of the voting power of such corporation (an "Interested
Shareholder") for three years following the date on which such person first
becomes an Interested Shareholder. Such a business combination is permitted only
if, prior to the time such person first becomes an Interested Shareholder, the
Board of Directors of the issuing corporation has approved the purchase of
shares which resulted in such person first becoming an Interested Shareholder.
After the initial three-year moratorium, such a business combination may not
occur unless (1) one of the exceptions referred to above applies, (2) the
holders of at least two-thirds of the voting shares, and of at least a majority
of the voting shares not beneficially owned by the Interested Shareholder,
approve the business combination at a meeting called for such purpose, or (3)
the business combination meets certain statutory criteria designed to ensure
that the issuing public corporation's remaining shareholders receive fair
consideration for their shares.
An Ohio corporation, under certain circumstances, may "opt out" of the
statute by specifically providing in its articles of incorporation that the
statute does not apply to any business combination of such corporation. The
statute still prohibits for 12 months, however, any business combination that
would have been prohibited but for the adoption of such an opt-out amendment.
The statute also provides that it will
76
<PAGE>
continue to apply to any business combination between a person who became an
Interested Shareholder prior to the adoption of such an amendment as if the
amendment had not been adopted. The Articles of Incorporation of the Holding
Company do not opt out of the protection afforded by Chapter 1704.
CONTROL SHARE ACQUISITION STATUTE. Section 1701.831 of the Ohio Revised
Code (the "Control Share Acquisition Statute") requires that certain
acquisitions of voting securities which would result in the acquiring
shareholder owning 20%, 33 1/3% or 50% of the outstanding voting securities of
the Holding Company (a "Control Share Acquisition") must be approved in advance
by the holders of at least a majority of the outstanding voting shares
represented at a meeting at which a quorum is present and a majority of the
portion of the outstanding voting shares represented at such a meeting,
excluding the voting shares owned by the acquiring shareholder. The Control
Share Acquisition Statute was intended, in part, to protect shareholders of Ohio
corporations from coercive tender offers.
TAKEOVER BID STATUTE. Ohio law also contains a statute regulating takeover
bids for any Ohio corporation. Such statute provides that no offeror may make a
takeover bid unless (i) at least 20 days prior thereto the offeror announces
publicly the terms of the proposed takeover bid and files with the Ohio Division
of Securities (the "Securities Division") and provides the target company with
certain information in respect of the offeror, his ownership of the company's
shares and his plans for the company, and (ii) within ten days following such
filing either (a) no hearing is required by the Securities Division, (b) a
hearing is requested by the target company within such time but the Securities
Division finds no cause for hearing exists, or (c) a hearing is ordered and upon
such hearing the Securities Division adjudicates that the offeror proposes to
make full, fair and effective disclosure to offerees of all information material
to a decision to accept or reject the offer.
The takeover bid statute also states that no offeror shall make a takeover
bid if he owns 5% or more of the issued and outstanding equity securities of any
class of the target company, any of which were purchased within one year before
the proposed takeover bid, and the offeror, before making any such purchase,
failed to announce his intention to gain control of the target company or
otherwise failed to make full and fair disclosure of such intention to the
persons from whom he acquired such securities. The United States District Court
for the Southern District of Ohio has determined that the Ohio takeover bid
statute is preempted by federal regulation.
ARTICLES OF INCORPORATION OF THE HOLDING COMPANY
ABILITY OF THE BOARD OF DIRECTORS TO ISSUE ADDITIONAL SHARES. The Articles
of Incorporation of the Holding Company permit the Board of Directors of the
Holding Company to issue additional common shares and preferred shares. The
ability of the Board of Directors to issue such additional shares may create
impediments to gaining, or otherwise discourage persons from attempting to gain,
control of the Holding Company.
MATTERS REQUIRING ENLARGED SHAREHOLDER VOTE. Article Sixth of the Articles
of Incorporation of the Holding Company provides that, in the event the Board of
Directors recommends against the approval of any of the following matters, the
holders of at least 75% of the voting shares of the Holding Company are required
to approve any such matters:
(1) A proposed amendment to the Articles of Incorporation of the Holding
Company;
(2) A proposed Amendment to the Code of Regulations of the Holding Company;
(3) A proposal to change the number of directors by action of the
shareholders;
(4) An agreement of merger or consolidation providing for the proposed
merger or consolidation of the Holding Company with or into one or more
other corporations;
(5) A proposed combination or majority share acquisition involving the
issuance of shares of the Holding Company and requiring shareholder
approval;
(6) A proposal to sell, exchange, transfer or otherwise dispose of all, or
substantially all, of the assets, with or without the goodwill, of the
Holding Company; or
77
<PAGE>
(7) A proposed dissolution of the Holding Company.
ELIMINATION OF CUMULATIVE VOTING. Section 1701.55 of the Ohio Revised Code
provides in substance and effect that shareholders of a for profit corporation
which is not a savings and loan association and which is incorporated under Ohio
law must initially be granted the right to cumulate votes in the election of
directors. The right to cumulate votes in the election of directors will exist
at a meeting of shareholders if notice in writing is given by any shareholder to
the President, a Vice President or the Secretary of an Ohio corporation, not
less than 48 hours before a meeting at which directors are to be elected, that
the shareholder desires that the voting for the election of directors shall be
cumulative and if an announcement of the giving of such notice is made upon the
convening of such meeting by the Chairman or Secretary or by or on behalf of the
shareholder giving such notice. If cumulative voting is invoked, each
shareholder would have a number of votes equal to the number of directors to be
elected, multiplied by the number of shares owned by him, and would be entitled
to distribute his votes among the candidates as he sees fit.
Section 1701.69 of the Ohio Revised Code provides that an Ohio corporation
may eliminate cumulative voting in the election of directors after the
expiration of 90 days after the date of initial incorporation by filing with the
Ohio Secretary of State an amendment to the articles of incorporation
eliminating cumulative voting. The Articles of Incorporation of the Holding
Company will be amended prior to the consummation of the Conversion to eliminate
cumulative voting. The elimination of cumulative voting may make it more
difficult for shareholders to elect as directors persons whose election is not
supported by the Board of Directors.
EMPLOYEE BENEFIT PLANS
The Stock Option Plan, the ESOP and the RRP also may be deemed to have
certain anti-takeover effects. See "DESCRIPTION OF AUTHORIZED SHARES" and
"MANAGEMENT -- Stock Benefit Plans -- Employee Stock Ownership Plan; -- Stock
Option Plan; and -- Recognition and Retention Plan."
DESCRIPTION OF AUTHORIZED SHARES
GENERAL
The Articles of Incorporation of the Holding Company authorize the issuance
of 2,000,000 common shares. The common shares authorized by the Holding
Company's Articles of Incorporation have no par value. Upon receipt by the
Holding Company of the purchase price therefor and subsequent issuance thereof,
each Common Share will be validly issued, fully paid and nonassessable. The
Common Shares of the Holding Company will represent nonwithdrawable capital and
will not and cannot be insured by the FDIC. Each Common Share will have the same
relative rights and will be identical in all respects to every other Common
Share.
The following is a summary description of the rights of the common shares of
the Holding Company, including the material express terms of such shares as set
forth in the Holding Company's Articles of Incorporation.
LIQUIDATION RIGHTS
In the event of the complete liquidation or dissolution of the Holding
Company, the holders of the Common Shares will be entitled to receive all assets
of the Holding Company available for distribution, in cash or in kind, after
payment or provision for payment of (i) all debts and liabilities of the Holding
Company, (ii) any accrued dividend claims, and (iii) any interests in the
Liquidation Account. See "THE CONVERSION -- Liquidation Account."
VOTING RIGHTS
The holders of the Common Shares will possess exclusive voting rights in the
Holding Company, unless preferred shares are issued. Each holder of Common
Shares will be entitled to one vote for each share held of record on all matters
submitted to a vote of holders of common shares. See "RESTRICTIONS ON
ACQUISITION OF THE HOLDING COMPANY AND THE BANK -- Articles of Incorporation of
the Holding Company -- Elimination of Cumulative Voting."
78
<PAGE>
DIVIDENDS
The holders of the Common Shares will be entitled to the payment of
dividends when, as and if declared by the Board of Directors and paid out of
funds, if any, available under applicable laws and regulations for the payment
of dividends. The payment of dividends is subject to federal and state statutory
and regulatory restrictions. See "DIVIDEND POLICY," "REGULATION -- Office of
Thrift Supervision -- Limitations on Capital Distributions" and "TAXATION --
Federal Taxation" for a description of restrictions on the payment of cash
dividends.
PREEMPTIVE RIGHTS
After the consummation of the Conversion, no shareholder of the Holding
Company will have, as a matter of right, the preemptive right to purchase or
subscribe for shares of any class, now or hereafter authorized, or to purchase
or subscribe for securities or other obligations convertible into or
exchangeable for such shares or which by warrants or otherwise entitle the
holders thereof to subscribe for or purchase any such share.
RESTRICTIONS ON ALIENABILITY
See "THE CONVERSION -- Restrictions on Transferability of Common Shares by
Directors and Officers" for a description of certain restrictions on the
transferability of Common Shares purchased by officers and directors; and
"RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY AND THE BANK" for
information regarding regulatory restrictions on acquiring Common Shares.
REGISTRATION REQUIREMENTS
The Holding Company will register its common shares pursuant to Section
12(g) of the Exchange Act upon the completion of the Conversion. The proxy and
tender offer rules, insider trading restrictions, annual and periodic reporting
and other requirements of the Exchange Act will apply to the Holding Company.
LEGAL MATTERS
Certain legal matters pertaining to the Common Shares and the federal and
Ohio tax consequences of the Conversion will be passed upon for the Holding
Company and the Bank by Vorys, Sater, Seymour and Pease, 221 E. Fourth Street,
Cincinnati, Ohio 45202. Certain legal matters are being passed upon for Webb by
Keating, Muething & Klekamp ("KMK"), One East Fourth Street, Cincinnati, Ohio
45202. Certain members of KMK may subscribe for Common Shares in the Offering,
to the extent they are eligible under the Plan.
EXPERTS
Keller has consented to the publication herein of the summary of its letter
to the Bank setting forth its opinion as to the estimated pro forma market value
of the Bank as converted and to the use of its name and statements with respect
to it appearing herein. The financial statements of the Bank as of March 31,
1996 and 1995, and for each of the years in the three-year period ended June 30,
1995, have been included herein in reliance upon the report of Clark, Schaefer,
Hackett & Co., independent certified public accountants, appearing elsewhere
herein, and upon the authority of such firm as experts in auditing and
accounting.
ADDITIONAL INFORMATION
The Bank has filed an Application for Approval of Conversion (the
"Application") with the OTS and the Division. This prospectus omits certain
information contained in the Application. The Application may be inspected at
the offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552, at the
Central Regional Office of the OTS, 200 W. Madison Street, Suite 1300, Chicago,
Illinois 60606 and at the offices of the Division, 77 S. High Street, Columbus,
Ohio 43215.
79
<PAGE>
FOUNDATION SAVINGS BANK
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
Independent Auditors' Report.............................. F-2
Financial Statements:
Statements of Financial Condition....................... F-3
Statements of Income.................................... F-4
Statements of Retained Earnings......................... F-5
Statements of Cash Flows................................ F-6 - F-7
Notes to Financial Statements........................... F-8 - F-20
</TABLE>
All financial statement schedules are omitted because the required
information either is not applicable or is shown in the financial statements or
in the notes thereto.
Foundation Bancorp, Inc. was incorporated April 16, 1996 and has engaged in
only minimal activities to date; accordingly, the financial statements of the
Company have been omitted because of their immateriality.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Foundation Savings Bank:
We have audited the statements of financial condition of Foundation Savings
Bank as of June 30, 1995 and 1994, and the related statements of income,
retained earnings, and cash flows for each of the three years in the period
ended June 30, 1995. These financial statements are the responsibility of the
Corporation'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 audits provide 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 Foundation Savings Bank as
of June 30, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended June 30, 1995 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Savings Bank adopted
the provisions of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" at July 1, 1993 and Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" at July 1, 1994.
CLARK, SCHAEFER, HACKETT & CO.
Cincinnati, Ohio
July 19, 1995
F-2
<PAGE>
FOUNDATION SAVINGS BANK
STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1995 AND 1994 AND MARCH 31, 1996 (UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
JUNE 30
----------------------------
1995 1994
MARCH 31, 1996 ------------- -------------
--------------
(UNAUDITED)
<S> <C> <C> <C>
Cash............................................................... $ 15,202 57,374 59,309
Interest-bearing deposits in other financial institutions.......... 4,221,221 3,885,606 2,402,282
-------------- ------------- -------------
4,236,423 3,942,980 2,461,591
Certificates of deposit in other financial institutions............ -- -- 1,400,000
Investment securities -- at amortized cost (fair value of $393,338,
$1,034,812 and $1,004,188 at March 31, 1996 (unaudited) and June
30, 1995 and 1994 respectively)................................... 400,000 1,050,000 1,050,000
Mortgage-backed securities -- at amortized cost (fair value of
$4,831,501, $5,409,400 and $6,443,808 at March 31, 1996
(unaudited) and June 30, 1995 and 1994, respectively)............. 4,957,151 5,532,399 6,592,744
Loans receivable, net.............................................. 21,358,992 20,510,541 18,794,133
Accrued interest receivable:
Loans............................................................ 96,212 79,335 57,341
Investments and interest bearing deposits........................ 4,040 16,389 17,597
Mortgage-backed securities....................................... 39,469 41,522 44,183
Federal Home Loan Bank stock -- at cost............................ 274,100 260,400 241,200
Property and equipment, net........................................ 317,417 323,773 335,302
Refundable federal income tax...................................... -- 31,927 22,400
Prepaid expenses and other assets.................................. 53,926 60,050 39,670
-------------- ------------- -------------
Total assets................................................... $ 31,737,730 31,849,316 31,056,161
-------------- ------------- -------------
-------------- ------------- -------------
LIABILITIES AND RETAINED EARNINGS
Deposits........................................................... $ 27,780,306 27,737,204 27,348,162
Advances from Federal Home Loan Bank............................... 841,870 1,191,577 954,788
Advances by borrowers for taxes, insurance and other............... 135,445 39,076 21,614
Accrued expenses................................................... 136,441 114,747 108,049
Accrued federal income tax......................................... 8,063 -- --
Deferred federal income tax........................................ 63,500 60,600 42,800
-------------- ------------- -------------
Total liabilities.............................................. 28,965,625 29,143,204 28,475,413
Commitments........................................................ -- -- --
Retained earnings, substantially restricted........................ 2,772,105 2,706,112 2,580,748
-------------- ------------- -------------
Total liabilities and retained earnings........................ $ 31,737,730 31,849,316 31,056,161
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
FOUNDATION SAVINGS BANK
STATEMENTS OF INCOME
THREE YEARS ENDED JUNE 30, 1995 AND THE NINE MONTHS
ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, JUNE 30,
--------------------- -------------------------------
1996 1995 1995 1994 1993
---------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income:
Loans............................................... $1,358,303 1,225,328 1,655,223 1,594,174 1,882,392
Mortgage-backed securities.......................... 233,510 242,173 320,376 286,084 231,785
Investment securities............................... 51,505 50,415 69,104 27,620 12,951
Interest-bearing deposits........................... 139,921 75,150 117,309 160,799 169,711
---------- --------- --------- --------- ---------
Total interest income............................. 1,783,239 1,593,066 2,162,012 2,068,677 2,296,839
---------- --------- --------- --------- ---------
Interest expense:
Deposits............................................ 1,167,132 946,303 1,308,686 1,297,024 1,499,192
Borrowings.......................................... 39,490 41,717 59,265 41,966 --
---------- --------- --------- --------- ---------
Total interest expense............................ 1,206,622 988,020 1,367,951 1,338,990 1,499,192
---------- --------- --------- --------- ---------
Net interest income................................... 576,617 605,046 794,061 729,687 797,647
Provision for loan losses............................. 34,000 9,000 12,000 32,600 82,600
---------- --------- --------- --------- ---------
Net interest income after provision for loan
losses........................................... 542,617 596,046 782,061 697,087 715,047
---------- --------- --------- --------- ---------
Other income:
Gain on sale of investment securities............... -- -- -- 132,431 61,291
Gain on sale of loans............................... 7,484 2,702 12,179 -- --
Net investment property income...................... 36,736 37,773 50,446 64,926 64,271
Gain on sale of equipment........................... -- -- -- 1,164 --
Other operating income.............................. 7,776 6,625 7,051 5,395 10,725
---------- --------- --------- --------- ---------
Total other income................................ 51,996 47,100 69,676 203,916 136,287
---------- --------- --------- --------- ---------
General, administration and other expense:
Employee compensation and benefits.................. 260,076 273,558 364,607 292,230 306,457
Occupancy and equipment............................. 58,431 57,614 76,604 77,488 84,122
Deposit insurance................................... 46,284 46,752 61,911 65,527 60,197
Franchise tax....................................... 25,204 23,798 31,916 31,372 29,134
Computer processing costs........................... 23,439 24,016 32,268 29,387 27,678
Other operating expense............................. 83,059 82,780 111,267 131,386 132,057
---------- --------- --------- --------- ---------
Total general, administration and other operating
expense.......................................... 496,493 508,518 678,573 627,390 639,645
---------- --------- --------- --------- ---------
Income before income taxes........................ 98,120 134,628 173,164 273,613 211,689
---------- --------- --------- --------- ---------
Federal income taxes (credits):
Current............................................. 29,227 31,381 30,000 62,263 93,176
Deferred............................................ 2,900 11,700 17,800 16,100 (8,000)
---------- --------- --------- --------- ---------
32,127 43,081 47,800 78,363 85,176
---------- --------- --------- --------- ---------
Net income........................................ $ 65,993 91,547 125,364 195,250 126,513
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
FOUNDATION SAVINGS BANK
STATEMENTS OF RETAINED EARNINGS
THREE YEARS ENDED JUNE 30, 1995 AND THE
NINE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
Balance at June 30, 1992........................................................ $2,258,985
Net income for the year ended June 30, 1993................................... 126,513
----------
Balance at June 30, 1993........................................................ 2,385,498
Net income for the year ended June 30, 1994................................... 195,250
----------
Balance at June 30, 1994........................................................ 2,580,748
Net income for the year ended June 30, 1995................................... 125,364
----------
Balance at June 30, 1995........................................................ 2,706,112
Net income for the nine months ended March 31, 1996 (unaudited)............. 65,993
----------
Balance at March 31, 1996 (unaudited)........................................... $2,772,105
----------
----------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
FOUNDATION SAVINGS BANK
STATEMENTS OF CASH FLOWS
THREE YEARS ENDED JUNE 30, 1995 AND THE NINE MONTHS ENDED
MARCH 31, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEARS ENDED JUNE 30,
---------------------- ----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Interest received................................ $1,774,495 1,584,429 2,145,841 2,065,169 2,267,264
Interest paid.................................... (1,204,903) (987,254) (1,365,659) (1,339,074) (1,500,248)
Cash paid to suppliers and employees............. (400,755) (465,902) (679,261) (648,076) (585,822)
Fees and commissions received.................... 27,298 30,195 7,051 6,332 19,211
Income taxes paid................................ 10,763 (23,527) (39,527) (67,463) (187,877)
Rental income received........................... 51,300 51,300 68,400 83,000 84,000
---------- ---------- ---------- ---------- ----------
Net cash provided by operating activities...... 258,198 189,241 136,845 99,888 96,528
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchase of mortgage-backed securities........... 82,714 -- -- (3,143,631) (3,048,520)
Repayments of mortgage-backed securities......... 471,651 728,932 1,029,624 1,798,427 887,113
Purchase of certificates of deposit.............. -- -- -- -- (400,000)
Maturities of certificates of deposit............ -- 1,300,000 1,400,000 -- --
Purchase of investment securities................ -- -- -- (1,050,000) --
Proceeds from sale of investment securities...... -- -- -- 143,272 66,712
Maturities of investment securities.............. 650,000 -- -- -- --
Loan disbursements............................... (6,319,728) (4,168,225) (5,637,576) (2,961,358) (6,377,791)
Loan principal repayments........................ 4,337,090 2,103,282 3,354,330 3,700,533 8,867,546
Proceeds from sale of loans...................... 1,123,109 184,202 576,584 -- --
Proceeds from sale of Federal Home Loan Bank
stock........................................... -- -- -- -- 2,900
Purchase of property and equipment............... (2,986) (3,869) (4,249) (5,526) (8,698)
Investment in foreclosed real estate............. -- -- -- -- (1,705)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) investing
activities.................................... 341,850 144,322 718,713 (1,518,283) (12,443)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Net increase (decrease) in deposits.............. 43,102 (1,571,482) 389,042 (1,713,715) 1,444,933
Proceeds from Federal Home Loan Bank advances.... -- 300,000 300,000 1,000,000 --
Repayment of Federal Home Loan Bank advances..... (349,707) (47,086) (63,211) (45,212) --
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing
activities.................................... (306,605) (1,318,568) 625,831 (758,927) 1,444,933
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents....................................... 293,443 (985,005) 1,481,389 (2,177,322) 1,529,018
Cash and cash equivalents at beginning of period... 3,942,980 2,461,591 2,461,591 4,638,913 3,109,895
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of period......... $4,236,423 1,476,586 3,942,980 2,461,591 4,638,913
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
FOUNDATION SAVINGS BANK
STATEMENTS OF CASH FLOWS
THREE YEARS ENDED JUNE 30, 1995 AND THE
NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEARS ENDED JUNE 30,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income................................................ $ 65,993 91,547 125,364 195,250 126,513
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sale of loans................................. (7,484) (2,702) (12,179) -- --
Gain on sale of investment securities................. -- -- -- (132,431) (61,291)
Depreciation and amortization......................... 9,342 11,797 15,778 16,497 22,960
Amortization of premiums and discounts on mortgage-
backed securities.................................... 20,883 21,194 30,721 55,881 24,574
Federal Home Loan Bank stock dividends................ (13,700) (15,000) (22,600) (11,300) (9,900)
Provision for loan losses............................. 34,000 9,000 12,000 32,600 82,600
Amortization of deferred loan fees.................... (11,388) (8,726) (9,567) (17,118) (27,438)
Increase in deferred loan fees........................ (4,050) 7,061 -- 937 7,804
Deferred federal income tax........................... -- -- 17,800 16,100 (8,000)
Effects of change in operating assets and liabilities:
Accrued interest receivable......................... (2,475) (3,618) (14,725) (30,971) (8,868)
Refundable federal income tax....................... 31,927 19,554 (9,527) (5,200) (17,200)
Prepaid expenses and other assets................... 6,124 (12,542) (20,380) 1,067 (16,072)
Advances by borrowers for taxes, insurance and
other.............................................. 96,369 71,651 17,462 (10,783) 4,941
Accrued expenses.................................... 21,694 25 6,698 (10,641) 53,405
Accrued federal income tax.......................... 10,963 -- -- -- (77,500)
--------- --------- --------- --------- ---------
Net cash provided by operating activities......... $ 258,198 189,241 136,845 99,888 96,528
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
The Savings Bank compensated the widow of the former managing officer with a
car with a net book value of $10,135 in 1994.
The Savings Bank sold foreclosed real estate and financed the transaction
with loans receivable totaling $67,900 in 1993.
See accompanying notes to financial statements.
F-7
<PAGE>
FOUNDATION SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 30, 1995 AND THE NINE MONTHS
ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following describes the organization and the significant accounting
policies followed in the preparation of these financial statements.
ORGANIZATION
The Savings Bank is a state chartered savings and loan association and a
member of the Federal Home Loan Bank System and subject to regulation by the
Office of Thrift Supervision (OTS), an office of the U. S. Government Department
of the Treasury. As a member of this system, the Savings Bank maintains a
required investment in capital stock of the Federal Home Loan Bank of
Cincinnati.
Savings accounts are insured by the Savings Association Insurance Fund
(SAIF), administered by the Federal Deposit Insurance Corporation (FDIC), within
certain limitations. An annual premium is required by the SAIF for the insurance
of such savings accounts.
UNAUDITED FINANCIAL STATEMENTS
The unaudited financial statements at March 31, 1996 and for the nine months
ended March 31, 1996 and 1995, reflect all adjustments, consisting solely of
normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of the financial position, results of operations and
cash flows for such periods. The financial position at March 31, 1996 and
results of operations for the nine months then ended are not necessarily
indicative of the financial position that may be expected at June 30, 1996, or
the results of operations that may be expected for the year ended June 30, 1996.
CASH AND CASH EQUIVALENTS
For the purpose of reporting cash flows, the Savings Bank considers all
highly liquid debt instruments with original maturity when purchased of three
months or less to be cash equivalents.
INVESTMENT AND MORTGAGE-BACKED SECURITIES
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". This standard addresses the accounting and
reporting for securities based on management's intent and ability to hold such
securities to maturity. The Savings Bank adopted this standard on July 1, 1994.
Statement No. 115 requires the classification of investments in debt and equity
securities into three categories; held to maturity, trading, and available for
sale. Debt securities that the Savings Bank has the positive intent and ability
to hold to maturity are classified as held to maturity securities and reported
at amortized cost. Debt and equity securities that are bought and held
principally for the purpose of selling in the near-term are classified as
trading securities and reported at fair value, with unrealized gains and losses
included in earnings. The Savings Bank has no trading securities. Debt and
equity securities not classified as either held to maturity securities or
trading securities are classified as available for sale securities and reported
at fair value, with unrealized gains or losses excluded from earnings and
reported as a separate component of stockholders' equity, net of deferred taxes.
At the date of implementation of Statement No. 115, the Savings Bank had not
identified any investment or mortgage-backed securities as available for sale.
Premiums and discounts on investment securities and mortgage-backed
securities are amortized and accreted using the interest method over the
expected lives of the related securities.
The Savings Bank presently holds all investment securities as held to
maturity carried at amortized cost.
F-8
<PAGE>
LOANS RECEIVABLE
Loans held in portfolio are stated at the principal amount outstanding,
adjusted for deferred loan origination fees and costs, the allowance for loan
losses, and premiums and discounts on loans purchased. Premiums and discounts on
loans purchased are amortized and accreted to operations using the interest
method over the estimated life of the underlying loans.
Loan origination fees and certain direct origination costs are capitalized
and recognized as an adjustment of the yield on the related loan over the
contractual life of the loan.
Interest is accrued as earned unless the collectibility of the loan is in
doubt. Uncollectible interest on loans that are contractually past due is
charged off, or an allowance is established based on management's periodic
evaluation. The allowance is established by a charge to interest income equal to
all interest previously accrued, and income is subsequently recognized only to
the extent that cash payments are received until, in management's judgment, the
borrower's ability to make periodic interest and principal payments has returned
to normal, in which case the loan is returned to accrual status.
Loans held for sale are carried at the lower of cost or market, determined
in the aggregate. In computing cost, deferred loan origination fees and costs
are aggregated with the principal balances of the related loans. At March 31,
1996 and June 30, 1995 and 1994, the Savings Bank had not identified any loans
held for sale.
The Savings Bank will either sell the related servicing on loans or retain
the servicing on loans sold and agree to remit to the investor loan principal
and interest at agreed-upon rates. For loans where servicing is retained by the
Savings Bank, these rates can differ from the loan's contractual interest rate
resulting in a "yield differential". In addition to previously deferred loan
origination fees and cash gains, gains on sale of loans can represent the
present value of the future yield differential less a normal servicing fee,
capitalized over the estimated life of the loans sold. Normal servicing fees are
determined by reference to the stipulated minimum servicing fee set forth by the
government agencies to whom the loans are sold. Such servicing fees are
representative of the Savings Bank's normal servicing costs.
The resulting capitalized excess servicing fee is amortized to operations
over the life of the loans using the interest method. If prepayments are higher
than expected, an immediate charge to operations is made. if prepayments are
lower, then the related adjustments are made prospectively.
It is the Savings Bank's policy to provide valuation allowances for
estimated losses on loans based on past loss experience, trends in the level of
delinquent and problem loans, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying collateral and current
and anticipated economic conditions in the primary lending area. When the
collection of a loan becomes doubtful, or otherwise troubled, the Savings Bank
records a loan loss provision equal to the difference between the fair value of
the property securing the loan and the loan's carrying value. Major loans and
major lending areas are reviewed periodically to determine potential problems at
an early date. The allowance for loan losses is increased by charges to earnings
and decreased by charge-offs (net of recoveries). The amount of actual
write-offs could differ from the estimate. Because of uncertainties inherent in
the estimation process, management's estimate of credit losses inherent in the
loan portfolio and the related allowance may change in the near term. However,
the amount of the change that is reasonably possible cannot be estimated.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan". This standard amends Statement No. 5 to clarify that a creditor
should evaluate the collectibility of both contractual interest and contractual
principal on all loans when assessing the need for a loss accrual. In October,
1994, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan
- -- Income Recognition and Disclosure", which amends Statement No. 114 to allow a
creditor to use existing methods for recognizing interest income on impaired
loans. The statements were effective for the fiscal year beginning July 1, 1995.
The Savings Bank adopted the statement effective July 1, 1995, without material
effect on financial condition or results of operations.
F-9
<PAGE>
For impairment recognized in accordance with SFAS No. 114, as amended, the
entire change in present value of expected cash flows is reported as bad debt
expense in the same manner in which impairment initially was recognized or as a
reduction in the amount of bad debt expense that otherwise would be reported.
Interest on impaired loans is reported on the cash basis. Impaired loans are
loans that are considered to be permanently impaired in relation to principal or
interest based on the original contract. Impaired loans would be charged off in
the same manner as all loans subject to charge off. The Savings Bank considers
its investment in one to four family and multi- family residential loans,
non-residential loans and consumer loans to be homogeneous and therefore
excluded from separate identification for evaluation of impairment. For the nine
months ended March 31, 1996, the Savings Bank had no loans that were impaired as
described in the pronouncement and therefore no interest income was recognized
or received on impaired loans.
REAL ESTATE ACQUIRED THROUGH FORECLOSURE
Real estate acquired through foreclosure results when property
collateralizing a loan is foreclosed upon or otherwise acquired by the
Association in satisfaction of the loan. Real estate acquired in settlement of
loans is recorded at the lower of the recorded investment in the loan satisfied
or the fair value of the assets received at the time of acquisition less
estimated costs to sell at the date of foreclosure. The fair value of the assets
received is based upon a current appraisal adjusted for estimated carrying and
selling costs. Valuations are periodically performed by management, and an
allowance for losses is established by a charge to operations if the carrying
value of a property exceeds its estimated net realizable value.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation of property and
equipment is provided by the straight-line method over the estimated useful
lives (range of lives five to fifteen years) of the related classes of assets.
INCOME TAXES
Effective July 1, 1993, the Savings Bank adopted Financial Accounting
Standards Board Statement No. 109 (FAS 109), "Accounting for Income Taxes". The
adoption of FAS 109 changed the method of accounting for income taxes from the
deferred method to an asset and liability approach which requires the
recognition of deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
basis of assets and liabilities. The impact of adopting this standard had no
material effect on the financial statements.
Under FAS 109, deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment. Income tax expense is
the tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
ACCOUNTING ESTIMATES
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
Financial Accounting Standards Board Statement No. 107, "Disclosures About
Fair Value of Financial Statements", requires disclosure of fair value
information about financial instruments, whether or not
F-10
<PAGE>
recognized in the statement of condition, for which it is practicable to
estimate that value. Statement No. 107 excludes certain financial instruments
and all nonfinancial instruments from its disclosure requirements. The Savings
Bank will be required to adopt Statement No. 107 for the year ending June 30,
1996.
In October, 1994, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 119, "Disclosures about Derivative
Financial Instruments and Fair Value of Financial Instruments". This statement
requires disclosures about the amounts, nature and terms of derivative financial
instruments that are not subject to Statement No. 105, "Disclosures of
Information about Financial Instruments and Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk", because they do not result in
off-balance-sheet risk of accounting loss.
It requires that a distinction be made between financial instruments held or
issued for trading purposes (including dealing and other trading activities
measured at fair value with gains and losses recognized in earnings) and
financial instruments held or issued for purposes other than trading. Statement
No. 119 is effective for financial statements issued for fiscal years ending
after December 15, 1995. Management does not expect an impact from the adoption
of this standard.
In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights". This statement requires 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 would
allocate the total cost of the mortgage loans to the mortgage servicing rights
and the loans based on their relative fair value. Statement No. 122 is effective
for fiscal years beginning after December 31, 1995. Management has not evaluated
the impact of this pronouncement.
In June 1996 the FASB issued SFAS No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" which
established accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. The standards are based on
a consistent application of a financial-components approach that focuses on
control. Under that approach, after a transfer of financial assets an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. The statement provides
consistent standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. This statement supersedes FASB
Statement No. 122. This statement is effective for transactions occurring after
December 31, 1996. Management does not expect an impact from adoption of this
standard.
F-11
<PAGE>
2. INVESTMENT SECURITIES:
The amortized cost, gross unrealized gains, gross unrealized losses and fair
values of investment securities are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------------------
(UNAUDITED)
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Obligations of U.S. Government agencies............ $ 400,000 -- 6,662 393,338
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
<CAPTION>
JUNE 30, 1995
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Obligations of U.S. Government agencies............ $ 1,050,000 -- 15,189 1,034,812
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
<CAPTION>
JUNE 30, 1994
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Obligations of U.S. Government agencies............ $ 1,050,000 -- 45,812 1,004,188
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
The amortized cost and fair value of investment securities at June 30, 1995
and 1994 by contractual maturity are shown below. Actual maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
JUNE 30, 1995
--------------------------
AMORTIZED
COST FAIR VALUE
------------ ------------
<S> <C> <C>
Due or callable in one year or less............................... $ 900,000 890,624
Due after one year through five years............................. 150,000 144,188
------------ ------------
$ 1,050,000 1,034,812
------------ ------------
------------ ------------
<CAPTION>
JUNE 30, 1994
--------------------------
AMORTIZED
COST FAIR VALUE
------------ ------------
<S> <C> <C>
Due or callable in one year or less............................... $ 900,000 855,688
Due after one year through five years............................. 150,000 148,500
------------ ------------
$ 1,050,000 1,004,188
------------ ------------
------------ ------------
</TABLE>
The above investment securities as of March 31, 1996 are all due or callable
in one year or less.
F-12
<PAGE>
3. MORTGAGE-BACKED SECURITIES:
The amortized cost, gross unrealized gains, gross unrealized losses and fair
value of mortgage-backed securities are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------------------
(UNAUDITED)
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage Corp.................... $ 2,305,249 434 55,672 2,250,011
Federal National Mortgage Association.............. 2,431,224 959 71,648 2,360,535
Government National Mortgage Association........... 220,678 277 -- 220,955
------------ ----- ----------- ------------
$ 4,957,151 1,670 127,320 4,831,501
------------ ----- ----------- ------------
------------ ----- ----------- ------------
<CAPTION>
JUNE 30, 1995
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage Corp.................... $ 2,641,753 -- 59,504 2,582,249
Federal National Mortgage Association.............. 2,658,239 -- 59,770 2,598,469
Government National Mortgage Association........... 232,407 -- 3,725 228,682
------------ ----------- ----------- ------------
$ 5,532,399 -- 122,999 5,409,400
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
<CAPTION>
JUNE 30, 1994
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage Corp.................... $ 3,272,681 -- 65,808 3,206,873
Federal National Mortgage Association.............. 3,079,018 -- 70,410 3,008,608
Government National Mortgage Association........... 241,045 -- 12,718 228,327
------------ ----------- ----------- ------------
$ 6,592,744 -- 148,936 6,443,808
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
The maturity of the mortgage-backed securities is based on the repayment of
the underlying mortgages.
4. LOANS RECEIVABLE:
Loans receivable consists of the following:
<TABLE>
<CAPTION>
JUNE 30
--------------------------
1995 1994
MARCH 31, 1996 ------------ ------------
--------------
(UNAUDITED)
<S> <C> <C> <C>
Residential one to four family real estate........................... $ 18,989,394 18,299,896 16,713,603
Multi-family residential real estate................................. 797,771 636,068 688,065
Commercial real estate............................................... 1,302,591 1,124,131 882,603
Property improvement................................................. -- -- 14,175
Consumer............................................................. 353,098 500,643 565,873
Passbook............................................................. 57,814 111,282 66,229
-------------- ------------ ------------
21,500,668 20,672,020 18,930,548
Less:
Loans in process................................................... (5,000) (15,000) --
Allowance for loan losses.......................................... (103,773) (98,138) (72,107)
Deferred loan fees................................................. (32,903) (48,341) (57,908)
Unearned discounts................................................. -- -- (6,400)
-------------- ------------ ------------
$ 21,358,992 20,510,541 18,794,133
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
F-13
<PAGE>
At March 31, 1996 (unaudited) and June 30, 1995, adjustable rate loans
approximated $9,456,000 and $10,862,000.
Activity in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
---------------------- ----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Beginning balance.................................... $ 98,138 72,107 72,107 100,725 14,625
Provision for loan losses............................ 34,000 9,000 12,000 32,600 82,600
Write-offs........................................... (28,365) (1,524) (3,969) (95,560) --
Recoveries........................................... -- 18,000 18,000 34,342 3,500
---------- ---------- ---------- ---------- ----------
Ending balance....................................... $ 103,773 97,583 98,138 72,107 100,725
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
Gross proceeds on sales of loans were $1,123,109, $184,202 and $576,584 for
the nine months ended March 31, 1996 and 1995 (unaudited) and the year ended
June 30, 1995, respectively. Gross realized gains on sales of loans were $7,484,
$2,702 and $12,179 for the nine months ended March 31, 1996 and 1995 (unaudited)
and the year ended June 30, 1995. Loans serviced for others as of March 31, 1996
and 1995 (unaudited), June 30, 1995, 1994 and 1993 were $251,902, $-0-,
$198,076, $-0-, and $-0-, respectively.
The Savings Bank grants first mortgages and other loans to customers located
primarily in the Metropolitan Cincinnati area. As such, a substantial portion of
its debtors' ability to honor their contracts is dependent upon the health of
the local economy and market.
At March 31, 1996 (unaudited) and June 30, 1995 and 1994, the Savings Bank
had non-accrual loans of $-0-, $-0-, and $92,965, respectively.
Loans to officers, directors and employees totalled approximately $94,896
and $100,142 at March 31, 1996 and 1995 (unaudited), respectively and $98,866
and $104,031 at June 30, 1995 and 1994, respectively. An analysis of loan
activity to such persons for the fiscal year ended June 30, 1995 and the nine
months ended March 31, 1996 (unaudited) is as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
MARCH 31, JUNE 30,
1996 1995
------------- -----------
(UNAUDITED)
<S> <C> <C>
Outstanding balance, beginning...................................... $ 98,866 104,031
New loans issued.................................................... -- --
Repayments.......................................................... 3,970 5,165
------------- -----------
Outstanding balance, ending......................................... $ 94,896 98,866
------------- -----------
------------- -----------
</TABLE>
5. PROPERTY AND EQUIPMENT:
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31,
1996 1995 1994
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Real estate owned -- investment property....................... $ 251,847 251,847 251,847
Furniture and equipment........................................ 153,264 154,913 150,665
Leasehold improvements......................................... 34,246 34,246 34,246
----------- --------- ---------
439,357 441,006 436,758
Less accumulated depreciation.................................. 121,940 117,233 101,456
----------- --------- ---------
$ 317,417 323,773 335,302
----------- --------- ---------
----------- --------- ---------
</TABLE>
F-14
<PAGE>
The Savings Bank leases its office facility under a ten year non-cancelable
lease which expires in March of 2001 with additional renewal options. Rent
expense was $40,017 and $40,017 for the nine months ended March 31, 1996 and
1995 (unaudited), respectively. Rent expense for the years ended June 30, 1995,
1994 and 1993 was $53,355, $53,355 and $53,305, respectively.
Minimum commitments under the term of the lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
MARCH 31, JUNE 30,
----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
1997...................... $ 51,628 1996...................... 50,456
1998...................... 51,628 1997...................... 51,628
1999...................... 51,628 1998...................... 51,628
2000...................... 51,628 1999...................... 51,628
Subsequent years.......... 51,628 Subsequent years.......... 90,350
----------- -----------
$ 258,140 295,690
----------- -----------
----------- -----------
</TABLE>
6. INVESTMENT PROPERTY:
The Savings Bank acquired real estate at the southeast corner of Eighth and
Vine Streets in 1980. The Savings Bank has a lease agreement on the property as
a parking lot under a three year lease beginning July 1, 1994. The lease
payments will be $5,700 per month for the first two years and $6,100 per month
for the third year. Rent income for the nine months ended March 31, 1996 and
1995 (unaudited) was $51,300 and $51,300, respectively. Rent income for the
years ended June 30, 1995 and 1994 was $68,400 and $83,000 respectively.
7. DEPOSITS:
Deposits consist of the following:
<TABLE>
<CAPTION>
JUNE 30
MARCH 31, 1996 ----------------------------------------------------
-------------------------
1995 1994
(UNAUDITED) ------------------------- -------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE RATE AMOUNT AVERAGE RATE AMOUNT AVERAGE RATE AMOUNT
------------- ---------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Passbook................................... 2.52% $1,085,461 2.87% $1,287,943 2.84% $1,834,533
NOW and money market accounts.............. 2.55 1,961,727 2.66 2,507,150 2.79 3,306,537
---------- ---------- ----------
2.54 3,047,188 2.77 3,795,093 2.81 5,141,070
---------- ---------- ----------
Certificates of deposit:
3 months................................. 4.29 368,147 4.42 203,356 3.38 483,701
6 months................................. 5.40 1,520,044 5.79 1,192,710 3.32 1,422,754
10/11 months............................. 2.65 44,047 6.31 4,900,236 -- --
12 months................................ 5.83 10,544,843 5.71 4,454,225 4.25 3,997,547
18 months................................ 6.41 5,639,480 6.19 8,514,317 5.17 11,403,901
2 years................................. 6.11 4,599,236 5.62 3,065,798 4.64 2,539,935
3 years................................. 5.84 830,643 5.53 556,922 5.35 505,082
4 years................................. 5.37 207,131 5.24 127,306 6.80 284,029
5 years................................. 5.79 979,547 6.56 927,241 6.55 1,570,143
---------- ---------- ----------
5.96 24,733,118 6.01 23,942,111 4.91 22,207,092
---------- ---------- ----------
5.58% $27,780,306 5.57% $27,737,204 4.52% $27,348,162
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-15
<PAGE>
Maturities of outstanding certificates of deposit are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
--------------------
1995 1994
--------- ---------
MARCH 31,
1996
-----------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C>
One year or less................................................................ $ 18,756 15,647 15,634
1 - 2 years..................................................................... 4,591 7,445 5,363
2 - 3 years..................................................................... 807 549 276
Over 3 years.................................................................... 579 301 934
----------- --------- ---------
$ 24,733 23,942 22,207
----------- --------- ---------
----------- --------- ---------
</TABLE>
Interest expense on deposits is summarized as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH
31, JUNE 30,
----------------------- ----------------------------------
1996 1995 1995 1994 1993
------------ --------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Passbook.......................................... $ 25,379 35,326 45,278 66,769 144,852
NOW and money market accounts..................... 41,711 60,477 79,124 98,787 96,553
Certificates of deposit........................... 1,100,042 850,500 1,184,284 1,131,468 1,257,787
------------ --------- ---------- ---------- ----------
$ 1,167,132 946,303 1,308,686 1,297,024 1,499,192
------------ --------- ---------- ---------- ----------
------------ --------- ---------- ---------- ----------
</TABLE>
The aggregate amount of certificates of deposits in denominations of
$100,000 or more was $2,581,410 and $3,088,352 at March 31, 1996 (unaudited) and
June 30, 1995, respectively. Deposit accounts exceeding $100,000 are not
federally insured.
8. ADVANCES FROM FEDERAL HOME LOAN BANK:
The Savings Bank borrowed $1,000,000 in 1994 from the Federal Home Loan Bank
under a mortgage matched advance program. Interest is charged on the advance at
a weighted average rate of 5.50% and is due in 120 to 180 monthly installments
of $9,517 including interest. The Savings Bank borrowed an additional $300,000
in 1995. The note is an interest only bearing an interest rate of 6.85%. The
note matured September 1, 1995.
Future maturities on the advance are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
- --------------------------------
(UNAUDITED) YEAR ENDED JUNE 30,
--------------------------------
<S> <C> <C> <C>
1997............................ $ 69,496 1996............................ $ 366,730
1998............................ 73,366 1997............................ 70,445
1999............................ 77,450 1998............................ 74,366
2000............................ 81,764 1999............................ 78,506
2001............................ 86,316 2000............................ 82,878
2002 and subsequent............. 453,478 2001 and subsequent............. 518,652
----------- ------------
$ 841,870 $ 1,191,577
----------- ------------
----------- ------------
</TABLE>
The advances are collateralized by a blanket agreement on residential
mortgage loans held by the Savings Bank. The Savings Bank has also pledged its
Federal Home Loan Bank stock and mortgage notes with unpaid principal balances
of approximately $1,275,000 for future advances.
9. CAPITAL REQUIREMENTS:
The Savings Bank is subject to minimum regulatory capital requirements
promulgated by the Office of Thrift Supervision (OTS). The minimum capital
standards generally require the maintenance of regulatory capital sufficient to
meet each of three tests, hereinafter described as the tangible capital
requirement, the core capital requirement and the risk-based capital
requirement.
The tangible capital requirement provides for minimum tangible capital
(defined as stockholders' equity less all intangible assets) equal to 1.5% of
adjusted total assets. The core capital requirement provides
F-16
<PAGE>
for minimum core capital (tangible capital plus certain forms of supervisory
goodwill and other qualifying intangible assets) equal to 3.0% of adjusted total
assets. The risk-based capital requirement currently provides for the
maintenance of core capital plus general loss allowances equal to 8.0% of
risk-weighted assets. In computing risk-weighted assets, the Savings Bank
multiplies the value of each asset on its statement of financial condition by a
defined risk-weighing factor, e.g., one-to-four family residential loans carry a
risk-weighted factor of 50%.
The Savings Bank's regulatory capital exceed all minimum capital
requirements as shown in the following table:
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------------
REGULATORY CAPITAL
RISK-
TANGIBLE CORE BASED
CAPITAL % CAPITAL % CAPITAL %
-------- ---- -------- ---- -------- ----
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Capital under generally accepted accounting principles...... $ 2,772 $ 2,772 $ 2,772
General valuation allowances................................ -- -- 96
-------- -------- --------
Regulatory capital computed................................. 2,772 8.7 2,772 8.7 2,868 19.6
Minimum capital requirements................................ 476 1.5 952 3.0 1,171 8.0
-------- ---- -------- ---- -------- ----
Regulatory capital-excess................................... $ 2,296 7.2 $ 1,820 5.7 $ 1,697 11.6
-------- ---- -------- ---- -------- ----
-------- ---- -------- ---- -------- ----
<CAPTION>
JUNE 30, 1995
----------------------------------------------
REGULATORY CAPITAL
RISK-
TANGIBLE CORE BASED
CAPITAL % CAPITAL % CAPITAL %
-------- ---- -------- ---- -------- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Capital under generally accepted accounting principles...... $ 2,706 $ 2,706 $ 2,706
General valuation allowances................................ -- -- 70
-------- -------- --------
Regulatory capital computed................................. 2,706 8.5 2,706 8.5 2,776 19.3
Minimum capital requirements................................ 478 1.5 955 3.0 1,153 8.0
-------- ---- -------- ---- -------- ----
Regulatory capital-excess................................... $ 2,228 7.0 $ 1,751 5.5 $ 1,623 11.3
-------- ---- -------- ---- -------- ----
-------- ---- -------- ---- -------- ----
</TABLE>
10. COMMITMENTS:
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 their
customers including commitments to extend credit. Such commitments involve, to
varying degrees, elements of credit and interest-rate risk in excess of the
amount recognized in the statement of financial condition. The contract or
notional amounts of the commitments reflect the extent of the Savings Bank's
involvement in such financial instruments.
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 is
represented by the contractual notional amount of those instruments. The Savings
Bank uses the same credit policies in making commitments and conditional
obligations as those utilized for on-balance-sheet instruments.
March 31, 1996, the Savings Bank had commitments to originate loans totaling
$726,005 (unaudited). The entire amount was for fixed rate residential loans. No
portion of these loans were disbursed prior to March 31, 1996, and the financial
statements do not reflect any liability for such commitments. Management
anticipates that all originations will be funded from existing liquidity and
normal monthly cash flows. Loan commitments as of June 30, 1995 and 1994 were
$411,000 and $628,000, respectively.
11. RETIREMENT PLAN:
The Savings Bank has a 401(K) Salary Savings Plan with the Ohio Savings and
Loan League. During the nine months ended March 31, 1996 and 1995 (unaudited)
and the years ended June 30, 1995, 1994, and 1993,
F-17
<PAGE>
respectively, retirement expense amounted to $5,053, $9,074, $10,585, $10,167
and $10,952. The plan covers all employees having completed one year of service
and having attained the age of twenty-one. The employee can contribute up to six
percent with the employer matching contribution of three percent and a
discretionary three percent employer matching contribution.
12. FEDERAL INCOME TAXES:
The Savings Bank has qualified under provisions of the Internal Revenue Code
which permits the Savings Bank to deduct from taxable income an allowance for
bad debts based on a percentage of taxable income before such deduction. The Tax
Reform Act of 1969 gradually reduced this reduction to 40% for years beginning
in 1979. The Tax Reform Act of 1986 reduced this deduction to 8% beginning in
1988.
Appropriated and unappropriated retained income at June 30, 1995 included
earnings of approximately $641,000, representing such bad debt deductions for
which no provision for federal income taxes has been made. In the future, if the
Savings Bank does not meet the federal income tax requirements necessary to
permit it to deduct an allowance for bad debts, the Savings Bank will be subject
to federal income tax at the then current corporate rate. Management does not
contemplate any action which would cause such cumulative bad debt deduction to
be subject to federal income taxes, although it is possible that changes in
legislation could, at a future date require recapture of all or part of this bad
debt deduction.
An analysis of income tax expense, setting forth the reasons for the
variations from the statutory rate is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30
---------------------- ----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal income taxes at the statutory rate of 34%..... $ 33,361 45,774 58,876 93,028 71,974
Bad debt deduction.................................... -- -- -- (13,300) 22,000
Other, primarily surtax exemptions.................... (1,234) (2,693) (11,076) (1,365) (8,798)
---------- ---------- ---------- ---------- ----------
$ 32,127 43,081 47,800 78,363 85,176
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
32.7% 32.0% 27.6% 28.6% 40.2%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
JUNE 30
------------------
1995 1994
MARCH 31, -------- --------
1996
------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets arising from:
Loan loss reserve......................................... $ 23,700 15,000 13,300
Deferred loan fees and costs.............................. 11,200 15,500 19,700
Basis of investments...................................... 2,000 2,000 2,000
------------ -------- --------
Total deferred tax assets............................... 36,900 32,500 35,000
------------ -------- --------
Deferred tax liabilities arising from:
Accrual to cash conversion................................ 33,600 30,300 19,500
Depreciation.............................................. 20,100 20,800 21,700
FHLB stock................................................ 46,700 42,000 36,600
------------ -------- --------
Total deferred tax liabilities.......................... (100,400 ) (93,100) (77,800)
------------ -------- --------
Net deferred tax liability.................................. $ 63,500 60,600 42,800
------------ -------- --------
------------ -------- --------
</TABLE>
F-18
<PAGE>
The Savings Bank has not recorded a valuation allowance, as the deferred tax
assets are presently considered to be realizable based on the level of
anticipated future taxable income. Net deferred tax liabilities and federal
income tax expense in future years can be significantly affected by changes in
enacted tax rates.
The components of deferred income tax expense (credit) are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30
---------------------- ----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Loan origination fees................................. $ 4,200 600 4,200 5,500 6,300
FHLB stock dividend................................... 4,700 5,100 5,400 3,900 3,000
Depreciation.......................................... (700) (700) (900) 200 2,000
Accrual to cash conversion............................ 3,500 6,300 10,800 19,800 (10,300)
Bad debt reserves and other........................... (8,800) 400 (1,700) (13,300) (9,000)
---------- ---------- ---------- ---------- ----------
$ 2,900 11,700 17,800 16,100 (8,000)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
13. CONTINGENCY -- SAIF RECAPITALIZATION:
The deposits of savings associations such as the Savings Bank are presently
insured by the SAIF, which together with the BIF, are the two insurance funds
administered by the FDIC. On November 14, 1995, the FDIC revised the premium
schedule for BIF-insured banks to provide a range of .00% to .27% (subject to a
$2,000 minimum) of deposits (as compared to the current range of .23% to .31% of
deposits for SAIF-insured institutions) due to the BIF achieving its statutory
reserve ratio. As a result, BIF members generally pay substantially lower
premiums than the SAIF members. It is anticipated that the SAIF will not be
adequately recapitalized until 2002, absent a substantial increase in premium
rates or the imposition of special assessments or other significant
developments, such as a merger of the SAIF and the BIF. As a result of this
disparity, SAIF members have been placed at a significant, competitive
disadvantage to BIF members due to higher costs for deposit insurance. A
recapitalization plan under consideration by the Treasury Department, the FDIC,
the OTS and the Congress reportedly provides for a one-time assessment of .80%
to .85% to be imposed on all deposits assessed at the SAIF rates in order to
recapitalize the SAIF and eliminate the disparity, and an eventual merger of the
SAIF and the BIF.
The Savings Bank currently is unable to predict the likelihood of
legislation effecting these changes, although a consensus appears to be
developing in this regard. If such an assessment was effected based on deposits
as of March 31, 1995, as proposed, the Savings Bank's pro rate share would
amount to approximately $136,100 to $144,600 after taxes, respectively, assuming
a 34% tax rate.
14. PLAN OF CONVERSION:
On May 31, 1996, the Savings Bank's Board of Directors adopted a Plan of
Conversion (the "Plan") to convert the Savings Bank from a state chartered
mutual savings bank to a state chartered stock savings bank, which will then
become a wholly owned subsidiary of a holding company formed in connection with
the Conversion. The holding company will issue common stock to be sold in the
conversion and will use a portion of the net proceeds thereof which it does not
retain to purchase the capital stock of the Savings Bank. The Plan is subject to
approval by the regulatory authorities and the members of the Savings Bank at a
special meeting.
At the time of conversion, the Savings Bank will establish a liquidation
account in an amount equal to its net worth as reflected in its latest balance
sheet used in its final conversion Prospectus. The liquidation account will be
maintained for the benefit of eligible deposit account holders who continue to
maintain their deposit accounts in the Savings Bank after conversion. Only in
the event of a complete liquidation will each deposit account holder be entitled
to receive a liquidation distribution from the liquidation account in the amount
of the then current adjusted subaccount balance for deposit accounts then held
before any liquidation distribution may be made with respect to common stock.
Dividends paid by the Savings Bank subsequent to the conversion cannot be paid
from this liquidation account.
F-19
<PAGE>
The Savings Bank may not declare or pay a cash dividend on or repurchase any
of its common stock if its net worth would thereby be reduced below either the
aggregate amount then required for the liquidation account or the minimum
regulatory capital requirements imposed by the federal and state regulations.
No conversion costs had been incurred as of March 31, 1996. If the
conversion is ultimately successful, conversion costs will be accounted for as a
reduction of the stock proceeds. If the conversion is unsuccessful, conversion
costs will be charged to the Savings Bank's operations.
F-20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE HOLDING COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY SECURITY, OTHER THAN THE
COMMON SHARES OFFERED HEREBY, TO ANY PERSON 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 DELIVERY OF
THIS PROSPECTUS WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS TO ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUMMARY....................................................... 3
SELECTED FINANCIAL INFORMATION AND OTHER DATA............................ 10
RISK FACTORS............................................................. 11
USE OF PROCEEDS.......................................................... 14
MARKET FOR THE COMMON SHARES............................................. 15
DIVIDEND POLICY.......................................................... 15
REGULATORY CAPITAL COMPLIANCE............................................ 16
CAPITALIZATION........................................................... 17
PRO FORMA DATA........................................................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS........................................................... 22
RECENT DEVELOPMENTS...................................................... 34
THE BUSINESS OF THE BANK................................................. 35
MANAGEMENT............................................................... 48
REGULATION............................................................... 53
TAXATION................................................................. 61
THE CONVERSION........................................................... 63
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY AND THE BANK.......... 76
DESCRIPTION OF AUTHORIZED SHARES......................................... 79
REGISTRATION REQUIREMENTS................................................ 80
LEGAL MATTERS............................................................ 80
EXPERTS.................................................................. 80
ADDITIONAL INFORMATION................................................... 80
FINANCIAL STATEMENTS..................................................... F-1
</TABLE>
UP TO 402,500 COMMON SHARES
FOUNDATION BANCORP, INC.
---------------------
PROSPECTUS
---------------------
CHARLES WEBB & COMPANY
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<C> <S> <C>
* Legal Fees and Expenses $ 85,000
* Printing, Postage and Mailing $ 25,000
* Appraisal Fees and Expenses $ 15,000
* Accounting Fees and Expenses $ 25,000
* Filing Fees $ 11,000
* Conversion Agent Fees $ 5,000
* Other Expenses $ 5,000
** Underwriting Fees and Expenses $ 80,000
---------
Total estimated expenses..................................................... $ 251,000
---------
---------
</TABLE>
- ------------------------
* Estimated.
** The Holding Company and the Bank have retained Charles Webb & Company
("Webb") to consult, advise and assist in the sale of the Common Shares in
the Offering on a "best efforts" basis. Webb will receive a financial
advisory fee in the amount of $50,000. In addition, the Holding Company will
reimburse Webb for certain expenses, including reasonable legal fees, not to
exceed $30,000. If the Holding Company and Webb deem necessary, Webb may
enter into agreements ("Selected Dealers Agreements") with other National
Association of Securities Dealers, Inc., member firms ("Selected Dealers")
for assistance in the sale of Common Shares. Selected Dealers will receive
fees equal to 4% of the aggregate purchase price of Common Shares sold, if
any, pursuant to Selected Dealer Agreements.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) OHIO REVISED CODE
Division (E) of Section 1701.13 of the Ohio Revised Code governs
indemnification by a corporation and provides as follows:
(E)(1) A corporation may indemnify or agree to 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, trustee, officer, employee, or agent of another
corporation, domestic or foreign, nonprofit or for profit, partnership, joint
venture, trust, or other enterprise, against expenses, including attorney's
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,
or 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 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, he had
reasonable cause to believe that his conduct was unlawful.
(2) A corporation may indemnify or agree to 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, trustee, officer, employee or agent of
another corporation, domestic or foreign, nonprofit or for profit, partnership,
joint venture, trust, or other enterprise, against expenses, including
attorney's fees, actually and
II-1
<PAGE>
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, except that no
indemnification shall be made in respect of any of the following:
(a) Any claim, issue, or matter as to which such person is adjudged to
be liable for negligence or misconduct in the performance of his duty to the
corporation unless, and only to the extent that the court of common pleas or
the court in which such action or suit was brought determines 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 as the court of common pleas or such other
court shall deem proper;
(b) Any action or suit in which the only liability asserted against a
director is pursuant to section 1701.95 of the Revised Code.
(3) To the extent that a director, trustee, officer, employee, or agent has
been successful on the merits or otherwise in defense of any action, suit, or
proceeding referred to in divisions (E)(1) and (2) of this section, or in
defense of any claim, issue, or matter therein, he shall be indemnified against
expenses, including attorney's fees, actually and reasonably incurred by him in
connection with the action, suit, or proceeding.
(4) Any indemnification under divisions (E)(1) and (2) 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,
trustee, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in divisions (E)(1) and (2)
of this section. Such determination shall be made as follows:
(a) By a majority vote of a quorum consisting of directors of the
indemnifying corporation who were not and are not parties to or threatened
with any such action, suit, or proceeding;
(b) If the quorum described in division (E)(4)(a) of this section is not
obtainable or if a majority vote of a quorum of disinterested directors so
directs, in a written opinion by independent legal counsel other than an
attorney, or a firm having associated with it an attorney, who has been
retained by or who has performed services for the corporation or any person
to be indemnified within the past five years;
(c) By the shareholders; or
(d) By the court of common pleas or the court in which such action,
suit, or proceeding was brought.
Any determination made by the disinterested directors under division
(E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this
section shall be promptly communicated to the person who threatened or brought
the action or suit by or in the right of the corporation under division (E)(2)
of this section, and within ten days after receipt of such notification, such
person shall have the right to petition the court of common pleas or the court
in which action or suit was brought to review the reasonableness of such
determination.
(5)(a) Unless at the time of a director's act or omission that is the
subject of an action, suit, or proceeding referred to in divisions (E)(1) and
(2) of this section, the articles or the regulations of a corporation state by
specific reference to this division that the provisions of this division do not
apply to the corporation and unless the only liability asserted against a
director in an action, suit, or proceeding referred to in divisions (E)(1) and
(2) of this section is pursuant to section 1701.95 of the Revised Code,
expenses, including attorney's fees, incurred by a director in defending the
action, suit, or proceeding shall be paid by the corporation as they are
incurred, in advance of the final disposition of the action, suit, or proceeding
upon receipt of an undertaking by or on behalf of the director in which he
agrees to do both of the following:
II-2
<PAGE>
(i) Repay such amount if it is proved by clear and convincing evidence
in a court of competent jurisdiction that his action or failure to act
involved an act or omission undertaken with deliberate intent to cause
injury to the corporation or undertaken with reckless disregard for the best
interests of the corporation;
(ii) Reasonably cooperate with the corporation concerning the action,
suit, or proceeding.
(b) Expenses, including attorney's fees, incurred by a director, trustee,
officer, employee, or agent in defending any action, suit, or proceeding
referred to in divisions (E)(1) and (2) of this section, may be paid by the
corporation as they are incurred, in advance of the final disposition of the
action, suit, or proceeding as authorized by the directors in the specific case
upon receipt of an undertaking by or on behalf of the director, trustee,
officer, employee, or agent to repay such amount, if it ultimately is determined
that he is not entitled to be indemnified by the corporation.
(6) The indemnification authorized by this section shall not be exclusive
of, and shall be in addition to, any other rights granted to those seeking
indemnification under the articles or the regulations or any agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
trustee, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
(7) A corporation may purchase and maintain insurance or furnish similar
protection, including but not limited to trust funds, letters of credit, or
self-insurance, on behalf of or for 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, trustee, officer, employee, or agent
of another corporation, domestic or foreign, nonprofit or profit, partnership,
joint venture, trust, or other enterprise, against any liability asserted
against him and incurred by him in 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. Insurance may be purchased from
or maintained with a person in which the corporation has a financial interest.
(8) The authority of a corporation to indemnify persons pursuant to
divisions (E)(1) and (2) of this section does not limit the payment of expenses
as they are incurred, indemnification, insurance, or other protection that may
be provided pursuant to divisions (E)(5), (6), and (7) of this section.
Divisions (E)(1) and (2) of this section do not create any obligation to repay
or return payments made by the corporation pursuant to division (E)(5), (6), or
(7).
(9) As used in this division, references to "corporation" includes all
constituent corporations in a consolidation or merger and the new or surviving
corporation, so that any person who is or was a director, officer, employee, or
agent of such a constituent corporation, or is or was serving at the request of
such constituent corporation as a director, trustee, officer, employee, or agent
of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust, or other enterprise, shall stand in the same
position under this section with respect to the new or surviving corporation as
he would if he had served the new or surviving corporation in the same capacity.
(b) THE BANK'S AMENDED CONSTITUTION
Article Eight of the Amended Constitution of the Bank provides for
indemnification of officers and directors as follows:
SECTION 1. To the fullest extent permitted by applicable law, this Bank
shall indemnify or agree to 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 this Bank, by reason of the fact that
he is or was a director or officer of this Bank, or is or was serving at the
request of this Bank as a director, trustee, officer, employee, or agent of
another corporation, domestic or foreign, nonprofit or for profit, partnership,
joint venture, trust, or other enterprise, against expenses, including
attorney's 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
II-3
<PAGE>
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of this Bank 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 or 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 he
reasonably believed to be in or not opposed to the best interests of this Bank
and, with respect to any criminal action or proceeding, he had reasonable cause
to believe that his conduct was unlawful.
SECTION 2. This Bank shall indemnify or agree to 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 this Bank to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of this Bank or is or was serving at the request of this Bank as a
director, trustee, officer, employee, or agent of another corporation, domestic
or foreign, nonprofit or for profit, partnership, joint venture, trust or other
enterprise, against expenses, including attorney's 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 this Bank, except that no
indemnification shall be made in respect of any of the following:
(A) Any claim, issue or matter as to which such person is adjudged to be
liable for negligence or misconduct in the performance of his duty to this
Bank unless, and only to the extent that, the Court of Common Pleas of
Hamilton County, Ohio, or the court in which such action or suit was brought
determines 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 as the Court of Common
Pleas of Hamilton County, Ohio, or such other court shall deem proper;
(B) Any action or suit in which the only liability asserted against a
director is pursuant to 1701.95 of the Ohio Revised Code.
SECTION 3. To the extent that a director or officer has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 1 or 2 of this Article Eight, or in defense of any claim, issue, or
matter therein, he shall be indemnified against expenses, including attorney's
fees, actually and reasonably incurred by him in connection with the action,
suit, or proceeding.
SECTION 4. Any indemnification under Sections 1 or 2 of this Article Eight,
unless ordered by a court, shall be made by this Bank only as authorized in the
specific case upon a determination that indemnification of the director or
officer is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article Eight. Such
determination shall be made as follows:
(A) By a majority vote of a quorum consisting of directors of this Bank
who were not and are not parties to or threatened with any such action,
suit, or proceeding;
(B) If the quorum described in Subsection (A) of this Section 4 is not
obtainable or if a majority vote of a quorum of disinterested directors so
directs, in a written opinion by independent legal counsel other than an
attorney, or a firm having associated with it an attorney, who has been
retained by or who has performed services for this Bank or any person to be
indemnified within the past five years;
(C) By the shareholders;
(D) By the Court of Common Pleas of Hamilton County, Ohio, or the court
in which such action, suit, or proceeding was brought.
Any determination made by the disinterested directors under Subsection (A)
of this Section 4 or by independent legal counsel under Subsection (B) of this
Section 4 shall be promptly communicated to the person who threatened or brought
the action or suit by or in the right of this Bank under Section 2 of this
Article Eight, and within ten days after receipt of such notification, such
person shall have the right to petition the Court of Common Pleas of Hamilton
County, Ohio, or the court in which such action or suit was brought to review
the reasonableness of such determination.
II-4
<PAGE>
SECTION 5.
(A) Expenses, including attorney's fees, incurred by a director in defending
the action, suit, or proceeding shall be paid by this Bank as they are incurred,
in advance of the final disposition of the action, suit, or proceeding upon
receipt of an undertaking by or on behalf of the director in which he agrees to
do both of the following:
(i) Repay such amount if it is proved by clear and convincing evidence
in a court of competent jurisdiction that his action or failure to act
involved an act or omission undertaken with deliberate intent to cause
injury to this Bank or undertaken with reckless disregard for the best
interests of this Bank;
(ii) Reasonably cooperate with this Bank concerning the action, suit, or
proceeding.
(B) Expenses, including attorney's fees, incurred by a director, trustee,
officer, employee, or agent in defending any action, suit, or proceeding
referred to in Section 2 of this Article Eight, may be paid by this Bank as they
are incurred, in advance of the final disposition of the action, suit, or
proceeding as authorized by the directors in the specific case upon receipt of
an undertaking by or on behalf of the director, trustee, officer, employee, or
agent to repay such amount, if it ultimately is determined that he is not
entitled to be indemnified by this Bank.
SECTION 6. The indemnification authorized by this Article Eight shall not
be exclusive of, and shall be in addition to, any other rights granted to those
seeking indemnification under the Articles or the Constitution of this Bank or
any agreement, vote of shareholders or disinterested directors, or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director or officer and shall inure to the benefit of the heirs, executors,
and administrators of such a person.
SECTION 7. This Bank may purchase and maintain insurance or furnish similar
protection, including but not limited to trust funds, letters of credit, or
self-insurance, on behalf of or for any person who is or was a director,
officer, employee, or agent of this Bank, or is or was serving at the request of
this Bank as a director, trustee, officer, employee, or agent of another
corporation, domestic or foreign, nonprofit or for profit, partnership, joint
venture, trust, or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not this Bank would have the power to indemnify him against such
liability under this section. Insurance may be purchased from or maintained with
a person in which this Bank has a financial interest.
SECTION 8. The authority of this Bank to indemnify persons pursuant to
Sections 1 or 2 of this Article Eight does not limit the payment of expenses as
they are incurred, indemnification, insurance, or other protection that may be
provided pursuant to Sections 5, 6 and 7 of this Article Eight. Sections 1 and 2
of this Article Eight do not create any obligation to repay or return payments
made by this Bank pursuant to Sections 5, 6 or 7 of this Article Eight.
SECTION 9. As used in this Article Eight, references to this Bank include
all constituent corporations in a consolidation or merger and the new or
surviving corporation, so that any person who is or was a director, officer,
employee, or agent of such a constituent corporation, or is or was serving at
the request of such constituent corporation as a director, trustee, officer,
employee, or agent of another corporation, domestic or foreign, nonprofit or for
profit, partnership, joint venture, trust, or other enterprise, shall stand in
the same position under this section with respect to the new or surviving
corporation as he would if he had served the new or surviving corporation in the
same capacity.
SECTION 10. Any action, suit or proceeding to determine a claim for
indemnification under this Article Eight may be maintained by the person
claiming such indemnification, or by the Bank, in the Court of Common Pleas of
Hamilton County, Ohio. This Bank and (by claiming such indemnification) each
such person consent to the exercise of jurisdiction over its or his person by
the Court of Common Pleas of Hamilton County, Ohio, in any such action, suit or
proceeding.
(c) THE HOLDING COMPANY'S CODE OF REGULATIONS
Article Five of the Holding Company's Code of Regulations provides for the
indemnification of officers and directors as follows:
II-5
<PAGE>
SECTION 5.01. MANDATORY INDEMNIFICATION. The corporation shall indemnify
any officer or director of the corporation 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
(including, without limitation, any action threatened or instituted 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, trustee, officer, employee or agent of
another corporation (domestic or foreign, nonprofit or for profit), partnership,
joint venture, trust or other enterprise, against expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs), 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, he had no reasonable cause to believe his conduct was unlawful. A
person claiming indemnification under this Section 5.01 shall be presumed, in
respect of any act or omission giving rise to such claim for indemnification, to
have 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 matter, to have had no reasonable cause to believe his conduct was
unlawful, and the termination of any action, suit or proceeding by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, rebut such presumption.
SECTION 5.02. COURT-APPROVED INDEMNIFICATION. Anything contained in the
Regulations or elsewhere to the contrary notwithstanding:
(A) the corporation shall not indemnify any officer or director of the
corporation who was a party to any completed action or suit instituted 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, trustee, officer, employee or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, in respect of any claim, issue or matter asserted
in such action or suit as to which he shall have been adjudged to be liable
for acting with reckless disregard for the best interests of the corporation
or misconduct (other than negligence) in the performance of his duty to the
corporation unless and only to the extent that the Court of Common Pleas of
Hamilton County, Ohio, or the court in which such action or suit was brought
shall determine upon application that, despite such adjudication of
liability, and in view of all the circumstances of the case, he is fairly
and reasonably entitled to such indemnity as such Court of Common Pleas or
such other court shall deem proper; and
(B) the corporation shall promptly make any such unpaid indemnification
as is determined by a court to be proper as contemplated by this Section
5.02.
SECTION 5.03. INDEMNIFICATION FOR EXPENSES. Anything contained in the
Regulations or elsewhere to the contrary notwithstanding, to the extent that an
officer or director of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
5.01, or in defense of any claim, issue or matter therein, he shall be promptly
indemnified by the corporation against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript costs)
actually and reasonably incurred by him in connection therewith.
SECTION 5.04 DETERMINATION REQUIRED. Any indemnification required under
Section 5.01 and not precluded under Section 5.02 shall be made by the
corporation only upon a determination that such indemnification of the officer
or director is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 5.01. Such determination may be made
only (A) by a majority vote of a quorum consisting of directors of the
corporation who were not and are not parties to, or threatened with, any such
action, suit or proceeding, or (B) if such a quorum is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a written opinion
by independent legal counsel other than an attorney, or a firm having associated
with it an attorney, who has been retained by or who has performed services for
the corporation, or any person to be indemnified, within the past five years, or
(C) by the shareholders, or (D) by the Court of Common Pleas of Hamilton County,
Ohio, or (if the corporation is a party thereto) the court in which such action,
suit or proceeding was brought, if any; any such determination may be made by a
court under division (D) of this Section 5.04 at any time including, without
limitation, any time before, during or after the time when any such
determination may be requested of, be under consideration by or
II-6
<PAGE>
have been denied or disregarded by the disinterested directors under division
(A) or by independent legal counsel under division (B) or by the shareholders
under division (C) of this Section 5.04; and no failure for any reason to make
any such determination, and no decision for any reason to deny any such
determination, by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by the shareholders under
division (C) of this Section 5.04 shall be evidence in rebuttal of the
presumption recited in Section 5.01. Any determination made by the disinterested
directors under division (A) or by independent legal counsel under division (B)
of this Section 5.04 to make indemnification in respect of any claim, issue or
matter asserted in an action or suit threatened or brought by or in the right of
the corporation shall be promptly communicated to the person who threatened or
brought such action or suit, and within ten (10) days after receipt of such
notification such person shall have the right to petition the Court of Common
Pleas of Hamilton County, Ohio, or the court in which such action or suit was
brought, if any, to review the reasonableness of such determination.
SECTION 5.05. ADVANCES FOR EXPENSES. Expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs) incurred in defending any action, suit or proceeding referred to in
Section 5.01 shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding to or on behalf of the officer or
director promptly as such expenses are incurred by him, but only if such officer
or director shall first agree, in writing, to repay all amounts so paid in
respect of any claim, issue or other matter asserted in such action, suit or
proceeding in defense of which he shall not have been successful on the merits
or otherwise:
(A) if it shall ultimately be determined as provided in Section 5.04
that he is not entitled to be indemnified by the corporation as provided
under Section 5.01; or
(B) if, in respect of any claim, issue or other matter asserted by or in
the right of the corporation in such action or suit, he shall have been
adjudged to be liable for acting with reckless disregard for the best
interests of the corporation or misconduct (other than negligence) in the
performance of his duty to the corporation, unless and only to the extent
that the Court of Common Pleas of Hamilton County, Ohio, or the court in
which such action or suit was brought shall determine upon application that,
despite such adjudication of liability, and in view of all the
circumstances, he is fairly and reasonably entitled to all or part of such
indemnification.
SECTION 5.06. ARTICLE FIVE NOT EXCLUSIVE. The indemnification provided by
this Article Five shall not be deemed exclusive of any other rights to which any
person seeking indemnification may be entitled under the Articles or the
Regulations or any agreement, vote of shareholders or disinterested directors,
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be an officer or director of the corporation and shall inure
to the benefit of the heirs, executors, and administrators of such a person.
SECTION 5.07. INSURANCE. The corporation may 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, trustee, officer, employee, or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the obligation or the power to
indemnify him against such liability under the provisions of this Article Five.
SECTION 5.08. CERTAIN DEFINITIONS. For purposes of this Article Five, and
as examples and not by way of limitation:
(A) A person claiming indemnification under this Article 5 shall be
deemed to have been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 5.01, or in defense of any
claim, issue or other matter therein, if such action, suit or proceeding
shall be terminated as to such person, with or without prejudice, without
the entry of a judgment or order against him, without a conviction of him,
without the imposition of a fine upon him and without his payment or
agreement to pay any amount in settlement thereof (whether or not any such
termination is based upon a judicial or other determination of the lack of
merit of the claims made against him or otherwise results in a vindication
of him); and
II-7
<PAGE>
(B) References to an "other enterprise" shall include employee benefit
plans; references to a "fine" shall include any excise taxes assessed on a
person with respect to an 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
best interests 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" within the meaning of that term as used in
this Article Five.
SECTION 5.09. VENUE. Any action, suit or proceeding to determine a claim
for indemnification under this Article Five may be maintained by the person
claiming such indemnification, or by the corporation, in the Court of Common
Pleas of Hamilton County, Ohio. The corporation and (by claiming such
indemnification) each such person consent to the exercise of jurisdiction over
its or his person by the Court of Common Pleas of Hamilton County, Ohio, in any
such action, suit or proceeding.
(c) INDEMNIFICATION AGREEMENTS
(i) AGREEMENT WITH KELLER & COMPANY, INC.
The Bank has agreed to indemnify Keller & Company, Inc. ("Keller"), the firm
retained by the Bank to provide the appraisal of the pro forma market value of
the Bank, as converted, in connection with certain matters related to the
appraisal. The Bank will indemnify Keller, its employees and affiliates, for
certain costs and expenses, including reasonable legal fees, in connection with
claims or litigation relating to the appraisal and arising out of any
misstatement or untrue statement of a material fact in information supplied to
Keller by the Bank or by an intentional omission by the Bank to state a material
fact in the information so provided, except where Keller has been negligent or
at fault.
(ii) AGREEMENT WITH WEBB
The Holding Company and the Bank have agreed to indemnify and hold Webb and
its directors, officers, employees, agents and any controlling person harmless
against any and all loss, liability, claim, damage or expense (including the
fees and disbursements of counsel reasonably incurred) arising out of any untrue
statement, or alleged untrue statement, of a material fact contained in the
Summary Proxy Statement or the Prospectus, any application to regulatory
authorities, any "blue sky" application, or any other related document prepared
or executed by or on behalf of the Bank with its consent in connection with, or
in contemplation of, the transactions contemplated by the Agency Agreement by
and among Webb, the Holding Company and the Bank, or any omission therefrom of a
material fact required to be stated therein, unless such untrue statement or
omission, or alleged untrue statement or omission, was made in reliance upon,
and in conformity with, written information regarding Webb furnished to the Bank
by Webb expressly for use in the Summary Proxy Statement or the Prospectus.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No securities of the Holding Company have been sold by the Holding Company
without registration pursuant to the Act, except as follows:
On April 16, 1996, in connection with the incorporation of the Holding
Company, 100 common shares, without par value, of the Holding Company (the
"Securities") were sold for an aggregate purchase price of $100 pursuant to
Section 4(2) of the Act in a transaction not involving any public offering. The
Securities were sold to Laird L. Lazelle, the President of the Holding Company,
who had access to all material information about the Holding Company. The
Securities were offered without the use of any form of general solicitation or
advertising. No underwriter was involved in the transaction, and no commission,
discount or other remuneration was paid or given in connection with the sale of
the Securities. Under the terms of the Subscription Agreement between the
Holding Company and Mr. Lazelle, the Securities will be repurchased by the
Holding Company for $100 on the effective date of the Conversion.
II-8
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
<TABLE>
<C> <S>
1 Form of Agency Agreement with Charles Webb & Company
10.3 Form of Employment Agreement between Foundation Bancorp, Inc. and Laird L. Lazelle
(proposed)
10.4 Form of Employment Agreement between Foundation Savings Bank and Laird L. Lazelle
(proposed)
23.1 Consent of Clark, Schaefer, Hackett & Co.
99.6 Appraisal Report
</TABLE>
- ------------------------
(b) Financial Statement Schedules:
No financial statement schedules are filed because the required information
is not applicable or is included in the financial statements of the Bank or
related notes.
ITEM 17. UNDERTAKINGS.
(a) The undersigned, Foundation Bancorp, Inc., 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
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.
(2) That, for the purpose of determining any liability under the 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 deemed to 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.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of Foundation Bancorp,
Inc., pursuant to the foregoing provisions or otherwise, Foundation Bancorp,
Inc. has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act, and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Foundation
Bancorp, Inc. of expenses incurred or paid by a director, officer or controlling
person of Foundation Bancorp, Inc. 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, Foundation Bancorp, Inc. will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-9
<PAGE>
REGISTRATION NO. 333-6069
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
TO
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FOUNDATION BANCORP, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FOUNDATION BANCORP, INC.
PRE-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT ON FORM S-1
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Agency Agreement with Charles Webb & Company
10.3 Form of Employment Agreement between Foundation Bancorp, Inc. and Laird L. Lazelle (proposed)
10.4 Form of Employment Agreement between Foundation Savings Bank and Laird L. Lazelle (proposed)
23.1 Consent of Clark, Schaefer, Hackett & Co.
99.6 Appraisal Report
</TABLE>
<PAGE>
FOUNDATION BANCORP, INC.
Up to 402,500 Shares of Common Stock
(No Par Value)
Subscription Price $10.00 Per Share
AGENCY AGREEMENT
June _____, 1996
Charles Webb & Company
211 Bradenton Drive
Dublin, Ohio 43017-5034
Ladies and Gentlemen:
Foundation Bancorp, Inc., Cincinnati, Ohio, an Ohio corporation (the
"Company"), and Foundation Savings Bank, Cincinnati, Ohio, an Ohio chartered
mutual savings and loan association (the "Bank"; references to the "Bank"
include the Bank in the mutual or stock form, as indicated by the context), with
its deposit accounts insured by the Savings Association Insurance Fund ("SAIF")
administered by the Federal Deposit Insurance Corporation ("FDIC"), hereby
confirm their agreements with Charles Webb & Company ("Agent") as follows:
Section 1. THE OFFERING. The Company is offering up to 402,500 shares of
common stock, no par value (the "Shares" or "Common Stock") (subject to increase
up to 462,875 shares), in a concurrent subscription offering (the "Subscription
Offering") and community offering (the "Community Offering") in connection with
the conversion of the Bank from an Ohio chartered mutual savings and loan
association to an Ohio chartered stock savings and loan association and the
issuance of all of the Bank's outstanding common stock to the Company (the
"Conversion") pursuant to the Bank's plan of conversion (the "Plan").
Non-transferable rights to subscribe for the Common Stock ("Subscription
Rights") will be granted, in the following priority in the Subscription
Offering: (1) the Bank's depositors with account balances of $50.00 or more as
of May 31, 1995 ("Eligible Account Holders"); (2) the Company's Employee Stock
Ownership Plan (the "ESOP"); and (3) the Bank's depositors with account balances
of $50.00 or more as of June 30, 1996 and who are not Eligible Account Holders
("Supplemental Eligible Account Holders"). The Company will issue such number
of shares of its Common Stock upon the Conversion as is subscribed for up to
402,500 shares (subject to increase up to 462,875 Shares) at a purchase price of
$10.00 per share (the "Purchase Price").
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 2
The Company is concurrently offering all shares of Common Stock not
subscribed for in the Subscription Offering, if any, in a direct Community
Offering to members of the general public with a preference to natural persons
residing in Hamilton County, Ohio (the Subscription Offering and Community
Offering are collectively referred to as the "Offering").
It is acknowledged that the purchase of Shares in the Offering is subject
to the maximum and minimum purchase limitations as described in the Plan and
that the Company and the Bank may reject, in whole or in part, any orders
received in the Community Offering. Collectively, these transactions are
referred to herein as the "Conversion."
The Company has filed with the Securities and Exchange Commission
("Commission") a registration statement on Form S-1 (File No. ______________)
("Registration Statement") containing a prospectus relating to the Offering for
the registration of the Shares under the Securities Act of 1933 ("1933 Act"),
and has filed such amendments thereto, if any, and such amended prospectuses as
may have been required to 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 any prospectus
is filed by the Company pursuant to Rule 424(b) or (c) of the rules and
regulations of the Commission under the 1933 Act ("1933 Act Regulations")
differing from the prospectus on file at the time the Registration Statement
initially becomes effective, the term "Prospectus" shall refer to the prospectus
filed pursuant to Rule 424(b) or (c) from and after the time said prospectus is
filed with the Commission.
The Bank has filed with the Office of Thrift Supervision ("OTS") and the
Superintendent of the Ohio Division of Financial Institutions (the "Ohio
Superintendent") an Application for Approval of Conversion on Form AC, including
the Prospectus, and has filed such amendments thereto, if any, as may have been
required by the OTS and the Ohio Superintendent (as so amended, the "Conversion
Application") pursuant to the Home Owners' Loan Act, as amended ("HOLA"), and 12
C.F.R. Part 563b with respect to the OTS and Ohio Revised Code Section 1155.27
and Ohio Administrative Code 1301:2-1-16 with respect to the Ohio Superintendent
(the "Conversion Regulations"). The Conversion Application has been approved
by the OTS and the Ohio Superintendent and the related Prospectus and proxy
statement have been authorized for use by the OTS and the Ohio Superintendent.
In addition, the Company has filed with the OTS an application on Form H-(e)1-S
("Holding Company Application"), and has filed such amendments thereto, if any,
as may have been required by the OTS, to become registered as a savings and loan
holding company under the HOLA.
Section 2. RETENTION OF THE AGENT; COMPENSATION; SALE AND DELIVERY OF THE
SHARES. Subject to the terms and conditions of this Agreement, the Company and
the Bank hereby
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 3
appoint Agent as their financial advisor and investment banker to advise and
assist the Company and the Bank with respect to the Company's sale of the Shares
in the Offering.
On the basis of the representations, warranties, and agreements herein
contained, but subject to the terms and conditions of this Agreement, the Agent
accepts such appointment and agrees to furnish the Company and the Bank with
the "Conversion Services" as such term is defined in the letter agreement dated
December 27, 1995 and accepted by the Bank on April 11, 1996 ("Letter
Agreement") between the Bank and Agent. The Agent shall not be required to
purchase any Shares and shall not be obligated to take any action which is
inconsistent with any law, regulation, decision or order applicable to the
Conversion or the Offering. If the Company and the Bank deem necessary, the
Agent will assemble and manage a selling group of broker-dealers which are
members of the National Association of Securities Dealers, Inc. ("NASD") to
participate in the solicitation of purchase orders for shares under a selected
dealers' agreement in the form attached hereto as Exhibit A.
In the event the Company is unable to sell a minimum of 297,500 Shares
during the Offering (including any permitted extensions thereof) herein
provided, this Agreement shall terminate and the Company shall refund to any
persons who have subscribed for any of the Shares, the full amount which it may
have received from them plus accrued interest as set forth in the Prospectus;
and none of the parties to this Agreement shall have any obligation to the other
parties hereunder, except as set forth in this Section 2 and in Sections 9, 11
and 12 hereof.
If all conditions precedent to the consummation of the Conversion,
including, without limitation, the receipt of subscriptions for the minimum
number of Shares permitted to be sold in the Conversion on the basis of the most
recent updated Conversion appraisal, are satisfied, the Company agrees to issue,
or have issued, the Shares sold in the Offering and to release for delivery
certificates for such Shares on the Closing Date (as hereinafter defined)
against payment to the Company by any means authorized by the Plan; provided,
however, that no funds shall be released to the Company until the conditions
specified in Section 10 hereof shall have been complied with to the reasonable
satisfaction of the Agent and its counsel. The release of Shares against
payment therefor shall be made at a time, date and place acceptable to the
Company, the Bank and the Agent. Certificates for Shares shall be delivered
directly to the purchasers in accordance with their directions. The date upon
which the Company shall release or deliver the Shares sold in the Offering, in
accordance with the terms herein, is called the "Closing Date."
The Company and the Bank, jointly and severally, agree as follows:
(a) To pay to the Agent a financial advisory fee of $50,000 for its
services hereunder, payable as follows: $5,000 was payable upon the
execution and delivery of the Letter Agreement; $10,000 was payable
upon filing of the
Draft of June 7, 1996
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Charles Webb & Company
Page 4
Registration Statement, Conversion Application and Holding Company
Application; $10,000 was payable upon the mailing of the Prospectus to
the Eligible Account Holders and Supplemental Eligible Account
Holders; and, $25,000 shall be payable upon the closing of the Plan
and the Offering.
(b) In addition to the above fee, the Company and the Bank also agree to
reimburse the Agent, from time to time upon Agent's request, for its
reasonable out-of-pocket expenses, including without limitation,
travel, meals and lodging, photocopying, telephone and facsimile
expenses and NASD and other filing fees. Such reimbursement will be
based upon documentation and will not exceed $5,000 without the prior
approval of the Company and the Bank. The Company and the Bank
further agree to reimburse the Agent for the reasonable legal fees and
expenses of its legal counsel not to exceed $25,000.
(c) The Company and the Bank shall also pay all other expenses of the
Conversion and the Offering, including, without limitation, filing and
registration fees of the OTS, Ohio Superintendent, FDIC, SEC, "Blue
Sky," NASD and Nasdaq, the fees of the Company's and the Bank's
accountants, conversion agent, attorneys, appraiser, transfer agent
and registrar, and data processing, printing, mailing and marketing
expenses associated with the Conversion and the Offering. If Agent
incurs any of such expenses on behalf of the Company or the Bank, they
shall reimburse the Agent, from time to time upon the Agent's request,
for all of such expenses it has incurred on behalf of them or either
of them and the amount thereof shall not be counted against the $5,000
limitation set forth in paragraph (b) above.
(d) Selected broker/dealers who assist in the Offering will be paid a fee
equal to 4.0% of the aggregate Purchase Price of the Shares sold by
them in the Offering. [Agent's total fee for such Shares shall equal
1.5% of the aggregate Purchase Price of the Shares sold by selected
broker/dealers. In the event any fees are paid to Agent pursuant to
this subsection (c), such fees shall be in lieu of, and not in
addition to, the fee paid pursuant to subsection (a) above.] Fees
with respect to purchases effected with the assistance of a
broker/dealer other than Agent shall be transmitted by the Agent to
such broker/dealer. The decision to utilize selected broker/dealers
will be made by the Company and the Bank.
(e) In addition, the Agent shall be paid a fee of $5,000 for the
performance of its duties as conversion agent and to arrange for data
processing services related to the Offering, which the Agent will
subcontract to a third party.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 5
Agent shall be deemed to have earned and shall be entitled to be paid all
of the financial advisory fee set forth above and shall further be entitled to
reimbursement of its out-of-pocket expenses as set forth above should the
Conversion be terminated or abandoned for any reason not attributable to the
action or inaction of the Agent.
The term of the Agent's duties to act as financial advisor and investment
banker to the Company and the Bank under this Agreement and the Letter
Agreement shall expire on April 10, 1997 unless the Conversion is terminated or
abandoned at any time prior to such date, in which case the term of the Agent's
duties shall terminate upon such termination or abandonment. Until such date or
earlier termination or abandonment, Agent shall have the exclusive right to
perform the Conversion Services for the Company and the Bank. Accordingly, they
agree they will not directly or indirectly retain any other financial advisor or
investment banker to perform for them financial advisory or investment banking
services like or similar to the Conversion Services. Thereafter, if the parties
wish to continue the relationship, a fee will be negotiated and an agreement
with respect to specific financial advisory services will be entered into at
that time. Should discussions commence for a specific acquisition transaction
by, or a sale of, the Company or the Bank during the period in which Agent is
acting as a financial advisor to the Company and the Bank, the general financial
advisory and investment banking relationship as set forth in this Section 2 will
terminate with respect to the specific transaction. If the Company or the Bank
and Agent wish to have Agent initiate, negotiate and/or process a specific
transaction, a fee will be negotiated and an agreement will be entered into at
that time.
Section 3. PROSPECTUS; OFFERING. The Shares are to be initially offered in
the Offering at the Subscription Price as defined and set forth on the cover
page of the Prospectus.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND BANK. 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; and no stop order has been issued with respect thereto
and no proceedings therefore have been initiated or to the best knowledge of the
Company or the Bank threatened by the Commission. At the time the Registration
Statement, including the Prospectus contained therein (including any amendment
or supplement thereto), became effective, the Registration Statement complied as
to form in all material respects with the requirements of the 1933 Act and the
regulations promulgated thereunder and the Registration Statement including the
Prospectus contained therein (including any amendment or supplement thereto),
any Blue Sky Application or any Sales Information (as such terms are defined in
Section 11 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
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 6
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 Rule 424(b) or (c) Prospectus was filed with or mailed to the
Commission for filing and at the Closing Date referred to in Section 5, the
Registration Statement including the Prospectus contained therein (including any
amendment or supplement thereto) and any Blue Sky Application or any Sales
Information 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 were made,
not misleading; provided, however, that the representations and warranties in
this subsection (a) shall not apply to statements or omissions made in reliance
upon and in conformity with written information furnished to the Company or the
Bank by the Agent expressly regarding the Agent for use under the caption
"_______________________" or written statements or omissions from any Sales
Information or information filed pursuant to state securities or blue sky laws
or regulations regarding the Agent.
(b) The Conversion Application was approved by the OTS on__________________
_______, 1996 and by the Ohio Superintendent on _________________, 1996 and the
related Prospectus and the proxy statement of the Bank relating to the special
meeting of members at which the Plan will be considered for approval by the
Bank's eligible voting members have been authorized for use by the OTS and the
Ohio Superintendent. At the time of the approval of the Conversion Application,
including the Prospectus, by the OTS and the Ohio Superintendent and at all
times subsequent thereto until the Closing Date, the Conversion Application,
including the Prospectus, will comply in all material respects with the
Conversion Regulations. The Conversion Application, including the Prospectus,
does 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
subsection (b) shall not apply to statements or omissions made in reliance upon
and in conformity with written information furnished to the Company or the Bank
by the Agent expressly regarding the Agent for use in the Prospectus under the
caption "_______________________________________" or statements in or omissions
from any Sales Information or information regarding the Agent filed pursuant to
state securities or blue sky laws or regulations.
(c) The Company filed the Holding Company Application with the OTS
pursuant to the HOLA, which was approved on __________________.
(d) No order has been issued by the OTS, Ohio Superintendent, the
Commission, the FDIC (and hereinafter reference to the FDIC shall include the
SAIF), or any other governmental agency preventing or suspending the use of the
Prospectus and no action by or before any
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 7
governmental entity to revoke any approval, authorization or order of
effectiveness related to the Conversion is, to the best knowledge of the Company
and the Bank, pending or threatened.
(e) The Plan has been adopted by the Boards of Directors of the Company and
the Bank as required by the Conversion Regulations.
(f) To the best knowledge of the Company, no person has sought to obtain
review of the final action of the OTS or the Ohio Superintendent in approving
the Plan or the Conversion or the OTS in approving the Holding Company
Application pursuant to the HOLA, Conversion Regulations, Blue Sky Laws, or any
other statute or regulation.
(g) The Bank has been duly incorporated and is validly existing as an Ohio
chartered savings and loan association in mutual form of organization in good
standing under the laws of the State of Ohio and upon the Conversion will become
a duly organized and validly existing Ohio chartered and loan association in
capital stock form of organization, in both instances duly authorized to conduct
its business and own its property as described in the Registration Statement and
the Prospectus; the Bank has obtained all licenses, permits and other
governmental authorizations currently required for the conduct of its business
except those that individually or in the aggregate would not materially
adversely affect the financial condition, earnings, capital, assets or
properties of the Company and the Bank taken as a whole; all such licenses,
permits and governmental authorizations are in full force and effect and the
Bank is complying therewith in all material respects; the Bank is duly qualified
as a foreign corporation in each jurisdiction in which the conduct of its
business requires such qualification, except where the failure to be so
qualified in one or more of such jurisdictions would not have a material adverse
effect on the condition, financial or otherwise, or the earnings, capital,
assets, properties or business of the Bank and the Company taken as a whole.
The Bank does not own any equity securities or any equity interest in any
business enterprise except as described in the Prospectus.
(h) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Ohio 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; and the
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the conduct of its business requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on the condition, financial or otherwise, earnings, capital, assets, properties
or the business, of the Company and the Bank taken as a whole. The Company has
obtained all licenses, permits and other governmental authorizations currently
required for the conduct of its business except those that individually or in
the aggregate would not materially adversely affect the financial condition,
earnings, capital, assets or properties of the Company and the Bank taken as a
whole; all such
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 8
licenses, permits and governmental authorizations are in full force and effect,
and the Company is complying therewith in all material respects.
(i) At the Closing Date, the Plan will have been duly adopted by the Board
of Directors of both the Company and the Bank, the Company and the Bank will
have completed all conditions precedent to the Conversion specified in the Plan
and the offer and sale of the Shares will have been conducted in all material
respects in accordance with the Plan, the Conversion Regulations (except as
modified or waived in writing by the OTS and Ohio Superintendent) and with all
other applicable laws, regulations, decisions and orders, including all terms,
conditions, requirements and provisions precedent to the Conversion imposed upon
the Company or the Bank by the OTS, the Ohio Superintendent, the FDIC, the
Commission or any other regulatory authority and in the manner described in the
Prospectus. At the Closing Date, to the best knowledge of the Company and the
Bank, no person will have sought to obtain review of the final action of the OTS
or the Ohio Superintendent in approving the Plan or in approving the Conversion
or the OTS in approving the Holding Company Application pursuant to any statute
or regulation.
(j) The Bank is a member of the Federal Home Loan Bank of Cincinnati
("FHLB-Cincinnati"); the deposit accounts of the Bank are insured by the FDIC
under the SAIF up to applicable limits; and no proceedings for the termination
or revocation of such membership or insurance are to the best knowledge of the
Company or the Bank, pending or threatened.
(k) The Company and the Bank have good and marketable title to all real
property and other assets material to the business of the Company and the Bank
and to those properties and assets described in the Registration Statement and
Prospectus as owned by them, free and clear of all liens, charges, encumbrances
or restrictions, except such as are described in the Registration Statement and
Prospectus or are not material to the business of the Company and the Bank; 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, including those
described in the Registration Statement and Prospectus, are in full force and
effect.
(l) The Company and the Bank have received an opinion of their special
counsel, Vorys, Sater, Seymour and Pease, Cincinnati, Ohio, with respect to the
federal income tax consequences of the Conversion and an opinion from Clark,
Schaefer, Hackett & Co., independent certified public accountants with respect
to the Ohio income tax consequences of the Conversion as described in the
Registration Statement and Prospectus; and the facts and representations upon
which such opinions are based are truthful, accurate and complete, and neither
the Company nor the Bank has taken any actions inconsistent therewith.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 9
(m) 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 in the case of
the Bank, as of the Closing Date, will have such approvals, authority and orders
to issue and sell the capital stock of the Bank to the Company and in the case
of the Company, as of the Closing Date, will have such approvals, authority and
orders to issue and sell the Shares to be sold by the Company as provided herein
and as described in the Prospectus.
(n) The Company and the Bank are not in violation of any directive from
the OTS, Ohio Superintendent, FDIC or any other governmental agency to make any
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 OTS,
Ohio Superintendent and the FDIC); 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 (including, without
limitation, regulations, decisions, directives and orders of the OTS, Ohio
Superintendent, the Commission and the FDIC) and, except as set forth in the
Registration Statement and the Prospectus, there is no suit, proceeding, charge
or action before or by any court, regulatory authority or governmental agency or
body, pending or, to the best knowledge of the Company and 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
and as 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, assets or business of the Company or the Bank
taken as a whole or which would materially affect their properties and assets.
(o) The consolidated financial statements and the schedules and notes
thereto which are included in the Registration Statement and which are a part of
the Prospectus fairly present the consolidated financial condition, results of
operations, retained earnings and cash flows of the Bank at the respective dates
thereof and for the respective periods covered thereby and comply as to form in
all material respects with the applicable accounting requirements of Title 12 of
the Code of Federal Regulations and generally accepted accounting principles
("GAAP"). Such financial statements have been prepared in accordance with GAAP
consistently applied through the periods involved (except as noted therein),
present fairly in all material respects the information required to be stated
therein and are consistent with the most recent financial statements and other
reports filed by the Bank with the OTS and the Ohio Superintendent, except that
accounting principles employed in such regulatory filings conform to the
requirements of such authorities and not necessarily to GAAP. The other
financial, statistical and pro forma information and related notes included in
the Prospectus present fairly the information shown therein on a basis
consistent with the audited and unaudited financial statements of the Bank
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 10
included in the Registration Statement and the Prospectus, and as to the pro
forma adjustments, the adjustments made therein have been properly applied on
the bases described therein.
(p) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as may otherwise be stated
therein: (i) there has not been any material adverse change in the condition,
financial or otherwise, of the Company and the Bank, or in the earnings,
capital, properties or business of the Company and the Bank considered as one
enterprise, whether or not arising in the ordinary course of business; (ii)
there has not been any material increase in the debt of the Bank or in loans
past due 90 days or more or real estate acquired by foreclosure, by deed-in-lieu
of foreclosure or deemed in-substance foreclosure or any material decrease in
surplus and reserves or total assets of the Bank; (iii) neither the Company nor
the Bank has issued any securities or incurred any liability or obligation for
borrowing other than in the ordinary course of business; (iv) there have not
been any transactions entered into by the Company or the Bank, except with
respect to those transactions entered into in the ordinary course of business;
(v) 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 Prospectus; and (vi) neither the Company nor the Bank
has any material contingent liabilities of any kind, contingent or otherwise,
except as set forth in the Prospectus.
(q) As of the date hereof and as of the Closing Date, neither the Company
nor the Bank is in violation of its articles of incorporation or bylaws or
charter, constitution or bylaws, respectively, (and the Bank will not be in
violation of its charter, constitution or bylaws in capital stock form at the
time of consummation of the Conversion), or in default in the performance or
observance of any material obligation, agreement, covenant, or condition
contained in any contract, lease, loan agreement, indenture or other instrument
to which it is a party or by which it or any of its property may be bound, which
would result in a material adverse change in the condition (financial or
otherwise), earnings, capital assets, properties or business of the Company and
the Bank, considered as one enterprise. 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 binding Agreement of the Company and the Bank
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by (i) bankruptcy, insolvency, moratorium, reorganization,
conservatorship, receivership or other similar laws relating to or affecting the
enforcement or creditors' rights generally or the rights of creditors of insured
financial institutions and their holding companies, the accounts of whose
subsidiaries are insured by the FDIC, (ii) general equity principles regardless
of whether such enforceability is considered in a proceeding in equity or at
law, or (iii) laws relating to the safety and soundness of insured depository
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 11
institutions and their affiliates as set forth in 12 U.S.C. Section 1818(b), and
except to the extent, if any, that the provisions of Sections 11 and 12 hereof
may be unenforceable as against public policy or by applicable law, including
without limitation Section 23A of the Federal Reserve Act, 12 U.S.C. 371c
("Section 23A").
(r) No default exists, and no event has occurred which with notice or
lapse of time, or both, would constitute a material 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 instrument or agreement to which the Company or
the Bank is a party or by which any of them or any of their property is bound or
affected except such defaults which would not have a material adverse affect on
the condition, financial or otherwise, earnings, capital, assets, properties or
business of the Company and the Bank considered as one enterprise; such
agreements are in full force and effect; and no other party to any such
agreements has instituted or, to the best knowledge of the Company or the Bank,
threatened any action or proceeding wherein the Company or the Bank might be
alleged to be in default thereunder under circumstances where such action or
proceeding, if determined adversely to the Company or the Bank, would have a
material adverse effect on the Company and the Bank considered as one
enterprise.
(s) Upon consummation of the Conversion, the authorized, issued and
outstanding equity capital of the Company will be within the range set forth in
the Prospectus under the caption "Capitalization," and no shares of Common Stock
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 be duly and validly issued, fully paid and nonassessable;
no preemptive rights exist with respect to the Shares; and the terms and
provisions of the Shares will conform 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, subject to such claims as may be asserted
against the purchasers thereof by third-party claimants.
(t) No approval, authorization, consent or other order of any regulatory
or supervisory or other public authority is required to be obtained by the
Company or the Bank in connection with the execution and delivery of this
Agreement or the issuance of the Shares except for the approval of the OTS, the
Ohio Superintendent, the Commission and any necessary qualification,
notification, registration or exemption under the securities or blue sky laws of
the various states in which the Shares are to be offered, and except as may be
required under the rules and regulations of the NASD and the Nasdaq Stock
Market.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 12
(u) Clark, Schaefer, Hackett & Co., which has certified the
____________________ financial statements of the Bank as of
_______________________________ and for each of the years in the three year
period ended _______________________, which are included in the Registration
Statement and the Prospectus, are, with respect to the Company and the Bank,
independent public accountants within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants, the Conversion
Regulations and the 1933 Act Regulations.
(v) Keller & Company, Inc., which has prepared the Bank's Conversion
Valuation Appraisal Report as of ____________________, as amended or
supplemented, if so amended or supplemented ("Appraisal"), is independent of the
Company and the Bank within the meaning of the Conversion Regulations.
(w) The Company and the Bank have timely filed all required federal, state
and local tax returns; the Company and the Bank have paid all taxes that have
become due and payable in respect of such returns, and except where permitted to
be extended, have made adequate reserves for similar future tax liabilities and
no deficiency has been asserted with respect thereto by any taxing authority.
(x) The Bank is in compliance in all material respects with the applicable
financial record-keeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, and the regulations and rules
thereunder.
(y) Neither the Company nor the Bank have made any payment of funds of the
Bank as a loan for the purchase of the Shares 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.
(z) Prior to the Conversion, the Bank was not authorized to issue shares
of capital stock and neither the Company nor the Bank: (i) issued any securities
within the last 18 months (except for notes to evidence other bank loans or
other liabilities in the ordinary course of business or as described in the
Prospectus and with respect to the Company; (ii) had any dealings within the 12
months prior to the date hereof 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 Offering and purchases and sales of United States
government and agency and other securities in the ordinary course of business;
(iii) entered into a financial or management consulting agreement except as
contemplated hereunder and except for the Letter Agreement; and (iv) engaged any
intermediary between the Agent and the Company and the Bank in connection with
the Offering, and no person is being compensated in any manner for such service.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 13
(aa) The Company and the Bank have not relied upon the Agent or the Agent's
counsel for any legal, tax or accounting advice in connection with the
Conversion.
(bb) The Company is not required to be registered under the Investment
Company Act of 1940, as amended.
(cc) All documents delivered by the Bank or the Company or their
representatives in connection with the issuance and sale of the Common Stock, or
in connection with the Agent's exercise of due diligence, were on the dates on
which they were delivered, accurate and complete in all material respects.
(dd) The records of account holders, depositors, borrowers and other
members of the Bank are accurate and complete in all material respects. Agent
shall have no liability to any person for the accuracy, reliability and
completeness of such records or for any denial or reduction of a subscription to
purchase Common Stock, whether as a result of a properly calculated allocation
pursuant to the Plan or otherwise, based upon such records.
(ee) To the best knowledge of the Company and the Bank, the Company and the
Bank are in compliance with all laws, rules and regulations relating to
environmental protection, and neither the Company nor the Bank has been notified
or is otherwise aware that either of them is potentially liable, or is
considered potentially liable, under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or any other Federal, state
or local environmental laws and regulations. To the best knowledge of the
Company and the Bank, no action, suits, regulatory investigations or other
proceedings are pending, or to the best knowledge of the Company and the Bank,
threatened against the Company or the Bank relating to environmental protection,
nor does the Company or the Bank have any reason to believe any such proceedings
may be brought against either of them. To the best knowledge of the Company and
the Bank, no disposal, release or discharge of hazardous or toxic substances,
pollutants or contaminants, including petroleum and gas products, as any of such
terms may be defined under federal, state or local law, has occurred on, in, at
or about any of the facilities or properties of the Company or the Bank.
Any certificates signed by an officer of the Company or the Bank pursuant
to the conditions of this Agreement and delivered to the Agent or their counsel
that refers to this Agreement shall be deemed to be a representation and
warranty by the Company or the Bank to the Agent as to the matters covered
thereby with the same effect as if such representation and warranty were set
forth herein.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 14
Section 5. REPRESENTATIONS AND WARRANTIES OF THE AGENT. Agent represents
and warrants to the Company and the Bank that:
(a) Agent is a corporation and is validly existing in good standing under
the laws of the State of Ohio with full power and authority to provide the
services to be furnished to the Bank and the Company hereunder.
(b) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary action on the part of Agent, and this Agreement has been duly and
validly executed and delivered by Agent and is the legal, valid and binding
agreement of Agent, enforceable in accordance with its terms.
(c) Agent and its employees, and to the best knowledge of Agent, its
agents and representatives, who shall perform any of the services hereunder
shall be duly authorized and empowered, and shall have all licenses, approvals
and permits necessary to perform such services; and Agent is a registered
selling agent in each of the jurisdictions in which the Shares are to be offered
by the Company in reliance upon Agent as a registered selling agent as set forth
in the blue sky memorandum prepared with respect to the Offering.
(d) The execution and delivery of this Agreement by Agent, the
consummation of the transactions contemplated hereby and compliance with the
terms and provision hereof will not materially conflict with, or result in a
material breach of, any of the terms, provision or conditions of, or constitute
a material default (or event which with notice or lapse of time or both would
constitute a default) under, the articles of incorporation of Agent or any
material agreement, indenture or other instrument to which Agent is a party or
by which it or its property is bound.
(e) No approval of any regulatory or supervisory or other public authority
is required in connection with Agent's execution and delivery of this Agreement,
except as may have been received.
(f) There is no suit or proceeding or charge or action before or by any
court, regulatory authority or government agency or body or, to the knowledge of
Agent, pending or threatened, which might materially and adversely affect
Agent's performance of this Agreement.
Section 6. COVENANTS OF THE COMPANY AND THE BANK. The Company and the Bank
hereby jointly and severally covenant with the Agent as follows:
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 15
(a) The Company will not, at any time after the date the Registration
Statement is declared effective, file any amendment or supplement to the
Registration Statement without providing the Agent and its counsel an
opportunity to review such amendment or supplement or file any amendment or
supplement to which the Agent or its counsel shall reasonably object.
(b) The Bank will not, at any time after the Conversion Application is
approved by the OTS and the Ohio Superintendent, file any amendment or
supplement to such Conversion Application without providing the Agent and its
counsel an opportunity to review such amendment or supplement or file any
amendment or supplement to which the Agent or its counsel shall reasonably
object.
(c) The Company will not file any amendment or supplement to such Holding
Company Application without providing the Agent and its counsel an opportunity
to review such amendment or supplement or file any amendment or supplement to
which the Agent or its counsel shall reasonably object.
(d) The Company and the Bank will use their best efforts to cause any
post-effective amendment to the Registration Statement to be declared effective
by the Commission and any post-effective amendment to the Conversion Application
to be approved by the OTS and the Ohio Superintendent and will immediately upon
receipt of any information concerning the events listed below notify the Agent:
(i) when the Registration Statement, as amended, has become effective; (ii) when
the Conversion Application, as amended, has been approved by the OTS and the
Ohio Superintendent; (iii) when the Holding Company Application, as amended, has
been approved by the OTS; (iv) of any comments from the Commission, the OTS, the
Ohio Superintendent, or any other governmental entity with respect to the
Conversion or the transactions contemplated by this Agreement; (v) of the
request by the Commission, the OTS, the Ohio Superintendent, or any other
governmental entity for any amendment or supplement to the Registration
Statement, the Conversion Application or the Holding Company Application, or for
additional information; (vi) of the issuance by the Commission, the OTS, the
Ohio Superintendent or any other governmental entity of any order or other
action suspending the Offering or the use of the Registration Statement or the
Prospectus or any other filing of the Company or the Bank under the Conversion
Regulations, or other applicable law, or the threat of any such action; (vii)
the issuance by the Commission, the OTS, the Ohio Superintendent, or any other
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the approval of the Conversion Application or Holding
Company Application, or of the initiation or threat of initiation or threat of
any proceedings for any such purpose; or (viii) of the occurrence of any event
mentioned in paragraph (h) below. The Company and the Bank will make every
reasonable effort (i) to prevent the issuance by the Commission, the OTS, the
Ohio Superintendent, or any state authority of any such order and,
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 16
if any such order shall at any time be issued, (ii) to obtain the lifting
thereof at the earliest possible time.
(e) The Company and the Bank will deliver to the Agent and to its counsel
two conformed copies of the Registration Statement, the Conversion Application
and the Holding Company Application, as originally filed and of each amendment
or supplement thereto, including all exhibits. The Company and the Bank also
will deliver such additional copies of the foregoing documents to counsel to the
Agent as may be required for any NASD filings.
(f) The Company and the Bank will furnish to the Agent, 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 ("1934 Act"), such number of copies
of such Prospectus as the Agent may reasonably request for the purposes
contemplated by the 1933 Act, the 1933 Act Regulations, the 1934 Act or the
rules and regulations promulgated under the 1934 Act ("1934 Act Regulations").
The Company authorizes the Agent to use the Prospectus in any lawful manner
contemplated by the Plan in connection with the sale of the Shares.
(g) The Company and the Bank will comply with any and all terms,
conditions, requirements and provisions with respect to the Conversion and the
transactions contemplated thereby imposed by the Commission, the OTS and the
Ohio Superintendent to be complied with subsequent to the Closing Date and when
the Prospectus is required to be delivered, the Company and the Bank will
comply, at their own expense, with all requirements imposed upon them by the
Commission, the OTS and the Ohio Superintendent, including, without limitation,
Rule 10b-5 under the 1934 Act, in each case as from time to time in force, so
far as necessary to permit the continuance of sales or dealing in shares of
Common Stock during such period in accordance with the provisions hereof and the
Prospectus.
(h) If, at any time during the period when the Prospectus relating to the
Shares is required to be delivered, 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 opinion of counsel for the Company and the Bank or in the
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 the
Prospectus is delivered to a purchaser, the Company and the Bank will, at their
expense, prepare and file with the Commission, the OTS and the Ohio
Superintendent and furnish to the Agent 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 the Agent and its
counsel after a reasonable time for review) which will amend or supplement the
Registration Statement or Prospectus 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
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 17
statements therein, in light of the circumstances existing at the time the
Prospectus is delivered to a purchaser, not misleading. For the purpose of this
Agreement, the Company and the Bank each will timely furnish to the Agent such
information with respect to itself as the Agent may from time to time reasonably
request.
(i) The Company and the Bank will take all necessary actions, in
cooperating with the Agent, 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 or to exempt such Shares from registration, or to exempt
the Company as a broker-dealer and its officers, directors and employees as
broker-dealers or Agent under the Blue Sky Laws of such jurisdictions in which
the Shares are required under the Conversion Regulations to be sold or as the
Agent and the Company and the Bank may reasonably agree upon; provided, however,
that the Company shall not be obligated to file any general consent to service
of process or 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 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 jurisdiction.
(j) The liquidation account for the benefit of Eligible Account Holders
and Supplemental Eligible Account Holders will be duly established and
maintained in accordance with the Conversion Regulations.
(k) The Company and the Bank will not sell or issue, contract to sell or
otherwise dispose of, for a period of 90 days after the Closing Date, without
the Agent's prior written consent, any shares of Common Stock other than in
connection with any plan or arrangement described in the Prospectus.
(l) The Company shall register its Common Stock under Section 12(g) of the
1934 Act concurrent with the Offering pursuant to the Plan and shall request
that such registration be effective upon completion of the Conversion. The
Company shall maintain the effectiveness of such registration for not less than
three years.
(m) For so long as the Common Stock is registered under the 1934 Act or
for three years from the date hereof, whichever period is greater, the Company
will furnish to its stockholders as soon as practicable after the end of each
fiscal year an annual report of the Company (including a consolidated balance
sheet and statements of consolidated income, stockholders' 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 and the 1934 Act).
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 18
(n) During the period of three years from the date hereof, the Company
will furnish to the Agent: (i) as soon as practicable after such information is
publicly available, a copy of each report of the Company 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 all
proxy statements and annual reports to stockholders), (ii) a copy of each other
non-confidential report of the Company mailed to its stockholders or filed with
the Commission, the Ohio Superintendent or any other supervisory or regulatory
authority or any 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 additional documents and information with respect to the Company
or the Bank as the Agent may reasonably request; and (iii) from time to time,
such other nonconfidential information concerning the Company or the Bank as the
Agent may reasonably request.
(o) 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."
(p) Neither the Company nor the Bank will distribute any prospectus,
offering circular or other offering material in connection with the offer and
sale of the Shares without first notifying the Agent and unless permitted by the
Conversion Regulations, the 1933 Act, the 1933 Act Regulations and state
securities or blue sky laws in any state in which the Shares are registered or
qualified for sale or exempt from registration.
(q) The Company will use its best efforts to (i) encourage and assist two
market makers to establish and maintain a market for the Shares and (ii) list
the Shares on a national securities exchange or on the Nasdaq Stock Market
effective on or prior to the Closing Date.
(r) The Bank will maintain appropriate arrangements for depositing all
funds received from persons mailing subscriptions for or orders to purchase
Shares in the Offering in an interest bearing account as 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 Offering in accordance with the Plan
and as described in the Prospectus or until refunds of such funds have been made
to the persons entitled thereto or withdrawal authorizations canceled in
accordance with the Plan and as described in the Prospectus. The Bank will
maintain such records of all funds received to permit the funds of each
subscriber to be separately insured by the FDIC (to the maximum extent
allowable) and to enable the Bank to make the 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.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 19
[(s) The Company will register as a savings and loan holding company under
the HOLA within 90 days of the Closing Date.]
(t) The Company and the Bank 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 Relating to Free Riding and
Withholding."
(u) The Bank will not amend the Plan of Conversion in any manner that, in
the reasonable opinion of the Agent, would materially and adversely affect the
sale of the shares or the terms of this Agreement without first notifying and
receiving the consent of the Agent.
(v) The records of account holders, depositors, borrowers and other
members of the Bank are complete in all material respects. Agent shall have no
liability to any person for the accuracy, reliability and completeness of such
records or for any denial or reduction of a subscription to purchase Common
Stock, whether as a result of a properly calculated allocation pursuant to the
Plan or otherwise, based upon such records.
(w) The Agent shall assist the Company in connection with the allocation
of the Shares in the event of an oversubscription and the Company shall provide
the Agent with all information necessary for the allocation of the Shares and
such information shall be accurate and reliable.
(x) Prior to the Closing Date, the Company and the Bank will inform the
Agent of any event or circumstances of which they are aware as a result of which
the Registration Statement, the Conversion Application and/or Prospectus, as
then amended or supplemented, would contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading.
(y) Prior to the Closing Date, the Plan shall have been approved by the
eligible voting members of the Bank in accordance with the Conversion
Regulations and the provisions of Bank's mutual charter, constitution and
bylaws.
(z) The Bank and the Company will conduct the Conversion in accordance
with the Plan, all applicable laws and regulations and in the manner described
in the Prospectus.
(aa) The Company will comply with the provisions of Rule 158 of the 1933
Act Regulations.
(bb) The Company will file with the Commission, within the time period
specified by statute or regulation, a report on Form SR pursuant to Rule 463 of
the 1933 Act Regulations.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 20
(cc) The Company and the Bank will take all necessary action, in
cooperation with the Agent, to quality the Shares for offering and sale under
the applicable Blue Sky laws of such states of the United States and other
jurisdictions as the Conversion Regulations and the Plan require and as the
Agent and the Company have agreed; provided, however, that the Company and the
Bank shall not be obligated to file any general consent to service of process or
to quality as a foreign corporation in any jurisdiction in which it is not so
qualified; and in each jurisdiction in which the shares have been so qualified,
the Company and the Bank will comply in all material respects will all
undertakings or commitments made by them under the Blue Sky Laws.
(dd) 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 10 hereof.
(ee) The Company and the Bank will conduct their businesses in material
compliance with all applicable federal and state laws, rules, regulations,
decisions, directives and orders, including all decisions, directives and orders
of the Commission, the OTS, the Ohio Superintendent and the FDIC.
(ff) Upon completion of the sale by the Company of the Shares contemplated
by the Prospectus, (i) the Bank will have been converted pursuant to the Plan to
an Ohio chartered stock savings and loan association, (ii) all of the authorized
and outstanding capital stock of the Bank will be owned by the Company, and
(iii) the Company will have no direct or indirect subsidiaries other than the
Bank. The Conversion will have been effected in accordance with all applicable
statutes, regulations, decisions and orders; and all terms, conditions,
requirements and provisions with respect to the Conversion (except those that
are conditions subsequent) imposed by the Commission, the OTS, the Ohio
Superintendent or any other governmental agency, 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.
(gg) The consummation of the transactions herein contemplated will not
conflict with or constitute a breach of, or default under, the articles of
incorporation and bylaws of the Company or the charter and bylaws of the Bank
(in either mutual or capital stock form); the consummation of the transactions
herein contemplated will not conflict with or constitute a breach of, or default
under, any material contract, lease or other instrument to which the Company or
the Bank has a beneficial interest, or any applicable law, rule, regulation or
order or violate any authorization, approval, judgment, decree, order, statute,
rule or regulation applicable to the Company or the Bank, except for such
conflicts or violations which would not have a material adverse effect on the
condition, financial or otherwise, and results of operations of the Company and
the Bank; with the exception of the liquidation account established in the
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 21
Conversion, the consummation of the transactions herein contemplated will not
result in the creation of any lien, charge or encumbrance upon any property of
the Company or the Bank.
Section 7. COVENANTS OF AGENT. Agent hereby covenants with the Company and
the Bank as follows:
(a) During the period when the Prospectus is used, Agent will comply, in
all material respects with all requirements imposed upon it by the OTS, the Ohio
Superintendent and, to the extent applicable, by the 1933 Act, the 1933 Act
Regulations, the 1934 Act and the 1934 Act Regulations, and Agent shall remain a
registered selling agent in all such jurisdictions in which the Company is so
relying for the sale of Shares as set forth in the blue sky memorandum with
respect to the Offering until the Conversion is consummated or terminated.
(b) Agent will distribute the Prospectus in connection with the sales of
the Common Stock in accordance with Conversion Regulations, the 1933 Act and the
1933 Act Regulations.
Section 8. [This Section intentionally left blank.]
Section 9. PAYMENT OF EXPENSES. Whether or not the Conversion is
completed or the sale of the Shares by the Company is consummated, the Company
and the Bank jointly and severally agree to pay or reimburse the Agent for: (a)
all filing fees in connection with all filings with the NASD or other regulatory
agencies and all stock exchanges or markets; (b) any stock issue or transfer
taxes which may be payable with respect to the sale of Shares; (c) all
reasonable expenses of the Conversion, including, but not limited to, the
Company and the Bank's attorneys' fees, transfer agent, registrar and other
agent charges, fees relating to auditing and accounting or other advisors and
costs of printing all documents necessary in connection with the Conversion; and
(d) all reasonable out-of-pocket expenses incurred by the Agent not to exceed
$5,000 (exclusive of legal fees and expenses which are not to exceed $25,000).
Such out-of-pocket expenses include, but are not limited to, travel,
communications and postage. However, such out-of-pocket expenses do not include
expenses incurred with respect to the matters set forth in (a) or (b) above. In
the event the Company is unable to sell a minimum of 297,500 Shares or the
Conversion is terminated or otherwise abandoned, the Company and the Bank shall
reimburse the Agent in accordance with Section 2 hereof and shall pay all
expenses required to be paid by this Section 9.
Section 10. CONDITIONS TO THE AGENT'S OBLIGATIONS. The Agent's
obligations hereunder, as to the Shares to be delivered at the Closing Date, are
subject, to the extent not waived by the Agent, to the condition that all
representations and warranties of the Company and the Bank herein are, at and as
of the commencement of the Offering and at and as of the Closing Date, true and
correct in all material respects, the condition that the Company and the Bank
shall have
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 22
performed all of their obligations hereunder to be performed on or before such
dates, and to the following further conditions:
(a) At the Closing Date, the Company and the Bank shall have conducted the
Conversion in accordance with the Plan, the Conversion Regulations, and all
other applicable laws, regulations, decisions and orders, including all terms,
conditions, requirements and provisions precedent to the Conversion imposed upon
them by the OTS, the Ohio Superintendent, the Commission and any state
securities agency.
(b) The Registration Statement shall have been declared effective by the
Commission, the Conversion Application approved by the OTS and the Ohio
Superintendent, and the Holding Company Application approved by the OTS not
later than 5:30 pm. on the date of this Agreement, or with the Agent's 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 therefore initiated or threatened by the Commission, or
any state authority and no order or other action suspending the authorization of
the Prospectus or the consummation of the Conversion shall have been issued or
proceedings therefore initiated or, to the best of the Company's and the Bank's
knowledge, threatened by the Commission, the OTS, the Ohio Superintendent or any
other federal or state authority.
(c) At the Closing Date, the Agent shall have received:
(1) The favorable opinion, dated as of the Closing Date and addressed
to the Agent and for its respective benefit, of Vorys, Sater, Seymour and
Pease, Cincinnati, Ohio, counsel for the Company and the Bank, in form and
substance satisfactory to counsel for the Agent 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 Ohio and has 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; and the Company is
qualified to do business as a foreign corporation and in good standing
in each jurisdiction in which the conduct of its business requires
such qualification, except where the failure to so qualify would not
have a material adverse effect on the financial condition, results of
operations, assets, properties or business of the Company.
(ii) The Bank has been duly incorporated and is validly existing
as an Ohio chartered savings and loan association in mutual form of
organization in good standing under the laws of the State of Ohio and,
upon consummation of the
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 23
Conversion, will become a duly organized and validly existing Ohio
chartered savings and loan association in capital stock form of
organization in good standing under the laws of the State of Ohio, in
both instances with full corporate power and authority to conduct its
business and own its property as described in the Registration
Statement and Prospectus; the Bank is duly qualified as a foreign
corporation to transact business in each jurisdiction in which the
failure to so qualify would have a material adverse effect on the
financial condition, results of operations or the business of the
Bank; and upon consummation of the Conversion, all of the issued and
outstanding capital stock of the Bank will be duly authorized and,
upon payment therefor, will be validly issued, fully paid and
nonassessable and all such capital stock will be owned of record, and
to the best of such counsel's knowledge, beneficially by the Company,
free and clear of any liens, encumbrances or claims.
(iii) The Bank is a member of the FHLB-Cincinnati. The deposit
accounts of the Bank are insured by the FDIC under the SAIF up to the
maximum amount allowed under law and, to the best of such counsel's
knowledge, no proceedings for the termination or revocation of such
membership or insurance are pending or threatened.
(iv) The description of the liquidation account as set forth in
the Prospectus under the caption "The Conversion--Liquidation Rights",
to the extent that such information constitutes matters of law or
legal conclusions, has been reviewed by such counsel and is accurate
in all material respects.
(v) Upon consummation of the Conversion, the authorized, issued
and outstanding capital stock of the Company will be within the range
set forth in the Prospectus under the caption "Capitalization," and no
shares of Common Stock have been issued prior to the Closing Date; at
the time of the Conversion, the Shares subscribed for pursuant to the
Offering 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
the Prospectus, will be duly and validly issued and fully paid and
non-assessable; the issuance of the Shares is not subject to
preemptive rights and the terms and provisions of the Shares conform
to the description thereof contained in the Prospectus and the form of
certificate used to evidence the Common Stock is in due and proper
form and complies with all applicable statutory requirements and the
regulations of the OTS and the Ohio Superintendent.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 24
(vi) The execution and delivery of this Agreement and the
consummation of the transactions contemplated thereby have been duly
and validly authorized by all necessary action on the part of the
Company and the Bank; and this Agreement is a valid and binding
obligation of the Company and the Bank, enforceable in accordance with
its terms, except as rights to indemnity and contribution thereunder
may be limited under applicable law and except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization, conservatorship, receivership or other similar laws
now or hereafter in effect relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of savings
institutions and their holding companies or by general equitable
principles, regardless of whether such enforceability is considered in
a proceeding in equity or at law; and to the best of such counsel's,
the execution and delivery of this Agreement, the incurrence of the
obligations herein set forth and the consummation of the transactions
contemplated will not conflict with or constitute a breach of, or
default under, and no event has occurred which, with notice or lapse
of time or both, would constitute a default under or result in the
creation or imposition of any lien, charge or encumbrance that would
have a material adverse effect on the financial condition, results of
operations or business of the Company and the Bank taken as a whole,
upon any property or assets of the Company or the Bank pursuant to any
material contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which the Company or the Bank is a party or by
which either of them may be bound, or to which any of the property or
assets of the Company or the Bank is subject (other than the
establishment of a liquidation account), nor will such execution or
delivery result in any violation of the provisions of the charter or
bylaws of the Company or the Bank, or any applicable federal or Ohio
law, act or regulation (except that no opinion need be rendered with
respect to the securities or blue sky laws of various jurisdictions or
the rules and regulations of the NASD).
(vii) The Conversion Application has been approved by the OTS and
the Ohio Superintendent and the Prospectus and the proxy statement of
the Bank has been authorized for use by the OTS and the Ohio
Superintendent. The OTS has approved the Holding Company Application,
and the purchase by the Company of all of the issued and outstanding
capital stock of the Bank has been authorized by the OTS and the Ohio
Superintendent and no action is pending or to the best of such
counsel's knowledge, threatened to revoke any such authorizations or
approvals.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 25
(viii) The Plan has been duly adopted by the required vote of the
directors of the Company and the Bank and approved by the eligible
voting members of the Bank in accordance with the Conversion
regulations and the applicable requirements of the Bank's charter,
constitution and bylaws.
(ix) Subject to the satisfaction of the conditions to the OTS and
the Ohio Superintendent approval of the Conversion, no further
approval, registration, authorization, consent or other order of or
notice to any governmental agency is required in connection with the
execution and delivery of this Agreement, the issuance of the Shares
and 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) and except as may be required under
the rules and regulations of the NASD (as to which no opinion need be
rendered).
(x) The Registration Statement is effective under the 1933 Act
and no stop order suspending the effectiveness has been issued under
the 1933 Act or proceedings therefor initiated or, to the best of such
counsel's knowledge, threatened by the Commission or any other
governmental agency.
(xi) At the time the Conversion Application, including the
Prospectus contained therein, was approved by the OTS and the Ohio
Superintendent, the Conversion Application, including the Prospectus
contained therein, complied as to form in all material respects with
the requirements of the Conversion Regulations (other than the
financial statements, the notes thereto, financial tables, and other
financial, statistical and appraisal data including therein, as to
which no opinion need be rendered).
(xii) At the time that the Registration Statement became
effective, (i) the Registration Statement (except as to financial
statements, the notes thereto, financial tables, financial,
statistical and appraisal data included therein, 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, the
notes thereto and other tabular, financial, statistical and appraisal
data included therein, 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.
(xiii) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened which are
required to be disclosed in the Registration Statement and Prospectus,
other than those disclosed
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 26
therein, and all pending legal and governmental proceedings to which
the Company or the Bank is a party or of which any of their property
is the object, which are not described in the Registration Statement
and the Prospectus, including ordinary routine litigation incidental
to the Company's or the Bank's business, are not material.
(xiv) To the best of 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
Conversion Application, the Registration Statement or required to be
filed as exhibits thereto other than those described or referred to
therein or filed as exhibits thereto and the descriptions thereof are
accurate.
(xv) The Company and the Bank have conducted the Conversion in
all material respects in accordance with the Plan and the Conversion
Regulations; the Plan complies with the Conversion Regulations; to the
best of such counsel's knowledge, no order has been issued by the OTS,
the Ohio Superintendent, the Commission or any state authority to
suspend the Offering or the use of the Prospectus, and no action for
such purposes has been instituted or, to the best of such counsel's
knowledge, threatened by the OTS, the Ohio Superintendent or the
Commission or any state authority and, to the best of such counsel's
knowledge, no person has sought to obtain regulatory or judicial
review of the final action of the OTS or the Ohio Superintendent as
applicable, approving or taking no objection to the Plan, the
Conversion Application, the Holding Company Application or the
Prospectus, as the case may be.
(xvi) To the best of such counsel's knowledge, the Company and
the Bank have obtained all licenses, permits and other governmental
authorizations currently required for the conduct of their respective
businesses as described in the Registration Statement and Prospectus,
except for licenses, approvals or authorizations the failure of which
to have would not result in a material adverse change in the financial
condition, results of operation or the business of the Company and the
Bank taken as a whole, and all such licenses, permits and other
governmental authorizations are in full force and effect, and the
Company and the Bank are in all materials respects complying
therewith.
(xvii) To the best of such counsel's knowledge, neither the
Company nor the Bank is in violation of its charter, constitution or
bylaws, or in default or violation in the performance or observance of
any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 27
agreement, note, lease or other instrument to which the Company or the
Bank is a party or by which the Company or the Bank or any of their
property may be bound in any respect that would have a material
adverse effect on the financial condition or results of operations of
the Company and the Bank taken as a whole.
(xviii) To the best of such counsel's knowledge, neither the
Company nor the Bank is in violation of any directive from the OTS,
the Ohio Superintendent or the FDIC to make any material change in the
method of conducting its respective business.
(xix) The information in the Prospectus under the captions
"Regulation," "The Conversion -- Tax Aspects," "Restriction on
Acquisition of the Company and the Bank," "Federal and State Taxation
(with respect to federal taxation only)," "Description of Capital
Stock of the Company," and "Description of the Capital Stock of the
Bank," to the extent that such information constitutes matters of law,
summaries of legal matters, documents or proceedings, or legal
conclusions, has been reviewed by such counsel and is correct in all
material respects.
In giving such opinion, such counsel may rely as to all matters of fact on
certificates of officers or directors of the Company and the Bank and
certificates of public officials. For purposes of such opinion, no proceedings
shall be deemed to be pending, no order or stop order shall be deemed to be
issued, and no action shall be deemed to be instituted unless, in each case, a
director or executive officer of the Company or the Bank shall have received a
copy of such proceedings, order, stop order or action. 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.
In addition, such counsel shall provide a letter stating that during the
preparation of the Registration Statement, Conversion Application and the
Prospectus, counsel participated in conferences with certain officers and other
representatives of the Bank and the Company, representatives of Agent, counsel
to Agent, representatives of the independent public accountants for the Bank and
the Company at which the contents of the Registration Statement, the Conversion
Application and the Prospectus and related matters were discussed 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, the Conversion Application and Prospectus, on the basis of the
foregoing (relying as to factual matters on certificates of officers and other
factual representations by the Bank and the Company), nothing has come to such
counsel's attention that caused them to believe that the Registration Statement
at the time it was declared effective by the SEC or the Prospectus as of its
date and as of the Closing Date,
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 28
contained or contains any untrue statement of a material fact or omitted or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such counsel shall express
no comment or opinion with respect to the financial statements, schedules and
other financial information and statistical and stock valuation data included,
or statistical methodology employed, in the Registration Statement, Conversion
Application and Prospectus).
(2) The favorable opinion, dated as of the Closing Date, of
Keating, Muething & Klekamp, Cincinnati, Ohio, the Agent's counsel,
with respect to such matters as the Agent may reasonably require.
Such opinion may rely upon the opinions of counsel to the Company and
the Bank, 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.
(d) At the Closing Date, the Agent shall receive a certificate of the
Chief Executive Officer and the principal financial or accounting officer of the
Company and a certificate of the Chief Executive Officer and the principal
financial or accounting officer of the Bank, both dated as of the Closing Date,
that states: (i) they have carefully reviewed the Prospectus and, in their
opinion, at the time the Prospectus became authorized for final use, the
Prospectus did not contain any 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 were made, not misleading; (ii)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus and since the date the Prospectus became authorized
for final use, no material adverse change in the condition, financial or
otherwise, or in the earnings, capital, properties or business of the Company
and the Bank considered as one enterprise has occurred and no other event has
occurred, which should have been set forth in an amendment or supplement to the
Prospectus which has not been so set forth, and the conditions set forth in this
Section 10 have been satisfied; (iii) the representations and warranties of the
Company and Bank made hereunder are true and correct with the same force and
effect a though expressly made at and as of the Closing Date; (iv) the Company
and the Bank have complied with all agreements and satisfied all conditions on
their part to be performed or satisfied at or prior to the Closing Date and will
comply in all material respects with all obligations to be satisfied by them
after Conversion; (v) no stop order suspending the effectiveness of the
Registration Statement has been initiated or, to the best knowledge of the
Company
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 29
or the Bank, threatened by the Commission or any state authority; (vi) no
order suspending the 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 are pending or, to the best
knowledge of the Company or the Bank, threatened by the OTS, the Ohio
Superintendent, the Commission, the FDIC or any state authority; and (vii) to
the best knowledge of the Company or the Bank, no person has sought to obtain
review of the final action of the OTS or the Ohio Superintendent approving
the Plan.
(e) 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 business of the Company and the
Bank considered as one enterprise, from that as of the latest dates as of which
such condition is set forth in the Prospectus other than transactions referred
to or contemplated therein; (ii) the Company or the Bank shall not have received
from the OTS, the Ohio Superintendent or the FDIC any direction (oral or
written) to make any material change in the method of conducting their business
with which it has not complied (which directive, if any, shall have been
disclosed to the Agent) or which materially and adversely would affect the
business, operations or financial condition or income of the Company and the
Bank considered as one enterprise; (iii) the Company and the Bank shall not 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; (iv) 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
best knowledge of the Company or the Bank, threatened against the Company or the
Bank or affecting any of their properties wherein an unfavorable decision,
ruling or finding would materially and adversely affect the business operations,
financial condition or income of the Company and the Bank considered as one
enterprise; and (v) the Shares have been qualified or registered for offering
and sale or exempted therefrom under the securities or blue sky laws of the
jurisdictions as the Agent shall have requested and as agreed to by the Company
and the Bank.
(f) Concurrently with the execution of this Agreement, the Agent shall
receive a letter from Clark, Schaefer, Hackett & Co. dated the date hereof and
addressed to the Agent: (i) confirming that Clark, Schaefer, Hackett & Co. is a
firm of independent public accountants within the meaning of the 1933 Act, the
1933 Act Regulations, 12 CFR Section 571.2(c)(3) and the Code of Professional
Ethics of the American Institute of Certified Public Accountants, and stating in
effect that in their opinion the consolidated financial statements of the Bank
as of __________________ and for the fiscal years ended _____________________
___________________________ as are included in the Registration Statement and
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, the 1933 Act Regulations, the Conversion Regulations, and GAAP applied
consistently; (ii) 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 consolidated financial statements of the Bank prepared by the Bank, a
reading of the minutes of the meetings of the Boards of Directors of the Bank
and the Company and the members of the Bank and consultations with
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 30
officers of the Bank responsible for financial and accounting matters, nothing
came to its attention which caused it to believe that: (A) the unaudited
financial statements of the Bank included in the Prospectus are not in
conformity with GAAP applied on a basis substantially consistent with that of
the audited financial statements included in the Prospectus; and (B) during the
period from that date of the latest audited consolidated financial statements
included in the Prospectus to a specified date not more than five business days
prior to the date hereof, there was any increase in borrowings or in
non-performing assets by the Company or the Bank; and (C) except as otherwise
discussed in the Prospectus there was any decrease in consolidated retained
earnings of the Bank at the date of such letter as compared with amounts shown
in the latest audited consolidated statement of condition included in the
Prospectus or there was any decrease in consolidated net income or net interest
income of the Bank for the number of full months commencing immediately after
the period covered by the latest audited consolidated income statement included
in the Prospectus and ended on the latest month end prior to the date of the
Prospectus or in such letter as compared to the corresponding period in the
preceding year (included in the Recent Developments Section of the Prospectus);
and (iii) stating that, in addition to the audit referred to in its opinion
included in the Prospectus and the performance of the procedures referred to in
clause (ii) of this subsection (f), it has compared with the general accounting
records of the Company and/or the Bank, as 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.
(g) At the Closing Date, the Agent shall receive a letter from Clark,
Schaefer, Hackett & Co. dated the Closing Date, addressed to the Agent,
confirming the statements made by them in the letter delivered by them pursuant
to subsection (f) of this Section 10, the "specified date" referred to in clause
(ii) of subsection (f) thereof to be a date specified in such letter, which
shall not be more than three business days prior to the Closing Date.
(h) At the Closing Date, the Agent shall receive a letter from Keller &
Company, Inc., dated the date thereof and addressed to counsel for the Agent,
(i) confirming that said firm is independent of the Company and the Bank and is
experienced and expert in the area of corporate appraisals within the meaning of
the Conversion Regulations, (ii) stating in effect that the Appraisal prepared
by such firm complies in all material respects with the applicable requirements
of the Conversion Regulations, and (iii) further stating that its opinion of the
aggregate pro forma market value of the Company and the Bank expressed in the
Appraisal as most recently updated, remains in effect.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 31
(i) The Company and the Bank shall not have sustained since the date of
the latest audited consolidated financial statements included in the Prospectus
any material loss or interference with their businesses 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.
(j) At or prior to the Closing Date, the Agent shall receive: (i) copies
of the letters from the OTS and the Ohio Superintendent approving the Conversion
Application and authorizing the use of the Prospectus; (ii) a copy of the order
from the Commission declaring the Registration Statement effective; (iii) a
certificate from the Ohio Superintendent evidencing the existence of the Bank;
(iv) a certificate of good standing from the State of Ohio evidencing the good
standing of the Company; (v) a certificate from the FDIC evidencing the Bank's
insurance of accounts; (vi) a certificate of the FHLB-Cincinnati evidencing the
Bank's membership thereof; (vii) a copy of the letter from the OTS approving the
Holding Company Application, and (viii) any other documents that the Agent shall
reasonably request.
(k) As soon as available after the Closing Date, the Agent shall receive,
upon request, a copy of the Bank's Ohio stock charter.
(l) Subsequent to the date hereof, there shall not have occurred any of
the following: (i) a suspension or limitation in trading in securities generally
on the New York Stock Exchange or in the over-the-counter market, or quotations
halted generally on the Nasdaq Stock Market, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities have been
required by either of such exchanges or the NASD or by order of the Commission
or any other governmental authority; (ii) a general moratorium on the operations
of commercial banks, Ohio or federal Banks or savings and loan associations or a
general moratorium on the withdrawal of deposits from commercial banks, Ohio or
federal Banks or savings and loan associations declared by federal or state
authorities; (iii) the engagement by the United States in hostilities which have
resulted in the declaration, on or after the date hereof, of a national
emergency or war; or (iv) a material decline in the price of equity or debt
securities in the effect of any of the above in the Agent's reasonable judgment,
makes it impracticable or inadvisable to proceed with the Offering or the
delivery of the Shares on the terms and in the manner contemplated in the
Registration Statement and Prospectus.
Section 11. INDEMNIFICATION.
(a) The Company and the Bank jointly and severally agree to indemnify and
hold harmless the Agent, each of its officers, directors, agents, servants and
employees and each person, if any, who controls the Agent 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
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 32
whatsoever (including but not limited to settlement expenses), joint or several,
that the Agent or any of them may suffer or to which the Agent and any such
persons may become subject under all applicable federal or state laws or
otherwise, and to promptly reimburse the Agent and any such persons upon written
demand for any expenses (including reasonable fees and disbursements of counsel)
incurred by the Agent or any of them in connection with investigating, preparing
to defend or defending any actions, proceedings or claims (whether commenced or
threatened) to the extent such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission contained in the
Registration Statement (or any amendment or supplement thereto), final
Prospectus (or any amendment or supplement thereto), the Conversion Application
(or any amendment or supplement thereto), the Holding Company Application or any
blue sky application or other instrument or document executed by the Company or
the Bank or based upon written information supplied by the Company or the Bank
filed in any state or jurisdiction to register or qualify any or all of the
Shares or to claim an exemption therefrom, or provided to any state or
jurisdiction to exempt the Company as a broker-dealer or its officers, directors
and employees as broker-dealers or agents, under the securities laws thereof
(collectively, the "Blue Sky Application"), or any application or other
document, advertisement, oral statement or communication ("Sales Information")
prepared, made or executed by or on behalf of the Company or the Bank based upon
written or oral information furnished by or on behalf of the Company or the
Bank, whether or not filed in any jurisdiction, in order to qualify or register
the Shares or to claim an exemption therefrom under the securities laws thereof;
(ii) arise out of or based upon the omission 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), final
Prospectus (or any amendment or supplement thereto), the Conversion Application
(or any amendment or supplement thereto), any 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 statement 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 any amendment or supplement thereto), the Conversion
Application, any Blue Sky Application or Sales Information made in reliance upon
and in conformity with information furnished in writing to the Company or the
Bank by the Agent regarding the Agent, it being understood and agreed that the
only such information furnished by the Agent consists of the information
described as such in subsection (b) below.
(b) The Agent agrees to indemnify and hold harmless the Company and the
Bank, each of their respective directors and officers and each person, if any,
who controls either the
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 33
Company or the Bank 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, 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 reasonable fees and disbursements of counsel)
incurred by them, or any of them, in connection with investigating, preparing to
defend 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 or
supplement thereto), the Conversion Application (or any amendment or supplement
thereto) or the Prospectus (or any amendment or supplement thereto), 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 the light of the circumstances under which they were
made, not misleading; provided, however, that the Agent's obligations under this
Section 11.(b) shall exist only if and only to the extent (i) 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), the Prospectus (or any amendment or supplement
thereto) or the Conversion Application (or any amendment or supplement thereto),
and Blue Sky Application or Sales Information in reliance upon and in conformity
with information furnished in writing to the Company or the Bank by the Agent
regarding the Agent.
(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 an indemnifying party shall not
relieve it from any liability which it may have on account of this Section 11 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 defense of such action
with counsel chosen by it and approved by the indemnified parties that are
defendants in such action, unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to them
that are different from or in addition to those available to such indemnifying
party. If an indemnifying party assumes the defense of such action, the
indemnifying parties shall not be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action,
proceeding or claim, other than reasonable costs of investigation. In no event
shall the indemnifying parties be liable for the fees and expenses of more than
one separate firm of attorneys (and 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,
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 34
proceedings or claims in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) The agreements in this Section 11 and in Section 12 hereof and the
representations and warranties of the Company and the Bank set forth in this
Agreement shall remain operative and in full force and effect regardless of: (i)
any investigation made by or on behalf of the Agent or any officers, directors
or controlling persons, agents or employees of the Agent or by or on behalf of
the Company or the Bank or any officers, directors or controlling persons,
agents or employees of the Company or the Bank; (ii) delivery of and payment
hereunder for the Shares; or (iii) any termination of this Agreement. To the
extent applicable, the Company's and the Bank's obligations under this Section
11 are subject to and limited by public policy and the provisions of applicable
law, including the provisions of Section 23A.
Section 12. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 11 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Company, the Bank or the Agent, as the case may
be, the Company, the Bank and the Agent 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 Company, the Bank or the Agent from persons
other than the other party thereto, who may also be liable for contribution) in
such proportion so that the Agent is responsible for that portion represented by
the percentage that the fees paid to the Agent pursuant to Section 2 of this
Agreement (not including expenses) bears to the gross proceeds received by the
Company from the sale of the Shares in the Offering and the Company and the Bank
shall be responsible for the balance. If, however, the allocation provided
above is not permitted by applicable law or if the indemnified party failed to
give the notice required under Section 11 above, 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 fault of the
Company and the Bank on the one hand and the Agent on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions, proceedings or claims in respect thereto), but also
the relative benefits received by the Company and the Bank on the one hand and
the Agent on the other from the Offering (before deducting expenses). The
relative benefits received by the Company and the Bank on the one hand and the
Agent on the other shall be deemed to be in the same proportion as the total
gross proceeds from the Offering received by the Company bear to the total fees
(excluding expenses) received by the
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 35
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 the
omission alleged omission to state a material fact relates to information
supplied by the Company and/or the Bank on the one hand or the Agent on the
other and the parties' relative intent, good faith, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Bank and the Agent agree that it would not be just and
equitable if contribution pursuant to this Section 12 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 12. 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 12 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 (excluding reimbursable expenses)
to the Agent under this 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 found guilty
of such fraudulent misrepresentation. The obligations of the Company and the
Bank under this Section 12 and under Section 11 shall be in addition to any
liability which the Company and the Bank may otherwise have. For purposes of
this Section 12, each of the Agent's, the Company's or the Bank's officers and
directors and each person, if any, who controls the Agent or the Company or the
Bank within the meaning of the 1933 Act and the 1934 Act shall have the same
rights to contribution as the Agent, the Company or the Bank. 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 12,
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 12. To the extent applicable, the Company's and Bank's obligations
under this Section 12 are subject to and limited by public policy and the
provisions of applicable law, including the provision of Section 23A. In no
case shall the Agent be required to contribute any amount in excess of the fees
received by the Agent pursuant to Section 2 of this Agreement.
Section 13. SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND INDEMNITIES. The
respective indemnities and agreements of the Company, the Bank and the Agent and
the representations and warranties and other statements of the Company and the
Bank set forth in or made pursuant to this Agreement shall remain in full force
and effect, regardless of any termination or cancellation
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 36
of this Agreement or any investigation made by or on behalf of the Agent, the
Company, the Bank or any controlling person referred to in Section 11 hereof,
and shall survive the issuance of the Shares, and any legal representative,
successor or assign of the Agent, the Company, the Bank, and any such
controlling person shall be entitled to the benefit of the respective
agreements, indemnities, warranties and representations.
Section 14. TERMINATION. The Agent may terminate its obligations under
this Agreement by giving the notice indicated below in this Section 14 at any
time after this Agreement becomes effective as follows:
(a) In the event the Company fails to sell the required minimum number of
Shares by the End Date, and in accordance with the provisions of the Plan or as
required by the Conversion 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
person, 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 Company and/or the Bank to the Agent as set forth in Sections 2,
9, 11 and 12 hereof.
(b) If any of the conditions specified in Section 10 shall not have been
fulfilled when and as required by this Agreement, unless waived in writing, by
the Closing Date, this Agreement and all of the Agent's obligations hereunder
may be canceled by the Agent by notifying the Company and the Bank of such
cancellation as provided in Section 15 hereof in writing 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 2, 9, 11 and 12 hereof.
(c) If the Agent elects to terminate this Agreement with respect to it as
provided in this Section 14, the Company and the Bank shall be notified promptly
by the Agent by telephone or telecopy, confirmed by letter.
The Company and the Bank may terminate this Agreement in the event the
Agent is in material breach of the representation and warranties or covenants
contained in Sections 5 and 7 and such breach has not been cured after the
Company and the Bank have provided the Agent with notice of such breach.
The Agent may terminate this Agreement with respect to the Company and the
Bank in the event either the Company or the Bank, respectively, is in material
breach of the representation and warranties or covenants contained in Sections
4, 4.(a) and 6 and such breach has not been cured after the Agent has provided
the Company and the Bank with notice of such breach.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 37
This Agreement may also be terminated by mutual written consent of the
parties hereto.
Section 15. NOTICES. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to Agent shall
be mailed, delivered or telecopied and confirmed to Charles Webb & Company, 211
Bradenton, Dublin, Ohio 43017-5034, Attention: Patricia A. McJoynt (with a copy
to Keating, Muething & Klekamp, 1800 Provident Tower, One East Fourth Street,
Cincinnati, Ohio 45202, Attention: James R. Whitaker, Esquire) and, if sent to
the Company and the Bank, shall be mailed, delivered or telecopied and confirmed
to the Company and the Bank at 25 Garfield Place, Cincinnati, Ohio 45202,
Attention: Laird L. Lazelle, President and Chief Executive Officer (with a copy
to Vorys, Sater, Seymour and Pease, Suite 2100, Atrium Two, 221 East Fourth
Street, Post Office Box 0236, Cincinnati, Ohio 45201-0236, Attention:
__________________________, Esquire).
Section 16. PARTIES. The Company and the Bank shall be entitled to act
and rely on any request, notice, consent, waiver or agreement purportedly given
on behalf of Agent, when the same shall have been given by any officer of the
Agent. Agent shall be entitled to act and rely on any request, notice, consent,
waiver or agreement purportedly given on behalf of the Company or the Bank, when
the same shall have been given by any officer of either the Company or the Bank.
This Agreement shall inure solely to the benefit of, and shall be binding upon,
the Agent, the Company, the Bank, and their respective successors, legal
representatives and assigns, and no other person shall have or be construed to
have any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provision herein contained.
Section 17. ENTIRE AGREEMENT. It is understood and agreed that this
Agreement is the exclusive agreement among the paries hereto, and supersedes any
prior agreement among the parties (except for specific references herein to the
Letter Agreement) and may not be varied except in writing signed by all the
parties.
Section 18. CLOSING. The closing for the sale of the Shares shall take
place on the Closing Date at such location as mutually agreed upon by the Agent
and the Company and the Bank. At the closing, the Company and the Bank shall
deliver to the Agent in same day funds the commissions, fees and expenses due
and owing to the Agent as set forth in Sections 2 and 9 hereof and the opinions
and certificates required hereby and other documents deemed reasonably necessary
by the Agent shall be executed and delivered to effect the sale of the Shares as
contemplated hereby and pursuant to the terms of the Prospectus.
Section 19. PARTIAL INVALIDITY. In the event that any term, provision or
covenant herein or the application thereof to any circumstance or situation
shall be invalid or unenforceable, in whole or in part, the remainder hereof and
the application of said term, provision or covenant
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 38
to any other circumstances or situation shall not be affected thereby, and each
term, provision or covenant herein shall be valid and enforceable to the full
extent permitted by law.
Section 20. CONSTRUCTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, except to the extent
that federal law shall apply, without regard to principles of conflicts of laws.
The Company and Bank each hereby submits to the non-exclusive jurisdiction of
the Federal and State courts in Hamilton County, Ohio in any suit or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby.
Section 21. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which so executed and delivered shall be an original, but
all of which together shall constitute but one and the same instrument.
Draft of June 7, 1996
<PAGE>
Charles Webb & Company
Page 39
If the foregoing correctly sets forth the arrangement among the Agent, the
Company and the Bank, please indicate acceptance thereof in the space provided
below for that purpose, whereupon this letter and Agent's acceptance shall
constitute a binding agreement.
Very truly yours,
FOUNDATION BANCORP, INC FOUNDATION SAVINGS BANK
By: ______________________ By: _____________________
Laird L. Lazelle Laird L. Lazelle
President and Chief President and Chief
Executive Officer Executive Officer
Accepted as of the date first above written.
CHARLES WEBB & COMPANY
By: ______________________
Patricia A. McJoynt
Executive Vice President
Draft of June 7, 1996
<PAGE>
EXHIBIT A
FOUNDATION BANCORP, INC.
Up to 402,500 Shares (Anticipated Maximum)
(No Par Value)
SELECTED DEALERS' AGREEMENT
___________________, 1996
Gentlemen:
We have agreed to assist Foundation Savings Bank, Cincinnati, Ohio, an Ohio
chartered mutual savings and loan association (the "Bank"), in connection with
the offer and sale of up to 402,500 shares of the common stock, no par value
("Common Stock"), of Foundation Bancorp, Inc., Cincinnati, Ohio, an Ohio
corporation (the "Company"), to be issued in connection with the conversion of
the Bank from the mutual to stock form of ownership pursuant to the Home Owners'
Loan Act, as amended, and 12 C.F.R. Part 563b with respect to federal law and
Ohio Revised Code Section 1155.27 and Ohio Administrative Code 1301:2-1-16 with
respect to Ohio law. The total number of shares of Common stock to be offered
may be decreased to a minimum of 297,500 shares. The price per share has been
fixed at $10.00. The Common Stock, 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 ("Prospectus"). In
connection with the Conversion, the Company, on a best efforts basis, is
offering for sale between $2,975,000 of shares and $4,025,000 of shares of the
Common Stock ("Shares"), in a Subscription Offering (as defined in the
Prospectus). Any Shares not sold in the Subscription Offering will be offered
to the general public in the Community Offering (as defined in the Prospectus)
giving preference to natural persons residing in Hamilton County, Ohio.
The Subscription and Community Offerings are being conducted under a plan
of conversion, as amended ("Plan"), adopted by the Bank's Board of Directors.
Pursuant to the Plan, the Bank intends to convert from an Ohio chartered mutual
savings and loan association to an Ohio chartered stock savings and loan
association and concurrently become the wholly-owned subsidiary of the Company
("Conversion"). The Subscription and Community Offerings are further being
conducted in accordance with the regulations of the Office of Thrift Supervision
and the Superintendent of the Ohio Division of Financial Institution and subject
to the provisions contained in the Plan.
<PAGE>
The Common Stock is also being offered in accordance with the Plan by
broker/dealers licensed by the National Association of Securities Dealers, Inc.
("NASD") which have been approved by the Bank ("Approved Brokers").
We are offering the Approved Brokers (of which you are one) the opportunity
to participate in the solicitation of offers to buy the Common Stock and we will
pay your a fee in the amount of ____ percent (____%) of the dollar amount of the
Common Stock sold on behalf of the Company by you, as evidenced by the
authorized designation of your firm on the order form or forms for payment
therefor to the special account established by the Bank 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 Common Stock 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, only out of our compensation as provided above, the fees to
which you are entitled hereunder.
Each order form for the purchase of Common Stock must set forth the
identity and address of each person to whom the certificates for such Common
Stock should be issued and delivered. Such order form also must clearly
identify you firm in order for you to receive compensation. You shall instruct
any subscriber who elects to send his order form to you to make any accompanying
check payable to "Foundation Bancorp, Inc."
This offer is made subject to the terms and conditions herein set forth and
is made only to Approved Brokers who are members in good standing of the NASD
who 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.
Orders for Common Stock will be subject to confirmation and we, acting on
behalf of the Company and the Bank, reserve the right in our unfettered
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
other person is authorized by the Company and 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 any of the Common Stock. No Approved
Broker is authorized to act as agent for us when soliciting offers to buy the
Common Stock from the public or otherwise. No Approved Broker shall engage in
any stabilizIng (as defined in Rule 10b-7 promulgated under the Securities
Exchange Act of 1934) with respect to the Company's Common Stock during the
offering.
We and each Approved Broker assisting in selling Common Stock pursuant
hereto agree to comply with the applicable requirements of the Securities
Exchange Act of 1934 and applicable state rules and regulations. Each
customer-carrying selected dealer that is not a $250,000 net capital reporting
broker/dealer agrees that it will not use a sweep arrangement and that it will
transmit all customer checks by noon of the next business day after receipt
thereof. In addition, we and each selected dealer confirm that the Securities
and Exchange Commission
<PAGE>
interprets Rule 15c2-8 promulgated under the Securities Exchange Act of 1934 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.
We and each Approved Broker further agree that to the extent that your
customers desire to pay for shares with funds held by or to be deposited with
us, in accordance with the interpretations of the Securities and Exchange
Commission of Rule 15c2-4 promulgated under the Securities Exchange Act of 1934,
either (a) upon receipt of an executed order form or direction to execute an
order form on behalf of a customer to forward the offering price of the Common
Stock ordered on or before noon of the next 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 instructions to execute and return 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 of the fifth business day ("Debit Date") following receipt of the
confirmation referred to in (i), and (iv) we will forward complete order forms
together with such funds to the Company on or before twelve noon on the next
business day and each selected dealer acknowledges that if the procedure in (b)
is adopted, our customers' funds are not required to be in their accounts until
the Debit Date.
Unless earlier terminated by us, this Agreement shall terminate upon the
closing date of the Conversion. We may terminate this Agreement or any
provisions hereof any time by written or telegraphic notice to you. Of course,
our obligations hereunder are subject to the successful completion of the
Conversion.
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
Common Stock 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 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 Common Stock 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 Common Stock in any
state.
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.
<PAGE>
This Agreement shall be construed in accordance with the laws of the State
of Ohio.
Please confirm your agreement hereto by signing and returning the
confirmations accompanying this letter at once to us at Charles Webb & Company,
211 Bradenton, Dublin, Ohio 43017. The enclosed duplicate copy will evidence
the agreement between us.
CHARLES WEBB & COMPANY
By:____________________________________
Patricia A. McJoynt
Executive Vice President
CONFIRMED AS OF:
_______________________ , 1996
_______________________
(Name of Dealer)
By: __________________
Its: __________________
365223.2
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter referred to as this "AGREEMENT") is
entered into as of the ___ day of ___________, 1996, by and between Foundation
Bancorp, Inc., a savings and loan holding company incorporated under Ohio law
(hereinafter referred to as the "EMPLOYER"), and Laird L. Lazelle, an individual
(hereinafter referred to as the "EMPLOYEE");
WITNESSETH:
WHEREAS, the EMPLOYEE is currently employed as the President and Chief
Executive Officer of Foundation Savings Bank (the "BANK"), which will become a
wholly owned subsidiary of the EMPLOYER upon the effectiveness of the BANK's
conversion to stock form;
WHEREAS, the EMPLOYEE desires to serve as the President and Chief Executive
Officer of the EMPLOYER and as the President and Chief Executive Officer of the
BANK; and
WHEREAS, the EMPLOYEE and the EMPLOYER desire to enter into this AGREEMENT
to set forth the terms and conditions of the employment relationship between the
EMPLOYER and the EMPLOYEE;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the EMPLOYER and the EMPLOYEE hereby agree as follows:
1. EMPLOYMENT AND TERM.
(a) TERM. Upon the terms and subject to the conditions of this AGREEMENT,
the EMPLOYER hereby employs the EMPLOYEE, and the EMPLOYEE hereby accepts
employment, as the President and Chief Executive Officer of the EMPLOYER. The
term of this AGREEMENT shall commence on the effective date of the BANK's
conversion from mutual to stock form and shall end thirty-six (36) months
thereafter, subject to extension pursuant to subsection (b) of this Section 1
(hereinafter, including any such extension, referred to as the "TERM"), and to
earlier termination as provided herein.
(b) EXTENSION. Prior to each anniversary of the date of this AGREEMENT,
the Board of Directors of the EMPLOYER shall review this AGREEMENT and
document its justification and approval of this AGREEMENT in the board
minutes. In connection with such annual review, the EMPLOYEE's term of
employment shall be extended for a one-year period beyond the then effective
expiration date, provided the Board of Directors of the EMPLOYER determines
in a duly adopted resolution that the performance of the EMPLOYEE has met the
Board's requirements and standards and that this AGREEMENT should be
extended. Any such extension shall be subject to the written consent of the
EMPLOYEE.
<PAGE>
2. DUTIES OF EMPLOYEE.
(a) GENERAL DUTIES AND RESPONSIBILITIES. The EMPLOYEE shall serve as the
President and Chief Executive Officer of the EMPLOYER. Subject to the direction
of the Boards of Directors of the EMPLOYER, the EMPLOYEE shall have
responsibility for the general management and control of the business and
affairs of the EMPLOYER and the BANK, and shall perform all duties and shall
have all powers which are commonly incident to the offices of President and
Chief Executive Officer or which, consistent therewith, are delegated to him by
the Board of Directors. Such duties include, but are not limited to, (1)
managing the day-to-day operations of the EMPLOYER, (2) managing the efforts of
the EMPLOYER to comply with applicable laws and regulations, (3) promotion of
the EMPLOYER and its services, (4) supervising other employees of the EMPLOYER,
(5) providing prompt and accurate reports to the Board of Directors of the
EMPLOYER regarding the affairs and condition of the EMPLOYER, and (6) making
recommendations to the Board of Directors of the EMPLOYER concerning the
strategies, capital structure, tactics, and general operations of the EMPLOYER
and the BANK. The EMPLOYER shall employ the EMPLOYEE during the TERM as
President and Chief Executive Officer without material diminishment of the
importance or prestige of his position.
(b) DEVOTION OF ENTIRE TIME TO THE BUSINESS OF THE EMPLOYER. The
EMPLOYEE shall devote his entire productive time, ability and attention
during normal business hours throughout the TERM to the faithful performance
of his duties under this AGREEMENT and the employment agreement between the
Bank and the EMPOLYEE of even date herewith (the "BANK AGREEMENT"). The
EMPLOYEE shall not directly or indirectly render any services of a business,
commercial or professional nature to any person or organization other than
the EMPLOYER and its subsidiaries and affiliates without the prior written
consent of the Board of Directors of the EMPLOYER; provided, however, that
the EMPLOYEE shall not be precluded from (i) vacations and other leave time
in accordance with Section 3(e) hereof; (ii) reasonable participation in
community, civic, charitable or similar organizations; or (iii) the pursuit
of personal investments which do not interfere or conflict with the
performance of the EMPLOYEE's duties to the EMPLOYER. Nothing in this
section shall limit the EMPLOYEE's right to invest in securities of any
business that does not provide services or products of the type or competing
with those provided by the EMPLOYER or its subsidiaries or affiliates or,
solely as a passive investor, in any business.
3. COMPENSATION, BENEFITS AND REIMBURSEMENTS.
(a) LIABILITY FOR BANK OBLIGATIONS. The EMPLOYER hereby agrees that it
shall be jointly and severally liable for the payment of all amounts due
under the BANK AGREEMENT and shall guarantee the performance of the BANK's
obligations thereunder, including but not limited to the BANK'S obligations
under Section 3 and Section 4 of the BANK AGREEMENT.
(b) BASE SALARY AND BONUSES. The EMPLOYER shall not be required by this
AGREEMENT to pay to the EMPLOYEE a base salary or any bonuses, except as a
result of its obligations with respect to the BANK AGREEMENT. The EMPLOYER may,
however, pay
-2-
<PAGE>
such base salary and bonuses as deemed appropriate by the Board of Directors in
the exercise of its discretion.
(c) EXPENSES. In addition to any compensation received under Section 3(a)
or (b) of this AGREEMENT, the EMPLOYER shall pay or reimburse the EMPLOYEE for
all reasonable travel, entertainment and miscellaneous expenses incurred in
connection with the performance of his duties under this AGREEMENT. Such
reimbursement shall be made in accordance with the existing policies and
procedures of the EMPLOYER pertaining to reimbursement of expenses to senior
management officials.
(d) EMPLOYEE BENEFIT PROGRAMS.
(i) During the TERM, the EMPLOYEE shall be entitled to participate
in all formally established employee benefit, bonus, pension and profit-sharing
plans and similar programs that are maintained by the EMPLOYER from time to
time, including programs in respect of group health, disability or life
insurance, and all employee benefit plans or programs hereafter adopted in
writing by the Board of Directors of the EMPLOYER, for which senior management
personnel are eligible, including any employee stock ownership plan, stock
option plan or other stock benefit plan (hereinafter collectively referred to as
the "BENEFIT PLANS"). Notwithstanding the foregoing sentence, the EMPLOYER may
discontinue or terminate at any time any such BENEFIT PLANS, now existing or
hereafter adopted, to the extent permitted by the terms of such plans and
applicable law and shall not be required to compensate the EMPLOYEE for such
discontinuance or termination; and
(ii) After the termination of the employment of the EMPLOYEE in
accordance with Section 4(a) of this AGREEMENT, for any reason other than JUST
CAUSE (as defined hereinafter), the EMPLOYER shall provide a group health
insurance program in which the EMPLOYEE and his spouse will be eligible to
participate and which shall provide substantially the same benefits as are
available to retired employees of the EMPLOYER on the date of this AGREEMENT
until both the EMPLOYEE and his spouse become sixty-five (65) years of age;
provided, however that all premiums for such program shall be paid by the
EMPLOYEE and/or his spouse after the EMPLOYEE's termination; provided further,
however, that if the EMPLOYER no longer makes available an employee group health
insurance program which permits the EMPLOYER to make coverage available for
retirees the EMPLOYEE shall be paid cash in an amount equal to the cost to the
EMPLOYEE of maintaining coverage substantially equivalent to the coverage
provided on the date of such termination to the EMPLOYEE and his spouse until
the EMPLOYEE and his SPOUSE become sixty-five (65) years of age.
(e) VACATION AND SICK LEAVE. The EMPLOYEE shall be entitled, without loss
of pay, to be absent voluntarily from the performance of his duties under this
AGREEMENT, subject to the following conditions:
(i) The EMPLOYEE shall be entitled to an annual vacation in
accordance with the provisions of the BANK AGREEMENT;
-3-
<PAGE>
(ii) The EMPLOYEE shall be entitled to annual sick leave as
established by the Board of Directors of the EMPLOYER for senior management
officials of the EMPLOYER;
(iii) In addition to paid vacations and sick leave, the EMPLOYEE
shall be entitled, without loss of pay, to absent himself voluntarily from
the performance of his employment with the EMPLOYER for such additional
period of time and for such valid and legitimate reasons as the Board may,
in its discretion, determine, and the Board may grant to the EMPLOYEE a
leave or leaves of absence, with or without pay, at such time or times and
upon such terms and conditions as such Board, in its discretion, may
determine.
4. TERMINATION OF EMPLOYMENT.
(a) GENERAL. The employment of the EMPLOYEE shall terminate at any time
during the TERM (i) at the option of the EMPLOYER upon the delivery by the
EMPLOYER of written notice of employment termination to the EMPLOYEE, or (ii) at
the option of the EMPLOYEE upon the delivery by the EMPLOYEE of written notice
of termination to the EMPLOYER if, unless consented to in writing by the
EMPLOYEE, (A) the present capacity or circumstances in which the EMPLOYEE is
employed are materially changed (including, without limitation, a material
reduction in responsibilities or authority, or the assignment of duties or
responsibilities substantially inconsistent with those normally associated with
EMPLOYEE's position described in Section 2(a) of this AGREEMENT), (B) the
EMPLOYEE is not elected a member of the Boards of Directors of the EMPLOYER or
the BANK or the EMPLOYEE is no longer the President and Chief Executive Officer
of the EMPLOYER and the BANK, (C) the EMPLOYEE is required to move his personal
residence, or perform his principal executive functions, more than thirty-five
(35) miles from his primary office as of the date of the commencement of the
TERM of this AGREEMENT, or (D) the EMPLOYER otherwise breaches this AGREEMENT in
any material respect.
(b) TERMINATION FOR JUST CAUSE. In the event that the EMPLOYER
terminates the employment of the EMPLOYEE before the expiration of the TERM
because of the EMPLOYEE's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure or refusal to perform the duties and responsibilities assigned in
this AGREEMENT or the BANK AGREEMENT, willful violation of any law, rule,
regulation (other than traffic violations or similar offenses ) or final
cease-and-desist order, conviction of a felony or for fraud or embezzlement,
or material breach of any provision of this AGREEMENT or the BANK AGREEMENT
(hereinafter collectively referred to as "JUST CAUSE"), the EMPLOYEE shall
not receive, and shall have no right to receive, any compensation or other
benefits for any period after such termination.
(c) TERMINATION IN CONNECTION WITH A CHANGE OF CONTROL. In the event
that, in connection with a CHANGE OF CONTROL (including, without limitation, a
termination other than for JUST CAUSE within the six months prior to a CHANGE OF
CONTROL) or after a CHANGE OF CONTROL, the employment of the EMPLOYEE is
terminated by the EMPLOYER for any reasons other than JUST CAUSE before the
expiration of the TERM or is
-4-
<PAGE>
terminated by the EMPLOYEE in accordance with Section 4(a) (ii) of this
AGREEMENT before the expiration of the TERM, then the following shall occur:
(i) The EMPLOYER shall promptly pay to the EMPLOYEE or to his
beneficiaries, dependents or estate an amount equal to the product of three
multiplied by the salary, if any, paid to the EMPLOYEE pursuant to
Section 3 (b) of this AGREEMENT;
(ii) The EMPLOYEE, his dependents, beneficiaries and estate shall
continue to be covered under all BENEFIT PLANS in which the EMPLOYEE is a
participant immediately prior to the CHANGE OF CONTROL of the EMPLOYER at
the EMPLOYER's expense as if the EMPLOYEE were still employed under this
AGREEMENT until the earliest of the expiration of the TERM or the date on
which the EMPLOYEE is included in another employer's benefit plans as a
full-time employee and shall be entitled thereafter to the benefits
described in section 3(d)(ii) of this AGREEMENT; and
(iii) The EMPLOYEE shall not be required to mitigate the amount of
any payment provided for in this AGREEMENT by seeking other employment or
otherwise, nor shall any amounts received from other employment or
otherwise by the EMPLOYEE offset in any manner the obligations of the
EMPLOYER hereunder, except as specifically stated in subparagraph (ii).
In the event that payments pursuant to this subsection (c) would result in
the imposition of a penalty tax pursuant to Section 280G(b) (3) of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder
(hereinafter collectively referred to as "SECTION 280G"), such payments shall be
reduced to the maximum amount which may be paid under SECTION 280G without
exceeding such limits. Payments pursuant to this subsection (c) also may not
exceed applicable limits established by the Office of Thrift Supervision
(hereinafter referred to as the "OTS"). In the event a reduction in payments is
necessary in order to comply with the requirements of this AGREEMENT relating to
the limitations of SECTION 280G or applicable OTS limits, the EMPLOYEE may
determine, in his sole discretion, which categories of payments are to be
reduced or eliminated.
(d) TERMINATION WITHOUT CHANGE OF CONTROL. In the event that the
employment of the EMPLOYEE is terminated by the EMPLOYER or is terminated by
the EMPLOYEE in accordance with Section 4(a) (ii) of this AGREEMENT before
the expiration of the TERM other than (A) for JUST CAUSE or (B) in connection
with or after a CHANGE OF CONTROL, the EMPLOYER shall be obligated (1) to
pay to the EMPLOYEE, his designated beneficiaries or his estate, for the
remainder of the TERM, the salary, if any, paid to the EMPLOYEE pursuant to
Section 3(b) of this AGREEMENT or the salary payable to the EMPLOYEE as a
result of any annual salary review in accordance with Section 3(b) of this
AGREEMENT; (2) to provide to the EMPLOYEE, at the EMPLOYER's expense, health,
life, disability, and other benefits as provided in Section 3(d)(i) of this
Agreement, until the expiration of the TERM or until the earlier date the
-5-
<PAGE>
EMPLOYEE obtains substantially equivalent coverage from another full-time
employer; and (3) to provide to the EMPLOYEE the benefits under Section
3(d)(ii) of this AGREEMENT, if any. In the event that payments pursuant to
this subsection (d) would result in the imposition of a penalty tax pursuant
to SECTION 280G, such payments shall be reduced to the maximum amount which
may be paid under SECTION 280G without exceeding those limits. In the event
a reduction in payment is necessary in order to comply with the requirements
of this AGREEMENT relating to the limitations of SECTION 280G or applicable
OTS limits, the EMPLOYEE may determine, in his sole discretion, which
categories of payments are to be reduced or eliminated.
(e) DEATH OF THE EMPLOYEE. The TERM automatically terminates upon the
death of the EMPLOYEE. In the event of such death, the EMPLOYEE's estate shall
be entitled to receive the compensation due the EMPLOYEE through the last day of
the calendar month in which the death occurred, except as otherwise specified
herein.
(f) "GOLDEN PARACHUTE" PROVISION. Any payments made to the EMPLOYEE
pursuant to this AGREEMENT or otherwise are subject to and conditioned upon
their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated
thereunder.
(g) DEFINITION OF "CHANGE OF CONTROL". A "CHANGE OF CONTROL" shall mean
any one of the following events: (i) the acquisition of ownership, holding or
power to vote more than 25% of the voting stock of the EMPLOYER or the BANK,
(ii) the acquisition of the ability to control the election of a majority of the
directors of the EMPLOYER or the BANK, (iii) the acquisition of a controlling
influence over the management or policies of the EMPLOYER or the BANK (as
determined in accordance with 12 C.F.R. 574.4(a)(3)) by any person or by persons
acting as a "group" (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934); (iv) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the EMPLOYER or the BANK cease for any reason to constitute at
least two-thirds thereof, provided that any individual whose election or
nomination for election as a member of the Board of Directors was approved by a
vote of at least two-thirds of the directors then in office shall be considered
to have continued to be a member of the Board of Directors; or (v) the
acquisition by any person or entity of "conclusive control" of the EMPLOYER
within the meaning of 12 C.F.R. Section 574.4(a), or any person or entity
obtains "rebuttable control" within the meaning of 12 C.F.R. Section 574.4(b)
that and has not been rebutted in accordance with 12 C.F.R. Section 574.4(c).
For purposes of this paragraph, the term "person" refers to an individual or a
corporation, partnership, trust, association, or other organization, but does
not include the EMPLOYEE and any person or persons with whom the EMPLOYEE is
"acting in concert" within the meaning of 12 C.F.R. Part 574.
.
(h) LEGAL FEES. EMPLOYER shall promptly pay all legal fees and expenses
which EMPLOYEE may incur as a result of EMPLOYEE or EMPLOYER contesting the
validity or enforceability of this AGREEMENT if a court of competent
jurisdiction renders a final decision in favor of EMPLOYEE with respect to any
such contest, or to the extent agreed to by EMPLOYER and EMPLOYEE in an
agreement of settlement with respect to any such contest.
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5. CONSOLIDATION, MERGER OR SALE OF ASSETS. Nothing in this AGREEMENT shall
preclude the EMPLOYER from consolidating with, merging into, or transferring
all, or substantially all, of its assets to another corporation that assumes all
of the EMPLOYER's obligations and undertakings hereunder. Upon such a
consolidation, merger or transfer of assets, the term "EMPLOYER" as used herein,
shall mean such other corporation or entity, and this AGREEMENT shall continue
in full force and effect.
6. CONFIDENTIAL INFORMATION. The EMPLOYEE acknowledges that during his
employment he will learn and have access to confidential information regarding
the EMPLOYER and its customers and businesses. The EMPLOYEE agrees and
covenants not to disclose or use for his own benefit, or the benefit of any
other person or entity, any confidential information, unless or until the
EMPLOYER consents to such disclosure or use or such information becomes common
knowledge in the industry or is otherwise legally in the public domain. The
EMPLOYEE shall not knowingly disclose or reveal to any unauthorized person any
confidential information relating to the EMPLOYER, its subsidiaries or
affiliates, or to any of the businesses operated by them, and the EMPLOYEE
confirms that such information constitutes the exclusive property of the
EMPLOYER. The EMPLOYEE shall not otherwise knowingly act or conduct himself (a)
to the material detriment of the EMPLOYER, its subsidiaries, or affiliates, or
(b) in a manner which is inimical or contrary to the interests of the EMPLOYER.
7. NONASSIGNABILITY. Neither this AGREEMENT nor any right or interest
hereunder shall be assignable by the EMPLOYEE, his beneficiaries, or legal
representatives without the EMPLOYER's prior written consent; provided, however,
that nothing in this Section 7 shall preclude (a) the EMPLOYEE from designating
a beneficiary to receive any benefits payable hereunder upon his death, or (b)
the executors, administrators, or other legal representatives of the EMPLOYEE or
his estate from assigning any rights hereunder to the person or persons entitled
thereto.
8. NO ATTACHMENT. Except as required by law, no right to receive payment
under this AGREEMENT shall be subject to anticipation, commutation, alienation,
sale, assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy, or similar process of assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
9. INDEMNIFICATION INSURANCE.
(a) INDEMNIFICATION. The EMPLOYER agrees to indemnify the EMPLOYEE and his
heirs, executors, and administrators to the fullest extent permitted under
applicable law and regulations, including, without limitation 12 U.S.C. Section
1828(k), against any and all expenses and liabilities reasonably incurred by the
EMPLOYEE in connection with or arising out of any action, suit or proceeding in
which the EMPLOYEE may be involved by reason of his having been a director or
officer of the EMPLOYER or any of its subsidiaries, whether or not the EMPLOYEE
is a director or officer at the time of incurring any such expenses or
liabilities. Such expenses and liabilities shall include, but shall not be
limited to, judgments, court costs and attorney's fees and the cost of
reasonable settlements. The EMPLOYEE shall be entitled to
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indemnification in respect of a settlement only if the Board of Directors of the
EMPLOYER has approved such settlement. Notwithstanding anything herein to the
contrary, (i) indemnification for expenses shall not extend to matters for which
the EMPLOYEE has been terminated for JUST CAUSE, and (ii) the obligations of
this Section 10 shall survive the TERM of this AGREEMENT. Nothing contained
herein shall be deemed to provide indemnification prohibited by applicable law
or regulation.
b. INSURANCE. During the TERM, the EMPLOYER shall provide the EMPLOYEE
(and his heirs, executors, and administrators) with coverage under a directors'
and officers' liability policy at the EMPLOYER's expense, at lease equivalent to
such coverage provided to directors and senior officers of the EMPLOYER.
10. BINDING AGREEMENT. This AGREEMENT shall be binding upon, and inure to the
benefit of, the EMPLOYEE and the EMPLOYER and their respective permitted
successors and assigns.
11. AMENDMENT OF AGREEMENT. This AGREEMENT may not be modified or amended,
except by an instrument in writing signed by the parties hereto.
12. WAIVER. No term or condition of this AGREEMENT shall be deemed to have
been waived, nor shall there be an estoppel against the enforcement of any
provision of this AGREEMENT, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver, unless specifically stated therein, and each waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than the act specifically waived.
13. SEVERABILITY. If, for any reason, any provision of this AGREEMENT is held
invalid, such invalidity shall not affect the other provisions of this AGREEMENT
not held so invalid, and each such other provision shall, to the full extent
consistent with applicable law, continue in full force and effect. If this
AGREEMENT is held invalid or cannot be enforced, then any prior Agreement
between the EMPLOYER (or any predecessor thereof) and the EMPLOYEE shall be
deemed reinstated to the full extent permitted by law, as if this AGREEMENT had
not been executed.
14. HEADINGS. The headings of the paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this AGREEMENT.
15. GOVERNING LAW; REGULATORY AUTHORITY. This AGREEMENT has been executed
and delivered in the State of Ohio and its validity, interpretation,
performance, and enforcement shall be governed by the laws of the State of
Ohio, except to the extent that federal law is governing. References to the
OTS included herein shall include any successor primary federal regulatory
authority of the EMPLOYER.
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16. EFFECT OF PRIOR AGREEMENTS. This AGREEMENT contains the entire
understanding between the parties hereto and supersedes any prior employment
agreement between the EMPLOYER or any predecessor of the EMPLOYER and the
EMPLOYEE.
17. NOTICES. Any notice or other communication required or permitted pursuant
to this AGREEMENT shall be deemed delivered if such notice or communication is
in writing and is delivered personally or by facsimile transmission or is
deposited in the United States mail, postage prepaid, addressed as follows:
If to the EMPLOYER:
Foundation Bancorp, Inc.
25 Garfield Place
Cincinnati, Ohio 45202
If to the EMPLOYEE:
Mr. Laird L. Lazelle
7 Spring Knoll Drive
Mariemont, Ohio 45227
IN WITNESS WHEREOF, the EMPLOYER has caused this AGREEMENT to be executed
by its duly authorized officer, and the EMPLOYEE has signed this AGREEMENT, each
as of the day and year first above written.
Attest: FOUNDATION BANCORP, INC.
By
- -------------------------------- ---------------------------------
Michael S. Schwartz
its Chairman of the Board
Attest:
- -------------------------------- -----------------------------------
Laird L. Lazelle
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter referred to as this "AGREEMENT") is
entered into as of the ___ day of ___________, 1996, by and between Foundation
Savings Bank, a savings and loan association incorporated under Ohio law
(hereinafter referred to as the "EMPLOYER"), and Laird L. Lazelle, an individual
(hereinafter referred to as the "EMPLOYEE");
WITNESSETH:
WHEREAS, the EMPLOYEE is currently employed as the President and Chief
Executive Officer of the EMPLOYER;
WHEREAS, as a result of the skill, knowledge and experience of the
EMPLOYEE, the Board of Directors of the EMPLOYER desires to retain the services
of the EMPLOYEE as the President and Chief Executive Officer of the EMPLOYER;
WHEREAS, the EMPLOYEE desires to continue to serve as the President and
Chief Executive Officer of the EMPLOYER; and
WHEREAS, the EMPLOYEE and the EMPLOYER desire to enter into this AGREEMENT
to set forth the terms and conditions of the employment relationship between the
EMPLOYER and the EMPLOYEE;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the EMPLOYER and the EMPLOYEE hereby agree as follows:
1. EMPLOYMENT AND TERM.
(a) TERM. Upon the terms and subject to the conditions of this AGREEMENT,
the EMPLOYER hereby employs the EMPLOYEE, and the EMPLOYEE hereby accepts
employment, as the President and Chief Executive Officer of the EMPLOYER. The
TERM of this AGREEMENT shall commence on the effective date of the EMPLOYER's
conversion from mutual to stock form and shall end thirty-six (36) months
thereafter, subject to extension pursuant to subsection (b) of this Section 1
(hereinafter, including any such extensions, referred to as the "TERM"), and to
earlier termination as provided herein.
(b) EXTENSION. Prior to each anniversary of the date of this
AGREEMENT, the Board of Directors of the EMPLOYER shall review this AGREEMENT
and document its justification and approval of this AGREEMENT in the board
minutes. In connection with such annual review, the TERM shall be extended
for a one-year period beyond the then effective expiration date, provided the
Board of Directors of the EMPLOYER determines in a duly adopted resolution
that the performance of the EMPLOYEE has met the Board's requirements and
standards and that this AGREEMENT should be extended. Any such extension
shall be subject to the written consent of the EMPLOYEE.
<PAGE>
2. DUTIES OF EMPLOYEE.
(a) GENERAL DUTIES AND RESPONSIBILITIES. The EMPLOYEE shall serve as the
President and Chief Executive Officer of the EMPLOYER. Subject to the direction
of the Board of Directors of the EMPLOYER, the EMPLOYEE shall have
responsibility for the general management and control of the business and
affairs of the EMPLOYER, and shall perform all duties and shall have all powers
which are commonly incident to the office of President and Chief Executive
Officer or which, consistent therewith, are delegated to him by the Board of
Directors. Such duties include, but are nor limited to, (1) managing the day-
to-day operations of the EMPLOYER, (2) managing the efforts of the EMPLOYER to
comply with applicable laws and regulations, (3) promotion of the EMPLOYER and
its services, (4) supervising other employees of the EMPLOYER, (5) providing
prompt and accurate reports to the Board of Directors of the EMPLOYER regarding
the affairs and conditions of the EMPLOYER, and (6) making recommendations to
the Board of Directors of the EMPLOYER concerning the strategies, capital
structure, tactics, and general operations of the EMPLOYER. The EMPLOYER shall
employ the EMPLOYEE during the TERM as President and Chief Executive Officer
without material diminishment of the importance or prestige of his position.
(b) DEVOTION OF ENTIRE TIME TO THE BUSINESS OF THE EMPLOYER. The EMPLOYEE
shall devote his entire productive time, ability and attention during normal
business hours throughout the TERM to the faithful performance of his duties
under this AGREEMENT. The EMPLOYEE shall not directly or indirectly render any
services of a business, commercial or professional nature to any person or
organization other than the EMPLOYER and its subsidiaries and affiliates without
the prior written consent of the Board of Directors of the EMPLOYER; provided,
however, that the EMPLOYEE shall not be precluded from (i) vacations and other
leave time in accordance with Section 3(e) hereof; (ii) reasonable participation
in community, civic, charitable or similar organizations; or (iii) the pursuit
of personal investments which do not interfere or conflict with the performance
of the EMPLOYEE's duties to the EMPLOYER. Nothing in this section shall limit
the EMPLOYEE's right to invest in securities of any business that does not
provide services or products of the type or competing with those provided by the
EMPLOYER or its subsidiaries or affiliates or, solely as a passive investor, in
any business.
3. COMPENSATION, BENEFITS AND REIMBURSEMENTS.
(a) SALARY. The EMPLOYEE shall receive during the TERM an annual salary
payable in equal installments not less often than monthly. The amount of
such annual salary shall be $85,000 until changed by the Board of Directors of
the EMPLOYER in accordance with Section 3(b) of this AGREEMENT.
(b) ANNUAL SALARY REVIEW. On or before each anniversary of the effective
date of this AGREEMENT, the annual salary of the EMPLOYEE shall be reviewed by
the Board of Directors of the EMPLOYER and may be maintained or increased, in
its discretion, based upon the EMPLOYEE's individual performance and the overall
profitability and financial condition of the
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EMPLOYER. The results of the annual salary review shall be reflected in the
minutes of the Board of Directors of the EMPLOYER.
(c) EXPENSES. In addition to any compensation received under Section 3(a)
or (b) of this AGREEMENT, the EMPLOYER shall pay or reimburse the EMPLOYEE for
all reasonable travel, entertainment and miscellaneous expenses incurred in
connection with the performance of his duties under this AGREEMENT. Such
reimbursement shall be made in accordance with the existing policies and
procedures of the EMPLOYER pertaining to reimbursement of expenses to senior
management officials.
(d) EMPLOYEE BENEFIT PROGRAMS.
(i) During the TERM, the EMPLOYEE shall be entitled to participate in
all formally established employee benefit, bonus, pension and profit-sharing
plans and similar programs that are maintained by the EMPLOYER from time to
time, including programs in respect of group health, disability or life
insurance, and all employee benefit plans or programs hereafter adopted in
writing by the Board of Directors of the EMPLOYER, for which senior management
personnel are eligible, including any employee stock ownership plan, stock
option plan or other stock benefit plan (hereinafter collectively referred to as
the "BENEFIT PLANS"). Notwithstanding the foregoing sentence, the EMPLOYER may
discontinue or terminate at any time any such BENEFIT PLANS, now existing or
hereafter adopted, to the extent permitted by the terms of such plans and
applicable law, and shall not be required to compensate the EMPLOYEE for such
discontinuance or termination; and
(ii) After the termination of the employment of the EMPLOYEE in
accordance with Section 4(a) of this AGREEMENT, for any reason other than JUST
CAUSE (as defined hereinafter), the EMPLOYER shall provide a group health
insurance program in which the EMPLOYEE and his spouse will be eligible to
participate and which shall provide substantially the same benefits as are
available to retired employees of the EMPLOYER on the date of this AGREEMENT
until both the EMPLOYEE and his spouse become sixty-five (65) years of age;
provided, however that all premiums for such program shall be paid by the
EMPLOYEE and/or his spouse after the EMPLOYEE's termination; provided further,
however, that if the EMPLOYER no longer makes available an employee group health
insurance program which permits the EMPLOYER to make coverage available for
retirees the EMPLOYEE shall be paid cash in an amount equal to the cost to the
EMPLOYEE of maintaining coverage substantially equivalent to the coverage
provided on the date of such termination to the EMPLOYEE and his spouse until
the EMPLOYEE and his SPOUSE become sixty-five (65) years of age.
(e) VACATION AND SICK LEAVE. The EMPLOYEE shall be entitled, without loss
of pay, to be absent voluntarily from the performance of his duties under this
AGREEMENT, subject to the following conditions:
(i) The EMPLOYEE shall be entitled to an annual vacation in
accordance with the policies periodically established by the Board of
Directors of the EMPLOYER for
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senior management officials of the EMPLOYER, provided that such annual
vacation shall be for a period of at least five weeks;
(ii) The EMPLOYEE shall be entitled to annual sick leave as
established by the Board of Directors of the EMPLOYER for senior management
officials of the EMPLOYER; and
(iii) In addition to paid vacations and sick leave, the EMPLOYEE
shall be entitled, without loss of pay, to absent himself voluntarily from
the performance of his employment with the EMPLOYER for such additional
period of time and for such valid and legitimate reasons as the Board may,
in its discretion, determine, and the Board may grant to the EMPLOYEE a
leave or leaves of absence, with or without pay, at such time or times and
upon such terms and conditions as such Board, in its discretion, may
determine.
4. TERMINATION OF EMPLOYMENT.
(a) GENERAL. The employment of the EMPLOYEE shall terminate at any
time during the TERM (i) at the option of the EMPLOYER upon the delivery by
the EMPLOYER of written notice of employment termination to the EMPLOYEE, or
(ii) at the option of the EMPLOYEE upon the delivery by the EMPLOYEE of
written notice of termination to the EMPLOYER if, unless consented to in
writing by the EMPLOYEE, (A) the present capacity or circumstances in which
the EMPLOYEE is employed are materially changed (including, without
limitation, a material reduction in responsibilities or authority, or the
assignment of duties or responsibilities substantially inconsistent with
those normally associated with EMPLOYEE's position described in Section 2(a)
of this AGREEMENT), (B) the EMPLOYEE is not elected a member of the Boards of
Directors of the EMPLOYER or Foundation Bancorp, Inc. ("BANCORP"), or any
other savings and loan holding company for the EMPLOYER, or the EMPLOYEE is no
longer the President and Chief Executive Officer of the EMPLOYER and BANCORP,
(C) the EMPLOYEE is required to move his personal residence, or perform his
principal executive functions, more than thirty-five (35) miles from his
primary office as of the date of the commencement of the TERM of this
AGREEMENT, or (D) the EMPLOYER otherwise breaches this AGREEMENT in any
material respect.
(b) TERMINATION FOR JUST CAUSE. In the event that the EMPLOYER terminates
the employment of the EMPLOYEE before the expiration of the TERM because of the
EMPLOYEE's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure or refusal to
perform the duties and responsibilities assigned in this AGREEMENT, willful
violation of any law, rule, regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, conviction of a felony or for fraud
or embezzlement, or material breach of any provision of this AGREEMENT
(hereinafter collectively referred to as "JUST CAUSE"), the EMPLOYEE shall not
receive, and shall have no right to receive, any compensation or other benefits
for any period after such termination.
(c) TERMINATION IN CONNECTION WITH A CHANGE OF CONTROL. In the event
that, in connection with a CHANGE OF CONTROL (including, without limitation, a
termination other
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than for JUST CAUSE within the six months prior to a CHANGE OF CONTROL) or after
a CHANGE OF CONTROL, the employment of the EMPLOYEE is terminated by the
EMPLOYER for any reason other than JUST CAUSE before the expiration of the
TERM or is terminated by the EMPLOYEE in accordance with Section 4(a) (ii) of
this AGREEMENT before the expiration of the TERM, then the following shall
occur:
(i) The EMPLOYER shall promptly pay to the EMPLOYEE or to his
beneficiaries, dependents or estate an amount equal to the product of three
multiplied by the greater of the annual salary set forth in Section 3(a) of
this AGREEMENT or the annual salary payable to the EMPLOYEE as a result of
any annual salary review in accordance with Section 3 (b) of this
AGREEMENT;
(ii) The EMPLOYEE, his dependents, beneficiaries and estate shall
continue to be covered under all BENEFIT PLANS in which the EMPLOYEE is a
participant immediately prior to the CHANGE OF CONTROL of the EMPLOYER at
the EMPLOYER's expense as if the EMPLOYEE were still employed under this
AGREEMENT until the earliest of the expiration of the TERM or the date on
which the EMPLOYEE is included in another employer's benefit plans as a
full-time employee and shall be entitled thereafter to the benefits
described in Section 3(d)(ii) of this AGREEMENT; and
(iii) The EMPLOYEE shall not be required to mitigate the amount of
any payment provided for in this AGREEMENT by seeking other employment or
otherwise, nor shall any amounts received from other employment or
otherwise by the EMPLOYEE offset in any manner the obligations of the
EMPLOYER hereunder, except as specifically stated in subparagraph (ii).
In the event that payments pursuant to this subsection (c) would result in
the imposition of a penalty tax pursuant to Section 280G(b) (3) of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder
(hereinafter collectively referred to as "SECTION 280G"), such payments shall be
reduced to the maximum amount which may be paid under SECTION 280G without
exceeding such limits. Payments pursuant to this subsection (c) also may not
exceed applicable limits established by the Office of Thrift Supervision
(hereinafter referred to as the "OTS"). In the event a reduction in payments is
necessary in order to comply with the requirements of this AGREEMENT relating to
the limitations of SECTION 280G or applicable OTS limits, the EMPLOYEE may
determine, in his sole discretion, which categories of payments are to be
reduced or eliminated.
(d) TERMINATION WITHOUT CHANGE OF CONTROL. In the event that the
employment of the EMPLOYEE is terminated by the EMPLOYER or is terminated by the
EMPLOYEE in accordance with Section 4(a) (ii) of this AGREEMENT before the
expiration of the TERM other than (A) for JUST CAUSE or (B) in connection with
or after a CHANGE OF CONTROL, the EMPLOYER shall be obligated (1) to pay to the
EMPLOYEE, his designated beneficiaries or his estate, for the remainder of the
TERM, the salary set forth in Section 3(a) of this AGREEMENT or the salary
payable to the EMPLOYEE as a result of any annual salary
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review in accordance with Section 3(b) of this AGREEMENT; (2) to provide to the
EMPLOYEE, at the EMPLOYER's expense, health, life, disability, and other
benefits as provided in Section 3(d)(i) of this Agreement, until the expiration
of the TERM or until the earlier date the EMPLOYEE obtains substantially
equivalent coverage from another full-time employer; and (3) to provide to the
EMPLOYEE the benefits set forth under Section 3(d)(ii) of this AGREEMENT. In
the event that payments pursuant to this subsection (d) would result in the
imposition of a penalty tax pursuant to SECTION 280G, such payments shall be
reduced to the maximum amount which may be paid under SECTION 280G without
exceeding those limits. Payments pursuant to this subsection also may not
exceed the applicable limits established by the OTS. In the event a reduction
in payments is necessary in order to comply with the requirements of this
AGREEMENT relating to the limitations of SECTION 280G or applicable OTS limits,
the EMPLOYEE may determine, in his sole discretion, which categories of payments
are to be reduced or eliminated.
(e) DEATH OF THE EMPLOYEE. The TERM automatically terminates upon the
death of the EMPLOYEE. In the event of such death, the EMPLOYEE's estate shall
be entitled to receive the compensation due the EMPLOYEE through the last day of
the calendar month in which the death occurred, except as otherwise specified
herein.
(f) "GOLDEN PARACHUTE" PROVISION. Any payments made to the EMPLOYEE
pursuant to this AGREEMENT or otherwise are subject to and conditioned upon
their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated
thereunder.
(g) DEFINITION OF "CHANGE OF CONTROL". A "CHANGE OF CONTROL" shall
mean any one of the following events; (i) the acquisition of ownership or
power to vote more than 25% of the voting stock of the EMPLOYER or BANCORP;
(ii) the acquisition of the ability to control the election of a majority of
the directors of the EMPLOYER or BANCORP; (iii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the EMPLOYER or BANCORP cease for any reason to
constitute at least two-thirds thereof; provided, however, that any
individual whose election or nomination for election as a member of the Board
of Directors was approved by a vote of at least two-thirds of the directors
then in office shall be considered to have continued to be a member of the
Board of Directors; or (iv) the acquisition by any person or entity of
"conclusive control" of the EMPLOYER within the meaning of 12 C.F.R. Section
574.4(a), or the acquisition by any person or entity of "rebuttable control"
within the meaning of 12 C.F.R. Section 574.4(b) and that has not been
rebutted in accordance with 12 C.F.R. Section 574.4(c). For purposes of this
paragraph, the term "person" refers to an individual or corporation,
partnership, trust, association, or other organization, but does not include
the EMPLOYEE and any person or persons with whom the EMPLOYEE is "acting in
concert" within the meaning of 12 C.F.R. Part 574.
(h) LEGAL FEES. EMPLOYER shall promptly pay all legal fees and expenses
which EMPLOYEE may incur as a result of EMPLOYEE or EMPLOYER contesting the
validity or
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enforceability of this AGREEMENT if a court of competent jurisdiction renders a
final decision in favor of EMPLOYEE with respect to any such contest, or to the
extent agreed to by EMPLOYER and EMPLOYEE in an agreement of settlement with
respect to any such contest.
5. SPECIAL REGULATORY EVENTS. Notwithstanding Section 4 of this AGREEMENT,
the obligations of the EMPLOYER to the EMPLOYEE shall be as follows in the event
of the following circumstances:
(a) If the EMPLOYEE is suspended and/or temporarily prohibited from
participating in the conduct of the EMPLOYER's affairs by a notice served under
Section 8(e) (3) or (g) (1) of the Federal Deposit Insurance Act (hereinafter
referred to as the "FDIA"), the EMPLOYER's obligations under this AGREEMENT
shall be suspended as of the date of service of such notice, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
EMPLOYER shall (i) pay the EMPLOYEE all of the compensation withheld while the
obligations in this AGREEMENT were suspended and (ii) reinstate any of the
obligations that were suspended.
(b) If the EMPLOYEE is removed and/or permanently prohibited from
participating in the conduct of the EMPLOYER's affairs by an order issued under
Section 8(e) (4) or (g) (1) of the FDIA, all obligations of the EMPLOYER under
this AGREEMENT shall terminate as of the effective date of such order; provided,
however, that vested rights of the EMPLOYEE shall not be affected by such
termination.
(c) If the EMPLOYER is in default as defined in Section 3(x)(1) of the
FDIA, all obligations under this AGREEMENT shall terminate as of the date of
default; provided, however, that vested rights of the EMPLOYEE shall not be
affected.
(d) All obligations under this AGREEMENT shall be terminated, except to
the extent of a determination that the continuation of this AGREEMENT is
necessary for the continued operation of the EMPLOYER, (i) by the Director of
the OTS, or his or her designee at the time that the Federal Deposit Insurance
Corporation enters into an agreement to provide assistance to or on behalf of
the EMPLOYER under the authority contained in Section 13(c) of the FDIA or (ii)
by the Director of the OTS, or his or her designee, at any time the Director of
the OTS, or his or her designee, approves a supervisory merger to resolve
problems related to the operation of the EMPLOYER or when the EMPLOYER is
determined by the Director of the OTS to be in an unsafe or unsound condition.
No vested rights of the EMPLOYEE shall be affected by any such action.
6. CONSOLIDATION, MERGER OR SALE OF ASSETS. Nothing in this AGREEMENT shall
preclude the EMPLOYER from consolidating with, merging into, or transferring
all, or substantially all, of its assets to another corporation that assumes all
of the EMPLOYER's obligations and undertakings hereunder. Upon such a
consolidation, merger or transfer of assets, the term "EMPLOYER" as used herein,
shall mean such other corporation or entity, and this AGREEMENT shall continue
in full force and effect.
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7. CONFIDENTIAL INFORMATION. The EMPLOYEE acknowledges that during his
employment he will learn and have access to confidential information regarding
the EMPLOYER and its customers and businesses. The EMPLOYEE agrees and
covenants not to disclose or use for his own benefit, or the benefit of any
other person or entity, any confidential information, unless or until the
EMPLOYER consents to such disclosure or use or such information becomes common
knowledge in the industry or is otherwise legally in the public domain. The
EMPLOYEE shall not knowingly disclose or reveal to any unauthorized person any
confidential information relating to the EMPLOYER, its parent, subsidiaries or
affiliates, or to any of the businesses operated by them, and the EMPLOYEE
confirms that such information constitutes the exclusive property of the
EMPLOYER. The EMPLOYEE shall not otherwise knowingly act or conduct himself (a)
to the material detriment of the EMPLOYER, its subsidiaries, or affiliates, or
(b) in a manner which is inimical or contrary to the interests of the EMPLOYER.
8. NONASSIGNABILITY. Neither this AGREEMENT nor any right or interest
hereunder shall be assignable by the EMPLOYEE, his beneficiaries, or legal
representatives without the EMPLOYER's prior written consent; provided, however,
that nothing in this Section 8 shall preclude (a) the EMPLOYEE from designating
a beneficiary to receive any benefits payable hereunder upon his death, or (b)
the executors, administrators, or other legal representatives of the EMPLOYEE or
his estate from assigning any rights hereunder to the person or persons entitled
thereto.
9. NO ATTACHMENT. Except as required by law, no right to receive payment
under this AGREEMENT shall be subject to anticipation, commutation, alienation,
sale, assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy, or similar process of assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
10. INDEMNIFICATION; INSURANCE.
(a) INDEMNIFICATION. The EMPLOYER agrees to indemnify the EMPLOYEE and
his heirs, executors, and administrators to the fullest extent permitted under
applicable law and regulations, including, without limitation 12 U.S.C. Section
1828(k), against any and all expenses and liabilities reasonably incurred by the
EMPLOYEE in connection with or arising out of any action, suit or proceeding in
which the EMPLOYEE may be involved by reason of his having been a director or
officer of the EMPLOYER or any of its subsidiaries, whether or not the EMPLOYEE
is a director or officer at the time of incurring any such expenses or
liabilities. Such expenses and liabilities shall include, but shall not be
limited to, judgments, court costs and attorney's fees and the cost of
reasonable settlements. The EMPLOYEE shall be entitled to indemnification in
respect of a settlement only if the Board of Directors of the EMPLOYER has
approved such settlement. Notwithstanding anything herein to the contrary, (i)
indemnification for expenses shall not extend to matters for which the EMPLOYEE
has been terminated for JUST CAUSE, and (ii) the obligations of this Section 10
shall survive the TERM of this AGREEMENT. Nothing contained herein shall be
deemed to provide indemnification prohibited by applicable law or regulation.
-8-
<PAGE>
(b) INSURANCE. During the TERM, the EMPLOYER shall provide the EMPLOYEE
(and his heirs, executors, and administrators) with coverage under a directors'
and officers' liability policy at the EMPLOYER's expense, at least equivalent to
such coverage provided to directors and senior officers of the EMPLOYER.
11. BINDING AGREEMENT. This AGREEMENT shall be binding upon, and inure to the
benefit of, the EMPLOYEE and the EMPLOYER and their respective permitted
successors and assigns.
12. AMENDMENT OF AGREEMENT. This AGREEMENT may not be modified or amended,
except by an instrument in writing signed by the parties hereto.
13. WAIVER. No term or condition of this AGREEMENT shall be deemed to have
been waived, nor shall there be an estoppel against the enforcement of any
provision of this AGREEMENT, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver, unless specifically stated therein, and each waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than the act specifically waived.
14. SEVERABILITY. If, for any reason, any provision of this AGREEMENT is held
invalid, such invalidity shall not affect the other provisions of this AGREEMENT
not held so invalid, and each such other provision shall, to the full extent
consistent with applicable law, continue in full force and effect. If this
AGREEMENT is held invalid or cannot be enforced, then any prior Agreement
between the EMPLOYER (or any predecessor thereof) and the EMPLOYEE shall be
deemed reinstated to the full extent permitted by law, as if this AGREEMENT had
not been executed.
15. HEADINGS. The headings of the paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this AGREEMENT.
16. GOVERNING LAW; REGULATORY AUTHORITY. This AGREEMENT has been executed and
delivered in the State of Ohio and its validity, interpretation, performance,
and enforcement shall be governed by the laws of the State of Ohio, except to
the extent that federal law is governing. References to the OTS included herein
shall include any successor primary federal regulatory authority of EMPLOYEE.
17. EFFECT OF PRIOR AGREEMENTS. This AGREEMENT contains the entire
understanding between the parties hereto and supersedes any prior employment
agreement between the EMPLOYER or any predecessor of the EMPLOYER and the
EMPLOYEE.
18. NOTICES. Any notice or other communication required or permitted pursuant
to this AGREEMENT shall be deemed delivered if such notice or communication is
in writing and is delivered personally or by facsimile transmission or is
deposited in the United States mail, postage prepaid, addressed as follows:
-9-
<PAGE>
If to the EMPLOYER:
Foundation Savings Bank
25 Garfield Place
Cincinnati, Ohio 45202
If to the EMPLOYEE:
Mr. Laird L. Lazelle
7 Spring Knoll Drive
Mariemont, Ohio 45227
IN WITNESS WHEREOF, the EMPLOYER has caused this AGREEMENT to be executed
by its duly authorized officer, and the EMPLOYEE has signed this AGREEMENT, each
as of the day and year first above written.
Attest: FOUNDATION SAVINGS BANK
By
- ------------------------------ ------------------------------------
Michael S. Schwartz
its Chairman of the Board
Attest:
- ------------------------------ --------------------------------------
Laird L. Lazelle
-10-
<PAGE>
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
We have issued our report dated July 19, 1995 accompanying the financial
statements of Foundation Savings Bank in Forms S-1, AC, and OC to be filed with
the Securities and Exchange Commission and the Office of Thrift Supervision on
or about August 1, 1996. We consent to the use of the aforementioned report in
the Registration Statement and Prospectus, and all amendments, thereto, and to
the use of our name as it appears under the caption "Experts".
CLARK, SCHAEFER, HACKETT & CO.
Cincinnati, OH
<PAGE>
CONVERSION VALUATION APPRAISAL REPORT
PREPARED FOR:
FOUNDATION SAVINGS BANK
and
FOUNDATION BANCORP, INC.
Cincinnati, Ohio
As of:
May 14, 1996
PREPARED BY:
KELLER & COMPANY, INC.
555 Metro Place North
Suite 524
Dublin, Ohio 43017
(614) 766-1426
KELLER & COMPANY
<PAGE>
CONVERSION VALUATION APPRAISAL REPORT
PREPARED FOR:
FOUNDATION SAVINGS BANK
and
FOUNDATION BANCORP, INC.
Cincinnati, Ohio
As of:
May 14, 1996
PREPARED BY:
Michael R. Keller
President
<PAGE>
INTRODUCTION
Keller & Company, Inc., an independent appraisal firm for financial
institutions, has prepared this Conversion Appraisal Report ("Report") which
provides the pro forma market value of the to-be-issued common stock of
Foundation Bancorp, Inc. (the "Corporation"), an Ohio corporation, formed as a
holding company to own all of the to-be-issued shares of common stock of
Foundation Savings Bank, Cincinnati, Ohio, ("Foundation" or the "Bank"). The
stock is to be issued in connection with the Bank's Application for Approval of
Conversion from a state-chartered mutual savings and loan association to a
state-chartered stock savings and loan association. The Application is being
filed with the Office of Thrift Supervision ("OTS") of the Department of the
Treasury and the Securities and Exchange Commission ("SEC"). In accordance with
the Bank's conversion, there will be a simultaneous issuance of all the Bank's
stock to the Corporation, which will be formed by the Bank. Such Application for
Conversion has been reviewed by us, including the Prospectus and related
documents, and discussed with the Bank's management and the Bank's conversion
counsel, Vorys, Sater, Seymour & Pease, Columbus, Ohio.
This conversion appraisal was prepared based on the guidelines provided by
OTS entitled "Guidelines for Appraisal Reports for the Valuation of Savings
Institutions Converting from the Mutual to Stock Form of Organization", in
accordance with the OTS application requirements of Regulation Section 563b and
the OTS's Revised Guidelines for Appraisal Reports, and represents a full
appraisal report. The Report provides detailed exhibits based on the Revised
Guidelines and a discussion on each of the fourteen factors that need to be
considered. Our valuation will be updated in accordance with the Revised
Guidelines and will consider any changes in market conditions for thrift
institutions.
The pro form a market value is defined as the price at which the stock of
the Corporation after conversion would change hands between a typical willing
buyer and a typical willing seller when the former is not under any compulsion
to buy and the latter is not under any compulsion to sell, and with both parties
having reasonable knowledge of relevant facts in an arms-length transaction. The
appraisal assumes the Bank is a going concern and that the shares issued by the
Corporation in the conversion are sold in noncontrol blocks.
In preparing this conversion appraisal, we have reviewed the audited
financial statements for the five fiscal years ended June 30, 1991 through 1995,
as well as the unaudited financial statements for the nine months ended March
31, 1995 and 1996, and discussed them with Foundation's management and with
Foundation's independent auditors, Clark, Schafer, Hackett & Co., Cincinnati,
Ohio. We have also discussed and reviewed with management other financial
matters. We have reviewed the Corporation's preliminary Form S-1 and the Bank's
preliminary Form AC and discussed them with management and with the Bank's
conversion counsel.
We have visited Foundation's home office and have traveled the surrounding
area in Hamilton County, Ohio. We have studied the economic and demographic
characteristics of the community of Cincinnati, where the Bank's office is
located, and the Bank's primary market area of Hamilton County,
<PAGE>
relative to Ohio and the United States. We have also examined the competitive
environment within which Foundation operates, giving consideration to the area's
key characteristics, both positive and negative.
We have given consideration to the market conditions for securities in
general and for publicly-traded thrift stocks in particular. We have examined
the performance of selected publicly-traded thrift institutions and compared the
performance of Foundation to those selected institutions.
Our valuation is not intended to represent and must not be interpreted to
be a recommendation of any kind as to the desirability of purchasing the to-be-
outstanding shares of common stock of the Corporation. Giving consideration to
the fact that this appraisal is based on numerous factors that can change over
time, we can provide no assurance that any person who purchases the stock of the
Corporation in this mutual-to stock conversion will subsequently be able to sell
such shares at prices similar to the pro forma market value of the Corporation
as determined in this conversion appraisal.
I. DESCRIPTION OF FOUNDATION SAVINGS BANK
GENERAL
Foundation Savings Bank, Cincinnati, Ohio, was incorporated in 1888 as an
Ohio savings and loan association with the name of Foundation Savings and Loan
Company. In 1991, Foundation changed its name to Foundation Savings Bank but
continued to maintain its savings and loan association charter.
Foundation conducts its business from its home office in downtown
Cincinnati, Ohio. The Bank's primary market area consists of Hamilton County,
Ohio, which includes the city of Cincinnati. Foundation's deposits are insured
up to applicable limits by the Federal Deposit Insurance Corporation ("FDIC") in
the Savings Association Insurance Fund ("SAIF"). The Bank is also subject to
certain reserve requirements of the Board of Governors of the Federal Reserve
Bank (the "FRB"). Foundation is a member of the Federal Home Loan Bank (the
"FHLB") of Cincinnati and is regulated by the OTS, and by the FDIC. At March 31,
1996, Foundation had assets of $31,738,000, deposits of $27,780,000, and
retained earnings of $2,772,000.
In the past five years, legislation has had an impact on the operations in
the financial institution industry. In 1989, the Financial Institution Reform,
Recovery, and Enforcement Act ("FIRREA") became effective and put into place
more stringent supervisory standards and higher capital requirements for the
thrift industry. FIRREA established new capital requirements and strengthened
OTS' enforcement powers. These capital requirements continue today under the
FDIC and the FRB and include a tier one capital requirement of 4.0 percent of
total assets, and a risk-based capital requirement of 8.0 percent of risk-
weighted assets. OTS now has the power to assess civil money penalties and issue
cease and desist orders for violations of regulations deemed unsafe and unsound
practices.
FIRREA also resulted in an increase in deposit insurance premiums which
thrifts must pay to the FDIC. A plan for a one-time premium of 0.85 percent to
0.90 percent of deposits based on deposits as of March 31, 1995, to capitalize
the SAIF does exist, and such an increase would have an immediate adverse
<PAGE>
effect on Foundation's equity and earnings. Further, there has been a recent
significant decrease in premiums on Bank Insurance Fund ("BIF") deposits, which
has an adverse competitive impact on Foundation and could affect the Bank's
ability to compete effectively with BIF-insured banks for deposits. Such impact
could result in a downward impact on prices of publicly traded thrift
institutions.
FIRREA's objective was strengthened in December, 1991, when the Federal
Deposit Insurance Bank Improvement Act of 1991 ("FDICIA") was passed, resulting
in additional provisions relating to thrift institutions. FDICIA provided for
the recapitalization of BIF. FDICIA requires federally-insured financial
institutions to be examined at least annually and submit independently audited
financial reports based on the size of the institution.
Foundation is a community-oriented institution which has been principally
engaged in the business of serving the financial needs of the public in its
local communities and throughout its market area. Foundation has been actively
and consistently involved in the origination of residential mortgage loans for
the purchase of one- to four-family dwellings, comprising 91.4 percent of its
loan originations during the nine months ended March 31, 1996, and 90.3 percent
of its loan originations during the fiscal year ended June 30, 1995. At March
31, 1996, a strong 88.9 percent of its net loans consisted of residential real
estate loans on one- to four-family dwellings, compared to a similar 88.5
percent at June 30, 1993, with the source of its funds being retail deposits
from residents in its local communities. The Bank is also an originator of
multi-family loans, nonresidential real estate loans, and offers consumer loans
on a less active basis. Consumer loans include automobile loans, loans on
savings accounts, and other secured and unsecured loans. Consumer loans
represented a very modest 1.9 percent share of the Bank's total loans at March
31, 1996.
The Bank had a moderate $4.9 million, or 15.4 percent of its assets in U.S.
government and federal agency securities, Federal funds sold and FHLB stock. The
Bank had an additional $5.0 million, or 15.8 percent of its assets, in mortgage-
backed securities, and $85,000 in interest-bearing deposits with the combined
total of investment securities, mortgage-backed securities and cash and cash
equivalents being $9.9 million or 31.1 percent of assets. Deposits and retained
earnings have been the sources of funds for the Bank's lending and investment
activities.
The management of Foundation is aware of the emphasis on matching the
maturities of assets and liabilities and monitoring the Bank's interest rate
sensitivity position and market value of portfolio equity. The Bank understands
the nature of interest rate risk and the potential earnings impact during times
of rapidly changing rates, either rising or falling. Foundation also recognizes
the need and importance of attaining a competitive net interest margin due to
its more moderate levels of fee and other income.
The Bank's gross amount of stock to be sold in the conversion will be
$3,500,000 or 350,000 shares at $10 per share based on the midpoint of the
appraised value, with net conversion proceeds of $3,249,000 reflecting
conversion expenses of $251,000. The actual cash proceeds to the Bank of $1.35
<PAGE>
million will represent fifty percent of the net conversion proceeds, less the
ESOP of $280,000, and will be invested in mortgage loans and consumer loans over
time, and initially invested in short term investments. The Bank may also use
the proceeds to expand services, expand operations or other financial service
organizations, diversification into other businesses, or for any other purposes
authorized by law. The Holding Company will use its proceeds to fund the ESOP
and to invest in short- and intermediate-term government securities.
Foundation has seen moderate overall deposit growth over the past five
fiscal years with deposits increasing 9.4 percent from June 30, 1991, to June
30, 1995, or an average of 2.3 percent per year. From June 30, 1995, to March
31, 1996, deposits increased by only 0.2 percent or 0.3 percent a year,
annualized, compared to a 1.4 percent growth rate in 1995. The Bank anticipates
a modest rate of growth in the future. The Bank has focused on maintaining a
strong residential real estate loan portfolio during the past five years,
increasing its level of investments and mortgage-backed securities, monitoring
its earnings and increasing its capital to assets ratio. Equity to assets
increased from 7.37 percent of assets at June 30, 1991, to 8.50 percent at June
30, 1995, and to 8.73 percent at March 31, 1996.
Foundation's primary lending strategy has been to originate and retain both
adjustable-rate and fixed-rate residential mortgage loans with similar levels of
fixed- and adjustable-rate mortgage loans.
Foundation's share of one- to four-family mortgage loans has remained
strong, increasing from 88.5 percent of gross loans at June 30, 1993, to 88.9
percent as of March 31, 1996. Nonresidential real estate loans increased from
5.27 percent at June 30, 1993, to 6.12 percent to 6.12 percent at March 31,
1996. Multi-family loans increased from 3.7 percent of gross loans at June 30,
1993, to 3.75 percent at March 31, 1996. The rise in multi-family and
nonresidential loans was offset by the Bank's decrease in consumer loans. The
Bank's share of consumer loans decreased from 3.5 percent at June 30, 1993, to
1.9 percent at March 31, 1996, representing a dollar decrease of only $268,000.
Management's internal strategy has also included continued emphasis on
maintaining an adequate and appropriate allowance for loan losses relative to
loans and nonperforming assets and in recognition of the more stringent
requirements within the industry to establish and maintain a higher level of
general valuation allowances. At June 30, 1993, Foundation had $101,000 in its
loan loss allowance or 0.52 percent of total loans, which increased to $104,000
and represented a lower 0.49 percent of total loans at March 31, 1996.
Interest income from loans and investments has been the basis of earnings
with the net interest margin being the key determinant of net earnings. The Bank
has also witnessed some higher levels of noninterest income due to gains on the
sale of assets. With a dependence on net interest margin for earnings, current
management will focus on strengthening the Bank's net interest margin without
undertaking excessive credit risk and will not pursue any significant change in
its interest rate risk position.
PERFORMANCE OVERVIEW
<PAGE>
Foundation's financial position over the past five fiscal years of June 30,
1991, through June 30, 1995, and for the nine months ended March 31, 1995 and
1996, is highlighted through the use of selected financial data in Exhibit 5.
Foundation has focused on strengthening its equity position, controlling its
overhead ratio, maintaining its general valuation allowance, and strengthening
its net interest margin. Foundation has experienced a moderate but slightly
volatile rise in assets from 1991 to 1995 and a smaller rate of increase in
deposits with a less than average increase in equity over the past five fiscal
years. The resultant impact has been a modest increase in the Bank's equity to
assets ratio.
Foundation witnessed a total increase in assets of $4.4 million or 15.9
percent for the period of June 30, 1991, to June 30, 1995, representing an
average annual increase in assets of 4.0 percent. For the year ended June 30,
1995, assets increased $793,000 or 2.6 percent. For the nine months ended March
31, 1996, the Bank's assets decreased $111,000 or 0.3 percent as a result of a
payoff of $350,000 in FHLB advances, and was the second decrease in assets since
1991. Over the past four fiscal periods, the Bank experienced its largest dollar
rise in assets of $2.6 million in fiscal year 1992, which represented a 9.5
percent increase in assets due primarily to a rise in mortgage-backed securities
and funded by a rise in deposits. This increase was succeeded by a $1.5 million
or 5.1 percent increase in assets in fiscal year 1993, a 1.8 percent decrease in
1994 and a 2.6 percent increase in 1995.
The Bank's net loan portfolio, including mortgage loans and non-mortgage
loans, decreased from $22.7 million at June 30, 1991, to $20.5 million at June
30, 1995, and represented a total decrease of $2.2 million, or 9.5 percent. The
average annual decrease during that period was 2.37 percent. That decrease was
the result of a high level of loan payoffs of one- to four-family loans in
fiscal year 1993 and a much lower level of loan originations in 1994. The
decrease in loans at Foundation was offset by the Bank's growth in mortgage-
backed securities. For the year ended June 30, 1995, loans increased $1.7
million or 9.1 percent. For the nine months ended March 31, 1996, net loans then
increased $848,000 or 4.1 percent.
Foundation has pursued obtaining funds through deposit growth in accordance
with the demand for loans, and has made limited use of FHLB advances, with
advances totaling $1,192,000 at June 30, 1995, and $842,000 at March 31, 1996.
The Bank's competitive rates for savings in its local market have been the
source of retail deposits. Deposits increased 8.9 percent from 1991 to 1992,
followed by a 5.2 percent increase in fiscal year 1993, a 6.3 percent decrease
in 1994 and then a minimal rebound in 1995, with an average annual rate of
increase of 2.3 percent from June 30, 1991, to June 30, 1995. For the nine
months ended March 31, 1996, deposits increased by $43,000 or 0.2 percent. The
Bank's strongest fiscal year deposit growth was in fiscal year 1992, when
deposits increased $2.3 million or 8.9 percent.
Foundation has been able to increase its retained earnings each fiscal year
from 1991 through 1995. At June 30, 1991, the Bank had retained earnings of $2.0
million representing a 7.37 percent equity to assets ratio, increasing to $2.7
million at June 30, 1995, and representing an 8.50 percent equity to assets
ratio. At March 31, 1996, equity was a higher $2.8 million or 8.73 percent of
assets. The rise in the equity to assets ratio is primarily the result of the
Bank's steady earnings performance in 1991 through
<PAGE>
1995. Equity increased 33.6 percent from June 30, 1991, to June 30, 1995,
representing an average annual increase of 8.4 percent and increased 2.4 percent
for the nine months ended March 31, 1996, or 3.3 percent, annualized.
INCOME AND EXPENSE
Exhibit 6 presents selected operating data for Foundation, reflecting the
Bank's income and expense trends. This table provides selected audited income
and expense figures in dollars for the fiscal years of 1991 through 1995 and
unaudited income and expense figures for the nine months ended March 31, 1995
and 1996.
Foundation has witnessed a decrease in its dollar level of interest income
from June 30, 1991, through June 30, 1995, ranging from a high of $2.5 million
in 1992 to a low of $2.1 million in 1994, increasing slightly to $2.2 million in
fiscal year 1995, representing a five year decrease of 11.6 percent, or an
average decrease of 2.9 percent per year. In fiscal year 1995 interest income
increased $93,000, or 4.5 percent to $2.2 million. For the nine months ended
March 31, 1996, interest income was $1.8 million or $2.1 million, annualized,
compared to $1.6 million for the nine months ended March 31, 1995, suggesting a
basically flat trend. The overall decrease in interest income was due primarily
to the Bank's decrease in rate, further reduced by a decrease due to volume.
The Bank's interest expense experienced a similar declining trend from
fiscal year 1991 to 1994, followed by an increase in 1995. Interest expense
decreased $516,000, or 27.8 percent, from 1991 to 1994, compared to a decrease
in interest income of $377,000, or 15.4 percent, for the same time period.
Interest expense then increased $29,000 or 2.2 percent from 1994 to 1995,
compared to an increase in interest income of $93,000 or 4.5 percent as
discussed above. Such lower increase in interest expense in 1995,
notwithstanding the increase in interest income, resulted in a modest increase
in annual net interest income to $794,000 for the fiscal year ended June 30,
1995. Net interest income increased from $591,000 in 1991 to its highest level
of $798,000 in 1993, followed by a decrease to $730,000 in fiscal year 1994, and
then an increase to $794,000 in 1995. For the nine months ended March 31, 1996,
Foundation's net interest expense was $1,207,000, or $1.6 million on an
annualized basis, which was greater than 1995 interest expense of $1.4 million.
The rise in interest expense during the nine months ended March 31, 1996,
combined with a flat trend in interest income resulted in a decrease in net
interest income. For the nine months ended March 31, 1996, net interest income
was $576,000 or $768,000, annualized, representing a 3.3 percent decrease from
net interest income in fiscal year 1995.
The Bank has made provisions for loan losses in each of the past five
fiscal years of 1991 through 1995, and in the nine months ended March 31, 1996.
The amounts of those provisions were determined in recognition of the Bank's
level of nonperforming assets, charge-offs and repossessed assets, but also
relative to the increase in provisions in the industry to strengthen the level
of general valuation allowance. The loan loss provisions were $5,000 in 1991,
$5,000 in 1992, $83,000 in 1993, $33,000 in 1994,
<PAGE>
$12,000 in 1995 and $34,000 in the nine months ended March 31, 1996. The impact
of these loan loss provisions has been to provide Foundation with a general
valuation allowance of $104,000 at March 31, 1996, or 0.48 percent of net loans
and 93.7 percent of nonperforming assets.
Total other income or noninterest income indicated volatile levels in
fiscal years 1991 to 1995, with a higher than average level in 1994. The highest
level of noninterest income was in fiscal year 1994 at $204,000 or 0.64 percent
of average assets and the lowest level at $70,000 was in 1995, representing 0.22
percent of assets. The high level of noninterest income in 1994 was primarily
due to the income from the gain on the sale of investments of $132,431.
Excluding income from investment gains in 1994, noninterest income would have
been $71,485 or 0.23 percent of assets. The average noninterest income level for
the past five fiscal years was $126,250 or 0.42 percent of average assets using
actual noninterest income, and $100,000 or 0.33 percent of average assets
excluding income from gains on sale of investments in 1994. With the exception
of the income from gains on investments, noninterest income consisted primarily
of office site income and service charges and other fees.
The Bank's general and administrative expenses or noninterest expenses
increased from $514,000 for the fiscal year of 1991 to $679,000 for the fiscal
year ended June 30, 1995. The dollar increase in noninterest expenses was
$165,000 from 1991 to 1995, representing an average annual increase of $41,250
or 6.5 percent. The average annual increase in other expenses was due to the
Bank's normal rise in overhead expenses. On a percent of assets basis, operating
expenses increased from 1.96 percent of average assets for the fiscal year ended
June 30, 1991, to 2.23 percent for the fiscal year ended June 30, 1995, which
was the Bank's highest ratio during the past five years but lower than current
industry averages of approximately 2.35 percent. For the nine months ended March
31, 1996, Foundation's ratio of operating expenses to average assets was a lower
2.08 percent.
The net earnings position of Foundation has indicated profitable
performance in each of the past five fiscal years ended June 30, 1991 through
1995, and for the nine months ended March 31, 1996. The annual net income
figures for the past five fiscal years of 1991, 1992, 1993, 1994 and 1995 have
been $119,000, $234,000, $127,000, $195,000, and $125,000, representing returns
on average assets of 0.45 percent, 0.81 percent, 0.40 percent, 0.62 percent, and
0.41 percent, respectively. The average return on assets for the past five
fiscal years was 0.54 percent. For the nine months ended March 31, 1996, net
earnings were $66,000, representing an annualized return on assets of 0.28
percent.
Exhibit 7 provides the Bank's normalized earnings or core earnings for
fiscal years 1993 to 1995 and for the twelve months ended March 31, 1996. The
Bank's normalized earnings eliminate any nonrecurring income and expense items.
In fiscal year 1995 and for the twelve months ended March 31, 1996, there were
no adjustments. For the fiscal years 1993 and 1994, there were reductions in
income of $112,000 and $41,000, respectively to recognize the Bank's higher
levels of gains on investments. The results of these adjustments were core
earnings of $116,000 in 1994 compared to actual net income of $195,000 and core
earnings of $122,000 in 1993.
<PAGE>
The key performance indicators comprised of selected operating ratios,
asset quality ratios and capital ratios are shown in Exhibit 8 to reflect the
results of performance. The Bank's return on assets increased from 0.45 percent
in fiscal year 1991 to its highest level of 0.81 percent in fiscal year 1992,
decreasing to 0.40 percent in fiscal year 1993, then increasing to 0.62 percent
in 1994 and down to 0.41 percent in fiscal year 1995. For the nine months ended
March 31, 1996, the Banks return on assets was a lower 0.28 percent.
The Bank's average interest rate spread strengthened from a low of 1.75
percent in fiscal year 1991 to 2.27 percent in fiscal year 1992, then declined
during the next two fiscal years to 2.22 percent in 1993 and to 2.02 percent in
1994, and then increased to 2.25 percent in 1995. For the nine months ended
March 31, 1996, annualized, net interest spread was a lower 2.00 percent. The
Bank's net interest margin indicated a similar trend, increasing from 2.28
percent in fiscal year 1991 to 2.69 percent in fiscal year 1992 then decreasing
to 2.35 percent in 1994, and then rising to 2.66 percent in 1995 and then down
to 2.47 percent for the nine months ended March 31, 1996. Foundation's interest
rate spread increased 52 basis points in 1992 to 2.27 percent from 1.75 percent
in 1991 and then decreased 5 basis points in 1993 to 2.22 percent as the result
of a larger decrease in interest expense. Interest rate spread then decreased 20
basis points to 2.02 percent for fiscal year 1994 and then increased 23 basis
points to 2.25 percent for the fiscal year ended June 30, 1995. The Bank's net
interest margin followed a similar trend, increasing 41 basis points to 2.69
percent in 1992 and then decreasing 12 basis points to 2.57 percent in 1993. Net
interest margin decreased 22 basis points to 2.35 percent in 1994 but rebounded
31 basis points to 2.66 percent in 1995. For the nine months ended March 31,
1996, Foundation's annualized net interest spread was a lower 2.00 percent, and
its net interest margin was a lower 2.47 percent.
The Bank's return on average equity increased from 1991 to 1992, but
decreased from 1993 to 1995. The return on average equity increased from 6.02
percent in 1991 to 10.89 percent in fiscal year 1992, and then down to 5.42
percent in fiscal year 1993.
The return on equity then increased to 7.92 percent in fiscal year 1994,
but decreased to 4.72 percent for the fiscal year ended June 30, 1995. For the
nine months ended March 31, 1996, annualized, return on average equity was an
even lower 3.20 percent.
Foundation's ratio of interest-earning assets to interest-bearing
liabilities increased slightly from 107.50 percent at June 30, 1991, to 108.92
percent at June 30, 1995, to 109.01 percent at March 31, 1996.
The Bank's ratio of non-interest expenses to average assets increased
steadily from 1.96 percent in fiscal year 1991 to 2.23 percent in fiscal year
1995, which was its highest ratio during the past five years. For the nine
months ended March 31, 1996, noninterest expenses to assets decreased to 2.08
percent. Another key noninterest expense ratio reflecting efficiency of
operation is the ratio of noninterest expenses to the sum of net interest income
and non-interest income referred to as the "efficiency ratio". The industry norm
is 60.0 percent with a higher ratio indicating less efficiency. The Bank has
been
<PAGE>
characterized with a weak efficiency ratio, which increased from 75.92 percent
in 1991 to 78.59 percent in 1995. The ratio was 78.98 percent for the nine
months ended March 31, 1996.
Earnings performance can be affected by an institution's asset quality
position. The ratio of nonperforming assets to total assets is a key indicator
of asset quality. Foundation witnessed a modest increase in its nonperforming
asset ratio from 1991 to 1993 and a strong decrease through March 31, 1996.
Nonperforming assets consist of nonaccruing loans, loans 90 days or more past
due and repossessed assets. The ratio of nonperforming assets to total assets
was 1.0 percent at June 30, 1991, and increased to 1.05 percent at June 30,
1993. The ratio then decreased sharply during the next fiscal year to 0.29
percent in 1994 and then up to 0.64 percent in 1995. At March 31, 1996,
Foundation's ratio of nonperforming assets to total assets decreased to 0.35
percent. The Bank's allowance for loan losses was only 3.4 percent of
nonperforming assets at June 30, 1991, but increased significantly during the
next four fiscal years, resulting primarily from the sharp decrease in
nonperforming assets as previously mentioned. As a percentage of nonperforming
assets, Foundation's allowance for loan losses increased to 7.0 percent in 1992,
30.3 percent in 1993, 77.4 percent in 1994 and 50.5 percent in 1995. At March
31, 1996, the ratio increased to 93.7 percent reflective of the significant
decrease in nonperforming assets.
Exhibit 9 provides the changes in net interest income due to rate and
volume changes for the past two fiscal years of 1994 and 1995 and for the nine
months ended March 31, 1996. In fiscal year 1994, net interest income decreased
$68,000, due to a decrease in interest expense of $160,000 offset by a larger
$228,000 decrease in interest income. The decrease in interest expense was due
to a decrease due to a change in rate of $135,000 accented by a decrease due to
volume of $25,000. The decrease in interest income was due to a decrease due to
rate of $170,000 increased by a decrease due to a change in volume of $58,000.
In fiscal year 1995, net interest income increased $64,000, due to a
$93,000 increase in interest income reduced by a $29,000 increase in interest
expense. The increase in interest income was due to a $96,000 increase due to
rate reduced by a $3,000 decrease due to volume. The increase in interest
expense was due to a $94,000 increase due to rate reduced by a $65,000 decrease
due to volume.
For the nine months ended March 31, 1996, compared to the nine months ended
March 31, 1995, net interest income decreased $28,000 due to a $218,000 increase
in interest expense reduced by a $190,000 increase in interest income. The rise
in interest expense was due to a $163,000 increase due to rate accented by a
$55,000 increase due to volume. The rise in interest income was basically split
with $93,000 due to a rise in rate and $97,000 due to a rise in volume.
YIELDS AND COSTS
The overview of yield and cost trends for the years ended June 30, 1993 to
1995, for the nine months ended March 31, 1995, and March 31, 1996 and at March
31, 1996, can be seen in Exhibit 10, which offers a summary of key yields on
interest-earning assets and costs of interest-bearing liabilities.
<PAGE>
Foundation's weighted average yield on its loan portfolio was 8.95 percent
in 1993 and decreased 80 basis points from fiscal year 1993 to 1995, to 8.15
percent, and then increased 23 basis points to 8.38 percent for the nine months
ended March 31, 1996. The yield on mortgage-backed securities decreased 11 basis
points from fiscal year 1993 to 1995 from 5.44 percent to 5.33 percent and then
increased 65 basis points to 5.98 percent for the nine months ended March 31,
1996. The yield on investment securities decreased 3 basis points from 5.32
percent in 1993 to 5.29 percent in 1995 and increased to 5.84 percent for the
nine months ended March 31, 1996. Other interest bearing deposits indicated an
increase in their yield of 321 basis points from 3.11 percent in 1993 to 5.32
percent in 1995 and then increased to 5.80 percent for the nine months ended
March 31, 1996. The combined weighted average yield on all interest-earning
assets decreased 17 basis points to 7.24 percent from 1993 to 1995. The yield on
interest-earning assets for the nine months ended March 31, 1996, was a higher
7.62 percent, while the yield at March 31, 1996, was a similar 7.27 percent when
compared to fiscal 1995.
Foundation's weighted average cost of interest-bearing liabilities
decreased 54 basis points to 4.65 percent from fiscal year 1993 to 1994, which
was less than the Bank's 74 basis point decrease in yield, resulting in the
decline in the Bank's interest rate spread of 20 basis points from 2.22 percent
to 2.02 percent from 1993 to 1994. The Bank's average cost of interest-bearing
liabilities then increased from 1994 to 1995 by 34 basis points to 4.99 percent
compared to a 57 basis point increase in yield on interest-earning assets. The
result was an increase in the Bank's interest rate spread of 23 basis points to
2.25 percent for fiscal year 1995. For the nine months ended March 31, 1996, the
Bank's cost of funds increased 63 basis points to 5.62 percent, compared to a
smaller 38 basis point increase in yield on interest-earning assets, resulting
in a lower net interest rate spread of 2.00 percent compared to 2.25 percent for
the fiscal year ended June 30, 1995. The Bank's net interest margin decreased
from 2.57 percent in fiscal year 1993 to 2.35 percent in fiscal year 1994, then
increasing to 2.66 percent for the year ended June 30, 1995. The Bank's net
interest margin for the nine months ended March 31, 1996, then decreased 19
basis points to 2.47 percent.
INTEREST RATE SENSITIVITY
Foundation has been successful in controlling its interest rate sensitivity
position due to an emphasis on the origination of adjustable-rate mortgage loans
and maintaining a moderate level of short term investments. However, the Bank's
more moderate level of capital is another factor that must be considered.
Foundation responded to the thrift industry's significant interest rate
risk exposure in the 1980's, which caused a negative impact on earnings and
market value of portfolio equity as a result of significant fluctuations in
interest rates, specifically rising rates. Such exposure was due to the
disparate rate of maturity and/or repricing of assets relative liabilities
commonly referred to as an institution's "gap". The larger an institution's gap,
the greater the risk (interest rate risk) of earnings loss due to a decrease in
net
<PAGE>
interest margin and a decrease in market value of equity or portfolio loss. In
response to the potential impact of interest rate volatility and negative
earnings impact, many institutions have taken steps in the 1990's to minimize
their gap position. This frequently results in a decline in the institution's
net interest margin and overall earnings performance.
The Bank measures its interest rate risk through the use of its net
portfolio value ("NPV") of the expected cash flows from interest-earning assets
and interest-bearing liabilities and any off-balance sheet contracts. The NPV
for the Bank is calculated on a quarterly basis by the OTS as well as the change
in the NPV for the Bank under rising and falling interest rates. Such changes in
NPV under changing rates is reflective of the Bank's interest rate risk
exposure.
There are other factors which have a measurable influence on interest rate
sensitivity. Such key factors to consider when analyzing interest rate
sensitivity include the Bank's equity position, the loan payoff schedule,
accelerated principal payments, deposit maturities, interest rate caps on
adjustable-rate mortgage loans, and deposit withdrawals.
Exhibit 11 provides the Bank's NPV as of December 31, 1995, and the change
in the Bank's NPV under rising and declining interest rates. Such calculations
are provided by OTS, and the focus of this exposure table is a 200 basis points
change in interest rates either up or down.
The Bank's change in its NPV at December 31, 1995, based on a rise in
interest rates of 200 basis points was a significant 28.0 percent decrease,
representing a dollar decrease in equity value of $717,000. In contrast, based
on a decline in interest rates of 200 basis points, the Bank's NPV was estimated
to increase 3.0 percent or $90,000 at December 31, 1995. The Bank's exposure at
December 31, 1995, increases to a 64.0 percent decrease under a 400 basis point
rise in rates, and the NPV is estimated to increase 7.0 percent based on a 400
basis point decrease in rates.
The Bank is aware of its higher interest rate risk exposure under strongly
rising rates and slightly positive exposure under falling rates. Due to
Foundation's recognition of the need to control its interest rate exposure, the
Bank has been active in the origination of adjustable-rate and mortgage loans,
which represented 51.7 percent of loans.
LENDING ACTIVITIES
Foundation has focused its lending activity on the origination of
conventional mortgage loans secured by one- to four-family dwellings. Exhibit 12
provides a summary of Foundation's loan portfolio, by loan type, at June 30,
1993 through 1995, and at March 31, 1996.
Residential loans secured by one- to four-family dwellings was the primary
loan type representing a very significant 88.9 percent of the Bank's net loans
as of March 31, 1996. This share has seen a minimal increase from 88.5 percent
at June 30, 1993. The second largest real estate loan type as of March 31, 1996,
was nonresidential real estate loans which comprised 6.1 percent of net loans
compared to a smaller 5.3 percent as of June 30, 1993. The nonresidential loan
category was also the second largest real
<PAGE>
estate loan type in 1993. The third key real estate loan type was multi-family
loans, which represented 3.74 percent of net loans as of March 31, 1996,
compared to a smaller 3.69 percent at June 30, 1993. These three real estate
loan categories represented 98.1 percent of net loans at March 31, 1996,
compared to a smaller 96.5 percent of net loans at June 30, 1993.
Consumer loans were the only other loan group at March 31, 1996, and
represented only 1.9 percent of net loans compared to 3.5 percent at June 30,
1993. Consumer loans were the fourth largest overall loan type at March 31,
1996, and the fourth largest loan type in 1993. The Bank originates savings
account loans, automobile loans and other personal loans. The overall mix of
loans has witnessed minimal change from fiscal yearend 1993 to March 31, 1996,
with the Bank having increased its level of one- to four-family real estate
loans, multi-family loans and nonresidential real estate loans to offset its
decrease in consumer loans.
The emphasis of Foundation's lending activity is the origination of
conventional mortgage loans secured by one- to four-family residences. Such
residences are located in Foundation's primary market area of Hamilton County.
At March 31, 1996, 88.9 percent of Foundation's net loans consisted of loans
secured by one- to four-family residential properties.
The Bank originates adjustable-rate mortgage loans, ("ARMs") with
adjustment/maturity periods of one and three years. The interest rates on ARMs
are indexed to the average monthly rate on the one-year U.S. Treasury Bill. The
Bank also offers loans with interest rates fixed for five, seven or ten years
and then adjusts their rate by adding 2.5 percent to 3.0 percent to the one-year
U.S. Treasury Bill Rate. The ARMs have a maximum rate adjustment of 2.0 percent
at each adjustment period and a 6.0 percent maximum adjustment over the life of
the loan with payments based on up to a 30 year loan term.
The majority of ARMs have terms of 15 to 30 years, and fixed rate loans
have normal terms of up to 30 years. The Bank retains most of its fixed rate
loans. Historically, about half of Foundation's loans are fixed-rate loans,
which represented 48.3 percent of loans due after March 31, 1996, with the
balance of 51.7 percent being ARMs.
The original loan to value ratio for conventional mortgage loans to
purchase or refinance single-family dwellings generally does not exceed 80
percent at Foundation, even though the Bank will grant loans with up to a 90
percent loan to value ratio, but private mortgage insurance is required at the
expense of the borrower.
Foundation has also been an originator of nonresidential real estate loans,
and has been less active in multifamily loans in the past. The Bank will
continue to make multifamily and nonresidential real estate loans. The Bank had
a total of $1.3 million in nonresidential real estate loans at March 31, 1996,
or 6. 1 percent of net loans, compared to $1.0 million or 5.3 percent of net
loans at June 30, 1993. The major portion of non- residential real estate loans
are secured by office buildings and other commercial properties. Multifamily
loans have increased from $722,000 or 3.7 percent of net loans at June 30, 1993,
to $798,000 or 3.7 percent of net loans at March 31, 1996.
<PAGE>
Foundation has not been active in consumer lending. Consumer loans consist
primarily of automobile loans, savings account loans, and personal loans, which
represented a combined total of 1.9 percent of net loans at March 31, 1996, down
from 3.5 percent in 1993. At March 31, 1996, consumer loans totaled $411,000.
Exhibit 13 provides a maturity schedule for Foundation's loan portfolio and
a breakdown of Foundation's fixed- and adjustable-rate loans, indicating a
balance of fixed- rate loans and ARMs. At March 31, 1996, 48.3 percent of the
Bank's total loans due after March 31, 1996, were fixed-rate and 51.7 percent
were adjustable-rate. Most loans are adjustable-rate, and it is also evident
that a strong 61.0 percent of one- to four-family residential mortgage loans and
53.9 percent of total loans have maturities of less than 20 years.
As indicated in Exhibit 14, Foundation experienced a decrease in both its
single family loan originations and total loan originations from fiscal years
1993 to 1995. Total loan originations in fiscal year 1995 were $5.6 million
compared to $6.4 million in fiscal year 1993, with fiscal year 1994 indicating a
much lower $3.0 million. The decrease in one- to four-family residential loan
originations from 1993 to 1995 of $744,000 represented 100.4 percent of the
$741,000 aggregate decrease in total loan originations from 1993 to 1995. Loan
originations for the nine months ended March 31, 1996, were a stronger $6.3
million, up from $4.2 million for the nine months ended March 31, 1995. Loan
originations for the purchase of one- to four-family residences represented 91.5
percent of total loan originations in fiscal year 1993, compared to a similar
91.4 percent in fiscal year 1994 and a lower 90.3 percent in fiscal year 1995.
One- to four family loan originations were 91.5 percent of total loan
originations for the nine months ended March 31, 1996. The Bank had no loan
purchases, with loan sales of $564,000 in 1995 and $1.1 million in the nine
months ended March 31, 1996. Overall, loan originations fell short of repayments
and other reductions in fiscal 1993 by $2.5 million, fell short of reductions in
fiscal year 1994 by $808,000, and then exceeded reductions in fiscal 1995 by
$1.7 million. For the nine months ended March 31, 1996, originations exceeded
reductions by $829,000.
NONPERFORMING ASSETS
Foundation understands asset quality risk and the direct relationship of
such risk to delinquent loans and nonperforming assets including real estate
owned. The quality of assets has been a key concern to financial institutions
throughout many regions of the country. A number of financial institutions have
been confronted with rapid increases in their levels of nonperforming assets and
have been forced to recognize significant losses, setting aside major valuation
allowances. A sharp increase in nonperforming assets has often been related to
specific regions of the country and has frequently been associated with higher
risk loans, including purchased nonresidential real estate loans. Foundation has
not been faced with such problems and has made a concerted effort to control its
nonperforming assets during the past five years.
<PAGE>
Exhibit 15 provides a summary of Foundation's delinquent loans at June 30,
1993 through 1995, and at March 31, 1996, indicating a moderate level of
delinquent loans from 1993 to 1995. Loans delinquent 90 days or more totaled
$333,000 at June 30, 1993, and decreased to $194,000 or 27.3 percent of
delinquent loans at June 30, 1995, with all delinquent loans totaling $613,000
in 1993 and $710,000 or 3.4 percent of loans at June 30, 1995. At March 31,
1996, delinquent loans of ninety days or more decreased to $111,000 or 0.52
percent of loans compared to 1.69 percent in 1993, with total delinquent loans
down to $242,000 or 1.13 percent of loans.
Foundation reviews each loan when it becomes delinquent 30 days or more, to
assess its collectibility and to initiate direct contact with the borrower. The
Bank sends the borrower a late payment notice within 15 days after the payment
is due. The Bank then initiates both written and oral communication with the
borrower if the loan remains delinquent for 60 days or more. When the loan
becomes delinquent at least 90 days, the Bank will commence foreclosure
proceedings and the borrower is sent a default notice. The Bank does not
normally accrue interest on loans past due 90 days or more. Most loans
delinquent 90 days or more are placed on a non-accrual status, and at that point
in time the Bank pursues foreclosure procedures. Foundation had no real estate
owned at June 30, 1993, 1994 or 1995, or at March 31, 1996.
Exhibit 16 provides a summary of Foundation's nonperforming assets at March
31, 1996, and at June 30, 1993 through 1995. Nonperforming assets consist of
non-accrual loans, loans delinquent 90 days or more, real estate acquired by
foreclosure or by deed in lieu, and repossessed assets. The Bank has
historically carried a lower than average level of nonperforming assets when
compared to its peer group and the thrift industry in general. Foundation's
level of nonperforming assets ranged from a high of $333,000 or 1.05 percent of
total assets at June 30, 1993, to a low of $93,000 or 0.30 percent of assets at
June 30, 1994. At March 31, 1996, Foundation's nonperforming assets consisted
entirely of loans delinquent 90 days or more with no real estate owned or
nonaccrual loans, and totaled $111,000 or 0.35 percent of assets and 0.52
percent of total loans.
Foundation's level of nonperforming assets is much lower than its level of
classified assets. The Bank's level of classified assets was $437,000 or 1.38
percent of assets at March 31, 1996 (reference Exhibit 17). The Bank's
classified assets consisted of $431,000 in substandard assets, with no assets
classified as doubtful and $6,000 classified as loss. The Bank's classified
assets were a higher $566,000 at June 30, 1993, or 1.79 percent of assets, and
consisted of $5,16,000 in substandard assets and $50,000 in assets classified as
loss.
Exhibit 18 shows Foundation's allowance for loan losses at March 31, 1996,
and for fiscal years 1993 through 1995, indicating the activity and the
resultant balances. Foundation has witnessed a minimal change in its balance of
allowance for loan losses, changing from $101,000 in 1993 to $104,000 at March
31, 1996, with provisions of $83,000 in 1993, $33,000 in 1994 and $12,000 in
fiscal 1995. During the nine months ended March 31, 1996, the Bank applied
provisions of $34,000. The Bank had no
<PAGE>
net charge-offs in 1993, $62,000 in 1994 and $28,000 in the nine months of
fiscal 1996, and net recoveries of $3,000 in 1993 and $14,000 in fiscal 1995.
The Bank's ratio of allowance for loan losses to total loans decreased from 0.51
percent at June 30, 1993, to 0.47 percent at June 30, 1995, due to charge-offs
exceeding allowances in 1994 and 1995. The allowance for loan losses to total
loans was 0.48 percent at March 31, 1996. Allowance for loan losses to
nonperforming assets were 50.52 percent at June 30, 1995, and a much higher
93.69 percent at March 31, 1996, reflecting the decrease in nonperforming
assets.
INVESTMENTS
The investment and securities portfolio of Foundation has been comprised of
federal funds, U.S. government obligations, mortgage-backed securities and FHLB
stock. Exhibit 19 provides a summary of Foundation's investment portfolio at
June 30, 1993 through 1995, and at March 31, 1996. Total investment securities
were $9.9 million at March 31, 1996, compared to $10.76 million at June 30,
1995, and $10.9 million at June 30, 1993. The primary component of investment
securities at March 31, 1996, was mortgage-backed securities, representing 50.3
percent of investments, followed by federal funds, representing 42.0 percent,
for a combined total of 92.3 percent. At June 30, 1995, the major component was
again mortgage-backed securities representing a larger 51.6 percent of
investments, with Federal funds being the second major investment group
comprising 28.9 percent of investments, and these two categories representing a
strong 80.5 percent. The securities portfolio had a weighted average yield of
5.84 percent, and the mortgage- backed securities had a weighted average yield
of 5.98 percent for the nine months ended March 31, 1996.
The Bank's mortgage-backed securities had a book value of $5.0 million at
March 31, 1996, compared to a market value of $4.8 million. Mortgage-backed
securities are included in total investments and shown in Exhibit 19. Mortgage-
backed securities had a book value of $5.5 million at June 30, 1995, compared to
a lower fair value of $5.4 million.
DEPOSIT ACTIVITIES
The change in the mix of deposits from June 30, 1993, to March 31, 1996, is
provided in Exhibit 20. There has been a moderate change in both total deposits
and in the deposit mix during this period. Certificates of deposit witnessed a
moderate increase in their share of deposits, rising from a strong 78.7 percent
of deposits at June 30, 1993, to an even higher 89.0 percent at March 31, 1996.
The unusually high share of certificates is the result of the Bank's single
office location in downtown Cincinnati with no drive-in access or off-street
parking. The major component of certificates had rates between 5.0 percent and
7.00 percent and consisted of 82.4 percent of certificates at March 31, 1996. At
June 30, 1993, the major component of certificates was also the 5.00 percent to
7.00 percent category with a lower 48.7 percent of deposits. Passbook accounts
decreased in dollar amount from $2.9 million to $1.1 million, and
<PAGE>
their share decreased from 9.9 percent to 3.9 percent from June 30, 1993, to
March 31, 1996, with modest decreases in rates during that period. NOW and money
market accounts also indicated a moderate decrease in their share from 11.4
percent in 1993 to 7. 1 percent at March 31, 1996. The Bank had no non-interest
bearing accounts.
Exhibit 21 shows the Bank's deposit activity for the three years ended June
30, 1993 to 1995, and at for the nine months ended March 31, 1996. With interest
credited, Foundation experienced a net decrease in deposits in fiscal year 1994
and increases in fiscal years 1993 and 1995 and for the nine months ended March
31, 1996. In fiscal year 1994, there was a net decrease in deposits of $1.7
million or 5.9 percent, with net withdrawals exceeding interest credited. In
fiscal year 1993, an increase in balances of $1.5 million resulted in a 5.9
percent increase, and in 1995 there was a net increase of $389,000 or 1.4
percent. For the nine months ended March 31, 1996, a decrease in deposit
balances of $1.1 million was offset by $1.2 million of interest credited, and
produced a net increase in deposits of $43,000 or 0.2 percent.
BORROWINGS
Foundation has relied on retail deposits as its primary source of funds,
making minimal use of FHLB advances during the past two fiscal years ended June
30, 1994, and during the nine months ended March 31, 1996. Exhibit 21 also shows
the Bank's balance of FHLB advances at June 30, 1993 through June 30, 1995, and
at March 31, 1996. The Bank's advances were zero at June 30, 1993, increasing to
$955,000 at June 30, 1994, and to $1.2 million at June 30, 1995, then to
$842,000 at March 31, 1996. The average interest rate on those advances was 5.16
percent in 1994, 5.64 percent in 1995 and 6.02 percent for the nine months ended
March 31, 1996.
SUBSIDIARIES
Foundation has no wholly-owned subsidiaries.
OFFICE PROPERTIES
Foundation has only one office, its home office located in downtown
Cincinnati. Foundation leases its office which has no drive-in window and no
off-street parking. The Bank's investment in its office premises, leasehold
improvements and furniture, fixtures and equipment totaled $318,000 or 1.00
percent of assets at March 31, 1996.
MANAGEMENT
The president, chief executive officer, and managing officer of Foundation
is Laird L. Lazelle. Mr. Lazelle joined the Bank in January 1994, as president
and chief executive officer. Mr. Lazelle is also
<PAGE>
a director. Mr. Lazelle was previously employed by The Tri State Bancorp, a
thrift holding company in Cincinnati, which was acquired by a bank holding
company. Mr. Lazelle served Tri State as president and chief executive officer.
Mr. Lazelle has over thirty-six years experience in the financial institution
industry. Ms. Dianne K. Rabe is vice president and chief operating officer of
the Bank and is a certified public accountant. Ms. Rabe joined the Bank in 1992
and prior to that worked for another Cincinnati thrift (reference Exhibit 22).
II. DESCRIPTION OF PRIMARY MARKET AREA
Foundation Savings Bank's primary market area is Hamilton County, Ohio,
including the city and community of Cincinnati, located in Hamilton County. The
Bank's home office and its branch office are located in the City of Cincinnati.
The Bank's economic performance has been very dependent on the overall
market and economic trends in Hamilton County. Hamilton County is home to a
diverse economy, and is a major center for manufacturing, wholesaling and
retailing. Among its prominent manufacturing groups are transportation
equipment, which includes aircraft engines and auto parts; food products; metal
working and general industrial machinery; chemicals and fabricated metal
products. Nearly 800 firms in Hamilton County are engaged in international trade
and generate large sales to customers outside the United States. Hamilton County
also offers strong opportunities for graduate and undergraduate education,
including the University of Cincinnati and Xavier University among many other
colleges, universities and specialized institutions.
Exhibit 23 provides a summary of key demographic data and trends for the
United States, Ohio, Hamilton County and Cincinnati for the periods of 1990,
1995, and 2000. Cincinnati indicated a decrease in population from 1990 through
1995, the only decline in population of the four geographic regions in our
table. Hamilton County witnessed no growth in population, while Ohio and the
United States did show increases. Overall, the period of 1990 to 1995 was
characterized by a rise in the national population of 5.7 percent, compared to
an increase in population of 2.8 percent in Ohio. Hamilton County witnessed a
nominal decrease from 866,288 in 1990 to 866,222 in 1995. During the same time,
population also decreased in Cincinnati by 3.5 percent, from 364,040 in 1990 to
351,298 in 1995. From 1995 through 2000, the population is projected to continue
to rise in the United States by 5.4 percent and in Ohio by 2.7 percent. Hamilton
County will show no percentage change in population though it will decrease
slightly to 866,216. Cincinnati is projected to continue to decrease its
population by 3.9 percent, declining to 337,598 by the year 2000.
Hamilton County and Cincinnati displayed trends in household levels similar
to their trends in population growth from 1990 to 1995. In 1990, Hamilton County
had a level of households of 338,881, and Cincinnati's number of households was
145,616. By 1995, Hamilton County, while showing no percentage decline, had
decreased minimally to 338,749 households, while Cincinnati decreased its
<PAGE>
number of households by 3.5 percent to 140,519. Both the county and the city
should experience slight decreases in households from 1995 to 2000. Hamilton
County is projected once again to experience no percentage change, while
actually decreasing to 338,595 households, and Cincinnati is projected to
decrease by 3.9 percent to 135,039 households. These decreases are in contrast
to Ohio's increase in households of 2.7 percent, and the United States' increase
of 5.3 percent from 1995 to 2000.
Both Cincinnati and Hamilton County had higher per capita income levels
than Ohio or the United States in 1990 and 1995. Cincinnati's per capita income
was a relatively high $19,246 in 1995 compared to a lower $18,004 for Hamilton
County, while Ohio and the United States experienced lower per capita income
levels of $15,708 and $16,405, respectively. In 1995, this represented a per
capita income for Cincinnati that was 6.9 percent higher than Hamilton County,
22.5 percent higher than Ohio, and 17.3 percent higher than the United States.
From 1990 to 1995, Cincinnati and Hamilton County witnessed increases in median
household income which exceeded the average increase in Ohio, and median
household income levels above those of Ohio and the United States. In 1990, the
United States had a median household income of $28,255 compared to $29,276 in
Ohio, $29,498 in Hamilton County, and $28,756 in Cincinnati. In 1995, Cincinnati
had an even higher $35,264 median household income, and Hamilton County's level
increased to $34,401. These figures were higher than Ohio and the United States
at $33,038 and $33,610, respectively. In 2000, Cincinnati is projected to have a
median household income that is the highest figure among the four groups on our
table, 5.6 percent higher than Hamilton County, 5.5 percent higher than Ohio and
4.0 percent higher than the United States. Cincinnati's median household income
is projected to decrease by 2.8 percent to $34,278 by 2000, remaining higher
than Hamilton County at $32,443, Ohio at $32,477, and the United States at
$32,972.
The major business source of personal income by industry group in Hamilton
County, based on total wages, was the manufacturing industry. This sector
contributed 30.3 percent of the wages in 1993, which was somewhat lower than
Ohio at 34.8 percent and moderately higher than the United States at 24.8
percent (reference Exhibit 24). The major employers in Hamilton County are:
Employer Industry Employees
- -------- -------- ---------
Procter & Gamble Co. Manufacturing 14,150
U.S. Government (all agencies) Government 13,562
University of Cincinnati Government 11,716
The Kroger Co. Wholesale/Retail 10,000
G.E. Aircraft Engines Manufacturing 8,000
City of Cincinnati Government 7,526
Cincinnati Public Schools Government 6,226
<PAGE>
Hamilton County Government 5,679
Cincinnati Gas & Electric Co. Services 5,000
Cincinnati Milacron Manufacturing 5,000
AK Steel Manufacturing 4,300
The major provider of income in the United States was the services industry
with a 31.0 percent share in 1993, while manufacturing was the major provider in
Ohio at 34.8 percent. The leading provider of income in Hamilton County was also
manufacturing at 30.3 percent, whereas the services sector ranked second at 28.5
percent of personal income and the wholesale/retail trade was third in Hamilton
County with a 22.2 percent share of personal income. These numbers compare to
19.3 percent for wholesale/retail and 26.5 percent for services in Ohio. The
wholesale/retail trade group was the third major source of personal income in
the United States at 19.8 percent and in Ohio at 19.3 percent. The construction,
finance, insurance and real estate, transportation/utilities, and the
agriculture/mining groups combined to contribute 19.0 percent of the wages
earned in Hamilton County, 19.4 percent of wages earned in Ohio, and 24.4
percent in the United States. The mix of income sources by industry group for
Hamilton County was similar to Ohio's mix in that both were dominated by the
manufacturing, wholesale/retail, and services sectors.
Exhibit 25 provides a summary of key housing data for Cincinnati, Hamilton
County, Ohio, and the United States. Cincinnati is characterized by the lowest
share of owner-occupied housing among the four areas outlined on Exhibit 25, at
55.9 percent, and Hamilton County has a similar share of owner-occupancy at 58.3
percent. Ohio and the United States have somewhat higher percentages of owner-
occupancy at 67.5 percent and 64.2 percent, respectively. Correspondingly,
Cincinnati supports a high rate of renter- occupied housing of 44.1 percent
compared to 41.7 percent in Hamilton County, which is higher than Ohio at 32.5
percent, and the United States at 35.8 percent. Cincinnati had a median housing
value of $74,330 which is 2.9 percent higher than Hamilton County's median
housing value of $72,243, and higher than Ohio's value of $63,457, but lower
than the United States' median housing value of $79,098, respectively.
Cincinnati had a median rent of $326 which is exceeded only by the United States
at $374. These median rent figures are higher than Hamilton County at $304 and
Ohio at $296.
An economic indicator that pertains more directly to the banking and thrift
industries is the issuance of new housing permits (reference Exhibit 26). In
1991, 1,713 new housing permits were issued in Hamilton County, and in 1992,
this number grew by 22.4 percent to 2,096 new housing permits in Hamilton
County. These numbers are fairly small when compared to the issuance of 29,542
permits in Ohio, and 796,647 in the United States. Ohio and the United States
also witnessed building permit growth rates of 16.3 percent and 20.1 percent,
respectively, in 1992. In 1993, however, Ohio and the United States witnessed
less significant growth, and Hamilton County authorized 1,924 new permits, a
decrease
<PAGE>
of 8.2 percent over the previous year. Ohio's increase of 9.1 percent was higher
than the United States increase in new housing permits of 8.6 percent. Hamilton
County's decline continued through 1994, when the county issued 1,676 new
housing permits, a 12.9 percent decrease, compared to increases of 5.2 percent
and 8.8 percent in Ohio and the United States, respectively.
The unemployment rate is another key economic indicator. Exhibit 27 shows
the average unemployment rates in Hamilton County, Ohio, and the United States
in 1990, 1993 and February, 1996. Hamilton County has been characterized by
unemployment rates lower than Ohio and the United States in 1990, 1993 and in
1996. The County experienced an increase in its unemployment rate from 4.2
percent in 1990 to 5.5 percent in 1993, but then declined once again to 4.1
percent by February, 1996. This represents a 25.5 percent decline in
unemployment since 1993 for Hamilton County, compared to declines of 15.4
percent for Ohio and 11.8 percent for the United States since 1993. Hamilton
County's February unemployment figure is 25.5 percent lower than the state
unemployment level and 31.7 percent lower than the unemployment figure for the
United States for February, 1996.
Exhibit 28 provides deposit data for banks, thrifts, and credit unions in
the Bank's market area of Hamilton County. Foundation Savings Bank's market
penetration in Hamilton County was 0.9 percent of thrift deposits and 0.2
percent of all financial institution deposits which totaled $16.3 billion. The
financial competition in Hamilton County is very competitive market with a high
level of deposits. Foundation's market share is not necessarily reflective of
its strength within this market area.
Exhibit 29 provides interest rate data by quarter for the years 1992
through the first quarter of 1996. The rates tracked are the prime rate, as well
as the rates on 90-Day, One-Year and 30-Year Treasury Bills. Rates indicated a
declining trend in the first three quarters of 1992, but then began to rise in
the fourth quarter with the exception of the prime rate, which remained at a
lower level at year end. In 1993 rates experienced some volatility, but
indicated the beginning of a rising trend in the last quarter. This rising trend
continued throughout all of 1994 and into the first quarter of 1995 with prime
reaching 9.00 percent. After the first quarter of 1995, however, rates
experienced considerable declines through the end of 1995, with the prime rate
decreasing to 8.50 percent. Such decrease in the prime rate continued through
the first quarter of 1996 as it fell to 8.25 percent. Rates on T-bills, however,
witnessed an increase with 30-Year Treasury Bills experiencing the largest
increase.
SUMMARY
To summarize, Hamilton County in general and Cincinnati in-particular
represent a stagnant market in terms of population growth and household levels.
However, per capita income and median household income have reached levels above
state and national averages. The market is led by the manufacturing industry,
which provides almost one third of all jobs in Hamilton County, and unemployment
levels have historically been lower than state and national levels. The city of
Cincinnati also had a higher median rent level than Ohio or Hamilton County, and
also a higher median household
<PAGE>
value than Ohio, when combined with new housing permits suggests a probable
increase in loan sales. Cincinnati has a competitive financial institution
market dominated by banks, with a total deposit base for all financial
institutions that exceeds $16.2 billion in deposits. Overall, the market area
represents a stagnant economic base.
III. COMPARABLE GROUP SELECTION
INTRODUCTION
Integral to the valuation of Foundation is the selection of an appropriate
group of publicly-traded thrift institutions, hereinafter referred to as the
"comparable group". This section identifies the comparable group and describes
each parameter used in the selection of each institution in the group, resulting
in a comparable group based on such specific and detailed parameters, current
financials and recent trading prices. The various characteristics of the
selected comparable group provide the primary basis for making the necessary
adjustments to the Bank's pro forma value relative to the comparable group.
There is also a recognition and consideration of financial comparisons with all
publicly- traded, SAIF- insured thrifts in the United States and all
publicly-traded, SAIF-insured thrifts in the Midwest and in Ohio.
Exhibits 30 and 31 present Thrift Stock Prices and Pricing Ratios and Key
Financial Data and Ratios, respectively, both individually and in aggregate, for
the universe of 328 publicly-traded, SAIF-insured thrifts in the United States
("all thrifts"), excluding mutual holding companies, used in the selection of
the comparable group and other financial comparisons. Exhibits 30 and 31 also
subclassify all thrifts by region, including the 150 Midwest thrifts ("Midwest
thrifts") and the 31 thrifts in Ohio ("Ohio thrifts"), and by trading exchange.
Exhibit 32 presents prices, pricing ratios and price trends for all SAIF insured
thrifts completing their conversions between July 1, 1995, and May 14, 1996.
The selection of the comparable group was based on the establishment of
both general and specific parameters using financial, operating and asset
quality characteristics of Foundation as determinants for defining those
parameters. The determination of parameters was also based on the uniqueness of
each parameter as a normal indicator of a thrift institution's operating
philosophy and perspective. The parameters established and defined are
considered to be both reasonable and reflective of Foundation's basic operation.
Inasmuch as the comparable group must consist of at least ten institutions, the
parameters relating to asset size and geographic location have been expanded as
necessary in order to fulfill this requirement.
GENERAL PARAMETERS
MERGER/ACQUISITION
The comparable group will not include any institution that is in the
process of a merger or acquisition due to the price impact of such a pending
transaction. The thrift institutions that were
<PAGE>
potential comparable group candidates but were not considered due to their
involvement in a merger/acquisition or a potential merger/acquisition include
the following:
Institution State
----------- -----
Financial Security Corp. Illinois
Workingmens Capital Holdings Indiana
Marshalltown Financial Corp. Iowa
LFS Bancorp, Inc. Kentucky
Barrington Bancorp, Inc. Ohio
Circle Financial Corp. Ohio
Third Financial Corp. Ohio
Four thrift institutions in Foundation's city, county or market area are
currently involved in merger/acquisition activity or have been recently so
involved, as indicated in Exhibit 33.
MUTUAL HOLDING COMPANIES
The comparable group will not include any mutual holding companies. Mutual
holding companies typically demonstrate higher price to book valuation ratios
that are the result of their minority ownership structure that are inconsistent
with those of conventional, publicly-traded institutions. Exhibit 34 presents
pricing ratios and Exhibit 35 presents key financial data and ratios for all
publicly-traded, SAIF-insured mutual holding companies in the United States. The
following thrift institutions were potential comparable group candidates, but
were not considered due to their mutual holding company form:
Institution State
----------- -----
Webster City Federal Savings Bank, MHC Iowa
Wayne Savings & Loan Co., MHC Ohio
TRADING EXCHANGE
It is necessary that each institution in the comparable group be listed on
one of the two major stock exchanges, the New York Stock Exchange or the
American Stock Exchange, or traded over-the-counter ("OTC") and listed on the
National Company of Securities Dealers Automated Quotation System ("NASDAQ").
Such a listing indicates that an institution's stock has demonstrated trading
activity and is responsive to normal market conditions, which are requirements
for listing. Of the 347 publicly-traded, SAIF insured institutions, including 19
mutual holding companies, 14 are traded on the New York Stock Exchange, 17 are
traded on the American Stock Exchange and 316 are listed on NASDAQ.
IPO DATE
Another general parameter for the selection of the comparable group is the
initial public offering ("IPO") date, which must be at least four quarterly
periods prior to the trading date of May 14, 1996, used
<PAGE>
in this report, in order to insure at least four consecutive quarters of
reported data as a publicly-traded institution. The resulting parameter is a
required IPO date prior to December 31, 1994.
GEOGRAPHIC LOCATION
The geographic location of an institution is a key parameter due to the
impact of various economic and thrift industry conditions on the performance and
trading prices of thrift institution stocks. Although geographic location and
asset size are the two parameters that have been developed incrementally to
fulfill the comparable group requirements, the geographic location parameter has
definitely eliminated regions of the United States distant to Foundation,
including the western states, the Southeastern states and the New England
states.
The geographic location parameter consists of Ohio, its surrounding states
of Kentucky, Indiana, Michigan, Pennsylvania and West Virginia, as well as the
states of Iowa, Illinois and Wisconsin, for a total of nine states. To extend
the geographic parameter beyond those states could result in the selection of
similar thrift institutions with regard to financial conditions and operating
characteristics, but with different pricing ratios due to their geographic
regions. The result could then be an unrepresentative comparable group with
regard to price relative to the parameters and, therefore, an inaccurate value.
ASSET SIZE
Asset size was another key parameter used in the selection of the
comparable group. The maximum total assets for any comparable group institution
considered was $350 million, due to the typically different operating
strategies, expansion capabilities, liquidity of stock and acquisition appeal of
larger institutions when compared to Foundation, with assets of approximately
$32 million. Such an asset size parameter was necessary to obtain a comparable
group of at least ten institutions.
In connection with asset size, we did not consider the number of offices or
branches in selecting or eliminating candidates since this characteristic is
directly related to operating expenses, which are recognized as an operating
performance parameter.
SUMMARY
Exhibits 36 and 37 show the 45 institutions considered as comparable group
candidates after applying the general parameters, with the shaded lines denoting
the institutions ultimately selected for the comparable group using the balance
sheet, performance and asset quality parameters established in this section.
<PAGE>
BALANCE SHEET PARAMETERS
INTRODUCTION
The balance sheet parameters focused on seven balance sheet ratios as
determinants for selecting a comparable group, as presented in Exhibit 36. The
balance sheet ratios consist of the following:
1. Cash and Investments/Assets
2. Mortgage-Backed Securities/Assets
3. One- to Four-Family Loans/Assets
4. Total Net Loans/Assets
5. Total Net Loans and Mortgage-Backed Securities/Assets
6. Borrowed Funds/Assets
7. Equity/Assets
The parameters enable the identification and elimination of thrift
institutions that are distinctly different from Foundation with regard to asset
mix. The balance sheet parameters also distinguish institutions with a
significantly different capital position from Foundation. The ratio of deposits
to assets was not used as a parameter as it is directly related to and affected
by an institution's equity and borrowed funds ratios, which are separate
parameters.
EQUITY TO ASSETS
Foundation's equity to assets ratio as of March 31, 1996, was 8.73 percent.
The equity to assets ratio for Foundation after conversion, based on the
midpoint value of $3,500,000 and net proceeds to the Bank of approximately $1.6
million, is projected to stabilize in the area of 11.0 percent to 12.0 percent.
Based on those equity ratios, we have defined the equity ratio parameter to be
7.0 percent to 22.0 percent with a midpoint ratio of 14.5 percent.
ONE- TO FOUR-FAMILY LOANS TO ASSETS
Foundation's lending activity is focused on the origination of residential
mortgage loans secured by one- to four-family dwellings. One- to four-family
loans, including construction loans, represented 60.7 percent of the Bank's
assets at March 31, 1996, which is similar to industry averages. The parameter
for this characteristic requires any comparable group institution to have from
25.0 percent to 80.0 percent of its assets in one- to four-family loans with a
midpoint of 52.5 percent.
CASH AND INVESTMENTS TO ASSETS
Foundation's level of cash and investments to assets was 14.6 percent at
March 31, 1996, and reflects the Bank's level of investments similar to national
and regional averages. The Bank's investments consist primarily of federal
funds and government securities. It should be noted that for the purposes of
comparable group selection and comparison, Federal Home Loan Bank stock is
included in other assets
<PAGE>
rather than in investments. During the past five fiscal years, Foundation's
level of cash and investments to assets has averaged 15.6 percent, from a high
of 19.9 percent at June 30, 1993, to a low of 11.6 percent in 1991.
The parameter range for cash and investments is broad due to the volatility
of this parameter and to prevent the elimination of otherwise good potential
comparable group candidates. The range has been defined as 5.0 percent of assets
to 40.0 of assets, with a midpoint of 22.5 percent.
MORTGAGE-BACKED SECURITIES TO ASSETS
At March 31, 1996, Foundation's ratio of mortgage-backed securities to
assets was 15.6 percent, similar to the national average of 14.1 percent and
higher than the regional average of 10.4 percent. Inasmuch as many institutions
purchase mortgage-backed securities as an alternative to lending relative to
cyclical loan demand and prevailing interest rates, this parameter is moderately
broad at 30.0 percent or less of assets and a midpoint of 15.0 percent.
TOTAL NET LOANS TO ASSETS
At March 31, 1996, Foundation had a ratio of total net loans to assets of
67.3 percent and a five fiscal year average of 68.5 percent. The parameter for
the selection of the comparable group is from 40.0 percent to 90.0 percent with
a midpoint of 65.0 percent. The wider range is simply due to the fact, as stated
above, that many institutions purchase a greater or smaller volume of
mortgage-backed securities as an alternative to lending, but may otherwise be
similar to Foundation.
TOTAL NET LOANS AND MORTGAGE-BACKED SECURITIES TO ASSETS
As discussed previously, Foundation's shares of mortgage-backed securities
to assets and total net loans to assets were 15.6 percent and 67.3 percent,
respectively, for a combined share of 82.9 percent. Recognizing the industry and
regional ratios of 14.1 percent and 10.4 percent, respectively, of
mortgage-backed securities to assets, the parameter range for the comparable
group in this category is 55.0 percent to 95.0 percent, with a midpoint of 75.0
percent.
ADVANCES TO ASSETS
Foundation had FHLB advances of $842,000 at March 31, 1996, less than its
advances of $1.2 million at June 30, 1995, and $955,000 at June 30, 1994. The
use of borrowed funds by some thrift institutions indicates an alternative to
retail deposits and may provide a source of term funds for lending. The federal
insurance premium on deposits has also increased the attractiveness of borrowed
funds.
The public demand for longer term funds increased in 1994 and the first
half of 1995 due to the rise in interest rates. The result was competitive rates
on longer term Federal Home Loan Bank advances, and an increase in borrowed
funds by many institutions as an alternative to higher cost, long term
<PAGE>
certificates. The ratio of borrowed funds to assets, therefore, does not
typically indicate higher risk or more aggressive lending, but primarily an
alternative to retail deposits.
The required range of borrowed funds to assets is 30.0 percent or less with
a midpoint of 15.0 percent, similar to the national average of 12.0 percent.
PERFORMANCE PARAMETERS
INTRODUCTION
Exhibit 37 presents five parameters identified as key indicators of
Foundation's earnings performance and the basis for such performance. The
primary performance indicator is the Bank's return on average assets ("ROAA").
The second performance indicator is the Bank's return on average equity
("ROAE"). To measure the Bank's ability to generate net interest income, we have
used net interest margin. The supplemental source of income for the Bank is
noninterest income, and the parameter used to measure this factor is noninterest
income to assets. The final performance indicator that has been identified is
the Bank's ratio of operating expenses to assets (noninterest expenses to
assets), a key factor in distinguishing different types of operations,
particularly institutions that are aggressive in secondary market activities
which results in much higher operating costs and overhead ratios.
RETURN ON AVERAGE ASSETS
The key performance parameter is the ROAA. Foundation's most recent ROAA
was 0.32 percent for the twelve months ended March 31, 1996, based on identical
net and core earnings after taxes as detailed in Item I of this report and
presented in Exhibit 7. The Bank's ROAA over the past five fiscal years, based
on net earnings, has ranged from a low of 0.40 percent in 1993 to a high of 0.81
percent in 1992 with an average ROAA of 0.54 percent. For the four quarters
following conversion in the fourth quarter of 1996, Foundation's ROAA is
projected to range between 0.67 percent and 0.80 percent, remaining within that
range through the end of 1998.
Considering primarily the historical, current and projected earnings
performance of Foundation, the range for the ROAA parameter based on net income
has been defined as 0.15 percent to a high of 0.85 percent with a midpoint of
0.50 percent.
RETURN ON AVERAGE EQUITY
The ROAE has been used as a secondary parameter to eliminate any
institutions with an unusual1y high or low ROAE that is inconsistent with the
Bank's position. This parameter does not provide as much meaning for a newly
converted thrift institution as it does for established stock institutions, due
to the newness of the capital structure of the newly converted thrift and the
inability to accurately reflect a mature ROAE for the newly converted thrift
relative to other stock institutions.
<PAGE>
The consolidated ROAE for the Bank and the Corporation on a pro forma basis
at the time of conversion is 2.59 percent based on the midpoint valuation. Prior
to conversion, the Bank's ROAE was 4.72 percent for the twelve months ended June
30, 1995, based on net income, with a five year average ROAE of 6.99 percent.
The parameter range for the comparable group, based on net income, is from 1.0
percent to 10.0 percent with a midpoint of 5.5 percent.
NET INTEREST MARGIN
Foundation had a net interest margin of 2.52 percent based on the twelve
month period ended March 31, 1996. The Bank's range of net interest margin for
the past five fiscal years has been from a low of 2.28 percent in 1991 to a high
of 2.69 percent in 1992 with an average of 2.51 percent.
The parameter range for the selection of the comparable group is from a low
of 2.00 percent to a high of 3.50 percent with a midpoint of 2.75 percent.
OPERATING EXPENSES TO ASSETS
Foundation had a somewhat lower than average operating expense to average
assets ratio of 2.16 percent for the twelve months ended March 31, 1996. The
Bank's ratio of operating expenses to average assets for the last five years has
ranged from a low of 1.85 percent in 1992 to a high of 2.23 percent in 1995 with
an average of 2.01 percent, considerably lower than the industry average of
approximately 2.30 percent.
The operating expense to assets parameter for the selection of the
comparable group is from a low of 1.50 percent to a high of 3.00 percent with a
midpoint of 2.25 percent.
NONINTEREST INCOME TO ASSETS
Foundation experienced a lower than average dependence on noninterest
income as a source of additional income for the twelve months ended March 31,
1996, and the fiscal year ended June 30, 1995, at 0.24 percent of average assets
and 0.22 percent of average assets, respectively. For the four fiscal years
prior to 1995, the Bank had ratios of noninterest income to average assets
ranging from average to higher than average. The Bank's noninterest income to
average assets of 0.24 percent for the twelve months ended March 31, 1996, was
below the industry average of 0.43 percent for that period. Foundation's
noninterest income for the past five fiscal years, including net gains and
losses, has fluctuated from a high of 0.65 percent of assets in 1994 to a low of
0.22 percent in 1995 with an average ratio of 0.42 percent.
The range for this parameter for the selection of the comparable group is
0.55 percent of assets or less, with a midpoint of 0.28 percent.
<PAGE>
ASSET QUALITY PARAMETERS
INTRODUCTION
The final set of financial parameters used in the selection of the
comparable group are asset quality parameters, also shown in Exhibit 37. The
purpose of these parameters is to insure that any thrift institution in the
comparable group has an asset quality position similar to that of Foundation.
The three defined asset quality parameters are the ratios of nonperforming
assets to total assets, repossessed assets to total assets and loan loss
reserves to total assets at the end of the most recent period.
NONPERFORMING ASSETS TO ASSETS RATIO
Foundation's ratio of nonperforming assets to assets was 0.35 percent at
March 31, 1996, which is considerably lower than both the national average of
1.49 percent and the Midwest regional average of 0.58 percent and an improvement
from its ratio of 0.64 percent at June 30, 1995. For the five fiscal years ended
June 30, 1995, the Bank's ratio decreased significantly from a high of 1.00
percent at June 30, 1991, to a low of 0.29 percent at June 30, 1994, with a five
year average of 0.79 percent.
The parameter range for nonperforming assets to assets has been defined as
0.90 percent of assets or less with a midpoint of 0.45 percent.
REPOSSESSED ASSETS TO ASSETS
Foundation was absent repossessed assets at March 31, 1996, and at June 30,
1993, 1994 and 1995. National and regional averages were 0.67 percent and 0.48
percent, respectively.
The range for the repossessed assets to total assets parameter is 0.40
percent of assets or less with a midpoint of 0.20 percent, well below the
industry average.
LOANS LOSS RESERVES TO ASSETS
Foundation had a loan loss reserve or allowance for loan losses of
$104,000, representing a loan loss allowance to total assets ratio of 0.33
percent at March 31, 1996, which is similar to its ratio of 0.31 percent at June
30, 1995, but higher than its ratio of 0.23 percent at June 30, 1994.
The loan loss allowance to assets parameter range used for the selection of
the comparable group focused on a minimum required ratio of 0. 10 percent of
assets.
THE COMPARABLE GROUP
With the application of the parameters previously identified and applied,
the final comparable group represents ten institutions identified in Exhibits
38, 39 and 40. The comparable group institutions range in size from $45.5
million to $339.3 million with an average asset size of $188.1 million and have
an average of 5.0 offices per institution compared to Foundation with assets of
$31.7 million and 1 office.
<PAGE>
Two of the comparable group institutions was converted in 1988, one in 1990, one
in 1992, three in 1993 and three in 1994.
Exhibit 41 presents a comparison of Foundation's market area demographic
data with that of each of the institutions in the comparable group.
SUMMARY OF COMPARABLE GROUP INSTITUTIONS
FIDELITY BANCORP, INC., Pittsburgh, Pennsylvania, is the holding company
for Fidelity Savings Bank. The Bank operates eight offices in the Greater
Pittsburgh Area. The Bank has total assets of $281.1 million, total equity of
$22.0 million, and reported ROAA of 0.60 percent.
FIRST FRANKLIN CORPORATION, Cincinnati, Ohio, is the holding company of
Franklin Savings & Loan Company which operates seven branches in the Greater
Cincinnati Metropolitan Area. The Company has assets of $207.1 million and
equity of $20.5 million and reported an ROAA of 0.62 percent.
GLENWAY FINANCIAL CORP., Cincinnati, Ohio, is the holding company for
Centennial Savings Bank. The Bank serves the Hamilton County market area from
its six full service offices. The Bank has total assets of $273.9 million, total
equity of $26.5 million, and ROAA of 0.56 percent.
HALLMARK CAPITAL CORP., West Allis, Wisconsin, is the unitary holding
company for West Allis Savings Bank, serving the metropolitan Milwaukee area
from its three offices. The Bank had total assets of $339.3 million and equity
$26.4 million at the end of its most recent quarter and had an ROAA of 0.57
percent for its four most recent quarters.
HARVEST HOME FINANCIAL CORPORATION, Cincinnati, Ohio, is the holding
company for Harvest Home Savings Bank, which operates three offices serving the
Greater Cincinnati area. The Bank had assets of 73.0 million and equity of 12.9
million at the end of its most recent quarter, and reported an ROAA of 0.80
percent for its trailing four quarters.
MFB CORP., Mishawaka, Indiana, is the holding company for Mishawaka Federal
Savings. Mishawaka Federal operates four offices in Mishawaka and surrounding
St. Joseph County. As of the most recent quarter, Mishawaka Federal had total
assets of $200.9 million, and total equity of $38.8 million. For the most recent
four quarters, Mishawaka Federal reported an ROAA of 0.69 percent.
MID-IOWA FINANCIAL CORP., Newton, Iowa, is the holding company for Mid-Iowa
Savings Bank, FSB. The Bank operates 6 offices in the central Iowa area and
focuses its lending activity on one-to-four family mortgage loans. The Bank has
total assets of $119.4 million and total equity of $10.8 million, with an ROAA
of 0.84 percent.
NORTH BANCSHARES, INC., Chicago, Illinois, is the holding company for North
Federal Savings Bank, a community oriented thrift operating 2 offices in the
Chicago area. As of the most recent quarter, the Bank had assets of $114.3
million and equity of $19.8 million, and reported an ROAA of 0.57 percent for
its most recent four quarters.
<PAGE>
SEVEN HILLS FINANCIAL CORP., Cincinnati, Ohio, is the holding company for
Seven Hills Savings Association, which operates three full service offices in
Hamilton County, Ohio, its primary market area. As of its most recent quarter,
the Association had assets of $45.5 million and equity of $9.7 million,
reporting an ROAA of 0.36 percent for its trailing four quarters.
SUBURBAN BANCORPORATION, INC., Cincinnati, Ohio, is the holding company for
Suburban Federal Savings Bank. The Bank's headquarters is located in
northeastern Cincinnati near the border of Hamilton and Warren Counties. The
Bank operates seven other branches throughout the Cincinnati area. The Bank has
total assets of $197. 1 million, and total equity of $25.6 million and reported
an ROAA for its most recent four quarters of 0.39 percent.
IV. ANALYSIS OF FINANCIAL PERFORMANCE
This section reviews and compares the financial performance of Foundation
to all thrifts, regional thrifts, Ohio thrifts and the ten institutions
constituting Foundation's comparable group, as selected and described in the
previous section. The comparative analysis focuses on financial condition,
earning performance and pertinent ratios as presented in Exhibits 42 through 47.
As presented in Exhibits 42 and 43, at March 31, 1996, Foundation's total
equity of 8.73 percent of assets was lower than the 13.19 percent for the
comparable group, and also lower than the 12.78 percent ratio of all thrifts,
and was more noticeably below the 14.59 percent ratio for Midwest thrifts, and
the 13.53 percent ratio for Ohio thrifts. The Bank had a 67.30 percent share of
net loans in its asset mix, higher than the comparable group at 61.67 percent,
similar to all thrifts at 67.45 percent and Midwest thrifts at 67.99 percent,
but lower than Ohio thrifts at 71.99 percent. Foundation's share of net loans,
similar to industry averages, is reflected in its average levels of cash and
investments of 14.61 percent and mortgage-backed securities of 15.62 percent.
The comparable group had a similar 14.33 percent share of mortgage-backed
securities and a higher 21.26 percent share of cash and investments. All thrifts
had 14.11 percent of assets in mortgage-backed securities and 14.36 percent in
cash and investments. Foundation's share of deposits of 87.53 percent was
significantly higher than the comparable group and the three geographic
categories, reflecting the Bank's low 2.65 percent level of FHLB advances. The
comparable group had deposits of 75.08 percent and borrowings of 10.49 percent.
All thrifts averaged a 73.73 percent share of deposits and 12.00 percent of
borrowed funds, while Midwest thrifts had a 72.55 percent share of deposits and
an 11.62 percent share of borrowed funds. Ohio thrifts averaged a 77.19 percent
share of deposits and a 8.02 percent share of borrowed funds. Foundation was
absent goodwill and other intangibles, compared to a nominal 0.03 percent for
the comparable group, 0.30 percent for all thrifts and 0.13 percent for both
Midwest thrifts and Ohio thrifts.
Operating performance indicators are summarized in Exhibits 44 and 45 and
provide a synopsis of key sources of income and key expense items for Foundation
in comparison to the comparable group, all thrifts, and regional thrifts for the
trailing four quarters.
<PAGE>
As shown in Exhibit 46, for the twelve months ended March 31, 1996,
Foundation had a yield on average interest-earning assets higher than the
comparable group but similar to the three geographical categories. The Bank's
yield on interest-earning assets was 7.76 percent compared to the comparable
group at 7.35 percent, all thrifts at 7.71 percent, Midwest thrifts at 7.67
percent and Ohio thrifts at 7.80 percent.
The Bank's cost of funds for the twelve months ended March 31, 1996, was
higher than the comparable group and all geographical categories for their most
recent four quarters. Foundation had an average cost of interest-bearing
liabilities of 5.71 percent compared to 5.04 percent for the comparable group,
4.91 percent for all thrifts, 4.98 percent for Midwest thrifts and 4.97 for Ohio
thrifts. The Bank's interest income and interest expense ratios resulted in an
interest rate spread of 2.05 percent, which was lower than the comparable group
at 2.31 percent, and much lower than all thrifts at 2.81 percent, Midwest
thrifts at 2.69 percent, and Ohio thrifts at 2.83 percent. Foundation
demonstrated a net interest margin of 2.52 percent for the twelve months ended
March 31, 1996, based on average interest-earning assets, which was lower than
the comparable group ratio of 2.98 percent. All thrifts averaged a significantly
higher 3.33 percent net interest margin for the trailing four quarters, as did
Midwest thrifts at 3.31 percent and Ohio thrifts at 3.43 percent.
Foundation's major source of income is interest earnings, as is evidenced
by the operations ratios presented in Exhibit 46. The Bank made a $37,000
provision for loan losses during the twelve months ended March 31, 1996,
representing a 0.12 percent ratio to average assets, compared to the comparable
group at 0.03 percent, all thrifts at 0.11 percent, Midwest thrifts at 0.07
percent and Ohio thrifts at 0.05 percent. In spite of Foundation's current
provision, similar to the national average, the Bank's loan loss reserve remains
lower than national, regional and state averages, reflecting its lower levels of
nonperforming assets, classified assets and high risk real estate loans. The
Bank's non- interest income was $75,000 or 0.24 percent of average assets for
the twelve months ended March 31, 1996, similar to the comparable group at 0.21
percent and Ohio thrifts at 0.24 percent, but lower than all thrifts at 0.43
percent and Midwest thrifts at 0.40 percent. For the twelve months ended March
31, 1996, Foundation's operating expense ratio was 2.16 percent, modestly lower
than the comparable group and the three geographical averages. The comparable
group's operating expense ratio was 2.20 percent, while all thrifts averaged
2.28 percent, Midwest thrifts averaged 2.20 percent and Ohio thrifts averaged
2.21 percent.
The overall impact of Foundation's income and expense ratios is reflected
in the Bank's income and return on assets. The Bank had an ROAA, based on both
net and core income, of 0.32 percent for the twelve months ended March 31, 1996.
For its most recent four quarters, the comparable group had a higher ROAA of
0.60 percent based on net income and an identical ROAA based on core income. All
thrifts averaged a higher net ROAA of 0.87 percent, while Midwest thrifts and
Ohio thrifts averaged a higher 0.9 3 percent and 0.90 percent, respectively.
Midwest thrifts indicated a core ROAA of 0.86
<PAGE>
percent, while all thrifts and Ohio thrifts averaged a core ROAA of 0.80 percent
and 0.86 percent, much higher than the Bank.
V. MARKET VALUE ADJUSTMENTS
This is a conclusive section where adjustments are made to determine the
pro forma market value or appraised value of the Corporation based on a
comparison of Foundation with the comparable group. These adjustments will take
into consideration such key items as earnings performance, market area,
financial condition, dividend payments, subscription interest, liquidity of the
stock to be issued, management, and market conditions or marketing of the issue.
It must be remembered that all of the institutions in the comparable group have
their differences, and as a result, such adjustments become necessary.
EARNINGS PERFORMANCE
In analyzing earnings performance, consideration was given to the level of
net interest income, the level and volatility of interest income and interest
expense relative to changes in market area conditions and overall interest
rates, the quality of assets as it relates to the presence of problem assets
which may result in adjustments to earnings, the level of current and historical
classified assets and real estate owned, the level of valuation allowances to
support any problem assets or nonperforming assets, the level and volatility of
non-interest income, and the level of non-interest expenses.
As discussed earlier, the Bank's historical business philosophy has focused
on strengthening its net interest income, maintaining its current low level of
nonperforming assets, improving its ratio of interest sensitive assets relative
to interest sensitive liabilities, maintaining stable net earnings, maintaining
an adequate level of general valuation allowances to reduce the impact of any
unforeseen losses, and closely scrutinizing and maintaining a reasonable level
of overhead expenses. The Bank will continue to focus on striving to increase
its net interest spread and net interest margin through well designed and more
active lending and conservative pricing of deposits, generate additional
noninterest income, improve its ratio of interest sensitive assets relative to
interest sensitive liabilities and increase its net income and return on assets.
Earnings are often related to an institution's ability to generate loans.
The Bank was an active originator of mortgage loans in calendar years 1991 to
1995. During the twelve months ended March 31, 1996, originations were 38. 1
percent higher than to those in the fiscal year ended June 30, 1995, and 56.0
percent higher than the 1993 to 1995 fiscal year average of loan originations,
with the majority of such increase in the category of one- to four-family
residential loans. Higher levels of loans sold and moderating interest rates in
late 1995 causing increased principal repayments during the twelve months ended
March 31, 1996, offset a major portion of the increased originations, resulting
in only a modest increase in the Bank's net loans receivable. Foundation's loans
receivable increased a modest $1.8 million
<PAGE>
or 9.3 percent from June 30, 1993, to March 31, 1996, an annualized average
increase of 3.4 percent, with that total decreasing 3.9 percent in fiscal year
1994 and then increasing at both June 30, 1995, and March 31, 1996. The Bank's
focus has consistently been on the origination of one- to four-family
residential mortgage loans, with that loan category constituting a preponderant
91.4 percent, 91.3 percent and 90.3 percent of total origination in fiscal years
1993, 1995 and 1995, respectively, and 89.4 percent for the twelve months ended
March 31, 1996. Consumer loans represented the second largest loan origination
category in fiscal years 1993 and 1994, and in fiscal year 1995 and for the
twelve months ended March 31, 1996, the second largest loan origination category
shifted to nonresidential loans. The impact of these primary lending efforts has
been to generate a yield on average interest-earning assets of 7.76 percent for
Foundation for the twelve months ended March 31, 1996, compared to 7.35 percent
for the comparable group, 7.71 percent for all thrifts and 7.67 for Midwest
thrifts. The Bank's level of interest income to average assets was 7.63 percent
for the twelve months ended March 31, 1996, which was higher than the comparable
group at 7.16 percent, Midwest thrifts at 7.40 percent and all thrifts at 7.41
percent for their most recent four quarters.
The Bank's net interest margin of 2.52 percent, based on average
interest-earning assets for the twelve months ended March 31, 1996, was lower
than the comparable group at 2.98 percent and more significantly lower than all
thrifts at 3.33 percent. Foundation's cost of interest-bearing liabilities of
5.71 percent for the twelve months ended March 31, 1996, was higher than the
comparable group at 5.04 percent,, and also higher than all thrifts at 4.91
percent and Midwest thrifts at 4.98 percent. Foundation's net interest spread of
2.05 percent for the twelve months ended March 31, 1996, was significantly lower
than the comparable group at 2.31 percent, Midwest thrifts at 2.69 percent and
all thrifts at 2.81 percent.
The Bank's ratio of noninterest income to assets was 0.24 percent for the
twelve months ended March 31, 1996, similar to the comparable group at 0.21
percent, but lower than all thrifts at 0.43 percent and Midwest thrifts at 0.40
percent. The Bank has also indicated similar operating expenses to the
comparable group and Midwest thrifts, but modestly lower expenses than all
thrifts. For the twelve months ended March 31, 1996, Foundation had an operating
expenses to assets ratio of 2. 16 percent, compared to a similar 2.20 percent
for both the comparable group and Midwest thrifts and a higher 2.28 percent for
all thrifts.
For the twelve months ended March 31, 1996, Foundation generated similar
levels of noninterest income and noninterest expenses, but a considerably lower
net interest margin relative to its comparable group. As a result, the Bank's
net income level was significantly lower than its comparable group for the
twelve months ended March 31, 1996. Based on identical net and core earnings,
the Bank had a return on average assets of 0.45 percent in fiscal year 1991,
0.81 percent in fiscal year 1992, 0.40 percent in fiscal year 1993, 0.62 percent
in fiscal year 1994, 0.41 percent in fiscal year 1995, and 0.32 percent for the
twelve months ended March 31, 1996. For its most recent four quarters, the
comparable group had a much higher ROAA of 0.60 percent, while all thrifts
indicated an even higher 0.87 percent.
<PAGE>
Foundation's earnings stream will continue to be dependent to a
considerable degree on the overall trends in interest rates. The Bank's cost of
newly issued or repriced interest-bearing liabilities will continue to increase
modestly, but its overall liability cost should remain fairly stable as deposits
continue their gradual movement toward longer term instruments. Such modest
upward pressure on savings costs is likely to continue based on current rates,
although the rate of increase may subside somewhat during the next few years. In
recognition of the foregoing earnings related factors, as well as the Bank's
downward trend in ROAA, net interest spread and net interest margin since 1993,
a maximum downward adjustment has been made to Foundation's pro forma market
value for earnings performance.
MARKET AREA
Foundation's primary market area is Hamilton County, Ohio, including the
Cincinnati community. The Bank's home office and branch office is located in the
City of Cincinnati. The market area is part of the Cincinnati MSA with Hamilton
County having a population base of almost 900,000 residents in 1995. The county
and the Bank's market area communities are characterized by higher housing
values, higher income levels and lower unemployment levels when compared to all
of Ohio. As discussed in Section II, a predominance of market area demographic
factors are favorable for the Bank's market area compared to all of Ohio or the
United States (reference Exhibit 41).
The major private sector employer in Hamilton County is Proctor & Gamble,
which contributes to the county's 30.3 percent share of workers in the
manufacturing industry. Other major private sector employers in Hamilton County
include The Kroger Company, a large supermarket chain, G.E. Aircraft Engines, AK
Steel, Cincinnati Gas & Electric and Cincinnati Milacron. The manufacturing
industry is the major employment category in Hamilton County, followed by the
retail/wholesale trade, with services a close third.
The level of financial competition is strong in the county, dominated by
the commercial banking industry, and results in more competitive pricing of
savings and loan products. North Cincinnati has competed for deposits during the
past five years but withdrawals exceeded new deposits. The market area indicates
growth potential, but at a high cost considering the large deposit base and the
competitiveness of the market. In recognition of these factors, we believe a
minimum upward adjustment is warranted.
FINANCIAL CONDITION
The financial condition of Foundation is discussed in Section I and shown
in Exhibits 1, 2, 5, 15, 16 and 17, and is compared to the comparable group in
Exhibits 40, 42 and 43. The Bank's total equity ratio before conversion was 8.73
percent at March 31, 1996, which was lower than the comparable group at 13.19
percent, Midwest thrifts at 14.59 percent and all thrifts at 12.78 percent. With
a conversion at the midpoint, the Corporation's pro forma equity to assets ratio
will increase to 16.03 percent, and the Bank's pro forma equity to assets ratio
will increase to 12.81 percent.
<PAGE>
The Bank's mix of assets is generally in line with its comparable group.
Foundation had a 67.30 percent share of net loans at March 31, 1996, compared to
the comparable group at 61.67 percent and all thrifts at 67.45 percent. The
Bank's share of cash and investments was 14.61 percent compared to a modestly
higher 21.26 percent for the comparable group and a similar 14.36 percent for
all thrifts. Foundation's ratio of mortgage-backed securities to total assets
was 15.62 percent, generally in line with the comparable group at 14.33 percent
and all thrifts at 14.11 percent. The Bank had a higher share of deposits at
87.53 percent with FHLB advances of only 2.65 percent, compared to the
comparable group's 75.08 percent in deposits and 10.49 percent in borrowed
funds.
The Bank was absent both goodwill and repossessed real estate compared to
0.07 percent and 0.67 percent of repossessed real estate for the comparable
group and all thrifts, respectively. The financial condition of Foundation is
further affected by its level of nonperforming assets at 0.35 percent of assets
at March 31, 1996, compared to a similar 0.29 percent for the comparable group.
It should be recognized, however, that the Bank's ratio of nonperforming assets
to total assets decreased from 1.05 percent in fiscal year 1993 to 0.61 at June
30, 1995, before decreasing to its March 31, 1996, level of 0.35 percent,
although the Bank was absent repossessed real estate in fiscal years 1993, 1994
and 1995 and at March 31, 1996.
The Bank had a lower share of high risk real estate loans at 6.62 percent
compared to 9.79 percent for the comparable group and 15.53 percent for all
thrifts. Foundation had $104,000 in general valuation allowances or 93.69
percent of nonperforming assets at March 31, 1996, compared to the comparable
group's higher 236.41 percent, with Midwest thrifts at 166.38 percent and all
thrifts at a lower 94.93 percent. The Bank's ratio is reflective of its current
absence of real estate owned and lower share of high risk real estate loans.
Overall, we believe that no adjustment is warranted for Foundation's current
financial condition.
DIVIDEND PAYMENTS
Foundation has not indicated its intention to pay an initial cash dividend.
The future payment of cash dividends will be dependent upon such factors as
earnings performance, capital position, growth level, and regulatory
limitations. Eight of the ten institutions in the comparable group pay cash
dividends for an average dividend yield of 2.50 percent for those eight
institutions, and an average dividend yield of 2.00 percent for all ten
institutions.
Currently, many thrifts are committing to initial cash dividends in
comparison to the more common absence of such a dividend commitment in 1994
conversions. As a result, we believe that a minimum downward adjustment to the
pro forma market value is warranted at this time related to dividend payments.
<PAGE>
SUBSCRIPTION INTEREST
The general interest in thrift conversion offerings was often difficult to
gauge in 1995. Based upon recent offerings, subscription and community interest
weakened significantly in early 1995 but regained some strength in the second
half of the year, which continued into 1996. Such interest has frequently been
directly related to the financial performance and condition of the thrift
institution converting, the strength of the local economy, general market
conditions and aftermarket price trends.
Foundation will focus its offering to depositors and residents in the
market area, which has generally been an active and receptive market for new
thrift stocks. The board of directors and officers anticipate purchasing
approximately $_____ or ___ percent of the conversion stock based on the
appraised midpoint valuation. Foundation will form an 8.0 percent ESOP, which
plans to purchase stock in the initial offering. Additionally, the Prospectus
restricts to ___ percent of the total number of shares to be issued in the
conversion the amount of conversion stock that may be purchased by a single
account holder, or by persons and associates acting in concert.
The Bank has secured the services of Charles Webb & Company ("Webb") to
assist the Bank in the marketing and sale of the conversion stock. Based on the
size of the offering, current market conditions, local market interest and the
terms of the offering, we believe that a minimum upward adjustment is warranted
for the Bank's anticipated subscription interest.
LIQUIDITY OF THE STOCK
Foundation will offer its shares through concurrent subscription and
community offerings with the assistance of Webb. If necessary, Webb will conduct
a syndicated community offering upon the completion of the subscription and
community offering. Foundation will pursue two market makers for the stock. The
Bank's offering is much small in size than the comparable group, most
considerably below the national average and, more significantly, approximately
96.0 percent below the Ohio average. It is likely, therefore, that the stock of
Foundation will be much less liquid than thrift stocks nationally and in its
Ohio market area. Therefore, we believe that a moderate downward adjustment to
the pro forma market value is warranted at this time relative to the liquidity
of the stock.
MANAGEMENT
The president, chief executive officer and designated managing officer of
Foundation is Laird L. Lazelle, who also serves as a director of the Bank. Mr.
Lazelle joined the Bank in 1994 and has over 36 years of financial institution
experience. Previously, Mr. Lazelle served as president and chief executive
officer of The TriState Bancorp. Mr. Lazelle and the management of Foundation
have made a concerted and combined effort to increase deposits and market share
and to strengthen local lending activity.
<PAGE>
Foundation has been able to strengthen its equity position and maintain a
reasonable level of operating expenses over the past few years. The Bank's
current asset quality, including nonperforming assets, has improved compared to
previous periods, although earnings, net interest spread and net interest margin
have declined since 1992 and remain below comparable group and industry
averages. It is our opinion that no adjustment to the pro forma market value is
warranted for management.
MARKETING OF THE ISSUE
The response to a newly issued thrift institution stock is more difficult
to predict, due to the volatility of new thrift stocks. Further, with each
conversion, there is a high level of uncertainty with regard to the stock market
particularly thrift institution stocks and interest rate trends. The impact of
recent increases in interest rates has made it more difficult for more thrift
institutions to strengthen their earnings and resulted in downward market
prices. Recent conflicts of opinion on interest rate trends and the recent rise
in interest rates have resulted in some significant stock volatility. Further,
the impact of the difference in a thrift's premium level on deposits compared to
BIF-insured institutions is another key concern, along with the one time
assessment of SAIF-insured thrifts to increase the capitalization of the SAIF
insurance fund.
The necessity to build a new issue discount into the stock price of a
converting thrift has prevailed in the thrift industry in recognition of higher
uncertainty among investors as a result of the thrift industry's dependence on
interest rate trends. We believe that a new issue discount applied to the price
to book valuation approach continues and is considered to be reasonable and
necessary in the pricing of the Corporation, and we have made a maximum downward
adjustment to the Corporation's pro forma market value in recognition of the new
issue discount.
VI. VALUATION METHODS
Under normal stock market conditions, the most frequently used method for
determining the pro forma market value of common stock for thrift institutions
by this firm is the price to book value ratio method. The focus on the price to
book value method is due to the volatility of earnings in the thrift industry.
As earnings in the thrift industry improved in late 1993, 1994 and 1995, there
has been more emphasis placed on the price to earnings method, but the price to
book value method continues to be the primary valuation method. These two
pricing methods have both been used in determining the pro forma market value of
the Corporation.
In recognition of the volatility and variance in earnings due to
fluctuations in interest rates, the continued differences in asset and liability
repricing and the frequent disparity in value between the price to book approach
and the price to earnings approach, a third valuation method has been used, the
price to net assets method. The price to net assets method is used less often
for valuing ongoing institutions;
<PAGE>
however, this method becomes more useful in valuing converting institutions when
the equity position and earnings performance of the institutions under
consideration are different.
In addition to the pro forma market value, we have defined a valuation
range with the minimum of the range being 85.0 percent of the pro forma market
value, the maximum of the range being 115.0 percent of the pro forma market
value, and a super maximum being 115.0 percent of the maximum. The pro forma
market value or appraised value will also be referred to as the "midpoint
value".
PRICE TO BOOK VALUE METHOD
The price to book value method focuses on a thrift institution's financial
condition, and does not give as much consideration to the institution's
performance as measured by net earnings. Therefore, this method is sometimes
considered less meaningful for institutions that do provide a consistent
earnings trend. Due to the earnings volatility of many thrift stocks, the price
to book value method is frequently used by investors who rely on an
institution's financial condition rather than earnings performance.
Consideration was given to the adjustments to the Bank's pro forma market
value discussed in Section V. Minimum upward adjustments were made for market
area and subscription interest. A minimum downward adjustment was made for
dividend payments. Moderate downward adjustments were made for earnings
performance and the liquidity of the stock and a maximum downward adjustment was
made for the marketing of the issue. No adjustments were made for the Bank's
financial condition or management.
Exhibit 48 shows the average and median price to book value ratios for the
comparable group which were 89.57 percent and 87.70 percent, respectively. The
total comparable group indicated a moderately wide range, from a low of 76.33
percent (MFB Corp.) to a high of 108.97 percent (Fidelity Bancorp, Inc.). This
variance cannot be attributed to any one factor such as the institution's equity
ratio or earnings performance. Excluding the low and the high in this group, the
price to book value range narrowed only slightly from a low of 80.60 percent to
a high of 104.33 percent.
Taking into consideration all of the previously mentioned items in
conjunction with the adjustments made in Section V, we have determined a pro
forma price to book value ratio of 62.49 percent at the midpoint and ranging
from a low of 57.89 percent at the minimum to a high of 70.19 percent at the
super maximum for the Corporation, which is strongly influenced by the Bank's
earnings performance, local market and subscription interest in thrift stocks.
Further, the Bank's equity to assets after conversion will be 12.81percent
compared to 13.19 percent for the comparable group. Based on this price to book
value ratio and the Bank's equity of $2,772,000 at March 31, 1996, the indicated
pro forma market value for the Bank using this approach is $3,500,581 (reference
Exhibit 49).
<PAGE>
PRICE TO EARNINGS METHOD
The focal point of this method is the determination of the earnings base to
be used and secondly, the determination of an appropriate price to earnings
multiple. The recent earnings position of Foundation is displayed in Exhibit 3,
indicating after tax net earnings for the twelve months ended March 31, 1996, of
$99,000. Exhibit 7 indicates that the Bank's core or normalized earnings were
also $99,000 for the twelve months ended March 31, 1996. To arrive at the pro
forma market value of the Bank by means of the price to earnings method, we used
the net and core earnings base of $99,000.
In determining the price to earnings multiple, we reviewed the range of
price to core earnings multiples for the comparable group and all
publicly-traded thrifts. The average price to net earnings multiple for the
comparable group was 21.81, while the median was 17.87. The average price to
core earnings multiple was a similar 21.59 and the median multiple was 17.57.
The comparable group's price to net earnings multiple was higher than the
average for all publicly-traded thrifts of 15.66 and higher than their median of
13.14. The price to core earnings multiple for all publicly-traded thrifts was
also lower than the comparable group with an average at 17.27 times core
earnings and a median at 14.41 times core earnings. The range in the price to
net earnings multiple for the comparable group was from a low of 12.26 (Mid-Iowa
Financial Corp.) to a high of 48.33 (Seven Hills Financial Corp.). The primary
range in the price to earnings multiple for the comparable group excluding the
high and low ranges was from a low price to earnings multiple of 12.61 to a high
of 28.30 times earnings for eight of the ten institutions in the group.
Consideration was given to the adjustments to the Corporation's pro forma
market value discussed in Section V. In recognition of these adjustments, we
have determined a price to earnings multiple of 24.07 based on Foundation's net
and core earnings of $99,000 for twelve months ended March 31, 1996. Based on
such a core earnings base of $99,000 and a price to earnings multiple of 24.07
(reference Exhibits 48 and 49), the pro forma market value of the Corporation
using the price to earnings ratio method is $3,500,581 at the midpoint. The
range in the price to earnings multiple is from a low of 21.71 at the minimum of
the range to a high of 28.35 at the super maximum of the range.
PRICE TO NET ASSETS METHOD
The final valuation method is the price to net assets method. This method
is not as frequently used due to the fact that it does not focus as much on an
institution's equity position or earnings performance. Exhibit 48 indicates that
the average price to net assets ratio for the comparable group was 11.58 percent
and the median was 10.35 percent. The range in the price to net assets ratios
for the comparable group varied from a low of 6.33 percent (Hallmark Capital
Corp.) to a high of 17.09 percent (Seven Hills Financial Corp.). It narrows
modestly with the elimination of the two extremes in the group to a low of 7.93
percent and a high of 16.28 percent.
<PAGE>
Based on the adjustments made previously for Foundation, it is our opinion
that an appropriate price to net assets ratio for the Corporation is 10.01
percent which is somewhat lower than the comparable group at 11.58 and ranges
from a low of 8.63 percent at the minimum to 12.82 percent at the super maximum.
Based on the Bank's March 31, 1996, asset base of $31,737,000, the indicated pro
forma market value of the Corporation using the price to net assets method is
$3,501,357 (reference Exhibit 49).
VALUATION CONCLUSION
Exhibit 54 provides a summary of the valuation premium or discount for each
of the valuation ranges when compared to the comparable group based on each of
the valuation approaches. At the midpoint value, the price to book value ratio
of 62.49 percent for the Corporation represents a discount of 30.23 percent
relative to the comparable group and decreases to 21.63 percent at the super
maximum. The price to earnings multiple of 24.07 for the Corporation at the
midpoint value indicates a premium of 10.40 percent, increasing to a premium of
29.99 percent at the super maximum. The price to assets ratio of 10.01 percent
at the midpoint represents a discount of 13.55 percent, changing to a premium of
10.72 percent at the super maximum.
It is our opinion that as of May 14, 1996, the pro forma market value of
the common stock to be issued by the Corporation is $3,500,000, representing
350,000 shares at $10.00 per share. The valuation range for this stock is from a
minimum of $2,975,000 or 297,500 shares at $10.00 per share to a maximum of
$4,025,000 or 402,500 shares at $10.00 per share, with such range being defined
as 15 percent below the appraised value to 15 percent above the appraised value.
The super maximum is $4,628,750 or 462,875 shares at $10.00 per share (reference
Exhibits 49 to 53). The appraised value of Foundation Bancorp, Inc. as of May
14, 1996, is $3,500,000.
<PAGE>
EXHIBIT 1
FOUNDATION SAVINGS BANK
CINCINNATI, OHIO
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT MARCH 31, 1996, AND JUNE 30, 1995
(In thousands)
<TABLE>
<CAPTION>
March 31, June 30,
ASSETS 1996 1995
- ------ -------- --------
(Unaudited)
<S> <C> <C>
Cash $ 15 $ 57
Interest-bearing deposits 4,221 3,886
-------- --------
Cash and cash equivalents 4,236 3,943
Certificates of deposit - -
Investment securities - at amortized cost (fair value of $393 and $1,035 at
March 31,1996, (unaudited) and June 30,1995, respectively) 400 1,050
Mortgage-backed securities - at amortized cost, (fair value of $4,832 and
$5,409 at March 31,1996, (unaudited) and June 30,1995, respectively) 4,957 5,532
Loans receivable 21,359 20,511
Accrued interest receivable:
Loans 96 79
Investments and interest bearing deposits 4 16
Mortgage-backed securities 40 42
Federal Home Loan Bank stock - at cost 274 260
Property and equipment, net 318 324
Refundable federal income tax - 32
Prepaid expenses and other assets 54 60
-------- --------
TOTAL ASSETS $31,738 $ 31,849
-------- --------
-------- --------
LIABILITIES AND RETAINED EARNINGS
- ---------------------------------
Deposits 27,780 27,737
Advances from the Federal Home Loan Bank 842 1,191
Advances by borrowers for taxes, insurance and other 136 39
Accrued expenses 136 115
Deferred Federal income tax 64 61
Accrued Federal income taxes 8 -
-------- --------
TOTAL LIABILITIES $28,966 $29,143
Commitments - -
Retained earnings 2,772 2,706
-------- --------
TOTAL LIABILITIES AND RETAINED EARNINGS $31,738 $31,849
-------- --------
-------- --------
</TABLE>
Source: Foundation Savings Bank's audited financial statement as of June 30,
1995, and unaudited financial statement as of March 31,1996.
<PAGE>
EXHIBIT 2
FOUNDATION SAVINGS BANK
CINCINNATI, OHIO
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT JUNE 30, 1991 THROUGH 1994
<TABLE>
<CAPTION>
ASSETS 1994 1993 1992 1991
- ------ ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Cash $ 60 $ 662 $ 610 $ 538
Interest-bearing deposits 2,402 3,977 2,500 2,411
------- ------- ------- -------
Cash and cash equivalents 2,462 4,639 3,110 2,949
Certificates of deposit 1,400 1,400 1,000 -
Investment securities at cost, market value of $6,443, at
June 30,1994,1993, 1,050 - - -
Mortgage-backed securities - at cost, market value of
$6,443, 5,344, $3,183 and $1,139 at June 1994,
1993, 1992 and 1991, respectively 6,593 5,303 3,167 1,132
Loans receivable 18,794 19,550 22,038 22,663
Accrued interest receivable:
Loans 57 46 47 36
Investments and interest bearing deposits 18 1 2 14
Mortgage-backed securities 44 38 27 12
Federal Home Loan Bank stock - at cost 241 233 226 224
Federal Home Loan Mortgage Corp. preferred stock at
cost (market value of $154 and $104 at June 30, 1993
and 1992, respectively - 11 16 25
Foreclosed real estate - - 63 -
Property and equipment, net 335 356 371 379
Deferred federal income taxes - - - 3
Refundable federal income tax 22 17 - 6,205
Prepaid expenses and other assets 40 41 24 28
------- ------- ------- -------
TOTAL ASSETS $31,056 $31,635 $30,091 $24,470
------- ------- ------- -------
------- ------- ------- -------
LIABILITIES AND RETAINED EARNINGS
- ---------------------------------
Deposits $27,348 $29,062 $27,617 $25,363
Advances from the Federal Home Loan Bank 954 - - -
Advances by borrowers for taxes, insurance and other 22 32 27 28
Accrued expenses 108 129 75 54
Accrued federal income tax - - 78 -
Deferred Federal income taxes 43 27 35 -
------- ------- ------- -------
TOTAL LIABILITIES $28,475 $29,250 $27,832 $25,445
------- ------- ------- -------
Retained earnings 2,581 2,385 2,259 2,025
------- ------- ------- -------
TOTAL LIABILITIES AND RETAINED EARNINGS $31,056 $31,635 $30,091 $27,470
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Source: Foundation Savings Banks audited financial statements.
<PAGE>
EXHIBIT 3
FOUNDATION SAVINGS BANK
CINCINNATI, OHIO
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1995 AND 1996, AND
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
March 31,
------------------- Year ended
1996 1995 June 1995
---- ---- ---------
(Unaudited)
<S> <C> <C> <C>
Interest and dividend income:
Loans $ 1,358 $ 1,225 $ 1,655
Mortgage-backed securities 234 242 321
Investment securities 52 51 69
Interest-bearing deposits 140 75 117
------- ------- -------
Total interest income 1,784 1,593 2,162
Interest expense:
Deposits 1,167 946 1,309
Borrowings 40 42 59
------- ------- -------
Total interest expense 1,207 988 1,368
------- ------- -------
Net interest income 577 605 794
Provision for loan losses 34 9 12
------- ------- -------
Net interest income after provision for loan losses 543 596 782
------- ------- -------
Other income
Gain on sale of investments - - -
Gain on sale of loans 7 3 12
Net office site income 37 38 50
Gain on sale of equipment - - -
Other operating income 8 7 7
------- ------- -------
Total other income 52 48 70
General, administrative and other expense
Compensation and benefits 260 274 365
Occupancy and equipment 59 57 77
Deposit insurance 46 47 62
Franchise tax 25 24 32
Computer processing 24 24 32
Other operating expenses 83 83 111
------- ------- -------
Total general, administrative and other
operating expenses 497 509 679
------- ------- -------
Net income before provision for income taxes 98 135 173
------- ------- -------
Provision for income taxes
Current 29 31 30
Deferred 3 12 18
------- ------- -------
Total provision for income taxes 32 43 48
Net income $ 66 $ 92 $ 125
------- ------- -------
------- ------- -------
</TABLE>
Source: Foundation Savings Bank's audited financial statement as of June
30, 1995, and nine months ended March 31, 1996 and 1995 (unaudited)
<PAGE>
EXHIBIT 4
FOUNDATION SAVINGS BANK
CINCINNATI, OHIO
STATEMENTS OF OPERATIONS
FISCAL YEARS ENDED JUNE 30, 1991 THROUGH 1994
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans $1,594 $1,882 $2,156 $2,194
Mortgage-backed securities 286 232 135 90
Investments 14 - - -
Interest-bearing deposits 161 170 173 144
Dividends 14 13 15 19
----- ----- ----- -----
Total interest and dividend income 2,069 2,297 2,479 2,446
Interest expense:
Deposits 1,297 1,499 1,713 1,855
Borrowings 42 - - -
----- ----- ----- -----
Total interest expense 1,339 1,499 1,713 1,855
----- ----- ----- -----
Net interest income 730 798 766 591
Provision for loan losses 33 83 5 5
----- ----- ----- -----
Net interest income after provision for loan losses 697 715 761 586
Other income
Gain on sale of investments 132 - - -
Gain on sale of stock - 61 54 -
Gain on sale of loans - - - -
Net office site income 65 - - -
Gain on sale of equipment 1 - - -
Rental income - 64 84 69
Other operating income 5 11 16 17
----- ----- ----- -----
Total other income 203 137 154 86
General, administration and other expenses 627 640 556 514
Net income before provision for income taxes 274 212 359 158
Provision for income taxes
Current 62 93 109 25
Deferred 16 (8) 16 14
----- ----- ----- -----
78 85 125 39
Net income $ 195 $ 127 $ 234 $ 119
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
Source: Foundation Savings Bank's audited financial statements
<PAGE>
EXHIBIT 5
SELECTED FINANCIAL INFORMATION AND OTHER DATA
AT MARCH 31, 1995 AND 1996, AND AT JUNE 30, 1991 THROUGH 1995
<TABLE>
<CAPTION>
At March 31 At June 30,
--------------- ----------------------------------------------
1996 1996 1996 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(Unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected financial condition
and other data:
Total amount of:
Assets $31,738 $29,898 $31,849 $31,056 $31,635 $30,091 $27,470
Cash and equivalents 4,236 1,477 3,943 2,462 4,639 3,110 2,949
Investment securities 674 1,406 1,310 2,691 1,644 1,242 248
Mortgage-backed securities 4,957 5,843 5,532 6,593 5,303 3,167 1,132
Loans receivable, net 21,359 20,670 20,511 18,794 19,550 22,038 22,663
Deposits 27,780 25,777 27,737 27,348 29,062 27,617 25,363
FHLB advances 842 1,208 1,192 955 - - -
Retained earnings 2,772 2,673 2,706 2,581 2,385 2,259 2,025
</TABLE>
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 6
INCOME AND EXPENSE TRENDS
FOR THE NINE MONTHS ENDED MARCH 31, 1995 AND 1996, AND
FOR THE YEARS ENDED JUNE 30, 1991 THROUGH 1995
<TABLE>
<CAPTION>
Nine months ended
March 31, For the years ended June 30,
----------------- --------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------
(Unaudited) (In thousands)
Summary of earnings:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $1,783 $1,593 $2,162 $2,069 $2,297 $2,479 $2,446
Interest expense 1,207 988 1,368 1,339 1,499 1,713 1,855
Net interest income 576 605 794 730 798 766 591
Provision for loan losses 34 9 12 33 83 5 5
Net interest income after
provision for loan losses 542 596 782 697 715 761 586
Other income 52 47 70 204 136 135 86
General, administrative and
other expense 496 509 679 627 639 537 514
Net income before provision
for income taxes 98 134 173 274 212 359 158
Provision for income taxes 32 43 48 79 85 125 39
----- ----- ----- ----- ----- ----- -----
Net income $ 66 $ 91 $ 125 $ 195 $ 127 $ 234 $ 119
----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- -----
</TABLE>
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 7
NORMALIZED EARNINGS TREND
FOR THE NINE MONTHS ENDED MARCH 31, 1996, AND
FOR THE YEARS ENDED JUNE 30, 1993 THROUGH 1995
Nine months ended
March 31, Years ended June 30,
----------------- --------------------------
1996 1995 1994 1993
---- ---- ---- ----
(Dollars In thousands)
Net income after taxes $ 99 $125 $195 $126
Net income before taxes and effect
of accounting adjustments 136 173 274 212
Income adjustments 0 0 (112) (41)
Expense adjustments 0 0 0 0
Normalized earnings before taxes 136 173 162 171
Taxes 43 48 46(1) 49(1)
---- ---- ---- ----
Normalized earnings after taxes $ 99 $125 $116 $122
---- ---- ---- ----
---- ---- ---- ----
- ------------------------------
(1) Based on tax rate of 28.5 percent
Source: Foundation Bancorp Inc.'s Prospectus
<PAGE>
EXHIBIT 8
PERFORMANCE INDICATORS
FOR THE NINE MONTHS ENDED MARCH 31,1995 AND 1996, AND
FOR THE YEARS ENDED JUNE 30,1991 THROUGH 1995
<TABLE>
<CAPTION>
At or for the nine months
ended March 31, At or for the years ended June 30,
------------------------- --------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
SELECTED FINANCIAL RATIOS:
<S> <C> <C> <C> <C> <C> <C> <C>
Performance ratios:
Return on average assets 0.28% 0.41% 0.41% 0.62% 0.40% 0.81% 0.45%
Return on average equity 3.20 4.66 4.72 7.92 5.42 10.89 6.02
Interest rate spread 2.00 2.33 2.25 2.02 2.22 2.27 1.75
Net interest margin 2.47 2.73 2.66 2.35 2.57 2.69 2.28
Non-interest expense to average assets 2.08 2.25 2.23 1.99 2.03 1.85 1.96
Average equity to average assets 8.66 8.73 8.71 7.80 7.42 7.40 7.53
Equity to assets, end of period 8.73 8.94 8.50 8.32 7.54 7.51 7.37
Nonperforming assets to average assets 0.35 0.23 0.64 0.29 1.05 0.96 1.00
Nonperforming loans to total loans 0.52 0.34 0.95 0.49 1.70 0.98 1.16
Asset quality ratios:
Allowance for loan losses to gross
loans 0.48 0.47 0.47 0.38 0.51 .07 0.04
Allowance for loan losses to
nonperforming loans 93.69 140.00 50.52 77.42 30.33 6.98 3.44
Net (charge-offs) recoveries to
average loans (0.18) 0.10 0.07 (0.32) 0.02 - -
Average interest-earning assets to
average interest-bearing liabilities 109.01% 108.99% 108.92% 107.70% 107.33% 106.97% 107.50%
</TABLE>
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 9
VOLUME/RATE ANALYSIS
FOR THE NINE MONTHS ENDED MARCH 31,1996, AND
FOR THE FISCAL YEARS ENDED JUNE 30,1994 AND 1995
<TABLE>
<CAPTION>
Nine months ended March 31, For the years ended June 30,
-------------------------------- ---------------------------------------------------------
1996 vs. 1995 1995 vs. 1994 1994 vs. 1993
-------------------------------- --------------- ----------------
Increase (Decrease) Increase (Decrease) Increase (Decrease)
Due to Total Due to Total Due to Total
------------------ Increase ------------------ Increase ------------------ Increase
Volume Rate (Decrease) Volume Rate (Decrease) Volume Rate (Decrease)
------ ---- ---------- ------ ---- ---------- ------ ---- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME ATTRIBUTABLE TO:
Interest-bearing deposits $ 55 $ 10 $ 65 $(109) $ 65 $ (44) $ (24) $ 15 $ (9)
Investments (5) 5 0 39 2 41 16 (1) 15
Mortgage-backed securities (39) 31 (8) (21) 56 39 104 (50) 54
Loans receivable 86 47 133 88 (27) 61 (154) (134) (288)
----- ----- ----- ----- ----- ----- ----- ----- -----
Total interest income $ 97 $ 93 $ 190 $ (3) $ 96 $ 93 $ (58) $(170) $(228)
----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- -----
INTEREST-BEARING LIABILITIES:
Deposits 58 163 221 (78) 90 12 (46) (156) (202)
FHLB advances (3) 0 (3) 13 4 17 21 21 42
----- ----- ----- ----- ----- ----- ----- ----- -----
Total interest expense 55 163 218 $ (65) $ 94 $ 29 $ (25) $(135) $(160)
----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (decrease) in net interest
income $ 42 $ (70) $ (23) $ 62 $ 2 $ 64 $ (33) $ (35) $ (68)
----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 10
YIELD AND COST TRENDS
AT MARCH 31, 1996,
THE NINE MONTHS ENDED MARCH 31, 1995 AND 1996, AND
FOR THE YEARS ENDED JUNE 30, 1993 THROUGH 1995, AND
<TABLE>
<CAPTION>
At Nine months ended
March 31, March 31, Year ended June 30,
-------- -------------------- ------------------------------------
1996 1996 1995 1995 1994 1993
-------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits 5.24% 5.80% 5.20% 5.32% 3.41% 3.11%
Investment securities 6.33 5.84 5.22 5.29 4.89 5.32
Mortgage-backed securities 5.41 5.98 5.26 5.33 4.41 5.44
Loans receivable 8.14 8.38 8.07 8.15 8.28 8.95
Total interest-earning assets 7.27 7.62 7.18 7.24 6.67 7.41
Interest-bearing liabilities:
Deposits 5.58 5.62 4.82 4.97 4.63 5.19
FHLB advances 5.51 5.59 5.63 5.64 5.16 -
Total interest-bearing liabilities 5.58 5.62 4.85 4.99 4.65 5.19
Interest rate spread 1.69 2.00 2.33 2.25 2.02 2.22
Net interest margin (net interest
income as a percent of average
interest earning assets) - 2.47 2.73 2.66 2.35 2.57
</TABLE>
Source: Foundation Bancorp Inc.'s Prospectus
<PAGE>
EXHIBIT 11
MARKET VALUE OF PORTFOLIO EQUITY
AT DECEMBER 31, 1995
December 31, 1995
-----------------------------
Change in
interest rates Board limit $ Change % Change
(basis points) % Change in NPV in NPV
-------------- ------------- --------- ---------
(In thousands)
+400 (0.60)% $(1,678) (0.64)%
+300 (0.50) (1,185) (0.45)
+200 (0.35) (717) (0.28)
+100 (0.20) (302) (0.12)
0 0.00 0 0.00
(100) 0.20 118 0.05
(200) 0.35 90 0.03
(300) 0.50 94 0.04
(400) 0.60 171 0.07
Source: Foundation Bancorp Inc.'s Prospectus
<PAGE>
EXHIBIT 12
LOAN PORTFOLIO COMPOSITION
AT MARCH 31,1996, AND AT JUNE 30,1993 THROUGH 1995
<TABLE>
<CAPTION>
At June 30,
-----------------------------------------------------------------------
At March 31,1996 1995 1994 1993
---------------------- -------------------- -------------------- -----------------------
Amount Percent Amount Percent Amount Percent Amount Percent
-------- --------- -------- --------- -------- --------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REAL ESTATE LOANS:
One- to four-family $18,990 88.91% $18,300 89.22% $16,714 88.93% $17,305 88.52%
Nonresidential 1,302 6.09 1,124 5.48 882 4.69 1,030 5.27
Multifamily 798 3.74 636 3.10 688 3.66 722 3.69
Commercial loans - - - - - - 2 0.01
-------- --------- -------- --------- -------- --------- -------- ---------
Total real estate loans 21,090 98.74 20,060 97.80 18,284 97.28 19,059 97.49
CONSUMER LOANS:
Property Improvement loans - - - - 14 0.08 19 0.10
Passbook loans 58 0.27 111 0.54 66 0.35 579 2.96
Other consumer loans 353 1.65 501 2.44 566 3.01 81 0.41
-------- --------- -------- --------- -------- --------- -------- ---------
Total loans $ 21,501 100.66% $ 20,672 100.78% $18,930 100.72% $19,738 100.96%
-------- --------- -------- --------- -------- --------- -------- ---------
-------- --------- -------- --------- -------- --------- -------- ---------
LESS:
Loans in process 5 0.02 15 0.07 - - 5 0.02
Allowance for loan losses 104 0.49 98 0.48 72 0.38 101 0.52
Deferred loan fees 33 0.15 48 0.23 58 0.31 74 0.38
Unearned discounts - - - - 6 0.03 8 0.04
Net loans $ 21,359 100.00% $ 20,511 100.00% $ 18,794 100.00% $19,550 100.00%
-------- --------- -------- --------- -------- --------- -------- ---------
-------- --------- -------- --------- -------- --------- -------- ---------
</TABLE>
Source: Foundation Bancorp Inc.'s Prospectus
<PAGE>
EXHIBIT 13
LOAN MATURITY SCHEDULE
AT MARCH 31,1996
<TABLE>
<CAPTION>
Due during the year ending
March 31, Due Due Due Due 20 or
----------------------------------- 4-5 years 6-10 years 11-20 years more years
1997 1998 1999 after 3/31/96 after 3/31/96 after 3/31/96 after 3/31/96 Total
------ ------ ------ ------------- -------------- -------------- -------------- ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family 573 $669 $713 $1,578 $4,050 $3,992 $7,411 $18,985
Nonresidential 65 68 67 133 345 351 273 1,302
Multifamily 30 33 36 78 221 284 116 798
----- ----- ----- ------ ------ ------ ------ -------
Total $668 $770 $816 $1,789 $4,616 $4,627 $7,800 $21,085
----- ----- ----- ------ ------ ------ ------ -------
Consumer loans:
Passbook loans 52 212 58 31 - - - 353
Other consumer 17 4 - 37 - - - 58
----- ----- ----- ------ ------ ------ ------ -------
Total $ 737 $ 986 $ 874 $1,857 $4,616 $4,627 $7,800 $21,496
----- ----- ----- ------ ------ ------ ------ -------
----- ----- ----- ------ ------ ------ ------ -------
Due more than
one year after
June 30,1995
------------
(in thousands)
Fixed rate of interest 10,022
Adjustable rate of interest 10,737
-------
$20,759
-------
-------
</TABLE>
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 14
LOAN ORIGINATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1995 AND 1996, AND
FOR THE YEARS ENDED JUNE 30, 1993 THROUGH 1995
<TABLE>
<CAPTION>
Nine months ended
March 31, Years ended June 30,
------------------- --------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Loans receivable-beginning of period $20,670 $20,511 $18,794 $19,550 $22,038
Loans originated:
Real Estate loans:
One- to four-family residential 5,780 3,910 5,090 2,707 5,834
Nonresidential 268 210 370 - 95
Multifamily residential 194 - - - -
Consumer 53 49 127 201 485
Passbook 24 - 50 54 14
-------- -------- -------- -------- --------
Total originations 6,319 4,169 5,637 2,962 6,378
Reductions:
Principal repayments 4,534 3,810 3,331 3,770 8,847
Loans sold 1,115 182 584 - -
-------- -------- -------- -------- --------
Total reductions 5,649 3,992 3,895 3,770 8,847
Other changes, net(1) 19 (18) (25) 52 (19)
-------- -------- -------- -------- --------
Loans receivable, end of period $21,359 $20,670 $20,511 $18,794 $19,550
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- --------------------------------
(1) Other items consist of loans in process, deferred loan fees and
allowances for loan losses.
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 15
DELINQUENT LOANS AT MARCH 31, 1996, AND AT JUNE 30,1993 THROUGH 1995
<TABLE>
<CAPTION>
At June 30,
----------------------------------------------------------------------
At March 31,1996 1995 1994 1993
-------------------- ---------------------- --------------------- ---------------------
% of % of % of % of
Amount Total loans Amount Total loans Amount Total loans Amount Total loans
------ ----------- ------ ----------- ------ ----------- ------ -----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans delinquent for:
30(59 days)
60(89 days) $ 2 0.01% $ 48 0.23% $ 115 .61% $ 157 0.80%
90 days and over 111 0.52 194 0.94 93 .49 333 1.69
---- ---- ---- ---- ---- ---- ----- ----
Total delinquent loans $113 0.53% $242 1.17% $208 1.10% $ 490 2.49%
---- ---- ---- ---- ---- ---- ----- ----
---- ---- ---- ---- ---- ---- ----- ----
</TABLE>
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 16
NONPERFORMING ASSETS
AT MARCH 31, 1995 AND 1996, AND AT JUNE 30, 1993 THROUGH 1995
<TABLE>
<CAPTION>
At March 31, At June 30,
--------------- -------------------------
1996 1995 1995 1994 1993
----- ----- ----- ----- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
Accruing loans delinquent
90 days and over $111 $70 $194 $ - $ -
Loans accounted for on a nonaccrual basis:
Real estate:
One-to four family - - - 93 333
Multifamily - - - - -
Nonresidential - - - - -
Consumer - - - - -
Total nonaccrual loans - - - - -
--- --- --- --- ---
Total nonperforming loans $111 $70 $194 $93 $333
---- --- ---- --- ----
---- --- ---- --- ----
Real Estate Owned - - - - -
--- --- --- --- ---
Total nonperforming assets $111 $70 $194 $93 $333
---- --- ---- --- ----
---- --- ---- --- ----
Allowance for loan losses $104 $98 $ 98 $72 $101
---- --- ---- --- ----
---- --- ---- --- ----
Nonperforming assets as a percent of total
loans 0.35% 0.23% 0.61% 0.30% 1.05%
Nonperforming loans as a percent of total
loans 0.52% 0.34% 0.95% 0.49% 1.70%
Allowance for loan losses as a percent of
nonperforming loans 93.69% 140.00% 50.52% 77.42% 30.33%
</TABLE>
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 17
CLASSIFIED ASSETS
AT MARCH 31,1995 AND 1996, AND AT JUNE 30,1993 THROUGH 1995
At March 31, At June 30,
--------------- -------------------------
1996 1995 1995 1994 1993
----- ----- ----- ----- -----
(In thousands)
Classified assets:
Substandard $431 $474 $441 $367 $516
Doubtful - - - - -
Loss 6 4 28 - 50
---- ---- ---- ---- ----
Total classified assets $437 $478 $469 $367 $566
---- ---- ---- ---- ----
---- ---- ---- ---- ----
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 18
ALLOWANCE FOR LOAN LOSSES
FOR THE NINE MONTHS ENDED MARCH 31,1996 AND 1995, AND
FOR THE YEARS ENDED JUNE 30,1993 THROUGH 1995
<TABLE>
<CAPTION>
Nine months ended
March 31, Year ended June 30,
---------------- --------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $98 $72 $72 $101 15
Charge offs (28) (1) (4) (96) -
Recoveries - 18 18 34 3
--- --- --- --- ---
Net (chargeoffs) recoveries (28) 17 14 (62) 3
Provision for loan losses 34 9 12 33 83
Balance at end of period $104 $98 $98 $ 72 $101
Ratio of net (charge offs) recoveries to
average loans outstanding during the period 0.13% 0.08% 0.07% 0.32% -
Ratio of allowance for loan losses to total
loans 0.48% 0.47% 0.47% 0.38% -
</TABLE>
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 19
INVESTMENT PORTFOLIO COMPOSITION
AT MARCH 31, 1996, AND
AT JUNE 30, 1993 THROUGH 1995
<TABLE>
<CAPTION>
At June 30,
----------------------------------------------------------
At March 3l,1996 1995 1994 1993
------------------- --------------- ------------------ ------------------
Carrying Fair Carrying Fair Carrying Fair Carrying Fair
Value Value Value Value Value Value Value Value
-------- -------- ------ -------- -------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits $ 85 $ 85 $ 786 $ 786 $ 1,827 $ 1,827 $ 3,477 $ 3,477
Certificates of deposit - - - - 1,400 1,400 1,400 1,400
Investment securities:
Federal funds 4,136 4,136 3,100 3,100 575 575 500 500
U.S government obligations 400 393 1,050 1,035 1,050 1,004 233 233
FHLB stock 274 274 260 260 241 241 11 155
Mortgage-backed securities 4,957 4,831 5,532 5,409 6,593 6,444 5,303 5,345
----- ----- ----- ----- ----- ----- ----- -----
Total investments $9,852 $9,719 $10,728 $10,590 $11,686 $11,491 $10,924 $11,110
------ ------ ------- ------- ------- ------- ------- -------
------ ------ ------- ------- ------- ------- ------- -------
</TABLE>
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 20
MIX OF DEPOSITS
AT MARCH 31,1996, AND AT JUNE 30,1993 THROUGH 1995
<TABLE>
<CAPTION>
At March 31, At June 30,
--------------------- ---------------------------------------------------------------
1996 1995 1994 1993
--------------------- -------------------- --------------------- --------------------
Percent Percent Percent Percent
of total of total of total of total
Amount deposits Amount deposits Amount deposits Amount deposits
-------- ---------- -------- ---------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TRANSACTION ACCOUNTS:
Passbook savings accounts(1) $ 1,085 3.91% $ 1,288 4.64% $ 1,835 6.71% $ 2,880 9.91%
NOW and money market accounts(2) 1,962 7.06% 2,507 9.04% 3,306 12.09% 3,313 11.40%
----- ---- ----- ---- ----- ----- ----- -----
Total transaction accounts 3,047 10.97% 3,795 13.68% 5,141 18.80% 6,193 21.31%
----- ----- ----- ----- ----- ----- ----- -----
CERTIFICATES OF DEPOSIT:
3.00% or less 105 0.38% 425 1.53% 250 0.91%
3.01% - 5.00% 1,593 5.73% 4,157 14.99% 18,975 69.38%
5.01% - 7.00% 22,892 82.40% 18,892 68.11% 2,236 8.18%
7.01% (9.00%) 143 0.52% 468 1.69% 746 2.73%
--- ---- --- ---- --- ----
Total certificates of Deposit (3) 24,733 89.03% 23,942 86.32% 22,207 81.20% 22,869 78.69%
------ ----- ------ ----- ------ ----- ------ -----
Total deposits $27,780 $27,737 $27,348 $29,062
------- ------- ------- -------
------- ------- ------- -------
100.00% 100.00% 100.00% 100.00%
------ ------ ------ ------
------ ------ ------ ------
_______________________________
(1) The weighted average rate on passbook savings accounts was 2.52%, 2.87%
and 2.84% at March 31,1996, and at June 30,1995 and 1994, respectively.
(2) The weighted average interest rate on NOW and money market accounts was
2.56%, 2.77% and 2.81 % at March 31,1996, and at June 30,1995 and 1994,
respectively.
(3) The weighted average rate on all certificates of deposit was 5.96%,
6.01 % and 4.91 % at March 31,1996, and at June 30,1995 and
1994, respectively.
</TABLE>
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 21
DEPOSIT AND BORROWED FUNDS ACTIVITY
FOR THE NINE MONTHS ENDED MARCH 31, 1995 AND 1996, AND
FOR THE YEARS ENDED JUNE 30,1993 THROUGH 1995
<TABLE>
<CAPTION>
DEPOSIT ACTIVITY
Nine months ended
March 31, Year ended June 30,
----------------- -----------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Beginning balance $27,737 $27,348 $27,348 $29,062 $27,617
Net increase (decrease) before interest
credited (1,124) ( 2,517) ( 920) ( 3,011) ( 54)
Interest credited 1,167 946 1,309 1,297 1,499
------- ------- ------- ------- -------
Ending balance 27,780 25,777 27,737 27,348 29,062
------- ------- ------- ------- -------
Net increase (decrease) $ 43 $(1,571) $ 389 $(1,714) $ 1,445
------- ------- ------- ------- -------
------- ------- ------- ------- -------
BORROWED FUNDS ACTIVITY
Nine months ended
March 31, Year ended June 30,
----------------- ------------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Average balance outstanding $ 931 $ 995 $1,046 $ 815 -
Maximum amount outstanding at any 1,186 1,213 1,213 1,000 -
month end during the period
Balance outstanding at end of period 842 1,208 1,192 955 -
Weighted average interest rate during the period 6.02% 5.36% 5.64% 5.16% -
Weighted average interest rate at end of period 5.51% 5.84% 5.85% 5.50% -
</TABLE>
Source: Foundation Bancorp Inc.'s Prospectus
<PAGE>
EXHIBIT 22
LIST OF KEY OFFICERS AND DIRECTORS
AT MARCH 31, 1996
Year of
Term commencement
Name expires Age (1) Position of directorship
- ---- ------- ------- -------- ---------------
Mardelle Dickhaut 1996 63 Director and Secretary 1989
Ruth C. Emden 1997 69 Director 1994
Laird L. Lazelle 1997 57 Director and President 1994
Robert E. Levitch 1998 62 Director 1963
Margo Liebert - 52 Treasure -
Dianne K. Rabe - 44 Vice President -
Michael S. Schwartz 1998 51 Chairman of the Board 1963
Paul L. Silverglade 1996 70 Director 1988
Ivan J. Silverman 1997 55 Director 1992
- ----------------------------
(1) As of March 31, 1996.
Source: Foundation Bancorp, Inc.'s Prospectus
<PAGE>
EXHIBIT 23
KEY DEMOGRAPHIC DATA AND TRENDS
CINCINNATI, HAMILTON COUNTY, OHIO AND THE UNITED STATES
1990, 1995, 2000
<TABLE>
<CAPTION>
Population (000) 1990 1995 % Change 2000 % Change
- --------------- ---- ---- -------- ---- --------
<S> <C> <C> <C> <C> <C>
Cincinnati $ 364,040 $ 351,298 -3.5% $ 337,598 -3.9%
Hamilton County 866,288 866,222 0.0% 866,216 0.0%
Ohio 10,847,115 11,151,720 2.8% 11,457,175 2.7%
United States 248,709,873 263,006,245 5.7% 277,083,635 5.4%
Households (000)
- ---------------
Cincinnati $ 145,616 $ 140,519 -3.5% $ 135,039 -3.9%
Hamilton County 338,881 338,749 0.0% 338,595 0.0%
Ohio 4,087,546 4,198,418 2.7% 4,311,607 2.7%
United States 91,947,410 97,069,804 5.6% 102,201,641 5.3%
Per Capita Income ($)
- --------------------
Cincinnati $ 15,189 $ 19,246 26.7% - -
Hamilton County 15,354 18,004 17.3% - -
Ohio 12,788 15,708 22.8% - -
United States 12,313 16,405 33.2% - -
Median Household Income ($)
- --------------------------
Cincinnati $ 28,756 $ 35,264 22.6% $ 34,278 -2.8%
Hamilton County 29,498 34,401 16.6% 32,443 -5.7%
Ohio 29,276 33,038 12.9% 32,477 -1.7%
United States 28,255 33,610 19.0% 32,972 -1.9%
</TABLE>
Source: Data Users Center and CACI.
<PAGE>
EXHIBIT 24
MAJOR SOURCES OF PERSONAL INCOME BY INDUSTRY GROUP
HAMILTON COUNTY, OHIO AND THE UNITED STATES
1993
Hamilton
Industry Group County Ohio United States
- -------------- ------ ---- -------------
Agriculture/Mining 0.4% 1.0% 1.6%
Construction 4.4 5.1 5.4
Manufacturing 30.3 34.8 24.8
Transportation/Utilities 6.6 6.3 7.7
Wholesale/Retail 22.2 19.3 19.8
Finance, Insurance, Real Estate 7.6 7.0 9.7
Services 28.5 26.5 31.0
Source: Bureau of the Census County Business Patterns
<PAGE>
EXHIBIT 25
KEY HOUSING DATA
CINCINNATI, HAMILTON COUNTY, OHIO AND THE UNITED STATES
1990
Occupied Housing Units 1990
---------------------- ----
Cincinnati 140,519
Hamilton County 338,881
Ohio 4,087,546
United States 91,947,410
Occupancy
---------
Cincinnati
Owner-Occupied 55.9%
Renter-Occupied 44.1%
Hamilton County
Owner-Occupied 58.3%
Renter-Occupied 41.7%
Ohio
Owner-Occupied 67.5%
Renter-Occupied 32.5%
United States
Owner-Occupied 64.2%
Renter-Occupied 35.8%
Median Housing Values
---------------------
Cincinnati $74,330
Hamilton County 72,243
Ohio 63,457
United States 79,098
Median Rent
-----------
Cincinnati $326
Hamilton County 304
Ohio 296
United States 374
Source: U.S. Department of Commerce and CACI Sourcebook.
<PAGE>
EXHIBIT 26
NEW HOUSING PERMITS AND GROWTH RATES
UNITED STATES, OHIO AND HAMILTON COUNTY
1991-1994
New Housing Permits
1-4 Family Dwellings
<TABLE>
<CAPTION>
% Change % Change % Change
1991 1992 1991-1992 1993 1992-1993 1994 1993-1994
---- ---- --------- ---- --------- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
United States 796,647 956,494 20.1% 1,038,907 8.6% 1,130,657 8.8%
Ohio 29,542 34,361 16.3% 37,477 9.1% 39,443 5.2%
Hamilton County 1,713 2,096 22.4% 1,924 -8.2% 1,676 -12.9%
</TABLE>
Source: Bureau of the Census
<PAGE>
EXHIBIT 27
UNEMPLOYMENT RATES
HAMILTON COUNTY, OHIO AND THE UNITED STATES
1990, 1993 AND 1996
Location 1990 1993 1996*
-------- ---- ---- -----
Hamilton County 4.2% 5.5% 4.1%
Ohio 5.7% 6.5% 5.5%
United States 5.5% 6.8% 6.0%
* February, 1996
Source: Ohio Bureau of Employment Services
<PAGE>
EXHIBIT 28
MARKET SHARE OF DEPOSITS
HAMILTON COUNTY
Foundation Foundation
Hamilton County Savings Bank's Savings Bank's
Deposits Share Share
(000) (000) (%)
--------------- ------------ -------------
Banks $12,423,808 --- ---
Thrifts $ 2,970,477 $27,737 0.9%
Credit Unions $ 865,203 --- ---
----------- ---------- ----------
Total $16,259,488 $27,737 0.2%
Source: Sheshunoff
<PAGE>
EXHIBIT 29
NATIONAL INTEREST RATES BY QUARTER
1992-1996
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1992 1992 1992 1992
------ ------ ------ ------
Prime Rate 6.50% 6.50% 6.00% 6.00%
90-Day Treasury Bills 4.14% 3.63% 2.73% 3.13%
1-Year Treasury Bills 4.49% 4.03% 3.04% 3.57%
30-Year Treasury Bills 7.98% 7.78% 7.67% 7.39%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1993 1993 1993 1993
------ ------ ------ ------
Prime Rate 6.00% 6.00% 6.00% 6.00%
90-Day Treasury Bills 2.93% 3.07% 2.96% 3.05%
1-Year Treasury Bills 3.27% 3.43% 3.35% 3.58%
30-Year Treasury Bills 6.92% 6.67% 6.03% 6.35%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1994 1994 1994 1994
------ ------ ------ ------
Prime Rate 6.25% 7.25% 7.75% 8.50%
90-Day Treasury Bills 3.54% 4.23% 5.14% 5.66%
1-Year Treasury Bills 4.40% 5.49% 6.13% 7.15%
30-Year Treasury Bills 7.11% 7.43% 7.82% 7.88%
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
1995 1995 1995 1995
------ ------ ------ ------
Prime Rate 9.00% 9.00% 8.75% 8.50%
90-Day Treasury Bills 5.66% 5.58% 5.40% 5.06%
1-Year Treasury Bills 6.51% 5.62% 5.45% 5.14%
30-Year Treasury Bills 7.43% 6.71% 5.69% 5.97%
1st Qtr.
1996
------
Prime Rate 8.25%
90-Day Treasury Bills 5.18%
1-Year Treasury Bills 5.43%
30-Year Treasury Bills 6.73%
Source: The Wall Street Journal
<PAGE>
KELLER & COMPANY PAGE 1
Columbus, Ohio
614-766-1426
EXHIBIT 30
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
PLE Pinnacle Bank AL AMSE 15.750 19.250 4.000 (8.03) (13.70)
SRN Southern BancCompany, Inc AL AMSE 13.000 13.125 11.375 8.33 4.00
SZB SouthFirst Bancshares, Inc. AL AMSE 11.500 16.000 10.625 (3.16) (8.00)
VAFD Valley Federal Savings Bank AL NASDAQ 30.500 35.250 8.500 (7.58) (12.86)
FFBH First Federal Bancshares of AR AR NASDAQ 13.250 13.500 13.000 NA NA
FTF Texarkana First Financial Corp AR AMSE 15.625 15.875 10.000 4.17 9.65
AHM Ahmanson & Company (H.F.) CA NYSE 24.625 28.625 2.688 5.35 4.23
AFFFZ America First Financial Fund CA NASDAQ 27.750 29.750 14.500 0.00 (1.77)
BVFS Bay View Capital Corp. CA NASDAQ 34.000 35.000 11.250 2.26 10.12
BYFC Broadway Financial Corp. CA NASDAQ 10.000 11.000 10.000 (3.61) (3.61)
CAL Cal Fed Bancorp, Inc. CA NYSE 18.000 200.000 6.250 2.86 18.03
CFHC Califbmia Financial Holding CA NASDAQ 21.125 21.875 5.909 (2.87) 6.64
CENF CENFED Financial Corp. CA NASDAQ 21.750 23.409 5.000 (7.09) 1.81
CSA Coast Savings Fin.incial CA NYSE 32.000 34.625 1.625 5.35 14.29
DSL Downey Financial Corp. CA NYSE 22.000 26.190 2.081 (3.30) 0.00
FIDF Fidelity Federal Bank, FSB CA NASDAQ 9.000 14.000 5.000 0.00 2.27
FSSB First FS&LA of San Bernardino CA NASDAQ 10.000 14.500 6.875 (13.04) (13.04)
FED FirstFed Financial Corp. CA NYSE 16.625 26.600 1.125 6.40 10.83
GLN Glendale Federal Bank, FSB CA NYSE 17.625 89.500 5.250 0.00 6.02
GDW Golden West Financial CA NYSE 54.625 55.875 3.875 6.07 3.31
GWF Great Western Financial CA NYSE 23.125 27.125 3.950 (1.60) (1.07)
HTHR Hawthorne Financial Corp. CA NASDAQ 7.000 35.500 2.250 38.34 33.33
HEMT HF Bancorp, Inc. CA NASDAQ 9.875 10.250 8.188 6.76 (3.66)
HBNK Highland Federal Bank FSB CA NASDAQ 16.125 17.000 11.000 (0.77) (0.77)
HFSF Home Federal Financial Corp. CA NASDAQ 18.250 19.000 4.388 1.39 4.29
MBBC Monterey Bay Bancorp, Inc. CA NASDAQ 12.000 13.063 8.750 (2.04) 2.13
NHSL NHS Financial, Inc. CA NASDAQ 9.500 11.087 3.696 8.57 2.70
PSSB Palm Springs Savings Bank CA NASDAQ 13.690 14.000 4.500 36.90 31.95
PFFB PFF Bancorp, Inc. CA NASDAQ 11.000 11.750 10.810 (2.74) NA
QCBC Quaker City Bancorp, Inc. CA NASDAQ 14.375 14.750 7.500 2.68 11.65
REDF RedFed Bancorp Inc. CA NASDAQ 9.750 14.500 7.750 13.04 2.63
SGVB SGV Bancorp, Inc. CA NASDAQ 8.875 10.125 8.000 1.43 (2.74)
WES Westcorp CA NYSE 19.250 23.000 3.888 0.00 2.67
FFBA First Colorado Bancorp, Inc. CO NASDAQ 12.750 13.197 3.189 5.15 7.37
<CAPTION>
PER SHARE PRICING RATIOS
------------------------------- --------------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earnings Bk. Value Assets Earnings
($) ($) ($) (X) (%) (%) (X)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
PLE Pinnacle Bank 16.84 218.37 0.72 9.49 93.53 7.21 10.29
SRN Southern BancCompany, Inc 15.52 76.13 NA NA 83.76 17.08 NA
SZB SouthFirst Bancshares, Inc. 17.44 99.37 NA NA 65.94 11.57 NA
VAFD Valley Federal Savings Bank 27.49 335.25 0.60 24.80 110.95 9.10 24.60
FFBH First Federal Bancshares of AR NA NA NA NA NA NA NA
FTF Texarkana First Financial Corp 16.98 82.36 NA NA 92.02 18.97 NA
AHM Ahmanson & Company (H.F.) 20.40 442.46 0.88 7.44 120.71 5.57 36.75
AFFFZ America First Financial Fund 25.52 388.17 1.60 9.60 108.74 7.15 9.67
BVFS Bay View Capital Corp. 29.46 421.76 0.60 NM 115.41 8.06 31.48
BYFC Broadway Financial Corp. NA NA NA NA NA NA NA
CAL Cal Fed Bancorp, Inc. 13.08 289.58 0.00 10.91 137.61 6.22 11.69
CFHC Califbmia Financial Holding 18.44 273.71 0.44 27.80 114.56 7.72 32.01
CENF CENFED Financial Corp. 21.02 420.07 0.33 11.27 103.47 5.18 16.11
CSA Coast Savings Fin.incial 22.89 443.40 0.00 15.69 139.80 7.22 18.08
DSL Downey Financial Corp. 22.83 274.12 0.46 13.02 96.36 8.03 14.67
FIDF Fidelity Federal Bank, FSB 9.59 179.78 0.00 NM 93.85 5.01 NM
FSSB First FS&LA of San Bernardino 17.75 314.62 0.00 NM 56.34 3.18 NM
FED FirstFed Financial Corp. 18.38 392.10 0.00 23.09 90.45 4.24 25.19
GLN Glendale Federal Bank, FSB 14.80 325.92 0.00 70.50 119.09 5.41 20.26
GDW Golden West Financial 39.79 597.27 0.36 12.39 137.28 9.15 12.53
GWF Great Western Financial 18.42 318.96 0.92 12.17 125.54 7.25 13.29
HTHR Hawthorne Financial Corp. 11.26 297.43 0.00 NM 62.17 2.35 NM
HEMT HF Bancorp, Inc. 13.45 117.61 NA NA 73.42 8.40 NA
HBNK Highland Federal Bank FSB 15.08 192.47 0.00 25.20 106.93 8.38 25.20
HFSF Home Federal Financial Corp. 14.84 195.51 0.24 27.24 122.98 9.33 48.03
MBBC Monterey Bay Bancorp, Inc. 15.15 96.59 NA NA 79.21 12.42 NA
NHSL NHS Financial, Inc. 9.78 115.99 0.16 47.50 97.14 8.19 47.50
PSSB Palm Springs Savings Bank 10.34 169.85 0.12 13.04 132.40 8.06 24.45
PFFB PFF Bancorp, Inc. 14.57 101.23 NA NA 75.50 10.87 NA
QCBC Quaker City Bancorp, Inc. 17.43 176.44 0.00 17.11 82.47 8.15 17.97
REDF RedFed Bancorp Inc. 11.83 214.43 0.00 NM 82.42 4.55 NM
SGVB SGV Bancorp, Inc. 11.94 122.11 NA NA 74.33 7.27 NA
WES Westcorp 12.37 125.03 0.37 13.01 155.62 15 40 28.73
FFBA First Colorado Bancorp, Inc. 12.02 74.27 NA NA 106.07 17.17 NA
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 2
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
MORG Morgan Financial Corp. CO NASDAQ 11.000 12.500 6.750 (10.20) (12.00)
EGFC Eagle Financial Corp. CT NASDAQ 23.500 27.750 6.198 1.08 (3.09)
FFES First Federal of East Hartford CT NASDAQ 17.250 21.500 4.000 (5.48) (13.75)
NTMG Nutmeg Federal S&LA CT NASDAQ 6.750 7.750 4.645 (12.90) (3.57)
WBST Webster Financial Corporation CT NASDAQ 27.250 30.500 3.864 (2.68) (7.63)
IFSB Independence Federal Savings DC NASDAQ 7.375 10.250 0.250 (7.81) (9.23)
BANC BankAtlantic Bancorp, Inc. FL NASDAQ 15.500 16.000 0.278 (1.59) 11.71
BKUNA BankUnitedFinancial Corp. FL NASDAQ 7.940 12.750 2.320 5.87 11.44
FFFG F.F.O. Financial Group, Inc. FL NASDAQ 2.625 10.000 0.563 0.00 (4.55)
FFLC FFLC Bancorp, Inc. FL NASDAQ 18.125 20.250 12.750 3.57 4.32
FFML First Family Financial Corp. FL NASDAQ 21.000 23.000 5.000 (3.45) (3.45)
FPRY First Financial Bancorp FL NASDAQ 20.625 21.125 4.132 (0.60) 0.61
FFPB First Palm Beach Bancorp, Inc. FL NASDAQ 22.125 24.875 14.000 (3.80) 2.31
FFPC Florida First Bancorp, Inc. FL NASDAQ 9.875 9.875 0.750 29.51 25.40
HOFL Home Financial Corp. FL NASDAQ 13.625 16.250 5.803 (3.09) (6.84)
SCSL Suncoast Savings and Loan FL NASDAQ 6.125 10.682 1.250 (2.00) (5.77)
CCFH CCF Holding Company GA NASDAQ 11.500 12.750 10.750 (4.17) (6.12)
EBSI Eagle Bancshares GA NASDAQ 16.000 19.000 1.875 1.59 0.00
FGHC First Georgia Holding, Inc. GA NASDAQ 7.000 7.833 1.222 0.00 (8.70)
FLFC First Liberty Financial Corp. GA NASDAQ 21.875 25.000 4.000 4.17 (0.57)
FLAG FLAG Financial Corp. GA NASDAQ 13.500 15.000 3.200 0.00 3.85
NFSL Newnan Savings Bank, FSB GA NASDAQ 19.000 19.000 2.955 7.04 18.75
CASH First Midwest Financial, Inc. IA NASDAQ 24.250 24.250 13.250 4.30 8.99
GFSB GFS Bancorp, Inc. IA NASDAQ 20.750 20.750 11.000 0.61 5.06
HZFS Horizon Financial Svcs Corp. IA NASDAQ 15.625 16.375 10.375 (0.79) 1.63
MFCX Marshalltown Financial Corp. IA NASDAQ 16.500 16.750 8.500 1.54 4.76
MIFC Mid-Iowa Financial Corp. IA NASDAQ 6.500 7.875 2.474 (10.34) (7.14)
MWBI Midwest Bancshares, Inc. IA NASDAQ 26.500 27.125 11.750 0.95 1.92
FFFD North Central Bancshares, Inc. IA NASDAQ 10.625 12.683 8.071 4.94 (1.97)
PMFI Perpetual Midwest Financial IA NASDAQ 17.625 17.750 10.000 0.71 6.82
SFFC StateFed Financial Corporation IA NASDAQ 16.500 19.750 10.500 (2.94) (4.35)
AVND Avondale Financial Corp. IL NASDAQ 13.500 15.250 11.500 (3.57) (9.24)
BABC Barrington Bancorp, Inc. IL NASDAQ 24.500 25.500 12.375 6.52 8.89
BELL Bell Bancorp IL NASDAQ 37.125 37.500 14.125 0.34 2.41
<CAPTION>
PER SHARE PRICING RATIOS
------------------------------- --------------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earnings Bk. Value Assets Earnings
($) ($) ($) (X) (%) (%) (X)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
MORG Morgan Financial Corp. 12.61 86.05 0.77 13.75 87.23 12.78 14.29
EGFC Eagle Financial Corp. 21.37 288.18 0.84 9.92 109.97 8.15 10.49
FFES First Federal of East Hartford 22.30 359.89 0.57 8.85 77.35 4.79 8.98
NTMG Nutmeg Federal S&LA 6.99 121.08 0.00 12.27 96.57 5.57 19.29
WBST Webster Financial Corporation 24.27 470.54 0.64 11.65 112.28 5.79 11.08
IFSB Independence Federal Savings 13.37 206.46 0.20 6.64 55.16 3.57 13.66
BANC BankAtlantic Bancorp, Inc. 11.65 139.90 0.17 10.20 133.05 11.08 13.03
BKUNA BankUnitedFinancial Corp. 7.93 129.72 0.00 6.56 100.13 6.12 NM
FFFG F.F.O. Financial Group, Inc. 2.24 35.76 0.00 13.13 117.19 7.34 15.44
FFLC FFLC Bancorp, Inc. 21.26 125.27 0.32 15.90 85.25 14.47 15.76
FFML First Family Financial Corp. 15.77 281.19 0.16 8.94 133.16 7.47 15.11
FPRY First Financial Bancorp 17.47 267.76 0.54 13.14 118.06 7.70 15.51
FFPB First Palm Beach Bancorp, Inc. 21.60 282.86 0.30 12.94 102.43 7.82 13.09
FFPC Florida First Bancorp, Inc. 6.24 90.11 0.18 12.99 158.25 10.96 14.31
HOFL Home Financial Corp. 13.32 49.55 0.68 15.31 102.29 27.50 16.03
SCSL Suncoast Savings and Loan 6.73 187.01 0.00 NA 91.01 3.28 NA
CCFH CCF Holding Company 15.36 71.12 NA NA 74.87 16.17 NA
EBSI Eagle Bancshares 11.91 179.11 0.51 10.46 134.34 8.93 10.81
FGHC First Georgia Holding, Inc. 5.86 70.23 0.07 12.50 119.45 9.97 13.46
FLFC First Liberty Financial Corp. 16.49 233.39 0.46 10.72 132.66 9.37 13.34
FLAG FLAG Financial Corp. 9.53 121.14 0.30 14.52 141.66 11.14 15.34
NFSL Newnan Savings Bank, FSB 12.86 111.04 0.31 9.05 147.74 17.11 10.33
CASH First Midwest Financial, Inc. 21.72 173.07 0.37 12.31 111.65 14.01 15.45
GFSB GFS Bancorp, Inc. 18.92 157.23 0.30 13.30 109.67 13.20 13.56
HZFS Horizon Financial Svcs Corp. 18.80 155.07 0.32 14.88 83.11 10.08 16.11
MFCX Marshalltown Financial Corp. 13.71 89.43 0.00 61.11 120.35 18.45 61.11
MIFC Mid-Iowa Financial Corp. 6.23 69.02 0.08 12.26 104.33 9.42 12.26
MWBI Midwest Bancshares, Inc. 26.58 383.24 0.51 7.82 99.70 6.91 11.23
FFFD North Central Bancshares, Inc. NA NA NA NA NA NA NA
PMFI Perpetual Midwest Financial 17.86 185.44 0.15 23.82 98.68 9.50 23.82
SFFC StateFed Financial Corporation 18.12 90.08 0.40 15.87 91.06 18.32 15.87
AVND Avondale Financial Corp. 16.21 144.41 NA NA 83.28 9.35 NA
BABC Barrington Bancorp, Inc. 17.49 106 17 0.28 42.98 140.08 23.08 43.75
BELL Bell Bancorp 33.38 210.48 0.41 29.46 111 22 17.64 30.94
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 3
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
CBCl CaIumet Bancorp, Inc. IL NASDAQ 28.000 28.500 10.333 0.00 0.90
CBSB Charter Financial, Inc. IL NASDAQ 11.375 12.250 6.361 (3.19) (2.69)
CBK Citizens First Financial Corp. IL AMSE 10.125 10.500 10.000 NA NA
CSBF CSB Financial Group, Inc. IL NASDAQ 9.000 9.625 8.810 (1.37) (1.37)
DFIN Damen Financial Corp. IL NASDAQ 11.560 11.940 11.000 (1.62) 0.00
FBCI FidelityBancorp, Inc. IL NASDAQ 16.310 16.375 9.500 6.95 5.23
FNSC Financial SecurityCorp. IL NASDAQ 25.875 26.500 11.875 4.55 17.61
FFBI First Financial Bancorp, Inc. IL NASDAQ 15.500 16.250 9.000 0.00 0.00
FMBD First Mutual Bancorp, Inc. IL NASDAQ 12.000 14.750 11.125 (3.03) (8.57)
FFDP FirstFed Bancshares IL NASDAQ 22.750 22.750 12.000 5.20 7.06
GTPS Great American Bancorp IL NASDAQ 13.750 15.125 11.875 (1.79) (6.78)
HNFC Hinsdale Financial Corp. IL NASDAQ 21.000 23.000 9.000 (2.33) (2.33)
HMCI HomeCorp, Inc. IL NASDAQ 17.500 18.500 5.000 (1.41) 2.94
KNK Kankakee Bancorp, Inc. IL AMSE 19.375 21.000 13.625 (4.91) (1.90)
LBCI Liberty Bancorp, Inc. IL NASDAQ 23.000 30.625 12.750 (6.12) (8.46)
MAFB MAF Bancorp, Inc. IL NASDAQ 26.310 26.810 2.727 1.19 5.24
NSBI N.S. Bancorp, Inc. IL NASDAQ 41.375 41.500 7.875 2.64 5.75
NBSI North Bancshares, Inc. IL NASDAQ 15.875 16.250 11.000 2.42 12.39
SWBl Southwest Bancshares IL NASDAQ 27.000 28.250 11.750 (0.46) 1.89
SPBC St. Paul Bancorp, Inc. IL NASDAQ 23.750 26.625 3.833 0.00 (3.06)
STND Standard Financial, Inc. IL NASDAQ 15.375 15.375 9.125 5.13 4.24
SFSB SuburbFed Financial Corp. IL NASDAQ 16.750 18.167 6.667 0.00 4.69
WCBI Westco Bancorp IL NASDAQ 29.500 29.500 11.500 5.36 7.27
FBCV 1ST Bancorp IN NASDAQ 28.000 34.286 4.190 (8.20) (5.88)
AMFC AMB Financial Corp. IN NASDAQ 9.750 11.000 9.750 (7.14) NA
ASBl Ameriana Bancorp IN NASDAQ 13.125 14.438 2.750 (7.89) (4.11)
ATSB AmTrust Capital Corp. IN NASDAQ 10.000 11.250 7.750 0.00 (4.76)
CBCO CB Bancorp, Inc. IN NASDAQ 16.750 19.250 7.125 (2.90) (12.42)
CBIN Community Bank Shares IN NASDAQ 13.750 14.750 12.000 (2.65) (3.51)
FFWC FFWCorp. IN NASDAQ 19.375 19.750 12.500 13.97 1.97
FFED Fidelity Federal Bancorp IN NASDAQ 12.375 14.773 1.534 4.71 (8.71)
FISB First Indiana Corporation IN NASDAQ 24.500 25.190 1.797 4.81 9.39
HBFW Home Bancorp IN NASDAQ 14.750 16.000 125.000 3.51 0.00
HBBl Home Building Bancorp IN NASDAQ 16.500 17.500 10.000 0.76 0.00
<CAPTION>
PER SHARE PRICING RATIOS
------------------------------- --------------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earnings Bk. Value Assets Earnings
($) ($) ($) (X) (%) (%) (X)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
CBCl CaIumet Bancorp, Inc. 31.99 188.32 0.00 13.27 87.53 14.87 13.33
CBSB Charter Financial, Inc. 12.88 59.73 NA NA 88.32 19.04 NA
CBK Citizens First Financial Corp. NA NA NA NA NA NA NA
CSBF CSB Financial Group, Inc. 12.30 39.84 NA NA 73.17 22.59 NA
DFIN Damen Financial Corp. 14.34 59.31 NA NA 80.61 19.49 NA
FBCI FidelityBancorp, Inc. 16.91 140.37 0.20 17.17 96.45 11.62 18.53
FNSC Financial SecurityCorp. 25.85 179.87 0.00 18.89 100.10 14.39 20.54
FFBI First Financial Bancorp, Inc. 16.67 187.79 0.00 13.72 92.98 8.25 16.67
FMBD First Mutual Bancorp, Inc. 16.55 65.55 NA NA 72.51 18.31 NA
FFDP FirstFed Bancshares 24.92 276.32 0.40 15.69 91.29 8.23 26.45
GTPS Great American Bancorp 18.11 61.56 NA NA 75.92 22.34 NA
HNFC Hinsdale Financial Corp. 20.20 253.53 0.00 13.73 103.96 8.28 15.44
HMCI HomeCorp, Inc. 18.40 303.40 0.00 16.51 95.11 5.77 23.65
KNK Kankakee Bancorp, Inc. 24.72 252.33 0.40 18.11 78.38 7.68 18.45
LBCI Liberty Bancorp, Inc. 25.66 269.38 0.60 17.83 89.63 8.54 17.69
MAFB MAF Bancorp, Inc. 20.91 377.58 0.31 9.36 125.82 6.97 9.17
NSBI N.S. Bancorp, Inc. 38.31 187.84 0.32 12.54 108.00 22.03 15.05
NBSI North Bancshares, Inc. 16.91 97.54 0.10 30.53 93.88 16.28 33.07
SWBl Southwest Bancshares 22.42 186.79 1 04 14.06 120.43 14.45 14.14
SPBC St. Paul Bancorp, Inc. 20.64 223.34 0.33 12.91 115.07 10.63 13.19
STND Standard Financial, Inc. 16.05 130.43 0.08 14.78 95.79 11.79 16.53
SFSB SuburbFed Financial Corp. 20.53 287.34 0.32 12.59 81.59 5.83 14.82
WCBI Westco Bancorp 27.10 173.22 0.64 14.25 108.86 17.03 14.25
FBCV 1ST Bancorp 32.33 410.07 0.34 2.86 86.61 6.83 NM
AMFC AMB Financial Corp. NA NA NA NA NA NA NA
ASBl Ameriana Bancorp 13.41 115.20 0.51 13.67 97.87 11.39 14.27
ATSB AmTrust Capital Corp. 13.32 128.88 0.00 27.78 75.08 7.76 111.11
CBCO CB Bancorp, Inc. 15.79 172.38 0.00 8.63 106.08 9.72 8.63
CBIN Community Bank Shares 12.78 108.75 NA NA 107.59 12.64 NA
FFWC FFWCorp. 21.76 201.43 0.48 11.40 89.04 9.62 10.25
FFED Fidelity Federal Bancorp 5.70 112.36 0.70 9.82 217.11 11.01 10.49
FISB First Indiana Corporation 15.97 178.41 0.49 12.01 153.41 13.73 14.16
HBFW Home Bancorp 16.60 101.07 0.00 17.56 88.86 14.59 17.56
HBBl Home Building Bancorp 20.04 131 70 0.23 25.38 82.34 12.53 25.78
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 4
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
HOMF Home Federal Bancorp IN NASDAQ 26.000 27.750 3.222 4.00 1.96
INCB Indiana Community Bank, SB IN NASDAQ 15.750 16.250 11.000 5.00 3.28
IFSL Indiana Federal Corporation IN NASDAQ 18.250 21.250 4.000 2.82 (14.12)
LOGN Logansport Financial Corp. IN NASDAQ 12.875 13.250 11.250 (1.90) (0.96)
MARN Marion Capital Holdings IN NASDAQ 20.750 20.750 14.250 1.22 2.47
MFBC MFBCorp. IN NASDAQ 14.250 16.250 10.500 0.00 1.79
NEIB Northeast Indiana Bancorp IN NASDAQ 12.000 13.500 11.250 (2.04) (4.00)
PFDC Peoples Bancorp IN NASDAQ 19.250 22.500 5.375 2.67 (3.75)
PERM Permanent Bancorp, Inc. IN NASDAQ 15.750 18.500 9.750 9.57 0.00
SOBI Sobieski Bancorp, Inc. IN NASDAQ 12.250 13.250 10.000 (5.77) (2.00)
WCHI Workingmens Capital Holdings IN NASDAQ 20.000 20.250 4.313 5.26 9.59
FFSL First Independence Corp. KS NASDAQ 18.000 19.250 10.875 (3.36) (2.70)
LARK Landmark Bancshares, Inc. KS NASDAQ 15.250 15.250 9.750 4.27 2.52
MCBS Mid Continent Bancshares Inc. KS NASDAQ 18.250 19.000 9.750 1.39 1.39
WBCI WFSBancorp,lnc. KS NASDAQ 22.750 22.750 11.000 0.55 1.11
CKFB CKF Bancorp, Inc. KY NASDAQ 19.500 20.250 11.375 0.00 (2.50)
CLAS Classic Bancshares, Inc. KY NASDAQ 11.250 11.750 10.500 3.45 (1.10)
FSBS First Ashland Financial Corp KY NASDAQ 18.250 18.375 12.500 0.69 23.73
FFKY First Federal Financial Corp. KY NASDAQ 37.500 39.250 6.125 2.74 4.17
FTSB Fort Thomas Financial Corp KY NASDAQ 17.000 17.000 11.250 27.10 37.37
FKKY Frankfort First Bancorp, Inc. KY NASDAQ 11.750 15.875 11.750 (18.97) (20.34)
GWBC Gateway Bancorp, Inc. KY NASDAQ 15.000 16.250 11.000 3.45 3.45
GTFN Great Financial Corporation KY NASDAQ 26.500 27.375 13.875 2.91 15.22
HFFB Harrodsburg First Fin Bancorp KY NASDAQ 14.750 15.500 12.375 7.27 9.26
KYF Kentucky First Bancorp, Inc KY AMSE 13.250 13.375 11.375 10.42 11.58
LFSB LFS Bancorp Inc. KY NASDAQ 19.125 20.875 12.750 0.66 1.32
CZF CitiSave Financial Corp LA AMSE 14.750 15.750 12.750 0.85 (0.84)
ISBF ISB Financial Corporation LA NASDAQ 15.560 17.000 12.938 (2.75) (4.25)
JEBC Jefferson Bancorp, Inc. LA NASDAQ 21.750 22.125 12.750 (1.14) 8.75
MERI Meritrust Federal SB LA NASDAQ 32.000 34.000 13.500 6.67 3.23
TSH Teche Holding Co. LA AMSE 13.250 14.500 11.375 3.92 (2.75)
AFCB Affiliated Community Bancorp MA NASDAQ 16.750 18.000 16.060 (0.36) (6.94)
BFD BostonFed Bancorp, Inc. MA AMSE 12.000 12.625 10.000 (1.03) 2.13
FMLY Family Bancorp MA NASDAQ 20.750 22.625 1.167 (1.19) 1.22
<CAPTION>
PER SHARE PRICING RATIOS
------------------------------- --------------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earnings Bk. Value Assets Earnings
($) ($) ($) (X) (%) (%) (X)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
HOMF Home Federal Bancorp 22.59 272.66 0.43 8.39 115.10 9.54 9.63
INCB Indiana Community Bank, SB 15.33 98.28 0.30 19.94 102.74 16.03 19.94
IFSL Indiana Federal Corporation 14.88 151.50 0.78 11.85 122.65 12.05 12.67
LOGN Logansport Financial Corp. 15.48 57.84 NA NA 83.17 22.26 NA
MARN Marion Capital Holdings 21.48 89.52 0.72 17.74 96.60 23.18 17.74
MFBC MFBCorp. 18.67 96.68 0.00 21.92 76.33 14.74 22.27
NEIB Northeast Indiana Bancorp 13.92 68.44 NA NA 86.21 17.53 NA
PFDC Peoples Bancorp 18.19 119.18 0.51 11.39 105.83 16.15 11.39
PERM Permanent Bancorp, Inc. 19.26 172.85 0.15 32.14 81.78 9.11 32.14
SOBI Sobieski Bancorp, Inc. 16.87 91.25 0.00 33.11 72.61 13.42 33.11
WCHI Workingmens Capital Holdings 14.55 118.84 0.34 18.35 137.46 16.83 18.52
FFSL First Independence Corp. 22.02 17,419.00 0.33 9.84 81.74 10.33 11.46
LARK Landmark Bancshares, Inc. 17.06 99.15 0.35 16.76 89.39 15.38 19.30
MCBS Mid Continent Bancshares Inc. 18.61 141.13 0.40 9.92 98.07 12.93 13.13
WBCI WFSBancorp,lnc. 21.69 176.65 0.40 27.08 104.89 12.88 19.12
CKFB CKF Bancorp, Inc. 17.43 61.11 NA NA 111.88 31.91 NA
CLAS Classic Bancshares, Inc. 14.76 51.26 NA NA 76.22 21.95 NA
FSBS First Ashland Financial Corp 16.87 64.04 NA NA 108.18 28.50 NA
FFKY First Federal Financial Corp. 23.39 166.54 0.90 14.31 160.32 22.52 16.45
FTSB Fort Thomas Financial Corp 14.02 56.22 NA NA 121.26 30.24 NA
FKKY Frankfort First Bancorp, Inc. 15.61 40.18 NA NA 75.27 29.24 NA
GWBC Gateway Bancorp, Inc. 16.00 61.19 NA NA 93.75 24.51 NA
GTFN Great Financial Corporation 19.19 169.06 0.42 17.10 138.09 15.67 20.87
HFFB Harrodsburg First Fin Bancorp 15.49 49.82 NA NA 95.22 29.61 NA
KYF Kentucky First Bancorp, Inc 14.29 60.48 NA NA 92.72 21.91 NA
LFSB LFS Bancorp Inc. 19.60 68.98 0.20 36.78 97.58 27.73 36.78
CZF CitiSave Financial Corp 16.26 82.63 NA NA 90.71 17.85 NA
ISBF ISB Financial Corporation 16.37 84.51 NA NA 95.05 18.41 NA
JEBC Jefferson Bancorp, Inc. 16.14 120.71 0.30 17.13 134.76 18.02 17.13
MERI Meritrust Federal SB 21.82 293.37 0.55 11.51 146.65 10.91 11.81
TSH Teche Holding Co. 14.59 77.61 NA NA 90.82 17.07 NA
AFCB Affiliated Community Bancorp 19.21 185.01 NA NA 87.19 9.05 NA
BFD BostonFed Bancorp, Inc. 14.92 102.85 NA NA 80.43 11.67 NA
FMLY Family Bancorp 16.84 217.12 0.40 10.64 123.22 9.56 11.93
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 5
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
ANBK American National Bancorp MD NASDAQ 9.875 10.250 4.639 1.28 (1.25)
EQSB Equitable Federal Savings Bank MD NASDAQ 22.500 24.500 11.250 0.00 0.00
FCIT First Citizens Financial Corp. MD NASDAQ 17.875 19.091 0.375 0.83 6.28
FFWM First FinanciaI-W. Maryland MD NASDAQ 19.375 27.250 7.167 9.15 0.65
HRBF Harbor Federal Bancorp, Inc. MD NASDAQ 12.875 15.500 9.750 (0.96) (3.74)
HFMD Home Federal Corp. MD NASDAQ 10.875 15.873 0.750 (1.14) 27.94
MFSL Maryland Federal Bancorp MD NASDAQ 29.250 34.125 4.545 (1.68) (9.65)
WSB Washington Savings Bank, FSB MD AMSE 5.500 6.917 0.281 4.76 10.00
WHGB WHG BancsharesCorp. MD NASDAQ 11.750 11.750 10.875 5.00 NA
MCBN Mid-Coast Bancorp, Inc. ME NASDAQ 19.375 20.250 8.095 0.00 (4.32)
BWFC Bank West Financial Corp. Ml NASDAQ 9.625 10.875 8.500 (2.53) (3.75)
CFSB CFSB Bancorp, Inc. Ml NASDAQ 20.310 24.000 3.486 (3.29) (12.65)
DNFC D & N Financial Corp. Ml NASDAQ 12.500 18.875 2.500 (1.96) (4.76)
MSBF MSB Financial, Inc. MI NASDAQ 17.000 19.500 10.750 6.25 (10.53)
MSBK Mutual Savings Bank, FSB Ml NASDAQ 5.625 25.500 3.000 2.27 (10.86)
OFCP Ottawa Financial Corp. Ml NASDAQ 16.250 16.750 10.250 0.00 0.78
SJSB SJS Bancorp Ml NASDAQ 20.000 20.250 10.810 8.11 1.91
SFB Standard Federal Bancorp Ml NYSE 40.125 43.125 4.750 (4.18) (2.73)
THR Three Rivers Financial Corp. Ml AMSE 13.000 13.500 11.375 (1.89) (2.80)
BDJI First Federal Bancorporation MN NASDAQ 13.000 14.750 10.625 (4.59) (5.45)
FFHH FSF Financial Corp. MN NASDAQ 12.375 13.500 7.750 (1.00) 0.00
HMNF HMN Financial, Inc. MN NASDAQ 15.560 16.125 9.313 3.73 1.20
MIVI Mississippi View Holding Co. MN NASDAQ 11.250 12.250 8.500 (2.17) (4.26)
QCFB QCF Bancorp, Inc. MN NASDAQ 14.000 15.125 11.000 (2.61) (5.08)
TCB TCF Financial Corp. MN NYSE 35.250 37.625 2.813 (1.05) (1.05)
WEFC Wells Financial Corp. MN NASDAQ 10.125 11.375 9.000 (3.57) (7.95)
CMRN Cameron Financial Corp MO NASDAQ 13.750 15.500 10.688 1.85 5.17
CAPS Capital Savings Bancorp, Inc. MO NASDAQ 19.060 19.500 12.250 2.34 2.34
FBSI First Bancshares, Inc. MO NASDAQ 16.250 17.000 10.250 1.56 (0.76)
GSBC Great Southern Bancorp, Inc. MO NASDAQ 25.750 27.250 2.292 (1.90) 7.38
HFSA Hardin Bancorp, Inc. MO NASDAQ 11.500 13.000 11.250 0.00 (4.17)
JSBA Jefferson Savings Bancorp MO NASDAQ 29.500 30.750 13.250 (0.84) 10.28
JOAC Joachim Bancorp, Inc. MO NASDAQ 12.250 13.500 11.500 1.03 0.00
MBLF MBLA Financial Corp. MO NASDAQ 24.750 26.000 12.750 12.50 17.86
<CAPTION>
PER SHARE PRICING RATIOS
------------------------------- --------------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earnings Bk. Value Assets Earnings
($) ($) ($) (X) (%) (%) (X)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
ANBK American National Bancorp 12.89 110.29 NA NA 76.61 8.95 NA
EQSB Equitable Federal Savings Bank 22.01 425.21 0.00 5.29 102.23 5.29 5.31
FCIT First Citizens Financial Corp. 13.35 210.00 0.00 13.75 133.90 8.51 15.28
FFWM First FinanciaI-W. Maryland 18.70 149.25 0.48 29.81 103.61 12.98 32.29
HRBF Harbor Federal Bancorp, Inc. 15.79 83.00 0.20 21.11 81.54 15.51 21.11
HFMD Home Federal Corp. 7.41 86.02 0.12 10.77 146.76 12.64 10.98
MFSL Maryland Federal Bancorp 29.84 363.00 0.58 10.60 98.02 8.06 14.85
WSB Washington Savings Bank, FSB 5.03 62.23 0.08 10.38 109.34 8.84 13.75
WHGB WHG BancsharesCorp. NA NA NA NA NA NA NA
MCBN Mid-Coast Bancorp, Inc. 21.23 242.18 0.47 11.89 91.26 8.00 12.66
BWFC Bank West Financial Corp. 11.99 60.63 0.21 21.39 80.28 15.87 37.02
CFSB CFSB Bancorp, Inc. 14.30 172.40 0.43 13.27 142.03 11.78 14.10
DNFC D & N Financial Corp. 10.16 180.39 0.00 7.40 123.03 6.93 8.33
MSBF MSB Financial, Inc. 18.86 83.33 0.30 10.97 90.14 20.40 12.06
MSBK Mutual Savings Bank, FSB 9.19 168.44 0.00 NM 61.21 3.34 NM
OFCP Ottawa Financial Corp. 14.92 136.66 0.32 21.67 108.91 11.89 21.96
SJSB SJS Bancorp 18.50 151.08 NA NA 108.11 13.24 NA
SFB Standard Federal Bancorp 30.02 431.63 0.72 10.56 133.66 9.30 11.66
THR Three Rivers Financial Corp. 15.17 99.04 NA NA 85.70 13.13 NA
BDJI First Federal Bancorporation 17.64 122.69 NA NA 73.70 10.60 NA
FFHH FSF Financial Corp. 15.24 84.61 0.50 24.75 81.20 14.63 24.75
HMNF HMN Financial, Inc. 17.54 104.63 0.00 13.19 88.71 14.87 14.82
MIVI Mississippi View Holding Co. 13.78 73.08 0.08 11.25 81.64 15.39 12.64
QCFB QCF Bancorp, Inc. 17.65 90.44 NA NA 79.32 15.48 NA
TCB TCF Financial Corp. 15.10 196.44 0.63 12.77 233.44 17.94 13.51
WEFC Wells Financial Corp. 13.41 89.68 NA NA 75.50 11.29 NA
CMRN Cameron Financial Corp 17.29 60.52 NA NA 79.53 22.72 NA
CAPS Capital Savings Bancorp, Inc. 20.34 194.94 0.33 10.53 93.71 9.78 10.53
FBSI First Bancshares, Inc. 18.26 107.92 0.20 18.06 88.99 15.06 18.26
GSBC Great Southern Bancorp, Inc. 14.21 142.44 0.65 11.76 181.21 18.08 12.44
HFSA Hardin Bancorp, Inc. 15.15 78.81 NA NA 75.91 14.59 NA
JSBA Jefferson Savings Bancorp 21.59 266.99 0.08 16.67 136.64 11.05 18.21
JOAC Joachim Bancorp, Inc. 14.08 47.91 NA NA 87.00 25.57 NA
MBLF MBLA Financial Corp. 20.68 142.21 0.40 25.78 119.68 17.40 25.78
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 6
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
MFSB Mutual Bancompany MO NASDAQ 21.000 21.750 10.000 0.00 23.53
NASB North American Savings Bank MO NASDAQ 31.000 32.375 2.500 1.64 0.81
NSLB NS&L Bancorp, Inc. MO NASDAQ 12.500 13.750 11.750 (2.91) (5.66)
PCBC Perry County Financial Corp. MO NASDAQ 17.375 21.500 12.375 2.21 (8.55)
RFED Roosevelt Financial Group MO NASDAQ 18.375 19.750 2.167 (3.29) (4.55)
SMFC Sho-Me Financial Corp. MO NASDAQ 15.750 16.250 9.375 8.62 3.28
SMBC Southern Missouri Bancorp, Inc MO NASDAQ 14.000 17.500 8.875 (2.61) (9.68)
CFTP Community Federal Bancorp MS NASDAQ 12.750 13.500 12.500 (1.92) NA
FFBS FFBS BanCorp, Inc. MS NASDAQ 20.500 21.500 12.000 5.13 17.14
MGNL Magna Bancorp, Inc. MS NASDAQ 34.750 36.250 1.688 14.88 13.93
GBCI GlacierBancorp, Inc. MT NASDAQ 22.000 22.273 1.495 10.00 21.00
SFBM Security Bancorp MT NASDAQ 20.250 23.250 4.250 (4.71) 0.00
UBMT United Savings Bank, F.A. MT NASDAQ 17.750 22.500 5.625 (4.05) (4.05)
WSTR WesterFed Financial Corp. MT NASDAQ 14.375 17.125 11.375 (0.45) (8.73)
COOP Cooperative Bankshares, Inc. NC NASDAQ 18.000 22.500 3.467 4.35 (2.70)
SOPN First Savings Bancorp, Inc. NC NASDAQ 18.750 21.000 13.500 5.63 (2.60)
GSFC Green Street Financial Corp. NC NASDAQ 12.440 12.875 12.125 1.55 NA
HFNC HFNC Financial Corp. NC NASDAQ 14.375 15.000 13.125 2.68 8.49
KSAV KS Bancorp, Inc. NC NASDAQ 18.250 22.000 11.625 1.39 (2.67)
PDB Piedmont Bancorp, Inc. NC AMSE 13.125 13.625 12.000 2.94 2.94
SSB Scotland Bancorp, Inc NC AMSE 12.000 12.625 11.625 (1.03) NA
SSM Stone Street Bancorp, Inc. NC AMSE 17.250 18.500 16.750 (2.13) NA
UFRM United Federal Savings Bank NC NASDAQ 7.875 8.750 1.750 (5.97) (1.56)
CFB Commercial Federal Corporation NE NYSE 38.375 38.875 1.625 0.33 (0.32)
EBCP Eastern Bancorp NH NASDAQ 23.500 27.500 4.500 (4.08) (5.05)
NHTB New Hampshire Thrift Bncshrs NH NASDAQ 9.625 13.000 1.750 (3.75) (4.94)
FBER 1st Bergen Bancorp NJ NASDAQ 9.375 10.000 9.310 (3.85) NA
CJFC Central Jersey Financial NJ NASDAQ 26.250 30.000 2.645 0.96 (11.76)
COFD Collective Bancorp, Inc. NJ NASDAQ 24.500 28.250 1.351 0.00 (4.63)
FSPG First Home Savings Bank, FSB NJ NASDAQ 18.250 19.000 2.531 2.82 2.82
FSFI First State Financial Services NJ NASDAQ 10.000 14.125 1.625 (16.67) (18.37)
FMCO FMS Financial Corporation NJ NASDAQ 17.000 17.500 1.500 7.94 3.03
IBSF IBS Financial Corp NJ NASDAQ 13.940 15.455 8.409 (1.31) (1.07)
LVSB Lakeview Financial NJ NASDAQ 18.250 19.750 8.068 (6.41) 1.39
<CAPTION>
PER SHARE PRICING RATIOS
------------------------------- --------------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earnings Bk. Value Assets Earnings
($) ($) ($) (X) (%) (%) (X)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
MFSB Mutual Bancompany 18.63 164.66 NA NA 112.72 12.75 NA
NASB North American Savings Bank 20.77 286.37 0.50 8.47 149.25 10.83 9.28
NSLB NS&L Bancorp, Inc. 16.17 66.03 NA NA 77.30 18.93 NA
PCBC Perry County Financial Corp. 18.83 90.28 NA NA 92.27 19.25 NA
RFED Roosevelt Financial Group 10 83 216.88 0.58 14.13 169.67 8.47 10.38
SMFC Sho-Me Financial Corp. 19.18 144.95 0.00 14.19 82.12 10.87 15.14
SMBC Southern Missouri Bancorp, Inc 15.41 92.54 0.50 21.21 90.85 15.13 21.88
CFTP Community Federal Bancorp NA NA NA NA NA NA NA
FFBS FFBS BanCorp, Inc. 16.43 78.55 1.40 19.16 124.77 26.10 19.16
MGNL Magna Bancorp, Inc. 18.12 185.48 0.45 11.47 191.78 18.74 12.41
GBCI GlacierBancorp, Inc. 11.41 118.53 0.56 12.50 192.81 18.56 12.50
SFBM Security Bancorp 21.70 246.47 0.64 12.50 93.32 8.22 15.34
UBMT United Savings Bank, F.A. 20.18 93.55 0.81 12.59 87.96 18.97 12.59
WSTR WesterFed Financial Corp. 17.77 133.82 0.30 14.97 80.89 10.74 16.15
COOP Cooperative Bankshares, Inc. 19.64 210.37 0.00 32.73 91.65 8.56 38.30
SOPN First Savings Bancorp, Inc. 17.94 68.45 0.68 19.74 104.52 27.39 19.33
GSFC Green Street Financial Corp. NA NA NA NA NA NA NA
HFNC HFNC Financial Corp. 14.16 53.88 NA NA 101.52 26.68 NA
KSAV KS Bancorp, Inc. 20.55 135.50 1.05 13.22 88.81 13.47 13.04
PDB Piedmont Bancorp, Inc. 14.05 47.20 NA NA 93.42 27.81 NA
SSB Scotland Bancorp, Inc NA NA NA NA NA NA NA
SSM Stone Street Bancorp, Inc. NA NA NA NA NA NA NA
UFRM United Federal Savings Bank 6.76 80.56 0.16 9.97 116.49 9.78 10.79
CFB Commercial Federal Corporation 26.57 439.20 0.30 10.23 144.43 8.74 10.29
EBCP Eastern Bancorp 26.48 344.02 0.57 11.69 88.75 6.83 14.33
NHTB New Hampshire Thrift Bncshrs 11.49 149.44 0.50 11.60 83.77 6.44 11.19
FBER 1st Bergen Bancorp NA NA NA NA NA NA NA
CJFC Central Jersey Financial 20.58 174.72 0.44 13.53 127.55 15.02 14.27
COFD Collective Bancorp, Inc. 17.47 247.88 0.80 9.39 140.24 9.88 9.61
FSPG First Home Savings Bank, FSB 14.97 229.73 0.48 8.41 121.91 7.94 8.82
FSFI First State Financial Services 11.06 153.56 0.22 8.77 90.42 6.51 10.53
FMCO FMS Financial Corporation 13.50 205.02 0.20 10.43 125.93 8.29 10.43
IBSF IBS Financial Corp 13.53 66.34 0.20 18.59 103.03 21.01 18.10
LVSB Lakeview Financial 20.40 183.63 0.23 6.84 89.46 9.94 14.84
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 7
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
LFBI Little Falls Bancorp, Inc. NJ NASDAQ 9.625 11.500 9.500 (6.10) (13.48)
PBCI Pamrapo Bancorp, Inc. NJ NASDAQ 19.250 26.125 2.563 (7.23) (14.44)
PFSB PennFed Financial Services,Inc NJ NASDAQ 15.375 15.875 9.063 5.13 (3.15)
PULS Pulse Bancorp NJ NASDAQ 16.000 17.750 4.000 2.40 (3.03)
SFIN Statewide Financial Corp. NJ NASDAQ 12.125 13.750 11.750 (5.83) (6.30)
FSBC First Savings Bank, FSB NM NASDAQ 6.500 10.417 1.750 1.96 4.00
GUPB GFSB Bancorp, Inc. NM NASDAQ 13.750 14.500 12.875 1.40 (5.17)
ALBK ALBANK Financial Corp NY NASDAQ 28.375 30.625 9.167 (5.42) 17.92
ALBC Albion Banc Corp. NY NASDAQ 16.750 18.750 10.500 (1.47) 0.75
ASFC Astoria Financial Corporation NY NASDAQ 52.375 53.875 25.375 8.98 6.08
BFSI BFS Bankorp, Inc. NY NASDAQ 38.750 38.750 2.500 6.90 4.73
CARV Carver Federal Savings Bank NY NASDAQ 8.000 10.750 6.250 (8.57) (4.48)
CONE Conestoga Bancorp, Inc. NY NASDAQ 20.875 21.125 10.000 0.00 1.21
FIBC Financial Bancorp, Inc. NY NASDAQ 13.125 14.875 8.500 1.94 0.96
HAVN Haven Bancorp, Inc. NY NASDAQ 27.625 27.625 10.000 15.10 21.43
LISB Long Island Bancorp, Inc. NY NASDAQ 27.375 28.875 12.090 0.00 4.29
NYB New York Bancorp Inc. NY NYSE 24.500 24.750 2.425 3.16 10.11
PEEK Peekskill Financial Corp. NY NASDAQ 11.500 12.125 11.125 2.22 0.52
PKPS Poughkeepsie Savings Bank, FS NY NASDAQ 5.000 26.750 0.875 (4.76) (9.09)
RELY Reliance Bancorp, Inc. NY NASDAQ 14.875 16.500 8.875 (2.46) 1.71
SFED SFS Bancorp, Inc. NY NASDAQ 12.000 13.500 11.000 (4.00) 0.00
TPNZ TappanZee Financial, Inc. NY NASDAQ 12.000 13.000 11.250 1.05 1.61
YFCB Yonkers Financial Corporation NY NASDAQ 10.000 10.125 9.690 NA NA
ASBP ASB Financial Corp. OH NASDAQ 14.125 16.500 11.375 (9.60) (7.38)
CAFI Camco Financial Corporation OH NASDAQ 19.250 19.500 12.857 4.05 4.05
COFI Charter One Financial OH NASDAQ 36.750 36.750 3.445 14.84 15.75
CRCL Circle Financial Corp. OH NASDAQ 35.125 35.125 10.500 31.31 30.09
CTZN CitFed Bancorp, Inc. OH NASDAQ 35.750 38.875 9.250 2.88 (1.38)
CIBI Community Investors Bancorp OH NASDAQ 15.250 17.500 10.750 (1.61) 5.17
EFBI Enterprise Federal Bancorp OH NASDAQ 14.250 18.000 11.250 0.00 (5.00)
FFDF FFD Financial Corp. OH NASDAQ 10.750 10.750 10.125 6.17 NA
FFYF FFY Financial Corp. OH NASDAQ 23.125 23.375 12.250 (0.54) 6.94
FFOH Fidelity Financial of Ohio OH NASDAQ 10.000 10.890 3.112 (0.60) (8.17)
FDEF First Defiance Financial OH NASDAQ 10.625 11.000 5.790 1.19 0.00
<CAPTION>
PER SHARE PRICING RATIOS
------------------------------- --------------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earnings Bk. Value Assets Earnings
($) ($) ($) (X) (%) (%) (X)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
LFBI Little Falls Bancorp, Inc. 14.26 93.85 NA NA 67.50 10.26 NA
PBCI Pamrapo Bancorp, Inc. 17.21 111.05 0.85 12.50 111.85 17.33 12.50
PFSB PennFed Financial Services,Inc 19.69 201.44 0.00 11.92 78.09 7.63 11.06
PULS Pulse Bancorp 13.84 116.42 0.75 12.03 115.61 13.74 11.94
SFIN Statewide Financial Corp. 13.72 106.09 NA NA 88.37 11.43 NA
FSBC First Savings Bank, FSB 8.08 168.13 0.00 11.02 80.45 3.87 13.54
GUPB GFSB Bancorp, Inc. 17.06 70.43 NA NA 80.60 19.52 NA
ALBK ALBANK Financial Corp 23.58 244.99 0.42 14.05 120.34 11.58 14.05
ALBC Albion Banc Corp. 23.36 218.97 0.31 23.59 71.70 7.65 27.46
ASFC Astoria Financial Corporation 52.31 612.14 0.60 11.80 100.12 8.56 12.84
BFSI BFS Bankorp, Inc. 28.19 346.35 0.00 6.66 137.46 11.19 6.91
CARV Carver Federal Savings Bank 15.12 156.94 0.00 23.53 52.91 5.10 18.60
CONE Conestoga Bancorp, Inc. 17.58 104.25 0.20 29.40 118.74 20.02 35.99
FIBC Financial Bancorp, Inc. 14.32 134.45 0.23 16.61 91.66 9.76 16.83
HAVN Haven Bancorp, Inc. 21.82 346.38 0.30 13.03 126.60 7.98 13.22
LISB Long Island Bancorp, Inc. 20.79 194.48 0.40 14.80 131.67 14.08 15 92
NYB New York Bancorp Inc. 13.58 234.93 0.80 9.65 180.41 10.43 10.21
PEEK Peekskill Financial Corp. 15.73 47.24 NA NA 73.11 24.34 NA
PKPS Poughkeepsie Savings Bank, FS 5.69 66.95 0.09 4.17 87.87 7.47 3.16
RELY Reliance Bancorp, Inc. 16.75 189.08 0.45 12.71 88.81 7.87 13.28
SFED SFS Bancorp, Inc. 16.68 118.69 NA NA 71.94 10.11 NA
TPNZ TappanZee Financial, Inc. 13.80 70.86 NA NA 86.96 16.93 NA
YFCB Yonkers Financial Corporation NA NA NA NA NA NA NA
ASBP ASB Financial Corp. 15.60 64.16 NA NA 90.54 22.02 NA
CAFI Camco Financial Corporation 14.52 174.34 0.41 9.08 132.58 11.04 11.81
COFI Charter One Financial 20.16 292.01 0.78 35.68 182.29 12.59 12.33
CRCL Circle Financial Corp. 34.51 323.98 0.62 24.39 101.78 10.84 28.56
CTZN CitFed Bancorp, Inc. 30.76 438.42 0.26 20.66 116.22 8.15 19.43
CIBI Community Investors Bancorp 16.93 122.33 0.12 12.10 90.08 12.47 12.82
EFBI Enterprise Federal Bancorp 14.86 95.34 3.00 14.39 95.90 14.95 20.65
FFDF FFD Financial Corp. NA NA NA NA NA NA NA
FFYF FFY Financial Corp. 20.25 110.37 0.55 17.13 114.20 20.95 16.52
FFOH Fidelity Financial of Ohio 12.47 61.22 NA NA 80.19 16.33 NA
FDEF First Defiance Financial 12.22 48.12 NA NA 86.95 22.08 NA
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 8
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
FFBZ First Federal Bancorp, Inc. OH NASDAQ 23.500 24.375 6.250 (1.05) 5.62
FFHS First Franklin Corporation OH NASDAQ 14.750 17.500 3.500 9.26 (4.84)
FFSW FirstFederal Financial Svcs OH NASDAQ 24.500 24.500 2.232 8.89 7.80
GFCO Glenway Financial Corp. OH NASDAQ 21.750 24.500 16.190 (6.45) 1.16
HHFC Harvest Home Financial Corp. OH NASDAQ 13.000 13.000 8.750 2.97 4.00
HVFD Haverfield Corporation OH NASDAQ 18.500 18.977 5.165 10.45 34.55
INBI Industrial Bancorp OH NASDAQ 16.000 16.000 12.125 6.67 15.32
LONF London Financial Corporation OH NYSE 9.750 11.250 9.750 (8.24) NA
MFFC Milton Federal Financial Corp. OH NASDAQ 14.750 17.125 10.000 (3.28) (4.84)
OHSL OHSL Financial Corp. OH NASDAQ 20.500 22.000 11.500 1.23 2.50
PTRS Potters Financial Corp. OH NASDAQ 16.250 18.500 9.000 (1.52) (12.16)
PVFC PVF Capital Corp. OH NASDAQ 19.000 20.750 6.474 (5.00) (3.80)
SFSL Security First Corp. OH NASDAQ 12.250 17.250 1.625 (3.92) (5.77)
SHFC Seven Hills Financial Corp. OH NASDAQ 14.500 17.500 11.000 0.00 0.00
SSBK StrongsvilleSavings Bank OH NASDAQ 21.625 21.750 15.500 8.13 16.89
SBCN Suburban Bancorporation, Inc. OH NASDAQ 15.000 18.500 10.500 (4.76) (13.04)
THIR Third Financial Corp. OH NASDAQ 31.250 31.500 14.500 5.93 9.65
WOFC Western Ohio Financial Corp. OH NASDAQ 22.750 24.375 14.750 1.11 (2.15)
WFCO Winton Financial Corp. OH NASDAQ 13.250 15.000 3.750 (1.85) 20.45
FFWD Wood Bancorp, Inc. OH NASDAQ 18.750 19.500 12.000 0.00 2.74
KFBI Klamath First Bancorp OR NASDAQ 13.500 14.000 12.500 0.45 0.93
BRFC Bridgeville Savings Bank PA NASDAQ 14.000 15.250 11.750 7.69 (1.75)
CVAL Chester Valley Bancorp Inc. PA NASDAQ 18.500 20.476 4.073 (0.67) 0.00
FSBI Fidelity Bancorp, Inc. PA NASDAQ 17.500 18.182 3.756 10.00 9.22
FBBC First Bell Bancorp, Inc. PA NASDAQ 13.375 14.250 10.000 (3.60) (3.60)
FKFS First Keystone Financial PA NASDAQ 17.250 20.875 10.250 (6.76) (12.66)
SHEN FirstShenangoBancorp, Inc. PA NASDAQ 21.250 22.250 12.750 2.41 0.00
GAF GA Financial, Inc. PA AMSE 11.000 11.500 10.750 0.00 NA
HARL Harleysville Savings Bank PA NASDAQ 18.000 19.750 3.535 (1.37) 5.88
LARL Laurel Capital Group, Inc. PA NASDAQ 15.500 16.500 3.627 0.00 (3.88)
MLFB MLF Bancorp, Inc. PA NASDAQ 24.000 24.750 12.438 3.23 1.87
PVSA Parkvale Financial Corporation PA NASDAQ 27.500 28.500 2.688 0.46 2.80
PBIX Patriot Bank Corp. PA NASDAQ 12.750 13.125 12.310 0.00 0.00
PWBC PennFirst Bancorp, Inc. PA NASDAQ 13.000 15.915 4.019 4.00 6.12
<CAPTION>
PER SHARE PRICING RATIOS
------------------------------- --------------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earnings Bk. Value Assets Earnings
($) ($) ($) (X) (%) (%) (X)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
FFBZ First Federal Bancorp, Inc. 16.04 220.75 0.38 10.54 146.51 10.65 10.78
FFHS First Franklin Corporation 17.31 182.15 0.28 13.92 85.21 8.10 14.18
FFSW FirstFederal Financial Svcs 14.71 303.31 0.44 13.54 166.55 8.08 15.61
GFCO Glenway Financial Corp. 24.28 251.07 0.51 15.43 89.58 8.66 15.65
HHFC Harvest Home Financial Corp. 14.44 81.55 0.29 20.31 90.03 15.94 20.31
HVFD Haverfield Corporation 14.81 178 37 0.52 15.42 124.92 10.37 16.37
INBI Industrial Bancorp 11.26 58.88 NA NA 142.10 27.17 NA
LONF London Financial Corporation NA NA NA NA NA NA NA
MFFC Milton Federal Financial Corp. 14.91 74.61 1.31 19.67 98.93 19.77 21.07
OHSL OHSL Financial Corp. 20.84 167.80 0.70 13.76 98.37 12.22 14.44
PTRS Potters Financial Corp. 20.80 213.70 0.21 14.13 78.13 7.60 14.38
PVFC PVF Capital Corp. 13.24 201.73 0.00 8.96 143.50 9.42 10.67
SFSL Security First Corp. 11.58 132.99 0.40 9.42 105.79 9.21 8.94
SHFC Seven Hills Financial Corp. 17.99 84.83 0.86 48.33 80.60 17.09 50.00
SSBK StrongsvilleSavings Bank 16.50 199.40 0.42 11.44 131.06 10.85 13.43
SBCN Suburban Bancorporation, Inc. 17.48 133.13 0.55 28.30 85.81 11.27 19.48
THIR Third Financial Corp. 24.88 137.05 0.60 17.36 125.60 22.80 19.29
WOFC Western Ohio Financial Corp. 25.27 95.97 1.00 19.28 90.03 23.71 26.45
WFCO Winton Financial Corp. 10.42 132.08 0.41 10.86 127.16 10.03 13.38
FFWD Wood Bancorp, Inc. 19.42 135.15 0.32 12.18 96.55 13.87 12.42
KFBI Klamath First Bancorp 14.83 52.80 NA NA 91.03 25.57 NA
BRFC Bridgeville Savings Bank 14.13 49.56 0.38 23.33 99.08 28.25 23.33
CVAL Chester Valley Bancorp Inc. 15.91 173.80 0.35 12.01 116.28 10.64 12.42
FSBI Fidelity Bancorp, Inc. 16.06 220.59 0.29 14.46 108.97 7.93 14.46
FBBC First Bell Bancorp, Inc. 13.99 66.44 NA NA 95.60 20.13 NA
FKFS First Keystone Financial 17.83 215.24 0.00 16.27 96.75 8.01 15.00
SHEN FirstShenangoBancorp, Inc. 20.40 154.13 0.39 14.66 104.17 13.79 15.51
GAF GA Financial, Inc. 14.34 63.90 NA NA 76.71 17.21 NA
HARL Harleysville Savings Bank 15.01 212.82 0.36 10.71 119.92 8.46 10.53
LARL Laurel Capital Group, Inc. 13.66 127.95 0.27 9.34 113.47 12.11 9.69
MLFB MLF Bancorp, Inc. 24.25 271.35 0.36 14.29 98.97 8.84 13.64
PVSA Parkvale Financial Corporation 20.99 282.75 0.49 9.89 131.01 9.73 10.62
PBIX Patriot Bank Corp. 15.47 89.48 NA NA 82.42 14.25 NA
PWBC PennFirst Bancorp, Inc. 13.37 170.26 0.36 13.27 97.23 7.64 13.40
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 9
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
PHFC Pittsburgh Home Financial Corp PA NASDAQ 10.500 11.125 10.060 -3.45 NA
PSAB Prime Bancorp, Inc. PA NASDAQ 17.500 20.682 3.194 -1.41 -5.41
PFNC Progress Financial Corporation PA NASDAQ 7.125 18.750 0.750 1.79 29.55
SVRN Sovereign Bancorp, Inc. PA NASDAQ 10.810 11.250 1.005 2.95 8.10
THRD TF Financial Corporation PA NASDAQ 14.125 16.000 9.750 0.89 -2.59
THBC Troy Hill Bancorp, Inc. PA NASDAQ 12.875 14.000 10.250 -4.63 -2.83
WVFC WVS Financial Corporation PA NASDAQ 19.750 22.250 13.000 -5.95 -2.47
YFED York Financial Corp. PA NASDAQ 17.750 18.864 4.731 4.41 2.16
AMFB American Federal Bank SC NASDAQ 16.000 16.500 0.625 4.92 6.67
CPCP Coastal Financial Corp. SC NASDAQ 20.375 21.250 2.397 7.24 7.24
FFCH First Financial Holdings Inc. SC NASDAQ 19.750 22.250 4.000 -2.47 0.00
FSFC First Southeast Financial Corp SC NASDAQ 18.250 20.250 11.750 -3.95 0.00
PALM Palfed, Inc. SC NASDAQ 12.250 18.500 3.500 -5.77 -3.92
SCCB S. Carolina Community Bancshrs SC NASDAQ 16.500 20.500 12.625 -0.75 -4.35
HFFC HF Financial Corp. SD NASDAQ 14.750 16.750 5.500 5.36 -10.61
LFCT Leader Financial Corp. TN NASDAQ 44.810 45.250 14.500 0.70 19.49
TWIN Twin City Bancorp TN NASDAQ 16.000 18.250 10.500 -3.03 -4.48
CBSA Coastal Bancorp, Inc. TX NASDAQ 17.875 18.875 9.875 2.14 -0.69
ETFS East Texas Financial Services TX NASDAQ 14.750 16.750 11.000 -1.67 -6.35
FBHC Fort Bend Holding Corp. TX NASDAQ 18.250 20.250 10.375 0.00 -1.35
LOAN Horizon Bancorp TX NASDAQ 11.000 11.500 7.250 -2.22 2.33
JXVL Jacksonville Bancorp, Inc. TX NASDAQ 10.060 11.990 7.141 4.52 -4.91
WFSB 1st Washington Bancorp Inc. VA NASDAQ 7.910 10.375 0.125 1.28 2.86
BFSB Bedford Bancshares, Inc. VA NASDAQ 16.250 18.750 10.250 -5.80 -5.80
CNIT CENIT Bancorp, Inc. VA NASDAQ 34.750 40.250 10.875 5.30 4.12
CFFC Community Financial Corp. VA NASDAQ 19.000 21.000 4.250 -9.52 -5.00
ESX Essex Bancorp, Inc. VA AMSE 2.750 19.250 0.750 10.00 16.92
FFFC FFVA Financial Corp. VA NASDAQ 30.500 32.250 16.500 3.39 -3.94
FFRV Fidelity Financial Bankshares VA NASDAQ 12.750 14.750 2.381 -2.86 -3.77
GSLC Guaranty Financial Corp. VA NASDAQ 7.750 8.500 6.313 0.00 -6.06
IFB Life Bancorp, Inc. VA NASDAQ 14.625 16.625 8.313 4.46 -2.50
VABF Virginia Beach Fed. Financial VA NASDAQ 7.750 9.938 1.625 -3.13 1.64
VFFC Virginia First Financial VA NASDAQ 12.000 12.125 1.250 4.35 9.09
CASB Cascade Financial Corp. WA NASDAQ 18.500 19.000 3.328 15.63 15.63
<CAPTION>
PER SHARE PRICING RATIOS
------------------------------- --------------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earnings Bk. Value Assets Earnings
($) ($) ($) (X) (%) (%) (X)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
FWWB Pittsburgh Home Financial Corp NA NA NA NA NA NA NA
IWBK Prime Bancorp, Inc. 15.44 163.55 0.65 11.01 113.34 10.70 12.32
MSEA Progress Financial Corporation 5.15 93.30 0.00 8.28 138.35 7.64 10.33
STSA Sovereign Bancorp, Inc. 7.58 175.83 0.08 10.39 142.61 6.15 11.26
WFSL TF Financial Corporation 17.80 114.78 0.26 14.71 78.35 12.31 15.52
AADV Troy Hill Bancorp, Inc. 16.73 75.37 0.32 12.03 76.96 17.08 13.14
ABCW WVS Financial Corporation 20.92 138.38 0.52 11.97 94.41 14.27 11.29
FCBF York Financial Corp. 15.22 173.33 0.55 11.09 116.62 10.24 13.05
FFEC American Federal Bank 9.80 123.44 0.28 11.03 163.27 12.96 10.06
FTFC Coastal Financial Corp. 9.63 157.70 0.49 15.09 211.58 12.92 15.79
FFCH First Financial Holdings Inc. 15.04 227.64 0.60 12.04 131.32 8.68 11.83
FSFC First Southeast Financial Corp 17.20 87.67 0.43 22.81 106.10 20.82 22.81
PALM Palfed, Inc. 10.09 119.41 0.02 14.76 121.41 10.26 17.50
SCCB S. Carolina Community Bancshrs 16.70 56.31 0.55 18.33 98.80 29.30 18.33
HFFC HF Financial Corp. 16.86 187.92 0.32 10.77 87.49 7.85 13.79
LFCT Leader Financial Corp. 25.71 320.22 0.63 11.40 174.29 13.99 11.64
TWIN Twin City Bancorp 15.69 114.01 0.55 12.60 101.98 14.03 14.55
CBSA Coastal Bancorp, Inc. 18.50 566.12 0.34 9.36 96.62 3.16 9.41
ETFS East Texas Financial Services 18.91 96.32 0.05 16.03 78.00 15.31 17.35
FBHC Fort Bend Holding Corp. 21.06 289.64 0.28 9.46 86.66 6.30 10.43
LOAN Horizon Bancorp 7.53 91.50 0.10 9.82 146.08 12.02 12.36
JXVL Jacksonville Bancorp, Inc. NA NA NA NA NA NA NA
WFSB 1st Washington Bancorp Inc. 4.79 80.47 0.12 15.21 165.14 9.83 35.95
BFSB Bedford Bancshares, Inc. 16.86 98.42 0.33 13.00 96.38 16.51 13.00
CNIT CENIT Bancorp, Inc. 29.27 400.72 0.40 23.48 118.72 8.67 19.52
CFFC Community Financial Corp. 16.99 124.25 0.41 11.59 111.83 15.29 11.59
ESX Essex Bancorp, Inc. 21.54 322.69 0.00 NM 12.77 0.85 NM
FFFC FFVA Financial Corp. 33.58 190.85 0.65 13.20 90.83 15.98 13.50
FFRV Fidelity Financial Bankshares 12.01 141.09 0.16 9.31 106.16 9.04 9.51
GSLC Guaranty Financial Corp. 6.88 105.07 0.00 10.33 112.65 7.38 13.14
IFB Life Bancorp, Inc. 14.74 115.79 0.44 16.25 99.22 12.63 15.39
VABF Virginia Beach Fed. Financial 8.28 125.95 0.16 23.48 93.60 6.15 NM
VCCF Virginia First Financial 9.81 127.14 0.06 8.28 122.32 9.44 10.17
CASB Cascade Financial Corp. 12.42 199.87 0.00 19.07 148.95 9.26 41.11
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 10
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
FWWB First SB of Washington Bancorp WA NASDAQ 14.625 15.125 12.375 11.43 12.50
IWBK InterWest Bancorp, Inc. WA NASDAQ 22.875 25.125 8.478 6.40 12.96
MSEA Metropolitan Bancorp WA NASDAQ 14.000 15.000 3.636 7.69 0.00
STSA Sterling Financial Corp. WA NASDAQ 13.500 14.500 1.878 (0.92) (0.92)
WFSL Washington Federal, Inc. WA NASDAQ 21.375 23.967 1.723 3.01 (5.00)
AADV Advantage Bancorp, Inc. WI NASDAQ 34.000 34.500 10.600 0.74 4.29
ABCW Anchor BanCorp Wisconsin WI NASDAQ 33.500 36.250 9.800 5.51 (2.19)
FCBF FCB Financial Corp. WI NASDAQ 17.500 18.500 12.000 (1.41) (4.37)
FFEC First Fed Bncshrs Eau Claire WI NASDAQ 14.625 15.375 8.375 4.46 5.41
FTFC First Federal Capital Corp. WI NASDAQ 22.875 22.875 1.449 6.40 15.09
FFHC First Financial Corp. WI NASDAQ 23.250 24.000 1.392 8.14 8.14
FNGB First Northern Capital Corp. WI NASDAQ 16.000 16.500 3.063 1.59 0.79
HALL Hallmark Capital Corp. WI NASDAQ 14.875 16.250 9.875 (0.83) (4.03)
MWFD Midwest Federal Financial WI NASDAQ 29.500 31.000 8.333 26.88 37.21
NWEQ Northwest Equity Corp. WI NASDAQ 10.125 11.375 6.875 (2.41) (5.81)
OSBF OSB Financial Corp. WI NASDAQ 22.750 24.875 14.500 (3.19) (3.70)
RELI Reliance Bancshares, Inc. WI NASDAQ 8.00 8.500 7.875 NA NA
SECP Security Capital Corporation WI NASDAQ 59.000 62.000 25.000 1.29 (3.48)
STFR St. Francis Capital Corp. WI NASDAQ 25.500 28.000 12.625 (2.86) (5.56)
FOBC Fed One Bancorp WV NASDAQ 14.875 16.250 5.358 (2.46) (5.56)
CRZY Crazy Woman Creek Bancorp WY NASDAQ 11.000 11.000 10.375 4.76 NA
TRIC Tri-County Bancorp, Inc. WY NASDAQ 18.000 18.500 11.375 0.00 2.13
<CAPTION>
PER SHARE PRICING RATIOS
------------------------------- --------------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earnings Bk. Value Assets Earnings
($) ($) ($) (X) (%) (%) (X)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
FWWB First SB of Washington Bancorp 15.25 59.11 NA NA 95.90 24.74 NA
IWBK InterWest Bancorp, Inc. 14.63 212.71 0.39 11.16 156.36 10.75 12.10
MSEA Metropolitan Bancorp 13.71 209.74 0.00 10.07 102.12 6.67 9.33
STSA Sterling Financial Corp. 11.30 276.03 0.00 15.00 119.47 4.89 15.34
WFSL Washington Federal, Inc. 14.04 115.72 0.86 11.49 152.24 18.47 12.01
AADV Advantage Bancorp, Inc. 26.04 284.11 0.26 14.53 130.57 11.97 16.11
ABCW Anchor BanCorp Wisconsin 23.83 333.03 0.30 12.64 140.58 10.06 12.88
FCBF FCB Financial Corp. 18.65 95.25 0.57 18.23 93.83 18.37 18.82
FFEC First Fed Bncshrs Eau Claire 14.04 98.07 0.10 16.81 104.17 14.91 17.41
FTFC First Federal Capital Corp. 15.03 219.45 0.56 12.36 152.20 10.42 16.82
FFHC First Financial Corp. 13.30 181.33 0.51 10.06 174.81 12.82 10.38
FNGB First Northern Capital Corp. 15.98 125.56 0.57 15.84 100.13 12.74 18.60
HALL Hallmark Capital Corp. 18.38 235.13 0.00 12.61 80.93 6.33 14.17
MWFD Midwest Federal Financial 20.26 217.00 0.26 14.60 145.61 13.59 17.99
NWEQ Northwest Equity Corp. 12.96 84.59 0.24 11.25 78.13 11.97 11.77
OSBF OSB Financial Corp. 28.01 222.41 0.56 58.33 81.22 10.23 35.00
RELI Reliance Bancshares, Inc. NA NA NA NA NA NA NA
SECP Security Capital Corporation 55.94 350.75 0.30 19.93 105.47 16.82 18.97
STFR St. Francis Capital Corp. 23.35 221.21 0.20 9.66 109.21 11.53 14.01
FOBC Fed One Bancorp 16.53 136.40 0.53 12.29 89.99 10.91 12.29
CRZY Crazy Woman Creek Bancorp NA NA NA NA NA NA NA
TRIC Tri-County Bancorp, Inc. 20.76 116.42 0.45 18.56 86.71 15.46 18.95
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 11
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
--------------------------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
ALL THRIFTS
AVERAGE 17.794 22.037 8.008 1.20 1.37
MEDIAN 16.188 18.313 9.094 0.00 0.00
HIGH 59.000 589.500 25.375 38.34 37.37
LOW 2.625 6.917 0.125 (18.97) (20.34)
AVERAGE FOR STATE
OH 18.923 20.391 9.202 2.15 3.94
AVERAGE BY REGION
MIDWEST 18.982 20.479 9.157 1.35 1.47
NEW ENGLAND 17.675 20.150 6.028 (3.04) (4.59)
MID ATLANTIC 16.906 19.181 7.108 0.07 0.73
SOUTHEAST 16.129 18.469 7.007 1.06 0.88
SOUTHWEST 15.232 16.668 9.537 0.62 (0.90)
WEST 17.842 39.337 6.363 3.74 4.97
AVERAGE BY EXCHANGE
NYSE 26.848 83.369 3.721 0.80 4.95
AMEX 12.544 14.583 9.921 1.45 (0.51)
OTC/NASDAQ 17.667 19.573 8.101 1.20 1.29
<CAPTION>
PER SHARE PRICING RATIOS
------------------------------- --------------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earnings Bk. Value Assets Earnings
($) ($) ($) (X) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C>
ALL THRIFTS
AVERAGE 17.27 170.68 0.36 15.66 106.25 12.85 17.27
MEDIAN 16.54 141.67 0.33 13.14 99.03 11.34 14.41
HIGH 55.94 612.14 3.00 70.50 233.44 31.91 111.11
LOW 2.24 35.76 0.00 2.86 12.77 0.85 3.16
AVERAGE FOR STATE
OH 17.88 162.58 0.60 17.451 110.257 14.077 17.559
AVERAGE BY REGION
MIDWEST 18.46 156.67 0.38 17.19 105.33 14.47 18.82
NEW ENGLAND 18.51 248.03 0.50 11.06 95.08 7.59 12.49
MID ATLANTIC 16.82 173.30 0.32 13.16 103.74 11.46 14.11
SOUTHEAST 14.88 147.39 0.37 14.18 113.86 13.15 15.54
SOUTHWEST 15.46 161.64 0.30 12.26 101.52 13.26 13.29
WEST 16.80 232.67 0.33 18.33 108.20 9.61 21.39
AVERAGE BY EXCHANGE
NYSE 20.63 347.00 0.42 17.03 139.57 8.84 17.45
AMEX 15.84 117.66 0.30 12.66 81.88 14.20 14.16
OTC/NASDAQ 17.19 165.20 0.36 15.62 105.93 12.97 17.30
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 1
Columbus, Ohio
614-766-1426
EXHIBIT 31
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C>
PLE Pinnacle Bank AL 194,311 14,983 14,431 0.77 0.71 10.29 9.48
SRN Southern Banc Company, Inc AL 110,757 22,571 22,325 NA NA NA NA
SZB SouthFirst Bancshares, Inc. AL 85,775 15,056 15,056 0.74 0.58 4.52 3.52
VAFD Valley Federal Savings Bank AL 122,083 10,010 10,010 0.36 0.36 4.61 4.67
FFBH First Federal Bancshares of AR AR 454,479 35,308 35,308 0.91 0.86 12.03 11.42
FTF Texarkana First Financial Corp AR 163,391 33,683 33,683 1.77 1.77 10.80 10.8
AHM Ahmanson & Company(H.F.) CA 49,781,986 2,952,702 2,808,721 0.88 0.24 15.41 4.15
AFFFZ America First Financial Fund CA 2,333,113 174,821 171,086 0.81 0.81 12.57 12.5
BVFS Bay View Capital Corp. CA 2,910,295 203,268 198,159 (0.10) 0.26 (1.43) 3.57
BYFC Broadway Financial Corp. CA 117,744 5,581 5,581 0.45 0.43 9.18 8.81
CAL Cal Fed Bancorp, Inc. CA 14,280,100 911,200 911,200 0.76 0.72 12.51 11.84
CFHC California Financial Holding CA 1,277,568 86,268 85,500 0.29 0.25 4.26 3.71
CENF CENFED Financial Corp. CA 2,113,582 105,775 105,526 0.48 0.33 9.92 6.91
CSA Coast Savings Financial CA 8,239,880 425,360 418,305 0.46 0.40 9.62 8.38
DSL Downey Financial Corp. CA 4,652,584 387,470 380,740 0.61 0.53 7.58 6.67
FIDF Fidelity Federal Bank, FSB CA 3,279,564 227,539 227,180 (1.97) (2.05) (37.85) (39.35)
FSSB First FS&LA Of San Bernardino CA 103,288 5,827 5,566 (0.17) (0.34) (2.9) (6.03)
FED FirstFed Financial Corp. CA 4,165,825 195,311 191,942 0.18 0.17 3.94 3.66
GLN Glendale Federal Bank, FSB CA 14,367,978 941,398 880,896 0.23 0.39 3.80 6.42
GDW Golden West Financial CA 35,013,718 2,332,592 2,194,398 0.75 0.74 11.76 11.64
GWF Great Western Financial CA 43,762,730 2,822,132 2,507,848 0.65 0.60 10.77 9.89
HTHR Hawthorne Financial Corp. CA 773,090 40,851 40,684 (0.21) (0.32) (4.82) (7.47)
HEMT HF Bancorp, Inc. CA 754,365 86,273 NA 0.19 0.16 1.50 1.23
HBNK Highland Federal Bank FSB CA 441,911 34,626 34,626 0.22 0.21 3.92 3.87
HFSF Home Federal Financial Corp. CA 716,755 54,404 54,213 0.34 0.19 4.71 2.67
MBBC Monterey Bay Bancorp, Inc. CA 329,768 47,604 46,953 0.21 0.26 1.49 1.85
NHSL NHS Financial, Inc. CA 292,618 24,671 24,618 0.16 0.16 1.93 1.9
PSSB Palm Springs Savings Bank CA 192,093 11,693 11,693 0.62 0.34 10.80 5.85
PFFB PFF Bancorp, Inc. CA 2,008,139 289,071 289,071 0.11 0.10 1.04 1.01
QCBC Quaker City Bancorp, Inc. CA 692,974 68,461 68,087 0.50 0.48 4.90 4.71
REDF RedFed Bancorp Inc. CA 871,814 48,078 48,078 (0.86) (1.18) (15.05) (20.58)
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
<S> <C> <C> <C> <C>
PLE Pinnacle Bank 12/17/86 AMSE 889,824 16.02
SRN Southern Banc Company, Inc 10105/95 AMSE 1,454,750 18.73
SZB SouthFirst Bancshares, Inc. 02/14/95 AMSE 863,200 13.38
VAFD Valley Federal Savings Bank 10/15/87 NASDAQ 364,160 12.75
FFBH First Federal Bancshares of AR 05/03/96 NASDAQ NA NA
FTF Texarkana First Financial Corp 07/07/95 AMSE 1,983,750 29.51
AHM Ahmanson & Company(H.F.) 10/01/72 NYSE 112,512,418 2728.43
AFFFZ America First Financial Fund NA NASDAQ 6,010,589 174.31
BVFS Bay View Capital Corp. 05/09/86 NASDAQ 6,900,306 224.26
BYFC Broadway Financial Corp. 01/09/96 NASDAQ NA NA
CAL Cal Fed Bancorp, Inc. 03/01/83 NYSE 49,312,944 881.47
CFHC California Financial Holding 04/01/83 NASDAQ 4,667,615 95.10
CENF CENFED Financial Corp. 10/25/91 NASDAQ 5,031,500 114.35
CSA Coast Savings Financial 12/23/85 NYSE 18,583,317 580.73
DSL Downey Financial Corp. 01/01/71 NYSE 16,972,905 398.86
FIDF Fidelity Federal Bank, FSB NA NASDAQ 18,242,465 173.30
FSSB First FS&LA Of San Bernardino 02/02/93 NASDAQ 328,296 3.78
FED FirstFed Financial Corp. 12/16/83 NYSE 10,624,298 168.66
GLN Glendale Federal Bank, FSB 10/01/83 NYSE 44,085,008 799.04
GDW Golden West Financial 05/29/59 NYSE 58,622,859 3143.65
GWF Great Western Financial NA NYSE 137,204,953 3310.07
HTHR Hawthorne Financial Corp. NA NASDAQ 2,599,275 12.67
HEMT HF Bancorp, Inc. 06130/95 NASDAQ 6,414,125 64.14
HBNK Highland Federal Bank FSB NA NASDAQ 2,295,983 39.03
HFSF Home Federal Financial Corp. 07/01/86 NASDAQ 3,666,090 64.16
MBBC Monterey Bay Bancorp, Inc. 02/15/95 NASDAQ 3,414,063 39.69
NHSL NHS Financial, Inc. NA NASDAQ 2,522,827 22.71
PSSB Palm Springs Savings Bank NA NASDAQ 1,130,946 11.03
PFFB PFF Bancorp, Inc. 03/29/96 NASDAQ 19,837,500 225.65
QCBC Quaker City Bancorp, Inc. 12/30/93 NASDAQ 3,927,600 54.50
REDF RedFed Bancorp Inc. 04/08/94 NASDAQ 4,065,670 41.16
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 2
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SGVB SGV Bancorp, Inc. CA 333,064 32,581 32,581 0.12 0.11 1.11 1.08
WES Westcorp CA 3,076,518 304,287 303,293 1.21 0.55 13.63 6.19
FFBA First Colorado Bancorp, Inc. CO 1,492,600 241,623 238,670 0.98 0.99 8.64 8.67
MORG Morgan Financial Corp. CO 71,654 10,501 10,501 0.97 0.93 6.38 6.12
EGFC Eagle Financial Corp. CT 1,290,670 95,721 86,181 0.92 0.87 12.33 11.65
FFES First Federal of East Hartford CT 933,433 57,831 57,633 0.60 0.59 8.81 8.69
NTMG Nutmeg Federal S&LA CT 85,724 5,399 5,399 0.62 0.41 10.20 6.71
WBST Webster Financial Corporation CT 3,813,173 213,846 166,674 0.56 0.60 10.14 10.76
IFSB Independence Federal Savings DC 263,740 17,082 14,678 0.54 0.26 8.99 4.36
BANC Bank Atlantic Bancorp, Inc. FL 1,642,825 136,819 125,676 1.08 0.86 16.11 12.86
BKUNA Bank United Financial Corp. FL 738,491 69,468 66,955 1.12 0.13 14.68 1.64
FFFG F.F.O. Financial Group, Inc. FL 301,485 18,780 18,780 0.64 0.54 9.17 7.79
FFLC FFLC Bancorp, Inc. FL 330,514 56,096 56,096 0.94 0.95 5.43 5.49
FFML First Family Financial Corp. FL 153,250 8,596 8,596 0.82 0.49 16.16 9.60
FPRY First Financial Bancorp FL 231,649 15,117 15,117 0.64 0.54 9.93 8.37
FFPB First Palm Beach Bancorp, Inc. FL 1,465,395 111,898 108,976 0.69 0.69 8.21 8.14
FFPC Florida First Bancorp, Inc. FL 304,040 21,069 21,069 0.86 0.78 12.90 11.82
HOF L Home Financial Corp. FL 1,227,371 313,193 313,193 1.70 1.61 6.58 6.24
SCSL Suncoast Savings and Loan FL 372,140 25,629 25,566 0.34 (0.28) 6.15 (5.06)
CCFH CCF Holding Company GA 79,578 17,187 17,187 0.86 0.79 6.13 5.62
EBSI Eagle Bancshares GA 558,315 37,131 37,131 0.97 0.94 13.77 13.33
FGHC First Georgia Holding, Inc. GA 142,133 11,605 10,263 0.87 0.81 10.61 9.91
FLFC First Liberty Financial Corp. GA 927,108 73,069 62,023 1.02 0.84 13.11 10.77
FLAG FLAG Financial Corp. GA 232,105 20,698 20,698 0.87 0.82 9.78 9.22
NFSL Newnan Savings Bank, FSB GA 160,656 18,605 18,483 1.89 1.65 17.69 15.47
CASH First Midwest Financial, Inc. IA 309,706 38,874 36,247 1.24 0.99 9.27 7.41
GFSB GFS Bancorp, Inc. IA 80,913 9,738 9,738 1.08 1.06 8.47 8.29
HZFS Horizon Financial Svcs Corp. IA 73,105 8,861 8,861 0.71 0.65 5.55 5.09
MFCX Marshalltown Financial Corp. IA 126,226 19,349 19,349 0.32 0.32 2.10 2.10
MIFC Mid-Iowa Financial Corp. IA 119,395 10,770 10,754 0.84 0.83 8.90 8.87
MWBI Midwest Bancshares, Inc. IA 136,809 9,490 9,490 0.99 0 69 14.16 9.87
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
<S> <C> <C> <C> <C>
GVB SGV Bancorp, Inc. 06/29/95 NASDAQ 2,727,656 24.55
WES Westcorp 05/01186 NYSE 24,605,960 455.21
FFBA First Colorado Bancorp, Inc. 01/02/96 NASDAQ 20,096,940 248.70
MORG Morgan Financial Corp. 01/11/93 NASDAQ 832,700 9.78
EGFC Eagle Financial Corp. 02/03/87 NASDAQ 4,478,691 117.57
FFES First Federal of East Hartford 06/23/87 NASDAQ 2,593,628 46.69
NTMG Nutmeg Federal S&LA NA NASDAQ 708,019 4.72
WBST Webster Financial Corporation 12/12/86 NASDAQ 8,103,746 226.90
IFSB Independence Federal Savings 06/06/85 NASDAQ 1,277,435 10.78
BANC Bank Atlantic Bancorp, Inc. 11/29/83 NASDAQ 11,742,999 176.14
BKUNA Bank United Financial Corp. 12/11/85 NASDAQ 5,693,125 46.97
FFFG F.F.O. Financial Group, Inc. 10/13/88 NASDAQ 8,430,000 21.58
FFLC FFLC Bancorp, Inc. 01/04/94 NASDAQ 2,638,356 46.17
FFML First Family Financial Corp. 10/22/92 NASDAQ 545,000 11.45
FPRY First Financial Bancorp 03/29188 NASDAQ 865,133 17.52
FFPB First Palm Beach Bancorp, Inc. 09/29/93 NASDAQ 5,180,687 115.27
FFPC Florida First Bancorp, Inc. 11/06/86 NASDAQ 3,374,245 26.99
HOF L Home Financial Corp. 10125/94 NASDAQ 24,770,607 365.37
SCSL Suncoast Savings and Loan 07130/85 NASDAQ 1,989,930 12.44
CCFH CCF Holding Company 07112/95 NASDAQ 1,118,850 14.27
EBSI Eagle Bancshares 04/01/86 NASDAQ 3,117,200 59.23
FGHC First Georgia Holding, Inc. 02/11/87 NASDAQ 2,023,711 14.67
FLFC First Liberty Financial Corp. 12106183 NASDAQ 3,972,342 84.41
FLAG FLAG Financial Corp. 12111/86 NASDAQ 1,916,000 26.35
NFSL Newnan Savings Bank, FSB 03/01/86 NASDAQ 1,446,856 24.96
CASH First Midwest Financial, Inc. 09120/93 NASDAQ 1,789,535 41.16
GFSB GFS Bancorp, Inc. 01/06/94 NASDAQ 514,600 10.68
HZFS Horizon Financial Svcs Corp. 06/30194 NASDAQ 471,437 7.19
MFCX Marshalltown Financial Corp. 03/31/94 NASDAQ 1,411,475 22.94
MIFC Mid-Iowa Financial Corp. 10114/92 NASDAQ 1,729,880 12.54
MWBI Midwest Bancshares, Inc. 11/12/92 NASDAQ 356,979 9.64
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 3
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFFD North Central Bancshares, Inc. IA 179,648 29,586 29,586 1.48 1.41 8.78 8.36
PMFI Perpetual Midwest Financial IA 374,039 36,053 36,053 0.41 0.41 4.09 4 09
SFFC State Fed Financial Corporation IA 74,182 14,925 14,925 1.18 1.18 5.80 5.80
AVND Avondale Financial Corp. IL 579,731 61,628 61,628 NA NA NA NA
BABC Barrington Bancorp, Inc. IL 70,204 11,565 11,565 0.53 0.52 3.20 3.14
BELL Bell Bancorp IL 1,938,454 307,385 307,385 0.63 0.60 4.03 3.85
CBCI Calumet Bancorp, Inc. IL 502,419 85,350 85,350 1.21 1.20 7.24 7.20
CBSB Charter Financial, Inc. IL 297,120 64,083 62,361 1.08 1.08 8.84 8.83
CBK Citizens First Financial Corp. IL 232,196 15,765 15,765 NA NA NA NA
CSBF CSB Financial Group, Inc. IL 41,231 12,728 12,728 NA NA NA NA
DFIN Damen Financial Corp. IL 235,320 56,903 56,903 NA NA NA NA
FBCI Fidelity Bancorp, Inc. IL 433,027 52,162 51,975 0.77 0.71 5.56 5.13
FNSC Financial Security Corp. IL 274,090 39,372 39,372 0.78 0.72 5.71 5.26
FFBI First Financial Bancorp, Inc. IL 88,615 7,865 7,865 0.70 0.57 6.53 5.33
FMBD First Mutual Bancorp, Inc. IL 285,296 72,050 72,050 0.99 0.95 4.14 3.99
FFDP FirstFed Bancshares IL 623,996 56,285 53,765 0.64 0.40 6.65 4.20
GTPS Great American Bancorp IL 117,706 34,632 34,632 0.77 0.77 2.95 2.94
HNFC Hinsdale Financial Corp. IL 682,029 54,341 52,679 0.62 0.55 8.24 7.35
HMCI HomeCorp, Inc. IL 341,742 20,731 20,731 0.37 0.26 6.28 4.31
KNK Kankakee Bancorp, Inc. IL 363,182 35,581 33,014 0.50 0.49 4.53 4.46
LBCI Liberty Bancorp, Inc. IL 669,949 63,818 63,649 0.56 0.56 5.49 5.51
MAFB MAF Bancorp, Inc. IL 1,980,184 109,654 109,654 0.88 0.90 15.13 15.48
NSBI N.S. Bancorp, Inc. IL 1,153,392 235,232 235,232 1.86 1.55 9.57 7.97
NBSI North Bancshares, Inc. IL 114,337 19,827 19,827 0.57 0.53 2.98 2.74
SWBI Southwest Bancshares IL 349,543 41,951 41,951 1.19 1.18 8.83 8.77
SPBC St. Paul Bancorp, Inc. IL 4,142,858 382,851 381,512 0.89 0.87 9.59 9.35
STND Standard Financial, Inc. IL 2,186,603 269,004 268,914 0.88 0.79 6.23 5.59
SFSB SuburbFed Financial Corp. IL 362,272 25,879 25,719 0.51 0.44 6.97 6.01
WCBI Westco Bancorp IL 309,265 48,383 48,383 1.32 1.32 8.46 8.43
FBCV 1ST Bancorp IN 273,122 21,535 21,535 2.25 (0.13) 35.92 (2.02)
AMFC AMB Financial Corp. IN 80,533 16,147 16,147 0.50 0.50 4.75 4.75
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
<S> <C> <C> <C> <C>
FFFD North Central Bancshares, Inc. 03/21/96 NASDAQ NA NA
PMFI Perpetual Midwest Financial 03/31/94 NASDAQ 2,017,082 34.29
SFFC State Fed Financial Corporation 01/05/94 NASDAQ 823,485 14.00
AVND Avondale Financial Corp. 04/07/95 NASDAQ 4,014,568 56.71
BABC Barrington Bancorp, Inc. 05/12/94 NASDAQ 661,250 12.40
BELL Bell Bancorp 12/23/91 NASDAQ 9,209,578 340.75
CBCI Calumet Bancorp, Inc. 02/20/92 NASDAQ 2,667,878 74.03
CBSB Charter Financial, Inc. 12/29/95 NASDAQ 4,974,282 53.77
CBK Citizens First Financial Corp. 05/01/96 AMSE NA NA
CSBF CSB Financial Group, Inc. 10/09/95 NASDAQ 1,035,000 9.83
DFIN Damen Financial Corp. 10/02/95 NASDAQ 3,967,500 46.12
FBCI Fidelity Bancorp, Inc. 12/15/93 NASDAQ 3,084,850 47.82
FNSC Financial Security Corp. 12/29/92 NASDAQ 1,523,808 39.62
FFBI First Financial Bancorp, Inc. 10/04/93 NASDAQ 471,896 7.31
FMBD First Mutual Bancorp, Inc. 07/05/95 NASDAQ 4,352,200 56.03
FFDP FirstFed Bancshares 07/01/92 NASDAQ 2,258,235 49.12
GTPS Great American Bancorp 06/30/95 NASDAQ 1,912,112 27.84
HNFC Hinsdale Financial Corp. 07/07/92 NASDAQ 2,690,155 56.49
HMCI HomeCorp, Inc. 06/22/90 NASDAQ 1,126,371 19.99
KNK Kankakee Bancorp, Inc. 01/06/93 AMSE 1,439,318 29.33
LBCI Liberty Bancorp, Inc. 12/24/91 NASDAQ 2,487,022 61.55
MAFB MAF Bancorp, Inc. 01112/90 NASDAQ 5,244,463 130.46
NSBI N.S. Bancorp, Inc. 12/19/90 NASDAQ 6,140,240 242.54
NBSI North Bancshares, Inc. 12/21/93 NASDAQ 1,172,243 19.05
SWBI Southwest Bancshares 06/24/92 NASDAQ 1,871,294 50.29
SPBC St. Paul Bancorp, Inc. 05/18/87 NASDAQ 18,549,634 456.78
STND Standard Financial, Inc. 08/01/94 NASDAQ 16,764,989 247.28
SFSB SuburbFed Financial Corp. 03/04/92 NASDAQ 1,260,769 20.33
WCBI Westco Bancorp 06/26/92 NASDAQ 1,785,395 49.60
FBCV 1ST Bancorp 04/07/87 NASDAQ 666,042 19.81
AMFC AMB Financial Corp. 04/01/96 NASDAQ NA NA
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 4
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASBI Ameriana Bancorp IN 383,072 44,583 44,514 0.93 0.91 7.20 7.00
ATSB AmTrust Capital Corp. IN 73,072 7,553 NA 0.31 0.07 2.75 0.60
CBCO CB Bancorp, Inc. IN 204,825 18,762 18,762 1.37 1.37 13.98 13.98
CBIN Community Bank Shares IN 215,726 25,351 25,351 0.91 0.89 7.07 6.91
FFWC FFW Corp. IN 148,892 16,083 16,083 0.90 1.00 8.07 8.96
FFED Fidelity Federal Bancorp IN 280,138 14,221 14,221 1.29 1.22 25.83 24.30
FISB First Indiana Corporation IN 1,476,879 132,245 130,363 1.18 1.00 13.88 11.80
HBFW Home Bancorp IN 312,758 51,355 51,355 0.86 0.86 4.97 4.96
HBBI Home Building Bancorp IN 42,407 5,992 5,992 0.46 0 45 3.16 3.09
HOMF Home Federal Bancorp IN 606,266 50,232 48,308 1.20 1.04 15.05 13.09
INCB Indiana Community Bank, SB IN 90,614 14,133 14,133 0.77 0.77 4.97 4.97
IFSL Indiana Federal Corporation IN 717,720 70,504 NA 1.02 0.96 10.75 10.06
LOGN Logansport Financial Corp. IN 76,493 20,473 20,473 1.40 1.33 5.41 5.13
MARN Marion Capital Holdings IN 179,329 43,031 43,031 1.41 1.41 5.79 5.79
MFBC MFB Corp. IN 200,895 38,799 38,799 0.69 0.69 3.40 3.36
NEIB Northeast Indiana Bancorp IN 141,098 28,697 28,697 1.09 1.09 5.62 5.62
PFDC Peoples Bancorp IN 280,778 42,857 42,857 1.45 1.44 9.58 9.55
PERM Permanent Bancorp, Inc. IN 377,905 42,101 41,500 0.33 0.33 2.75 2.74
SOB Sobieski Bancorp, Inc. IN 76,362 14,120 14,120 0.42 0.42 2.24 2.24
WCHI Workingmens Capital Holdings IN 213,673 26,164 26,164 0.91 0.90 7.55 7.44
FFSL First Independence Corp. KS 101,628 12,845 12,845 1.13 0.97 8.56 7.34
LARK Landmark Bancshares, Inc. KS 193,403 33,272 33,272 0.91 0.79 5.30 4.60
MCBS Mid Continent Bancshares Inc. KS 290,903 36,434 36,384 1.40 1.06 10.14 7.69
WBCI WFS Bancorp, Inc. KS 275,758 33,854 33,837 0.45 0.65 3.90 5.67
CKFB CKF Bancorp, Inc. KY 56,549 16,129 16,129 1.32 1.32 4.75 4.75
CLAS Classic Bancshares, Inc. KY 67,786 19,517 19,517 NA NA NA NA
FSBS First Ashland Financial Corp KY 90,216 23,761 23,761 0.86 0.85 3.69 3.67
FFKY First Federal Financial Corp. KY 351,010 49,291 45,966 1.65 1.43 11.50 9.98
FTSB Fort Thomas Financial Corp KY 88,470 22,057 22,057 1.32 1.32 6.61 6.61
FKKY Frankfort First Bancorp, Inc. KY 138,609 49,624 49,624 0.99 1.05 4.20 4.47
GWBC Gateway Bancorp, Inc. KY 73,409 18,478 18,478 1.14 1.14 5.85 5.85
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
<S> <C> <C> <C> <C>
ASBI Ameriana Bancorp 03/02/87 NASDAQ 3,325,277 46.14
ATSB AmTrust Capital Corp. 03/28/95 NASDAQ 566,964 5 81
CBCO CB Bancorp, Inc. 12/28/92 NASDAQ 1,188,226 21.39
CBIN Community Bank Shares 04/10/95 NASDAQ 1,983,720 28.27
FFWC FFW Corp. 04/05/93 NASDAQ 739,176 13.31
FFED Fidelity Federal Bancorp 08/31/87 NASDAQ 2,493,229 32.02
FISB First Indiana Corporation 08/02/83 NASDAQ 8,278,225 188.33
HBFW Home Bancorp 03/30/95 NASDAQ 3,094,489 44.87
HBBI Home Building Bancorp 02/08/95 NASDAQ 322,000 5.64
HOMF Home Federal Bancorp 01/23/88 NASDAQ 2,223,532 55.87
INCB Indiana Community Bank, SB 12/15/94 NASDAQ 922,039 14.06
IFSL Indiana Federal Corporation 02/04/87 NASDAQ 4,737,329 87.64
LOGN Logansport Financial Corp. 06/14/95 NASDAQ 1,322,500 16.37
MARN Marion Capital Holdings 03/18/93 NASDAQ 2,003,170 40.94
MFBC MFB Corp. 03/25/94 NASDAQ 2,077,873 29.61
NEIB Northeast Indiana Bancorp 06/28/95 NASDAQ 2,061,670 26.80
PFDC Peoples Bancorp 07/07/87 NASDAQ 2,355,883 45.94
PERM Permanent Bancorp, Inc. 04/04/94 NASDAQ 2,186,261 35.53
SOB Sobieski Bancorp, Inc. 03/31/95 NASDAQ 836,860 10.67
WCHI Workingmens Capital Holdings 06/07/90 NASDAQ 1,797,920 30.12
FFSL First Independence Corp. 10/08/93 NASDAQ 583,421 10.79
LARK Landmark Bancshares, Inc. 03/28/94 NASDAQ 1,950,522 28.77
MCBS Mid Continent Bancshares Inc. 06/27/94 NASDAQ 2,061,250 36.98
WBCI WFS Bancorp, Inc. 06/03/94 NASDAQ 1,561,009 35.32
CKFB CKF Bancorp, Inc. 01/04/95 NASDAQ 925,333 17.81
CLAS Classic Bancshares, Inc. 12/29/95 NASDAQ 1,322,500 15.54
FSBS First Ashland Financial Corp 04/07/95 NASDAQ 1,408,750 20.43
FFKY First Federal Financial Corp. 07/15/87 NASDAQ 2,107,680 76.93
FTSB Fort Thomas Financial Corp 06/28/95 NASDAQ 1,573,775 19.08
FKKY Frankfort First Bancorp, Inc. 07/10/95 NASDAQ 3,450,000 45.71
GWBC Gateway Bancorp, Inc. 01/18/95 NASDAQ 1,199,612 17.09
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 5
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GTFN Great Financial Corporation KY 2,477,204 281,206 276,685 1.00 0.81 8.18 6.68
HFFB Harrodsburg First Fin Bancorp KY 108,710 31,161 31,161 NA NA NA NA
KYF Kentucky First Bancorp, Inc KY 83,981 19,841 19,841 1.12 1.12 5.27 5.27
LFSB LFS Bancorp Inc. KY 233,737 66,419 66,419 0.77 0.77 2.75 2.75
CZF CitiSave Financial Corp LA 79,717 14,497 14,484 1.15 1.08 7.47 6.98
ISBF ISB Financial Corporation LA 623,720 120,802 120,752 1.24 1.23 6.22 6.18
JEBC Jefferson Bancorp, Inc. LA 265,039 35,429 35,429 1.00 1.00 7.77 7.76
MERI Meritrust Federal SB LA 227,121 16,896 16,896 1.02 0.99 14.10 13.77
TSH Teche Holding Co. LA 328,426 61,730 61,730 1.18 1.16 7.91 7.78
AFCB Affiliated Community Bancorp MA 938,331 96,194 95,458 0.72 0.86 6.26 7.53
BFD BostonFed Bancorp, Inc. MA 677,762 91,574 91,574 0.22 0.17 2.49 1.91
FMLY Family Bancorp MA 887,387 68,843 62,978 0.96 0.85 12.56 11.20
ANBK American National Bancorp MD 439,005 49,089 49,089 0.18 0.17 2.33 2.20
EQSB Equitable Federal Savings Bank MD 255,127 13,205 13,205 1.13 1.12 21.89 21.80
FCIT First Citizens Financial Corp. MD 607,429 38,641 38,641 0.71 0.64 11.37 10.20
FFWM First Financial-W. Maryland MD 326,489 40,919 40,919 0.43 0.39 3.56 3.27
HRBF Harbor Federal Bancorp, Inc. MD 154,218 29,346 29,346 0.82 0.82 3.77 3.77
HFMD Home Federal Corp. MD 216,684 18,673 18,417 1.19 1.17 14.29 14.01
MFSL Maryland Federal Bancorp MD 1,143,338 93,982 92,414 0.79 0.57 9.72 6.95
WSB Washington Savings Bank, FSB MD 262,632 21,231 21,231 0.92 0.69 12.60 9.40
WHGB WHG Bancshares Corp. MD 85,027 8,453 8,453 0.77 0.77 8.33 8.33
MCBN Mid-Coast Bancorp, Inc. ME 55,406 4,858 4,858 0.68 0.64 7.73 7.23
BWFC Bank West Financial Corp. MI 139,217 27,540 27,540 0.69 0.41 3.41 2.03
CFSB CFSB Bancorp, Inc. MI 771,672 64,012 64,012 0.94 0.88 11.56 10.77
DNFC D & N Financial Corp. MI 1,231,927 69,364 68,268 1.06 0.94 19.79 17.54
MSBF MSB Financial, Inc. MI 56,317 12,747 12,747 1.92 1.76 7.79 7.13
MSBK Mutual Savings Bank, FSB MI 719,490 39,244 39,244 0.01 (0.09) 0.20 (1.66)
OFCP Ottawa Financial Corp. MI 745,464 81,374 65,222 0.99 0.99 4.97 4.99
SJSB SJS Bancorp MI 143,857 17,619 17,619 0.68 0.67 5.67 5.56
SFB Standard Federal Bancorp Ml 13,505,427 939,243 801,430 0.93 0.84 13.88 12.54
THR Three Rivers Financial Corp. MI 85,138 13,044 12,986 NA NA NA NA
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
<S> <C> <C> <C> <C>
GTFN Great Financial Corporation 03/31/94 NASDAQ 14,652,595 362.65
HFFB Harrodsburg First Fin Bancorp 10/04/95 NASDAQ 2,182,185 31.10
KYF Kentucky First Bancorp, Inc 08/29/95 AMSE 1,388,625 17.18
LFSB LFS Bancorp Inc. 04/04/94 NASDAQ 3,388,706 63.11
CZF CitiSave Financial Corp 07/14/95 AMSE 964,707 13.51
ISBF ISB Financial Corporation 04/07/95 NASDAQ 7,380,671 114.84
JEBC Jefferson Bancorp, Inc. 08/18/94 NASDAQ 2,195,634 42.81
MERI Meritrust Federal SB NA NASDAQ 774,176 22.64
TSH Teche Holding Co. 04/19/95 AMSE 4,232,000 58.19
AFCB Affiliated Community Bancorp 10/19/95 NASDAQ 5,071,666 89.39
BFD BostonFed Bancorp, Inc. 10/24/95 AMSE 6,589,617 80.72
FMLY Family Bancorp 11/07/86 NASDAQ 4,087,048 85.83
ANBK American National Bancorp 10/31/95 NASDAQ 3,980,500 39.31
EQSB Equitable Federal Savings Bank 09/10/93 NASDAQ 600,000 13.50
FCIT First Citizens Financial Corp. 12/17/86 NASDAQ 2,892,534 49.96
FFWM First Financial-W. Maryland 02/11/92 NASDAQ 2,187,584 40.47
HRBF Harbor Federal Bancorp, Inc. 08/12/94 NASDAQ 1,857,974 26.94
HFMD Home Federal Corp. 02/10/84 NASDAQ 2,519,010 20.78
MFSL Maryland Federal Bancorp 06/02/87 NASDAQ 3,149,705 95.28
WSB Washington Savings Bank, FSB NA AMSE 4,220,206 19.52
WHGB WHG Bancshares Corp. 04/01/96 NASDAQ NA NA
MCBN Mid-Coast Bancorp, Inc. 11/02/89 NASDAQ 228,777 3.92
BWFC Bank West Financial Corp. 03/30/95 NASDAQ 2,296,040 22.52
CFSB CFSB Bancorp, Inc. 06/22/90 NASDAQ 4,476,139 96.24
DNFC D & N Financial Corp. 02/13/85 NASDAQ 6,829,402 87.07
MSBF MSB Financial, Inc. 02/06/95 NASDAQ 675,804 12.16
MSBK Mutual Savings Bank, FSB 07/17/92 NASDAQ 4,271,394 23.49
OFCP Ottawa Financial Corp. 08/19/94 NASDAQ 5,454,838 88.64
SJSB SJS Bancorp 02/16/95 NASDAQ 952,200 18.81
SFB Standard Federal Bancorp 01/21/87 NYSE 31,289,495 1329.80
THR Three Rivers Financial Corp. 08/24/95 AMSE 859,625 11.39
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 6
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BDJI First Federal Bancorporation MN 100,533 14,458 14,458 0.71 0.71 5.03 5.03
FFHH FSF Financial Corp. MN 326,689 52,167 52,167 0.63 0.62 3.37 3.35
HMNF IIMN Financial, Inc. MN 542,012 90,879 90,879 1.10 0.98 6.27 5.59
MIVI Mississippi View Holding Co. MN 69,983 13,197 13,197 1.32 1.17 6.73 5.98
QCFB QCF Bancorp, Inc. MN 161,231 31,465 31,465 1.45 1.45 8.09 8.09
TCB TCF Financial Corp. MN 7,039,282 541,019 517,393 1.37 1.29 19.87 18.82
WEFC Wells Financial Corp. MN 196,184 29,327 29,327 0.81 0.79 5.96 5.77
CMRN Cameron Financial Corp MO 172,484 45,775 45,775 1.60 1.58 5.72 5.64
CAPS Capital Savings Bancorp, Inc. MO 202,554 21,136 21,136 0.95 0.95 8.96 8.96
FBSI First Bancshares, Inc. MO 140,471 23,771 23,725 0.79 0.78 4.42 4.34
GSBC Great Southern Bancorp, Inc. MO 658,834 65,706 64,562 1.64 1.54 16.20 15.26
HFSA Hardin Bancorp, Inc. MO 83,386 16,035 16,035 0.64 0.64 4.56 4.55
JSBA Jefferson Savings Bancorp MO 1,114,294 81,088 66,842 0.62 0.57 8.90 8.19
JOAC Joachim Bancorp, Inc. MO 36,431 10,706 10,706 0.68 0.68 4.25 4.25
MBLF MBLA Financial Corp. MO 195,074 28,365 28,365 0.70 0.70 4.83 4.81
MFSB Mutual Bancompany MO 54,913 6,213 6,213 0.22 0.24 2.18 2.34
NASB North American Savings Bank MO 656,855 47,644 45,643 1.36 1.24 18.76 17.14
NSLB NS&L Bancorp, Inc. MO 56,552 13,847 13,847 NA NA NA NA
PCBC Perry County Financial Corp. MO 77,318 16,127 16,127 1.00 0.98 5.18 5.09
RFED Roosevelt Financial Group MO 9,134,660 509,105 NA 0.66 0.88 13.04 17.29
SMFC Sho-Me Financial Corp. MO 263,890 31,605 31,605 0.83 0.78 6.26 5.86
SMBC Southern Missouri Bancorp, Inc MO 159,470 26,560 26,560 0.75 0.74 4.20 4.12
CFTP Community Federal Bancorp MS 162,042 23,427 23,427 1.28 1.28 9 37 9.37
FFBS FFBS BanCorp, Inc. MS 123,553 24,170 24,170 1.32 1.32 6.50 6.50
MGNL Magna Bancorp, Inc. MS 1,290,780 126,078 118,413 1.79 1.66 18.11 16.78
GBCI Glacier Bancorp, Inc. MT 398,220 38,335 38,278 1.59 1.59 16.25 16.26
SFBM Security Bancorp MT 365,307 32,181 27,633 0.69 0.56 8.17 6.66
UBMT United Savings Bank, F.A. MT 114,440 24,688 24,688 1.62 1.61 7.22 7.20
WSTR WesterFed Financial Corp. MT 588,255 78,102 78,102 0.76 0.70 5.68 5.27
COOP Cooperative Bankshares, Inc. NC 313,803 29,301 25,772 0.28 0.24 3.10 2.64
SOPN First Savings Bancorp, Inc. NC 256,294 67,178 67,178 1.48 1.51 5.68 5.78
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
<S> <C> <C> <C> <C>
BDJI First Federal Bancorporation 04/04/95 NASDAQ 819,375 11 68
FFHH FSF Financial Corp. 10/07/94 NASDAQ 3,860,913 48.74
HMNF IIMN Financial, Inc. 06/30/94 NASDAQ 5,180,210 75.76
MIVI Mississippi View Holding Co. 03/24/95 NASDAQ 957,593 10.89
QCFB QCF Bancorp, Inc. 04/03/95 NASDAQ 1,782,750 26.30
TCB TCF Financial Corp. 06/17/86 NYSE 35,834,837 129901.00
WEFC Wells Financial Corp. 04/11/95 NASDAQ 2,187,500 22.70
CMRN Cameron Financial Corp 04/03/95 NASDAQ 2,850,180 39.19
CAPS Capital Savings Bancorp, Inc. 12/29/93 NASDAQ 1,039,079 18.44
FBSI First Bancshares, Inc. 12/22/93 NASDAQ 1,301,576 21.80
GSBC Great Southern Bancorp, Inc. 12/14/89 NASDAQ 4,625,353 114.48
HFSA Hardin Bancorp, Inc. 09/29/95 NASDAQ 1,058,000 12.17
JSBA Jefferson Savings Bancorp 04/08/93 NASDAQ 4,173,563 123.64
JOAC Joachim Bancorp, Inc. 12/28/95 NASDAQ 760,437 10.27
MBLF MBLA Financial Corp. 06/24/93 NASDAQ 1,371,738 28.81
MFSB Mutual Bancompany 02/02/95 NASDAQ 333,500 6.00
NASB North American Savings Bank 09/27/85 NASDAQ 2,293,752 73.40
NSLB NS&L Bancorp, Inc. 06/08/95 NASDAQ 856,449 11.35
PCBC Perry County Financial Corp. 02/13/95 NASDAQ 856,452 16.70
RFED Roosevelt Financial Group 01/23/87 NASDAQ 42,117,674 779.18
SMFC Sho-Me Financial Corp. 07/01/94 NASDAQ 1,820,550 27.08
SMBC Southern Missouri Bancorp, Inc 04/13/94 NASDAQ 1,723,201 25.85
CFTP Community Federal Bancorp 03/26/96 NASDAQ NA NA
FFBS FFBS BanCorp, Inc. 07/01/93 NASDAQ 1,572,883 29.88
MGNL Magna Bancorp, Inc. 03/13/91 NASDAQ 6,959,091 215.73
GBCI Glacier Bancorp, Inc. 03/30/84 NASDAQ 3,359,767 67.20
SFBM Security Bancorp 11/20/86 NASDAQ 1,482,182 31.13
UBMT United Savings Bank, F.A. 09/23/86 NASDAQ 1,223,312 21.41
WSTR WesterFed Financial Corp. 01/10/94 NASDAQ 4,395,804 65.39
COOP Cooperative Bankshares, Inc. 08/21/91 NASDAQ 1,491,698 26.85
SOPN First Savings Bancorp, Inc. 01/06/94 NASDAQ 3,744,000 6833.00
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 7
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GSFC Green Street Financial Corp. NC 213,285 23,158 23,158 NA NA NA NA
HFNC HFNC Financial Corp. NC 926,259 243,502 243,502 NA NA NA NA
KSAV KS Bancorp, Inc. NC 89,871 13,628 13,612 1.14 1.16 6.85 6.94
PDB Piedmont Bancorp, Inc. NC 124,847 37,164 37,164 1.35 1.38 7.23 7.43
SSB Scotland Bancorp, Inc NC 57,718 8,580 8,580 1.25 1.25 8.52 8.52
SSM Stone Street Bancorp, Inc. NC 81,560 11,729 11,729 1.40 1.40 9.78 9.78
UFRM United Federal Savings Bank NC 246,918 20,714 20,714 1.00 0.93 12.75 11.85
CFB Commercial Federal Corporation NE 6,617,488 400,399 359,682 0.84 0.84 15.33 15.24
EBCP Eastern Bancorp NH 824,899 63,505 59,786 0.61 0.49 8.21 6.65
NHTB New Hampshire Thrift Bncshrs NH 252,481 19,417 19,417 0.58 0.61 7.41 7.74
FBER 1st Bergen Bancorp NJ 258,566 42,712 42,712 NA NA NA NA
CJFC Central Jersey Financial NJ 466,208 54,909 51,027 1.11 1.06 10.78 10.26
COFD Collective Bancorp, Inc. NJ 5,058,597 356,448 331,049 1.05 1.03 15.87 15.51
FSPG First Home Savings Bank, FSB NJ 466,363 30,396 29,572 1.01 0.96 15.60 14.84
FSFl First State Financial Services NJ 597,269 43,002 40,703 0.74 0.62 11.15 9.30
FMCO FMS Financial Corporation NJ 505,700 33,288 32,372 0.84 0.84 13.04 13.01
IBSF IBS Financial Corp NJ 756,928 154,419 154,419 1.11 1.13 5.16 5.25
LVSB Lakeview Financial NJ 440,940 48,976 38,139 1.55 0.71 13.34 6.13
LFBI Little Falls Bancorp, Inc. NJ 285,478 43,373 39,885 NA NA NA NA
PBCI Pamrapo Bancorp, Inc. NJ 368,394 57,084 56,568 1.42 1.42 9.05 9.05
PFSB PennFed Financial Services, lnc NJ 1,022,777 91,782 72,708 0.74 0.79 7.06 7.61
PULS Pulse Bancorp NJ 452,455 53,777 53,777 1.17 1.18 10.04 10.11
SFIN Statewide Financial Corp. NJ 559,049 72,315 72,101 NA NA NA NA
FSBC First Savings Bank, FSB NM 116,966 5,620 5,620 0.34 0.28 7.76 6.32
GUPB GFSB Bancorp, Inc. NM 66,821 16,189 16,189 1.40 1.40 5.85 5.85
ALBK ALBANK Financial Corp NY 3,333,105 320,820 283,160 0.98 0.98 9.31 9.30
ALBC Albion Banc Corp. NY 57,089 6,089 6,089 0.31 0.27 3.03 2.61
ASFC Astoria Financial Corporation NY 6,708,166 573,262 466,411 0.75 0.69 8.44 7.76
BFSI BFS Bankorp, Inc. NY 566,452 46,102 46,102 1.84 1.78 24.94 24.08
CARV Carver Federal Savings Bank NY 363,225 34,986 33,264 0.20 0.25 2.06 2.61
CONE Conestoga Bancorp, Inc. NY 494,348 79,964 79,964 0.66 0.53 4.10 3.33
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
<S> <C> <C> <C> <C>
GSFC Green Street Financial Corp. 04/04/96 NASDAQ NA NA
HFNC HFNC Financial Corp. 12/29/95 NASDAQ 17,192,500 225.65
KSAV KS Bancorp, Inc. 12/30/93 NASDAQ 663,263 12.27
PDB Piedmont Bancorp, Inc. 12/08/95 AMSE 2,645,000 35.05
SSB Scotland Bancorp, Inc 04/01/96 AMSE NA NA
SSM Stone Street Bancorp, Inc. 04/01/96 AMSE NA NA
UFRM United Federal Savings Bank 07/01/80 NASDAQ 3,065,064 22.99
CFB Commercial Federal Corporation 12/31/84 NYSE 15,067,179 585 74
EBCP Eastern Bancorp 11/17/83 NASDAQ 2,397,788 58.15
NHTB New Hampshire Thrift Bncshrs 05/22/86 NASDAQ 1,689,503 16.47
FBER 1st Bergen Bancorp 04/01/96 NASDAQ NA NA
CJFC Central Jersey Financial 09/01/84 NASDAQ 2,668,269 66.71
COFD Collective Bancorp, Inc. 02/07/84 NASDAQ 20,407,332 515.29
FSPG First Home Savings Bank, FSB 04/20/87 NASDAQ 2,030,009 38.06
FSFl First State Financial Services 12/18/87 NASDAQ 3,889,405 52.99
FMCO FMS Financial Corporation 12/14/88 NASDAQ 2,466,573 40.08
IBSF IBS Financial Corp 10/13/94 NASDAQ 11,409,899 164.02
LVSB Lakeview Financial 12/22/93 NASDAQ 2,401,263 41.42
LFBI Little Falls Bancorp, Inc. 01/05/96 NASDAQ 3,041,750 33.46
PBCI Pamrapo Bancorp, Inc. 11/14/89 NASDAQ 3,317,464 68.01
PFSB PennFed Financial Services, lnc 07/15/94 NASDAQ 5,077,205 75.85
PULS Pulse Bancorp 09/18/86 NASDAQ 3,886,458 60.24
SFIN Statewide Financial Corp. 10/02195 NASDAQ 5,269,752 68.82
FSBC First Savings Bank, FSB 08/08/86 NASDAQ 695,698 4.70
GUPB GFSB Bancorp, Inc. 06/30/95 NASDAQ 948,750 13.52
ALBK ALBANK Financial Corp 04/01/92 NASDAQ 13,605,064 392.85
ALBC Albion Banc Corp. 07/26/93 NASDAQ 260,714 4.30
ASFC Astoria Financial Corporation 11/18/93 NASDAQ 10,958,470 557.51
BFSI BFS Bankorp, Inc. 05/12/88 NASDAQ 1,635,488 58.88
CARV Carver Federal Savings Bank 10/25/94 NASDAQ 2,314,375 20.83
CONE Conestoga Bancorp, Inc. 03/30/94 NASDAQ 4,741,935 97.80
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 8
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIBC Financial Bancorp, Inc. NY 251,873 26,835 26,683 0.66 0.65 5.40 5.37
HAVN Haven Bancorp, Inc. NY 1,485,076 93,537 92,974 0.68 0.67 10.26 10.13
LISB Long Island Bancorp, Inc. NY 4,834,405 516,870 516,870 0.95 0.88 8.72 8.16
NYB New York Bancorp Inc. NY 2,754,437 159,177 159,177 1.19 1.13 19.84 18.84
PEEK Peekskill Financial Corp. NY 193,675 59,409 59,409 NA NA NA NA
PKPS Poughkeepsie Savings Bank, FSB NY 839,174 71,266 71,266 1.94 2.55 25.03 32.85
RELY Reliance Bancorp, Inc. NY 1,744,365 154,566 104,281 0.88 0.84 6.80 6.51
SFED SFS Bancorp, Inc. NY 165,569 23,274 23,274 0.63 0.63 5.08 5.06
TPNZ Tappan Zee Financial, Inc. NY 114,790 22,360 22,360 0.81 0.76 5.55 5.17
YFCB Yonkers Financial Corporation NY 208,283 15,765 15,765 0.72 0.77 9.61 10.21
ASBP ASB Financial Corp. OH 109,960 26,744 26,744 1.04 1.04 5.28 5.28
CAFI Camco Financial Corporation OH 343,711 28,625 28,625 1.22 0.94 15.56 11.93
COFI Charter One Financial OH 13,173,988 909,433 895,183 0.28 1.08 4.31 16.77
CRCL Circle Financial Corp. OH 229,406 24,436 21,196 0.49 0.42 4.32 3.71
CTZN CitFed Bancorp, Inc. OH 2,477,970 173,858 149,916 0.44 0.46 6.21 6.55
CIBI Community Investors Bancorp OH 85,785 11,869 11,869 1.01 0.96 7.21 6.86
EFBI Enterprise Federal Bancorp OH 207,680 32,363 32,290 1.12 0.78 5.38 3.76
FFDF FFD Financial Corp. OH 59,617 7,905 7,905 0.82 0.82 6.34 6.34
FFYF FFY Financial Corp. OH 573,162 105,162 105,162 1.21 1.25 6.50 6.72
FFOH Fidelity Financial Of Ohio OH 249,366 50,780 50,780 0.83 0.83 6.02 6.01
FDEF First Defiance Financial OH 528,222 134,187 134,187 1.15 1.13 5.61 5.52
FFBZ First Federal Bancorp, Inc. OH 173,191 13,527 13,508 1.10 1.07 14.88 14.56
FFHS First Franklin Corporation OH 216,124 20,542 20,542 0.63 0.62 6.61 6.51
FFSW FirstFederal Financial Svcs OH 993,459 76,772 71,976 1.06 0.89 12.90 10.88
GFCO Glenway Financial Corp. OH 273,890 26,485 25,854 0.56 0.55 5.82 5.75
HHFC Harvest Home Financial Corp. OH 73,005 12,930 12,930 0.80 0.80 4.31 4.31
HVFD Haverfield Corporation OH 339,630 28,194 28,112 0.65 0.61 7.98 7.51
INBI Industrial Bancorp OH 327,028 62,538 62,538 1.48 1.48 7.38 7.38
LONF London Financial Corporation OH 34,152 3,224 3,224 0.44 0.44 4.51 4.51
MFFC Milton Federal Financial Corp. OH 171,708 34,308 34,308 1.13 1.06 4.88 4.55
OHSL OHSL Financial Corp. OH 205,462 25,521 25,521 0.95 0.92 7.51 7.22
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
<S> <C> <C> <C> <C>
FIBC Financial Bancorp, Inc. 08/17/94 NASDAQ 1,873,365 23.53
HAVN Haven Bancorp, Inc. 09/23/93 NASDAQ 4,287,464 99.68
LISB Long Island Bancorp, Inc. 04/18/94 NASDAQ 24,858,699 699.15
NYB New York Bancorp Inc. 01/28/88 NYSE 11,724,647 275.53
PEEK Peekskill Financial Corp. 12/29/95 NASDAQ 4,099,750 47.66
PKPS Poughkeepsie Savings Bank, FSB 11/19/05 NASDAQ 12,534,825 67.37
RELY Reliance Bancorp, Inc. 03/31/94 NASDAQ 9,225,739 148.77
SFED SFS Bancorp, Inc. 06/30/95 NASDAQ 1,395,000 18.14
TPNZ Tappan Zee Financial, Inc. 10/05/95 NASDAQ 1,620,062 19.44
YFCB Yonkers Financial Corporation 04/18/96 NASDAQ NA NA
ASBP ASB Financial Corp. 05/11/95 NASDAQ 1,713,960 27.21
CAFI Camco Financial Corporation NA NASDAQ 1,971,477 35.73
COFI Charter One Financial 01/22/88 NASDAQ 45,114,703 1522.62
CRCL Circle Financial Corp. 08/06/91 NASDAQ 708,096 18.59
CTZN CitFed Bancorp, Inc. 01/23/92 NASDAQ 5,651,983 194.99
CIBI Community Investors Bancorp 02/07/95 NASDAQ 701,246 10.34
EFBI Enterprise Federal Bancorp 10/17/94 NASDAQ 2,178,240 32.13
FFDF FFD Financial Corp. 04/03/96 NASDAQ NA NA
FFYF FFY Financial Corp. 06/28/93 NASDAQ 5,192,895 117.49
FFOH Fidelity Financial Of Ohio 03/04/96 NASDAQ 4,073,252 40.22
FDEF First Defiance Financial 10/02/95 NASDAQ 10,977,694 115.27
FFBZ First Federal Bancorp, Inc. 07/13/92 NASDAQ 784,558 18.63
FFHS First Franklin Corporation 01/26/88 NASDAQ 1,186,518 16.02
FFSW FirstFederal Financial Svcs 03/31/87 NASDAQ 3,275,415 74.44
GFCO Glenway Financial Corp. 11/30/90 NASDAQ 1,090,887 23.45
HHFC Harvest Home Financial Corp. 10/10/94 NASDAQ 895,182 10.74
HVFD Haverfield Corporation 03/19/85 NASDAQ 1,904,102 28.56
INBI Industrial Bancorp 08/01/95 NASDAQ 5,554,500 84.71
LONF London Financial Corporation 04/01/96 NYSE NA NA
MFFC Milton Federal Financial Corp. 10/07/94 NASDAQ 2,301,409 36.25
OHSL OHSL Financial Corp. 02/10/93 NASDAQ 1,224,468 25.10
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 9
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PTRS Potters Financial Corp. OH 113,862 11,081 11,081 0.54 0.53 5.67 5.55
PVFC PVF Capital Corp. OH 312,466 20,513 20,513 1.14 0.96 18.41 15.54
SFSL Security First Corp. OH 469,656 40,901 39,766 1.18 1.24 13.51 14.20
SHFC Seven Hills Financial Corp. OH 45,511 9,651 9,651 0.36 0.34 1.69 1.61
SSBK Strongsville Savings Bank OH 504,631 41,761 40,875 1.00 0.85 11.88 10.07
SBCN Suburban Bancorporation, Inc. OH 197,137 25,639 25,639 0.39 0.57 2.95 4.30
THIR Third Financial Corp. OH 155,687 28,257 28,257 1.40 1.25 7.85 7.04
WOFC Western Ohio Financial Corp. OH 231,505 59,669 59,669 1.42 1.04 4.72 3.44
WFCO Winton Financial Corp. OH 262,329 20,698 20,144 0.94 0.77 12.54 10.23
FFWD Wood Bancorp, Inc. OH 140,383 20,172 20,172 1.18 1.15 8.22 8.00
KFBI I(Iamath First Bancorp OR 594,269 166,860 166,860 1.23 1.23 7.70 7.70
BRFC Bridgeville Savings Bank PA 55,712 15,883 15,883 1.24 1.24 4.17 4.17
CVAL Chester Valley Bancorp Inc. PA 274,575 25,123 25,123 0.91 0.88 10.03 9.63
FSBI Fidelity Bancorp, Inc. PA 301,442 21,951 21,775 0.60 0.59 7.73 7.61
FBBC First Bell Bancorp, Inc. PA 542,600 114,272 114,272 1.54 1.53 7.44 7.40
FKFS First Keystone Financial PA 278,204 23,043 23,043 0.48 0.52 5.49 5.96
SHEN First Shenango Bancorp, Inc. PA 355,710 47,090 47,090 1.01 0.96 7.19 6.78
GAF GA Financial, Inc. PA 568,725 127,659 127,659 0.60 0.81 6.38 8.61
HARL Harleysville Savings Bank PA 273,997 19,325 19,325 0.82 0.83 11.94 12.12
LARL Laurel Capital Group, Inc. PA 193,008 20,609 20,609 1.35 1.31 13.23 12.79
MLFB MLF Bancorp, Inc. PA 1,757,048 144,607 141,343 0.69 0.72 7.43 7.74
PVSA Parkvale Financial Corporation PA 914,016 67,862 67,546 1.04 0.97 15.22 14.20
PBIX Patriot Bank Corp. PA 312,990 54,126 54,126 NA NA NA NA
PWBC PennFirst Bancorp, Inc. PA 680,434 53,430 48,680 0.61 0.61 7.46 7.42
PHFC Pittsburgh Home Financial Corp PA 195,154 11,229 11,229 NA NA NA NA
PSAB Prime Bancorp, Inc. PA 608,967 57,484 53,764 1.02 91.00 10.89 9.72
PFNC Progress Financial Corporation PA 347,991 19,224 19,075 0.86 0.67 19.35 15.06
SVRN Sovereign Bancorp, Inc. PA 8,411,108 438,461 317,818 0.80 0.74 14.71 13.69
THRD TF Financial Corporation PA 519,196 74,298 74,298 0.92 0.87 5.60 5.29
THBC Troy Hill Bancorp, Inc. PA 80,484 17,865 17,865 1.38 1.26 6.09 5.57
WVFC WVS Financial Corporation PA 240,282 36,331 36,331 1.23 1.26 8.09 8.27
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
<S> <C> <C> <C> <C>
PTRS Potters Financial Corp. 12/31/93 NASDAQ 532,809 9.32
PVFC PVF Capital Corp. 12/30/92 NASDAQ 1,548,957 28.27
SFSL Security First Corp. 01/22/88 NASDAQ 3,531,508 43.16
SHFC Seven Hills Financial Corp. 12/31/93 NASDAQ 536,472 7.78
SSBK Strongsville Savings Bank NA NASDAQ 2,530,800 50.62
SBCN Suburban Bancorporation, Inc. 09/30/93 NASDAQ 1,480,732 23.88
THIR Third Financial Corp. 03/25/93 NASDAQ 1,135,954 33.23
WOFC Western Ohio Financial Corp. 07/29/94 NASDAQ 2,412,240 56.08
WFCO Winton Financial Corp. 08/04/88 NASDAQ 1,986,152 23.83
FFWD Wood Bancorp, Inc. 08/31/93 NASDAQ 1,038,744 18.70
KFBI I(Iamath First Bancorp 10/05/95 NASDAQ 11,254,425 154.75
BRFC Bridgeville Savings Bank 10/07/94 NASDAQ 1,124,125 15.18
CVAL Chester Valley Bancorp Inc. 03/27/87 NASDAQ 1,579,803 28.83
FSBI Fidelity Bancorp, Inc. 06/24/88 NASDAQ 1,366,526 21.43
FBBC First Bell Bancorp, Inc. 06/29/95 NASDAQ 8,166,450 112.29
FKFS First Keystone Financial 01/26/95 NASDAQ 1,292,500 24.56
SHEN First Shenango Bancorp, Inc. 04/06/93 NASDAQ 2,307,808 47.45
GAF GA Financial, Inc. 03/26/96 AMSE 8,900,000 101.24
HARL Harleysville Savings Bank 08/04/87 NASDAQ 1,287,442 23.50
LARL Laurel Capital Group, Inc. 02/20/87 NASDAQ 1,508,464 23.76
MLFB MLF Bancorp, Inc. 08/11/94 NASDAQ 6,475,100 144.07
PVSA Parkvale Financial Corporation 07/16/87 NASDAQ 3,232,643 88.49
PBIX Patriot Bank Corp. 12/04/95 NASDAQ 3,497,748 44.60
PWBC PennFirst Bancorp, Inc. 06/13/90 NASDAQ 3,996,494 47.96
PHFC Pittsburgh Home Financial Corp 04/01/96 NASDAQ NA NA
PSAB Prime Bancorp, Inc. 11/21/88 NASDAQ 3,723,353 66.09
PFNC Progress Financial Corporation 07/18/83 NASDAQ 3,730,000 27.04
SVRN Sovereign Bancorp, Inc. 08/12/86 NASDAQ 47,837,843 532.20
THRD TF Financial Corporation 07/13/94 NASDAQ 4,523,374 65.02
THBC Troy Hill Bancorp, Inc. 06/27/94 NASDAQ 1,067,917 14.42
WVFC WVS Financial Corporation 11/29/93 NASDAQ 1,736,400 36.90
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 10
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YFED York Financial Corp. PA 1,048,673 92,078 92,078 0.97 0.83 11.42 9.78
AMFB American Federal Bank SC 1,345,884 109,792 101,108 1.28 1.40 16.14 17.67
CFCP Coastal Financial Corp. SC 428,352 26,162 26,162 0.95 0.90 15.65 14.86
FFCH First Financial Holdings Inc. SC 1,449,162 95,758 95,758 0.75 0.76 11.29 11.45
FSFC First Southeast Financial Corp SC 359,481 70,513 70,513 0.90 0 90 4.59 4.57
PALM Palfed, Inc. SC 623,553 52,706 50,118 0.66 0.56 8.53 7.19
SCCB S. Carolina Community Bancshrs SC 43,939 13,027 13,027 1.50 1.50 4.95 4.95
HFFC HF Financial Corp. SD 574,027 51,514 51,355 0.78 0.61 8.68 6.79
LFCT Leader Financial Corp. TN 3,177,812 255,171 255,171 1.40 1.37 17.36 17.01
TWIN Twin City Bancorp TN 102,423 14,095 14,095 1.08 0.93 7.84 6.79
CBSA Coastal Bancorp, Inc. TX 2,806,740 93,006 75,483 0.37 0.37 10.64 10.58
ETFS East Texas Financial Services TX 114,961 22,570 22,570 0.89 0.83 4.58 4.27
FBHC Fort Bend Holding Corp. TX 241,761 17,578 17,578 0.74 0.67 10.08 9.16
LOAN Horizon Bancorp TX 126,884 10,966 10,593 1.53 1.21 17.40 13.67
JXVL Jacksonville Bancorp, Inc. TX 198,081 20,741 20,741 0.74 0.74 7.20 7.20
WFSB 1st Washington Bancorp Inc. VA 795,319 47,355 47,355 0.63 0.27 11.04 4.68
BFSB Bedford Bancshares, Inc. VA 117,596 18,938 18,938 1.26 1.25 7.56 7.54
CNIT CENIT Bancorp, Inc. VA 639,812 46,729 44,955 0.40 0.48 5.57 6.71
CFFC Community Financial Corp. VA 157,766 21,575 21,575 1.34 1.34 10.20 10.20
ESX Essex Bancorp, Inc. VA 338,724 22,630 14,053 (0.39) (1.36) (10.05) (35.14)
FFFC FFVA Financial Corp. VA 517,754 84,487 82,789 1.25 1.21 7.22 7.04
FFRV Fidelity Financial Bankshares VA 321,558 27,360 27,337 0.99 0.97 12.15 11.93
GSLC Guaranty Financial Corp. VA 96,577 6,327 6,327 0.57 0.43 9.97 7.54
LIFB Life Bancorp, Inc. VA 1,204,577 153,350 147,680 0.85 0.89 5.91 6.19
VABF Virginia Beach Fed. Financial VA 624,964 41,100 41,100 0.23 0.01 3.99 0.20
VFFC Virginia First Financial VA 713,931 55,114 53,131 1.21 0.98 16.02 13.01
CASB Cascade Financial Corp. WA 326,266 20,269 20,269 0.56 0.27 8.90 4.22
FWWB First SB Of Washington Bancorp WA 594,917 153,453 153,453 NA NA NA NA
IWBK InterWest Bancorp, Inc. WA 1,368,548 94,118 91,398 1.08 0.99 14.78 13.63
MSEA Metropolitan Bancorp WA 778,165 50,882 46,026 0.70 0.76 11.08 11.97
STSA Sterling Financial Corp. WA 1,497,617 87,314 74,879 0.45 0.44 7.70 7.54
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
<S> <C> <C> <C> <C>
YFED York Financial Corp. 02/01/84 NASDAQ 6,049,983 108.90
AMFB American Federal Bank 01/19/89 NASDAQ 10,903,385 166.28
CFCP Coastal Financial Corp. 09/26/90 NASDAQ 2,716,265 42.92
FFCH First Financial Holdings Inc. 11/10/83 NASDAQ 6,365,941 132.09
FSFC First Southeast Financial Corp 10/08/93 NASDAQ 4,100,615 80.99
PALM Palfed, Inc. 12/15/85 NASDAQ 5,221,962 67.42
SCCB S. Carolina Community Bancshrs 07/07/94 NASDAQ 780,275 14.14
HFFC HF Financial Corp. 04/08/92 NASDAQ 3,054,572 43.53
LFCT Leader Financial Corp. 09/30/93 NASDAQ 9,923,812 436.65
TWIN Twin City Bancorp 01/04/95 NASDAQ 898,404 15.27
CBSA Coastal Bancorp, Inc. NA NASDAQ 4,957,870 85.23
ETFS East Texas Financial Services 01/10/95 NASDAQ 1,193,568 17.68
FBHC Fort Bend Holding Corp. 06/30/93 NASDAQ 834,703 15.02
LOAN Horizon Bancorp NA NASDAQ 1,386,757 13.87
JXVL Jacksonville Bancorp, Inc. 04/01/96 NASDAQ NA NA
WFSB 1st Washington Bancorp Inc. 05/14/87 NASDAQ 9,882,877 77.83
BFSB Bedford Bancshares, Inc. 08/22/94 NASDAQ 1,194,875 20.61
CNIT CENIT Bancorp, Inc. 08/06/92 NASDAQ 1,596,675 58.68
CFFC Community Financial Corp. 03/30/88 NASDAQ 1,269,698 22.85
ESX Essex Bancorp, Inc. NA AMSE 1,049,684 1.97
FFFC FFVA Financial Corp. 10/12/94 NASDAQ 2,712,832 79.51
FFRV Fidelity Financial Bankshares 05/01/86 NASDAQ 2,279,047 30.20
GSLC Guaranty Financial Corp. NA NASDAQ 919,168 7.12
LIFB Life Bancorp, Inc. 10/11/94 NASDAQ 10,403,125 150.85
VABF Virginia Beach Fed. Financial 11/01/80 NASDAQ 4,961,840 39.69
VFFC Virginia First Financial 01/01/78 NASDAQ 5,615,450 67.39
CASB Cascade Financial Corp. 09/16/92 NASDAQ 1,632,388 27.75
FWWB First SB Of Washington Bancorp 11/01/95 NASDAQ 10,064,918 132.10
IWBK InterWest Bancorp, Inc. NA NASDAQ 6,433,934 140.74
MSEA Metropolitan Bancorp 01/09/90 NASDAQ 3,710,205 51.72
STSA Sterling Financial Corp. NA NASDAQ 5,425,648 7053.00
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 11
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WFSL Washington Federal, Inc. WA 4,928,989 598,099 568,869 1.75 1.68 13.78 13.19
AADV Advantage Bancorp, Inc. WI 980,006 95,793 82,999 0.90 0.81 9.43 8.49
ABCW Anchor BanCorp Wisconsin WI 1,707,062 122,164 119,216 0.89 0.87 12.07 11.82
FCBF FCB Financial Corp. WI 250,658 49,077 49,077 0.99 0.96 5.01 4.83
FFEC First Fed Bncshrs Eau Claire WI 672,300 96,278 92,366 0.97 0.92 5.85 5.57
FTFC First Federal Capital Corp. WI 1,382,069 94,672 89,135 0.92 0.68 13.46 9.92
FFHC First Financial Corp. WI 5,419,203 397,571 377,355 1.28 1.25 18.92 18.38
FNGB First Northern Capital Corp. WI 572,193 72,840 72,840 0.84 0.71 6.53 5.56
HALL Hallmark Capital Corp. WI 339,283 26,524 NA 0.57 0.52 6.40 5.74
MWFD Midwest Federal Financial WI 177,164 16,541 15,756 1.11 0.90 11.34 9.22
NWEQ Northwest Equity Corp. WI 82,976 11,665 11,665 1.15 1.10 7.49 7.22
OSBF OSB Financial Corp. WI 253,714 31,952 31,952 0.17 0.30 1.34 2.30
RELI Reliance Bancshares, Inc. WI 32,260 9,616 NA 1.23 1.25 4.32 4.39
SECP Security Capital Corporation WI 3,344,642 564,530 564,530 0.89 0.94 5.09 5.34
STFR St. Francis Capital Corp. WI 1,295,580 135,162 129,106 1.31 0.90 11.70 8.04
FOBC Fed One Bancorp WV 339,562 41,140 38,958 1.00 1.00 7.74 7.74
CRZY Crazy Woman Creek Bancorp WY 37,510 5,856 5,856 0.96 0.96 6.10 6.10
TRIC Tri-County Bancorp, Inc. WY 73,436 13,094 13,094 0.94 0.91 4.69 4.53
<CAPTION>
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
<S> <C> <C> <C> <C>
WFSL Washington Federal, Inc. 11/17/82 NASDAQ 42,592,347 926.38
AADV Advantage Bancorp, Inc. 03/23/92 NASDAQ 3,449,426 112.11
ABCW Anchor BanCorp Wisconsin 07/16/92 NASDAQ 5,125,813 183.89
FCBF FCB Financial Corp. 09/24/93 NASDAQ 2,631,644 48.69
FFEC First Fed Bncshrs Eau Claire 10/12/94 NASDAQ 6,855,379 95.98
FTFC First Federal Capital Corp. 11/02/89 NASDAQ 6,297,735 125.95
FFHC First Financial Corp. 12/24/80 NASDAQ 29,885,122 638.79
FNGB First Northern Capital Corp. 12/29/83 NASDAQ 4,557,125 72.34
HALL Hallmark Capital Corp. 01/03/94 NASDAQ 1,442,950 22.00
MWFD Midwest Federal Financial 07/08/92 NASDAQ 816,440 17.55
NWEQ Northwest Equity Corp. 10/11/94 NASDAQ 980,892 10.67
OSBF OSB Financial Corp. 07/01/92 NASDAQ 1,140,772 26.81
RELI Reliance Bancshares, Inc. 04/19/96 NASDAQ NA NA
SECP Security Capital Corporation 01/03/94 NASDAQ 9,535,665 553.07
STFR St. Francis Capital Corp. 06/21/93 NASDAQ 5,856,699 159.60
FOBC Fed One Bancorp 01/19/95 NASDAQ 2,489,462 38.90
CRZY Crazy Woman Creek Bancorp 03/29/96 NASDAQ NA NA
TRIC Tri-County Bancorp, Inc. 09/30/93 NASDAQ 630,788 11.67
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 12
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED INSTITUTIONS
(EXCLUDING MUTUAL HOLDING COMPANIES)
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ----------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- ------ ------ ------ --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALL THRIFTS
AVERAGE 1,299,310 105,708 100,289 0.87 0.80 8.18 7.28
MEDIAN 312,990 37,131 36,384 0.89 0.83 7.49 6.91
HIGH 49,781,986 2,952,702 2,808,721 2.25 2.55 35.92 32.85
LOW $32,260 3,224 3,224 (1.97) (2.05) (37.85) (39.35)
AVERAGE FOR STATE
OH 750,958 67,347 65,746 0.90 0.87 7.64 7.50
AVERAGE BY REGION
MIDWEST 833,594 79,686 77,642 0.95 0.89 8.34 7.66
NEW ENGLAND 718,881 68,005 67,339 0.64 0.51 5.55 3.87
MID ATLANTIC 698,736 73,872 69,550 0.96 0.91 8.50 98.04
SOUTHEAST 779,048 60,853 50,568 0.90 0.79 9.47 7.91
SOUTHWEST 791,045 89,916 88,715 0.90 0.84 9.04 8.27
WEST 5,332,194 347,823 335,358 0.43 0.38 5.33 4.30
AVERAGE BY EXCHANGE
NYSE 14,806,579 951,108 888,446 0.75 0.63 11.60 9.91
AMEX 225,814 33,372 32,665 0.90 0.80 6.27 4.20
OTC/NASDAQ 724,050 69,998 66,321 0.88 0.81 8.11 7.31
CAPITAL ISSUES
-----------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---- -------- ------- ----
ALL THRIFTS
AVERAGE 5,918,080 128.40
MEDIAN 2,466,573 39.69
HIGH 137,204,953 3310.07
LOW 228,777 1.97
AVERAGE FOR STATE
OH 3,904,654 94.05
AVERAGE BY REGION
MIDWEST 4,676,586 106.70
NEW ENGLAND 5,113,788 84.62
MID ATLANTIC 4,302,132 84.79
SOUTHEAST 4,485,419 73.76
SOUTHWEST 6,044,550 98.30
WEST 16,475,605 407.11
AVERAGE BY EXCHANGE
NYSE 43,572,371 1227.40
AMEX 2,677,165 31.84
OTC/NASDAQ 4,348,706 82.69
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 1
Columbus, Ohio
614-766-1426
EXHIBIT 32
RECENTLY CONVERTED, SAIF-INSURED THRIFT INSTITUTIONS
PRICES AND PRICING RATIOS
<TABLE>
<CAPTION>
PRO FORMA RATIOS
---------------------------------------
Price/ Price/
Price/ Book Tang. Bk. Price/
IPO Earnings Value Value Assets
Date (X) (%) (%) (%)
---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
FMBD First Mutual Bancorp, Inc. IL 07/05/95 13.10 67.50 67.49 15.80
FTF Texarkana First Financial Corp AR 07/07/95 6.00 64.50 64.50 12.40
FKKY Frankfort First Bancorp, Inc. KY 07110/95 14.30 70.50 70.49 23.90
CCFH CCF Holding Company GA 07/12/95 11.80 71.80 71.79 14.70
CZF CitiSave Financial Corp LA 07/14195 12.50 70.90 70.87 12.20
INBI Industrial Bancorp OH 08/01195 9.40 71.90 71.90 17.20
THR Three Rivers Financial Corp. Ml 08/24195 9.80 71.00 71.71 10.60
KYF Kentucky First Bancorp, Inc KY 08/29/95 15.50 72.00 71.95 18.10
HFSA Hardin Bancorp, Inc. MO 9129195 16.40 67.80 67.84 12.20
SFIN Statewide Financial Corp. NJ 10/02195 9.40 76.40 76.67 10.00
FDEF First Defiance Financial OH 10/02/95 NA NA NA NA
DFIN Damen Financial Corp. IL 10102195 36.80 73.00 73.02 17.20
HFFB Harrodsburg First Fin Bancorp KY 10104/95 14.00 73.70 73.72 19.10
TPNZ Tappan Zee Financial, Inc. NY 10105195 12.30 74.00 74.39 15.10
SRN Southern Banc Company, Inc AL 10/05195 30.10 66.10 67.06 12.60
KFBI Klamath First Bancorp OR 10/05195 13.40 75.50 75.55 21.20
CSBF CSB Financial Group, Inc. IL 10/09195 14.30 66.50 66.50 19.40
AFCB Affiliated Community Bancorp MA 10119195 NA NA NA NA
BFD BostonFed Bancorp, Inc. MA 10/24195 93.40 74.50 74.48 10.00
ANBK American National Bancorp MD 10131/95 NA NA NA NA
FWW First SB Of Washington Bancorp WA 11101/95 13.70 73.10 73.08 18.20
PBIX Patriot Bank Corp. PA 12104195 18.00 71.00 70.99 14.10
PDB Piedmont Bancorp, Inc. NC 12/08195 14.10 71.50 71.50 21.80
JOAC Joachim Bancorp, Inc. MO 12/28195 18.80 72.00 71.99 19.80
CLAS Classic Bancshares, Inc. KY 12129195 17.20 69.30 69.29 17.80
HFNC HFNC Financial Corp. NC 12129195 15.80 71.20 71.22 22.50
CBSB Charter Financial, Inc. IL 12129195 NA NA NA NA
PEEK Peekskill Financial Corp. NY 12129/95 14.10 70.80 70.81 20.80
FFBA First Colorado Bancorp, Inc. CO 1102196 NA NA NA NA
LFBI Little Falls Bancorp, Inc. NJ 1105196 31.90 71.40 71.43 13.40
BYFC Broadway Financial Corp. CA 1109796 13.30 68.50 68.48 8.00
FFOH Fidelity Financial Of Ohio OH 03/04/96 NA NA NA NA
FFFD North Central Bancshares, Inc. IA 3121196 NA NA NA NA
CFTP Community Federal Bancorp MS 03126/96 14.00 71.40 71.35 22.20
GAF GA Financial, Inc. PA 3126196 13.80 70.50 70.52 15.70
<CAPTION>
CURRENT RATIOS
---------------------------------------
Price/ Price/
Price/ Book Tang. Bk. Price/
Earnings Value Value Assets
(X) (%) (%) (%)
--- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
FMBD First Mutual Bancorp, Inc. IL 17.65 72.51 72.51 18.31
FTF Texarkana First Financial Corp AR 10.28 92.02 92.02 18.97
FKKY Frankfort First Bancorp, Inc. KY 19.58 75.27 75.27 29.24
CCFH CCF Holding Company GA 17.97 74.87 74.87 16.17
CZF CitiSave Financial Corp LA 14.18 90.71 90.77 17.85
INBI Industrial Bancorp OH 16.00 142.10 142.10 27.17
THR Three Rivers Financial Corp. MI 20.31 85.70 86.09 13.13
KYF Kentucky First Bancorp, Inc KY 14.40 92.72 92.72 21.91
HFSA Hardin Bancorp, Inc. MO 19.17 75.91 75.91 14.59
SFIN Statewide Financial Corp. NJ NA 88.37 88.63 11.43
FDEF First Defiance Financial OH 17.71 86.95 86.95 22.08
DFIN Damen Financial Corp. IL 18.06 80.61 80.61 19.49
HFFB Harrodsburg First Fin Bancorp KY 23.05 95.22 95.22 29.61
TPNZ Tappan Zee Financial, Inc. NY 18.75 86.96 86.96 16.93
SRN Southern Banc Company, Inc AL NA 83.76 84.69 17.08
KFBI Klamath First Bancorp OR NA 91.03 91.03 25.57
CSBF CSB Financial Group, Inc. IL NA 73.17 73.17 22.59
AFCB Affiliated Community Bancorp MA 10.21 87.19 87.88 9.05
BFD BostonFed Bancorp, Inc. MA 17.65 80.43 80.43 11.67
ANBK American National Bancorp MD 22.44 76.61 76.61 8.95
FWW First SB Of Washington Bancorp WA NA 95.90 95.90 24.74
PBIX Patriot Bank Corp. PA 18.75 82.42 82.42 14.25
PDB Piedmont Bancorp, Inc. NC 16.41 93.42 93.42 27.81
JOAC Joachim Bancorp, Inc. MO NA 87.00 87.00 25.57
CLAS Classic Bancshares, Inc. KY NA 76.22 76.22 21.95
HFNC HFNC Financial Corp. NC NA 101.52 101.52 26.68
CBSB Charter Financial, Inc. IL NA 88.32 90.78 19.04
PEEK Peekskill Financial Corp. NY 15.97 73.11 73.11 24.34
FFBA First Colorado Bancorp, Inc. CO NA 106.07 107.41 17.17
LFBI Little Falls Bancorp, Inc. NJ NA 67.50 73.42 10.26
BYFC Broadway Financial Corp. CA NA NA NA NA
FFOH Fidelity Financial Of Ohio OH NA 80.19 80.19 16.33
FFFD North Central Bancshares, Inc. IA NA NA NA NA
CFTP Community Federal Bancorp MS NA NA NA NA
GAF GA Financial, Inc. PA NA 76.71 76.71 17.21
<CAPTION>
PRICES AND TREND FROM IPO DATE
------------------------------------------------------------------
1 Day 1 Week 1 Mo.
IPO After After After
Price IPO % IPO % IPO %
($) ($) Change ($) Change ($) Change
--- --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FMBD First Mutual Bancorp, Inc. IL 10.00 11.13 11.25 11.63 16.25 12.06 20.63
FTF Texarkana First Financial Corp AR 10.00 12.88 28.75 13.13 31.25 12.50 25.00
FKKY Frankfort First Bancorp, Inc. KY 10.00 12.25 22.50 12.06 20.63 12.00 20.00
CCFH CCF Holding Company GA 10.00 11.56 15.63 10.75 7.50 11.00 10.00
CZF CitiSave Financial Corp LA 10.00 13.50 35.00 13.00 30.00 13.25 32.50
INBI Industrial Bancorp OH 10.00 12.13 21.25 12.56 25.63 13.13 31.25
THR Three Rivers Financial Corp. MI 10.00 11.38 13.75 11.75 17.50 11.63 16.25
KYF Kentucky First Bancorp, Inc KY 10.00 12.00 20.00 12.50 25.00 12.50 25.00
HFSA Hardin Bancorp, Inc. MO 10.00 12.19 21.88 12.25 22.50 12.75 27.50
SFIN Statewide Financial Corp. NJ 10.00 13.25 32.50 13.13 31.25 12.63 26.25
FDEF First Defiance Financial OH NA 10.44 NA 10.31 NA 10.00 NA
DFIN Damen Financial Corp. IL 10.00 11.50 15.00 11.38 13.75 11.75 17.50
HFFB Harrodsburg First Fin Bancorp KY 10.00 12.50 25.00 12.38 23.75 13.13 31.25
TPNZ Tappan Zee Financial, Inc. NY 10.00 11.63 16.25 11.50 15.00 12.00 20.00
SRN Southern Banc Company, Inc AL 10.00 12.38 23.75 12.50 25.00 12.50 25.00
KFBI Klamath First Bancorp OR 10.00 12.50 25.00 12.88 28.75 12.88 28.75
CSBF CSB Financial Group, Inc. IL 8.00 9.00 12.50 9.25 15.63 9.13 14.06
AFCB Affiliated Community Bancorp MA NA 16.75 NA 16.38 NA 17.38 NA
BFD BostonFed Bancorp, Inc. MA 10.00 12.00 20.00 12.00 20.00 11.75 17.50
ANBK American National Bancorp MD NA 9.63 NA 9.63 NA 9.63 NA
FWW First SB Of Washington Bancorp WA 10.00 12.44 24.40 12.69 26.90 13.13 31.25
PBIX Patriot Bank Corp. PA 10.00 12.75 27.50 12.75 27.50 12.88 28.75
PDB Piedmont Bancorp, Inc. NC 10.00 NA NA 12.88 28.75 12.50 25.00
JOAC Joachim Bancorp, Inc. MO 10.00 13.50 35.00 13.00 30.00 12.50 25.00
CLAS Classic Bancshares, Inc. KY 10.00 11.75 17.50 11.75 17.50 11.50 15.00
HFNC HFNC Financial Corp. NC 10.00 13.13 31.25 13.38 33.75 13.25 32.50
CBSB Charter Financial, Inc. IL NA 10.81 NA 10.88 NA 11.38 NA
PEEK Peekskill Financial Corp. NY 10.00 12.13 21.25 11.75 17.50 11.25 12.50
FFBA First Colorado Bancorp, Inc. CO NA 11.44 NA 11.63 NA 12.00 NA
LFBI Little Falls Bancorp, Inc. NJ 10.00 11.31 13.13 11.38 13.75 11.00 10.00
BYFC Broadway Financial Corp. CA 10.00 10.38 3.75 10.25 2.50 10.25 2.50
FFOH Fidelity Financial Of Ohio OH NA 10.50 NA 10.00 NA 10.13 NA
FFFD North Central Bancshares, Inc. IA NA 10.88 NA 10.69 NA 10.44 NA
CFTP Community Federal Bancorp MS 10.00 12.63 26.25 12.88 28.75 12.63 26.25
GAF GA Financial, Inc. PA 10.00 11.38 13.75 11.50 15.00 11.00 10.00
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 2
Columbus, Ohio
614-766-1426
RECENTLY CONVERTED, SAIF-INSURED THRIFT INSTITUTIONS
PRICES AND PRICING RATIOS
<TABLE>
<CAPTION>
PRO FORMA RATIOS
-------------------------------------
Price/ Price/
Price/ Book Tang. Bk. Price/
IPO Earnings Value Value Assets
Date (X) (%) (%) (%)
---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
PFFB PFF Bancorp, Inc. CA 3129196 26.60 69.00 68.99 9.50
CRZY Crazy Woman Creek Bancorp WY 03/29196 16.40 69.70 69.72 22.00
SSM Stone Street Bancorp, Inc. NC 04/01/96 19.70 74.90 74.92 24.40
PHFC Pittsburgh Home Financial Corp PA 04101/96 17.50 72.80 72.83 12.20
SSB Scotland Bancorp, Inc NC 04/01/96 16.20 74.80 74.83 24.20
WHG WHG Bancshares Corp. MD 4101196 15.50 71.10 71.08 16.00
FBER 1st Bergen Bancorp NJ 04/01196 21.70 74.80 74.81 12.50
LONF London Financial Corporation OH 04/01/96 22.40 68.50 68.46 13.40
JXVL Jacksonville Bancorp, Inc. TX 04101/96 NA NA NA NA
AMFC AMB Financial Corp. IN 4101196 18.20 70.80 70.83 14.00
FFDF FFD Financial Corp. OH 04/03196 17.40 69.90 69.87 19.80
GSFC Green Street Financial Corp. NC 04/04/96 14.80 71.00 71.03 22.20
YFCB Yonkers Financial Corporation NY 04118/96 16.10 74.90 74.93 14.60
RELI Reliance Bancshares, Inc. WI 04/19196 22.50 72.50 72.47 38.90
CBK Citizens First Financial Corp. IL 05/01196 15.30 73.10 73.10 11.00
FFBH First Federal Bancshares of AR AR 5103196 9.80 63.40 63.39 10.20
<CAPTION>
CURRENT RATIOS
--------------------------------------
Price/ Price/
Price/ Book Tang. Bk. Price/
Earnings Value Value Assets
(X) (%) (%) (%)
--- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
PFFB PFF Bancorp, Inc. CA NA 75.50 75.50 10.87
CRZY Crazy Woman Creek Bancorp WY NA NA NA NA
SSM Stone Street Bancorp, Inc. NC NA NA NA NA
PHFC Pittsburgh Home Financial Corp PA NA NA NA NA
SSB Scotland Bancorp, Inc NC NA NA NA NA
WHG WHG Bancshares Corp. MD NA NA NA NA
FBER 1st Bergen Bancorp NJ NA NA NA NA
LONF London Financial Corporation OH NA NA NA NA
JXVL Jacksonville Bancorp, Inc. TX NA NA NA NA
AMFC AMB Financial Corp. IN NA NA NA NA
FFDF FFD Financial Corp. OH NA NA NA NA
GSFC Green Street Financial Corp. NC NA NA NA NA
YFCB Yonkers Financial Corporation NY NA NA NA NA
RELI Reliance Bancshares, Inc. WI NA NA NA NA
CBK Citizens First Financial Corp. IL NA NA NA NA
FFBH First Federal Bancshares of AR AR NA NA NA NA
<CAPTION>
PRICES AND TREND FROM IPO DATE
------------------------------------------------------------------
1 Day 1 Week 1 Mo.
IPO After After After
Price IPO % IPO % IPO %
($) ($) Change ($) Change ($) Change
--- --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PFFB PFF Bancorp, Inc. CA 10.00 11.38 13.75 11.63 16.25 11.63 16.25
CRZY Crazy Woman Creek Bancorp WY 10.00 NA NA 10.75 7.50 10.50 5.00
SSM Stone Street Bancorp, Inc. NC 15.00 17.50 16.67 18.00 20.00 17.75 18.33
PHFC Pittsburgh Home Financial Corp PA 10.00 11.00 10.00 11.00 10.00 10.63 6.25
SSB Scotland Bancorp, Inc NC 10.00 12.25 22.50 12.50 25.00 11.75 17.50
WHG WHG Bancshares Corp. MD 10.00 11.13 11.25 11.06 10.60 11.25 12.50
FBER 1st Bergen Bancorp NJ 10.00 10.00 0.00 9.50 (5.00) 9.63 (3.75)
LONF London Financial Corporation OH 10.00 10.81 8.12 10.63 6.25 10.13 1.25
JXVL Jacksonville Bancorp, Inc. TX NA 11.11 NA 9.63 NA 9.88 NA
AMFC AMB Financial Corp. IN 10.00 10.50 5.00 10.50 5.00 10.50 5.00
FFDF FFD Financial Corp. OH 10.00 10.50 5.00 10.50 5.00 10.31 3.10
GSFC Green Street Financial Corp. NC 10.00 12.88 28.75 12.25 22.50 12.31 23.10
YFCB Yonkers Financial Corporation NY 10.00 9.75 (2.50) 10.13 1.25 10.00 0.00
RELI Reliance Bancshares, Inc. WI 8.00 8.38 4.69 8.25 3.13 8.00 0.00
CBK Citizens First Financial Corp. IL 10.00 10.50 5.00 10.00 0.00 NA NA
FFBH First Federal Bancshares of AR AR 10.00 13.00 30.00 13.25 32.50 NA NA
</TABLE>
<PAGE>
EXHIBIT 33
Page 1
KELLER & COMPANY
Columbus, Ohio
614-766-1426
THRIFT ACQUISITIONS AND PENDING ACQUISITIONS
COUNTY, CITY OR MARKET AREA OF FOUNDATION SAVINGS BANK
1. Target institution:
Name Brentwood Financial Corp.
City and state Cincinnati, OH
Asset size $100,300,000
Acquiring institution:
Name PNC Bank Corp.
City and state Pittsburgh, PA
Asset size $64,000,000,000
Transaction:
Purchase price $21,700,000
Price/earnings (x) 21.00
Price/book value (%) 153.00
Date completed 03/03/95
2. Target institution:
Name Circle Financial Corp.
City and state Sharonville, OH
Asset size $229,400,000
Acquiring institution:
Name . Fidelity Financial of Ohio, Inc.
City and state Cincinnati, OH
Asset size $249,400,000
Transaction:
Purchase price $27,000,000
Price/earnings (x) 25.9
Price/book value (%) 111.0
Date completed Pending (announced 4/29/96)
<PAGE>
Page 2
KELLER & COMPANY
Columbus, Ohio
614-766-1426
THRIFT ACQUISITIONS AND PENDING ACQUISITIONS
COUNTY, CITY OR MARKET AREA OF FOUNDATION SAVINGS BANK
3. Target institution:
Name Kentucky Enterprise Bancorp, Inc.
City and state Newport, KY
Asset size $276,100,000
Acquiring institution:
Name Fifth Third Bancorp
City and state Cincinnati, OH
Asset size $18,900,000,000
Transaction:
Purchase price $94,000,000
Price/earnings (x) NM
Price/book value (%) 176.0
Date completed 3/15/96
4. Target institution:
Name PSB Holdings Corp.
City and state Xenia, Ohio
Asset size $174,800,000
Acquiring institution:
Name CitFed Bancorp, Inc.
City and state Dayton, Ohio
Asset size $2,300,000,000
Transaction:
Purchase price $56,000,000
Price/earnings (x) NM
Price/book value (%) 175.0
Date completed 08/31/95
<PAGE>
EXHIBIT 34
KELLER & COMPANY
Columbus, Ohio
614-766-1426
THRIFT STOCK PRICES AND PRICING RATIOS
PUBLICLY-TRADED, SAIF INSURED MUTUAL HOLDING COMPANIES
AS OF MAY 14, 1996
<TABLE>
<CAPTION>
PER SHARE
-------------------------------------------------
Latest All Time All Time Monthly Quarterly
Price High Low Change Change
State Exchange ($) ($) ($) (%) (%)
----- -------- -------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PFSL Pocahontas FS&LA, MHC AR NASDAQ 15.000 17.250 9.500 3.45 -6.25
CMSV Community Savings, MHC FL NASDAQ 15.000 18.250 10.000 0.00 -5.51
FFFL Fidelity fSB of Florida, MHC FL NASDAQ 14.500 17.000 9.091 11.54 0.00
HARB Harbor Federal Savings Bk, MHC FL NASDAQ 27.250 29.250 11.875 0.93 -0.91
FFSX First Fed SB of Siouxland, MHC IA NASDAQ 24.750 28.625 9.063 1.02 1.02
WCFB Webster City Federal SB, MHC IA NASDAQ 13.000 13.500 8.813 1.96 5.05
JXSB Jacksonville Savings Bank, MHC IL NASDAQ 13.250 14.250 10.000 0.00 -1.85
LFED Leeds Federal Savings Bk, MHC MD NASDAQ 13.625 16.750 9.875 -2.68 -4.39
GFED Guaranty Federal SB, MHC MO NASDAQ 11.500 12.500 8.000 -4.17 -2.13
PULB Pulaski Bank, Savings Bk, MHC MO NASDAQ 15.500 16.500 10.500 3.33 -1.59
FSLA First Savings Bank, MHC NJ NASDAQ 15.250 17.500 5.579 -3.17 -1.61
FSNJ First Savings Bk of NJ, MHC NJ NASDAQ 13.875 19.500 10.750 -2.63 -13.28
SBFL SB of the Finger Lakes, MHC NY NASDAQ 16.000 16.750 8.125 -4.48 0.00
WAYN Wayne Savings & Loan Co. MHC OH NASDAQ 21.000 23.000 11.818 1.20 -5.62
CMSB Commonwealth Savings Bank, MHC PA NASDAQ 21.750 24.875 11.625 8.07 -8.90
GDVS Greater Delaware Valley SB,MHC PA NASDAQ 10.625 13.000 9.375 -1.16 -11.46
HARS Harris Savings Bank, MHC PA NASDAQ 16.250 20.500 12.750 -8.45 -12.16
NWSB Northwest Savings Bank, MHC PA NASDAQ 24.750 27.000 14.750 10.61 7.61
RVSB Riverview Savings Bank, MHC WA NASDAQ 15.250 17.000 9.711 -4.69 0.15
ALL MUTUAL HOLDING COMPANIES
AVE RAGE 16.743 19.105 10.06 0.56 -3.25
MEDIAN 15.250 17.250 9.88 0.00 -1.85
HIGH 27.250 29.250 14.75 11.54 7.61
LOW 10.625 12.500 5.58 -8.45 -13.28
<CAPTION>
PER SHARE PRICING RATIOS
---------------------------- ----------------------------------------
Book 12 Month Price/ Price/ Price/ Price/Core
Value Assets Div. Earinings Bk.Value Assets Earnings
State Exchange ($) ($) ($) (X) (%) (%) (X)
----- -------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PFSL Pocahontas FS&LA, MHC AR NASDAQ 13.64 229.43 0.67 12.40 109.97 6.54 12.10
CMSV Community Savings, MHC FL NASDAQ 15.36 120.90 0.48 15.79 97.66 12.41 18.07
FFFL Fidelity fSB of Florida, MHC FL NASDAQ 12.31 116.05 0.56 19.86 117.79 12.49 19.86
HARB Harbor Federal Savings Bk, MHC FL NASDAQ 16.78 189.40 0.98 12.62 162.40 14.39 12.67
FFSX First Fed SB of Siouxland, MHC IA NASDAQ 21.52 255.82 0.69 15.18 115.01 9.67 16.50
WCFB Webster City Federal SB, MHC IA NASDAQ 10.32 46.31 0.80 25.00 125.97 28.07 25.49
JXSB Jacksonville Savings Bank, MHC IL NASDAQ 13.39 111.01 NA NA 98.95 11.94 NA
LFED Leeds Federal Savings Bk, MHC IL NASDAQ 12.65 77.34 0.63 17.03 107.71 17.62 16.82
GFED Guaranty Federal SB, MHC MO NASDAQ 8.42 59.63 NA NA 136.58 19.29 NA
PULB Pulaski Bank, Savings Bk, MHC MO NASDAQ 10.67 85.00 0.80 24.60 145.27 18.24 28.70
FSLA First Savings Bank, MHC NJ NASDAQ 13.98 147.33 0.37 12.60 109.08 10.35 13.38
FSNJ First Savings Bk of NJ, MHC NJ NASDAQ 17.70 217.75 NA NA 78.39 6.37 NA
SBFL SB of the Finger Lakes, MHC NY NASDAQ 11.87 95.06 NA NA 134.79 16.83 NA
WAYN Wayne Savings & Loan Co. MHC OH NASDAQ 15.84 173.03 1.08 21.88 132.58 12.14 22.83
CMSB Commonwealth Savings Bank, MHC PA NASDAQ 15.92 191.83 0.50 16.86 136.62 11.34 18.91
GDVS Greater Delaware Valley SB,MHC PA NASDAQ 8.90 73.48 NA NA 119.38 14.46 NA
HARS Harris Savings Bank, MHC PA NASDAQ 13.51 112.03 0.51 19.35 120.28 14.51 19.35
NWSB Northwest Savings Bank, MHC PA NASDAQ 16.38 151.22 0.60 16.61 151.10 16.37 16.39
RVSB Riverview Savings Bank, MHC WA NASDAQ 10.48 95.01 0.18 13.99 145.52 16.05 14.52
ALL MUTUAL HOLDING COMPANIES
AVE RAGE 13.67 134.09 0.63 17.41 123.42 14.16 18.26
MEDIAN 13.51 116.05 0.62 16.74 120.28 14.39 17.45
HIGH 21.52 255.82 1.08 25.00 162.40 28.07 28.70
LOW 8.42 46.31 0.18 12.40 78.39 6.37 2.10
</TABLE>
<PAGE>
EXHIBIT 35
KELLER & COMPANY
Columbus, Ohio
614-766-1426
KEY FINANCIAL DATA AND RATIOS
PUBLICLY-TRADED, SAIF INSURED MUTUAL HOLDING COMPANIES
AS OF MAY 14,1996
<TABLE>
<CAPTION>
ASSETS AND EQUITY PROFITABILITY
---------------------------------- ------------------------------------
Total Total Total Core Core
Assets Equity Tang. Equity ROAA ROAA ROAE ROAE
State ($000) ($000) ($000) (%) (%) (%) (%)
----- --------- ------- -------- ----- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PFSL Pocahontas FS&LA, MHC AR 369,379 21,964 21,964 0.56 0.58 9.45 9.70
CMSV Community Savings, MHC FL 587,064 74,587 74,587 0.82 0.71 6.32 5.49
FFFL Fidelity FSB of Florida, MHC FL 779,620 81,266 80,209 0.65 0.65 6.22 6.22
HARB Harbor Federal Savings Bk, MHC FL 932,858 82,640 82,640 1.19 1.18 13.70 13.63
FFSX First Fed SB of Siouxland, MHC IA 436,519 36,727 36,547 0.64 0.59 7.78 7.16
WCFB Webster City Federal SB, MHC IA 97,258 21,675 21,675 1.11 1.09 5.04 4.93
JXSB Jacksonville Savings Bank, MHC IL 138,766 16,734 16,732 0.41 0.32 3.83 2.95
LFED Leeds Federal Savings Bk, MHC MD 266,658 43,610 43,610 1.03 1.04 6.32 6.37
GFED Guaranty Federal SB, MHC MO 186,357 26,303 26,303 0.71 0.71 5.22 5.28
PULB Pulaski Bank, Savings Bk, MHC MO 177,984 22,339 22,339 0.72 0.62 6.09 5.18
FSLA First Savings Bank, MHC NJ 959,356 91,060 79,028 0.87 0.82 9 48 8.97
FSNJ First Savings Bk of NJ, MHC NJ 657,075 53,411 53,411 0.04 0.36 0.47 4.02
SBFL SB of the Finger Lakes, MHC NY 169,685 21,188 21,188 0.13 0.29 1.06 2.46
WAYN Wayne Savings & Loan Co. MHC OH 245,892 22,516 22,516 0.56 0.53 6.13 5.85
CMSB Commonwealth Savings Bank, MHC PA 1,657,690 137,683 120,977 0.78 0.70 8.41 7.52
GDVS Greater Delaware Valley SB, MHC PA 240,468 29,123 29,123 0.48 0.48 4.10 4.10
HARS Harris Savings Bank, MHC PA 1,255,864 151,459 141,473 0.81 0.81 6.34 6.32
NWSB Northwest Savings Bank, MHC PA 1,767,455 188,638 186,334 1.06 1.07 9.34 9.47
RVSB Riverview Savings Bank, MHC WA 204,794 22,593 19,856 1.21 1.16 11.26 10.84
ALL MUTUAL HOLDING COMPANIES
AVERAGE 585,829 60,290 57,922 0.73 0.72 6.66 6.66
MEDIAN 369,379 36,727 36,547 0.72 0.70 6.32 6.22
HIGH 1,767,455 188,638 186,334 1.21 1.18 13.70 13.63
LOW 97,258 16,734 16,732 0.04 0.29 0.47 2.46
<CAPTION>
CAPITAL ISSUES
------------------------------------------------
Number of Mkt. Value
IPO Shares of Shares
Date Exchange Outstg. ($M)
---------- -------- ------------ ----------
<S> <C> <C> <C> <C>
PFSL Pocahontas FS&LA, MHC 04/05/94 NASDAQ 1,610,000 25.36
CMSV Community Savings, MHC 10/24/94 NASDAQ 4,855,627 82.55
FFFL Fidelity FSB of Florida, MHC 01/07/94 NASDAQ 6,717,821 109.16
HARB Harbor Federal Savings Bk, MHC 01/06/94 NASDAQ 4,925,233 135.44
FFSX First Fed SB of Siouxland, MHC 07/13/92 NASDAQ 1,706,345 41.81
WCFB Webster City Federal SB, MHC 08/15/94 NASDAQ 2,100,000 25.73
JXSB Jacksonville Savings Bank, MHC 04/21/95 NASDAQ 1,250,000 17.34
LFED Leeds Federal Savings Bk, MHC 05/02/94 NASDAQ 3,448,000 51.72
GFED Guaranty Federal SB, MHC 04/10/95 NASDAQ 3,125,000 37.11
PULB Pulaski Bank, Savings Bk, MHC 05/11/94 NASDAQ 2,094,000 31.41
FSLA First Savings Bank, MHC 07/10/92 NASDAQ 6,511,756 100.93
FSNJ First Savings Bk of NJ, MHC 01/09/95 NASDAQ 3,017,500 52.05
SBFL SB of the Finger Lakes, MHC 11/11/94 NASDAQ 1,785,000 28.11
WAYN Wayne Savings & Loan Co. MHC 06/25/93 NASDAQ 1,421,094 32.69
CMSB Commonwealth Savings Bank, MHC 01/24/94 NASDAQ 8,641,558 196.60
GDVS Greater Delaware Valley SB, MHC 03/03/95 NASDAQ 3,272,500 39.27
HARS Harris Savings Bank, MHC 01/25/94 NASDAQ 11,210,400 224.21
NWSB Northwest Savings Bank, MHC 11/07/94 NASDAQ 11,688,000 260.06
RVSB Riverview Savings Bank, MHC 10/26/93 NASDAQ 2,155,390 31.35
ALL MUTUAL HOLDING COMPANIES
AVERAGE 4,291,328 80.15
MEDIAN 3,125,000 41.81
HIGH 11,688,000 260.06
LOW 1,250,000 17.34
</TABLE>
<PAGE>
EXHIBIT 36
KELLER & COMPANY PAGE 1
Columbus, Ohio
614-766-1426
FOUNDATION SAVINGS BANK
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
General Parameters:
States: IA IL IN KY MI OH PA WI WV
lPO Date: Less Than or Equal to 12/31/94
Asset size: Less Than or Equal to $350,000
<TABLE>
<CAPTION>
Total Total Net
Cash & 1-4 Fam. Net Loans Borrowed
Total Invest./ MBS/ Loans/ Loans/ & MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
-------- ------- -------- ------- ------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOUNDATION SAVINGS BANK -- 31,738 14.61 15.62 60.65 67.30 82.92 2.65 8.73
- -----------------------------------------------------------------------------------------------------------------------------------
DEFINED PARAMETERS FOR Prior to Less Than 5.00- Less Than 25.00- 40.00- 55.00- Less Than 7.00-
INCLUSION IN COMPARABLE GROUP 12/31/94 350,000 40.00 30.00 80.00 90.00 95.00 30.00 22.00
- -----------------------------------------------------------------------------------------------------------------------------------
SHFC Seven Hills Financial Corp. OH 12/31/93 45,511 6.71 14.44 60.43 77.18 91.62 0.22 21.21
BRFC Bridgeville Savings Bank PA 10/07/94 55,712 24.79 34.79 30.72 36.65 71.44 9.54 28.51
HHFC Harvest Home Financial Corp. OH 10/10/94 73,005 35.24 8.00 46.66 54.74 62.74 0.00 17.71
HZFS Horizon Financial Svcs Corp. IA 06/30/94 73,105 30.63 0.00 42.61 66.37 66.37 13.25 12.12
SFFC State Fed Financial Corporation IA 01/05/94 74,182 12.61 0.00 55.45 82.23 82.23 17.52 20.12
THBC Troy Hill Bancorp. Inc. PA 06/27/94 80,484 10.63 7.49 57.25 79.92 87.41 10.66 22.20
GFSB GFS Bancorp, Inc. IA 01/06/94 80,913 10.91 4.37 55.37 83.34 87.71 23.89 12.04
NWEQ Northwest Equity Corp. WI 10/11/94 82,976 7.30 6.65 57.48 82.92 89.56 17.48 14.06
FFBI First Financial Bancorp, Inc IL 10/04/93 88,615 16.80 8.87 44.26 72.00 80.87 11.28 8.88
INCB Indiana Community Bank, IN 12/15/94 90,614 12.67 3.78 41.46 80.01 83.79 0.00 15.60
PTRS Potters Financial Corp. OH 12/31/93 113,862 28.33 24.74 31.72 43.98 68.71 1.28 9.73
NBSI North Bancshares, Inc. IL 12/21/93 114,337 39.19 7.84 44.79 50.92 58.76 14.65 17.34
MIFC Mid-Iowa Financial Corp. IA 10/14/92 119,395 22.91 25.53 38.65 49.86 75.38 15.91 9.02
MWBI Midwest Bancshares, Inc. IA 11/12/92 136,809 19.40 22.17 45.33 55.51 77.68 17.40 6.94
FFWD Wood Bancorp, Inc. OH 08/31/93 140,383 16.58 4.02 64.26 77.91 81.93 4.93 14.37
FFWC FFW Corp. IN 04/05/93 148,892 17.60 12.99 44.22 67.24 80.23 26.39 10.80
MFFC Milton Federal Financial Corp. OH 10/07/94 171,708 23.99 11.67 53.45 61.87 73.54 6.53 19.98
FFBZ First Federal Bancorp, Inc. OH 07/13/92 173,191 7.45 1.03 57.62 87.70 88.73 14.69 7.81
MWFD Midwest Federal Financial WI 07/08/92 177,164 20.07 5.93 33.85 69.86 75.80 9.03 9.34
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 2
Columbus, Ohio
614-766-1426
FOUNDATION SAVINGS BANK
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
General Parameters:
States: IA IL IN KY Ml OH PA WI WV
lPO Date: Less Than or Equal to 12/31/94
Asset size: Less Than or Equal to $350,000 Total
<TABLE>
<CAPTION>
Total Total Net
Cash & 1-4 Fam. Net Loans Borrowed
Total Invest./ MBS/ Loans/ Loans/ & MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
-------- ------- -------- ------- ------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOUNDATION SAVINGS BANK -- 31,738 14.61 15.62 60.65 67.30 82.92 2.65 8.73
- -----------------------------------------------------------------------------------------------------------------------------------
DEFINED PARAMETERS FOR Prior to Less Than 5.00- Less Than 25.00- 40.00- 55.00- Less Than 7.00-
INCLUSION IN COMPARABLE GROUP 12/31/94 350,000 40.00 30.00 80.00 90.00 95.00 30.00 22.00
- -----------------------------------------------------------------------------------------------------------------------------------
MARN Marion Capital Holdings IN 03/18/93 179,329 15.42 0.02 47.46 77.86 77.89 3.76 24.00
LARL Laurel Capital Group, Inc. PA 02/20/87 193,008 15.92 7.81 58.96 74.40 82.21 2.24 10.68
SBCN Suburban Bancorporation, Inc. OH 09/30/93 197,137 6.99 15.29 53.72 75.47 90.76 21.65 13.01
MFBC MFB Corp. IN 03/25/94 200,895 30.47 2.70 61.58 65.29 67.99 4.73 19.31
CBCO CB Bancorp, Inc. IN 12/28/92 204,825 46.59 4.57 37.17 44.81 49.38 22.03 9.16
OHSL OHSL Financial Corp. OH 02/10/93 205,462 13.53 13.54 49.05 70.03 83.57 7.35 12.42
EFBI Enterprise Federal Bancorp OH 10/17/94 207,680 24.37 15.38 44.24 58.61 73.99 19.26 15.58
FFHS First Franklin Corporation OH 01/26/88 216,124 13.85 18.31 51.63 65.87 84.18 3.38 9.50
WOFC Western Ohio Financial Corp OH 07/29/94 231,50 520.42 12.83 56.70 65.00 77.83 13.62 25.77
WVFC WVS Financial Corporation PA 11/29/93 240,28 233.38 6.22 46.72 58.56 64.78 11.24 15.12
FCBF FCB Financial Corp WI 09/24/93 250,658 11.07 4.27 53.17 82.16 86.43 18.57 19.58
OSBF OSB Financial Corp WI 07/01/92 253,714 29.66 1.57 49.92 66.45 68.02 23.10 12.59
WFCO Winton Financial Corp OH 08/04/88 262,329 NA NA 36.67 82.68 NA 11.59 7.89
FBCV 1ST Bancorp IN 04/07/87 273,122 24.80 1.06 59.62 70.53 71.60 39.48 7.88
GFCO Glenway Financial Corp. OH 11/30/90 273,890 11.27 8.58 64.58 78.39 86.97 7.14 9.67
HARL Harleysville Savings Bank PA 08/04/87 273,997 16.67 4.15 75.05 77.03 81.19 4.95 7.05
CVAL Chester Valley Bancorp Inc. PA 03/27/87 274,575 17.48 0.67 52.76 79.05 79.72 5.84 9.15
FFED Fidelity Federal Bancorp IN 08/31/87 280,138 4.64 4.44 47.10 86.02 90.46 25.12 5.08
PFDC Peoples Bancorp IN 07/07/87 280,778 20.98 0.25 71.14 77.50 77.76 0.36 15.26
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 3
Columbus, Ohio
614-766-1426
FOUNDATION SAVINGS BANK
COMPARABLE GROUP SELECTION
BALANCE SHEET PARAMETERS
General Parameters:
States: IA IL IN KY Ml OH PA WI WV
lPO Date: Less Than or Equal to 12/31/94
Asset size: Less Than or Equal to $350,000 Total
<TABLE>
<CAPTION>
Total Total Net
Cash & 1-4 Fam. Net Loans Borrowed
Total Invest./ MBS/ Loans/ Loans/ & MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
-------- ------- -------- ------- ------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOUNDATION SAVINGS BANK -- 31,738 14.61 15.62 60.65 67.30 82.92 2.65 8.73
- -----------------------------------------------------------------------------------------------------------------------------------
DEFINED PARAMETERS FOR Prior to Less Than 5.00- Less Than 25.00- 40.00- 55.00- Less Than 7.00-
INCLUSION IN COMPARABLE GROUP 12/31/94 350,000 40.00 30.00 80.00 90.00 95.00 30.00 22.00
- -----------------------------------------------------------------------------------------------------------------------------------
FSBI Fidelity Bancorp, Inc. PA 06/24/88 301,442 26.73 27.05 28.51 43.23 70.28 10.94 7.28
WCBl Westco Bancorp IL 06/26/92 309,265 30.04 0.00 55.37 68.55 68.55 0.00 15.64
CASH First Midwest Financial, Inc. IA 09/20/93 309,706 14.68 11.67 24.34 70.84 82.51 21.84 12.55
PVFC PVF Capital Corp. OH 12/30/92 312,466 11.21 0.25 30.42 86.78 87.03 0.96 6.56
HALL Hallmark Capital Corp. WI 01/03/94 339,283 19.28 23.25 39.79 55.80 79.05 26.24 7.82
HVFD Haverfield Corporation OH 03/19/85 339,630 12.58 0.66 67.42 84.15 84.81 0.00 8.30
HMCI HomeCorp, Inc. IL 06/22/90 341,742 8.77 7.13 46.45 77.04 84.17 0.00 6.07
</TABLE>
<PAGE>
EXHIBIT 37
KELLER & COMPANY PAGE 1
Columbus, Ohio
614-766-1426
FOUNDATION SAVINGS BANK
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
MOST RECENT FOUR QUARTERS
General Parameters:
States: IA IL IN KY ML OH PA WI WV
IPO Date: 12/31/94
Asset size: $350,000
<TABLE>
<CAPTION>
OPERATING PERFORMANCE ASSETS QUALITY
----------------------------------- ------------------------
Net Oper- Nonin-
Inter- ating terest
est Expen- In- Re-
Total Mar- ses/ come/ NPA/ REO/ serves/
Assets ROAA ROAE gin** Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%) (%)
-------- ------ ---- ---- ----- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOUNDATION SAVINGS BANK -- 31,738 0.32 3.67 2.52 2.16 0.24 0.35 0.00 0.33
DEFINED PARAMETERS FOR
Less Less Less Greater
Prior to Less Than 0.15- 1.00- 2.00- 1.50- Than Than Than Than
INCLUSION IN COMPARABLE GROUP 12/31/94 350,000 0.85 10.00 3.50 3.00 0.55 0.90 0.40 0.10
SHFC Seven Hills Financial Corp. OH 12/31/93 45,511 0.36 1.69 3.36 2.81 0.03 0.22 0.00 0.11
BRFC Bridgeville Savin PA 10/07/94 55,712 1.24 4.17 5.10 2.95 0.18 0.25 0.00 0.26
HHFC Harvest Home Financial Corp. OH 10/10/94 73,005 0.80 4.31 3.20 2.00 0.07 0.20 0.00 0.15
HZFS Horizon Financial Svcs Corp. IA 06/30/94 73,105 0.71 5.55 3.39 2.73 0.43 1.69 0.00 0.40
SFFC State Fed Financial Corporation IA 01/05/94 74,182 1.18 5.80 3.70 1.76 0.08 NA NA 0.32
THBC Troy Hill Bancorp, Inc. PA 06/27/94 80,484 1.38 6.09 4.24 2.06 0.10 2.95 0.03 0.88
GFSB GFS Bancorp, Inc. IA 01/06/94 80,913 1.08 8.47 3.21 1.71 0.11 NA NA NA
NWEQ Northwest Equity Corp. WI 10/11/94 82,976 1.15 7.49 4.36 2.74 0.46 0.52 0.15 0.53
FFBI first Financial Bancorp, Inc. IL 10/04/93 88,615 0.70 6.53 3.28 3.18 0.46 0.40 0.00 0.40
INCB Indiana Community Bank, SB IN 12/15/94 90,614 0.77 4.97 4.40 3.61 0.83 NA 0.00 0.53
PTRS Potters Financial Corp. OH 12/31/93 113,862 0.54 5.67 3 40 2.64 0.22 2.49 0.09 1.81
NBSI North Bancshares, Inc. IL 12/21/93 114,337 0.57 2.98 3.20 2.49 0.14 0.00 0.00 0.18
MIFC Mid-Iowa Financial Corp. IA 10/14/92 119,395 0.84 8.90 2.70 2.20 0.46 0.15 0.00 0.22
MWBI Midwest Bancshares, Inc. IA 11/12/92 136,809 0.99 14.16 2.95 1.94 0.15 0.27 0.14 0.48
FFWD Wood Bancorp, Inc. OH 08/31/93 140,383 1.18 8.22 4.29 2.53 0.25 0.18 0.02 0.33
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 2
Columbus, Ohio
614-766-1426
FOUNDATION SAVINGS BANK
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
MOST RECENT FOUR QUARTERS
General Parameters:
States: IA IL IN KY MI OH PA WI WV
IPO Date: 12/31/94
Asset size: $350,000
<TABLE>
<CAPTION>
OPERATING PERFORMANCE ASSET QUALITY
------------------------------------ ------------------------
Net Oper- Nonin-
Inter- ating terest
est Expen- In- Re-
Total Mar- ses/ come/ NPA/ REO/ serves/
Assets ROAA ROAE gin** Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%) (%)
-------- ------ ---- ---- ----- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOUNDATION SAVINGS BANK -- 31,738 0.32 3.67 2.52 2.16 0.24 0.35 0.00 0.33
Less Less Less Less Greater
DEFINED PARAMETERS FOR Prior to Than 0.15- 1.00 2.00- 1.50- Than Than Than Than
INCLUSION IN COMPARABLE GROUP 12/31/94 350,000 0.85 10.00 3.50 3.00 0.55 0.90 0.40 0.10
FFWC FFW Corp. IN 04/05/93 148,892 0.90 8.07 3.01 1.72 0.31 0.06 0.01 0.35
MFFC Milton Federal Financial Corp. OH 10/07/94 171,708 1.13 4.88 3.76 2.17 0.14 0.40 0.02 0.22
FFBZ First Federal Bancorp, Inc. OH 07/13/92 173,191 1.10 14.88 3.83 2.40 0.46 0.62 0.02 0.89
MWFD Midwest Federal Financial WI 07/08/92 177,164 1.11 11.34 3.97 3.03 0.80 0.16 0.00 0.75
MARN Marion Capital Holdings IN 03/18/93 179,329 1.41 5.79 4.23 2.19 0.14 0.93 0.10 1.12
LARL Laurel Capital Group, Inc. PA 02/20/87 193,008 1.35 13.23 4.00 2.01 0.26 0.70 0.12 0.99
SBCN Suburban Bancorporation, Inc. OH 09/30/93 197,137 0.39 2.95 3.01 2.29 0.24 0.20 0.16 1.59
MFBC MFB Corp. IN 03/25/94 200,895 0.69 3.40 3.04 1.99 0.17 0.05 0.00 0.15
CBCO CB Bancorp, lnc. IN 12/28/92 204,825 1.37 13.98 4.33 2.02 0.58 0.84 0.00 0 66
OHSL OHSL Financial Corp. OH 02/10/93 205,462 0.95 7.51 3.39 2.08 0.14 0.26 0.00 0.25
EFBI Enterprise Federal Bancorp OH 10/17/94 207,680 1.12 5.38 3.17 1 99 0.05 0.01 0.00 0.16
FFHS First Franklin Corporation OH 01/26/88 216,124 0.63 6.61 2.78 1.94 0.17 0.73 0.09 0.42
WOFC Western Ohio Financial Corp. OH 07/29/94 231,505 1.42 4.72 4.00 2.32 0.05 0.25 0.00 0.33
WVFC WVS Financial Corporation PA 11/29/93 240,282 1.23 8.09 4.06 1.95 0.13 0.45 0.01 0.80
FCBF CB Financial Corp. WI 09/24/93 250,658 0.99 5.01 3.29 1.84 0.27 0.09 0.00 0.41
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 3
Columbus, Ohio
614-766-1426
FOUNDATION SAVINGS BANK
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
MOST RECENT FOUR QUARTERS
General Parameters:
States: IA IL IN KY MI OH PA WI WV
IPO Date: 12/31/94
Asset size: $350,000
<TABLE>
<CAPTION>
OPERATING PERFORMANCE ASSET QUALITY
------------------------------------ ------------------------
Net Oper- Nonin-
Inter- ating terest
est Expen- In- Re-
Total Mar- ses/ come/ NPA/ REO/ serves/
Assets ROAA ROAE gin** Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%) (%)
-------- ------ ---- ---- ----- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Less Less Less Less Greater
PARAMETERS FOR Prior to Than 0.15- 1.00 2.00- 1.50- Than Than Than Than
INCLUSION IN COMPARABLE GROUP 12/31/94 350,000 0.85 10.00 3.50 3.00 0.55 0.90 0.40 0.10
OSBF OSB Financial Corp. WI 07/01/92 253,714 0.17 1.34 2.76 2.15 0.26 0.14 0.00 0.37
WFCO Winton Financial Corp. OH 08/04/88 262,329 0.94 12.54 3.41 2.29 0.13 0.53 0.20 0.34
FBCV 1ST Bancorp IN 04/07/87 273,122 2.25 35.92 2.27 2.75 0.60 0.38 0.05 0.33
GFCO Glenway Financial Corp. OH 11/30/90 273,890 0.56 5.82 3.02 2.23 0.22 0.49 0.12 0.23
HARL Harleysville Savings Bank PA 08/04/87 273,997 0.82 11.94 2.87 1.51 0.12 0.05 0.00 0.61
CVAL Chester Valley Bancorp Inc. PA 03/27/87 274,575 0.91 10.03 3.72 2.59 0.36 1.03 0.00 0.96
FFED Fidelity Federal Bancorp IN 08/31/87 280,138 1.29 25.83 2.25 2.87 2.68 0.07 0.01 0.30
PFDC Peoples Bancorp, IN 07/07/87 280,778 1.45 9.58 3.74 1.55 0.23 0.33 0.0 0.32
FSBI Fidelity Bancorp, Inc. PA 06/24/88 301,442 0.60 7.73 2.98 2.20 0.21 0.81 0.29 0.44
WCBI Westco Bancorp IL 06/26/92 309,265 1.32 8.46 3.68 1.75 0.22 0.58 0.00 0.29
CASH First Midwest Financial, Inc. IA 09/20/93 309,706 1.24 9.27 3.47 2.08 0.42 0.39 0.03 0.58
PVFC PVF Capital Corp. OH 12/30/92 312,466 1.14 18.41 3.76 2.49 0.36 1.23 0.00 0.85
HALL Hallmark Capital Corp. WI 01/03/94 339,283 0.57 6.40 2.48 1.84 0.22 0.09 0.00 0.34
HVFD Haverfield Corporation OH 03/19/85 339,630 0.65 7.98 3.40 2.95 0.60 0.78 0.19 0.81
HMCl HomeCorp, Inc. IL 06/22/90 341,742 0.37 6.28 2.92 2.67 0.48 3.24 2.99 0.50
</TABLE>
<PAGE>
KELLER & COMPANY PAGE 4
Columbus, Ohio
614-766-1426
FOUNDATION SAVINGS BANK
COMPARABLE GROUP SELECTION
OPERATING PERFORMANCE AND ASSET QUALITY PARAMETERS
MOST RECENT FOUR QUARTERS
General Parameters:
States: IA IL IN KY MI OH PA WI WV
IPO Date: 12/31/94
Asset size: $350,000
<TABLE>
<CAPTION>
OPERATING PERFORMANCE ASSET QUALITY
------------------------------------ ------------------------
Net Oper- Nonin-
Inter- ating terest
est Expen- In- Re-
Total Mar- ses/ come/ NPA/ REO/ serves/
Assets ROAA ROAE gin** Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%) (%)
-------- ------ ---- ---- ----- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Less Less Less Less Greater
PARAMETERS FOR Prior to Than 0.15- 1.00 2.00- 1.50- Than Than Than Than
INCLUSION IN COMPARABLE GROUP 12/31/94 350,000 0.85 10.00 3.50 3.00 0.55 0.90 0.40 0.10
PFNC Progress Financial Corporation PA 07/18/83 347,991 0.86 19.35 3.47 3.66 0.75 1.33 0.22 0.59
SWBI Southwest Bancshares IL 06/24/92 349,543 1.19 8.83 3.59 1.85 0.19 0.25 0.03 0.22
</TABLE>
* Asset quality ratios reflect balance sheet totals at the end of the most
recent quarter.
** Based on average interest-earning assets.
<PAGE>
EXHIBIT 38
KELLER & COMPANY
Columbus, Ohio
614-766-1426
FOUNDATION SAVINGS BANK
FINAL COMPARABLE GROUP
BALANCE SHEET RATIOS
<TABLE>
<CAPTION>
Total
Total Net Borrow-
Cash & 1-4 Fam. Net Loans ed
Total Invest./ MBS/ Loans/ Loans/ &MBS/ Funds/ Equity/
Assets Assets Assets Assets Assets Assets Assets Assets
IPO Date ($000) (%) (%) (%) (%) (%) (%) (%)
-------- ------ ------- ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOUNDATION SAVINGS BANK -- 31,738 14.61 15.62 60.65 67.30 82.92 2.65 8.73
LESS LESS LESS
DEFINED FOR Prior to THAN 5.00- THAN 25.00- 40.00- 55.00 THAN 7.00-
INCLUSION IN COMPARABLE GROUP 12/31/94 350,000 40.00 30.00 80.00 90.00 95.00 30.00 22.00
SHFC Seven Hills Financial Corp. OH 12/31/93 45,511 6.71 14.44 60.43 77.18 91.62 0.22 21.21
HHFC Harvest Home Financial Corp. OH 10/10/94 73,005 35.24 8.00 46.66 54.74 62.74 0.00 7.71
NBSI North Bancshares, Inc. IL 12/21/93 114,337 39.19 7.84 44.79 50.92 58.76 14.65 17.34
MIFC Mid-Iowa Financial Corp. IA 10/14/92 119,395 22.91 25.53 38.65 49.86 75.38 15.91 9.02
SBCN Suburban Bancorporation, Inc. OH 09/30/93 197,137 6.99 15.29 53.72 75.47 90.76 21.65 13.01
MFBC MFB Corp. IN 03/25/94 200,895 30.47 2.70 61.58 65.29 67.99 4.73 19.31
FFHS First Franklin Corporation OH 01/26/88 216,124 13.85 18.31 51.63 65.87 84.18 3.38 9.50
GFCO Glenway Financial Corp. OH 11/30/90 273,890 11.27 8.58 64.85 78.39 86.97 7.14 9.67
FSBI Fidelity Bancorp, Inc. PA 06/24/88 301,442 26.73 27.05 28.51 43.23 70.28 10.94 7.28
HALL Hallmark Capital Corp. WI 01/03/94 339,283 19.28 23.25 39.79 55.80 79.05 26.24 7.82
AVERAGE 188,102 21.26 15.10 49.06 61.67 76.77 10.49 13.19
MEDIAN 199,016 21.10 14.86 49.15 60.55 77.22 9.04 11.34
HIGH 339,283 39.19 27.05 64.85 78.39 91.62 26.24 21.21
LOW 45,511 6.71 2.70 28.51 43.23 58.76 0.00 7.28
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
EXHIBIT 39
FOUNDATION SAVINGS BANK
FINAL COMPARABLE GROUP
OPERATING PERFORMANCE AND ASSET QUALITY RATIOS
MOST RECENT FOUR QUARTERS
<TABLE>
<CAPTION>
OPERATING PERFORMANCE
------------------------------------------------------
Net Operating Noninterest
Total Interest Expenses/ Inconie/
Assets ROAA ROAE Margin** Assets Assets
lPO Date ($000) (%) %) (%) (%) (%)
-------- ------ ---- ---- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
FOUNDATION SAVINGS BANK -- 31,738 0.32 3.67 2.52 2.16 0.24
- -------------------------------------------------------------------------------------------------------------------------
DEFINED PARAMETERS FOR Prior to LESS THAN 0.15- 1.00- 2.00- 1.50- LESS THAN
INCLUSION IN COMPARABLE GROUP 12/31/94 350,000 0.85 10.00 3.50 3.00 0.55
- -------------------------------------------------------------------------------------------------------------------------
SHFC Seven Hills Financial Corp. OH 12/31/93 45,511 0.36 1.69 3.36 2.81 0.03
HHFC Harvest Home Financial Corp. OH 10/10/94 73,005 0.80 4.31 3.20 2.00 0.07
NBSI North Bancshares, Inc. IL 12/21/93 114,337 0.57 2.98 3.20 2.49 0.14
MIFC Mid-Iowa Financial Corp. IA 10/14/92 119,395 0.84 8.90 2.70 2.20 0.46
SBCN Suburban Bancorporation, Inc. OH 09/30/93 197,137 0.39 2.95 3.01 2.29 0.24
MFBC MFBCorp. IN 03/25/94 200,895 0.69 3.40 3.04 1.99 0.17
FFHS First Franklin Corporation OH 01/26/88 216,124 0.63 6.61 2.78 1.94 0.17
GFCO Glenway Financial Corp. OH 11/30/90 273,890 0.56 5.82 3.02 2.23 0.22
FSBI Fidelity Bancorp, Inc. PA 06/24/88 301,442 0.60 7.73 2.98 2.20 0.21
HALL Hallmark Capital Corp. WI 01/03/94 339,283 0.57 6.40 2.48 1.84 0.22
AVERAGE 188,102 0.60 5.08 2.98 2.20 0.19
MEDIAN 199,016 0.59 5.07 3.02 2.20 0.19
HIGH 339,283 0.84 8.90 3.36 2.81 0.46
LOW 45,511 0.36 1.69 2.48 1.84 0.03
</TABLE>
* Asset quality ratios reflect balance sheet totals at the end of the
most recent quarter.
** Based on average interest-earning assets.
ASSET QUALITY *
-----------------------------
NPA/ REO/ Reserves/
Assets Assets Assets
(%) (%) (%)
--- --- ---
FOUNDATION SAVINGS BANK 0.35 0.00 0.33
- ------------------------------------------------------------------------------
DEFINED PARAMETERS FOR LESS THAN LESS THAN GREATER THAN
INCLUSION IN COMPARABLE GROUP 0.90 0.40 0.10
- ------------------------------------------------------------------------------
SHFC Seven Hills Financial Corp. OH 0.22 0.00 0.11
HHFC Harvest Home Financial Corp. OH 0.20 0.00 0.15
NBSI North Bancshares, Inc. IL 0.00 0.00 0.18
MIFC Mid-Iowa Financial Corp. IA 0.15 0.00 0.22
SBCN Suburban Bancorporation, Inc. OH 0.20 0.16 1.59
MFBC MFBCorp. IN 0.05 0.00 0.16
FFHS First Franklin Corporation OH 0.73 0.09 0.42
GFCO Glenway Financial Corp. OH 0.49 0.12 0.23
FSBI Fidelity Bancorp, Inc. PA 0.81 0.29 0.44
HALL Hallmark Capital Corp. WI 0.09 0.00 0.34
AVERAGE 0.29 0.07 0.38
MEDIAN 0.20 0.00 0.23
HIGH 0.81 0.29 1.59
LOW 0.00 0.00 0.11
* Asset quality ratios reflect balance sheet totals at the end of the
most recent quarter.
** Based on average interest-earning assets.
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
EXHIBIT 40
FOUNDATION SAVINGS BANK
COMPARABLE GROUP CHARACTERISTICS AND BALANCE SHEET TOTALS
<TABLE>
<CAPTION>
Number Conversion
of (lPO)
Offices Exchange Date
------- -------- ----
<S> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK CINCINNATI OH 1 NA NA
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. Pittsburgh PA 8 NASDAQ 06/24/88
FFHS First Franklin Corporation Cincinnati OH 7 NASDAQ 01/26/88
GFCO Glenway Financial Corp. Cincinnati OH 6 NASDAQ 11/30/90
HALL Hallmark Capital Corp. West Allis WI 3 NASDAQ 01/03/94
HHFC Harvest Home Financial Corporation Cheviot OH 3 NASDAQ 10/10/94
MFBC MFB Corp. Mishawaka IN 4 NASDAQ 03/25/94
MIFC Mid-Iowa Financial Corp. Newton IA 6 NASDAQ 10/14/92
NBSI North Bancshares, Inc. Chicago IL 2 NASDAQ 12/21/93
SHFC Seven Hills Financial Corporation Cincinnati OH 3 NASDAQ 12/31/93
SBCN Suburban Bancorporation, Inc. Cincinnati OH 8 NASDAQ 09/30/93
Average 5.0
Median 5.0
High 8.0
Low 2.0
<CAPTION>
Most Recent Quarter
---------------------------------------------------------------------
Total Goodwill
Total Int. Earning Net and Total Total
Assets Assets Loans Intang. Deposits Equity
($000) ($000) ($000) ($000) ($000) ($000)
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK 31,738 31,206 21,359 0 27,780 2,772
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. 301,442 280,985 130,305 176 243,404 21,951
FFHS First Franklin Corporation 216,124 207,598 142,369 0 187,217 20,542
GFCO Glenway Financial Corp. 273,890 266,521 214,700 631 221,647 26,485
HALL Hallmark Capital Corp. 339,283 319,349 189,315 0 219,541 26,524
HHFC Harvest Home Financial Corporation 73,005 70,109 39,963 0 59,606 12,930
MFBC MFB Corp. 200,895 189,642 131,169 0 149,981 38,799
MIFC Mid-Iowa Financial Corp. 119,395 111,183 59,527 16 88,324 10,770
NBSI North Bancshares, Inc. 114,337 110,899 58,220 0 74,955 19,827
SHFC Seven Hills Financial Corporation 45,511 44,739 35,124 0 35,461 9,651
SBCN Suburban Bancorporation, Inc. 197,137 194,550 148,781 0 126,210 25,639
Average 188,102 179,558 114,947 82 140,635 21,312
Median 199,016 192,096 130,737 0 138,096 21,247
High 339,283 319,349 214,700 631 243,404 38,799
Low 45,511 44,739 35,124 0 35,461 9,651
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
EXHIBIT 41
FOUNDATION SAVINGS BANK
COMPARABLE GROUP MARKET AREA COMPARISON
<TABLE>
<CAPTION>
1990-1995 Per Median Median
Population Capita Household Housing
1995 Growth Income Income Value
Population (%) ($) ($) ($)
---------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK OH 866,222 1.2 18,004 34,401 72,243
COMPARABLE GROUP
FSBl Fidelity Bancorp, Inc. PA 1,324,237 0.2 17,394 31,126 57,081
FFHS First Franklin Corporation OH 866,222 1.2 18,004 34,401 72,243
GFCO Glenway Financial Corp. OH 866,222 1.2 18,004 34,401 72,243
HALL Hallmark Capital Corp. WI 931,864 (0.6) 14,408 29,297 65,300
HHFC Harvest Home Financial Corporation OH 866,222 1.2 18,004 34,401 2,243
MFBC MFBCorp. IN 257,533 0.8 16,003 34,165 50,751
MIFC Mid-Iowa Financial Corp. IA 35,197 0.2 13,732 29,685 46,000
NBSI North Bancshares, Inc. IL 5,144,275 0.8 17,825 36,543 102,118
SHFC Seven Hills Financial Corporation OH 866,222 1.2 18,004 34,401 72,243
SBCN Suburban Bancorporatlon, Inc. OH 866,222 1.2 18,004 34,401 72,243
Average 1,202,422 0.7 16,938 33,282 68,247
Median 866,222 1.0 17,915 34,401 72,243
High 5,144,275 1.2 18,004 36,543 102,118
Low 35,197 (0.6) 13,732 29,297 46,000
<CAPTION>
High Below
Median Unem- School College Poverty
Rent ployment Graduates Graduates Level
($) (%) (%) (%) (%)
--- --- --- --- ---
<S> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK OH 304 5.5 75.6 23.7 13.3
COMPARABLE GROUP
FSBl Fidelity Bancorp, Inc. PA 315 6.3 79.0 22.6 8.7
FFHS First Franklin Corporation OH 304 5.5 75.6 23.7 13.3
GFCO Glenway Financial Corp. OH 304 5.5 75.6 23.7 13.3
HALL Hallmark Capital Corp. WI 363 6.8 76.3 9.3 15.9
HHFC Harvest Home Financial Corporation OH 304 5.5 75.6 23.7 13.3
MFBC MFBCorp. IN 325 5.7 76.1 19.2 9.7
MIFC Mid-Iowa Financial Corp. IA 240 3.7 77.6 12.7 7.0
NBSI North Bancshares, Inc. IL 411 5.4 73.4 22.8 14.2
SHFC Seven Hills Financial Corporation OH 304 5.5 75.6 23.7 13.3
SBCN Suburban Bancorporatlon, Inc. OH 304 5.5 75.6 23.7 13.3
Average 317 5.5 76.0 21.5 12.2
Median 304 5.5 75.6 23.3 13.3
High 411 6.8 79.0 23.7 15.9
Low 240 3.7 73.4 12.7 7.0
</TABLE>
<PAGE>
EXHIBIT 42
KELLER & COMPANY
Columbus, Ohio
614-766-1426
BALANCE SHEET
ASSET COMPOSITION - MOST RECENT QUARTER
<TABLE>
<CAPTION>
As a Percent of total Assets
------------------------------------------------------------------------
Real
Total Cash & Net Loan Loss Estate
Assets Invest. MBS Loans Reserves Owned
($000) (%) (%) (%) (%) (%)
------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK 31,738 14.61 15.62 67.30 0.33 0.00
COMPARABLE GROUP
FSBl Fidelity Bancorp, Inc. 301,442 26.73 27.05 43.23 0.44 0.29
FFHS First Franklin Corporation 216,124 13.85 18.31 65.87 0.42 0.09
GFCO Glenway Financial Corp. 273,890 11.27 8.58 78.39 0.23 0.12
HALL Hallmark Capital Corp. 339,283 19.28 23.25 55.80 0.34 0.00
HHFC Harvest Home Financial Corp. 73,005 35.24 8.00 54.74 0.15 0.00
MFBC MFB Corp. 200,895 30.47 2.70 65.29 0.16 0.00
MIFC Mid-Iowa Financial Corp. 119,395 22.91 25.53 49.86 0.22 0.00
NBSI North Bancshares, Inc. 114,337 39.19 7.84 50.92 0.18 0.00
SHFC Seven Hills Financial Corp. 45,511 6.71 14.44 77.18 0.11 0.00
SBCN Suburban Bancorporation, Inc. 197,137 6.99 15.29 75.47 1.59 0.16
Average 188,102 21.26 15.10 61.67 0.38 0.07
Median 199,016 21.10 14.86 60.55 0.22 0.00
High 339,283 39.19 27.05 78.39 1.59 0.29
Low 45,511 6.71 2.70 43.23 0.11 0.00
ALL THRIFTS (328)
Average 2,758,216 14.36 14.11 67.45 0.67 0.67
MIDWEST THRIFTS (150)
Average 778,364 18.72 10.39 67.99 0.48 0.48
OHIO THRIFTS (31)
Average 750,958 16.16 9.50 71.99 0.52 0.06
<CAPTION>
As a Percent of total Assets
-----------------------------------------------------------------------------------
Interest Interest Capitalized
Goodwill Other High Risk Non-Perf. Earning Bearing Loan
& Intang. Assets R.E. Loans Assets Assets Liabilities Servicing
(%) (%) (%) (%) (%) (%) (%)
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK 0.00 2.47 6.62 0.35 98.32 90.20 0.00
COMPARABLE GROUP
FSBl Fidelity Bancorp, Inc. 0.06 2.64 9.50 0.81 93.21 89.77 0.00
FFHS First Franklin Corporation 0.00 1.88 13.13 0.73 96.06 88.88 0.00
GFCO Glenway Financial Corp. 0.23 3.29 13.13 0.49 97.31 88.51 0.00
HALL Hallmark Capital Corp. NA 1.67 7.28 0.09 94.12 85.75 NA
HHFC Harvest Home Financial Corp. 0.00 2.26 6.27 0.20 96.03 79.60 0.00
MFBC MFB Corp. 0.00 1.53 1.24 0.05 94.40 73.89 0.00
MIFC Mid-Iowa Financial Corp. 0.01 1.63 6.13 0.15 93.12 85.74 0.00
NBSI North Bancshares, Inc. 0.00 2.05 4.38 0.00 96.99 77.92 0.00
SHFC Seven Hills Financial Corp. 0.00 1.68 14.20 0.22 98.30 77.97 0.00
SBCN Suburban Bancorporation, Inc. 0.00 1.94 22.62 0.20 98.69 86.22 0.00
Average 0.03 2.06 9.79 0.29 95.82 83.43 0.00
Median 0.00 1.91 8.39 0.20 96.04 85.74 0.00
High 0.23 3.29 22.62 0.81 98.69 89.77 0.00
Low 0.00 1.53 1.24 0.00 93.12 73.89 0.00
ALL THRIFTS (328)
Average 0.30 2.87 15.53 1.49 94.42 87.68 0.32
MIDWEST THRIFTS (150)
Average 0.13 2.44 11.78 0.58 95.16 82.65 0.11
OHIO THRIFTS (31)
Average 0.13 2.16 15.71 0.51 95.33 83.76 0.06
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 43
KELLER & COMPANY
Columbus, Ohio
6140766-1426
BALANCE SHEET COMPARISON
LIABILITIES AND EQUITY - MOST RECENT QUARTER
As a Percent of Assets
-------------------------------------------------------------------------------------
Toal Total Total Total Other Preferred Common
Liabilities Equity Deposits Borrowings Liabilities Equity Equity
($000) ($000) (%) (%) (%) (%) (%)
--------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK 28,966 2,772 87.53 2.65 1.08 NA NA
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. 279,491 21,951 80.75 10.94 1.03 0.00 7.28
FFHS First Franklin Corporation 195,582 20,542 86.62 3.38 0.49 0.00 9.50
GFCO Glenway Financial Corp. 247,405 26,485 80.93 7.14 2.26 0.00 9.67
HALL Hallmark Capital Corp. 312,759 26,524 64.71 26.24 1.24 0.00 7.82
HHFC Harvest Home Financial Corp. 60,075 12,930 81.65 0.00 0.64 0.00 17.71
MFBC MFBCorp. 162,096 38,799 74.66 4.73 1.30 0.00 19.31
MIFC Mid-Iowa Financial Corp. 108,625 10,770 73.98 15.91 1.09 0.00 9.02
NBSI North Bancshares, Inc. 94,510 19,827 65.56 14.65 2.45 0.00 17.34
SHFC Seven Hills Financial Corp. 35,860 9,651 77.92 0.22 0.66 0.00 21.21
SBCN Suburban Bancorporation, Inc. 171,498 25,639 64.02 21.65 1.32 0.00 13.01
Average 166,790 21,312 75.08 10.49 1.25 0.00 13.19
Median 166,797 21,247 76.29 9.04 1.16 0.00 11.34
High 312,759 38,799 86.62 26.24 2.45 0.00 21.21
Low 35,860 9,651 64.02 0.00 0.49 0.00 7.28
ALL THRIFTS (328)
Average 1,193,602 105,708 73.73 12.00 1.49 0.07 12.71
MIDWEST THRIFTS (150)
Average 704,591 73,773 72.55 11.62 1.24 0.02 14.57
OHIO THRIFTS (31)
Average 683,611 67,347 77.19 8.02 1.26 0.08 13.45
<CAPTION>
As a Percent of Assets
-------------------------------------------------------------------------------------
FASB115 Reg. Reg. Reg.
Unrealized Retained Total Tangible Core Tangible Risk-Based
Gain(Loss) Earnings Equity Equity Capital Capital Capital
(%) (%) (%) (%) (%) (%) (%)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK 0.00 8.73 8.73 8.73 8.73 8.73 19.49
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. (0.26) 4.64 7.28 7.23 7.31 NA NA
FFHS First Franklin Corporation 0.04 3.80 9.50 9.50 6.48 6.48 15.13
GFCO Glenway Financial Corp. 0.02 4.54 9.67 9.46 8.60 NA NA
HALL Hallmark Capital Corp. (0.12) 4.81 7.82 NA 6.11 NA NA
HHFC Harvest Home Financial Corp. 0.17 5.91 17.71 17.71 NA NA NA
MFBC MFBCorp. (0.10) 10.02 19.31 19.31 15.40 15.40 39.60
MIFC Mid-Iowa Financial Corp. 0.03 5.58 9.02 9.01 7.39 7.39 21.82
NBSI North Bancshares, Inc. (0.33) 9.54 17.34 17.34 15.38 15.38 47.95
SHFC Seven Hills Financial Corp. (0.01) 11.81 21.21 21.21 18.06 18.06 38.77
SBCN Suburban Bancorporation, Inc. 0.00 7.86 13.01 13.01 10.87 10.87 21.03
Average (0.06) 6.85 13.19 13.75 10.62 12.26 30.72
Median (0.01) 5.75 11.34 13.01 8.60 13.13 30.30
High 0.17 11.81 21.21 21.21 18.06 18.06 47.95
Low (0.33) 3.80 7.28 7.23 6.11 6.48 15.13
ALL THRIFTS (328)
Average 0.04 6.25 12.78 12.62 10.55 10.43 23.14
MIDWEST THRIFTS (150)
Average 0.01 7.07 14.59 14.54 11.81 11.73 25.00
OHIO THRIFTS (31)
Average 0.07 6.66 13.53 13.41 11.16 11.34 22.54
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 44
KELLER & COMPANY
Columbus, Ohio
614-766-1426
INCOME AND EXPENSE COMPARISON
TRAILING FOUR QUARTERS
($000)
Net Gain Total Goodwill Net
Interest Interest Interest Provision (Loss) Non-Int. & Intang. Real Est.
Income Expense Income for Loss on Sale Income Amtz. Expense
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK 2,352 1,587 765 37 16 75 0 0
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. 19,796 11,602 8,194 160 40 631 264 1
FFHS First Franklin Corporation 14,930 9,363 5,567 36 30 373 0 6
GFCO Glenway Financial Corp. 19,724 11,850 7,874 63 183 590 221 (17)
HALL Hallmark Capital Corp. 20,852 13,924 6,928 281 260 1,031 0 0
HHFC Harvest Home Financial Corp. 4,954 2,752 2,202 6 0 52 0 0
MFBC MFB Corp. 12,885 7,328 5,557 29 21 344 0 0
MIFC Mid-Iowa Financial Corp. 7,760 4,866 2,894 33 5 504 1 (3)
NBSI North Bancshares, Inc. 7,717 4,253 3,464 34 76 157 0 0
SHFC Seven Hills FinancialCorp. 3,284 1,792 1,492 0 12 13 0 0
SBCN Suburban Bancorporation, Inc. 15,071 9,215 5,856 2 (551) 479 0 134
Average 12,697 7,695 5,003 64 8 417 49 12
Median 13,908 8,272 5,562 34 26 426 0 0
High 20,852 13,924 8,194 281 260 1,031 264 134
Low 3,284 1,792 1,492 0 (551) 13 0 (17)
ALL THRIFTS (328)
Average 97,781 61,155 36,626 2,757 2,570 6,282 600 655
MIDWEST THRIFTS(150)
Average 57,937 35,192 22,745 564 609 4,434 333 (114)
OHIO THRIFTS (31)
Average 52,153 32,793 19,359 227 444 2,620 184 (17)
<CAPTION>
Net Net Inc.
Total Non- Income Before
Non-Int. Recurring Before Income Extraord. Extraord. Net Core
Expense Expense Taxes Taxes Items Items Income Income
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK 666 0 136 37 99 0 99 99
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. 6,262 0 2,443 738 1,705 0 1,705 1,679
FFHS First Franklin Corporation 3,999 0 1,935 634 1,301 0 1,301 1,282
GFCO Glenway Financial Corp. 6,043 154 2,387 885 1,502 0 1,502 1,483
HALL Hallmark Capital Corp. 5,275 0 2,663 1,015 1,648 0 1,648 1,479
HHFC Harvest Home Financial Corp. 1,404 0 844 286 558 0 558 558
MFBC MFB Corp. 3,730 0 2,163 863 1,300 0 1,300 1,286
MIFC Mid-Iowa Financial Corp. 2,405 0 1,364 449 915 0 915 912
NBSI North Bancshares, Inc. 2,730 0 933 304 629 0 629 579
SHFC Seven Hills FinancialCorp. 1,291 0 226 60 166 0 166 158
SBCN Suburban Bancorporation, Inc. 4,550 0 1,232 453 779 0 779 1,137
Average 3,769 15 1,619 569 1,050 0 1,050 1,055
Median 3,865 0 1,650 544 1,108 0 1,108 1,210
High 6,262 154 2,663 1,015 1,705 0 1,705 1,679
Low 1,291 0 226 60 166 0 166 158
ALL THRIFTS (328)
Average 25,740 653 16,381 6,159 10,222 (11) 10,211 8,941
MIDWEST THRIFTS (150)
Average 15,632 1,048 10,571 3,737 6,833 (9) 6,824 7,101
OHIO THRIFTS (31)
Average 12,047 4,553 5,601 1,920 3,681 0 3,681 6,348
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 45
KELLER & COMPANY
Columbus, OHio
614-766-1426
INCOME AND EXPENSE COMPARISON
AS A PERCENTAGE OF AVERAGE ASSETS
TRAILING FOUR QUARTERS
Net Gain Total Goodwill Net
Interest Interest Interest Provision (Loss) Non-Int. & Intang. Real Est.
Income Expense Income for Loss on Sale Income Amtz. Expense
(%) (%) (%) (%) (%) (%) (%) (%)
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK 7.63 5.15 2.48 0.12 0.05 0.24 0.00 0.00
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. 6.95 4.08 2.88 0.06 0.01 0.22 0.09 0.00
FFHS First Franklin Corporation 7.23 4.53 2.69 0.02 0.01 0.18 0.00 0.00
GFCO Glenway Financial Corp. 7.29 4.38 2.91 0.02 0.07 0.22 0.08 (0.01)
HALL Hallmark Capital Corp. 7.26 4.85 2.41 0.10 0.09 0.36 0.00 0.00
HHFC Harvest Home Financial Corp. 7.06 3.92 3.14 0.01 0.00 0.07 0.00 0.00
MFBC MFB Corp. 6.88 3.91 2.97 0.02 0.01 0.18 0.00 0.00
MIFC Mid-Iowa Financial Corp. 7.09 4.45 2.64 0.03 0.00 0.46 0.00 0.00
NBSI North Bancshares, Inc. 7.05 3.89 3.17 0.03 0.07 0.14 0.00 0.00
SHFC Seven Hills FinancialCorp. 7.15 3.90 3.25 0.00 0.03 0.03 0.00 0.00
SBCN Suburban Bancorporation, Inc. 7.59 4.64 2.95 0.00 (0.28) 0.24 0.00 0.07
Average 7.16 4.25 2.90 0.03 0.00 0.21 0.02 0.01
Median 7.12 4.23 2.93 0.02 0.01 0.20 0.00 0.00
High 7.59 4.85 3.25 0.10 0.09 0.46 0.09 0.07
Low 6.88 3.89 2.41 0.00 (0.28) 0.03 0.00 (0.01)
ALL THRIFTS (328)
Average 7.41 4.21 3.20 0.11 0.11 0.43 0.02 0.01
MIDWEST THRIFTS (150)
Average 7.40 4.20 3.20 0.07 0.11 0.40 0.01 (0.01)
OHIO THRIFTS (31)
Average 7.56 4.24 3.32 0.05 0.10 0.25 0.02 0.00
<CAPTION>
Net Net Inc.
Total Non- Income Before
Non-Int. Recurring Before Income Extraord. Extraord. Net Core
Expense Expense Taxes Taxes Items Items Income Income
(%) (%) (%) (%) (%) (%) (%) (%)
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK 2.16 0 0.44 0.12 0.32 0 0.32 0.32
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. 2.20 0.00 0.86 0.26 0.60 0.00 0.60 0.59
FFHS First Franklin Corporation 1.94 0.00 0.94 0.31 0.63 0.00 0.63 0.62
GFCO Glenway Financial Corp. 2.23 0.06 0.88 0.33 0.56 0.00 0.56 0.55
HALL Hallmark Capital Corp. 1.84 0.00 0.93 0.35 0.57 0.00 0.57 0.52
HHFC Harvest Home Financial Corp. 2.00 0.00 1.20 0.41 0.80 0.00 0.80 0.80
MFBC MFB Corp. 1.99 0.00 1.15 0.46 0.69 0.00 0.69 0.69
MIFC Mid-Iowa Financial Corp. 2.20 0.00 1.25 0.41 0.84 0.00 0.84 0.83
NBSI North Bancshares, Inc. 2.49 0.00 0.85 0.28 0.57 0.00 0.57 0.53
SHFC Seven Hills FinancialCorp. 2.81 0.00 0.49 0.13 0.36 0.00 0.36 0.34
SBCN Suburban Bancorporation, Inc. 2.29 0.00 0.62 0.23 0.39 0.00 0.39 0.57
Average 2.20 0.01 0.92 0.32 0.60 0.00 0.60 0.60
Median 2.20 0.00 0.91 0.32 0.59 0.00 0.59 0.58
High 2.81 0.06 1.25 0.46 0.84 0.00 0.84 0.83
Low 1.84 0.00 0.49 0.13 0.36 0.00 0.36 0.34
ALL THRIFTS (328)
Average 2.28 0.02 1.35 0.47 0.87 0.00 0.87 0.80
MIDWEST THRIFTS (150)
Average 2.20 0.02 1.44 0.50 0.93 0.00 0.93 0.86
OHIO THRIFTS (31)
Average 2.21 0.05 1.36 0.45 0.90 0.00 0.90 0.87
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
EXHIBIT 46
YIELDS, COSTS AND EARNINGS RATIOS
TRAILING FOUR QUARTERS
Yield on Cost of Net Net
Int. Earning Int. Bearing Interest Interest Core Core
Assets Liabilities Spread Margin ROAA ROAA ROAE ROAE
(%) (%) (%) (%) (%) (%) (%) (%)
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK 7.76 5.71 2.05 2.52 0.32 0.32 3.67 3.67
FSBI Fidelity Bancorp, Inc. 7.20 4.59 2.61 2.98 0.60 0.59 7.73 7.61
FFHS First Franklin Corporation 7.44 5.06 2.38 2.78 O 63 0.62 6.61 6.51
GFCO Glenway Financial Corp. 7.55 4.96 2.59 3.02 0.56 0.55 5.82 5.75
HALL Hallmark Capital Corp. 7.48 5.51 1.97 2.48 0.57 0.52 6.40 5.74
HHFC Harvest Home Financial Corp. 7.21 4.85 2.36 3.20 0.80 0.80 4.31 4.31
MFBC MFB Corp. 7.06 5.04 2.02 3.04 0.69 0.69 3.40 3.36
MIFC Mid-Iowa Financial Corp. 7.24 4.98 2.26 2.70 0.84 0.83 8.90 8.87
NBSI North Bancshares, Inc. 7.13 4.97 2.16 3.20 0.57 0.53 2.98 2.74
SHFC Seven Hills Financial Corp. 7.39 5.02 2.37 3.36 0.36 0.34 1.69 1.61
SBCN Suburban Bancorporation, Inc. 7.75 5.41 2.34 3.01 0.39 0.57 2.95 4.30
Average 7.35 5.04 2.31 2.98 0.60 0.60 5.08 5.08
Median 7.32 5.00 2.35 3.02 0.59 0.58 5.07 5.03
High 7.75 5.51 2.61 3.36 0.84 0.83 8.90 8.87
Low 7.06 4.59 1.97 2.48 0.36 0.34 1.69 1.61
ALL THRIFTS (328)
Average 7.71 4.91 2.81 3.33 0.87 0.80 8.18 7.28
MIDWEST THRIFTS (150)
Average 7.67 4.98 2.69 3.31 0.93 0.86 7.79 7.09
OHIO THRIFTS (31)
Average 7.80 4.97 2.83 3.43 0.90 0.87 7.64 7.50
* Based on average interest-earning assets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
EXHIBIT 47
DIVIDENDS, RESERVES AND SUPPLEMENTAL DATA
DIVIDENDS
12 Month 12 Month
12 Month Common Current Dividend
Preferred Div./ Dividend Payout
Dividends Share Yield Ratio
($000) ($) (%) (%)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK NA NA NA NA
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. $0.00 $0.29 $1.66 $ 24.03
FFHS First Franklin Corporation $0.00 $0.28 $1.90 $ 26.42
GFCO Glenway Financial Corp. $0.00 $0.51 $3.13 $ 36.17
HALL Hallmark Capital Corp. $0.00 $0.00 $0.00 $ 0.00
HHFC Harvest Home Financial Corp. $0.00 $0.29 $3.08 $ 45.31
MFBC MFBCorp. $0.00 $0.00 $0.00 $ 0.00
MIFC Mid-Iowa Financial Corp. $0.00 $0.08 $1.23 $ 15.09
NBSI North Bancshares, Inc. $0.00 $0.10 $2.52 $ 19.23
SHFC Seven Hills Financial Corp. $0.00 $0.86 $2.48 $286.67
SBCN Suburban Bancorporation, Inc. $0.00 $0.55 $4.00 $103.77
Average $0.00 $0.30 $2.00 $ 55.67
Median $0.00 $0.29 $2.19 $ 25.23
High $0.00 $0.86 $4.00 $286.67
Low $0.00 $0.00 $0.00 $ 0.00
ALL THRIFTS (328)
Average $356.00 $0.25 $1.33 $ 19.72
MIDWEST THRIFTS (150)
Average $33.00 $0.38 $1.88 $ 33.49
OHIO THRIFTS (31)
Average $0.00 $0.60 $2.15 $ 62.16
<CAPTION>
RESERVES AND SUPPLEMENTAL DATA - MOST RECENT PERIOD
Net
Reserves/ Reserves/ Chargeoffs/ Provisions/ 1 Year Total
Gross Non-Perf. Average Net Repricing Effective Assets/
Loans Assets Loans Chargeoffs Gap Tax Rate Employee
(%) (%) (%) (%) (%) (%) ($000)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SUBJECT
FOUNDATION SAVINGS BANK $0.48 $93.69 $0.13 $132.14 NA $27.21 3,967
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. $1.02 $ 55.09 $0.28 $ 67.42 NA $27.96 3,045
FFHS First Franklin Corporation $0.64 $ 57.88 $0.00 NM NA $33.11 4,698
GFCO Glenway Financial Corp. $0.29 NA NA NA NA $37.13 NA
HALL Hallmark Capital Corp. $0.60 $390.48 $0.02 NM NA $35.69 NA
HHFC Harvest Home Financial Corp. $0.28 $ 75.00 NA NA NA $34.30 NA
MFBC MFBCorp. $0.25 $325.00 $0.00 NM NA $39.82 4,100
MIFC Mid-Iowa Financial Corp. $0.44 $142.62 $0.05 $128.57 $1.69 $32.94 3,317
NBSI North Bancshares, Inc. $0.36 NM $0.00 NM $1.91 $32.25 3,573
SHFC Seven Hills Financial Corp. $0.14 $ 51.02 $0.00 NM NA $25.00 3,034
SBCN Suburban Bancorporation, Inc. $2.06 $794.18 $0.00 NM NA NM 3,341
Average $0.61 $236.41 $0.04 $ 98.00 $1.80 $33.13 3,587
Median $0.40 $108.81 $0.00 $ 98.00 $1.80 $33.11 3,341
High $2.06 $794.18 $0.28 $128.57 $1.91 $39.82 4,698
Low $0.14 $ 51.02 $0.00 $ 67.42 $1.69 $25.00 3,034
ALL THRIFTS (328)
Average $0.65 $ 94.93 $0.09 $ 92.01 -$0.78 $23.84 3,938
MIDWEST THRIFTS (150)
Average $0.72 $166.38 $0.09 $198.10 -$2.86 $34.91 3,864
OHIO THRIFTS (31)
Average $0.75 $146.54 $0.14 $253.15 -$5.48 $34.63 3,800
</TABLE>
<PAGE>
KELLER & COMPANY
Columbus, Ohio
614-766-1426
EXHIBIT 48
COMPARABLE GROUP MARKET, PRICING AND FINANCIAL RATIOS
STOCK PRICES AS OF MAY 14,1996
<TABLE>
<CAPTION>
Market Data Pricing Ratios
---------------------------------- -------------------------------------------
Book Price/ Price/ Price/
Market Price/ 12 Mo. Value Price/ Book Price/ Tang. Core
Value Share EPS /Share Earnings Value Assets Bk. Val Earnings
($M) ($) ($) ($) (X) (%) (%) (%) (O/*)
--- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOUNDATION SAVINGS BANK
Appraised value - midpoint 3.50 10.00 0.42 16.00 24.07 62.49 10.01 62.49 24.07
Minimum of range 2.98 10.00 0.46 17.27 21.71 57.89 8.63 57.89 21.71
Maximum of range 4.03 10.00 0.38 15.06 26.19 66.39 11.33 66.39 26.19
Superrange maximum 4.63 10.00 0.35 14.25 28.35 70.19 12.82 70.19 28.35
ALL THRIFTS (328)
Average 123.29 17.79 1.42 17.27 15.66 106.25 12.85 109.38 17.27
Median 37.79 16.19 1.29 16.54 13.14 99.03 11.34 102.23 14.41
OHIO THRIFTS (31)
Average 94.18 18.92 1.34 17.88 17.45 110.25 14.08 112.52 17.56
Median 29.43 16.25 1.30 16.50 14.39 98.93 12.22 98.93 15.61
COMPARABLE GROUP (10)
Average 18.77 14.80 0.80 16.78 21.81 89.57 11.58 90.89 21.59
Median 20.04 14.81 0.65 17.40 17.87 87.70 10.35 90.03 17.57
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. 23.91 17.50 1.21 16.06 14.46 108.97 7.93 109.86 14.46
FFHS First Franklin Corporation 17.50 14.75 1.06 17.31 13.92 85.21 8.10 85.21 14.18
GFCO Glenway Financial Corp. 23.73 21.75 1.41 24.28 15.43 89.58 8.66 91.77 15.65
HALL Hallmark Capital Corp. 21.46 14.88 1.18 18.38 12.61 80.93 6.33 NA 14.17
HHFC Harvest Home Financial Corp. 11.64 13.00 0.64 14.44 20.31 90.03 15.94 90.03 20.31
MFBC MFBCorp. 29.61 14.25 0.65 18.67 21.92 76.33 14.74 76.33 22.27
MIFC Mid-Iowa Financial Corp. 11.24 6.50 0.53 6.23 12.26 104.33 9.42 104.50 12.26
NBSI North Bancshares, Inc. 18.61 15.88 0.52 16.91 30.53 93.88 16.28 93.88 33.07
SHFC Seven Hills Financial Corp. 7.78 14.50 0.30 17.99 48.33 80.60 17.09 80.60 50.00
SBCN Suburban Bancorporation, Inc. 22.21 15.00 0.53 17.48 28.30 85.81 11.27 85.81 19.48
Dividends Financial Ratios
--------------------------------- -----------------------
Div./ Dividend Payout Equity/
Share Yield Ratio Assets ROA ROE
($) (%) (0/0) (0/0) (0/a) (%)
--- --- ----- ----- ----- ---
FOUNDATION SAVINGS BANK
Appraised value - midpoint 0.00 0.00 0.00 16.01 0.42 2.60
Minimum of range 0.00 0.00 0.00 14.91 0.40 2.67
Maximum of range 0.00 0.00 0.00 17.07 0.43 2.54
Superrange maximum 0.00 0.00 0.00 18.26 0.45 2.48
ALL THRIFTS (328)
Average 0.36 1.81 29.03 12.78 0.87 8.18
Median 0.33 1.92 22.67 10.66 0.89 7.50
OHIO THRIFTS (31)
Average 0.60 2.15 62.16 13.53 0.90 7.64
Median 0.44 2.18 33.20 12.42 1.00 6.34
COMPARABLE GROUP (10)
Average 0.30 2.00 55.67 13.19 0.60 5.08
Median 0.29 2.19 25.23 11.34 0.59 5.07
COMPARABLE GROUP
FSBI Fidelity Bancorp, Inc. 0.29 1.66 24.03 7.28 0.60 7.73
FFHS First Franklin Corporation 0.28 1.90 26.42 9.50 0.63 6.61
GFCO Glenway Financial Corp. 0.51 3.13 36.17 9.67 0.56 5.82
HALL Hallmark Capital Corp. 0.00 0.00 0.00 7.82 0.57 6.40
HHFC Harvest Home Financial Corp. 0.29 3.08 45.31 17.71 0.80 4.31
MFBC MFBCorp. 0.00 0.00 0.00 19.31 0.69 3.40
MIFC Mid-Iowa Financial Corp. 0.08 1.23 15.09 9.02 0.84 8.90
NBSI North Bancshares, Inc. 0.10 2.52 19.23 17.34 0.57 2.98
SHFC Seven Hills Financial Corp. 0.86 2.48 286.67 21.21 0.36 1.69
SBCN Suburban Bancorporation, Inc. 0.55 4.00 103.77 13.01 0.39 2.95
</TABLE>
<PAGE>
EXHIBIT 49
KELLER & COMPANY
Columbus, Ohio
614-766-1426
VALUATION ANALYSIS AND CONCLUSIONS
Foundation Savings Bank\Foundation Bancorp, Inc.
Stock Prices as of May 14, 1996
<TABLE>
<CAPTION>
Valuation assumptions: Comparable Group All Thrifts
Symbol Value Average Median Average Median
------ ----- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Post conv. price to earnings P/E 24.07 21.81 17.87 15.66 13.14
Post conv. price to book value P/B 62.49% 89.57% 87.70% 106.25% 99.03%
Post conv. price to assets P/A 10.01% 11.58% 10.35% 12.85% 11.34%
Pre conversion earnings ($) Y $ 99,000 12 months ended March 31, 1996.
Pre conversion book value ($) B $ 2,772,000 At March 31, 1996
Pre conversion assets ($) A $ 31,738,000 At March 3l, 1996
Conversion expense ($) X $ 251,000
Proceeds not reinvested ($) Z $ 280,000
ESOP borrowings ($) E $ 280,000
ESOP cost of borrowings, net (%) S 6.11%
ESOP term of borrowings (yrs.) T 7
RRP amount ($) M $ 140,000
RRP expense ($) N $ 28,000
Tax rate (%) TAX 34.00%
Investment rate of return, net (%) R 3.65%
Investment rate of return, pretax (%) 5.53%
</TABLE>
FORMULAE TO INDICATE VALUE AFTER CONVERSION:
1. P/E method: Value = P/E(Y-R(X+Z)-ES-(1-TAX)E/T-(1-TAX)N)) = $ 3,498,858
-------------------------------------
1-(P/E)R
2. P/B method: Value = P/B(B-X-E-M) = $ 3,500,581
------------
1-PIB
3. P/A method: Value = PIA(A-X) = $ 3,501,357
--------
1-P/A
VALUATION CORRELATION AND CONCLUSIONS:
Number of Price TOTAL
Shares Per Share VALUE
--------- --------- -----
APPRAISED VALUE - MID RANGE 350,000 $10.00 $3,500,000
Minimum - 85% of midrange 297,500 $10.00 $2,975,000
Maximum - 115% of midrange 402,500 $10.00 $4,025,000
Superrange - 115% of maximum 462,875 $10.00 $4,628,750
<PAGE>
EXHIBIT 50
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Foundation Savings Bank\Foundation Bancorp, Inc.
At the MINIMUM of the Range
<TABLE>
<CAPTION>
<S> <C> <C>
1. GROSS CONVERSION PROCEEDS
Minimum market value $ 2,975,000
Less: Estimated conversion expenses 251,000
Net conversion proceeds $ 2,724,000
2. GENERATION OF ADDITIONAL INCOME
Net conversion proceeds $ 2,724,000
Less: Proceeds not invested(1) 238,000
Total conversion proceeds invested $ 2,486,000
Investment rate 3.65%
Earnings increase - return on proceeds invested $ 90,734
Less: Estimated cost of ESOP borrowings 14,542
Less: Amortization of ESOP borrowings, net of taxes 22,440
Less: RRP expense, net of taxes 5,708
Net earnings increase $ 38,044
3. COMPARATIVE EARNINGS
Regular Core
------- ----
Before conversion - 12 months ended 03/31/96 $ 99,000 99,000
Net earnings increase 38,044 38,044
After conversion $ 137,044 137,044
4. COMPARATIVE NET WORTH (2)
Before conversion - 03/31/96 $ 2,772,000
Conversion proceeds 2,367,000
After conversion $ 5,139,000
5. COMPARATIVE NET ASSETS
Before conversion - 03/31/96 $ 31,738,000
Conversion proceeds 2,724,000
After conversion $ 34,462,000
</TABLE>
(1) Represents ESOP borrowings.
(2) ESOP borrowings and RRP are omitted from net worth.
<PAGE>
EXHIBIT 51
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Foundation Savings Bank\Foundation Bancorp, Inc.
At the MIDPOINT of the Range
<TABLE>
<CAPTION>
<S> <C> <C>
1. GROSS CONVERSION PROCEEDS
Midpoint market value $ 3,500,000
Less: Estimated conversion expenses 251,000
Net conversion proceeds $ 3,249,000
2. GENERATION OF ADDITIONAL INCOME
Net conversion proceeds $ 3,249,000
Less: Proceeds not invested(1) 280,000
Total conversion proceeds invested $ 2,969,000
Investment rate of return 3.65%
Earnings increase - return on proceeds invested $ 108,363
Less: Estimated cost of ESOP borrowings 17,108
Less: Amortization of ESOP borrowings, net of taxes 26,400
Less: RRP expense, net of taxes 18,480
Net earnings increase $ 46,375
3. COMPARATIVE EARNINGS
Regular Core
------- ----
Before conversion - 12 months ended 03/31/96 $ 99,000 99,000
Net earnings increase 46,375 46,375
After conversion $ 145,375 145,375
4. COMPARATIVE NET WORTH (2)
Before conversion - 03/31/96 $ 2,772,000
Conversion proceeds 2,829,000
After conversion $ 5,601,000
5. COMPARATIVE NET ASSETS
Before conversion - 03/31/96 $ 31,738,000
Conversion proceeds 3,249,000
After conversion $ 34,987,000
(1) Represents ESOP borrowings.
(2) ESOP borrowings and RRP are omitted from net worth.
</TABLE>
<PAGE>
EXHIBIT 52
KELLER & COMPANY
Columbus, Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Foundation Savings Bank\Foundation Bancorp, Inc.
At the MAXIMUM of the Range
<TABLE>
<CAPTION>
<S> <C> <C>
1. GROSS CONVERSION PROCEEDS
Maximum market value $ 4,025,000
Less: Estimated conversion expenses 251,000
Net conversion proceeds $ 3,774,000
2. GENERATION OF ADDITIONAL INCOME
Net conversion proceeds $ 3,774,000
Less: Proceeds not invested (1) 322,000
Total conversion proceeds invested $ 3,452,000
Investment rate 3.65%
Earnings increase - return on proceeds invested $ 125,991
Less: Estimated cost of ESOP borrowings 19,674
Less: Amortization of ESOP borrowings, net of taxes 30,360
Less: RRP expense, net of taxes 21,252
Net earnings increase $ 54,705
3. COMPARATIVE EARNINGS
Regular Core
------- ----
Before conversion - 12 months ended 03/31/96 $ 99,000 99,000
Net earnings increase 54,705 54,705
After conversion $ 153,705 153,705
4. COMPARATIVE NET WORTH (2)
Before conversion - 03/31/96 $ 2,772,000
Conversion proceeds 3,291,000
After conversion $ 6,063,000
5. COMPARATIVE NET ASSETS
Before conversion - 03/31/96 $ 31,738,000
Conversion proceeds 3,774,000
After conversion $ 35,512,000
(1) Represents ESOP borrowings.
(2) ESOP borrowings and RRP are omitted from net worth.
</TABLE>
<PAGE>
EXHIBIT 53
KELLER & COMPANY
Columbus Ohio
614-766-1426
PROJECTED EFFECT OF CONVERSION PROCEEDS
Foundation Savings Bank\Foundation Bancorp, Inc.
At the SUPERRANGE Maximum
<TABLE>
<CAPTION>
<S> <C> <C>
1. GROSS CONVERSION PROCEEDS
Superrange market value $ 4,628,750
Less: Estimated conversion expenses 251 ,000
Net conversion proceeds $ 4,377,750
2. GENERATION OF ADDITIONAL INCOME
Net conversion proceeds $ 4,377,750
Less: Proceeds not invested (1) 370,300
Total conversion proceeds invested $ 4,007,450
Investment rate 3.65%
Earnings increase - return on proceeds invested $ 146,264
Less: Estimated cost of ESOP borrowings 22,625
Less: Amortization of ESOP borrowings, net of taxes 34,914
Less: RRP expense, net of taxes 24,440
Net earnings increase $ 64,285
3. COMPARATIVE EARNINGS
Regular Core
------- ----
Before conversion - 12 months ended 03/31/96 $ 99,000 99,000
Net earnings increase 64,285 64,285
After conversion $ 163,285 163,285
4. COMPARATIVE NET WORTH (2)
Before conversion - 03/31/96 $ 2,772,000
Conversion proceeds 3,822,300
After conversion $ 6,594,300
5. COMPARATIVE NET ASSETS
Before conversion - 03/31/96 $ 31,738,000
Conversion proceeds 4,377,750
After conversion $ 36,115,750
(1) Represents ESOP borrowings.
(2) ESOP borrowings and RRP are omitted from net worth.
</TABLE>
<PAGE>
EXHIBIT 54
KELLER & COMPANY
Columbus, Ohio
614-766-1426
SUMMARY OF VALUATION PREMIUM OR DISCOUNT
Premium or (discount)
from comparable group
---------------------
Foundation Average Median
---------- ------- ------
MIDPOINT:
Price/earnings 24.07 x 10.40% 34.72%
Price/book value 62.49% * (30.23)% (28.74)%
Price/assets 10.01% (13.55)% (3.27)%
Price/tangible book value 62.49% (31 .25)% (30.59)%
Price/core earnings 24.07 x 11.53% 37.06%
MINIMUM OF RANGE:
Price/earnings 21.71 x (0.45)% 21.48%
Price/book value 57.89% * (35.37)% (33.99)%
Price/assets 8.63% (25.43)% (16.55)%
Price/tangible book value 57.89% (36.31)% (35.70)%
Price/core earnings 21.71 x 0.57% 23.59%
MAXIMUM OF RANGE:
Price/earnings 26.19 x 20.08% 46.54%
Price/book value 66.39% * (25.88)% (24.30)%
Price/assets 11.33% (2.09)% 9.56%
Price/tangible book value 66.39% (26.96)% (26.26)%
Price/core earnings 26.19 x 21.32% 49.08%
SUPER MAXIMUM OF RANGE:
Price/earnings 28.35 x 29.99% 58.63%
Price/book value 70.19% * (21.63)% (19.96)%
Price/assets 12.82% 10.72% 23.89%
Price/tangible book value 70.19% (22.77)% (22.03)%
Price/core earnings 28.35 x 31.33% 61.39%
* Represents pricing ratio associated with primary valuation method.
<PAGE>
ALPHABETICAL
EXHIBITS
<PAGE>
EXHIBIT A
KELLER & COMPANY, INC.
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 43017
(614) 766-1426
(614) 766-1459 FAX
PROFILE OF THE FIRM
KELLER & COMPANY, INC. is a full service consulting firm to financial
institutions, serving clients throughout the United States from its offices in
Columbus, Ohio. The firm consults primarily in the areas of regulatory and
compliance matters, financial analysis and strategic planning, stock valuation
and appraisal, mergers and acquisitions, mutual to stock conversions,
conversion/mergers and branching. Since its inception in 1985, KELLER & COMPANY
has provided a wide range of consulting services to over 80 financial
institutions including thrifts, banks, mortgage companies and holding companies.
KELLER & COMPANY is an affiliate member of the Community Bankers of America, the
Ohio League of Financial institutions, and the Tri State League of Financial
institutions.
Each of the firm's senior consultants has over fifteen years front line
experience and accomplishment in various areas of the thrift, banking, and real
estate industries. Each consultant provides to clients distinct and diverse
areas of expertise. Specific services and projects have included charter and
insurance applications, market studies, institutional mergers and acquisitions,
branch sales and acquisitions, operations and performance analyses, business
plans, strategic planning, financial projection and modeling, stock valuation,
fairness opinions, capital plans, policy development and revision, lending,
underwriting and investment criteria, data processing and management information
systems, and incentive compensation programs.
It is the goal of KELLER & COMPANY to provide specific and ongoing services that
are pertinent and responsive to the needs of the individual client institution
within the changing industry environment, and to offer those services at
reasonable fees on a timely basis. In recent years, KELLER & COMPANY has become
one of the leading consulting firms in the nation.
<PAGE>
CONSULTANTS IN THE FIRM
MICHAEL R. KELLER has over eighteen years experience as a consultant to the
financial institution industry. Immediately following his graduation from
college, he was employed by the Ohio Division of Savings and Loan Associations,
working for two years in the northeastern Ohio district as an examiner of thrift
institutions before pursuing graduate studies at the Ohio State University.
Mr. Keller later worked as an associate for a management consulting firm
specializing in services to thrift institutions. During his eight years with the
firm, he specialized in mergers and acquisitions, branch acquisitions and sales,
branch feasibility studies, stock valuations, charter applications, and site
selection analyses. By the time of his departure, he had attained the position
of Vice President, with experience in almost all facets of thrift operations.
Prior to forming Keller & Company, Mr. Keller also worked as a senior consultant
in a larger consulting firm. In that position, he broadened his activities and
experience, becoming more involved with institutional operations, business and
strategic planning, regulatory policies and procedures, conversion appraisals,
and fairness opinions. Mr. Keller established the firm in November, 1985 to
better serve the needs of the financial institution industry.
Mr. Keller graduated from Wooster College with a B.A. in Economics in 1972, and
later received an M.B.A. in Finance in 1976 from the Ohio State University where
he took courses in corporate stock valuations.
JOHN A. SHAFFER has over twenty years experience in banking, finance, real
estate lending, and development.
From 1971 to 1974, Mr. Shaffer was employed by a large real estate investment
trust as a lending officer, specializing in construction and development loans.
By 1974, having gained experience in loan underwriting, management and workout,
he joined Chemical Bank of New York and was appointed Vice President for Loan
Administration of Chemical Mortgage Company in Columbus, Ohio. At Chemical, he
managed all commercial and residential loan servicing, administering a portfolio
in excess of $1 billion. His responsibilities also included the analysis,
management and workout of problem commercial loans and properties, and the
structuring, negotiation, acquisition and sale of loan servicing and mortgage
and equity securities.
<PAGE>
Mr. Shaffer later formed an independent real estate and financial consulting
firm, serving corporate and institutional clients, and also investing in and
developing real estate. His primary activities have included the planning,
analysis, financing, implementation, and administration of real estate projects,
as well as financial projection and modeling, cost and profit analysis, loan
management, budgeting, cash flow management and project design.
Mr. Shaffer graduated from Syracuse University in 1965 with a B.S. in Business
Administration, later receiving an M.B.A. in Finance and a Ph.D. in Economics
from New York University.
JOHN S. KORTING has eighteen years experience in the financial institution
industry working in such areas as data processing, software design, strategic
planning, productivity improvement, cash management, incentive compensation
planning, asset and liability management and organizational planning.
Mr. Korting began his career with Huntington Bank, Columbus, Ohio, in 1976 as
manager of the accounting department in the Bank's operations area, focusing on
system analysis for automated teller machines and electronic funds transfer.
Mr. Korting then became a system engineer with Electronic Data Systems, Dallas,
Texas, providing computer programming and implementation support. He then
served as a senior consultant with two big eight accounting firms, Deloitte &
Touche and Price Waterhouse. He worked on a wide variety of financial
institution projects, including strategic planning, Office of Thrift Supervision
business plans, financial analysis, computer, installations, computerized
financial modeling, and bank operations.
John Korting graduated from the Ohio State University with a B.S. in Accounting
and Computer Science in 1976.
<PAGE>
EXHIBIT B
RB 20
CERTIFICATION
I hereby certify that I have not been the suited of any criminal, civil or
administrative judgments, consents, undertakings or orders, or any past or
ongoing indictments, formal investigations, examinations, or administrative
proceedings (excluding routine or customary audits, inspections and
investigations) issued by any federal or state court, any department,
agency, or commission of the U.S. Government, any state or municipality,
any self-regulatory trade or professional organization, or any foreign
government or governmental entity, which involve:
(i) commission of a felony, fraud, moral turpitude, dishonesty or
breach of trust;
(ii) violation of securities or commodities laws or regulations;
(iii) violation of depository institution laws or regulations;
(iv) violation of housing authority laws or regulations;
(v) violation of the rules, regulations, codes of conduct or ethics
of a self-regulatory trade or professional organization;
(vi) adjudication of bankruptcy or insolvency or appointment of a
receiver, conservator, trustee, referee, or guardian.
I hereby certify that the statements I have made herein are true, complete, and
correct to the best of my knowledge and belief.
Conversion Appraiser
Michael R. Keller
<PAGE>
EXHIBIT C
AFFIDAVIT OF INDEPENDENCE
STATE OF OHIO,
COUNTY OF FRANKLIN, ss:
I, Michael R. Keller, being first duly sworn hereby depose and say that:
The fee which I received directly from the applicant, Foundation Savings
Bank, Cincinnati, Ohio, in the amount of $15,000 for the performance of my
appraisal was not related to the value determined in the appraisal; that the
undersigned appraiser is independent and has fully disclosed to the Office of
Thrift Supervision any relationships which may have a material bearing upon the
question of my independence; and that any indemnity agreement with the applicant
has been fully disclosed in a written statement to the Office of Thrift
Supervision.
Further, affiant sayeth naught.
MICHAEL R. KELLER
Sworn to before me and subscribed in my presence this 24th day of May,
1996.
NOTARY PUBLIC
